<PAGE>
As filed with the Securities and Exchange Registration No. 33-75962*
Commission on February 21, 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. 5 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment To
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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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:
X on May 1, 1996 pursuant to paragraph (a)(1) of Rule 485
-----------
*Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which includes
all the information which would currently be required in a prospectus relating
to the securities covered by the following earlier Registration Statement: 33-
75978.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
Registrant expects to file a Rule 24f-2 Notice for the fiscal year ended
December 31, 1995 on or before February 29, 1996.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
1 Cover Page. . . . . . . . . . . . . . . Cover Page
2 Definitions . . . . . . . . . . . . . . Definitions
3 Synopsis or Highlights. . . . . . . . . Prospectus Summary; Fee
Table
4 Condensed Financial Information . . . . Condensed Financial
Information
5 General Description of Registrant,
Depositor, and Portfolio Companies. . . The Company; Variable
Annuity Account C;
The Funds
6 Deductions and Expenses . . . . . . . . Charges and Deductions;
Distribution
7 General Description of Variable Annuity
Contracts . . . . . . . . . . . . . . . Purchase; Miscellaneous
8 Annuity Period. . . . . . . . . . . . . Annuity Period
9 Death Benefit . . . . . . . . . . . . . Death Benefit During
Accumulation Period;
Death Benefit Payable
During the Annuity Period
10 Purchases and Contract Value. . . . . . Purchase; Contract
Valuation
11 Redemptions . . . . . . . . . . . . . . Right to Cancel;
Withdrawals
12 Taxes . . . . . . . . . . . . . . . . . Tax Status
13 Legal Proceedings . . . . . . . . . . . Miscellaneous - Legal
Matters and Proceedings
14 Table of Contents of the Statement of
Additional Information. . . . . . . . . Contents of the Statement
of Additional Information
<PAGE>
FORM N-4
ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
15 Cover Page. . . . . . . . . . . . . . . Cover page
16 Table of Contents . . . . . . . . . . . Table of Contents
17 General Information and History . . . . General Information and
History
18 Services. . . . . . . . . . . . . . . . General Information and
History; Independent
Auditors
19 Purchase of Securities Being Offered. . Offering and Purchase of
Contracts
20 Underwriters. . . . . . . . . . . . . . Offering and Purchase of
Contracts
21 Calculation of Performance Data . . . . Performance Data; Average
Annual Total Return
Quotations
22 Annuity Payments. . . . . . . . . . . . Annuity Payments
23 Financial Statements. . . . . . . . . . Financial Statements
PART C (OTHER INFORMATION)
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
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- --------------------------------------------------------------------------------
This Prospectus describes two group deferred variable annuity contracts
("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). One allows lump sum payments ("Single Purchase Payment Contracts")
and the other allows installment payments ("Installment Purchase Payment
Contracts"). The Contracts are available through participation in the
"Opportunity Plus" retirement programs which receive favorable tax deferred
treatment under Federal income tax law. (See "Purchase.") Interests in these
Contracts are offered to employees of school boards and public universities in
the state of New York.
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 - TCI Growth (a Twentieth Century
Portfolio fund)
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account and the Fixed 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 is available at no charge. The
SAI has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. The Table of Contents for the SAI is printed
on page 16 in this Prospectus. An SAI may be obtained by indicating the request
on the enrollment form or on the prospectus receipt contained in this
Prospectus, or by calling the number listed under the "Inquiries" section of the
Prospectus Summary.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1,
1996.
<PAGE>
TABLE OF CONTENTS
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- --------------------------------------------------------------------------------
<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
Purchasing Interests in the Contract............................................. 4
Right to Cancel.................................................................. 4
CHARGES AND DEDUCTIONS............................................................... 4
Daily Deductions from the Separate Account....................................... 4
Maintenance Fee.................................................................. 5
Deferred Sales Charge............................................................ 5
Fund Expenses.................................................................... 6
Premium and Other Taxes.......................................................... 6
CONTRACT VALUATION................................................................... 6
Account Values................................................................... 6
Accumulation Units............................................................... 7
Net Investment Factor............................................................ 7
TRANSFERS............................................................................ 7
WITHDRAWALS.......................................................................... 7
Reinvestment Privilege........................................................... 8
CONTRACT LOANS....................................................................... 8
ADDITIONAL WITHDRAWAL OPTIONS........................................................ 8
DEATH BENEFIT DURING ACCUMULATION PERIOD............................................. 9
ANNUITY PERIOD....................................................................... 9
Annuity Period Elections......................................................... 9
Annuity Options.................................................................. 10
Annuity Payments................................................................. 11
Charges Deducted During the Annuity Period....................................... 11
Death Benefit Payable During the Annuity Period.................................. 11
TAX STATUS........................................................................... 11
Introduction..................................................................... 11
Taxation of the Company.......................................................... 12
Contracts Used with Certain Retirement Plans..................................... 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
MISCELLANEOUS........................................................................ 14
Opportunity Plus Processing Office............................................... 14
Distribution..................................................................... 14
Delay or Suspension of Payments.................................................. 14
Performance Reporting............................................................ 14
Voting Rights.................................................................... 15
Changes in Beneficiary Designations.............................................. 15
Modification of the Contract..................................................... 15
Agreements With the Company...................................................... 15
Legal Matters and Proceedings.................................................... 15
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 16
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT.......................................... 17
APPENDIX II--THE FIXED ACCOUNT....................................................... 18
</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
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- --------------------------------------------------------------------------------
The following terms are defined as they are used in this Prospectus:
ACCOUNT: A record established for each Participant to identify contract values
accumulated on each Participant's behalf during the Accumulation Period. For any
given Participant, the Account includes amounts held under an Installment
Purchase Payment Contract and a Single Purchase Payment Contract.
ACCOUNT VALUE: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
ACCOUNT YEAR: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
ACCUMULATION PERIOD: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
ACCUMULATION UNIT: A measure of the value of each Subaccount before annuity
payments begin.
ANNUITANT: The person on whose life or life expectancy the annuity payments are
based.
ANNUITY: A series of payments for life, a definite period or a combination of
the two.
ANNUITY DATE: The date on which annuity payments begin.
ANNUITY PERIOD: The period during which annuity payments are made.
ANNUITY UNIT: A measure of the value of each Subaccount selected during the
Annuity Period.
BENEFICIARY(IES): The person or persons identified in the enrollment form who
are to receive any death benefit proceeds payable under the Contract.
CODE: Internal Revenue Code of 1986, as amended.
COMPANY (WE, US): Aetna Life Insurance and Annuity Company.
CONTRACTS: The group deferred, variable annuity contracts offered by this
Prospectus.
CONTRACT HOLDER: The person or entity to whom the Contract is issued. The
Contract Holder of the Contract is usually the employer.
CREDITED INTEREST OPTIONS: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account and the Fixed 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.
FUND(S): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the Contract.
HOME OFFICE: The Company's principal executive offices, located at 151
Farmington Avenue, Hartford, Connecticut 06156.
NYSUT: New York State United Teachers Trust.
OPPORTUNITY PLUS PROCESSING OFFICE: The Opportunity Plus administrative
headquarters. The mailing address is P.O. Box 12894, Albany, New York
12212-2894.
PARTICIPANT (YOU): A person participating in a Plan maintained by an eligible
organization.
PLAN(S): Tax-deferred retirement plans under Section 403(b) of the Code for
employees of public school systems.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
PURCHASE PAYMENT(S): The gross payment(s) made to the Company under a Contract.
PURCHASE PAYMENT PERIODS: For "Installment Purchase Payment Contracts," the
period of time for completion of the agreed upon annual number and amount of
Purchase Payments. For example, if it is determined that the Purchase Payment
Period will consist of 12 payments per year and only 11 payments are made, the
Purchase Payment Period is not completed until the twelfth Purchase Payment is
made.
SEPARATE ACCOUNT: Variable Annuity Account C, a separate account established by
the Company for the purpose of funding variable annuity contracts issued by the
Company.
SUBACCOUNT(S): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
UUP: United University Professions.
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.
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DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
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- --------------------------------------------------------------------------------
CONTRACTS OFFERED
The two Contracts described in this Prospectus are group deferred variable
annuity contracts issued by Aetna Life Insurance and Annuity Company (the
"Company"). One allows lump sum payments ("Single Purchase Payment Contracts")
and the other allows installment payments ("Installment Purchase Payment
Contracts"). The purpose of the Contract is to accumulate values and to provide
benefits upon retirement for retirement plans under Section 403(b) of the Code.
The Contracts are available for school boards and public universities in the
State of New York, specifically for Participants who are members of NYSUT and
UUP.
The Contracts are available to Plans that include a variable annuity
contract alone or in conjunction with retail mutual funds for which Systemized
Benefits Administrators, Inc. ("SBA"), an affiliate of the Company, has agreed
to perform recordkeeping services and to provide consolidated statements. SBA
may receive compensation for these services, but such compensation will
generally not be charged to the Separate Account or deducted from a
Participant's Account under the Contract.
CONTRACT PURCHASE
The Contracts may be purchased by eligible organizations on behalf of a
group made up of their employees. Eligible employees may participate in the
Contract by completing the enrollment form and submitting it to the Opportunity
Plus Processing Office. Purchase Payments can be applied to the Contract either
through a lump-sum transfer from a pre-existing plan or through salary
reduction. (See "Purchase--Right to Cancel.")
FREE LOOK PERIOD
Contract Holders and Participants have the right to cancel their purchase
within 10 days after receiving the Contract or other document evidencing
interest in the Contract by returning it to the Opportunity Plus Processing
Office along with a written notice of cancellation. The amount received upon
cancellation will be the full value of Purchase Payments plus any increase or
minus any decrease in the Account Value allocated to the Subaccounts. (See
"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 Contracts allow 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 Contracts also provide for investment in Credited Interest Options which
allow you to earn fixed rates of interest. The fixed options available under the
Contracts are the Guaranteed Accumulation Account ("GAA") and the Fixed Account.
(See the Appendices to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges and an administrative charge), as well as any annual maintenance fee and
premium and other taxes. The Funds also incur certain fees and expenses which
are deducted directly from the Funds. A deferred sales charge may apply upon a
full or partial withdrawal of the Account Value. (See the Fee Table and "Charges
and Deductions.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
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 Company.
