As filed with the Securities and Exchange Registration No. 33-91846*
Commission on February 27, 1997 Registration No. 811-2513
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
Post-Effective Amendment No. 9 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------------------
Variable Annuity Account C of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RC4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code: (860) 273-7834
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RC4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
60 days after filing pursuant to paragraph (a)(2) of Rule 485
--------
X on May 1, 1997 pursuant to paragraph (a)(1) of Rule 485
--------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
registered an indefinite number of securities under the Securities Act of 1933.
Registrant expects to file a Rule 24f-2 Notice for the fiscal year ended
December 31, 1996 on or before February 28, 1997.
*Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which includes
all the information which would currently be required in a prospectus relating
to the securities covered by the following earlier Registration Statement:
33-75976.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
<S> <C> <C> <C>
1 Cover Page........................................... Cover Page
2 Definitions.......................................... Definitions
3 Synopsis............................................. Prospectus Summary; Fee Table
4 Condensed Financial Information...................... Condensed Financial Information
5 General Description of Registrant,
Depositor, and Portfolio Companies................... The Company; Variable Annuity
Account C; The Funds
6 Deductions and Expenses.............................. Charges and Deductions;
Distribution
7 General Description of Variable Annuity
Contracts ........................................... Purchase; Miscellaneous
8 Annuity Period....................................... Annuity Period
9 Death Benefit........................................ Death Benefit During
Accumulation Period; Death
Benefit Payable During the Annuity
Period
10 Purchases and Contract Value......................... Purchase; Contract Valuation
11 Redemptions.......................................... Right to Cancel; Withdrawals
12 Taxes................................................ Tax Status
13 Legal Proceedings.................................... Miscellaneous - Legal Matters and
Proceedings
14 Table of Contents of the Statement of
Additional Information............................... Contents of the Statement of
Additional Information
<PAGE>
Form N-4
Item No. Part B (Statement of Additional Information) Location
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and
History
18 Services............................................. General Information and
History; Independent Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase of
Contracts
20 Underwriters......................................... Offering and Purchase of
Contracts
21 Calculation of Performance Data...................... Performance Data; Average
Annual Total Return
Quotations
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements
</TABLE>
Part C (Other Information)
--------------------------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
The Contrats offered in connection with this Prospectus are group deferred
variable annuity contracts ("Contracts") issued by Aetna Life Insurance and
Annuity Company (the "Company"). The Contracts are designed to fund plans
that provide retirement income for employees of institutions of higher
education. The Contracts are available through participation in retirement
programs which receive favorable tax deferred treatment under Federal income
tax law. (See "Purchase.")
The Contracts provide that contributions may be allocated to one or more of
the Credited Interest Options or to one or more of the Subaccounts of
Variable Annuity Account C, a separate account of the Company. The
Subaccounts invest directly in shares of the following Funds:
(bullet) Aetna Variable Fund
(bullet) Aetna Income Shares
(bullet) Aetna Variable Encore Fund
(bullet) Aetna Investment Advisers Fund, Inc.
(bullet) Aetna Ascent Variable Portfolio
(bullet) Aetna Crossroads Variable Portfolio
(bullet) Aetna Legacy Variable Portfolio
(bullet) Aetna Variable Capital Appreciation Portfolio
(bullet) Aetna Variable Growth Portfolio
(bullet) Aetna Variable Index Plus Portfolio
(bullet) Aetna Variable Small Company Portfolio
(bullet) Alger American Growth Portfolio
(bullet) Alger American Small Cap Portfolio
(bullet) American Century VP Capital Appreciation
(formerly known as TCI Growth)
(bullet) Calvert Responsibly Invested Balanced Portfolio
(bullet) Fidelity VIP II Contrafund Portfolio
(bullet) Fidelity VIP Equity-Income Portfolio
(bullet) Fidelity VIP Growth Portfolio
(bullet) Fidelity VIP Overseas Portfolio
(bullet) Franklin Government Securities Trust
(bullet) Janus Aspen Aggressive Growth Portfolio
(bullet) Janus Aspen Balanced Portfolio
(bullet) Janus Aspen Flexible Income Portfolio
(bullet) Janus Aspen Growth Portfolio
(bullet) Janus Aspen Short-Term Bond Portfolio
(bullet) Janus Aspen Worldwide Growth Portfolio
(bullet) Lexington Natural Resources Trust
(bullet) Neuberger & Berman Growth Portfolio
(bullet) Scudder International Portfolio Class A Shares
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account, the Fixed Plus Account and the Fixed Account
(available for accumulation only in limited circumstances). Except as
specifically mentioned, this Prospectus describes only investments through
the Separate Account. A brief description of each of the Credited Interest
Options is contained in Appendices to this Prospectus. Additional information
concerning the Guaranteed Accumulation Account is contained in a separate
prospectus.
