<PAGE>
As filed with the Securities and Exchange Registration No. 33-81216
Commission on April 17, 1996 Registration No. 811-2513
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
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POST-EFFECTIVE AMENDMENT NO. 3 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)
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It is proposed that this filing will become effective (CHECK APPROPRIATE SPACE):
----- immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
-----
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 filed a Rule 24f-2 Notice for the fiscal year ended December 31, 1995
on 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
<PAGE>
<CAPTION>
FORM N-4
ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
- -------- -------------------------------------------- --------
<S> <C> <C>
15 Cover Page . . . . . . . . . . . . . . . . . Cover page
16 Table of Contents. . . . . . . . . . . . . . Table of Contents
17 General Information and History. . . . . . . General Information and History
18 Services . . . . . . . . . . . . . . . . . . General Information and
History; Independent Auditors
19 Purchase of Securities Being Offered . . . . Offering and Purchase of
Contracts
20 Underwriters . . . . . . . . . . . . . . . . Offering and Purchase of
Contracts
21 Calculation of Performance Data. . . . . . . Performance Data; Average
Annual Total Return Quotations
22 Annuity Payments . . . . . . . . . . . . . . Annuity Payments
23 Financial Statements . . . . . . . . . . . . Financial Statements
</TABLE>
PART C (OTHER INFORMATION)
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
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- --------------------------------------------------------------------------------
This Prospectus describes group flexible premium deferred variable annuity
contracts ("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). The Contracts are designed to fund the State University of New York
("SUNY") Defined Contribution Retirement Plan (the "SUNY Plan") and to accept
transfers of amounts made to the predecessor program which is qualified under
Section 403(b) of the Code. Two Contracts will be issued: one for transferred
assets from the predecessor Section 403(b) optional retirement program
("Rollover Contract"), and one for ongoing contributions and transferred assets
from the SUNY Plan, a plan qualified under Sections 401(a) and 414(h) of the
Code ("Modal Contract").
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 - Franklin Government Securities
- Aetna Income Shares Trust
- Aetna Variable Encore Fund - Janus Aspen Aggressive Growth
- Aetna Investment Advisers Fund, Portfolio
Inc. - Janus Aspen Growth Portfolio
- Alger American Growth Portfolio - Janus Aspen Short-Term Bond
- Alger American Small Cap Portfolio Portfolio
- Calvert Responsibly Invested - Janus Aspen Worldwide Growth
Balanced Portfolio Portfolio
- Fidelity VIP II Asset Manager - Lexington Emerging Markets Fund,
Portfolio Inc.
- Fidelity VIP II Contrafund - Lexington Natural Resources Trust
Portfolio - Neuberger & Berman Growth Portfolio
- Fidelity VIP II Index 500 Portfolio - Scudder International Portfolio
- Fidelity VIP Equity-Income Class A Shares
Portfolio - TCI Growth (a Twentieth Century
fund)
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account and the Fixed Plus Account. Except as
specifically mentioned, this Prospectus describes only investments through the
Separate Account. A brief description of each of the Credited Interest Options
is contained in Appendices to this Prospectus. Additional information concerning
the Guaranteed Accumulation Account is contained in a separate prospectus.
The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest Options
may be available under all Contracts. 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 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 14 of this Prospectus. An SAI
may be obtained at no charge 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................................. 3
PURCHASE...................................................... 4
Contract Availability..................................... 4
Contract Purchase......................................... 4
Purchase Payments......................................... 4
Rights Under the Contract................................. 4
Right to Cancel........................................... 4
CHARGES AND DEDUCTIONS........................................ 5
Daily Deductions from the Separate Account................ 5
Fund Expenses............................................. 5
Premium and Other Taxes................................... 5
CONTRACT VALUATION............................................ 5
Account Value............................................. 5
Accumulation Units........................................ 5
Net Investment Factor..................................... 6
TRANSFERS..................................................... 6
WITHDRAWALS................................................... 6
Reinvestment Privilege.................................... 7
DEATH BENEFIT DURING ACCUMULATION PERIOD...................... 7
ANNUITY PERIOD................................................ 7
Annuity Period Elections.................................. 7
Annuity Options........................................... 8
Annuity Payments.......................................... 8
Charges Deducted During the Annuity Period................ 9
Death Benefit Payable During the Annuity Period........... 9
TAX STATUS.................................................... 9
Introduction.............................................. 9
Taxation of the Company................................... 9
Contracts Used With Certain Retirement Plans.............. 10
MISCELLANEOUS................................................. 12
Distribution.............................................. 12
Delay or Suspension of Payments........................... 12
Performance Reporting..................................... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Voting Rights............................................. 12
Modification of the Contract.............................. 13
Transfer of Ownership; Assignment......................... 13
Legal Matters and Proceedings............................. 13
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION........... 14
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT................... 15
APPENDIX II--FIXED PLUS ACCOUNT............................... 16
</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.
AETNA PROCESSING OFFICE: The administrative headquarters for the SUNY Defined
Contribution Plan. The mailing address is P.O. Box 12894, Albany, New York
12212-2894.
ANNUITANT: The person on whose life or life expectancy the annuity payments are
based.
ANNUITY: A series of payments for life, a definite period or a combination of
the two.
ANNUITY DATE: The date on which annuity payments begin.
ANNUITY PERIOD: The period during which annuity payments are made.
ANNUITY UNIT: A measure of the value of each Subaccount selected during the
Annuity Period.
BENEFICIARY(IES): The person or persons identified on the enrollment form who
are to receive any death benefit proceeds payable under the Contract.
CODE: The Internal Revenue Code of 1986, amended.
COMPANY (WE, US): Aetna Life Insurance and Annuity Company.
CONTRACT: The group deferred, variable annuity contracts offered by this
Prospectus.
CONTRACT HOLDER: The entity to which the Contract is issued. The Contract Holder
is the trustee of a multiple employer trust approved by the Company to apply for
and own the Contract as authorized by SUNY.
CREDITED INTEREST OPTIONS: The fixed interest options available under the
Contract. The Credited Interest Options currently consist of the Guaranteed
Accumulation Account and the Fixed Plus Account, each of which is described in
an Appendix to this Prospectus. Amounts allocated to the Credited Interest
Options are included in the Account Value.
EMPLOYEE ACCOUNT: An account established for each Participant. This Account is
credited with net Purchase Payments made by the Participant.
EMPLOYER ACCOUNT: An account established for each Participant. This Account will
be credited with net Purchase Payments made by the employer.
FUND(S): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the Contract.
MODAL CONTRACT: A Contract that accepts Purchase Payments made pursuant to Code
Sections 401(a) and 414(h) and transferred funds attributable to Section 401(a)
and 414(h) contributions.
PARTICIPANT (YOU): A person participating in the Plan.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
PLAN(S): The SUNY Defined Contribution Plan (or any predecessor SUNY plan
qualified under Section 403(b) of the Code).
PLAN ADMINISTRATOR: The individual or entity designated under the Plan who is
responsible for the interpretation and administration of the Plan. The Company
is not the Plan Administrator.
PURCHASE PAYMENT(S): The gross payment(s) made to the Company under a Contract.
ROLLOVER CONTRACT: A Contract that accepts Purchase Payments attributable to a
transfer of employer contributions and after-tax employee contributions made
pursuant to SUNY's Section 403(b) optional retirement program.
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.
SUNY PLAN: The State of New York Defined Contribution Retirement Plan.
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 designed to fund the SUNY
Plan and to accept transfers from SUNY's predecessor optional retirement program
which is qualified under Section 403(b) of the Code. The Contracts are group
flexible premium deferred variable annuity contracts under which accounts are
established for persons in the group.
Two Contracts have been issued: one for transferred assets under the
predecessor Section 403(b) program ("Rollover Contract"), and one for ongoing
contributions and transferred assets under the SUNY Plan qualified under
Sections 401(a) and 414(h) of the Code ("Modal Contract"). (See "Contract
Availability.")
CONTRACT PURCHASE
For each Contract, both an Employee Account and an Employer Account will be
established for each Participant. The Accounts are established when you complete
an enrollment form (and any other required forms) and forward them to the
Company through the Aetna Processing Office. (See "Purchase.")
FREE LOOK PERIOD
Participation under the Contract may be cancelled within 10 days after you
receive the Certificate by returning it to the Company along with a written
notice of cancellation. The amount you will receive upon cancellation will
reflect the investment performance of the Subaccounts into which your Purchase
Payments were deposited. In some cases this may be more or less than the amount
of your Purchase Payments. (See "Purchase--Right to Cancel.")
INVESTMENT OPTIONS
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein, as designated by the
Participant. The Contract allows investment in any or all of the Subaccounts, as
well as in the Credited Interest Options described below. For a complete list of
the Funds available under the Contracts, and a description of the investment
objectives of each of the Funds and their investment advisers, see "Investment
Options--The Funds" in this Prospectus, as well as the prospectuses for each of
the Funds.
The Contract also provides for investment in Credited Interest Options which
allow you to earn fixed rates of interest. The fixed options available under the
Contract are the Guaranteed Accumulation Account ("GAA") and the Fixed Plus
Account. (See the Appendices to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and an administrative expense charge), as well as premium and other
taxes. The Funds also incur certain fees and expenses which are deducted
directly from the Funds. (See the Fee Table and "Charges and Deductions.")
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, Account
Values may be transferred among the Subaccounts and the Credited Interest
Options without charge. Transfers can be requested in writing or by telephone in
accordance with the Company's transfer procedures. (See the Appendices for a
full description of the restrictions applicable to transfers made from the
Credited Interest Options.) (See "Transfers.")
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Aetna
Processing Office. A distribution can be made only if the Plan
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
Administrator certifies in writing that you are eligible, both as to the timing
and form of distribution. Limitations apply to withdrawals from the Fixed Plus
Account. The withdrawal may be subject to income tax and a federal tax penalty.
(See "Withdrawals.")
DEATH BENEFIT
A death benefit is payable if the Participant dies before the Annuity Date.
Death benefit proceeds will be paid to the Beneficiary in an amount equal to the
Account Value. Until the election of a method of payment, the Account Value will
remain invested under the Contract as it was before the Participant's death. The
Beneficiary may elect to receive the proceeds in a lump sum or under any of the
payment options available under the Contract. However, the Code requires that
distributions begin within a certain time period. (See "Death Benefit During
Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to the
Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, you may elect to begin receiving Annuity Payments.
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 20% withholding for income tax may be imposed on certain
withdrawals. (See "Tax Status.")
INQUIRIES
The Company has established the Aetna Processing Office to provide
administrative support to SUNY Participants. This office will handle
enrollments, billing, transfers, redemptions, and inquiries for all SUNY
Participants. All forms and correspondence should be sent to:
Aetna Processing Office
P.O. Box 12894
Albany, New York 12212-2894
Telephone Number: 1-800-677-4636
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SUMMARY - 2
<PAGE>
FEE TABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Fee Table describes the charges and expenses associated with the Contract
during the Accumulation Period. For amounts deducted during the Annuity Period,
see "Charges Deducted During the Annuity Period." The charges and expenses shown
below do not include premium taxes that may be applicable. For more information
regarding fees and expenses paid out of the assets of a particular Fund, see the
Fund's prospectus.
CHARGES AGAINST THE SEPARATE ACCOUNT. Each Subaccount pays these expenses out of
its assets. The charges are reflected in the Subaccount's daily Accumulation
Unit Value and are not charged directly to an Account. They include:
<TABLE>
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE................................ 1.25%
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>
ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses applicable
to the Funds. A Fund's "Other Expenses" include operating costs of the Fund.
These expenses are reflected in the Fund's net asset value and are not deducted
from the Account Value under the Contract. (Except as noted, the following
figures are a percentage of average net assets and, except where otherwise
indicated, are based on figures for the year ended December 31, 1995.)
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES(1) OTHER EXPENSES TOTAL FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
<S> <C> <C> <C>
Aetna Variable Fund(2) 0.25% 0.06% 0.31%
Aetna Income Shares(2) 0.25% 0.08% 0.33%
Aetna Variable Encore Fund(2) 0.25% 0.10% 0.35%
Aetna Investment Advisers Fund,
Inc.(2) 0.25% 0.08% 0.33%
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Alger American Small Cap Portfolio 0.85% 0.07% 0.92%
Calvert Responsibly Invested Balanced
Portfolio(3) 0.70% 0.13% 0.83%
Fidelity VIP II Asset Manager
Portfolio(4) 0.71% 0.08% 0.79%
Fidelity VIP II Contrafund
Portfolio(4) 0.61% 0.11% 0.72%
Fidelity VIP II Index 500 Portfolio(5) 0.00% 0.28% 0.28%
Fidelity VIP Equity-Income Portfolio 0.51% 0.10% 0.61%
Franklin Government Securities
Trust(6) 0.63% 0.13% 0.76%
Janus Aspen Aggressive Growth
Portfolio(7) 0.75% 0.11% 0.86%
Janus Aspen Growth Portfolio(7) 0.65% 0.13% 0.78%
Janus Aspen Short-Term Bond
Portfolio(7) 0.00% 0.70% 0.70%
Janus Aspen Worldwide Growth
Portfolio(7) 0.68% 0.22% 0.90%
Lexington Emerging Markets Fund,
Inc.(8) 0.85% 0.90% 1.75%
Lexington Natural Resources Trust 1.00% 0.47% 1.47%
Neuberger & Berman Growth Portfolio(9) 0.84% 0.10% 0.94%
Scudder International Portfolio Class
A Shares 0.88% 0.20% 1.08%
TCI Growth(10) 1.00% 0.00% 1.00%
</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.
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
(2) As of May 1, 1996, the Company will provide administrative services to the
Fund and will assume the Fund's ordinary recurring direct costs under an
Administrative Services Agreement. The "Other Expenses" shown are not based
on figures for the year ended December 31, 1995, but reflect the fee payable
under this Agreement.
(3) The Management and Advisory Fees are subject to a performance adjustment,
after July 1, 1996, which could cause the fee to be as high as 0.85% or as
low as 0.55%, depending on performance. "Other Expenses" reflect an indirect
fee of 0.02%. Net fund operating expenses after reductions for fees paid
indirectly would be 0.81%.
(4) A portion of the brokerage commissions the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been
0.81% for the Asset Manager Portfolio; and 0.73% for the Contrafund
Portfolio.
(5) The Fund's expenses were voluntarily reduced by the Fund's investment
adviser. Absent reimbursement, the management fee, other expenses and total
expenses would have been 0.28%, 0.19% and 0.47%, respectively, for the Index
500 Portfolio.
(6) An expense reimbursement arrangement was in effect until Februrary 1, 1996;
however, it is no longer in effect. The advisory fee and total annual
expenses shown above reflect the actual expenses of the Fund before
reimbursement, as if such arrangement had not been in effect during 1995.
(7) The information for each Portfolio is net of fee waivers or reductions from
Janus Capital. Fee reductions for Aggressive Growth, Growth, and Worldwide
Growth Portfolios reduce the management fee to the level of the
corresponding Janus retail fund. Other waivers, if applicable, are first
applied against the management fee and then against other expenses. Without
such waivers or reductions, the Management Fee, Other Expenses, and Total
Fund Annual Expenses would have been 0.82%, 0.11% and 0.93% for Aggressive
Growth Portfolio; 0.85%, 0.13% and 0.98% for Growth Portfolio; 0.65%, 0.72%,
and 1.37% for Short-Term Bond Portfolio; and 0.87%, 0.22% and 1.09% for
Worldwide Growth Portfolio; respectively. Janus Capital may modify or
terminate the waivers or reductions at any time upon 90 days' notice to the
Portfolio's Board of Trustees.
(8) The Fund's investment adviser has agreed to voluntarily limit the total
expenses of the Fund (excluding interest, taxes, brokerage, and
extraordinary expenses, but including management fees and operating
expenses) to an annual rate of 1.75% of the Fund's average net assets
through April 30, 1997. Without this agreement, the Fund's Investment
Advisory Fee, Total Other Expenses and Total Fund Annual Expenses would have
been 0.85%, 3.24% and 4.09% for the most recent fiscal year.
(9) Neuberger & Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investment
assets in a corresponding series ("Series") of Advisers Management Trust.
Expenses in the table reflect expenses of the Portfolio and include the
Portfolio's pro rata portion of the operating expenses of the Portfolio's
corresponding Series. The Portfolio pays Neuberger & Berman Management, Inc.
("NBMI") an administration fee based on the Portfolio's net asset value. The
corresponding Series of the Portfolio pays NBMI a management fee based on
the Series' average daily net assets. Accordingly, this table combines
management fees at the Series level and administration fees at the Portfolio
level in a unified fee rate. (See "Expenses" in the Trust's prospectus.)
(10) The Portfolio's investment adviser pays all expenses of the Portfolio
except brokerage commissions, taxes, interest, fees, expenses of the
non-interested person directors (including counsel fees) and extraordinary
expenses. These expenses have historically represented a very small
percentage (less than 0.01%) of total net assets in a fiscal year.
- --------------------------------------------------------------------------------
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.
Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets, you would have paid the following expenses on a $1,000
investment at the end of the applicable time period:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Aetna Variable Fund $16 $49 $ 85 $186
Aetna Income Shares $16 $50 $ 86 $188
Aetna Variable Encore Fund $16 $51 $ 87 $190
Aetna Investment Advisers Fund, Inc. $16 $50 $ 86 $188
Alger American Growth Portfolio $21 $66 $113 $243
Alger American Small Cap Portfolio $22 $68 $116 $250
Calvert Responsibly Invested Balanced Portfolio $21 $65 $112 $241
Fidelity VIP II Asset Manager Portfolio $21 $64 $110 $237
Fidelity VIP II Contrafund Portfolio $20 $62 $106 $230
Fidelity VIP II Index 500 Portfolio $16 $48 $ 83 $182
Fidelity VIP Equity-Income Portfolio $19 $58 $101 $218
Franklin Government Securities Trust $20 $63 $108 $234
Janus Aspen Aggressive Growth Portfolio $21 $66 $113 $244
Janus Aspen Growth Portfolio $21 $64 $109 $236
Janus Aspen Short-Term Bond Portfolio $20 $61 $105 $227
Janus Aspen Worldwide Growth Portfolio $22 $67 $115 $248
Lexington Emerging Markets Fund, Inc. $30 $93 $158 $332
Lexington Natural Resources Trust $28 $84 $144 $305
Neuberger & Berman Growth Portfolio $22 $69 $117 $252
Scudder International Portfolio Class A Shares $24 $73 $125 $267
TCI Growth $23 $70 $120 $258
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION
(SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE YEARS IN THE
TEN-YEAR PERIOD ENDED DECEMBER 31, 1995 (AS APPLICABLE), IS DERIVED FROM THE
FINANCIAL STATEMENTS OF THE 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 $105.558 $107.925 $102.383 $ 97.165 $77.845
Value at end of period $137.869 $105.558 $107.925 $102.383 $97.165
Increase (decrease) in value of accumulation
unit(1) 30.61% (2.19)% 5.41% 5.37% 24.82%
Number of accumulation units outstanding at
end of period 6,364,000 13,966,072 21,148,863 24,201,565 20,948,226
AETNA INCOME SHARES
Value at beginning of period $40.173 $42.283 $39.038 $36.789 $31.192
Value at end of period $46.913 $40.173 $42.283 $39.038 $36.789
Increase (decrease) in value of accumulation
unit(1) 16.78% (4.99)% 8.31% 6.11% 17.94%
Number of accumulation units outstanding at
end of period 2,377,622 5,108,720 8,210,666 8,507,292 7,844,412
AETNA VARIABLE ENCORE FUND
Value at beginning of period $36.271 $35.282 $34.619 $33.812 $32.138
Value at end of period $37.988 $36.271 $35.282 $34.619 $33.812
Increase (decrease) in value of accumulation
unit(1) 4.73% 2.80% 1.92% 2.39% 5.21%
Number of accumulation units outstanding at
end of period 1,836,260 3,679,802 5,086,515 7,534,662 8,430,082
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $14.270 $14.519 $13.379 $12.736 $10.896
Value at end of period $17.954 $14.270 $14.519 $13.379 $12.736
Increase (decrease) in value of accumulation
unit(1) 25.82% (1.71)% 8.52% 5.05% 16.89%
Number of accumulation units outstanding at
end of period 9,193,181 21,990,186 30,784,750 34,802,433 22,898,099
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $11.715
Increase (decrease) in value of accumulation
unit(1) 17.15%
Number of accumulation units outstanding at
end of period 530,263
ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period $ 9.513 $10.072 $10.000(3)
Value at end of period $13.558 $ 9.513 $10.072
Increase (decrease) in value of accumulation
unit(1) 42.52% (5.55)% 0.72%
Number of accumulation units outstanding at
end of period 1,714,187 665,518 51,327
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
Value at beginning of period $13.990 $14.640 $13.726 $12.913 $11.233
Value at end of period $17.951 $13.990 $14.640 $13.726 $12.913
Increase (decrease) in value of accumulation
unit(1) 28.31% (4.44)% 6.66% 6.30% 14.96%
Number of accumulation units outstanding at
end of period 856,361 743,464 705,415 503,006 355,851
<CAPTION>
1990 1989
------------ --------------
<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 GROWTH 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
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
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period $ 9.447 $10.000(5)
Value at end of period $10.912 $ 9.447
Increase (decrease) in value of accumulation
unit(1) 15.51% (5.53)%
Number of accumulation units outstanding at
end of period 1,316,916 1,254,504
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(15)
Value at end of period $11.763
Increase (decrease) in value of accumulation
unit(1) 17.63%
Number of accumulation units outstanding at
end of period 525,476
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period $10.000(15)
Value at end of period $11.740
Increase (decrease) in value of accumulation
unit(1) 17.40%
Number of accumulation units outstanding at
end of period 290,547
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(15)
Value at end of period $11.617
Increase (decrease) in value of accumulation
unit(1) 16.17%
Number of accumulation units outstanding at
end of period 628,582
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $10.198
Increase (decrease) in value of accumulation
unit(1) 1.98%
Number of accumulation units outstanding at
end of period 762
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $10.197
Increase (decrease) in value of accumulation
unit(1) 1.97%
Number of accumulation units outstanding at
end of period 1,302
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $14.190 $14.929 $14.050 $13.219 $11.545
Value at end of period $16.495 $14.190 $14.990 $14.050 $13.219
Increase (decrease) in value of accumulation
unit(1) 16.24% (4.95)% 6.26% 6.29% 14.50%
Number of accumulation units outstanding at
end of period 809,414 804,457 960,629 810,155 627,552
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $12.169 $10.000(7)
Value at end of period $15.323 $12.169
Increase (decrease) in value of accumulation
unit(1) 25.91% 21.69%
Number of accumulation units outstanding at
end of period 1,280,953 393,553
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $10.853
Increase (decrease) in value of accumulation
unit(1) 8.53%
Number of accumulation units outstanding at
end of period 161
<CAPTION>
1990 1989 1988 1987 1986
------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FIDELITY VIP II ASSET MANAGER 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
FIDELITY VIP II CONTRAFUND 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
FIDELITY VIP II INDEX 500 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
FIDELITY VIP EQUITY-INCOME 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
FIDELITY VIP GROWTH 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
FIDELITY VIP OVERSEAS 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 $10.581 $10.000(6)
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
JANUS ASPEN AGGRESSIVE GROWTH 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
JANUS ASPEN 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
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $ 9.911 $10.000(13)
Value at end of period $12.124 $ 9.911
Increase (decrease) in value of accumulation
unit(1) 22.33% (0.89)%
Number of accumulation units outstanding at
end of period 3,345 1,555
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $11.859
Increase (decrease) in value of accumulation
unit(1) 18.59%
Number of accumulation units outstanding at
end of period 109,717
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $10.393
Increase (decrease) in value of accumulation
unit(1) 3.93%
Number of accumulation units outstanding at
end of period 18,473
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $12.158
Increase (decrease) in value of accumulation
unit(1) 21.58%
Number of accumulation units outstanding at
end of period 314,653
LEXINGTON EMERGING MARKETS FUND, INC.
Value at beginning of period $ 8.772 $10.000(8)
Value at end of period $ 8.323 $ 8.772
Increase (decrease) in value of accumulation
unit(1) (5.12)% (12.28)%
Number of accumulation units outstanding at
end of period 371,156 144,750
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $ 9.412 $10.071 $ 9.193 $ 9.018 $ 9.608
Value at end of period $10.862 $ 9.412 $10.071 $ 9.193 $ 9.018
Increase (decrease) in value of accumulation
unit(1) 15.41% (6.54)% 9.55% 1.94% (6.14)%
Number of accumulation units outstanding at
end of period 530,562 533,016 341,771 198,338 144,139
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $13.398 $14.278 $13.536 $12.511 $ 9.769
Value at end of period $17.430 $13.398 $14.278 $13.536 $12.511
Increase (decrease) in value of accumulation
unit(1) 30.09% (6.16)% 5.48% 8.19% 28.07%
Number of accumulation units outstanding at
end of period 2,359,090 2,107,525 1,927,674 1,346,898 971,985
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES**
Value at beginning of period $13.227 $13.508 $ 9.922 $10.239** $ 9.256
Value at end of period $14.515 $13.227 $13.508 $ 9.922 $10.239
Increase (decrease) in value of accumulation
unit(1) 9.74% (2.08)% 36.14% (3.10)% 10.62%
Number of accumulation units outstanding at
end of period 3,823,292 4,240,412 2,371,037 1,161,007 779,667
TCI GROWTH
Value at beginning of period $11.172 $11.443 $10.495 $10.000(12)
Value at end of period $14.464 $11.172 $11.443 $10.495
Increase (decrease) in value of accumulation
unit(1) 29.47% (2.37)% 9.03% 4.95%
Number of accumulation units outstanding at
end of period 1,784,552 1,608,362 1,016,894 232,832
<CAPTION>
1990 1989 1988 1987 1986
------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN FLEXIBLE INCOME 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
JANUS ASPEN GROWTH 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
JANUS ASPEN SHORT-TERM BOND 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
JANUS ASPEN WORLDWIDE GROWTH 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
LEXINGTON EMERGING MARKETS FUND, INC.
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation
unit(1)
Number of accumulation units outstanding at
end of period
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $11.441 $10.000(9)
Value at end of period $ 9.608 $11.441
Increase (decrease) in value of accumulation
unit(1) (16.02)% 14.41%
Number of accumulation units outstanding at
end of period 75,052 11,481
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $10.772 $10.000(10)
Value at end of period $ 9.769 $10.772
Increase (decrease) in value of accumulation
unit(1) (9.31)% 7.72%
Number of accumulation units outstanding at
end of period 482,220 68,885
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARE
Value at beginning of period $10.306 $10.000(11)
Value at end of period $ 9.256 $10.306
Increase (decrease) in value of accumulation
unit(1) (10.19)% 3.06%
Number of accumulation units outstanding at
end of period 317,829 32,902
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>
- --------------------------------------------------------------------------------
AUV HISTORY - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charge or the fixed dollar annual
maintenance fee, if any. Inclusion of these charges would reduce the
investment results shown.
(2) The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(3) The initial Accumulation Unit value was established at $10.000 on September
17, 1993. The Portfolio became available under the Contract on March 15,
1994.
(4) The initial Accumulation Unit value was established at $10.000 on May 31,
1989, the date on which the Fund became available under the Contract.
(5) The initial Accumulation Unit value was established at $10.000 during March
1994, when funds were first received under this option.
(6) 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.
(7) The initial Accumulation Unit value was established at $10.000 during June
1994, when funds were first received in this option.
(8) The initial Accumulation Unit value was established at $10.000 during
October 1994, when funds were first received in this option.
(9) The initial Accumulation Unit value was established at $10.000 on May 31,
1989, the date on which the Fund became available under the Contract.
(10) The initial Accumulation Unit value was established at $10.000 on May 31,
1989, the date on which the Portfolio became available under the Contract.
(11) 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.
(12) 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.
(13) The initial Accumulation Unit value was established at $10.000 during
November 1994, when funds were first received in this option.
(14) The initial Accumulation Unit value was established at $10.000 during July
1995, when the Fund became available under the Contract.
(15) The initial Accumulation Unit value was established at $10.000 during May
1995, when the Fund 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 - 4
<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 Holdings, Inc.,
which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc.
and an indirect wholly owned subsidiary of Aetna Life and Casualty 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 the "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 of the Separate Account, such
assets are not chargeable with liabilities arising out of any other business
conducted by the Company. Income, gains or losses of the Separate Account are
credited or charged against the assets of the Separate Account without regard to
other income, gains or losses. All obligations arising under the Contracts are
our general corporate obligations.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the enrollment form. In turn, the Subaccounts invest in the
corresponding Funds at net asset value.
SUNY 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.
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
- -AETNA VARIABLE FUND seeks to maximize total return through investments in a
diversified portfolio of common stocks and securities convertible into common
stock.(1)
- -AETNA INCOME SHARES seeks to maximize total return, consistent with reasonable
risk, through investments in a diversified portfolio consisting primarily of
debt securities.(1)
- -AETNA VARIABLE ENCORE FUND seeks to provide high current return, consistent
with preservation of capital and liquidity, through investment in high-quality
money market instruments. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government.(1)
- -AETNA INVESTMENT ADVISERS FUND, INC. is a managed fund which seeks to maximize
investment return consistent with reasonable safety of principal by
- --------------------------------------------------------------------------------
1
<PAGE>
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)
- -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 of
companies which have a market capitalization of $1 billion or greater.(2)
- -ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
long-term capital appreciation Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of such securities, have total market
capitalization within the range of companies included on the Russell 2000
Growth Index, updated quarterly. The Russell 2000 Growth Index is designed to
track the performance of small capitalization companies. At March 31, 1996, the
range of market capitalization of these companies was $20 million to $3.0
billion.(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--ASSET MANAGER
PORTFOLIO seeks high total return with reduced risk over the long-term by
allocating its assets among stocks, bonds and short-term fixed-income
instruments.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND PORTFOLIO
seeks maximum total return over the long term by investing mainly in equity
securities of companies that are undervalued or out-of-favor.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--INDEX 500 PORTFOLIO
seeks to provide investment results that correspond to the total return of
common stocks publicly traded in the United States by duplicating the
composition and total return of the Standard & Poor's Composite Index of 500
stocks.(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)
- -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 December 29, 1995 included companies with capitalizations of
between approximately $118 million and $7.5 billion, but which is expected to
change on a regular basis.(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. The Portfolio pursues its
investment objective 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 EMERGING MARKETS FUND, INC. seeks long-term growth of capital
primarily through investment in equity securities of companies domiciled in, or
doing business in emerging countries and emerging markets. Investments in
emerging markets involve risks not present in domestic markets. See the Fund's
prospectus for information on risks inherent in this investment.(7)
- -LEXINGTON NATURAL RESOURCES TRUST is a NONDIVERSIFIED portfolio that seeks
long-term growth of capital through investment primarily in common stocks of
companies
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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 generally invests in
securities believed to have the maximum potential for long-term capital
appreciation. The Portfolio expects to be almost fully invested in common
stocks, often of companies that may be temporarily out of favor in the
market.(8)
- -SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO CLASS A SHARES
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, Inc.
(5) Franklin Advisers, Inc.
(6) Janus Capital Corporation
(7) Lexington Management Corporation (adviser); Market Systems Research
Advisors, Inc. (subadviser-Natural Resources Trust only)
(8) Neuberger & Berman Management Inc. (Investment Manager); Neuberger &
Berman, L.P. (Sub-Adviser)
(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 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. SUNY 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 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 II.)
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PURCHASE
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CONTRACT AVAILABILITY
The Contracts are designed to fund the SUNY Plan and to accept transfers of
amounts made to the predecessor program which is qualified under Section 403(b)
of the Code. Two Contracts have been issued: one for transferred assets from the
predecessor Section 403(b) SUNY optional retirement program ("Rollover
Contract"), and one for ongoing contributions and transferred assets from a plan
qualified under Sections 401(a) and 414(h) of the Code ("Modal Contract").
Contracts are issued in allocated form which means that one or more
individual accounts are established for each Participant. Two accounts will be
established under each Contract: an Employer Account and an Employee Account.
Under a ROLLOVER CONTRACT, Purchase Payments attributable to a transfer of
AFTER-TAX employee contributions made to the predecessor 403(b) SUNY optional
retirement program are allocated to the EMPLOYEE ACCOUNT, and Purchase Payments
attributable to a transfer of EMPLOYER CONTRIBUTIONS made to the predecessor
Section 403(b) SUNY optional retirement program are allocated to the EMPLOYER
ACCOUNT.
Under a MODAL CONTRACT, ongoing Purchase Payments made pursuant to SECTION
414(H) of the Code and transferred funds attributable to Code Section 414(h)
contributions from another investment provider under the SUNY Plan are allocated
to the EMPLOYEE ACCOUNT, and ongoing Purchase Payments made pursuant to SECTION
401(A) of the Code and transferred funds attributable to Code Section 401(a)
contributions from another investment provider under the SUNY Plan are allocated
to the EMPLOYER ACCOUNT. (See also "Tax Status.")
CONTRACT PURCHASE
Employees of SUNY may fill out an enrollment form (or forms) and return it
to the Company for review, acceptance or rejection. The Company must accept or
reject the enrollment form within two business days of receipt. If the
enrollment materials are incomplete, the Company may hold any forms and
accompanying Purchase Payments for five days. Purchase Payments may be held for
longer periods pending acceptance of the forms only with consent of the
Participant, or under limited circumstances, with the consent of the Contract
Holder. If we agree to hold Purchase Payments for longer than the five business
days based on the consent of the Contract Holder, the Purchase Payments will be
deposited in the Aetna Variable Encore Fund Subaccount until the forms are
completed.
PURCHASE PAYMENTS
As discussed above, Purchase Payments can be applied to the Contracts either
through a lump-sum transfer of existing plan assets, or through ongoing
contributions. For Modal Contracts, the Code imposes a maximum limit on annual
Purchase Payments that may be contributed to a 401(a) Plan on your behalf. (See
"Tax Status.")
ALLOCATION OF PURCHASE PAYMENTS. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified by the
Participant on the enrollment form. Changes in such allocation may be made in
writing or by telephone transfer. Allocations must be in whole percentages. (See
"Transfers.")
RIGHTS UNDER THE CONTRACT
You have a nonforfeitable right to the value of your Employee Account and
Employer Account, as determined by the Plan Administrator in accordance with the
terms of the Plan. You may select the investment options to be used for
allocations to both your Employee and Employer Accounts. You may elect an
Annuity Option, subject to Plan Administrator certification that you are
eligible for a distribution and that the form of annuity is permitted under the
terms of the Plan.