Certain charges may be assessed upon withdrawal. The withdrawal may also be
subject to income tax and a federal tax penalty. The Code restricts full and
partial withdrawals in some circumstances. (See "Withdrawals.")
The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period to persons meeting certain criteria. Additional Withdrawal
Options may not be suitable in every situation. (See "Additional Withdrawal
Options.")
LOANS
Participants under Section 403(b) Plans may request a loan from their
Account Value at any time during the Accumulation Period. (See "Contract
Loans.")
DEATH BENEFIT
A death benefit is payable if the Participant dies before the Annuity Date.
Death benefit proceeds will be paid to the Beneficiary in an amount equal to the
Account Value. Until the election of a method of payment, the Account Value will
remain invested under the Contract. The Beneficiary may elect to receive the
proceeds in a lump sum or under any of the payment options available under the
Contract. However, the Code requires that distributions begin within a certain
time period. (See "Death Benefit During 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 continue
to vary with the investment performance of the Subaccount(s) selected. The
Company reserves the right to limit the number of Subaccounts that may be
available during the Annuity Period. (See "Annuity Period.")
TAXES
Contributions and earnings are not generally taxed until you or your
Beneficiary(ies) actually receive a distribution from the Contract. A 10%
federal tax penalty and a 20% withholding for income tax may be imposed on
certain withdrawals. (See "Tax Status.")
INQUIRIES
- - Questions, inquiries or requests for additional information can be directed to
your agent or local representative, or you may contact the Company through the
Opportunity Plus Processing Office by writing to P.O. Box 12894, Albany, New
York 12212-2894, or by calling 1-800-OPP-INFO (1-800-677-4636). (See
"Miscellaneous--Opportunity Plus Processing Office.")
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SUMMARY - 2
<PAGE>
FEE TABLE
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- --------------------------------------------------------------------------------
This Fee Table describes the various charges and expenses associated with the
Contracts during the Accumulation Period. For amounts deducted during the
Annuity Period, see "Charges Deducted During the Annuity Period." No sales
charge is paid upon purchase of the Contracts. All costs that are borne directly
or indirectly under the Subaccounts and Funds are shown below. For more
information regarding expenses paid out of the assets of a particular Fund, see
the Fund's prospectus.
DIRECT CHARGES. These charges are deducted directly from the Account Value. They
include:
DEFERRED SALES CHARGE. The deferred sales charge is deducted as a
percentage of the amount withdrawn from Installment Purchase Payment
Contracts. The total amount deducted for the deferred sales charge will
not exceed 8.5% of the total Purchase Payments applied to the Account
under the Installment Purchase Payment Contract. The amount of the
deferred sales charge is calculated as follows:
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT CONTRACTS:*
PURCHASE PAYMENT DEFERRED SALES
PERIODS COMPLETED CHARGE DEDUCTION
- --------------------------------------- ----------------------
<S> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
More than 10 0%
</TABLE>
* For Single Purchase Payment Contracts, there is no deduction for deferred
sales charges. For Installment Purchase Payment Contracts, the deferred sales
charge is waived for amounts deposited in the Subaccounts (or GAA) on or after
April 1, 1995. (See "Charges and Deductions--Deferred Sales Charge.")
<TABLE>
<S> <C>
ANNUAL CONTRACT MAINTENANCE FEE. The maintenance fee will generally be.................... $ 15.00
deducted quarterly during the Accumulation Period in an amount equal
to $3.75 each calendar quarter.
</TABLE>
INDIRECT CHARGES. Each Subaccount pays these expenses out of its assets. The
charges are reflected in the Subaccount's daily Accumulation Unit Value and are
not charged directly to an Account. They include:
<TABLE>
<S> <C>
MORTALITY AND EXPENSE RISK CHARGE......................................................... 1.25%
ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an Administrative Expense
Charge.................................................................................... 0.00%
However, we reserve the right to deduct a daily charge of not more than 0.25%
per year from the Subaccounts.
---------
TOTAL SEPARATE ACCOUNT CHARGES.......................................................... 1.25%
</TABLE>
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FEE TABLE - 1
<PAGE>
ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, these figures are a percentage of each Fund's
average net assets and are based on figures for the year ended December 31,
1995. A Fund's "Other Expenses" include operating costs of the Fund. These
expenses are reflected in the Fund's net asset value and are not deducted from
the Account Value under the Contract.
<TABLE>
<CAPTION>
INVESTMENT
ADVISORY
FEES(1) OTHER EXPENSES TOTAL FUND
(AFTER EXPENSE (AFTER EXPENSE ANNUAL
REIMBURSEMENT) REIMBURSEMENT) EXPENSES
-------------- -------------- -----------
<S> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Alger American Growth Portfolio
Alger American Small Cap Portfolio
Calvert Responsibly Invested Balanced
Portfolio
Fidelity VIP II Asset Manager
Portfolio
Fidelity VIP II Contrafund
Portfolio(2)
Fidelity VIP II Index 500 Portfolio
Fidelity VIP Equity-Income
Portfolio(3)
Franklin Government Securities Trust
Janus Aspen Aggressive Growth
Portfolio(4)
Janus Aspen Growth Portfolio(4)
Janus Aspen Short-Term Bond
Portfolio(4)
Janus Aspen Worldwide Growth
Portfolio(4)
Lexington Emerging Markets Fund, Inc.
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio
TCI Growth(5)
</TABLE>
- --------------------------
(1) Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Contract. These reimbursements are paid
out of the investment advisory fees and are not charged to investors.
(2) This Fund has only limited operating history; therefore the expenses are
estimated for the current fiscal year.
(3) A portion of the brokerage commissions the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been
% for the Equity-Income Portfolio.
(4) The expense figures shown are net of certain expense waivers from Janus
Capital Corporation. Without such waivers, Investment Advisory Fees, Other
Expenses and Total Mutual Fund Annual Expenses for the Portfolios for the
fiscal year ended December 31, 1995 would have been: %, %, and
%, respectively, for Janus Aspen Aggressive Growth Portfolio; %,
% and %, respectively, for Janus Aspen Growth Portfolio; %,
% and %, respectively, for Janus Aspen Short-Term Bond Portfolio;
and %, % and %, respectively, for Janus Aspen Worldwide
Growth Portfolio.
(5) The Portfolio's investment adviser pays all expenses of the Portfolio except
brokerage commissions, taxes, interest, fees and expenses of the
non-interested directors (including counsel fees) and extraordinary
expenses.
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FEE TABLE - 2
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For the
purposes of these Examples, the maximum maintenance fee of $15.00 that can be
deducted under the Contract has been converted to a percentage of assets equal
to %.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
------------------------------------- -------------------------------------
IF YOU WITHDRAW YOUR ENTIRE ACCOUNT IF YOU DO NOT WITHDRAW YOUR ACCOUNT
VALUE AT THE END OF THE PERIODS VALUE, OR IF YOU ANNUITIZE AT THE END
SHOWN, YOU WOULD PAY THE FOLLOWING OF THE PERIODS SHOWN, YOU WOULD PAY
EXPENSES, INCLUDING ANY APPLICABLE THE FOLLOWING EXPENSES (NO DEFERRED
DEFERRED SALES CHARGE:* SALES CHARGE IS REFLECTED):**
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Alger American Growth Portfolio
Alger American Small Cap Portfolio
Calvert Responsibly Invested Balanced
Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP II Index 500 Portfolio
Fidelity VIP Equity-Income Portfolio
Franklin Government Securities Trust
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Short-Term Bond Portfolio
Janus Aspen Worldwide Growth Portfolio
Lexington Emerging Markets Fund, Inc.
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio
TCI Growth
</TABLE>
- ------------------------------
* For Single Purchase Payment Accounts, there is no deduction for deferred
sales charges. For Installment Purchase Payment Accounts, the deferred sales
charge is waived for amounts deposited in the Subaccounts (or GAA) on or
after April 1, 1995.
**This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION
(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 $107.925 $102.383 $ 97.165 $77.845
Value at end of period $105.558 $107.925 $102.383 $97.165
Increase (decrease) in value of
accumulation unit(1) (2.19)% 5.41% 5.37% 24.82%
Number of accumulation units outstanding
at end of period 13,966,072 21,148,863 24,201,565 20,948,226
AETNA INCOME SHARES
Value at beginning of period $42.283 $39.038 $36.789 $31.192
Value at end of period $40.173 $42.283 $39.038 $36.789
Increase (decrease) in value of
accumulation unit(1) (4.99)% 8.31% 6.11% 17.94%
Number of accumulation units outstanding
at end of period 5,108,720 8,210,666 8,507,292 7,844,412
AETNA VARIABLE ENCORE FUND
Value at beginning of period $35.282 $34.619 $33.812 $32.138
Value at end of period $36.271 $35.282 $34.619 $33.812
Increase (decrease) in value of
accumulation unit(1) 2.80% 1.92% 2.39% 5.21%
Number of accumulation units outstanding
at end of period 3,679,802 5,086,515 7,534,662 8,430,082
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $14.519 $13.379 $12.736 $10.896
Value at end of period $14.270 $14.519 $13.379 $12.736
Increase (decrease) in value of
accumulation unit(1) (1.71)% 8.52% 5.05% 16.89%
Number of accumulation units outstanding
at end of period 21,990,186 30,784,750 34,802,433 22,898,099
ALGER AMERICAN SMALL CAP
PORTFOLIO
Value at beginning of period $10.072 $10.000(3)
Value at end of period $ 9.513 $10.072
Increase (decrease) in value of
accumulation unit(1) (5.55)% 0.72%
Number of accumulation units outstanding
at end of period 665,518 51,327
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
Value at beginning of period $14.640 $13.726 $12.913 $11.233
Value at end of period $13.990 $14.640 $13.726 $12.913
Increase (decrease) in value of
accumulation unit(1) (4.44)% 6.66% 6.30% 14.96%
Number of accumulation units outstanding
at end of period 743,464 705,415 503,006 355,851
FIDELITY ASSET MANAGER
PORTFOLIO
Value at beginning of period $10.000(5)
Value at end of period $ 9.447
Increase (decrease) in value of
accumulation unit(1) (5.53)%
Number of accumulation units outstanding
at end of period 1,254,504
<CAPTION>
1990 1989 1988 1987 1986
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $76.311 $59.871 $52.885 $50.760 $43.205
Value at end of period $77.845 $76.311 $59.871 $52.885 $50.760
Increase (decrease) in value of
accumulation unit(1) 2.01% 27.46% 13.21% 4.19% 17.49%
Number of accumulation units outstanding
at end of period 18,362,906 17,142,820 16,455,396 16,497,406 16,578,251
AETNA INCOME SHARES
Value at beginning of period $28.943 $25.574 $24.061 $23.308 $20.703
Value at end of period $31.192 $28.943 $25.574 $24.061 $23.308
Increase (decrease) in value of
accumulation unit(1) 7.77% 13.17% 6.29% 3.23% 12.58%
Number of accumulation units outstanding
at end of period 6,984,793 6,202,834 5,955,293 5,372,271 6,188,470
AETNA VARIABLE ENCORE FUND
Value at beginning of period $30.012 $27.783 $26.171 $24.812 $23.504
Value at end of period $32.138 $30.012 $27.783 $26.171 $24.812
Increase (decrease) in value of
accumulation unit(1) 7.08% 8.02% 6.16% 5.48% 5.57%
Number of accumulation units outstanding
at end of period 10,220,110 8,286,033 8,154,644 7,326,151 6,692,947
AETNA INVESTMENT ADVISERS
FUND, INC.
