<PAGE>
As filed with the Securities and Exchange Registration No. 333-01107
Commission on August 2, 1996 Registration No. 811-2513
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1
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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Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
It is proposed that this filing will become effective on August 9, 1996.
-----------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has registered an indefinite number of securities under the Securities Act of
1933. Registrant filed a Rule 24f-2 Notice for the fiscal year ended
December 31, 1995 on February 29, 1996.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
Form
N-4
Item No. Part A (Prospectus) Location
- -------- ------------------- --------
1 Cover Page ................................. Cover Page
2 Definitions ................................ Definitions
3 Synopsis.................................... Prospectus Summary;
Fee Table
4 Condensed Financial Information............. Not Applicable
5 General Description of Registrant,
Depositor, and Portfolio Companies.......... The Company; Variable
Annuity Account C;
The Funds
6 Deductions and Expenses .................... Charges and Fees During
the Accumulation Period;
Charges and Fees During
the Accumulation Period
7 General Description of Variable Annuity
Contracts .................................. Purchase; Miscellaneous
8 Annuity Period ............................. Annuity Period
9 Death Benefit .............................. Death Benefit
10 Purchases and Contract Value ............... Purchase; Determining
Individual Account
Current Value
11 Redemptions ................................ Contract Rights;
Additional Withdrawal
Options
12 Taxes ...................................... Tax Status
13 Legal Proceedings .......................... Miscellaneous - Legal
Proceedings and Legal
Matters
14 Table of Contents of the Statement of
Additional Information ..................... Statement of Additional
Information - Table of
Contents
<PAGE>
Form
N-4 Part B
Item No. (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;
General; Average
Annual Total Return
Quotations
22 Annuity Payments ........................... Annuity Payments
23 Financial Statements ....................... Financial Statements
of the Separate
Account; Financial
Statements of Aetna
Life Insurance and
Annuity Company
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>
SUBJECT TO COMPLETION
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
PROSPECTUS
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This Prospectus describes the Retirement Plus and Voluntary Contracts which are
group deferred variable annuity contracts (the "Contracts") issued by Aetna Life
Insurance and Annuity Company ("Company"). See "Purchase." The Contracts are
designed to fund plans that provide for retirement income and are established
under the Internal Revenue Code of 1986, as amended ("Code"). Amounts held under
a Contract may be entitled to tax-deferred treatment under certain sections of
the Code.
Each Contract allows values to accumulate under variable investment options or
credited interest options, or a combination of these investment options. They
also provide for the payment of annuity benefits on a variable or fixed basis,
or a combination thereof.
The variable funding options ("Funds") currently available through the Separate
Account under the Contracts described in this Prospectus are as follows:
<TABLE>
<S> <C>
- Aetna Variable Fund - Fidelity VIP Growth Portfolio
- Aetna Income Shares - Fidelity VIP Overseas Portfolio
- Aetna Variable Encore Fund - Franklin Government Securities
- Aetna Investment Advisers Fund, Trust
Inc. - Janus Aspen Aggressive Growth
- Aetna Ascent Variable Portfolio Portfolio
- Aetna Crossroads Variable Portfolio - Janus Aspen Balanced Portfolio
- Aetna Legacy Variable Portfolio - Janus Aspen Flexible Income
- Alger American Growth Portfolio Portfolio
- Alger American Small Cap Portfolio - Janus Aspen Growth Portfolio
- Calvert Responsibly Invested - Janus Aspen Short-Term Bond
Balanced Portfolio Portfolio
- Fidelity VIP II Contrafund - Janus Aspen Worldwide Growth
Portfolio Portfolio
- Fidelity VIP Equity-Income - Lexington Natural Resources Trust
Portfolio - Neuberger & Berman Growth Portfolio
- Scudder International Portfolio
Class A Shares
- TCI Growth (a Twentieth Century
fund)
</TABLE>
The credited interest options available for the accumulation of values are the
Guaranteed Accumulation Account, the Fixed Plus Account and the Fixed Account.
The Guaranteed Accumulation Account and the Fixed Plus Account are offered only
in those jurisdictions in which they are approved. (See Appendix I and Appendix
II). The Fixed Account is available for accumulation only in limited
circumstances. (See Appendix III.) Except as specifically mentioned, this
Prospectus describes only the variable options of the Contracts. Additional
information about the Guaranteed Accumulation Account is also contained in an
accompanying prospectus.
The availability of the above Funds and credited interest options is subject to
applicable regulatory authorization. Not all Funds or credited interest options
are available in all jurisdictions or under a particular Contract. Please check
with your employer to determine option availability.
This Prospectus sets forth concisely the information about Variable Annuity
Account C (the "Separate Account") that a prospective investor should know
before investing. Additional information about the Separate Account is contained
in a Statement of Additional Information ("SAI") dated , 1996, which
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents for the SAI is printed in this
Prospectus. An SAI may be obtained without charge by indicating the request on
the enrollment form or on the enclosed prospectus receipt for this Prospectus or
by calling 1-800-525-4225.
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.
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE>
TABLE OF CONTENTS
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS.......................................................................... DEFINITIONS - 1
PROSPECTUS SUMMARY................................................................... SUMMARY - 1
FEE TABLE............................................................................ FEE TABLE - 1
PERFORMANCE DATA..................................................................... 1
THE COMPANY.......................................................................... 2
VARIABLE ANNUITY ACCOUNT C........................................................... 2
THE FUNDS............................................................................ 2
Fund Investment Advisers......................................................... 4
Mixed and Shared Funding......................................................... 4
Fund Changes..................................................................... 5
Fund Limitations................................................................. 5
PURCHASE............................................................................. 5
The Contracts.................................................................... 5
Eligible Contract Holders........................................................ 5
Purchase By Exchange............................................................. 5
Contract Charges and Fees Options................................................ 5
Responsibilities of Contract Holders............................................. 5
Enrollment of Participants....................................................... 5
Contributions.................................................................... 6
Contribution Limits For Contracts Used with 403(b) Plans..................... 6
Contribution Limits for Contracts Used with 401(a)/401(k) Plans.............. 6
Distribution..................................................................... 6
DETERMINING INDIVIDUAL ACCOUNT CURRENT VALUE......................................... 7
Fund Record Units................................................................ 7
Net Return Factor................................................................ 7
Transfer Credits................................................................. 7
CONTRACT RIGHTS...................................................................... 8
Right to Cancel.................................................................. 8
Rights Under the Contracts....................................................... 8
Rights Under the Retirement Plus Contract.................................... 8
Rights Under The Voluntary Contract.......................................... 8
Rights to Your Individual Account............................................ 8
TRANSFERS AND ALLOCATION CHANGES..................................................... 8
WITHDRAWALS.......................................................................... 9
Withdrawal Restrictions for Contracts Used with 403(b) Plans..................... 9
Reinvestment Privilege........................................................... 10
CONTRACT LOANS....................................................................... 10
CHARGES AND FEES DURING THE ACCUMULATION PERIOD...................................... 10
Annual Maintenance Fee........................................................... 14
Withdrawal Fee................................................................... 14
Mortality and Expense Risk Charges............................................... 15
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Administrative Expense Charge.................................................... 15
Fund Expenses.................................................................... 15
Premium and Other Taxes.......................................................... 15
CHARGES AND FEES DURING THE ANNUITY PERIOD........................................... 16
Mortality and Expense Risk Charges............................................... 16
Administrative Expense Charge.................................................... 16
Withdrawal Fee................................................................... 16
ADDITIONAL WITHDRAWAL OPTIONS........................................................ 16
ANNUITY PERIOD....................................................................... 16
Annuity Period Elections......................................................... 16
Annuity Options.................................................................. 17
DEATH BENEFIT........................................................................ 18
Accumulation Period.............................................................. 19
Annuity Period................................................................... 19
TAX STATUS........................................................................... 19
Introduction..................................................................... 19
Taxation of the Company.......................................................... 20
Tax Status of the Contracts...................................................... 20
Contracts Used with 403(b) Plans................................................. 20
Contracts Used With "Qualified" Plans............................................ 22
Penalty Tax on Certain Distributions............................................. 22
Other Tax Consequences........................................................... 22
MISCELLANEOUS........................................................................ 23
Voting Rights.................................................................... 23
Modification of the Contracts.................................................... 23
Contract Holder Inquiries........................................................ 23
Telephone Transfers.............................................................. 23
Payments......................................................................... 23
Transfer of Ownership; Assignment................................................ 24
Legal Proceedings................................................................ 24
Legal Matters.................................................................... 24
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 25
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT.......................................... 26
APPENDIX II--FIXED PLUS ACCOUNT...................................................... 27
APPENDIX III--FIXED ACCOUNT.......................................................... 29
APPENDIX IV--EMPLOYEE APPOINTMENT OF EMPLOYER AS AGENT UNDER AN ANNUITY CONTRACT..... 31
APPENDIX V--CONTRACTS ACQUIRED BY EXCHANGE........................................... 32
</TABLE>
<PAGE>
DEFINITIONS
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- --------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the meanings shown:
ACCUMULATION PERIOD: The period during which Net Contribution(s) are applied to
an Individual Account.
ADJUSTED CURRENT VALUE: The Current Value of an Individual Account plus or minus
any applicable aggregate GA Account Market Value Adjustment, if applicable.
AGGREGATE CURRENT VALUE: Current Value of Individual Accounts under a Contract
and other contracts of the same class as the Contract covering employees of the
employer maintaining the Plan. Where such other contract becomes effective after
the date a Contract became effective, the aggregation will commence in
accordance with the Company's existing administrative practice, but in no event
later than the first day of the next succeeding anniversary date. Where such
other contract is in existence prior to, or on the date a Contract became
effective, the aggregation will commence on the date the Contract becomes
effective.
ANNUITANT: A person on whose life an Annuity payment is based under a Contract.
ANNUITY: Payments of income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
ANNUITY PERIOD: The period during which Annuity payments are made.
ANNUITY UNIT: A measure of the value attributable to each Fund selected during
the Annuity Period.
BENEFICIARY: The person named to receive any benefits which remain under a
Contract after a Participant's death. Participants designate a Plan beneficiary
for their Individual Accounts.
CODE: Internal Revenue Code of 1986, as amended.
COMPANY: Aetna Life Insurance and Annuity Company, sometimes referred to as "we"
or "us."
CONTRACT(S): Either the Retirement Plus Contract or the Voluntary Contract
offered by this Prospectus or both.
CONTRACT HOLDER: The entity to which a Contract is issued. The Contract Holder
is usually the employer.
CONTRIBUTION: A payment received at the Company's Home Office and allocated to a
Contract.
CURRENT VALUE: For an Individual Account during the Accumulation Period, the
Current Value is the total of:
(a) The amount, if any, in the Fixed Plus Account, with interest earned to
date; plus
(b) The amount, if any, in the GA Account with interest earned to date; plus
(c) The amount, if any, in the Fixed Account with interest earned to date;
plus
(d) The value of all Fund Record Units, if any, as of the most recent
Valuation Period; less
(e) Any Maintenance Fee(s) due.
DISTRIBUTOR(S): The registered broker-dealer(s) which have entered into selling
agreements with the Company to offer and sell the Contracts. The Company may
also serve as a Distributor.
EMPLOYEE ACCOUNT: An Individual Account that will be credited with Participant
Contributions, specifically employee salary reduction contributions.
EMPLOYER ACCOUNT: An Individual Account that will be credited with the employer
Contributions.
ERISA: Employee Retirement Income Security Act of 1974.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
FIXED ACCOUNT: An accumulation option with a guaranteed minimum interest rate
which is available for accumulation only in limited circumstances. See Appendix
III.
FIXED PLUS ACCOUNT: An accumulation option with a guaranteed minimum interest
rate. The Company may credit a higher rate which is not guaranteed.
FUND RECORD UNITS: Units representing the portion of the Net Contribution(s)
applied to each Fund under the Separate Account.
FUNDS: The open-end registered management investment companies or separate
investment portfolio thereof, in which the Separate Account invests.
GENERAL ACCOUNT: The account holding the assets of the Company, other than those
assets held in the Company's separate account(s).
GUARANTEED ACCUMULATION ACCOUNT (GA ACCOUNT OR THE GAA): An accumulation option
where the Company guarantees stipulated rate(s) of interest for a specified
period of time. See Appendix I. All General Account assets of the Company are
available to meet the guarantees for the GA Account.
HOME OFFICE: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
INDIVIDUAL ACCOUNT(S): Account(s) established for each Participant under each
Contract in which he or she may be participating to keep a record of Current
Values and transactions.
MAINTENANCE FEE: A maintenance fee will be charged for each Participant under
each Contract and will be deducted during the Accumulation Period from the sum
under each Contract of the Current Value of Participant's Individual Accounts
and upon full surrender of the Participant's Individual Accounts.
MARKET VALUE ADJUSTMENT: An adjustment to the amount withdrawn or transferred
from the Guaranteed Accumulation Account prior to the end of that Guaranteed
Term. The adjustment reflects the change in the value of the investment due to
changes in interest rates since the date of deposit. See Appendix I and the
prospectus for the Guaranteed Accumulation Account for a discussion of how the
market value adjustment is actually calculated.
NET CONTRIBUTIONS: A Contribution less applicable premium taxes.
PARTICIPANT: An eligible person participating in the Plan maintained by the
Contract Holder, for whom an Individual Account has been established by the
Contract Holder, referred to as "you."
PLAN(S): The Plan named on the cover of a Contract established under Code
Section 403(b) or Sections 401(a)/401(k).
RETIREMENT PLUS CONTRACT: The group deferred variable annuity contract offered
by this Prospectus which allows for employer Contributions and employee
Contributions.
SEC: Securities and Exchange Commission.
SEPARATE ACCOUNT: Variable Annuity Account C, an account established by the
Company under Section 38a-433 of the Connecticut General Statutes, that buys and
holds shares of the Fund(s) available under a Contract.
UNDERWRITER: The registered broker-dealer which contracts with other registered
broker-dealers on behalf of the Separate Account to offer and sell the
Contracts.
VALUATION PERIOD: The period as of 4:15 p.m. Eastern time each day the New York
Stock Exchange is open, until 4:15 p.m. Eastern time of the next such business
day or such other day that any of the Funds determines its net asset value.
VALUATION RESERVE: A reserve established pursuant to the insurance laws of
Connecticut to measure voting rights during the Annuity Period and the value of
a commutation right available under the "Payments for a Specified Period"
nonlifetime Annuity option when elected on a variable basis under a Contract.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
VARIABLE ANNUITY: An Annuity providing for the accumulation of values and/or for
Annuity payments which vary in dollar amount with investment results.
VOLUNTARY CONTRACT: The group deferred variable annuity contract offered by this
Prospectus which allows only for employee Contributions.
WITHDRAWAL FEE: If all or any portion of an Individual Account's Current Value
is withdrawn during the Accumulation Period, a percentage of the amount
withdrawn may be deducted so that the Company may recover sales and
administrative related expenses.
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DEFINITIONS - 3
<PAGE>
PROSPECTUS SUMMARY
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- --------------------------------------------------------------------------------
CONTRACTS OFFERED
The Contracts are group deferred, variable annuity contracts. Under the
Retirement Plus Contract, Contributions may be made by the Contract Holder
(generally, the employer) and the Participants. Under the Voluntary Contract,
Contributions may be made only by Participants. See "The Contracts," "Contract
Rights" and "Miscellaneous."
The Contracts are being offered in certain markets to fund Plans that are
adopted under Sections 401(a), 401(k) or 403(b) of the Code. Amounts held under
the Plans may be entitled to tax-deferred treatment under the Code. Under the
Plans, Contributions made under the Plan are forwarded by the Contract Holder to
the Company.
PURCHASE
Each Contract may be purchased by eligible organizations on behalf of a
group made up of their employees. Eligible employees may participate in a
Contract by completing an enrollment form (and any other required forms) and
submitting it to the Company with an initial Contribution. See "Purchase."
WITHDRAWALS
Each Contract allows withdrawals of all or a portion of your Individual
Account Current Value during the Accumulation Period. Certain charges and fees
may be assessed upon withdrawal from either Contract. See "Charges and Fees
During the Accumulation Period." Limitations apply to withdrawals from the Fixed
Plus Account. See Appendix II. The Code restricts full and partial withdrawals
in certain circumstances. See "Withdrawal Restrictions For Contracts Used with
403(b) Plans." Amounts withdrawn from the GAA may be subject to a Market Value
Adjustment. See Appendix I.
WITHDRAWAL FEE
Amounts withdrawn from either Contract may be subject to a Withdrawal Fee.
The maximum Withdrawal Fee that could be assessed on a full or partial
withdrawal is 8.5% of the total Contributions made to the Individual Account of
a Contract. See "Charges and Fees During the Accumulation Period--Withdrawal
Fee."
TAXES AND WITHHOLDING
A 10% federal tax penalty and a 20% withholding for income tax may be
imposed on certain withdrawals. See "Tax Status."
CONTRACT CHARGES
Certain charges are associated with each Contract; for example, mortality
and expense risk charges, administrative expense charges and Maintenance Fees.
The Funds are also subject to certain fees and expenses. Contributions may also
be subject to premium taxes. See "Charges and Fees During the Accumulation
Period" for a complete explanation of these charges.
FREE LOOK PERIOD
Contract Holders have the right to cancel their Contract and Participants
have the right to cancel their participation in a Contract within 10 days (or
longer if required by state law). Unless state law requires otherwise, the
Company will return the full amount of Contributions increased or decreased by
the investment performance of the variable funding options to which
Contributions were deposited.
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SUMMARY - 1
<PAGE>
FEE TABLE
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- --------------------------------------------------------------------------------
The purpose of the Fee Table is to assist Contract Holders in understanding the
various costs and expenses that may be borne, directly or indirectly, under each
Contract. The costs and expenses will be based upon the charges and fees option
the Contract Holder selects. The information listed reflects the charges due
under each Contract, as well as the fees and expenses deducted from the Funds.
Additional information regarding the charges and fees assessed under each
Contract can be found under "Contract Charges and Fees Options" and "Charges and
Fees During the Accumulation Period" in this Prospectus. Charges and expenses
shown do not take into account premium taxes that may be applicable. for more
information regarding expenses paid out of the assets of a particular Fund, see
the Fund's Prospectus.
CONTRACT HOLDER TRANSACTION EXPENSES
WITHDRAWAL FEE for withdrawals under each Contract (as a percentage of
amount withdrawn)(1):
<TABLE>
<CAPTION>
NUMBER OF YEARS
INDIVIDUAL ACCOUNT HAS
BEEN ESTABLISHED FEE
- ---------------------------------------- ---
<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%
10 or more 0%
ANNUAL MAINTENANCE FEE(2)
Per Participant, Per Contract............................................................. $ 20.00
SEPARATE ACCOUNT ANNUAL EXPENSES
(Daily deductions, equal to the percentage shown on an annual basis, made from amounts
allocated to the variable options under each Contract)
Mortality and Expense Risk Charge(3)...................................................... 1.25%
Administrative Expense Charge(4).......................................................... 0.25%
Total Separate Account Annual Expenses.................................................... 1.50%
</TABLE>
- ------------------------
(1) This sets forth the Withdrawal Fee schedule for 10 years, the maximum
duration of the Withdrawal Fee. The total amount deducted for the Withdrawal
Fee will not exceed 8.5% of the Contributions made to an Individual Account.
See "Contract Charges and Fees Options" and "Charges and Fees During the
Accumulation Period--Withdrawal Fee" for instances in which the Withdrawal
Fee will only be charged for 5 years or not at all and for a description of
this charge.
(2) This represents the maximum annual Maintenance Fee that will be deducted
under a Contract. See "Contract Charges and Fees Options" and "Charges and
Fees During the Accumulation Period--Annual Maintenance Fee" for instances
in which this fee may be reduced and for a description of this charge. A
Maintenance Fee, to the extent permitted by state law, is also deducted upon
termination of an Individual Account.
(3) This represents the maximum mortality and expense risk charge that may be
deducted under a Contract. See "Contract Charges and Fees Options" and
"Charges and Fees During the Accumulation Period--Mortality and Expense Risk
Charges" for instances in which this fee may be reduced and for a
description of this charge.
(4) This represents the maximum annual administrative expense charge that will
be deducted under a Contract. See "Contract Charges and Fees Options" and
"Charges and Fees During the Accumulation Period--Administrative Expense
Charge" for instances in which this fee may be reduced and for a description
of this charge.
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FEE TABLE - 1
<PAGE>
FUND ANNUAL EXPENSES
(Except as noted, the following figures are a percentage of average net assets
and, except where otherwise indicated, are based on figures for the year ended
December 31, 1995.) A Fund's "Other Expenses" include operating costs of the
Fund. These expenses shown below are reflected in the Fund's net asset value and
are not deducted from the Individual Account Current 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(2) 0.50% 0.06% 0.56%
Aetna Income Shares(2) 0.40% 0.08% 0.48%
Aetna Variable Encore Fund(2) 0.25% 0.10% 0.35%
Aetna Investment Advisers Fund, Inc(2) 0.50% 0.08% 0.58%
Aetna Ascent Variable Portfolio(2) 0.60% 0.15% 0.75%
Aetna Crossroads Variable Portfolio(2) 0.60% 0.15% 0.75%
Aetna Legacy Variable Portfolio(2) 0.60% 0.15% 0.75%
Alger American Growth Portfolio 0.75% 0.10% 0.85%
Alger American Small Cap Portfolio 0.85% 0.07% 0.92%
Calvert Responsibly Invested Balanced
Portfolio(3) 0.70% 0.13% 0.83%
Fidelity VIP II Contrafund
Portfolio(4) 0.61% 0.11% 0.72%
Fidelity VIP Equity-Income Portfolio 0.51% 0.10% 0.61%
Fidelity VIP Growth Portfolio 0.61% 0.09% 0.70%
Fidelity VIP Overseas Portfolio 0.76% 0.15% 0.91%
Franklin Government Securities
Trust(5) 0.63% 0.13% 0.76%
Janus Aspen Aggressive Growth
Portfolio(6) 0.75% 0.11% 0.86%
Janus Aspen Balanced Portfolio(6) 0.82% 0.55% 1.37%
Janus Aspen Flexible Income Portfolio 0.65% 0.42% 1.07%
Janus Aspen Growth Portfolio(6) 0.65% 0.13% 0.78%
Janus Aspen Short-Term Bond
Portfolio(6) 0.00% 0.70% 0.70%
Janus Aspen Worldwide Growth
Portfolio(2) 0.68% 0.22% 0.90%
Lexington Natural Resources Trust 1.00% 0.47% 1.47%
Neuberger & Berman Growth Portfolio(2) 0.84% 0.10% 0.94%
Scudder International Portfolio Class
A Shares 0.88% 0.20% 1.08%
TCI Growth(2) 1.00% 0.00% 1.00%
</TABLE>
- --------------------------
(1)Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Contract. These reimbursements are paid
out of the investment advisory fees and are not charged to investors.
(2)As of May 1, 1996, the Company provides administrative services to the Fund
and assumes the Fund's ordinary recurring direct costs under an
Administrative Services Agreement. The "Other Expenses" shown are not based
on figures for the year ended December 31, 1995, but reflect the fee payable
under this Agreement.
(3)The management and Advisory Fees are subject to a performance adjustment,
after July 1, 1996, which could cause the fee to be as high as 0.85% or as
low as 0.55%, depending on performance. "Other Expenses" reflect an indirect
fee of 0.02%. Net fund operating expenses after reductions for fees paid
indirectly would be 0.81%.
(4)A portion of the brokerage commissions the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been
0.73% for the Contrafund Portfolio.
(5)An expense reimbursement arrangement was in effect until February 1, 1996;
however, it is no longer in effect. The advisory fee and total annual
expenses shown above reflect the actual expenses of the fund before
reimbursement, as if such arrangement had not been in effect during 1995.
(6)The information for each Portfolio is net of fee waivers or reductions from
Janus Capital. Fee reductions for the Aggressive Growth, Balanced, Growth,
and Worldwide Growth Portfolios reduce the management fee to the level of the
corresponding Janus retail fund. Other waivers, if applicable, are first
applied against the management fee and then against other expenses. Without
such waivers or reductions, the Management Fee, Other Expenses and Total Fund
Annual Expenses would have been 82%, 0.11%, and 0.93% for Aggressive Growth
Portfolio; 1.00%, 0.55%, 1.55% for Balanced Portfolio; 0.85%, 0.13% and 0.98%
for growth Portfolio; 0.65%, 0.72% and 1.37% for Short-Term Bond Portfolio
and 0.87%, 0.22% and 1.09% for Worldwide Growth Portfolios; respectively.
Janus Capital may modify or terminate the waivers or reductions at any time
upon 90 days' notice to the Portfolio's Board of Trustees.
(7)Neuberger & Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust.
Expenses in the table reflect expenses of the Portfolio and include the
Portfolio's pro rata portion of the operating expenses of the Portfolios
corresponding Series. The Portfolio pays Neuberger & Berman Management Inc.
("NBMI") an administration fee based on the Portfolios net asset value. The
corresponding Series of the Portfolio pays NBMI a management fee based on the
Series average daily net assets. Accordingly, this table combines management
fees at the Series level and administration fees at the Portfolio Level in a
unified fee rate. (See "Expenses" in the Trust's prospectus.)
(8)The Portfolio's investment adviser pays all expenses of the Portfolio except
brokerage commissions, taxes, interest, fees, expenses of the non-interested
person directors (including counsel fees) and extraordinary expenses. These
expenses have historically represented a very small percentage (less than
0.01%) of total net assets in a fiscal year.
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
<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 $73 $122 $162 $250 $22 $68 $116 $250
Aetna Income Shares $73 $120 $158 $242 $21 $65 $112 $242
Aetna Variable Encore Fund $71 $116 $152 $228 $20 $61 $106 $228
Aetna Investment Advisers Fund, Inc. $74 $123 $163 $252 $22 $68 $117 $252
Aetna Ascent Variable Portfolio $75 $128 $171 $269 $24 $74 $126 $269
Aetna Crossroads Variable Portfolio $75 $128 $171 $269 $24 $74 $126 $269
Aetna Legacy Variable Portfolio $75 $128 $171 $269 $24 $74 $126 $269
Alger American Growth Portfolio $76 $130 $176 $279 $25 $77 $131 $279
Alger American Small Cap Portfolio $77 $132 $180 $286 $26 $79 $134 $286
Calvert Responsibly Invested Balanced
Portfolio $76 $130 $175 $277 $25 $76 $130 $277
Fidelity VIP II Contrafund Portfolio $75 $127 $170 $266 $24 $73 $124 $266
Fidelity VIP Equity-Income Portfolio $74 $124 $165 $255 $22 $69 $119 $255
Fidelity VIP Growth Portfolio $75 $126 $169 $264 $23 $72 $123 $264
Fidelity VIP Overseas Portfolio $77 $132 $179 $285 $25 $78 $134 $285
Franklin Government Securities Trust $75 $128 $172 $270 $24 $74 $126 $270
Janus Aspen Aggressive Growth Portfolio $76 $131 $177 $280 $25 $77 $131 $280
Janus Aspen Balanced Portfolio $81 $145 $201 $330 $30 $92 $157 $330
Janus Aspen Flexible Income Portfolio $78 $137 $187 $301 $27 $83 $142 $301
Janus Aspen Growth Portfolio $75 $128 $173 $272 $24 $74 $127 $272
Janus Aspen Short-Term Bond Portfolio $75 $126 $169 $264 $23 $72 $123 $264
Janus Aspen Worldwide Growth Portfolio $77 $132 $179 $284 $25 $78 $133 $284
Lexington Natural Resources Trust $82 $148 $205 $339 $31 $95 $161 $339
Neuberger & Berman Growth Portfolio $77 $133 $181 $288 $26 $79 $135 $288
Scudder International Portfolio Class A
Shares $78 $137 $187 $302 $27 $83 $142 $302
TCI Growth $78 $135 $183 $294 $26 $81 $138 $294
</TABLE>
- --------------------------
(1) This hypothetical illustration assumes that (i) a withdrawal charge will be
applicable for a 10-year period, (ii) a transfer credit will apply, and
(iii) less than $500,000 in assets will be held by the Company. Accordingly,
the Individual Account is subject to a mortality and expense risk charge of
1.25%, an administrative expense charge of 0.25%, $15.00 annual Maintenance
Fee, as an annual charge of 0.107% of the estimated assets held in the
Separate Account under the Contracts, and a Withdrawal Fee for 10 years. See
"Charges and Fees During the Accumulation Period."
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FEE TABLE - 3
<PAGE>
PERFORMANCE DATA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
From time to time, the Company may advertise different types of historical
performance for the variable funding options of the Separate Account available
under the Contracts described in this Prospectus. The Company may advertise the
"standardized average annual total returns" of the variable funding options,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
return." Both methods are described below. Further information is contained in
the SAI.
"Standardized average annual total returns" are computed according to a
formula in which a hypothetical investment of $1,000 is applied to the variable
funding options under the Contracts and then related to the ending redeemable
values over the most recent one, five and ten-year periods (or since inception
if less than 10 years). Standardized returns will reflect the deduction of all
recurring charges during each period (e.g., mortality and expense risk charges,
the annual Maintenance Fee, the administrative expense charge and any applicable
Withdrawal Fee).
"Non-standardized returns" will be calculated in a similar manner, except
that non-standardized figures will not reflect the deduction of any applicable
Withdrawal Fee (which would decrease the level of performance shown if reflected
in these calculations). The non-standardized figures may also include a
three-year period.
For Funds that were in existence prior to the date that the Fund became
available under the Contracts, the performance data will show the investment
performance that such Fund would have achieved (reduced by the applicable
charges) had it been available under the Contracts for the period quoted.
We may distribute sales literature that compares the percentage change in
Fund Record Unit values for any of the Funds to established market indexes such
as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average or
to the percentage change in values of other management investment companies that
have investment objectives similar to the Fund being compared.
We may publish in advertisements and reports to you and Contract Holders,
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.
- --------------------------------------------------------------------------------
1
<PAGE>
THE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company ( the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc.
which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc.
and an indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Variable Annuity Account C is a separate account established by the Company
in 1976 pursuant to the insurance laws of the State of Connecticut. The Separate
Account was formed for the purpose of segregating assets attributable to the
variable portions of the Contracts from other assets of the Company. The
Separate Account is registered as a unit investment trust under the Investment
Company Act of 1940, and meets the definition of "separate account" under
federal securities laws.
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 the
Company 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 other income, gains or losses of the Company. All obligations arising under
the Contracts are general corporate obligations of the Company.
THE FUNDS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Contract Holder will designate some or all of the mutual funds described
below as variable funding options under the Contracts. Except where noted, all
of the Funds are diversified as defined in the Investment Company Act of 1940.
The availability of the Funds is subject to applicable regulatory authorization.
Not all Funds are available in all jurisdictions or under a particular Contract.
- -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 investing
in one or more of the following asset classes: stocks, bonds and cash
equivalents based on the Company's judgment of which of those sectors or mix
thereof offers the best investment prospects.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA ASCENT VARIABLE PORTFOLIO seeks to
provide capital appreciation by allocating its investments among equities and
fixed income securities. The Portfolio is managed for investors who generally
have an investment horizon exceeding 15 years, and who have a high level of
risk tolerance. See the Fund's prospectus for a description of the risks
involved.(1)
- --------------------------------------------------------------------------------
2
<PAGE>
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA CROSSROADS VARIABLE PORTFOLIO seeks to
provide total return (i.e., income and capital appreciation, both realized and
unrealized) by allocating its investments among equities and fixed income
securities. The Portfolio is managed for investors who generally have an
investment horizon exceeding 10 years and who have a moderate level of risk
tolerance.(1)
- -AETNA GENERATION PORTFOLIOS, INC.--AETNA LEGACY VARIABLE PORTFOLIO seeks to
provide total return consistent with preservation of capital by allocating its
investments among equities and fixed income securities. The Portfolio is
managed for investors who generally have an investment horizon exceeding five
years and who have a low level of risk tolerance.(1)
- -ALGER AMERICAN FUND--ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital
appreciation by investing in a diversified, actively managed portfolio of
equity securities. The Portfolio primarily invests in equity securities of
companies which have a market capitalization of $1 billion or greater.(2)
- -ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks
long-term capital appreciation. Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization within the range of companies included in the Russell 2000
Growth Index, updated quarterly. The Russell 2000 Growth Index is designed to
track the performance of small capitalization companies. At March 31, 1996, the
range of market capitalization of these companies was $20 million to $3.0
billion.(2)
- -CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO is a nondiversified portfolio
that seeks growth of capital through investment in enterprises that make a
significant contribution to society through their products and services and
through the way they do business.(3)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND PORTFOLIO
seeks maximum total return over the long term by investing mainly in equity
securities of companies that are undervalued or out-of-favor.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--EQUITY-INCOME PORTFOLIO
seeks reasonable income by investing primarily in income-producing equity
securities. In selecting investments, the Fund also considers the potential for
capital appreciation.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--GROWTH PORTFOLIO seeks
capital appreciation by investing mainly in common stocks, although its
investments are not restricted to any one type of security.(4)
- -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--OVERSEAS PORTFOLIO
seeks long-term growth by investing in foreign securities (at least 65% of the
Funds total assets in securities of issuers from at least three countries
outside of North America).(4)
- -FRANKLIN GOVERNMENT SECURITIES TRUST seeks income through investments in
obligations of the U.S. Government or its agencies or instrumentality's,
primarily GNMA obligations.(5)
- -JANUS ASPEN SERIES--AGGRESSIVE GROWTH PORTFOLIO is a NONDIVERSIFIED portfolio
that seeks long-term growth of capital in a manner consistent with the
preservation of capital. The Portfolio pursues its investment objective by
normally investing at least 50% of its equity assets in securities issued by
medium-sized companies. Medium-sized companies are those whose market
capitalizations fall within the range of companies in the S&P Midcap 400 Index,
which as of December 29, 1995 included companies with capitalizations between
approximately $118 million and $7.5 billion, but which is expected to change on
a regular basis.(6).
- -JANUS ASPEN SERIES--BALANCED PORTFOLIO seeks long-term capital growth
consistent with the preservation of capital and balanced by current income. The
Portfolio purses its investment objective by investing 40%-60% of its assets in
equity securities selected primarily for their growth potential and 40%-60% of
its assets in fixed-income securities selected primarily for their income
potential.(6)
- -JANUS ASPEN SERIES--FLEXIBLE INCOME PORTFOLIO seeks to obtain maximum total
return, consistent with preservation of capital. Total return is expected to
result from a combination of current income and capital appreciation. The
Portfolio invests in all types of income producing securities and may have
substantial holdings of debt securities rated below investment grade (e.g. junk
bonds). High yield, high risks securities involve certain risks. See the Fund's
prospectus for a discussion of these risks.(6)
- --------------------------------------------------------------------------------
3
<PAGE>
- -JANUS ASPEN SERIES--GROWTH PORTFOLIO seeks long-term growth of capital
consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing primarily in companies of any size.(6)
- -JANUS ASPEN SERIES--SHORT-TERM BOND PORTFOLIO seeks as high a level of current
income as is consistent with preservation of capital. The Portfolio pursues its
investment objective by investing primarily in short-and intermediate-term
fixed income securities.(6)
- -JANUS ASPEN SERIES--WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of
capital in a manner consistent with the preservation of capital, primarily
through investments in common stocks of foreign and domestic issuers.(6)
- -LEXINGTON NATURAL RESOURCES TRUST is a nondiversified portfolio that seeks
long-term growth of capital through investment primarily in common stocks of
companies which own or develop natural resources and other basic commodities,
or supply goods and services to such companies.(7)
- -NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST-- GROWTH PORTFOLIO seeks capital
appreciation without regard to income. The Portfolio generally invests in
securities believed to have the maximum potential for long-term capital
appreciation. The Portfolio expects to be almost fully invested in common
stocks, of companies that may be temporarily out of favor in the market.(8)
- -SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO CLASS A SHARES
seeks long-term growth of capital primarily through diversified holdings of
marketable foreign equity investments.(9)
- -TCI PORTFOLIOS, INC.--TCI GROWTH (a Twentieth Century Fund) seeks capital
growth. The Fund seeks to achieve its objective by investing in common stocks
(including securities convertible into common stocks) and other securities that
meet certain fundamental and technical standards of selection and, in the
opinion of the Fund's investment manager, have better than average potential
for appreciation.(10)
Investment Advisers for each of the Funds:
(1) Aetna Life Insurance and Annuity Company
(2) Fred Alger Management, Inc.
