<PAGE>
As filed with the Securities and Exchange Registration No. 2-52449*
Commission on February 28, 1996 Registration No. 811-2513
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Post-Effective Amendment No. 62 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 individual 403(b) tax deferred annuity contracts
covered by Registration Statement 33-75992.
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
<TABLE>
<CAPTION>
Form N-4
- --------
Item No. Part A (Prospectus) Location
- -------- ------------------- ---------
<S> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Form N-4
- --------
Item No. Part B (Statement of Additional Information) Location
- -------- -------------------------------------------- ---------
<S> <C> <C>
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
</TABLE>
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 deferred variable annuity contracts ("Contracts")
issued by Aetna Life Insurance and Annuity Company (the "Company"). The
Contracts are available through participation in (1) plans adopted by public
school systems and certain tax-exempt (Section 501(c)(3)) organizations under
Section 403(b) of the Code; (2) deferred compensation plans adopted by state and
local governments for their employees or independent contractors, or both, under
Section 457 of the Internal Revenue Code of 1986, as amended, and under (3)
defined contribution plans under Section 401(a) of the Code. (See "Purchase.")
Only interests in group contracts are currently offered for sale; however,
"Contracts" shall also apply to individual Contracts which were issued by the
Company in the past to Participants under certain Section 403(b) Plans.
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
- Aetna Income Shares
- Aetna Variable Encore Fund
- Aetna Investment Advisers Fund, Inc.
- TCI Growth (a Twentieth Century fund)
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account and the Fixed Account. (On June 30, 1995 the
Fixed Plus Account replaced the Fixed Account as the Credited Interest Option
for Contracts issued to Participants under the State of Mississippi Deferred
Compensation Plan. See Appendix III. The Guaranteed Accumulation Account will
continue to be available.) 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 in 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 17 of this Prospectus. An
SAI may be obtained by indicating the request on the enrollment forms 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........................................................ 2
PURCHASE............................................................................. 2
Contract Availability............................................................ 2
Purchasing Interests in the Contract............................................. 3
Purchase Payments................................................................ 3
Transfer Credits................................................................. 3
Right to Cancel.................................................................. 4
CHARGES AND DEDUCTIONS............................................................... 4
Daily Deductions from the Separate Account....................................... 4
Mortality and Expense Risk Charge............................................ 4
Administrative Expense Charge................................................ 4
Maintenance Fee.................................................................. 4
Deferred Sales Charge............................................................ 5
Fund Expenses.................................................................... 6
Premium and Other Taxes.......................................................... 6
CONTRACT VALUATION................................................................... 6
Account Value.................................................................... 6
Accumulation Units............................................................... 7
Net Investment Factor............................................................ 7
TRANSFERS............................................................................ 7
WITHDRAWALS.......................................................................... 7
Reinvestment Privilege........................................................... 8
CONTRACT LOANS....................................................................... 8
ADDITIONAL WITHDRAWAL OPTIONS........................................................ 9
DEATH BENEFIT DURING ACCUMULATION PERIOD............................................. 9
ANNUITY PERIOD....................................................................... 10
Annuity Period Elections......................................................... 10
Annuity Options.................................................................. 10
Annuity Payments................................................................. 11
Charges Deducted During the Annuity Period....................................... 11
Death Benefit Payable During the Annuity Period.................................. 11
TAX STATUS........................................................................... 12
Introduction..................................................................... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Taxation of the Company.......................................................... 12
Contracts Used with Certain Retirement Plans..................................... 12
MISCELLANEOUS........................................................................ 15
Distribution..................................................................... 15
Delay or Suspension of Payments.................................................. 15
Performance Reporting............................................................ 16
Voting Rights.................................................................... 16
Modification of the Contract..................................................... 16
Transfer of Ownership; Assignment................................................ 16
Legal Matters and Proceedings.................................................... 16
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 17
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT.......................................... 18
APPENDIX II--THE FIXED ACCOUNT....................................................... 19
APPENDIX III--THE FIXED PLUS ACCOUNT
(State of Mississippi Deferred Compensation Plan only)............................. 20
</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 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.
CODE: Internal Revenue Code of 1986, as amended.
COMPANY (WE, US): Aetna Life Insurance and Annuity Company.
CONTRACT: The group and individual deferred, variable annuity contracts
described in this Prospectus.
CONTRACT HOLDER: The person or entity to whom the Contract is issued. The
Contract Holder under a group Contract is usually the employer; the Contract
Holder under an individual Contract under a Section 403(b) Plan is the
Participant.
CREDITED INTEREST OPTIONS: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account and the Fixed Account, each of which is described in an Appendix to this
Prospectus. The Fixed Plus Account is available only to Participants in the
State of Mississippi Deferred Compensation Plan. (See Appendix III.) Amounts
allocated to the Credited Interest Options are included in the Account Value.
ERISA: Employee Retirement Income Security Act of 1974, as amended.
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.
PARTICIPANT (YOU): A person participating in a Plan maintained by an eligible
organization.
PLAN(S): Tax-deferred annuity plans established under Section 403(b) of the Code
for employees of public school systems and certain tax-exempt organizations
(Section 501(c)(3) organizations), deferred compensation plans adopted by state
and local governments for their employees or independent contractors, or both,
under Section 457 of the Code and defined contribution plans established under
Section 401(a) of the Code.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
PLAN ACCOUNT: The record established for a Contract Holder of the Net Purchase
Payment(s) accumulated under a Contract where individual Accounts are not
maintained.
PURCHASE PAYMENT(S): The gross payment(s) made to the Company under a Contract.
PURCHASE PAYMENT PERIODS: For "Installment Purchase Payment Accounts," the
period of time for completion of the agreed upon annual number and amount of
Purchase Payments. For example, if it is determined that the Purchase Payment
Period will consist of 12 payments per year and only 11 payments are made, the
Purchase Payment Period is not completed until the twelfth Purchase Payment is
made.
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 and individual 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 (1) public
school systems and certain tax exempt (Section 501(c)(3)) organizations for
their employees under Section 403(b) of the Code ("403(b) Plans"); (2) deferred
compensation plans adopted by state and local governments for their employees or
independent contractors or both under Section 457 of the Code ("457 Plans"); and
(3) qualified defined contribution plans under Section 401(a) of the Code ("401
Plans").
CONTRACT PURCHASE
The group Contract may be purchased by eligible organizations on behalf of a
group made up of their employees. Eligible employees may participate in the
Contract by completing the enrollment 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 or through periodic salary reductions.
Individual Contracts are no longer offered for sale, but were issued to
Participants under some Section 403(b) Plans prior to May 1, 1996. (See
"Purchase.")
