<PAGE>
As filed with the Securities and Exchange Registration No. 33-75986*
Commission on February 20, 1996 Registration No. 811-2513
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
Post-Effective Amendment No. 4 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 prospectuses relating
to the securities covered by the following earlier Registration Statements:
33-75970; 33-75954; and 33-75956.
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>
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 group deferred variable annuity contracts
("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). The Contracts are available for nonprofit healthcare organizations
and certain tax-exempt nonhealthcare (Section 501(c)(3)) organizations for their
employees under Section 403(b) of the Internal Revenue Code of 1986 as amended
(the "Code") and for employees of certain tax-exempt organizations and their
for-profit subsidiaries in connection with qualified defined contribution plans
under Sections 401(a)/401(k) of the Code. (See "Purchase.")
The Contracts provide that contributions may be allocated to one or more of the
Credited Interest Options or to one or more of the Subaccounts of Variable
Annuity Account C, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:
- Aetna Variable Fund - Fidelity VIP Overseas Portfolio
- Aetna Income Shares - Franklin Government Securities
- Aetna Variable Encore Fund Trust
- Aetna Investment Advisers Fund, - Janus Aspen Aggressive Growth
Inc. Portfolio
- Aetna Ascent Variable Portfolio - Janus Aspen Balanced Portfolio
- Aetna Crossroads Variable Portfolio - Janus Aspen Flexible Income
- Aetna Legacy Variable Portfolio Portfolio
- Alger American Growth Portfolio - Janus Aspen Growth Portfolio
- Alger American Small Cap Portfolio - Janus Aspen Short-Term Bond
- Calvert Responsibly Invested Portfolio
Balanced Portfolio - Janus Aspen Worldwide Growth
- Fidelity VIP II Contrafund Portfolio
Portfolio - Lexington Natural Resources Trust
- Fidelity VIP Equity-Income - Neuberger & Berman Growth Portfolio
Portfolio - Scudder International Portfolio
- Fidelity VIP Growth Portfolio - TCI Growth (a Twentieth Century
fund)
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account, the Fixed Account and the Fixed Plus Account.
Except as specifically mentioned, this Prospectus describes only investments
through the Separate Account. A brief description of each of the Credited
Interest Options is contained in Appendices to this Prospectus. Additional
information concerning the Guaranteed Accumulation Account is also contained in
a separate prospectus.
The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest Options
may be available in all jurisdictions, under all Contracts or under all Plans.
Please check with your employer to determine option availability. (See
"Investment Options.")
This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract through the Separate
Account. 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 18 of this Prospectus. An SAI may be obtained by indicating the request
on the enrollment form or on the prospectus receipt contained in this
Prospectus, or by calling the number listed under the "Inquiries" section of the
Prospectus Summary.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1,
1996.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS........................................................... DEFINITIONS - 1
PROSPECTUS SUMMARY.................................................... SUMMARY - 1
FEE TABLE............................................................. FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION....................................... AUV HISTORY - 1
THE COMPANY........................................................... 1
VARIABLE ANNUITY ACCOUNT C............................................ 1
INVESTMENT OPTIONS.................................................... 1
The Funds......................................................... 1
Credited Interest Options......................................... 4
PURCHASE.............................................................. 4
Contract Availability............................................. 4
Purchasing Interests in the Contract.............................. 4
Purchase Payments................................................. 4
Rights Under the Contract......................................... 5
Transfer Credits.................................................. 5
Right to Cancel................................................... 5
CHARGES AND DEDUCTIONS................................................ 5
Daily Deductions from the Separate Account........................ 5
Mortality and Expense Risk Charge............................ 5
Administrative Expense Charge................................ 6
Maintenance Fee................................................... 6
Deferred Sales Charge............................................. 6
Fund Expenses..................................................... 8
Premium and Other Taxes........................................... 8
CONTRACT VALUATION.................................................... 8
Account Value..................................................... 8
Accumulation Units................................................ 8
Net Investment Factors............................................ 9
TRANSFERS............................................................. 9
Dollar Cost Averaging Program..................................... 9
WITHDRAWALS........................................................... 9
Reinvestment Privilege............................................ 10
CONTRACT LOANS........................................................ 10
ADDITIONAL WITHDRAWAL OPTIONS......................................... 11
DEATH BENEFIT DURING ACCUMULATION PERIOD.............................. 11
ANNUITY PERIOD........................................................ 12
Annuity Period Elections.......................................... 12
Annuity Options................................................... 12
Annuity Payments.................................................. 13
Charges Deducted During the Annuity Period........................ 13
Death Benefit Payable During Annuity Period....................... 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
TAX STATUS............................................................ 14
Introduction...................................................... 14
Taxation of the Company........................................... 14
Contracts Used with Certain Retirement Plans...................... 14
MISCELLANEOUS......................................................... 17
Distribution...................................................... 17
Delay or Suspension of Payments................................... 17
Performance Reporting............................................. 17
Voting Rights..................................................... 17
Modification of the Contract...................................... 18
Legal Matters and Proceedings..................................... 18
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION................... 18
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT........................... 19
APPENDIX II--THE FIXED ACCOUNT........................................ 20
APPENDIX III--THE FIXED PLUS ACCOUNT.................................. 21
APPENDIX IV--EMPLOYEE APPOINTMENT OF EMPLOYER AS AGENT UNDER AN
ANNUITY CONTRACT.................................................... 23
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following terms are defined as they are used in this Prospectus:
ACCOUNT: A record which identifies contract values accumulated on behalf of each
Participant during the Accumulation Period. One or more Employee Accounts and
Employer Accounts may be established for each Participant.
ACCOUNT VALUE: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
ACCOUNT YEAR: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
ACCUMULATION PERIOD: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
ACCUMULATION UNIT: A measure of the value of each Subaccount before annuity
payments begin.
ANNUITANT: The person on whose life or life expectancy the annuity payments are
based.
ANNUITY: A series of payments for life, a definite period or a combination of
the two.
ANNUITY DATE: The date on which annuity payments begin.
ANNUITY PERIOD: The period during which annuity payments are made.
ANNUITY UNIT: A measure of the value of each Subaccount selected during the
Annuity Period.
CODE: Internal Revenue Code of 1986, as amended.
COMPANY (WE, US): Aetna Life Insurance and Annuity Company.
CONTRACT: The group deferred variable annuity contracts offered by this
Prospectus.
CONTRACT BENEFICIARY(IES): Under the Contract, the Contract Holder is the
Contract Beneficiary. The Participant designates a beneficiary with the
employer, pursuant to terms of the Plan. (See definition of "Plan Beneficiary"
below.)
CONTRACT HOLDER: The person or entity to whom the Contract is issued. The
Contract Holder is usually the employer.
CREDITED INTEREST OPTIONS: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account, the Fixed Account and the Fixed Plus Account, each of which is
described in an Appendix to this Prospectus. Amounts allocated to the Credited
Interest Options are included in the Account Value.
EMPLOYEE ACCOUNT: An Account that is credited with payments derived from
employee salary reduction contributions and remitted to the Company by the
employer on behalf of each Participant.
EMPLOYER ACCOUNT: An account that is credited with net Purchase Payments made by
the Contract Holder.
FUND(S): An open-end registered manaement 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 BENEFICIARY: The person entitled to receive benefits under the Plan in the
event of the Participant's death.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
PLAN(S): Tax-deferred retirement plans under Section 403(b) of the Code for
employees of nonprofit healthcare organizations and other Section 501(c)(3)
nonhealthcare organizations. Certain for-profit subsidiaries of tax-exempt
organizations may be offered a separate Contract in connection with qualified
defined contribution plans under Section 401(a)/401(k) of the Code.
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 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 nonprofit healthcare
organizations and certain tax-exempt nonhealthcare (Section 501(c)(3))
organizations for their employees under Section 403(b) of the Code, and for
employees of certain for-profit subsidiaries of tax-exempt organizations in
connection with qualified defined contribution plans under Section 401(a)/401(k)
of the Code. Under these Plans, the Contract Holder (employer) makes
contributions on behalf of a Participant (employee) and the Participant makes
contributions via salary reduction.
CONTRACT PURCHASE
The 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 form and submitting it 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 or employer
contributions. (See "Purchase.")
FREE LOOK PERIOD
Contract Holders have the right to cancel their purchase within 10 days
after receiving 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 received upon cancellation will reflect the
investment performance of the Subaccounts into which Purchase Payments were
deposited. In some cases this may be more or less than the amount of Purchase
Payments. (See "Purchase--Right to Cancel.")
INVESTMENT OPTIONS
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in any or all of the Subaccounts, as well as in the Credited Interest Options
described below. For a complete list of the Funds available under the Contracts,
and a description of the investment objectives of each of the Funds and their
investment advisers, see "Investment Options-- The Funds" in this Prospectus, as
well as the prospectuses for each of the Funds.
The Contract also provides for investment in Credited Interest Options which
allow you to earn fixed rates of interest. The fixed options available under the
Contract are the Guaranteed Accumulation Account ("GAA"), the Fixed Account, and
the Fixed Plus Account. (See the Appendices to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges and an administrative 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 Appendices for a full
description of the restrictions applicable to transfers from the Credited
Interest Options.) (See "Transfers.")
WITHDRAWALS
The Contract Holder may redeem 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. Limitations apply to withdrawals from the Fixed Plus Account.
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 in some circumstances. (See "Withdrawals.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
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
A Contract Holder under a Section 403(b) Plan may request a loan on your
behalf at any time during the Accumulation Period. Such loan will be taken from
the Employee Account and/or the Employer Account, as permitted by the Contract
Holder. Loans are not available from Contracts issued under Section
401(a)/401(k) Plans. (See "Contract Loans.")
DEATH BENEFIT
The Contract provides that a death benefit is payable to the Contract
Beneficiary upon the death of the Participant before the Annuity Date. The
Contract Holder may direct that we make such payment to the Plan Beneficiary.
The amount of the death benefit will be equal to the Account Value. Until the
election of a method of payment, the Account Value will remain invested under
the Contract. The Contract Holder, on behalf of a Plan 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,
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, the Contract Holder, on your behalf, may elect the
commencement of Annuity Payments. Annuity Payments can 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
Contributions and earnings are not generally taxed until you or your
beneficiary(ies) actually receive a distribution from the Contract. A 10%
federal tax penalty and a 20% withholding for income tax may be imposed on
certain withdrawals. (See "Tax Status.")