(3) Calvert Asset Management Company, Inc.
(4) Fidelity Management & Research Company
(5) Franklin Advisers, Inc.
(6) Janus Capital Corporation
(7) Lexington Management Corporation (adviser);
Market Systems Research Advisors, Inc. (subadviser)
(8) Neuberger & Berman Management Inc. (Investment Manager); Neuberger &
Berman, L.P. (Sub-Adviser)
(9) Scudder, Stevens & Clark, Inc.
(10) Investors Research Corporation
There is no assurance that the Funds will achieve their investment
objectives. Participants bear the full investment risk of investments in the
Funds selected.
Some of the Funds may invest in instruments known as derivatives as part of
their investment strategies, as described in their respective prospectuses. The
use of certain derivatives such as inverse floaters and principal only debt
instruments may involve higher risk of volatility to a Fund. The use of leverage
in connection with derivatives can also increase risk of losses. See the
prospectus for the Funds for a discussion of the risks associated with an
investment in those funds.
More comprehensive information, including a discussion of potential risks,
is found in the current prospectus for each Fund which is distributed with and
must accompany this Prospectus. Contract Holders and Participants should read
the accompanying prospectuses carefully before investing. Additional
prospectuses and the Statements of Additional Information for this Prospectus
and each of the Funds can be obtained from the Company's Home Office at the
address and telephone number listed on the cover of this Prospectus.
MIXED AND SHARED FUNDING
Shares of the Funds are available to insurance company separate accounts
which fund variable annuity contracts and variable life insurance policies,
including the Contracts described in this Prospectus. Because Fund shares are
offered to separate accounts of both affiliated and unaffiliated insurance
companies, it is conceivable that, in the future, it may not be advantageous for
variable life insurance separate accounts and variable annuity separate accounts
to invest in these Funds simultaneously, since the interests of such
policyowners or contractholders may differ. Although neither the Company nor the
Funds currently foresee any such disadvantages either to variable life insurance
or to variable annuity policyowners, each Fund's Board of Trustees/Directors has
agreed to monitor events in order to identify any material irreconcilable
conflicts which may possibly arise and to determine what action, if any, should
be taken in response thereto. If such a conflict were to occur, one of the
separate accounts
- --------------------------------------------------------------------------------
4
<PAGE>
might withdraw its investment in a Fund. This might force that Fund to sell
portfolio securities at disadvantageous prices.
FUND CHANGES
The Company reserves the right, subject to compliance with appropriate state
and federal laws, to change the Fund(s) in which the Separate Account invests,
and/or replace the shares of any Fund(s) held in the Separate Account with
shares of any other Fund(s).
FUND LIMITATIONS
The Contract Holder may decide to offer only a select number of Funds as
funding options under its Plan, or may decide to change which Funds it offers.
No more than 18 different choices of investment options may be made during the
Accumulation Period. See "Transfers and Allocation Changes."
The Company's current policy is to allow only Aetna Variable Fund, Aetna
Income Shares and Aetna Investment Advisers Fund, Inc. to be used as variable
investment options during the Annuity Period. See "Annuity Period Elections."
PURCHASE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE CONTRACTS
The Contracts are group deferred, variable annuity contracts. Under the
Retirement Plus Contract, Contributions may be made by the Contract Holder
(generally, the employer) and the Participants. The Contract Holder, or any
person designated by the Contract Holder, may exercise the rights under the
Retirement Plus Contract. The Contract Holder may, by written direction, allow
Participants to select the investment options for the Contract Holder
Contributions and Participant Contributions. Under the Voluntary Contract,
Contributions may be made only by Participants. Each Participant may exercise
the rights under the Voluntary Contract with respect to the Participant's
Individual Accounts. See "Contract Rights" and "Miscellaneous."
ELIGIBLE CONTRACT HOLDERS
An organization eligible to establish tax-deferred annuity plans under
Section 403(b) or Sections 401(a)
/401(k) of the Code may acquire either or both of the Contracts for its Plan by
filling out the appropriate master application forms and returning them to the
Company or to a Distributor for delivery to the Company. Once we approve the
application, a group Contract is issued to the organization as Contract Holder.
PURCHASE BY EXCHANGE
Certain organizations which own contracts issued by the Company may exchange
their existing contract(s) for either or both of the Contracts. See Appendix V.
CONTRACT CHARGES AND FEES OPTIONS
Your Contract's charges and fees will depend in part upon the Aggregate
Current Value and in part upon choices made by your Contract Holder. Each
Contract offers a Contract Holder the flexibility to choose a charges and fees
structure during the Accumulation Period that will best suit the needs of its
Participants. For a description of the Contracts' charges and fees, see "Charges
and Fees During the Accumulation Period."
RESPONSIBILITIES OF CONTRACT HOLDERS
The Contract Holder is responsible for maintaining all Participant vesting
percentages and records, ensuring that the Plan meets certain nondiscrimination
requirements imposed by the Code, and ensuring employee Contributions do not
exceed the maximum limits imposed by the Code.
If a Contract is used to fund an ERISA Plan, the Contract Holder must:
(a) provide written certification to the Company of the satisfaction of
applicable requirements for ERISA tax-deferred annuity plans, and
(b) certify that all distributions are made in accordance with the terms of
the Plan, and, if applicable, the requirements of the Code.
ENROLLMENT OF PARTICIPANTS
Eligible organizations may acquire the Contract by submitting an application
to the Company. Once we approve the application, a group Contract is issued to
the
- --------------------------------------------------------------------------------
5
<PAGE>
employer or association as the group Contract Holder. Participants may purchase
interests in a group Contract by submitting an enrollment form to the Company.
The Company must accept or reject the application or enrollment form within
two business days of receipt. If the enrollment materials are incomplete, the
Company may hold any forms and accompanying Purchase Payments for five days.
Purchase payments may be held for longer periods pending acceptance of the forms
only with the consent of the Participant, or under limited circumstances, with
the consent of the Contract Holder. If we agree to hold Purchase Payments for
longer than five business days based on the consent of the Contract Holder, the
Purchase Payments will be deposited in the Aetna Variable Encore Fund Subaccount
until the forms are completed.
After accepting your application, we will establish one or more Individual
Accounts to track Contributions and transactions. If you and your employer make
Contributions under a Retirement Plus Contract, we may establish an Employee
Account and an Employer Account. For any lump sum Contribution under either
Contract, we may establish a separate Individual Account for that Contribution.
CONTRIBUTIONS
Under a Contract, Contributions may be made on an installment basis or one
or more lump sum Contribution(s) may be made. The Company reserves the right not
to accept any Contribution. Each Contribution is forwarded to the Company
through a Distributor.
Net Contribution(s) may accumulate (a) on a variable basis by allocation to
one or more of the available Funds; (b) on a fixed basis under the GA Account;
(c) on a fixed basis under the Fixed Plus Account; and (d) in a combination of
any of the available investment options. See Appendix I and Appendix II. The
Fixed Account is available only for Net Contribution(s) previously allocated to
a fixed account under a contract exchanged for a Contract. See Appendix III. The
Net Contribution(s) must be allocated to the respective options in increments of
whole percentage amounts.
CONTRIBUTION LIMITS FOR CONTRACTS USED WITH 403(B) PLANS
The Code imposes a maximum limit on annual Contributions which may be
excluded from your gross income. That limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. In addition, Contributions
will be excluded from your gross income only if the 403(b) Plan meets certain
Code nondiscrimination requirements. It is the Contract Holder's responsibility
to determine compliance with these requirements and other provisions of the
Plan. See "Rights Under the Contracts."
CONTRIBUTION LIMITS FOR CONTRACTS USED WITH 401(A)/401(K) PLANS
The Code imposes a maximum limit on annual Contributions that may be
excluded from a Participant's gross income. Such limit must be calculated under
the Plan by the Contract Holder in accordance with Sections 402(g) and 415 of
the Code. In addition, Contributions will be excluded from a Participant's gross
income only if the 401(a)/401(k) Plan meets certain nondiscrimination
requirements.
DISTRIBUTION
The Company will serve as Underwriter for the securities sold by this
Prospectus. The Company is registered as a broker-dealer with the SEC 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 Individual Accounts under a Contract.
Persons offering and selling the Contracts may receive commissions in
connection with the sale of a Contract. The sales commission will range from 1%
to 4% of the first year Contributions. The Company may also pay renewal
commissions on Contributions 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 Contributions 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 Individual Account are set forth on your enrollment form. Commissions and
sales related expenses are paid by the Company and are not deducted from
Contributions. See "Charges and Fees During the Accumulation Period--Withdrawal
Fee."
- --------------------------------------------------------------------------------
6
<PAGE>
Occasionally, we may pay commissions and fees to Distributors which are
affiliated or associated with the Contract Holder or the Participants. We may
also enter into agreements with some entities associated with the Contract
Holder or Participants in which we would agree to pay the association for
certain services in connection with administering the Contracts. In both these
circumstances there may be an understanding that the Distributor or association
would endorse the Company as a provider of the Contracts. You will be notified
if a Contract is subject to these arrangements.
DETERMINING INDIVIDUAL ACCOUNT CURRENT VALUE
The Current Value of your Individual Account as of the most recent Valuation
Period, is determined by adding the value of any Fund Record Units attributed to
the Fund(s) you have selected to the value, with interest earned to date, of any
amounts invested in the Fixed Plus Account, the GAA and/or the Fixed Account,
less any Maintenance Fee(s) due.
FUND RECORD UNITS
A Contribution that is directed to one or more of the Funds is deposited in
the Separate Account and credited to your Individual Account in the form of Fund
Record Units for each Fund selected. The number of Fund Record Units credited is
determined by dividing the applicable portion of the Contribution by that
Contract's Fund Record Unit value of the appropriate Fund. The value of Fund
Record Units attributable to the Funds will be affected by the investment
performance, expenses and charges of those Funds. Generally, if the net asset
value of the Fund increases, so does the Fund Record Unit value; however,
performance of the Separate Account is reduced by charges and fees under a
Contract.
The Fund Record Unit value used is that next computed following the date on
which a Contribution is received, unless the application has not been accepted.
In that event, Contributions will be credited at the Fund Record Unit Value next
determined after acceptance of the application. Shares of the Funds are
purchased by the Separate Account at the net asset value next determined by the
Fund following receipt of Contributions by the Separate Account.
Fund Record Units are valued separately for each Fund. Therefore, if you
elect to have a Contribution invested in a combination of Funds, you will have
Fund Record Units credited from more than one source.
NET RETURN FACTOR
The value of a Fund Record Unit for any Valuation Period is calculated by
multiplying the Fund Record Unit value for the immediately preceding Valuation
Period by the net return factor of the appropriate investment option for the
Current Valuation Period.
The net return factor is calculated separately for each Fund in which assets
of the Separate Account are invested. It is determined by adding 1.0000000 to
the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the Separate Account at the
end of a Valuation Period; minus
(b) The value of the shares of the Fund held by the Separate Account at the
start of the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if any);
(d) Divided by the total value of the Fund Record Units and Fund Annuity
Units of the Separate Account at the start of the Valuation Period;
(e) Minus a Separate Account charge at an annual effective rate as shown in
a Contract for mortality and expense risks and profit and a daily
administrative expense charge which will not exceed the amount shown on
Contract Schedule I on an annual basis.
The net return rate may be more or less than zero.
TRANSFER CREDITS
If a Contract Holder is transferring to the Company assets held by another
provider of funding for a Plan, a transfer credit is applied to the Individual
Accounts, subject to certain conditions (and state approval). This benefit is
provided on a nondiscriminatory basis if your Contract is eligible. In certain
circumstances, a Contract Holder may elect to forego the transfer credit and the
Contract will be subject to lower charges and fees. See "Charges and Fees During
the Accumulation Period-- Option B." The transfer credit will be credited to the
Fixed Plus Account. See Appendix II.
Once transfer credit amounts are applied to the Individual Accounts, all
provisions of the Contract apply. If a transfer credit is due under a Contract,
you will be provided with additional information specific to the Contract.
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7
<PAGE>
CONTRACT RIGHTS
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- --------------------------------------------------------------------------------
RIGHT TO CANCEL
The Contract Holder may cancel a Contract and you may cancel your interest
in a Contract, no later than ten days after receiving it (or as otherwise
allowed by state law) by returning it, along with a written notice of
cancellation, to us. Within seven days after we receive the Contract and the
written notice at our Home Office, we will return your Current Value, unless the
laws of the state in which the Contract was issued require that we return
Contributions (if greater than your Current Value). In states that do not
require a return of Contributions, you bear the entire investment risk for
amounts allocated among the variable funding options during the free look
period.
RIGHTS UNDER THE CONTRACTS
Your rights and the Contract Holder's rights are set forth in each Contract
purchased by the Contract Holder. You should consult with your employer to
determine which Contract your employer has purchased and you should refer to
that Contract to determine your rights. Benefits payable to you are governed
exclusively by the Plan. The Company is not a party to the Plan.
RIGHTS UNDER THE RETIREMENT PLUS CONTRACT. Under the Retirement Plus
Contract, the rights rest with the Contract Holder (generally the employer). The
Contract Holder may, by written direction, allow Participants to select the
investment options for the Employer Account and Employee Account. The exercise
of other rights under the Retirement Plus Contract must be made by the Contract
Holder on your behalf. You have no rights to direct the Company as to payments
under the Contract unless countersigned by the Contract Holder.
For the Retirement Plus Contract, the Contract Holder and each Participant
must agree in writing to the terms and conditions of the Contract, to have the
Contract Holder make choices under the Contract, and to be bound by the Contract
Holder's direction to the Company. See Appendix IV.
RIGHTS UNDER THE VOLUNTARY CONTRACT. You may make any choices, subject to
the terms of your Plan, under the Voluntary Contract with respect to your
Individual Accounts.
RIGHTS TO YOUR INDIVIDUAL ACCOUNT. For Contracts used with a 403(b) Plan,
you have a nonforfeitable right to the value of your Contributions pursuant to
Code Section 403(b) and the terms of the Plan as interpreted by the Contract
Holder. You have a nonforfeitable right to the value of your Individual Account
to which your employer's Contributions are credited pursuant to the terms of,
and to the extent of your vested percentage under, the Plan as interpreted by
the Contract Holder.
For Contracts used with a 401(a)/401(k) Plan, your right to Contributions
derived from your Contributions and, with respect to the Retirement Plus
Contract, from your employer's Contributions, must be nonforfeitable in order
for the Plan to qualify for favorable tax treatment afforded to 401(a)/401(k)
Plans under the Code.
TRANSFERS AND ALLOCATION CHANGES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Before the Annuity Period, the allocation of future Net Contributions among
the allowable investment options under a Contract may be changed. There is no
limit on the number of these changes. Each Contract also allows any number of
transfers of not less than $500 among funding options during the calendar year,
without charge. The total number of funding options, however, may not exceed 18
during the Accumulation Period. Each Fund, the Fixed Plus Account, the Fixed
Account and each guaranteed term of the GAA, counts as one option, even if
amounts are no longer allocated to that option.
Any transfer involving a Fund will be based on the Fund Record Unit value
next determined after we receive a valid request at our Home Office.
Transfers from the Fixed Plus Account are limited. See Appendix I, II and
III for more information on transfers from the GAA, the Fixed Plus Account and
the Fixed Account.
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8
<PAGE>
WITHDRAWALS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Each Contract allows the withdrawal of all or a portion of an Individual
Account Adjusted Current Value during the Accumulation Period. To do so, we must
receive a properly completed disbursement form in our Home Office. Disbursement
forms are available from us and our representatives.
Withdrawals may be requested in one of the following four ways:
- -FULL WITHDRAWAL FROM A CONTRACT: The amount paid will be the sum of the
Individual Accounts allocated to the Funds, the GAA (plus or minus the Market
Value Adjustment), and the Fixed Account, minus any applicable Withdrawal Fee
and Maintenance Fee due plus one-fifth of the sum of the Individual Accounts
allocated to the Fixed Plus Account*, minus any Fixed Plus Account withdrawals,
transfers or annuitizations made in the prior 12 months.
- -FULL WITHDRAWAL FROM AN INDIVIDUAL ACCOUNT: The amount paid will be the
Individual Account allocated to the Funds, the GAA (plus or minus the Market
Value Adjustment), and the Fixed Account, minus any applicable Withdrawal Fee
and Maintenance Fee due plus one-fifth of the Individual Account allocated to
the Fixed Plus Account*, minus any Fixed Plus Account withdrawals, transfers,
loan or annuitizations made in the prior 12 months.**
- -PARTIAL WITHDRAWAL (PERCENTAGE): The amount paid will be the percentage of the
Individual Account Current Value requested minus any applicable Withdrawal
Fee.** However, amounts withdrawn from the Fixed Plus Account may not exceed
20% minus any Fixed Plus Account *** withdrawals, transfers or annuitizations
in the prior 12 months.
- -PARTIAL WITHDRAWAL (SPECIFIC DOLLAR AMOUNT): The amount paid will be the dollar
amount requested. However, the amount withdrawn from the Individual Account
will equal the dollar amount requested plus any applicable Withdrawal Fee.**
The amount withdrawn from the Fixed Plus Account may not exceed 20% minus any
Fixed Plus Account *** withdrawals, transfers or annuitizations in the prior 12
months.
* The balance of the amount held in the Fixed Plus Account will be paid in
four annual installments. If the withdrawal is due to death, annuitization,
or meets other qualifications, the entire amount held in the Fixed Plus
Account will be paid in one lump sum (or used to provide Annuity payments)
rather than in annual installments. See Appendix II for more information.
** A 20% income tax may be withheld from amounts paid directly to you. See
"Tax Status--Contracts Used with Qualified Plans."
*** The 20% limit is waived if the partial withdrawal is due to annuitization
or death. See Appendix II for more information.
All amounts paid will be based on Individual Account Current Values as of
the end of the Valuation Period in which the request is received, in good order
in our Home Office. For any partial withdrawal, unless otherwise requested,
partial withdrawals are satisfied by withdrawing amounts on a pro rata basis
from each investment option in which the Individual Account is invested.
WITHDRAWAL RESTRICTIONS FOR CONTRACTS USED WITH 403(B) PLANS
Code Section 403(b) imposes restrictions on full or partial withdrawals from
Individual Accounts attributable to: (a) Contributions made on or after January
1, 1989, under a salary reduction agreement, and (b) any earnings on the entire
403(b) Employee Account credited on and after January 1, 1989. Withdrawals of
these amounts are allowed only if: (a) you have died, (b) you have become
disabled, as defined in the Code, (c) you have attained age 59 1/2, (d) you have
separated from service, or (e) it is otherwise allowed by federal law,
regulations or rulings. Withdrawals are also allowed if you can prove financial
hardship as defined by the IRS, but the withdrawal is limited to the lesser of
Contributions attributable to Participant salary reduction contributions made on
or after January 1, 1989, or the amount necessary to relieve the hardship. Even
if a withdrawal is permitted under these provisions, a 10% federal penalty tax
may be assessed on the amount paid to you if it does not otherwise meet the
exceptions to the penalty tax provisions. See "Tax Status--Contracts Used with
Qualified Plans." We must receive certification in writing that one of these
conditions has been met before a payment will be made.
The Code permits a full or partial withdrawal of an amount equal to the
Employee Account Value as of
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9
<PAGE>
December 31, 1988 (the "grandfathered" amount), subject to the terms of the
403(b) Plan. Although the Code withdrawal restrictions do not apply to this
amount, a 10% federal penalty tax may be assessed on the amount paid to you if
it does not otherwise meet the exceptions to the penalty tax provisions. See
"Tax Status--Contracts Used with 403(b) Plans" and "Tax Status--Contracts used
with Qualified Plans."
We believe that the Code withdrawal restrictions do not apply to tax-free
transfers pursuant to Revenue Ruling 90-24. We further believe that the
withdrawal restrictions will not apply to any "grandfathered" amount which is
transferred pursuant to Revenue Ruling 90-24 into another 403(b) Contract.
Revenue Ruling 90-24 provides that a direct transfer from one 403(b) investment
to another 403(b) investment is not a distribution and is not taxable if, after
the transfer, the transferred amounts continue to be subject to the same or more
stringent distribution requirements.
REINVESTMENT PRIVILEGE
All or a portion of the proceeds received for the full withdrawal of an
Individual Account may be reinvested within 30 days after the withdrawal if
allowed by law. Any Maintenance Fee and Withdrawal Fee charged at the time of
the withdrawal on the amount being reinvested will be included in the
reinstatement. Any Maintenance Fee which falls due after the withdrawal and
before the reinstatement will be deducted from the amount reinstated. Any Market
Value Adjustment deducted from GA Account withdrawals will not be included in
the reinstatement. Amounts will be reinstated among the Fixed Plus Account, the
GA Account, and/or the Fund(s) for the Separate Account in the same proportion
as they were at the time of withdrawal. Any amounts reinstated to the GA Account
will be credited to terms available during the then-current Deposit Period. The
number of Fund Record Units reinstated will be based on the Fund Record Unit
Value(s) next computed after receipt in good order at the Company's Home Office
of the reinstatement request and the amount to be reinvested.
CONTRACT LOANS
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During the Accumulation Period, each Contract used with a 403(b) Plan allows
loans from the Individual Account. Under the Retirement Plus Contract, a loan
may be restricted to your Employee Account unless the Contract Holder has
authorized loans from the value of the Employer Account (check with the Contract
Holder to see if this is available). Loans can only be made from the Current
Value held in the Funds, the Fixed Plus Account and/or the Fixed Account. See
Appendix II and Appendix III. A loan may be obtained by reviewing and reading
the terms of your loan application, properly completing a loan request form and
submitting it to the Company's Home Office.
CHARGES AND FEES DURING THE ACCUMULATION PERIOD
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The amount of the charges and fees that will be assessed under a Contract
will be based upon the charges and fees option selected by the Contract Holder.
See "Contract Charges and Fees Options." You should consult your employer to
determine which charges and fees option applies to your Individual Accounts.
Based upon its prior experience with similar annuity contracts, the Company
has determined that its costs of administering a Contract will fluctuate with
the amount of the Aggregate Current Value, the average Contributions per
Participant transferred under a Contract, and whether a Withdrawal Fee is
charged. The charges and fees for the initial Contract year will be based on the
estimated year-end Aggregate Current Value, as determined by the Company. If
your charges and fees change on your Contract Anniversary, the Fund Record Unit
values might change so that the Current Value of your Individual Account would
stay the same. If you invest in one of the series of the Aetna GET Fund, the GET
Fund guarantee will be recalculated based on the new Fund Record Unit value so
that the new guarantee would be equivalent to the original guarantee.
A Contract Holder may elect whether a Withdrawal Fee will be applicable
under a Contract, and if so, whether the Withdrawal Fee will be applicable for a
5-year period or a 10-year period. When a Withdrawal Fee is not charged, the
Company has determined that more Individual Account transactions occur, and as a
result, in
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10
<PAGE>
some circumstances the Company imposes a greater administrative expense charge
and Maintenance Fee charge. The 5-year period and 10-year period Withdrawal Fees
are as follows:
<TABLE>
<S> <C>
FIVE-YEAR WITHDRAWAL PERIOD:
<CAPTION>
NUMBER OF YEARS
INDIVIDUAL ACCOUNT
HAS BEEN ESTABLISHED FEE
- ---------------------------------------- ---
<S> <C>
Less than 1 5%
1 or more but less than 2 4%
2 or more but less than 3 3%
3 or more but less than 4 2%
4 or more but less than 5 1%
5 or more 0%
TEN-YEAR WITHDRAWAL PERIOD:
<CAPTION>
NUMBER OF YEARS
INDIVIDUAL ACCOUNT
HAS BEEN ESTABLISHED FEE
- ---------------------------------------- ---
<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%
10 or more 0%
</TABLE>
For Contracts issued in the State of New York only the Ten-Year Withdrawal
Period Fee Schedule is available. Additionally, for those New York Contracts
under which the GAA is selected as a funding option, the withdrawal fee imposed
under the Ten-Year Withdrawal Period (as set forth in the schedule above), will
never be greater than (a) 7% of amounts withdrawn from investment options other
than the GAA, plus (b) 7% of amounts withdrawn from the GAA, reduced (but not
below zero) by one percent for each year the contract has been in force.
The following schedule illustrates the withdrawal fee imposed if the
Ten-Year Withdrawal Period is selected for Contracts issued in the State of
Oregon:
<TABLE>
<CAPTION>
NUMBER OF YEARS
INDIVIDUAL ACCOUNT
HAS BEEN ESTABLISHED FEE
- ---------------------------------------- ---
<S> <C>
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
</TABLE>
In selecting a charges and fees option, a Contract Holder should consider
the composition and needs of its Participants to determine which option is most
appropriate.
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11
<PAGE>
OPTION A
A Contract Holder may select any of the charges and fees elections under
Option A below. Under Option A, a transfer credit may apply to transfers to the
Company of assets not previously held by the Company. See "Determining
Individual Account Current Value--Transfer Credits" and Appendix II. If a
Contract is purchased by exchange, then for existing participants of the
exchanged contract, the Option A charges and fees schedule set forth below with
a Withdrawal Fee for 10 years will apply. See Appendix V. New participants of a
Contract purchased by exchange, will be subject to the charges and fees schedule
selected by the Contract Holder.
<TABLE>
<CAPTION>
LESS $500,000 $1,000,001 $5,000,001 GREATER
THAN TO TO TO THAN
OPTION "A" CHARGES $500,000 $1,000,000 $5,000,000 $15,000,000 $15,000,000
<S> <C> <C> <C> <C> <C>
WITHDRAWAL FEE
FOR 10 YEARS
Mortality and Expense Charge 1.25% 1.15% 1.05% 1.00% 0.95%
Administrative Expense Charge 0.25% 0.15% 0.10% 0.05% 0.00%
Maintenance Fee $15 $15 $0 $0 $0
WITHDRAWAL FEE
FOR 5 YEARS
Mortality and Expense Charge 1.25% 1.25% 1.15% 1.10% 1.05%
Administrative Charge 0.25% 0.15% 0.10% 0.05% 0.00%
Maintenance Fee $15 $15 $0 $0 $0
NO WITHDRAWAL FEE
Mortality and Expense Charge 1.25% 1.25% 1.15% 1.10% 1.05%
Administrative Charge 0.25% 0.20% 0.15% 0.10% 0.05%
Maintenance Fee $20 $20 $10 $10 $10
</TABLE>
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<PAGE>
OPTION B
Charges and fees elections under Option B are available only if the Company
will hold all assets of the Plans of the Contract Holder and if the Contract
Holder is transferring assets to the Company in an amount which satisfies the
then current rules of the Company. This option is provided on a
nondiscriminatory basis if your contract is eligible. If a Contract Holder
selects a charges and fees election under Option B, no transfer credit will
apply.
<TABLE>
<CAPTION>
LESS $500,000 $1,000,001 $5,000,001 GREATER
THAN TO TO TO THAN
OPTION "B" CHARGES $500,000 $1,000,000 $5,000,000 $15,000,000 $15,000,000
<S> <C> <C> <C> <C> <C>
WITHDRAWAL FEE
FOR 10 YEARS
Mortality and Expense Charge 1.15% 1.05% 0.95% 0.90% 0.85%
Administrative Expense Charge 0.25% 0.15% 0.10% 0.05% 0.00%
Maintenance Fee $15 $15 $0 $0 $0
WITHDRAWAL FEE
FOR 5 YEARS
Mortality and Expense Charge 1.15% 1.15% 1.05% 1.00% 0.95%
Administrative Charge 0.25% 0.15% 0.10% 0.05% 0.00%
Maintenance Fee $15 $15 $0 $0 $0
NO WITHDRAWAL FEE
Mortality and Expense Charge 1.15% 1.15% 1.05% 1.00% 0.95%
Administrative Charge 0.25% 0.20% 0.15% 0.10% 0.05%
Maintenance Fee $20 $20 $10 $10 $10
</TABLE>
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<PAGE>
The following describes the charges and fees that we may deduct during the
Accumulation Period from the Individual Accounts under each Contract.
ANNUAL MAINTENANCE FEE
An annual Maintenance Fee is charged for each Participant and is deducted
from the sum of the Current Value of your Individual Accounts under a Contract.
This fee is to reimburse the Company for some of its administrative expenses
relating to the establishment and maintenance of the Individual Account. Because
the annual Maintenance Fee is based, in part, on the amount of the Aggregate
Current Value, the annual Maintenance Fee may change on each contract
anniversary.
The Maintenance Fee is deducted from your Individual Accounts on the
Contract anniversary date (or, if not a Valuation Date, on the next Valuation
Date). Under the Retirement Plus Contract, the Contract Holder may elect that
the entire Maintenance Fee be deducted from only one Individual Account--either
the Employee Account or the Employer Account. Alternatively, the Maintenance Fee
may be billed to the employer at or prior to such deduction under the Retirement
Plus Contract. A Maintenance Fee, to the extent permitted by state law, is also
deducted upon the full withdrawal of a Participant's Individual Accounts. No
Maintenance Fee is deducted from a separate Individual Account established for
the purpose of a lump sum contribution. We deduct this fee from each investment
option in the same proportion that the values held under each option have to the
total value under the Individual Account.
WITHDRAWAL FEE
There are no deductions from Contributions for sales commissions or related
expenses. Sales commissions and expenses are advanced by the Company and
recovered out of any Withdrawal Fees or, if Withdrawal Fees are insufficient,
out of its profits from investment activities, including the mortality and
expense risk charges under a Contract. The total amount deducted for the
Withdrawal Fee will not exceed 8.5% of the Contributions made to an Individual
Account. For sales commissions paid in connection with the sale of a Contract,
see "Contract Purchase--Distribution." If applicable, the Withdrawal Fee will
apply to withdrawals from the Funds, the GA Account or the Fixed Account. No
Withdrawal Fee will be deducted from the Fixed Plus Account. There are
additional restrictions and deductions on withdrawals. See "Contract
Rights--Withdrawals."
A Withdrawal Fee is not deducted from any portion of the Individual Account
Current Value under a Contract which is:
(a) withdrawn due to the Participant's separation from service with the
Contract Holder (the Contract Holder must submit documentation
satisfactory to the Company confirming the Participant is no longer
providing services to the employer);
(b) applied to provide Annuity benefits under a Contract;
(c) withdrawn on or after the tenth anniversary of the effective date of the
Individual Account if a ten-year duration for Withdrawal Fees has been
elected on or after the fifth anniversary if a five-year duration has
been elected;
(d) paid due to the death of the Participant before Annuity payments under a
Contract begin;
(e) withdrawn due to the election of any additional withdrawal option under
a Contract (see "Additional Withdrawal Options");
(f) withdrawn due to financial hardship, as specified in the Code;
(g) paid where the Individual Account Value is $3,500 or less and no amount
has been withdrawn, taken as a loan or used to purchase Annuity benefits
during the prior 12 months; or
(h) paid in an amount of up to 10% of the Individual Account Current Value.
This applies only to the first partial withdrawal in each calendar year.
The 10% amount will be calculated using the Individual Account Current
Value on the date the request is received, in good order, in the Home
Office. This provision is available to Participants who are between the
ages of 59 1/2 and 70 1/2. Any loans outstanding on an Individual
Account are excluded from the Individual Account Current Value when
calculating the 10% amount. This provision is not applicable to a full
withdrawal of the Individual Account, or to partial withdrawals due to
loan defaults. See "Contract Rights--Contract Loans." This provision may
not be exercised if SWO is elected. See "Additional Withdrawal Options."
Although no Withdrawal Fee is deducted in the above instances, the amount
withdrawn may, however, be subject
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14
<PAGE>
to the 10% federal penalty tax. See "Tax Status-- Contracts Used with 403(b)
Plans" and "Tax Status-- Contracts Used with Qualified Plans."
MORTALITY AND EXPENSE RISK CHARGES
We make a daily deduction from any portion of an Individual Account Current
Value allocated to the Funds under a Contract for mortality and expense risks.
The mortality risk charge is to compensate us for the risk we assume when we
promise to continue making payments for the lives of individual Annuitants
according to Annuity rates specified in the tables at the time Annuity payments
begin. The expense risk charge is to compensate us for the risk that actual
expenses for costs incurred under a Contract will exceed the maximum costs that
can be charged under the Contract. Because it is based, in part, on the amount
of the Aggregate Current Value, the charge for mortality and expense risks may
change on each contract anniversary.
Based on our actuarial determination, we do not anticipate that the
Withdrawal Fee will cover all sales and administrative expenses which we will
incur in connection with a Contract. Also, we do not intend to profit from
either the annual Maintenance Fee or the administrative expense charge, if
imposed. We do hope to profit from the daily deduction for mortality and expense
risks. Any such profit, as well as any other profit realized by us and held in
the general account (which supports insurance and annuity obligations), would be
available for any proper corporate purpose, including, but not limited to,
payment of sales and distribution expenses.
ADMINISTRATIVE EXPENSE CHARGE
We deduct a daily charge for administrative expenses from any portion of an
Individual Account Current Value allocated to the Funds to reimburse the Company
for some of the expenses we incur for administering a Contract. Because it is
based, in part, on the amount of the Aggregate Current Value, the administrative
expense charge may change on each contract anniversary.
FUND EXPENSES
Each Fund has an investment adviser. An investment advisory fee, based on
the Fund's average net assets, is deducted from the assets of each Fund and paid
to the investment adviser.
Most expenses incurred in the operations of the Funds are borne by that
Fund. Fund advisers may reimburse the Funds they advise for some or all of these
expenses. For further details of each Fund's expenses, you and the Contract
Holder should read the accompanying prospectus for each Fund and refer to the
Fee Table in this Prospectus.
PREMIUM AND OTHER TAXES
Several states and municipalities impose a premium tax on Annuities.
Currently such taxes range from 0% to 4%. The Company reserves the right to
deduct premium tax against Contributions or Current Values at any time, but no
earlier than when due under state law. The Company's current practice is to
deduct for premium taxes at the time of complete withdrawal or annuitization. In
addition to premium tax, the Company reserves the right to assess a charge for
any state or federal taxes due against a Contract or the Separate Account
assets.
CHARGES AND FEES DURING THE ANNUITY PERIOD
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This section describes the charges and fees that we may deduct during the
Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
During the Annuity Period a daily charge for mortality and expense risks
equal to an annual effective rate of 1.25% may be deducted from any portion of
an Individual Account allocated to the Funds.
ADMINISTRATIVE EXPENSE CHARGE
During the Annuity Period, a daily charge for administrative expenses equal
to an annual effective rate of up to 0.25% may be deducted from any portion of
an Individual Account under a Contract allocated to the Funds.
WITHDRAWAL FEE
A Withdrawal Fee will apply during the Annuity Period if a non-lifetime
Annuity Option is elected on a variable basis and the remaining value is
withdrawn before 5 years of Annuity payments have been completed. See "Annuity
Period--Annuity Options."
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15
<PAGE>
ADDITIONAL WITHDRAWAL OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company offers certain withdrawal options under each Contract that are
not considered annuity options ("Additional Withdrawal Options"). To exercise
these options, the Current Value must meet the minimum dollar amounts and you
must satisfy the age criteria applicable to that option.
The Additional Withdrawal Options currently available under the Contract
include the following:
- -SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of partial withdrawals from
your Individual Account based on a payment method you select. It is designed
for those who want a periodic income while retaining investment flexibility for
amounts accumulated under a Contract. (This option may not be elected if you
have an outstanding contract loan).
- -ECO--ESTATE CONSERVATION OPTION. ECO offers the same investment flexibility as
SWO but is designed for those who want to receive only the minimum distribution
that the Code requires each year. Under ECO, the company calculates the minimum
distribution amount required by law at age 70 1/2 or retirement, if later, for
governmental or church plans, and pays you that amount once a year. (See "Tax
Status.")
Other Additional Withdrawal Options may be added from time to time.
Additional information relating to any of the Additional Withdrawal Options may
be obtained from your local representative or from the Company at its Home
Office. For Contracts issued in the state of New York, no Market Value
Adjustment will be imposed on withdrawals from the GA Account for SWO or ECO.
If one of the Additional Withdrawal Options is selected, your Account will
retain all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Current Account Value will continue to be subject to
the charges and deductions described in this Prospectus.
Once elected, an Additional Withdrawal Option, may be revoked at any time by
submitting a written request to our Home Office. Once an option is revoked, it
may not be elected again, nor may any other Additional Withdrawal Options be
elected unless permitted by the Code. The Company reserves the right to
discontinue the availability of one or all of those Additional Withdrawal
Options at any time, and/or to change the terms of future elections.