FREE LOOK PERIOD
Participation under the Contract may be cancelled 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
you will receive upon cancellation will reflect the investment performance of
the Subaccounts into which your Purchase Payments were deposited. In some cases
this may be more or less than the amount of your 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 Account.
The Fixed Plus Account is available only to Participants in the State of
Mississippi Deferred Compensation Plan. (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 and any administrative expense charge), as well as any annual
maintenance fee and premium and other taxes. The Funds also incur certain fees
and expenses which are deducted directly from the Funds. A deferred sales charge
may apply upon a full or partial withdrawal of the Account Value. (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 from the Credited
Interest Options.)
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
WITHDRAWALS
The Contract Holder may withdraw all or a part of the Account Value prior to
the Annuity Date by properly completing a disbursement form and sending it to
the Company. Certain charges may be assessed upon withdrawal. The withdrawal may
also be subject to income tax and a federal tax penalty. The Code restricts full
and partial withdrawals under Section 403(b) Plans 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
Participants under Section 403(b) Plans may request a loan from their
Account Value at any time during the Accumulation Period. Loans are not
available from Contracts issued under Section 457 and 401(a) Plans. (See
"Contract Loans.")
DEATH BENEFIT
A death benefit is payable if the Participant dies before the Annuity Date.
Death benefit proceeds will be paid 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 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 which
may be made on either a fixed, variable or combination fixed and variable basis.
If a variable payout is selected, 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
For 457 Plans, contributions and earnings are not generally taxed until
distributed or made available under the employer's plan. For Section 403(b) and
401(a) Plans, contributions and earnings are not generally taxed until you or
your beneficiary(ies) actually receive a distribution from the Contract, and 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." No sales charge is
paid upon purchase of the Contract. All costs that are borne directly or
indirectly under the Subaccounts and Funds are shown below. Some expenses may
vary as explained under "Charges and Deductions." Charges shown do not include
premium taxes that may be applicable. For more information regarding fees and
expenses paid out of the assets of a particular Fund, see the Fund's prospectus.
DIRECT CHARGES. These charges are deducted directly from the Account Value. They
include:
DEFERRED SALES CHARGE. The deferred sales charge is deducted as a
percentage of the amount withdrawn. The total amount deducted for the
deferred sales charge will not exceed 8.5% of the total Purchase Payments
applied to the Account. The amount of the deferred sales charge is
calculated as follows:
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT ACCOUNTS: SINGLE PURCHASE PAYMENT ACCOUNTS:
PURCHASE PAYMENT DEFERRED SALES ACCOUNT YEARS DEFERRED SALES
PERIODS COMPLETED CHARGE DEDUCTION COMPLETED CHARGE DEDUCTION
- ------------------------------ ---------------- ------------------------------ ----------------
<S> <C> <C> <C>
Less than 5 5% Less than 5 5%
5 or more but less than 7 4% 5 or more but less than 6 4%
7 or more but less than 9 3% 6 or more but less than 7 3%
9 or more but less than 10 2% 7 or more but less than 8 2%
More than 10 0% 8 or more but less than 9 1%
9 or more 0%
</TABLE>
<TABLE>
<S> <C>
ANNUAL CONTRACT MAINTENANCE FEE -- Installment Purchase Payment Account................... $ 20.00
-- Single Purchase Payment Account........................... $ 0.00
The maintenance fee will generally be deducted annually from each Account during the
Accumulation Period. The amount of the maintenance fee may be reduced or eliminated for
group contracts. The amount shown is the MAXIMUM maintenance fee that can be deducted
under the Contract.
</TABLE>
INDIRECT CHARGES. 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%
ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an Administrative Expense Charge.
However, we reserve the right to deduct a daily charge from the Subaccounts, equivalent on
an annual basis to not more than 0.25%..................................................... 0.00%
-----
TOTAL SEPARATE ACCOUNT CHARGES........................................................... 1.25%
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, these figures are a percentage of each Fund's
average net assets and are based on figures for the year ended December 31,
1995. 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.
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES(1) OTHER EXPENSES TOTAL FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
<S> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
TCI Growth(2)
</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) 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.
The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For the
purposes of these Examples, the maximum maintenance fee of $20.00 that can be
deducted under the Contract has been converted to a percentage of assets equal
to %.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
------------------------------------- -------------------------------------
IF YOU WITHDRAW YOUR ENTIRE ACCOUNT IF YOU DO NOT WITHDRAW YOUR ACCOUNT
VALUE AT THE END OF THE PERIODS VALUE, OR IF YOU ANNUITIZE AT THE END
SHOWN, YOU WOULD PAY THE FOLLOWING OF THE PERIODS SHOWN, YOU WOULD PAY
EXPENSES, INCLUDING ANY APPLICABLE THE FOLLOWING EXPENSES (NO DEFERRED
DEFERRED SALES CHARGE: SALES CHARGE IS REFLECTED):*
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers
Fund, Inc.
TCI Growth
</TABLE>
- ------------------------------
* This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)
- --------------------------------------------------------------------------------
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
TEN-YEAR PERIOD ENDED DECEMBER 31, 1995 (AS APPLICABLE), 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 1991 1990 1989 1988
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $107.925 $102.383 $97.165 $77.845 $76,311 $59.871 $52.885
Value at end of period $105.558 $107.925 $102.383 $97.165 $77.845 $76.311 $59.871
Increase (decrease) in value of
accumulation unit(1) (2.19)% 5.41% 5.37% 24.82% 2.01% 27.46% 13.21%
Number of accumulation units
outstanding at end of period 13,966,072 21,148,863 24,201,565 20,948,226 18,362,906 17,142,820 16,455,396
AETNA INCOME SHARES
Value at beginning of period $42.283 $39.038 $36.789 $31.192 $28.943 $25.574 $24.061
Value at end of period $40.173 $42.283 $39.038 $36.789 $31.192 $28.943 $25.574
Increase (decrease) in value of
accumulation unit(1) (4.99)% 8.31% 6.11% 17.94% 7.77% 13.17% 6.29%
Number of accumulation units
outstanding at end of period 5,108,720 8,210,666 8,507,292 7,844,412 6,984,793 6,202,834 5,955,293
AETNA VARIABLE ENCORE FUND
Value at beginning of period $35.282 $34.619 $33.812 $32.138 $30.012 $27.783 $26.171
Value at end of period $36.271 $35.282 $34.619 $33.812 $32.138 $30.012 $27.783
Increase (decrease) in value of
accumulation unit(1) 2.80% 1.92% 2.39% 5.21% 7.08% 8.02% 6.16%
Number of accumulation units
outstanding at end of period 3,679,802 5,086,515 7,534,662 8,430,082 10,220,110 8,286,033 8,154,644
AETNA INVESTMENT
ADVISERS FUND, INC.