INQUIRIES
Questions, inquiries or requests for additional information can be directed
to your agent or local representative, or you may contact the Company as
follows:
<TABLE>
<S> <C>
- Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-1277
Attention: Customer Service
(For AetnaPlus Contracts)
- Call Customer Service: 1-800-525-4225 (for automated transfers or changes
in the allocation of Account Values, call:
1-800-262-3862)
(For Multiple Option Contracts)
- Call Customer Service: 1-800-677-4636 (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. Some expenses may vary as explained under
"Charges and Deductions." The charges and expenses shown below 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...................... $ 15.00
Single Purchase Payment Account........................... $ 0.00
The maintenance fee will generally be deducted annually from each Account
during the Accumulation Period. The amount shown is the MAXIMUM maintenance fee
that can be deducted under each Account.
</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..................................................................................... 0.00%
-----
However, we reserve the right to deduct a daily charge of not more than 0.25%
per year from the Subaccounts.
TOTAL SEPARATE ACCOUNT CHARGES........................................................... 1.25%
</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, the following figures are a percentage of average
net assets and, except where otherwise indicated, are based on figures for the
year ended December 31, 1995. A Fund's "Other Expenses" include operating costs
of the Fund.
<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.
Aetna Ascent Variable Portfolio(2)
Aetna Crossroads Variable Portfolio(2)
Aetna Legacy Variable Portfolio(2)
Alger American Growth Portfolio
Alger American Small Cap Portfolio
Calvert Responsibly Invested Balanced
Portfolio
Fidelity VIP II Contrafund
Portfolio(2)
Fidelity VIP Equity-Income
Portfolio(3)
Fidelity VIP Growth Portfolio(3)
Fidelity VIP Overseas Portfolio
Franklin Government Securities Trust
Janus Aspen Aggressive Growth
Portfolio(4)
Janus Aspen Balanced Portfolio(4)
Janus Aspen Flexible Income
Portfolio(4)
Janus Aspen Growth Portfolio(4)
Janus Aspen Short-Term Bond
Portfolio(4)
Janus Aspen Worldwide Growth
Portfolio(4)
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio
TCI Growth(5)
</TABLE>
- --------------------------
(1) Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Contract. These reimbursements are paid
out of the investment advisory fees and are not charged to investors.
(2) This fund has only limited operating history; therefore the expenses are
estimated for the current fiscal year.
(3) A portion of the brokerage commissions the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been
% for the Equity-Income Portfolio and % for the Growth Portfolio.
(4) The expense figures shown are net of certain expense waivers from Janus
Capital Corporation. Without such waivers, Investment Advisory Fees, Other
Expenses and Total Mutual Fund Annual Expenses for the Portfolios for the
fiscal year ended December 31, 1995 would have been: %, %, and
%, respectively, for Janus Aspen Aggressive Growth Portfolio; %,
%, and %, respectively, for Janus Aspen Balanced Portfolio;
%, %, and %, respectively, for Janus Aspen Flexible Income
Portfolio; %, % and %, respectively, for Janus Aspen Growth
Portfolio; %, % and %, respectively, for Janus Aspen
Short-Term Bond Portfolio; and %, % and %, respectively, for
Janus Aspen Worldwide Growth Portfolio.
(5) The Portfolio's investment adviser pays all expenses of the Portfolio except
brokerage commissions, taxes, interest, fees and expenses of the
non-interested directors (including counsel fees) and extraordinary
expenses.
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
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 $15.00 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.
Aetna Ascent Variable
Portfolio
Aetna Crossroads Variable
Portfolio
Aetna Legacy Variable
Portfolio
Alger American Growth
Portfolio
Alger American Small Cap
Portfolio
Calvert Responsibly Invested
Balanced Portfolio
Fidelity VIP II Contrafund
Portfolio
Fidelity VIP Equity-Income
Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas
Portfolio
Franklin Government Securities
Trust
Janus Aspen Aggressive Growth
Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income
Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Short-Term Bond
Portfolio
Janus Aspen Worldwide Growth
Portfolio
Lexington Natural Resources
Trust
Neuberger & Berman Growth
Portfolio
Scudder International
Portfolio
TCI Growth
</TABLE>
- ------------------------------
* 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 - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION
AETNA PLUS CONTRACTS
(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
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $11.020 $10.454 $97.165 $77.845 $76.311
Value at end of period $10.778 $11.020 $10.454(2) $97.165 $77.845
Increase (decrease) in value of
accumulation unit(1) (2.20)% 5.41% (2) 24.82% 2.01%
Number of accumulation units outstanding
at end of period 114,733,035 44,166,470 21,250 20,948,226 18,362,906
AETNA INCOME SHARES
Value at beginning of period $10.905 $10.068 $36.789 $31.192 $28.943
Value at end of period $10.360 $10.905 $10.068(3) $36.789 $31.192
Increase (decrease) in value of
accumulation unit(1) (5.00)% 8.31% (3) 17.94% 7.77%
Number of accumulation units outstanding
at end of period 11,713,354 4,084,142 3,870 7,844,412 6,984,793
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.241 $10.048 $33.812 $32.138 $30.012
Value at end of period $10.528 $10.241 $10.048(4) $33.812 $32.138
Increase (decrease) in value of
accumulation unit(1) 2.80% 1.92% (4) 5.21% 7.08%
Number of accumulation units outstanding
at end of period 7,673,528 2,766,044 825 8,430,082 10,220,110
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $11.057 $10.189 $12.736 $10.896 $10.437
Value at end of period $10.868 $11.057 $10.189(6) $12.736 $10.896
Increase (decrease) in value of
accumulation unit(1) (1.71)% 8.52% (6) 16.89% 4.40%
Number of accumulation units outstanding
at end of period 23,139,604 11,368,365 11,508 22,898,099 17,078,985
ALGER AMERICAN SMALL CAP
PORTFOLIO
Value at beginning of period $9.959 $10.000(7)
Value at end of period $9.437 $ 9.959
Increase (decrease) in value of
accumulation unit(1) (5.24)% (0.41)%
Number of accumulation units outstanding
at end of period 6,339,407 781,836
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
Value at beginning of period $11.036 $10.278 $10.000(8)
Value at end of period $10.554 $11.036 $10.278
Increase (decrease) in value of
accumulation unit(1) (4.37)% 7.37% 2.78%
Number of accumulation units outstanding
at end of period 521,141 144,168 2,556
FRANKLIN GOVERNMENT SECURITIES
TRUST
Value at beginning of period $10.642 $10.008 $10.000(8)
Value at end of period $10.119 $10.642 $10.008
Increase (decrease) in value of
accumulation unit(1) (4.91)% 6.33% 0.08%
Number of accumulation units outstanding
at end of period 325,365 167,137 5,559
<CAPTION>
1989 1988 1987 1986
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $59.871 $52.885 $50.760 $43.205
Value at end of period $76.311 $59.871 $52.885 $50.760
Increase (decrease) in value of
accumulation unit(1) 27.46% 13.21% 4.19% 17.49%
Number of accumulation units outstanding
at end of period 17,142,820 16,455,396 16,497,406 16,578,251
AETNA INCOME SHARES
Value at beginning of period $25.574 $24.061 $23.308 $20.703
Value at end of period $28.943 $25.574 $24.061 $23.308
Increase (decrease) in value of
accumulation unit(1) 13.17% 6.29% 3.23% 12.58%
Number of accumulation units outstanding
at end of period 6,202,834 5,955,293 5,372,271 6,188,470
AETNA VARIABLE ENCORE FUND
Value at beginning of period $27.783 $26.171 $24.812 $23.504
Value at end of period $30.012 $27.783 $26.171 $24.812
Increase (decrease) in value of
accumulation unit(1) 8.02% 6.16% 5.48% 5.57%
Number of accumulation units outstanding
at end of period 8,286,033 8,154,644 7,326,151 6,692,947
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $10.000(5)
Value at end of period $10.437
Increase (decrease) in value of
accumulation unit(1) 4.37%
Number of accumulation units outstanding
at end of period 9,535,986
ALGER AMERICAN SMALL CAP
PORTFOLIO
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
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
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
FRANKLIN GOVERNMENT SECURITIES
TRUST
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>
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(9)
Value at end of period $10.581
Increase (decrease) in value of
accumulation unit(1) 5.81%
Number of accumulation units outstanding
at end of period 753,862
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10.000(9)
Value at end of period $ 9.873
Increase (decrease) in value of
accumulation unit(1) (1.27)%
Number of accumulation units outstanding
at end of period 28,543
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.877 $ 9.832 $10.000(8)
Value at end of period $10.154 $10.877 $ 9.832
Increase (decrease) in value of
accumulation unit(1) (6.65)% 10.63% (1.68)%
Number of accumulation units outstanding
at end of period 703,676 135,614 561
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.747 $10.864 $10.000(8)
Value at end of period $11.026 $11.747 $10.864
Increase (decrease) in value of
accumulation unit(1) (6.14)% 8.13% 8.64%
Number of accumulation units outstanding
at end of period 1,865,104 546,559 10,645
SCUDDER INTERNATIONAL PORTFOLIO
Value at beginning of period $12.957 $ 9.578 $10.000(8)
Value at end of period $12.687 $12.957 $ 9.578
Increase (decrease) in value of
accumulation unit(1) (2.08)% 35.28% (4.22)%
Number of accumulation units outstanding
at end of period 6,558,946 1,020,233 5,232
TCI GROWTH
Value at beginning of period $12.069 $10.692 $10.000(8)
Value at end of period $11.781 $12.069 $10.692
Increase (decrease) in value of
accumulation unit(1) (2.39)% 12.88% 6.92%
Number of accumulation units outstanding
at end of period 12,853,828 3,667,821 2,254
</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 charges or the fixed dollar annual
maintenance fee, if any. Inclusion of these charges would reduce the
investment results shown.