ANNUITY PERIOD
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ANNUITY PERIOD ELECTIONS
We must receive in writing the Annuity start date and Annuity option you
have elected (for details, see the Statement of Additional Information). Until a
date and option are elected, your Individual Accounts will continue in the
Accumulation Period.
We must receive written notice at least 30 days before Annuity payments
begin electing or changing (a) the date on which Annuity payments are to begin,
(b) the Annuity option, (c) whether the payments are to be made monthly,
quarterly, semiannually or annually, and (d) the investment option(s) used to
provide Annuity payments (i.e., a fixed annuity using the general account, or a
variable annuity using any of the funds 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 Funds available; however,
additional Funds may be available under some Annuity Options in the future).
(See "Annuity Options.") Once Annuity Payments begin, the Annuity Option may not
be changed, nor may transfers be made among funding options.
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
(3 1/2% per annum, unless a 5% annual rate is elected). Selection of a 5% rate
causes a higher first payment, but Annuity payments will increase thereafter
only to the extent 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 details
regarding the selection of a net investment rate.)
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<PAGE>
No election may be made that would result in a first Annuity payment of less
than $20 or total yearly Annuity payments of less than $100. If the combined
value of the Employer and Employee Accounts is insufficient to elect an option
for the minimum amount specified, a lump sum payment must be elected.
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) your life, (b) the joint lives of
you and your Plan beneficiary, (c) a period certain greater than your life
expectancy, or (d) a period certain greater than the joint life expectancies of
you and your Plan beneficiary.
Section 401(a)(9) of the Code has required minimum distribution rules for
403(b) Plans. Under such rules, generally, distributions of the Individual
Account Current Value attributable to contributions made on and after January 1,
1987 and any of the earnings on the entire Individual Account after that date
must begin by April 1 of the calendar year following the year in which you
attain age 70 1/2. However, for governmental and church 403(b) Plans,
distributions on these amounts must 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. Distributions of the Individual Account Current Value as of
December 31, 1986 must generally begin by age 75. In addition, distributions
must be in a form and amount sufficient to satisfy the Code requirements.
Section 401(a)(9) of the Code also has required minimum distribution rules
for 401(a)/401(k) Plans. Under such rules, distribution of the entire Individual
Account Current Value must be made, or must begin no later than April 1 of the
calendar year following the calendar year in which the Participant attains age
70 1/2. However, for Participants in governmental or church plans, or for
Participants who attained age 70 1/2 prior to January 1, 1988, distribution must
be made, or begin by April 1 of the calendar year following the calendar year in
which the Participant attains age 70 1/2 or retires, whichever occurs later. In
addition, distributions must be in a form and amount sufficient to satisfy the
Code requirements.
In determining the amount of benefit payments, the minimum distribution
incidental death benefit rule described in IRS regulations* must be satisfied.
This distribution rule does not apply to certain 403(b) Plans if Annuity Option
4 is elected and your spouse is the second Annuitant. See "Annuity
Period--Annuity Options."
You will be subject to a 50% federal penalty tax on the amount of
distribution required each year that is not distributed under the Code's minimum
distribution rules.
* This rule assures that any death benefits payable under the Plan are
incidental to the primary purpose of the Plan which is to provide retirement
benefits to the Participant. The amount to be distributed under this rule is
determined based on the Participant's age and tables contained in the IRS
regulations.
If you elect a Variable Annuity Option, your Individual Account will be
allocated to the Separate Account and the Company will make a daily deduction
for mortality and expense risks. See "Charges and Fees During the Accumulation
Period--Mortality and Expense Risk Charges." Therefore, electing the nonlifetime
option on a variable basis will result in a deduction being made even though the
Company assumes no mortality risk. During the Accumulation Period, the Company
will also deduct daily a charge for administrative expenses. See "Charges and
Fees During the Annuity Period-- Administrative Expense Charge."
ANNUITY OPTIONS
- -OPTION 1--Payments of Interest on Sum Left with the Company--This Option may be
used only by the Plan beneficiary when the Participant dies before the Company
has started paying an Annuity. A portion or all of the sum paid upon death may
be held under this Option and will be held in the General Account of the
Company at interest. Under this Option, the Company will:
(a) pay a portion or all of the sum held by the Company; or
(b) apply a portion or all of the sum held by the Company to any Annuity
Option below upon receipt of written direction on a form acceptable to
the Company.
If the Plan beneficiary is the Participant's surviving spouse, the lump-sum
payment may be deferred to a date not later than when the Participant would
have attained age 70 1/2.
If the Plan beneficiary is not a spouse, the Contract Holder must tell the
Company to pay the full sum within 5 years after the death of the
Participant.
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<PAGE>
- -OPTION 2--Payments for a Stated Period of Time--An Annuity will be paid for the
number of years chosen (See Contract Schedule II).
If payments for this option are made under a Variable Annuity, the present
value of any remaining payments may be withdrawn at any time. If a withdrawal is
requested prior to the minimum number of years specified on Contract Schedule
II, it will be subject to any withdrawal fee, if applicable (See Contract
Schedule I).
- -OPTION 3--Life Income--An Annuity will be paid for the life of the Annuitant.
The Company may also guarantee payments for 60, 120, 180, or 240 months or such
other periods as the Company may offer at the time of annuitization if so
directed by the Contract Holder.
- -OPTION 4--Life Income based upon the lives of two Annuitants--An Annuity will
be paid during the lives of the Annuitant and a second Annuitant. Payments will
continue until both Annuitants have died. When this option is chosen, a choice
of the following must be made:
(a) 100% of the payment to continue after the first death;
(b) 66 2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) Payments for a minimum of 120 months, with 100% of the payment to
continue after the first death; or
(e) 100% of the payment to continue at the death of the second Annuitant and
50% of the payment to continue at the death of the Annuitant.
We may also offer additional Annuity Options under your Contract from time
to time. The company expects to offer additional Annuity Options and enhanced
versions of the Annuity Options listed above at some time during 1996. These
additional Annuity Options and enhanced versions of the existing options will
have additional Funds available and will allow transfers between Funds during
the Annuity Period. (Additional Funds 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. Please refer to the Contract,
or call the number listed on the cover of this Prospectus, 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.
Payments under any lifetime Annuity option will be determined without regard
to the sex of the Annuitant(s). Such Annuity payments will be based solely on
the age of the Annuitant(s).
If a lifetime option is elected without a guaranteed minimum payment period,
it is possible that only one Annuity payment will be made if the Annuitant under
Option 3, or the surviving Annuitant under Option 4, should die prior to the due
date of the second Annuity payment.
Once lifetime Annuity payments begin, neither the Contract Holder nor the
Annuitant can elect to receive a lump sum settlement.
DEATH BENEFIT
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ACCUMULATION PERIOD
A portion or all of any death proceeds may be (a) paid to the Plan
beneficiary in a lump sum; (b) applied to any of the Annuity Options; (c)
subject to applicable provisions of the Code, left in the variable investment
options; (d) if the beneficiary is your spouse, paid under an Additional
Withdrawal Option; or (e) subject to applicable provisions of the Code, left on
deposit in the Company's general account and the beneficiary may receive
monthly, quarterly, semiannual or annual interest payments at the interest rate
then currently being credited on such deposits. The balance on deposit can be
withdrawn at any time or applied under any Annuity Option. See "Annuity
Period--Annuity Options." Any lump sum payment paid during the Accumulation
Period or under the applicable lifetime or nonlifetime Annuity options will
normally be made within seven calendar days after proof of death acceptable to
the Company and a request for payment on a form acceptable to the Company is
received at our Home Office in good order.
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<PAGE>
Until the election of method of payment, amounts will remain invested as
they were before the death, and the beneficiary will assume all nonforfeitable
rights under a Contract. The Code requires that distributions begin within a
certain time period. If the Plan beneficiary is your surviving spouse and the
Plan allows, the Plan beneficiary has until you would have attained age 70 1/2
to begin Annuity payments, to receive a lump sum distribution, or to begin
receiving distributions under an Additional Withdrawal Option. If your Plan
beneficiary is not your surviving spouse, either Annuity payments must begin by
December 31 of the year following the year of your death, or the entire value
must be distributed by December 31 of the fifth year following the year of your
death. In no event may payments to any Plan beneficiary extend beyond the life
of the Plan beneficiary or any period certain greater than the Plan
beneficiary's life expectancy. Failure to commence distribution within the above
time periods can result in tax penalties.
If a lump sum distribution is elected, the Plan beneficiary will receive the
value of the Individual Account determined as of the Valuation Period in which
proof of death acceptable to us and a request for payment on a form acceptable
to the Company is received at our Home Office in good order. The distribution is
taxed in the same manner as a full surrender. If an Annuity Option is elected,
the value applied to the Annuity Option is determined in the same manner, and
the proceeds are taxed in the same manner as the annuity payments. If amounts
are left in the variable investment options, the Individual Account Current
Value will continue to be affected by the investment performance of the
investment option(s) selected. If amounts are left on deposit in the general
account, the principal amount is guaranteed, but interest payments may vary. In
general, regardless of the method of payment, payments received by your
beneficiaries after your death are taxed in the same manner as if you had
received those payments. (See "Tax Status.")
ANNUITY PERIOD
If an Annuitant dies after Annuity payments have begun, any death benefit
payable will depend upon the terms of a Contract and the Annuity option
selected.
If Annuity option 3 or 4 was elected without a guaranteed minimum payment
period under a Contract, Annuity payments will cease upon the death of the
Annuitant under a Life Annuity or the death of the surviving Annuitant under
(i), (ii), (iii) or (v) of option 4.
Under a Contract, if Annuity option 3 or 4 was elected with a guaranteed
minimum payment period and the death of the second Annuitant under Annuity
option 3 or the surviving Annuitant under (iv) of Annuity option 4 occurs prior
to the end of that period, we will pay to the person designated by the Contract
Holder in a lump sum (unless otherwise requested) the present value of the
guaranteed Annuity payments remaining. Such value will be determined as of the
Valuation Period in which proof of death acceptable to us and a request for
payment are received at our Home Office. The value will be reduced by any
payments made after the date of death.
If Annuity option 3 was elected under a Contract and the Annuitant dies
before all guaranteed payments are made, the value of any remaining payments may
be paid in a lump sum to your Plan beneficiary and no Withdrawal Fee will be
imposed. Such value will be determined as of the Valuation Period in which proof
of death acceptable to us and a request for payment on a form acceptable to the
Company are received at our Home Office in good order.
If the Annuitant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining values
must be distributed to your designated Plan beneficiary at least as rapidly as
under the original method of distribution.
Any lump sum payment paid under the applicable lifetime or nonlifetime
Annuity options will normally be made within seven calendar days after proof of
death, acceptable to us, and a request for payment are received at our Home
Office.
TAX STATUS
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INTRODUCTION
The following discussion is a general discussion of federal income tax
considerations relating to a Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the Contracts. Any
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19
<PAGE>
person concerned about these tax implications should consult a competent tax
adviser before initiating any transaction.
This discussion is based upon the Company's understanding of the present
federal income tax laws as they are currently interpreted by the Internal
Revenue Service ("IRS"). The tax treatment of annuities may change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change). No
representation is made as to the likelihood of the continuation of the present
federal income tax laws or of the current interpretation by the IRS. Moreover,
no attempt has been made to consider any applicable state or other tax laws.
The Contracts may be purchased and used in connection with certain
retirement arrangements entitled to special income tax treatment under Sections
403(b) or 401(a) of the Code. The ultimate effect of federal income taxes on the
amounts held under a Contract, or Annuity Payments, and on the economic benefit
to the Contract Holder, the Annuitant, or the Beneficiary may depend on the tax
status of the individual concerned.
The Company makes no attempt to provide more than general information about
use of either Contract with the various types of retirement plans. Contract
Holders and participants under retirement plans as well as annuitants and
beneficiaries are cautioned that the rights of any person to any benefits under
a Contract may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the Contract issued in connection with
such a plan. Some retirement plans are subject to distribution and other
requirements that are not incorporated in the administration of a Contract.
Contract Holders are responsible for determining that contributions,
distributions and other transactions with respect to a Contract satisfy
applicable law. Purchasers of a Contract for use with any retirement plan should
consult their legal counsel and tax adviser regarding the suitability of the
Contract.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under Part I of Subchapter
L of the Code. Since the Separate Account is not an entity separate from the
Company, and its operation forms a part of the Company, it will not be taxed
separately as a "regulated investment company" under Subchapter M of 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 interpretations 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.
TAX STATUS OF THE CONTRACTS
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate accounts used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owner's gross income. One of the circumstances that has raised
this issue is the number of funding options available under the Contracts. The
Company reserves the right to modify the Contracts as necessary to attempt to
prevent a Contract Holder from being considered the owner of a pro rata share of
the assets of the Separate Account.
CONTRACTS USED WITH 403(B) PLANS
The Contracts are designed for use with Section 403(b) plans. The tax rules
applicable to participants and beneficiaries in retirement plans vary according
to the type of plan and the terms and conditions of the plan. Special favorable
tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances.
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20
<PAGE>
Under Code Section 403(b), payments made by public school systems and
certain tax exempt organizations to purchase annuity contracts for their
employees are excludable from the gross income of the employee, subject to
certain limitations. However, these payments may be subject to FICA (Social
Security) taxes. A Contract issued as a tax-deferred annuity under Section
403(b) will be amended as necessary to conform to the requirements of the Code.
In order to be excludable from your taxable income, your total annual
contributions to Section 403(b) plans cannot exceed either of two limits set by
the Code. The first limit, under Section 415, is generally the lesser of 25
percent of your compensation or $30,000. This limit applies to all your own
contributions, your employer's contributions under the Plan on your behalf, and,
if you are in control of the employer as defined in the Code, contributions
under certain other retirement plans. The second limit, which is the exclusion
allowance under Section 403(b) of the Code, is usually calculated according to a
formula that takes account of your length of employment, any pretax
contributions you and your employer have already made under the Plan, and pretax
contributions to certain other retirement plans. There is also a third limit
that specifically limits your salary reduction contributions to the Plan to no
more than $9,500 annually (subject to indexing); your own limit may be lower.
Code Section 403(b)(11) restricts the distribution under Code Section 403(b)
annuity contracts of: (1) elective contributions made in years beginning after
December 31, 1988; (2) earnings on those contributions; and (3) earnings in such
years on amounts held as of the last year beginning before January 1, 1989.
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 elective contributions may not be
distributed in the case of hardship.
The Code also has required distribution rules for Section 403(b) plans.
Distributions of amounts as of December 31, 1986, generally must begin by age
75. Distributions attributable to contributions made on or after January 1,
1987, and any earnings on the entire Individual Account on or after that date,
must begin by (1) for governmental or church plans, April 1 of the calendar year
following the calendar year in which the participant attains age 70 1/2 or
retires, whichever occurs later, or (2) for all other plans, April 1 of the
calendar year following the calendar year in which the participant attains age
70 1/2. To comply with these provisions, distributions must be in a form and
amount sufficient to satisfy the minimum distribution rules and the minimum
distribution incidental death benefit rules specified in IRS regulations. In
general, annuity payments may not extend beyond your life, the joint lives of
you and your beneficiary, a period certain greater than your life expectancy, or
a period certain greater than the joint life expectancies of you and your
beneficiary. If you die after the required minimum distributions have 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.
If you die before the required minimum distributions have commenced,
distribution to your beneficiary generally must either commence as an annuity
within one year or be completed within five years, subject to certain special
rules. If distributions are taken in excess of the minimum required
distribution, the Company will no longer maintain the grandfathered amount. See
"Contract Rights--Withdrawals."
All distributions will be taxed as they are received unless you made a
rollover contribution of the distribution to another Section 403(b) plan or an
individual retirement 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 generally are
provided the opportunity to elect not to have tax withheld from distributions.
Certain distributions from Section 403(b) tax-sheltered annuities are subject to
mandatory federal income tax withholding. We will report to the IRS the taxable
portion of all distributions.
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21
<PAGE>
CONTRACTS USED WITH "QUALIFIED" PLANS
The Contracts are designed for use with certain types of retirement plans
that qualify for favorable tax treatment under Section 401(a) of the Code
("Qualified Plans"). Code section 401(a) permits employers to establish various
types of retirement plans for employees, and permits self-employed individuals
to establish retirement plans for themselves and their employees. These
retirement plans may permit the purchase of the Contracts to accumulate
retirement savings under the plans. Adverse tax consequences to the plan, to the
participant or to both may result if this Contract is assigned or transferred to
any individual as a means to provide benefit payments.
The tax rules applicable to participants and beneficiaries in retirement
plans vary according to the type of plan and the terms and conditions of the
plan. Adverse tax consequences may result from contributions in excess of
specified limits; distributions prior to age 59 1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances.
In the case of a withdrawal under a Contract paid to a plan participant or
beneficiary, including withdrawals under the Systematic Withdrawal Option or the
Estate Conservation Option, a ratable portion of the amount received is taxable,
generally based on the ratio of the "investment in the contract" to the
individual's total accrued benefit under the retirement plan. The "investment in
the contract" generally equals the amount of any non-deductible contributions
paid by or on behalf of any individual's total accrued benefit under the
retirement plan. The "investment in the contract" generally equals the amount of
any non-deductible contributions paid by or on behalf of any individual. For a
Contract issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from a qualified plan.
In general, only the portion of the Annuity payment that represents the
amount by which the Account Value exceeds the "investment in the contract" will
be taxed; after the "investment in the contract" is recovered, the full amount
of any additional Annuity payments is taxable. For Variable Annuity payments,
the taxable portion is generally determined by an equation that establishes a
specific dollar amount of each payment that is not taxed. The dollar amount is
determined by dividing the "investment in the contract" by the total number of
expected periodic payments. However, the entire distribution will be taxable
once the recipient has recovered the dollar amount of his or her "investment in
the contract." For Fixed Annuity payments, in general there is no tax on the
portion of each payment which represents the same ratio that the "investment in
the contract" bears to the total expected value of the Annuity payments for the
term of the payments; however, the remainder of each Annuity payment is taxable.
Once the "investment in the contract" has been fully recovered, the full amount
of any additional Annuity payments is taxable.
Pension 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 generally are
provided the opportunity to elect not to have tax withheld from distributions.
However, certain distributions are subject to mandatory federal income tax
withholding.
PENALTY TAX ON CERTAIN DISTRIBUTIONS
The Code generally imposes a 10% penalty tax on the taxable portion of any
distribution from a 403(b) plan or a Qualified Plan unless (a) made when you
have attained age 59 1/2, (b) attributable to your disability, (c) made to a
beneficiary or your estate on or after your death, (d) made when you have
attained age 55 and have separated from service with the plan sponsor, (e) the
distribution amount is rolled over into another Section 403(b) plan or an IRA in
accordance with the terms of the Code, or (f) the distribution amount is
annuitized over your life or life expectancy or the joint lives or life
expectancies of you and your plan beneficiary, provided you have separated from
service with the plan sponsor. In addition, the penalty tax is abated 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.
OTHER TAX CONSEQUENCES
As noted above, the foregoing discussion of the federal income tax
consequences is not exhaustive and special rules are provided with respect to
other tax consequences not discussed in this Prospectus. A competent tax advisor
should be consulted for further information.
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<PAGE>
MISCELLANEOUS
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VOTING RIGHTS
Each Contract Holder may direct us in the voting of shares at meetings of
shareholders of the appropriate Fund(s). The number of votes to which each
Contract Holder may give direction will be determined as of the record date.
The number of votes each Contract Holder is entitled to direct with respect
to a particular Fund during the Accumulation Period is equal to the portion of
the sum of all Current Values of a Contract attributable to that Fund divided by
the net asset value of one share of that Fund. During the Annuity Period, the
number of votes is equal to the Valuation Reserve applicable to the portion of a
Contract attributable to that Fund, divided by the net asset value of one share
of that Fund. In determining the number of votes, fractional votes will be
recognized. Where the value of a Contract or Valuation Reserve relates to more
than one Fund, the calculation of votes will be performed separately for each
Fund.
Participants and Annuitants have a fully vested (100%) interest in the value
of the Individual Accounts which are credited with Participant Contributions.
Participants and Annuitants also have a nonforfeitable (vested) right to the
value of the Employer Account pursuant to the terms of, and to the extent of
their vested percentage under the Plan. Therefore, such Participants and
Annuitants may instruct the Contract Holder how to direct us to cast the votes
for the portion of the Current Value or Valuation Reserve attributable to their
Individual Accounts. Votes attributable to those Participants and Annuitants who
do not instruct the Contract Holder will be cast by us in the same proportion as
votes for which instructions have been received by the Contract Holder. Votes
attributable to Contract Holders who do not direct us will be cast by us in the
same proportion as the votes for which we have received directions.
Contract Holders, or Participants and Annuitants entitled to instruct the
casting of votes, will receive a notice of each meeting of shareholders,
together with any proxy solicitation materials, and a statement of the number of
votes attributable to their participation under a Contract and stating the right
to instruct the Contract Holder how such votes shall be cast.
MODIFICATION OF THE CONTRACTS
Only an authorized officer of the Company may change the terms of this
Contract. The Company reserves the right to modify this Contract to meet the
requirements of applicable state and federal laws or regulations. The Company
will notify the Contract Holder and Participants in writing of any changes.
The Company may change the tables for determining the amount of Annuity
benefit payments attributable only to Contributions accepted after the effective
date of change, without Contract Holder consent. Such a change will not become
effective earlier than twelve months after (1) the effective date of the
Contract, or (2) the effective date of a previous change. The Company will
notify the Contract Holder in writing at least thirty (30) days before the
effective date of the change. The Company may not make changes which adversely
affect the Annuity benefits attributable to Contributions already made to the
Contract.
CONTRACT HOLDER INQUIRIES
A Contract Holder or a Participant may direct inquiries to a local
representative of the Distributor or may write directly to us at the address
shown on the cover page of this prospectus.
TELEPHONE TRANSFERS
Subject to the Contract Holder's approval, the Participant automatically has
the right to make transfers among Funds by telephone. We have enacted procedures
to prevent abuses of Individual Account transactions by telephone. The
procedures include requiring the use of a personal identification number (PIN)
to execute transactions. The Participant is responsible for safeguarding his or
her PIN, and for keeping Individual Account information confidential. If the
Company fails to follow its procedures, it would be liable for any losses to the
Participant's Individual Account resulting from the failure. To ensure
authenticity, we record all calls requesting transfers on the 800 line. Note:
all Individual Account information and transactions permitted are subject to the
terms of the Plan(s).
PAYMENTS
Payments for withdrawal requests (subject to the limitations on withdrawals
from the Fixed Plus Account described in Appendix II) will be made in accordance
with
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<PAGE>
SEC requirements, but normally not later than seven calendar days after a
properly completed disbursement form is received at our Home Office or within
seven calendar days of the date the withdrawal form may specify. Payments may be
delayed for: (a) any period in which the New York Stock Exchange ("Exchange") is
closed (other than customary weekend and holiday closings) or in which trading
on the Exchange is restricted; (b) any period in which an emergency exists where
disposal of securities held by the funds is not reasonably practicable or is not
reasonably practicable for the value of the assets of the Funds to be fairly
determined; or (c) such other periods as the SEC may by order permit for the
protection of Contract Holders and Participants. The conditions under which
restricted trading or an emergency exists shall be determined by the rules and
regulations of the SEC.
TRANSFER OF OWNERSHIP; ASSIGNMENT
Unless contrary to applicable law, assignment of a Contract or an Individual
Account is prohibited.
LEGAL PROCEEDINGS
We know of no material legal proceedings pending to which the Separate
Account is a party, nor which would materially affect the Separate Account.
LEGAL MATTERS
The validity of the securities offered by this Prospectus has been passed
upon by Susan E. Bryant, Esq., Counsel to the Company.
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<PAGE>
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
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The following items are the contents of the Statement of Additional
Information:
<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
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of Aetna Life Insurance and Annuity Company
</TABLE>
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<PAGE>
APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
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THE GAA IS A CREDITED INTEREST OPTION AVAILABLE DURING THE ACCUMULATION PERIOD
UNDER THE CONTRACTS. AMOUNTS ALLOCATED TO LONG-TERM CLASSIFICATIONS OF GAA ARE
HELD IN A NONINSULATED, NONUNITIZED SEPARATE ACCOUNT. AMOUNTS ALLOCATED TO
SHORT-TERM CLASSIFICATIONS OF GAA ARE HELD IN THE COMPANY'S GENERAL ACCOUNT.
THIS APPENDIX IS A SUMMARY OF GAA AND IS NOT INTENDED TO REPLACE THE GAA
PROSPECTUS. YOU SHOULD READ THE ACCOMPANYING GAA PROSPECTUS CAREFULLY BEFORE
INVESTING.
The GAA is a credited interest option in which we guarantee stipulated rates
of interest for stated periods of time on amounts directed to the 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 over the period of one year. This option
guarantees the minimum interest rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years and Long-Term GAA has Guaranteed Terms from more than three and up to ten
years.
Purchase Payments must remain in the GAA for the full Guaranteed Term to
receive the quoted interest rates. Withdrawals or transfers from a Guaranteed
Term before the end of that Guaranteed Term may be subject to a Market Value
Adjustment ("MVA"). For Contracts issued in New York, no MVA applies upon the
election of the Estate Conservation Option or the Systemic Withdrawal Option. An
MVA reflects the change in the value of the investments due to changes in
interest rates since the date of deposit. When interest rates increase after the
date of deposit, the value of the investment decreases, and the MVA is negative.
Conversely, when interest rates decrease after the date of deposit, the value of
the investment increases, and the MVA is positive. It is possible that a
negative MVA could result in the Participant receiving an amount that is less
than the amount paid into the GAA.
As a Guaranteed Term matures assets accumulating under the 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
Withdrawal Fee, federal tax penalties or mandatory income tax withholding and a
Maintenance Fee.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts which have been accumulating under the GAA
transferred to one or more of the Funds available during the Annuity Period. GAA
cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
The Company makes 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
the 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 during 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 the GAA, although such value
is included in determining the value of the Individual Account against which a
loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn from the 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.
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26
<PAGE>
APPENDIX II
FIXED PLUS ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FIXED PLUS ACCOUNT IS AN INVESTMENT OPTION AVAILABLE DURING THE ACCUMULATION
PERIOD UNDER THE CONTRACTS. THE FOLLOWING SUMMARIZES MATERIAL INFORMATION
CONCERNING THE FIXED PLUS ACCOUNT THAT IS OFFERED AS AN OPTION UNDER THE
CONTRACTS. ADDITIONAL INFORMATION MAY BY FOUND IN YOUR CERTIFICATE OR CONTRACT.
AMOUNTS ALLOCATED TO THE FIXED PLUS ACCOUNTS ARE HELD IN THE COMPANY'S GENERAL
ACCOUNT THAT SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED
PLUS ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON EXEMPTIONS
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THIS PROSPECTUS
REGARDING THE FIXED PLUS ACCOUNT, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY
AND COMPLETENESS OF THE STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE
FIXED PLUS ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Plus Account guarantees that amounts allocated to this option will
earn the minimum Fixed Plus interest rate specified in a Contract. We may credit
a higher interest rate from time to time. The Company's determination of
interest rates reflects the investment income earned on invested assets and the
amortization of any capital gains and/or losses realized on the sale of invested
assets. Under this option, we assume the risk of investment gain or loss by
guaranteeing Net Contribution values and promising a minimum interest rate and
Annuity payment.
The Fixed Plus Account will reflect a compound interest rate credited by us.
The interest rate quoted is an annual effective yield. Amounts applied to the
Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
Beginning on the tenth Individual Account Year, we will credit amounts held
in the Fixed Plus Account with an interest rate that is at least 0.25% higher
than the then-declared interest rate for the Fixed Plus Accounts for Individual
Accounts that have not reached their tenth anniversary.
The Company reserves the right to limit Net Contribution(s) and/or transfers
to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day our Home Office receives a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loan or annuitizations
made in the prior 12 months. In calculating the 20% limit, we reserve the right
to include payments made due to the election of an Additional Withdrawal Option.
The 20% limit is waived if the partial withdrawal is taken pro rata from each
investment option the Individual Account invests and is due to annuitization or
death. The waiver upon death will only be exercised once and must occur within 6
months after the Participant's date of death. Any such surrender or
annuitization must be made pro rata from all funding options.
If a full withdrawal is requested, we will pay any amounts held in the Fixed
Plus Account, with interest, in five annual payments equal to:
- One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, loan, transfers
or annuitizations made in the prior 12 months;
- One-fourth of the then remaining Fixed Plus Account Value 12 months later;
- One-third of the then remaining Fixed Plus Account Value 12 months later;
- One-half of the then remaining Fixed Plus Account Value 12 months later;
and
- The balance of the Fixed Plus Account Value 12 months later.
- --------------------------------------------------------------------------------
27
<PAGE>
We will waive this payout provision for a Fixed Plus Account full surrender
if a full withdrawal is made due to:
(a) the Participant's death, before Annuity payments begin and request for
payment is received within 6 months after the Participant's date of
death;
(b) the election of an Annuity option;
(c) if the Fixed Plus Account Value is $3,500 or less and no withdrawals,
transfers, loan or annuitizations have been made from the Account within
the prior 12 months.
Once we receive a request for a full withdrawal from an Account, no further
withdrawals or transfers will be permitted from the Fixed Plus Account. A full
withdrawal from the Fixed Plus Account may be canceled at any time before the
end of the five-payment period.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day our Home Office receives a
written request, reduced by any Fixed Plus Account withdrawals, transfers, loan
or annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of an Additional
Withdrawal Option. The 20% limit on transfers will be waived when the value in
the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts which have been accumulating under the
Fixed Plus Account transferred to one or more of the Funds available during the
Annuity Period to provide lifetime Variable Annuity payments.
SWO
The Systematic Withdrawal Option may not be elected if you have requested a
Fixed Plus Account transfer or withdrawal within the prior 12 month period.
LOANS
Loans may be made from those Individual Account Current Values held in the
Fixed Plus Account. A 5% default charge may be assessed on amounts loaned from,
but not repaid to the Fixed Plus Account. The default charge will apply to
borrowed amounts that exceed the amount eligible for withdrawal at the time the
loan is made.
TRANSFER CREDITS
The Company provides a transfer credit in certain circumstances. See
"Transfer Credits." The amount of the transfer credit may be changed in the
discretion of the Company, but is currently equal to 2% of the assets
transferred to the Company under a Contract that remain in the Individual
Accounts as of the one year anniversary of a participant's first Net
Contributions under the Contract, plus the interest that would have been
credited had that amount been deposited in the Fixed Plus Account on the first
business day of the calendar month following its calculation. The transfer
credit is applied to the Current Value held in the Fixed Plus Account.
- --------------------------------------------------------------------------------
28
<PAGE>
APPENDIX III
FIXED ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FIXED ACCOUNT IS AN INVESTMENT OPTION AVAILABLE ONLY FOR AMOUNTS PREVIOUSLY
ALLOCATED TO A FIXED ACCOUNT UNDER CONTRACTS THAT ARE EXCHANGED INTO ONE OR MORE
OF THE CONTRACTS. SEE APPENDIX V. NO NEW CONTRIBUTIONS OR TRANSFERS TO THE FIXED
ACCOUNT WILL BE ALLOWED.
THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED ACCOUNT.
ADDITIONAL INFORMATION MAY BE FOUND IN YOUR CERTIFICATE OR CONTRACT. AMOUNTS
ALLOCATED TO THE FIXED ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT.
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 THIS
PROSPECTUS REGARDING THE FIXED ACCOUNT, HOWEVER, MAY BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF THE STATEMENTS. DISCLOSURE IN THIS APPENDIX
REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC.
The Fixed Account guarantees that amounts allocated to this option will earn
the minimum interest rate specified in the Contract. (This minimum interest rate
cannot be changed by the Company.) We may credit a higher interest rate from
time to time. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under this option,
we assume the risk of investment gain or loss by guaranteeing Net Purchase
Payment values and promising a minimum interest rate and Annuity payment.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to 6 months or (b) as provided by
federal law.
In addition, if allowed by state law, we may pay any Fixed Account
withdrawal value in equal payments, with interest, over a period not to exceed
60 months, when:
(a) the Fixed Account withdrawal value for the Contract or for the total of
the Accounts under the Contract exceeds $250,000 on the day prior to the
withdrawal; and
(b) the sum of the current Fixed Account withdrawal and the total of all
Fixed Account withdrawals from the Contract or any Account under the
Contract within the past 12 calendar months exceeds 20% of the amount in
the Fixed Account on the day prior to the current withdrawal.
Interest, as used above, will not be more than two percentage points below
any rate determined prospectively by the Board of Directors for this class of
Contract. In no event will the interest rate be less than the minimum stated in
the Contract.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
MORTALITY AND EXPENSE RISK CHARGES
The Fixed Account will reflect a compound interest rate credited by us. The
interest rate quoted is an annual effective yield. We make no deductions from
the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers from the Fixed Account to any other available investment option(s)
are allowed in each calendar year during the Accumulation Period. The amount
that may be transferred may vary at our discretion; however, it will never be
less than 10% of the amount held under the Fixed Account. Transfers to the Fixed
Plus Account will be permitted without regard to this limitation.
- --------------------------------------------------------------------------------
29
<PAGE>
By notifying us at our Home Office at least 30 days before Annuity payments
begin, the Contract Holder, on your behalf, may elect to have amounts which have
been accumulating under the Fixed Account transferred to one or more of the
Funds available during the Annuity Period to provide Variable Annuity payments.
CONTRACT LOANS
Loans may be made from those Individual Account Current Values held in the
Fixed Account.
- --------------------------------------------------------------------------------
30
<PAGE>
APPENDIX IV
EMPLOYEE APPOINTMENT OF EMPLOYER
AS AGENT UNDER AN ANNUITY CONTRACT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
My employer has adopted a plan under Internal Revenue Code Section 403(b)
("Plan") and has purchased an Aetna Life Insurance and Annuity Company
("Company") group variable annuity contract ("Contract") as the funding vehicle.
Contributions under this Plan will be made by me through salary reduction to an
Employee Account, and by my employer to an Employer Account.
By electing to participate in my employer's Plan, I voluntarily appoint my
employer, who is the Contract Holder, as my agent for the purposes of all
transactions under the Contract in accordance with the terms of the Plan. The
Company is not a party to the Plan and does not interpret the Plan provisions.
As a Participant in the Plan, I understand and agree to the following terms
and conditions:
- I own the value of my Employee Account subject to the restrictions of
Section 403(b) and the terms of the Plan. Subject to the terms of the
vesting schedule in the Plan and the restrictions of Section 403(b), I
have ownership in the value of my Employer Account.
- I understand that the Company will process transactions only with my
employer's written direction to the Company. I agree to be bound by my
employer's interpretation of the Plan provisions and its written direction
to the Company.
- My employer may permit me to make investment selections under the Employee
Account and/or the Employer Account directly with the Company under the
terms of the Contract. Without my employer's written permission, I will be
unable to make any investment selections under the Contract.
- On my behalf, my employer may request a loan in accordance with the terms
of the Contract and the provisions of the Plan. The Company will make
payment of the loan amount directly to me. I will be responsible for
making repayments directly to the Company in a timely manner.
- In the event of my death, my employer is the named beneficiary under the
terms of the Contract. I have the right to name a personal beneficiary as
determined under the terms of the Plan and file that beneficiary election
with my employer. It is my employer's responsibility to direct the Company
to properly pay any death benefits.
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31
<PAGE>
APPENDIX V
CONTRACTS ACQUIRED BY EXCHANGE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Certain holders of contracts issued by the Company may exchange their
contract(s) (the "Exchanged Contracts") for either or both of the Contracts (the
"Acquired Contract(s)"). The contracts eligible for exchange are existing group
taxed-deferred annuity contracts issued by the Company of the same class as the
Contracts. The Company will not assess any charges or deductions in connection
with an exchange. See "Deferred Sales Charges" below. Upon an exchange, the
rights of the Exchanged Contract holder and participants under the Exchanged
Contract will be governed by the Acquired Contract(s).