Value at beginning of period $14.519 $13.379 $12.736 $10.896 $10.437 $10.000(2)
Value at end of period $14.270 $14.519 $13.379 $12.736 $10.896 $10.437
Increase (decrease) in value of
accumulation unit(1) (1.71)% 8.52% 5.05% 16.89% 4.40% 4.37%
Number of accumulation units
outstanding at end of period 21,990,186 30,784,750 34,802,433 22,898,099 17,078,985 9,535,986
TCI GROWTH
Value at beginning of period $10.463 $10.000(3)
Value at end of period $10.213 $10.463
Increase (decrease) in value of
accumulation unit(1) (2.39)% 4.63%
Number of accumulation units
outstanding at end of period 12,096,731 12,272,152
<CAPTION>
1987 1986
--------- ---------
<S> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $50.760 $43.205
Value at end of period $52.885 $50.760
Increase (decrease) in value of
accumulation unit(1) 4.19% 17.49%
Number of accumulation units
outstanding at end of period 16,497,406 16,578,251
AETNA INCOME SHARES
Value at beginning of period $23.308 $20.703
Value at end of period $24.061 $23.308
Increase (decrease) in value of
accumulation unit(1) 3.23% 12.58%
Number of accumulation units
outstanding at end of period 5,372,271 6,188,470
AETNA VARIABLE ENCORE FUND
Value at beginning of period $24.812 $23.504
Value at end of period $26.171 $24.812
Increase (decrease) in value of
accumulation unit(1) 5.48% 5.57%
Number of accumulation units
outstanding at end of period 7,326,151 6,692,947
AETNA INVESTMENT
ADVISERS FUND, INC.
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
TCI GROWTH
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
</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. These
figures do not reflect the deferred sales charge or the fixed dollar annual
maintenance fee, if any. Inclusion of these charges would reduce the
investment results shown.
(2) The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(3) The initial Accumulation Unit value was established at $10.000 on February
1, 1993, the date on which the Portfolio became available under the
Contract.
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<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 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 other
income, gains or losses of the Company. All obligations arising under the
Contracts are general corporate obligations of the Company.
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.
Under group Contracts, 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, under all Contracts, or in 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)
- -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.(2)
Investment Advisers for each of the Funds:
(1) Aetna Life Insurance and Annuity Company
(2) 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 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.
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 received
the quoted interest rates, or a market value adjustment (which may be positive
or negative) will be applied. (See Appendix I.)
- - The Fixed Account is a part of the Company's general account. The Fixed
Account guarantees a minimum interest rate, as specified in the Contract. The
Company may credit higher interest rates from time to time. Transfers from the
Fixed Account are limited. (See Appendix II.)
PURCHASE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACT AVAILABILITY
The Contracts are designed to fund Plans adopted by (1) public school
systems and certain tax-exempt (Section 501(c)(3)) organizations for their
employees under Section 403(b) of the Code; (2) deferred compensation plans
adopted by state and local governments for their employees or independent
contractors or both under Section 457; and (3) qualified defined contribution
plans under Section 401(a) of the Code. The Contract Holder must notify the
Company as to whether Title I of ERISA including the Retirement Equity Act of
1984, applies to the Plan.
- --------------------------------------------------------------------------------
2
<PAGE>
Only interests in group contracts are currently offered for sale; however,
individual contracts were available in the past for use in connection with
certain Section 403(b) plans, and this prospectus also describes those
individual Contracts.
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 or association, and individual
accounts are established for each Participant. An individual Contract is owned
by the Participant. In both cases, a Participant's interest in the Contract is
known as his or her "Account."
For Contracts issued to 457 Plans, the Contract Holder has all right, title
and interest in amounts held under the Contract. The Contract will be part of
the employer's general assets, subject to the claims of its general creditors.
For group Contracts issued to 403(b) Plans, the Contract is issued to the
employer as the Contract Holder. However, Participants have rights and interest
in amounts held under the Contract. For individual Contracts, Participants have
all rights under the Contract.
For Contracts issued to 401(a) Plans, Participants have such rights under
the Contract as are set forth under the Plan.
Benefits available to you are governed exclusively by the provisions of the
Plan. Some of the options and elections under the Contract may not be available
to you under the provisions of the Plan. Generally, for 403(b) Plans, elections
may be made by you; for 457 Plans, elections must be made by the Contract
Holder.
There are times when employers and employees enter into an agreement
whereby, as a condition of employee participation in a 403(b) Plan, the
employees agree that the employer will have sole responsibility for all Contract
transactions. While we are not a party to any 403(b) Plans adopted by various
employers, we recognize each such agreement between the employer and employees
and, in those situations, require employer authorization for all Contract
transactions.
PURCHASING INTERESTS IN THE CONTRACT
Eligible organizations may acquire a group Contract by submitting the
appropriate forms to the Company. Once we approve the forms, a group Contract is
issued to the employer or association 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 forms within two business
days of receipt. If the enrollment forms are 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 enrollment forms. 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
Generally, two types of Purchase Payments may be made under the Contract,
and depending upon which type of payment is made, different Accounts may be
established for each payment type. Continuing, periodic payments will be placed
in "Installment Purchase Payment Accounts." Lump-sum transfers of amounts
accumulated under a pre-existing plan may be placed in "Single Purchase Payment
Accounts" in accordance with the Company's procedures and minimums in effect at
the time of purchase. The Code imposes a maximum limit on annual Purchase
Payments which may be excluded from a Participant's gross income. (See "Tax
Status.")
For 457 Plan Participants, installment Purchase Payments must be at least
$50 per month ($600 annually) per Participant, and may not be less than $25 per
payment.
ALLOCATION OF PURCHASE PAYMENTS. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified by the
Participant on the enrollment forms. Changes in such allocation may be made in
writing or by telephone transfer. Allocations must be in whole percentages. (See
"Transfers.")
TRANSFER CREDITS
The Company may provide a transfer credit on "transferred assets," subject
to certain conditions and state approvals. Transferred assets are the value of
contributions made on your behalf under this Plan or a prior plan before such
amounts are applied to this Contract. The transfer credit will equal a
percentage of the transferred assets applied to the Contract that remain in the
Contract after a specified period of time. Once a transfer credit is applied to
your Contract, all provisions of the Contract apply. This benefit is provided on
a
- --------------------------------------------------------------------------------
3
<PAGE>
nondiscriminatory basis. If a transfer credit is due under the Contract, you
will be provided with additional information specific to the Contract.
RIGHT TO CANCEL
Participation under the Contract may be cancelled without penalty by
returning it (or other document evidencing your interest) to the Company with a
written notice of your 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 your request for cancellation, we will return your Account Value, unless
the 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, you bear 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
your 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.