(2) The Accumulation Unit value was converted to $10.000 on August 21, 1992 upon
the commencement of a new administrative system. Immediately prior to that
date, the Accumulation Unit value of the Fund was $97.817. On the date of
conversion, additional units were issued so that account values were not
changed as a result of the conversion. The percentage change in the
Accumulation Unit value from the beginning of the year to the date of
conversion was 0.67%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 4.54%.
(3) The Accumulation Unit value was converted to $10.000 on August 21, 1992 upon
the commencement of a new administrative system. Immediately prior to that
date, the Accumulation Unit value of the Fund was $38.521. On the date of
conversion, additional units were issued so that account values were not
changed as a result of the conversion. The percentage change in the
Accumulation Unit value from the beginning of the year to the date of
conversion was 4.70%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.68%.
(4) The Accumulation Unit value was converted to $10.000 on August 21, 1992 upon
the commencement of a new administrative system. Immediately prior to that
date, the Accumulation Unit value of the Fund was $34.397. On the date of
conversion, additional units were issued so that account values were not
changed as a result of the conversion. The percentage change in the
Accumulation Unit value from the beginning of the year to the date of
conversion was 1.73%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.48%.
(5) The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(6) The Accumulation Unit value was converted to $10.000 on August 21, 1992 upon
the commencement of a new administrative system. Immediately prior to that
date, the Accumulation Unit value of the Fund was $13.118. On the date of
conversion, additional units were issued so that account values were not
changed as a result of the conversion. The percentage change in the
Accumulation Unit value from the beginning of the year to the date of
conversion was 2.99%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 1.89%.
(7) The initial Accumulation Unit value was established at $10.000 on September
17, 1993, the date on which the Portfolio became available under the
Contract.
(8) The initial Accumulation Unit value was established at $10.000 on August 21,
1992, the date on which the Fund/Portfolio became available under the
Contract.
(9) The initial Accumulation Unit value was established at $10.000 during
October 1994, when the funds were first received in this option.
* Formerly Calvert Socially Responsible Series.
- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>
CONDENSED FINANCIAL INFORMATION
MULTIPLE OPTION CONTRACTS
(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
---------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $107.925 $102.383 $ 97.165 $77.845
Value at end of period $105.558 $107.925 $102.383 $97.165
Increase (decrease) in value of
accumulation unit(1) (2.19)% 5.41% 5.37% 24.82%
Number of accumulation units outstanding
at end of period 13,966,072 21,148,863 24,201,565 20,948,226
AETNA INCOME SHARES
Value at beginning of period $42.283 $39.038 $36.789 $31.192
Value at end of period $40.173 $42.283 $39.038 $36.789
Increase (decrease) in value of
accumulation unit(1) (4.99)% 8.31% 6.11% 17.94%
Number of accumulation units outstanding
at end of period 5,108,720 8,210,666 8,507,292 7,844,412
AETNA VARIABLE ENCORE FUND
Value at beginning of period $35.282 $34.619 $33.812 $32.138
Value at end of period $36.271 $35.282 $34.619 $33.812
Increase (decrease) in value of
accumulation unit(1) 2.80% 1.92% 2.39% 5.21%
Number of accumulation units outstanding
at end of period 3,679,802 5,086,515 7,534,662 8,430,082
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $14.519 $13.379 $12.736 $10.896
Value at end of period $14.270 $14.519 $13.379 $12.736
Increase (decrease) in value of
accumulation unit(1) (1.71)% 8.52% 5.05% 16.89%
Number of accumulation units outstanding
at end of period 21,990,186 30,784,750 34,802,433 22,898,099
ALGER AMERICAN SMALL CAP
PORTFOLIO
Value at beginning of period $10.072 $10.000(3)
Value at end of period $ 9.513 $10.072
Increase (decrease) in value of
accumulation unit(1) (5.55)% 0.72%
Number of accumulation units outstanding
at end of period 665,518 51,327
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
Value at beginning of period $14.640 $13.726 $12.913 $11.233
Value at end of period $13.990 $14.640 $13.726 $12.913
Increase (decrease) in value of
accumulation unit(1) (4.44)% 6.66% 6.30% 14.96%
Number of accumulation units outstanding
at end of period 743,464 705,415 503,006 355,851
FRANKLIN GOVERNMENT
SECURITIES TRUST
Value at beginning of period $14.929 $14.050 $13.219 $11.545
Value at end of period $14.190 $14.929 $14.050 $13.219
Increase (decrease) in value of
accumulation unit(1) (4.95)% 6.26% 6.29% 14.50%
Number of accumulation units outstanding
at end of period 804,457 960,629 810,155 627,552
<CAPTION>
1990 1989 1988 1987 1986
----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $76.311 $59.871 $52.885 $50.760 $43.205
Value at end of period $77.845 $76.311 $59.871 $52.885 $50.760
Increase (decrease) in value of
accumulation unit(1) 2.01% 27.46% 13.21% 4.19% 17.49%
Number of accumulation units outstanding
at end of period 18,362,906 17,142,820 16,455,396 16,497,406 16,578,251
AETNA INCOME SHARES
Value at beginning of period $28.943 $25.574 $24.061 $23.308 $20.703
Value at end of period $31.192 $28.943 $25.574 $24.061 $23.308
Increase (decrease) in value of
accumulation unit(1) 7.77% 13.17% 6.29% 3.23% 12.58%
Number of accumulation units outstanding
at end of period 6,984,793 6,202,834 5,955,293 5,372,271 6,188,470
AETNA VARIABLE ENCORE FUND
Value at beginning of period $30.012 $27.783 $26.171 $24.812 $23.504
Value at end of period $32.138 $30.012 $27.783 $26.171 $24.812
Increase (decrease) in value of
accumulation unit(1) 7.08% 8.02% 6.16% 5.48% 5.57%
Number of accumulation units outstanding
at end of period 10,220,110 8,286,033 8,154,644 7,326,151 6,692,947
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $10.437 $10.000(2)
Value at end of period $10.896 $10.437
Increase (decrease) in value of
accumulation unit(1) 4.40% 4.37%
Number of accumulation units outstanding
at end of period 17,078,985 9,535,986
ALGER AMERICAN SMALL CAP
PORTFOLIO
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
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
Value at beginning of period $10.568 $10.000(4)
Value at end of period $11.233 $10.568
Increase (decrease) in value of
accumulation unit(1) 6.29% 5.68%
Number of accumulation units outstanding
at end of period 148,576 20,710
FRANKLIN GOVERNMENT
SECURITIES TRUST
Value at beginning of period $10.581 $10.000(5)
Value at end of period $11.545 $10.581
Increase (decrease) in value of
accumulation unit(1) 9.11% 5.81%
Number of accumulation units outstanding
at end of period 178,761 25,258
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990
---------- ------------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $12.169
Increase (decrease) in value of
accumulation unit(1) 21.69%
Number of accumulation units
outstanding at end of period 393,553
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $ 9.911
Increase (decrease) in value of
accumulation unit(1) (0.89)%
Number of accumulation units
outstanding at end of period 1,555
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.071 $ 9.193 $9.018 $9.608 $11.441
Value at end of period $ 9.412 $10.071 $9.193 $ 9.018 $ 9.608
Increase (decrease) in value of
accumulation unit(1) (6.54)% 9.55% 1.94% (6.14)% (16.02)%
Number of accumulation units
outstanding at end of period 533,016 341,771 198,338 144,139 75,052
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $14.278 $13.536 $12.511 $ 9.769 $10.772
Value at end of period $13.398 $14.278 $13.536 $12.511 $ 9.769
Increase (decrease) in value of
accumulation unit(1) (6.16)% 5.48% 8.19% 28.07% (9.31)%
Number of accumulation units
outstanding at end of period 2,107,525 1,927,674 1,346,898 971,985 482,220
SCUDDER INTERNATIONAL PORTFOLIO**
Value at beginning of period $13.508 $ 9.922 $10.239** $ 9.256 $10.306
Value at end of period $13.227 $13.508 $ 9.922 $10.239 $ 9.256
Increase (decrease) in value of
accumulation unit(1) (2.08)% 36.14% (3.10)% 10.62% (10.19)%
Number of accumulation units
outstanding at end of period 4,240,412 2,371,037 1,161,007 779,667 317,829
TCI GROWTH
Value at beginning of period $11.443 $10.495 $10.000(9)
Value at end of period $11.172 $11.443 $10.495
Increase (decrease) in value of
accumulation unit(1) (2.37)% 9.03% 4.95%
Number of accumulation units
outstanding at end of period 1,608,362 1,016,894 232,832
<CAPTION>
1989
-------------
<S> <C>
JANUS ASPEN AGGRESSIVE GROWTH PORTF
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
JANUS ASPEN FLEXIBLE INCOME PORTFOL
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
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.000(4)
Value at end of period $11.441
Increase (decrease) in value of
accumulation unit(1) 14.41%
Number of accumulation units
outstanding at end of period 11,481
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $10.000(4)
Value at end of period $10.772
Increase (decrease) in value of
accumulation unit(1) 7.72%
Number of accumulation units
outstanding at end of period 68,885
SCUDDER INTERNATIONAL PORTFOLIO**
Value at beginning of period $10.000(8)
Value at end of period $10.306
Increase (decrease) in value of
accumulation unit(1) 3.06%
Number of accumulation units
outstanding at end of period 32,906
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 charges 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 September
17, 1993, the date on which the Portfolio became available under the
Contract.
(4) The initial Accumulation Unit value was established at $10.000 on May 31,
1989, the date on which the Fund/Portfolio became available under the
Contract.
(5) The initial Accumulation Unit value was established at $10.000 on June 7,
1989, the date on which the Fund became available under the Contract.
(6) The initial Accumulation Unit value was established at $10.000 during June
1994, when funds were first received in this option.
(7) The initial Accumulation Unit value was established at $10.000 during
November 1994, when funds were first received in this option.
(8) The initial Accumulation Unit value was established at $10.000 on July 5,
1989, the date on which the Portfolio became available under the Contract.
(9) The initial Accumulation Unit value was established at $10.000 on September
21, 1992, the date on which the Portfolio became available under the
Contract.
* Formerly Calvert Socially Responsible Series.
