<PAGE>
As filed with the Securities and Exchange Registration No. 33-91846*
Commission on February 22, 1996 Registration No. 811-251
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
Post-Effective Amendment No. 2 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment To
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------------------
Variable Annuity Account C of Aetna Life Insurance and Annuity Company
(EXACT NAME OF REGISTRANT)
Aetna Life Insurance and Annuity Company
(NAME OF DEPOSITOR)
151 Farmington Avenue, RE4C, Hartford, Connecticut 06156
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Depositor's Telephone Number, including Area Code: (860) 273-7834
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4C, Hartford, Connecticut 06156
(NAME AND ADDRESS OF AGENT FOR SERVICE)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
X on May 1, 1996 pursuant to paragraph (a)(1) of Rule 485
------------
*Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which includes
all the information which would currently be required in a prospectus relating
to the securities covered by the following earlier Registration Statement:
33-75976.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
Registrant expects to file a Rule 24f-2 Notice for the fiscal year ended
December 31, 1995 on or before February 29, 1996.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
1 Cover Page............................... Cover Page
2 Definitions.............................. Definitions
3 Synopsis or Highlights................... Prospectus Summary; Fee
Table
4 Condensed Financial Information.......... Condensed Financial
Information
5 General Description of Registrant,
Depositor, and Portfolio Companies....... The Company; Variable
Annuity Account C;
The Funds
6 Deductions and Expenses.................. Charges and Deductions;
Distribution
7 General Description of Variable Annuity
Contracts................................ Purchase; Miscellaneous
8 Annuity Period........................... Annuity Period
9 Death Benefit............................ Death Benefit During
Accumulation Period;
Death Benefit Payable
During the Annuity Period
10 Purchases and Contract Value............. Purchase; Contract
Valuation
11 Redemptions.............................. Right to Cancel;
Withdrawals
12 Taxes.................................... Tax Status
13 Legal Proceedings........................ Miscellaneous - Legal
Matters and Proceedings
14 Table of Contents of the Statement of
Additional Information................... Contents of the Statement
of Additional Information
<PAGE>
FORM N-4
ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
15 Cover Page............................. Cover page
16 Table of Contents...................... Table of Contents
17 General Information and History........ General Information and
History
18 Services............................... General Information and
History; Independent
Auditors
19 Purchase of Securities Being Offered... Offering and Purchase of
Contracts
20 Underwriters........................... Offering and Purchase of
Contracts
21 Calculation of Performance Data........ Performance Data; Average
Annual Total Return
Quotations
22 Annuity Payments....................... Annuity Payments
23 Financial Statements................... Financial Statements
PART C (OTHER INFORMATION)
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Prospectus describes group deferred variable annuity contracts
("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). The Contracts are designed to fund plans that provide retirement
income for employees of state or municipal institutions of higher education. The
Contracts are available through participation in retirement programs which
receive favorable tax deferred treatment under Federal income tax law. (See
"Purchase.")
The Contracts provide that contributions may be allocated to one or more of the
Credited Interest Options or to one or more of the Subaccounts of Variable
Annuity Account C, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:
- - Aetna Variable Fund - Fidelity VIP Overseas Portfolio
- - Aetna Income Shares - Franklin Government Securities Trust
- - Aetna Variable Encore Fund - Janus Aspen Aggressive Growth
- - Aetna Investment Advisers Fund, Inc. Portfolio
- - Aetna Ascent Variable Portfolio - Janus Aspen Balanced Portfolio
- - Aetna Crossroads Variable Portfolio - Janus Aspen Flexible Income
- - Aetna Legacy Variable Portfolio Portfolio
- - Alger American Growth Portfolio - Janus Aspen Growth Portfolio
- - Alger American Small Cap Portfolio - Janus Aspen Short-Term Bond
- - Calvert Responsibly Invested Balanced Portfolio
Portfolio - Janus Aspen Worldwide Growth
- - Fidelity VIP II Contrafund Portfolio Portfolio
- - Fidelity VIP Equity-Income Portfolio - Lexington Natural Resources Trust
- - Fidelity VIP Growth Portfolio - Neuberger & Berman Growth Portfolio
- Scudder International Portfolio
- TCI Growth (a Twentieth Century
fund)
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account and the Fixed Plus Account. Except as
specifically mentioned, this Prospectus describes only investments through the
Separate Account. A brief description of each of the Credited Interest Options
is contained in Appendices to this Prospectus. Additional information concerning
the Guaranteed Accumulation Account is contained in a separate prospectus.
The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest Options
may be available in all jurisdictions, under all Contracts, or under all Plans.
Please check with your employer to determine option availability. (See
"Investment Options.")
This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract. Additional
information about the Separate Account is contained in a Statement of Additional
Information ("SAI") which is available at no charge. The SAI has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents for the SAI is printed on page 15 of this Prospectus. An
SAI may be obtained by indicating the request on the enrollment form or on the
prospectus receipt contained in this Prospectus, or by calling the number listed
under the "Inquiries" section of the Prospectus Summary.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1,
1996.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS...................................................... DEFINITIONS - 1
PROSPECTUS SUMMARY............................................... SUMMARY - 1
FEE TABLE........................................................ FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION.................................. AUV HISTORY - 1
THE COMPANY...................................................... 1
VARIABLE ANNUITY ACCOUNT C....................................... 1
INVESTMENT OPTIONS............................................... 1
The Funds.................................................... 1
Credited Interest Options.................................... 4
PURCHASE......................................................... 4
Contract Availability........................................ 4
Purchasing Interests in the Contract......................... 4
Rights Under the Contract.................................... 4
Right to Cancel.............................................. 4
CHARGES AND DEDUCTIONS........................................... 5
Daily Deductions from the Separate Account................... 5
Mortality and Expense Risk Charge............................ 5
Asset-Based Sales Charge..................................... 5
Administrative Expense Charge................................ 5
Fund Expenses................................................ 5
Premium and Other Taxes...................................... 5
CONTRACT VALUATION............................................... 6
Account Value................................................ 6
Accumulation Units........................................... 6
Net Investment Factor........................................ 6
TRANSFERS........................................................ 6
Dollar Cost Averaging Program................................ 6
WITHDRAWALS...................................................... 7
Reinvestment Privilege....................................... 7
CONTRACT LOANS................................................... 7
ADDITIONAL WITHDRAWAL OPTIONS.................................... 8
DEATH BENEFIT DURING ACCUMULATION PERIOD......................... 8
ANNUITY PERIOD................................................... 9
Annuity Period Elections..................................... 9
Annuity Options.............................................. 9
Duration of Annuity Payments................................. 10
Charges Deducted During the Annuity Period................... 11
Death Benefit Payable During the Annuity Period.............. 11
TAX STATUS....................................................... 11
Introduction................................................. 11
Taxation of the Company...................................... 11
Contracts Used with Certain Retirement Plans................. 11
</TABLE>
<PAGE>
<TABLE>
<S> <C>
MISCELLANEOUS.................................................... 14
Distribution................................................. 14
Delay or Suspension of Payments.............................. 14
Performance Reporting........................................ 14
Voting Rights................................................ 15
Changes in Beneficiary Designations.......................... 15
Modification of the Contract................................. 15
Legal Matters and Proceedings................................ 15
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.............. 15
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT...................... 16
APPENDIX II--FIXED PLUS ACCOUNT.................................. 17
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following terms are defined as they are used in this Prospectus:
ACCOUNT: A record which identifies contract values accumulated on behalf of each
Participant during the Accumulation Period. One or more Employee Accounts and
Employer Accounts may be established for each Participant.
ACCOUNT VALUE: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
ACCOUNT YEAR: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
ACCUMULATION PERIOD: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
ACCUMULATION UNIT: A measure of the value of each Subaccount before annuity
payments begin.
ANNUITANT: The person on whose life or life expectancy the annuity payments are
based.
ANNUITY: A series of payments for life, a definite period or a combination of
the two.
ANNUITY DATE: The date on which annuity payments begin.
ANNUITY PERIOD: The period during which annuity payments are made.
ANNUITY UNIT: A measure of the value of each Subaccount selected during the
Annuity Period.
BENEFICIARY(IES): The person(s) entitled to receive any death benefit upon the
death of the Participant.
CODE: Internal Revenue Code of 1986, as amended.
COMPANY (WE, US): Aetna Life Insurance and Annuity Company.
CONTRACT: The group deferred variable annuity contracts offered by this
Prospectus.
CONTRACT HOLDER: The entity to whom the Contract is issued. The Contract Holder
is usually the employer.
CREDITED INTEREST OPTIONS: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account and the Fixed Plus Account, each of which is described in an Appendix to
this Prospectus. Amounts allocated to the Credited Interest Options are included
in the Account Value.
EMPLOYEE ACCOUNT: An account that is credited with payments derived from
Employee salary reduction or salary deduction contributions (as provided for by
the Plan) and remitted to the Company by the Employer on behalf of each
Participant.
EMPLOYER ACCOUNT: An account that is credited with net Purchase Payments made by
the Contract Holder.
SECTION 403(B) CONTRACT: A contract that accepts Purchase Payments made pursuant
to Code Section 403(b) and transferred funds attributable to Code Section
403(b).
SECTION 401(A) CONTRACT: A Contract that accepts Purchase Payments made pursuant
to Code Section 401(a) and transferred funds attributable to Section 401(a)
contributions. Section 401(a) Contracts issued to some Plans may also accept
Purchase Payments made pursuant to Code Section 414(h) and transferred funds
attributable to Section 414(h).
FUND(S): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the Contract.
HOME OFFICE: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
LOAN ACCOUNT: An account established for record keeping purposes and credited
with the amount of any loan.
PARTICIPANT (YOU): A person participating in a Plan maintained by an eligible
organization.
PLAN(S): Tax-deferred retirement plans adopted by public higher education
systems for their employees under Section 401(a) or Section 403(b) of the Code.
PURCHASE PAYMENT(S): The gross payment(s) submitted to the Company under a
Contract.
SEPARATE ACCOUNT: Variable Annuity Account C, a separate account established by
the Company for the purpose of funding variable annuity contracts issued by the
Company.
SUBACCOUNT(S): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
VALUATION DATE: The date and time at which the value of the Subaccount is
calculated. Currently, this calculation occurs at the close of business of the
New York Stock Exchange on any normal business day, Monday through Friday, that
the New York Stock Exchange is open.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACTS OFFERED
The Contracts described in this Prospectus are group deferred variable
annuity contracts issued by Aetna Life Insurance and Annuity Company (the
"Company"). The purpose of the Contract is to accumulate values and to provide
benefits upon retirement. The Contracts are available for state or municipal
institutions of higher education to fund (1) tax-deferred annuity programs under
Section 403(b) of the Code, and/or qualified defined contribution plans under
Section 401(a) of the Code. Section 401 Contracts issued to some Plans may also
accept payments and transferred funds made pursuant to Section 414(h) of the
Code.
CONTRACT PURCHASE
The Contract may be purchased by state or municipal institutions of higher
education on behalf of a group made up of their employees. One or more Contracts
are issued to the Contract Holder once we receive a completed master application
form(s). Eligible employees may participate in the Contract by completing the
enrollment form (and any other required forms) and submitting them to the
Company. Purchase Payments can be applied to the Contract either through a
lump-sum transfer from a pre-existing plan, through periodic salary reduction or
salary deduction (as provided for by the Plan) or through employer
contributions. For each Contract, one or more Employee Accounts will be
established for contributions made by an employee, and an Employer Account may
be established for contributions made by the employer on the employee's behalf.
(See "Purchase.")
FREE LOOK PERIOD
You or the Contract Holder may cancel participation in the Contract within
10 days after you receive the Contract or other document evidencing your
interest in the Contract (or longer if required by state law) by returning it to
the Company along with a written notice of cancellation. Unless state law
requires otherwise, the amount that will be received upon cancellation will
reflect the investment performance of the Subaccounts into which Purchase
Payments were deposited. In some cases this may be more or less than the amount
of Purchase Payments. (See "Purchase--Right to Cancel.")
INVESTMENT OPTIONS
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in any or all of the Subaccounts, as well as in the Credited Interest Options
described below. For a complete list of the Funds available under the Contracts,
and a description of the investment objectives of each of the Funds and their
investment advisers, see "Investment Options-- The Funds" in this Prospectus, as
well as the prospectuses for each of the Funds.