RIGHT TO CANCEL
Participation under the Contract may be cancelled without penalty by
returning the certificate to the Aetna Processing Office with a written notice
of your intent to cancel. You have ten days to exercise this right. We will
produce a refund of the Purchase Payment (plus or minus any increase or decrease
in value) not later than seven days after we receive the certificate and the
written notice at the Aetna Processing Office.
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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 used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
ADMINISTRATIVE EXPENSE CHARGE. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge. The
administrative expense charge compensates the Company for its administrative
expenses incurred in connection with the Contract. 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
an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation Period or Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.
PREMIUM AND OTHER TAXES
Several states and municipalities impose a premium tax on Annuities. These
taxes currently range from 0% to 4%; however, there is currently no premium tax
on annuity contracts issued in the state of New York. In states that do impose a
premium tax, the Company reserves the right to deduct the tax from 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 your Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in any of the Credited Interest Options.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable
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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 "Purchase Payments." Each subsequent Purchase Payment (or amount
transferred) will be credited to your Account at the AUV computed on the next
Valuation Date following our receipt of your payment or transfer request. The
value of an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance of a
Subaccount from one Valuation Date to the next. The net investment factor for a
Subaccount for any valuation period is equal to the sum of 1.0000 plus the net
investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current Valuation
Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding Valuation
Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation of the
Subaccount;
(d) divided by the total value of the Subaccount's Accumulation and Annuity
Units the preceding Valuation Date;
(e) minus 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, you can transfer amounts held under
your Accounts from one Subaccount to another. Transfers between the Credited
Interest Options and the Subaccounts are subject to certain restrictions. (See
Appendices I and II.) A request for transfer can be made either in writing or by
telephone. The telephone transfer privilege is available automatically; no
special election is necessary. All transfers must be in accordance with the
terms of the Contract and your Plan, as applicable.
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge, provided that the transfer amount
is not less than $500. Any transfer will be based on the Accumulation Unit Value
next determined after the Company receives a valid transfer request at its Home
Office. Transfers are currently not available during the Annuity Period;
however, they may be available under some Annuity Options beginning later in
1996. (See "Annuity Period--Annuity Options.")
WITHDRAWALS
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You may withdraw all or a portion of the Account Value during the
Accumulation Period, subject to Plan Administrator certification in writing that
you are eligible, both as to the timing and form of distribution. Payments for
withdrawal requests will be made in accordance with SEC requirements, but
normally not later than seven calendar days following our receipt of a
disbursement form.
Withdrawals may be requested in one of the following forms:
- -FULL WITHDRAWAL OF AN ACCOUNT: The amount paid for a full withdrawal will be
the Account Value allocated to the Subaccounts and the, Guaranteed Accumulation
Account (plus or minus a market value adjustment) (see Appendix I), plus the
amount available for withdrawal from the Fixed Plus Account (see Appendix II).
- -PARTIAL WITHDRAWALS: The amount paid will be the percentage or dollar amount of
the Account Value requested; however, the amount available for withdrawal from
the Fixed Plus Account is limited (see Appendix II).
For any partial withdrawal, amounts will be withdrawn proportionately from
the Subaccounts or Credited Interest Option in which the Account is invested,
unless you request otherwise. All amounts paid will be based on Account Values
as of the next Valuation Date
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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.")
REINVESTMENT PRIVILEGE
You may elect to reinvest all or a portion of the proceeds received from a
full withdrawal of your Account within 30 days after such withdrawal has been
made. Accumulation Units will be credited to the Account for the amount
reinvested. Reinvested amounts will be reallocated to the applicable investment
options in the same proportion as they were allocated at the time of withdrawal.
Accumulation Units will be credited to your Account based on the Accumulation
Unit Value next computed following our receipt of your request along with the
amount to be reinvested. The reinvestment privilege may be used only once. See
Appendix I for a discussion of amounts withdrawn from GAA and then reinvested.
If you are contemplating reinvestment, you should seek competent advice
regarding the tax consequences associated with such a transaction.
DEATH BENEFIT DURING ACCUMULATION PERIOD
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The Contract provides that a death benefit is payable to the
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 Beneficiary:
- - in a lump sum; or
- - in accordance with any of the Annuity Options available under the Contract.
The Beneficiary may instead elect one of the following two options; however,
the Code limits how long the death benefit proceeds may be left in these options
(see below):
- - to leave the Account Value invested in the Contract; or
- - to leave the Account Value on deposit in the Company's general account, and to
receive monthly, quarterly, semi-annual or annual interest payments at the
interest rate then being credited on such deposits. The balance on deposit can
be withdrawn at any time or applied to an Annuity Option.
When paying the Beneficiary, we will determine the Account Value on the
Valuation Date following the date on which the Aetna Processing Office receives
proof of death acceptable to the Company. Interest, if any, will be paid from
the date of death at a rate no less than required by law. We will mail payment
to the Beneficiary within seven days after we receive proof of death and the
request for payment.
The Code requires that distribution of death proceeds begin within a certain
period of time. Generally, either payments must begin by December 31 of the year
following the year of your death, or the entire value of your benefits must be
distributed by December 31 of the fifth year following the year of your death.
If your Beneficiary is your spouse, he or she is not required to begin
distributions until the year you would have attained age 70 1/2. In no event may
payments extend beyond the life expectancy of the Beneficiary or any period
certain greater than the Beneficiary's life expectancy. If no elections are
made, no distributions will be made. Failure to commence distributions within
the above time periods can result in tax penalties. Regardless of the method of
payment, death benefit proceeds will generally be taxed to the Beneficiary in
the same manner as if you had received those payments. (See "Tax Status.")
ANNUITY PERIOD
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ANNUITY PERIOD ELECTIONS
For a governmental plan, 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 you attain age 70 1/2 or retire, whichever
is later. 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. (See "Tax Status.")
At least 30 days prior to the Annuity Date, you must notify the Aetna
Processing Office in writing of the following:
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- - the date on which you would like to start receiving annuity payments;
- - the Annuity Option under which you want your payments to be calculated and
paid;
- - whether the payments are to be made monthly, quarterly, semi-annually or
annually; and
- - the investment option(s) used to provide annuity payments (i.e., a fixed
annuity using the general account or any of the Subaccounts available at the
time of annuitization). As of the date of this Prospectus, Aetna Variable
Fund, Aetna Income Shares and Aetna Investment Advisers Fund, Inc. are the
only Subaccounts available; however, additional Subaccounts may be available
under some Annuity Options in the future. (See "Annuity Options.")
ANNUITY OPTIONS
You 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-- An annuity with payments
guaranteed for 5, 10, 15 or 20 years, or such other periods as the Company may
offer at the time of annuitization.
- -OPTION 3--LIFE INCOME BASED UPON 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.
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,
the Annuity must be paid on a fixed basis and payments may be made for 6-30
years. For amounts held in the Subaccounts or the Guaranteed Accumulation
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.
We may also offer additional Annuity Options under your Contract from time
to time. The Company expects to offer additional Annuity Options and enhanced
versions of the Annuity Options listed above at some time during 1996. 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
DURATION OF ANNUITY PAYMENTS. Annuity Payments may not extend beyond (a)
the life of the Annuitant, (b) the joint lives of the Annuitant and Beneficiary,
(c) a period certain greater than the Annuitant's life expectancy, or (d) a
period certain greater than the joint life expectancies of the Annuitant and
Beneficiary.
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AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on how
you allocate your Account Value between fixed and variable payouts. No election
may be made that would result in the first Annuity Payment of less than $20, or
total yearly Annuity Payments of less than $100. If your Account Value on the
Annuity Date is insufficient to elect an option for the minimum amount
specified, a lump-sum payment must be elected.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3 1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3 1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)
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 expense 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.
If Lifetime Option 2 or Option 4 was elected and the death of the Annuitant
under Option 2, or the surviving Annuitant under Option 4, occurs prior to the
end of the guaranteed minimum payment period, we will pay to the Beneficiary in
a lump sum, unless otherwise requested, the present value of the guaranteed
annuity payments remaining.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a lump-sum
to the beneficiary (unless otherwise requested).
If the Annuitant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at the Aetna Processing
Office. Under Options 2 and 4, 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. Such value will be reduced by any payments made
after the date of death.
TAX STATUS
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INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
The Company makes no guarantee regarding the tax treatment of any contract or
transaction involving a Contract. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Annuity Payments, and on the economic
benefit to the Contract Holder, Participant or Beneficiary may depend upon the
tax status of the individual concerned. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed
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separately as a "regulated investment company" under the Code. Investment income
and realized capital gains are automatically applied to increase reserves under
the
Contracts. Under existing federal income tax law, the Company believes that the
Separate Account investment income and realized net capital gains will not be
taxed to the extent that such income and gains are applied to increase the
reserves under the Contracts.
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 Contracts are designed to provide retirement benefits to
Participants of the SUNY Plan. Purchase Payments made under Sections 401(a),
414(h) and 403(b) of the Code are permitted under the Contracts.
The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants as
well as beneficiaries are cautioned that the rights of any person to any
benefits under the Contracts may be subject to the terms and conditions of the
plans themselves, in addition to the terms and conditions of the Contracts
issued in connection with such plans. Some retirement plans are subject to
limitations on distribution and other requirements that are not incorporated in
the Contracts. Purchasers are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts satisfy
applicable laws, and should consult their legal counsel and tax adviser
regarding the suitability of the Contract.
MINIMUM DISTRIBUTION REQUIREMENTS. The Code has required distribution rules
for Section 403(b) and 401(a) plans. Under 403(b) plans, distributions of
amounts held as of December 31, 1986 must generally begin by the end of the
calendar year in which you attain age 75 or retire, if later. However, special
rules require that some or all of that balance be distributed earlier if any
distributions are taken in excess of the minimum required amount. Distributions
under 401(a) plans, and distributions attributable to contributions under
Section 403(b) plans made 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 beneficiary, or over a period not greater than your life
expectancy or the joint life expectancies of you and your beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your beneficiary must be made at least as rapidly as under the
method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. 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. If the Beneficiary is your spouse, distribution must begin
by the later of 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
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10
<PAGE>
taxed upon distribution. The Code has specific rules that apply, depending on
the type of distribution received, if after-tax contributions were made.
In general, payments received by your beneficiaries after your death are
taxed in the same manner as if you have 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 in accordance with the terms of the Code, or (f)
the distribution amount is made in substantially equal periodic payments (at
least annually) over your life or life expectancy or the joint lives or joint
life expectancies of you and your plan beneficiary, provided you have separated
from service with the plan sponsor. In addition, the penalty tax does not apply
for the amount of a distribution equal to unreimbursed medical expenses incurred
by you that qualify for deduction as specified in the Code. The Code may impose
other penalty taxes in other circumstances.
SECTION 403(B) PLANS. Under Section 403(b), contributions made by public
school systems to purchase annuity contracts for their employees are generally
excludable from the gross income of the employee.
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
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 owner from being
considered the federal tax owner of the assets of the Separate Account.
SECTION 401(A) PLANS. Section 401(a) permits corporate employers to
establish various types of retirement plans for employees, and permits self-
employed individuals to establish various types of retirement plans for
themselves and for their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax consequences to the plan, to the participant or to both may result
if this Contract is assigned or transferred to any individual except to a
participant as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a Participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of your compensation or $30,000. In addition,
Purchase Payments will be excluded from a Participant's gross income only if the
401(a) plan meets certain nondiscrimination requirements.
SECTION 414(H) PLANS. Under Section 414(h) of the Code, where a
governmental employer "picks up" plan contributions otherwise designated as
employee contributions, the contributions are treated as employer contributions.
The 414(h) contributions are excluded from the employee's taxable income and are
not subject to federal income tax withholding.
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11
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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 4% of those Purchase Payments. The Company may also pay renewal commissions
on Purchase Payments made after the first year and asset-based service fees. The
average of all payments made by the Company is estimated to equal approximately
3% of the total Purchase Payments made over the life of an average Contract. The
Company may also reimburse the Distributor for certain expenses. The name of the
Distributor and the registered representative responsible for your Account are
set forth in your enrollment materials. Commissions and sales related expenses
are paid by the Company and are not deducted from Purchase Payments. (See
"Charges and Deductions.")
THIRD PARTY COMPENSATION ARRANGEMENTS. Occasionally, we may pay commissions
and fees to Distributors which are affiliated or associated with the Contract
Holder or the Participants. We may also enter into agreements with some entities
associated with the Contract Holder or Participants in which we would agree to
pay the association for certain services in connection with administering the
Contracts. In both these circumstances there may be an understanding that the
Distributor or association 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" and "non-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 and
non-standardized returns will reflect the reduction of all recurring charges
during each period (e.g., mortality and expense risk charges and any
administrative expense charge). The non-standardized figures may also include
monthly, quarterly, year-to-date or 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.
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<PAGE>
VOTING RIGHTS
In accordance with the Company's view of present applicable law, it will
vote the shares of each of the Funds held by the Separate Account at regular and
special meetings of Fund shareholders in accordance with instructions received
from persons having a voting interest in the Separate Account. Participants and
Annuitants have a fully vested (100%) interest in the benefits provided under
the Contract and may instruct SUNY how to direct the Company to cast the votes
for the portion of the Account Value or valuation reserve attributable to their
Accounts. Currently, for group contracts used with Section 403(b) plans, the
Company obtains participant voting instructions directly from the participants,
subject to the receipt of authorization from the Contract Holder to accept such
instructions. The Company will vote shares for which it has not received
instructions in the same proportion as it votes shares for which it has received
instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest, as
well as any proxy materials and a form on which to give voting instructions.
Voting instructions will be solicited by written communication at least 14 days
before such meeting. The number of votes to which each person may give direction
will be determined as of the record date set by the Fund.
The number of votes which SUNY or the Participant, 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 Contracts that would apply only to individuals who
become Participants under that Contract after the effective date of such
changes. If the Contract Holder does not agree to a change, no new Participants
will be covered under the Contract. Certain changes will require the approval of
appropriate state or federal regulatory authorities.
TRANSFER OF OWNERSHIP; ASSIGNMENT
No assignment of a Contract will be binding on us unless made in writing and
sent to us at our Aetna Processing Office. The Company will use reasonable
procedures to confirm that the assignment is authentic, including verification
of signature. If the Company fails to follow its procedures, it would be liable
for any losses to you directly resulting from the failure. Otherwise, we are not
responsible for the validity of any assignment. The rights of the Contract
Holder and the interest of the Annuitant and any Beneficiary will be subject to
the rights of any assignee of record.
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.
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13
<PAGE>
CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
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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:
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
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APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
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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 LONG-TERM CLASSIFICATIONS OF GAA ARE HELD IN A
NONINSULATED, NONUNITIZED SEPARATE ACCOUNT. AMOUNTS ALLOCATED TO SHORT-TERM
CLASSIFICATIONS OF GAA ARE HELD IN THE COMPANY'S GENERAL ACCOUNT. THIS APPENDIX
IS A SUMMARY OF GAA AND IS NOT INTENDED TO REPLACE THE GAA PROSPECTUS. YOU
SHOULD READ THE ACCOMPANYING GAA PROSPECTUS CAREFULLY BEFORE INVESTING.
GAA is a credited interest option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. This option guarantees the minimum interest
rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from three to ten years.
Purchase Payments must remain in GAA for the full Guaranteed Term to receive
the quoted interest rates. Withdrawals or transfers from a Guaranteed Term
before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). An MVA reflects the change in the value of the investments
due to changes in interest rates since the date of deposit. When interest rates
increase after the date of deposit, the value of the investment decreases and
the MVA is negative. Conversely, when interest rates decrease after the date of
deposit, the value of the investment increases, and the MVA is positive. It is
possible that a negative MVA could result in the Participant receiving an amount
which is less than the amount paid into GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to
federal tax penalties or mandatory income tax withholding.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under GAA
transferred to one or more of the Subaccounts available during the Annuity
Period. GAA cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Transfers are permitted among Guaranteed Terms. However, amounts applied to
GAA may not be transferred to another Guaranteed Term of GAA, or to any other
Subaccount or credited interest option available under the Contract, during the
deposit period or the 90 days after the close of the deposit period. We will
apply an MVA to transfers made before the end of a Guaranteed Term, unless such
transfer is due to the maturity of the Guaranteed Term.
REINVESTMENT PRIVILEGE
If amounts are withdrawn from GAA and reinvested, they will be applied to
the current deposit period. Amounts are proportionately reinvested in the same
manner as they were allocated before the withdrawal. Any negative MVA amount
applied to a withdrawal is not included in the reinvestment.
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APPENDIX II
FIXED PLUS ACCOUNT
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THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED PLUS ACCOUNT.
AMOUNTS ALLOCATED TO THE FIXED PLUS ACCOUNT ARE HELD IN THE COMPANY'S GENERAL
ACCOUNT THAT SUPPORTS GENERAL INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN
THE FIXED PLUS ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON
EXEMPTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THE
PROSPECTUS REGARDING THE FIXED PLUS ACCOUNT, MAY, HOWEVER, BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX
REGARDING THE FIXED PLUS ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will never
fall below the guaranteed minimum. The Company's determination of interest rates
reflects the investment income earned on invested assets and the amortization of
any capital gains and/or losses realized on the sale of invested assets. Under
the Fixed Plus Account, the Company assumes the risk of investment gain or loss
by guaranteeing Account Values and promising a minimum interest rate and Annuity
Payment.
The Fixed Plus Account will reflect a compound interest rate credited by us.
The interest rate quoted is an annual effective yield. Amounts applied to the
Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
Beginning in the tenth Account Year, we will credit amounts held in the
Fixed Plus Account with an interest rate that is at least 0.25% higher than the
then-declared interest rate for the Fixed Plus Account for Accounts that have
not reached their tenth anniversary.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day a written request is received at the Aetna
Processing Office. Such amount will be reduced by any Fixed Plus Account
withdrawals, transfers or annuitizations made during the prior 12 months.
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 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.
Once we receive a request for a full withdrawal, no further withdrawals 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
and pay the Account Value in a lump sum if a full withdrawal is made (a) due to
the Participant's death before the Annuity Date; (b) due to the election of an
Annuity option; (c) if the Fixed Plus Account value is $3,500 or less and the
amount withdrawn is to be transferred to
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<PAGE>
another investment program under the SUNY Plan and no withdrawals, transfers or
annuitizations have been made from the Account within the prior 12 months; or
(d) when the Account Value is $4,000 or less and the amount withdrawn is paid to
the Participant in a lump sum.
ALTERNATIVE PAYMENT OF CONTRACT SURRENDER VALUE
As an alternative to the payment of Fixed Plus Account Values described
above, the Contract Holder may elect the following. If the Contract Holder
intends to surrender the entire Contract, the Company must be notified of such
intent no less than 60 days prior to the proposed withdrawal date. Within 30
days of its receipt of such notice, the Company will supply the Contract Holder
with the specific period and interest rate that would apply to a complete
surrender of the Contract under option (b) below. The Contract Holder must then
irrevocably elect, in writing, to receive the total of all current Account
Values invested in the Fixed Plus Account in either (a) the manner described
under "Fixed Plus Account Withdrawals" above; or (b) level, annual payments for
a period not to exceed ten years.
If alternative (b) is elected, the interest credited to the Fixed Plus
Account may be reduced up to 1.5% from the interest rate being credited upon the
date of withdrawal. This interest rate will remain constant throughout the
payment period.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request,
reduced by any Fixed Plus Account withdrawals, transfers or annuitizations made
during the prior 12 months. 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 the Aetna Processing 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.
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FOR MASTER APPLICATIONS ONLY
I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C STATE UNIVERSITY OF NEW YORK
"SUNY" 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.
81216(S)-2) DATED MAY 1, 1996.
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CONTRACT HOLDER'S SIGNATURE
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DATE
81216-2 (5/96)
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<PAGE>
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VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996
Group Variable Annuity Contracts issued to
The State University of New York ("SUNY") Defined Contribution Retirement Plan
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 describing contracts issued in
connection with the Defined Contribution Plan for the State University of New
York.
A free prospectus is available upon request from the local Aetna Life
Insurance and Annuity Company office or by writing to or calling:
Aetna Processing Office
P.O. Box 12894
Albany, New York 12212-2894
1-800-677-4636
Read the prospectus before you invest. Unless otherwise indicated, terms used
in this Statement of Additional Information shall have the same meaning as in
the prospectus.
TABLE OF CONTENTS
Page
General Information and History. . . . . . . . . . . . . . . . . . . . 2
Variable Annuity Account C . . . . . . . . . . . . . . . . . . . . . . 2
Offering and Purchase of Contracts . . . . . . . . . . . . . . . . . . 3
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Average Annual Total Return Quotations. . . . . . . . . . . . . . . 4
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Sales Material and Advertising . . . . . . . . . . . . . . . . . . . . 6
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements of the Separate Account . . . . . . . . . . . . . S-1
Financial Statements of Aetna Life Insurance and Annuity Company . . . F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1995, the Company had
assets of $27.1 billion (subject to $25.5 billion of customer and other
liabilities, $1.6 billion of shareholder equity) which includes $11 billion in
assets held in the Company's separate accounts. The Company had $22 billion in
assets under management, including $8 billion in its mutual funds. 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
Holdings, Inc., which is in turn a wholly owned subsidiary of Aetna Retirement
Services, Inc. and an indirect 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).
The Company has established the Aetna Processing Office to provide
administrative support to the Contract Holder and Participants of the State
University of New York Defined Contribution Retirement Plan ("SUNY"). This
office will handle enrollments, billing, transfers, redemptions, and inquiries
for all SUNY Contract Holders and Participants. All forms and correspondence
should be sent to the address listed on the cover of this Statement of
Additional Information.
Other than the mortality and expense risk charges and administrative expense
charge, if any, described in the prospectus, all expenses incurred in the
operations of the Separate Account are borne by the Company. (See "Charges and
Deductions" in the prospectus.) The Company receives reimbursement for certain
administrative costs from some unaffiliated sponsors of the Funds used as
funding options under the Contract. These fees generally range up to 0.25%.
The assets of the Separate Account are held by the Company. The Separate
Account has no custodian. However, the Funds in whose shares the assets of the
Separate Account are invested each have custodians, as discussed in their
respective prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of each of the Subaccounts of the Separate
Account will be invested exclusively in shares of the Funds described in the
Prospectus. Purchase Payments made under the Contract may be allocated to one
or more of the Subaccounts. The Company may make additions to or deletions from
available investment options as permitted by law. The availability of the Funds
is subject to applicable regulatory authorization. The Funds currently
available under the Contract are as follows:
2
<PAGE>
<TABLE>
<S> <C>
Aetna Variable Fund Franklin Government Securities Trust
Aetna Income Shares Janus Aspen Aggressive Growth Portfolio
Aetna Variable Encore Fund Janus Aspen Growth Portfolio
Aetna Investment Advisers Fund, Inc. Janus Aspen Short-Term Bond Portfolio
Alger American Growth Portfolio Janus Aspen Worldwide Growth Portfolio
Alger American Small Cap Portfolio Lexington Emerging Markets Fund, Inc.
Calvert Responsibly Invested Balanced Portfolio Lexington Natural Resources Trust
Fidelity VIP II Asset Manager Portfolio Neuberger & Berman Growth Portfolio
Fidelity VIP II Contrafund Portfolio Scudder International Portfolio Class A Shares
Fidelity VIP II Index 500 Portfolio TCI Growth
Fidelity VIP Equity-Income Portfolio
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through
life insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is
continuous. A description of the manner in which Contracts are purchased may
be found in the prospectus under the sections titled "Purchase" and "Contract
Valuation."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
Prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized
returns," calculated in an identical manner but including additional periods.
The standardized 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, five and ten year periods
(or fractional periods thereof). The standardized and non-standardized
figures reflect the deduction of all recurring charges during each period
(e.g., mortality and expense risk charges and any applicable administrative
expense charges). These charges will be deducted on a pro rata basis in the
case of fractional periods. The non-standardized figures may be computed to
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 such date. These figures are calculated by
3
<PAGE>
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 Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will
perform in any future period. Additionally, the Account Value upon
redemption may be more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED
The table below reflects the average annual standardized and non-standardized
total return quotation figures for the period ended December 31, 1995 for the
Subaccounts under the Contract issued by the Company. For those Subaccounts
where results are not available for the full calendar period indicated, the
percentage shown is an average annual return since inception (denoted with
an *).
<TABLE>
<CAPTION>
STANDARDIZED NON-STANDARDIZED FUND
------------ --------------------- INCEPTION
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years DATE
---------- ------ ------- -------- ------ ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 30.61% 12.11% 12.30% 30.61% 10.43% 12.11% 12.30% 04/30/75
Aetna Income Shares 16.78% 8.51% 8.52% 16.78% 6.32% 8.51% 8.52% 06/01/78
Aetna Variable Encore Fund 4.74% 3.40% 4.92% 4.74% 3.14% 3.40% 4.92% 09/01/75
Aetna Investment Advisers Fund, Inc. 25.65% 10.50% 9.39%* 25.65% 10.30% 10.50% 9.39%* 06/23/89
Alger American Growth Portfolio 34.76% 20.23% 17.97%* 34.76% 17.75% 20.23% 17.97%* 01/08/89
Alger American Small Cap Portfolio 42.53% 19.11% 21.09%* 42.53% 14.64% 19.11% 21.09%* 09/21/88
Calvert Responsibly Invested Balanced
Portfolio 28.31% 9.83% 8.71%* 28.31% 9.36% 9.83% 8.71%* 09/04/86
Fidelity VIP II Asset Manager Portfolio 15.51% 11.37% 9.88%* 15.51% 8.66% 11.37% 9.88%* 09/06/89
Fidelity VIP II Contrafund Portfolio 37.94%* n/a n/a 37.94%* n/a n/a n/a 01/03/95
Fidelity VIP II Index 500 Portfolio 35.53% 14.03%* n/a 35.53% 13.59% 14.03%* n/a 08/27/92
Fidelity VIP Equity-Income Portfolio 33.55% 19.82% 11.99%* 33.55% 18.13% 19.82% 11.99%* 10/22/86
Franklin Government Securities Trust 16.24% 7.40% 7.89%* 16.24% 5.49% 7.40% 7.89%* 05/30/89
Janus Aspen Aggressive Growth Portfolio 25.91% 26.02%* n/a 25.91% 26.02%* n/a n/a 9/13/93
Janus Aspen Growth Portfolio 28.19% 13.63%* n/a 28.19% 13.63%* n/a n/a 09/13/93
Janus Aspen Short-Term Bond Portfolio 7.89% 3.18%* n/a 7.89% 3.18%* n/a n/a 09/13/93
4
<PAGE>
<CAPTION>
STANDARDIZED NON-STANDARDIZED FUND
------------ --------------------- INCEPTION
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years DATE
---------- ------ ------- -------- ------ ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Janus Aspen Worldwide Growth Portfolio 25.83% 19.19%* n/a 25.83% 19.19%* n/a n/a 09/13/93
Lexington Emerging Markets Fund, Inc. (5.12%) (3.18%)* n/a (5.12%) (3.18%)* n/a n/a 03/31/94
Lexington Natural Resources Trust 15.41% 5.03%* n/a 15.41% 5.72% 5.03%* n/a 10/14/91
Neuberger & Berman Growth Portfolio 30.09% 12.28% 10.77% 30.09% 8.80% 12.28% 10.77% 12/31/85
Scudder International Portfolio
Class A Shares 9.74% 9.03% 8.03%* 9.74% 13.52% 9.03% 8.03%* 05/01/87
TCI Growth 29.47% 13.49% 11.46%* 29.47% 11.28% 13.49% 11.46%* 11/20/87
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These
figures represent historical performance and should not be considered a
projection of future performance.
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date 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 Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date 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:
5
<PAGE>
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Contract or Account and that the
value of an Accumulation Unit for the tenth Valuation Date 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 Date on 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 Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date on 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 Subaccounts to established market
indices 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 Subaccount
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.