** Formerly T. Rowe Price International Equity Fund. On April 27, 1992, the
Fund's assets were liquidated and merged into Scudder Variable Life
Investment Fund -- Managed International Portfolio. The Accumulation Unit
Value following the merger was $10.051.
- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>
THE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Services, Inc.,
which is in turn a wholly owned subsidiary of Aetna Life and Casualty Company, a
diversified financial services company.
VARIABLE ANNUITY ACCOUNT C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company established Variable Annuity Account C (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), and meets the
definition of "separate account" under 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 if the Separate Account, such
assets are not chargeable with liabilities arising out of any other business
conducted by the Company. Income, gains or losses of the Separate Account are
credited to or charged against the assets of the Separate Account without regard
to 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
The Contract Holder, or the Participant, if allowed by the Contract Holder,
may allocate Purchase Payments to one or more of the Subaccounts as designated
on the enrollment form. In turn, the Subaccounts invest in the corresponding
Funds at net asset value.
The Contract Holder may decide to offer only a select number of Funds under
its Plan, or it may decide to substitute shares of one Fund for shares of
another Fund currently held by the Separate Account. The availability of Funds
may be subject to regulatory authorization. In addition, the Company may add or
withdraw Funds, as permitted by applicable law. Not all Funds may be available
in all jurisdictions, 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)
- --------------------------------------------------------------------------------
1
<PAGE>
- -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)
- -AETNA INVESTMENT ADVISERS FUND, INC. is a managed fund which seeks to maximize
investment return consistent with reasonable safety of principal by investing
in one or more of the following asset classes: stocks, bonds and cash
equivalents based on the Company's judgment of which of those sectors or mix
thereof offers the best investment prospects.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA ASCENT VARIABLE PORTFOLIO seeks to
provide capital appreciation by allocating its investments among equities and
fixed income securities. The Portfolio is managed for investors who generally
have an investment horizon exceeding 15 years, and who have a high level of
risk tolerance.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA CROSSROADS VARIABLE PORTFOLIO seeks to
provide total return (i.e., income and capital appreciation, both realized and
unrealized) by allocating its investments among equities and fixed income
securities. The Portfolio is managed for investors who generally have an
investment horizon exceeding 10 years and who have a moderate level of risk
tolerance.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA LEGACY VARIABLE PORTFOLIO seeks to
provide total return consistent with preservation of capital by allocating its
investments among equities and fixed income securities. The Portfolio is
managed for investors who generally have an investment horizon exceeding five
years and who have a low level of risk tolerance.(1)
- -ALGER AMERICAN FUND--ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities. The Portfolio primarily invests in equity securities which
have a market capitalization of $1 billion or greater.(2)
- -ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
capital return through investment in common stock of smaller companies offering
the potential for significant price gain. The Portfolio invests at least 65% of
its net assets in equity securities of companies that have total market
capitalization of less than $1 billion at the time of purchase.(2)
- -CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO is a NONDIVERSIFIED portfolio
that seeks growth of capital through investment in enterprises that make a
significant contribution to society through their products and services and
through the way they do business.(3)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND PORTFOLIO
seeks maximum total return over the long term by investing in securities of
companies that are undervalued or out-of-favor.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--EQUITY-INCOME PORTFOLIO
seeks reasonable income by investing primarily in income-producing equity
securities. In selecting investments, the Fund also considers the potential for
capital appreciation.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--GROWTH PORTFOLIO seeks
capital appreciation by investing mainly in common stocks, although its
investments are not restricted to any one type of security.(4)
- -FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND--OVERSEAS PORTFOLIO seeks
long-term growth by investing mainly in foreign securities (at least 65% of the
Fund's total assets in securities of issuers from at least three countries
outside of North America).(4)
- -FRANKLIN GOVERNMENT SECURITIES TRUST seeks income through investments in
obligations of the U.S. Government or its agencies or instrumentalities,
primarily GNMA obligations.(5)
- -JANUS ASPEN SERIES--AGGRESSIVE GROWTH PORTFOLIO is a NONDIVERSIFIED portfolio
that seeks long-term growth of capital in a manner consistent with the
preservation of capital. The Portfolio pursues its investment objective by
normally investing at least 50% of its equity assets in securities issued by
medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S & P Midcap 400
Index, which as of included companies with capitalizations between
approximately and , but which is expected to change on a regular
basis.(6)
- -JANUS ASPEN SERIES--BALANCED PORTFOLIO seeks long-term capital growth,
consistent with preservation of
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capital and balanced by current income. The Portfolio pursues its investment
objective by investing 40%-60% of its assets in equity securities selected
primarily for their growth potential and 40%-60% of its assets in fixed-income
securities.(6)
- -JANUS ASPEN SERIES--FLEXIBLE INCOME PORTFOLIO seeks to obtain maximum total
return, consistent with preservation of capital from a combination of current
income and capital appreciation. The Portfolio invests in all types of income
producing securities and may have substantial holdings of debt securities rated
below investment grade (e.g., junk bonds). High yield, high risk securities
involve certain risks. See the Fund's prospectus for a discussion of these
risks.(6)
- -JANUS ASPEN SERIES--GROWTH PORTFOLIO seeks long-term growth of capital in a
manner consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing in common stocks of companies of any size.(6)
- -JANUS ASPEN SERIES--SHORT-TERM BOND PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital by investing primarily in
short-and intermediate-term fixed income securities.(6)
- -JANUS ASPEN SERIES--WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of
capital in a manner consistent with preservation of capital. The Portfolio
pursues its investment objective primarily through investments in common stocks
of foreign and domestic issuers.(6)
- -LEXINGTON NATURAL RESOURCES TRUST is a NONDIVERSIFIED portfolio that seeks
long-term growth of capital through investment primarily in common stocks of
companies which own or develop natural resources and other basic commodities or
supply goods and services to such companies.(7)
- -NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST-- GROWTH PORTFOLIO seeks capital
appreciation without regard to income. The Portfolio pursues its investment
objective by investing in common stocks, often of companies that may be
temporarily out of favor in the market.(8)
- -SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO seeks long-term
growth of capital primarily through diversified holdings of marketable foreign
equity investments.(9)
- -TCI PORTFOLIOS, INC.--TCI GROWTH (a Twentieth Century fund) seeks capital
growth. The Fund seeks to achieve its objective by investing in common stocks
(including securities convertible into common stocks) and other securities that
meet certain fundamental and technical standards of selection and, in the
opinion of the Fund's investment manager, have better than average potential
for appreciation.(10)
Investment Advisers for each of the Funds:
(1) Aetna Life Insurance and Annuity Company
(2) Fred Alger Management, Inc.
(3) Calvert Asset Management Company, Inc.
(4) Fidelity Management & Research Company
(5) Franklin Advisers, Inc.
(6) Janus Capital Corporation
(7) Lexington Management Corporation (adviser); Market Systems Research
Advisors, Inc. (subadviser)
(8) Neuberger & Berman Management Incorporated
(9) Scudder, Stevens & Clark, Inc.
(10) Investors Research Corporation
RISKS ASSOCIATED WITH INVESTMENT IN THE FUNDS. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential risks,
is found in the respective Fund prospectuses which accompany this Prospectus.
You should read the Fund prospectuses and consider carefully, and on a
continuing basis, which Fund or combination of Funds is best suited to your
long-term investment objectives.
CONFLICTS OF INTEREST (MIXED AND SHARED FUNDING). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued 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
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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.)
- - The Fixed Plus Account is also a part of the Company's general account and
guarantees a minimum interest rate, as specified in the Contract. The Company
may credit higher interest rates in its discretion. Withdrawals and transfers
from the Fixed Plus Account are limited. (See Appendix III.)
PURCHASE
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CONTRACT AVAILABILITY
The Contracts are designed to fund Plans adopted by (1) nonprofit healthcare
organizations and certain tax-exempt nonhealthcare (Section 501(c)(3))
organizations for their employees under Section 403(b) of the Code, and (2)
certain tax-exempt organizations or their for-profit subsidiaries in connection
with qualified defined contribution plans under Section 401(a)/401(k) of the
Code. The Contract Holder must notify the Company whether Title I of the
Employee Retirement Income Security Act of 1974 ("ERISA"), as amended by
subsequent law, including the Retirement Equity Act of 1984, applies to the
Plan.
PURCHASING INTERESTS IN THE CONTRACT
Eligible organizations may acquire the Contract by submitting an application
to the Company. Once we approve the application, 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 application or enrollment form within
two business days of receipt. If the application or enrollment form is
incomplete, the Company may hold any forms and accompanying Purchase Payments
for five days. Purchase Payments may be held for longer periods only with the
consent of the Contract Holder or Participant, pending acceptance of the 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
The Contract provides for the establishment of two Accounts on behalf of
each Participant. The Employer Account will be credited with Purchase Payments
made by the employer (Contract Holder). The Employee Account will be credited
with Purchase Payments derived from employee salary reduction contributions.
Continuing, periodic payments made by you or the employer are 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. Single Purchase Payment Accounts will be designated as
Employer Accounts or Employee Accounts as instructed by the Contract Holder.
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from a Participant's gross income. (See "Tax Status.")
ALLOCATION OF PURCHASE PAYMENTS. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified by the
Contract
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Holder or the Participant, if allowed by the Contract Holder, on the enrollment
form. Changes in such allocation may be made in writing or by telephone
transfer. Allocations must be in whole percentages, and there may be limitations
on the number of investment options that can be selected during the Accumulation
Period. (See "Transfers.")
RIGHTS UNDER THE CONTRACT
The Contract Holder has all rights, title and interest in the amounts held
under the Contract or in the Account; the Contract Holder makes all elections
under the Contract. Participants have no rights to direct the Company as to
payments under the Contract unless countersigned by the Contract Holder.
Benefits payable to Participants are governed exclusively by the Plan. The
Company is not a party to the Plan.
For 403(b) Plans, Participants have a nonforfeitable right to the value of
their Employee Account pursuant to the terms of the Plan as interpreted by the
Contract Holder. Participants have a nonforfeitable right to the value of the
Employer Account pursuant to the terms of, and to the extent of the
Participant's vested percentage under, the Plan as interpreted by the Contract
Holder.