The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest
Options may be available in all jurisdictions, under all Contracts, or under
all Plans. Please check with your employer to determine option availability.
(See "Investment Options.")
This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract. Additional
information about the Separate Account is contained in a Statement of
Additional Information ("SAI") which is available at no charge. The SAI has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents for the SAI is printed on page
of this Prospectus. An SAI may be obtained by indicating the request on the
enrollment form or on the prospectus receipt contained in this Prospectus, or
by calling the number listed under the "Inquiries" section of the Prospectus
Summary.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This Prospectus and the Statement of Additional Information are dated May 1,
1997.
<PAGE>
TABLE OF CONTENTS
DEFINITIONS DEFINITIONS - 1
PROSPECTUS SUMMARY SUMMARY - 1
FEE TABLE FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION AUV HISTORY - 1
THE COMPANY 1
VARIABLE ANNUITY ACCOUNT C 1
INVESTMENT OPTIONS 1
The Funds 1
Credited Interest Options 4
PURCHASE 5
Contract Availability 5
Purchasing Interests in the Contract 5
Rights Under the Contract 5
Right to Cancel 5
CHARGES AND DEDUCTIONS 5
Daily Deductions from the Separate Account 5
Mortality and Expense Risk Charge 5
Asset Based Sales Charge 6
Administrative Expense Charge 6
Fund Expenses 6
Premium and Other Taxes 7
CONTRACT VALUATION 7
Account Value 7
Accumulation Units 7
Net Investment Factor 7
TRANSFERS 7
Dollar Cost Averaging Program 7
WITHDRAWALS 8
Reinvestment Privilege 8
CONTRACT LOANS 8
ADDITIONAL WITHDRAWAL OPTIONS 8
DEATH BENEFIT DURING ACCUMULATION PERIOD 9
ANNUITY PERIOD 10
Annuity Period Elections 10
Annuity Options 10
Duration of Annuity Payments 10
Charges Deducted During the Annuity Period 11
Death Benefit Payable During the Annuity Period 11
TAX STATUS 12
Introduction 12
Taxation of the Company 12
Contracts Used with Certain Retirement Plans 12
<PAGE>
MISCELLANEOUS 14
Distribution 14
Delay or Suspension of Payments 15
Performance Reporting 15
Voting Rights 15
Changes in Beneficiary Designations 15
Modification of the Contract 16
Legal Matters and Proceedings 16
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 17
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT 18
APPENDIX II--FIXED PLUS ACCOUNT 19
APPENDIX III--FIXED PLUS ACCOUNT (Applicable Only In Limited
Circumstances) 21
APPENDIX IV--FIXED PLUS ACCOUNT (Applicable Only In Limited
Circumstances) 23
APPENDIX V--FIXED ACCOUNT (Applicable Only In Limited Circumstances) 25
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED
HEREIN.
<PAGE>
DEFINITIONS
The following terms are defined as they are used in this Prospectus:
Account: A record which identifies contract values accumulated on behalf of
each Participant during the Accumulation Period. One or more Employee
Accounts and Employer Accounts may be established for each Participant.
Account Value: The total dollar value of amounts held in an Account as of
each Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to
an Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Annuitant: The person on whose life or life expectancy the annuity payments
are based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Beneficiary(ies): The person(s) entitled to receive any death benefit upon
the death of the Participant.
Code: Internal Revenue Code of 1986, as amended.
Company (We, Us): Aetna Life Insurance and Annuity Company.
Contract: The group deferred variable annuity contracts offered by this
Prospectus.
Contract Holder: The entity to whom the Contract is issued. The Contract
Holder is usually the employer.
Credited Interest Options: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account and the Fixed Plus Account, each of which is described in an Appendix
to this Prospectus. The Fixed Account is an additional Credited Interest
Option described in an Appendix to this Prospectus; however, the Fixed
Account is available during accumulation only in limited circumstances.
Amounts allocated to the Credited Interest Options are included in the
Account Value.
Employee Account: An account that is credited with payments derived from
employee salary reduction or salary deduction contributions (as provided for
by the Plan) and remitted to the Company by the employer on behalf of each
Participant.