The Contract also provides for investment in Credited Interest Options which
allow you to earn fixed rates of interest. The fixed options available under the
Contract are the Guaranteed Accumulation Account ("GAA") and the Fixed Plus
Account. (See the Appendices to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges, an asset-based sales charge and an administrative charge), as well as
premium and other taxes. The Funds also incur certain fees and expenses which
are deducted directly from the Funds. (See the Fee Table and "Charges and
Deductions.")
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, Account
Values may be transferred among the Subaccounts and the Credited Interest
Options without charge. Transfers can be requested in writing or by telephone in
accordance with the Company's transfer procedures. (See the Appendices for a
full description of the restrictions applicable to transfers made from the
Credited Interest Options.) (See "Transfers.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date, subject to Plan provisions, by properly completing a disbursement form and
sending it to the Company. Limitations apply to withdrawals from the Fixed Plus
Account. A distribution can be made from the Employer Account and certain
Employee Accounts (as provided by the Plan) only if the Contract Holder
certifies in writing that you are eligible, both as to timing and form of
distribution. The withdrawal will generally be subject to income tax and may be
subject to a federal tax penalty. The Code restricts full and partial
withdrawals in some circumstances. (See "Withdrawals.")
The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period to persons meeting certain criteria. Additional Withdrawal
Options are not available in all states and may not be suitable in every
situation. (See "Additional Withdrawal Options.")
LOANS
If allowed by the Plan, Participants may request a loan from their Account
Value during the Accumulation Period. (See "Contract Loans.")
DEATH BENEFIT
A death benefit is payable if the Participant dies before the Annuity Date.
Death benefit proceeds will be paid to the Beneficiary in an amount equal to the
Account Value. Until the election of a method of payment, the Account Value will
remain invested under the Contract. The Beneficiary may elect to receive the
proceeds in a lump sum or under any of the payment options available under the
Contract. However, the Code requires that distributions begin within a certain
time period. (See "Death Benefit During the Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to the
Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, you may elect to begin receiving Annuity Payments. For
the Employer Account and certain Employee Accounts, the Contract Holder must
provide written certification that the distribution is in accordance with the
terms of the Plan. (See "Rights Under the Contract.") Annuity Payments can be
made on either a fixed, variable or combination fixed and variable basis. If you
choose a variable payout, the payments will vary with the investment performance
of the Subaccount(s) selected. The Company reserves the right to limit the
number of Subaccounts that may be available during the Annuity Period. (See
"Annuity Period.")
TAXES
Contributions and earnings are not generally taxed until you or your
beneficiary(ies) actually receive a distribution from the Contract. A 10%
federal tax penalty and a 20% withholding for income tax may be imposed on
certain withdrawals. (See "Tax Status.")
INQUIRIES
Questions, inquiries or requests for additional information can be directed
to your agent or local representative, or you may contact the Company as
follows:
<TABLE>
<S> <C>
- Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-1277
Attention: Customer Service
- Call Customer Service: 1-800-525-4225 (for automated transfers or changes
in the allocation of Account Values, call:
1-800-262-3862)
</TABLE>
- --------------------------------------------------------------------------------
SUMMARY - 2
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Fee Table describes the various charges and expenses associated with the
Contract during the Accumulation Period. For amounts deducted during the Annuity
Period, see "Charges Deducted During the Annuity Period." The charges and
expenses shown below do not include premium taxes that may be applicable. For
more information regarding the expenses paid out of the assets of a particular
Fund, see the Fund's prospectus.
CHARGES AGAINST THE SEPARATE ACCOUNT. Each Subaccount pays these expenses out of
its assets. The charges are reflected in the Subaccount's daily Accumulation
Unit Value and are not charged directly to an Account. They include:
<TABLE>
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE 1.25%
ASSET BASED SALES CHARGE. We will monitor the deductions applicable to 0.15%
each Account for the total sales charges to ensure they will never
exceed 8.5% of the total Purchase Payments actually made to the
Account. The sales charges apply during the Accumulation Period only.
ADMINISTRATIVE CHARGE. We currently do not impose an Administrative 0.00%
Charge. However, we reserve the right to deduct a daily charge of not
more than 0.25% per year from the Subaccounts.
TOTAL SEPARATE ACCOUNT CHARGES 1.40%
</TABLE>
ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses applicable
to the Funds. A Fund's "Other Expenses" include operating costs of the Fund.
These expenses are reflected in the Fund's net asset value and are not deducted
from the Account Value under the Contract. (Except as noted, the following
figures are a percentage of average net assets and, except where otherwise
indicated, are based on figures for the year ended December 31, 1995.)
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES(1) OTHER EXPENSES TOTAL FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
Aetna Variable Fund 0.25% 0.05% 0.30%
<S> <C> <C> <C>
Aetna Income Shares 0.25% 0.08% 0.33%
Aetna Variable Encore Fund 0.25% 0.07% 0.32%
Aetna Investment Advisers Fund, Inc. 0.25% 0.07% 0.32%
Aetna Ascent Variable Portfolio(2)
Aetna Crossroads Variable Portfolio(2)
Aetna Legacy Variable Portfolio(2)
Alger American Growth Portfolio
Alger American Small Cap Portfolio
Calvert Responsibly Invested Balanced Portfolio
Fidelity VIP II Contrafund Portfolio(2)
Fidelity VIP Equity-Income Portfolio(3)
Fidelity VIP Growth Portfolio(3)
Fidelity VIP Overseas Portfolio
Franklin Government Securities Trust
Janus Aspen Aggressive Growth Portfolio(4)
Janus Aspen Balanced Portfolio(4)
Janus Aspen Flexible Income Portfolio(4)
Janus Aspen Growth Portfolio(4)
Janus Aspen Short-Term Bond Portfolio(4)
Janus Aspen Worldwide Growth Portfolio(4)
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES(1) OTHER EXPENSES TOTAL FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
<S> <C> <C> <C>
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio
TCI Growth(5)
</TABLE>
- --------------------------
(1) Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Contract. These reimbursements are paid
out of the investment advisory fees and are not charged to investors.
(2) This fund has only limited operating history; therefore the expenses are
estimated for the current fiscal year.
(3) A portion of the brokerage commissions the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been
% for the Equity-Income Portfolio and % for the Growth Portfolio.
(4) The expense figures shown are net of certain expense waivers from Janus
Capital Corporation. Without such waivers, Investment Advisory Fees, Other
Expenses and Total Mutual Fund Annual Expenses for the Portfolios for the
fiscal year ended December 31, 1995 would have been: %, %, and %,
respectively, for Janus Aspen Balanced Portfolio; %, % and %,
respectively, for Janus Aspen Growth Portfolio; %, % and %,
respectively, for Janus Aspen Short-Term Bond Portfolio; and %, % and
%, respectively, for Janus Aspen Worldwide Growth Portfolio.
(5) The Portfolio's investment adviser pays all expenses of the Portfolio except
brokerage commissions, taxes, interest, fees and expenses of the
non-interested directors (including counsel fees) and extraordinary
expenses.
HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets, you would have paid the following expenses on a $1,000
investment at the end of the applicable time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Alger American Growth Portfolio
Alger American Small Cap Portfolio
Calvert Responsibly Invested Balanced Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Franklin Government Securities Trust
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Short-Term Bond Portfolio
Janus Aspen Worldwide Growth Portfolio
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio
TCI Growth
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
CONDENSED FINANCIAL INFORMATION
(SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE YEARS IN THE
FOUR YEAR PERIOD ENDED DECEMBER 31, 1995, IS DERIVED FROM THE FINANCIAL
STATEMENTS OF THE SEPARATE ACCOUNT, WHICH FINANCIAL STATEMENTS HAVE BEEN AUDITED
BY KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS. THE FINANCIAL STATEMENTS AS OF
AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE INDEPENDENT AUDITORS' REPORT
THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
<TABLE>
<CAPTION>
1995 1994 1993 1992
--------- --------- --------- ---------
AETNA VARIABLE FUND
<S> <C> <C> <C> <C>
Value at beginning of period $11.083 $10.531 $10.000(2)
Value at end of period $10.823 $11.083 $10.531
Increase (decrease) in value of accumulation unit(1) (2.35)% 5.24% 5.31%
Number of accumulation units outstanding at end of period 77,511 37,807 3,948
AETNA INCOME SHARES
Value at beginning of period $11.107 $10.271 $10.000(2)
Value at end of period $10.536 $11.107 $10.271
Increase (decrease) in value of accumulation unit(1) (5.14)% 8.14% 2.71%
Number of accumulation units outstanding at end of period 14,482 4,936 416
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.252 $10.076 $10.000(2)
Value at end of period $10.523 $10.252 $10.076
Increase (decrease) in value of accumulation unit(1) 2.64% 1.75% 0.76%
Number of accumulation units outstanding at end of period 12,934 3,066 547
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of period $11.109 $10.253 $10.000(2)
Value at end of period $10.900 $11.109 $10.253
Increase (decrease) in value of accumulation unit(1) (1.88)% 8.35% 2.53%
Number of accumulation units outstanding at end of period 11,773 6,540 221
ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period $10.000 $10.000(3)
Value at end of period $ 9.461 $10.000
Increase (decrease) in value of accumulation unit(1) (5.39)% 0.00%
Number of accumulation units outstanding at end of period 4,575 2
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
Value at beginning of period $11.352 $10.589 $10.000(2)
Value at end of period $10.839 $11.352 $10.589
Increase (decrease) in value of accumulation unit(1) (4.52)% 7.21% 5.89%
Number of accumulation units outstanding at end of period 8,469 2,383 125
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $10.843 $10.214 $10.000(2)
Value at end of period $10.294 $10.843 $10.214
Increase (decrease) in value of accumulation unit(1) (5.06)% 6.16% 2.14%
Number of accumulation units outstanding at end of period 10,738 4,409 470
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(4)
Value at end of period $10.577
Increase (decrease) in value of accumulation unit(1) 5.77%
Number of accumulation units outstanding at end of period 820
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10.000
Value at end of period $10.000
Increase (decrease) in value of accumulation unit(1) 0.00%
Number of accumulation units outstanding at end of period 0
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $11.261 $10.196 $10.000(2)
Value at end of period $10.496 $11.261 $10.196
Increase (decrease) in value of accumulation unit(1) (6.79)% 10.45% 1.96%
Number of accumulation units outstanding at end of period 7,350 2,438 165
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.796 $10.927 $10.000(2)
Value at end of period $11.055 $11.796 $10.927
Increase (decrease) in value of accumulation unit(1) (6.28)% 7.95% 9.27%
Number of accumulation units outstanding at end of period 21,935 7,403 477
SCUDDER INTERNATIONAL PORTFOLIO
Value at beginning of period $12.883 $ 9.539 $10.000(2)
Value at end of period $12.595 $12.883 $ 9.539
Increase (decrease) in value of accumulation unit(1) (2.24)% 35.06% (4.81)%
Number of accumulation units outstanding at end of period 22,036 4,560 281
TCI GROWTH
Value at beginning of period $12.046 $10.000(5)
Value at end of period $11.740 $12.046
Increase (decrease) in value of accumulation unit(1) (2.54)% 20.46%
Number of accumulation units outstanding at end of period 15,078 4,104
</TABLE>
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value.
(2) The initial Accumulation Unit value was established at $10.000 on July 20,
1992.
(3) The initial Accumulation Unit value was established at $10.000 on September
17, 1993, the date on which the Portfolio became available under the
Contract.
(4) The initial Accumulation Unit value was established at $10.000 during
October 1994, when funds were first received in this option.
(5) The initial Accumulation Unit value was established at $10.000 on February
1, 1993.
- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>
THE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Services, Inc.,
which is in turn a wholly owned subsidiary of Aetna Life and Casualty Company, a
diversified financial services company.
VARIABLE ANNUITY ACCOUNT C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company established Variable Annuity Account C (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), and meets the
definition of "separate account" under the federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets of the Separate Account, such
assets are not chargeable with liabilities arising out of any other business
conducted by the Company. Income, gains or losses of the Separate Account are
credited to or charged against the assets of the Separate Account without regard
to our other income, gains or losses. All obligations arising under the
Contracts are our general corporate obligations.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the enrollment form. In turn, the Subaccounts invest in the
corresponding Funds at net asset value.