DIFFERENCES BETWEEN EXCHANGED CONTRACTS AND ACQUIRED CONTRACTS
The terms of the Acquired Contracts vary from the Exchanged Contracts and it
may or may not be advantageous to make an exchange. Contract Holders and
Participants should review the Acquired Contract and an Exchanged Contract to
determine all the differences. Some differences relate to the minimum guaranteed
interest rates for the GAA, Fixed Plus Account and the Fixed Account, the
availability of the Fixed Account (see Appendix III), the annuity options, and
the tables on which Annuity payments are based.
SPECIAL ACQUIRED CONTRACTS PROVISIONS
Except as follows, terms of the Acquired Contracts are identical to the
Contracts described in the Prospectus:
TRANSFER CREDIT
If a new participant under an Acquired Contract transfers to the Company
assets not previously held by the Company, the new participant may receive a
transfer credit. Participants of an Exchanged Contract in effect for less than
one year who transferred assets not previously held by the Company may also
receive a transfer credit. See "Transfer Credit."
DEFERRED SALES CHARGE
Under the Acquired Contract, new participants of the Acquired Contract will
be subject to the Withdrawal Fee elected by the Contract Holder. See "Charges
and Fees During the Annuity Period." The Withdrawal Fee for existing
participants of an Exchanged Contract, however, will be subject to the deferred
sales charges outlined below and as previously set forth in their Exchanged
Contract. In general, deferred sales charges may be deducted from amounts
withdrawn during the first 10 Purchase Payment Periods completed (if the
Exchanged Contract is an Installment Purchase Payment Contract) or 9 Account
Years (if the Exchanged Contract is a Single Purchase Payment Contract), as set
forth in the table below. Consult the Exchanged Contract to determine whether it
is an Installment Payment Contract or Single Purchase Payment Contract. For
purposes of determining if a deferred sales charge applies under an Acquired
Contract, amounts received under an Exchanged Contract will be credited for the
period of time during which the amount was held under an Exchanged Contract.
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32
<PAGE>
The following tables reflect the deferred sales charge deduction as a
percentage of the amount withdrawn from the Funds, GAA and the Fixed Account:
<TABLE>
<S> <C>
INSTALLMENT PURCHASE PAYMENT ACCOUNT:
<CAPTION>
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 10 2%
More than 10 0%
SINGLE PURCHASE PAYMENT ACCOUNT:
<CAPTION>
DEFERRED
SALES
ACCOUNT YEARS CHARGE
COMPLETED DEDUCTION
- ---------------------------------------- ---------
<S> <C>
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
</TABLE>
The deduction for the deferred sales charge will not exceed 8.5% of the
total Purchase Payments actually made to an Individual Account.
The deferred sales charge will apply to withdrawals during the Accumulation
Period. It will apply during the Annuity Period if a non-lifetime Annuity option
is elected on a variable basis and the remaining value is withdrawn before five
years of Annuity payments have been completed.
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33
<PAGE>
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VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION DATED ____________, 1996
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the current prospectus dated ____________, 1996
which describes the Retirement Plus Contract and Voluntary Contract funded
through Variable Annuity Account C (the "Separate Account"). A free
prospectus is available upon request from the local Aetna Life Insurance and
Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-525-4225
Read the prospectus before you invest. Unless otherwise indicated, terms used
in this Statement of Additional Information shall have the same meaning as in
the prospectus.
TABLE OF CONTENTS
Page
----
General Information and History. . . . . . . . . . . . . . . . . . . . . . 1
Variable Annuity Account C . . . . . . . . . . . . . . . . . . . . . . . . 1
Offering and Purchase of Contracts . . . . . . . . . . . . . . . . . . . . 2
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Average Annual Total Return Quotations. . . . . . . . . . . . . . . . . 3
Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Sales Material and Advertising . . . . . . . . . . . . . . . . . . . . . . 5
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
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 is a stock life insurance company
which was organized under the insurance laws of the State of Connecticut in
1976. Through a merger, it succeeded to the business of Aetna Variable
Annuity Life Insurance Company (formerly Participating Annuity Life Insurance
Company organized in 1954). As of December 31, 1995, the Company had assets
of $27.1 billion (subject to $25.5 billion of customer and other liabilities
and $1.6 billion of shareholder equity) which include $11 billion in assets
held in the Company's separate accounts. The Company had $22 billion in
assets under management, including $8 billion in its mutual funds. As of
December 31, 1994, it ranked among the top 2% of all U.S. life insurance
companies by size. The Company is a wholly owned subsidiary of Aetna
Retirement Holdings, Inc., which is in turn a wholly owned subsidiary of
Aetna Retirement Services, Inc., and an indirect wholly owned subsidiary of
Aetna Inc. The Company is engaged in the business of issuing life insurance
policies and annuity contracts in all states of the United States and in the
District of Columbia. 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 a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges and administrative expense
charge, if any, described in the prospectus, all expenses incurred in the
operations of the Separate Account are borne by the Company. (See "Charges
and Deductions" in the Prospectus.) The Company receives reimbursement for
certain administrative costs from some unaffiliated sponsors of the Funds
used as funding options under the Contract. These fees generally range from
0.15% to 0.25%.
The assets of the Separate Account are held by the Company. Please refer to
the prospectuses of the individual Funds in whose shares the assets of the
Separate Account are invested regarding the custodians for those Funds.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C is a separate account established by the Company
for the purpose of funding variable annuity contracts issued by the Company.
The Separate Account is registered with the Securities and Exchange
Commission as a unit investment trust under the Investment Company Act of
1940, as amended. The assets of the Separate Account will be invested
exclusively in shares of the mutual funds described in the Prospectus
("Funds"). Purchase Payments made under the Contract may be allocated to one
or more of the Funds. The Company may make additions to or deletions from
available investment options as permitted by law. The availability of the
Funds is subject to applicable regulatory authorization. Not all Funds are
available in all jurisdictions or under all Contracts. The Funds currently
available under the Contract are as follows:
1
<PAGE>
Aetna Variable Fund Franklin Government Securities Trust
Aetna Income Shares Janus Aspen Aggressive Growth Portfolio
Aetna Variable Encore Fund Janus Aspen Balanced Portfolio
Aetna Investment Advisers Fund, Inc. Janus Aspen Flexible Income Portfolio
Aetna Ascent Variable Portfolio Janus Aspen Growth Portfolio
Aetna Crossroads Variable Portfolio Fidelity VIP Overseas Portfolio
Aetna Legacy Variable Portfolio Janus Aspen Short-Term Bond Portfolio
Alger American Growth Fund Janus Aspen Worldwide Growth Portfolio
Alger American Small Cap Portfolio Lexington Natural Resources Trust
Calvert Responsibly Invested Balanced Neuberger & Berman Growth Portfolio
Portfolio Scudder International Portfolio
Fidelity VIP II Contrafund Portfolio TCI Growth (a Twentieth Century Fund)
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
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 - Contract
Purchase" and "Determining Contract Value."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the variable options 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 and for the periods prescribed by the
Securities and Exchange Commission (the "standardized total return"), as well
as the "non-standardized total return," calculated in an identical manner but
including additional periods.
The standardized total return figures are computed according to a formula in
which a hypothetical initial Purchase Payment of $1,000 is applied to the
variable options under the Contract, and then related to the ending
redeemable values over one, five and ten year periods (or fractional periods
thereof). Such figures reflect the deduction of all recurring charges during
each period (e.g., mortality and expense risk charges and any applicable
administrative expense charge). These charges will be deducted on a pro rata
basis in the case of fractional periods.
2
<PAGE>
The non-standardized total return figures use the same formula, but may be
computed to include a three year period as well as the one, five and ten year
periods.
For variable options of the Separate Account that were in existence prior to
the date the Fund became available under the Contract, the 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.
The total return quotations are based upon historical earnings and are not
necessarily representative of future performance. Investment results of the
Funds will fluctuate over time, and any presentation of the Funds' total
return quotations for any prior period should not be considered as a
representation of how the Funds will perform in any future period.
Additionally, your Contract Value upon redemption may be more or less than
your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED
The table below reflects the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1995 for
the variable options under the Contract issued by the Company.
<TABLE>
FUND
<CAPTION> INCEPTION
STANDARDIZED NON-STANDARDIZED DATE
------------------------------------------------------------------------------------------
SUBACCOUNT 1 YEAR 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND 23.66% 10.81% 11.92% 30.18% 10.05% 11.72% 11.92% 04/30/75
- -----------------------------------------------------------------------------------------------------------------------------------
AETNA INCOME SHARES 10.55 7.25% 8.15% 16.38% 5.94% 8.13% 8.15% 06/01/78
- -----------------------------------------------------------------------------------------------------------------------------------
AETNA VARIABLE ENCORE FUND (0.86)% 2.20% 4.55% 4.37% 2.78% 3.04% 4.55% 09/01/75
- -----------------------------------------------------------------------------------------------------------------------------------
AETNA INVESTMENT ADVISERS FUND, INC. 18.97% 9.22% 8.32%* 25.23% 9.92% 10.12% 9.01%* 06/23/89
- -----------------------------------------------------------------------------------------------------------------------------------
AETNA ASCENT VARIABLE PORTFOLIO 4.09%* N/A N/A 9.58%* N/A N/A N/A 07/03/95
- -----------------------------------------------------------------------------------------------------------------------------------
AETNA CROSSROADS VARIABLE PORTFOLIO 2.99%* N/A N/A 8.42%* N/A N/A N/A 07/03/95
- -----------------------------------------------------------------------------------------------------------------------------------
AETNA LEGACY VARIABLE PORTFOLIO 1.98%* N/A N/A 7.35%* N/A N/A N/A 07/03/95
- -----------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN GROWTH PORTFOLIO 27.52% 18.84% 16.87%* 34.24%* 17.33% 19.81% 17.56%* 01/08/89
- -----------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAP PORTFOLIO 34.95% 17.55% 20.05%* 42.06% 13.94% 18.51% 20.55%* 09/21/88
- -----------------------------------------------------------------------------------------------------------------------------------
CALVERT RESPONSIBLY INVESTED BALANCED
PORTFOLIO 21.35% 8.59% 8.11%* 27.74% 9.21% 9.48% 8.34%* 09/30/86
- -----------------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP II CONTRAFUND PORTFOLIO 30.58%* N/A N/A 37.46%* N/A N/A N/A 01/03/95
- -----------------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP EQUITY-INCOME PORTFOLIO 26.33% 18.44% 11.36%* 32.99% 17.72% 19.41% 11.60%* 10/22/86
- -----------------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP GROWTH PORTFOLIO 26.59% 17.91% 12.91%* 33.25% 15.49% 18.87% 13.16%* 11/07/86
- -----------------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP OVERSEAS PORTFOLIO 2.54% 5.54% 5.28%* 7.95% 13.47% 6.41% 5.65%* 02/13/87
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
FUND
<CAPTION> INCEPTION
STANDARDIZED NON-STANDARDIZED DATE
------------------------------------------------------------------------------------------
SUBACCOUNT 1 YEAR 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO 19.21% 22.82%* N/A 25.49% 25.59%* N/A N/A 9/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN BALANCED PORTFOLIO 16.68% 9.64%* N/A 22.83% 12.11%* N/A N/A 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO 15.81% 5.55%* N/A 21.91% 7.93%* N/A N/A 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN GROWTH PORTFOLIO 21.72% 10.88%* N/A 28.14% 13.38%* N/A N/A 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SHORT-TERM BOND PORTFOLIO 2.40% 0.66%* N/A 7.80% 2.93%* N/A N/A 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO 19.00% 16.11%* N/A 25.27% 18.73%* N/A N/A 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
LEXINGTON NATURAL RESOURCES TRUST 9.27% 16.26%* N/A 15.03% 5.66% 17.69%* N/A 10/14/91
- -----------------------------------------------------------------------------------------------------------------------------------
NEUBERGER & BERMAN GROWTH PORTFOLIO 23.18% 11.52% 10.66% 29.67% 9.33% 12.43% 10.66% 12/31/85
- -----------------------------------------------------------------------------------------------------------------------------------
SCUDDER INTERNATIONAL PORTFOLIO
CLASS A SHARES 3.88% 7.67% 7.22%* 9.36% 12.89% 8.55% 7.60%* 04/30/87
- -----------------------------------------------------------------------------------------------------------------------------------
TCI GROWTH 22.59% 12.99% 11.15%* 29.04% 12.18% 13.91% 11.57%* 11/20/87
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE REFER TO THE DISCUSSION PRECEDING THE TABLE FOR AN EXPLANATION OF THE
CHARGES INCLUDED IN THE STANDARDIZED AND NON-STANDARDIZED FIGURES. THESE
FIGURES REPRESENT HISTORICAL PERFORMANCE AND SHOULD NOT BE CONSIDERED A
PROJECTION OF FUTURE PERFORMANCE.
ANNNUITY PAYMENTS
When Variable Annuity payments are to begin, the value of the Individual
Account is determined using Fund Annuity 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 Variable Annuity payment for each $1,000 of
value applied. Thereafter, Variable Annuity payments fluctuate as the Fund
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 Fund Annuity Units (which does not change thereafter) in each of the
designated investment options. This number is calculated by dividing (a) by
(b), where (a) is the amount of the first Annuity payment based on a
particular investment option, and (b) is the then current Fund Annuity Unit
value for that investment option. As noted, Fund 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.
4
<PAGE>
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000 Fund
Annuity Units credited under a particular Contract or Account and that the
value of a Fund Annuity Unit for the tenth Valuation Period prior to
retirement was $13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly Variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of a Fund 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 Fund Annuity Units is
determined to be 20.414. The value of this number of Fund 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
Fund Annuity Units determined above) produces a result of 1.0014057. This is
then multiplied by the Fund Annuity Unit value for the prior Valuation Period
(assume such value to be $13.504376) to produce a Fund 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
Fund Annuity Units by the current Fund Annuity Unit value, or 20.414 times
$13.523359, which produces a payment of $276.07.
* If an assumed net investment rate of 5% is elected, the appropriate factor
to neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature
that explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable
annuity contracts and other types of savings or investment products,
including, but not limited to, personal savings accounts and certificates of
deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the
Subaccount being compared.
5
<PAGE>
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.
6
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
INDEX
Independent Auditors' Report . . . . . . . . . . . . . . . . . S-2
Statement of Assets and Liabilities . . . . . . . . . . . . . S-3
Statement of Operations . . . . . . . . . . . . . . . . . . . S-8
Statements of Changes in Net Assets . . . . . . . . . . . . . S-9
Notes to Financial Statements . . . . . . . . . . . . . . . . S-10
Condensed Financial Information . . . . . . . . . . . . . . . S-12
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contract Owners of Variable Annuity Account C:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account C (the "Account")
as of December 31, 1995, and the related statement of operations for the year
then ended, statements of changes in net assets for each of the years in the
two-year period then ended and condensed financial information for the year
ended December 31, 1995. These financial statements and condensed financial
information are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements and
condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
condensed financial information are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence
with the custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Aetna Life Insurance and Annuity Company Variable Annuity
Account C as of December 31, 1995, the results of its operations for the year
then ended, changes in its net assets for each of the years in the two-year
period then ended and condensed financial information for the year ended
December 31, 1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 16, 1996
S-2
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENT OF ASSETS AND LIABILITIES - December 31, 1995
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 135,944,293 shares at $29.06 per share (cost $3,682,373,523).................... $3,949,941,096
Aetna Income Shares; 29,688,857 shares at $13.00 per share (cost $382,776,733)....................... 386,007,595
Aetna Variable Encore Fund; 17,318,377 shares at $13.30 per share (cost $221,087,268) ............... 230,291,686
Aetna Investment Advisers Fund, Inc.; 49,855,715 shares at $14.50 per share
(cost $600,395,092) ............................................................................... 723,017,695
Aetna GET Fund, Series B; 5,897,397 shares at $12.40 per share (cost $59,712,454).................... 73,136,258
Aetna Ascent Variable Portfolio; 454,714 shares at $10.80 per share (cost $4,803,331)................ 4,908,736
Aetna Crossroads Variable Portfolio; 341,591 shares at $10.74 per share (cost $3,599,790)............ 3,668,757
Aetna Legacy Variable Portfolio; 180,468 shares at $10.64 per share (cost $1,883,466)................ 1,919,680
Alger American Funds:
Alger American Growth Portfolio; 1,234,082 shares at $31.16 per share (cost
$38,739,937)....................................................................................... 38,454,000
Alger American Small Capitalization Portfolio; 6,121,453 shares at $39.41 per share
(cost $203,207,523)................................................................................ 241,246,447
Calvert Responsibly Invested Balanced Portfolio; 16,846,014 shares at $1.70 per share
(cost $26,512,853)................................................................................ 28,688,761
Fidelity Investments Variable Insurance Products Funds:
Equity-Income Portfolio; 1,973,219 shares at $19.27 per share (cost $35,264,252)................... 38,023,939
Growth Portfolio; 949,237 shares at $29.20 per share (cost $27,212,340)............................ 27,717,728
Overseas Portfolio; 218,122 shares at $17.05 per share (cost $3,555,791)........................... 3,718,987
Fidelity Investments Variable Insurance Products Funds II -
Asset Manager Portfolio; 910,080 shares at $15.79 per share (cost $12,839,173)..................... 14,370,158
Contrafund Portfolio; 2,202,984 shares at $13.78 per share (cost $30,071,951) ..................... 30,357,117
Index 500 Portfolio; 45,055 shares at $75.71 per share (cost $3,187,279) .......................... 3,411,144
Franklin Government Securities Trust; 1,651,095 shares at $13.35 per share
(cost $21,210,874) .............................................................................. 22,042,115
Janus Aspen Series -
Aggressive Growth Portfolio; 5,116,845 shares at $17.08 per share (cost $74,304,318)............... 87,395,716
Balanced Portfolio; 115,516 shares at $13.03 per share (cost $1,444,640)........................... 1,505,170
Flexible Income Portfolio; 347,266 shares at $11.11 per share (cost $3,690,542).................... 3,858,123
Growth Portfolio; 376,690 shares at $13.45 per share (cost $4,920,509)............................. 5,066,487
Short-Term Bond Portfolio; 54,258 shares at $10.03 per share (cost $544,564)....................... 544,210
Worldwide Growth Portfolio; 1,048,130 shares at $15.31 per share (cost $15,260,366)................ 16,046,863
Lexington Emerging Markets Fund, Inc.; 329,323 shares at $9.38 per share (cost $3,135,164) .......... 3,089,046
Lexington Natural Resources Trust; 1,257,565 shares at $11.30 per share (cost $12,932,744) .......... 14,210,484
Neuberger & Berman Advisers Management Trust - Growth Portfolio; 3,460,773 shares
at $25.86 per share (cost $77,838,858)............................................................ 89,495,579
Scudder Variable Life Investment Fund - International Portfolio; 13,936,090 shares
at $11.82 per share (cost $151,941,144).................................. ........................ 164,724,583
TCI Portfolios, Inc. - TCI Growth; 35,261,982 shares at $12.06 per share (cost $333,587,996) ........ 425,259,499
NET ASSETS ............................................................................................ 6,632,117,659
--------------
--------------
</TABLE>
S-3
<PAGE>
Net assets represented by:
<TABLE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Reserves for annuity contracts in accumulation and payment period:
AETNA VARIABLE FUND:
Qualified I ..................................................... 549,055.7 $180.879 $99,312,649
Qualified III ................................................... 6,364,000.3 137.869 877,395,210
Qualified IV .................................................... 269.0 83.646 22,498
Qualified V ..................................................... 121,691.2 14.113 1,717,411
Qualified VI .................................................... 188,964,022.4 14.077 2,660,123,261
Qualified VII ................................................... 9,779,134.6 13.247 129,544,460
Qualified VIII .................................................. 20,835.7 13.074 272,413
Qualified IX .................................................... 21,417.9 12.935 277,043
Qualified X (1.15)............................................... 273,578.4 14.108 3,859,670
Qualified X (1.25)............................................... 2,370,233.5 14.077 33,366,740
Reserves for annuity contracts in payment period (Note 1)........ 144,049,741
AETNA INCOME SHARES:
Qualified I ..................................................... 72,902.0 47.405 3,455,895
Qualified III ................................................... 2,377,621.8 46.913 111,541,104
Qualified V ..................................................... 20,427.2 12.283 250,918
Qualified VI .................................................... 21,379,975.5 12.098 258,665,226
Qualified VII ................................................... 185,030.5 11.176 2,067,926
Qualified VIII .................................................. 1,090.6 11.143 12,153
Qualified IX .................................................... 3,580.8 11.203 40,116
Qualified X (1.15)............................................... 50,261.1 12.125 609,409
Qualified X (1.25)............................................... 354,993.3 12.098 4,294,879
Reserves for annuity contracts in payment period (Note 1) ....... 5,069,969
AETNA VARIABLE ENCORE FUND:
Qualified I ..................................................... 150,480.4 38.485 5,791,253
Qualified III ................................................... 1,836,260.4 37.988 69,756,054
Qualified V ..................................................... 19,202.4 11.003 211,293
Qualified VI .................................................... 12,999,680.2 11.026 143,337,034
Qualified VII ................................................... 324,091.0 10.936 3,544,190
Qualified VIII .................................................. 656.2 10.620 6,969
Qualified IX .................................................... 3,050.3 10.857 33,118
Qualified X (1.15)............................................... 145,629.4 11.051 1,609,306
Qualified X (1.25)............................................... 544,382.5 11.026 6,002,469
AETNA INVESTMENT ADVISERS FUND, INC.:
Qualified I ..................................................... 393,612.5 18.024 7,094,461
Qualified III ................................................... 9,193,181.4 17.954 165,052,015
Qualified V ..................................................... 19,038.2 13.693 260,683
Qualified VI .................................................... 38,152,394.6 13.673 521,663,491
Qualified VII ................................................... 335,791.4 13.135 4,410,596
Qualified VIII .................................................. 1,055.3 12.695 13,397
Qualified IX .................................................... 3,961.7 12.613 49,969
Qualified X (1.15)............................................... 138,270.8 13.703 1,894,705
Qualified X (1.25)............................................... 940,932.7 13.673 12,865,516
Reserves for annuity contracts in payment period (Note 1) ....... 9,712,862
AETNA GET FUND, SERIES B:
Qualified III .................................................. 63,245.0 12.850 812,688
S-4
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Qualified VI..................................................... 5,279,157.0 12.850 67,836,249
Qualified X (1.25)............................................... 349,212.6 12.850 4,487,321
AETNA ASCENT VARIABLE PORTFOLIO:
Qualified III.................................................... 8.4 10.673 90
Qualified V...................................................... 202.1 10.666 2,156
Qualified VI..................................................... 393,052.6 10.673 4,195,040
Qualified VIII................................................... 7.7 10.673 82
Qualified X (1.15)............................................... 15,054.8 10.982 165,326
Qualified X (1.25)............................................... 49,748.1 10.976 546,042
AETNA CROSSROADS VARIABLE PORTFOLIO:
Qualified V...................................................... 243.2 10.605 2,579
Qualified VI..................................................... 294,673.3 10.612 3,126,954
Qualified VIII................................................... 43.8 10.611 464
Qualified X (1.15)............................................... 2,393.5 10.868 26,012
Qualified X (1.25)............................................... 47,204.4 10.862 512,748
AETNA LEGACY VARIABLE PORTFOLIO:
Qualified VI..................................................... 143,636.5 10.580 1,519,662
Qualified X (1.15)............................................... 17,106.0 10.631 181,853
Qualified X (1.25)............................................... 20,531.2 10.626 218,165
ALGER AMERICAN FUNDS:
ALGER AMERICAN GROWTH PORTFOLIO:
Qualified III ................................................... 530,262.6 11.715 6,211,911
Qualified V...................................................... 7,965.7 10.365 82,564
Qualified VI..................................................... 2,832,439.7 10.157 28,770,111
Qualified VIII................................................... 38.3 10.371 397
Qualified X (1.15)............................................... 12,858.7 11.385 146,392
Qualified X (1.25)............................................... 284,978.1 11.379 3,242,625
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO:
Qualified III ................................................... 1,714,187.0 13.558 23,241,019
Qualified V ..................................................... 31,527.5 13.463 424,453
Qualified VI .................................................... 15,036,764.7 13.450 202,245,073
Qualified VIII .................................................. 3,845.1 14.093 54,189
Qualified X (1.15)............................................... 54,683.5 13.481 737,179
Qualified X (1.25)............................................... 1,081,374.8 13.450 14,544,534
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO:
Qualified III ................................................... 856,360.5 17.951 15,372,772
Qualified V ..................................................... 14,656.3 13.870 203,278
Qualified VI .................................................... 966,097.9 13.527 13,068,322
Qualified VIII .................................................. 3,611.6 12.291 44,389
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS:
EQUITY-INCOME PORTFOLIO:
Qualified III ................................................... 628,581.6 11.617 7,301,978
Qualified V ..................................................... 1,107.9 11.047 12,239
Qualified VI .................................................... 1,660,304.1 11.092 18,415,763
Qualified VIII .................................................. 638.7 11.054 7,060
Qualified X (1.15)............................................... 118,679.1 13.902 1,649,878
Qualified X (1.25)............................................... 766,359.8 13.880 10,637,021
GROWTH PORTFOLIO:
Qualified III ................................................... 762.1 10.198 7,772
Qualified V ..................................................... 2,540.5 10.183 25,871
Qualified VI .................................................... 1,833,793.9 10.066 18,458,844
S-5
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
Qualified VIII .................................................. 158.7 10.190 1,617
Qualified X (1.15)............................................... 45,764.6 14.023 641,737
Qualified X (1.25)............................................... 612,991.7 14.000 8,581,887
OVERSEAS PORTFOLIO:
Qualified III ................................................... 1,301.8 10.197 13,274
Qualified V ..................................................... 190.8 9.954 1,899
Qualified VI .................................................... 196,089.8 9.961 1,953,206
Qualified X (1.15)............................................... 4,284.4 10.278 44,037
Qualified X (1.25)............................................... 166,303.2 10.262 1,706,571
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II:
ASSET MANAGER PORTFOLIO:
Qualified III.................................................... 1,316,915.5 10.912 14,370,158
CONTRAFUND PORTFOLIO:
Qualified III ................................................... 525,476.0 11.763 6,181,326
Qualified V ..................................................... 6,415.4 10.461 67,111
Qualified VI .................................................... 2,116,732.0 10.397 22,007,519
Qualified VIII .................................................. 173.7 10.467 1,818
Qualified X (1.15)............................................... 5,452.8 10.689 63,737
Qualified X (1.25)............................................... 174,259.3 10.681 2,035,606
INDEX 500 PORTFOLIO:
Qualified III ................................................... 290,546.8 11.740 3,411,144
FRANKLIN GOVERNMENT SECURITIES TRUST:
Qualified III ................................................... 809,413.7 16.495 13,351,329
Qualified V ..................................................... 16,226.2 11.946 193,844
Qualified VI .................................................... 717,760.0 11.762 8,442,415
Qualified VIII .................................................. 4,916.9 11.090 54,527
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO:
Qualified III ................................................... 1,280,952.5 15.323 19,627,517
Qualified V.. ................................................... 15,482.4 13.296 205,852
Qualified VI. ................................................... 4,887,059.8 13.322 65,105,449
Qualified VIII .................................................. 1,021.7 13.321 13,610
Qualified X (1.15)............................................... 22,049.9 12.869 283,760
Qualified X (1.25)............................................... 167,919.9 12.861 2,159,528
BALANCED PORTFOLIO:
Qualified III ................................................... 161.4 10.853 1,751
Qualified V ..................................................... 160.2 10.843 1,737
Qualified VI .................................................... 93,303.8 10.850 1,012,385
Qualified X (1.15)............................................... 9,382.9 11.265 105,697
Qualified X (1.25)............................................... 34,071.6 11.259 383,600
FLEXIBLE INCOME PORTFOLIO:
Qualified III ................................................... 3,344.5 12.124 40,550
Qualified V ..................................................... 745.1 12.054 8,981
Qualified VI .................................................... 315,361.3 12.077 3,808,592
GROWTH PORTFOLIO:
Qualified III ................................................... 109,716.5 11.859 1,301,115
Qualified V. .................................................... 166.2 10.872 1,807
Qualified VI. ................................................... 259,195.5 10.870 2,817,612
Qualified X (1.15)............................................... 3,238.4 11.633 37,671
Qualified X (1.25)............................................... 78,126.0 11.626 908,282
S-6
<PAGE>
<CAPTION>
Accumulation
Unit
Units Value
<S> <C> <C> <C>
SHORT-TERM BOND PORTFOLIO:
Qualified III ................................................... 18,472.9 10.393 191,983
Qualified V ..................................................... 23.8 10.316 245
Qualified VI .................................................... 32,695.8 10.323 337,528
Qualified X (1.25)............................................... 1,405.3 10.285 14,454
WORLDWIDE GROWTH PORTFOLIO:
Qualified III ................................................... 314,652.7 12.158 3,825,607
Qualified V ..................................................... 11,127.9 10.952 121,875
Qualified VI .................................................... 1,036,039.6 10.877 11,268,519
Qualified VIII .................................................. 13.7 10.846 149
Qualified X (1.15)............................................... 2,616.9 12.223 31,987
Qualified X (1.25)............................................... 65,384.2 12.216 798,726
LEXINGTON EMERGING MARKETS FUND:
Qualified III ................................................... 371,155.8 8.323 3,089,046
LEXINGTON NATURAL RESOURCES TRUST:
Qualified III ................................................... 530,562.2 10.862 5,763,092
Qualified V ..................................................... 8,347.9 12.095 100,969
Qualified VI .................................................... 711,891.9 11.720 8,346,423
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST:
GROWTH PORTFOLIO:
Qualified III ................................................... 2,359,089.9 17.430 41,119,982
Qualified V ..................................................... 35,940.7 14.359 516,068
Qualified VI .................................................... 3,331,217.5 14.345 47,786,169
Qualified VIII .................................................. 5,947.6 12.334 73,360
SCUDDER VARIABLE LIFE INVESTMENT FUND:
INTERNATIONAL PORTFOLIO:
Qualified III ................................................... 3,823,292.2 14.515 55,495,694
Qualified V ..................................................... 38,067.4 13.799 525,305
Qualified VI .................................................... 7,323,208.0 13.923 101,958,550
Qualified VIII .................................................. 12,189.3 11.733 143,011
Qualified X (1.15)............................................... 41,921.0 13.952 584,886
Qualified X (1.25)............................................... 432,183.0 13.923 6,017,137
TCI PORTFOLIOS, INC.:
TCI GROWTH:
Qualified III *.................................................. 1,784,551.6 14.464 25,811,741
Qualified III .................................................. 4,184,701.2 13.224 55,336,455
Qualified V ..................................................... 24,825.6 15.176 376,753
Qualified VI .................................................... 21,986,645.3 15.253 335,360,124
Qualified VII ................................................... 63,035.5 12.840 809,380
Qualified VIII .................................................. 8,144.3 12.868 104,799
Qualified IX .................................................... 1,241.8 12.581 15,623
Qualified X (1.15)............................................... 13,306.7 15.285 203,397
Qualified X (1.25)............................................... 474,744.3 15.253 7,241,227
$6,632,117,659
--------------
--------------
</TABLE>
*Applies only to participants of the Opportunity Plus program and Multiple
Options Contracts.
See Notes to Financial Statements.
S-7
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENT OF OPERATIONS - Year Ended December 31, 1995
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends: (Notes 1 and 3)
Aetna Variable Fund............................................................ $648,150,765
Aetna Income Shares............................................................ 23,872,308
Aetna Variable Encore Fund .................................................... 172,751
Aetna Investment Advisers Fund, Inc............................................ 47,274,300
Aetna GET Fund, Series B ...................................................... 1,878,972
Aetna Ascent Variable Portfolio ............................................... 110,626
Aetna Crossroads Variable Portfolio ........................................... 61,834
Aetna Legacy Variable Portfolio ............................................... 33,640
Calvert Responsibly Invested Balanced Portfolio .............................. 2,556,825
Fidelity Investments Variable Insurance Products Fund - Equity Income Portfolio 423,626
Fidelity Investments Variable Insurance Products Fund - Growth Portfolio ...... 10,256
Fidelity Investments Variable Insurance Products Fund - Overseas Portfolio .... 5,145
Fidelity Investments Variable Insurance Products Fund II - Asset Manager Portfolio 259,914
Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio 379,043
Franklin Government Securities Trust .......................................... 1,061,449
Janus Aspen Series - Aggressive Growth Portfolio............................... 982,586
Janus Aspen Series - Balanced Portfolio........................................ 11,553
Janus Aspen Series - Flexible Income Portfolio................................. 151,761
Janus Aspen Series - Growth Portfolio.......................................... 91,472
Janus Aspen Series - Short-Term Bond Portfolio................................. 11,707
Janus Aspen Series - Worldwide Growth Portfolio................................ 50,858
Lexington Emerging Markets Fund................................................ 29,990
Lexington Natural Resources Trust.............................................. 59,767
Neuberger & Berman Advisers Management Trust - Growth Portfolio ............... 1,779,523
Scudder Variable Life Investment Fund - International Portfolio............... 670,720
TCI Portfolios, Inc. - TCI Growth.............................................. 339,221
--------------
Total investment income ..................................................... 730,430,612
Valuation period deductions (Note 2)............................................. (71,090,542)
--------------
Net investment income............................................................ 659,340,070
--------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1 and 4)
Proceeds from sales ........................................................... $570,154,582
Cost of investments sold ...................................................... 409,480,615
------------
Net realized gain ........................................................... 160,673,967
Net unrealized gain on investments:
Beginning of year ............................................................. 73,479,233
End of year ................................................................... 594,083,184
------------
Net unrealized gain ......................................................... 520,603,951
--------------
Net realized and unrealized gain on investments ................................. 681,277,918
--------------
Net increase in net assets resulting from operations ............................ $1,340,617,988
--------------
--------------
</TABLE>
See Notes to Financial Statements.
S-8
<PAGE>
VARIABLE ANNUITY ACCOUNT C
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
---- ----
<S> <C> <C>
FROM OPERATIONS:
Net investment income .......................................... $ 659,340,070 $ 476,196,420
Net realized and unrealized gain (loss) on investments .......... 681,277,918 (581,812,453)
Net increase (decrease) in net assets resulting from operations 1,340,617,988 (105,616,033)
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ..................... 771,594,245 711,565,372
Sales and administrative charges deducted by the Company ........ (98,694) (137,737)
Net variable annuity contract purchase payments ............... 771,495,551 711,427,635
Transfers from the Company for mortality guarantee adjustments .. 3,678,430 1,880,350
Transfers to the Company's fixed account options ................ (44,377,350) (56,920,532)
Transfers to other variable annuity accounts ........... 0 (23,284,415)
Redemptions by contract holders ................................. (287,945,984) (269,542,942)
Annuity payments ................................................ (14,807,537) (11,189,149)
Other ........................................................... 1,144,770 1,452,959
Net increase in net assets from unit transactions ............. 429,187,880 353,823,906
Change in net assets ............................................ 1,769,805,868 248,207,873
NET ASSETS:
Beginning of year ............................................... 4,862,311,791 4,614,103,918
End of year...................................................... $6,632,117,659 $4,862,311,791
-------------- --------------
-------------- --------------
</TABLE>
See Notes to Financial Statements.
S-9
<PAGE>
VARIABLE ANNUITY ACCOUNT C
NOTES TO FINANCIAL STATEMENTS - December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Variable Annuity Account C ("Account") is registered under the Investment
Company Act of 1940 as a unit investment trust. The Account is sold
exclusively for use with annuity contracts that are qualified under the
Internal Revenue Code of 1986, as amended.
The accompanying financial statements of the Account have been prepared in
accordance with generally accepted accounting principles.
a. VALUATION OF INVESTMENTS
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on December 31, 1995:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna GET Fund, Series B
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Alger American Fund:
- Alger American Growth Portfolio
- Alger American Small Capitalization Portfolio
Calvert Responsibly Invested Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
- Equity-Income Portfolio
- Growth Portfolio
- Overseas Portfolio
Fidelity Investments Variable Insurance Products Fund II:
- Asset Manager Portfolio
- Contrafund Portfolio
- Index 500 Portfolio
Franklin Government Securities Trust
Janus Aspen Series:
- Aggressive Growth Portfolio
- Balanced Portfolio
- Flexible Income Portfolio
- Growth Portfolio
- Short-Term Bond Portfolio
- Worldwide Growth Portfolio
Lexington Emerging Markets Fund
Lexington Natural Resources Trust
Neuberger & Berman Advisers Management Trust:
- Growth Portfolio
Scudder Variable Life Investment Fund:
- International Portfolio
TCI Portfolios, Inc.:
- TCI Growth
b. OTHER
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. FEDERAL INCOME TAXES
The operations of Variable Annuity Account C form a part of, and are taxed
with, the total operations of Aetna Life Insurance and Annuity Company
("Company") which is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended.
d. ANNUITY RESERVES
Annuity reserves are computed for currently payable contracts according
to the Progressive Annuity, Individual Annuity Mortality, and Group
Annuity Mortality tables using various assumed interest rates not to
exceed seven percent. Mortality experience is monitored by the Company.