The Contract Holder and each Participant have agreed in writing to the terms
and conditions of the Contract, to have the Contract Holder make all choices
under the Contract, and to be bound by the Contract Holder's directions to the
Company. (See Appendix IV).
In addition to the responsibilities mentioned elsewhere in this Prospectus,
the Contract Holder must:
- - maintain all Participant vesting percentages and records;
- - certify that all distributions are made in accordance with the terms of the
Plan; and
- - ensure that the Plan meets certain nondiscrimination requirements imposed by
the Code.
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 non-discriminatory basis. If a transfer credit is due under the Contract, you
will be provided with additional information specific to the Contract.
RIGHT TO CANCEL
The Contract Holder may cancel participation under the Contract without
penalty by returning it to the Company with a written notice of cancellation. In
most states, Contract Holders have ten days to exercise this right; some states
allow a longer free-look period. When we receive the request for cancellation,
we will return the 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, the purchaser bears the entire investment risk for amounts
allocated among the Subaccounts during the free look period. Account Values will
be determined as of the Valuation Date on which we receive the request for
cancellation at our Home Office.
CHARGES AND DEDUCTIONS
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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
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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 charge. The
administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of the
administrative services to be provided while the Contract is in force. The
Company does not expect to make a profit from this charge.
Under the Contract, the amount of the administrative expense charge may be
of an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation Period or Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from each Installment Purchase Payment Account. No maintenance
fee will be deducted from Single Purchase Payment Accounts. The maintenance fee
is to reimburse the Company for some of its administrative expenses relating to
the establishment and maintenance of the Accounts.
The maximum maintenance fee that can be deducted from each Account is $15.
However, the maintenance fee may be reduced or eliminated depending upon certain
criteria described below. At the election of the employer, the entire
maintenance fee may be deducted from only one Account--either the Employee
Account or the Employer Account. The Company may send a bill to the employer at
or prior to such deduction. The maintenance fee will be deducted on a pro rata
basis from each Subaccount and Credited Interest Option in which you have an
interest. If the Account Value is withdrawn, the full maintenance fee will be
deducted at the time of withdrawal.
REDUCTION OR ELIMINATION OF THE MAINTENANCE FEE. 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
Contract 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 the amounts
withdrawn from the Subaccounts, the Fixed Account and the Guaranteed
Accumulation Account. No deferred sales charge is deducted from amounts
withdrawn from the Fixed Plus 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
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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%
<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>
* The following deferred sales charge schedule applies for withdrawals from the
Guaranteed Accumulation Account for group master Contracts issued after July
29, 1993 in the State of New York and is based on the number of completed
Purchase Payment Periods for Installment Purchase Payment Accounts or Account
Years for Single Purchase Payment Accounts:
<TABLE>
<CAPTION>
COMPLETED PURCHASE DEFERRED SALES
PAYMENT PERIODS CHARGE
OR ACCOUNT YEARS DEDUCTION
- -------------------- ---------------
<S> <C>
1, 2 or 3 5%
4 4%
5 3%
6 2%
7 1%
8 0%
</TABLE>
Generally, if you transfer the total account value under another similar
annuity contract issued by the Company to an Account under this Contract, the
effective date of the new Account will be the same effective date as your former
contract for the purpose of calculating the applicable deferred sales charge
under this Contract.
A deferred sales charge will not be deducted from any portion of the Account
Value if the withdrawal is:
- - due to the Participant's separation from service with the Employer (the
employer must submit documentation satisfactory to the Company confirming that
the Participant is no longer providing services to the employer);
- - 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");
- - due to financial hardship as specified in the Code;
- - paid where the Account Value of any one Account is $3,500 or less and no
amount has been withdrawn, taken as a loan, or used to purchase Annuity
benefits during the prior 12 months; or
- - taken from an installment Purchase Payment Account by a Participant who is at
least age 59 1/2 and who has completed nine or more Purchase Payment Periods.
Where the Company is the exclusive variable annuity provider for a Plan, and
the Plan also offers a 403(b)(7) custodial arrangement providing retail mutual
funds with only one fund family where the Company or an affiliate is the
recordkeeper, the deferred sales charge will also be waived if such withdrawal
is due to a transfer to a 403(b)(7) option under the custodial option described
above.
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
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, 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 the 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 any
withdrawal due to a default on a
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contract loan (see "Contract Loans"). This provision may not be exercised if SWO
is elected. (See "Additional Withdrawal Options.")
In the instances cited above, no deferred sales charge is deducted. However,
the amount withdrawn may be subject to the 10% federal penalty tax.
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
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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.
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
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Fund and is reduced each day by a percentage that accounts for the daily
assessment of mortality and expense risk charges and the administrative charge
(if any).
Initial Purchase Payments will be credited to your Account as described
under "Purchasing Interests in the Contract." Each subsequent Purchase Payment
(or amount transferred) will be credited to your Account at the AUV computed on
the next Valuation Date following our receipt of your payment or transfer
request. The value of an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance of a
Subaccount from one Valuation Date to the next. The net investment factor for a
Subaccount for any valuation period is equal to the sum of 1.000 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
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At any time prior to the Annuity Date, the Contract Holder (or you, if
authorized by the Contract Holder) 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 employer's Plan, as applicable.
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge, provided that the transfer amount
is not less than $500. However, the total number of investment options that you
may select during the Accumulation Period may be limited, as set forth on your
enrollment form. Any transfer will be based on the Accumulation Unit Value next
determined after the Company receives a valid transfer request at its Home
Office. Transfers are currently not available during the Annuity Period;
however, they may be available under some Annuity Options beginning later in
1996. (See "Annuity Period -- Annuity Options.")
DOLLAR COST AVERAGING PROGRAM
The Contract Holder (or you, if authorized) may establish automated
transfers of Account Values on a monthly or quarterly basis through the
Company's Dollar Cost Averaging Program, if available under your Plan. Dollar
Cost Averaging is a system for investing a fixed amount of money at regular
intervals over a period of time. Dollar Cost Averaging does not ensure a profit
nor guarantee against loss in a declining market. You should consider your
financial ability to continue purchases through periods of low price levels.
Please refer to the Inquiries section of the prospectus summary which describes
how you can obtain further information.
WITHDRAWALS
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The Contract Holder, on your behalf, may withdraw all or a portion of the
Account Value at any time during the Accumulation Period, subject to the
withdrawal restrictions under Section 403(b) Contracts described below, and to
the limitations on withdrawals from the Fixed Plus Account. To request a
withdrawal, the Contract Holder, on your behalf, must properly complete a
disbursement form and send it to our Home Office. If you are married and are
participating in a Plan subject to ERISA, the Contract Holder must provide
written certification that the applicable Retirement Equity Act requirements
have been met. Payments for withdrawal
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requests will be made in accordance with SEC requirements, but normally not
later than seven calendar days following our receipt of a disbursement form.
Withdrawals may be requested in one of the following forms:
- -FULL WITHDRAWAL OF THE CONTRACT: The amount paid upon a full withdrawal will be
the Account Value of all Accounts 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, plus the amount available for withdrawal from the Fixed
Plus Account (see Appendix III).
- -FULL WITHDRAWAL OF AN ACCOUNT: The amount paid for 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, plus the amount available for withdrawal from the Fixed Plus Account (see
Appendix III).
- -PARTIAL WITHDRAWALS (Percentage): The amount paid will be the percentage of the
Account Value requested minus any applicable deferred sales charge; however,
amounts available for withdrawal from the Fixed Plus Account are limited (see
Appendix III).
- -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. The
amount available for withdrawal from the Fixed Plus Account is limited (see
Appendix III).
For any partial withdrawal, the value of the Accumulation Units canceled
will be withdrawn proportionately from the Subaccounts or Credited Interest
Options in which Purchase Payments are allocated, unless requested otherwise in
writing by the Contract Holder. All amounts paid will be based on Account Values
as of the next Valuation Date after we receive a request for withdrawal at our
Home Office, or on such later date as the disbursement form may specify. A 20%
federal income tax may be withheld from amounts paid directly to you. (See "Tax
Status -- Contracts Used with Certain Retirement Plans.")
WITHDRAWAL RESTRICTIONS FROM 403(B) PLANS. Under Section 403(b) Contracts, a
withdrawal of salary reduction contributions and earnings on such contributions
is generally prohibited prior to 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 may elect to reinvest all or a portion of the proceeds
received from a full withdrawal of an 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 maintenance fee and 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 the Account based on the
Accumulation Unit Value next computed following our receipt of the request along
with the amount to be reinvested. The reinvestment privilege may be used only
once. See Appendix I for a discussion of amounts withdrawn from GAA and then
reinvested. If you are contemplating reinvestment, you should seek competent
advice regarding the tax consequences associated with such a transaction.
CONTRACT LOANS
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During the Accumulation Period, a Contract Holder of a 403(b) Plan may
request (on your behalf) a loan from the your Employee Account. The Contract
Holder may also authorize contract loans from the value of the Employer Account
(check with the Contract Holder to see if this is available). 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 from Contracts issued to 401(a)/401(k) Plans.
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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, the Account Value must meet the minimum dollar amounts and age
criteria applicable to that option.
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. For
Contracts issued in the state of New York, no market value adjustment will be
imposed on withdrawals from GAA for SWO or ECO.
If one of the Additional Withdrawal Options is selected, your Account 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 elected, an Additional Withdrawal Option, may be revoked by the
Contract Holder 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 Contract
Beneficiary(ies) 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 Plan Beneficiary (as directed in writing by the
Contract Holder):
- - 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
Plan Beneficiary is your spouse).
The Contract Holder, on behalf of the Plan 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 Plan Beneficiary, we will determine the Account Value on the
Valuation Date following the date on which we receive proof of death acceptable
to the Company. Interest, if any, will be paid from the date of death at a rate
no less than required by law. We will mail
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payment to the Contract Holder, or to the Plan Beneficiary, if requested by the
Contract Holder, 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, if your Plan Beneficiary is not your spouse either
annuity 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 Plan 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 Plan Beneficiary or any period certain greater than the
Plan 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
governmental and 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 Contract Holder, on your
behalf, must notify us in writing of the following:
- - the date on which you would like to start receiving Annuity payments;
- - the Annuity option under which you want your payments to be calculated and
paid;
- - whether the payments are to be made monthly, quarterly, semi-annually or
annually; and the investment option(s) used to provide Annuity payments (i.e.,
a fixed annuity using the general account or a variable annuity using any of
the Subaccounts available at the time of annuitization). As of the date of
this Prospectus, Aetna Variable Fund, Aetna Income Shares and Aetna Investment
Advisers Fund, Inc. are the only Subaccounts available; however, additional
Subaccounts may be available under some Annuity Options in the future. (See
"Annuity Options.")