Value at beginning of period $10.437 $10.000(2)
Value at end of period $10.896 $10.437
Increase (decrease) in value of
accumulation unit(1) 4.40% 4.37%
Number of accumulation units outstanding
at end of period 17,078,985 9,535,986
ALGER AMERICAN SMALL CAP
PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units outstanding
at end of period
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO*
Value at beginning of period $10.568 $10.000(4)
Value at end of period $11.233 $10.568
Increase (decrease) in value of
accumulation unit(1) 6.29% 5.68%
Number of accumulation units outstanding
at end of period 148,576 20,710
FIDELITY 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
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $14.929 $14.050 $13.219 $11.545
Value at end of period $14.109 $14.990 $14.050 $13.219
Increase (decrease) in value of
accumulation unit(1) (4.95)% 6.26% 6.29% 14.50%
Number of accumulation units outstanding
at end of period 804,457 960,629 810,155 627,552
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $12.169
Increase (decrease) in value of
accumulation unit(1) 21.69%
Number of accumulation units outstanding
at end of period 393,553
LEXINGTON EMERGING MARKETS FUND, INC.
Value at beginning of period $10.000(8)
Value at end of period $ 8.772
Increase (decrease) in value of
accumulation unit(1) (12.28)%
Number of accumulation units outstanding
at end of period 144,750
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.071 $ 9.193 $ 9.018 $ 9.608
Value at end of period $ 9.412 $10.071 $ 9.193 $ 9.018
Increase (decrease) in value of
accumulation unit(1) (6.54)% 9.55% 1.94% (6.14)%
Number of accumulation units outstanding
at end of period 533,016 341,771 198,338 144,139
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $14.278 $13.536 $12.511 $ 9.769
Value at end of period $13.398 $14.278 $13.536 $12.511
Increase (decrease) in value of
accumulation unit(1) (6.16)% 5.48% 8.19% 28.07%
Number of accumulation units outstanding
at end of period 2,107,525 1,927,674 1,346,898 971,985
SCUDDER INTERNATIONAL PORTFOLIO**
Value at beginning of period $13.508 $ 9.922 $10.239** $ 9.256
Value at end of period $13.227 $13.508 $ 9.922 $10.239
Increase (decrease) in value of
accumulation unit(1) (2.08)% 36.14% (3.10)% 10.62%
Number of accumulation units outstanding
at end of period 4,240,412 2,371,037 1,161,007 779,667
TCI GROWTH
Value at beginning of period $11.443 $10.495 $10.000(12)
Value at end of period $11.172 $11.443 $10.495
Increase (decrease) in value of
accumulation unit(1) (2.37)% 9.03% 4.95%
Number of accumulation units outstanding
at end of period 1,608,362 1,016,894 232,832
<CAPTION>
1990 1989
---------- ----------
<S> <C> <C>
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
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**
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>
(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.
* Formerly Calvert Socially Responsible Series.
** Formerly T. Rowe Price International Equity Fund. On April 27, 1992, the
Fund's assets were liquidated and merged into Scudder Variable Life
Investment Fund -- Managed International Portfolio. The Accumulation Unit
value following the merger was $10.051.
- --------------------------------------------------------------------------------
AUV HISTORY - 2
<PAGE>
THE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Services, Inc.,
which is in turn a wholly owned subsidiary of Aetna Life and Casualty Company, a
diversified financial services company.
VARIABLE ANNUITY ACCOUNT C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company established Variable Annuity Account C (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of "separate account" under federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets of the Separate Account, such
assets are not chargeable with liabilities arising out of any other business we
may conduct. Income, gains or losses of the Separate Account are credited to or
charged against the assets of the Separate Account without regard to our other
income, gains or losses. All obligations arising under the Contracts are our
general corporate obligations.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the enrollment form. In turn, the Subaccounts invest in the
corresponding Funds at net asset value.
The Contract Holder may decide to offer only a select number of Funds under
its Plan, or it may decide to substitute shares of one Fund for shares of
another Fund currently held by the Separate Account. The availability of Funds
may be subject to regulatory authorization. In addition, the Company may add or
withdraw Funds, as permitted by applicable law.
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 which
have a market capitalization of $1 billion or greater.(2)
- -ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
capital return through investment in common stock of smaller companies offering
the potential for significant price gain. The Portfolio invests at least 65% of
its net assets in equity securities of companies that have total market
capitalization of less than $1 billion at the time of purchase.(2)
- -CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO is a NONDIVERSIFIED portfolio
that seeks growth of capital through investment in enterprises that make a
significant contribution to society through their products and services and
through the way they do business.(3)
- -FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND II--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.
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND PORTFOLIO
seeks maximum total return over the long term by investing in securities of
companies that are undervalued or out-of-favor.(4)
- -FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND 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 500 Composite Stock Price
Index.(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 included companies with capitalizations between approximately
and , 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 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 which own or develop natural resources and other basic commodities or
supply goods and services to such companies.(7)
- -NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST-- GROWTH PORTFOLIO seeks capital
appreciation without regard to income. The Portfolio pursues its investment
- --------------------------------------------------------------------------------
2
<PAGE>
objective by investing in common stocks, often of companies that may be
temporarily out of favor in the market.(8)
- -SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO seeks long-term
growth of capital primarily through diversified holdings of marketable foreign
equity investments.(9)
- -TCI PORTFOLIOS, INC.--TCI GROWTH (a Twentieth Century fund) seeks capital
growth. The Fund seeks to achieve its objective by investing in common stocks
(including securities convertible into common stocks) and other securities that
meet certain fundamental and technical standards of selection and, in the
opinion of the Fund's investment manager, have better than average potential
for appreciation.(10)
Investment Advisers for each of the Funds:
(1) Aetna Life Insurance and Annuity Company
(2) Fred Alger Management, Inc.
(3) Calvert Asset Management Company, Inc.
(4) Fidelity Management & Research Company
(5) Franklin Advisers, Inc.
(6) Janus Capital Corporation
(7) Lexington Management Corporation (adviser); Market Systems Research
Advisors, Inc. (subadviser) [Lexington Natural Resources Trust only]
(8) Neuberger & Berman Management Incorporated
(9) Scudder, Stevens & Clark, Inc.
(10) Investors Research Corporation
RISKS ASSOCIATED WITH INVESTMENT IN THE FUNDS. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential risks,
is found in the respective Fund prospectuses which accompany this Prospectus.
You should read the Fund prospectuses and consider carefully, and on a
continuing basis, which Fund or combination of Funds is best suited to your
long-term investment objectives.
CONFLICTS OF INTEREST (MIXED AND SHARED FUNDING). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued by the Company or by third parties. This is referred to as "mixed
funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of 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 Contracts as described below. The Contract Holder
may elect not to offer all Credited Interest Options under its Plan. The
Credited Interest Options currently available under the Contract include the
Guaranteed Accumulation Account and the Fixed Account.
- - The Guaranteed Accumulation Account (GAA) is a credited interest option
through which we guarantee stipulated rates of interest for stated periods of
time. Amounts must remain in the GAA for the full guaranteed term to received
the quoted interest rates, or a market value adjustment (which may be positive
or negative) will be applied. (See Appendix I.)
- - The Fixed Account is a part of the Company's general account. The Fixed
Account guarantees a minimum interest rate, as specified in the Contract. The
Company may credit higher interest rates from time to time. Transfers from the
Fixed Account are limited. (See Appendix II.)
- --------------------------------------------------------------------------------
3
<PAGE>
PURCHASE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACT AVAILABILITY
The Contracts are designed to allow the accumulation of assets and to
provide retirement benefits under retirement plans under Section 403(b) of the
Code by school boards and public universities in the state of New York, for
Participants who are members of NYSUT or UUP.
Two group contracts may be issued to cover all present and future
Participants. The group Contracts are generally owned by the employer and
individual Accounts are established for each Participant. Single Purchase
Payment Contracts are issued for lump-sum transfers to us of amounts accumulated
under a pre-existing Plan. Installment Purchase Payment Contracts are
established to accept continuing periodic payments. We reserve the right to set
a minimum Purchase Payment on single Purchase Payment Contracts. Lump sum
transfers below this minimum will be applied to an installment Purchase Payment
Contract.
Under the Plans, the employer has no right, title or interest in the amounts
held under the Contract or in the Account; Participants make all elections under
the Contract.
PURCHASING INTERESTS IN THE CONTRACT
Eligible organizations may acquire Contracts by submitting an application to
the Opportunity Plus Processing Office at 18 Corporate Woods Boulevard, Fourth
Floor, Albany, New York 12211. Once we approve the forms, the Contract will be
issued to the employer as the group Contract Holder. Participants may purchase
interests in a group Contract by submitting enrollment materials to the
Opportunity Plus Processing Office.
The Company must accept or reject the application or enrollment form within
two business days of receipt. If the forms are incomplete, the Company may hold
any forms and accompanying Purchase Payments for five days. Purchase Payments
may be held for longer periods only with the consent of the Contract Holder or
Participant, pending acceptance of the forms. The Code imposes a maximum limit
on annual Purchase Payments which may be excluded from a Participant's gross
income. (See "Tax Status.") Initial payments held for longer than the five
business days will be deposited in the Aetna Variable Encore Fund Subaccount
until the forms are completed.