The Contract Holder may decide to offer only a select number of Funds under
its Plan, or it may decide to substitute shares of one Fund for shares of
another Fund currently held by the Separate Account. The availability of Funds
may be subject to regulatory authorization. In addition, the Company may add or
withdraw Funds, as permitted by applicable law. Not all Funds may be available
in all jurisdictions, or under all Contracts, or under all Plans.
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
- -AETNA VARIABLE FUND seeks to maximize total return through investments in a
diversified portfolio of common stocks and securities convertible into common
stock.(1)
- -AETNA INCOME SHARES seeks to maximize total return, consistent with reasonable
risk, through investments in a diversified portfolio consisting primarily of
debt securities.(1)
- -AETNA VARIABLE ENCORE FUND seeks to provide high current return, consistent
with preservation of capital and liquidity, through investment in high-quality
money market instruments. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government.(1)
- --------------------------------------------------------------------------------
1
<PAGE>
- -AETNA INVESTMENT ADVISERS FUND, INC. is a managed fund which seeks to maximize
investment return consistent with reasonable safety of principal by investing
in one or more of the following asset classes: stocks, bonds and cash
equivalents based on the Company's judgment of which of those sectors or mix
thereof offers the best investment prospects.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA ASCENT VARIABLE PORTFOLIO seeks to
provide capital appreciation by allocating its investments among equities and
fixed income securities. The Portfolio is managed for investors who generally
have an investment horizon exceeding 15 years, and who have a high level of
risk tolerance.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA CROSSROADS VARIABLE PORTFOLIO seeks to
provide total return (i.e., income and capital appreciation, both realized and
unrealized) by allocating its investments among equities and fixed income
securities. The Portfolio is managed for investors who generally have an
investment horizon exceeding 10 years and who have a moderate level of risk
tolerance.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA LEGACY VARIABLE PORTFOLIO seeks to
provide total return consistent with preservation of capital by allocating its
investments among equities and fixed income securities. The Portfolio is
managed for investors who generally have an investment horizon exceeding five
years and who have a low level of risk tolerance.(1)
- -ALGER AMERICAN FUND--ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities. The Portfolio primarily invests in equity securities which
have a market capitalization of $1 billion or greater.(2)
- -ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
capital return through investment in common stock of smaller companies offering
the potential for significant price gain. The Portfolio invests at least 65% of
its net assets in equity securities of companies that have total market
capitalization of less than $1 billion at the time of purchase.(2)
- -CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO is a NONDIVERSIFIED portfolio
that seeks growth of capital through investment in enterprises that make a
significant contribution to society through their products and services and
through the way they do business.(3)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND PORTFOLIO
seeks maximum total return over the long term by investing in securities of
companies that are undervalued or out-of-favor.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--EQUITY-INCOME PORTFOLIO
seeks reasonable income by investing primarily in income-producing equity
securities. In selecting investments, the Fund also considers the potential for
capital appreciation.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--GROWTH PORTFOLIO seeks
capital appreciation by investing mainly in common stocks, although its
investments are not restricted to any one type of security.(4)
- -FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND--OVERSEAS PORTFOLIO seeks
long-term growth by investing mainly in foreign securities (at least 65% of the
Fund's total assets in securities of issuers from at least three countries
outside of North America).(4)
- -FRANKLIN GOVERNMENT SECURITIES TRUST seeks income through investments in
obligations of the U.S. Government or its agencies or instrumentalities,
primarily GNMA obligations.(5)
- -JANUS ASPEN SERIES--AGGRESSIVE GROWTH PORTFOLIO is a NONDIVERSIFIED portfolio
that seeks long-term growth of capital in a manner consistent with the
preservation of capital. The Portfolio pursues its investment objective by
normally investing at least 50% of its equity assets in securities issued by
medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S & P Midcap 400
Index, which as of included companies with capitalizations between
approximately and , but which is expected to change on a regular
basis.(6)
- -JANUS ASPEN SERIES--BALANCED PORTFOLIO seeks long-term capital growth,
consistent with preservation of capital and balanced by current income. The
Portfolio pursues its investment objective by investing 40%-60% of its assets
in equity securities selected primarily for their growth potential and 40%-60%
of its assets in fixed-income securities.(6)
- --------------------------------------------------------------------------------
2
<PAGE>
- -JANUS ASPEN SERIES--FLEXIBLE INCOME PORTFOLIO seeks to obtain maximum total
return, consistent with preservation of capital from a combination of current
income and capital appreciation. The Portfolio invests in all types of income
producing securities and may have substantial holdings of debt securities rated
below investment grade (e.g., junk bonds).(6)
- -JANUS ASPEN SERIES--GROWTH PORTFOLIO seeks long-term growth of capital in a
manner consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing in common stocks of companies of any size.(6)
- -JANUS ASPEN SERIES--SHORT-TERM BOND PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital by investing primarily in
short-and intermediate-term fixed income securities.(6)
- -JANUS ASPEN SERIES--WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of
capital in a manner consistent with preservation of capital. The Portfolio
pursues its investment objective primarily through investments in common stocks
of foreign and domestic issuers.(6)
- -LEXINGTON NATURAL RESOURCES TRUST is a NONDIVERSIFIED portfolio that seeks
long-term growth of capital through investment primarily in common stocks of
companies which own or develop natural resources and other basic commodities or
supply goods and services to such companies.(7)
- -NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST-- GROWTH PORTFOLIO seeks capital
appreciation without regard to income. The Portfolio pursues its investment
objective by investing in common stocks, often of companies that may be
temporarily out of favor in the market.(8)
- -SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO seeks long-term
growth of capital primarily through diversified holdings of marketable foreign
equity investments.(9)
- -TCI PORTFOLIOS, INC.--TCI GROWTH (A TWENTIETH CENTURY FUND) seeks capital
growth. The Fund seeks to achieve its objective by investing in common stocks
(including securities convertible into common stocks) and other securities that
meet certain fundamental and technical standards of selection and, in the
opinion of the Fund's investment manager, have better than average potential
for appreciation.(10)
Investment Advisers for each of the Funds:
(1) Aetna Life Insurance and Annuity Company
(2) Fred Alger Management, Inc.
(3) Calvert Asset Management Company, Inc.
(4) Fidelity Management & Research Company
(5) Franklin Advisers, Inc.
(6) Janus Capital Corporation
(7) Lexington Management Corporation (adviser); Market Systems Research
Advisors, Inc. (subadviser)
(8) Neuberger & Berman Management Incorporated
(9) Scudder, Stevens & Clark, Inc.
(10) Investors Research Corporation
RISKS ASSOCIATED WITH INVESTMENT IN THE FUNDS. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential risks,
is found in the respective Fund prospectuses which accompany this Prospectus.
You should read the Fund prospectuses and consider carefully, and on a
continuing basis, which Fund or combination of Funds is best suited to your
long-term investment objectives.
CONFLICTS OF INTEREST (MIXED AND SHARED FUNDING). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued or sponsored by the Company or by third parties. This is referred to as
"mixed funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to identify
any material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict.
- --------------------------------------------------------------------------------
3
<PAGE>
CREDITED INTEREST OPTIONS
Purchase Payments may be allocated to one or more of the Credited Interest
Options available under the Contract as described below. The Contract Holder may
elect not to offer all Credited Interest Options under its Plan.
- - The Guaranteed Accumulation Account (GAA) is a credited interest option
through which we guarantee stipulated rates of interest for stated periods of
time. Amounts must remain in the GAA for the full guaranteed term to receive
the quoted interest rates, or a market value adjustment (which may be positive
or negative) will be applied. (See Appendix I.)
- - The Fixed Plus Account is a part of the Company's general account and
guarantees a minimum interest rate, as specified in the Contract. The Company
may credit higher interest rates in its discretion. Withdrawals and transfers
from the Fixed Plus Account are limited. (See Appendix II.)
PURCHASE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACT AVAILABILITY
The Contracts are designed to fund Plans adopted by state or municipal
institutions of higher education for their employees. The Plans may be (1)
tax-deferred annuity programs under Section 403(b) of the Code, and/or (2)
qualified defined contribution plans under Section 401(a) and 414(h) of the
Code.
Eligible participants in the Plan seeking to invest and accumulate money for
retirement can purchase individual interests in group Contracts. The group
Contract is generally owned by the employer, and individual accounts are
established for each Participant. For each Contract, one or more Employee
Accounts will be established for contributions derived from employee salary
reduction, and an Employer Account may be established for contributions made by
the employer on the employee's behalf.
PURCHASING INTERESTS IN THE CONTRACT
Eligible organizations may acquire both types (403(b) and 401(a)) of group
Contracts for its Plans(s) by submitting the appropriate master application
form(s) to the Company. Once we approve the application, a group Contract is
generally issued to the employer as the group Contract Holder. Participants may
purchase interests in a group Contract by submitting an enrollment form to the
Company.
The Company must accept or reject the enrollment form within two business
days of receipt. If the application or enrollment form is incomplete, the
Company may hold any forms and accompanying Purchase Payments for five days.
Purchase Payments may be held for longer periods only with the consent of the
Contract Holder or Participant, pending acceptance of the application or
enrollment form. Initial payments held for longer than the five business days
will be deposited in the Aetna Variable Encore Fund Subaccount until the forms
are completed.
Purchase Payments will initially be allocated to the Subaccounts or Credited
Interest Options as specified by the Participant on the enrollment form. Changes
in such allocation may be made in writing or by telephone transfer. Allocations
must be in whole percentages, and there may be limitations on the number of
investment options that can be selected during the Accumulation Period. (See
"Transfers.") The Code imposes a maximum limit on annual Purchase Payments which
may be excluded from a Participant's gross income. (See "Tax Status.")
RIGHTS UNDER THE CONTRACT
You have a nonforfeitable right to the value of your Employee Account. You
have a nonforfeitable right to the value of your Employer Account to the extent
of your vested percentage under the Plan as interpreted by the Contract Holder.
You may select the investment options for your Employer Account and your
Employee Account. You may elect an Annuity option for your Account Value;
however, for your Employer and certain Employee Accounts (as provided in the
Plan), the Contract Holder must certify that you are eligible for a distribution
and that the form of Annuity is permitted under the terms of the Plan.
RIGHT TO CANCEL
The Contract or participation under the Contract may be canceled without
penalty by returning it (or other document evidencing your interest) to the
Company with a written notice of intent to cancel. In most states, you have ten
days to exercise this right; some states allow you a longer free-look period.
When we receive the request for cancellation, we will return the Account Value,
unless the
- --------------------------------------------------------------------------------
4
<PAGE>
laws of the state in which the Contract was issued require that we return the
initial Purchase Payment (if greater than the Account Value). In states that do
not require a return of Purchase Payments, the purchaser bears the entire
investment risk for amounts allocated among the Subaccounts during the free look
period. Account Values will be determined as of the Valuation Date on which we
receive the request for cancellation at our Home Office.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. The Company makes a daily deduction from
each of the Subaccounts for the mortality and expense risk charge. The charge is
equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of the mortality and expense
risks under the Contract. The mortality risks are those assumed for our promise
to make lifetime payments according to annuity rates specified in the Contract.
The expense risk is the risk that the actual expenses for costs incurred under
the Contract will exceed the maximum costs that can be charged under the
Contract.
If the amount deducted for mortality and expense risks is not sufficient to
cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
ASSET-BASED SALES CHARGE. There are no deductions from Purchase Payments
for sales commissions or related expenses. Sales commissions and expenses are
advanced by the Company and recovered out of an asset-based sales charge that is
deducted from the Account in an amount that equals 0.15% on an annual basis. The
deduction is made from amounts held in the Subaccounts during the Accumulation
Period only. We will monitor each Account to ensure that the total sales charges
will never exceed 8.5% of the total Purchase Payments actually made to the
Account.
If the asset-based sales charges are insufficient to recover sales
commissions, such commissions would be recovered out of the Company's profits
from investment activities, including the mortality and expense risk charges
under the Contract. For sales commissions paid in connection with the sale of
the Contracts, see "Distribution."