Annuity Payments will not begin until you have selected an Annuity Option.
Until a date and option are elected, the Account will continue in the
Accumulation Period. Once Annuity payments begin, the Annuity Option may not be
changed, nor may transfers currently be made among the investment option(s)
selected. (See "Annuity Options" below for more information about transfers
during the Annuity Period).
ANNUITY OPTIONS
The Contract Holder, on behalf of the Participant, may choose one of the
following Annuity Options:
LIFETIME ANNUITY OPTIONS:
- -OPTION 1--Life Annuity--An annuity with payments ending on the Annuitant's
death.
- -OPTION 2--Life Annuity with Guaranteed Payments--A life 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 the 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, 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.
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NONLIFETIME ANNUITY OPTIONS:
- -OPTION 1--Payments for a Specified Period--payments will continue for a
specified period of time, as provided for under your Contract.
Under the nonlifetime option, the type of annuity (fixed or variable) and
the number of years that may be selected are determined by the investment
options used prior to annuitization. For amounts held in the Fixed Plus Account
(if available under the Contract), the annuity must be paid on a fixed basis and
payments may be made for 5-30 years. For amounts held in the Subaccounts, the
Guaranteed Accumulation Account or the Fixed Account, an annuity may be selected
on a fixed or variable basis and payments may be made for 3-30 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 apply to the existing
options, the guaranteed payout rates for the new and enhanced options will be
the same or lower.) Please refer to the Contract, or call the number listed in
the "Inquiries" section of the Prospectus Summary, to determine which options
are available and the terms of such options. It is not expected that these
additional or enhanced options will be made available to those who have already
commenced receiving Annuity Payments.
ANNUITY PAYMENTS
DATE PAYOUTS START. Annuity payments may not extend beyond (a) the life of
the Annuitant, (b) the joint lives of the Annuitant and Plan 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 Plan
Beneficiary.
AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on your
Account Value, how it is allocated between fixed and variable payouts, and the
Annuity option chosen. No election may be made that would result in the first
Annuity payment of less than $20, or total yearly Annuity payments of less than
$100. If your combined Employer and Employee Account Value on the Annuity Date
is insufficient to elect an option for the minimum amount specified, a lump-sum
payment must be elected.
If Annuity payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3 1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity payments
would decline if the rate were below 5%. Use of the 3 1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further information on the impact of
selecting a particular 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 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.
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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 Plan
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 Plan 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 Plan 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 Plan 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) plans, and
Section 401(a) and Section 401(k) plans. The tax rules applicable to retirement
plans vary according to the type of plan and the terms and conditions of the
plan.
The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants as
well as Plan 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 respect to the Contracts satisfy
applicable laws, and should consult their legal counsel and tax adviser
regarding the suitability of the Contract.
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MINIMUM DISTRIBUTION REQUIREMENTS. The Code has required distribution rules
for Section 403(b), 401(a) and 401(k) Plans. Under 403(b) Plans, distributions
of amounts held as of December 31, 1986 must generally begin by the end of the
calendar year in which you attain age 75 (or retire, if later, for governmental
or church plans). However, special rules require that some or all of that
balance be distributed earlier if any distributions are taken in excess of the
minimum required amount. Distributions under 401(a) and 401(k) Plans, and
distributions attributable to contributions under Section 403(b) Plans on or
after January 1, 1987 (including any earnings on the entire Account Value after
that date), must generally begin by April 1 of the calendar year following the
calendar year in which you attain age 70 1/2 or retire, whichever occurs later.
In general, annuity payments must be distributed over your life or the joint
lives of you and your Plan Beneficiary, or over a period not greater than your
life expectancy or the joint life expectancies of you and your Plan Beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your Plan Beneficiary must be made at least as rapidly as under
the method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your beneficiary by December 31 of the year
following your death. However, a spousal beneficiary has certain rollover rights
which can only be exercised in the year of your death. The rules are complex and
you should consult your tax adviser before electing the method of calculation to
satisfy the minimum distribution requirements.
If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year
containing the fifth anniversary of the date of your death. Alternatively,
payments may be made over the life of the beneficiary or over a period not
extending beyond the life expectancy of the beneficiary provided the
distribution begins by December 31 of the calendar year following the calendar
year of your death, or December 31 of the calendar year in which you would have
attained age 70 1/2.
If you fail to receive the minimum required distribution for any tax year, a
50% excise tax is imposed on the required amount that was not distributed.
TAXATION OF DISTRIBUTIONS. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to another
plan of the same type or to an individual retirement annuity/account ("IRA") in
accordance with the Code, or unless you have made after-tax contributions to the
plan, which are not taxed upon distribution. The Code has specific rules that
apply, depending on the type of distribution received, if after-tax
contributions were made.
In general, payments received by your Plan Beneficiaries after your death
are taxed in the same manner as if you had received those payments, except that
a limited death benefit exclusion may apply.
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from annuities are subject to mandatory federal income tax
withholding. We will report to the IRS the taxable portion of all distributions.
The Code imposes a 10% penalty tax on the taxable portion of any
distribution unless made when (a) you have attained age 59 1/2, (b) you have
become disabled, (c) you have died, (d) you have separated from service with the
plan sponsor at or after age 55, (e) the distribution amount is rolled over into
another plan of the same type or to an IRA in accordance with the terms of the
Code, or (f) the distribution amount is made in substantially equal periodic
payments (at least annually) over your life or life expectancy or the joint
lives or joint life expectancies of you and your plan beneficiary, provided you
have separated from service with the plan sponsor. In addition, the penalty tax
does not apply for the amount of a distribution equal to unreimbursed medical
expenses incurred by you that qualify for deduction as specified in the Code.
The Code may impose other penalty taxes in other circumstances.
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SECTION 403(B) PLANS. Under Section 403(b), contributions made by nonprofit
healthcare organizations and other Section 501(c)(3) tax exempt organizations to
purchase annuity contracts for their employees are generally excludable from the
gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by you and your employer cannot exceed either of two limits set by the
Code. The first limit, under Section 415, is generally the lesser of 25% of your
includable compensation or $30,000. The second limit, which is the exclusion
allowance under Section 403(b), is usually calculated according to a formula
that takes into account your length of employment and any pretax contributions
to certain other retirement plans. These two limits apply to your contributions
as well as to any contributions made by your employer on your behalf. There is
an additional limit that specifically limits your salary reduction contributions
to generally no more than $9,500 annually (subject to indexing); your own limit
may be higher or lower, depending on certain conditions. In addition Purchase
Payments will be excluded from a Participant's gross income only if the Plan
meets certain nondiscrimination 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 includable in the variable contract owner's gross income. The Treasury
announced that guidance would be issued in the future regarding the extent to
which owners could direct their investments among Subaccounts without being
treated as owners of the underlying assets of the Separate Account. It is
possible that the Treasury's position, when announced, may adversely affect the
tax treatment of existing contracts. The Company therefore reserves the right to
modify the Contract as necessary to attempt to prevent the Contract owner from
being considered the federal tax owner of the assets of the Separate Account.
SECTION 401(A) AND 401(K) PLANS. Section 401(a) and 401(k) permits certain
employers to establish various types of retirement plans for employees, and
permits self-employed individuals to establish various types of retirement plans
for themselves and for their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax consequences to the Plan, to the Participant or to both may result
if this Contract is assigned or transferred to any individual except to a
Participant as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a Participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of your compensation or $30,000. The limit
applies to your contributions as well as any contributions made by your employer
on your behalf. There is an additional limit that specifically limits your
salary reduction contributions under a 401(k) Plan to generally no more than
$9,500 annually (subject to indexing). Your own limits 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
nondiscrimination requirements.
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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 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 6% of those Purchase Payments. The Company may also pay renewal commissions
and asset-based service fees on Purchase Payments made after the first year. 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.
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
In accordance with the Company's view of present applicable law, it will
vote the shares of each of the Funds
- --------------------------------------------------------------------------------
17
<PAGE>
held by the Separate Account at regular and special meetings of Fund
shareholders in accordance with instructions received from persons having a
voting interest in the Separate Account. Participants and Annuitants have a
fully vested (100%) interest in the value of the Employee Account and also have
a nonforfeitable (vested) right to the value of the Employer Account pursuant to
the terms of, and to the extent of their vested percentage under the Plan.
Therefore, such Participants and Annuitants may instruct the Contract Holder how
to direct the Company to cast the votes for the portion of the Account Value or
valuation reserve attributable to their Accounts. The Company will vote shares
for which it has not receive instructions in the same proportion as it votes
shares for which it has received instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest, as
well as any proxy materials and a form on which to give voting instructions.
Voting instructions will be solicited by written communication at least 14 days
before such meeting. The number of votes to which each person may give direction
will be determined as of the record date set by the Fund.
The number of votes each Contract Holder, Participant or beneficiary, as
applicable, may cast during the Accumulation Period is equal to the portion of
the Account Value to that Fund, divided by the net asset value of one share of
that Fund. During the Annuity Period, the number of votes is equal to the
valuation reserve applicable to the portion of the Contract attributable to that
Fund, divided by the net asset value of one share of that Fund. In determining
the number of votes, fractional votes will be recognized.
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 the Contract that would apply only to individuals who
become Participants under that Contract after the effective date of such
changes. If the Contract Holder does not agree to a change, no new Participants
will be covered under the Contract. Certain changes will require the approval of
appropriate state or federal regulatory authorities.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Susan E. Bryant, Esq., Counsel to the Company.
CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
<TABLE>
<S> <C>
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
</TABLE>
- --------------------------------------------------------------------------------
18
<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 SHOULD READ THE ACCOMPANYING GAA PROSPECTUS
CAREFULLY BEFORE INVESTING.