S-10
<PAGE>
VARIABLE ANNUITY ACCOUNT C
NOTES TO FINANCIAL STATEMENTS - December 31, 1995 (continued)
Charges to annuity reserves for mortality and expense risk experience are
reimbursed to the Company if the reserves required are less than originally
estimated. If additional reserves are required, the Company reimburses the
Account.
2. VALUATION PERIOD DEDUCTIONS
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
3. DIVIDEND INCOME
On an annual basis the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income and accumulated net realized gain on investments is included in net
unrealized gain in the Statement of Operations.
4. PURCHASES AND SALES OF INVESTMENTS
The cost of purchases and proceeds from sales of investments other than
short-term investments for the year ended December 31, 1995 aggregated
$1,658,682,532 and $570,154,582, respectively.
5. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
S-11
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AETNA VARIABLE FUND:
Qualified I ............................................................. $138.406 $180.879 30.69%
Qualified III ........................................................... 105.558 137.869 30.61%
Qualified IV ............................................................ 63.884 83.646 30.93%
Qualified V ............................................................. 10.823 14.113 30.40%
Qualified VI ............................................................ 10.778 14.077 30.61%
Qualified VII ........................................................... 10.136 13.247 30.69%
Qualified VIII .......................................................... 10.011 13.074 30.60%
Qualified IX ............................................................ 9.879 12.935 30.93%
Qualified X (1.15) ...................................................... 10.791 14.108 30.74%
Qualified X (1.25) ...................................................... 10.778 14.077 30.61%
- -------------------------------------------------------------------------------------------------------------------------
AETNA INCOME SHARES:
Qualified I ............................................................. $ 40.570 $ 47.405 16.85%
Qualified III ........................................................... 40.173 46.913 16.78%
Qualified V ............................................................. 10.536 12.283 16.59%
Qualified VI ............................................................ 10.360 12.098 16.78%
Qualified VII ........................................................... 9.565 11.176 16.85%
Qualified VIII .......................................................... 9.543 11.143 16.77%
Qualified IX ............................................................ 9.570 11.203 17.07%
Qualified X (1.15) ...................................................... 10.373 12.125 16.89%
Qualified X (1.25) ...................................................... 10.360 12.098 16.78%
- -------------------------------------------------------------------------------------------------------------------------
AETNA VARIABLE ENCORE FUND:
Qualified I ............................................................. $ 36.723 $ 38.485 4.80%
Qualified III ........................................................... 36.271 37.988 4.73%
Qualified V ............................................................. 10.523 11.003 4.57%
Qualified VI ............................................................ 10.528 11.026 4.73%
Qualified VII ........................................................... 10.435 10.936 4.80%
Qualified VIII .......................................................... 10.141 10.620 4.73%
Qualified IX ............................................................ 10.341 10.857 5.00%
Qualified X (1.15) ...................................................... 10.541 11.051 4.84%
Qualified X (1.25) ...................................................... 10.528 11.026 4.73%
- -------------------------------------------------------------------------------------------------------------------------
AETNA INVESTMENT ADVISERS FUND, INC.:
Qualified I ............................................................. $ 14.317 $ 18.024 25.89%
Qualified III ........................................................... 14.270 17.954 25.82%
Qualified V ............................................................. 10.900 13.693 25.62%
Qualified VI ............................................................ 10.868 13.673 25.81%
Qualified VII ........................................................... 10.434 13.135 25.89%
Qualified VIII .......................................................... 10.091 12.695 25.81%
Qualified IX ............................................................ 10.000 12.613 26.13%
Qualified X (1.15) ...................................................... 10.880 13.703 25.95%
Qualified X (1.25) ...................................................... 10.868 13.673 25.81%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-12
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AETNA GET FUND, SERIES B:
Qualified III ........................................................... $ 10.160 $ 12.850 26.48%
Qualified VI ............................................................ 10.160 12.850 26.48%
Qualified X (1.25) ...................................................... 10.160 12.850 26.48%
- -------------------------------------------------------------------------------------------------------------------------
AETNA ASCENT VARIABLE PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.673 6.73% (4)
Qualified V ............................................................. 10.000 10.666 6.66% (5)
Qualified VI ............................................................ 10.000 10.673 6.73% (5)
Qualified VIII .......................................................... 10.000 10.673 6.73% (5)
Qualified X (1.15) ...................................................... 10.000 10.982 9.82% (3)
Qualified X (1.25) ...................................................... 10.000 10.976 9.76% (3)
- -------------------------------------------------------------------------------------------------------------------------
AETNA CROSSROADS VARIABLE PORTFOLIO:
Qualified V ............................................................. $ 10.000 $ 10.605 6.05% (5)
Qualified VI ............................................................ 10.000 10.612 6.12% (5)
Qualified VIII .......................................................... 10.000 10.611 6.11% (5)
Qualified X (1.15) ...................................................... 10.000 10.868 8.68% (3)
Qualified X (1.25) ...................................................... 10.000 10.862 8.62% (3)
- -------------------------------------------------------------------------------------------------------------------------
AETNA LEGACY VARIABLE PORTFOLIO:
Qualified VI ............................................................ $ 10.000 $ 10.580 5.80% (5)
Qualified X (1.15) ...................................................... 10.000 10.631 6.31% (4)
Qualified X (1.25) ...................................................... 10.000 10.626 6.26% (4)
- -------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN FUNDS:
ALGER AMERICAN GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.715 17.15% (4)
Qualified V ............................................................. 10.000 10.365 3.65% (5)
Qualified VI ............................................................ 10.000 10.157 1.57% (5)
Qualified VIII .......................................................... 10.000 10.371 3.71% (5)
Qualified X (1.15) ...................................................... 10.000 11.385 13.85% (3)
Qualified X (1.25) ...................................................... 10.000 11.379 13.79% (3)
- -------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO:
Qualified III ........................................................... $ 9.513 $ 13.558 42.52%
Qualified V ............................................................. 9.461 13.463 42.29%
Qualified VI ............................................................ 9.437 13.450 42.52%
Qualified VIII .......................................................... 9.889 14.093 42.51%
Qualified X (1.15) ...................................................... 9.450 13.481 42.66%
Qualified X (1.25) ...................................................... 9.437 13.450 42.52%
- -------------------------------------------------------------------------------------------------------------------------
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO:
Qualified III ........................................................... $ 13.990 $ 17.951 28.31%
Qualified V ............................................................. 10.839 13.870 27.96%
Qualified VI ............................................................ 10.554 13.527 28.17%
Qualified VIII .......................................................... 9.590 12.291 28.16%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
(Decrease)
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS:
EQUITY - INCOME PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.617 16.17% (2)
Qualified V ............................................................. 10.000 11.047 10.47% (5)
Qualified VI ............................................................ 10.000 11.092 10.92% (5)
Qualified VIII .......................................................... 10.000 11.054 10.54% (5)
Qualified X (1.15) ...................................................... 10.409 13.902 33.55%
Qualified X (1.25) ...................................................... 10.403 13.880 33.42%
- -------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.198 1.98% (4)
Qualified V ............................................................. 10.000 10.183 1.83% (5)
Qualified VI ............................................................ 10.000 10.066 0.66% (5)
Qualified VIII .......................................................... 10.000 10.190 1.90% (5)
Qualified X (1.15) ...................................................... 10.479 14.023 33.82%
Qualified X (1.25) ...................................................... 10.472 14.000 33.69%
- -------------------------------------------------------------------------------------------------------------------------
OVERSEAS PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.197 1.97% (4)
Qualified V ............................................................. 10.000 9.954 (0.46%) (5)
Qualified VI ............................................................ 10.000 9.961 (0.39%) (5)
Qualified X (1.15) ...................................................... 9.480 10.278 8.43%
Qualified X (1.25) ...................................................... 9.474 10.262 8.32%
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II:
ASSET MANAGER PORTFOLIO:
Qualified III ........................................................... $ 9.447 $ 10.912 15.51%
- -------------------------------------------------------------------------------------------------------------------------
CONTRAFUND PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.763 17.63% (2)
Qualified V ............................................................. 10.000 10.461 4.61% (5)
Qualified VI ............................................................ 10.000 10.397 3.97% (5)
Qualified VIII .......................................................... 10.000 10.467 4.67% (5)
Qualified X (1.15) ...................................................... 10.000 10.689 6.89% (2)
Qualified X (1.25) ...................................................... 10.000 10.681 6.81% (2)
- -------------------------------------------------------------------------------------------------------------------------
INDEX 500 PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.740 17.40% (2)
- -------------------------------------------------------------------------------------------------------------------------
FRANKLIN GOVERNMENT SECURITIES TRUST:
Qualified III ........................................................... $ 14.190 $ 16.495 16.24%
Qualified V ............................................................. 10.294 11.946 16.06%
Qualified VI ............................................................ 10.119 11.762 16.24%
Qualified VIII .......................................................... 9.541 11.090 16.23%
- -------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO:
Qualified III ........................................................... $ 12.169 $ 15.323 25.91%
Qualified V ............................................................. 10.577 13.296 25.71%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Increase
(Decrease)
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JANUS ASPEN SERIES:
AGGRESSIVE GROWTH PORTFOLIO (continued):
Qualified VI ............................................................ $ 10.581 $ 13.322 25.91%
Qualified VIII .......................................................... 10.581 13.321 25.90%
Qualified X (1.15) ...................................................... 10.000 12.869 28.69% (2)
Qualified X (1.25) ...................................................... 10.000 12.861 28.61% (2)
- -------------------------------------------------------------------------------------------------------------------------
BALANCED PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.853 8.53% (4)
Qualified V ............................................................. 10.000 10.843 8.43% (5)
Qualified VI ............................................................ 10.000 10.850 8.50% (5)
Qualified X (1.15) ...................................................... 10.000 11.265 12.65% (3)
Qualified X (1.25) ...................................................... 10.000 11.259 12.59% (3)
- -------------------------------------------------------------------------------------------------------------------------
FLEXIBLE INCOME PORTFOLIO:
Qualified III ........................................................... $ 9.911 $ 12.124 22.33%
Qualified V ............................................................. 10.000 12.054 20.54% (1)
Qualified VI ............................................................ 9.873 12.077 22.33%
- -------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 11.859 18.59% (4)
Qualified V ............................................................. 10.000 10.872 8.72% (5)
Qualified VI ............................................................ 10.000 10.870 8.70% (5)
Qualified X (1.15) ...................................................... 10.000 11.633 16.33% (3)
Qualified X (1.25) ...................................................... 10.000 11.626 16.26% (3)
- -------------------------------------------------------------------------------------------------------------------------
SHORT TERM BOND PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 10.393 3.93% (4)
Qualified V ............................................................. 10.000 10.316 3.16% (5)
Qualified VI ............................................................ 10.000 10.323 3.23% (5)
Qualified X (1.25) ...................................................... 10.000 10.285 2.85% (4)
- -------------------------------------------------------------------------------------------------------------------------
WORLDWIDE GROWTH PORTFOLIO:
Qualified III ........................................................... $ 10.000 $ 12.158 21.58% (4)
Qualified V ............................................................. 10.000 10.952 9.52% (4)
Qualified VI ............................................................ 10.000 10.877 8.77% (5)
Qualified VIII .......................................................... 10.000 10.846 8.46% (5)
Qualified X (1.15) ...................................................... 10.000 12.223 22.23% (2)
Qualified X (1.25) ...................................................... 10.000 12.216 22.16% (2)
- -------------------------------------------------------------------------------------------------------------------------
LEXINGTON EMERGING MARKETS FUND:
Qualified III ........................................................... $ 8.772 $ 8.323 (5.12%)
- -------------------------------------------------------------------------------------------------------------------------
LEXINGTON NATURAL RESOURCES TRUST:
Qualified III ........................................................... $ 9.412 $ 10.862 15.41%
Qualified V ............................................................. 10.496 12.095 15.24%
Qualified VI ............................................................ 10.154 11.720 15.42%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-15
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Increase
Value at Value at in Value of
Beginning End of Accumulation
of Year Year Unit
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST - GROWTH PORTFOLIO:
Qualified III ........................................................... $ 13.398 $ 17.430 30.09%
Qualified V ............................................................. 11.055 14.359 29.89%
Qualified VI ............................................................ 11.026 14.345 30.10%
Qualified VIII .......................................................... 9.482 12.334 30.09%
- --------------------------------------------------------------------------------------------------------------------------
SCUDDER VARIABLE LIFE INVESTMENT FUND - INTERNATIONAL
PORTFOLIO:
Qualified III ........................................................... $ 13.227 $ 14.515 9.74%
Qualified V ............................................................. 12.595 13.799 9.56%
Qualified VI ............................................................ 12.687 13.923 9.74%
Qualified VIII .......................................................... 10.692 11.733 9.73%
Qualified X (1.15) ...................................................... 12.701 13.952 9.85%
Qualified X (1.25) ...................................................... 12.687 13.923 9.74%
- --------------------------------------------------------------------------------------------------------------------------
TCI PORTFOLIOS, INC.:
TCI GROWTH:
Qualified III* .......................................................... $ 11.172 $ 14.464 29.47%
Qualified III ........................................................... 10.213 13.224 29.47%
Qualified V ............................................................. 11.740 15.176 29.27%
Qualified VI ............................................................ 11.781 15.253 29.47%
Qualified VII ........................................................... 9.911 12.840 29.55%
Qualified VIII .......................................................... 9.939 12.868 29.46%
Qualified IX ............................................................ 9.693 12.581 29.80%
Qualified X (1.15) ...................................................... 11.794 15.285 29.60%
Qualified X (1.25) ...................................................... 11.781 15.253 29.47%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Applies only to participants of the Opportunity Plus program and Multiple
Options Contracts.
QUALIFIED I Individual contracts issued prior to May 1, 1975
in connection with "Qualified Corporate Retirement
Plans" established pursuant to Section 401 of the
Internal Revenue Code ("Code"); "Tax-Deferred
Annuity Plans" established by the public school
systems and tax-exempt organizations pursuant to
Section 403(b) of the Code, and certain Individual
Retirement Annuity Plans established by or on
behalf of individuals pursuant to section 408(b)
of the Code; Individual contracts issued prior to
November 1, 1975 in connection with "H.R. 10
Plans" established by persons entitled to the
benefits of the Self-Employed Individuals Tax
Retirement Act of 1962, as amended; allocated
group contracts issued prior to May 1, 1975 in
connection with Qualified Corporate Retirement
Plans; and group contracts issued prior to
October 1, 1978 in connection with Tax-Deferred
Annuity Plans.
QUALIFIED III Individual contracts issued in connection with
Tax-Deferred Annuity Plans and Individual
Retirement Annuity Plans since May 1, 1975, H.R.
10 Plans since November 1, 1975; group contracts
issued since October 1, 1978 in connection with
Tax-Deferred Annuity
S-16
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CONDENSED FINANCIAL INFORMATION
CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
(continued)
- --------------------------------------------------------------------------------
QUALIFIED III (continued): Plans and group contracts issued since May 1, 1979
in connection with "Deferred Compensation Plans"
adopted by state and local governments and H.R. 10
Plans.
QUALIFIED IV Certain large group contracts (Jumbo) issued in
connection with Tax-Deferred Annuity Plans and
Deferred Compensation Plans issued since
January 1, 1979.
QUALIFIED V Group AetnaPlus contracts issued since August 28,
1992 in connection with "Optional Retirement
Plans" established pursuant to Section 403(b) or
401(a) of the Internal Revenue Code.
QUALIFIED VI Group AetnaPlus contracts issued in connection
with Tax-Deferred Annuity Plans and Retirement
Plus Plans since August 28, 1992.
QUALIFIED VII Certain existing contracts that were converted to
ACES, the new administrative system (Previously
valued under Qualified I).
QUALIFIED VIII "Group Aetna Plus" contracts issued in connection
with Tax-Deferred Annuity Plans and "Deferred
Compensation Plans" adopted by state and local
governments since June 30, 1993.
QUALIFIED IX Certain large group contracts (Jumbo) that were
converted to ACES, the new administrative system
(previously valued under Qualified VI).
QUALIFIED X Individual Retirement Annuity and Simplified
Employee Pension Plans issued or converted to
ACES, the new administrative system.
1 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during March 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
2 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during May 1995 when the
fund became available under the contract or the applicable daily asset
charge was first utilized.
3 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during June 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
4 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during July 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
5 - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established at $10.000 during August 1995 when
the fund became available under the contract or the applicable daily asset
charge was first utilized.
S-17
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Independent Auditors' Report..................................... F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993.............................. F-3
Consolidated Balance Sheets as of December 31, 1995 and 1994... F-4
Consolidated Statements of Changes in Shareholder's Equity for
the Years Ended
December 31, 1995, 1994 and 1993.............................. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993.............................. F-6
Notes to Consolidated Financial Statements....................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life Insurance
and Annuity Company and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1993 the
Company changed its methods of accounting for certain investments in debt and
equity securities.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 6, 1996
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Income
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Premiums............................................. $ 130.8 $ 124.2 $ 82.1
Charges assessed against policyholders............... 318.9 279.0 251.5
Net investment income................................ 1,004.3 917.2 911.9
Net realized capital gains........................... 41.3 1.5 9.5
Other income......................................... 42.0 10.3 9.5
-------- -------- --------
Total revenue...................................... 1,537.3 1,332.2 1,264.5
-------- -------- --------
Benefits and expenses:
Current and future benefits.......................... 915.3 854.1 818.4
Operating expenses................................... 318.7 235.2 207.2
Amortization of deferred policy acquisition costs.... 43.3 26.4 19.8
-------- -------- --------
Total benefits and expenses........................ 1,277.3 1,115.7 1,045.4
-------- -------- --------
Income before federal income taxes..................... 260.0 216.5 219.1
Federal income taxes................................. 84.1 71.2 76.2
-------- -------- --------
Net income............................................. $ 175.9 $ 145.3 $ 142.9
-------- -------- --------
-------- -------- --------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Balance Sheets
(millions)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
ASSETS
- -------------------------------------------------------
Investments:
Debt securities, available for sale:
(amortized cost: $11,923.7 and $10,577.8)........... $12,720.8 $10,191.4
Equity securities, available for sale:
Non-redeemable preferred stock (cost: $51.3 and
$43.3)............................................ 57.6 47.2
Investment in affiliated mutual funds (cost: $173.4
and $187.1)....................................... 191.8 181.9
Common stock (cost: $6.9 at December 31, 1995)..... 8.2 --
Short-term investments............................... 15.1 98.0
Mortgage loans....................................... 21.2 9.9
Policy loans......................................... 338.6 248.7
Limited partnership.................................. -- 24.4
--------- ---------
Total investments................................ 13,353.3 10,801.5
Cash and cash equivalents.............................. 568.8 623.3
Accrued investment income.............................. 175.5 142.2
Premiums due and other receivables..................... 37.3 75.8
Deferred policy acquisition costs...................... 1,341.3 1,164.3
Reinsurance loan to affiliate.......................... 655.5 690.3
Other assets........................................... 26.2 15.9
Separate Accounts assets............................... 10,987.0 7,420.8
--------- ---------
Total assets..................................... $27,144.9 $20,934.1
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY
- -------------------------------------------------------
Liabilities:
Future policy benefits............................... $ 3,594.6 $ 2,912.7
Unpaid claims and claim expenses..................... 27.2 23.8
Policyholders' funds left with the Company........... 10,500.1 8,949.3
--------- ---------
Total insurance reserve liabilities.............. 14,121.9 11,885.8
Other liabilities.................................... 259.2 302.1
Federal income taxes:
Current............................................ 24.2 3.4
Deferred........................................... 169.6 233.5
Separate Accounts liabilities........................ 10,987.0 7,420.8
--------- ---------
Total liabilities................................ 25,561.9 19,845.6
--------- ---------
--------- ---------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized;
55,000 shares issued and outstanding)............... 2.8 2.8
Paid-in capital...................................... 407.6 407.6
Net unrealized capital gains (losses)................ 132.5 (189.0)
Retained earnings.................................... 1,040.1 867.1
--------- ---------
Total shareholder's equity....................... 1,583.0 1,088.5
--------- ---------
Total liabilities and shareholder's equity..... $27,144.9 $20,934.1
--------- ---------
--------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Shareholder's equity, beginning of year................ $ 1,088.5 $ 1,246.7 $ 990.1
Net change in unrealized capital gains (losses)........ 321.5 (303.5) 113.7
Net income............................................. 175.9 145.3 142.9
Common stock dividends declared........................ (2.9) -- --
--------- --------- ---------
Shareholder's equity, end of year...................... $ 1,583.0 $ 1,088.5 $ 1,246.7
--------- --------- ---------
--------- --------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income........................................... $ 175.9 $ 145.3 $ 142.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Increase in accrued investment income.............. (33.3) (17.5) (11.1)
Decrease (increase) in premiums due and other
receivables....................................... 25.4 1.3 (5.6)
Increase in policy loans........................... (89.9) (46.0) (36.4)
Increase in deferred policy acquisition costs...... (177.0) (105.9) (60.5)
Decrease in reinsurance loan to affiliate.......... 34.8 27.8 31.8
Net increase in universal life account balances.... 393.4 164.7 126.4
Increase in other insurance reserve liabilities.... 79.0 75.1 86.1
Net increase in other liabilities and other
assets............................................ 15.0 53.9 7.0
Decrease in federal income taxes................... (6.5) (11.7) (3.7)
Net accretion of discount on bonds................. (66.4) (77.9) (88.1)
Net realized capital gains......................... (41.3) (1.5) (9.5)
Other, net......................................... -- (1.0) 0.2
---------- ---------- ----------
Net cash provided by operating activities........ 309.1 206.6 179.5
---------- ---------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale................. 4,207.2 3,593.8 473.9
Equity securities.................................. 180.8 93.1 89.6
Mortgage loans..................................... 10.7 -- --
Limited partnership................................ 26.6 -- --
Investment maturities and collections of:
Debt securities available for sale................. 583.9 1,289.2 2,133.3
Short-term investments............................. 106.1 30.4 19.7
Cost of investment purchases in:
Debt securities.................................... (6,034.0) (5,621.4) (3,669.2)
Equity securities.................................. (170.9) (162.5) (157.5)
Short-term investments............................. (24.7) (106.1) (41.3)
Mortgage loans..................................... (21.3) -- --
Limited partnership................................ -- (25.0) --
---------- ---------- ----------
Net cash used for investing activities........... (1,135.6) (908.5) (1,151.5)
---------- ---------- ----------
Cash Flows from Financing Activities:
Deposits and interest credited for investment
contracts........................................... 1,884.5 1,737.8 2,117.8
Withdrawals of investment contracts.................. (1,109.6) (948.7) (1,000.3)
Dividends paid to shareholder........................ (2.9) -- --
---------- ---------- ----------
Net cash provided by financing activities........ 772.0 789.1 1,117.5
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents... (54.5) 87.2 145.5
Cash and cash equivalents, beginning of year........... 623.3 536.1 390.6
---------- ---------- ----------
Cash and cash equivalents, end of year................. $ 568.8 $ 623.3 $ 536.1
---------- ---------- ----------
---------- ---------- ----------
Supplemental cash flow information:
Income taxes paid, net............................... $ 90.2 $ 82.6 $ 79.9
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries
(collectively, the "Company") is a provider of financial services and life
insurance products in the United States. The Company has two business segments,
financial services and life insurance.
The financial services products include individual and group annuity contracts
which offer a variety of funding and distribution options for personal and
employer-sponsored retirement plans that qualify under Internal Revenue Code
Sections 401, 403, 408 and 457, and individual and group non-qualified annuity
contracts. These contracts may be immediate or deferred and are offered
primarily to individuals, pension plans, small businesses and employer-sponsored
groups in the health care, government, education (collectively "not-for-profit"
organizations) and corporate markets. Financial services also include pension
plan administrative services.
The life insurance products include universal life, variable universal life,
interest sensitive whole life and term insurance. These products are offered
primarily to individuals, small businesses, employer sponsored groups and
executives of Fortune 2000 companies.
BASIS OF PRESENTATION
The consolidated financial statements include Aetna Life Insurance and Annuity
Company and its wholly owned subsidiaries, Aetna Insurance Company of America
and Aetna Private Capital, Inc. Aetna Life Insurance and Annuity Company is a
wholly owned subsidiary of Aetna Retirement Services, Inc. ("ARSI"). ARSI is a
wholly owned subsidiary of Aetna Life and Casualty Company ("Aetna"). Two
subsidiaries, Systematized Benefits Administrators, Inc. ("SBA"), and Aetna
Investment Services, Inc. ("AISI"), which were previously reported in the
consolidated financial statements were distributed in the form of dividends to
ARSI in December of 1995. The impact to the Company's financial statements of
distributing these dividends was immaterial.
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles. Intercompany transactions have been
eliminated. Certain reclassifications have been made to 1994 and 1993 financial
information to conform to the 1995 presentation.
ACCOUNTING CHANGES
Accounting for Certain Investments in Debt and Equity Securities
On December 31, 1993, the Company adopted Financial Accounting Standard ("FAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities, which
requires the classification of debt securities into three categories: "held to
maturity", which are carried at amortized cost; "available for sale", which are
carried at fair value with changes in fair value recognized as a component of
shareholder's equity; and "trading", which are carried at fair value with
immediate recognition in income of changes in fair value.
Initial adoption of this standard resulted in a net increase of $106.8 million,
net of taxes of $57.5 million, to net unrealized gains in shareholder's equity.
These amounts exclude gains and losses allocable to experience-rated (including
universal life) contractholders. Adoption of FAS No. 115 did not have a material
effect on deferred policy acquisition costs.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from reported results using those estimates.
CASH AND CASH EQUIVALENT
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of ninety days or less when purchased.
INVESTMENTS
Debt Securities
At December 31, 1995 and 1994, all of the Company's debt securities are
classified as available for sale and carried at fair value. These securities are
written down (as realized losses) for other than temporary decline in value.
Unrealized gains and losses related to these securities, after deducting amounts
allocable to experience-rated contractholders and related taxes, are reflected
in shareholder's equity.
Fair values for debt securities are based on quoted market prices or dealer
quotations. Where quoted market prices or dealer quotations are not available,
fair values are measured utilizing quoted market prices for similar securities
or by using discounted cash flow methods. Cost for mortgage-backed securities is
adjusted for unamortized premiums and discounts, which are amortized using the
interest method over the estimated remaining term of the securities, adjusted
for anticipated prepayments.
Purchases and sales of debt securities are recorded on the trade date.
Equity Securities
Equity securities are classified as available for sale and carried at fair value
based on quoted market prices or dealer quotations. Equity securities are
written down (as realized losses) for other than temporary declines in value.
Unrealized gains and losses related to such securities are reflected in
shareholder's equity. Purchases and sales are recorded on the trade date.
The investment in affiliated mutual funds represents an investment in the Aetna
Series Fund, Inc., a retail mutual fund which has been seeded by the Company,
and is carried at fair value.
Mortgage Loans and Policy Loans
Mortgage loans and policy loans are carried at unpaid principal balances net of
valuation reserves, which approximates fair value, and are generally secured.
Purchases and sales of mortgage loans are recorded on the closing date.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Limited Partnership
The Company's limited partnership investment was carried at the amount invested
plus the Company's share of undistributed operating results and unrealized gains
(losses), which approximates fair value. The Company disposed of the limited
partnership during 1995.
Short-Term Investments
Short-term investments, consisting primarily of money market instruments and
other debt issues purchased with an original maturity of over ninety days and
less than one year, are considered available for sale and are carried at fair
value, which approximates amortized cost.
DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring insurance business have been deferred. These costs,
all of which vary with and are primarily related to the production of new
business, consist principally of commissions, certain expenses of underwriting
and issuing contracts and certain agency expenses. For fixed ordinary life
contracts, such costs are amortized over expected premium-paying periods. For
universal life and certain annuity contracts, such costs are amortized in
proportion to estimated gross profits and adjusted to reflect actual gross
profits. These costs are amortized over twenty years for annuity pension
contracts, and over the contract period for universal life contracts.
Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross profits
would not be adequate to cover related losses and expenses.
INSURANCE RESERVE LIABILITIES
The Company's liabilities include reserves related to fixed ordinary life, fixed
universal life and fixed annuity contracts. Reserves for future policy benefits
for fixed ordinary life contracts are computed on the basis of assumed
investment yield, assumed mortality, withdrawals and expenses, including a
margin for adverse deviation, which generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 10.00%. Assumed
investment yield is based on the Company's experience. Mortality and withdrawal
rate assumptions are based on relevant Aetna experience and are periodically
reviewed against both industry standards and experience.
Reserves for fixed universal life (included in Future Policy Benefits) and fixed
deferred annuity contracts (included in Policyholders' Funds Left With the
Company) are equal to the fund value. The fund value is equal to cumulative
deposits less charges plus credited interest thereon, without reduction for
possible future penalties assessed on premature withdrawal. For guaranteed
interest options, the interest credited ranged from 4.00% to 6.38% in 1995 and
4.00% to 5.85% in 1994. For all other fixed options, the interest credited
ranged from 5.00% to 7.00% in 1995 and 5.00% to 7.50% in 1994.
Reserves for fixed annuity contracts in the annuity period and for future
amounts due under settlement options are computed actuarially using the 1971
Individual Annuity Mortality Table, the 1983 Individual Annuity Mortality Table,
the
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
1983 Group Annuity Mortality Table and, in some cases, mortality improvement
according to scales G and H, at assumed interest rates ranging from 3.5% to
9.5%. Reserves relating to contracts with life contingencies are included in
Future Policy Benefits. For other contracts, the reserves are reflected in
Policyholders' Funds Left With the Company.
Unpaid claims for all lines of insurance include benefits for reported losses
and estimates of benefits for losses incurred but not reported.
PREMIUMS, CHARGES ASSESSED AGAINST POLICYHOLDERS, BENEFITS AND EXPENSES
Premiums are recorded as revenue when due for fixed ordinary life contracts.
Charges assessed against policyholders' funds for cost of insurance, surrender
charges, actuarial margin and other fees are recorded as revenue for universal
life and certain annuity contracts. Policy benefits and expenses are recorded in
relation to the associated premiums or gross profit so as to result in
recognition of profits over the expected lives of the contracts.
SEPARATE ACCOUNTS
Assets held under variable universal life, variable life and variable annuity
contracts are segregated in Separate Accounts and are invested, as designated by
the contractholder or participant under a contract, in shares of Aetna Variable
Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers
Fund, Inc., Aetna GET Fund, or The Aetna Series Fund Inc., which are managed by
the Company or other selected mutual funds not managed by the Company. Separate
Accounts assets and liabilities are carried at fair value except for those
relating to a guaranteed interest option which is offered through a Separate
Account. The assets of the Separate Account supporting the guaranteed interest
option are carried at an amortized cost of $322.2 million for 1995 (fair value
$343.9 million) and $149.7 million for 1994 (fair value $146.3 million), since
the Company bears the investment risk where the contract is held to maturity.
Reserves relating to the guaranteed interest option are maintained at fund value
and reflect interest credited at rates ranging from 4.5% to 8.38% in both 1995
and 1994. Separate Accounts assets and liabilities are shown as separate
captions in the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains (losses) of the Separate Accounts are not
reflected in the Consolidated Statements of Income (with the exception of
realized capital gains (losses) on the sale of assets supporting the guaranteed
interest option). The Consolidated Statements of Cash Flows do not reflect
investment activity of the Separate Accounts.
FEDERAL INCOME TAXES
The Company is included in the consolidated federal income tax return of Aetna.
The Company is taxed at regular corporate rates after adjusting income reported
for financial statement purposes for certain items. Deferred income tax benefits
result from changes during the year in cumulative temporary differences between
the tax basis and book basis of assets and liabilities.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS
Investments in debt securities available for sale as of December 31, 1995 were
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies and corporations... $ 539.5 $ 47.5 $ -- $ 587.0
Obligations of states and political
subdivisions................................ 41.4 12.4 -- 53.8
U.S. Corporate securities:
Financial.................................. 2,764.4 110.3 2.1 2,872.6
Utilities.................................. 454.4 27.8 1.0 481.2
Other...................................... 2,177.7 159.5 1.2 2,336.0
--------- ---------- ----- ---------
Total U.S. Corporate securities............ 5,396.5 297.6 4.3 5,689.8
Foreign securities:
Government................................. 316.4 26.1 2.0 340.5
Financial.................................. 534.2 45.4 3.5 576.1
Utilities.................................. 236.3 32.9 -- 269.2
Other...................................... 215.7 15.1 -- 230.8
--------- ---------- ----- ---------
Total Foreign securities................... 1,302.6 119.5 5.5 1,416.6
Residential mortgage-backed securities:
Residential pass-throughs.................. 556.7 99.2 1.8 654.1
Residential CMOs........................... 2,383.9 167.6 2.2 2,549.3
--------- ---------- ----- ---------
Total Residential mortgage-backed
securities................................ 2,940.6 266.8 4.0 3,203.4
Commercial/Multifamily mortgage-backed
securities.................................. 741.9 32.3 0.2 774.0
--------- ---------- ----- ---------
Total Mortgage-backed securities........... 3,682.5 299.1 4.2 3,977.4
Other asset-backed securities................ 961.2 35.5 0.5 996.2
--------- ---------- ----- ---------
Total debt securities available for sale..... $11,923.7 $811.6 $14.5 $12,720.8
--------- ---------- ----- ---------
--------- ---------- ----- ---------
</TABLE>
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Investments in debt securities available for sale as of December 31, 1994 were
as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of
U.S. government agencies and corporations... $ 1,396.1 $ 2.0 $ 84.2 $ 1,313.9
Obligations of states and political
subdivisions................................ 37.9 1.2 -- 39.1
U.S. Corporate securities:
Financial.................................. 2,216.9 3.8 109.4 2,111.3
Utilities.................................. 100.1 -- 7.9 92.2
Other...................................... 1,344.3 6.0 67.9 1,282.4
--------- ---------- ---------- ---------
Total U.S. Corporate securities............ 3,661.3 9.8 185.2 3,485.9
Foreign securities:
Government................................. 434.4 1.2 33.9 401.7
Financial.................................. 368.2 1.1 23.0 346.3
Utilities.................................. 204.4 2.5 9.5 197.4
Other...................................... 46.3 0.8 1.5 45.6
--------- ---------- ---------- ---------
Total Foreign securities................... 1,053.3 5.6 67.9 991.0
Residential mortgage-backed securities:
Residential pass-throughs.................. 627.1 81.5 5.0 703.6
Residential CMOs........................... 2,671.0 32.9 139.4 2,564.5
--------- ---------- ---------- ---------
Total Residential mortgage-backed
securities.................................. 3,298.1 114.4 144.4 3,268.1
Commercial/Multifamily mortgage-backed
securities.................................. 435.0 0.2 21.3 413.9
--------- ---------- ---------- ---------
Total Mortgage-backed securities............. 3,733.1 114.6 165.7 3,682.0
Other asset-backed securities................ 696.1 0.2 16.8 679.5
--------- ---------- ---------- ---------
Total debt securities available for sale..... $10,577.8 $133.4 $519.8 $10,191.4
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
</TABLE>
At December 31, 1995 and 1994, net unrealized appreciation (depreciation) of
$797.1 million and $(386.4) million, respectively, on available for sale debt
securities included $619.1 million and $(308.6) million, respectively, related
to experience-rated contractholders, which were not included in shareholder's
equity.