6
<PAGE>
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Contract Holders or Participants. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments, including comparison
between the Contracts and the characteristics of and market for such financial
instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
7
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
INDEX
Independent Auditors' Report . . . . . . . . . . . . . S-2
Statement of Assets and Liabilities. . . . . . . . . . S-3
Statement of Operations. . . . . . . . . . . . . . . . S-8
Statements of Changes in Net Assets. . . . . . . . . . S-9
Notes to Financial Statements . . . . . . . . . . . . S-10
Condensed Financial Information. . . . . . . . . . . . S-12
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contract Owners of Variable Annuity Account C:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account C (the "Account")
as of December 31, 1995, and the related statement of operations for the year
then ended, statements of changes in net assets for each of the years in the
two-year period then ended and condensed financial information for the year
ended December 31, 1995. These financial statements and condensed financial
information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
condensed financial information are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence
with the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Aetna Life Insurance and Annuity Company Variable Annuity
Account C as of December 31, 1995, the results of its operations for the year
then ended, changes in its net assets for each of the years in the two-year
period then ended and condensed financial information for the year ended
December 31, 1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 16, 1996
S-2
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES - December 31, 1995
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 135,944,293 shares at $29.06 per share (cost $3,682,373,523).................... $3,949,941,096
Aetna Income Shares; 29,688,857 shares at $13.00 per share (cost $382,776,733)....................... 386,007,595
Aetna Variable Encore Fund; 17,318,377 shares at $13.30 per share (cost $221,087,268) ............... 230,291,686
Aetna Investment Advisers Fund, Inc.; 49,855,715 shares at $14.50 per share
(cost $600,395,092) ............................................................................... 723,017,695
Aetna GET Fund, Series B; 5,897,397 shares at $12.40 per share (cost $59,712,454).................... 73,136,258
Aetna Ascent Variable Portfolio; 454,714 shares at $10.80 per share (cost $4,803,331)................ 4,908,736
Aetna Crossroads Variable Portfolio; 341,591 shares at $10.74 per share (cost $3,599,790)............ 3,668,757
Aetna Legacy Variable Portfolio; 180,468 shares at $10.64 per share (cost $1,883,466)................ 1,919,680
Alger American Funds:
Alger American Growth Portfolio; 1,234,082 shares at $31.16 per share (cost
$38,739,937)....................................................................................... 38,454,000
Alger American Small Capitalization Portfolio; 6,121,453 shares at $39.41 per share
(cost $203,207,523)................................................................................ 241,246,447
Calvert Responsibly Invested Balanced Portfolio; 16,846,014 shares at $1.70 per share
(cost $26,512,853)................................................................................ 28,688,761
Fidelity Investments Variable Insurance Products Funds:
Equity-Income Portfolio; 1,973,219 shares at $19.27 per share (cost $35,264,252)................... 38,023,939
Growth Portfolio; 949,237 shares at $29.20 per share (cost $27,212,340)............................ 27,717,728
Overseas Portfolio; 218,122 shares at $17.05 per share (cost $3,555,791)........................... 3,718,987
Fidelity Investments Variable Insurance Products Funds II -
Asset Manager Portfolio; 910,080 shares at $15.79 per share (cost $12,839,173)..................... 14,370,158
Contrafund Portfolio; 2,202,984 shares at $13.78 per share (cost $30,071,951) ..................... 30,357,117
Index 500 Portfolio; 45,055 shares at $75.71 per share (cost $3,187,279) .......................... 3,411,144
Franklin Government Securities Trust; 1,651,095 shares at $13.35 per share
(cost $21,210,874) .............................................................................. 22,042,115
Janus Aspen Series -
Aggressive Growth Portfolio; 5,116,845 shares at $17.08 per share (cost $74,304,318)............... 87,395,716
Balanced Portfolio; 115,516 shares at $13.03 per share (cost $1,444,640)........................... 1,505,170
Flexible Income Portfolio; 347,266 shares at $11.11 per share (cost $3,690,542).................... 3,858,123
Growth Portfolio; 376,690 shares at $13.45 per share (cost $4,920,509)............................. 5,066,487
Short-Term Bond Portfolio; 54,258 shares at $10.03 per share (cost $544,564)....................... 544,210
Worldwide Growth Portfolio; 1,048,130 shares at $15.31 per share (cost $15,260,366)................ 16,046,863
Lexington Emerging Markets Fund, Inc.; 329,323 shares at $9.38 per share (cost $3,135,164) .......... 3,089,046
Lexington Natural Resources Trust; 1,257,565 shares at $11.30 per share (cost $12,932,744) .......... 14,210,484
Neuberger & Berman Advisers Management Trust - Growth Portfolio; 3,460,773 shares
at $25.86 per share (cost $77,838,858)............................................................ 89,495,579
Scudder Variable Life Investment Fund - International Portfolio; 13,936,090 shares
at $11.82 per share (cost $151,941,144).................................. ........................ 164,724,583
TCI Portfolios, Inc. - TCI Growth; 35,261,982 shares at $12.06 per share (cost $333,587,996) ........ 425,259,499
NET ASSETS ............................................................................................ 6,632,117,659
--------------
--------------
</TABLE>
S-3
<PAGE>
Net assets represented by:
<TABLE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Reserves for annuity contracts in accumulation and payment period:
AETNA VARIABLE FUND:
Qualified I ..................................................... 549,055.7 $180.879 $99,312,649
Qualified III ................................................... 6,364,000.3 137.869 877,395,210
Qualified IV .................................................... 269.0 83.646 22,498
Qualified V ..................................................... 121,691.2 14.113 1,717,411
Qualified VI .................................................... 188,964,022.4 14.077 2,660,123,261
Qualified VII ................................................... 9,779,134.6 13.247 129,544,460
Qualified VIII .................................................. 20,835.7 13.074 272,413
Qualified IX .................................................... 21,417.9 12.935 277,043
Qualified X (1.15)............................................... 273,578.4 14.108 3,859,670
Qualified X (1.25)............................................... 2,370,233.5 14.077 33,366,740
Reserves for annuity contracts in payment period (Note 1)........ 144,049,741
AETNA INCOME SHARES:
Qualified I ..................................................... 72,902.0 47.405 3,455,895
Qualified III ................................................... 2,377,621.8 46.913 111,541,104
Qualified V ..................................................... 20,427.2 12.283 250,918
Qualified VI .................................................... 21,379,975.5 12.098 258,665,226
Qualified VII ................................................... 185,030.5 11.176 2,067,926
Qualified VIII .................................................. 1,090.6 11.143 12,153
Qualified IX .................................................... 3,580.8 11.203 40,116
Qualified X (1.15)............................................... 50,261.1 12.125 609,409
Qualified X (1.25)............................................... 354,993.3 12.098 4,294,879
Reserves for annuity contracts in payment period (Note 1) ....... 5,069,969
AETNA VARIABLE ENCORE FUND:
Qualified I ..................................................... 150,480.4 38.485 5,791,253
Qualified III ................................................... 1,836,260.4 37.988 69,756,054
Qualified V ..................................................... 19,202.4 11.003 211,293
Qualified VI .................................................... 12,999,680.2 11.026 143,337,034
Qualified VII ................................................... 324,091.0 10.936 3,544,190
Qualified VIII .................................................. 656.2 10.620 6,969
Qualified IX .................................................... 3,050.3 10.857 33,118
Qualified X (1.15)............................................... 145,629.4 11.051 1,609,306
Qualified X (1.25)............................................... 544,382.5 11.026 6,002,469
AETNA INVESTMENT ADVISERS FUND, INC.:
Qualified I ..................................................... 393,612.5 18.024 7,094,461
Qualified III ................................................... 9,193,181.4 17.954 165,052,015
Qualified V ..................................................... 19,038.2 13.693 260,683
Qualified VI .................................................... 38,152,394.6 13.673 521,663,491
Qualified VII ................................................... 335,791.4 13.135 4,410,596
Qualified VIII .................................................. 1,055.3 12.695 13,397
Qualified IX .................................................... 3,961.7 12.613 49,969
Qualified X (1.15)............................................... 138,270.8 13.703 1,894,705
Qualified X (1.25)............................................... 940,932.7 13.673 12,865,516
Reserves for annuity contracts in payment period (Note 1) ....... 9,712,862
AETNA GET FUND, SERIES B:
Qualified III .................................................. 63,245.0 12.850 812,688
S-4
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Qualified VI..................................................... 5,279,157.0 12.850 67,836,249
Qualified X (1.25)............................................... 349,212.6 12.850 4,487,321
AETNA ASCENT VARIABLE PORTFOLIO:
Qualified III.................................................... 8.4 10.673 90
Qualified V...................................................... 202.1 10.666 2,156
Qualified VI..................................................... 393,052.6 10.673 4,195,040
Qualified VIII................................................... 7.7 10.673 82
Qualified X (1.15)............................................... 15,054.8 10.982 165,326
Qualified X (1.25)............................................... 49,748.1 10.976 546,042
AETNA CROSSROADS VARIABLE PORTFOLIO:
Qualified V...................................................... 243.2 10.605 2,579
Qualified VI..................................................... 294,673.3 10.612 3,126,954
Qualified VIII................................................... 43.8 10.611 464
Qualified X (1.15)............................................... 2,393.5 10.868 26,012
Qualified X (1.25)............................................... 47,204.4 10.862 512,748
AETNA LEGACY VARIABLE PORTFOLIO:
Qualified VI..................................................... 143,636.5 10.580 1,519,662
Qualified X (1.15)............................................... 17,106.0 10.631 181,853
Qualified X (1.25)............................................... 20,531.2 10.626 218,165
ALGER AMERICAN FUNDS:
ALGER AMERICAN GROWTH PORTFOLIO:
Qualified III ................................................... 530,262.6 11.715 6,211,911
Qualified V...................................................... 7,965.7 10.365 82,564
Qualified VI..................................................... 2,832,439.7 10.157 28,770,111
Qualified VIII................................................... 38.3 10.371 397
Qualified X (1.15)............................................... 12,858.7 11.385 146,392
Qualified X (1.25)............................................... 284,978.1 11.379 3,242,625
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO:
Qualified III ................................................... 1,714,187.0 13.558 23,241,019
Qualified V ..................................................... 31,527.5 13.463 424,453
Qualified VI .................................................... 15,036,764.7 13.450 202,245,073
Qualified VIII .................................................. 3,845.1 14.093 54,189
Qualified X (1.15)............................................... 54,683.5 13.481 737,179
Qualified X (1.25)............................................... 1,081,374.8 13.450 14,544,534
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO:
Qualified III ................................................... 856,360.5 17.951 15,372,772
Qualified V ..................................................... 14,656.3 13.870 203,278
Qualified VI .................................................... 966,097.9 13.527 13,068,322
Qualified VIII .................................................. 3,611.6 12.291 44,389
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS:
EQUITY-INCOME PORTFOLIO:
Qualified III ................................................... 628,581.6 11.617 7,301,978
Qualified V ..................................................... 1,107.9 11.047 12,239
Qualified VI .................................................... 1,660,304.1 11.092 18,415,763
Qualified VIII .................................................. 638.7 11.054 7,060
Qualified X (1.15)............................................... 118,679.1 13.902 1,649,878
Qualified X (1.25)............................................... 766,359.8 13.880 10,637,021
GROWTH PORTFOLIO:
Qualified III ................................................... 762.1 10.198 7,772
Qualified V ..................................................... 2,540.5 10.183 25,871
Qualified VI .................................................... 1,833,793.9 10.066 18,458,844
S-5
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Qualified VIII .................................................. 158.7 10.190 1,617
Qualified X (1.15)............................................... 45,764.6 14.023 641,737
Qualified X (1.25)............................................... 612,991.7 14.000 8,581,887
OVERSEAS PORTFOLIO:
Qualified III ................................................... 1,301.8 10.197 13,274
Qualified V ..................................................... 190.8 9.954 1,899
Qualified VI .................................................... 196,089.8 9.961 1,953,206
Qualified X (1.15)............................................... 4,284.4 10.278 44,037
Qualified X (1.25)............................................... 166,303.2 10.262 1,706,571
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II:
ASSET MANAGER PORTFOLIO:
Qualified III.................................................... 1,316,915.5 10.912 14,370,158
CONTRAFUND PORTFOLIO:
Qualified III ................................................... 525,476.0 11.763 6,181,326
Qualified V ..................................................... 6,415.4 10.461 67,111
Qualified VI .................................................... 2,116,732.0 10.397 22,007,519
Qualified VIII .................................................. 173.7 10.467 1,818
Qualified X (1.15)............................................... 5,452.8 10.689 63,737
Qualified X (1.25)............................................... 174,259.3 10.681 2,035,606
INDEX 500 PORTFOLIO:
Qualified III ................................................... 290,546.8 11.740 3,411,144
FRANKLIN GOVERNMENT SECURITIES TRUST:
Qualified III ................................................... 809,413.7 16.495 13,351,329
Qualified V ..................................................... 16,226.2 11.946 193,844
Qualified VI .................................................... 717,760.0 11.762 8,442,415
Qualified VIII .................................................. 4,916.9 11.090 54,527
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO:
Qualified III ................................................... 1,280,952.5 15.323 19,627,517
Qualified V.. ................................................... 15,482.4 13.296 205,852
Qualified VI. ................................................... 4,887,059.8 13.322 65,105,449
Qualified VIII .................................................. 1,021.7 13.321 13,610
Qualified X (1.15)............................................... 22,049.9 12.869 283,760
Qualified X (1.25)............................................... 167,919.9 12.861 2,159,528
BALANCED PORTFOLIO:
Qualified III ................................................... 161.4 10.853 1,751
Qualified V ..................................................... 160.2 10.843 1,737
Qualified VI .................................................... 93,303.8 10.850 1,012,385
Qualified X (1.15)............................................... 9,382.9 11.265 105,697
Qualified X (1.25)............................................... 34,071.6 11.259 383,600
FLEXIBLE INCOME PORTFOLIO:
Qualified III ................................................... 3,344.5 12.124 40,550
Qualified V ..................................................... 745.1 12.054 8,981
Qualified VI .................................................... 315,361.3 12.077 3,808,592
GROWTH PORTFOLIO:
Qualified III ................................................... 109,716.5 11.859 1,301,115
Qualified V. .................................................... 166.2 10.872 1,807
Qualified VI. ................................................... 259,195.5 10.870 2,817,612
Qualified X (1.15)............................................... 3,238.4 11.633 37,671
Qualified X (1.25)............................................... 78,126.0 11.626 908,282
S-6
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
SHORT-TERM BOND PORTFOLIO:
Qualified III ................................................... 18,472.9 10.393 191,983
Qualified V ..................................................... 23.8 10.316 245
Qualified VI .................................................... 32,695.8 10.323 337,528
Qualified X (1.25)............................................... 1,405.3 10.285 14,454
WORLDWIDE GROWTH PORTFOLIO:
Qualified III ................................................... 314,652.7 12.158 3,825,607
Qualified V ..................................................... 11,127.9 10.952 121,875
Qualified VI .................................................... 1,036,039.6 10.877 11,268,519
Qualified VIII .................................................. 13.7 10.846 149
Qualified X (1.15)............................................... 2,616.9 12.223 31,987
Qualified X (1.25)............................................... 65,384.2 12.216 798,726
LEXINGTON EMERGING MARKETS FUND:
Qualified III ................................................... 371,155.8 8.323 3,089,046
LEXINGTON NATURAL RESOURCES TRUST:
Qualified III ................................................... 530,562.2 10.862 5,763,092
Qualified V ..................................................... 8,347.9 12.095 100,969
Qualified VI .................................................... 711,891.9 11.720 8,346,423
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
GROWTH PORTFOLIO:
Qualified III ................................................... 2,359,089.9 17.430 41,119,982
Qualified V ..................................................... 35,940.7 14.359 516,068
Qualified VI .................................................... 3,331,217.5 14.345 47,786,169
Qualified VIII .................................................. 5,947.6 12.334 73,360
SCUDDER VARIABLE LIFE INVESTMENT FUND:
INTERNATIONAL PORTFOLIO:
Qualified III ................................................... 3,823,292.2 14.515 55,495,694
Qualified V ..................................................... 38,067.4 13.799 525,305
Qualified VI .................................................... 7,323,208.0 13.923 101,958,550
Qualified VIII .................................................. 12,189.3 11.733 143,011
Qualified X (1.15)............................................... 41,921.0 13.952 584,886
Qualified X (1.25)............................................... 432,183.0 13.923 6,017,137
TCI PORTFOLIOS, INC.:
TCI GROWTH:
Qualified III *.................................................. 1,784,551.6 14.464 25,811,741
Qualified III .................................................. 4,184,701.2 13.224 55,336,455
Qualified V ..................................................... 24,825.6 15.176 376,753
Qualified VI .................................................... 21,986,645.3 15.253 335,360,124
Qualified VII ................................................... 63,035.5 12.840 809,380
Qualified VIII .................................................. 8,144.3 12.868 104,799
Qualified IX .................................................... 1,241.8 12.581 15,623
Qualified X (1.15)............................................... 13,306.7 15.285 203,397
Qualified X (1.25)............................................... 474,744.3 15.253 7,241,227
$6,632,117,659
--------------
--------------
</TABLE>
*Applies only to participants of the Opportunity Plus program and Multiple
Options Contracts.
See Notes to Financial Statements.
S-7
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENT OF OPERATIONS - Year Ended December 31, 1995
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends: (Notes 1 and 3)
Aetna Variable Fund............................................................ $648,150,765
Aetna Income Shares............................................................ 23,872,308
Aetna Variable Encore Fund .................................................... 172,751
Aetna Investment Advisers Fund, Inc............................................ 47,274,300
Aetna GET Fund, Series B ...................................................... 1,878,972
Aetna Ascent Variable Portfolio ............................................... 110,626
Aetna Crossroads Variable Portfolio ........................................... 61,834
Aetna Legacy Variable Portfolio ............................................... 33,640
Calvert Responsibly Invested Balanced Portfolio .............................. 2,556,825
Fidelity Investments Variable Insurance Products Fund - Equity Income Portfolio 423,626
Fidelity Investments Variable Insurance Products Fund - Growth Portfolio ...... 10,256
Fidelity Investments Variable Insurance Products Fund - Overseas Portfolio .... 5,145
Fidelity Investments Variable Insurance Products Fund II - Asset Manager Portfolio 259,914
Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio 379,043
Franklin Government Securities Trust .......................................... 1,061,449
Janus Aspen Series - Aggressive Growth Portfolio............................... 982,586
Janus Aspen Series - Balanced Portfolio........................................ 11,553
Janus Aspen Series - Flexible Income Portfolio................................. 151,761
Janus Aspen Series - Growth Portfolio.......................................... 91,472
Janus Aspen Series - Short-Term Bond Portfolio................................. 11,707
Janus Aspen Series - Worldwide Growth Portfolio................................ 50,858
Lexington Emerging Markets Fund................................................ 29,990
Lexington Natural Resources Trust.............................................. 59,767
Neuberger & Berman Advisers Management Trust - Growth Portfolio ............... 1,779,523
Scudder Variable Life Investment Fund - International Portfolio............... 670,720
TCI Portfolios, Inc. - TCI Growth.............................................. 339,221
--------------
Total investment income ..................................................... 730,430,612
Valuation period deductions (Note 2)............................................. (71,090,542)
--------------
Net investment income............................................................ 659,340,070
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1 and 4)
Proceeds from sales ........................................................... $570,154,582
Cost of investments sold ...................................................... 409,480,615
------------
Net realized gain ........................................................... 160,673,967
Net unrealized gain on investments:
Beginning of year ............................................................. 73,479,233
End of year ................................................................... 594,083,184
------------
Net unrealized gain ......................................................... 520,603,951
--------------
Net realized and unrealized gain on investments ................................. 681,277,918
--------------
Net increase in net assets resulting from operations ............................ $1,340,617,988
--------------
--------------
</TABLE>
See Notes to Financial Statements.
S-8
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
---- ----
<S> <C> <C>
FROM OPERATIONS:
Net investment income .......................................... $ 659,340,070 $ 476,196,420
Net realized and unrealized gain (loss) on investments .......... 681,277,918 (581,812,453)
Net increase (decrease) in net assets resulting from operations 1,340,617,988 (105,616,033)
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ..................... 771,594,245 711,565,372
Sales and administrative charges deducted by the Company ........ (98,694) (137,737)
Net variable annuity contract purchase payments ............... 771,495,551 711,427,635
Transfers from the Company for mortality guarantee adjustments .. 3,678,430 1,880,350
Transfers to the Company's fixed account options ................ (44,377,350) (56,920,532)
Transfers to other variable annuity accounts ........... 0 (23,284,415)
Redemptions by contract holders ................................. (287,945,984) (269,542,942)
Annuity payments ................................................ (14,807,537) (11,189,149)
Other ........................................................... 1,144,770 1,452,959
Net increase in net assets from unit transactions ............. 429,187,880 353,823,906
Change in net assets ............................................ 1,769,805,868 248,207,873
NET ASSETS:
Beginning of year ............................................... 4,862,311,791 4,614,103,918
End of year...................................................... $6,632,117,659 $4,862,311,791
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements.
S-9
<PAGE>
VARIABLE ANNUITY ACCOUNT C
NOTES TO FINANCIAL STATEMENTS - December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Annuity Account C ("Account") is registered under the Investment
Company Act of 1940 as a unit investment trust. The Account is sold
exclusively for use with annuity contracts that are qualified under the
Internal Revenue Code of 1986, as amended.
The accompanying financial statements of the Account have been prepared in
accordance with generally accepted accounting principles.
a. VALUATION OF INVESTMENTS
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on December 31, 1995:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna GET Fund, Series B
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Alger American Fund:
- Alger American Growth Portfolio
- Alger American Small Capitalization Portfolio
Calvert Responsibly Invested Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
- Equity-Income Portfolio
- Growth Portfolio
- Overseas Portfolio
Fidelity Investments Variable Insurance Products Fund II:
- Asset Manager Portfolio
- Contrafund Portfolio
- Index 500 Portfolio
Franklin Government Securities Trust
Janus Aspen Series:
- Aggressive Growth Portfolio
- Balanced Portfolio
- Flexible Income Portfolio
- Growth Portfolio
- Short-Term Bond Portfolio
- Worldwide Growth Portfolio
Lexington Emerging Markets Fund
Lexington Natural Resources Trust
Neuberger & Berman Advisers Management Trust:
- Growth Portfolio
Scudder Variable Life Investment Fund:
- International Portfolio
TCI Portfolios, Inc.:
- TCI Growth
b. OTHER
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. FEDERAL INCOME TAXES
The operations of Variable Annuity Account C form a part of, and are taxed
with, the total operations of Aetna Life Insurance and Annuity Company
("Company") which is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended.
d. ANNUITY RESERVES
Annuity reserves are computed for currently payable contracts according
to the Progressive Annuity, Individual Annuity Mortality, and Group
Annuity Mortality tables using various assumed interest rates not to
exceed seven percent. Mortality experience is monitored by the Company.
S-10
<PAGE>
VARIABLE ANNUITY ACCOUNT C
NOTES TO FINANCIAL STATEMENTS - December 31, 1995 (continued)
Charges to annuity reserves for mortality and expense risk experience are
reimbursed to the Company if the reserves required are less than originally
estimated. If additional reserves are required, the Company reimburses the
Account.
2. VALUATION PERIOD DEDUCTIONS
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
3. DIVIDEND INCOME
On an annual basis the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income and accumulated net realized gain on investments is included in net
unrealized gain in the Statement of Operations.
4. PURCHASES AND SALES OF INVESTMENTS
The cost of purchases and proceeds from sales of investments other than
short-term investments for the year ended December 31, 1995 aggregated
$1,658,682,532 and $570,154,582, respectively.
5. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
S-11
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AETNA VARIABLE FUND:
Qualified I ............................................................. $138.406 $180.879 30.69%
Qualified III ........................................................... 105.558 137.869 30.61%
Qualified IV ............................................................ 63.884 83.646 30.93%
Qualified V ............................................................. 10.823 14.113 30.40%
Qualified VI ............................................................ 10.778 14.077 30.61%
Qualified VII ........................................................... 10.136 13.247 30.69%
Qualified VIII .......................................................... 10.011 13.074 30.60%
Qualified IX ............................................................ 9.879 12.935 30.93%
Qualified X (1.15) ...................................................... 10.791 14.108 30.74%
Qualified X (1.25) ...................................................... 10.778 14.077 30.61%
- -------------------------------------------------------------------------------------------------------------------------
AETNA INCOME SHARES:
Qualified I ............................................................. $ 40.570 $ 47.405 16.85%
Qualified III ........................................................... 40.173 46.913 16.78%
Qualified V ............................................................. 10.536 12.283 16.59%
Qualified VI ............................................................ 10.360 12.098 16.78%
Qualified VII ........................................................... 9.565 11.176 16.85%
Qualified VIII .......................................................... 9.543 11.143 16.77%
Qualified IX ............................................................ 9.570 11.203 17.07%
Qualified X (1.15) ...................................................... 10.373 12.125 16.89%
Qualified X (1.25) ...................................................... 10.360 12.098 16.78%
- -------------------------------------------------------------------------------------------------------------------------
AETNA VARIABLE ENCORE FUND:
Qualified I ............................................................. $ 36.723 $ 38.485 4.80%
Qualified III ........................................................... 36.271 37.988 4.73%
Qualified V ............................................................. 10.523 11.003 4.57%
Qualified VI ............................................................ 10.528 11.026 4.73%
Qualified VII ........................................................... 10.435 10.936 4.80%
Qualified VIII .......................................................... 10.141 10.620 4.73%
Qualified IX ............................................................ 10.341 10.857 5.00%
Qualified X (1.15) ...................................................... 10.541 11.051 4.84%
Qualified X (1.25) ...................................................... 10.528 11.026 4.73%
- -------------------------------------------------------------------------------------------------------------------------
AETNA INVESTMENT ADVISERS FUND, INC.:
Qualified I ............................................................. $ 14.317 $ 18.024 25.89%
Qualified III ........................................................... 14.270 17.954 25.82%
Qualified V ............................................................. 10.900 13.693 25.62%
Qualified VI ............................................................ 10.868 13.673 25.81%
Qualified VII ........................................................... 10.434 13.135 25.89%
Qualified VIII .......................................................... 10.091 12.695 25.81%
Qualified IX ............................................................ 10.000 12.613 26.13%
Qualified X (1.15) ...................................................... 10.880 13.703 25.95%
Qualified X (1.25) ...................................................... 10.868 13.673 25.81%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AETNA GET FUND, SERIES B:
Qualified III ........................................................... $ 10.160 $ 12.850 26.48%
Qualified VI ............................................................ 10.160 12.850 26.48%
Qualified X (1.25) ...................................................... 10.160 12.850 26.48%
- -------------------------------------------------------------------------------------------------------------------------
AETNA ASCENT VARIABLE PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.673 6.73% (4)
Qualified V ............................................................. 10.000 10.666 6.66% (5)
Qualified VI ............................................................ 10.000 10.673 6.73% (5)
Qualified VIII .......................................................... 10.000 10.673 6.73% (5)
Qualified X (1.15) ...................................................... 10.000 10.982 9.82% (3)
Qualified X (1.25) ...................................................... 10.000 10.976 9.76% (3)
- -------------------------------------------------------------------------------------------------------------------------
AETNA CROSSROADS VARIABLE PORTFOLIO:
Qualified V ............................................................. $ 10.000 $ 10.605 6.05% (5)
Qualified VI ............................................................ 10.000 10.612 6.12% (5)
Qualified VIII .......................................................... 10.000 10.611 6.11% (5)
Qualified X (1.15) ...................................................... 10.000 10.868 8.68% (3)
Qualified X (1.25) ...................................................... 10.000 10.862 8.62% (3)
- -------------------------------------------------------------------------------------------------------------------------
AETNA LEGACY VARIABLE PORTFOLIO:
Qualified VI ............................................................ $ 10.000 $ 10.580 5.80% (5)
Qualified X (1.15) ...................................................... 10.000 10.631 6.31% (4)
Qualified X (1.25) ...................................................... 10.000 10.626 6.26% (4)
- -------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN FUNDS:
ALGER AMERICAN GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.715 17.15% (4)
Qualified V ............................................................. 10.000 10.365 3.65% (5)
Qualified VI ............................................................ 10.000 10.157 1.57% (5)
Qualified VIII .......................................................... 10.000 10.371 3.71% (5)
Qualified X (1.15) ...................................................... 10.000 11.385 13.85% (3)
Qualified X (1.25) ...................................................... 10.000 11.379 13.79% (3)
- -------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO:
Qualified III ........................................................... $ 9.513 $ 13.558 42.52%
Qualified V ............................................................. 9.461 13.463 42.29%
Qualified VI ............................................................ 9.437 13.450 42.52%
Qualified VIII .......................................................... 9.889 14.093 42.51%
Qualified X (1.15) ...................................................... 9.450 13.481 42.66%
Qualified X (1.25) ...................................................... 9.437 13.450 42.52%
- -------------------------------------------------------------------------------------------------------------------------
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO:
Qualified III ........................................................... $ 13.990 $ 17.951 28.31%
Qualified V ............................................................. 10.839 13.870 27.96%
Qualified VI ............................................................ 10.554 13.527 28.17%
Qualified VIII .......................................................... 9.590 12.291 28.16%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
(Decrease)
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS:
EQUITY - INCOME PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.617 16.17% (2)
Qualified V ............................................................. 10.000 11.047 10.47% (5)
Qualified VI ............................................................ 10.000 11.092 10.92% (5)
Qualified VIII .......................................................... 10.000 11.054 10.54% (5)
Qualified X (1.15) ...................................................... 10.409 13.902 33.55%
Qualified X (1.25) ...................................................... 10.403 13.880 33.42%
- -------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.198 1.98% (4)
Qualified V ............................................................. 10.000 10.183 1.83% (5)
Qualified VI ............................................................ 10.000 10.066 0.66% (5)
Qualified VIII .......................................................... 10.000 10.190 1.90% (5)
Qualified X (1.15) ...................................................... 10.479 14.023 33.82%
Qualified X (1.25) ...................................................... 10.472 14.000 33.69%
- -------------------------------------------------------------------------------------------------------------------------
OVERSEAS PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.197 1.97% (4)
Qualified V ............................................................. 10.000 9.954 (0.46%) (5)
Qualified VI ............................................................ 10.000 9.961 (0.39%) (5)
Qualified X (1.15) ...................................................... 9.480 10.278 8.43%
Qualified X (1.25) ...................................................... 9.474 10.262 8.32%
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II:
ASSET MANAGER PORTFOLIO:
Qualified III ........................................................... $ 9.447 $ 10.912 15.51%
- -------------------------------------------------------------------------------------------------------------------------
CONTRAFUND PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.763 17.63% (2)
Qualified V ............................................................. 10.000 10.461 4.61% (5)
Qualified VI ............................................................ 10.000 10.397 3.97% (5)
Qualified VIII .......................................................... 10.000 10.467 4.67% (5)
Qualified X (1.15) ...................................................... 10.000 10.689 6.89% (2)
Qualified X (1.25) ...................................................... 10.000 10.681 6.81% (2)
- -------------------------------------------------------------------------------------------------------------------------
INDEX 500 PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.740 17.40% (2)
- -------------------------------------------------------------------------------------------------------------------------
FRANKLIN GOVERNMENT SECURITIES TRUST:
Qualified III ........................................................... $ 14.190 $ 16.495 16.24%
Qualified V ............................................................. 10.294 11.946 16.06%
Qualified VI ............................................................ 10.119 11.762 16.24%
Qualified VIII .......................................................... 9.541 11.090 16.23%
- -------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO:
Qualified III ........................................................... $ 12.169 $ 15.323 25.91%
Qualified V ............................................................. 10.577 13.296 25.71%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
(Decrease)
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO (continued):
Qualified VI ............................................................ $ 10.581 $ 13.322 25.91%
Qualified VIII .......................................................... 10.581 13.321 25.90%
Qualified X (1.15) ...................................................... 10.000 12.869 28.69% (2)
Qualified X (1.25) ...................................................... 10.000 12.861 28.61% (2)
- -------------------------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.853 8.53% (4)
Qualified V ............................................................. 10.000 10.843 8.43% (5)
Qualified VI ............................................................ 10.000 10.850 8.50% (5)
Qualified X (1.15) ...................................................... 10.000 11.265 12.65% (3)
Qualified X (1.25) ...................................................... 10.000 11.259 12.59% (3)
- -------------------------------------------------------------------------------------------------------------------------
FLEXIBLE INCOME PORTFOLIO:
Qualified III ........................................................... $ 9.911 $ 12.124 22.33%
Qualified V ............................................................. 10.000 12.054 20.54% (1)
Qualified VI ............................................................ 9.873 12.077 22.33%
- -------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.859 18.59% (4)
Qualified V ............................................................. 10.000 10.872 8.72% (5)
Qualified VI ............................................................ 10.000 10.870 8.70% (5)
Qualified X (1.15) ...................................................... 10.000 11.633 16.33% (3)
Qualified X (1.25) ...................................................... 10.000 11.626 16.26% (3)
- -------------------------------------------------------------------------------------------------------------------------
SHORT TERM BOND PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.393 3.93% (4)
Qualified V ............................................................. 10.000 10.316 3.16% (5)
Qualified VI ............................................................ 10.000 10.323 3.23% (5)
Qualified X (1.25) ...................................................... 10.000 10.285 2.85% (4)
- -------------------------------------------------------------------------------------------------------------------------
WORLDWIDE GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 12.158 21.58% (4)
Qualified V ............................................................. 10.000 10.952 9.52% (4)
Qualified VI ............................................................ 10.000 10.877 8.77% (5)
Qualified VIII .......................................................... 10.000 10.846 8.46% (5)
Qualified X (1.15) ...................................................... 10.000 12.223 22.23% (2)
Qualified X (1.25) ...................................................... 10.000 12.216 22.16% (2)
- -------------------------------------------------------------------------------------------------------------------------
LEXINGTON EMERGING MARKETS FUND:
Qualified III ........................................................... $ 8.772 $ 8.323 (5.12%)
- -------------------------------------------------------------------------------------------------------------------------
LEXINGTON NATURAL RESOURCES TRUST:
Qualified III ........................................................... $ 9.412 $ 10.862 15.41%
Qualified V ............................................................. 10.496 12.095 15.24%
Qualified VI ............................................................ 10.154 11.720 15.42%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-15
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST - GROWTH PORTFOLIO:
Qualified III ........................................................... $ 13.398 $ 17.430 30.09%
Qualified V ............................................................. 11.055 14.359 29.89%
Qualified VI ............................................................ 11.026 14.345 30.10%
Qualified VIII .......................................................... 9.482 12.334 30.09%
- --------------------------------------------------------------------------------------------------------------------------
SCUDDER VARIABLE LIFE INVESTMENT FUND - INTERNATIONAL
PORTFOLIO:
Qualified III ........................................................... $ 13.227 $ 14.515 9.74%
Qualified V ............................................................. 12.595 13.799 9.56%
Qualified VI ............................................................ 12.687 13.923 9.74%
Qualified VIII .......................................................... 10.692 11.733 9.73%
Qualified X (1.15) ...................................................... 12.701 13.952 9.85%
Qualified X (1.25) ...................................................... 12.687 13.923 9.74%
- --------------------------------------------------------------------------------------------------------------------------
TCI PORTFOLIOS, INC.:
TCI GROWTH:
Qualified III* .......................................................... $ 11.172 $ 14.464 29.47%
Qualified III ........................................................... 10.213 13.224 29.47%
Qualified V ............................................................. 11.740 15.176 29.27%
Qualified VI ............................................................ 11.781 15.253 29.47%
Qualified VII ........................................................... 9.911 12.840 29.55%
Qualified VIII .......................................................... 9.939 12.868 29.46%
Qualified IX ............................................................ 9.693 12.581 29.80%
Qualified X (1.15) ...................................................... 11.794 15.285 29.60%
Qualified X (1.25) ...................................................... 11.781 15.253 29.47%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Applies only to participants of the Opportunity Plus program and Multiple
Options Contracts.
QUALIFIED I Individual contracts issued prior to May 1, 1975
in connection with "Qualified Corporate Retirement
Plans" established pursuant to Section 401 of the
Internal Revenue Code ("Code"); "Tax-Deferred
Annuity Plans" established by the public school
systems and tax-exempt organizations pursuant to
Section 403(b) of the Code, and certain Individual
Retirement Annuity Plans established by or on
behalf of individuals pursuant to section 408(b)
of the Code; Individual contracts issued prior to
November 1, 1975 in connection with "H.R. 10
Plans" established by persons entitled to the
benefits of the Self-Employed Individuals Tax
Retirement Act of 1962, as amended; allocated
group contracts issued prior to May 1, 1975 in
connection with Qualified Corporate Retirement
Plans; and group contracts issued prior to
October 1, 1978 in connection with Tax-Deferred
Annuity Plans.
QUALIFIED III Individual contracts issued in connection with
Tax-Deferred Annuity Plans and Individual
Retirement Annuity Plans since May 1, 1975, H.R.
10 Plans since November 1, 1975; group contracts
issued since October 1, 1978 in connection with
Tax-Deferred Annuity
S-16
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
- --------------------------------------------------------------------------------
QUALIFIED III (continued): Plans and group contracts issued since May 1, 1979
in connection with "Deferred Compensation Plans"
adopted by state and local governments and H.R. 10
Plans.
QUALIFIED IV Certain large group contracts (Jumbo) issued in
connection with Tax-Deferred Annuity Plans and
Deferred Compensation Plans issued since
January 1, 1979.
QUALIFIED V Group AetnaPlus contracts issued since August 28,
1992 in connection with "Optional Retirement
Plans" established pursuant to Section 403(b) or
401(a) of the Internal Revenue Code.
QUALIFIED VI Group AetnaPlus contracts issued in connection
with Tax-Deferred Annuity Plans and Retirement
Plus Plans since August 28, 1992.
QUALIFIED VII Certain existing contracts that were converted to
ACES, the new administrative system (Previously
valued under Qualified I).
QUALIFIED VIII "Group Aetna Plus" contracts issued in connection
with Tax-Deferred Annuity Plans and "Deferred
Compensation Plans" adopted by state and local
governments since June 30, 1993.
QUALIFIED IX Certain large group contracts (Jumbo) that were
converted to ACES, the new administrative system
(previously valued under Qualified VI).
QUALIFIED X Individual Retirement Annuity and Simplified
Employee Pension Plans issued or converted to
ACES, the new administrative system.
1 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during March 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
2 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during May 1995 when the
fund became available under the contract or the applicable daily asset
charge was first utilized.