ADMINISTRATIVE EXPENSE CHARGE. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge. The
administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of the
administrative services to be provided while the Contract is in force. The
Company does not expect to make a profit from this charge.
Under the Contract, the amount of the administrative expense charge may be
of an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation Period or Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.
PREMIUM AND OTHER TAXES
Several states and municipalities impose a premium tax on Annuities. These
taxes currently range from 0% to 4%. The Company reserves the right to deduct
premium tax against Purchase Payments or Account Values, but no earlier than
when we have a tax liability under state law. The Company's current practice is
to deduct for premium taxes at the time of complete withdrawal or annuitization.
In addition to the premium tax, the Company reserves the right to assess a
charge for any state or federal taxes due against the Contract or the Separate
Account assets. (See "Tax Status.")
- --------------------------------------------------------------------------------
5
<PAGE>
CONTRACT VALUATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in your Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in any of the Credited Interest Options.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each day
by a percentage that accounts for the daily assessment of mortality and expense
risk charges and the administrative charge (if any).
Initial Purchase Payments will be credited to your Account as described
under "Purchasing Interests in the Contract." Each subsequent Purchase Payment
(or amount transferred) will be credited to your Account at the AUV computed on
the next Valuation Date following our receipt of your payment or transfer
request. The value of an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance of a
Subaccount from one Valuation Date to the next. The net investment factor for a
Subaccount for any valuation period is equal to the sum of 1.0000 plus the net
investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current Valuation
Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding Valuation
Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation of the
Subaccount, divided by
(d) the AUV of the Subaccount on the preceding Valuation Date, minus
(e) a daily charge at the annual effective rate of 1.25% for mortality and
expense risks, 0.15% for asset based sales charges (during the Accumulation
Period only), and up to 0.25% as an administrative expense charge (currently
0%).
The gross investment rate may be either positive or negative.
TRANSFERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At any time prior to the Annuity Date, you can transfer amounts held under
your Account from one Subaccount to another. Transfers between the Credited
Interest Options and the Subaccounts are subject to certain restrictions. (See
Appendices I and II.) A request for transfer can be made either in writing or by
telephone. The telephone transfer privilege is available automatically; no
special election is necessary. All transfers must be in accordance with the
terms of the Contract and your Plan, as applicable.
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge, provided that the transfer amount
is not less than $500. However, the total number of investment options that you
may select during the Accumulation Period may be limited, as set forth on your
enrollment form. Any transfer will be based on the Accumulation Unit Value next
determined after the Company receives a valid transfer request at its Home
Office. Transfers are currently not available during the Annuity Period;
however, they may be available under some Annuity Options beginning later in
1996 (see "Annuity Period--Annuity Options.")
DOLLAR COST AVERAGING PROGRAM
You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program. Dollar Cost
Averaging is a system for investing a fixed amount of money at regular intervals
over a period of time. Dollar Cost Averaging does not ensure a profit nor
guarantee
- --------------------------------------------------------------------------------
6
<PAGE>
against loss in a declining market. You should consider your financial ability
to continue purchases through periods of low price levels. Please refer to the
Inquiries
section of the Prospectus Summary which describes how you can obtain further
information.
WITHDRAWALS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
All or a portion of the Account Value may be withdrawn at any time during
the Accumulation Period, subject to the withdrawal restrictions under Section
403(b) Contracts described below, and subject to limitations on withdrawals from
the Fixed Plus Account. The Contract may require that the Contract Holder
certify in writing that you are eligible both as to the timing and form of
distribution. To request a withdrawal, you must properly complete a disbursement
form and send it to our Home Office. Payments for withdrawal requests will be
made in accordance with SEC requirements, but normally not later than seven
calendar days following our receipt of a disbursement form. Withdrawals may be
requested in one of the following forms:
- -FULL WITHDRAWAL OF AN ACCOUNT: The amount paid for a full withdrawal will be
the Account Value allocated to the Subaccounts and the Guaranteed Accumulation
Account (plus or minus a market value adjustment) (see Appendix I), plus the
amount available for withdrawal from the Fixed Plus Account (see Appendix II).
- -PARTIAL WITHDRAWALS (Percentage or Specified Dollar Amount): The amount paid
will be the percentage of the Account Value or the dollar amount requested;
however, the amount available for withdrawal from the Fixed Plus Account is
limited (see Appendix II).
For any partial withdrawal, the value of the Accumulation Units canceled
will be withdrawn proportionately from the Subaccounts or Credited Interest
Options in which your Purchase Payments are allocated, unless you request
otherwise in writing. All amounts paid will be based on Account Values as of the
next Valuation Date after we receive a request for withdrawal at our Home
Office, or on such later date as the disbursement form may specify. A 20%
federal income tax may be withheld from amounts paid directly to you. (See "Tax
Status--Contracts Used with Certain Retirement Plans.")
WITHDRAWAL RESTRICTIONS FROM 403(B) PLANS. Under Section 403(b) Contracts, a
withdrawal of salary reduction contributions and earnings on such contributions
is generally prohibited prior to your death, disability, attainment of age
59 1/2, separation from service or financial hardship. (See "Tax Status.")
REINVESTMENT PRIVILEGE
You may elect to reinvest all or a portion of the proceeds received from a
full withdrawal of your Account within 30 days after such withdrawal has been
made. Accumulation Units will be credited to the Account for the amount
reinvested. Reinvested amounts will be reallocated to the applicable investment
options in the same proportion as they were allocated at the time of withdrawal.
Accumulation Units will be credited to your Account based on the Accumulation
Unit Value next computed following our receipt of your request along with the
amount to be reinvested. The reinvestment privilege may be used only once. See
Appendix I for a discussion of amounts withdrawn from GAA and then reinvested.
If you are contemplating reinvestment, you should seek competent advice
regarding the tax consequences associated with such a transaction.
CONTRACT LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If allowed by the Plan, Participants may request a loan from their Account
Value during the Accumulation Period. Loans can only be made from those Account
Values held in the Subaccounts or from those Credited Interest Options that
allow loans. (See Appendices I and II.) A loan may be obtained by reviewing and
reading the terms of your loan agreement, properly completing a loan request
form and submitting it to the Company's Home Office.
- --------------------------------------------------------------------------------
7
<PAGE>
ADDITIONAL WITHDRAWAL OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Additional Withdrawal Options"). To exercise
these options, your Account Value must meet the minimum dollar amounts and age
criteria applicable to that option. In addition, for Employer and certain
Employee Accounts, the Contract Holder must provide written certification that
the distribution is in accordance with the terms of the Plan. The Additional
Withdrawal Options currently available under the Contract include the following:
- -SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of partial withdrawals from
your Account based on a payment method you select. It is designed for those who
want a periodic income while retaining investment flexibility for amounts
accumulated under a Contract. (This option may not be elected if you have an
outstanding contract loan.)
- -ECO--ESTATE CONSERVATION OPTION. ECO offers the same investment flexibility as
SWO but is designed for those who want to receive only the minimum distribution
that the Code requires each year. Under ECO, the Company calculates the minimum
distribution amount required by law at age 70 1/2 or retirement, if later, for
governmental plans, and pays you that amount once a year. (See "Tax Status.")
Other Additional Withdrawal Options may be added from time to time.
Additional information relating to any of the Additional Withdrawal Options may
be obtained from your local representative or from the Company at its Home
Office.
If you select one of the Additional Withdrawal Options, you will retain all
of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus.
Once you elect an Additional Withdrawal Option, you may revoke it any time
by submitting a written request to our Home Office. Once an option is revoked,
it may not be elected again nor may any other Additional Withdrawal Option be
elected, unless permitted by the Code. The Company reserves the right to
discontinue the availability of one or all of these Additional Withdrawal
Options at any time, and/or to change the terms of future elections.
DEATH BENEFIT DURING ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Contract provides that a death benefit is payable to the
Beneficiary(ies) upon the death of the Participant before the Annuity Date. If a
lump-sum distribution or an Annuity Option is elected within six months of the
Participant's death, a guaranteed death benefit is provided. For each Account,
the death benefit is guaranteed to be the greater of:
(a) the Account Value, plus any positive aggregate Market Value Adjustment (MVA)
that applies to amounts allocated to the Guaranteed Accumulation Account
(GAA), on the day the death notice and request for payment are received in
good order at our Home Office; or
(b) the sum of the net Purchase Payments made to each Account, minus the total
of all withdrawals or annuitizations made from the Account and any amount
allocated to the Loan Account.
If a full or partial withdrawal is made within six months after your death,
the Beneficiary will receive the Account Value, plus any positive MVA that would
apply to any portion of the Account allocated to GAA. If a lump-sum distribution
is elected six months or more after your death, the Beneficiary will receive the
Account Value, plus or minus any MVA that would apply to any portion of the
Account allocated to GAA. The value of the Account is determined as of the
Valuation Date on which proof of death acceptable to us and a request for
payment are received at our Home Office.
Death benefit proceeds may be paid to the Beneficiary:
- - in a lump sum; or
- - in accordance with any of the Annuity Options available under the Contract.
- --------------------------------------------------------------------------------
8
<PAGE>
The Beneficiary may instead elect one of the following two options; however,
the Code limits how long the death benefit proceeds may be left in these options
(see below):
- - to leave the Account Value invested in the Contract; or
- - to leave the Account Value on deposit in the Company's general account, and to
receive monthly, quarterly, semi-annual or annual interest payments at the
interest rate then being credited on such deposits. The balance on deposit can
be withdrawn at any time or applied to an Annuity Option.
When paying the Beneficiary, we will determine the Account Value on the
Valuation Date following the date on which we receive proof of death acceptable
to the Company. Interest, if any, will be paid from the date of death at a rate
no less than required by law. We will mail payment to the Beneficiary within
seven days after we receive proof of death and request for payment.
The Code requires that distribution of death proceeds begin within a certain
period of time. Generally, either payments must begin by December 31 of the year
following the year of your death, or the entire value of your benefits must be
distributed by December 31 of the fifth year following the year of your death.
If your Beneficiary is your spouse, he or she is not required to begin
distributions until the year you would have attained age 70 1/2. In no event may
payments extend beyond the life of the Beneficiary or any specified period
greater than the Beneficiary's life expectancy. If no elections are made, no
distributions will be made. Failure to commence distributions within the above
time periods can result in tax penalties. Regardless of the method of payment,
death benefit proceeds will generally be taxed to the Beneficiary in the same
manner as if you had received those payments. (See "Tax Status.")
ANNUITY PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUITY PERIOD ELECTIONS
The Code generally requires that minimum annual distributions of the Account
Value must begin by April 1st of the calendar year following the calendar year
in which a Participant attains age 70 1/2 (or retires, if later, for
governmental plans). In addition, distributions must be in a form and amount
sufficient to satisfy the Code requirements. These requirements may be satisfied
by the election of certain Annuity Options or Additional Withdrawal Options.
(See "Tax Status.")
At least 30 days prior to the Annuity Date, you must notify us in writing of
the following:
- - the date on which you would like to start receiving annuity payments;
- - the Annuity Option under which you want your payments to be calculated and
paid;
- - whether the payments are to be made monthly, quarterly, semi-annually or
annually; and
- - the investment option(s) used to provide annuity payments (i.e., a fixed
annuity using the general account or any of the Subaccounts available at the
time of annuitization). As of the date of this Prospectus, Aetna Variable
Fund, Aetna Income Shares and Aetna Investment Advisers Fund, Inc. are the
only Subaccounts available; however, additional Subaccounts may be available
under some Annuity Options in the future. (See "Annuity Options" below.)
For the Employer and certain Employee Accounts, the Contract Holder must
provide written certification that the distribution is in accordance with the
terms of the Plan (see "Rights Under the Contract.")
Annuity Payments will not begin until you have selected an Annuity Date and
an Annuity Option. Until a date and option are elected the Account will continue
in the Accumulation Period. If your Plan is subject to ERISA, you must also
submit the appropriate joint and survivor annuity waiver and spousal consent
form(s) to us. Until a date and option are elected, the Account will continue in
the Accumulation Period. Once annuity payments begin, the Annuity Option may not
be changed, nor may transfers currently be made among the investment option(s)
selected. (See "Annuity Options" below for more information about transfers
during the Annuity Period.)