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
The amortized cost and fair value of debt securities for the year ended December
31, 1995 are shown below by contractual maturity. Actual maturities may differ
from contractual maturities because securities may be restructured, called, or
prepaid.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- ---------
(MILLIONS)
<S> <C> <C>
Due to mature:
One year or less..................................... $ 348.8 $ 351.1
After one year through five years.................... 2,100.2 2,159.5
After five years through ten years................... 2,516.0 2,663.4
After ten years...................................... 2,315.0 2,573.2
Mortgage-backed securities........................... 3,682.5 3,977.4
Other asset-backed securities........................ 961.2 996.2
--------- ---------
Total................................................ $11,923.7 $12,720.8
--------- ---------
--------- ---------
</TABLE>
The Company engages in securities lending whereby certain securities from its
portfolio are loaned to other institutions for short periods of time. Cash
collateral, which is in excess of the market value of the loaned securities, is
deposited by the borrower with a lending agent, and retained and invested by the
lending agent to generate additional income for the Company. The market value of
the loaned securities is monitored on a daily basis with additional collateral
obtained or refunded as the market value fluctuates. At December 31, 1995, the
Company had loaned securities (which are reflected as invested assets on the
Consolidated Balance Sheets) with a market value of approximately $264.5
million.
At December 31, 1995 and 1994, debt securities carried at $7.4 million and $7.0
million, respectively, were on deposit as required by regulatory authorities.
The valuation reserve for mortgage loans was $3.1 million at December 31, 1994.
There was no valuation reserve for mortgage loans at December 31, 1995. The
carrying value of non-income producing investments was $0.1 million and $0.2
million at December 31, 1995 and 1994, respectively.
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Investments in a single issuer, other than obligations of the U.S. government,
with a carrying value in excess of 10% of the Company's shareholder's equity at
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
AMORTIZED
DEBT SECURITIES COST FAIR VALUE
---------- ----------
(MILLIONS)
<S> <C> <C>
General Electric Corporation........................... $ 314.9 $ 329.3
General Motors Corporation............................. 273.9 284.5
Associates Corporation of North America................ 230.2 239.1
Society National Bank.................................. 203.5 222.3
Ciesco, L.P............................................ 194.9 194.9
Countrywide Funding.................................... 171.2 172.7
Baxter International................................... 168.9 168.9
Time Warner............................................ 158.6 166.1
Ford Motor Company..................................... 156.7 162.6
</TABLE>
The portfolio of debt securities at December 31, 1995 and 1994 included $662.5
million and $318.3 million, respectively, (5% and 3%, respectively, of the debt
securities) of investments that are considered "below investment grade". "Below
investment grade" securities are defined to be securities that carry a rating
below BBB-/Baa3, by Standard & Poors/ Moody's Investor Services, respectively.
The increase in below investment grade securities is the result of a change in
investment strategy, which has reduced the Company's holdings in residential
mortgage-back securities and increased the Company's holdings in corporate
securities. Residential mortgage-back securities are subject to higher
prepayment risk and lower credit risk, while corporate securities earning a
comparable yield are subject to higher credit risk and lower prepayment risk. We
expect the percentage of below investment grade securities will increase in
1996, but we expect that the overall average quality of the portfolio of debt
securities will remain at AA-. Of these below investment grade assets, $14.5
million and $31.8 million, at December 31, 1995 and 1994, respectively, were
investments that were purchased at investment grade, but whose ratings have
since been downgraded.
Included in residential mortgage-back securities are collateralized mortgage
obligations ("CMOs") with carrying values of $2.5 billion and $2.6 billion at
December 31, 1995 and 1994, respectively. The principal risks inherent in
holding CMOs are prepayment and extension risks related to dramatic decreases
and increases in interest rates whereby the CMOs would be subject to repayments
of principal earlier or later than originally anticipated. At December 31, 1995
and 1994, approximately 79% and 85%, respectively, of the Company's CMO holdings
consisted of sequential and planned amortization class debt securities which are
subject to less prepayment and extension risk than other CMO instruments. At
December 31, 1995 and 1994, approximately 81% and 82%, respectively, of the
Company's CMO holdings were collateralized by residential mortgage loans, on
which the timely payment of principal and interest was backed by specified
government agencies (e.g., GNMA, FNMA, FHLMC).
If due to declining interest rates, principal was to be repaid earlier than
originally anticipated, the Company could be affected by a decrease in
investment income due to the reinvestment of these funds at a lower interest
rate. Such prepayments may result in a duration mismatch between assets and
liabilities which could be corrected as cash from prepayments could be
reinvested at an appropriate duration to adjust the mismatch.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
2. INVESTMENTS (CONTINUED)
Conversely, if due to increasing interest rates, principal was to be repaid
slower than originally anticipated, the Company could be affected by a decrease
in cash flow which reduces the ability to reinvest expected principal repayments
at higher interest rates. Such slower payments may result in a duration mismatch
between assets and liabilities which could be corrected as available cash flow
could be reinvested at an appropriate duration to adjust the mismatch.
At December 31, 1995 and 1994, approximately 3% and 4%, respectively, of the
Company's CMO holdings consisted of interest-only strips ("IOs") or
principal-only strips ("POs"). IOs receive payments of interest and POs receive
payments of principal on the underlying pool of mortgages. The risk inherent in
holding POs is extension risk related to dramatic increases in interest rates
whereby the future payments due on POs could be repaid much slower than
originally anticipated. The extension risks inherent in holding POs was
mitigated somewhat by offsetting positions in IOs. During dramatic increases in
interest rates, IOs would generate more future payments than originally
anticipated.
The risk inherent in holding IOs is prepayment risk related to dramatic
decreases in interest rates whereby future IO cash flows could be much less than
originally anticipated and in some cases could be less than the original cost of
the IO. The risks inherent in IOs are mitigated somewhat by holding offsetting
positions in POs. During dramatic decreases in interest rates POs would generate
future cash flows much quicker than originally anticipated.
Investments in available for sale equity securities were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
------ ---------- ---------- ----------
(MILLIONS)
<S> <C> <C> <C> <C>
1995
Equity Securities................ $231.6 $ 27.2 $ 1.2 $ 257.6
------ ----- --- ----------
1994
Equity Securities................ $230.5 $ 6.5 $ 7.9 $ 229.1
------ ----- --- ----------
</TABLE>
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS
Realized capital gains or losses are the difference between proceeds received
from investments sold or prepaid, and amortized cost. Net realized capital gains
as reflected in the Consolidated Statements of Income are after deductions for
net realized capital gains (losses) allocated to experience-rated contracts of
$61.1 million, $(29.1) million and $(54.8) million for the years ended December
31, 1995, 1994, and 1993, respectively. Net realized capital gains (losses)
allocated to experience-rated contracts are deferred and subsequently reflected
in credited rates on an amortized basis. Net unamortized gains (losses),
reflected as a component of Policyholders' Funds Left With the Company, were
$7.3 million and $(50.7) million at the end of December 31, 1995 and 1994,
respectively.
Changes to the mortgage loan valuation reserve and writedowns on debt securities
are included in net realized capital gains (losses) and amounted to $3.1
million, $1.1 million and $(98.5) million, of which $2.2 million, $0.8 million
and $(91.5) million were allocable to experience-rated contractholders, for the
years ended December 31, 1995, 1994 and 1993, respectively. The 1993 losses were
primarily related to writedowns of interest-only mortgage-backed securities to
their fair value.
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED)
Net realized capital gains (losses) on investments, net of amounts allocated to
experience-rated contracts, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $32.8 $ 1.0 $ 9.6
Equity securities...................................... 8.3 0.2 0.1
Mortgage loans......................................... 0.2 0.3 (0.2)
----- ----- ------
Pretax realized capital gains.......................... $41.3 $ 1.5 $ 9.5
----- ----- ------
After-tax realized capital gains....................... $25.8 $ 1.0 $ 6.2
----- ----- ------
</TABLE>
Gross gains of $44.6 million, $26.6 million and $33.3 million and gross losses
of $11.8 million, $25.6 million and $23.7 million were realized from the sales
of investments in debt securities in 1995, 1994 and 1993, respectively.
Changes in unrealized capital gains (losses), excluding changes in unrealized
capital gains (losses) related to experience-rated contracts, for the years
ended December 31, were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ -------- ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $255.9 $ (242.1) $164.3
Equity securities...................................... 27.3 (13.3) 10.6
Limited partnership.................................... 1.8 (1.8) --
------ -------- ------
285.0 (257.2) 174.9
Deferred federal income taxes (See Note 6)............. (36.5) 46.3 61.2
------ -------- ------
Net change in unrealized capital gains (losses)........ $321.5 $ (303.5) $113.7
------ -------- ------
------ -------- ------
</TABLE>
Net unrealized capital gains (losses) allocable to experience-rated contracts of
$515.0 million and $104.1 million at December 31, 1995 and $(260.9) million and
$(47.7) million at December 31, 1994 are reflected on the Consolidated Balance
Sheet in Policyholders' Funds Left With the Company and Future Policy Benefits,
respectively, and are not included in shareholder's equity.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED)
Shareholder's equity included the following unrealized capital gains (losses),
which are net of amounts allocable to experience-rated contractholders, at
December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------- -------
(MILLIONS)
<S> <C> <C> <C>
Debt securities
Gross unrealized capital gains....................... $179.3 $ 27.4 $ 164.3
Gross unrealized capital losses...................... (1.3) (105.2) --
------ ------- -------
178.0 (77.8) 164.3
Equity securities
Gross unrealized capital gains....................... 27.2 6.5 12.0
Gross unrealized capital losses...................... (1.2) (7.9) (0.1)
------ ------- -------
26.0 (1.4) 11.9
Limited Partnership
Gross unrealized capital gains....................... -- -- --
Gross unrealized capital losses...................... -- (1.8) --
------ ------- -------
Deferred federal income taxes (See Note 6)............. 71.5 108.0 61.7
------ ------- -------
Net unrealized capital gains (losses).................. $132.5 $(189.0) $ 114.5
------ ------- -------
------ ------- -------
</TABLE>
4. NET INVESTMENT INCOME
Sources of net investment income were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------ ------
(MILLIONS)
<S> <C> <C> <C>
Debt securities........................................ $ 891.5 $823.9 $828.0
Preferred stock........................................ 4.2 3.9 2.3
Investment in affiliated mutual funds.................. 14.9 5.2 2.9
Mortgage loans......................................... 1.4 1.4 1.5
Policy loans........................................... 13.7 11.5 10.8
Reinsurance loan to affiliate.......................... 46.5 51.5 53.3
Cash equivalents....................................... 38.9 29.5 16.8
Other.................................................. 8.4 6.7 7.7
-------- ------ ------
Gross investment income................................ 1,019.5 933.6 923.3
Less investment expenses............................... (15.2) (16.4) (11.4)
-------- ------ ------
Net investment income.................................. $1,004.3 $917.2 $911.9
-------- ------ ------
-------- ------ ------
</TABLE>
Net investment income includes amounts allocable to experience-rated
contractholders of $744.2 million, $677.1 million and $661.3 million for the
years ended December 31, 1995, 1994 and 1993, respectively. Interest credited to
contractholders is included in Current and Future Benefits.
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY
The Company distributed $2.9 million in the form of dividends of two of its
subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995.
The amount of dividends that may be paid to the shareholder in 1996 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$70.0 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's equity those amounts determined in
conformity with statutory accounting practices prescribed or permitted by the
Department, which differ in certain respects from generally accepted accounting
principles. Statutory net income was $70.0 million, $64.9 million and $77.6
million for the years ended December 31, 1995, 1994 and 1993, respectively.
Statutory shareholder's equity was $670.7 million and $615.0 million as of
December 31, 1995 and 1994, respectively.
At December 31, 1995 and December 31, 1994, the Company does not utilize any
statutory accounting practices which are not prescribed by insurance regulators
that, individually or in the aggregate, materially affect statutory
shareholder's equity.
6. FEDERAL INCOME TAXES
The Company is included in the consolidated federal income tax return of Aetna.
Aetna allocates to each member an amount approximating the tax it would have
incurred were it not a member of the consolidated group, and credits the member
for the use of its tax saving attributes in the consolidated return.
In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was enacted
which resulted in an increase in the federal corporate tax rate from 34% to 35%
retroactive to January 1, 1993. The enactment of OBRA resulted in an increase in
the deferred tax liability of $3.4 million at date of enactment, which is
included in the 1993 deferred tax expense.
Components of income tax expense (benefits) were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -------
(MILLIONS)
<S> <C> <C> <C>
Current taxes (benefits):
Income from operations............................... $82.9 $78.7 $ 87.1
Net realized capital gains........................... 28.5 (33.2) 18.1
----- ----- -------
111.4 45.5 105.2
----- ----- -------
Deferred taxes (benefits):
Income from operations............................... (14.4) (8.0) (14.2)
Net realized capital gains........................... (12.9) 33.7 (14.8)
----- ----- -------
(27.3) 25.7 (29.0)
----- ----- -------
Total................................................ $84.1 $71.2 $ 76.2
----- ----- -------
----- ----- -------
</TABLE>
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
6. FEDERAL INCOME TAXES (CONTINUED)
Income tax expense was different from the amount computed by applying the
federal income tax rate to income before federal income taxes for the following
reasons:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(MILLIONS)
<S> <C> <C> <C>
Income before federal income taxes..................... $260.0 $216.5 $219.1
Tax rate............................................... 35% 35% 35%
------ ------ ------
Application of the tax rate............................ 91.0 75.8 76.7
------ ------ ------
Tax effect of:
Excludable dividends................................. (9.3) (8.6) (8.7)
Tax reserve adjustments.............................. 3.9 2.9 4.7
Reinsurance transaction.............................. (0.5) 1.9 (0.2)
Tax rate change on deferred liabilities.............. -- -- 3.7
Other, net........................................... (1.0) (0.8) --
------ ------ ------
Income tax expense................................... $ 84.1 $ 71.2 $ 76.2
------ ------ ------
------ ------ ------
</TABLE>
The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities at December 31 are presented below:
<TABLE>
<CAPTION>
1995 1994
------ ------
(MILLIONS)
<S> <C> <C>
Deferred tax assets:
Insurance reserves................................... $290.4 $211.5
Net unrealized capital losses........................ -- 136.3
Unrealized gains allocable to experience-rated
contracts........................................... 216.7 --
Investment losses not currently deductible........... 7.3 15.5
Postretirement benefits other than pensions.......... 7.7 8.4
Other................................................ 32.0 28.3
------ ------
Total gross assets..................................... 554.1 400.0
Less valuation allowance............................... -- 136.3
------ ------
Deferred tax assets, net of valuation.................. 554.1 263.7
Deferred tax liabilities:
Deferred policy acquisition costs.................... 433.0 385.2
Unrealized losses allocable to experience-rated
contracts........................................... -- 108.0
Market discount...................................... 4.4 3.6
Net unrealized capital gains......................... 288.2 --
Other................................................ (1.9) 0.4
------ ------
Total gross liabilities................................ 723.7 497.2
------ ------
Net deferred tax liability............................. $169.6 $233.5
------ ------
------ ------
</TABLE>
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
6. FEDERAL INCOME TAXES (CONTINUED)
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. At December 31, 1994, $81.0 million of net unrealized
capital losses were reflected in shareholder's equity without deferred tax
benefits. As of December 31, 1995, no valuation allowance was required for
unrealized capital gains and losses. The reversal of the valuation allowance had
no impact on net income in 1995.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that has
not been subject to taxation. As of December 31, 1983, no further additions
could be made to the Policyholders' Surplus Account for tax return purposes
under the Deficit Reduction Act of 1984. The balance in such account was
approximately $17.2 million at December 31, 1995. This amount would be taxed
only under certain conditions. No income taxes have been provided on this amount
since management believes the conditions under which such taxes would become
payable are remote.
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1986. Discussions are
being held with the Service with respect to proposed adjustments. However,
management believes there are adequate defenses against, or sufficient reserves
to provide for, such challenges. The Service has commenced its examinations for
the years 1987 through 1990.
7. BENEFIT PLANS
Employee Pension Plans--The Company, in conjunction with Aetna, has
non-contributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over sixty consecutive months of highest
earnings in a 120 month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to the amounts that are currently deductible for tax
reporting purposes. The accumulated benefit obligation and plan assets are
recorded by Aetna. The accumulated plan assets exceed accumulated plan benefits.
There has been no funding to the plan for the years 1993 through 1995, and
therefore, no expense has been recorded by the Company.
Agent Pension Plans--The Company, in conjunction with Aetna, has a non-qualified
pension plan covering certain agents. The plan provides pension benefits based
on annual commission earnings. The accumulated plan assets exceed accumulated
plan benefits. There has been no funding to the plan for the years 1993 through
1995, and therefore, no expense has been recorded by the Company.
Employee Postretirement Benefits--In addition to providing pension benefits,
Aetna also provides certain postretirement health care and life insurance
benefits, subject to certain caps, for retired employees. Medical and dental
benefits are offered to all full-time employees retiring at age 50 with at least
15 years of service or at age 65 with at least 10 years of service. Retirees are
required to contribute to the plans based on their years of service with Aetna.
The cost to the Company associated with the Aetna postretirement plans for 1995,
1994 and 1993 were $1.4 million, $1.0 million and $0.8 million, respectively.
Agent Postretirement Benefits--The Company, in conjunction with Aetna, also
provides certain postemployment health care and life insurance benefits for
certain agents.
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
7. BENEFIT PLANS (CONTINUED)
The cost to the Company associated to the agents' postretirement plans for 1995,
1994 and 1993 were $0.8 million, $0.7 million and $0.6 million, respectively.
Incentive Savings Plan--Substantially all employees are eligible to participate
in a savings plan under which designated contributions, which may be invested in
common stock of Aetna or certain other investments, are matched, up to 5% of
compensation, by Aetna. Pretax charges to operations for the incentive savings
plan were $4.9 million, $3.3 million and $3.1 million in 1995, 1994 and 1993,
respectively.
Stock Plans--Aetna has a stock incentive plan that provides for stock options
and deferred contingent common stock or cash awards to certain key employees.
Aetna also has a stock option plan under which executive and middle management
employees of Aetna may be granted options to purchase common stock of Aetna at
the market price on the date of grant or, in connection with certain business
combinations, may be granted options to purchase common stock on different
terms. The cost to the Company associated with the Aetna stock plans for 1995,
1994 and 1993, was $6.3 million, $1.7 million and $0.4 million, respectively.
8. RELATED PARTY TRANSACTIONS
The Company is compensated by the Separate Accounts for bearing mortality and
expense risks pertaining to variable life and annuity contracts. Under the
insurance contracts, the Separate Accounts pay the Company a daily fee which, on
an annual basis, ranges, depending on the product, from .25% to 1.80% of their
average daily net assets. The Company also receives fees from the variable life
and annuity mutual funds and The Aetna Series Fund for serving as investment
adviser. Under the advisory agreements, the Funds pay the Company a daily fee
which, on an annual basis, ranges, depending on the fund, from .25% to 1.00% of
their average daily net assets. The advisory agreements also call for the
variable funds to pay their own administrative expenses and for The Aetna Series
Fund to pay certain administrative expenses. The Company also receives fees
(expressed as a percentage of the average daily net assets) from The Aetna
Series Fund for providing administration, shareholder services and promoting
sales. The amount of compensation and fees received from the Separate Accounts
and Funds, included in Charges Assessed Against Policyholders, amounted to
$128.1 million, $104.6 million and $93.6 million in 1995, 1994 and 1993,
respectively. The Company may waive advisory fees at its discretion.
The Company may, from time to time, make reimbursements to a Fund for some or
all of its operating expenses. Reimbursement arrangements may be terminated at
any time without notice.
Since 1981, all domestic individual non-participating life insurance of Aetna
and its subsidiaries has been issued by the Company. Effective December 31,
1988, the Company entered into a reinsurance agreement with Aetna Life Insurance
Company ("Aetna Life") in which substantially all of the non-participating
individual life and annuity business written by Aetna Life prior to 1981 was
assumed by the Company. A $108.0 million commission, paid by the Company to
Aetna Life in 1988, was capitalized as deferred policy acquisition costs. The
Company maintained insurance reserves of $655.5 million and $690.3 million as of
December 31, 1995 and 1994, respectively, relating to the business assumed. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance reserves.
The loan is being reduced in accordance with the decrease in the reserves. The
fair value of this loan was $663.5 million and $630.3 million as of December 31,
1995 and 1994, respectively, and is based upon the fair value of the underlying
assets. Premiums of $28.0 million, $32.8 million and $33.3 million and current
and future benefits of $43.0 million, $43.8 million and $55.4 million were
assumed in 1995, 1994 and 1993, respectively.
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
8. RELATED PARTY TRANSACTIONS (CONTINUED)
Investment income of $46.5 million, $51.5 million and $53.3 million was
generated from the reinsurance loan to affiliate in 1995, 1994 and 1993,
respectively. Net income of approximately $18.4 million, $25.1 million and $13.6
million resulted from this agreement in 1995, 1994 and 1993, respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue from
Aetna Life for the purchase and administration of a life contingent single
premium variable payout annuity contract. In addition, the Company also is
responsible for administering fixed annuity payments that are made to annuitants
receiving variable payments. Reserves of $28.0 million and $24.2 million were
maintained for this contract as of December 31, 1995 and 1994, respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement with
Aetna Life to reinsure amounts in excess of this limit, up to a maximum of $8.0
million on any new individual life business, on a yearly renewable term basis.
Premium amounts related to this agreement were $3.2 million, $1.3 million and
$0.6 million for 1995, 1994 and 1993, respectively.
The Company received no capital contributions in 1995, 1994 or 1993.
The Company distributed $2.9 million in the form of dividends of two of its
subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995.
Premiums due and other receivables include $5.7 million and $27.6 million due
from affiliates in 1995 and 1994, respectively. Other liabilities include $12.4
million and $27.9 million due to affiliates for 1995 and 1994, respectively.
Substantially all of the administrative and support functions of the Company are
provided by Aetna and its affiliates. The financial statements reflect allocated
charges for these services based upon measures appropriate for the type and
nature of service provided.
9. REINSURANCE
The Company utilizes indemnity reinsurance agreements to reduce its exposure to
large losses in all aspects of its insurance business. Such reinsurance permits
recovery of a portion of losses from reinsurers, although it does not discharge
the primary liability of the Company as direct insurer of the risks reinsured.
The Company evaluates the financial strength of potential reinsurers and
continually monitors the financial condition of reinsurers. Only those
reinsurance recoverables deemed probable of recovery are reflected as assets on
the Company's Consolidated Balance Sheets.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
9. REINSURANCE (CONTINUED)
The following table includes premium amounts ceded/assumed to/from affiliated
companies as discussed in Note 8 above.
<TABLE>
<CAPTION>
CEDED TO ASSUMED
DIRECT OTHER FROM OTHER NET
AMOUNT COMPANIES COMPANIES AMOUNT
--------- ------------- ------------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
1995
Premiums:
Life Insurance....................................... $ 28.8 $ 8.6 $ 28.0 $ 48.2
Accident and Health Insurance........................ 7.5 7.5 -- --
Annuities............................................ 82.1 -- 0.5 82.6
--------- ----- ----- ---------
Total earned premiums................................ $ 118.4 $ 16.1 $ 28.5 $ 130.8
--------- ----- ----- ---------
--------- ----- ----- ---------
1994
Premiums:
Life Insurance....................................... $ 27.3 $ 6.0 $ 32.8 $ 54.1
Accident and Health Insurance........................ 9.3 9.3 -- --
Annuities............................................ 69.9 -- 0.2 70.1
--------- ----- ----- ---------
Total earned premiums................................ $ 106.5 $ 15.3 $ 33.0 $ 124.2
--------- ----- ----- ---------
--------- ----- ----- ---------
1993
Premiums:
Life Insurance....................................... $ 22.4 $ 5.6 $ 33.3 $ 50.1
Accident and Health Insurance........................ 12.9 12.9 -- --
Annuities............................................ 31.3 -- 0.7 32.0
--------- ----- ----- ---------
Total earned premiums................................ $ 66.6 $ 18.5 $ 34.0 $ 82.1
--------- ----- ----- ---------
--------- ----- ----- ---------
</TABLE>
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
10. FINANCIAL INSTRUMENTS
ESTIMATED FAIR VALUE
The carrying values and estimated fair values of the Company's financial
instruments at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
(MILLIONS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................................. $ 568.8 $ 568.8 $ 623.3 $ 623.3
Short-term investments.................................... 15.1 15.1 98.0 98.0
Debt securities........................................... 12,720.8 12,720.8 10,191.4 10,191.4
Equity securities......................................... 257.6 257.6 229.1 229.1
Limited partnership....................................... -- -- 24.4 24.4
Mortgage loans............................................ 21.2 21.9 9.9 9.9
Liabilities:
Investment contract liabilities:
With a fixed maturity................................... 989.1 1,001.2 826.7 833.5
Without a fixed maturity................................ 9,511.0 9,298.4 8,122.6 7,918.2
</TABLE>
Fair value estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument, such as
estimates of timing and amount of expected future cash flows. Such estimates do
not reflect any premium or discount that could result from offering for sale at
one time the Company's entire holdings of a particular financial instrument, nor
do they consider the tax impact of the realization of unrealized gains or
losses. In many cases, the fair value estimates cannot be substantiated by
comparison to independent markets, nor can the disclosed value be realized in
immediate settlement of the instrument. In evaluating the Company's management
of interest rate and liquidity risk, the fair values of all assets and
liabilities should be taken into consideration, not only those above.
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
SHORT-TERM INSTRUMENTS: Fair values are based on quoted market prices or dealer
quotations. Where quoted market prices are not available, the carrying amounts
reported in the Consolidated Balance Sheets approximates fair value. Short-term
instruments have a maturity date of one year or less and include cash and cash
equivalents, and short-term investments.
DEBT AND EQUITY SECURITIES: Fair values are based on quoted market prices or
dealer quotations. Where quoted market prices or dealer quotations are not
available, fair value is estimated by using quoted market prices for similar
securities or discounted cash flow methods.
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
10. FINANCIAL INSTRUMENTS (CONTINUED)
MORTGAGE LOANS: Fair value is estimated by discounting expected mortgage loan
cash flows at market rates which reflect the rates at which similar loans would
be made to similar borrowers. The rates reflect management's assessment of the
credit quality and the remaining duration of the loans. The fair value estimate
of mortgage loans of lower quality, including problem and restructured loans, is
based on the estimated fair value of the underlying collateral.
INVESTMENT CONTRACT LIABILITIES (INCLUDED IN POLICYHOLDERS' FUNDS LEFT WITH THE
COMPANY):
WITH A FIXED MATURITY: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
WITHOUT A FIXED MATURITY: Fair value is estimated as the amount payable to the
contractholder upon demand. However, the Company has the right under such
contracts to delay payment of withdrawals which may ultimately result in paying
an amount different than that determined to be payable on demand.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (INCLUDING DERIVATIVE FINANCIAL
INSTRUMENTS)
During 1995, the Company received $0.4 million for writing call options on
underlying securities. As of December 31, 1995 there were no option contracts
outstanding.
At December 31, 1995, the Company had a forward swap agreement with a notional
amount of $100.0 million and a fair value of $0.1 million.
The Company did not have transactions in derivative instruments in 1994.
The Company also holds investments in certain debt and equity securities with
derivative characteristics (i.e., including the fact that their market value is
at least partially determined by, among other things, levels of or changes in
interest rates, prepayment rates, equity markets or credit ratings/spreads). The
amortized cost and fair value of these securities, included in the $13.4 billion
investment portfolio, as of December 31, 1995 was as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
(MILLIONS) COST VALUE
----------- -----------
<S> <C> <C>
Collateralized mortgage obligations......................... $ 2,383.9 $ 2,549.3
Principal-only strips (included above)...................... 38.7 50.0
Interest-only strips (included above)....................... 10.7 20.7
Structured Notes (1)........................................ 95.0 100.3
</TABLE>
(1) Represents non-leveraged instruments whose fair values and credit risk are
based on underlying securities, including fixed income securities and
interest rate swap agreements.
11. COMMITMENTS AND CONTINGENT LIABILITIES
COMMITMENTS
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a specified
future date and at a specified price or yield. The inability of counterparties
to honor these commitments may result in either higher or lower replacement
cost. Also, there is likely to be a change in
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Services, Inc.)
Notes to Consolidated Financial Statements (continued)
December 31, 1995, 1994, and 1993
11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
the value of the securities underlying the commitments. At December 31, 1995,
the Company had commitments to purchase investments of $31.4 million. The fair
value of the investments at December 31, 1995 approximated $31.5 million. There
were no outstanding forward commitments at December 31, 1994.
LITIGATION
There were no material legal proceedings pending against the Company as of
December 31, 1995 or December 31, 1994 which were beyond the ordinary course of
business. The Company is involved in lawsuits arising, for the most part, in the
ordinary course of its business operations as an insurer.
12. SEGMENT INFORMATION
The Company's operations are reported through two major business segments: Life
Insurance and Financial Services.
Summarized financial information for the Company's principal operations was as
follows:
<TABLE>
<CAPTION>
(MILLIONS) 1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Financial services........................................ $ 1,129.4 $ 946.1 $ 892.8
Life insurance............................................ 407.9 386.1 371.7
----------- ----------- -----------
Total revenue............................................. $ 1,537.3 $ 1,332.2 $ 1,264.5
----------- ----------- -----------
Income before federal income taxes:
Financial services........................................ $ 158.0 $ 119.7 $ 121.1
Life insurance............................................ 102.0 96.8 98.0
----------- ----------- -----------
Total income before federal income taxes.................. $ 260.0 $ 216.5 $ 219.1
----------- ----------- -----------
Net income:
Financial services........................................ $ 113.8 $ 85.5 $ 86.8
Life insurance............................................ 62.1 59.8 56.1
----------- ----------- -----------
Net income.................................................. $ 175.9 $ 145.3 $ 142.9
----------- ----------- -----------
Assets under management, at fair value:
Financial services........................................ $ 23,224.3 $ 17,785.2 $ 16,600.5
Life insurance............................................ 2,698.1 2,171.7 2,175.5
----------- ----------- -----------
Total assets under management............................. $ 25,922.4 $ 19,956.9 $ 18,776.0
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-26
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT C
VARIABLE ANNUITY CONTRACTS
ISSUED BY
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Form No. 01107(S) ALIAC Ed. August 1996
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
<TABLE>
<S><C>
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 Group Combination Annuity Contract (Nonparticipating) (A001RP95)(3)
(4.2) Form of Group Combination Annuity Certificate (Nonparticipating) (A007RC95)(3)
(4.3) Form of Group Combination Annuity Contract (Nonparticipating) (A020RV95)(3)
(4.4) Form of Group Combination Annuity Certificate (Nonparticipating) (A027RV95)(3)
(4.5) Form of Endorsement for Exchanged Contracts (EINRP95)(3)
(4.6) Form of Endorsement for Exchanged Contracts (EINRV95)(3)
(4.7) Form of Endorsement for 401(a) Plans(3)
(5) Form of Variable Annuity Contract Application (300-MOP-IB)(4)
(6) Certification of Incorporation and By-Laws of Depositor(5)
(7) Not applicable
<PAGE>
(8.1) Fund Participation Agreement (Amended and Restated) between Aetna Life
Insurance and Annuity Company, Alger American Fund and Fred Alger
Management, Inc. dated March 31, 1995(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(2)
(8.3) Second Amendment dated January 1, 1996 to Fund Participation Agreement
between Aetna Life Insurance and Annuity Company and Calvert Asset
Management Company (Calvert Responsibly Invested Balanced Portfolio, formerly
Calvert Socially Responsible Series) dated March 13, 1989 and
amended December 27, 1993(6)
(8.4) Fund Participation Agreement between Aetna Life Insurance and Annuity Company
and Fidelity Distributors Corporation (Variable Insurance Products Fund) dated
February 1, 1994 and amended March 1, 1996(2)
(8.5) Fund Participation Agreement between Aetna Life Insurance and Annuity Company
and Fidelity Distributors Corporation (Variable Insurance Products Fund II) dated
February 1, 1994 and amended March 1, 1996(2)
(8.6) Service Agreement between Aetna Life Insurance and Annuity Company and
Fidelity Investments Institutional Operations Company dated as of November 1, 1995(6)
(8.7) Fund Participation Agreement between Aetna Life Insurance and Annuity Company
and Franklin Advisers, Inc. dated January 31, 1989(2)
(8.8) Fund Participation Agreement between Aetna Life Insurance and Annuity Company
and Janus Aspen Series dated April 19, 1994 and amended March 1, 1996(2)
(8.9) 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(2)
(8.10) Fund Participation Agreement between Aetna Life Insurance and Annuity Company
and Advisers Management Trust (now Neuberger & Berman Advisers Management
Trust) dated April 14, 1989 and as assigned and modified on May 1, 1995(2)
(8.11) 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(2)
(8.12) Amendment dated as of February 20, 1996 to Fund Participation Agreement
between Aetna Life Insurance and Annuity Company and Scudder Variable Life
Investment Fund dated April 27, 1992 as amended February 19, 1993 and
August 13, 1993(6)
(8.13) 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(2)
(9) Opinion of Counsel
(10.1) Consent of Independent Auditors
</TABLE>
<PAGE>
(10.2) Consent of Counsel (included in Exibit 24(b)(9))
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data(8)
(14) Not applicable
(15.1) Powers of Attorney
(15.2) Authorization for Signatures(2)
(27) Financial Data Schedule
1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on
April 22, 1996.
2. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on
April 12, 1996.
3. Incorporated by reference to Registration Statement on Form N-4
(File No. 333-01107), as filed electronically on February 21, 1996.
4. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-91846), as filed on May 1, 1995.
5. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed electronically on
April 15, 1996.
6. Incorporated by reference to Post -Effective Amendment No. 3 to Registration
Statement on form N-4 (File No. 33-88720), as filed electronically on
June 28, 1996.
7. Incorporated by Reference to Registrant's 24f-2 Notice for fiscal year ended
December 31, 1995, as filed electronically on February 29, 1996.
8. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-88720), as filed electronically on
November 30, 1995.
9. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-88720), as filed electronically on
April 22, 1996.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Name and Principal
Business Address* Positions and Offices with Depositor
- ------------------ ------------------------------------
Daniel P. Kearney Director and President
Timothy A. Holt Director, Senior Vice President and
Chief Financial Officer
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
Deborah Koltenuk Vice President and Treasurer,
Corporate Controller
Zoe Baird Senior Vice President and
General Counsel
Diane Horn Vice President and Chief
Compliance Officer
Susan E. Schechter Corporate Secretary and Counsel
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
ITEM 26.
Attached hereto is a diagram of all persons directly or indirectly under
common control with the Registrant. The diagram indicates the percentage of
voting securities (rights) owned and, in parenthesis after the company's
name, the state or the other sovereign power under the laws of which the
company is organized. Accompanying the diagram is a list which indicates the
principal business of each company.
<PAGE>
JULY 31, 1996 ORGANIZATION CHART PAGE 1
AETNA
INC.
(1) (Connecticut)
|
|---------------------------------------------------|
100% 100%
| |
AETNA U.S.
SERVICES, HEALTHCARE
INC. INC.
(1) (Connecticut) (a) (1) (Pennsylvania) (a)
| |
See See
Pages Supplement
2 and 3 #4
(1) Corporation (a) Fully Consolidated
(2) Partnership (b) One Line Consolidation
(3) Joint Venture (c) Not Consolidated
(4) Trust
(5) Limited Liability Company
Percentages are rounded to the nearest
whole percent and are based on ownership
of voting rights.
<PAGE>
<TABLE>
<CAPTION>
<S><C>
JULY 31, 1996 PAGE 2
AETNA
SERVICES,
INC.
(1)(Connecticut)(a)
|
- ----------------------------------------------------------------------------------------------------------------------------------
| | | | | |
100% 100% 100% | 100% 100%
| | | | | |
AETNA AETNA AETNA | AETNA HEALTH STRUCTURED
LIFE RETIREMENT INTERNATIONAL, | AND LIFE BENEFITS,
INSURANCE SERVICES, INC. | INSURANCE INC.
COMPANY INC. | COMPANY |
| | |
(1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Connecticut)(a) | (1)(Connecticut)(a) (1)(Connecticut)(a)
| | | | | |
See See See | | |
Supplement Supplement Supplement | |---------------------- 100%
#1 #2 #3 | | | | |
| | | | |
| 100% | 99%* STRUCTURED
| | | | BENEFITS
| AETNA | GATEWAY OF FLORIDA,
| GATEWAY | ONE INC.
| OF | L.L.C.
| ILLINOIS, | (1)(Florida)(b)
| INC. |
| (1)(Delaware)(a) | (5)(Delaware)(b)
| |
| -----------------------
| | |
| 15% 15%
| | |
| PARKLAKE NORTHLAKE
| ASSOCIATES CENTRE
| ASSOCIATES
|
SEE
PAGE (2)(Georgia)(b) (2)(Georgia)(b)
3
</TABLE>
* Aetna Gateway of Illinois, Inc. owns 1% of this Limited Liability Company.