3 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during June 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
4 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during July 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
5 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during August 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
S-17
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Independent Auditors' Report..................................... F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993.............................. F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994... F-4
Consolidated Statements of Changes in Shareholder's Equity for
the Years Ended
December 31, 1995, 1994 and 1993.............................. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993.............................. F-6
Notes to Consolidated Financial Statements....................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life Insurance
and Annuity Company and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
Company changed its methods of accounting for certain investments in debt and
equity securities.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 6, 1996
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Income
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Premiums............................................. $ 130.8 $ 124.2 $ 82.1
Charges assessed against policyholders............... 318.9 279.0 251.5
Net investment income................................ 1,004.3 917.2 911.9
Net realized capital gains........................... 41.3 1.5 9.5
Other income......................................... 42.0 10.3 9.5
-------- -------- --------
Total revenue...................................... 1,537.3 1,332.2 1,264.5
-------- -------- --------
Benefits and expenses:
Current and future benefits.......................... 915.3 854.1 818.4
Operating expenses................................... 318.7 235.2 207.2
Amortization of deferred policy acquisition costs.... 43.3 26.4 19.8
-------- -------- --------
Total benefits and expenses........................ 1,277.3 1,115.7 1,045.4
-------- -------- --------
Income before federal income taxes..................... 260.0 216.5 219.1
Federal income taxes................................. 84.1 71.2 76.2
-------- -------- --------
Net income............................................. $ 175.9 $ 145.3 $ 142.9
-------- -------- --------
-------- -------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Balance Sheets
(millions)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
- -------------------------------------------------------
Investments:
Debt securities, available for sale:
(amortized cost: $11,923.7 and $10,577.8)........... $12,720.8 $10,191.4
Equity securities, available for sale:
Non-redeemable preferred stock (cost: $51.3 and
$43.3)............................................ 57.6 47.2
Investment in affiliated mutual funds (cost: $173.4
and $187.1)....................................... 191.8 181.9
Common stock (cost: $6.9 at December 31, 1995)..... 8.2 --
Short-term investments............................... 15.1 98.0
Mortgage loans....................................... 21.2 9.9
Policy loans......................................... 338.6 248.7
Limited partnership.................................. -- 24.4
--------- ---------
Total investments................................ 13,353.3 10,801.5
Cash and cash equivalents.............................. 568.8 623.3
Accrued investment income.............................. 175.5 142.2
Premiums due and other receivables..................... 37.3 75.8
Deferred policy acquisition costs...................... 1,341.3 1,164.3
Reinsurance loan to affiliate.......................... 655.5 690.3
Other assets........................................... 26.2 15.9
Separate Accounts assets............................... 10,987.0 7,420.8
--------- ---------
Total assets..................................... $27,144.9 $20,934.1
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
- -------------------------------------------------------
Liabilities:
Future policy benefits............................... $ 3,594.6 $ 2,912.7
Unpaid claims and claim expenses..................... 27.2 23.8
Policyholders' funds left with the Company........... 10,500.1 8,949.3
--------- ---------
Total insurance reserve liabilities.............. 14,121.9 11,885.8
Other liabilities.................................... 259.2 302.1
Federal income taxes:
Current............................................ 24.2 3.4
Deferred........................................... 169.6 233.5
Separate Accounts liabilities........................ 10,987.0 7,420.8
--------- ---------
Total liabilities................................ 25,561.9 19,845.6
--------- ---------
--------- ---------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized;
55,000 shares issued and outstanding)............... 2.8 2.8
Paid-in capital...................................... 407.6 407.6
Net unrealized capital gains (losses)................ 132.5 (189.0)
Retained earnings.................................... 1,040.1 867.1
--------- ---------
Total shareholder's equity....................... 1,583.0 1,088.5
--------- ---------
Total liabilities and shareholder's equity..... $27,144.9 $20,934.1
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Shareholder's equity, beginning of year................ $ 1,088.5 $ 1,246.7 $ 990.1
Net change in unrealized capital gains (losses)........ 321.5 (303.5) 113.7
Net income............................................. 175.9 145.3 142.9
Common stock dividends declared........................ (2.9) -- --
--------- --------- ---------
Shareholder's equity, end of year...................... $ 1,583.0 $ 1,088.5 $ 1,246.7
--------- --------- ---------
--------- --------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income........................................... $ 175.9 $ 145.3 $ 142.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued investment income.............. (33.3) (17.5) (11.1)
Decrease (increase) in premiums due and other
receivables....................................... 25.4 1.3 (5.6)
Increase in policy loans........................... (89.9) (46.0) (36.4)
Increase in deferred policy acquisition costs...... (177.0) (105.9) (60.5)
Decrease in reinsurance loan to affiliate.......... 34.8 27.8 31.8
Net increase in universal life account balances.... 393.4 164.7 126.4
Increase in other insurance reserve liabilities.... 79.0 75.1 86.1
Net increase in other liabilities and other
assets............................................ 15.0 53.9 7.0
Decrease in federal income taxes................... (6.5) (11.7) (3.7)
Net accretion of discount on bonds................. (66.4) (77.9) (88.1)
Net realized capital gains......................... (41.3) (1.5) (9.5)
Other, net......................................... -- (1.0) 0.2
---------- ---------- ----------
Net cash provided by operating activities........ 309.1 206.6 179.5
---------- ---------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale................. 4,207.2 3,593.8 473.9
Equity securities.................................. 180.8 93.1 89.6
Mortgage loans..................................... 10.7 -- --
Limited partnership................................ 26.6 -- --
Investment maturities and collections of:
Debt securities available for sale................. 583.9 1,289.2 2,133.3
Short-term investments............................. 106.1 30.4 19.7
Cost of investment purchases in:
Debt securities.................................... (6,034.0) (5,621.4) (3,669.2)
Equity securities.................................. (170.9) (162.5) (157.5)
Short-term investments............................. (24.7) (106.1) (41.3)
Mortgage loans..................................... (21.3) -- --
Limited partnership................................ -- (25.0) --
---------- ---------- ----------
Net cash used for investing activities........... (1,135.6) (908.5) (1,151.5)
---------- ---------- ----------
Cash Flows from Financing Activities:
Deposits and interest credited for investment
contracts........................................... 1,884.5 1,737.8 2,117.8
Withdrawals of investment contracts.................. (1,109.6) (948.7) (1,000.3)
Dividends paid to shareholder........................ (2.9) -- --
---------- ---------- ----------
Net cash provided by financing activities........ 772.0 789.1 1,117.5
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents... (54.5) 87.2 145.5
Cash and cash equivalents, beginning of year........... 623.3 536.1 390.6
---------- ---------- ----------
Cash and cash equivalents, end of year................. $ 568.8 $ 623.3 $ 536.1
---------- ---------- ----------
---------- ---------- ----------
Supplemental cash flow information:
Income taxes paid, net............................... $ 90.2 $ 82.6 $ 79.9
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries
(collectively, the "Company") is a provider of financial services and life
insurance products in the United States. The Company has two business segments,
financial services and life insurance.
The financial services products include individual and group annuity contracts
which offer a variety of funding and distribution options for personal and
employer-sponsored retirement plans that qualify under Internal Revenue Code
Sections 401, 403, 408 and 457, and individual and group non-qualified annuity
contracts. These contracts may be immediate or deferred and are offered
primarily to individuals, pension plans, small businesses and employer-sponsored
groups in the health care, government, education (collectively "not-for-profit"
organizations) and corporate markets. Financial services also include pension
plan administrative services.
The life insurance products include universal life, variable universal life,
interest sensitive whole life and term insurance. These products are offered
primarily to individuals, small businesses, employer sponsored groups and
executives of Fortune 2000 companies.
BASIS OF PRESENTATION
The consolidated financial statements include Aetna Life Insurance and Annuity
Company and its wholly owned subsidiaries, Aetna Insurance Company of America
and Aetna Private Capital, Inc. Aetna Life Insurance and Annuity Company is a
wholly owned subsidiary of Aetna Retirement Services, Inc. ("ARSI"). ARSI is a
wholly owned subsidiary of Aetna Life and Casualty Company ("Aetna"). Two
subsidiaries, Systematized Benefits Administrators, Inc. ("SBA"), and Aetna
Investment Services, Inc. ("AISI"), which were previously reported in the
consolidated financial statements were distributed in the form of dividends to
ARSI in December of 1995. The impact to the Company's financial statements of
distributing these dividends was immaterial.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Intercompany transactions have been
eliminated. Certain reclassifications have been made to 1994 and 1993 financial
information to conform to the 1995 presentation.
ACCOUNTING CHANGES
Accounting for Certain Investments in Debt and Equity Securities
On December 31, 1993, the Company adopted Financial Accounting Standard ("FAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities, which
requires the classification of debt securities into three categories: "held to
maturity", which are carried at amortized cost; "available for sale", which are
carried at fair value with changes in fair value recognized as a component of
shareholder's equity; and "trading", which are carried at fair value with
immediate recognition in income of changes in fair value.
Initial adoption of this standard resulted in a net increase of $106.8 million,
net of taxes of $57.5 million, to net unrealized gains in shareholder's equity.
These amounts exclude gains and losses allocable to experience-rated (including
universal life) contractholders. Adoption of FAS No. 115 did not have a material
effect on deferred policy acquisition costs.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those estimates.
CASH AND CASH EQUIVALENT
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of ninety days or less when purchased.
INVESTMENTS
Debt Securities
At December 31, 1995 and 1994, all of the Company's debt securities are
classified as available for sale and carried at fair value. These securities are
written down (as realized losses) for other than temporary decline in value.
Unrealized gains and losses related to these securities, after deducting amounts
allocable to experience-rated contractholders and related taxes, are reflected
in shareholder's equity.
Fair values for debt securities are based on quoted market prices or dealer
quotations. Where quoted market prices or dealer quotations are not available,
fair values are measured utilizing quoted market prices for similar securities
or by using discounted cash flow methods. Cost for mortgage-backed securities is
adjusted for unamortized premiums and discounts, which are amortized using the
interest method over the estimated remaining term of the securities, adjusted
for anticipated prepayments.
Purchases and sales of debt securities are recorded on the trade date.
Equity Securities
Equity securities are classified as available for sale and carried at fair value
based on quoted market prices or dealer quotations. Equity securities are
written down (as realized losses) for other than temporary declines in value.
Unrealized gains and losses related to such securities are reflected in
shareholder's equity. Purchases and sales are recorded on the trade date.
The investment in affiliated mutual funds represents an investment in the Aetna
Series Fund, Inc., a retail mutual fund which has been seeded by the Company,
and is carried at fair value.
Mortgage Loans and Policy Loans
Mortgage loans and policy loans are carried at unpaid principal balances net of
valuation reserves, which approximates fair value, and are generally secured.
Purchases and sales of mortgage loans are recorded on the closing date.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Limited Partnership
The Company's limited partnership investment was carried at the amount invested
plus the Company's share of undistributed operating results and unrealized gains
(losses), which approximates fair value. The Company disposed of the limited
partnership during 1995.
Short-Term Investments
Short-term investments, consisting primarily of money market instruments and
other debt issues purchased with an original maturity of over ninety days and
less than one year, are considered available for sale and are carried at fair
value, which approximates amortized cost.
DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring insurance business have been deferred. These costs,
all of which vary with and are primarily related to the production of new
business, consist principally of commissions, certain expenses of underwriting
and issuing contracts and certain agency expenses. For fixed ordinary life
contracts, such costs are amortized over expected premium-paying periods. For
universal life and certain annuity contracts, such costs are amortized in
proportion to estimated gross profits and adjusted to reflect actual gross
profits. These costs are amortized over twenty years for annuity pension
contracts, and over the contract period for universal life contracts.
Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross profits
would not be adequate to cover related losses and expenses.
INSURANCE RESERVE LIABILITIES
The Company's liabilities include reserves related to fixed ordinary life, fixed
universal life and fixed annuity contracts. Reserves for future policy benefits
for fixed ordinary life contracts are computed on the basis of assumed
investment yield, assumed mortality, withdrawals and expenses, including a
margin for adverse deviation, which generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 10.00%. Assumed
investment yield is based on the Company's experience. Mortality and withdrawal
rate assumptions are based on relevant Aetna experience and are periodically
reviewed against both industry standards and experience.
Reserves for fixed universal life (included in Future Policy Benefits) and fixed
deferred annuity contracts (included in Policyholders' Funds Left With the
Company) are equal to the fund value. The fund value is equal to cumulative
deposits less charges plus credited interest thereon, without reduction for
possible future penalties assessed on premature withdrawal. For guaranteed
interest options, the interest credited ranged from 4.00% to 6.38% in 1995 and
4.00% to 5.85% in 1994. For all other fixed options, the interest credited
ranged from 5.00% to 7.00% in 1995 and 5.00% to 7.50% in 1994.
Reserves for fixed annuity contracts in the annuity period and for future
amounts due under settlement options are computed actuarially using the 1971
Individual Annuity Mortality Table, the 1983 Individual Annuity Mortality Table,
the
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
1983 Group Annuity Mortality Table and, in some cases, mortality improvement
according to scales G and H, at assumed interest rates ranging from 3.5% to
9.5%. Reserves relating to contracts with life contingencies are included in
Future Policy Benefits. For other contracts, the reserves are reflected in
Policyholders' Funds Left With the Company.
Unpaid claims for all lines of insurance include benefits for reported losses
and estimates of benefits for losses incurred but not reported.
PREMIUMS, CHARGES ASSESSED AGAINST POLICYHOLDERS, BENEFITS AND EXPENSES
Premiums are recorded as revenue when due for fixed ordinary life contracts.
Charges assessed against policyholders' funds for cost of insurance, surrender
charges, actuarial margin and other fees are recorded as revenue for universal
life and certain annuity contracts. Policy benefits and expenses are recorded in
relation to the associated premiums or gross profit so as to result in
recognition of profits over the expected lives of the contracts.
SEPARATE ACCOUNTS
Assets held under variable universal life, variable life and variable annuity
contracts are segregated in Separate Accounts and are invested, as designated by
the contractholder or participant under a contract, in shares of Aetna Variable
Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers
Fund, Inc., Aetna GET Fund, or The Aetna Series Fund Inc., which are managed by
the Company or other selected mutual funds not managed by the Company. Separate
Accounts assets and liabilities are carried at fair value except for those
relating to a guaranteed interest option which is offered through a Separate
Account. The assets of the Separate Account supporting the guaranteed interest
option are carried at an amortized cost of $322.2 million for 1995 (fair value
$343.9 million) and $149.7 million for 1994 (fair value $146.3 million), since
the Company bears the investment risk where the contract is held to maturity.
Reserves relating to the guaranteed interest option are maintained at fund value
and reflect interest credited at rates ranging from 4.5% to 8.38% in both 1995
and 1994. Separate Accounts assets and liabilities are shown as separate
captions in the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains (losses) of the Separate Accounts are not
reflected in the Consolidated Statements of Income (with the exception of
realized capital gains (losses) on the sale of assets supporting the guaranteed
interest option). The Consolidated Statements of Cash Flows do not reflect
investment activity of the Separate Accounts.
FEDERAL INCOME TAXES
The Company is included in the consolidated federal income tax return of Aetna.
The Company is taxed at regular corporate rates after adjusting income reported
for financial statement purposes for certain items. Deferred income tax benefits
result from changes during the year in cumulative temporary differences between
the tax basis and book basis of assets and liabilities.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS
Investments in debt securities available for sale as of December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies and corporations... $ 539.5 $ 47.5 $ -- $ 587.0
Obligations of states and political
subdivisions................................ 41.4 12.4 -- 53.8
U.S. Corporate securities:
Financial.................................. 2,764.4 110.3 2.1 2,872.6
Utilities.................................. 454.4 27.8 1.0 481.2
Other...................................... 2,177.7 159.5 1.2 2,336.0
--------- ---------- ----- ---------
Total U.S. Corporate securities............ 5,396.5 297.6 4.3 5,689.8
Foreign securities:
Government................................. 316.4 26.1 2.0 340.5
Financial.................................. 534.2 45.4 3.5 576.1
Utilities.................................. 236.3 32.9 -- 269.2
Other...................................... 215.7 15.1 -- 230.8
--------- ---------- ----- ---------
Total Foreign securities................... 1,302.6 119.5 5.5 1,416.6
Residential mortgage-backed securities:
Residential pass-throughs.................. 556.7 99.2 1.8 654.1
Residential CMOs........................... 2,383.9 167.6 2.2 2,549.3
--------- ---------- ----- ---------
Total Residential mortgage-backed
securities................................ 2,940.6 266.8 4.0 3,203.4
Commercial/Multifamily mortgage-backed
securities.................................. 741.9 32.3 0.2 774.0
--------- ---------- ----- ---------
Total Mortgage-backed securities........... 3,682.5 299.1 4.2 3,977.4
Other asset-backed securities................ 961.2 35.5 0.5 996.2
--------- ---------- ----- ---------
Total debt securities available for sale..... $11,923.7 $811.6 $14.5 $12,720.8
--------- ---------- ----- ---------
--------- ---------- ----- ---------
</TABLE>
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Investments in debt securities available for sale as of December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies and corporations... $ 1,396.1 $ 2.0 $ 84.2 $ 1,313.9
Obligations of states and political
subdivisions................................ 37.9 1.2 -- 39.1
U.S. Corporate securities:
Financial.................................. 2,216.9 3.8 109.4 2,111.3
Utilities.................................. 100.1 -- 7.9 92.2
Other...................................... 1,344.3 6.0 67.9 1,282.4
--------- ---------- ---------- ---------
Total U.S. Corporate securities............ 3,661.3 9.8 185.2 3,485.9
Foreign securities:
Government................................. 434.4 1.2 33.9 401.7
Financial.................................. 368.2 1.1 23.0 346.3
Utilities.................................. 204.4 2.5 9.5 197.4
Other...................................... 46.3 0.8 1.5 45.6
--------- ---------- ---------- ---------
Total Foreign securities................... 1,053.3 5.6 67.9 991.0
Residential mortgage-backed securities:
Residential pass-throughs.................. 627.1 81.5 5.0 703.6
Residential CMOs........................... 2,671.0 32.9 139.4 2,564.5
--------- ---------- ---------- ---------
Total Residential mortgage-backed
securities.................................. 3,298.1 114.4 144.4 3,268.1
Commercial/Multifamily mortgage-backed
securities.................................. 435.0 0.2 21.3 413.9
--------- ---------- ---------- ---------
Total Mortgage-backed securities............. 3,733.1 114.6 165.7 3,682.0
Other asset-backed securities................ 696.1 0.2 16.8 679.5
--------- ---------- ---------- ---------
Total debt securities available for sale..... $10,577.8 $133.4 $519.8 $10,191.4
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
</TABLE>
At December 31, 1995 and 1994, net unrealized appreciation (depreciation) of
$797.1 million and $(386.4) million, respectively, on available for sale debt
securities included $619.1 million and $(308.6) million, respectively, related
to experience-rated contractholders, which were not included in shareholder's
equity.
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
The amortized cost and fair value of debt securities for the year ended December
31, 1995 are shown below by contractual maturity. Actual maturities may differ
from contractual maturities because securities may be restructured, called, or
prepaid.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- ---------
(MILLIONS)
<S> <C> <C>
Due to mature:
One year or less..................................... $ 348.8 $ 351.1
After one year through five years.................... 2,100.2 2,159.5
After five years through ten years................... 2,516.0 2,663.4
After ten years...................................... 2,315.0 2,573.2
Mortgage-backed securities........................... 3,682.5 3,977.4
Other asset-backed securities........................ 961.2 996.2
--------- ---------
Total................................................ $11,923.7 $12,720.8
--------- ---------
--------- ---------
</TABLE>
The Company engages in securities lending whereby certain securities from its
portfolio are loaned to other institutions for short periods of time. Cash
collateral, which is in excess of the market value of the loaned securities, is
deposited by the borrower with a lending agent, and retained and invested by the
lending agent to generate additional income for the Company. The market value of
the loaned securities is monitored on a daily basis with additional collateral
obtained or refunded as the market value fluctuates. At December 31, 1995, the
Company had loaned securities (which are reflected as invested assets on the
Consolidated Balance Sheets) with a market value of approximately $264.5
million.
At December 31, 1995 and 1994, debt securities carried at $7.4 million and $7.0
million, respectively, were on deposit as required by regulatory authorities.
The valuation reserve for mortgage loans was $3.1 million at December 31, 1994.
There was no valuation reserve for mortgage loans at December 31, 1995. The
carrying value of non-income producing investments was $0.1 million and $0.2
million at December 31, 1995 and 1994, respectively.
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Investments in a single issuer, other than obligations of the U.S. government,
with a carrying value in excess of 10% of the Company's shareholder's equity at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
AMORTIZED
DEBT SECURITIES COST FAIR VALUE
---------- ----------
(MILLIONS)
<S> <C> <C>
General Electric Corporation........................... $ 314.9 $ 329.3
General Motors Corporation............................. 273.9 284.5
Associates Corporation of North America................ 230.2 239.1
Society National Bank.................................. 203.5 222.3
Ciesco, L.P............................................ 194.9 194.9
Countrywide Funding.................................... 171.2 172.7
Baxter International................................... 168.9 168.9
Time Warner............................................ 158.6 166.1
Ford Motor Company..................................... 156.7 162.6
</TABLE>
The portfolio of debt securities at December 31, 1995 and 1994 included $662.5
million and $318.3 million, respectively, (5% and 3%, respectively, of the debt
securities) of investments that are considered "below investment grade". "Below
investment grade" securities are defined to be securities that carry a rating
below BBB-/Baa3, by Standard & Poors/ Moody's Investor Services, respectively.
The increase in below investment grade securities is the result of a change in
investment strategy, which has reduced the Company's holdings in residential
mortgage-back securities and increased the Company's holdings in corporate
securities. Residential mortgage-back securities are subject to higher
prepayment risk and lower credit risk, while corporate securities earning a
comparable yield are subject to higher credit risk and lower prepayment risk. We
expect the percentage of below investment grade securities will increase in
1996, but we expect that the overall average quality of the portfolio of debt
securities will remain at AA-. Of these below investment grade assets, $14.5
million and $31.8 million, at December 31, 1995 and 1994, respectively, were
investments that were purchased at investment grade, but whose ratings have
since been downgraded.
Included in residential mortgage-back securities are collateralized mortgage
obligations ("CMOs") with carrying values of $2.5 billion and $2.6 billion at
December 31, 1995 and 1994, respectively. The principal risks inherent in
holding CMOs are prepayment and extension risks related to dramatic decreases
and increases in interest rates whereby the CMOs would be subject to repayments
of principal earlier or later than originally anticipated. At December 31, 1995
and 1994, approximately 79% and 85%, respectively, of the Company's CMO holdings
consisted of sequential and planned amortization class debt securities which are
subject to less prepayment and extension risk than other CMO instruments. At
December 31, 1995 and 1994, approximately 81% and 82%, respectively, of the
Company's CMO holdings were collateralized by residential mortgage loans, on
which the timely payment of principal and interest was backed by specified
government agencies (e.g., GNMA, FNMA, FHLMC).
If due to declining interest rates, principal was to be repaid earlier than
originally anticipated, the Company could be affected by a decrease in
investment income due to the reinvestment of these funds at a lower interest
rate. Such prepayments may result in a duration mismatch between assets and
liabilities which could be corrected as cash from prepayments could be
reinvested at an appropriate duration to adjust the mismatch.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Conversely, if due to increasing interest rates, principal was to be repaid
slower than originally anticipated, the Company could be affected by a decrease
in cash flow which reduces the ability to reinvest expected principal repayments
at higher interest rates. Such slower payments may result in a duration mismatch
between assets and liabilities which could be corrected as available cash flow
could be reinvested at an appropriate duration to adjust the mismatch.
At December 31, 1995 and 1994, approximately 3% and 4%, respectively, of the
Company's CMO holdings consisted of interest-only strips ("IOs") or
principal-only strips ("POs"). IOs receive payments of interest and POs receive
payments of principal on the underlying pool of mortgages. The risk inherent in
holding POs is extension risk related to dramatic increases in interest rates
whereby the future payments due on POs could be repaid much slower than
originally anticipated. The extension risks inherent in holding POs was
mitigated somewhat by offsetting positions in IOs. During dramatic increases in
interest rates, IOs would generate more future payments than originally
anticipated.
The risk inherent in holding IOs is prepayment risk related to dramatic
decreases in interest rates whereby future IO cash flows could be much less than
originally anticipated and in some cases could be less than the original cost of
the IO. The risks inherent in IOs are mitigated somewhat by holding offsetting
positions in POs. During dramatic decreases in interest rates POs would generate
future cash flows much quicker than originally anticipated.
Investments in available for sale equity securities were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------ ---------- ---------- ----------
(MILLIONS)
<S> <C> <C> <C> <C>
1995
Equity Securities................ $231.6 $ 27.2 $ 1.2 $ 257.6
------ ----- --- ----------
1994
Equity Securities................ $230.5 $ 6.5 $ 7.9 $ 229.1
------ ----- --- ----------
</TABLE>
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS
Realized capital gains or losses are the difference between proceeds received
from investments sold or prepaid, and amortized cost. Net realized capital gains
as reflected in the Consolidated Statements of Income are after deductions for
net realized capital gains (losses) allocated to experience-rated contracts of
$61.1 million, $(29.1) million and $(54.8) million for the years ended December
31, 1995, 1994, and 1993, respectively. Net realized capital gains (losses)
allocated to experience-rated contracts are deferred and subsequently reflected
in credited rates on an amortized basis. Net unamortized gains (losses),
reflected as a component of Policyholders' Funds Left With the Company, were
$7.3 million and $(50.7) million at the end of December 31, 1995 and 1994,
respectively.
Changes to the mortgage loan valuation reserve and writedowns on debt securities
are included in net realized capital gains (losses) and amounted to $3.1
million, $1.1 million and $(98.5) million, of which $2.2 million, $0.8 million
and $(91.5) million were allocable to experience-rated contractholders, for the
years ended December 31, 1995, 1994 and 1993, respectively. The 1993 losses were
primarily related to writedowns of interest-only mortgage-backed securities to
their fair value.
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED)
Net realized capital gains (losses) on investments, net of amounts allocated to
experience-rated contracts, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $32.8 $ 1.0 $ 9.6
Equity securities...................................... 8.3 0.2 0.1
Mortgage loans......................................... 0.2 0.3 (0.2)
----- ----- ------
Pretax realized capital gains.......................... $41.3 $ 1.5 $ 9.5
----- ----- ------
After-tax realized capital gains....................... $25.8 $ 1.0 $ 6.2
----- ----- ------
</TABLE>
Gross gains of $44.6 million, $26.6 million and $33.3 million and gross losses
of $11.8 million, $25.6 million and $23.7 million were realized from the sales
of investments in debt securities in 1995, 1994 and 1993, respectively.
Changes in unrealized capital gains (losses), excluding changes in unrealized
capital gains (losses) related to experience-rated contracts, for the years
ended December 31, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ -------- ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $255.9 $ (242.1) $164.3
Equity securities...................................... 27.3 (13.3) 10.6
Limited partnership.................................... 1.8 (1.8) --
------ -------- ------
285.0 (257.2) 174.9
Deferred federal income taxes (See Note 6)............. (36.5) 46.3 61.2
------ -------- ------
Net change in unrealized capital gains (losses)........ $321.5 $ (303.5) $113.7
------ -------- ------
------ -------- ------
</TABLE>
Net unrealized capital gains (losses) allocable to experience-rated contracts of
$515.0 million and $104.1 million at December 31, 1995 and $(260.9) million and
$(47.7) million at December 31, 1994 are reflected on the Consolidated Balance
Sheet in Policyholders' Funds Left With the Company and Future Policy Benefits,
respectively, and are not included in shareholder's equity.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED)
Shareholder's equity included the following unrealized capital gains (losses),
which are net of amounts allocable to experience-rated contractholders, at
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- -------
(MILLIONS)
<S> <C> <C> <C>
Debt securities
Gross unrealized capital gains....................... $179.3 $ 27.4 $ 164.3
Gross unrealized capital losses...................... (1.3) (105.2) --
------ ------- -------
178.0 (77.8) 164.3
Equity securities
Gross unrealized capital gains....................... 27.2 6.5 12.0
Gross unrealized capital losses...................... (1.2) (7.9) (0.1)
------ ------- -------
26.0 (1.4) 11.9
Limited Partnership
Gross unrealized capital gains....................... -- -- --
Gross unrealized capital losses...................... -- (1.8) --
------ ------- -------
Deferred federal income taxes (See Note 6)............. 71.5 108.0 61.7
------ ------- -------
Net unrealized capital gains (losses).................. $132.5 $(189.0) $ 114.5
------ ------- -------
------ ------- -------
</TABLE>
4. NET INVESTMENT INCOME
Sources of net investment income were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------ ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $ 891.5 $823.9 $828.0
Preferred stock........................................ 4.2 3.9 2.3
Investment in affiliated mutual funds.................. 14.9 5.2 2.9
Mortgage loans......................................... 1.4 1.4 1.5
Policy loans........................................... 13.7 11.5 10.8
Reinsurance loan to affiliate.......................... 46.5 51.5 53.3
Cash equivalents....................................... 38.9 29.5 16.8
Other.................................................. 8.4 6.7 7.7
-------- ------ ------
Gross investment income................................ 1,019.5 933.6 923.3
Less investment expenses............................... (15.2) (16.4) (11.4)
-------- ------ ------
Net investment income.................................. $1,004.3 $917.2 $911.9
-------- ------ ------
-------- ------ ------
</TABLE>
Net investment income includes amounts allocable to experience-rated
contractholders of $744.2 million, $677.1 million and $661.3 million for the
years ended December 31, 1995, 1994 and 1993, respectively. Interest credited to
contractholders is included in Current and Future Benefits.
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY
The Company distributed $2.9 million in the form of dividends of two of its
subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995.
The amount of dividends that may be paid to the shareholder in 1996 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$70.0 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's equity those amounts determined in
conformity with statutory accounting practices prescribed or permitted by the
Department, which differ in certain respects from generally accepted accounting
principles. Statutory net income was $70.0 million, $64.9 million and $77.6
million for the years ended December 31, 1995, 1994 and 1993, respectively.
Statutory shareholder's equity was $670.7 million and $615.0 million as of
December 31, 1995 and 1994, respectively.
At December 31, 1995 and December 31, 1994, the Company does not utilize any
statutory accounting practices which are not prescribed by insurance regulators
that, individually or in the aggregate, materially affect statutory
shareholder's equity.
6. FEDERAL INCOME TAXES
The Company is included in the consolidated federal income tax return of Aetna.
Aetna allocates to each member an amount approximating the tax it would have
incurred were it not a member of the consolidated group, and credits the member
for the use of its tax saving attributes in the consolidated return.
In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was enacted
which resulted in an increase in the federal corporate tax rate from 34% to 35%
retroactive to January 1, 1993. The enactment of OBRA resulted in an increase in
the deferred tax liability of $3.4 million at date of enactment, which is
included in the 1993 deferred tax expense.
Components of income tax expense (benefits) were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -------
(MILLIONS)
<S> <C> <C> <C>
Current taxes (benefits):
Income from operations............................... $82.9 $78.7 $ 87.1
Net realized capital gains........................... 28.5 (33.2) 18.1
----- ----- -------
111.4 45.5 105.2
----- ----- -------
Deferred taxes (benefits):
Income from operations............................... (14.4) (8.0) (14.2)
Net realized capital gains........................... (12.9) 33.7 (14.8)
----- ----- -------
(27.3) 25.7 (29.0)
----- ----- -------
Total................................................ $84.1 $71.2 $ 76.2
----- ----- -------
----- ----- -------
</TABLE>
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
6. FEDERAL INCOME TAXES (CONTINUED)
Income tax expense was different from the amount computed by applying the
federal income tax rate to income before federal income taxes for the following
reasons:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Income before federal income taxes..................... $260.0 $216.5 $219.1
Tax rate............................................... 35% 35% 35%
------ ------ ------
Application of the tax rate............................ 91.0 75.8 76.7
------ ------ ------
Tax effect of:
Excludable dividends................................. (9.3) (8.6) (8.7)
Tax reserve adjustments.............................. 3.9 2.9 4.7
Reinsurance transaction.............................. (0.5) 1.9 (0.2)
Tax rate change on deferred liabilities.............. -- -- 3.7
Other, net........................................... (1.0) (0.8) --
------ ------ ------
Income tax expense................................... $ 84.1 $ 71.2 $ 76.2
------ ------ ------
------ ------ ------
</TABLE>
The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities at December 31 are presented below:
<TABLE>
<CAPTION>
1995 1994
------ ------
(MILLIONS)
<S> <C> <C>
Deferred tax assets:
Insurance reserves................................... $290.4 $211.5
Net unrealized capital losses........................ -- 136.3
Unrealized gains allocable to experience-rated
contracts........................................... 216.7 --
Investment losses not currently deductible........... 7.3 15.5
Postretirement benefits other than pensions.......... 7.7 8.4
Other................................................ 32.0 28.3
------ ------
Total gross assets..................................... 554.1 400.0
Less valuation allowance............................... -- 136.3
------ ------
Deferred tax assets, net of valuation.................. 554.1 263.7
Deferred tax liabilities:
Deferred policy acquisition costs.................... 433.0 385.2
Unrealized losses allocable to experience-rated
contracts........................................... -- 108.0
Market discount...................................... 4.4 3.6
Net unrealized capital gains......................... 288.2 --
Other................................................ (1.9) 0.4
------ ------
Total gross liabilities................................ 723.7 497.2
------ ------
Net deferred tax liability............................. $169.6 $233.5
------ ------
------ ------
</TABLE>
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
6. FEDERAL INCOME TAXES (CONTINUED)
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. At December 31, 1994, $81.0 million of net unrealized
capital losses were reflected in shareholder's equity without deferred tax
benefits. As of December 31, 1995, no valuation allowance was required for
unrealized capital gains and losses. The reversal of the valuation allowance had
no impact on net income in 1995.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that has
not been subject to taxation. As of December 31, 1983, no further additions
could be made to the Policyholders' Surplus Account for tax return purposes
under the Deficit Reduction Act of 1984. The balance in such account was
approximately $17.2 million at December 31, 1995. This amount would be taxed
only under certain conditions. No income taxes have been provided on this amount
since management believes the conditions under which such taxes would become
payable are remote.
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1986. Discussions are
being held with the Service with respect to proposed adjustments. However,
management believes there are adequate defenses against, or sufficient reserves
to provide for, such challenges. The Service has commenced its examinations for
the years 1987 through 1990.
7. BENEFIT PLANS
Employee Pension Plans--The Company, in conjunction with Aetna, has
non-contributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over sixty consecutive months of highest
earnings in a 120 month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to the amounts that are currently deductible for tax
reporting purposes. The accumulated benefit obligation and plan assets are
recorded by Aetna. The accumulated plan assets exceed accumulated plan benefits.
There has been no funding to the plan for the years 1993 through 1995, and
therefore, no expense has been recorded by the Company.
Agent Pension Plans--The Company, in conjunction with Aetna, has a non-qualified
pension plan covering certain agents. The plan provides pension benefits based
on annual commission earnings. The accumulated plan assets exceed accumulated
plan benefits. There has been no funding to the plan for the years 1993 through
1995, and therefore, no expense has been recorded by the Company.
Employee Postretirement Benefits--In addition to providing pension benefits,
Aetna also provides certain postretirement health care and life insurance
benefits, subject to certain caps, for retired employees. Medical and dental
benefits are offered to all full-time employees retiring at age 50 with at least
15 years of service or at age 65 with at least 10 years of service. Retirees are
required to contribute to the plans based on their years of service with Aetna.
The cost to the Company associated with the Aetna postretirement plans for 1995,
1994 and 1993 were $1.4 million, $1.0 million and $0.8 million, respectively.
Agent Postretirement Benefits--The Company, in conjunction with Aetna, also
provides certain postemployment health care and life insurance benefits for
certain agents.
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
7. BENEFIT PLANS (CONTINUED)
The cost to the Company associated to the agents' postretirement plans for 1995,
1994 and 1993 were $0.8 million, $0.7 million and $0.6 million, respectively.
Incentive Savings Plan--Substantially all employees are eligible to participate
in a savings plan under which designated contributions, which may be invested in
common stock of Aetna or certain other investments, are matched, up to 5% of
compensation, by Aetna. Pretax charges to operations for the incentive savings
plan were $4.9 million, $3.3 million and $3.1 million in 1995, 1994 and 1993,
respectively.
Stock Plans--Aetna has a stock incentive plan that provides for stock options
and deferred contingent common stock or cash awards to certain key employees.
Aetna also has a stock option plan under which executive and middle management
employees of Aetna may be granted options to purchase common stock of Aetna at
the market price on the date of grant or, in connection with certain business
combinations, may be granted options to purchase common stock on different
terms. The cost to the Company associated with the Aetna stock plans for 1995,
1994 and 1993, was $6.3 million, $1.7 million and $0.4 million, respectively.
8. RELATED PARTY TRANSACTIONS
The Company is compensated by the Separate Accounts for bearing mortality and
expense risks pertaining to variable life and annuity contracts. Under the
insurance contracts, the Separate Accounts pay the Company a daily fee which, on
an annual basis, ranges, depending on the product, from .25% to 1.80% of their
average daily net assets. The Company also receives fees from the variable life
and annuity mutual funds and The Aetna Series Fund for serving as investment
adviser. Under the advisory agreements, the Funds pay the Company a daily fee
which, on an annual basis, ranges, depending on the fund, from .25% to 1.00% of
their average daily net assets. The advisory agreements also call for the
variable funds to pay their own administrative expenses and for The Aetna Series
Fund to pay certain administrative expenses. The Company also receives fees
(expressed as a percentage of the average daily net assets) from The Aetna
Series Fund for providing administration, shareholder services and promoting
sales. The amount of compensation and fees received from the Separate Accounts
and Funds, included in Charges Assessed Against Policyholders, amounted to
$128.1 million, $104.6 million and $93.6 million in 1995, 1994 and 1993,
respectively. The Company may waive advisory fees at its discretion.