ANNUITY OPTIONS
You may choose one of the following Annuity Options:
- --------------------------------------------------------------------------------
9
<PAGE>
LIFETIME ANNUITY OPTIONS:
- -OPTION 1--Life Annuity--An annuity with payments ending on the Participant's
death.
- -OPTION 2--Life Annuity with Guaranteed Payments-- An annuity with payments
guaranteed for 5, 10, 15 or 20 years, or such other periods as the Company may
offer at the time of annuitization.
- -OPTION 3--Life Income based Upon Lives of Two Annuitants--An annuity will be
paid during the lives of the Annuitant and a second Annuitant, with 100%,
66 2/3% or 50% of the payment to continue after the first death, or 100% of the
payment to continue at the death of the second Annuitant and 50% of the payment
to continue at the death of the Annuitant.
- -OPTION 4--Life Income based Upon the Lives of Two Payees--An annuity with
Payments for a minimum of 120 months, with 100% of the payment to continue
after the first death.
If Option 1 or 3 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 3, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Participant cannot elect to receive a
lump-sum settlement.
NONLIFETIME ANNUITY OPTIONS:
- -OPTION 1--Payments for a Specified Period--payments will continue for a
specified period of time, as provided for under your Contract. Under some
Contracts, for amounts held in the Fixed Plus Account, the annuity must be paid
on a fixed basis. (See Appendix II-- "Transfers Among Investment Options" to
determine if this applies to your Contract.)
If a nonlifetime option is elected on a variable basis, the Annuitant may
request at any time during the payment period that the present value of all or a
portion of the remaining variable payments be paid in one sum. The nonlifetime
option is not available on a variable basis under a Contract which provides for
immediate Annuity benefits.
We may also offer additional Annuity Options under your Contract from time
to time. Beginning in May 1996, the Company expects to offer additional Annuity
Options and enhanced versions of the Annuity Options listed above. These
additional Annuity Options and enhanced versions of the existing options will
have additional Subaccounts available and will allow transfers between
Subaccounts during the Annuity Period. (Additional Subaccounts and transfer
capability are expected during the second half of 1996.) Such additional or
enhanced options will be made available by an endorsement to the Contract, which
will include the guaranteed annuity payout rates and other terms applicable to
such options. (Depending on which guaranteed payout rates apply to the existing
options, the guaranteed payout rates for the new and enhanced options will be
the same or lower). Please refer to the Contract, or call the number listed in
the "Inquiries" section of the Prospectus Summary, to determine which options
are available and the terms of such options. It is not expected that these
additional or enhanced options will be made available to those who have already
commenced receiving Annuity Payments.
DURATION OF ANNUITY PAYMENTS
Annuity payments may not extend beyond (a) the life of the Participant, (b)
the joint lives of the Participant and Beneficiary, (c) a specified period
greater than the Participant's life expectancy, or (d) a period certain greater
than the joint life expectancies of the Participant and Beneficiary.
AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on how
you allocate your Account Value between fixed and variable payouts. No election
may be made that would result in the first Annuity payment of less than $20, or
total yearly Annuity payments of less than $100. If your Account Value on the
Annuity Date is insufficient to elect an option for the minimum amount
specified, a lump-sum payment must be elected.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3 1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3 1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)
- --------------------------------------------------------------------------------
10
<PAGE>
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks and from any
amounts held on a variable basis. Therefore, electing the nonlifetime option on
a variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE
ANNUITY PERIOD
If a Participant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 3 was elected, Annuity Payments will cease on
the death of the Participant under Option 1 or the death of the surviving
Annuitant under Option 3.
If Lifetime Option 2 or Option 4 was elected and the death of the
Participant under Option 2, or the surviving Annuitant under Option 4, occurs
prior to the end of the guaranteed minimum payment period, we will pay to the
beneficiary in a lump sum, unless otherwise requested, the present value of the
guaranteed annuity payments remaining.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a lump-sum
to the Beneficiary (unless otherwise requested).
If the Participant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the Beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after acceptable proof
of death, and a request for payment are received at our Home Office. The value
of any death benefit proceeds will be determined as of the next Valuation Date
after we receive acceptable proof of death and a request for payment. Under
Options 2 and 4, such value will be reduced by any payments made after the date
of death.
TAX STATUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
The Company makes no guarantee regarding the tax treatment of any contract or
transaction involving a Contract. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Annuity payments, and on the economic
benefit to the Contract Holder, Participant or Beneficiary may depend upon the
tax status of the individual concerned. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Account investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.
The Company does not anticipate that it will incur any federal income tax
liability attributable to the Separate Account and, therefore, the Company does
not intend to make provisions for any such taxes. However, if changes in the
federal tax laws or interpretation thereof result in the Company being taxed on
income or gains attributable to the Separate Account, then the Company may
impose a charge against the Separate Account (with respect to some or all
Contracts) in order to set aside provisions to pay such taxes.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
IN GENERAL. The Contract is designed for use with Section 403(b) plans and
Section 401(a) plans. The tax rules applicable to retirement plans vary
according to the type of plan and the terms and conditions of the plan.
The Company makes no attempt to provide more than general information about
use of the Contracts with
- --------------------------------------------------------------------------------
11
<PAGE>
the various types of retirement plans. Participants as well as Beneficiaries are
cautioned that the rights of any person to any benefits under the Contracts may
be subject to the terms and conditions of the plans themselves, in addition to
the terms and conditions of the Contracts issued in connection with such plans.
Some retirement plans are subject to limitations on distribution and other
requirements that are not incorporated in the Contracts. Purchasers are
responsible for determining that contributions, distributions and other
transactions relating to the Contracts satisfy applicable laws, and should
consult their legal counsel and tax adviser regarding the suitability of the
Contract.
MINIMUM DISTRIBUTION REQUIREMENTS. The Code has required distribution rules
for Section 403(b) and 401(a) Plans. Under 403(b) Plans, distributions of
amounts held as of December 31, 1986 must generally begin by the end of the
calendar year in which you attain age 75 (or retire, if later, for governmental
or church plans). However, special rules require that some or all of that
balance be distributed earlier if any distributions are taken in excess of the
minimum required amount. Distributions under 401(a) Plans, and distributions
attributable to contributions under Section 403(b) Plans on or after January 1,
1987 (including any earnings on the entire Account Value after that date), must
generally begin by April 1 of the calendar year following the calendar year in
which you attain age 70 1/2. For governmental or church plans, distributions
must begin by April 1 of the calendar year following the year you attain age
70 1/2 or retire, whichever occurs later.
In general, annuity payments must be distributed over your life or the joint
lives of you and your beneficiary, or over a period not greater than your life
expectancy or the joint life expectancies of you and your beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your beneficiary must be made at least as rapidly as under the
method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your beneficiary by December 31 of the year
following your death. However, a spousal beneficiary has certain rollover rights
which can only be exercised in the year of your death. The rules are complex and
you should consult your tax adviser before electing the method of calculation to
satisfy the minimum distribution requirements.
If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year
containing the fifth anniversary of the date of your death. Alternatively,
payments may be made over the life of the beneficiary or over a period not
extending beyond the life expectancy of the beneficiary provided the
distribution begins by December 31 of the calendar year following the calendar
year of your death, or December 31 of the calendar year in which you would have
attained age 70 1/2.
If you fail to receive the minimum required distribution for any tax year, a
50% excise tax is imposed on the required amount that was not distributed.
TAXATION OF DISTRIBUTIONS. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to another
plan of the same type or to an individual retirement annuity/account ("IRA") in
accordance with the Code, or unless you have made after-tax contributions to the
plan, which are not taxed upon distribution. The Code has specific rules that
apply, depending on the type of distribution received, if after-tax
contributions were made.
In general, payments received by your Beneficiaries after your death are
taxed in the same manner as if you had received those payments, except that a
limited death benefit exclusion may apply.
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from annuities are subject to mandatory federal income tax
withholding. We will report to the IRS the taxable portion of all distributions.
The Code imposes a 10% penalty tax on the taxable portion of any
distribution unless made when (a) you have attained age 59 1/2, (b) you have
become disabled, (c) you have died, (d) you have separated from service with the
- --------------------------------------------------------------------------------
12
<PAGE>
plan sponsor at or after age 55, (e) the distribution amount is rolled over into
another plan of the same type or to an IRA in accordance with the terms of the
Code, or (f) the distribution amount is made in substantially equal periodic
payments (at least annually) over your life or life expectancy or the joint
lives or joint life expectancies of you and your plan beneficiary, provided you
have separated from service with the plan sponsor. In addition, the penalty tax
does not apply for the amount of a distribution equal to unreimbursed medical
expenses incurred by you that qualify for deduction as specified in the Code.
The Code may impose other penalty taxes in other circumstances.
SECTION 403(B) PLANS. Under Section 403(b), contributions made by public
school systems and Section 501(c)(3) tax exempt organizations to purchase
annuity contracts for their employees are generally excludable from the gross
income of the employee.
In order to be excludable from taxable income, total annual contributions
made by you and your employer cannot exceed either of two limits set by the
Code. The first limit, under Section 415, is generally the lesser of 25% of your
includable compensation or $30,000. The second limit, which is the exclusion
allowance under Section 403(b), is usually calculated according to a formula
that takes into account your length of employment and any pretax contributions
to certain other retirement plans. These two limits apply to your contributions
as well as to any contributions made by your employer on your behalf. There is
an additional limit that specifically limits your salary reduction contributions
to generally no more than $9,500 annually (subject to indexing); your own limit
may be higher or lower, depending on certain conditions.
Section 403(b)(11) restricts the distribution under Section 403(b) contracts
of: (1) salary reduction contributions made after December 31, 1988; (2)
earnings on those contributions; and (3) earnings during such period on amounts
held as of December 31, 1988. Distribution of those amounts may only occur upon
death of the employee, attainment of age 59 1/2, separation from service,
disability, or financial hardship. In addition, income attributable to salary
reduction contributions may not be distributed in the case of hardship.
If, pursuant to Revenue Ruling 90-24, the Company agrees to accept, under
any of the Contracts covered by this Prospectus, amounts transferred from a Code
Section 403(b)(7) custodial account, such amounts will be subject to the
withdrawal restrictions set forth in Code Section 403(b)(7)(A)(ii).
Generally, no amounts accumulated under the Contract will be taxable prior
to the time of actual distribution. However, the IRS has stated in published
rulings that a variable contract owner, including participants under Section
403(b) plans, will be considered the owner of separate account assets if the
contract owner possesses incidents of investment control over the assets. In
these circumstances, income and gains from the separate account assets would be
currently includable in the variable contract owner's gross income. The Treasury
announced that guidance would be issued in the future regarding the extent to
which owners could direct their investments among Subaccounts without being
treated as owners of the underlying assets of the Separate Account. It is
possible that the Treasury's position, when announced, may adversely affect the
tax treatment of existing contracts. The Company therefore reserves the right to
modify the Contract as necessary to attempt to prevent the Contract owner from
being considered the federal tax owner of the assets of the Separate Account.
SECTION 401(A) PLANS. Section 401(a) permits certain employers to establish
various types of retirement plans for employees, and permits self-employed
individuals to establish various types of retirement plans for themselves and
for their employees. These retirement plans may permit the purchase of the
Contracts to accumulate retirement savings under the plans. Adverse tax
consequences to the Plan, to the Participant or to both may result if this
Contract is assigned or transferred to any individual except to a Participant as
a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a Participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of your compensation or $30,000. In addition,
Purchase Payments will be excluded from a Participant's gross income only if the
401(a) Plan meets certain nondiscrimination requirements.
- --------------------------------------------------------------------------------
13
<PAGE>
MISCELLANEOUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DISTRIBUTION
The Company will serve as the Principal Underwriter for the securities sold
by this Prospectus. The Company is registered as a broker-dealer with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers, Inc. (NASD). As Underwriter, the Company will contract
with one or more registered broker-dealers ("Distributors"), including at least
one affiliate of the Company, to offer and sell the Contracts. All persons
offering and selling the Contracts must be registered representatives of the
Distributors and must also be licensed as insurance agents to sell variable
annuity contracts. These registered representatives may also provide services to
Participants in connection with establishing their Accounts under the Contract.