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.
RIGHT TO CANCEL
Contract Holders and Participants have the right to cancel their purchase
within 10 days of receiving the Contract (or other document evidencing your
interest) by returning it to the Opportunity Plus Processing Office with a
written notice of intent to cancel. When we receive your request for
cancellation, we will return your Account Value. You bear the entire investment
risk for amounts allocated among the Subaccounts during the free look period.
Account Values will be determined as of the Valuation Date on which we receive
your request for cancellation at the Opportunity Plus Processing Office.
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
MORTALITY AND EXPENSE RISK CHARGE. The Company makes a daily deduction from
each of the Subaccounts for the mortality and expense risk charge. The charge is
equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of the mortality and expense
risks under the Contract. The mortality risks are those assumed for our promise
to make lifetime payments according to annuity rates specified in the Contract.
The expense risk is the risk that the actual expenses for costs incurred under
the Contract will exceed the maximum costs that can be charged under the
Contract.
If the amount deducted for mortality and expense risks is not sufficient to
cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the
- --------------------------------------------------------------------------------
4
<PAGE>
Contracts and as a source of profit to the Company. The Company expects to make
a profit from the mortality and expense risk charge.
ADMINISTRATIVE EXPENSE CHARGE. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge. The
administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of the
administrative services to be provided while the Contract is in force. The
Company does not expect to make a profit from this charge.
Under the Contract, the amount of the administrative expense charge may be
of an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation Period or Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value. The maintenance fee is to reimburse the
Company for some of its administrative expenses relating to the establishment
and maintenance of the Accounts.
The maximum maintenance fee that can be deducted under the Contract is $15.
One fourth of this fee ($3.75) is deducted during the first month after the end
of each calendar quarter. The maintenance fee will be deducted on a pro rata
basis from each investment option in which you have an interest.
DEFERRED SALES CHARGE
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of the amounts
withdrawn from the Subaccounts, the Fixed Account and the Guaranteed
Accumulation Account. No deferred sales charge is deducted from amounts
withdrawn from the Fixed Plus Account.
For Installment Purchase Payment Contracts, the deferred sales charge is
based on the number of completed Purchase Payment Periods. For Single Purchase
Payment Contracts, it is based on the number of Contract Years that have elapsed
since the Purchase Payments were made. The amount of the deferred sales charge
is determined in accordance with the schedule set forth in the following
tables:*
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT
CONTRACTS:
DEFERRED SALES
PURCHASE PAYMENT CHARGE
PERIODS COMPLETED DEDUCTION
- -------------------- ---------------
<S> <C>
Less than 5 5%
5 or more but less
than 7 4%
7 or more but less
than 9 3%
9 or more but less
than 10 2%
More than 10 0%
</TABLE>
* The following deferred sales charge schedule applies for withdrawals from the
Guaranteed Accumulation Account for Master Contracts sold after July 29, 1993
in the State of New York and is based on the number of completed Purchase
Payment Periods for Installment Purchase Payment Contracts or Account Years
for Single Purchase Payment Contracts:
<TABLE>
<CAPTION>
DEFERRED SALES
COMPLETED PURCHASE CHARGE
PAYMENT PERIODS DEDUCTION
- -------------------- ---------------
<S> <C>
1, 2 or 3 5%
4 4%
5 3%
6 2%
7 1%
8 0%
</TABLE>
There is no deferred sales charge provision on Single Purchase Payment
Contracts. However, if amounts are transferred from a Single Purchase Payment
Contract to an Installment Purchase Payment Contract, the applicable deferred
sales charge provisions apply to all amounts in the Installment Purchase Payment
Contract.
In addition, if a nonlifetime Annuity Option is elected on a variable basis
and the remaining value is withdrawn before three years of Annuity payments have
been completed, the applicable deferred sales charge will be assessed (see
"Annuity Options").
The deduction for the deferred sales charge will not exceed 8.5% of the
total Purchase Payments actually made to the Account. The Company does not
anticipate that the deferred sales charge will cover all sales and
administrative expenses which it incurs in connection with the Contract. The
difference will be covered by the general assets of the Company which are
attributable, in part, to mortality and expense risk charges under the Contract
described above.
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5
<PAGE>
Generally, if you transfer the total account value under another similar
annuity contract issued by the Company to an Account under this Contract, the
effective date of the new Account will be the same effective date as your former
contract for the purpose of calculating the applicable deferred sales charge
under this Contract.
A deferred sales charge will not be deducted from any portion of the Account
Value if the withdrawal is:
- - applied to provide Annuity benefits;
- - taken on or after the tenth anniversary of the effective date of the Account;
- - paid due to your death before Annuity payments begin;
- - made due to the election of an Additional Withdrawal Option (see "Additional
Withdrawal Options");
- - paid where the Account Value is $2,500 or less and no amount has been
withdrawn, taken as a loan, or used to purchase Annuity benefits during the
prior 12 months;
- - taken from an Installment Purchase Payment Contract by a Participant who is at
least age 59 1/2 and who has completed nine Purchase Payment Periods;
- - withdrawn due to disability as specified in the Code;
- - withdrawn due to financial hardship as specified in the Code;
- - withdrawn due to separation from service while meeting the age and service
requirements to receive benefits under the New York State Teachers' or
Employees' Retirement Systems (even if you are not a member of either system);
or
- - withdrawn from the portion of the Account Value invested in the Subaccount(s)
and/or GAA attributable to Purchase Payments made on or after April 1, 1995.
This waiver does not apply to amounts deposited in the Fixed Account. If
amounts are deposited in a Subaccount or GAA and then transferred to the Fixed
Account, the waiver would no longer apply. If amounts are deposited in the
Fixed Account and then transferred to a Subaccount or GAA, the waiver would
not apply to amounts that came from the Fixed Account. No deferred sales
charge would be assessed unless and until these amounts are withdrawn from the
Account. For any withdrawal, the Account Value of the Purchase Payment(s) made
on or after April 1, 1995 will be withdrawn first. Then, the remaining Account
Value will be used to satisfy the disbursement request.
FREE WITHDRAWALS. For Participants between the ages of 59 1/2 and 70 1/2,
up to 10% of the current Account Value may be withdrawn during each calendar
year without imposition of a deferred sales charge. The free withdrawal applies
only to the first partial withdrawal in each calendar year. The 10% amount will
be based on the Account Value calculated on the Valuation Date next following
our receipt of your request for withdrawal. Any outstanding contract loans are
excluded from the Account Value when calculating the 10% free withdrawal amount.
This provision does not apply to a full withdrawal of the Account, or to partial
withdrawals due to a default on a contract loan (see "Contract Loans"). This
provision may not be exercised if ECO or SWO is elected. (See "Additional
Withdrawal Options.")
In the instances cited above, no deferred sales charge is deducted. However,
the amount withdrawn may be subject to the 10% federal penalty tax. (See "Tax
Status.")
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
Currently, there is no premium tax on annuities under New York regulations.
However, if the state does impose a premium tax, it would be deducted from the
amount applied to an annuity option. We reserve the right to deduct a state
premium tax at any time from the Purchase Payment(s) or from the Account Value
at any time, but no earlier than when we have a tax liability under state law.
(See "Tax Status.")
CONTRACT VALUATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in any of the Credited Interest Options.
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6
<PAGE>
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each day
by a percentage that accounts for the daily assessment of mortality and expense
risk charges and the administrative charge (if any).
Initial Purchase Payments will be credited to your Account as described
under "Purchasing Interests in the Contract." Each subsequent Purchase Payment
(or amount transferred) will be credited to your Account at the AUV computed on
the next Valuation Date following our receipt of your payment or transfer
request. The value of an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance of a
Subaccount from one Valuation Date to the next. The net investment factor for a
Subaccount for any valuation period is equal to the sum of 1.0000 plus the net
investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current Valuation
Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding Valuation
Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation of the
Subaccount, divided by
(d) the AUV of the Subaccount on the preceding Valuation Date, minus
(e) a daily charge at the annual effective rate of 1.25% for mortality and
expense risks and up to 0.25% as an administrative expense charge (currently
0%).
The net investment rate may be either positive or negative.
TRANSFERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At any time prior to the Annuity Date, the Contract Holder (or you, if
authorized by the Contract Holder) can transfer amounts held under the Contracts
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 Contracts
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 the
Opportunity Plus Processing 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Subject to the withdrawal restrictions under Section 403(b) Contracts
described below, all or a portion of the Account Value may be withdrawn at any
time during the Accumulation Period. To request a withdrawal, you must properly
complete a disbursement form and send it to the Opportunity Plus Processing
Office. Payments for withdrawal requests will be made in accordance with SEC
requirements, but normally not later than seven calendar days following our
receipt of a disbursement form.
Withdrawals may be requested as in one of the following forms:
- -FULL WITHDRAWAL OF AN ACCOUNT: The amount paid upon a full withdrawal will be
the full Account Value, minus any applicable deferred sales charge and
maintenance fee due.
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7
<PAGE>
- -PARTIAL WITHDRAWALS (Percentage): The amount paid will be the percentage of the
Account Value requested minus any applicable deferred sales charge.
- -PARTIAL WITHDRAWAL (Specified Dollar Amount): The amount paid will be the
dollar amount requested. However, the amount withdrawn from the Account will
equal the amount requested plus any applicable deferred sales charge.
For any partial withdrawal, the value of the Accumulation Units canceled
will be withdrawn proportionately from the Subaccounts or Credited Interest
Options in which your Purchase Payments are allocated, unless you request
otherwise in writing. All amounts paid will be based on Account Values as of the
next Valuation Date after we receive a request for withdrawal at our Home
Office, or on such later date as the disbursement form may specify. A 20%
federal income tax may be withheld from amounts paid directly to you. (See "Tax
Status--Contracts Used with Certain Retirement Plans.")
WITHDRAWAL RESTRICTIONS FROM 403(B) PLANS. Under Section 403(b) Contracts, a
withdrawal of salary reduction contributions and earnings on such contributions
is generally prohibited prior to the Participant's death, disability, attainment
of age 59 1/2, separation from service or financial hardship. (See "Tax
Status.")