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 the Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from each Installment Purchase Payment Account on its
anniversary date. The maintenance fee is to reimburse the Company for some of
its administrative expenses relating to the establishment and maintenance of the
Accounts. The maintenance fee, to the extent permitted by state law, is also
deducted upon termination of an individual or Plan Account.
The annual maintenance fee on each Account or Plan Account is $15 for those
Plans where annual aggregate Purchase Payments are expected to be in excess of
$100,000 and the sponsoring employer has agreed to accommodate group meetings on
its premises for soliciting potential Participants. For Plans not meeting these
criteria, the annual maintenance fee is $20. The maintenance fee will be
deducted on a pro rata basis from each Subaccount in which you have an interest.
If the Account Value is withdrawn, the full maintenance fee will be deducted at
the time of withdrawal.
If a university establishes a Section 403(b) Plan and both employer and
employee salary reduction contributions are made, two individual Accounts will
be established for each Participant. However, only one maintenance fee will be
imposed provided average annual Purchase payments are $5,000 per Participant and
annual Purchase payments for the Plan are $500,000 or more.
- --------------------------------------------------------------------------------
4
<PAGE>
There is no maintenance fee deducted from a separate individual Account
established under an installment Purchase Payment Contract for a lump-sum
payment of $10,000 or more made to the Contract on your behalf.
No annual maintenance fee is deducted from a Plan Account established by a
403(b) Contract Holder under an unallocated Contract.
REDUCTION OR ELIMINATION OF THE MAINTENANCE FEE. Under group Contracts, the
annual maintenance fee may be reduced or eliminated under various conditions as
agreed to by us and by the Contract Holder in writing. Any reduction or
elimination of the annual maintenance fee will reflect differences in
administrative costs and services after taking into consideration factors such
as the following:
- - the size, characteristics, and nature of the group to which a Contract is
issued;
- - the level of our anticipated expenses in administering the Contract, such as
billing for Purchase Payments, producing periodic reports, providing for the
direct payment of contract charges rather than having them deducted from
Account Values, and any other factors pertaining to the level and expense of
administrative services which will be provided under the Contract.
Any reduction or elimination of maintenance fees will not be unfairly
discriminatory against any person. We will make any reduction in annual
maintenance fees according to our own rules in effect at the time an application
for a Contract is approved. We reserve the right to change these rules from time
to time.
DEFERRED SALES CHARGE
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of amount
withdrawn from the Subaccounts, the Fixed Account or the Guaranteed Accumulation
Account.
For Installment Purchase Payment Accounts, the deferred sales charge is
based on the number of completed Purchase Payment Periods. For Single Purchase
Payment Accounts, it is based on the number of Contract Years that have elapsed
since the Purchase Payments were made. The amount of the deferred sales charge
is determined in accordance with the schedule set forth in the following tables:
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT
ACCOUNTS:
DEFERRED SALES
PURCHASE PAYMENT CHARGE
PERIODS COMPLETED DEDUCTION
- -------------------- ---------------
<S> <C>
Less than 5 5%
5 or more but less
than 7 4%
7 or more but less
than 9 3%
9 or more but less
than 10 2%
More than 10 0%
</TABLE>
<TABLE>
<CAPTION>
SINGLE PURCHASE PAYMENT ACCOUNTS:
DEFERRED SALES
ACCOUNT YEARS CHARGE
COMPLETED DEDUCTION
- -------------------- ---------------
<S> <C>
Less than 5 5%
5 or more but less
than 6 4%
6 or more but less
than 7 3%
7 or more but less
than 8 2%
8 or more but less
than 9 1%
9 or more 0%
</TABLE>
A deferred sales charge will not be deducted from any portion of the Account
Value if the withdrawal is:
- - applied to provide Annuity benefits;
- - taken on or after the tenth anniversary of the effective date of the Account;
- - paid due to your death before Annuity payments begin;
- - made due to the election of an Additional Withdrawal Option (see "Additional
Withdrawal Options");
- - paid where the Account Value is $2,500 or less and no amount has been
withdrawn, taken as a loan, or used to purchase Annuity benefits during the
prior 12 months. This provision is not available under Plan Accounts (where
individual Accounts are not maintained by us) or applicable to the withdrawal
of all individual Accounts under one Contract established with us;
- - taken from an installment Purchase Payment Account by a Participant who is at
least age 59 1/2 and who has completed nine Purchase Payment Periods; or
- - taken due to an unforeseeable emergency provisions as described in the Code
(457 Plans only).
The deduction for the deferred sales charge will not exceed 8.5% of the
total Purchase Payments actually made to the Account. The Company does not
anticipate that the deferred sales charge will cover all sales and
- --------------------------------------------------------------------------------
5
<PAGE>
administrative expenses which it incurs in connection with the Contract. The
difference will be covered by the general assets of the Company which are
attributable, in part, to mortality and expense risk charges under the Contract
described above.
FREE WITHDRAWALS. For Participants between the ages of 59 1/2 and 70 1/2
under Section 403(b) Plans, up to 10% of the current Account Value may be
withdrawn during each calendar year without imposition of a deferred sales
charge. The free withdrawal applies only to the first partial withdrawal in each
calendar year. The 10% amount will be based on the Account Value calculated on
the Valuation Date next following our receipt of your request for withdrawal.
Any outstanding contract loans are excluded from the Account Value when
calculating the 10% free withdrawal amount. This provision does not apply to a
full withdrawal of the Account, or to partial withdrawals due to a default on a
contract loan (see "Contract Loans"). This provision may not be exercised if an
Additional Withdrawal Option is elected. (See "Additional Withdrawal Options.")
REDUCTION OR ELIMINATION OF THE DEFERRED SALES CHARGE. For a particular
plan, we may reduce, waive or eliminate the deferred sales charge. Any
reduction, waiver or elimination of such charges will reflect differences or
expected differences in the amounts of unrecovered distribution costs or
services of the types that the charge is intended to defray. When considering
whether to reduce or eliminate such charges or to grant such a waiver, we will
take into account factors which may include the following:
- - the number of participants under the Plan;
- - the expected level of assets or cash flow under the Plan;
- - the level of agent involvement in sales activities;
- - the level of our sales-related expenses;
- - the specific distribution provisions under the Plan;
- - the Plan's purchase of one or more other variable annuity contracts from us
and the features of those contracts;
- - the level of employer involvement in determining eligibility for distributions
under the Contract; and
- - our assessment of financial risk to the Company relating to surrenders.
Any reduction, waiver or elimination of deferred sales charges will not be
unfairly discriminatory against any person.