The Company may, from time to time, make reimbursements to a Fund for some or
all of its operating expenses. Reimbursement arrangements may be terminated at
any time without notice.
Since 1981, all domestic individual non-participating life insurance of Aetna
and its subsidiaries has been issued by the Company. Effective December 31,
1988, the Company entered into a reinsurance agreement with Aetna Life Insurance
Company ("Aetna Life") in which substantially all of the non-participating
individual life and annuity business written by Aetna Life prior to 1981 was
assumed by the Company. A $108.0 million commission, paid by the Company to
Aetna Life in 1988, was capitalized as deferred policy acquisition costs. The
Company maintained insurance reserves of $655.5 million and $690.3 million as of
December 31, 1995 and 1994, respectively, relating to the business assumed. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance reserves.
The loan is being reduced in accordance with the decrease in the reserves. The
fair value of this loan was $663.5 million and $630.3 million as of December 31,
1995 and 1994, respectively, and is based upon the fair value of the underlying
assets. Premiums of $28.0 million, $32.8 million and $33.3 million and current
and future benefits of $43.0 million, $43.8 million and $55.4 million were
assumed in 1995, 1994 and 1993, respectively.
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
8. RELATED PARTY TRANSACTIONS (CONTINUED)
Investment income of $46.5 million, $51.5 million and $53.3 million was
generated from the reinsurance loan to affiliate in 1995, 1994 and 1993,
respectively. Net income of approximately $18.4 million, $25.1 million and $13.6
million resulted from this agreement in 1995, 1994 and 1993, respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue from
Aetna Life for the purchase and administration of a life contingent single
premium variable payout annuity contract. In addition, the Company also is
responsible for administering fixed annuity payments that are made to annuitants
receiving variable payments. Reserves of $28.0 million and $24.2 million were
maintained for this contract as of December 31, 1995 and 1994, respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement with
Aetna Life to reinsure amounts in excess of this limit, up to a maximum of $8.0
million on any new individual life business, on a yearly renewable term basis.
Premium amounts related to this agreement were $3.2 million, $1.3 million and
$0.6 million for 1995, 1994 and 1993, respectively.
The Company received no capital contributions in 1995, 1994 or 1993.
The Company distributed $2.9 million in the form of dividends of two of its
subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995.
Premiums due and other receivables include $5.7 million and $27.6 million due
from affiliates in 1995 and 1994, respectively. Other liabilities include $12.4
million and $27.9 million due to affiliates for 1995 and 1994, respectively.
Substantially all of the administrative and support functions of the Company are
provided by Aetna and its affiliates. The financial statements reflect allocated
charges for these services based upon measures appropriate for the type and
nature of service provided.
9. REINSURANCE
The Company utilizes indemnity reinsurance agreements to reduce its exposure to
large losses in all aspects of its insurance business. Such reinsurance permits
recovery of a portion of losses from reinsurers, although it does not discharge
the primary liability of the Company as direct insurer of the risks reinsured.
The Company evaluates the financial strength of potential reinsurers and
continually monitors the financial condition of reinsurers. Only those
reinsurance recoverables deemed probable of recovery are reflected as assets on
the Company's Consolidated Balance Sheets.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
9. REINSURANCE (CONTINUED)
The following table includes premium amounts ceded/assumed to/from affiliated
companies as discussed in Note 8 above.
<TABLE>
<CAPTION>
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER
AMOUNT COMPANIES COMPANIES
--------- ------------- -------------
(MILLIONS)
<S> <C> <C> <C>
1995
Premiums:
Life Insurance.................................................................. $ 28.8 $ 8.6 $ 28.0
Accident and Health Insurance................................................... 7.5 7.5 --
Annuities....................................................................... 82.1 -- 0.5
--------- ----- -----
Total earned premiums........................................................... $ 118.4 $ 16.1 $ 28.5
--------- ----- -----
--------- ----- -----
1994
Premiums:
Life Insurance.................................................................. $ 27.3 $ 6.0 $ 32.8
Accident and Health Insurance................................................... 9.3 9.3 --
Annuities....................................................................... 69.9 -- 0.2
--------- ----- -----
Total earned premiums........................................................... $ 106.5 $ 15.3 $ 33.0
--------- ----- -----
--------- ----- -----
1993
Premiums:
Life Insurance.................................................................. $ 22.4 $ 5.6 $ 33.3
Accident and Health Insurance................................................... 12.9 12.9 --
Annuities....................................................................... 31.3 -- 0.7
--------- ----- -----
Total earned premiums........................................................... $ 66.6 $ 18.5 $ 34.0
--------- ----- -----
--------- ----- -----
<CAPTION>
NET
AMOUNT
---------
<S> <C>
1995
Premiums:
Life Insurance.................................................................. $ 48.2
Accident and Health Insurance................................................... --
Annuities....................................................................... 82.6
---------
Total earned premiums........................................................... $ 130.8
---------
---------
1994
Premiums:
Life Insurance.................................................................. $ 54.1
Accident and Health Insurance................................................... --
Annuities....................................................................... 70.1
---------
Total earned premiums........................................................... $ 124.2
---------
---------
1993
Premiums:
Life Insurance.................................................................. $ 50.1
Accident and Health Insurance................................................... --
Annuities....................................................................... 32.0
---------
Total earned premiums........................................................... $ 82.1
---------
---------
</TABLE>
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
10. FINANCIAL INSTRUMENTS
ESTIMATED FAIR VALUE
The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................................. $ 568.8 $ 568.8 $ 623.3 $ 623.3
Short-term investments.................................... 15.1 15.1 98.0 98.0
Debt securities........................................... 12,720.8 12,720.8 10,191.4 10,191.4
Equity securities......................................... 257.6 257.6 229.1 229.1
Limited partnership....................................... -- -- 24.4 24.4
Mortgage loans............................................ 21.2 21.9 9.9 9.9
Liabilities:
Investment contract liabilities:
With a fixed maturity................................... 989.1 1,001.2 826.7 833.5
Without a fixed maturity................................ 9,511.0 9,298.4 8,122.6 7,918.2
</TABLE>
Fair value estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument, such as
estimates of timing and amount of expected future cash flows. Such estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Company's entire holdings of a particular financial instrument, nor
do they consider the tax impact of the realization of unrealized gains or
losses. In many cases, the fair value estimates cannot be substantiated by
comparison to independent markets, nor can the disclosed value be realized in
immediate settlement of the instrument. In evaluating the Company's management
of interest rate and liquidity risk, the fair values of all assets and
liabilities should be taken into consideration, not only those above.
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
SHORT-TERM INSTRUMENTS: Fair values are based on quoted market prices or dealer
quotations. Where quoted market prices are not available, the carrying amounts
reported in the Consolidated Balance Sheets approximates fair value. Short-term
instruments have a maturity date of one year or less and include cash and cash
equivalents, and short-term investments.
DEBT AND EQUITY SECURITIES: Fair values are based on quoted market prices or
dealer quotations. Where quoted market prices or dealer quotations are not
available, fair value is estimated by using quoted market prices for similar
securities or discounted cash flow methods.
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
10. FINANCIAL INSTRUMENTS (CONTINUED)
MORTGAGE LOANS: Fair value is estimated by discounting expected mortgage loan
cash flows at market rates which reflect the rates at which similar loans would
be made to similar borrowers. The rates reflect management's assessment of the
credit quality and the remaining duration of the loans. The fair value estimate
of mortgage loans of lower quality, including problem and restructured loans, is
based on the estimated fair value of the underlying collateral.
INVESTMENT CONTRACT LIABILITIES (INCLUDED IN POLICYHOLDERS' FUNDS LEFT WITH THE
COMPANY):
WITH A FIXED MATURITY: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
WITHOUT A FIXED MATURITY: Fair value is estimated as the amount payable to the
contractholder upon demand. However, the Company has the right under such
contracts to delay payment of withdrawals which may ultimately result in paying
an amount different than that determined to be payable on demand.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (INCLUDING DERIVATIVE FINANCIAL
INSTRUMENTS)
During 1995, the Company received $0.4 million for writing call options on
underlying securities. As of December 31, 1995 there were no option contracts
outstanding.
At December 31, 1995, the Company had a forward swap agreement with a notional
amount of $100.0 million and a fair value of $0.1 million.
The Company did not have transactions in derivative instruments in 1994.
The Company also holds investments in certain debt and equity securities with
derivative characteristics (i.e., including the fact that their market value is
at least partially determined by, among other things, levels of or changes in
interest rates, prepayment rates, equity markets or credit ratings/spreads). The
amortized cost and fair value of these securities, included in the $13.4 billion
investment portfolio, as of December 31, 1995 was as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
(MILLIONS) COST VALUE
----------- -----------
<S> <C> <C>
Collateralized mortgage obligations..................................................................... $ 2,383.9 $ 2,549.3
Principal-only strips (included above).................................................................. 38.7 50.0
Interest-only strips (included above)................................................................... 10.7 20.7
Structured Notes (1).................................................................................... 95.0 100.3
</TABLE>
(1) Represents non-leveraged instruments whose fair values and credit risk are
based on underlying securities, including fixed income securities and
interest rate swap agreements.
11. COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a specified
future date and at a specified price or yield. The inability of counterparties
to honor these commitments may result in either higher or lower replacement
cost. Also, there is likely to be a change in
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
the value of the securities underlying the commitments. At December 31, 1995,
the Company had commitments to purchase investments of $31.4 million. The fair
value of the investments at December 31, 1995 approximated $31.5 million. There
were no outstanding forward commitments at December 31, 1994.
LITIGATION
There were no material legal proceedings pending against the Company as of
December 31, 1995 or December 31, 1994 which were beyond the ordinary course of
business. The Company is involved in lawsuits arising, for the most part, in the
ordinary course of its business operations as an insurer.
12. SEGMENT INFORMATION
The Company's operations are reported through two major business segments: Life
Insurance and Financial Services.
Summarized financial information for the Company's principal operations was as
follows:
<TABLE>
<CAPTION>
(MILLIONS) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Financial services..................................................................... $ 1,129.4 $ 946.1 $ 892.8
Life insurance......................................................................... 407.9 386.1 371.7
----------- ----------- -----------
Total revenue.......................................................................... $ 1,537.3 $ 1,332.2 $ 1,264.5
----------- ----------- -----------
Income before federal income taxes:
Financial services..................................................................... $ 158.0 $ 119.7 $ 121.1
Life insurance......................................................................... 102.0 96.8 98.0
----------- ----------- -----------
Total income before federal income taxes............................................... $ 260.0 $ 216.5 $ 219.1
----------- ----------- -----------
Net income:
Financial services..................................................................... $ 113.8 $ 85.5 $ 86.8
Life insurance......................................................................... 62.1 59.8 56.1
----------- ----------- -----------
Net income............................................................................... $ 175.9 $ 145.3 $ 142.9
----------- ----------- -----------
Assets under management, at fair value:
Financial services..................................................................... $ 23,224.3 $ 17,785.2 $ 16,600.5
Life insurance......................................................................... 2,698.1 2,171.7 2,175.5
----------- ----------- -----------
Total assets under management.......................................................... $ 25,922.4 $ 19,956.9 $ 18,776.0
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-26
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT C
VARIABLE ANNUITY CONTRACTS
ISSUED BY
AETNA LIFE INSURANCE AND ANNUITY COMPANY
FORM NO. 81216(S)-2 ALIAC ED. MAY 1996
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of December 31, 1995
- Statement of Operations for the year ended December 31, 1995
- Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
- Notes to Financial Statements
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended December
31, 1995, 1994 and 1993
- Consolidated Balance Sheets as of December 31, 1995 and 1994
- Consolidated Statements of Changes in Shareholder's Equity for
the years ended December 31, 1995, 1994 and 1993
- Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance and
Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3.1) Form of Broker-Dealer Agreement(1)
(3.2) Alternative Form of Wholesaling Agreement and related Selling
Agreement(1)
(4.1) Form of Variable Annuity Contract (G-401-IB(X/M))
(4.2) Form of Variable Annuity Contract (G-CDA-IB(XC/SM))
(5) Form of Variable Annuity Contract Application (300-MOP-IB)(2)
(6) Certificate of Incorporation and By-Laws of Depositor(3)
(7) Not applicable
(8.1) Fund Participation Agreement (Amended and Restated) between Aetna
Life Insurance and Annuity Company, Alger American Fund and Fred
Alger Management, Inc. dated March 31, 1995(1)
(8.2) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company (Calvert
Responsibly Invested
<PAGE>
Balanced Portfolio formerly Calvert Socially Responsible Series)
dated March 13, 1989 and amended December 12, 1993(1)
(8.3) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation (Variable
Insurance Products Fund) dated February 1, 1994 and amended
March 1, 1996(1)
(8.4) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Fidelity Distributors Corporation (Variable
Insurance Products Fund II) dated February 1, 1994 and amended
March 1, 1996(1)
(8.5) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989(1)
(8.6) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994 and
amended March 1, 1996(1)
(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(1)
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Lexington Emerging Markets Fund, Inc. and
Lexington Management Corporation dated April 28, 1994(4)
(8.9) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Advisers Management Trust (now Neuberger &
Berman Advisers Management Trust) dated April 14, 1989 and as
assigned and modified on May 1, 1995(1)
(8.10) 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(1)
(8.11) 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(1)
(9) Opinion of Counsel(5)
(10.1) Consent of Independent Auditors
(10.2) Consent of Counsel
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data(6)
(14) Not applicable
(15.1) Powers of Attorney(7)
(15.2) Authorization for Signatures(1)
(27) Financial Data Schedule
1. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996.
<PAGE>
2. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on May 1,
1995.
3. Incorporated by reference to Post-Effective Amendment No. 58 to Registration
Statement on Form N-4 (File No. 2-52449), as filed on February 28, 1994.
4. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75978), as filed electronically on August
24, 1994.
5. Incorporated by reference to Registrant's 24f-2 Notice for fiscal year ended
December 31, 1995, as filed electronically on February 29, 1996.
6. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-81216), as filed on April 28, 1995.
7. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75974), as filed electronically on April
9, 1996.
<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, Senior Vice President and Chief
Financial Officer
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 Vice President
Glen Salow Director Vice President
Creed R. Terry Director Vice President
Eugene M. Trovato Vice President and Treasurer, Corporate
Controller
Zoe Baird Senior Vice President and General Counsel
Diane Horn Vice President and Chief Compliance
Officer
Susan E. Schechter Corporate Secretary and Counsel
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Incorporated herein by reference to Item 26 of Post-Effective Amendment No.
5 to Registration Statement on Form N-4 (File No. 33-75986), as filed
electronically on April 12, 1996.
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of February 29, 1996, there were 527,607 individuals holding interests
in variable annuity contracts funded through Variable Annuity Account C.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Section 33-320a of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and officers of
Connecticut corporations. The statute provides in general that Connecticut
corporations shall indemnify their officers, directors, employees, agents, and
certain other defined individuals against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses actually incurred in connection with
proceedings against the corporation. The corporation's obligation to provide
such indemnification does not apply unless (1) the individual is successful on
the merits in the defense of any such proceeding; or (2) a determination is made
(by a majority of the board of directors not a party to the proceeding by
written consent; by independent legal counsel selected by a majority of the
directors not involved in the proceeding; or by a majority of the shareholders
not involved in the proceeding) that the individual acted in good faith and in
the best interests of the corporation; or (3) the court, upon application by the
individual, determines in view of all the circumstances that such person is
reasonably entitled to be indemnified.
C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut
corporation cannot indemnify a director or officer to an extent either greater
or less than that authorized by the statute, e.g., pursuant to its certificate
of incorporation, bylaws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Consistent with the statute, Aetna Life and Casualty Company has procured
insurance from Lloyd's of London and several major United States excess insurers
for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor, which supplements the indemnification
rights provided by C.G.S. Section 33-320a to the extent such coverage does not
violate public policy.
ITEM 29. PRINCIPAL UNDERWRITER
(a) In addition to serving as the principal underwriter for the
Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also acts
as the principal underwriter for Variable Life Account B and Variable
Annuity Accounts B and G (separate accounts of ALIAC registered as
unit investment trusts), and Variable Annuity Account I (a separate
account of Aetna Insurance Company of America registered as a unit
investment trust). Additionally, ALIAC is the investment adviser for
Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund,
Aetna Investment Advisers Fund, Inc., Aetna GET Fund, Aetna Series
Fund, Inc. and Aetna Generation Portfolios, Inc. ALIAC is also the
depositor of Variable Life Account B and Variable Annuity Accounts B
and G.
<PAGE>
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1995:
<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 $1,830,629 $74,341,006
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
Variable Annuity Account C.
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
and
Aetna Processing Office
18 Corporate Woods Blvd., Fourth Floor
P. O. Box 12894
Albany, New York 12212-2894
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
<PAGE>
(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) 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, certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment
No. 3 to its Registration Statement on Form N-4 (File No. 33-81216) and has duly
caused this Post-Effective Amendment No. 3 to its Registration Statement on Form
N-4 (File No. 33-81216) to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Hartford, State of Connecticut, on the 17th day
of April, 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. 3 to the Registration Statement on Form N-4 (File No. 33-81216)
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, Senior Vice President and Chief Financial )
- --------------------------- Officer )
Timothy A. Holt )
)
Eugene M. Trovato* Vice President and Treasurer, Corporate Controller ) April
- --------------------------- ) 17, 1996
Eugene M. Trovato )
)
Christopher J. Burns* Director )
- --------------------------- )
Christopher J. Burns )
<PAGE>
Laura R. Estes* Director )
- --------------------------- )
Laura R. Estes )
)
Gail P. Johnson* Director )
- --------------------------- )
Gail P. Johnson )
)
John Y. Kim* Director )
- --------------------------- )
John Y. Kim )
)
Shaun P. Mathews* Director )
- --------------------------- )
Shaun P. Mathews )
)
Glen Salow* Director )
- --------------------------- )
Glen Salow )
)
Creed R. Terry* Director )
- --------------------------- )
Creed R. Terry )
By: /s/ Julie E. Rockmore
-------------------------------------------
Julie E. Rockmore
*Attorney-in-Fact
</TABLE>
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
Exhibit No. Exhibit Page
----------- ------- ----
99-B.1 Resolution of the Board of Directors of *
Aetna Life Insurance and Annuity Company
establishing Variable Annuity Account C
99-B.3.1 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-401-IB(X/M)) ----
99-B.4.2 Form of Variable Annuity Contract (G-CDA-IB(XC/SM)) ----
99-B.5 Form of Variable Annuity Contract *
Application (300-MOP-IB)
99-B.6 Certificate of Incorporation and By-Laws of *
Depositor
99-B.8.1 Fund Participation Agreement (Amended and *
Restated) between Aetna Life Insurance and
Annuity Company, Alger American Fund and
Fred Alger Management, Inc. dated March 31,
1995
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 12, 1993
99-B.8.3 Fund Participation Agreement between Aetna *
Life Insurance and Annuity Company and
Fidelity Distributors Corporation (Variable
Insurance Products Fund) dated February 1,
1994 and amended March 1, 1996
99-B.8.4 Fund Participation Agreement between Aetna *
Life Insurance and Annuity Company and
Fidelity Distributors Corporation (Variable
Insurance Products Fund II) dated February
1, 1994 and amended March 1, 1996
99-B.8.5 Fund Participation Agreement between Aetna *
Life Insurance and Annuity Company and
Franklin Advisers, Inc. dated January 31,
1989
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
----------- ------- ----
99-B.8.6 Fund Participation Agreement between Aetna *
Life Insurance and Annuity Company and
Janus Aspen Series dated April 19, 1994 and
amended March 1, 1996
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,
Lexington Emerging Markets Fund, Inc. and
Lexington Management Corporation dated
April 28, 1994
99-B.8.9 Fund Participation Agreement between Aetna *
Life Insurance and Annuity Company and
Advisers Management Trust (now Neuberger &
Berman Advisers Management Trust) dated
April 14, 1989 and as assigned and modified
on May 1, 1995.
99-B.8.10 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.8.11 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 (included in item 99-B.9) ----
99-B.13 Computation of Performance Data *
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
----------- ------- ----
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule ----
*Incorporated by reference
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
[LOGO] HOME OFFICE: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Aetna Life Insurance and Annuity Company, herein called
Aetna, agrees to pay the benefits stated in this Contract.
SPECIFICATIONS
- -------------------------------------------------------------------------------
Plan
- -------------------------------------------------------------------------------
Type of Plan
- -------------------------------------------------------------------------------
Contract Holder
- -------------------------------------------------------------------------------
Contract No.
- -------------------------------------------------------------------------------
Effective Date
- -------------------------------------------------------------------------------
This Contract is Delivered in and is Subject to the Laws of that
Jurisdiction
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND IV.
RIGHT TO CANCEL
- -------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within 10 days of receiving it
by returning this Contract along with a written notice to Aetna at the above
address or to the agent from whom it was purchased. Within 7 days after it
receives the notice of cancellation and this Contract at its Home Office,
Aetna will return the entire consideration paid plus any increase or minus
any decrease in the current value of any funds allocated to the Separate
Account as of the date this Contract is received by the agent or the date
this Contract is mailed to Aetna.
This page, the following pages, and the application make up the entire
Contract.
Signed at the Home Office on the Effective Date.
/s/ Dan Kearney /s/ Lucille M. Nickerson
President Secretary
Group Variable, Fixed, or Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE
ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN
EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE
ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS
MATURITY.
G-401-IB(X/M)
<PAGE>
SPECIFICATIONS
- -------------------------------------------------------------------------------
GUARANTEED There is a guaranteed interest rate for Purchase Payment(s)
INTEREST RATE held in the Fixed Account (See 1.14) and the GA Account
(See 1.15).
- -------------------------------------------------------------------------------
DEDUCTIONS FROM There will be deductions for mortality and expense risks and
THE SEPARATE administrative fees. (See 3.04 and 4.07.)
ACCOUNT
- -------------------------------------------------------------------------------
DEDUCTION FROM Purchase Payment(s) are subject to a deduction for premium
PURCHASE taxes, if any. (See 3.01.)
PAYMENT(S)
If Variable Annuity payments are not to decrease, Aetna must earn a gross return
on the assets of the Separate Account of:
- -- 4.75% on an annual basis plus an annual return of up to 0.25% to offset
the administrative charge set at the time Annuity payments commence if an
Assumed Annual Net Return Rate of 3.5% is chosen; or
- -- 6.25% on an annual basis plus an annual return of up to 0.25% to offset
the administrative charge set at the time Annuity payments commence if an
Assumed Annual Net Return Rate of 5% is chosen.
This Contract is a legal contract and constitutes the entire legal
relationship between Aetna and the Contract Holder.
READ THIS CONTRACT CAREFULLY. This Contract sets forth, in detail, all of
the rights and obligations of both you and Aetna. IT IS THEREFORE IMPORTANT
THAT YOU READ THIS CONTRACT CAREFULLY.
2
<PAGE>
TABLE OF CONTENTS
I. GENERAL DEFINITIONS
- -------------------------------------------------------------------------------
PAGE
1.01 Adjusted Current Value. . . . . . . . . . . . . . . . . . . . . . . . .6
1.02 Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.03 Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.04 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.05 Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.06 Contract Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.07 Current Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.08 Deposit Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.09 Fixed Plus Account. . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.10 Fixed Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.11 Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
1.12 General Account . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.13 Guaranteed Accumulation Account (GA Account). . . . . . . . . . . . . .7
1.14 Guaranteed Interest Rate - Fixed Plus Account . . . . . . . . . . . . .7
1.15 Guaranteed Rates - GA Account . . . . . . . . . . . . . . . . . . . . .7
1.16 Guaranteed Term (Term). . . . . . . . . . . . . . . . . . . . . . . . .8
1.17 Guaranteed Term Classifications . . . . . . . . . . . . . . . . . . . .8
1.18 Market Value Adjustment (MVA) . . . . . . . . . . . . . . . . . . . . .8
1.19 Matured Term Value. . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.20 Matured Term Value Transfer . . . . . . . . . . . . . . . . . . . . . .8
1.21 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.22 Net Purchase Payment. . . . . . . . . . . . . . . . . . . . . . . . . .8
1.23 Nonunitized Separate Account. . . . . . . . . . . . . . . . . . . . . .8
1.24 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.25 Plan Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.26 Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.27 Purchase Payment(s) . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.28 Reinvestment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.29 Separate Account. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.30 Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
1.31 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3
<PAGE>
PAGE
1.32 Valuation Period (Period) . . . . . . . . . . . . . . . . . . . . . . 10
1.33 Variable Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
II. GENERAL PROVISIONS
- -------------------------------------------------------------------------------
2.01 Change of Contract. . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.02 Change of Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.03 Nonparticipating Contract . . . . . . . . . . . . . . . . . . . . . . 11
2.04 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.05 State Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.06 Control of Contract . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.07 Designation of Beneficiary. . . . . . . . . . . . . . . . . . . . . . 12
2.08 Misstatements and Adjustments . . . . . . . . . . . . . . . . . . . . 12
2.09 Incontestability. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Grace Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.11 Individual Certificates . . . . . . . . . . . . . . . . . . . . . . . 12
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- -------------------------------------------------------------------------------
3.01 Net Purchase Payment(s) . . . . . . . . . . . . . . . . . . . . . . . 12
3.02 Individual Account(s) . . . . . . . . . . . . . . . . . . . . . . . . 13
3.03 Fund Record Units - Separate Account. . . . . . . . . . . . . . . . . 13
3.04 Net Return Factor(s) - Separate Account . . . . . . . . . . . . . . . 13
3.05 Fund Record Unit Value - Separate Account . . . . . . . . . . . . . . 14
3.06 Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . 14
3.07 Transfer of Current Value from the Funds or GA Account. . . . . . . . 16
3.08 Transfer of Current Value from the Fixed Plus Account . . . . . . . . 16
3.09 Notice to the Participant . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Timing and Manner of Distributions. . . . . . . . . . . . . . . . . . 17
3.11 Sum Payable at Death (Before Annuity Payments Start). . . . . . . . . 17
3.12 Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.13 Payment of Surrender Value. . . . . . . . . . . . . . . . . . . . . . 18
3.14 Alternative Payment of Surrender Value. . . . . . . . . . . . . . . . 19
3.15 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4
<PAGE>
PAGE
IV. ANNUITY PROVISIONS
- -------------------------------------------------------------------------------
4.01 Choices to be Made. . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.02 Terms of Annuity Options. . . . . . . . . . . . . . . . . . . . . . . 20
4.03 Annuity Payments to Participant . . . . . . . . . . . . . . . . . . . 21
4.04 Death of Annuitant. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.05 Fund(s) Annuity Units - Separate Account. . . . . . . . . . . . . . . 21
4.06 Fund(s) Annuity Unit Value - Separate Account . . . . . . . . . . . . 22
4.07 Annuity Net Return Factor(s) - Separate Account . . . . . . . . . . . 22
4.08 Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5
<PAGE>
I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
1.01 ADJUSTED CURRENT VALUE: The Current Value of an Individual Account plus
or minus any aggregate GA Account MVA, if
applicable. (See 1.18)
1.02 ANNUITANT: A person whose life is measured for purposes of
the duration of Annuity payments under this
Contract.
1.03 ANNUITY: Payment of an income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.04 CERTIFICATE: The document evidencing a Participant's right
to payment(s) under this Contract. The
Certificate shall be issued to and become the
property of the Participant. The State
University of New York (SUNY)shall not be a
party to the Certificate.
1.05 CONTRACT: This agreement between Aetna and the Contract
Holder.
1.06 CONTRACT HOLDER: The trustee of a multiple employer trust
approved by Aetna to apply for and own the
Contract as authorized by SUNY. The entity to
which the Contract is issued.
1.07 CURRENT VALUE: The sum of all Net Purchase Payments to a
Participant's Individual Accounts, plus any
interest added to the portion allocated to the
Fixed Plus Account; plus any interest added to
the portion allocated to the GA Account; and
plus or minus the investment experience of the
portion allocated to the Funds since deposit;
less any amounts surrendered and any amounts
applied to an Annuity as of the most recent
Valuation Period.
1.08 DEPOSIT PERIOD: A calendar month, a calendar quarter, or any
other period of time specified by Aetna during
which Net Purchase Payment(s) and Transfers are
accepted into the GA Account for one or more
Guaranteed Terms.
1.09 FIXED PLUS ACCOUNT: An accumulation option with a guaranteed
minimum interest rate. Aetna may credit a
higher rate which is not guaranteed. The
portion that may be surrendered or transferred
in a 12 month period is restricted.
1.10 FIXED ANNUITY: An Annuity with payments which do not vary in
amount.
1.11 FUND(S): The open-end registered management investment
companies (mutual funds) made available by
Aetna under this Contract. These Funds
currently are:
- Aetna Variable Fund - a growth and income
fund;
- Aetna Income Shares - a bond fund;
- Aetna Variable Encore Fund - a money market
fund;
- Aetna Investment Advisers Fund, Inc. - a
managed fund;
6
<PAGE>
1.11 FUND(S) (CONT'D): - Franklin Government Securities Trust - a
government bond fund;
- Neuberger & Berman Advisers Management Trust
(Growth Portfolio) - a growth fund;
- Lexington Natural Resources Trust - a
natural resources fund;
- Calvert Socially Responsible Series - a
socially responsible fund;
- Scudder Variable Life Investment Fund
(International Portfolio) - an
international fund;
- TCI Portfolios, Inc., (TCI Growth) - a
growth fund.
- The Alger American Fund, (Alger American
Small Capitalization Portfolio) - a small
cap fund.
Additional information regarding these Funds is
available in each Fund prospectus.
1.12 GENERAL ACCOUNT: The Account holding the assets of Aetna, other
than those assets held in Aetna's Separate
Account(s) and the Nonunitized Separate
Account(s).
1.13 GUARANTEED ACCUMULATION An accumulation option where Aetna guarantees a
ACCOUNT (GA ACCOUNT): stipulated rate of interest for a specified
period of time. All assets of Aetna, including
amounts in the Nonunitized Separate Account,
are available to meet the guarantees under the
GA Account.
1.14 GUARANTEED INTEREST RATE - On any Purchase Payment(s) made to the Fixed
FIXED PLUS ACCOUNT: Plus Account. Aetna will add interest daily at
an annual rate no less than 3%. Aetna may add
interest daily at a higher rate as determined
by its Board of Directors. Beginning on the
tenth anniversary of the effective date of an
Individual Account, on and after February 1,
1994, Aetna will credit amounts held in the
Fixed Plus Account with an interest rate that
is .25% higher than the then-declared interest
rate for the Fixed Plus Account for Individual
Accounts before the tenth anniversary. This
additional interest rate reflects a reduction
in the interest rate holdback margin for profit
and expenses.
1.15 GUARANTEED RATES - GA Aetna will declare all interest rate(s)
ACCOUNT: applicable to a specific Term at the start of
the Deposit Period for that Term. These rate(s)
are guaranteed by Aetna for that Deposit Period
and the ensuing Term and are not based on the
actual investment experience of the underlying
assets in the GA Account. The Guaranteed Rates
are annual effective yields. The interest is
credited daily at a rate that will produce the
guaranteed annual effective yield over the
period of a year. No annual rate will ever be
less than 3%.
For Guaranteed Terms of one year or less, one
Guaranteed Rate is credited for the full
Guaranteed Term. For longer Guaranteed Terms,
an initial Guaranteed Rate is credited from the
date of deposit to the end of a specified
period within the Guaranteed
7
<PAGE>
1.15 GUARANTEED RATES - GA Term. There may be different Guaranteed Rate(s)
ACCOUNT (CONT'D): declared for subsequent specified time
intervals throughout the Guaranteed Term. The
rate(s) will be set and announced prior to the
Deposit Period for that Term.
1.16 GUARANTEED TERM (TERM): The period of time for which interest rates are
guaranteed on Net Purchase Payment(s) and on
Transfers made into a Deposit Period of the
GA Account. Terms are offered at Aetna's
discretion for various lengths of time ranging
up to and including ten years.
1.17 GUARANTEED TERM The grouping of Terms according to their time
CLASSIFICATIONS: to maturity. The following are the
Classifications:
(1) Short-Term: Terms of up to and including
3 years. All amounts under Short-Term
Classifications are made to the General
Account; or
(2) Long-Term: Terms of greater than 3 years
and up to and including 10 years. All
amounts under Long-Term Classifications
are made to a Nonunitized Separate
Account.
During a Deposit Period, Aetna may make
available one or more Terms within a
Classification. The Participant has the option
to allocate Net Purchase Payment(s) and
Transfers into any or all of the available
Deposit Period Terms. If no specific direction
is given, Net Purchase Payment(s) and Transfers
will go into available Terms on a pro rata
basis within the Classification(s) previously
chosen by the Participant. At least one Term in
the Short-Term Classification will be available
each Deposit Period.
1.18 MARKET VALUE ADJUSTMENT An adjustment to the amount withdrawn or
(MVA): transferred from a GA Account Term prior to the
end of that Term. The adjustment reflects the
change in the value of the investment due to
changes in interest rates since the date of
deposit and is computed using the formula given
in 3.06. The adjustment is expressed as a
percentage of each dollar being withdrawn.
1.19 MATURED TERM VALUE: The amount payable on a GA Account Term's
Maturity Date.
1.20 MATURED TERM VALUE During the calendar month following a GA
TRANSFER: Account Maturity Date, the Participant may
notify the Aetna Processing Office in writing
to transfer or surrender all or part of the
Matured Term Value, plus interest at the new
Guaranteed Rate accrued thereon, from the GA
Account without an MVA. This provision only
applies to the first such written request
received from the Participant during this
period for any Matured Term Value.
1.21 MATURITY DATE: The last day of a GA Account Term.
1.22 NET PURCHASE PAYMENT: The Purchase Payment less premium taxes, as
applicable.
1.23 NONUNITIZED SEPARATE An Account set up by Aetna under Title 38,
ACCOUNT: Section 38a-433 of the Connecticut General
Statutes that holds assets for GA Account Terms
greater than three years. There are no discrete
units for this Account. The Participant does
not participate in the investment gain or loss
from the assets held in
8
<PAGE>
1.23 NONUNITIZED SEPARATE the Nonunitized Separate Account. Such gain or
ACCOUNT (CONT'D): loss is borne entirely by Aetna. These assets
may be chargeable with liabilities arising out
of any other business of Aetna.
1.24 PARTICIPANT: A person who participates in the Plan named on
the cover of this Contract.