REINVESTMENT PRIVILEGE
You may elect to reinvest all or a portion of the proceeds received from a
full withdrawal of your Account within 30 days after such withdrawal has been
made. Accumulation Units will be credited to the Account for the amount
reinvested, as well as any maintenance fee and any deferred sales charge imposed
at the time of withdrawal. Any maintenance fee which falls due after the
withdrawal and before the reinvestment will be deducted from the amounts
reinvested. Reinvested amounts will be reallocated to the applicable investment
options in the same proportion as they were allocated at the time of withdrawal.
Accumulation Units will be credited to your Account based on the Accumulation
Unit Value next computed following our receipt of your request along with the
amount to be reinvested. The reinvestment privilege may be used only once. See
Appendix I for a discussion of amounts withdrawn from GAA and then reinvested.
If you are contemplating reinvestment, you should seek competent advice
regarding the tax consequences associated with such a transaction.
CONTRACT LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
During the Accumulation Period, Participants may request a loan from their
Account Value. Loans can only be taken from those Account Values held in the
Subaccounts or from those Credited Interest Options that allow loans. (See
Appendices I and II.) A loan may be obtained by reviewing and reading the terms
of the loan agreement, properly completing a loan request form and submitting it
to the Opportunity Plus Processing Office.
ADDITIONAL WITHDRAWAL OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Additional Withdrawal Options"). These options
are available for Participants whose Account Value is at least $25,000 at the
time of election.
The Additional Withdrawal Options currently available under the Contract
include the following:
- - SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of partial withdrawals
from your Account based on a payment method you select. It is designed for
those who want a periodic income while retaining investment flexibility for
amounts accumulated under a Contract. This option may not be elected if you
have an outstanding contract loan and payments may not be made until you
attain age 59 1/2 (55 if separated from service with the Contract Holder).
- - ECO--ESTATE CONSERVATION OPTION. ECO offers the same investment flexibility
as SWO but is designed for those who want to receive only the minimum
distribution that the Code requires each year. Under ECO, the Company
calculates the minimum distribution amount required by law at age 70 1/2 (or
retirement, if later, for governmental plans), and pays you that amount once a
year. (See "Tax Status.")
Other Additional Withdrawal Options may be added from time to time.
Additional information relating to any
- --------------------------------------------------------------------------------
8
<PAGE>
of the Additional Withdrawal Options may be obtained from your local
representative or from the Company at the Opportunity Plus Processing Office.
If you select one of the Additional Withdrawal Options, you will retain all
of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus.
Once you elect an Additional Withdrawal Option, you may revoke it any time
by submitting a written request to the Opportunity Plus Processing Office. Once
an option is revoked, it may not be elected again, nor may any other additional
withdrawal options be elected. The Company reserves the right to discontinue the
availability of one or all of these Additional Withdrawal Options at any time,
and/or to change the terms of future elections.
DEATH BENEFIT DURING ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Contract provides that a death benefit is payable to the
Beneficiary(ies) upon the death of the Participant before the Annuity Date. The
amount of the death benefit will be equal to the Account Value. Death benefit
proceeds may be paid to the Beneficiary:
- - in a lump sum;
- - in accordance with any of the Annuity Options available under the Contract; or
- - under any Additional Withdrawal Options available under the Contract (if the
Beneficiary is your spouse).
The Beneficiary may instead elect one of the following two options; however,
the Code limits how long the death benefit proceeds may be left in these options
(see below):
- - to leave the Account Value invested in the Contract; or
- - to leave the Account Value on deposit in the Company's general account, and to
receive monthly, quarterly, semi-annual or annual interest payments at the
interest rate then being credited on such deposits. The balance on deposit can
be withdrawn at any time or applied to an Annuity Option.
When paying the Beneficiary, we will determine the Account Value on the
Valuation Date following the date on which we receive proof of death acceptable
to the Company. Interest, if any, will be paid from the date of death at a rate
no less than required by law. We will mail payment to the Beneficiary within
seven days after we receive proof of death.
The Code requires that distribution of death proceeds begin within a certain
period of time. Generally, either annuity payments must begin by December 31 of
the year following the year of your death, or the entire value of your benefits
must be distributed by December 31 of the fifth year following the year of your
death. If your 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUITY PERIOD ELECTIONS
The Code generally requires that minimum annual distributions of the Account
Value must begin by April 1st of the calendar year following the calendar year
in which a Participant attains age 70 1/2. In addition, distributions must be in
a form and amount sufficient to satisfy the Code requirements. These
requirements may be satisfied by the election of certain Annuity Options or
Additional Withdrawal Options. (See "Tax Status.")
At least 30 days prior to the Annuity Date, you must notify us in writing of
the following:
- - the date on which you would like to start receiving annuity payments;
- --------------------------------------------------------------------------------
9
<PAGE>
- - the Annuity Option under which you want your payments to be calculated and
paid;
- - whether the payments are to be made monthly, quarterly, semi-annually or
annually; and
- - the investment option(s) used to provide annuity payments (i.e., a fixed
annuity using the general account or any of the Subaccounts available at the
time of annuitization). As of the date of this Prospectus, Aetna Variable
Fund, Aetna Income Shares and Aetna Investment Advisers Fund, Inc. are the
only Subaccounts available; however, additional Subaccounts may be available
under some Annuity Options in the future. (See "Annuity Options" below.)
Annuity payments will not begin until you have selected an Annuity Option.
Until a date and option are elected, the Account will continue in the
Accumulation Period. Once annuity payments begin, the Annuity Option may not be
changed, nor may transfers currently be made among the investment option(s)
selected. (See "Annuity Options" below for more information about transfers
during the Annuity Period.)
ANNUITY OPTIONS
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, an annuity may be selected on a fixed or
variable basis and payments may be made for 3-30 years. If this option is
elected on a variable basis, the Annuitant may request at any time during the
payment period that the present value of all or any portion of the remaining
variable payments be paid in one sum. However, under an Installment Purchase
Payment Contract, any lump-sum elected before three years of payments have been
completed will be treated as a withdrawal during the Accumulation Period and any
applicable deferred sales charge will be assessed. (See "Charges and
Deductions--Deferred Sales Charge.")
We may also offer additional Annuity Options under your Contract from time
to time. Beginning in May 1996, the Company expects to offer additional Annuity
Options and enhanced versions of the Annuity Options listed above. These
additional Annuity Options and enhanced versions of the existing options will
have additional Subaccounts available and will allow transfers between
Subaccounts during the Annuity Period. (Additional Subaccounts and transfer
capability are expected during the second half of 1996.) Such additional or
enhanced options will be made available by an endorsement to the Contract, which
will include the guaranteed annuity payout rates and other terms applicable to
such options. (Depending on which guaranteed payout rates apply to the existing
options, the guaranteed payout rates for the new and enhanced options will be
the same or lower.) Please refer to the Contract, or call the number listed in
the "Inquiries" section of the Prospectus Summary, to determine which options
are available and the terms of such options. It is not expected that these
additional or enhanced options will be made available to those who have already
commenced receiving Annuity Payments.
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10
<PAGE>
ANNUITY PAYMENTS
DATE PAYOUTS START. When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95. Annuity
payments may not extend beyond (a) the life of the Annuitant, (b) the joint
lives of the Annuitant and beneficiary, (c) a period certain greater than the
Annuitant's life expectancy, or (d) a period certain greater than the joint life
expectancies of the Annuitant and beneficiary.
AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on the
size of your Account Value, how you allocate it between fixed and variable
payouts, and the Annuity Option chosen. No election may be made that would
result in 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 information on the impact of
selecting a particular net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative charge from amounts
held under the variable options. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
If an Annuitant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 3 was elected, Annuity Payments will cease on
the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 3.
If Lifetime Option 2 or Option 4 was elected and the death of the Annuitant
under Option 2, or the surviving Annuitant under Option 4, occurs prior to the
end of the guaranteed minimum payment period, we will pay to the beneficiary in
a lump sum, unless otherwise requested, the present value of the guaranteed
annuity payments remaining.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a lump-sum
to the beneficiary (unless otherwise requested), and no deferred sales charge
will be imposed.
If the Annuitant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at our Home Office. The
value of any death benefit proceeds will be determined as of the next Valuation
Date after we receive acceptable proof of death and a request for payment. Under
Options 2 and 4, such value will be reduced by any payments made after the date
of death.
TAX STATUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
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11
<PAGE>
may depend upon the tax status of the individual concerned. Any person concerned
about these tax implications should consult a competent tax adviser before
initiating any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Account investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretation thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
IN GENERAL. The Contract is designed for use with Section 403(b) plans. The
tax rules applicable to retirement plans vary according to the type of plan and
the terms and conditions of the plan.
The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants as
well as 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.
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.
In order to be excludable from taxable income, total annual contributions
made by you and your employer cannot exceed either of two limits set by the
Code. The first limit, under Section 415, is generally the lesser of 25% of your
includible compensation or $30,000. The second limit, which is the exclusion
allowance under Section 403(b), is usually calculated according to a formula
that takes into account your length of employment and any pretax contributions
to certain other retirement plans. These two limits apply to your contributions
as well as to any contributions made by your employer on your behalf. There is
an additional limit that specifically limits your salary reduction contributions
to generally no more than $9,500 annually (subject to indexing); your own limit
may be higher or lower, depending on certain conditions. In addition Purchase
Payments will be excluded from your gross income only if the Plan meets certain
non-discrimination requirements.
Section 403(b)(11) restricts the distribution under Section 403(b) contracts
of: (1) salary reduction contributions made after December 31, 1988; (2)
earnings on those contributions; and (3) earnings during such period on amounts
held as of December 31, 1988. Distribution of those amounts may only occur upon
death of the employee, attainment of age 59 1/2, separation from service,
disability, or financial hardship. In addition, income attributable to salary
reduction contributions may not be distributed in the case of hardship.
If, pursuant to Revenue Ruling 90-24, the Company agrees to accept, under
any of the Contracts covered by this Prospectus, amounts transferred from a Code
Section 403(b)(7) custodial account, such amounts will be subject to the
withdrawal restrictions set forth in Code Section 403(b)(7)(A)(ii).