PAYMENT OF COMMISSIONS. Persons offering and selling the Contracts may
receive commissions in connection with the sale of the Contracts. The maximum
percentage amount that the Company will ever pay as commission with respect to
any given Purchase Payment is with respect to those made during the first year
of Purchase Payments under an Account. The percentage amount will range from 1%
to 3% of those Purchase Payments. The Company may also pay renewal commissions
on Purchase Payments made after the first year and asset-based service fees. The
average of all payments made by the Company is estimated to equal approximately
3% of the total Purchase Payments made over the life of an average Contract. The
Company may also reimburse the Distributor for certain expenses. The name of the
Distributor and the registered representative responsible for your Account are
set forth in your enrollment materials. Commissions and sales related expenses
are paid by the Company and are not deducted from Purchase Payments. (See
"Charges and Deductions.")
THIRD PARTY COMPENSATION ARRANGEMENTS. Occasionally, we may pay commissions
and fees to Distributors which are affiliated or associated with the Contract
Holder or the Participants. We may also enter into agreements with some entities
associated with the Contract Holder or Participants in which we would agree to
pay the entity for certain services in connection with administering the
Contracts. In both these circumstances there may be an understanding that the
Distributor or entity would endorse the Company as a provider of the Contract.
You will be notified if you are purchasing a Contract that is subject to these
arrangements.
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or is not reasonably practicable for
the value of the Subaccount's assets; or (c) during such other periods as the
SEC may by order permit for the protection of investors. The conditions under
which restricted trading or an emergency exists shall be determined by the rules
and regulations of the SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount and then related to the ending redeemable values over the most recent
one, five and ten-year periods (or since inception, if less than ten years).
Standardized returns will reflect the reduction of all recurring charges during
each period (e.g., mortality and expense risk charges, asset-based sales charge
and any administrative expense charge). The non-standardized figures are
computed in the same manner but may also include monthly, quarterly,
year-to-date and three-year periods.
The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.
- --------------------------------------------------------------------------------
14
<PAGE>
VOTING RIGHTS
In accordance with the Company's view of present applicable law, it will
vote the shares of each of the Funds held by the Separate Account at regular and
special meetings of Fund shareholders in accordance with instructions received
from persons having a voting interest in the Separate Account. Participants may
instruct the Contract Holder how to direct the Company to cast the votes for the
portion of the Account Value or valuation reserve attributable to their
Accounts. The Company will vote shares for which it has not received
instructions in the same proportion as it votes shares for which it has received
instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest, as
well as any proxy materials and a form on which to give voting instructions.
Voting instructions will be solicited by written communication at least 14 days
before such meeting. The number of votes to which each person may give direction
will be determined as of the record date set by the Fund.
The number of votes each Contract Holder or Participant, or Beneficiary as
applicable, may cast during the Accumulation Period is equal to the portion of
the Account Value to that Fund, divided by the net asset value of one share of
that Fund. During the Annuity Period, the number of votes is equal to the
valuation reserve applicable to the portion of the Contract attributable to that
Fund, divided by the net asset value of one share of that Fund. In determining
the number of votes, fractional votes will be recognized.
CHANGES IN BENEFICIARY DESIGNATIONS
The designated Beneficiary may be changed at any time prior to the Annuity
Date, subject to limitations contained in the Code and other applicable laws.
Such change will not become effective until written notice of the change is
received by the Company.
MODIFICATION OF THE CONTRACT
The Company may change the Contract as required by federal or state law. In
addition, the Company may, upon 30 days written notice to the Contract Holder,
make other changes to group Contracts that would apply only to individuals who
become Participants under that Contract after the effective date of such
changes. If the Contract Holder does not agree to a change, no new Participants
will be covered under the Contract. Certain changes will require the approval of
appropriate state or federal regulatory authorities.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Susan E. Bryant, Esq., Counsel to the Company.
CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Statement of Additional Information contains more specific information on
the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
<TABLE>
<S> <C>
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE GUARANTEED ACCUMULATION ACCOUNT ("GAA") IS A CREDITED INTEREST OPTION
AVAILABLE DURING THE ACCUMULATION PERIOD UNDER THE CONTRACTS DESCRIBED IN THIS
PROSPECTUS. AMOUNTS ALLOCATED TO GAA ARE HELD IN A NONINSULATED, NONUNITIZED
SEPARATE ACCOUNT. THIS APPENDIX IS A SUMMARY OF GAA AND IS NOT INTENDED TO
REPLACE THE GAA PROSPECTUS. YOU SHOULD READ THE ACCOMPANYING GAA PROSPECTUS
CAREFULLY BEFORE INVESTING.
GAA is a Credited Interest Option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. This option guarantees the minimum interest
rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from three to ten years.
Purchase Payments must remain in GAA for the full Guaranteed Term to receive
the quoted interest rates. Withdrawals or transfers from a Guaranteed Term
before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). An MVA reflects the change in the value of the investments
due to changes in interest rates since the date of deposit. When interest rates
increase after the date of deposit, the value of the investment decreases and
the MVA is negative. Conversely, when interest rates decrease after the date of
deposit, the value of the investment increases, and the MVA is positive. It is
possible that a negative MVA could result in the Participant receiving an amount
which is less than the amount paid into GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to
federal tax penalties or mandatory income tax withholding.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under GAA
transferred to one or more of the Subaccounts available during the Annuity
Period. GAA cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Transfers are permitted among Guaranteed Terms. However, amounts applied to
GAA may not be transferred to another Guaranteed Term of GAA, or to any other
Subaccount or Credited Interest Option available under the Contract, during the
deposit period or the 90 days after the close of the deposit period. We will
apply an MVA to transfers made before the end of a Guaranteed Term, unless such
transfer is due to the maturity of the Guaranteed Term.
CONTRACT LOANS
Loans may not be made against amounts held in GAA, although such value is
included in determining the Account Value against which a loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn for GAA and are reinvested, they will be applied to
the current deposit period. Amounts are proportionately reinvested in the same
manner as they were allocated before the withdrawal. Any negative MVA amount
applied to a withdrawal is not included in the reinvestment.
- --------------------------------------------------------------------------------
16
<PAGE>
APPENDIX II (A)
FIXED PLUS ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED PLUS ACCOUNT.
AMOUNTS ALLOCATED TO THE FIXED PLUS ACCOUNT ARE HELD IN THE COMPANY'S GENERAL
ACCOUNT THAT SUPPORTS GENERAL INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN
THE FIXED PLUS ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON
EXEMPTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THE
PROSPECTUS REGARDING THE FIXED PLUS ACCOUNT, MAY, HOWEVER, BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX
REGARDING THE FIXED PLUS ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will never
fall below the guaranteed minimum. The Company's determination of interest rates
reflects the investment income earned on invested assets and the amortization of
any capital gains and/or losses realized on the sale of invested assets. Under
the Fixed Plus Account, the Company assumes the risk of investment gain or loss
by guaranteeing Account Values and promising a minimum interest rate and Annuity
Payment.
The Fixed Plus Account will reflect a compound interest rate credited by us.
The interest rate quoted is an annual effective yield. Amounts applied to the
Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
Beginning on the tenth Account Year, we will credit amounts held in the
Fixed Plus Account with an interest rate that is at least 0.25% higher than the
then declared interest rate for the Fixed Plus Account for Accounts that have
not reached their tenth anniversary.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to 6 months; or (b) as provided by
federal law.
The Company reserves the right to limit Purchase Payment(s) and/or transfers
to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day our Home Office receives a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of any Additional
Withdrawal Options.
The 20% limit is waived if the partial withdrawal is due to annuitization or
death. The waiver upon death will only be exercised once and must occur within
six months after the Participant's date of death. Any such surrender or
annuitization must also be made pro rata from all Subaccounts and Credited
Interest Options available under the Contract.
If a full withdrawal is requested, we will pay any amounts held in the Fixed
Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers, loans
or annuitizations made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
- --------------------------------------------------------------------------------
17
<PAGE>
5. The balance of the Fixed Plus Account Value 12 months later.
Once we receive a request for a full withdrawal, no further withdrawals,
loans or transfers will be permitted from the Fixed Plus Account. A full
withdrawal from the Fixed Plus Account may be cancelled at any time before the
end of the five-payment period. We will waive the Fixed Plus Account full
withdrawal provision if a full withdrawal is made due to (a) the Participant's
death within 6 months after the Participant's date of death before Annuity
payments begin and request for payment is received; (b) the election of an
Annuity option; or (c) if the Fixed Plus Account value is $3,500 or less and no
withdrawals, transfers, loans or annuitizations have been made from the Account
within the prior 12 months; or (d) the Participant's separation from service
with the employer (if the separation from service is certified by the employer
and the withdrawal request is received within 60 days of the date of
termination), subject to a 3% charge based on the entire Fixed Plus Account
value. If the Participant who separates from service chooses to have the five
annual payments of the Fixed Plus Account withdrawal as described above, then no
charge will be assessed.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of one of the
Additional Withdrawal Options. The 20% limit on transfers will be waived when
the value in the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before the Annuity Date,
you may elect to have amounts which have been accumulating under the Fixed Plus
Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide lifetime variable Annuity Payments. For amounts which
have been accumulating under the Fixed Plus Account, a nonlifetime annuity
option may only be elected on a fixed basis.
SWO
The Systematic Withdrawal Option may not be elected if you have requested a
Fixed Plus Account transfer or withdrawal within the prior 12 month period.
CONTRACT LOANS
If permitted under the Plan, loans may be made from Account Values held in
the Fixed Plus Account. See the loan agreement for a description of the amount
available and the consequences upon loan default if more than 20% of the Fixed
Plus Account Value is used for a loan.
- --------------------------------------------------------------------------------
18
<PAGE>
APPENDIX II(B)
FIXED PLUS ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED PLUS ACCOUNT.
AMOUNTS ALLOCATED TO THE FIXED PLUS ACCOUNT ARE HELD IN THE COMPANY'S GENERAL
ACCOUNT THAT SUPPORTS GENERAL INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN
THE FIXED PLUS ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON
EXEMPTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THE
PROSPECTUS REGARDING THE FIXED PLUS ACCOUNT, MAY, HOWEVER, BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX
REGARDING THE FIXED PLUS ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Plus Account guarantees that amounts allocated to this option will
earn the minimum interest rate specified in the Contract. We may credit a higher
interest rate from time to time. The Company's determination of interest rates
reflects the Investment income earned on invested assets and the amortization of
any capital gains and/or losses realized on the sale of invested assets. Under
this option, we assume the risk of investment gain or loss by guaranteeing Net
Purchase Payment values and promising a minimum interest rate and Annuity
payment.
Under certain emergency conditions, we may defer payment of a Fixed Plus
Account withdrawal value (a) for a period of up to 6 months or (b) as provided
by federal law.
During any calendar year, any withdrawals requested from an Account's Fixed
Plus Account value may not exceed 20% of the Account's Fixed Plus Account Value
as of the date the withdrawal request is received in good order at our Home
Office. The withdrawal value will be reduced by any Fixed Plus Account
withdrawal(s), transfer(s) or annuitizations previously made during the calendar
year.
The 20% limit is waived if the partial withdrawal is due to annuitization or
death. The waiver upon death will only be exercised once and must occur within 6
months after the Participant's date of death.
In the event of an complete Account withdrawal, we will pay any Fixed Plus
Account withdrawal value from the Account with interest, in five annual payments
of:
1. One-fifth of the Fixed Plus Account withdrawal value minus any Fixed Plus
Account withdrawal(s), transfer(s) or annuitizations made during the
calendar year;
2. One-fourth of the remaining Fixed Plus Account withdrawal value 12 months
later;
3. One third of the remaining Fixed Plus Account withdrawal value 12 months
later;
4. One-half of the remaining Fixed Plus Account withdrawal value 12 months
later; and
5. The balance of the Fixed Plus Account withdrawal value as the fifth and
final payment 12 months later.
Once we receive notification of an Account termination, no further
withdrawal(s) or transfer(s) will be permitted from the Fixed Plus Account.
We will waive the Fixed Plus Account full surrender provision if a full
withdrawal is made due to:
(a) the Participant's death within 6 months after the Participant's date of
death before Annuity payments begin and request for payment is received;
(b) the election of an Annuity option;
(c) if the Fixed Plus Account value is $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the Account during the
calendar year), the entire Fixed Plus Account value will be paid in one
sum.