1.25 PLAN ADMINISTRATOR: The individual or entity designated under the
terms of the SUNY Defined Contribution
Retirement Plan.
1.26 PROGRAM: The 403(b) optional retirement program which
was the predecessor program to the SUNY Defined
Contribution Plan.
1.27 PURCHASE PAYMENT(S): Payment(s) received by Aetna at the Aetna
Processing Office as a rollover or transfer of
403(b) funds from another investment provider
under the SUNY optional retirement program.
1.28 REINVESTMENT: The Participant will be mailed a notice at
least 18 calendar days before a Term's
Maturity Date. This notice will contain the
current Deposit Period's Guaranteed Rate(s),
Term(s) and projected Matured Term Value. If no
specific direction is given by the Participant
prior to the Maturity Date, each Matured Term
Value will be reinvested in a Term of the same
duration. If a Term of the same duration is
unavailable, each Matured Term Value will
automatically be reinvested in the current
Deposit Period for the next shortest Term
available in the same Classification. If,
however, only one Term is available within the
Classification, then the Matured Term Value
will automatically be reinvested in that Term.
A confirmation statement will be mailed to the
Participant the next business day after the
Maturity Date. This notice will state the Term
and Guaranteed Rate(s) which will apply to the
reinvested Matured Term Value.
1.29 SEPARATE ACCOUNT: Variable Annuity Account C is a Separate
Account set up by Aetna Under the Connecticut
Insurance Laws and subject to the Laws of
New York. It is an account that buys and holds
shares of the Fund(s). Income, gains or losses,
realized or unrealized are credited or charged
to the Separate Account without regard to other
income, gains or losses of Aetna. Aetna owns
the assets held in the Separate Account and is
not a trustee as to such amounts. This Separate
Account generally is not guaranteed and is held
at market value. The assets of the Separate
Account, to the extent of reserves and other
contract liabilities of the Account, shall not
be charged with other Aetna liabilities.
1.30 SURRENDER VALUE: The amount payable by Aetna upon the surrender
of any portion of an Individual Account.
1.31 TRANSFERS: The movement of invested amounts among the
available Fund(s); the Fixed Plus Account and
the GA Account under this Contract during the
accumulation period.
9
<PAGE>
1.32 VALUATION PERIOD (PERIOD): The period as of 4:15 p.m. Eastern time on each
day the New York Stock Exchange is open for
business to 4:15 p.m. Eastern time of the next
such business day, or such other day that one
or more of the Fund(s) determines its net asset
value.
1.33 VARIABLE ANNUITY: An Annuity with payments that vary with the net
investment results of a Separate Account.
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.01 CHANGE OF CONTRACT: Except as provided below, only an authorized
officer of Aetna may change the terms of the
Contract by notifying the Contract Holder, in
writing, at least 30 days before the effective
date of the change. Any change will not affect
the amount or terms of any Annuity which begins
before the change.
Aetna may make a change that affects the GA
Account Market Value Adjustment (3.06) with at
least 30 days' advance written notice to the
Contract Holder. Any such change shall become
effective for any present or future
Participant.
Any change that affects the following
provisions of this Contract will not apply to
Individual Accounts in existence before the
effective date of the change:
(a) Net Purchase Payment(s) (1.22)
(b) GA Account Guaranteed Rate (1.15)
(c) Fixed Plus Account Guaranteed Rate (1.14)
(d) Net Return Factor(s) -- Separate
Account (3.04)
(e) Current Value (1.07)
(f) Surrender Value (1.30)
(g) Fund(s) Annuity Unit Value -- Separate
Account (4.06)
(h) Annuity Options (4.08)
(i) Fixed Annuity Interest Rates (4.01)
(j) Maximum Transfer Fee (3.07)
Any change that affects the Annuity options and
the tables for the options can be made:
(1) No earlier than 12 months after the
effective date of this Contract; and
(2) No earlier than 12 months after the
effective date of any such prior change.
New Participants covered under this Contract on
or after the effective date of any change will
be subject to the change. If the Contract
Holder does not agree to any change under this
provision, no new Participants will be covered
under this Contract. Aetna will continue to
accept Purchase Payments for the Participants
covered under this Contract before the change.
This Contract may also be changed as required
by federal or state law.
10
<PAGE>
2.02 CHANGE OF FUND(S): Aetna, or the Separate Account may:
(a) Change the Fund(s) which may be invested
in by the Separate Account; and
(b) Replace the shares of any Fund(s) held in
the Separate Account with shares of any
other Fund(s).
Changes must be:
(a) Approved by a majority vote in the
Separate Account with respect to the
Fund(s) whose shares are to be replaced;
(b) Deemed necessary by Aetna under the
Investment Company Act of 1940; or
(c) Deemed necessary by Aetna to accomplish
the purpose of the Separate Account.
Aetna will notify the Contract Holder of any
change.
2.03 NONPARTICIPATING CONTRACT: Participants or their beneficiaries will not
have a right to share in the earnings of Aetna.
2.04 PAYMENTS: Aetna will make Annuity payments as and when
due. Aetna will determine other payments and/or
elections as of the end of the Valuation Period
in which the request is received at the Aetna
Processing Office. Such payments will be made
within 7 calendar days of receipt at the Aetna
Processing Office of a written claim for
payment which is in good order, except as
provided in 3.13.
2.05 STATE LAWS: This Contract complies with the laws of the
State of New York. Any Surrender Value, death
benefit or Annuity payments are equal to or
greater than the minimum required by such laws.
Annuity tables for legal reserve valuation
shall be as required by state law. Such tables
may be different from Annuity tables used to
determine Annuity payments.
2.06 CONTROL OF CONTRACT: This Contract is designed to accept rollovers
or transfers of 403(b) funds contributed to a
governmental plan which provided for retirement
income that is not subject to Title I of the
Employee Retirement Income Security Act of 1974
(ERISA), as amended by subsequent law including
REA. The 403(b) funds must be rolled over or
transferred from another investment provider
under the SUNY optional retirement program.
Participants may select the investment
option(s) for the Employer Account and/or the
Employee Account. Choices made under this
Contract must be in writing or in a form
satisfactory to Aetna. Until receipt of such
choices in the Aetna Processing Office, Aetna
may rely on any previous choices made. The
Participant may direct Aetna to make an
in-service transfer to another investment
provider under the SUNY optional retirement
program, pursuant to IRS Revenue Ruling 90-24.
Checks for in-service transfers will be made
payable only to the acquiring investment
provider.
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<PAGE>
2.06 CONTROL OF CONTRACT (a) Nontransferable and Nonassignable: This
(CONT'D): Contract and any Individual Accounts are
nontransferable and nonassignable, except
pursuant to a "qualified domestic
relations order" as set forth under the
Internal Revenue Code of 1986, as it may
be amended from time to time.
(b) Distributions: A Participant may apply for
a distribution from his or her Employee
and/or Employer Account. However, the
Plan Administrator must certify in writing
that the distribution is in accordance
with the terms of the Program.
(c) Participant Rights/Employee Account: The
Participant has a nonforfeitable right to
the value of his or her Employee Account
pursuant to the terms of the Program as
interpreted by the Plan Administrator.
(d) Participant Rights/Employer Account: The
Participant has a nonforfeitable right to
the value of his or her Employer Account
pursuant to the terms of, and to the
extent of his or her vested percentage
under the Program, as interpreted by the
Plan Administrator.
2.07 DESIGNATION OF Each Participant shall name the beneficiary of
BENEFICIARY: his or her Employer and Employee Account. Upon
the Participant's death, Aetna will pay any
portion of the Individual Account Current Value
to the beneficiary in any form permitted under
the Contract and as elected by the beneficiary.
2.08 MISSTATEMENTS AND If Aetna finds the age of any payee to be
ADJUSTMENTS: misstated, the correct facts will be used to
adjust payments.
2.09 INCONTESTABILITY: Aetna cannot cancel this Contract because of
any error of fact on the application.
2.10 GRACE PERIOD: This Contract will remain in effect even if
Purchase Payments are not continued.
2.11 INDIVIDUAL CERTIFICATES: Aetna shall issue Certificates to the
Participants as required under the New York
Insurance Laws. The Certificate will summarize
certain provisions of the Contract.
Certificates are for information only and are
not a part of the Contract.
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- --------------------------------------------------------------------------------
3.01 NET PURCHASE PAYMENT(S): This amount is the actual Purchase Payment less
any premium tax. As a rule, Aetna will deduct
the premium tax when Annuity benefits are
purchased (see Part IV). If Aetna determines
that a premium tax is due when Purchase
Payments are received or at any other time, it
will deduct the tax at that time.
The Net Purchase Payment(s) may be credited
among:
(a) The Fixed Plus Account; and
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<PAGE>
3.01 NET PURCHASE PAYMENT(S) (b) The GA Account; and
(CONT'D): (c) The Fund(s) in which the Separate Account
invests.
Aetna must be told the allocation percentage to
be applied to the Fixed Plus Account, the
current Deposit Period for each of the
available Terms in the GA Account and/or each
Fund.
The Participant may change the allocation of
future Net Purchase Payment(s) at any time,
without charge.
3.02 INDIVIDUAL ACCOUNT(S): This Contract is issued to the Contract Holder.
However, Aetna will maintain two Individual
Accounts for each Participant. These are:
(a) An Employer Account: This Individual
Account will be credited with the Net
Purchase Payment(s) attributable to a
rollover or transfer of employer
contributions; and
(b) An Employee Account: This Individual
Account will be credited with the Net
Purchase Payment(s) attributable to a
rollover or transfer of after-tax employee
contributions. This Contract does not
allow Net Purchase Payment(s) attributable
to a rollover or transfer of salary
reduction contributions.
3.03 FUND RECORD UNITS -- The portion of the Net Purchase Payment(s)
SEPARATE ACCOUNT: applied to the Separate Account will determine
the number of each Fund's Record Units. This
number is equal to the Net Purchase Payment
applied to the Fund divided by the Fund Record
Unit Value (see 3.05) for the Valuation Period
in which the Purchase Payment is received in
good order.
3.04 NET RETURN FACTOR(S) -- The Net Return Factors are used to compute all
SEPARATE ACCOUNT: Separate Account Values and payments for any
Fund.
The Net Return Factor for each Fund is equal to
1.0000000 plus the Net Return Rate.
The Net Return Rate is equal to:
(a) The sum of:
(i) The value of the shares of the Fund
held by the Separate Account at the
end of a Valuation Period; minus
(ii) The value of the shares of the Fund
held by the Separate Account at the
start of the Valuation Period; plus
or minus
(iii) Taxes (or reserves for taxes) on the
Separate Account (if any);
(b) Divided by the total value of the Fund
Record Units and Fund Annuity Units of the
Separate Account at the start of the
Valuation Period;
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<PAGE>
3.04 NET RETURN FACTOR(S) -- (c) Minus a daily actuarial charge at an
SEPARATE ACCOUNT annual rate of 1.25% for Annuity mortality
(CONT'D): and expense risks and profit and a daily
administrative charge which will not
exceed 0.25% on an annual basis. The
administrative charge may be changed
annually except for amounts which have
been used to purchase an Annuity.
A Net Return Rate may be more or less than 0%.
The value of a share of the Fund is equal to
the net assets of the Fund divided by the
number of shares outstanding.
3.05 FUND RECORD UNIT VALUE -- Each Fund's Record Unit Value is computed by
SEPARATE ACCOUNT: multiplying the Net Return Factor for the
current Valuation Period by the Fund's Record
Unit Value for the previous Period. The dollar
value of a Fund's Record Unit, Separate Account
assets, and Variable Annuity payments may go up
or down due to investment gain or loss.
3.06 MARKET VALUE ADJUSTMENT: There will be an MVA for a withdrawal from the
GA Account before the end of a Term when the
withdrawal is due to:
(1) A Transfer;
(2) A full or partial surrender; or
(3) A payment of a premium for Annuity
Option 2.
The MVA reflects the changes in market interest
rates since the beginning of the Deposit
Period. The market value adjustment amount (the
dollar amount of the MVA) can be positive or
negative. The total of all market value
adjustment amounts from every Guaranteed Term
affected by the withdrawal is called the
aggregate market value adjustment amount
(aggregate MVA amount). This aggregate MVA
amount may be a positive or negative figure,
and therefore, may increase or decrease the
actual amount withdrawn from the GA Account to
satisfy a withdrawal.
The amount of the withdrawal will be adjusted
to a market value amount as described below.
The market value adjusted amount will be equal
to the amount withdrawn multiplied by the
following ratio:
X
---
365
(1 + i)
---------
X
---
365
(1 + j)
Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining,
(computed from Wednesday of the week
of withdrawal) in the Guaranteed
Term.
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<PAGE>
3.06 MARKET VALUE ADJUSTMENT Each business day, the Wall Street Journal
(CONT'D): publishes the prices of all outstanding U.S.
Treasury issues. In this display, Treasury
Notes are identified by the interest rate at
which they were issued and the month and year
in which they mature. The final figure shown
for a given Treasury issue is its yield to
maturity as of the preceding business day.
These yields determine the Current Yield and
the Deposit Period Yield in the market value
adjustment calculation.
The Deposit Period Yield will be determined as
follows:
(i) At the close of the last business day of
each week of the Deposit Period, a yield
will be computed as the average of the
yields on that day of U.S. Treasury Notes
which mature in the last three months of
the Guaranteed Term. (The average is
calculated by summing the yields of the
U.S. Treasury Notes included and dividing
that sum by the number of U.S. Treasury
Notes so included.)
(ii) The Deposit Period Yield is the average of
those yields for the Deposit Period. If
withdrawal is made prior to the close of
the Deposit Period, it is the average of
those yields on each week preceding
withdrawal. (The average is calculated by
summing the week by week yields included
and dividing that sum by the number of
week by week yields so included.)
The Current Yield is the average of the yields
on the last business day of the week preceding
withdrawal on the same U.S. Treasury Notes
included in the Deposit Period Yield. (The
average is calculated by summing the yields of
the U.S. Treasury Notes included and dividing
that sum by the number of U.S. Treasury Notes
so included.)
In the event that no U.S. Treasury Notes which
mature in the last three months of the
Guaranteed Term exist, Aetna reserves the right
to use the U.S. Treasury Notes that mature in a
following quarter.
Full and partial surrenders as well as
Transfers made in connection with the Sum
Payable at Death provision (see 3.11), or in
connection with Disability as defined below,
within six months of the date of the
Participant's death or termination of
employment due to disability, will be the
greater of:
(a) The aggregate MVA amount which is the sum
of all market value adjusted amounts
calculated due to a withdrawal of amounts
(for surrender or Transfer) from Terms
prior to the end of those Terms. The
aggregate MVA may be either positive or
negative; or
(b) The applicable portion of the Current
Value in the GA Account.
After the six month period, the surrender or
Transfer will be the aggregate MVA amount
(i.e., including all MVAs).
15
<PAGE>
3.06 MARKET VALUE ADJUSTMENT "Disability," for purposes of this Section
(CONT'D): means the inability to engage in any
substantial gainful activity by reason of any
medically determinable physical or mental
impairment which can be expected to result in
death or to be long-continued and indefinite
duration and can be expected to be for life.
The greater of the aggregate MVA amount or the
applicable portion of the Current Value in the
GA Account is applied to amounts withdrawn from
the GA Account for payment of a premium under
Annuity Options 3 or 4.
3.07 TRANSFER OF CURRENT VALUE Before an Annuity option is elected, all or any
FROM THE FUNDS OR GA portion of the Adjusted Current Value may be
ACCOUNT: transferred from any Fund or the GA Account to:
(a) Any other Fund;
(b) The Fixed Plus Account; or
(c) Any GA Account Term available in the
current Deposit Period.
Amounts in a specific GA Account Term cannot be
transferred to the Deposit Period of another
Term within the same Classification except at
the Term's Maturity. Amounts applied to
Classifications of the GA Account may not be
transferred to the Fund(s) or the Fixed Plus
Account during the Deposit Period or for 90
days after the close of the Deposit Period.
For each Individual Account, twelve Transfers
of the Adjusted Current Value (excluding
Transfers from the GA Account at the end of a
Guaranteed Term) can be made during a calendar
year period. Should Aetna allow additional
Transfers, each may be subject to a fee of
up to $10.
3.08 TRANSFER OF CURRENT VALUE During each rolling 12 month period, before an
FROM THE FIXED PLUS Annuity option is elected, up to 20% of the
ACCOUNT: Current Value in the Fixed Plus Account may be
transferred to one or more of the Fund(s) or to
the GA Account's then-current DepositPeriod.
The 20% limit is reduced by any partial
surrender(s) or amount(s) used to purchase an
Annuity during the 12 month period.
The Current Value of the Fixed Plus Account, as
used above, is the value when the request is
received at the Aetna Processing Office.
3.09 NOTICE TO THE PARTICIPANT: Aetna will notify the Participant each year of:
(a) The value of any amounts held in:
(1) The Fixed Plus Account;
(2) The GA Account;
(3) The Fund(s) for the Separate Account;
(b) The number of any Fund(s) Record Units;
(c) The Fund(s) Record Unit Value(s); and
(d) The Surrender Values of these amounts.
Such number or values will be as of a date no
more than 60 days before the date of the
notice.
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<PAGE>
3.10 TIMING AND MANNER OF Distribution of benefits to a Participant may
DISTRIBUTIONS: be made in the form of an Annuity, as described
in 4.01. In certain limited circumstances, as
permitted under the terms of the Program,
distribution may be made in a lump sum, as
described in 3.12 and 3.13. The Participant
may elect the form of distribution subject to
Plan Administrator certification in writing
that the Participant is eligible, both as to
the timing and the form of distribution.
The distribution of benefits accrued after
December 31, 1986 must be made in a lump sum or
must begin by April 1 of the calendar year
following the calendar year in which the
Participant attains age 70 1/2 or retires,
whichever occurs later.
During the calendar year in which the
Participant attains age 70 1/2, Aetna will
notify the Participant regarding the
distribution of benefits. If the Participant
does not request commencement of benefits as
described above, Aetna will not be responsible
for compliance with the Code Section 401(a)(9)
minimum distribution requirements and for any
adverse tax consequences that may result.
3.11 SUM PAYABLE AT DEATH Aetna will pay any portion of the Individual
(BEFORE ANNUITY PAYMENTS Accounts Current Value to the beneficiary when:
START):
(a) The Participant dies before Annuity
payments start; and
(b) The notice of death is received in good
order by Aetna.
The sum payable will be the Current Value on
the date when the notice is received in good
order at the Aetna Processing Office. The
amount paid from the Fixed Plus Account will
not be less than the Net Purchase Payment(s)
allocated to the Fixed Plus Account plus
interest (less any prior Transfers, surrenders,
or amounts used to purchase Annuity options).
The beneficiary may choose to apply any sum
under an Annuity option (4.08), subject to any
other terms and conditions of this Contract, or
to receive a lump sum.
If the beneficiary of the death proceeds is the
Participant's surviving spouse, the first
Annuity payment or the lump sum payment is not
required to begin earlier than when the
Participant would have attained age 70 1/2 or
such later date as may be allowed under federal
law or regulations. If the beneficiary is not
the surviving spouse, all of the Current Value
must either be applied to an Annuity option
within one year of the Participant's death or
be paid within 5 years of the Participant's
death (see Part IV). If no beneficiary exists,
the payment will be made to the Participant's
estate.
3.12 SURRENDER VALUE: Except as otherwise provided in 3.13, a
Participant may request a partial or full
surrender from his or her Individual Accounts
as a Transfer to another investment provider
under the SUNY optional retirement program.
In certain limited circumstances, as permitted
under the terms of the Program, the Participant
may elect a lump sum distribution subject to
Plan Administrator
17
<PAGE>
3.12 SURRENDER VALUE certification in writing that the Participant
(CONT'D): is eligible, both as to the timing and the
form of distribution. Written direction from
the Participant on a form acceptable to Aetna
must be received in the Aetna Processing
Office.
Full and partial surrenders are satisfied by
withdrawing amounts from each of the investment
options in which the Individual Account is
invested (the Fund(s), the Fixed Plus Account,
the GA Account Short-Term Classification and
the GA Account Long-Term Classification) on a
pro rata basis. Terms within the GA Account
Short-Term and Long-Term Classifications are
considered as two separate investment options.
Amounts will be removed within a GA Account
Classification starting with the Term still in
effect with the oldest Deposit Period. However,
the Participant may specify a particular order
in which investment options will be liquidated
in order to satisfy a partial surrender
request.
Any amount that is withdrawn from the Fixed
Plus Account will be subject to the limitations
in 3.13.
3.13 PAYMENT OF SURRENDER When Aetna receives a full surrender request,
VALUE: no additional partial surrenders or Transfers
from the Fixed Plus Account are permitted
during the payout period. The Current Value of
the Fixed Plus Account will be paid in five
annual payments of:
(a) One-fifth of the Current Value on the day
the request is received in good order at
Aetna's Processing Office, reduced by any
amount from the Fixed Plus account
transferred, surrendered or used to
purchase Annuity benefits during the prior
12 months;
(b) One-fourth of the remaining Current Value
12 months later;
(c) One-third of the remaining Current Value
12 months later;
(d) One-half of the remaining Current Value
12 months later; and
(e) The balance of the Current Value 12 months
later.
The Current Value will be paid in a lump sum
when a surrender is:
(a) Due to a Participant's death before
Annuity payments begin;
(b) Used to purchase Annuity benefits;
(c) When the amount in the Fixed Plus Account
is $3,500 or less, the surrendered amount
is to be transferred to another investment
provider under the SUNY optional
retirement program and no amount has been
surrendered, transferred or used to
purchase Annuity benefits during the prior
12 months.
(d) When the Individual Accounts Adjusted
Current Value is $4,000 or less and the
surrendered amount is paid to the
Participant in a lump sum.
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<PAGE>
3.13 PAYMENT OF SURRENDER Any full surrender from the Fixed Plus Account
VALUE (CONT'D): may be canceled at any time before the end of
the payment period.
During each rolling 12 month period, up to 20%
of the Current Value in the Fixed Plus Account
may be withdrawn as a partial surrender. This
20% limit is reduced by any amount(s)
transferred or used to purchase an Annuity
during the 12 month period.
3.14 ALTERNATIVE PAYMENT OF As an alternative to 3.13, the Contract Holder
SURRENDER VALUE: may elect the following: If the entire Contract
is to be surrendered by the Contract Holder,
the Contract Holder must notify Aetna of such
intent no less than 60 days prior to the
proposed surrender date. Within 30 days of
receipt of such notice, Aetna will supply the
Contract Holder with the specific period and
interest rate that would apply to a complete
surrender of the Contract under (b) below. The
Contract Holder must then irrevocably elect, in
writing, to receive the total of all Individual
Accounts' Current Values invested in the Fixed
Plus Account:
(a) In the manner described in 3.13 above; or
(b) In level, annual payments for a period not
to exceed ten years.
If this alternative (b) is elected, the
interest credited to the Fixed Plus Account may
be reduced by up to 1.5% from the net effective
rate of interest being credited upon the date
of surrender. This interest rate will remain
constant throughout the payment period.
3.15 REINSTATEMENT: All or a portion of the proceeds of a full
surrender of this Contract may be reinvested
within 30 days after the surrender if allowed
by law. Any Market Value Adjustment deducted
from GA Account surrenders will not be included
in the reinstatement. Amounts will be
reinstated among the Fixed Plus Account, GA
Account, and the Fund(s) in the same proportion
as they were at the time of surrender. Any
amount reinstated to the GA Account will be
redited to the available Terms of the current
Deposit Period. In the event that a Term of the
same duration is unavailable, amounts will be
reinvested in the next shortest Term available
in the current Deposit Period. If no shorter
Term is available, the next longer Term will be
used. The number of Fund(s) Record Units
reinstated will be based on the Record Unit
Value(s) next computed after receipt at the
Aetna Processing Office of the reinstatement
request and the amount to be reinvested.
Reinstatement is permitted only once.
19
<PAGE>
IV. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
4.01 CHOICES TO BE MADE: The Participant may elect an Annuity option by
telling Aetna to pay all or any portion of his
or her Individual Accounts Current Value (minus
any premium tax) as a premium for an Annuity
under Option 2, 3, or 4 (see 4.08). A
completed and signed election form must be
submitted to the Aetna Processing Office. The
form must include Plan Administrator
certification that the Participant is entitled
to a distribution under the terms of the
Program and that the Annuity option chosen is
permitted under the terms of the Program. Any
election of an Annuity option must comply with
the incidental death benefit rules under Code
Section 401(a)(9) regulations. This restriction
does not apply if Option 4 is chosen and the
second Annuitant is the spouse of the
Participant.
Generally, the first Annuity payment must be
made by April 1 of the calendar year following
the calendar year in which the Participant
attains age 70 1/2 or retires, whichever occurs
later.
When an Annuity option is chosen, Aetna must
also be told if payments are to be made other
than monthly and to pay:
(a) A Fixed Annuity using the General Account;
(b) A Variable Annuity using any of the
Fund(s) made available by Aetna for
Annuity purposes; or
(c) A combination of (a) and (b).
The assumed interest rate for a Fixed Annuity
and the interest rate under Annuity option 1
will be no less than 3%. Aetna may add interest
daily under Annuity option 1 at a higher rate
as determined by its Board of Directors.
If a Variable Annuity is chosen, an Assumed
Annual Net Return Rate of 5% may be chosen. If
not chosen, Aetna will use an Assumed Annual
Net Return Rate of 3.5%.
With the exception of Option 2 on a variable
basis, once elected, an Annuity option may not
be revoked.
4.02 TERMS OF ANNUITY OPTIONS: (a) No choice of any Annuity option may be
made if the first payment would be less
than $20 or if the total payments in a
year would be less than $100.
(b) If a Fixed Annuity under Option 2, 3, or 4
is chosen and a larger payment would
result from applying the Surrender Value
to a current Aetna single premium
immediate Annuity, Aetna will make the
larger payment.
(c) Age, where used in the following tables,
means age on the birthday closest to the
date of the first payment.
The Annuity rates for Options 3 and 4 are
based on mortality from 1983 Table a.
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<PAGE>
4.02 TERMS OF ANNUITY OPTIONS (d) Assumed Annual Net Return Rate is the
(CONT'D): interest rate used to determine the amount
of the first Annuity payment under a
Variable Annuity. The Separate Account
must earn this rate plus enough to cover
the mortality and expense risks charges
(which may include profit) and
administrative charges if future Variable
Annuity Payments are to remain level.
4.03 ANNUITY PAYMENTS TO In no event may any payments to the Participant
PARTICIPANT: under an Annuity option extend beyond:
(a) The life of the Participant;
(b) The lives of the Participant and the
beneficiary;
(c) A period certain greater than the
Participant's life expectancy according
to regulations under Code Section
401(a)(9), determined as of the date
payments are to commence; or
(d) A period certain greater than the life
expectancies of the Participant and the
beneficiary according to regulations under
Code Section 401(a)(9), determined as of
the date payments are to begin.
4.04 DEATH OF ANNUITANT When an Annuitant dies under Options 2 and 3,
the present value of any remaining guaranteed
payments will be paid in one sum to the
beneficiary or, upon election by the
beneficiary, any remaining payments will
continue to the beneficiary. If no beneficiary
exists, the present value of any remaining
guaranteed payments will be paid in one lump
sum to the Participant's estate.
However, if a beneficiary dies while under
Option 1 or while receiving Annuity payments,
the present value of any remaining payments
will be paid in one lump sum to the
beneficiary's estate. The interest rate used to
determine the first payment will be used to
calculate the present value.
In no event may any payments to the beneficiary
under an Annuity option extend beyond:
(a) The life of the beneficiary determined as
of the date payments are to commence; or
(b) Any certain period greater than the
beneficiary's life expectancy as
determined by regulations under Code
Section 401(a)(9) as of the date payments
are to begin.
4.05 FUND(S) ANNUITY UNITS -- The number of each Fund's Annuity units is
SEPARATE ACCOUNT: based on the amount of the first Variable
Annuity payment which is equal to:
(a) The portion of the Current Value (minus
any premium tax) applied to pay a
Variable Annuity; divided by
(b) 1,000; multiplied by
(c) The payment rate for the option chosen.
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<PAGE>
4.05 FUND(S) ANNUITY UNITS -- Such amount, or portion, of the variable
SEPARATE ACCOUNT payment will be divided by the appropriate
(CONT'D): Fund(s) Annuity Unit Value (see 4.06) on the
tenth Valuation Period before the due date of
the first payment to determine the number of
each Fund Annuity Units. The number of each
Fund Annuity Units remains fixed. Each future
payment is equal to the sum of the products of
each Fund Annuity Unit Value multiplied by the
appropriate number of Units. The Fund Annuity
Unit Value on the tenth Valuation Period prior
to the due date of the payment is used.
4.06 FUND(S) ANNUITY UNIT For any Valuation Period, a Fund(s) Annuity
VALUE -- SEPARATE Unit Value is equal to:
ACCOUNT:
(a) The value for the previous Period;
multiplied by
(b) The Net Return Factor(s) (see 4.07) for
the Period; multiplied by
(c) A factor to reflect the Assumed Annual Net
Return Rate.
The factor for 3.5% per year is .9999058; for
5% per year it is .9998663.
The dollar value of a Fund(s) Annuity Unit
Values and payments may go up or down due to
investment gain or loss.
If Variable Annuity payments are not to
decrease, Aetna must earn a gross return on the
assets of the Separate Account of:
- 4.75% on an annual basis plus an annual
return of up to 0.25% to offset the
administrative charge set at the time
Annuity payments commence if an Assumed
Annual Net Return Rate of 3.5% is chosen; or
- 6.25% on an annual basis plus an annual
return of up to 0.25% to offset the
administrative charge set at the time
Annuity payments commence if an Assumed
Annual Net Return Rate of 5% is chosen.
Payments shall not be changed due to changes in
the mortality or expense results or
administrative charges.
4.07 ANNUITY NET RETURN The Annuity Return Factor(s) are used to
FACTOR(S) -- SEPARATE compute all Separate Account Annuity payments
ACCOUNT: for any Fund.
The Annuity Net Return Factor(s) for each Fund
is equal to 1.0000000 plus the Net Return Rate.
The Net Return Rate is equal to:
(a) The value of the shares of the Fund held
by the Separate Account at the end of a
Valuation Period; minus
(b) The value of the shares of the Fund held
by the Separate Account at the start of
the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the
Separate Account (if any);
(d) The total value of the Fund(s) Record
Units and the Fund(s) Annuity Units of
the Separate Account at the start of the
Valuation Period; minus
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<PAGE>
4.07 ANNUITY NET RETURN (e) A daily actuarial charge at an annual rate
FACTOR(S) -- SEPARATE of 1.25% for Annuity mortality and expense
ACCOUNT (CONT'D): risks and profit and a daily
administrative charge which will not
exceed 0.25% on an annual basis.
A Net Return Rate may be more or less than 0%.
The value of a share of the Fund is equal to
the net assets of the Fund divided by the
number of shares outstanding.
4.08 ANNUITY OPTIONS: Option 1 -- Payments of Interest on Sum Left
with Aetna -- This option may be used only by
the beneficiary when the Participant dies
before Aetna has started paying an Annuity. A
portion or all of the sum paid upon death may
be held under this option and will be held in
the General Account of Aetna at interest
(see 4.01). The beneficiary may later tell
Aetna to:
(a) Pay a portion or all of the sum held by
Aetna; or
(b) Apply a portion or all of the sum held by
Aetna to any Annuity option below.
If the beneficiary is the Participant's
surviving spouse, payment may be deferred to a
date not later than when the Participant would
have attained age 70 1/2.
If the beneficiary is not the Participant's
surviving spouse, the entire sum must either be
applied to an Annuity option within one year of
the Participant's death, or be paid to the
beneficiary within 5 years after the
Participant's death.
Option 2 -- Payments for a Stated Period of
Time -- An Annuity will be paid for the number
of years chosen. The number of years that may
be chosen will be determined in part by the
accumulation options in which the Individual
Account Current Value was held prior to the
election of the Annuity option as follows:
For amounts invested in the GA Account or one
or more of the Fund(s), the number of years
chosen must be at least 3 and not more than 30
and the Annuity may be a Fixed or Variable
Annuity.
For amounts invested in the Fixed Plus Account,
the number of years chosen must be at least 6
and not more than 30 and the Annuity must be a
Fixed Annuity.
If payments for this option are made under a
Variable Annuity, the present value of any
remaining payments may be withdrawn at any
time.
Option 3 -- Life Income -- An Annuity will be
paid for the life of the Annuitant. If also
chosen, Aetna will guarantee payments for 60,
120, 180, or 240 months.
Option 4 -- Life Income for Two Payees -- An
Annuity will be paid during the lives of the
Annuitant and a second Annuitant. Payments will
continue until both Annuitants have died. When
this option is chosen, a choice must be made
of:
23
<PAGE>
4.08 ANNUITY OPTIONS (a) 100% of the payment to continue after the
(CONT'D): first death;
(b) 66 2/3% of the payment to continue after
the first death;
(c) 50% of the payment to continue after the
first death;
(d) Payments for a minimum of 120 months, with
100% of the payment to continue after the
first death; or
(e) 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.
Other Options -- Aetna may make other options
available as allowed by the laws of the state
in which this Contract is delivered.
24
<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL
YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3 3.00% $28.99 $86.76 $172.88 $343.23
4 3.00% 22.06 66.02 131.56 261.19
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
</TABLE>
25
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ADJUSTED
AGE OF NONE 60 120 180 240
ANNUITANT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 $4.05 $4.05 $4.03 $3.99 $3.93
51 4.12 4.11 4.09 4.05 3.99
52 4.19 4.19 4.16 4.11 4.04
53 4.27 4.26 4.23 4.18 4.10
54 4.35 4.34 4.31 4.25 4.16
55 4.44 4.42 4.39 4.32 4.22
56 4.53 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49
60 4.95 4.93 4.86 4.73 4.55
61 5.07 5.05 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83
65 5.65 5.61 5.47 5.22 4.89
66 5.82 5.77 5.61 5.33 4.96
67 6.01 5.94 5.75 5.44 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14
70 6.64 6.54 6.23 5.76 5.19
71 6.88 6.76 6.41 5.86 5.24
72 7.14 7.00 6.59 5.97 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.73 7.53 6.96 6.16 5.35
75 8.06 7.82 7.14 6.25 5.38
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ADJUSTED AGES
- --------------------------
SECOND
ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.03
55 55 3.88 4.25 4.47 3.87 4.14
55 60 3.99 4.44 4.71 3.98 4.42
60 55 3.99 4.44 4.71 3.98 4.42
60 60 4.24 4.71 4.99 4.23 4.57
60 65 4.38 4.97 5.32 4.38 4.93
65 60 4.38 4.97 5.32 4.38 4.93
65 65 4.72 5.33 5.70 4.71 5.14
65 70 4.93 5.68 6.15 4.91 5.66
70 65 4.93 5.68 6.15 4.91 5.66
70 70 5.40 6.21 6.70 5.36 5.96
70 75 5.69 6.68 7.32 5.62 6.67
75 70 5.69 6.68 7.32 5.62 6.67
75 75 6.37 7.45 8.15 6.23 7.12
75 80 6.78 8.11 8.99 6.54 8.13
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
27
<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL
YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT
<S> <C> <C> <C> <C> <C>
3 3.50% $29.19 $87.33 $173.91 $344.86
4 3.50% 22.27 66.61 132.65 263.04
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
</TABLE>
28
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
<TABLE>
<CAPTION>
ADJUSTED
AGE OF
ANNUITANT NONE 60 120 180 240
<S> <C> <C> <C> <C> <C>
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
29
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
ADJUSTED AGES
- --------------------------
SECOND
ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
30
<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL
YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3 5.00% $29.80 $89.04 $176.99 $349.72
4 5.00% 22.89 68.38 135.93 268.58
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- ------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ADJUSTED
AGE OF
ANNUITANT NONE 60 120 180 240
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 6.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- --------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
ADJUSTED AGES
- -------------------------
SECOND
ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- -------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract and the Certificate are hereby endorsed to amend and restate
SECTION 1.11 entitled Funds with the following statement.