Generally, no amounts accumulated under the Contract will be taxable prior
to the time of actual distribution. However, the IRS has stated in published
rulings that a variable contract owner, including participants under Section
403(b) Plans, will be considered the owner of separate account assets if the
contract owner possesses incidents of investment control over the assets. In
these circumstances, income and gains from the separate account assets would be
currently includible in the variable contract owner's gross income. The Treasury
announced that guidance would be issued in the future regarding the extent to
which owners could direct their investments among Subaccounts without
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12
<PAGE>
being treated as owners of the underlying assets of the Separate Account. It is
possible that the Treasury's position, when announced, may adversely affect the
tax treatment of existing contracts. The Company therefore reserves the right to
modify the Contract as necessary to attempt to prevent the Contract owner from
being considered the federal tax owner of the assets of the Separate Account.
MINIMUM DISTRIBUTION REQUIREMENTS. The Code has required distribution rules
for Section 403(b) Plans. Under 403(b) Plans, distributions of amounts held as
of December 31, 1986 must generally begin by the end of the calendar year in
which you attain age 75 (or retire, if later, for governmental or church plans).
However, special rules require that some or all of that balance be distributed
earlier if any distributions are taken in excess of the minimum required amount.
Distributions attributable to contributions under Section 403(b) Plans on or
after January 1, 1987 (including any earnings on the entire Account Value after
that date), must generally begin by April 1 of the calendar year following the
calendar year in which you attain age 70 1/2 or retire, whichever occurs later.
In general, annuity payments must be distributed over your life or the joint
lives of you and your beneficiary, or over a period not greater than your life
expectancy or the joint life expectancies of you and your beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your beneficiary must be made at least as rapidly as under the
method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your beneficiary, the
regulations for Code Section 401(a))9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your beneficiary by December 31 of the year
following your death. However, a spousal beneficiary has certain rollover rights
which can only be exercised in the year of your death. The rules are complex and
you should consult your tax adviser before electing the method of calculation to
satisfy the minimum requirements.
If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year
containing the fifth anniversary of the date of your death. Alternatively,
payments may be made over the life of the beneficiary or over a period not
extending beyond the life expectancy of the beneficiary provided the
distribution begins by December 31 of the calendar year following the calendar
year of your death, or December 31 of the calendar year in which you would have
attained age 70 1/2.
If you fail to receive the minimum required distribution for any tax year, a
50% excise tax is imposed on the required amount that was not distributed.
TAXATION OF DISTRIBUTIONS. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to another
plan of the same type or to an individual retirement annuity/account ("IRA") in
accordance with the Code, or unless you have made after-tax contributions to the
plan, which are not taxed upon distribution. The Code has specific rules that
apply, depending on the type of distribution received, if after-tax
contributions were made.
In general, payments received by your beneficiaries after your death are
taxed in the same manner as if you had received those payments, except that a
limited death benefit exclusion may apply.
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from annuities are subject to mandatory federal income tax
withholding. We will report to the IRS the taxable portion of all distributions.
The Code imposes a 10% penalty tax on the taxable portion of any
distribution unless made when (a) you have attained age 59 1/2, (b) you have
become disabled, (c) you have died, (d) you have separated from service with the
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.
- --------------------------------------------------------------------------------
13
<PAGE>
MISCELLANEOUS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPPORTUNITY PLUS PROCESSING OFFICE
We have established the Opportunity Plus Processing Office to provide
administrative support to Participants of the Opportunity Plus Program. This
office will handle enrollments, billing, transfers, redemptions and inquiries
for all Opportunity Plus Participants. All forms and correspondence should be
sent to:
Aetna Life Insurance and Annuity Company
Opportunity Plus Processing Office
P.O. Box 12894
Albany, New York 12212-2894
Telephone Number: 1-800-677-4636
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-- Deferred Sales Charge."
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or is not reasonably practicable for
the value of the Subaccount's assets; or (c) during such other periods as the
SEC may by order permit for the protection of investors. The conditions under
which restricted trading or an emergency exists shall be determined by the rules
and regulations of the SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount and then related to the ending redeemable values over the most recent
one, five and ten-year periods (or since inception, if less than ten years).
Standardized returns will reflect the reduction of all recurring charges during
each period (e.g., mortality and expense risk charges, annual maintenance fees,
administrative expense charge (if any) and any applicable deferred sales
charge). "Non-standardized returns" will be calculated in a similar manner,
except that non-standardized figures will not reflect the deduction of any
applicable deferred sales charge (which would decrease the level of performance
shown if reflected in these calculations). The non-standardized figures may also
include monthly, quarterly, year-to-date and three-year periods.
The Company may also advertise certain ratings, rankings or other
information related to the Company,
- --------------------------------------------------------------------------------
14
<PAGE>
the Subaccounts or the Funds. Further details regarding performance reporting
and advertising are described in the Statement of Additional Information.
VOTING RIGHTS
In accordance with the Company's view of present applicable law, it will
vote the shares of each of the Funds held by the Separate Account at regular and
special meetings of Fund shareholders in accordance with instructions received
from each Contract Holder. Participants and Annuitants have a fully vested
(100%) interest in the benefits provided under the Contract and may instruct the
Contract Holder how to direct the Company to cast the votes for the portion of
the Account Value or valuation reserve attributable to their individual
Accounts. The Company will vote shares for which it has not received
instructions in the same proportion as it votes shares for which it has received
instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest, as
well as any proxy materials and a form on which to give voting instructions.
Voting instructions will be solicited by written communication at least 14 days
before such meeting. The number of votes to which each person may give direction
will be determined as of the record date set by the Fund.
The number of votes each Contract Holder or Participant, as applicable, may
cast during the Accumulation Period is equal to the portion of the Account Value
to that Fund, divided by the net asset value of one share of that Fund. During
the Annuity Period, the number of votes is equal to the valuation reserve
applicable to the portion of the Contract attributable to that Fund, divided by
the net asset value of one share of that Fund. In determining the number of
votes, fractional votes will be recognized.
CHANGES IN BENEFICIARY DESIGNATIONS
The designated Beneficiary may be changed at any time. Such change will not
become effective until written notice of the change is received by the Company.
MODIFICATION OF THE CONTRACT
The Company may change the Contract as required by federal or state law. In
addition, the Company may, upon 30 days written notice to the Contract Holder,
make other changes to 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.
AGREEMENTS WITH THE COMPANY
In 1994, NYSUT and the Company entered into an arrangement which calls for
NYSUT to exclusively endorse the Opportunity Plus program and for the Company to
provide educational programs focusing on financial planning for retirement. The
educational program is provided to all NYSUT members including agency fee
payors. Trained personnel have been hired by the Company to conduct these
programs exclusively for NYSUT members. NYSUT is reimbursed for direct out-
of-pocket expenses incurred in the promotion of the Opportunity Plus program up
to a maximum of $75,000 per year. In addition, the Company will pay NYSUT
between $30,000-$42,000 per month from 1994 through 1998. NYSUT has indicated to
the Company that it intends to use these amounts to enhance benefits to the
membership.
The Company compensates UUP $48,000 per year for the use of on-site campus
facilities, the endorsement of the Opportunity Plus program and for the use of
UUP payroll slots.
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.
- --------------------------------------------------------------------------------
15
<PAGE>
CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Statement of Additional Information contains more specific information on
the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
<TABLE>
<S> <C>
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
</TABLE>
- --------------------------------------------------------------------------------
16
<PAGE>
APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE GUARANTEED ACCUMULATION ACCOUNT ("GAA") IS A CREDITED INTEREST OPTION
AVAILABLE DURING THE ACCUMULATION PERIOD UNDER THE CONTRACTS DESCRIBED IN THIS
PROSPECTUS. AMOUNTS ALLOCATED TO GAA ARE HELD IN A NONINSULATED, NONUNITIZED
SEPARATE ACCOUNT. THIS APPENDIX IS A SUMMARY OF GAA AND IS NOT INTENDED TO
REPLACE THE GAA PROSPECTUS. YOU SHOULD READ THE ACCOMPANYING GAA PROSPECTUS
CAREFULLY BEFORE INVESTING.
GAA is a Credited Interest Option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. This option guarantees the minimum interest
rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from three to ten years.
Purchase Payments must remain in GAA for the full Guaranteed Term to receive
the quoted interest rates. Withdrawals or transfers from a Guaranteed Term
before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). An MVA reflects the change in the value of the investments
due to changes in interest rates since the date of deposit. When interest rates
increase after the date of deposit, the value of the investment decreases and
the MVA is negative. Conversely, when interest rates decrease after the date of
deposit, the value of the investment increases, and the MVA is positive. It is
possible that a negative MVA could result in the Participant receiving an amount
which is less than the amount paid into GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge and/or federal tax penalties or mandatory income tax
withholding.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under GAA
transferred to one or more of the Subaccounts available during the Annuity
Period. GAA cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Transfers are permitted among Guaranteed Terms. However, amounts applied to
GAA may not be transferred to another Guaranteed Term of GAA, or to any other
Subaccount or Credited Interest Option available under the Contract, during the
deposit period or the 90 days after the close of the deposit period. We will
apply an MVA to transfers made before the end of a Guaranteed Term, unless such
transfer is due to the maturity of the Guaranteed Term.
CONTRACT LOANS
Loans may not be made against amounts held in GAA, although such value is
included in determining the Account Value against which a loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn from GAA and reinvested, they will be applied to
the current deposit period. Amounts are proportionately reinvested to the
classifications in the same manner as they were allocated before the withdrawal.
Any negative MVA amount applied to a withdrawal is not included in the
reinvestment.
- --------------------------------------------------------------------------------
17
<PAGE>
APPENDIX II
FIXED ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED ACCOUNT.
AMOUNTS ALLOCATED TO THE FIXED ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT
THAT SUPPORTS GENERAL INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED
ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON EXEMPTIONS UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THE PROSPECTUS REGARDING
THE FIXED ACCOUNT, MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE
PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND
COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE FIXED
ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Account guarantees the minimum interest rate specified in the
Contract. The Company may credit a higher interest rate from time to time. The
current rate is subject to change at any time, but will never fall below the
guaranteed minimum. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under the Fixed
Account, the Company assumes the risk of investment gain or loss by guaranteeing
Account Values and promising a minimum interest rate and Annuity Payment. The
Fixed Account is available under Installment Purchase Payment Contracts only.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as provided by
federal law.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
The Fixed Account will reflect a compound interest rate credited by us. The
interest rate quoted is an annual effective yield. We make no deductions from
the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
If a withdrawal is made from the Fixed Account, a deferred sales charge may
apply. See "Charges and Deductions-- Deferred Sales Charge."