Percentages are rounded to the nearest whole percent and are based on
ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
<S><C>
JULY 31, 1996 PAGE 3
AETNA
SERVICES,
INC.
(1) (Connecticut) (a)
|
---------------------------------------------------------------------------------------------
| | | | |
| | | | |
100% 100%* | 100% 100%
| | | | |
| | | | |
SPAN DATA AETNA | AETNA AE FIFTEEN,
PROCESSING FOUNDATION, INC. | BUSINESS INCORPORATED
CENTER, INC. | RESOURCES,
| INC.
|
(1) (Connecticut) (a)(1) (Connecticut) (a) | (1) (Connecticut) (a)(1) (Connecticut) (a)
|
|
|
---------------------------------------------------------------------------------------------
| | | | |
| | | | |
100% 100% 95%** 100% 100%
| | | | |
LUETTGENS AE AETNA FARMINGTON AETNA
LIMITED HOUSING CAPITAL HOLDINGS REALTY
CORP L.L.C. INC. INVESTMENTS I,
INC.
(1) (Connecticut) (a)(1) (Connecticut) (a) (5) (Delaware) (a)(1) (Connecticut) (a)(1) (Connecticut) (a)
|
|
84%***
|
AETNA
PROPERTIES I
LIMITED
PARTNERSHIP
(2) (Connecticut) (c)
</TABLE>
* Nonstock Corporation
** Aetna Capital Holdings, Inc. (see Supplement #3b) owns 5% of this Limited
Liability Company.
*** Aetna Realty Investments I, Inc. is a 1% general partner and an 83% limited
partner
Percentages are rounded to the nearest whole percent and are based on
ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
<S><C>
JULY 31, 1996 SUPPLEMENT #1
AETNA
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
|
--------------------------------------------------------------|-----------------------------------------------
| | | | | | | |
100% 100% 100% 100% | 100% 99%* 100%
| | | | | | | |
CMBS AETNA ALIC AETNA | CDI CDI AB
HOLDINGS, REAL ESTATE ENERGY, INSURANCE | EQUITY, ---1%--- EQUITY, FOURTEEN,
INC. PROPERTIES, CO. COMPANY OF | INC. L.L.C. INC.
INC. CONNECTICUT |
|
(1)(Texas)(a) (1)(Connecticut)(a) (1)(Texas)(a) (1)(Connecticut)(a)| (1)(Delaware)(a) (5)(Delaware)(a) (1)(Connecticut)(a)
| |
| |
--------------------------------------------------------|------------------------------ |
| | | | | | |
100% 70% 100% | 13%** 80% 50%
| | | | | | |
AETNA BAYSHORE AETNA/AREA | AETNA SHADOW RIDGE CAPITOL DISTRICT
LIFE HEIGHTS CORPORATION | INSTITUTIONAL AT OAK PARK ENERGY CENTER
ASSIGNMENT ASSOCIATES | INVESTORS I CONDOMINIUM COGENERATION
COMPANY | LIMITED ASSOCIATES ASSOCIATES
| PARTNERSHIP
(1)(Connecticut)(a) (2) (Florida) (b) (1) (Connecticut) (a) |(2) (Connecticut) (b) (2) (California) (b) (2)(Connecticut) (b)
-------------------------------------------------------|-----------------------------------------------------
| | | | | | |
100% 99%***** 100% | 99%**** 100% 90% ***
| | | | | | |
BPC BPC AHP See BAY AREA BAY AREA 455
EQUITY, EQUITY, HOLDINGS, Supplement MALL, MALL, MARKET
INC. ---1%--- L.L.C. INC. #1a L.L.C. ---1%--- INC. STREET
(1)(Delaware)(a) (5)(Delaware)(a) (1)(Connecticut)(a) (5)(Delaware)(a) (1)(Delaware)(a) (2)(California)(b)
|
See
Supplement
#1e
* CDI Equity, Inc. owns 1% of this Limited Liability Company
** Aetna Real Estate Properties, Inc. is a 1% general partner. Percentages are rounded to the nearest whole percent
*** 89% general partner and 1% limited partner. and are based on ownership of voting rights.
**** Bay Area Mall, Inc. owns 1% of this Limited Liability Company.
***** BPC Equity, Inc. owns 1% of this Limited Liability Company.
</TABLE>
<PAGE>
JULY 31, 1996 SUPPLEMENT #1A
<TABLE>
<S> <C>
AETNA
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
|
---------------------------------------------------------------------------------------------------------------
| | | | | | |
50% * 50% * 50% * 50% * | 50% * 50% *
| | | | | | |
FRIDAY KOLL KOLL KOLL | KOLL KOLL
ASSOCIATES CENTER CENTER CENTER | CENTER CENTER
NEWPORT A NEWPORT NEWPORT | NEWPORT NEWPORT
NUMBER 8 NUMBER 9 | NUMBER 10 NUMBER 11
|
(2) (California) (b) (2) (California) (b) (2) (California) (b) (2) (California) (b) |(2) (California) (b) (2) (California) (b)
|
|
------------------------------------------------------------------
| | | | |
60% 60% ** | 62% 99%***
| | | | |
KOLL KOLL | AETNA WATERLOO
CENTER CENTER | HAMILTON ASSOCIATES
NEWPORT NEWPORT | PARTNERSHIP LIMITED
NUMBER 14 NUMBER 15 | PARTNERSHIP
| (2) (North
(3) (California) (b) (2) (California) (b) | (2) (Illinois) (b) Carolina)(b)
|
|
------------------------------------------------------------------------------------------------------------------
| | | | | | |
99% 60% 50% 60% | 68% 99%
| | | | | | |
HAYWARD GABLES GABLES COUNTRY CLUB See BIRTCHER HARBOR
INDUSTRIAL AT AT HEIGHTS AT Supplement AETNA- BUSINESS
PARK FARMINGTON BRIGHTON WOBURN #1b LAGUNA PARK
ASSOCIATES ASSOCIATES ASSOCIATES ASSOCIATES HILLS
(2)(Connecticut)(b) (2)(Connecticut)(b) (2) (New York) (b) (2)(Massachusetts)(b) (2) (California) (b) (2) (California) (b)
</TABLE>
* Aetna Life Insurance Company is a 49% general partner and a 1% limited
partner.
** Aetna Life Insurance Company is a 59% general partner and a 1% limited
partner.
*** Aetna Life Insurance Company is a 99% general partner and Trumbull Three,
Inc. is a 1% limited partner.
Percentages are rounded to the nearest whole percent and
are based on ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
<S><C>
JULY 31, 1996 SUPPLEMENT #1b
-------------------
AETNA
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
-------------------
|
|
------------------------------------------------------------------------------------------------------
| | | | | |
99%* 100% 99%* 99%* | 80%
| | | | | |
ENSENADA TREVOSE OAKS OAKS | KBC-RED
DE LAS HOSPITALITY, AT AT | HILL
COLINAS I INC. VALLEY VALLEY | LIMITED
ASSOCIATES RANCH I RANCH II | PARTNERSHIP
|
(2)(Texas)(b) (1)(Connecticut)(b) (2)(Texas)(b) (2)(Texas)(b) | (2)(California)(b)
|
|
|
|
|
------------------------------------------------------------------------------------------------------
| | | | | |
100%* 100% 100% 100% | 84%****
| | | | | |
TRUMBULL TRUMBULL TRUMBULL TRUMBULL | CENTURY
ONE, TWO, THREE, FOUR, | CITY
INC. INC. INC. INC. | NORTH
| L.L.C.
|
(1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Connecticut(a) | (5)(Delaware)(b)
|
|
|------------------------
|
|
See
Supplement
#1c
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
|
|
|
|
|
------------------------------------------
| | |
80% 75% |
| | |
KBC- C.R.I. |
EASTSIDE HOTEL |
LIMITED ASSOCIATES, |
PARTNERSHIP L.P. |
|
(2)(Arizona)(b) (2)(Iowa)(b) |
|
|
|
|
------------------------------------------
| | |
99%*** 60% |
| | |
SOUTHFIELD LINCOLN |
PARTNERS RANCHO |
CUCAMONGA |
ASSOCIATES |
|
(2)(Maryland)(b) (2)(California)(b) |
|
|
------------------------------------------
|
99%*
|
VILLAGE
GREEN OF
MADISON
HEIGHTS
(2)(Michigan)(b)
</TABLE>
* Aetna Life Insurance Company is a 99% general partner and Trumbull One,
Inc. is a 1% limited partner.
** Aetna Life Insurance Company is a 99% general partner and Trumbull Three,
Inc. is a 1% limited partner.
*** Aetna Life Insurance Company is a 99% general partner and Trumbull Four,
Inc. is a 1% limited partner.
**** Aetna Health and Life Insurance Company owns 16% of this limited liability
company.
Percentages are rounded to the nearest whole percent and are based on ownership
of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #1c
<TABLE>
<S> <C>
AETNA
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
|
--------------------------------------------------|--------------------------------------------------
| | | | | | |
65% 50% 60% | 75% 99%* 50%
| | | | | | |
CENTRUM TRI-CITY SOUTHWEST | B&H CHAMPIONS CHRIS-TOWN
ASSOCIATES MALL FINANCIAL | VENTURES IV RICHLAND VILLAGE
ASSOCIATES CENTER | LIMITED NORTHCOURTE ASSOCIATES
ASSOCIATES | PARTNERSHIP PARTNERSHIP
|
(2) (California) (b) (2) (Arizona) (b) (2) (Arizona) (b) |(2)(Connecticut)(b) (2) (Texas) (a) (2) (Arizona) (b)
|
|
----------|-------------------------------------------------
| | | |
60% | 50% 50%
| | | |
WOODSIDE | SPECTRUM CAMBRIDGESIDE
TERRACE | FASHION GALLERIA
PARTNERS | CENTER
|
|
(2) (California) (b)| (2) (Arizona) (b) (2)(Massachusetts)(b)
|
|
|
See
Supplement
#1d
</TABLE>
*Aetna Life Insurance Company is a 99% general partner and Trumbull One, Inc.,
is a 1% limited partner.
Percentages are rounded to the nearest whole percent and are based on
ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #1d
<TABLE>
<S> <C>
AETNA
LIFE
INSURANCE
COMPANY
(1)(Connecticut)(a)
|
|
---------------------------------------------------------------------------------------------------------------
| | | | | | | |
| | | | | | | |
99%*** 30% 99% 99%*** | 99%*** 85% * 25%
| | | | | | | |
GOLF ADBI MARRIOTT TCR | FAIRWAY 1501 THACE
COURSE PARTNERSHIP INNER VENTANJA | PARTNERS FOURTH AVE. ASSOCIATES
VIEW HARBOR LIMITED | LIMITED
PARTNERSHIP HOTEL PARTNERSHIP | PARTNERSHIP
|
(2)(Maryland)(b) (2)(Florida)(b) (2)(Maryland)(a) (2) (Texas)(b)| (2)(Maryland)(b) (2)(Washington)(b) (2) (Michigan) (b)
|
|
|
|
--------------------------------------------------------------------------------------------------------------
| | | | | | |
| | | | | | |
99% *** 99% ** 99% ** | 99%**** 100% 99%****
| | | | | | |
| | | | | | |
LINCOLN EASTMEADOW EASTMEADOW | AZALEA SOUTHEAST MENLO
LOS PADRES DISTRIBUTION DISTRIBUTION | MALL, SECOND ONE,
CENTER CENTER PHASE | L.L.C. -1%- AVENUE, -1%- L.L.C.
LIMITED II LIMITED | INC.
PARTNERSHIP PARTNERSHIP |
(2)(California)(b) (2)(Georgia)(b) (2)(Georgia)(b) | (5)(Delaware)(b) (1)(Delaware)(a) (5)(Delaware)(b)
|
------------------------------------------
| |
| |
15% 15%
211 CENTRAL
EAST TRUST
ONTARIO CENTER
ASSOCIATES ASSOCIATES
(2) (Illinois) (b) (2) (Ohio) (b)
</TABLE>
*Aetna Life Insurance Company is a 84% general partner and a 1% limited
partner.
**Aetna Life Insurance Company is a 98% general partner and a 1% limited
partner.
***Aetna Life Insurance Company is a 99% general partner and Trumbull Two,
Inc., is a 1% limited partner.
****Southeast Second Avenue, Inc. owns 1% of these limited liability companies.
Percentages are rounded to the nearest whole percent and are based
on ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #1e
<TABLE>
<S> <C>
AHP
HOLDINGS,
INC.
(1)(Connecticut)(a)
|
-------------------------------------------------------|---------------------------------------------------
| | | | | | |
100% 100% 100% | 100% 100% 100%
| | | | | | |
AETNA AETNA AETNA | INFORMED AETNA AETNA
HEALTH DENTAL HEALTH | HEALTH, HEALTH HEALTH
PLANS OF CARE OF PLANS OF | INC. PLANS OF PLANS OF
OHIO, INC. CALIFORNIA, FLORIDA, | TENNESSEE, INC. GEORGIA,
INC. INC. | INC.
(1) (Ohio) (a) (1) (California) (a) (1) (Florida) (a) | (1) (Delaware) (a) (1)(Tennessee)(a) (1) (Georgia) (a)
|
|
------------------------------------------------------|--------------------------------------------------
| | | | | |
100% 100% | 100% 100% 100%
| | | | | |
AETNA AETNA | HEALTHWAYS AETNA AETNA
HEALTH DENTAL | SYSTEMS, HEALTH PLANS HEALTH PLANS
MANAGEMENT, CARE OF | INC. OF THE OF THE
INC. NEW JERSEY, | MID-ATLANTIC, CAROLINAS,
INC. | INC. INC.
(1) (Delaware) (a) (1) (New Jersey) (a) | (1)(Delaware)(a) (1)(Virginia)(a) (1) (North Carolina) (a)
| | |
See | |
Supplement | See
#1g | Supplement
| #1h
|
|
|
|
|
|
See
Supplement
#1f
</TABLE>
Percentages are rounded to the nearest whole percent and are based
on ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #1F
<TABLE>
<CAPTION>
AHP
HOLDINGS,
INC.
(1) (Connecticut)(a)
|
-----------------------------------------------------------------------------------------------------------------
| | | | | | |
<S> | <C> | | | | | |
55% 100% 100% | 100% 100% 100%
| | | |
PHPSNE AETNA AETNA | HUMAN AETNA AETNA
PARENT HEALTH DENTAL CARE | AFFAIRS HEALTH DENTAL CARE
CORPORATION PLANS OF OF TEXAS, | INTERNATIONAL, PLANS OF OF
ARIZONA, INC. | INCORPORATED ILLINOIS, KENTUCKY,
INC. | INC. INC.
|
(1) (Delaware)(a) (1) (Arizona) (a) (1) (Texas) (a) | (1) (Utah) (a) (1) (Illinois)(a) (1) (Kentucky)(a)
| | |
| | |
100% | See
| | Supplement
| | #1j
AETNA ---------------------------------------------------------------------------------------------
HEALTH PLANS | | | | |
OF SOUTHERN 100% 100% | 100% 100%
NEW ENGLAND, | | | | |
INC. AETNA HEALTH AETNA | AETNA AETNA
(1) PLANS OF CENTRAL HEALTH | HEALTH PROFESSIONAL
(Connecticut)(a) AND EASTERN PLANS OF | PLANS OF MANAGEMENT
PENNSYLVANIA, INC. TEXAS, INC. | LOUISIANA, CORPORATION
| INC.
(1) (Pennsylvania)(a) (1) (Texas) (a) | (1) (Louisiana)(a) (1) (Connecticut)(a)
| |
| -------------------- --------------------
| | | |
100% 55% 100% 100%
| | | |
FREEDOM MED ADS HEALTHWAYS,
CHOICE, SOUTHWEST, HEALTH INC.
INC. INC. MANAGEMENT,
INC.
(1) (Pennsylvania)(a) (1) (Texas) (a) (1) (California)(a) (1) (Illinois)(a)
</TABLE>
Percentages are rounded to the nearest whole percent and
are based on ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #1g
AETNA
HEALTH
MANAGEMENT,
INC.
(1)(Delaware)(a)
|
|
------------------------------------------------------
| |
100% 100%
| |
AETNA AETNA
GOVERNMENT HEALTH
HEALTH PLANS PLANS, OF
INC. CALIFORNIA, INC.
(1)(California)(a) (1)(California)(a)
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #1h
HEALTHWAYS
SYSTEMS,
INC.
(1) (Delaware) (a)
|
-------------------------------------------------
| |
100% 100%
| |
AETNA AETNA
HEALTH HEALTH
PLANS OF PLANS OF
NEW YORK, NEW JERSEY,
INC. INC.
(1) (New York) (a) (1) (New Jersey) (a)
Percentages are rounded to the nearest
whole percent and are based on ownership
of voting rights.
<PAGE>
<TABLE>
<CAPTION>
<S><C>
JULY 31, 1996 SUPPLEMENT #1j
HUMAN
AFFAIRS
INTERNATIONAL,
INCORPORATED
(1) (Utah) (a)
|
|
--------------------------------------------------------------------------------------
| | | |
100% 100% 100% 100%
| | | |
HUMAN HUMAN BEHAVIORAL HUMAN
AFFAIRS AFFAIRS HEALTHCARE AFFAIRS
OF ALASKA, INTERNATIONAL SOLUTIONS, INTERNATIONAL
INC. OF CALIFORNIA INC. IPA, INC.
(1) (Alaska) (a) (1) (California) (a) (1) (Delaware) (a) (1) (New York) (a)
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
JULY 31, 1996 SUPPLEMENT #2
AETNA
RETIREMENT
SERVICES,
INC.
(1) (Connecticut) (a)
|
100%
|
AETNA
RETIREMENT
HOLDINGS,
INC.
|
(1) (Connecticut) (a)
|
----------------------------------------------------------------------------------------------------------
| | | | |
100% 100% 100% 100% 100%
| | | | |
AETNA LIFE SYSTEMATIZED AETNA AELTUS AETNA
INSURANCE BENEFITS FINANCIAL INVESTMENT INVESTMENT
AND ANNUITY ADMINISTRATORS, SERVICES, MANAGEMENT, SERVICES,
COMPANY INC. INC. INC. INC.
(1) (Connecticut) (a) (1) (Connecticut) (a) (1) (Connecticut) (a) (1) (Connecticut) (a) (1) (Connecticut) (a)
| |
See See
Supplement Supplement
#2a #2b
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
</TABLE>
<PAGE>
JULY 31, 1996 SUPPLEMENT #2a
<TABLE>
<S> <C>
AETNA LIFE
INSURANCE
AND ANNUITY
COMPANY
(1) (Connecticut) (a)
|
------------------------------------------------------------------------------------------------------------
| | | | |
100% 100% | 99% 100%
| | | | |
AETNA AETNA | AETNA AETNA
INSURANCE PRIVATE | INCOME VARIABLE
COMPANY CAPITAL | SHARES ENCORE
OF AMERICA INC. | FUND
|
(1) (Connecticut) (a) (1) (Connecticut) (a) | (4)(Massachusetts)(b) (4)(Massachusetts)(b)
|
|
|
------------------------------------------------------------------------------------------------------------
| | | | |
100% 98% 100% 100% 13%
| | | | |
AETNA AETNA AETNA AETNA AETNA
GET FUND VARIABLE GENERATION INVESTMENT SERIES
FUND PORTFOLIOS, ADVISERS FUND,
INC. FUND, INC. INC.
(4) (Massachusetts) (b) (4)(Massachusetts)(b) (1) (Maryland) (b) (1) (Maryland) (b) (1) (Maryland) (b)
</TABLE>
Percentages are rounded to the nearest whole percent and are based on ownership
of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #2b
<TABLE>
<S> <C>
AELTUS
INVESTMENT
MANAGEMENT,
INC.
(1)(Connecticut)(a)
|
-------------------------------------------------------------------------------
| | | |
100% 100% 100% 35%
| | | |
AETNA AELTUS AELTUS SMITH
INVESTMENT CAPITAL, TRUST WHILEY
MANAGEMENT INC. COMPANY &
(BERMUDA) COMPANY
HOLDINGS LIMITED
(1) (Bermuda) (a) (1) (Connecticut) (a) (1) (Connecticut) (a) (1) (Delaware) (b)
|
|------------------------
| |
100% 50%
| |
AETNA CHINA
INVESTMENT DYNAMIC
MANAGEMENT INVESTMENT
(S'PORE) MANAGEMENT
PTE LTD. (HONG KONG)
LIMITED
(1) (Singapore) (a) (1) (Hong Kong) (b)
</TABLE>
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #3
<TABLE>
<S> <C>
AETNA
INTERNATIONAL,
INC.
(1)(Connecticut)(a)
|
--------------------------------------------------------------------------------------------------------------------
| | | | | | | |
100% 50% 100% 100% | 80% 100% 100%
| | | | | | | |
AETNA EAST ASIA AETNA AE | ALICA AETNA AETNA
INTERNATIONAL AETNA INTERNATIONAL INSURANCE | HOLDINGS, LIFE INTERNATIONAL
HOLDINGS INSURANCE FUND (CAYMAN) | INC. INSURANCE HOLDINGS
(HONG KONG) I COMPANY MANAGEMENT LTD. | COMPANY OF (HONG KONG) II
LIMITED (BERMUDA) LTD. INC. | AMERICA LIMITED
(1)(Hong Kong)(a) (1)(Bermuda)(b) (1)(Connecticut)(a) (1)(Cayman)(b) | (1)(Connecticut)(a) (1)(Connecticut)(a) (1)(Hong Kong)(a)
| | | | |
| | ----------------------- | |
| | | | | | |
35% * 100% 100% | 100% 50% 82%
| | | | | | |
BLUE CROSS EAST ASIA AETNA | AETNA PT DANAMON- DAYA
(ASIA PACIFIC) AETNA INTERNACIONAL | S.A. AETNA LIFE AETNA
INSURANCE SERVICES DE MEXICO | INSURANCE (MALAYSIA)
LTD. COMPANY S.A. DE C.V. | COMPANY SDN. BHD.
LIMITED |
(1)(Hong Kong)(b) (1)(Hong Kong)(b) (1)(Mexico)(a) | (1)(Chile)(a) (1)(Indonesia)(a) (1)(Malaysia)(a)
| | | | |
See See | See 100%
Supplement Supplement | Supplement |
#3c #3d | #3e AETNA
| UNIVERSAL
-------------- INSURANCE
| | SDN. BHD.
| 100%
| | (1)(Malaysia)(a)
| ARCELLA
| LIMITED
|
|
| (1)(Hong Kong)(a)
|
|
See
Supplement
#3a
*East Asia Aetna Insurance Company (Bermuda) Ltd. owns 30% of Percentages are rounded to the nearest whole percent and
Blue Cross (Asia Pacific) Insurance Ltd. are based on ownership of voting rights.
</TABLE>
<PAGE>
JULY 31, 1996 SUPPLEMENT #3a
<TABLE>
<S> <C>
AETNA
INTERNATIONAL,
INC.
(1)(Connecticut)(a)
|
-----------------------------------------------------------------------------------------------------------
| | | | |
100% 100% | 80% 100%
| | | | |
AETNA AETNA | AETNA HEART AETNA
LIFE & INTERNATIONAL | COMPANY LIFE
CASUALTY GLOBAL | LIMITED INSURANCE
BERMUDA INVESTMENT | INC.
LIMITED SERVICES |
|
(1) (Bermuda) (a) (1) (Luxembourg) (b) | (1)(Taiwan) (a) (1) (Philippines) (a)
| |
| | |
5%* | 100%
| | |
THE | AETNA
AETNA | HEALTHCARE,
INTERNATIONAL | INC.
UMBRELLA |
FUND |
(1) (Luxembourg) (b) |
| (1) (Philippines) (a)
|
|
|
|
SEE
SUPPLEMENT
#3b
</TABLE>
*Percentage controlled by Aetna Life and Casualty Company includes ownership
by the following: Aetna Life and Casualty Company 1%, Aetna Life 'Insurance
Company of America 4%, Aetna Investment Management (F.E.) Limited 2% and
Aetna Life Insurance Company of Canada 1%.
Percentages are rounded to the nearest whole percentage and
are based on ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #3b
<TABLE>
<S> <C>
AETNA
INTERNATIONAL,
INC.
(1)(Connecticut)(a)
|
-----------------------------------------------------------------------------------------------------
| | | | | |
100% 100% 100% | 80% 100%
| | | | | |
AETNA LIFE AND AETNA AETNA | AETNA AETNA
CASUALTY INVESTMENT CAPITAL | SECURITIES CAPITAL
INTERNATIONAL MANAGEMENT HOLDINGS, | INVESTMENT MANAGEMENT
FINANCE N.V. (AUSTRALIA) INC. | MANAGEMENT INTERNATIONAL
LIMITED | (TAIWAN) LTD. LTD.
(1)(Netherlands |
Antilles)(a) (1)(Australia)(a) (1)(Connecticut)(a) | (1)(Taiwan)(a) (1)(United Kingdom)(a)
| |
| ---------------------------------------------------------------------------------
| | | | | |
100% 100% 100% 80% 100% 100%
| | | | | |
AETNA AE FIVE AETNA AETNA AETNA AETNA
(NETHERLANDS) INCORPORATED CANADA INVESTMENT INTERNATIONAL INVESTMENT
HOLDINGS HOLDINGS MANAGEMENT (N.Z.) MANAGEMENT
B.V. LIMITED (TAIWAN) LIMITED (F.E.) HOLDINGS
LIMITED LIMITED
(1)(Netherlands)(b) (1)(Connecticut)(a) (1)(Canada)(a) (1)(Taiwan)(a) (1)(New Zealand)(a) (1) (Hong Kong)(a)
| | |
See See See
Supplement Supplement Supplement
#3f #3g #3h
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
</TABLE>
<PAGE>
JULY 31, 1996 SUPPLEMENT #3C
BLUE CROSS
(ASIA PACIFIC)
INSURANCE
LTD.
|
(1) (Hong Kong) (b)
|
------------------------------------------------
| | |
100% 100% 100%
| | |
TRAVELGUARD TOURSAFE TRAVELSAFE
LIMITED LIMITED LIMITED
(1) (Hong Kong) (b) (1) (Hong Kong) (b) (1) (Hong Kong) (b)
* Aetna International, Inc. and AE Five, Incorporated each own 15% og this
corporation.
Percentages are rounded to the nearest whole
percent and are based on ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
AETNA
INTERNACIONAL
DE MEXICO
S.A. DE C.V.
(1) (Mexico) (a)
|
15%*
|
VALORES
MONTERREY
AETNA,
S.A.
DE C.V.
(1) (Mexico) (b)
|
-----------------------------------------------------------------------------------
| | | | |
<S> <C>
100% 100% 100% 100% 95%
| | | | |
MEXIMED, FIANZAS SEGUROS GRUPO VAMSA, ASESORES EN
S.A. DE C.V. MONTERREY MONTERREY S.A. DE C.V. PROMOCION
AETNA, AETNA, SEGUNOMINA
S.A. S.A. S.A. DE C.V.
(1) (Mexico) (a) (1) (Mexico) (a) (1) (Mexico) (a) (1) (Mexico) (a) (1) (Mexico) (a)
</TABLE>
* Aetna International, Inc. and AE Five, Incorporated each own 15% og this
corporation.
Percentages are rounded to the nearest whole
percent and are based on ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
AETNA
S.A.
(1) (Chile (a)
|
----------------------------------------------------------------------------------------
| | | | | |
<S> <C> |
98% 100% 100% | 100% 100%
|
AETNA AETNA AETNA | AETNA AETNA
CHILE ADMINISTRADORA CHILE | PENSIONES CREDITO
SEGUROS DE FONDOS DE SEGUROS | S.A. HIPOTECARIO
GENERALES INVERSION DE VIDA | S.A.
S.A. S.A. S.A. |
(1) (Chile) (a) (1) (Chile) (a) (1) (Chile) (a) | (1) (Chile) (a) (1) (Chile) (a)
| | |
---------------------------------------------------- | |
| | | | |
60% 86%* 90% 52% 99%****
| | | | |
AETNA AETNA AETNA ADMINISTRADORA IMMOBILARIA
VIDA INTERNATIONAL SALUD DE FONDOS PADRE
S.A. PERU S.A. DE PENSIONES MARINANO
S.A. SANTA MARIA S.A.
S.A.
(1) (Argentina) (a) (1) (Peru) (a) (1) (Chile) (a) (1) (Chile) (a) (1) (Chile) (a)
| |
34% 100%
| |
COMPANIA SANTA MARIA
DE SEGUROS INTERNACIONAL
CONDOR S.A.
S.A.
(1) (Peru) (a) (1) (Chile) (a)
|
71%**
|
AETNA ADMINISTRADORA
PENSIONES DE FONDOS
PERU DE PENSIONES
S.A. ***30% INTEGRA
|--------| S.A.
(1) (Peru) (a) (1) (Peru) (a)
</TABLE>
* Aetna Chile Seguros DeVida S.A. and Aetna Chile Seguros Generales S.A.
have combined ownership of 14%.
** Aetna S.A. owns 29% of this company.
*** Aetna Pensiones Peru S.A. owns 30% of this company.
**** Aetna S.A. owns 1% of this company.
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
AETNA
CANADA
HOLDINGS
LIMITED
(1) (Canada) (a)
|
----------------------------------------------------------------------------------------
| | | | |
<S> <C>
100% 92%* 70%** 100% 100%
| | | | |
AETNA LIFE EQUINOX 2733854 AETNA AETNA
INSURANCE FINANCIAL CANADA CAPITAL ACCEPTANCE
COMPANY 8% GROUP 30% LTD. MANAGEMENT CORPORATION
OF CANADA INC. LIMITED LIMITED
(1) (Canada) (a) (1) (Canada) (a) (1) (Canada) (a) (1) (Ontario) (a) (1) (Ontario) (a)
|
--------------------------------------------------------------------------------------------------------------
| | | | | |
25% 100% 100% 100% 100% 100%
| | | | | |
ECLIPSE AETNA LANDEX MOUNT-BATTEN 3158047 3273806
CLAIMS BENEFITS PROPERTIES PROPERTIES CANADA CANADA
SERVICES, MANAGEMENT, LTD. LIMITED LIMITED LIMITED
INC. INC.
(1) (Ontario) (b) (1) (Canada) (a) (1) (B.C.) (a) (1) (Ontario) (a) (1) (Canada) (a) (1) (Canada) (a)
| |
| |
20% 45%
| |
PVS CHURCHILL
PREFERRED OFFICE
VISION PARK
SERVICES LIMITED
INC.
(1) (Canada) (b) (1) (Canada) (b)
</TABLE>
* Aetna Life Insurance Company of Canada owns 8% of this corporation.
** Equinox Financial Group, Inc. owns 30% of this corporation.
Percentages are rounded to the nearest whole percent and are based
on ownership of voting rights.
<PAGE>
<TABLE>
<CAPTION>
AETNA
INTERNATIONAL
(N.Z.)
LIMITED
(1) (New Zealand) (a)
|
|
50%
|
AETNA
HEALTH
(N.Z.)
LIMITED
(1) (New Zealand) (a)
|
--------------------------------------------------------------------------
| | |
<S> <C>
100% 100% 100%
| | |
AETNA LIFE FIRST MANAGED CARE
INSURANCE MEDICAL (NEW ZEALAND)
(N.Z.) CORPORATION LIMITED
LIMITED LIMITED
(1) (New Zealand) (a) (1) (New Zealand) (a) (1) (New Zealand) (a)
|
50%
|
PRIME HEALTH
LIMITED
(1) (New Zealand) (a)
</TABLE>
Percentages are rounded to the nearest whole percent and are based
on ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #3h
<TABLE>
<S> <C>
AETNA
INVESTMENT
MANAGEMENT
(F.E.) HOLDINGS
LIMITED
(1) (Hong Kong) (a)
|
--------------------------------------------------------------------------------------------------
| | | | |
100% 100% 100% 100% 14%
| | | | |
PLJ AETNA AETNA AETNA KWANG HUA
HOLDINGS INVESTMENT INTERNATIONAL INVESTMENT SECURITIES
LIMITED MANAGEMENT FUND MANAGEMENT INVESTMENT
(F.E.) LIMITED MANAGERS (F.E.) NOMINEES & TRUST CO.
LIMITED LIMITED LTD
(1) (Hong Kong) (a) (1) (Hong Kong) (a) (1) (Hong Kong) (a) (1) (Hong Kong) (a) (1) (Taiwan) (a)
</TABLE>
Percentages are rounded to the nearest whole percent
and are based on ownership of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #4
<TABLE>
<S> <C>
U.S.
HEALTHCARE,
INC.
(1)
(Pennsylvania) (a)
|
---------------------------------------
| | |
100% | 100%
| | |
U. S. | PRIMARY
HEALTHCARE, | HOLDINGS,
FINANCIAL | INC.
SERVICES, |
INC. |
|
(1) (Delaware) | (1) (Delaware)
(a) | (a)
| | |
See | See
Supplement | Supplement
#5 | #6
|
--------------------------------------------------------------------------------------------------------------------
| | | | | | |
100% 100% 100% | 100% 100% 100%
| | | | | | |
U.S. U.S. U.S. | U.S. CORPORATE U.S. MANAGED
HEALTHCARE HEALTHCARE HEALTHCARE | HEALTH HEALTH CARE
DENTAL PLAN, DENTAL PLAN, DENTAL PLAN, | INSURANCE INSURANCE INC.
INC. INC. INC. | COMPANY COMPANY
|
(1) (1) (New (1) (Delaware) | (1) (New York) (1) (Minnesota) (1) (Maryland)
(Pennsylvania) Jersey) (a) (a) | (a) (a) (a)
(a) |
|
--------------------------------------------------------------------------------------------------------------------
| | | | | |
100% 100% 100% 100% 100% 100%
| | | | | |
HEALTH U. S. U. S. U. S. U. S. U. S.
MAINTENANCE HEALTHCARE, HEALTHCARE, HEALTHCARE, HEALTHCARE, HEALTHCARE OF
ORGANIZATION INC. INC. INC. INC. NEW HAMPSHIRE,
OF NEW JERSEY, INC.
INC.
(1) (New Jersey) (1) (New York) (1) (Connecticut) (1) (Massachusetts) (1) (Delaware) (1) (New Hampshire)
(a) (a) (a) (a) (a) (a)
</TABLE>
Percentages are rounded to the nearest whole percent and are based on ownership
of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #5
<TABLE>
<S> <C>
U.S.
HEALTHCARE,
FINANCIAL
SERVICES,
INC.
(1) (Delaware)
(a)
|
----------------------------------------------------------------------------------------------------------------
| | | | | | |
100% 100% 100% | 100% 100% 100%
| | | | | | |
ADVENT INDEPENDENT UNITES STATES | UNITES STATES U.S. HEALTH U.S. HEALTHCARE
INVESTMENTS, INVESTMENTS, PHYSICIANS | HOME HEALTH AVIATION PROPERTIES,
INC. INC. CARE | CARE CORP. INC.
SYSTEMS, INC. | SYSTEMS, INC.
|
(1) | (1) (1) (1)
(1) (Delaware) (1) (Delaware) (Pennsylvania) | (Pennsylvania) (Pennsylvania) (Pennsylvania)
(a) (a) (a) | (a) (a) (a)
| |
-------------------------------------- ------------------------------------------------------
| | | | | |
100% 100% 100% 51% 88% 100%
| | | | | |
U. S. HEALTHCARE WISSAHICKON CRITERION INTELI -HEALTH, USHC
HEALTHCARE DATA PAYMENT COMMUNICATIONS INC. MANAGEMENT
ADVANTAGE, INTERCHANGE ADMINISTRATORS, INC. SERVICES
INC. CORPORATION INC. CORPORATION
(1) (Delaware) (1) (Delaware) (1) (Delaware) (1) (Delaware) (1) (Delaware) (1) (Delaware)
(a) (a) (a) (a) (a) (a)
| |
| |
100% 100%
| |
ADVENT FINANCIAL ORION COMPUTER
SERVICES, SYSTEMS,
INC. INC.