We may also negotiate provisions regarding the deferred sales charge with
respect to Contracts issued to certain employer groups or associations which
have negotiated on behalf of its employees. All variations in, or elimination
of, provisions regarding the deferred sales charge resulting from such
negotiations will be offered uniformly to all employees within the group. For
specific information on fees applicable to your Account, please call the number
listed under the "Inquiries" section.
We will make any reduction in deferred sales charge according to our own
rules in effect at the time an application for a Contract is approved. We
reserve the right to change these rules from time to time.
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 at any time, 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.")
CONTRACT VALUATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the 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.
- --------------------------------------------------------------------------------
6
<PAGE>
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 expense 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 and up to 0.25% as an administrative expense charge (currently
0%).
The net investment rate may be either positive or negative.
TRANSFERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At any time prior to the Annuity Date, you can transfer amounts held under
your Contract from one Subaccount to another. Transfers between the Credited
Interest Options and the Subaccounts are subject to certain restrictions. (See
Appendices I, II and III.) 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. 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.")
WITHDRAWALS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For Section 457 Plans, the Contract Holder may withdraw all or a portion of
the individual Account Value or a Plan Account Value during the Accumulation
Period by properly completing a disbursement form and sending it to our Home
Office. For Section 403(b) Plans, if permitted by the Plan, you may request to
withdraw all or a portion of your Account Value, subject to the withdrawal
restrictions for Section 403(b) Plans described below. If you are married and
are participating in an ERISA 403(b) Plan, your spouse must consent in writing
to the withdrawal request. Withdrawals under Section 401(a) Plans are governed
by the terms of the Plan as interpreted by the Contract Holder and communicated
to the Company. 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.
- --------------------------------------------------------------------------------
7
<PAGE>
Withdrawals may be requested in one of the following forms:
- -FULL WITHDRAWAL OF THE CONTRACT: The amount paid will be the value of the Plan
Account or all Accounts minus any applicable deferred sales charge and
maintenance fee due. Only the group Contract Holder may request a full
withdrawal of the Contract.
- -FULL WITHDRAWAL OF AN ACCOUNT: The amount paid upon a full withdrawal will be
the Account Value allocated to the Subaccounts, the Guaranteed Accumulation
Account (plus or minus a market value adjustment) (see Appendix I), and the
Fixed Account, minus any applicable deferred sales charge and maintenance fee
due.
- -PARTIAL WITHDRAWALS (Percentage): The amount paid will be the percentage of the
Account Value requested minus any applicable deferred sales charge.
- -PARTIAL WITHDRAWAL (Specified Dollar Amount): The amount paid will be the
dollar amount requested. However, the amount withdrawn from the Account will
equal the amount requested plus any applicable deferred sales charge.
For information about withdrawals from the Fixed Plus Account (if available)
see Appendix III.
For any partial withdrawal, the value of the Accumulation Units cancelled
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. Under
Section 403(b) Plans and Section 401(a) Plans, 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 the Participant's death, disability, attainment
of age 59 1/2, separation from service or financial hardship. (See "Tax
Status.")
REINVESTMENT PRIVILEGE
The Contract Holder or, if permitted by the Plan, you, may elect to reinvest
all or a portion of the proceeds received from a full withdrawal of your Account
or Plan Account within 30 days after such withdrawal has been made. Accumulation
Units will be credited to the Account for the amount reinvested, as well as any
applicable maintenance fee and any appropriate portion of any deferred sales
charge imposed at the time of withdrawal. Any maintenance fee which falls due
after the withdrawal and before the reinvestment will be deducted from the
amounts 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. See Appendix I for a discussion of
amounts withdrawn from GAA and then reinvested. The reinvestment privilege may
be used only once. If you are contemplating reinvestment, you should seek
competent advice regarding the tax consequences associated with such a
transaction.
CONTRACT LOANS
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During the Accumulation Period, Participants in 403(b) Plans may request a
loan from their Account Value. Loans can only be taken from those Account Values
held in the Subaccounts or from those Credited Interest Options that allow
loans. (See Appendices I, II and III.) A loan may be obtained by reviewing and
reading the terms of the loan agreement, properly completing a loan request form
and submitting it to the Company's Home Office. Loans are not available under
Contracts issued to Section 457 or 401(a) Plans. Additionally, loans are not
available from values held in TCI Growth, although the entire Account Value is
used to determine the maximum loan that may be made.
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ADDITIONAL WITHDRAWAL OPTIONS
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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 and 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 or church 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 an Additional Withdrawal Option is elected Participants under a 403(b)
Plan and Contract Holders under 457 Plans 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 Options 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
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The Contract provides that a death benefit is payable to the beneficiary
named in the Contract. For Section 457 Plans and 401 Plans, the Contract Holder
is the beneficiary under the Contract, but may direct that we make such payment
to the beneficiary under the Plan upon the death of the Participant before the
Annuity Date. The amount of the death benefit will be equal to the Account
Value. Death benefit proceeds may be paid to the beneficiary:
- - in a lump sum;
- - in accordance with any of the Annuity Options available under the Contract; or
- - under any Additional Withdrawal Options available under the Contract (if the
beneficiary is your spouse).
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
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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.
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 expectancy of the beneficiary or any period
certain 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
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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 government
or church 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, the Participant under a Section
403(b) Plan, or the Contract Holder under a Section 457 or Section 401(a) Plan,
must notify us in writing of the following:
- - the date on which annuity payments should start;
- - the Annuity Option under which payments should 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 become
available under some Annuity Options in the future. (See "Annuity Options"
below.)
Annuity Payments will not begin until an Annuity Option is elected. 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. 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
The Annuity Options currently available are as follows.
LIFETIME ANNUITY OPTIONS:
- -OPTION 1--Life Annuity--An annuity with payments ending on the Annuitant'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 Payees--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,
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should die prior to the due date of the second Annuity Payment. Once lifetime
Annuity payments begin, the Annuitant 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 the Contract.
Under the nonlifetime option, a fixed or variable annuity may be elected and
the number of years that may be selected are determined by the investment
options used prior to annuitization. For amounts held in the Subaccounts, the
Guaranteed Accumulation Account or the Fixed Account, payments may be made for
3-30 years. For amounts held in the Fixed Plus Account (if available under the
Contract), payments may be made for 5-30 years. If this 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 any portion of the remaining variable payments
be paid in one sum. However, any lump-sum elected before three years of payments
have been completed will be treated as a withdrawal during the Accumulation
Period and any applicable deferred sales charge will be assessed. (See "Charges
and Deductions--Deferred Sales Charge.") 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 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.
ANNUITY PAYMENTS
DATE PAYOUTS START. When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95. Annuity
payments may not extend beyond (a) the life of the Annuitant, (b) the joint
lives of the Annuitant and beneficiary, (c) a period certain greater than the
Annuitant's life expectancy, or (d) a period certain greater than the joint life
expectancies of the Annuitant and beneficiary.
AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on the
size of your Account Value, how you allocate it between fixed and variable
payouts, and the annuity option chosen. No election may be made that would
result in a first Annuity Payment of less that $20 or total yearly Annuity
payments of less than $100. If the value of the Individual or Plan Account 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.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks 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 an Annuitant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If
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Option 1 or Option 3 was elected, Annuity payments will cease on the death of
the Annuitant 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 Annuitant
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), and no deferred sales charge
will be imposed.
If the Annuitant 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 proof of death
acceptable to us, 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
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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's 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.
Accordingly, 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), 457 and
401(a) plans. The tax rules applicable to participants and beneficiaries in
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 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 with
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respect 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), 401(a) and 457 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 may 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, 457 Plans and
distributions attributable to contributions made under Section 403(b) Plans on
or after January 1, 1987 (including any earnings on the entire Account Value on
or after that date), must generally begin by April 1 of the calendar year
following the calendar year in which the participant attains age 70 1/2. For
governmental or church plans, distributions must commence by April 1 of the
calendar year following the year in which the participant attains age 70 1/2 or
retires, 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. Also,
under a Section 457 Plan, any distribution payable over a period of more than
one year must be made in substantially nonincreasing amounts.
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, other than under a Section
457 Plan, 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 required 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, not to exceed 15 years
for a nonspousal beneficiary under a Section 457 Plan, 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. Under Section 403(b) Plans and Section 401(a)
Plans, 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 under Section 403(b) Plans and Section
401(a) Plans 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 made under a Section 403(b) Plan or a Section 401(a) Plan 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
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the plan sponsor at or after age 55, (e) the distribution amount is rolled over
into another plan of the same type 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.
Under Section 457 Plans, contributions and earnings are generally taxed when
they are distributed or made available under the employers' plan. See "Section
457 Plans" below.
SECTION 457 PLANS. Code Section 457 provides for certain deferred
compensation plans. These plans may be offered with respect to service for state
governments, local governments, political subdivisions, agencies,
instrumentalities and certain affiliates of such entities and tax-exempt
organizations. These plans are subject to various restrictions on contributions
and distributions. The plans may permit participants to specify the form of
investment for their deferred compensation account. In general, all investments
are owned by the sponsoring employer and are subject to the claims of the
general creditors of the employer. Depending on the terms of the particular
plan, the employer may be entitled to draw on deferred amounts for purposes
unrelated to its Section 457 plan obligations. In general, all amounts received
under a Section 457 plan are taxable and are subject to federal income tax
withholding as wages. This includes payments for death benefits and periodic and
nonperiodic distributions. If we make payments directly to a participant or
beneficiary on behalf of the employer as owner, we will withhold federal taxes
(and state taxes, if applicable) and will report it to the IRS as taxable
income.
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
includible 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. In addition Purchase
Payments will be excluded from a Participant's gross income only if the Plan
meets certain non-discrimination requirements.
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 includible 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
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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 corporate 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.
MISCELLANEOUS
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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 principal 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 7% of those Purchase Payments. The Company may also pay renewal commissions
on Purchase Payments made after the first year and, under group Contracts,
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--Deferred Sales
Charge."
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.
- --------------------------------------------------------------------------------
15
<PAGE>
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, annual maintenance fees,
administrative expense charge (if any) and any applicable deferred sales
charge). "Non-standardized returns" will be calculated in a similar manner,
except that non-standardized figures will not reflect the deduction of any
applicable deferred sales charge (which would decrease the level of performance
shown if reflected in these calculations). The non-standardized figures 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.
VOTING RIGHTS
Each Contract Holder may direct us in the voting of shares at meetings of
shareholders of the appropriate Fund. The number of votes to which each Contract
Holder may give direction will be determined as of the record date.
The number of votes each Contract Holder is entitled to direct with respect
to a particular Fund during the Accumulation Period is equal to the portion of
the current value of the Contract attributable 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. Where the value of the Contract or Valuation Reserve relates to more
than one Fund, the calculation of votes will be performed separately for each
Fund.
Unless otherwise provided by the Plan, Participants of 403(b) Plans have a
fully vested (100%) interest in the benefits provided under the Contract.
Therefore, such Participants may instruct the Contract Holder how to direct us
to cast the votes for the portion of the Contract value or Valuation Reserve
attributable to their individual accounts. Votes attributable to those
Participants who do not instruct the Contract Holder will be cast by us in the
same proportion as votes for which instructions have been received by the
Contract Holder. Votes attributable to Contract Holders who do not direct us
will be cast in the same proportion as the votes for which we have received
directions.
Contract Holders, or Participants entitled to instruct the casting of votes,
will receive a notice of each meeting of shareholders, together with any proxy
solicitation materials, and a statement of the number of votes attributable to
their participation under the Contract and stating the right to instruct the
Contract Holder how such votes shall be cast.
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.
TRANSFER OF OWNERSHIP; ASSIGNMENT
Unless contrary to applicable law, assignment of the Contract or a Plan or
Individual Account is prohibited.
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.
- --------------------------------------------------------------------------------
16
<PAGE>
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>
- --------------------------------------------------------------------------------
17
<PAGE>
APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE GUARANTEED ACCUMULATION ACCOUNT ("GAA") IS A CREDITED INTEREST OPTION
AVAILABLE DURING THE ACCUMULATION PERIOD UNDER THE CONTRACTS DISCUSSED 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 AND THE CONTRACT HOLDER 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, as specified in
the Contract. 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. We make no
deductions from the credited interest rate for mortality and expense risks;
these risks are considered in determining the credited rate.
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.
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.
TRANSFERS AND WITHDRAWALS
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. Transfers to other Guaranteed Terms or to
any other Subaccount or credited interest option available under the Contract
are not permitted 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. Additionally, amounts withdrawn may be subject to a deferred sales charge,
federal tax penalties or mandatory income tax withholding and a maintenance fee.
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 from GAA and reinvested, they will be applied to
the current deposit period. Amounts are proportionately reinvested to the
Classifications 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.
- --------------------------------------------------------------------------------
18
<PAGE>
APPENDIX II
FIXED ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED ACCOUNT.
AMOUNTS ALLOCATED TO THE FIXED ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT
THAT SUPPORTS GENERAL INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED
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 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
ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
This option 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.
We, under certain emergency conditions, 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.