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers from the Fixed Account to any other available investment
options(s) are allowed in each calendar year during the Accumulation Period.
There is no limit on the number of transfers that you can make out of the Fixed
Account in a calendar year; however, the amount you are allowed to transfer from
the Fixed Account is the current value of your Fixed Account multiplied by the
current maximum percentage of the transfer allowed (the "window") minus any
previous transfers made during the calendar year.
By notifying us at the Opportunity Plus Processing Office at least 30 days
before Annuity payments begin, you may elect to have amounts which have been
accumulating under the Fixed Account transferred to one or more of the
Subaccounts available during the Annuity Period to provide variable Annuity
Payments.
CONTRACT LOANS
Loans may be made from Account Values held in the Fixed Account.
- --------------------------------------------------------------------------------
18
<PAGE>
FOR MASTER APPLICATIONS ONLY
I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C "OPPORTUNITY PLUS" GROUP
DEFERRED VARIABLE ANNUITY PROSPECTUS DATED MAY 1, 1996, AS WELL AS ALL CURRENT
PROSPECTUSES PERTAINING TO THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER THE
CONTRACTS.
- ---- PLEASE SEND AN ACCOUNT C STATEMENT OF ADDITIONAL INFORMATION (FORM NO.
75962(S)) DATED MAY 1, 1996.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
75962-2 (5/96)
- --------------------------------------------------------------------------------
<PAGE>
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996
for
OPPORTUNITY PLUS
Group Variable Multiple Option Annuity Contracts
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account C (the
"Separate Account") dated May 1, 1996.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Opportunity Plus 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 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 . . . . . . . . . . . . . . . . . . . 6
Sales Material and Advertising . . . . . . . . . . . . 7
Independent Auditors . . . . . . . . . . . . . . . . . 8
Financial Statements of the Separate Account . . . . . S-1
Financial Statements of Aetna Life Insurance
and Annuity Company . . . . . . . . . . . . . . . . . F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1995, the Company
managed over $___ billion of assets, and as of December 31, 1994, it ranked
among the top 2% of all U.S. life insurance companies by size. The Company is a
wholly owned subsidiary of Aetna Retirement Services, Inc., which is in turn a
wholly owned subsidiary of Aetna Life and Casualty Company. The Company is
engaged in the business of issuing life insurance policies and annuity contracts
in all states of the United States. The Company's Home Office is located at 151
Farmington Avenue, Hartford, Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
The Company has established the Opportunity Plus Processing Office to provide
administrative support to Contract Holders and Participants investing in the
Opportunity Plus Contract. This office will handle enrollments, billing,
transfers, redemptions, and inquiries for all Opportunity Plus Contract Holders
and Participants. All forms and correspondence should be sent to:
Aetna Life Insurance and Annuity Company
Opportunity Plus Processing Office
P.O. Box 12894
Albany, New York 12212-2894
Telephone number: 1-800-677-4636
Other than the mortality and expense risk charges and administrative expense
charge described in the prospectus, all expenses incurred in the operations of
the Separate Account are borne by the Company. See "Charges and Deductions" in
the prospectus. The Company receives reimbursement for certain administrative
costs from some unaffiliated sponsors of the Funds used as funding options under
the Contract. These fees generally range up to 0.25%.
The assets of the Separate Account are held by the Company. The Separate
Account has no custodian. However, the Funds in whose shares the assets of the
Separate Account are invested each have custodians, as discussed in their
respective prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of each of the Subaccounts of the Separate
Account will be invested exclusively in shares of the Funds described in the
Prospectus. Purchase Payments made
2
<PAGE>
under the Contract may be allocated to one or more of the Subaccounts. The
Company may make additions to or deletions from available investment options as
permitted by law. The availability of the Funds is subject to applicable
regulatory authorization. Not all Funds are available in all jurisdictions,
under all Contracts, or under all Plans. The Funds currently available under
the Contract are as follows:
<TABLE>
<CAPTION>
<S> <C>
Aetna Income Shares Franklin Government Securities Trust
Aetna Investment Advisers Fund, Inc. Janus Aspen Aggressive Growth Portfolio
Aetna Variable Encore Fund Janus Aspen Growth Portfolio
Aetna Variable Fund 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 Lexington Natural Resources Trust
Portfolio Neuberger and Berman Growth Portfolio
Fidelity VIP II Asset Manager Portfolio Scudder International Portfolio
Fidelity VIP II Contrafund Portfolio TCI Growth
Fidelity VIP II Index 500 Portfolio
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,"
both of which are described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, three, five and ten year
periods (or fractional periods thereof). The standardized figures reflect the
deduction of all recurring charges during each period (e.g., mortality and
expense risk charges, maintenance fees, administrative expense charges, and
deferred sales charges). These charges will be deducted on a pro rata basis in
the case of
3
<PAGE>
fractional periods. The maintenance fee is converted to a percentage of assets
based on the average account size under the Contracts described in the
Prospectus.
The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations). The non-standardized figures may also include monthly,
quarterly, year-to-date and three year periods.
If a Fund was in existence prior to the date it became available under the
Contract, standardized and non-standardized total returns may include periods
prior to the date on which such Fund became available under the Contract. These
figures are calculated by adjusting the actual returns of the Fund to reflect
the charges that would have been assessed under the Contract had that Fund been
available under the Contract during that period.
Investment results of the Funds will fluctuate over time, and any presentation
of the Subaccounts' total return quotations for any prior period should not be
considered as a representation of how the Subaccounts will perform in any future
period. Additionally, the Account Value upon redemption may be more or less
than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED
The tables shown below represent each type of contract provided for in this
Statement of Additional Information. The first table reflects the average
annual SEC and Company Total Return quotation figures for the periods ended
December 31, 1995 for the Subaccounts under the Single Payment Contract issued
by the Company. The second table reflects the average annual SEC and Company
Total Return quotation figures for the periods ended December 31, 1995 for the
Subaccounts under Installment Payment Contracts with a $15 annual maintenance
fee, deducted quarterly. For those Subaccounts where results are not available
for the full calendar period indicated, the percentage shown is an average
annual return since inception (denoted with an *).
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
FUND
SINGLE PURCHASE PAYMENT CONTRACT STANDARDIZED NON-STANDARDIZED INCEPTION
($0 MAINTENANCE FEE) DATE
- ---------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Fund 04/30/75
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 06/01/78
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund 09/01/75
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 06/23/89
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ---------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio 09/30/86
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
FUND
SINGLE PURCHASE PAYMENT CONTRACT STANDARDIZED NON-STANDARDIZED INCEPTION
($0 MAINTENANCE FEE) DATE
- ---------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager Portfolio 11/07/86
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Index 500 Portfolio 02/13/87
- ---------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 9/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- ---------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
FUND
INSTALLMENT PURCHASE PAYMENT CONTRACTS STANDARDIZED NON-STANDARDIZED INCEPTION
($15 MAINTENANCE FEE) DATE
- ---------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Fund 04/30/75
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 06/01/78
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund 09/01/75
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 06/23/89
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ---------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio 09/30/86
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
FUND
INSTALLMENT PURCHASE PAYMENT CONTRACTS STANDARDIZED NON-STANDARDIZED INCEPTION
($15 MAINTENANCE FEE) DATE
- ---------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Equity-Income Portfolio 10/22/86
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Asset Manager Portfolio 11/07/86
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Contrafund Portfolio 01/03/95
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Index 500 Portfolio 02/13/87
- ---------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 9/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio 04/30/87
- ---------------------------------------------------------------------------------------------------------------------------------
TCI Growth 11/20/87
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Period before the first
annuity payment is due. Such value (less any applicable premium tax) is applied
to provide an Annuity in accordance with the annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first annuity payment for each $1,000 of value applied.
Thereafter, variable annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first annuity payment based on a
6
<PAGE>
particular investment option, and (b) is the then current Annuity Unit value for
that investment option. As noted, Annuity Unit values fluctuate from one
Valuation Period to the next; such fluctuations reflect changes in the net
investment factor for the appropriate Fund(s) (with a ten Valuation Period lag
which gives the Company time to process Annuity payments) and a mathematical
adjustment which offsets the assumed net investment rate of 3.5% or 5% per
annum.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Account and that the value of an
Accumulation Unit for the tenth Valuation Period prior to retirement was
$13.650000. This produces a total value of $40,950.
Also assume 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 $1,000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Period in which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Fund is 1.0015000
as of the tenth Valuation Period preceding the due date of the second monthly
payment, multiplying this factor by .9999058* (to neutralize the assumed net
investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Period (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Period in which the second payment is due.
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and Certificates of Deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Funds to established market indexes such
as the Standard & Poor's 500 Stock Index and the
7
<PAGE>
Dow Jones Industrial Average or to the percentage change in values of other
management investment companies that have investment objectives similar to the
Fund being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. From time to time, we will quote articles from newspapers
and magazines or other publications or reports, including, but not limited to
The Wall Street Journal, Money magazine, USA Today and The VARDS Report.
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Contract Holders or Participants. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments, including comparison
between the Contracts and the characteristics of and market for such financial
instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
8
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
INDEX
Independent Auditors' Report . . . . . . . . . . . . . . . . . . S-2
Statement of Assets and Liabilities. . . . . . . . . . . . . . . S-3
Statement of Operations. . . . . . . . . . . . . . . . . . . . . S-4
Statements of Changes in Net Assets. . . . . . . . . . . . . . . S-5
Notes to Financial Statements . . . . . . . . . . . . . . . . . S-6
FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT AND INSURANCE COMPANY
WILL BE PROVIDED IN A SUBSEQUENT POST-EFFECTIVE AMENDMENT.