The open-end registered management investment companies (mutual funds)
made available by Aetna under this Contract. These Funds currently are:
- - Aetna Variable Fund -- a growth and income fund;
- - Aetna Income Shares -- a bond fund;
- - Aetna Variable Encore Fund -- a money market fund;
- - Aetna Investment Advisers Fund, Inc. -- a managed fund;
Alger American Fund -- Alger American Small Capitalization Portfolio ("Alger
- - American Small Cap Portfolio") -- a small cap fund;
Calvert Socially Responsible Series -- a socially responsible fund;
- - Franklin Government Securities Trust -- a government bond fund;
- - Janus Aspan Series -- Aggressive Growth Portfolio -- an aggressive growth
fund;
- - Lexington Emerging Markets Fund, Inc. -- an emerging markets fund;
- - Lexington Natural Resources Trust -- a natural resources fund;
- - Neuberger & Berman Advisers Management Trust (Growth Portfolio) -- a
growth fund;
- - Scudder Variable Life Investment Fund International Portfolio -- an
international fund;
- - TCI Portfolios, Inc., (TCI Growth) -- a growth fund.
Additional information regarding these Fund(s) is available in each Fund
prospectus.
Endorsed and made a part of the Contract and the Certificate effective
July 22, 1994.
/s/ Dan Kearney
-----------------
PRESIDENT
AETNA LIFE INSURANCE AND ANNUITY COMPANY
<PAGE>
[logo]
AETNA LIFE INSURANCE AND ANNUITY COMPANY
HOME OFFICE: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Group Variable, Fixed, or Combination Contract
Nonparticipating
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
ENDORSEMENT
The Contract and the Certificate are hereby endorsed to amend SECTION 1.11
entitled FUND(S) to read as follows.
The open-end registered management investment companies (mutual
funds) made available by Aetna under this Contract. These Funds
currently are:
- - Aetna Variable Fund
- - Aetna Income Shares
- - Aetna Variable Encore Fund
- - Aetna Investment Advisers Fund, Inc.
- - Alger American Fund - Alger American Growth Portfolio
- - Alger American Fund - Alger American Small Capitalization Portfolio
- - Calvert Responsibly Invested Balanced Portfolio
- - Fidelity Investments Variable Insurance Products Fund II - Asset Manager
Portfolio
- - Fidelity Investments Variable Insurance Products Fund II - Contrafund
Portfolio
- - Fidelity Investments Variable Insurance Products Fund II - Index 500
Portfolio
- - Fidelity Investments Variable Insurance Portfolio Fund - Equity- Income
Portfolio
- - Franklin Government Securities Trust
- - Janus Aspen Series - Aggressive Growth Portfolio
- - Janus Aspen Series - Growth Portfolio
- - Janus Aspen Series - Short-Term Bond Portfolio
- - Janus Aspen Series - Worldwide Growth Portfolio
- - Lexington Emerging Markets Fund, Inc.
- - Lexington Natural Resources Trust
- - Neuberger & Berman Advisers Management Trust - Growth Portfolio
- - Scudder Variable Life Investment Fund - International Portfolio
- - TCI Portfolios, Inc. - TCI Growth
Additional information regarding these Funds is available in each Fund
prospectus.
Endorsed and made part of the Contract and the Certificate effective September
1, 1995.
/s/ Dan Kearney
-----------------------------
President
Aetna Life Insurance and Annuity Company
ESUNYAD2-95
<PAGE>
------------------------------------------------------------
AETNA LIFE INSURANCE AND ANNUITY COMPANY
[logo] HOME OFFICE: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Aetna Life Insurance and Annuity Company,
herein called Aetna, agrees to pay the
benefits stated in this Contract.
SPECIFICATIONS
- --------------------------------------------------------------------------------
Plan
SUNY OPTIONAL RETIREMENT PROGRAM
- --------------------------------------------------------------------------------
Type of Plan
OPTIONAL RETIREMENT PROGRAM SUBJECT TO 401
- --------------------------------------------------------------------------------
Contract Holder
STATE UNIVERSITY OF NEW YORK (SUNY)
- --------------------------------------------------------------------------------
Contract No.
SPECIMEN
- --------------------------------------------------------------------------------
Effective Date
MARCH 1, 1994
- --------------------------------------------------------------------------------
This Contract is Delivered in YOUR STATE and is Subject to the Laws of that
Jurisdiction
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND IV.
RIGHT TO CANCEL
- --------------------------------------------------------------------------------
The Contract Holder may cancel this Contract within 10 days of receiving it by
returning this Contract along with a written notice to Aetna at the above
address or to the agent from whom it was purchased. Within 7 days after it
receives the notice of cancellation and this Contract at its Home Office, Aetna
will return the entire consideration paid plus any increase or minus any
decrease in the current value of any funds allocated to the Separate Account as
of the date this Contract is received by the agent or the date this Contract is
mailed to Aetna.
This page, the following pages, and the application make up the entire Contract.
Signed at the Home Office on the Effective Date.
/s/ Dan Kearney /s/ Lucille M. Nickerson
President Secretary
Group Variable, Fixed, or Combination Annuity Contract
Nonparticipating
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN EITHER AN INCREASE OR
DECREASE IN THE CURRENT VALUE. THE MARKET VALUE ADJUSTMENT FORMULA DOES NOT
APPLY TO A GUARANTEED TERM AT THE TIME OF ITS MATURITY.
G-CDA-IB(XC/SM)
<PAGE>
SPECIFICATIONS
- --------------------------------------------------------------------------------
GUARANTEED There is a guaranteed interest rate for Purchase Payment(s)
INTEREST RATE held in the Fixed Account (See 1.14) and the GA Account
(See 1.15).
- --------------------------------------------------------------------------------
DEDUCTIONS FROM There will be deductions for mortality and expense risks and
THE SEPARATE administrative fees. (See 3.04 and 4.07.)
ACCOUNT
- --------------------------------------------------------------------------------
DEDUCTION FROM Purchase Payment(s) are subject to a deduction for premium
PURCHASE taxes, if any. (See 3.01.)
PAYMENT(S)
If Variable Annuity payments are not to decrease, Aetna must earn a gross return
on the assets of the Separate Account of:
- - 4.75% on an annual basis plus an annual return of up to 0.25% to offset the
administrative charge set at the time Annuity payments commence if an Assumed
Annual Net Return Rate of 3.5% is chosen; or
- - 6.25% on an annual basis plus an annual return of up to 0.25% to offset the
administrative charge set at the time Annuity payments commence if an Assumed
Annual Net Return Rate of 5% is chosen.
This Contract is a legal contract and constitutes the entire legal relationship
between Aetna and the Contract Holder.
READ THIS CONTRACT CAREFULLY. This Contract sets forth, in detail, all of the
rights and obligations of both you and Aetna. IT IS THEREFORE IMPORTANT THAT
YOU READ THIS CONTRACT CAREFULLY.
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TABLE OF CONTENTS
I. GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
Page
1.01 Adjusted Current Value. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.02 Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.03 Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.04 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.05 Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.06 Contract Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.07 Current Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.08 Deposit Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.09 Fixed Plus Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.10 Fixed Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.11 Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.12 General Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.13 Guaranteed Accumulation Account (GA Account). . . . . . . . . . . . . . . 7
1.14 Guaranteed Interest Rate - Fixed Plus Account . . . . . . . . . . . . . . 7
1.15 Guaranteed Rates - GA Account . . . . . . . . . . . . . . . . . . . . . . 7
1.16 Guaranteed Term (Term). . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.17 Guaranteed Term Classifications . . . . . . . . . . . . . . . . . . . . . 8
1.18 Market Value Adjustment (MVA) . . . . . . . . . . . . . . . . . . . . . . 8
1.19 Matured Term Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.20 Matured Term Value Transfer . . . . . . . . . . . . . . . . . . . . . . . 8
1.21 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.22 Net Purchase Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.23 Nonunitized Separate Account. . . . . . . . . . . . . . . . . . . . . . . 8
1.24 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.25 Plan Administrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.26 Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.27 Purchase Payment(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.28 Reinvestment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.29 Separate Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.30 Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.31 Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
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1.32 Valuation Period (Period) . . . . . . . . . . . . . . . . . . . . . . . .10
1.33 Variable Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
II. GENERAL PROVISIONS
- --------------------------------------------------------------------------------
2.01 Change of Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.02 Change of Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.03 Nonparticipating Contract . . . . . . . . . . . . . . . . . . . . . . . .11
2.04 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.05 State Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.06 Control of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.07 Designation of Beneficiary. . . . . . . . . . . . . . . . . . . . . . . .12
2.08 Misstatements and Adjustments . . . . . . . . . . . . . . . . . . . . . .12
2.09 Incontestability. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.10 Grace Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.11 Individual Certificates . . . . . . . . . . . . . . . . . . . . . . . . .12
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- --------------------------------------------------------------------------------
3.01 Net Purchase Payment(s) . . . . . . . . . . . . . . . . . . . . . . . . .12
3.02 Individual Account(s) . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.03 Fund Record Units - Separate Account. . . . . . . . . . . . . . . . . . .13
3.04 Net Return Factor(s) - Separate Account . . . . . . . . . . . . . . . . .13
3.05 Fund Record Unit Value - Separate Account . . . . . . . . . . . . . . . .14
3.06 Market Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . . .14
3.07 Transfer of Current Value from the Funds or GA Account. . . . . . . . . .16
3.08 Transfer of Current Value from the Fixed Plus Account . . . . . . . . . .16
3.09 Notice to the Participant . . . . . . . . . . . . . . . . . . . . . . . .16
3.10 Timing and Manner of Distributions. . . . . . . . . . . . . . . . . . . .17
3.11 Sum Payable at Death (Before Annuity Payments Start). . . . . . . . . . .17
3.12 Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
3.13 Payment of Surrender Value. . . . . . . . . . . . . . . . . . . . . . . .18
3.14 Alternative Payment of Surrender Value. . . . . . . . . . . . . . . . . .19
3.15 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
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IV. ANNUITY PROVISIONS
- --------------------------------------------------------------------------------
4.01 Choices to be Made. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
4.02 Terms of Annuity Options. . . . . . . . . . . . . . . . . . . . . . . . .20
4.03 Annuity Payments to Participant . . . . . . . . . . . . . . . . . . . . .21
4.04 Death of Annuitant. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.05 Fund(s) Annuity Units - Separate Account. . . . . . . . . . . . . . . . .21
4.06 Fund(s) Annuity Unit Value - Separate Account . . . . . . . . . . . . . .22
4.07 Annuity Net Return Factor(s) - Separate Account . . . . . . . . . . . . .22
4.08 Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
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I. GENERAL DEFINITIONS
- ------------------------------------------------------------------------------
1.01 ADJUSTED CURRENT VALUE: The Current Value of an Individual Account
plus or minus any aggregate GA Account MVA,
if applicable. (See 1.18)
1.02 ANNUITANT: A person whose life is measured for purposes
of the duration of Annuity payments under
this Contract.
1.03 ANNUITY: Payment of an income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.04 CERTIFICATE: The document evidencing a Participant's right
to payment(s) under this Contract. The
Certificate shall be issued to and become
the property of the Participant. The
State University of New York (SUNY) shall not
be a party to the Certificate.
1.05 CONTRACT: This agreement between Aetna and the Contract
Holder.
1.06 CONTRACT HOLDER: The trustee of a multiple employer trust
approved by Aetna to apply for and own the
Contract as authorized by SUNY. The entity
to which the Contract is issued.
1.07 CURRENT VALUE: The sum of all Net Purchase Payments to a
Participant's Individual Accounts, plus
any interest added to the portion allocated
to the Fixed Plus Account; plus any interest
added to the portion allocated to the GA
Account; and plus or minus the investment
experience of the portion allocated to the
Funds since deposit; less any amounts
surrendered and any amounts applied to an
Annuity as of the most recent Valuation Period.
1.08 DEPOSIT PERIOD: A calendar month, a calendar quarter, or any
other period of time specified by Aetna
during which Net Purchase Payment(s) and
Transfers are accepted into the GA Account
for one or more Guaranteed Terms.
1.09 FIXED PLUS ACCOUNT: An accumulation option with a guaranteed
minimum interest rate. Aetna may credit a
higher rate which is not guaranteed. The
portion that may be surrendered or transferred
in a 12 month period is restricted.
1.10 FIXED ANNUITY: An Annuity with payments which do not vary
in amount.
1.11 FUND(S): The open-end registered management investment
companies (mutual funds) made available by
Aetna under this Contract. These Funds
currently are:
- Aetna Variable Fund - a growth and income
fund;
- Aetna Income Shares - a bond fund;
- Aetna Variable Encore Fund - a money
market fund;
- Aetna Investment Advisers Fund, Inc. - a
managed fund;
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1.11 FUND(S) (CONT'D): - Franklin Government Securities Trust -
a government bond fund;
- Neuberger & Berman Advisers Management
Trust (Growth Portfolio) - a growth fund;
- Lexington Natural Resources Trust - a
natural resources fund;
- Calvert Socially Responsible Series -
a socially responsible fund;
- Scudder Variable Life Investment Fund
(International Portfolio) - an international
fund;
- TCI Portfolios, Inc., (TCI Growth) - a
growth fund.
- The Alger American Fund, (Alger American
Small Capitalization Portfolio) - a small
cap fund.
Additional information regarding these Funds
is available in each Fund prospectus.
1.12 GENERAL ACCOUNT: The Account holding the assets of Aetna, other
than those assets held in Aetna's Separate
Account(s) and the Nonunitized Separate
Account(s).
1.13 GUARANTEED ACCUMULATION An accumulation option where Aetna guarantees
ACCOUNT (GA ACCOUNT): a stipulated rateof interest for a specified
period of time. All assets of Aetna,
including amounts in the Nonunitized Separate
Account, are available to meet the guarantees
under the GA Account.
1.14 GUARANTEED INTEREST RATE - On any Purchase Payment(s) made to the Fixed
FIXED PLUS ACCOUNT: Plus Account. Aetna will add interest daily at
an annual rate no less than 3%. Aetna may
add interest daily at a higher rate as
determined by its Board of Directors.
Beginning on the tenth anniversary of the
effective date of an Individual Account, on
and after February 1, 1994, Aetna will credit
amounts held in the Fixed Plus Account with
an interest rate that is .25% higher than
the then-declared interest rate for the Fixed
Plus Account for Individual Accounts before
the tenth anniversary. This additional
interest rate reflects a reduction in the
interest rate holdback margin for profit and
expenses.
1.15 GUARANTEED RATES - GA Aetna will declare all interest rate(s)
ACCOUNT: applicable to a specific Term at the start of
the Deposit Period for that Term. These rate(s)
are guaranteed by Aetna for that Deposit
Period and the ensuing Term and are not based
on the actual investment experience of the
underlying assets in the GA Account. The
Guaranteed Rates are annual effective yields.
The interest is credited daily at a rate that
will produce the guaranteed annual effective
yield over the period of a year. No annual
rate will ever be less than 3%.
For Guaranteed Terms of one year or less, one
Guaranteed Rate is credited for the full
Guaranteed Term. For longer Guaranteed Terms,
an initial Guaranteed Rate is credited from
the date of deposit to the end of a specified
period within the Guaranteed
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1.15 GUARANTEED RATES - GA Term. There may be different Guaranteed
ACCOUNT (CONT'D): Rate(s) declared for subsequent specified time
intervals throughout the Guaranteed Term.
The rate(s) will be set and announced prior
to the Deposit Period for that Term.
1.16 GUARANTEED TERM (TERM): The period of time for which interest rates
are guaranteed on Net Purchase Payment(s) and
on Transfers made into a Deposit Period of
the GA Account. Terms are offered at Aetna's
discretion for various lengths of time ranging
up to and including ten years.
1.17 GUARANTEED TERM The grouping of Terms according to their time
CLASSIFICATIONS: to maturity. The following are the
Classifications:
(1) Short-Term: Terms of up to and including
3 years. All amounts under Short-Term
Classifications are made to the General
Account; or
(2) Long-Term: Terms of greater than 3 years
and up to and including 10 years. All
amounts under Long-Term Classifications
are made to a Nonunitized Separate
Account.
During a Deposit Period, Aetna may make
available one or more Terms within a
Classification. The Participant has the
option to allocate Net Purchase Payment(s) and
Transfers into any or all of the available
Deposit Period Terms. If no specific
direction is given, Net Purchase Payment(s)
and Transfers will go into available Terms
on a pro rata basis within the
Classification(s) previously chosen by the
Participant. At least one Term in the
Short-Term Classification will be available
each Deposit Period.
1.18 MARKET VALUE ADJUSTMENT An adjustment to the amount withdrawn or
(MVA): transferred from a GA Account Term prior to
the end of that Term. The adjustment reflects
the change in the value of the investment
due to changes in interest rates since the
date of deposit and is computed using the
formula given in 3.06. The adjustment is
expressed as a percentage of each dollar
being withdrawn.
1.19 MATURED TERM VALUE: The amount payable on a GA Account Term's
Maturity Date.
1.20 MATURED TERM VALUE During the calendar month following a GA
TRANSFER: Account Maturity Date, the Participant may
notify the Aetna Processing Office in writing
to transfer or surrender all or part of the
Matured Term Value, plus interest at the new
Guaranteed Rate accrued thereon, from the GA
Account without an MVA. This provision only
applies to the first such written request
received from the Participant during this
period for any Matured Term Value.
1.21 MATURITY DATE: The last day of a GA Account Term.
1.22 NET PURCHASE PAYMENT: The Purchase Payment less premium taxes, as
applicable.
1.23 NONUNITIZED SEPARATE An Account set up by Aetna under Title 38,
ACCOUNT: Section 38a-433 of the Connecticut General
Statutes that holds assets for GA Account
Terms greater than three years. There are
no discrete units for this Account. The
Participant does not participate in the
8
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1.23 NONUNITIZED SEPARATE investment gain or loss from the assets held
ACCOUNT (CONT'D): in the Nonunitized Separate Account. Such
gain or loss is borne entirely by Aetna.
These assets may be chargeable with
liabilities arising out of any other business
of Aetna.
1.24 PARTICIPANT: A person who participates in the Plan named
on the cover of this Contract.
1.25 PLAN ADMINISTRATOR: The individual or entity designated under
the terms of the SUNY Defined Contribution
Retirement Plan.
1.26 PROGRAM: The 403(b) optional retirement program which
was the predecessor program to the SUNY
Defined Contribution Plan.
1.27 PURCHASE PAYMENT(S): Payment(s) received by Aetna at the Aetna
Processing Office as a rollover or transfer
of 403(b) funds from another investment
provider under the SUNY optional retirement
program.
1.28 REINVESTMENT: The Participant will be mailed a notice at
least 18 calendar days before a Term's
Maturity Date. This notice will contain the
current Deposit Period's Guaranteed Rate(s),
Term(s) and projected Matured Term Value.
If no specific direction is given by the
Participant prior to the Maturity Date, each
Matured Term Value will be reinvested in a
Term of the same duration. If a Term of the
same duration is unavailable, each Matured
Term Value will automatically be reinvested
in the current Deposit Period for the next
shortest Term available in the same
Classification. If, however, only one Term is
available within the Classification, then the
Matured Term Value will automatically be
reinvested in that Term. A confirmation
statement will be mailed to the Participant
the next business day after the Maturity Date.
This notice will state the Term and Guaranteed
Rate(s) which will apply to the reinvested
Matured Term Value.
1.29 SEPARATE ACCOUNT: Variable Annuity Account C is a Separate
Account set up by Aetna Under the Connecticut
Insurance Laws and subject to the Laws of
New York. It is an account that buys and
holds shares of the Fund(s). Income, gains or
losses, realized or unrealized are credited
or charged to the Separate Account without
regard to other income, gains or losses of
Aetna. Aetna owns the assets held in the
Separate Account and is not a trustee as to
such amounts. This Separate Account generally
is not guaranteed and is held at market value.
The assets of the Separate Account, to the
extent of reserves and other contract
liabilities of the Account, shall not be
charged with other Aetna liabilities.
1.30 SURRENDER VALUE: The amount payable by Aetna upon the surrender
of any portion of an Individual Account.
9
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1.31 TRANSFERS: The movement of invested amounts among the
available Fund(s); the Fixed Plus Account and
the GA Account under this Contract during the
accumulation period.
1.32 VALUATION PERIOD (PERIOD): The period as of 4:15 p.m. Eastern time on
each day the New York Stock Exchange is open
for business to 4:15 p.m. Eastern time of the
next such business day, or such other day that
one or more of the Fund(s) determines its net
asset value.
1.33 VARIABLE ANNUITY: An Annuity with payments that vary with the
net investment results of a Separate Account.
II. GENERAL PROVISIONS
- -------------------------------------------------------------------------------
2.01 CHANGE OF CONTRACT: Except as provided below, only an authorized
officer of Aetna may change the terms of the
Contract by notifying the Contract Holder, in
writing, at least 30 days before the effective
date of the change. Any change will not
affect the amount or terms of any Annuity
which begins before the change.
Aetna may make a change that affects the
GA Account Market Value Adjustment (3.06)
with at least 30 days' advance written
notice to the Contract Holder. Any such
change shall become effective for any present
or future Participant.
Any change that affects the following
provisions of this Contract will not apply
to Individual Accounts in existence before the
effective date of the change:
(a) Net Purchase Payment(s) (1.22)
(b) GA Account Guaranteed Rate (1.15)
(c) Fixed Plus Account Guaranteed Rate (1.14)
(d) Net Return Factor(s) -- Separate Account
(3.04)
(e) Current Value (1.07)
(f) Surrender Value (1.30)
(g) Fund(s) Annuity Unit Value -- Separate
Account (4.06)
(h) Annuity Options (4.08)
(i) Fixed Annuity Interest Rates (4.01)
(j) Maximum Transfer Fee (3.07)
Any change that affects the Annuity options and
the tables for the options can be made:
(1) No earlier than 12 months after the
effective date of this Contract; and
(2) No earlier than 12 months after the
effective date of any such prior change.
New Participants covered under this Contract
on or after the effective date of any change
will be subject to the change. If the
Contract Holder does not agree to any change
under this provision, no new Participants
will be covered under this Contract. Aetna
will continue to accept Purchase Payments for
the Participants covered under this Contract
before the change. This Contract may also
be changed as required by federal or state
law.
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2.02 CHANGE OF FUND(S): Aetna, or the Separate Account may:
(a) Change the Fund(s) which may be invested
in by the Separate Account; and
(b) Replace the shares of any Fund(s) held in
the Separate Account with shares of
any other Fund(s).
Changes must be:
(a) Approved by a majority vote in the
Separate Account with respect to the
Fund(s) whose shares are to be replaced;
(b) Deemed necessary by Aetna under the
Investment Company Act of 1940; or
(c) Deemed necessary by Aetna to accomplish
the purpose of the Separate Account.
Aetna will notify the Contract Holder of any
change.
2.03 NONPARTICIPATING CONTRACT: Participants or their beneficiaries will not
have a right to share in the earnings of Aetna.
2.04 PAYMENTS: Aetna will make Annuity payments as and when
due. Aetna will determine other payments
and/or elections as of the end of the
Valuation Period in which the request is
received at the Aetna Processing Office. Such
payments will be made within 7 calendar days
of receipt at the Aetna Processing Office of
a written claim for payment which is in good
order, except as provided in 3.13.
2.05 STATE LAWS: This Contract complies with the laws of the
State of New York. Any Surrender Value,
death benefit or Annuity payments are equal
to or greater than the minimum required by such
laws. Annuity tables for legal reserve
valuation shall be as required by state law.
Such tables may be different from Annuity
tables used to determine Annuity payments.
2.06 CONTROL OF CONTRACT: This Contract is designed to accept rollovers
or transfers of 403(b) funds contributed to a
governmental plan which provided for
retirement income that is not subject to
Title I of the Employee Retirement Income
Security Act of 1974 (ERISA), as amended by
subsequent law including REA. The 403(b)
funds must be rolled over or transferred
from another investment provider under
the SUNY optional retirement program.
Participants may select the investment
option(s) for the Employer Account and/or the
Employee Account. Choices made under this
Contract must be in writing or in a form
satisfactory to Aetna. Until receipt of such
choices in the Aetna Processing Office, Aetna
may rely on any previous choices made. The
Participant mays direct Aetna to make an
in-service transfer to another investment
provider under the SUNY optional retirement
program, pursuant to IRS Revenue Ruling 90-24.
Checks for in-service transfers will be made
payable only to the acquiring investment
provider.
(a) Nontransferable and Nonassignable: This
Contract and any Individual Accounts are
nontransferable and nonassignable, except
pursuant to a ""qualified domestic
relations order'' as set forth under the
Internal Revenue Code of 1986, as it may
be amended from time to time.
(b) Distributions: A Participant may apply
for a distribution from his or her
Employee and/or Employer Account. However,
the Plan Administrator must certify in
writing that the distribution is in
accordance with the terms of the Program.
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2.06 CONTROL OF CONTRACT: (c) Participant Rights/Employee Account: The
(CONT'D): Participant has a nonforfeitable right
to the value of his or her Employee
Account pursuant to the terms of the
Program as interpreted by the Plan
Administrator.
(d) Participant Rights/Employer Account: The
Participant has a nonforfeitable right to
the value of his or her Employer Account
pursuant to the terms of, and to the
extent of his or her vested percentage
under the Program, as interpreted by the
Plan Administrator.
2.07 DESIGNATION OF Each Participant shall name the beneficiary of
BENEFICIARY: his or her Employer and Employee Account. Upon
the Participant's death, Aetna will pay any
portion of the Individual Account Current
Value to the beneficiary in any form permitted
under the Contract and as elected by the
beneficiary.
2.08 MISSTATEMENTS AND If Aetna finds the age of any payee to be
ADJUSTMENTS: misstated, the correct facts will be used to
adjust payments.
2.09 INCONTESTABILITY: Aetna cannot cancel this Contract because of
any error of fact on the application.
2.10 GRACE PERIOD: This Contract will remain in effect even if
Purchase Payments are not continued.
2.11 INDIVIDUAL CERTIFICATES: Aetna shall issue Certificates to the
Participants as required under the New York
Insurance Laws. The Certificate will summarize
certain provisions of the Contract.
Certificates are for information only and are
not a part of the Contract.
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
- -------------------------------------------------------------------------------
3.01 NET PURCHASE PAYMENT(S): This amount is the actual Purchase Payment
less any premium tax. As a rule, Aetna will
deduct the premium tax when Annuity benefits
are purchased (see Part IV). If Aetna
determines that a premium tax is due when
Purchase Payments are received or at any
other time, it will deduct the tax at that
time.
The Net Purchase Payment(s) may be credited
among:
(a) The Fixed Plus Account; and
(b) The GA Account; and
(c) The Fund(s) in which the Separate Account
invests.
Aetna must be told the allocation percentage to
be applied to the Fixed Plus Account, the
current Deposit Period for each of the
available Terms in the GA Account and/or each
Fund.
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3.01 NET PURCHASE PAYMENT(S): The Participant may change the allocation of
(CONT'D): future Net Purchase Payment(s) at any time,
without charge.
3.02 INDIVIDUAL ACCOUNT(S): This Contract is issued to the Contract Holder.
However, Aetna will maintain two Individual
Accounts for each Participant. These are:
(a) An Employer Account: This Individual
Account will be credited with the Net
Purchase Payment(s) attributable to a
rollover or transfer of employer
contributions; and
(b) An Employee Account: This Individual
Account will be credited with the Net
Purchase Payment(s) attributable to a
rollover or transfer of after-tax
employee contributions. This Contract
does not allow Net Purchase Payment(s)
attributable to a rollover or transfer
of salary reduction contributions.
3.03 FUND RECORD UNITS -- The portion of the Net Purchase Payment(s)
SEPARATE ACCOUNT: applied to the Separate Account will determine
the number of each Fund's Record Units. This
number is equal to the Net Purchase Payment
applied to the Fund divided by the Fund Record
Unit Value (see 3.05) for the Valuation Period
in which the Purchase Payment is received in
good order.
3.04 NET RETURN FACTOR(S) -- The Net Return Factors are used to compute all
SEPARATE ACCOUNT: Separate Account Values and payments for any
Fund.
The Net Return Factor for each Fund is equal to
1.0000000 plus the Net Return Rate.
The Net Return Rate is equal to:
(a) The sum of:
(i) The value of the shares of the Fund
held by the Separate Account at the
end of a Valuation Period; minus
(ii) The value of the shares of the Fund
held by the Separate Account at the
start of the Valuation Period; plus
or minus
(iii) Taxes (or reserves for taxes) on the
Separate Account (if any);
(b) Divided by the total value of the Fund
Record Units and Fund Annuity Units of
the Separate Account at the start of the
Valuation Period;
(c) Minus a daily actuarial charge at an
annual rate of 1.25% for Annuity mortality
and expense risks and profit and a daily
administrative charge which will not
exceed 0.25% on an annual basis. The
administrative charge may be changed
annually except for amounts which have
been used to purchase an Annuity.
13
<PAGE>
3.04 NET RETURN FACTOR(S) -- A Net Return Rate may be more or less than 0%.
SEPARATE ACCOUNT:
(CONT'D): The value of a share of the Fund is equal to
the net assets of the Fund divided by the
number of shares outstanding.
3.05 FUND RECORD UNIT VALUE -- Each Fund's Record Unit Value is computed by
SEPARATE ACCOUNT: multiplying the Net Return Factor for the
current Valuation Period by the Fund's Record
Unit Value for the previous Period. The dollar
value of a Fund's Record Unit, Separate
Account assets, and Variable Annuity payments
may go up or down due to investment gain
or loss.
3.06 MARKET VALUE ADJUSTMENT: There will be an MVA for a withdrawal from
the GA Account before the end of a Term when
the withdrawal is due to:
(1) A Transfer;
(2) A full or partial surrender; or
(3) A payment of a premium for Annuity
Option 2.
The MVA reflects the changes in market interest
rates since the beginning of the Deposit
Period. The market value adjustment amount
(the dollar amount of the MVA) can be positive
or negative. The total of all market value
adjustment amounts from every Guaranteed Term
affected by the withdrawal is called the
aggregate market value adjustment amount
(aggregate MVA amount). This aggregate MVA
amount may be a positive or negative figure,
and therefore, may increase or decrease the
actual amount withdrawn from the GA Account
to satisfy a withdrawal.
The amount of the withdrawal will be adjusted
to a market value amount as described below.
The market value adjusted amount will be equal
to the amount withdrawn multiplied by the
following ratio:
X
---
365
(1 + i)
---------
X
---
365
(1 + j)
Where:
i is the Deposit Period Yield
j is the Current Yield
x is the number of days remaining,
(computed from Wednesday of the week
of withdrawal) in the Guaranteed
Term.
14
<PAGE>
3.06 MARKET VALUE ADJUSTMENT Each business day, the Wall Street Journal
(CONT'D): publishes the prices of all outstanding U.S.
Treasury issues. In this display, Treasury
Notes are identified by the interest rate at
which they were issued and the month and year
in which they mature. The final figure shown
for a given Treasury issue is its yield to
maturity as of the preceding business day.
These yields determine the Current Yield and
the Deposit Period Yield in the market value
adjustment calculation.
The Deposit Period Yield will be determined as
follows:
(i) At the close of the last business day of
each week of the Deposit Period, a yield
will be computed as the average of the
yields on that day of U.S. Treasury Notes
which mature in the last three months of
the Guaranteed Term. (The average is
calculated by summing the yields of the
U.S. Treasury Notes included and dividing
that sum by the number of U.S. Treasury
Notes so included.)
(ii) The Deposit Period Yield is the average
of those yields for the Deposit Period.
If withdrawal is made prior to the close
of the Deposit Period, it is the average
of those yields on each week preceding
withdrawal. (The average is calculated by
summing the week by week yields included
and dividing that sum by the number of
week by week yields so included.)
The Current Yield is the average of the yields
on the last business day of the week preceding
withdrawal on the same U.S. Treasury Notes
included in the Deposit Period Yield. (The
average is calculated by summing the yields
of the U.S. Treasury Notes included and
dividing that sum by the number of U.S.
Treasury Notes so included.)
In the event that no U.S. Treasury Notes
which mature in the last three months of the
Guaranteed Term exist, Aetna reserves the
right to use the U.S. Treasury Notes that
mature in a following quarter.
Full and partial surrenders as well as
Transfers made in connection with the Sum
Payable at Death provision (see 3.11), or
in connection with Disability as defined
below, within six months of the date of the
Participant's death or termination of
employment due to disability, will be the
greater of:
(a) The aggregate MVA amount which is the
sum of all market value adjusted amounts
calculated due to a withdrawal of amounts
(for surrender or Transfer) from Terms
prior to the end of those Terms. The
aggregate MVA may be either positive or
negative; or
(b) The applicable portion of the Current
Value in the GA Account.
After the six month period, the surrender or
Transfer will be the aggregate MVA amount
(i.e., including all MVAs).
15
<PAGE>
3.06 MARKET VALUE ADJUSTMENT "Disability", for purposes of this Section
(CONT'D): means the inability to engage in any
substantial gainful activity by reason of
any medically determinable physical or mental
impairment which can be expected to result in
death or to be long-continued and indefinite
duration and can be expected to be for life.
The greater of the aggregate MVA amount or the
applicable portion of the Current Value in the
GA Account is applied to amounts withdrawn
from the GA Account for payment of a premium
under Annuity Options 3 or 4.