In addition, if allowed by state law, we may pay any Fixed Account
withdrawal value in equal payments, with interest, over a period not to exceed
60 months, when;
(a) the Fixed Account withdrawal value for the Contract or for the total of
all Individual Accounts under the Contract exceeds $250,000 on the day before
the withdrawal; and
(b) the sum of the current Fixed Account withdrawal and the total of all
Fixed Account withdrawals from the Contract or any Individual Account under the
Contract within the past 12 calendar months exceeds 20% of the amount in the
Fixed Account on the day before the current withdrawal.
Interest, as used above, will not be more than two percentage points below
any rate determined prospectively by the Board of Directors for this class of
Contract. In no event will the interest rate be less than the minimum stated in
the Contract.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
MORTALITY AND EXPENSE RISK CHARGES
The Fixed 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 Account to any other available investment options
are allowed in each calendar year during the Accumulation Period. The amount
which may be transferred may vary at our discretion; however, it will never be
less than 10% of the amount held under the Fixed Account.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, the Contract Holder or, if permitted by the Plan, you may elect to have
amounts which have been accumulating under the Fixed Account transferred to one
or more of the Subaccounts available during the Annuity Period to provide
variable Annuity Payments.
CONTRACT LOANS (403(B) PLANS ONLY)
Loans may be made from Account Values held in the Fixed Account.
- --------------------------------------------------------------------------------
19
<PAGE>
APPENDIX III
FIXED PLUS ACCOUNT
APPLICABLE TO STATE OF MISSISSIPPI DEFERRED COMPENSATION PLAN ONLY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS INFORMATION IS BEING PROVIDED TO DESCRIBE THE FIXED PLUS ACCOUNT, A
CREDITED INTEREST OPTION AVAILABLE FOR THE ACCUMULATION OF VALUES UNDER THE
AETNA LIFE INSURANCE AND ANNUITY COMPANY (COMPANY) ANNUITY CONTRACTS ISSUED BY
THE STATE OF MISSISSIPPI FOR ITS DEFERRED COMPENSATION PLAN. ADDITIONAL
INFORMATION MAY BE FOUND IN THE CONTRACT. AMOUNTS ALLOCATED TO THE FIXED PLUS
ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT THAT SUPPORTS INSURANCE AND
ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED PLUS ACCOUNT HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE ON EXEMPTIONS
UNDER THE SECURITITES ACT OF 1933, AS AMENDED. THE FIXED PLUS ACCOUNT PROVIDES A
PORTFOLIO RATE OF RETURN WITH A GUARANTEE OF PRINCIPAL AND INTEREST. IT HAS
REPLACED THE FIXED ACCOUNT UNDER THE CONTRACT.
THE FIXED PLUS ACCOUNT
This option guarantees that amounts allocated to this option will earn the
minimum interest rate specified in the contract. The Company may credit a higher
interest rate. 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,
the Company assumes the risk of investment gain or loss by guaranteeing net
contribution values and promising a minimum interest rate and annuity payments.
The Fixed Plus Account reflects a compounded credited interest rate. The
interest rate quoted is an annual effective yield. Amounts applied to the Fixed
Plus Account will earn the interest rate in effect when actually applied. There
are no deductions made from the credited interest rate for mortality and expense
risks, these risks are considered in determining the credited rate. For a period
of time, not to exceed two years, or until full reimbursement if obtained in
less than two years the interest rate credited on the Fixed Plus Account will be
reduced by an amount equal to approximately .001% to reimburse the State for
costs associated with the evaluation of the Plan.
Beginning on the tenth anniversary of your individual account, the Company
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 individual accounts that have not reached their tenth anniversary.
The Company reserves the right to limit contributions and/or transfers to
the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for a partial withdrawal is 20% of the amount held in
the Fixed Plus Account on the date the Company's Home Office receives a written
request, reduced by any Fixed Plus Account withdrawals, transfers or
annuitizations made in the prior 12 months. In calculating the 20% limit, the
Company reserves the right to include payments made due to the election of the
Estate Conservation Option or the Systematic Withdrawal Option.
The 20% limit is waived if the partial withdrawal is due to annuitization,
death, separation from service (when the conditions specified under (d) below
are met), or hardship (when the conditions specified under (e) below are met).
For these waivers to apply, any such partial withdrawal must also be made pro
rata from all options under the individual account.
If a full withdrawal of a participant's entire individual account is
requested, the Company will pay any amounts held in the Fixed Plus Account, with
interest, in five annual payments of:
- One-fifth of the Fixed Plus Account value on the date the
request is received, reduced by any Fixed Plus Account
withdrawals, transfers or annuitizations made in the prior 12
months;
- One-fourth of the remaining Fixed Plus Account value 12 months
later;
- --------------------------------------------------------------------------------
20
<PAGE>
- One-third of the remaining Fixed Plus Account value 12 months
later;
- One-half of the remaining Fixed Plus Account value 12 months
later;
- The balance of the Fixed Plus Account value 12 month later.
Once a request for a full withdrawal from an individual account is received,
no further withdrawals or transfers will be permitted from the Fixed Plus
Account. A full withdrawal from the Fixed Plus Account may be canceled at any
time before the end of the five-payment period.
The Company will waive the Fixed Plus Account full withdrawal provision if a
full withdrawal is made due to:
(a) the participants death, before annuity payments begin;
(b) the election of an annuity option;
(c) if the Fixed Plus Account value if $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the individual account
within the prior 12 months);
(d) the participant's separation from service with the State of Mississippi,
if the following conditions are met:
(1) the separation from service is certified by the employer;
(2) the amount is paid directly to the participant, or is paid to the
employer for purposes of annuitization under the State of Mississippi
Deferred Compensation Plan; and
(3) the amount paid for all withdrawals due to separation from service for
all participants under the annuity contract during the previous 12
month period does not exceed 20% of the average value of all
Individual accounts during that same peirod.
(e) hardship due to an unforeseeable emergency, as defined by the Internal
Revenue Code for 457 deferred compensation plans, if the following
conditions are met:
(1) the hardship is certified by the employer;
(2) the amount is paid directly to the participant; and
(3) the amount paid for all withdrawals due to hardship for all
participants under the annuity contract during the previous 12 month
period does not exceed 10% of the average values of all individual
accounts during the same period.
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 our Home Office receives a
written request, reduced by any Fixed Plus Account withdrawals, transfers 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 the Estate
Conservation Option or the Systematic Withdrawal Option. The Company will waive
the 20% transfer limit when the value in the Fixed Plus Account is $1,000 or
less.
By notifying the Company at our Home Office at least 30 days before annuity
payments begin, you may elect to have amounts which have been accumulating under
the Fixed Plus Account transferred to the Aetna Variable Fund to provide
variable annuity payments.
SYSTEMATIC WITHDRAWAL OPTION
SWO may not be elected if you have requested a Fixed Plus Account transfer
or withdrawal within the prior 12 month period.