Amounts applied to the Fixed Plus Account will earn the interest rate in
effect when actually applied to the Fixed Plus Account.
- --------------------------------------------------------------------------------
19
<PAGE>
MORTALITY AND EXPENSE RISK CHARGES
The Fixed Plus Account will reflect a compound interest rate credited by us.
The interest rate quoted is an annual effective yield. We make no deductions
from the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers from the Fixed Plus Account to any other available investment
option(s) are allowed once in each calendar year during the Accumulation Period.
The amount that may be transferred will be up to 20% of the amount held in the
Fixed Plus Account. We will waive the 20% transfer limit when the value in the
Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before annuity payments
begin, the Contract Holder, on your behalf, may elect to have amounts which have
been accumulating under the Fixed Plus Account transferred to one or more of the
Subaccounts available during the Annuity Period to provide variable annuity
payments under any of the lifetime or nonlifetime Annuity Options.
- --------------------------------------------------------------------------------
20
<PAGE>
FOR MASTER APPLICATIONS ONLY
I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C GROUP DEFERRED VARIABLE ANNUITY
PROSPECTUS DATED MAY 1, 1996 FOR OPTIONAL RETIREMENT PROGRAMS, AS WELL AS ALL
CURRENT PROSPECTUSES PERTAINING TO THE VARIABLE INVESTMENT OPTIONS AVAILABLE
UNDER THE CONTRACTS.
- ---- PLEASE SEND AN ACCOUNT C STATEMENT OF ADDITIONAL INFORMATION (FORM NO.
91846(S)-2) DATED MAY 1, 1996.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
91846-2 (5/96)
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996
The Retirement Program for Higher Education - Group Variable Annuity Contracts
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the current prospectus for Variable Annuity Account
C (the "Separate Account") dated May 1, 1996.
A free prospectus is available upon request from the local Aetna Life
Insurance and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-525-4225
Read the prospectus before you invest. Unless otherwise indicated, terms used
in this Statement of Additional Information shall have the same meaning as in
the prospectus.
TABLE OF CONTENTS
Page
General Information and History ........................................ 2
Variable Annuity Account C ............................................. 2
Offering and Purchase of Contracts ..................................... 3
Performance Data ....................................................... 3
General ............................................................. 3
Average Annual Total Return Quotations .............................. 4
Annuity Payments ....................................................... 5
Sales Material and Advertising ......................................... 6
Independent Auditors ................................................... 7
Financial Statements of the Separate Account ........................... S-1
Financial Statements of Aetna Life Insurance and Annuity Company ....... F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State
of Connecticut in 1976. Through a merger, it succeeded to the business of
Aetna Variable Annuity Life Insurance Company (formerly Participating Annuity
Life Insurance Company organized in 1954). As of December 31, 1995, the
Company managed over $___ billion of assets, and as of December 31, 1994, it
ranked among the top 2% of all U.S. life insurance companies by size. The
Company is a wholly owned subsidiary of Aetna Retirement Services, Inc.,
which is in turn a wholly owned subsidiary of Aetna Life and Casualty
Company. The Company is engaged in the business of issuing life insurance
policies and annuity contracts in all states of the United States. The
Company's Home Office is located at 151 Farmington Avenue, Hartford,
Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under
the Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges, asset-based sales charge
and administrative expense charge, if any, described in the prospectus, all
expenses incurred in the operations of the Separate Account are borne by the
Company. (See "Charges and Deductions" in the prospectus.) The Company
receives reimbursement for certain administrative costs from some
unaffiliated sponsors of the Funds used as funding options under the
Contract. These fees generally range up to 0.25%.
The assets of the Separate Account are held by the Company. The Separate
Account has no custodian. However, the Funds in whose shares the assets of
the Separate Account are invested each have custodians, as discussed in their
respective prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity
contracts issued by the Company. The Separate Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940, as amended. The assets of each of the
Subaccounts of the Separate Account will be invested exclusively in shares of
the Funds described in the Prospectus. Purchase Payments made under the
Contract may be allocated to one or more of the Subaccounts. The Company may
make additions to or deletions from available investment options as permitted
by law. The availability of the Funds is subject to applicable regulatory
authorization. Not all Funds are available in all jurisdictions, under all
Contracts, or under all Plans. The Funds currently available under the
Contract are as follows:
2
<PAGE>
<TABLE>
<S> <C>
Aetna Variable Fund Fidelity VIP Overseas Portfolio
Aetna Income Shares Franklin Government Securities Trust
Aetna Variable Encore Fund Janus Aspen Aggressive Growth Portfolio
Aetna Investment Advisers Fund, Inc. Janus Aspen Balanced Portfolio
Aetna Ascent Variable Portfolio Janus Aspen Flexible Income Portfolio
Aetna Crossroads Variable Portfolio Janus Aspen Growth Portfolio
Aetna Legacy Variable Portfolio Janus Aspen Short-Term Bond Portfolio
Alger American Growth Portfolio Janus Aspen Worldwide Growth Portfolio
Alger American Small Cap Portfolio Lexington Natural Resources Trust
Calvert Responsibly Invested Balanced Portfolio Neuberger & Berman Growth Portfolio
Fidelity VIP II Contrafund Portfolio Scudder International Portfolio
Fidelity VIP Equity-Income Portfolio TCI Growth
Fidelity VIP Growth Portfolio
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the Depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through
life insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is
continuous. A description of the manner in which Contracts are purchased may
be found in the prospectus under the sections titled "Purchase" and "Contract
Valuation."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
Prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized
returns", calculated in an identical manner but including additional periods.
The standardized total return figures are computed according to a formula in
which a hypothetical initial Purchase Payment of $1,000 is applied to the
various Subaccounts under the Contract, and then related to the ending
redeemable values over one, five and ten year periods (or fractional periods
thereof). The standardized figures reflect the deduction of all recurring
charges during each period (e.g., mortality and expense risk charges,
asset-based sales charges, and administrative expense charges). These
charges will be deducted on a pro rata basis in the case of fractional
periods.
The non-standardized figures use the same formula, but may be computed to
include monthly, quarterly, year-to-date and three-year periods.
3
<PAGE>
If a Fund was in existence prior to the date it became available under the
Contract, standardized and non-standardized total returns may include periods
prior to the date on which such Fund became available under the Contract.
These figures are calculated by adjusting the actual returns of the Fund to
reflect the charges that would have been assessed under the Contract had that
Fund been available under the Contract during that period.
Investment results of the Funds will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will
perform in any future period. Additionally, your Account Value upon
redemption may be more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED
The table below reflects the average annual standardized and non-standardized
total return quotation figures for the period ended December 31, 1995 for
each of the Subaccounts available under the Contract. For those Subaccounts
where results are not available for the full calendar period indicated, the
percentage shown is an average annual return since inception (denoted with
an *).
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
FUND
STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- -------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 04/30/75
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 06/01/78
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund 09/01/75
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 06/23/89
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 07/03/95
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- -------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced
Portfolio 09/30/86
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity Growth Portfolio 11/07/86
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 02/13/87
- -------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 9/13/93
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
FUND
STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- -------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Janus Aspen Balanced Portfolio 09/13/93
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- -------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- -------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- -------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- -------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined
using Accumulation Unit values as of the tenth Valuation Period before the
first Annuity payment is due. Such value (less any applicable premium tax) is
applied to provide an Annuity in accordance with the Annuity and investment
options elected.
The Annuity option tables found in the Contract show, for each form of
Annuity, the amount of the first Annuity payment for each $1,000 of value
applied. Thereafter, variable Annuity payments fluctuate as the Annuity Unit
value(s) fluctuates with the investment experience of the selected investment
option(s). The first payment and subsequent payments also vary depending on
the assumed net investment rate selected (3.5% or 5% per annum). Selection
of a 5% rate causes a higher first payment, but Annuity payments will
increase thereafter only to the extent that the net investment rate increases
by more than 5% on an annual basis. Annuity payments would decline if the
rate failed to increase by 5%. Use of the 3.5% assumed rate causes a lower
first payment, but subsequent payments would increase more rapidly or decline
more slowly as changes occur in the net investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number
of Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where
(a) is the amount of the first Annuity payment based on a particular
investment option, and (b) is the then current Annuity Unit value for that
investment option. As noted, Annuity Unit values fluctuate from one Valuation
Period to the next; such fluctuations reflect changes in the net investment
factor for the appropriate Fund(s) (with a ten Valuation Period lag which
gives the Company time to process Annuity payments) and a mathematical
adjustment which offsets the assumed net investment rate of 3.5% or 5% per
annum.
5
<PAGE>
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Contract or Account and that
the value of an Accumulation Unit for the tenth Valuation Period prior to
retirement was $13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Period in
which the first payment was due was $13.400000. When this value is divided
into the first monthly payment, the number of Annuity Units is determined to
be 20.414. The value of this number of Annuity Units will be paid in each
subsequent month.
If the net investment factor with respect to the appropriate Fund is
1.0015000 as of the tenth Valuation Period preceding the due date of the
second monthly payment, multiplying this factor by .9999058* (to neutralize
the assumed net investment rate of 3.5% per annum built into the number of
Annuity Units determined above) produces a result of 1.0014057. This is then
multiplied by the Annuity Unit value for the prior Valuation Period (assume
such value to be $13.504376) to produce an Annuity Unit value of $13.523359
for the Valuation Period in which the second payment is due.
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor
to neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature
that explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable
annuity contracts and other types of savings or investment products,
including, but not limited to, personal savings accounts and Certificates of
Deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Funds to established market indexes
such as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial
Average or to the percentage change in values of other management investment
companies that have investment objectives similar to the Fund being compared.
We may publish in advertisements and reports, the ratings and other
information assigned to us by one or more independent rating organizations
such as A.M. Best Company, Duff & Phelps, Standard & Poor's Corporation and
Moody's Investors Services, Inc. The purpose of the ratings is to reflect
our financial strength and/or claims-paying ability. We may also quote
ranking services such as Morningstar's Variable Annuity/Life Performance
Report and Lipper's Variable Insurance Products Performance
6
<PAGE>
Analysis Service (VIPPAS), which rank variable annuity or life Subaccounts or
their underlying funds by performance and/or investment objective. From time
to time, we will quote articles from newspapers and magazines or other
publications or reports, including, but not limited to The Wall Street
Journal, Money magazine, USA Today and The VARDS Report.
The Company may provide in advertising, sales literature, periodic
publications or other materials information on various topics of interest to
current and prospective Contract Holders or Participants. These topics may
include the relationship between sectors of the economy and the economy as a
whole and its effect on various securities markets, investment strategies and
techniques (such as value investing, market timing, dollar cost averaging,
asset allocation, constant ratio transfer and account rebalancing), the
advantages and disadvantages of investing in tax-deferred and taxable
investments, customer profiles and hypothetical purchase and investment
scenarios, financial management and tax and retirement planning, and
investment alternatives to certificates of deposit and other financial
instruments, including comparison between the Contracts and the
characteristics of and market for such financial instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are
the independent auditors for the Separate Account and for the Company. The
services provided to the Separate Account include primarily the examination
of the Separate Account's financial statements and the review of filings made
with the SEC.