3.07 TRANSFER OF CURRENT VALUE Before an Annuity option is elected, all or
FROM THE FUNDS OR GA any portion of the Adjusted Current Value may
ACCOUNT: be transferred from any Fund or the GA Account
to:
(a) Any other Fund;
(b) The Fixed Plus Account; or
(c) Any GA Account Term available in the
current Deposit Period.
Amounts in a specific GA Account Term cannot
be transferred to the Deposit Period of another
Term within the same Classification except at
the Term's Maturity. Amounts applied to
Classifications of the GA Account may not be
transferred to the Fund(s) or the Fixed Plus
Account during the Deposit Period or for 90
days after the close of the Deposit Period.
For each Individual Account, twelve Transfers
of the Adjusted Current Value (excluding
Transfers from the GA Account at the end of
a Guaranteed Term) can be made during a
calendar year period. Should Aetna allow
additional Transfers, each may be subject to
a fee of up to $10.
3.08 TRANSFER OF CURRENT VALUE During each rolling 12 month period, before
FROM THE FIXED PLUS an Annuity option is elected, up to 20% of
ACCOUNT: the Current Value in the Fixed Plus Account
may be transferred to one or more of the
Fund(s) or to the GA Account's then-current
Deposit Period. The 20% limit is reduced
by any partial surrender(s) or amount(s)
used to purchase an Annuity during the
12 month period.
The Current Value of the Fixed Plus Account,
as used above, is the value when the request
is received at the Aetna Processing Office.
3.09 NOTICE TO THE PARTICIPANT: Aetna will notify the Participant each year
of:
(a) The value of any amounts held in:
(1) The Fixed Plus Account;
(2) The GA Account;
(3) The Fund(s) for the Separate
Account;
(b) The number of any Fund(s) Record Units;
(c) The Fund(s) Record Unit Value(s); and
(d) The Surrender Values of these amounts.
Such number or values will be as of a date no
more than 60 days before the date of the
notice.
16
<PAGE>
3.10 TIMING AND MANNER OF Distribution of benefits to a Participant may
DISTRIBUTIONS: be made in the form of an Annuity, as
described in 4.01. In certain limited
circumstances, as permitted under the terms
of the Program, distribution may be made in a
lump sum, as described in 3.12 and 3.13. The
Participant may elect the form of
distribution subject to Plan Administrator
certification in writing that the Participant
is eligible, both as to the timing and the
form of distribution.
The distribution of benefits accrued after
December 31, 1986 must be made in a lump sum
or must begin by April 1 of the calendar year
following the calendar year in which the
Participant attains age 70 1/2 or retires,
whichever occurs later.
During the calendar year in which the
Participant attains age 70 1/2, Aetna will
notify the Participant regarding the
distribution of benefits. If the Participant
does not request commencement of benefits
as described above, Aetna will not be
responsible for compliance with the Code
Section 401(a)(9) minimum distribution
requirements and for any adverse tax
consequences that may result.
3.11 SUM PAYABLE AT DEATH Aetna will pay any portion of the Individual
(BEFORE ANNUITY PAYMENTS Accounts Current Value to the beneficiary when:
START):
(a) The Participant dies before Annuity
payments start; and
(b) The notice of death is received in
good order by Aetna.
The sum payable will be the Current Value on
the date when the notice is received in good
order at the Aetna Processing Office. The
amount paid from the Fixed Plus Account will
not be less than the Net Purchase Payment(s)
allocated to the Fixed Plus Account plus
interest (less any prior Transfers,
surrenders, or amounts used to purchase
Annuity options). The beneficiary may choose
to apply any sum under an Annuity option
(4.08), subject to any other terms and
conditions of this Contract, or to receive a
lump sum.
If the beneficiary of the death proceeds is
the Participant's surviving spouse, the first
Annuity payment or the lump sum payment is
not required to begin earlier than when the
Participant would have attained age 70 1/2
or such later date as may be allowed under
federal law or regulations. If the beneficiary
is not the surviving spouse, all of the
Current Value must either be applied to an
Annuity option within one year of the
Participant's death or be paid within 5 years
of the Participant's death (see Part IV). If
no beneficiary exists, the payment will
be made to the Participant's estate.
3.12 SURRENDER VALUE: Except as otherwise provided in 3.13, a
Participant may request a partial or full
surrender from his or her Individual Accounts
as a Transfer to another investment provider
under the SUNY optional retirement program.
In certain limited circumstances, as
permitted under the terms of the Program,
the Participant may elect a lump sum
distribution subject to Plan Administrator
certification in
17
<PAGE>
3.12 SURRENDER VALUE writing that the Participant is eligible,
(CONT'D): both as to the timing and the form of
distribution. Written direction from the
Participant on a form acceptable to Aetna must
be received in the Aetna Processing Office.
Full and partial surrenders are satisfied by
withdrawing amounts from each of the
investment options in which the Individual
Account is invested (the Fund(s), the
Fixed Plus Account, the GA Account Short-
Term Classification and the GA Account
Long-Term Classification) on a pro rata
basis. Terms within the GA Account
Short-Term and Long-Term Classifications
are considered as two separate investment
options. Amounts will be removed within
a GA Account Classification starting with
the Term still in effect with the oldest
Deposit Period. However, the Participant
may specify a particular order in which
investment options will be liquidated in
order to satisfy a partial surrender
request.
Any amount that is withdrawn from the Fixed
Plus Account will be subject to the
limitations in 3.13.
3.13 PAYMENT OF SURRENDER When Aetna receives a full surrender request,
VALUE: no additional partial surrenders or Transfers
from the Fixed Plus Account are permitted
during the payout period. The Current Value
of the Fixed Plus Account will be paid in
five annual payments of:
(a) One-fifth of the Current Value on the day
the request is received in good order at
Aetna's Processing Office, reduced by
any amount from the Fixed Plus account
transferred, surrendered or used to
purchase Annuity benefits during the
prior 12 months;
(b) One-fourth of the remaining Current
Value 12 months later;
(c) One-third of the remaining Current
Value 12 months later;
(d) One-half of the remaining Current
Value 12 months later; and
(e) The balance of the Current Value 12
months later.
The Current Value will be paid in a lump sum
when a surrender is:
(a) Due to a Participant's death before
Annuity payments begin;
(b) Used to purchase Annuity benefits;
(c) When the amount in the Fixed Plus Account
is $3,500 or less, the surrendered amount
is to be transferred to another
investment provider under the SUNY
optional retirement program and no amount
has been surrendered, transferred or
used to purchase Annuity benefits during
the prior 12 months.
(d) When the Individual Accounts Adjusted
Current Value is $4,000 or less and the
surrendered amount is paid to the
Participant in a lump sum.
18
<PAGE>
3.13 PAYMENT OF SURRENDER Any full surrender from the Fixed Plus
VALUE (CONT'D): Account may be canceled at any time before
the end of the payment period.
During each rolling 12 month period, up to
20% of the Current Value in the Fixed
Plus Account may be withdrawn as a partial
surrender. This 20% limit is reduced by
any amount(s) transferred or used to
purchase an Annuity during the 12 month
period.
3.14 ALTERNATIVE PAYMENT OF As an alternative to 3.13, the Contract
SURRENDER VALUE: Holder may elect the following: If the
entire Contract is to be surrendered by the
Contract Holder, the Contract Holder must
notify Aetna of such intent no less than
60 days prior to the proposed surrender date.
Within 30 days of receipt of such notice,
Aetna will supply the Contract Holder with
the specific period and interest rate that
would apply to a complete surrender of
the Contract under (b) below. The Contract
Holder must then irrevocably elect, in
writing, to receive the total of all
Individual Accounts' Current Values invested
in the Fixed Plus Account:
(a) In the manner described in 3.13 above; or
(b) In level, annual payments for a period
not to exceed ten years.
If this alternative (b) is elected, the
interest credited to the Fixed Plus Account
may be reduced by up to 1.5% from the net
effective rate of interest being credited
upon the date of surrender. This interest
rate will remain constant throughout the
payment period.
3.15 REINSTATEMENT: All or a portion of the proceeds of a full
surrender of this Contract may be reinvested
within 30 days after the surrender if
allowed by law. Any Market Value Adjustment
deducted from GA Account surrenders will not
be included in the reinstatement. Amounts
will be reinstated among the Fixed Plus
Account, GA Account, and the Fund(s) in
the same proportion as they were at the
time of surrender. Any amount reinstated to
the GA Account will be credited to the
available Terms of the current Deposit Period.
In the event that a Term of the same duration
is unavailable, amounts will be reinvested
in the next shortest Term available in the
current Deposit Period. If no shorter Term is
available, the next longer Term will be used.
The number of Fund(s) Record Units reinstated
will be based on the Record Unit Value(s)
next computed after receipt at the Aetna
Processing Office of the reinstatement request
and the amount to be reinvested.
Reinstatement is permitted only once.
19
<PAGE>
IV. ANNUITY PROVISIONS
- -------------------------------------------------------------------------------
4.01 CHOICES TO BE MADE: The Participant may elect an Annuity option
by telling Aetna to pay all or any portion of
his or her Individual Accounts Current Value
(minus any premium tax) as a premium for an
Annuity under Option 2, 3, or 4 (see 4.08).
A completed and signed election form must be
submitted to the Aetna Processing Office.
The form must include Plan Administrator
certification that the Participant is
entitled to a distribution under the terms
of the Program and that the Annuity option
chosen is permitted under the terms of the
Program. Any election of an Annuity option
must comply with the incidental death
benefit rules under Code Section 401(a)(9)
regulations. This restriction does not apply
if Option 4 is chosen and the second
Annuitant is the spouse of the Participant.
Generally, the first Annuity payment must be
made by April 1 of the calendar year
following the calendar year in which the
Participant attains age 70 1/2 or retires,
whichever occurs later.
When an Annuity option is chosen, Aetna
must also be told if payments are to be made
other than monthly and to pay:
(a) A Fixed Annuity using the General
Account;
(b) A Variable Annuity using any of the
Fund(s) made available by Aetna for
Annuity purposes; or
(c) A combination of (a) and (b).
The assumed interest rate for a Fixed Annuity
and the interest rate under Annuity option 1
will be no less than 3%. Aetna may add
interest daily under Annuity option 1 at a
higher rate as determined by its Board of
Directors.
If a Variable Annuity is chosen, an Assumed
Annual Net Return Rate of 5% may be chosen.
If not chosen, Aetna will use an Assumed
Annual Net Return Rate of 3.5%.
With the exception of Option 2 on a variable
basis, once elected, an Annuity option may not
be revoked.
4.02 TERMS OF ANNUITY OPTIONS: (a) No choice of any Annuity option may be
made if the first payment would be less
than $20 or if the total payments in a
year would be less than $100.
(b) If a Fixed Annuity under Option 2, 3, or
4 is chosen and a larger payment would
result from applying the Surrender Value
to a current Aetna single premium
immediate Annuity, Aetna will make
the larger payment.
(c) Age, where used in the following tables,
means age on the birthday closest to the
date of the first payment.
The Annuity rates for Options 3 and 4 are
based on mortality from 1983 Table a.
20
<PAGE>
4.02 TERMS OF ANNUITY OPTIONS (d) Assumed Annual Net Return Rate is
(CONT'D): the interest rate used to determine
the amount of the first Annuity payment
under a Variable Annuity. The
Separate Account must earn this rate
plus enough to cover the mortality
and expense risks charges (which may
include profit) and administrative
charges if future Variable Annuity
Payments are to remain level.
4.03 ANNUITY PAYMENTS TO In no event may any payments to the
PARTICIPANT: Participant under an Annuity option extend
beyond:
(a) The life of the Participant;
(b) The lives of the Participant and the
beneficiary;
(c) A period certain greater than the
Participant's life expectancy according
to regulations under Code Section
401(a)(9), determined as of the date
payments are to commence; or
(d) A period certain greater than the life
expectancies of the Participant and the
beneficiary according to regulations
under Code Section 401(a)(9), determined
as of the date payments are to begin.
4.04 DEATH OF ANNUITANT: When an Annuitant dies under Options 2 and 3,
the present value of any remaining guaranteed
payments will be paid in one sum to the
beneficiary or, upon election by the
beneficiary, any remaining payments will
continue to the beneficiary. If no
beneficiary exists, the present value of any
remaining guaranteed payments will be paid in
one lump sum to the Participant's estate.
However, if a beneficiary dies while under
Option 1 or while receiving Annuity payments,
the present value of any remaining payments
will be paid in one lump sum to the
beneficiary's estate. The interest rate used
to determine the first payment will be used
to calculate the present value.
In no event may any payments to the
beneficiary under an Annuity option extend
beyond:
(a) The life of the beneficiary determined as
of the date payments are to commence; or
(b) Any certain period greater than the
beneficiary's life expectancy as
determined by regulations under Code
Section 401(a)(9) as of the date
payments are to begin.
4.05 FUND(S) ANNUITY UNITS -- The number of each Fund's Annuity units is
SEPARATE ACCOUNT: based on the amount of the first Variable
Annuity payment which is equal to:
(a) The portion of the Current Value (minus
any premium tax) applied to pay a
Variable Annuity; divided by
(b) 1,000; multiplied by
(c) The payment rate for the option chosen.
21
<PAGE>
4.05 FUND(S) ANNUITY UNITS -- Such amount, or portion, of the variable
SEPARATE ACCOUNT payment will be divided by the appropriate
(CONT'D): Fund(s) Annuity Unit Value (see 4.06) on the
tenth Valuation Period before the due date
of the first payment to determine the number
of each Fund Annuity Units. The number of
each Fund Annuity Units remains fixed. Each
future payment is equal to the sum of the
products of each Fund Annuity Unit Value
multiplied by the appropriate number of Units.
The Fund Annuity Unit Value on the tenth
Valuation Period prior to the due date of
the payment is used.
4.06 FUND(S) ANNUITY UNIT For any Valuation Period, a Fund(s) Annuity
VALUE -- SEPARATE Unit Value is equal to:
ACCOUNT:
(a) The value for the previous Period;
multiplied by
(b) The Net Return Factor(s) (see 4.07) for
the Period; multiplied by
(c) A factor to reflect the Assumed Annual
Net Return Rate.
The factor for 3.5% per year is .9999058; for
5% per year it is .9998663.
The dollar value of a Fund(s) Annuity Unit
Values and payments may go up or down due to
investment gain or loss.
If Variable Annuity payments are not to
decrease, Aetna must earn a gross return on
the assets of the Separate Account of:
- 4.75% on an annual basis plus an annual
return of up to 0.25% to offset the
administrative charge set at the time
Annuity payments commence if an Assumed
Annual Net Return Rate of 3.5% is chosen; or
- 6.25% on an annual basis plus an annual
return of up to 0.25% to offset the
administrative charge set at the time
Annuity payments commence if an Assumed
Annual Net Return Rate of 5% is chosen.
Payments shall not be changed due to changes
in the mortality or expense results or
administrative charges.
4.07 ANNUITY NET RETURN The Annuity Return Factor(s) are used to
FACTOR(S) -- SEPARATE compute all Separate Account Annuity payments
ACCOUNT: for any Fund.
The Annuity Net Return Factor(s) for each
Fund is equal to 1.0000000 plus the Net
Return Rate. The Net Return Rate is equal to:
(a) The value of the shares of the Fund held
by the Separate Account at the end of
a Valuation Period; minus
(b) The value of the shares of the Fund held
by the Separate Account at the start of
the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the
Separate Account (if any);
(d) The total value of the Fund(s) Record
Units and the Fund(s) Annuity Units of
the Separate Account at the start of the
Valuation Period; minus
22
<PAGE>
4.07 ANNUITY NET RETURN (e) A daily actuarial charge at an annual
FACTOR(S) -- SEPARATE rate of 1.25% for Annuity mortality and
ACCOUNT (CONT'D): expense risks and profit and a daily
administrative charge which will not
exceed 0.25% on an annual basis.
A Net Return Rate may be more or less than 0%.
The value of a share of the Fund is equal to
the net assets of the Fund divided by the
number of shares outstanding.
4.08 ANNUITY OPTIONS: Option 1 -- Payments of Interest on Sum Left
with Aetna -- This option may be used only by
the beneficiary when the Participant dies
before Aetna has started paying an Annuity.
A portion or all of the sum paid upon death
may be held under this option and will be held
in the General Account of Aetna at interest
(see 4.01). The beneficiary may later tell
Aetna to:
(a) Pay a portion or all of the sum held by
Aetna; or
(b) Apply a portion or all of the sum held by
Aetna to any Annuity option below.
If the beneficiary is the Participant's
surviving spouse, payment may be deferred to a
date not later than when the Participant would
have attained age 70 1/2.
If the beneficiary is not the Participant's
surviving spouse, the entire sum must either
be applied to an Annuity option within one
year of the Participant's death, or be paid
to the beneficiary within 5 years after the
Participant's death.
Option 2 -- Payments for a Stated Period of
Time -- An Annuity will be paid for the number
of years chosen. The number of years that may
be chosen will be determined in part by the
accumulation options in which the Individual
Account Current Value was held prior to the
election of the Annuity option as follows:
For amounts invested in the GA Account or one
or more of the Fund(s), the number of years
chosen must be at least 3 and not more than
30 and the Annuity may be a Fixed or Variable
Annuity.
For amounts invested in the Fixed Plus Account,
the number of years chosen must be at least 6
and not more than 30 and the Annuity must be
a Fixed Annuity.
If payments for this option are made under
a Variable Annuity, the present value of any
remaining payments may be withdrawn at any
time.
Option 3 -- Life Income -- An Annuity will be
paid for the life of the Annuitant. If also
chosen, Aetna will guarantee payments for 60,
120, 180, or 240 months.
23
<PAGE>
4.08 ANNUITY OPTIONS Option 4 -- Life Income for Two Payees --
(CONT'D): An Annuity will be paid during the lives of
the Annuitant and a second Annuitant. Payments
will continue until both Annuitants have died.
When this option is chosen, a choice must be
made of:
(a) 100% of the payment to continue after the
first death;
(b) 66 2/3% of the payment to continue after
the first death;
(c) 50% of the payment to continue after the
first death;
(d) Payments for a minimum of 120 months,
with 100% of the payment to continue
after the first death; or
(e) 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.
Other Options -- Aetna may make other options
available as allowed by the laws of the state
in which this Contract is delivered.
24
<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL
YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3 3.00% $28.99 $86.76 $172.88 $343.23
4 3.00% 22.06 66.02 131.56 261.19
5 3.00% 17.91 53.59 106.78 211.99
6 3.00% 15.14 45.30 90.27 179.22
7 3.00% 13.16 39.39 78.49 155.83
8 3.00% 11.68 34.96 69.66 138.31
9 3.00% 10.53 31.52 62.81 124.69
10 3.00% 9.61 28.77 57.33 113.82
11 3.00% 8.86 26.52 52.85 104.93
12 3.00% 8.24 24.65 49.13 97.54
13 3.00% 7.71 23.08 45.98 91.29
14 3.00% 7.26 21.73 43.29 85.95
15 3.00% 6.87 20.56 40.96 81.33
16 3.00% 6.53 19.54 38.93 77.29
17 3.00% 6.23 18.64 37.14 73.74
18 3.00% 5.96 17.84 35.56 70.59
19 3.00% 5.73 17.13 34.14 67.78
20 3.00% 5.51 16.50 32.87 65.26
21 3.00% 5.32 15.92 31.72 62.98
22 3.00% 5.15 15.40 30.68 60.92
23 3.00% 4.99 14.92 29.74 59.04
24 3.00% 4.84 14.49 28.88 57.33
25 3.00% 4.71 14.09 28.08 55.76
26 3.00% 4.59 13.73 27.36 54.31
27 3.00% 4.47 13.39 26.68 52.97
28 3.00% 4.37 13.08 26.06 51.74
29 3.00% 4.27 12.79 25.49 50.60
30 3.00% 4.18 12.52 24.95 49.53
- --------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
ADJUSTED
AGE OF
ANNUITANT NONE 60 120 180 240
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 $4.05 $4.05 $4.03 $3.99 $3.93
51 4.12 4.11 4.09 4.05 3.99
52 4.19 4.19 4.16 4.11 4.04
53 4.27 4.26 4.23 4.18 4.10
54 4.35 4.34 4.31 4.25 4.16
55 4.44 4.42 4.39 4.32 4.22
56 4.53 4.51 4.47 4.40 4.29
57 4.62 4.61 4.56 4.48 4.35
58 4.72 4.71 4.65 4.56 4.42
59 4.83 4.81 4.75 4.64 4.49
60 4.95 4.93 4.86 4.73 4.55
61 5.07 5.05 4.97 4.83 4.62
62 5.20 5.17 5.08 4.92 4.69
63 5.34 5.31 5.20 5.02 4.76
64 5.49 5.45 5.33 5.12 4.83
65 5.65 5.61 5.47 5.22 4.89
66 5.82 5.77 5.61 5.33 4.96
67 6.01 5.94 5.75 5.44 5.02
68 6.20 6.13 5.91 5.54 5.08
69 6.41 6.33 6.07 5.65 5.14
70 6.64 6.54 6.23 5.76 5.19
71 6.88 6.76 6.41 5.86 5.24
72 7.14 7.00 6.59 5.97 5.28
73 7.43 7.26 6.77 6.06 5.32
74 7.73 7.53 6.96 6.16 5.35
75 8.06 7.82 7.14 6.25 5.38
- -------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
26
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
ADJUSTED AGES
- --------------------------
SECOND
ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.03
55 55 3.88 4.25 4.47 3.87 4.14
55 60 3.99 4.44 4.71 3.98 4.42
60 55 3.99 4.44 4.71 3.98 4.42
60 60 4.24 4.71 4.99 4.23 4.57
60 65 4.38 4.97 5.32 4.38 4.93
65 60 4.38 4.97 5.32 4.38 4.93
65 65 4.72 5.33 5.70 4.71 5.14
65 70 4.93 5.68 6.15 4.91 5.66
70 65 4.93 5.68 6.15 4.91 5.66
70 70 5.40 6.21 6.70 5.36 5.96
70 75 5.69 6.68 7.32 5.62 6.67
75 70 5.69 6.68 7.32 5.62 6.67
75 75 6.37 7.45 8.15 6.23 7.12
75 80 6.78 8.11 8.99 6.54 8.13
- -------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
27
<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ------------------------------------------------------------
GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL
YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3 3.50% $29.19 $87.33 $173.91 $344.86
4 3.50% 22.27 66.61 132.65 263.04
5 3.50% 18.12 54.19 107.92 213.99
6 3.50% 15.35 45.92 91.44 181.32
7 3.50% 13.38 40.01 79.69 158.01
8 3.50% 11.90 35.59 70.88 140.56
9 3.50% 10.75 32.16 64.05 127.00
10 3.50% 9.83 29.42 58.59 116.18
11 3.50% 9.09 27.18 54.13 107.34
12 3.50% 8.46 25.32 50.42 99.98
13 3.50% 7.94 23.75 47.29 93.78
14 3.50% 7.49 22.40 44.62 88.47
15 3.50% 7.10 21.24 42.31 83.89
16 3.50% 6.76 20.23 40.29 79.89
17 3.50% 6.47 19.34 38.51 76.37
18 3.50% 6.20 18.55 36.94 73.25
19 3.50% 5.97 17.85 35.54 70.47
20 3.50% 5.75 17.22 34.28 67.98
21 3.50% 5.56 16.65 33.15 65.74
22 3.50% 5.39 16.13 32.13 63.70
23 3.50% 5.24 15.66 31.19 61.85
24 3.50% 5.09 15.24 30.34 60.17
25 3.50% 4.96 14.85 29.56 58.62
26 3.50% 4.84 14.49 28.85 57.20
27 3.50% 4.73 14.15 28.19 55.90
28 3.50% 4.63 13.85 27.58 54.69
29 3.50% 4.53 13.57 27.02 53.57
30 3.50% 4.45 13.30 26.49 52.53
- ------------------------------------------------------------
</TABLE>
28
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
<TABLE>
<CAPTION>
- ---------------------------------------------------------
ADJUSTED
AGE OF
ANNUITANT NONE 60 120 180 240
- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- ---------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
29
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
ADJUSTED AGES
- --------------------
SECOND
ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ---------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
30
<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL
YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3 5.00% $29.80 $89.04 $176.99 $349.72
4 5.00% 22.89 68.38 135.93 268.58
5 5.00% 18.74 56.00 111.33 219.98
6 5.00% 15.99 47.77 94.96 187.64
7 5.00% 14.02 41.90 83.30 164.59
8 5.00% 12.56 37.52 74.58 147.35
9 5.00% 11.42 34.11 67.81 133.99
10 5.00% 10.51 31.40 62.42 123.34
11 5.00% 9.77 29.19 58.03 114.66
12 5.00% 9.16 27.36 54.38 107.45
13 5.00% 8.64 25.81 51.31 101.39
14 5.00% 8.20 24.50 48.69 96.21
15 5.00% 7.82 23.36 46.44 91.75
16 5.00% 7.49 22.37 44.47 87.88
17 5.00% 7.20 21.51 42.75 84.48
18 5.00% 6.94 20.74 41.23 81.47
19 5.00% 6.71 20.06 39.88 78.80
20 5.00% 6.51 19.46 38.68 76.42
21 5.00% 6.33 18.91 37.59 74.28
22 5.00% 6.17 18.42 36.62 72.35
23 5.00% 6.02 17.98 35.73 70.61
24 5.00% 5.88 17.57 34.93 69.02
25 5.00% 5.76 17.20 34.20 67.57
26 5.00% 5.65 16.87 33.53 66.25
27 5.00% 5.54 16.56 32.92 65.04
28 5.00% 5.45 16.28 32.35 63.93
29 5.00% 5.36 16.01 31.83 62.90
30 5.00% 5.28 15.77 31.35 61.95
- ------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
OPTION 3
LIFE INCOME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
ADJUSTED
AGE OF
ANNUITANT NONE 60 120 180 240
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 6.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- --------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
32
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
ADJUSTED AGES
- -------------------------
SECOND
ANNUITANT ANNUITANT OPTION 4A OPTION 4B OPTION 4C OPTION 4D OPTION 4E
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- -------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
33
<PAGE>
<TABLE>
<S> <C>
[LOGO] APPLICATION FORM Aetna Life Insurance and Annuity Company
Group Annuity Contracts 151 Farmington Avenue, Hartford, CT 06156-8022
- ---------------------------------------------------------------------------------------------------------------------------
CLIENT - Name of applicant/employer Doe University
INFORMATION ----------------------------------------------------------------------------------------------------
- Address 123 Any Street
----------------------------------------------------------------------------------------------------
- City Anywhere State Anystate Zip Code 00001
----------------------------------------------------------------------------------------------------
- Tax Identification No. 987-65-4321
----------------------------------------------------------------------------------------------------
- Name of plan (if any) Tax-Deferred Plan
----------------------------------------------------------------------------------------------------
ACCOUNT 5. Type of plan and section of Internal Revenue Code (if any) under which plan is to qualify:
INFORMATION / / 403(b) Public School System / / 457 Public Employer / / Non-457 Tax-Exempt Deferred
Tax-Deferred Annuity Deferred Compensation Compensation (for select
management and highly
/ / 403(b) for 501(c)(3) Organization compensated employees)
Tax-Deferred Annuity (Organizations formed after / / 457 Tax-Exempt Deferred
10/9/69 must have IRS ruling regarding 501(c)(3) status) Compensation (for select
/ / Retirement Plus / / AHA Retirement Plus management and highly
compensated employees)
/ / 401(k) for 501(c)(3) Organization (Organizations
formed after 10/9/69 must have IRS ruling regarding / / Other ____________________
501(c)(3) status)
/ / Optional Retirement Plan for Higher Education
/ / 403(b) / / 401(a)
----------------------------------------------------------------------------------------------------
- Is this contract subject to ERISA Title I? / / Yes If yes, Plan anniversary Month ___ Day ___
----------------------------------------------------------------------------------------------------
- Contract is to be: / / Allocated / / Unallocated 8. Contract effective date 12-15-92
----------------------------------------------------------------------------------------------------
9. GAA Maturity Notices should be mailed to: / / Participants / / Employer
/ / Participants and Employer
----------------------------------------------------------------------------------------------------
10. Will this contract change or replace any existing life insurance or annuity
contract? / / Yes / / No
----------------------------------------------------------------------------------------------------
If yes, please provide carrier name, account number, and date to be cancelled
----------------------------------------------------------------------------------------------------
11. Special Requests
----------------------------------------------------------------------------------------------------
INVESTMENT 12. PARTICIPANTS MAY ELECT THE INVESTMENT ALLOCATION FOR:
OPTIONS Employer and Employee contributions / / Employee
----------------------------------------------------------------------------------------------------
13. FOR EMPLOYER DIRECTED ALLOCATIONS: Enter the percentage of payment and the investment option
chosen for allocation purposes.
/ / Employer Modal Contributions: 100% GAA
-----------------------------------------
/ / Employee Modal Contributions: 50% Fixed; 50% Variable
-----------------------------------------
/ / Transferred Assets:
-----------------------------------------------------
----------------------------------------------------------------------------------------------------
I UNDERSTAND THAT AMOUNTS WITHDRAWN FROM A GAA TERM MAY BE SUBJECT TO A MARKET VALUE ADJUSTMENT
PRIOR TO THE MATURITY DATE OF THAT TERM AS SPECIFIED IN THE CONTRACT. I FURTHER UNDERSTAND THAT
ANNUITY PAYMENTS AND ACCOUNT VALUES (IF ANY), WHEN BASED ON THE INVESTMENT EXPERIENCE OF A
SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
Dated at Anywhere, Anystate this 1st day of December 1992
------------------------- ----- -------------
CITY AND STATE
Joe Smith John D. Doe Plan Administrator
------------------------- ------------------------------------
WITNESS CONTRACT HOLDER/TITLE
HOME OFFICE USE: ACCEPTED _________________
</TABLE>
<PAGE>
<TABLE>
<S> <C>
-----------------------------------------------------------------------------------------------------
PRODUCER'S Do you have any reason to believe any existing life insurance or annuity contracts will be modified or
NOTE: replaced if this contract is issued? / / Yes / / No
---------------------------
Signature of Producer
-----------------------------------------------------------------------------------------------------
CORRECTIONS AND AMENDMENTS (Home Office Use Only). Errors and omissions may be corrected by the
Company but no change in plan, classification, amount, age at issue, or extra benefits shall be made
without written consent of the Contract Holder. (N/A in W. VA.)
-----------------------------------------------------------------------------------------------------
--------------------------------------------------
Affix Prospectus
Receipt Here
---------------------------------------------------
</TABLE>
<PAGE>
------------------------------------------------------------
[LOGO]
AETNA LIFE INSURANCE AND ANNUITY COMPANY
HOME OFFICE: 151 Farmington Avenue
Hartford, Connecticut 06156
(800) 525-4225
Group Variable, Fixed, or Combination Contract
Nonparticipating
------------------------------------------------------------
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON
INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT
GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS CONTRACT CONTAINS A MARKET VALUE
ADJUSTMENT FORMULA. APPLICATION OF A MARKET VALUE ADJUSTMENT MAY RESULT IN
EITHER AN INCREASE OR DECREASE IN THE CURRENT VALUE. THE MARKET VALUE
ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE TIME OF ITS
MATURITY.
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY
ENDORSEMENT
The Contract and the Certificate are hereby endorsed to amend SECTION 1.11
entitled FUND(S) to read as follows.
The open-end registered management investment companies (mutual funds)
made available by Aetna under this Contract. These Funds currently are:
- - Aetna Variable Fund
- - Aetna Income Shares
- - Aetna Variable Encore Fund
- - Aetna Investment Advisers Fund, Inc.
- - Alger American Fund - Alger American Growth Portfolio
- - Alger American Fund - Alger American Small Capitalization Portfolio
- - Calvert Responsibly Invested Balanced Portfolio
- - Fidelity Investments Variable Insurance Products Fund II - Asset Manager
Portfolio
- - Fidelity Investments Variable Insurance Products Fund II - Contrafund
Portfolio
- - Fidelity Investments Variable Insurance Products Fund II - Index 500 Portfolio
- - Fidelity Investments Variable Insurance Portfolio Fund - Equity- Income
Portfolio
- - Franklin Government Securities Trust
- - Janus Aspen Series - Aggressive Growth Portfolio
- - Janus Aspen Series - Growth Portfolio
- - Janus Aspen Series - Short-Term Bond Portfolio
- - Janus Aspen Series - Worldwide Growth Portfolio
- - Lexington Emerging Markets Fund, Inc.
- - Lexington Natural Resources Trust
- - Neuberger & Berman Advisers Management Trust - Growth Portfolio
- - Scudder Variable Life Investment Fund - International Portfolio
- - TCI Portfolios, Inc. - TCI Growth
Additional information regarding these Funds is available in each Fund
prospectus.
Endorsed and made part of the Contract and the Certificate effective
September 1, 1995.
/s/ Dan Kearney
-----------------
President
Aetna Life Insurance and Annuity Company
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of Aetna Life Insurance and Annuity Company
and Contract Owners of Aetna Variable Annuity Account C:
We consent to the use of our reports dated February 6, 1996 and February 16,
1996 included herein and to the references to our Firm under the captions
"Condensed Financial Information" in the Prospectus and "Independent Auditors"
in the Statement of Additional Information.
Our report dated February 6, 1996 refers to a change in 1993 in the Company's
method of accounting for certain investments in debt and equity securities.
KPMG Peat Marwick LLP
Hartford, Connecticut
April 16, 1996
<PAGE>
151 Farmington Avenue SUSAN E. BRYANT
Hartford, CT 06156 Counsel
Law & Regulatory Affairs, RE4C
(860) 273-7834
Fax: (860) 273-8340
April 17, 1996
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Dear Sir or Madam:
As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I
hereby consent to the use of my opinion dated February 28, 1996 (incorporated
herein by reference to the 24f-2 Notice for the fiscal year ended
December 31, 1995 filed on behalf of Variable Annuity Account C of Aetna Life
Insurance and Annuity Company on February 29, 1996) as an exhibit to this
Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File
No. 33-81216) and to my being named under the caption "Legal Matters" therein.
Sincerely,
/s/ Susan E. Bryant
Susan E. Bryant
Counsel
Aetna Life Insurance and Annuity Company
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 6,038,034,475
<INVESTMENTS-AT-VALUE> 6,632,117,659
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,632,117,659
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 6,632,117,659
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,632,117,659
<DIVIDEND-INCOME> 730,430,612
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (71,090,542)
<NET-INVESTMENT-INCOME> 659,340,070
<REALIZED-GAINS-CURRENT> 160,673,967
<APPREC-INCREASE-CURRENT> 520,603,951
<NET-CHANGE-FROM-OPS> 1,340,617,988
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,769,805,868
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