(1) (Delaware) (1) (Pennsylvania)
(a) (a)
|
-----------------------------------------------------------------------------
| | | | |
100% 100% 100% 100% 100%
| | | | |
CORPORATE MANAGED U.S. MENTAL U.S. QUALITY WORKERS COMP
HEALTH CARE HEALTH ALGORITHMS, ADVANTAGE,
ADMINISTRATORS, COORDINATORS, SYSTEMS, INC. INC.
INC. INC. INC.
(1) (1) (1) (1) (1)
(Pennsylvania) (Delaware) (Pennsylvania) (Pennsylvania) (Pennsylvania)
(a) (a) (a) (a) (a)
</TABLE>
Percentages are rounded to the nearest whole percent and are based on ownership
of voting rights.
<PAGE>
JULY 31, 1996 SUPPLEMENT #6
<TABLE>
<S> <C>
PRIMARY
HOLDINGS,
INC.
(1)(Delaware)(a)
|
100%
|
PRIMARY
INVESTMENTS,
INC.
(1)(Delaware)(a)
|
|
-----------------------------------------------------------------------------------------------------------------
| | | | | | |
100% 100% 100% 100% 100% 100% 100%
| | | | | | |
UNITED STATES U.S. U.S. U.S. U.S. ADVENT HMO U.S. HEALTH
HEALTH HEALTHCARE, HEALTHCARE, HEALTHCARE HEALTHCARE CORPORATION INSURANCE
CARE SYSTEMS INC. INC. OF THE OF COMPANY
OF CAROLINAS, GEORGIA,
PENNSYLVANIA, INC. INC.
INC.
(1)(Pennsylvania)(a) (1)(Virginia)(a) (1)(Ohio)(a) (1)(North Carolina)(a) (1)(Georgia)(a) (1)(North Dakota)(a) (1)(Connecticut)(a)
</TABLE>
Percentages are rounded to the nearest whole percent and are based on ownership
of voting rights.
<PAGE>
The following is a list of the principal businesses of each of the companies
listed in the previous table:
<TABLE>
<CAPTION>
Company Name Principal Business
------------ ------------------
<S> <C>
Aetna Inc. Holding Company
Aetna Services, Inc. Holding Company
U.S. Healthcare, Inc. Holding Company
Aetna Life Insurance Company Life and Health Insurance and related services
Aetna Retirement Services, Inc. Holding Company
Aetna Canada Holdings Limited Investment Holding Company
Aetna International, Inc. Holding Company for International Subsidiaries
Aetna International (N.Z.) Limited Holding Company
Aetna Health and Life Insurance Company Life and Health Insurance
Luettgens Limited Retail Specialty Store
AE Housing Corp. Real Estate
Aetna Gateway of Illinois Inc. Real Estate Investments
Gateway One L.L.C. Real Estate
Structured Benefits, Inc. Brokering of Life and Annuity products and
Administrative Services.
Structured Benefits of Florida, Inc. Brokering of Life and Annuity products and
Administrative Services
Aetna Capital L.L.C. Finance - limited liability company
Aetna (Netherlands) Holdings B.V. Finance Company
Span Data Processing Center, Inc. Data Processing
5th Generation, Inc. Dissolved
Aetna Foundation, Inc. Supports charitable scientific, literary and
educational activities
AE Four Incorporated General partner of Camballin of W. Australia
AE Ten Incorporated Shell
AE Fifteen Incorporated Shell Corp. for interest in cogeneration
Arcelia Limited Investment & holding Co. for Aetna's Asia Pacific
operations
Aetna Realty Investments I, Inc. Real Estate Investment
Aetna Properties I Limited Partnership Real Estate Investment
Aetna Investment Management (F.E.) Investment Holding Company
Holdings Limited
Consultores De Pensiones S.R.L. Financial advice/performance of reports
Aetna Re-Insurance Company (U.K.) Ltd Reinsurance
PLJ Holdings Limited Investment Mgmt & Securities Trading
Aetna Investment Management (F.E.) Investment Mgmt. & Advisory Services. for Individual
Limited Clients and Investment Funds
Aetna Int'l Fund Managers Limited Investment & Unit Trust Management
<PAGE>
Aetna Investment Management (F.E.) Nominee Services Holding Assets of AIM
Nominees Limited F.E.'s Customers in street name
<PAGE>
Kwang Hua Securities Investment & Trust Securities Investment & Trust
Co. LTD
Aetna Real Estate Properties Inc. Acquire, develop and lease real estate
ALIC Energy, Co. Acquisition & Management of non-traditional
investments
Aetna Life Assignment Company Assignment Company for structured settlement
Human Affairs International Incorporated Provide employee assistance services and managed
mental health programs
Bayshore Heights Associates Real Estate
Aetna Institutional Investors I Real Estate Investment
Limited Partnership
Human Affairs of Alaska, Inc. Provides mental health services/managed mental
health services
Human Affairs International of California Provides mental health services/managed mental
health services
Human Affairs International IPA, Inc. Independent practice association
Behavioral Healthcare Solutions, Inc. Mental health services
Aetna Hamilton Partnership Real Estate
F.L. Properties Real Estate
Aetna Life & Casualty (Bermuda) Insurance Guarantee & Indemnity Business
AE Fourteen, Inc. Cogeneration
Shadow Oaks Real Estate
Shadow Ridge at Oak Park Condominium Real Estate
Associates
Capitol District Energy Center Cogeneration of electrical power
Cogeneration Associates
455 Market Street Real Estate
Friday Associates Real Estate Investment
Koll Center Newport A Real Estate Investment
Koll Center Newport Number 1 Real Estate Investment
Koll Center Newport Number 2 Real Estate Investment
Koll Center Newport Number 7 Real Estate Investment
Koll Center Newport Number 8 Real Estate Investment
Koll Center Newport Number 9 Real Estate Investment
Koll Center Newport Number 10 Real Estate Investment
Koll Center Newport Number 11 Real Estate Investment
Koll Center Newport Number 14 Real Estate Investment
Koll Center Newport Number 15 Real Estate Investment
Waterloo Associates Limited Partnership Real Estate Investment
Hayward Industrial Park Associates Real Estate Investment
Gables at Farmington Associates Real Estate Investment
Gables at Brighton Associates Real Estate Investment
Country Club Heights at Woburn
Associates Real Estate Investment
<PAGE>
Birtcher Aetna-Laguna Hills Real Estate Investment
Harbor Business Park Real Estate Investment
Ensenada De Las Colinas I Associates Real Estate Investment
Trevose Hospitality, Inc. Real Estate Investment
Oaks at Valley Ranch I Real Estate Investment
Oaks at Valley Ranch II Real Estate Investment
KBC-Reid Hill Limited Partnership Real Estate Investment
KBC - Eastside Limited Partnership Real Estate Investment
C.R.I. Hotel Associates, L.P. Real Estate Investment
Trumbull One, Inc. Real Estate Investment
Trumbull Two, Inc. Real Estate Investment
Trumbull Three, Inc. Real Estate Investment
Trumbull Four, Inc. Real Estate Investment
Century City North L.L.C. Real Estate Investment
Southfield Partners Real Estate Investment
Lincoln Rancho Cucamonga Associates Real Estate Investment
Village Green of Madison Heights Real Estate Investment
Centrum Associates Real Estate Investment
Tri-City Mall Associates Real Estate Investment
B&H Ventures IV Limited Partnership Real Estate Investment
Champions Richland NorthCourte
Partnership Real Estate Investment
Chris-Town Village Associates Real Estate Investment
Woodside Terrace Partners Real Estate Investment
Spectrum Fashion Center Real Estate Investment
Forge Park Associates Real Estate Investment
Cambridgeside Galleria Real Estate Investment
Golf Course View Partnership Real Estate Investment
ADBI Partnership Real Estate Investment
Marriott Inner Harbor Hotel Real Estate Investment
TCR Ventanja Limited Partnership Real Estate Investment
Fairway Partners Real Estate Investment
1501 Fourth Ave. Limited Partnership Real Estate Investment
Thace Associates Real Estate Investment
Lincoln Los Padres Real Estate Investment
EastMeadow Distribution Center Limited Real Estate Investment
Partnership
ARB-DTC LTD. Partnership Real Estate Investment
Eastmeadow Distribution Center Phase II Real Estate Investment
Limited Partnership
Azalea Mall. L.L.C. Real Estate Holding Company
Southeast Second Avenue, Inc. Real Estate Investment
Menlo One, L.L.C. Real Estate Holding Company
Aeltus Investment Management Inc. Investment Advisor
<PAGE>
Aetna Investment Management (Bermuda) Holding Company
Holdings Limited
Aeltus Capital, Inc. Broker-dealer related functions
Smith Whiley & Company Alliance with Aeltus
Aetna Realty Investors, Inc. Separate Entity for Aeltus' R.E. personnel
and activities
<PAGE>
Aetna Investment Management (B.V.I.) Provide nominee and custodian services
Nominees Limited
Aetna Investment Management Investment Management
(Hong Kong) Limited
Aeltus Investment Management Fund Assets Pension Management
International Limited
Aetna Investment Management (S'Pore) Limited private investment management
PTE LTD.
Aetna Financial Services Limited Investment Management Company
China Dynamic Investment Management Establish and manage collective investment
(Hong Kong) Limited scheme
Aetna Funds Management (Australia) Funds Management Company
Limited
AHP Holdings, Inc. Holding company
Aetna Health Plans of Ohio, Inc. HMO
Aetna Dental Care of California, Inc. Provide pre-paid dental services
Aetna Health Plans of Florida, Inc. HMO
Informed Health Inc. Sponsors health Information service
Aetna Health Plans of Tennessee, Inc. HMO
Aetna Health Plans of Georgia, Inc. HMO
Aetna Dental Care of New Jersey Inc. Dental Care
Healthways Systems, Inc. Holding company
Aetna Health Plans of the Mid-Atlantic, Inc. HMO
Aetna Health Plans of the Carolinas Inc. HMO
PHPSNE Parent Corporation Holding company
Aetna Health Plans of Arizona, Inc. HMO
Aetna Health Plans of Illinois, Inc. HMO
Aetna Dental Care of Kentucky, Inc. Dental Plan Organization
Aetna Health Plans of Southern New HMO
England, Inc.
Aetna Health Plans of Central and Eastern HMO
PA, Inc.
Aetna Health Plans of Texas, Inc. HMO
Aetna Health Plans of Louisiana, Inc. HMO
Aetna Professional Management Physician Practice Mgmt. Co.
Corporation
Freedom Choice, Inc. Third party administrator
Med Southwest, Inc. Holding Company
WMC Transition Corporation General business corporation
Aetna Health Management Inc. HMO management company
Aetna Government Health Plans, Inc. Sponsors CHAMPUS business
Aetna Health Plans of California, Inc. HMO
Aetna Health Plans of New York Inc. HMO
Aetna Health Plans of New Jersey, Inc. HMO
<PAGE>
MED Southwest, Inc. Holding Company
Southwest Physicians Life Insurance Life and Health Insurer
Company
Aetna Health Plans of North Texas, Inc. HMO
Aetna Asia Trust Unit trust for long term capital application
Aetna Retirement Services, Inc. Holding Company
Aetna Retirement Holdings, Inc. Holding Company
Systematized Benefits Administrators, Inc. Third Party Administrator
Aetna Life Insurance and Annuity Company Life insurance, pensions and annuities
Aetna Investment Services, Inc. Distribute securities products - ALIAC
and outside funds
Aetna Financial Services, Inc. Broker-Dealer and investment advisor
Aetna Insurance Company of America Write/reinsure life and annuity business
Aetna Variable Fund Regulated investment Co. (Mutual Fund)
Aetna Generation Portfolios, Inc. Regulated Investment Co. (Mutual Fund)
Aetna Investment Advisers Fund, Inc. Regulated Investment Co. (Mutual Fund)
Aetna Series Fund, Inc. Regulated Investment Co. (Mutual Fund)
Aetna Trust Company Recently sold
Aetna Life Insurance Company of Canada Life, accident and sickness insurance
Equinox Financial Group Inc. Distributor. of life insurance, financial & related products
2733854 Canada Ltd. Marketing of life ins. and related products
Aetna Capital Management Limited Investment Counselor Portfolio Manager
Aetna Acceptance Corporation Limited Provision of Financial Assistance to
Agents to Assist in growth of business
Eclipse Claims Services, Inc. Electronic Claims adjustment services
Aetna Benefits Management Inc. Claims Administration and Actuarial Services
Landex Properties Ltd. Real Estate acquisitions
Mount-Batten Properties LTD Acquisition, development and management
of Real Estate
PVS Preferred Vision Services, Inc. Provider of Ophthalmic, Service for Four
major shareholders
Churchill Office Park Limited Real Estate Development of Ottawa site
Aetna International Holdings (Hong Kong) Holding Company for insurance and financial services
Aetna International Fund Management Inc. Investment Management. Services
East Asia Aetna Insurance Company Life Disability and Employee Benefits Ins.
(Bermuda) Ltd. in H.K.
AE Insurance (Cayman) LTD. Insurance Company
Blue Cross (Asia Pacific) Insurance Ltd. Underwriter Casualty and general ins in HK
and Macau
East Asia Aetna Services Company Limited Mgmt. Services to Associates CO.
Aetna International De Mexico S.A.
DE C.V.
ALIAC Holdings Inc. Dedicated holding company
Aetna Life Insurance Company of America Life Insurance
<PAGE>
Aetna International Holdings (Hong Kong) Holding Company
II Limited
PT Danamon-Aetna Life Insurance Limited liability life insurance company
Company
DAYA Aetna (Malaysia) Sdn. Bhd.. Holding Company
Aetna Universal Insurance Sdn. Bhd. Individual Life, Home service, group
and general insurance
Aetna Investment Management (Taiwan) Provide non-security business and in
Limited investment advice
Aetna Investment Management (Australia) Stockbroking
Limited
Aetna Capital Holdings, Inc. Holding Company
AE Five Incorporated Holding Company
Aetna Securities Investment Management Securities Investment Advisor
(Taiwan)
Aetna Securities Investment Management Securities investment advisor
(Taiwan) LTD.
Aetna Capital Management International Promoter of offshore mutual funds or
Ltd. other open-ended investment vehicles.
TravelGuard Limited Insurance agent
Toursafe Limited Insurance Agent
TravelSage Limited Insurance Agent for its ultimate Holding
Co.
Aetna Internacional De Mexico S.A. De C.V. Mexican Holding co.
Valores Monterrey Aetna, S.A. De C.V. Holding Co.
Meximed S.A. De C.V. Services for insureds for hospitals
admissions and claims processing
Fianzas Monterrey Aetna, S.A. Issuance of Bonds
Seguros Monterrey Aetna, S.A. Insurance and Reinsurance
Grupo Vamsa S.A. De C.V. Legal Administration and Financial Services
Asesores En Promocion Segunomina S.A. Marketing of Segunos products/payroll
De C.V. discounts
Aetna S.A. Holding Co.
Aetna Chile Seguros Generales S.A. Casualty Ins. Co.
Aetna Administradora De Fondos De Real Estate Investment Trust Mgmt. Co.
Inversion S.A.
Aetna Credito Hipotecario S.A. Mtg. Company
Aetna Pensiones S.A. Holding Co. for Santa Maria
Aetna Pensiones Peru S.A. Investment
Aetna Chile Seguros De Vide S.A. Life Insurance CO.
Aetna Vida S.A. Health and Life Insurance
Aetna International Peru S.A. Holding Co. for Condor Shares
Aetna Salud S.A. Health Indemnity Provide in Chile
<PAGE>
Administradora De Fondos De Pensiones Pension Funds Mgmt. Co.
Santa Maria S.A.
Administradora De Fondos De Pensiones Mgmt. of Pension Funds
Integra S.A.
Aetna Inversiones Limitada Limited investment company
Compania De Seguros Condor S.A. Insurance and Reinsurance
Santa Maria Internacional S.A. Pension Administration
Aetna International (N.A.) Limited Holding Co.
Aetna Health (N.Z.) Limited Health Insurance Underwriting
Aetna Life Insurance (N.Z.) Limited Group benefits/pension management
First Medical Corporation Limited Indemnity Health Insurance
Managed Care New Zealand Limited Superannuitization/long term care
United States Health Care Systems of HMO
Pennsylvania, Inc., d/b/a The Health
Maintenance Organization of Pennsylvania
and also U.S. Healthcare
Health Maintenance Organization of New HMO
Jersey, Inc. also d/b/a U.S. Healthcare
U.S. Healthcare, Inc. (a New York HMO
corporation)
U.S. Healthcare, Inc. (a Delaware HMO
corporation)
U.S. Healthcare, Inc. (a Connecticut HMO
corporation)
U.S. Healthcare, Inc. (a Massachusetts HMO
corporation)
U.S. Healthcare, Inc. (a Virginia corporation) HMO
U.S. Healthcare of New Hampshire, Inc. HMO
U.S. Healthcare of Georgia, Inc. HMO
U.S. Healthcare, Inc. d/b/a USHC HMO
U.S. Healthcare of the Carolinas, Inc. HMO
Advent HMO Corporation Inactive
U.S. Healthcare Dental Plan, Inc. (a Dental
Pennsylvania corporation)
U.S. Healthcare Dental Plan, Inc. (a New Dental
Jersey corporation)
U.S. Healthcare Dental Plan, Inc. (a Dental
Delaware corporation)
U.S. Health Insurance Company (a Accident and health insurance company
New York corporation)
Corporate Health Insurance Company Accident and health insurance company
U.S. Health Insurance Company (a Accident and health insurance company
Connecticut corporation)
<PAGE>
U.S. Managed Care, Inc. (formerly, U.S. Utilization review
Healthcare, Inc. (a Maryland corporation))
United States Home Health Care Systems, Inactive - other medical services
Inc.
United States Physicians Care Systems, Inc. Financial services to physicians
U.S. Healthcare Properties, Inc. Holding company for real estate
U.S. Healthcare Financial Services, Inc. Holding company
Primary Investments, Inc. Holding company
Primary Holdings, Inc. Holding company
U.S. Health Aviation Corp. Ownership and operation of airplanes
Advent Financial Services, Inc. Holding company
U.S. Healthcare Advantage, Inc. Holding company
Advent Investments, Inc. Holding company
Independent Investments, Inc. Holding company
<PAGE>
Corporate Health Administrators, Inc. Third party administrator for self-insured plans
Wissahickon Payment Administrators, Inc. Third party administrator
Managed Care Coordinators, Inc. Helps multi-state and national employers with the
evaluation and administration of multiple health plans
U.S. Mental Health Systems, Inc. Provides access to appropriate levels of care for persons
with mental health and substance abuse problems
U.S. Quality Algorithms, Inc. d/b/a USQA Services to analyze the quality and effectiveness
of medical care
Workers Comp Advantage, Inc. Case management and other medical management services for
employers on costs related to workers' compensation claims
Healthcare Data Interchange Corporation Software development
Orion Computer Systems, Inc. Software development
Inteli-Health, Inc. Software development
Criterion Communications, Inc. Corporate communications
USHC Management Services Corporation Management and financial services to network providers
</TABLE>
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of May 31, 1996 there were 581,139 contract owners of variable annuity
contracts funded through Variable Annuity Account C.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Section 33-320a of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and officers of
Connecticut corporations. The statute provides in general that Connecticut
corporations shall indemnify their officers, directors, employees, agents, and
certain other defined individuals against judgments, fines, penalties, amounts
paid in settlement and reasonable expenses actually incurred in connection with
proceedings against the corporation. The corporation's obligation to provide
such indemnification does not apply unless (1) the individual is successful on
the merits in the defense of any such proceeding; or (2) a determination is
made (by a majority of the board of directors not a party to the proceeding by
written consent; by independent legal counsel selected by a majority of the
directors not involved in the proceeding; or by a majority of the shareholders
not involved in the proceeding) that the individual acted in good faith and in
the best interests of the corporation; or (3) the court, upon application by
the individual, determines in view of all the circumstances that such person is
reasonably entitled to be indemnified.
C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut
corporation cannot indemnify a director or officer to an extent either greater
or less than that authorized by the statute, e.g., pursuant to its certificate
of incorporation, bylaws, or any separate contractual arrangement. However,
the statute does specifically authorize a corporation to procure
indemnification insurance to provide greater indemnification rights. The
premiums for such insurance may be shared with the insured individuals on an
agreed basis.
Consistent with the statute, Aetna Life and Casualty Company has procured
insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor, which supplements the indemnification
rights provided by C.G.S. Section 33-320a to the extent such coverage does not
violate public policy.
ITEM 29. PRINCIPAL UNDERWRITER
(a) In addition to serving as the principal underwriter for
the Registrant, Aetna Life Insurance and Annuity Company (ALIAC)
also acts as the principal underwriter for Aetna Variable Encore
Fund, Aetna Variable Fund, Aetna Series Fund, Inc., Aetna
Generation Portfolios, Inc., Aetna Income Shares, Aetna Investment
Advisers Fund, Inc., Aetna GET Fund, Variable Life Account B and
Variable Annuity Accounts B and G (separate accounts of ALIAC
registered as unit investment trusts), and Variable Annuity Account
I (a separate account of Aetna Insurance Company of America
registered as a unit investment trust). Additionally, ALIAC is the
investment adviser for Aetna Variable Fund, Aetna Income Shares,
Aetna Variable Encore Fund, Aetna Investment Advisers Fund, Inc.,
Aetna GET
<PAGE>
Fund, and Aetna Series Fund, Inc. ALIAC is also the depositor of
Variable Life Account B and Variable Annuity Accounts B, C 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 $1,830,629 $74,341,006
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 Variable Annuity Account C.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules under it relating to the
securities described in and issued under this Registration Statement are
located at the home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration
statement on Form N-4 as frequently as is necessary to ensure that
the audited financial statements in the registration statement are
never more than sixteen months old for as long as payments under
the variable annuity contracts may be accepted;
<PAGE>
(b) to include as part of any application to purchase a contract
offered by a prospectus which is part of this registration
statement on Form N-4, a space that an applicant can check to
request a Statement of Additional Information; and
(c) to deliver any Statement of Additional Information and any
financial statements required to be made available under this Form
N-4 promptly upon written or oral request.
(d) The Company hereby represents that it is relying upon and
complies with the provisions of Paragraphs (1) through (4) of the
SEC Staff's No-Action Letter dated November 22, 1988 with respect
to language concerning withdrawal restrictions applicable to plans
established pursuant to Section 403(b) of the Internal Revenue
Code. See American Counsel of Life Insurance; SEC No-Action
Letter, [1989 Transfer Binder] Fed. SEC. L. Rep. (CCH) PARA 78,904 at
78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account C of Aetna Life Insurance and
Annuity Company, has duly caused this Pre-Effective Amendment No. 1 to its
Registration Statement on Form N-4 (File No. 333-01107) to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Hartford,
State of Connecticut, on the 31st day of July, 1996.
VARIABLE ANNUITY ACCOUNT C OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(REGISTRANT)
By: AETNA LIFE INSURANCE AND ANNUITY
COMPANY
(DEPOSITOR)
By: /s/ Daniel P. Kearney*
--------------------------------
Daniel P. Kearney
President
Signature Title Date
- --------- ----- -----
Daniel P. Kearney* Director and President )
- ------------------------ )
Daniel P. Kearney (principal executive officer) )
)
Timothy A. Holt* Director and Chief Financial Officer ) July
- ------------------------ ) 31, 1996
Timothy A. Holt )
)
Christopher J. Burns* Director )
- ------------------------ )
Christopher J. Burns )
)
Gail P. Johnson* Director )
- ------------------------ )
Gail P. Johnson )
)
John Y. Kim* Director )
- ------------------------ )
John Y. Kim )
<PAGE>
)
Laura R. Estes* Director )
- ------------------------ )
Laura R. Estes )
)
Shaun P. Mathews* Director )
- ------------------------ )
Shaun P. Mathews )
)
Glen Salow* Director )
- ------------------------ )
Glen Salow )
)
Creed R. Terry* Director )
- ------------------------ )
Creed R. Terry )
)
Deborah Koltenuk* Vice President and Treasurer, )
- ------------------------ Corporate Controller )
Deborah Koltenuk )
By: /s/ Susan E. Bryant
- ---------------------------------------
Susan E. Bryant
*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 Group Combination Annuity Contract *
(Nonparticipating) (A001RP95)
99-B.4.2 Form of Group Combination Annuity Certificate *
(Nonparticipating) (A007RC95)
99-B.4.3 Form of Group Combination Annuity Contract *
(Nonparticipating) (A020RV95)
99-B.4.4 Form of Group Combination Annuity Certificate *
(Nonparticipating) (A027RV95)
99-B.4.5 Form of Endorsement for Exchanged Contracts (EINRP95) *
99-B.4.6 Form of Endorsement for Exchanged Contracts (EINRV95) *
9-B.4.7 Form of Endorsement for 401(a) Plans *
99-B.5 Form of Variable Annuity Contract Application (300-GTD-IA) *
99-B.6 Certification of Incorporation and By-Laws of Depositor *
99-B.8.1 Fund Participation Agreement (Amended and Restated) *
between Aetna Life Insurance and Annuity Company, Alger
American Fund and Fred Alger Management, Inc.
dated March 31, 1995
* Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.8.2 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Calvert Asset
Management Company (Calvert Responsibly Invested
Balanced Portfolio, formerly Calvert Socially
Responsible Series) dated March 13, 1989 and amended
December 12, 1993
99-B.8.3 Second Amendment dated January 1, 1996 to 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.8.4 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Fidelity
Distributors Corporation (Variable Insurance Products
Fund) dated February 1, 1994 and amended March 1, 1996
99-B.8.5 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Fidelity
Distributors Corporation (Variable Insurance Products
Fund II) dated February 1, 1994 and amended March 1, 1996
99-B.8.6 Service Agreement between Aetna Life Insurance and Annuity *
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995
99-B.8.7 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Franklin Advisers,
Inc. dated January 31, 1989
99-B.8.8 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Janus Aspen Series
dated April 19, 1994 and amended March 1, 1996
99-B.8.9 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
* Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.8.10 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company and Advisers
Management Trust (now Neuberger & Berman Advisers
Management Trust) dated April 14, 1989 and as
assigned and modified on May 1, 1995
99-B.8.11 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.8.12 Amendment dated as of February 20, 1996 *
to Fund Participation Agreement between Aetna Life
Insurance and Annuity Company and Scudder Variable
Life Investment Fund dated April 27, 1992 as
amended February 19, 1993 and August 13, 1993.
99-B.8.13 Fund Participation Agreement between Aetna Life *
Insurance and Annuity Company, Investors Research
Corporation and TCI Portfolios, Inc. dated July 29,
1992 and amended December 22, 1992 and June 1, 1994
99-B.9 Opinion of Counsel
----
99-B.10.1 Consent of Independent Auditors
----
99-B.10.2 Consent of Counsel (included in Exhibit 99-B.9) *
99-B.13 Computation of Performance Data *
9-B.15.1 Powers of Attorney
----
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule
----
* Incorporated by reference
<PAGE>
[LETTERHEAD]
July 31, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Filing Desk
Re: Variable Annuity Account C of Aetna Life Insurance
and Annuity Company
Pre-Effective Amendment No. 1 to Registration Statement
on Form N-4
File Nos. 333-01107 and 811-2513
Gentlemen:
The undersigned has acted as counsel to Aetna Life Insurance and Annuity
Company, a Connecticut life insurance company (the "Company") in connection
with the registration on Form N-4 of interests in Variable Annuity Account C
of the Company. It is my understanding that the Company, as depositor, has
registered an indefinite number of shares of beneficial interest under the
Securities Act of 1933, as amended ("Securities Act") pursuant to Rule 24f-2
under the Investment Company Act of 1940 (the "Investment Company Act").
In connection with such representation, I have reviewed the Registration
Statement on Form N-4 (File No. 333-10017) filed with the Securities Exchange
Commission on February 21, 1996 and this Pre-Effective Amendment No. 1 (the
"Registration Statement"). I have also examined originals or copies,
certified or otherwise identified to my satisfaction, of such documents,
trust records and other instruments I have deemed necessary or appropriate
for the purpose of this opinion. For purposes of such examination, I have
assumed the genuineness of all signatures on original documents and the
conformity to the original of all copies.
I am admitted to practice law in Connecticut, New York and Oklahoma, and do
not purport to be an expert on the laws of any other state. My opinion
herein as to any other law is based upon a limited inquiry thereof which I
have deemed appropriate under the circumstances.
Based upon the foregoing, and assuming the securities are issued and sold in
accordance with the provisions of the prospectus, I am of the opinion that
the Securities being registered will be legally issued and will represent
binding obligations of the Company.
<PAGE>
Page 2
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to my being named under the caption "Legal Matters" in the
prospectus contained therein.
Very truly yours,
/s/ Susan E. Bryant
Susan E. Bryant
Counsel
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors of Aetna Life Insurance and Annuity Company
and Contract Owners of Aetna Variable Annuity Account C:
We consent to the use of our reports dated February 6, 1996 and
February 16, 1996 included herein and to the reference to our Firm under the
caption "Independent Auditors" in Statement of Additional Information.
Our report dated February 6, 1996 refers to a change in 1993 in the Company's
method of accounting for certain investments in debt and equity securities.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
July 31, 1996
<PAGE>
POWER OF ATTORNEY
I, Deborah Koltenuk, Vice President and Treasurer, Corporate Controller of
Aetna Life Insurance and Annuity Company, do hereby constitute and appoint
Susan E. Bryant, Kirk P. Wickman, and Julie E. Rockmore and each of them
individually, my true and lawful attorneys, with full power to them and each
of them to sign for me, and in my name and in the capacity indicated below,
any and all amendments to the Registration Statements listed below filed with
the Securities and Exchange Commission by Aetna Life Insurance and Annuity
Company under the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, including but not limited to pre-effective amendments
and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75962 33-75998
2-52449 33-75964 33-76000
33-02339 33-75966 33-76002
33-34370 33-75968 33-76004
33-34583 33-75970 33-76018
33-42555 33-75972 33-76024
33-60477 33-75974 33-76026
33-61897 33-75976 33-79118
33-62473 33-75978 33-79122
333-01107 33-75980 33-81216
33-63611 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
33-75960 33-75996 33-63657
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 16th day of July, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Deborah Koltenuk
- ---------------------------------------------------
Deborah Koltenuk
Vice President and Treasurer, Corporate Controller
<PAGE>
POWER OF ATTORNEY
I, Christopher J. Burns, Director of Aetna Life Insurance and Annuity
Company, do hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers,
and Julie E. Rockmore and each of them individually, my true and lawful
attorneys, with full power to them and each of them to sign for me, and in my
name and in the capacity indicated below, any and all amendments to the
Registration Statements listed below filed with the Securities and Exchange
Commission by Aetna Life Insurance and Annuity Company under the Securities
Act of 1933, as amended, and/or the Investment Company Act of 1940, including
but not limited to pre-effective amendments and post-effective amendments to
such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Christopher J. Burns
- ---------------------------------------------------
Christopher J. Burns
Director
<PAGE>
POWER OF ATTORNEY
I, Laura R. Estes, Director of Aetna Life Insurance and Annuity Company, do
hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers, and Julie
E. Rockmore and each of them individually, my true and lawful attorneys, with
full power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments to the Registration
Statements listed below filed with the Securities and Exchange Commission by
Aetna Life Insurance and Annuity Company under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, including but not limited
to pre-effective amendments and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Laura R. Estes
- ---------------------------------------------------
Laura R. Estes
Director
<PAGE>
POWER OF ATTORNEY
I, Gail P. Johnson, Director of Aetna Life Insurance and Annuity Company, do
hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers, and Julie
E. Rockmore and each of them individually, my true and lawful attorneys, with
full power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments to the Registration
Statements listed below filed with the Securities and Exchange Commission by
Aetna Life Insurance and Annuity Company under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, including but not limited
to pre-effective amendments and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Gail P. Johnson
- ---------------------------------------------------
Gail P. Johnson
Director
<PAGE>
POWER OF ATTORNEY
I, Daniel P. Kearney, Director and President (principal executive officer) of
Aetna Life Insurance and Annuity Company, do hereby constitute and appoint
Susan E. Bryant, Steven J. Lauwers, and Julie E. Rockmore and each of them
individually, my true and lawful attorneys, with full power to them and each
of them to sign for me, and in my name and in the capacity indicated below,
any and all amendments to the Registration Statements listed below filed with
the Securities and Exchange Commission by Aetna Life Insurance and Annuity
Company under the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, including but not limited to pre-effective amendments
and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Daniel P. Kearney
- ---------------------------------------------------
Daniel P. Kearney
Director and President
<PAGE>
POWER OF ATTORNEY
I, John Y. Kim, Director of Aetna Life Insurance and Annuity Company, do
hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers, and Julie
E. Rockmore and each of them individually, my true and lawful attorneys, with
full power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments to the Registration
Statements listed below filed with the Securities and Exchange Commission by
Aetna Life Insurance and Annuity Company under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, including but not limited
to pre-effective amendments and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ John Y. Kim
- ---------------------------------------------------
John Y. Kim
Director
<PAGE>
POWER OF ATTORNEY
I, Shaun P. Mathews, Director of Aetna Life Insurance and Annuity Company, do
hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers, and Julie
E. Rockmore and each of them individually, my true and lawful attorneys, with
full power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments to the Registration
Statements listed below filed with the Securities and Exchange Commission by
Aetna Life Insurance and Annuity Company under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, including but not limited
to pre-effective amendments and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Shaun P. Mathews
- ---------------------------------------------------
Shaun P. Mathews
Director
<PAGE>
POWER OF ATTORNEY
I, Glen Salow, Director of Aetna Life Insurance and Annuity Company, do
hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers, and Julie
E. Rockmore and each of them individually, my true and lawful attorneys, with
full power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments to the Registration
Statements listed below filed with the Securities and Exchange Commission by
Aetna Life Insurance and Annuity Company under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, including but not limited
to pre-effective amendments and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Glen Salow
- ---------------------------------------------------
Glen Salow
Director
<PAGE>
POWER OF ATTORNEY
I, Creed R. Terry, Director of Aetna Life Insurance and Annuity Company, do
hereby constitute and appoint Susan E. Bryant, Steven J. Lauwers, and Julie
E. Rockmore and each of them individually, my true and lawful attorneys, with
full power to them and each of them to sign for me, and in my name and in the
capacity indicated below, any and all amendments to the Registration
Statements listed below filed with the Securities and Exchange Commission by
Aetna Life Insurance and Annuity Company under the Securities Act of 1933, as
amended, and/or the Investment Company Act of 1940, including but not limited
to pre-effective amendments and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Creed R. Terry
- ---------------------------------------------------
Creed R. Terry
Director
<PAGE>
POWER OF ATTORNEY
I, Timothy A. Holt, Director and Chief Financial Officer of Aetna Life
Insurance and Annuity Company, do hereby constitute and appoint Susan E.
Bryant, Steven J. Lauwers, and Julie E. Rockmore and each of them
individually, my true and lawful attorneys, with full power to them and each
of them to sign for me, and in my name and in the capacity indicated below,
any and all amendments to the Registration Statements listed below filed with
the Securities and Exchange Commission by Aetna Life Insurance and Annuity
Company under the Securities Act of 1933, as amended, and/or the Investment
Company Act of 1940, including but not limited to pre-effective amendments
and post-effective amendments to such filings:
Registration Statements filed under the Securities Act of 1933, as amended:
2-52448 33-75960 33-75996
2-52449 33-75962 33-75998
33-02339 33-75964 33-76000
33-34370 33-75966 33-76002
33-34583 33-75968 33-76004
33-42555 33-75970 33-76018
33-60477 33-75972 33-76024
33-61897 33-75974 33-76026
33-62473 33-75976 33-79118
3333-01107 33-75978 33-79122
33-63611 33-75980 33-81216
33-63657 33-75982 33-87642
33-64277 33-75984 33-87932
33-64331 33-75986 33-88720
33-75248 33-75988 33-88722
33-75954 33-75990 33-88724
33-75956 33-75992 33-89858
33-75958 33-75994 33-91846
Registration Statements filed under the Investment Company Act of 1940:
811-2512 811-2513 811-4536 811-5906
hereby ratifying and confirming on this 21st day of March, 1996 my signature
as it may be signed by my said attorneys to any such registration statements,
applications and any and all amendments thereto:
/s/ Timothy A. Holt
- ---------------------------------------------------
Timothy A. Holt
Director and Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 6,038,034,475
<INVESTMENTS-AT-VALUE> 6,632,117,659
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,632,117,659
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 6,632,117,659
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</TABLE>