GAA is a Credited Interest Option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. This option guarantees the minimum interest
rate specified in the Contract.
During a specified period of time, (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from more than three and up 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"). For Contracts issued in New York, no MVA applies upon the
election of the Estate Conservation Option or the Systematic Withdrawal Option.
An MVA reflects the change in the value of the investments due to changes in
interest rates since the date of deposit. When interest rates increase after the
date of deposit, the value of the investment decreases and the MVA is negative.
Conversely, when interest rates decrease after the date of deposit, the value of
the investment increases, and the MVA is positive. It is possible that a
negative MVA could result in the Participant receiving an amount which is less
than the amount paid into GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge, federal tax penalties or mandatory income tax withholding
and a maintenance fee.
By notifying us at least 30 days prior to the Annuity Date, the Contract
Holder may elect a variable annuity on your behalf and have amounts that have
been accumulating under GAA transferred to one or more of the Subaccounts
available during the Annuity Period. GAA cannot be used as an investment option
during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Transfers are permitted among Guaranteed Terms. However, amounts applied to
GAA may not be transferred to another Guaranteed Term of GAA, or to any other
Subaccount or Credited Interest Option available under the Contract, during the
deposit period or the 90 days after the close of the deposit period. We will
apply an MVA to transfers made before the end of a Guaranteed Term, unless such
transfer is due to the maturity of the Guaranteed Term.
CONTRACT LOANS
Loans may not be made against amounts held in GAA, although such value is
included in determining the Account Value against which a loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn 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.
- --------------------------------------------------------------------------------
19
<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.
The Fixed Account guarantees the minimum interest rate specified in the
Contract. The Company may credit a higher interest rate from time to time. The
current rate is subject to change at any time, but will never fall below the
guaranteed minimum. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under the Fixed
Account, the Company assumes the risk of investment gain or loss by guaranteeing
Account Values and promising a minimum interest rate and Annuity Payment.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as provided by
federal law.
In addition, if allowed by state law, the Company 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 the
Accounts under the Contract exceeds $250,000 on the day prior to the
withdrawal; and
(b) the sum of the current Fixed Account withdrawal and the total of all Fixed
Account withdrawals from the Contract or for the total of the Accounts under
the Contract within the past 12 calendar months exceeds 20% of the amount in
the Fixed Account on the day prior to 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.
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.
If a withdrawal is made from the Fixed Account, a deferred sales charge may
apply. (See "Charges and Deductions-- Deferred Sales Charge.")
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers from the Fixed Account to any other available investment
options(s) 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, on your behalf, 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
Under 403(b) Plans, loans may be made from Account Values held in the Fixed
Account.
- --------------------------------------------------------------------------------
20
<PAGE>
APPENDIX III
FIXED PLUS ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED PLUS
ACCOUNT. AMOUNTS ALLOCATED TO THE FIXED PLUS ACCOUNT ARE HELD IN THE COMPANY'S
GENERAL ACCOUNT THAT SUPPORTS GENERAL INSURANCE AND ANNUITY OBLIGATIONS.
INTERESTS IN THE FIXED PLUS ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN
RELIANCE ON EXEMPTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE
IN THE PROSPECTUS REGARDING THE FIXED PLUS ACCOUNT, MAY, HOWEVER, BE SUBJECT TO
CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING
TO THE ACCURACY AND COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX
REGARDING THE FIXED PLUS ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will never
fall below the guaranteed minimum. The Company's determination of interest rates
reflects the investment income earned on invested assets and the amortization of
any capital gains and/or losses realized on the sale of invested assets. Under
the Fixed Plus Account, the Company assumes the risk of investment gain or loss
by guaranteeing Account Values and promising a minimum interest rate and Annuity
Payment. This option is not available in the state of New York.
The Fixed Plus Account will reflect a compound interest rate credited by us.
The interest rate quoted is an annual effective yield. Amounts applied to the
Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
Beginning on the tenth Account Year, we will credit amounts held in the
Fixed Plus Account with an interest rate that is at least 0.25% higher than the
then-declared interest rate for the Fixed Plus Accounts for Accounts that have
not reached their tenth anniversary.
The Company reserves the right to limit Purchase Payment(s) and/or transfers
to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day our Home Office receives a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of any of the
Additional Withdrawal Options.
The 20% limit is waived if the partial withdrawal is due to annuitization or
death. The waiver upon death will only be exercised once and must occur within
six months after the Participant's date of death. Any such surrender or
annuitization must also be made pro rata from all Subaccounts and Credited
Interest Options available under the Contract.
If a full withdrawal is requested, we will pay any amounts held in the Fixed
Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
5. The balance of the Fixed Plus Account Value 12 months later.
- --------------------------------------------------------------------------------
21
<PAGE>
Once we receive a request for a full withdrawal, no further withdrawals,
loans or transfers will be permitted from the Fixed Plus Account. A full
withdrawal from the Fixed Plus Account may be cancelled at any time before the
end of the five-payment period. We will waive the Fixed Plus Account full
withdrawal provision if a full withdrawal is made due to:
(a) the Participant's death, before Annuity payments begin and request for
payment is received within 6 months after the Participant's date of death;
(b) the election of an Annuity option;
(c) if the Fixed Plus Account value is $3,500 or less and no withdrawals,
transfers, loan or annuitizations have been made from the Account within the
prior 12 months.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of an Additional
Withdrawal Option. The 20% limit on transfers will be waived when the value in
the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before the Annuity Date,
you may elect to have amounts which have been accumulating under the Fixed Plus
Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide lifetime variable Annuity Payments.
SWO
The Systematic Withdrawal Option may not be elected if you have requested a
Fixed Plus Account transfer or withdrawal within the prior 12 month period.
CONTRACT LOANS
If permitted under the Contract, loans may be made from Account Values held
in the Fixed Plus Account. See the loan agreement for a description of the
amount available and the consequences upon loan default if more than 20% of the
Fixed Plus Account Value is used for a loan.
- --------------------------------------------------------------------------------
22
<PAGE>
APPENDIX IV
EMPLOYEE APPOINTMENT OF EMPLOYER
AS AGENT UNDER AN ANNUITY CONTRACT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
My employer has adopted a Retirement Plan under Internal Revenue Code
Section 403(b) ("Plan") and has purchased an Aetna Life Insurance and Annuity
Company ("Company") group variable annuity contract ("Contract") as the funding
vehicle. Contributions under this Plan will be made by me through salary
reduction to an Employee Account, and by my employer to an Employer Account.
By electing to participate in my employer's Plan, I voluntarily appoint my
employer, who is the Contract Holder, as my agent for the purposes of all
transactions under the Contract in accordance with the terms of the Plan. The
Company is not a party to the Plan and does not interpret the Plan provisions.
As a Participant in the Plan, I understand and agree to the following terms
and conditions:
- - I own the value of my Employee Account subject to the restrictions of Section
403(b) and the terms of the Plan. Subject to the terms of the vesting schedule
in the Plan and the restrictions of Section 403(b), I have ownership in the
value of my Employer Account.
- - I understand that the Company will process transactions only with my
employer's written direction to the Company. I agree to be bound by my
employer's interpretation of the Plan provisions and its written direction to
the Company.
- - My employer may permit me to make investment selections under the Employee
Account and/or the Employer Account directly with the Company under the terms
of the Contract. Without my employer's written permission, I will be unable to
make any investment selections under the Contract.
- - On my behalf, my employer may request a loan in accordance with the terms of
the Contract and the provisions of the Plan. The Company will make payment of
the loan amount directly to me. I will be responsible for making repayments
directly to the Company in a timely manner.
- - In the event of my death, my employer is the named beneficiary under the terms
of the Contract. I have the right to name a personal beneficiary as determined
under the terms of the Plan and file that beneficiary election with my
employer. It is my employer's responsibility to direct the Company to properly
pay any death benefits.
- --------------------------------------------------------------------------------
23
<PAGE>
FOR MASTER APPLICATIONS ONLY
I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C "RETIREMENT PLUS -- GROUP
DEFERRED VARIABLE ANNUITY" 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.
75986(S)) DATED MAY 1, 1996.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
75986-2 (5/96)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996
AetnaPlus Contracts and Multiple Option Contracts
Group Variable Annuity Contracts Available under Section 403(b) and 401(a)
RETIREMENT PLUS
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
<TABLE>
<CAPTION>
Page
<S> <C>
General Information and History................................................ 2
Variable Annuity Account C..................................................... 2
Offering and Purchase of Contracts............................................. 3
Performance Data............................................................... 3
General.................................................................... 3
Average Annual Total Return Quotations..................................... 4
Annuity Payments............................................................... 10
Sales Material and Advertising................................................. 11
Independent Auditors........................................................... 11
Financial Statements of the Separate Account................................... S-1
Financial Statements of Aetna Life Insurance and Annuity Company............... F-1
</TABLE>
<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 the Separate Account will be invested
exclusively in shares of the Funds described in the Prospectus. Purchase
Payments made under the Contract may be allocated to one or more of the
Subaccounts. The Company may make additions to or deletions from available
investment options as permitted by law. The availability of the Funds is
subject to applicable regulatory authorization. Not all Funds are available in
all jurisdictions or under all Plans. The Funds currently available under the
Contract are as follows:
2
<PAGE>
<TABLE>
<S> <C>
Aetna Variable Fund Fidelity VIP Overseas Portfolio
Aetna Income Shares Franklin Government Securities Trust
Aetna Variable Encore Fund Janus Aspen Aggressive Growth Portfolio
Aetna Investment Advisers Fund, Inc. Janus Aspen Balanced Portfolio
Aetna Ascent Variable Portfolio Janus Aspen Flexible Income Portfolio
Aetna Crossroads Variable Portfolio Janus Aspen Growth Portfolio
Aetna Legacy Variable Portfolio Janus Aspen Short-Term Bond Portfolio
Alger American Growth Portfolio Janus Aspen Worldwide Growth Portfolio
Alger American Small Cap Portfolio Lexington Natural Resources Trust
Calvert Responsibly Invested Balanced Portfolio Neuberger & Berman Growth Portfolio
Fidelity VIP II Contrafund Portfolio Scudder International Portfolio
Fidelity VIP Equity-Income Portfolio TCI Growth
Fidelity VIP Growth Portfolio
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the Depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through
life insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the sections titled "Purchase" and "Contract Valuation."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
Prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as the "non-standardized total
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 charges, maintenance fees, administrative expense charges, and
deferred sales charges). 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
3
<PAGE>
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
There are two sets of total return quotations shown below: one for AetnaPlus
Contracts and one for Multiple Option Contracts (as identified on the cover of
your Prospectus). The contract features and charges under these types of
contracts are identical; however, they are administered on two different
administrative systems. Due to differences in the way the two systems
administered payments prior to mid-1994, performance for the Subaccounts under
the two systems for those periods differs.