S-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT C
VARIABLE ANNUITY CONTRACTS
ISSUED BY
AETNA LIFE INSURANCE AND ANNUITY COMPANY
FORM NO. 75962(S) - 2 ALIAC ED. MAY 1996
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:*
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of December 31, 1995
- Statement of Operations for the year ended December 31, 1995
- Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
- Notes to Financial Statements
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1995, 1994 and 1993
- Consolidated Balance Sheets as of December 31, 1995 and 1994
- Consolidated Statements of Changes in Shareholder's Equity for
the years ended December 31, 1995, 1994 and 1993
- Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance and
Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3.1) Form of Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and related Selling
Agreement(2)
(4.1) Form of Variable Annuity Contract (G-TDA-HH(XC/M)) and (GTDA-
HH(XC/S))(3)
(5) Form of Variable Annuity Contract Application (300-TDA-HH(XC))(3)
(6) Certification of Incorporation and By-Laws of Depositor(4)
(7) Not applicable
(8.1) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Alger American Fund and Fred Alger Management,
Inc. dated September 1, 1993(2)
(8.2) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company (Calvert
Responsibly Invested Balanced Portfolio formerly Calvert Socially
Responsible Series) dated March 13, 1989 and amended December 27,
1993(5)
<PAGE>
(8.3) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Variable Insurance Products Fund, Fidelity
Distributors Corporation dated February 1, 1994(6)
(8.4) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Variable Insurance Products Fund II, Fidelity
Distributors Corporation dated February 1, 1994(6)
(8.5) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Government Securities Trust dated
January 31, 1989(7)
(8.6) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994 and
amended June 15, 1994(8)
(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(5)
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Lexington Emerging Markets Fund, Inc. and
Lexington Management Corporation (its investment advisor) dated
April 28, 1994(9)
(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(2)
(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(10)
(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(10)
(9) Opinion of Counsel*
(10.1) Consent of Independent Auditors*
(10.2) Consent of Counsel*
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data*
(14) Financial Data Schedule*
(15.1) Powers of Attorney(11)
(15.2) Authorization for Signatures(12)
* To be filed by amendment.
1. Incorporated by reference to Registrant's Registration Statement on Form N-4
(File No. 2-52449) filed on February 28, 1986.
2. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75996) filed on April 21, 1994.
3. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-75962) filed on March 24, 1995.
<PAGE>
4. Incorporated by reference to Post-Effective Amendment No. 58 to Registration
Statement on Form N-4 (File No. 2-52449) filed on February 28, 1994.
5. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-75978) filed on March 24, 1995.
6. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75978) filed on April 25, 1994.
7. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75990) filed on April 25, 1994.
8. Incorporated by reference to Post-Effective Amendment No. 2 to Registration
Statement on Form N-4 (File No. 33-75960) filed on August 9, 1994.
9. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-75978) filed on August 24, 1994.
10. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-88720) filed on January 20, 1995.
11. The Power of Attorney for David E. Bushong, Acting Chief Financial Officer,
is incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-87932), as filed
electronically, on September 18, 1995. The Powers of Attorney for all other
signatories are incorporated by reference to Post-Effective Amendment No. 5
to Registration Statement on Form N-4 (File No. 33-75982), as filed
electronically, on February 20, 1996.
12. Incorporated by Reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-91846) as filed electronically on August
16, 1995.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal
Business Address* Positions and Offices with Depositor
- ------------------ ------------------------------------
Daniel P. Kearney Director and President
Timothy A. Holt Director
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Senior Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
James C. Hamilton Vice President and Treasurer
David E. Bushong Acting Chief Financial Officer
Eugene M. Trovato Vice President, Chief Accounting Officer and
Corporate Controller
Zoe Baird Senior Vice President and General Counsel
Susan E. Schechter Corporate Secretary and Counsel
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
<PAGE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Incorporated herein by reference to Item 26 of Post-Effective Amendment No. 5
to Registration Statement on Form N-4 (File No. 33-75982), as filed
electronically on February 20, 1996.
ITEM 27. NUMBER OF CONTRACT OWNERS
As of December 31, 1995, there were 577,320 individuals holding interests in
variable annuity contracts funded through Account C.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Section 33-320a of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and officers of
Connecticut corporations. The statute provides in general that Connecticut
corporations shall indemnify their officers, directors, employees, agents, and
certain other defined individuals against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses actually incurred in connection with
proceedings against the corporation. The corporation's obligation to provide
such indemnification does not apply unless (1) the individual is successful on
the merits in the defense of any such proceeding; or (2) a determination is made
(by a majority of the board of directors not a party to the proceeding by
written consent; by independent legal counsel selected by a majority of the
directors not involved in the proceeding; or by a majority of the shareholders
not involved in the proceeding) that the individual acted in good faith and in
the best interests of the corporation; or (3) the court, upon application by the
individual, determines in view of all the circumstances that such person is
reasonably entitled to be indemnified.
C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut
corporation cannot indemnify a director or officer to an extent either greater
or less than that authorized by the statute, e.g., pursuant to its certificate
of incorporation, bylaws, or any separate contractual arrangement. However, the
statute does specifically authorize a corporation to procure indemnification
insurance to provide greater indemnification rights. The premiums for such
insurance may be shared with the insured individuals on an agreed basis.
Consistent with the statute, Aetna Life and Casualty Company has procured
insurance from Lloyd's of London and several major United States excess insurers
for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor, which supplements the indemnification
rights provided by C.G.S. Section 33-320a to the extent such coverage does not
violate public policy.
ITEM 29. PRINCIPAL UNDERWRITER
(a) In addition to serving as the principal underwriter for the Registrant,
Aetna Life Insurance and Annuity Company (ALIAC) also acts as the
principal underwriter for Variable Life Account B and Variable Annuity
Accounts B and G (separate accounts of ALIAC
<PAGE>
registered as unit investment trusts), and Variable Annuity Account I (a
separate account of Aetna Insurance Company of America registered as a
unit investment trust). Additionally, ALIAC is the investment adviser
for Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund,
Aetna Investment Advisers Fund, Inc., Aetna GET Fund, Aetna Series Fund,
Inc. and Aetna Generation Portfolios, Inc. ALIAC is also the depositor
of Variable Life Account B and Variable Annuity Accounts B and G.
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1995:
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation
Principal Discounts and on Redemption Brokerage
Underwriter Commissions or Annuitization Commissions Compensation*
- ----------- ----------- ---------------- ----------- -------------
Aetna Life $ ** $ **
Insurance and
Annuity
Company
* Compensation shown in column 5 includes deductions for mortality and expense
risk guarantees and contract charges assessed to cover costs incurred in the
sales and administration of the contracts issued under Account C.
** To be updated by amendment.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Records concerning contract owners of Variable Annuity Account C covered by
this Registration Statement are located at the offices of the Depositor as
follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
and
Opportunity Plus Processing Office
18 Corporate Woods Blvd., Fourth Floor
Albany, NY 12211
<PAGE>
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on Form
N-4 as frequently as is necessary to ensure that the audited financial
statements in the registration statement are never more than sixteen
months old for as long as payments under the variable annuity contracts
may be accepted;
(b) to include as part of any application to purchase a contract offered by a
prospectus which is part of this registration statement on Form N-4, a
space that an applicant can check to request a Statement of Additional
Information; and
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and complies with
the provisions of Paragraphs (1) through (4) of the SEC Staff's No-Action
Letter dated November 22, 1988 with respect to language concerning
withdrawal restrictions applicable to plans established pursuant to
Section 403(b) of the Internal Revenue Code. See American Counsel of
Life Insurance; SEC No-Action Letter, [1989 Transfer Binder] Fed. SEC. L.
Rep. (CCH) PARA 78,904 at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, the Registrant, Variable Annuity Account C of Aetna Life
Insurance and Annuity Company, has duly caused this Post-Effective Amendment No.
5 to its Registration Statement on Form N-4 (File No. 33-75962) to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Hartford, State of Connecticut, on the 21st day of February, 1996.
VARIABLE ANNUITY ACCOUNT C OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(REGISTRANT)
By: AETNA LIFE INSURANCE AND ANNUITY
COMPANY
(DEPOSITOR)
By: Daniel P. Kearney*
----------------------------------------
Daniel P. Kearney
President
As required by the Securities Act of 1933, as amended, this Post-Effective
Amendment No. 5 to the Registration Statement on Form N-4 (File No. 33-75962)
has been signed by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
Daniel P. Kearney* Director and President )
- --------------------------- (principal executive officer) )
Daniel P. Kearney )
)
Timothy A. Holt* Director ) February
- --------------------------- ) 21, 1996
Timothy A. Holt )
)
David E. Bushong* Acting Chief Financial Officer )
- --------------------------- )
David E. Bushong )
)
Eugene M. Trovato* Vice President, Chief Accounting )
- --------------------------- Officer and Corporate Controller )
Eugene M. Trovato )
)
Christopher J. Burns* Director )
- --------------------------- )
Christopher J. Burns )
)
<PAGE>
Laura R. Estes* Director )
- --------------------------- )
Laura R. Estes )
)
Gail P. Johnson* Director )
- --------------------------- )
Gail P. Johnson )
)
John Y. Kim* Director )
- --------------------------- )
John Y. Kim )
)
Shaun P. Mathews* Director )
- --------------------------- )
Shaun P. Mathews )
)
Glen Salow* Director )
- --------------------------- )
Glen Salow )
)
Creed R. Terry* Director )
- --------------------------- )
Creed R. Terry )
By: /s/ Julie E. Rockmore
--------------------------------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.1 Resolution of the Board of Directors of Aetna Life
Insurance and Annuity Company establishing Variable
Annuity Account C *
99-B.3.1 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-TDA-HH(XC/M)) and
(GTDA-HH(XC/S)) *
99-B.5 Form of Variable Annuity Contract Application
(300-TDA-HH(XC)) *
99-B.6 Certification of Incorporation and By-Laws of Depositor *
99-B.8.1 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company, Alger American Fund and Fred Alger
Management, Inc. dated September 1, 1993 *
99-B.8.2 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company and Calvert Asset Management Company
(Calvert Responsibly Invested Balanced Portfolio, formerly
Calvert Socially Responsible Series) dated March 13, 1989
and amended December 27, 1993 *
99-B.8.3 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company and Variable Insurance Products Fund,
Fidelity Distributors Corporation dated February 1, 1994 *
99-B.8.4 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company and Variable Insurance Products Fund II,
Fidelity Distributors Corporation dated February 1, 1994 *
99-B.8.5 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company and Franklin Government Securities
Trust 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 June 15, 1994 *
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company and Lexington Management Corporation
regarding Natural Resources Trust dated December 1, 1988
and amended February 11, 1991 *
99-B.8.8 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company, Lexington Emerging Markets Fund, Inc.
and Lexington Management Corporation (its investment
advisor) 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 *
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 **
99-B.13 Computation of Performance Data **
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule **
*Incorporated by reference
**To be filed by amendment