- --------------------------------------------------------------------------------
21
<PAGE>
FOR MASTER APPLICATIONS ONLY
I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C GROUP TAX-DEFERRED ANNUITY AND
DEFERRED COMPENSATION PROSPECTUS DATED MAY 1, 1996 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.
52449(S)-2) DATED MAY 1, 1996.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
52449-2 (5/96)
- --------------------------------------------------------------------------------
<PAGE>
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996
Group and Individual Variable Annuity Contracts Available under Section
403(b), 457 and 401(a)
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. 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........................................ 1
Variable Annuity Account C............................................. 1
Offering and Purchase of Contracts..................................... 2
Performance Data....................................................... 2
General............................................................. 2
Average Annual Total Return Quotations.............................. 3
Annuity Payments....................................................... 3
Sales Material and Advertising......................................... 5
Independent Auditors................................................... 5
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 and administrative expense
charge 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 mutual 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:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
TCI Growth
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the Funds.
1
<PAGE>
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," both of which are described below.
The standardized and non-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, three, 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 charge, maintenance fees, administrative expense charge, and
deferred sales charge). These charges will be deducted on a pro rata basis
in the case of fractional periods. The maintenance fee is converted to a
percentage of assets based on the average account size under the Contracts
described in the Prospectus.
The non-standardized figures will be calculated in a similar manner, except
that they will not reflect the deduction of any applicable deferred sales
charge (which would decrease the level of performance shown if reflected in
these calculations). The non-standardized figures may also include monthly,
quarterly, year-to-date and three-year periods.
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, the Account Value upon
redemption may be more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED
The tables shown below represent each type of Account provided for in this
Statement of Additional Information. The first table reflects the average
annual standardized and nonstandardized total return quotation
2
<PAGE>
figures for the periods ended December 31, 1995 for the Subaccounts under
Single Purchase Payment Accounts. The second and third tables reflect the
average annual standardized and nonstandardized total return quotation figures
for the periods ended December 31, 1995 for the Subaccounts under Installment
Purchase Payment Accounts with a $15 and $20 annual maintenance fee,
respectively. 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
SINGLE PAYMENT ACCOUNT: INCEPTION
($0 MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED 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
- ----------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND
INSTALLMENT PAYMENT ACCOUNT: INCEPTION
($15 ANNUAL MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED 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
- ----------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FUND
INSTALLMENT PAYMENT ACCOUNT: INCEPTION
($20 ANNUAL MAINTENANCE FEE) STANDARDIZED NON-STANDARDIZED 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
- ----------------------------------------------------------------------------------------------------------------
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
3
<PAGE>
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.
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 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
4
<PAGE>
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 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.
5
<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 THE INSURANCE COMPANY WILL BE
FILED 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. 52449(S)-2 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
(3.1) Form of Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and related Selling
Agreement(2)
(4.1) Form of Variable Annuity Contract (G-CDA-HF)(3)
(4.2) Form of Variable Annuity Contract (G-TDA-HG)*
(4.3) Form of Certificate of Group Annuity Coverage (GTCC-HF)(3)
(5) Form of Variable Annuity Contract Application (300-GTD-IA)(3)
(6) Certificate of Incorporation and By-Laws of Depositor(4)
(7) Not applicable
(8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended December 22, 1992
and June 1, 1994(5)
(9) Opinion of Counsel*
(10.1)Consent of Independent Auditors*
<PAGE>
(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(6)
(15.2)Authorization for Signatures(7)
* 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.
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 Post-Effective Amendment No. 60 to
Registration Statement on Form N-4 (File No. 2-52449) filed on February
24, 1995.
4. 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.
5. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-88720) filed on January 20, 1995.
6. The Power of Attorney for Timothy A. Holt, Director and Chief Financial
Officer, is incorporated by reference to Post-Effective Amendment No. 21 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on February 27, 1996. 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.
7. 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
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Timothy A. Holt Director, Senior Vice President and
Chief Financial Officer
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
Zoe Baird Senior Vice President and General
Counsel
Susan E. Schechter Corporate Secretary and Counsel
Eugene M. Trovato Vice President and Treasurer,
Corporate Controller
Diane B. Horn Vice President and Chief Compliance
Officer
* 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 of Post-Effective Amendment
No. 5 to Registration Statement on Form N-4 (File No. 33-75982) filed on
February 20, 1996.
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.
<PAGE>
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.
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1995:
<PAGE>
<TABLE><CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation
Principal Discounts and on Redemption Brokerage
Underwriter Commissions or Annuitization Commissions Compensation*
- ----------- ------------------ ---------------- ------------ -------------
<S> <C> <C> <C> <C>
Aetna Life $ ** $ **
Insurance and
Annuity
Company
</TABLE>
* 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;
(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.
<PAGE>
(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. 62 to its Registration Statement on Form N-4 (File No. 2-52449) to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Hartford, State of Connecticut, on the 28th 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. 62 to the Registration Statement on Form N-4 (File No. 2-52449)
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Daniel P. Kearney* Director and President )
- ------------------------- (principal executive officer) )
Daniel P. Kearney )
Christopher J. Burns* Director )
- ------------------------- )
Christopher J. Burns )
Laura R. Estes Director )
- ------------------------- )
Laura R. Estes )
Timothy A. Holt* Director, and Chief Financial Officer ) February
- ------------------------- ) 28th, 1996
Timothy A. Holt )
Gail P. Johnson Director )
- ------------------------- )
Gail P. Johnson )
John Y. Kim Director )
- ------------------------- )
John Y. Kim )
</TABLE>
<PAGE>
Shaun P. Mathews* Director )
- ------------------------- )
Shaun P. Mathews )
Glen Salow* Director )
- ------------------------- )
Glen Salow )
Creed R. Terry* Director )
- ------------------------- )
Creed R. Terry )
Eugene M. Trovato Vice President and Treasurer, )
- ------------------------- Corporate Controller )
Eugene M. Trovato )
By: /s/ Julie E. Rockmore
---------------------------------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and *
Annuity Company establishing Variable Annuity Account C
99-B.3.1 Form of Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and related Selling *
Agreement
99-B.4.1 Form of Variable Annuity Contract (G-CDA-HF) *
99-B.4.2 Form of Variable Annuity Contract (G-TDA-HG) **
99-B.5 Form of Variable Annuity Contract Application (300-GTD-IA) *
99-B.6 Certificate of Incorporation and By-Laws of Depositor *
99-B.8 Fund Participation Agreement between Aetna Life Insurance and *
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended December 22,
1992 and June 1, 1994
99-B.9 Opinion of Counsel **
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 **
</TABLE>
* Incorporated by reference
** To be filed by amendment