Additionally, each set of tables shown below represents the variations in
contract payment type and in the maintenance fees assessed under different
plans. Table A reflects the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1995 for the
Subaccounts under Single Payment Accounts issued by the Company. Tables B and C
reflect the average annual standardized and non-standardized total return
quotation figures for the periods ended December 31, 1995 for the Subaccounts
under Installment Payment Accounts with a $15 annual maintenance fee and a $7.50
annual maintenance fee, respectively. In both sets of tables, 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 *).
AETNA PLUS CONTRACTS
TABLE A
<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
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<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 Crossroads Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio 09/30/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Growth Portfolio 11/07/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 02/13/87
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- ----------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AETNA PLUS CONTRACTS
TABLE B
<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
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<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 Investment Advisers Fund, Inc. 06/23/89
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio 09/30/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Growth Portfolio 11/07/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 02/13/87
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- ----------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
AETNA PLUS CONTRACTS
TABLE C
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
FUND
INSTALLMENT PAYMENT ACCOUNT: INCEPTION
($7.50 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
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio 09/30/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Growth Portfolio 11/07/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 02/13/87
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- ----------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
MULTIPLE OPTION CONTRACTS
TABLE A
<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
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio 09/30/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Growth Portfolio 11/07/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 02/13/87
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- ----------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
MULTIPLE OPTION CONTRACTS
TABLE B
<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
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio 09/30/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Growth Portfolio 11/07/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 02/13/87
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- ----------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
MULTIPLE OPTION CONTRACTS
TABLE C
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
FUND
INSTALLMENT PAYMENT ACCOUNT: INCEPTION
($7.50 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
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio 09/30/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Growth Portfolio 11/07/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity Overseas Portfolio 02/13/87
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- ----------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Period before the first
Annuity payment is due. Such value (less any applicable premium tax) is applied
to provide an Annuity in accordance with the Annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b) where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Period to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Fund(s) (with a ten Valuation Period lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.
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
11
<PAGE>
the prior Valuation Period (assume such value to be $13.504376) to produce an
Annuity Unit value of $13.523359 for the Valuation Period in which the second
payment is due.
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and Certificates of Deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Funds to established market indexes such
as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average or
to the percentage change in values of other management investment companies that
have investment objectives similar to the Fund being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance 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
12
<PAGE>
include primarily the examination of the Separate Account's financial
statements and the review of filings made with the SEC.
13
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
INDEX
Independent Auditors' Report.................................... S-2
Statement of Assets and Liabilities............................. S-3
Statement of Operations......................................... S-4
Statements of Changes in Net Assets............................. S-5
Notes to Financial Statements................................... S-6
FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT
AND INSURANCE COMPANY WILL BE PROVIDED
IN A SUBSEQUENT POST-EFFECTIVE AMENDMENT
S-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT C
VARIABLE ANNUITY CONTRACTS
ISSUED BY
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Form No. 75986(S) ALIAC Ed. May 1996
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:*
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of December 31, 1995
- Statement of Operations for the year ended December 31, 1995
- Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
- Notes to Financial Statements
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993
- Consolidated Balance Sheets as of December 31, 1995 and 1994
- Consolidated Statements of Changes in Shareholder's Equity for
the years ended December 31, 1995, 1994 and 1993
- Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
- Notes to Consolidated Financial Statements
(b)Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance and
Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3.1) 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-IA(RP))(3)
(4.2) Form of Variable Annuity Contract (G-CDA-IA(RPM/XC))(4)
(4.3) Form of Variable Annuity Contract (G-CDA-HF)(5)
(5) Form of Variable Annuity Contract Application (300-GTD-IA)(6)
(6) Certification of Incorporation and By-Laws of Depositor(7)
(7) Not applicable
(8.1) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Alger American Fund and Fred Alger
Management, Inc. dated September 1, 1993(2)
<PAGE>
(8.2) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company
(Calvert Responsibly Invested Balanced Portfolio formerly
Calvert Socially Responsible Series) dated March 13, 1989 and
amended December 27, 1993(8)
(8.3) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation dated
February 1, 1994 (Variable Insurance Products Fund)(9)
(8.4) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation dated
February 1, 1994 (Variable Insurance Products Fund II)(9)
(8.5) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989(10)
(8.6) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994 and
amended June 15, 1994(11)
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Lexington Management Corporation regarding
Natural Resources Trust dated December 1, 1988 and amended
February 11, 199(18)
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Advisers Management Trust (now Neuberger &
Berman Advisers Management Trust) dated April 14, 1989(2)
(8.9) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Scudder Variable Life Investment Fund dated
April 27, 1992 and amended February 19, 1993 and August 13,
1993(12)
(8.10) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended December 22, 1992
and June 1, 1994(12)
(9) Opinion of Counsel*
(10.1) Consent of Independent Auditors*
(10.2) Consent of Counsel*
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data*
(14) Financial Data Schedule*
(15.1) Powers of Attorney(13)
(15.2) Authorization for Signatures(14)
*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.
<PAGE>
3. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-75986) filed on April 28, 1995.
4. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 75954) filed on February 28, 1995.
5. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-75964) filed on February 24, 1995.
6. 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.
7. 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.
8. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-75978) filed on March 24, 1995.
9. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75978) filed on April 25, 1994.
10. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75990) filed on April 25, 1994.
11. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form N-4 (File No. 33-75960) filed on August 9, 1994.
12. Incorporated by reference to Registration Statement on Form N-4 (File
No. 33-88720) filed on January 20, 1995.
13. The Power of Attorney for David E. Bushong, Acting Chief Financial Officer,
is incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-87932), as filed
electronically, on September 18, 1995. The Power of Attorney for all other
signatories is 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.
14. Incorporated by Reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-75996) filed on February 23, 1995.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal
Business Address* Positions and Offices With Depositor
- ------------------ ------------------------------------
Daniel P. Kearney Director and President
Timothy A. Holt Director
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Senior Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
James C. Hamilton Vice President and Treasurer
David E. Bushong Acting Chief Financial Officer
Eugene M. Trovato Vice President, Chief Accounting Officer and
Corporate Controller
Zoe Baird Senior Vice President and General Counsel
Susan E. Schechter Corporate Secretary and Counsel
* The principal business address of all directors and officers listed is
151 Farmington Avenue, Hartford, Connecticut 06156.
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT
Incorporated herein by references to Item 26 of Post-Effective Amendment
No. 5 to Registration Statement on Form N-4 (File No. 33-75982), as filed
electronically, 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.
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
<PAGE>
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:
<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
<PAGE>
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.
(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. 4 to its Registration Statement on Form N-4 (File No. 33-75986) to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Hartford, State of Connecticut, on the 20th 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. 4 to the Registration Statement on Form N-4 (File No. 33-75986)
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 )
)
)
Timothy A. Holt* Director )
- ----------------------------- )
Timothy A. Holt )
)
)
David E. Bushong* Acting Chief Financial Officer ) February
- ----------------------------- ) 20, 1996
David E. Bushong )
)
)
Eugene M. Trovato* Vice President, Chief Accounting )
- ----------------------------- Officer and Corporate Controller )
Eugene M. Trovato )
)
)
Christopher J. Burns* Director )
- ----------------------------- )
Christopher J. Burns )
<PAGE>
Laura R. Estes* Director )
- ----------------------------- )
Laura R. Estes )
)
)
Gail P. Johnson* Director )
- ----------------------------- )
Gail P. Johnson )
)
)
John Y. Kim* Director )
- ----------------------------- )
John Y. Kim )
)
)
Shaun P. Mathews* Director )
- ----------------------------- )
Shaun P. Mathews )
)
)
Glen Salow* Director )
- ----------------------------- )
Glen Salow )
)
)
Creed R. Terry* Director )
- ----------------------------- )
Creed R. Terry )
</TABLE>
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-IA(RP)) *
99-B.4.2 Form of Variable Annuity Contract (G-CDA-IA(RPM/XC)) *
99-B.4.3 Form of Variable Annuity Contract (G-CDA-HF) *
99-B.5 Form of Variable Annuity Contract Application (300-GTD-IA) *
99-B.6 Certification of Incorporation and By-Laws of Depositor *
99-B.8.1 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Alger American Fund and Fred Alger
Management, Inc. dated September 1, 1993
99-B.8.2 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Calvert Asset Management Company
(Calvert Responsibly Invested Balanced Portfolio formerly
Calvert Socially Responsible Series) dated March 13, 1989
and amended December 27, 1993
99-B.8.3 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Fidelity Distributors Corporation
dated February 1, 1994 (Variable Insurance Products Fund)
99-B.8.4 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Fidelity Distributors Corporation
dated February 1, 1994 (Variable Insurance Products Fund II)
99-B.8.5 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Franklin Advisers, Inc. dated
January 31, 1989
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE
- ----------- ------- ----
<S> <C> <C>
99-B.8.6 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Janus Aspen Series dated April 19,
1994 and amended June 15, 1994
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Lexington Management Corporation
regarding Natural Resources Trust dated December 1, 1988
and amended February 11, 1991
99-B.8.8 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Advisers Management Trust (now
Neuberger & Berman Advisers Management Trust) dated
April 14, 1989
99-B.8.9 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Scudder Variable Life Investment
Fund dated April 27, 1992 and amended February 19, 1993
and August 13, 1993
99-B.8.10 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Investors Research Corporation and
TCI Portfolios, Inc. dated July 29, 1992 and amended
December 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