7
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
INDEX
Independent Auditors' Report ............................................. S-2
Statement of Assets and Liabilities ...................................... S-3
Statement of Operations .................................................. S-4
Statements of Changes in Net Assets ...................................... S-5
Notes to Financial Statements ............................................ S-6
FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT
AND INSURANCE COMPANY WILL BE PROVIDED
IN A SUBSEQUENT POST-EFFECTIVE AMENDMENT
S-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT C
VARIABLE ANNUITY CONTRACTS
ISSUED BY
AETNA LIFE INSURANCE AND ANNUITY COMPANY
FORM NO. 91846-2(S) ALIAC ED. MAY 1996
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:*
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of December 31, 1995
- Statement of Operations for the year ended December 31, 1995
- Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
- Notes to Financial Statements
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993
- Consolidated Balance Sheets as of December 31, 1995 and 1994
- Consolidated Statements of Changes in Shareholder's Equity for
the years ended December 31, 1995, 1994 and 1993
- Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance and
Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3) Form of Broker-Dealer Agreement(2)
(4.1) Form of Variable Annuity Contracts and Certificates of Group Annuity
Coverage (G-CDA-95(ORP)), (GTCC-95(ORP)) and (G-CDA-95(TORP))(3)
(4.2) Form of Variable Annuity Contract (G-TDA-IB(AORP))*
(4.3) Form of Variable Annuity Contract (G-TDA-IB(ATORP))*
(4.4) Form of Variable Annuity Contract (G-CDA-IB(ORP))(4)
(4.5) Form of Variable Annuity Contract(G-CDA-IB(TORP))(4)
(4.6) Form of Certificate of Group Annuity Coverage (GTCC-95(TORP))(3)
(5) Form of Variable Annuity Contract Application (300-MOP-IB)(3)
(6) Certification of Incorporation and By-Laws of Depositor(5)
(7) Not applicable
<PAGE>
(8.1) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Alger American Fund and Fred Alger Management,
Inc. dated September 1, 1993(2)
(8.2) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company (Calvert
Responsibly Invested Balanced Portfolio formerly Calvert Socially
Responsible Series) dated March 13, 1989 and amended December 27,
1993(6)
(8.3) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation dated
February 1, 1994 (Variable Insurance Products Fund)(7)
(8.4) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation dated
February 1, 1994 (Variable Insurance Products Fund II)(7)
(8.5) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989(8)
(8.6) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994 and
amended June 15, 1994(9)
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Lexington Management Corporation regarding
Natural Resources Trust dated December 1, 1988 and amended
February 11, 1991(6)
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Advisers Management Trust (now Neuberger &
Berman Advisers Management Trust) dated April 14, 1989(2)
(8.9) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Scudder Variable Life Investment Fund dated
April 27, 1992 and amended February 19, 1993 and August 13, 1993(10)
(8.10) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Investors Research Corporation and TCI Portfolios,
Inc. dated July 29, 1992 and amended December 27, 1992 and June 1,
1994(10)
(9) Opinion of Counsel*
(10.1) Consent of Independent Auditors*
(10.2) Consent of Counsel*
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data*
(14) Financial Data Schedule*
(15.1) Powers of Attorney(11)
(15.2) Authorization for Signatures(12)
* To be filed by amendment.
1. Incorporated by reference to Registration Statement on Form N-4
(File No. 2-52449) filed on February 28, 1986.
<PAGE>
2. Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-75996) filed on April 21,
1994.
3. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-91846) filed on May 1, 1995.
4. Incorporated by reference to Post-Effective Amendment No. 3 to
Registration Statement on Form N-4 (File No. 33-75976) filed on April 28,
1995.
5. Incorporated by reference to Post-Effective Amendment No. 58 to
Registration Statement on Form N-4 (File No. 2-52449) filed on February 28,
1994.
6. Incorporated by Reference to Post-Effective Amendment No. 4 to
Registration Statement on Form N-4 (File No. 33-75978) filed on March 24,
1995.
7. Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-75978) filed on April 25,
1994.
8. Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-75990) filed on April 25,
1994.
9. Incorporated by reference to Post-Effective Amendment No. 2 to
Registration Statement on Form N-4 (File No. 33-75960) filed on August 9,
1994.
10. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-88720) filed on January 20, 1995.
11. The Power of Attorney for David E. Bushong, Acting Chief Financial
Officer, is incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-87932), as filed
electronically, on September 18, 1995. The Powers of Attorney for all other
signatories are incorporated by reference to Post-Effective Amendment No. 5
to Registration Statement on Form N-4 (File No. 33-75982), as filed
electronically, on February 20, 1996.
12. Incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-91846) as filed
electronically on August 16, 1995.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal
Business Address* Positions and Offices with Depositor
- ------------------ ------------------------------------
Daniel P. Kearney Director and President
Timothy A. Holt Director
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Senior Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
James C. Hamilton Vice President and Treasurer
David E. Bushong Acting Chief Financial Officer
Eugene M. Trovato Vice President, Chief Accounting Officer and
Corporate Controller
Zoe Baird Senior Vice President and General Counsel
Susan E. Schechter Corporate Secretary and Counsel
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Incorporated herein by reference to Item 26 to Registration Statement on
Form N-4 (File No. 33-75982), as filed electronically on February 20, 1996.
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of December 31, 1995, there were 577,320 individuals holding interests
in variable annuity contracts funded through Account C.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Section 33-320a of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and officers of
Connecticut corporations. The statute provides in general that Connecticut
corporations shall indemnify their officers, directors, employees, agents,
and certain other defined individuals against judgments, fines, penalties,
amounts paid in settlement and reasonable expenses actually incurred in
connection with proceedings against the corporation. The corporation's
obligation to provide such indemnification does not apply unless (1) the
individual is successful on the merits in the defense of any such proceeding;
or (2) a determination is made (by a majority of the board of directors not a
party to the proceeding by written consent; by independent legal counsel
selected by a majority of the directors not involved in the proceeding; or by
a majority of the shareholders not involved in the proceeding) that the
individual acted in good faith and in the best interests of the corporation;
or (3) the court, upon application by the individual, determines in view of
all the circumstances that such person is reasonably entitled to be
indemnified.
C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut
corporation cannot indemnify a director or officer to an extent either
greater or less than that authorized by the statute, e.g., pursuant to its
certificate of incorporation, bylaws, or any separate contractual
arrangement. However, the statute does specifically authorize a corporation
to procure indemnification insurance to provide greater indemnification
rights. The premiums for such insurance may be shared with the insured
individuals on an agreed basis.
Consistent with the statute, Aetna Life and Casualty Company has procured
insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor, which supplements the indemnification
rights provided by C.G.S. Section 33-320a to the extent such coverage does
not violate public policy.
ITEM 29. PRINCIPAL UNDERWRITER
(a) In addition to serving as the principal underwriter for the
Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also acts
as the principal underwriter for Variable Life Account B and Variable
Annuity Accounts B and G (separate accounts of ALIAC registered as unit
investment trusts), and Variable Annuity Account I (a separate account
of Aetna Insurance Company of America registered as a unit investment
trust). Additionally, ALIAC is the investment adviser for Aetna
Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna
Investment Advisers Fund, Inc., Aetna GET Fund, Aetna Series Fund, Inc.
and Aetna Generation Portfolios, Inc. ALIAC is also the depositor of
Variable Life Account B and Variable Annuity Accounts B and G.
<PAGE>
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1995:
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation
Principal Discounts and on Redemption Brokerage
Underwriter Commissions or Annuitization Commissions Compensation*
- ----------- ----------- ---------------- ----------- -------------
Aetna Life $ ** $ **
Insurance and
Annuity
Company
* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs incurred
in the sales and administration of the contracts issued under Account C.
** To be updated by amendment.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All records concerning contract owners of Variable Annuity Account C are
located at the home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement
on Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
<PAGE>
(b) to include as part of any application to purchase a contract
offered by a prospectus which is part of this registration statement on
Form N-4, a space that an applicant can check to request a Statement of
Additional Information; and
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this Form N-4
promptly upon written or oral request.
(d) The Company hereby represents that it is relying upon and
complies with the provisions of Paragraphs (1) through (4) of the SEC
Staff's No-Action Letter dated November 22, 1988 with respect to
language concerning withdrawal restrictions applicable to plans
established pursuant to Section 403(b) of the Internal Revenue Code.
See American Counsel of Life Insurance; SEC No-Action Letter,
[1989 Transfer Binder] Fed. SEC. L. Rep. (CCH) PARA 78,904 at 78,523
(November 22, 1988).
(e) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication
of such issue.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, the Registrant, Variable Annuity Account C of Aetna Life
Insurance and Annuity Company, has duly caused this Post-Effective Amendment
No. 2 to its Registration Statement on Form N-4 (File No. 33-91846) to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Hartford, State of Connecticut, on the 22nd day of February, 1996.
VARIABLE ANNUITY ACCOUNT C OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(REGISTRANT)
By: AETNA LIFE INSURANCE AND ANNUITY
COMPANY
(DEPOSITOR)
By: Daniel P. Kearney*
----------------------------------------
Daniel P. Kearney
President
As required by the Securities Act of 1933, as amended, this Post-Effective
Amendment No. 2 to the Registration Statement on Form N-4 (File No. 33-91846)
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
Daniel P. Kearney* Director and President )
- --------------------------- (principal executive officer) )
Daniel P. Kearney )
)
Timothy A. Holt* Director ) February
- --------------------------- ) 22, 1996
Timothy A. Holt )
)
David E. Bushong* Acting Chief Financial Officer )
- --------------------------- )
David E. Bushong )
)
Eugene M. Trovato* Vice President, Chief Accounting )
- --------------------------- Officer and Corporate Controller )
Eugene M. Trovato )
)
Christopher J. Burns* Director )
- --------------------------- )
Christopher J. Burns )
)
<PAGE>
Laura R. Estes* Director )
- --------------------------- )
Laura R. Estes )
)
Gail P. Johnson* Director )
- --------------------------- )
Gail P. Johnson )
)
John Y. Kim* Director )
- --------------------------- )
John Y. Kim )
)
Shaun P. Mathews* Director )
- --------------------------- )
Shaun P. Mathews )
)
Glen Salow* Director )
- --------------------------- )
Glen Salow )
)
Creed R. Terry* Director )
- --------------------------- )
Creed R. Terry )
By: /s/ Julie E. Rockmore
--------------------------------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT PAGE
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance *
and Annuity Company establishing Variable Annuity Account C
99-B.3 Form of Broker-Dealer Agreement *
99-B.4.1 Form of Variable Annuity Contracts and Certificates of Group *
Annuity Coverage (G-CDA-95(ORP)), (GTCC-95(ORP)) and
(G-CDA-95(TORP))
99-B.4.2 Form of Variable Annuity Contract (G-TDA-IB(AORP)) **
99-B.4.3 Form of Variable Annuity Contract (G-TDA-IB(ATORP)) **
99-B.4.4 Form of Variable Annuity Contract (G-CDA-IB(ORP)) *
99-B.4.5 Form of Variable Annuity Contract (G-CDA-IB(TORP)) *
99-B.4.6 Form of Certificate of Group Annuity Coverage (GTCC-95(TORP)) *
99-B.5 Form of Variable Annuity Contract Application (300-MOP-IB) *
99-B.6 Certification of Incorporation and By-Laws of Depositor *
99-B.8.1 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Alger American Fund and Fred Alger
Management, Inc. dated September 1, 1993
99-B.8.2 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Calvert Asset Management Company
(Calvert Responsibly Invested Balanced Portfolio formerly
Calvert Socially Responsible Series) dated March 13, 1989 and
amended December 27, 1993
* Incorporated by reference
** To be filed by amendment
<PAGE>
EXHIBIT NO. EXHIBIT PAGE
99-B.8.3 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Franklin Advisers, Inc. dated
January 31, 1989
99-B.8.4 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Fidelity Distributors Corporation
dated February 1, 1994 (Variable Insurance Products Fund)
99-B.8.5 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Fidelity Distributors Corporation
dated February 1, 1994 (Variable Insurance Products Fund II)
99-B.8.6 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Janus Aspen Series dated April 19,
1994 and amended June 15, 1994
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Lexington Management Corporation
regarding Natural Resources Trust dated December 1, 1988
and amended February 11, 1991
99-B.8.8 Fund Participation Agreement between Aetna Life Insurance and *
Annuity Company and Advisers Management Trust (now Neuberger
& Berman Advisers Management Trust) dated April 14, 1989
99-B.8.9 Fund Participation Agreement between Aetna Life Insurance and *
Annuity Company and Scudder Variable Life Investment Fund
dated April 27, 1992 and amended February 19, 1993 and
August 13, 1993
99-B.8.10 Fund Participation Agreement between Aetna Life Insurance and *
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended
December 27, 1992 and June 1, 1994
99-B.9 Opinion of Counsel **
* Incorporated by reference
** To be filed by amendment
<PAGE>
EXHIBIT NO. EXHIBIT PAGE
99-B.10.1 Consent of Independent Auditors **
99-B.10.2 Consent of Counsel **
99-B.13 Computation of Performance Data **
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule **
* Incorporated by reference
** To be filed by amendment