Employer Account: An account that is credited with net Purchase Payments made
by the Contract Holder.
Fund(s): An open-end registered management investment company whose shares
are purchased by the Separate Account to fund the benefits provided by the
Contract.
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Loan Account: An account established for record keeping purposes and credited
with the amount of any loan.
Master Contracts: Contracts used in conjunction with a group of affiliated
government institutions of higher education.
Participant (You): A person participating in a Plan maintained by an eligible
organization.
Plan(s): Tax-deferred retirement plans adopted by higher education systems
for their employees under Section 401(a) or Section 403(b) of the Code.
DEFINITIONS - 1
<PAGE>
Purchase Payment(s): The gross payment(s) submitted to the Company under a
Contract.
Section 403(b) Contract: A Contract that accepts Purchase Payments made
pursuant to Code Section 403(b) and transferred funds attributable to Code
Section 403(b).
Section 401(a) Contract: A Contract that accepts Purchase Payments made
pursuant to Code Section 401(a) and transferred funds attributable to Section
401(a) contributions. Section 401(a) Contracts issued to some Plans may also
accept Purchase Payments made pursuant to Code Section 414(h) and transferred
funds attributable to Section 414(h).
Separate Account: Variable Annuity Account C, a separate account established
by the Company for the purpose of funding variable annuity contracts issued
by the Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
Valuation Date: The date and time at which the value of the Accumulation Unit
Value and Annuity Unit Value of a Subaccount is calculated. Currently, this
calculation occurs after the close of business of the New York Stock Exchange
on any normal business day, Monday through Friday, that the New York Stock
Exchange is open.
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group
deferred variable annuity contracts issued by Aetna Life Insurance and
Annuity Company (the "Company"). The purpose of the Contract is to accumulate
values and to provide benefits upon retirement. The Contracts are available
for institutions of higher education to fund (1) tax-deferred annuity
programs under Section 403(b) of the Code, and/or (2) qualified defined
contribution plans under Section 401(a) of the Code. Section 401 Contracts
issued to some Plans may also accept payments and transferred funds made
pursuant to Section 414(h) of the Code.
CONTRACT PURCHASE
The Contract may be purchased by institutions of higher education on
behalf of a group made up of their employees. One or more Contracts are
issued to the Contract Holder once we receive a completed master application
form(s). Eligible employees may participate in the Contract by completing the
enrollment form (and any other required forms) and submitting them to the
Company. Depending upon the terms of the Plan, Purchase Payments can be
applied to the Contract either through a lump-sum transfer, through periodic
salary reduction or salary deduction, or through employer contributions. For
each Contract, one or more Employee Accounts will be established for
contributions made by an employee, and one or more Employer Accounts may be
established for contributions made by the employer on the employee's behalf.
(See "Purchase.")
FREE LOOK PERIOD
You or the Contract Holder may cancel participation in the Contract within
10 days after you receive the Contract or other document evidencing your
interest in the Contract (or longer if required by state law) by returning it
to the Company along with a written notice of cancellation. Unless state law
requires otherwise, the amount that will be received upon cancellation will
reflect the investment performance of the Subaccounts into which Purchase
Payments were deposited. In some cases this may be more or less than the
amount of Purchase Payments. (See "Purchase--Right to Cancel.")
INVESTMENT OPTIONS
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows
investment in any or all of the Subaccounts, as well as in the Credited
Interest Options described below. The total number of investment options that
may be selected during the Accumulation Period is limited. For a complete
list of the Funds available under the Contracts, a description of the
investment objectives of each of the Funds and their investment advisers, and
a description of the limitations on the number of investment options, see
"Investment Options--The Funds" in this Prospectus, as well as the
prospectuses for each of the Funds.
The Contract also provides for investment in Credited Interest Options
which allow you to earn fixed rates of interest. The fixed options available
under the Contract are the Guaranteed Accumulation Account ("GAA"), the Fixed
Plus Account and the Fixed Account (available during accumulation only in
limited circumstances). (See the Appendices to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges, an asset based sales charge and an administrative expense charge),
as well as premium and other taxes. Not all charges apply to all Contracts.
The Funds also incur certain fees and expenses which are deducted directly
from the Funds. (See the Fee Table and "Charges and Deductions.")
TRANSFERS
Subject to certain limitations, Account Values may be transferred among
the Subaccounts and the Credited Interest Options without charge. Transfers
can be requested in writing or by telephone in accordance with the Company's
transfer procedures. (See the Appendices for a full description of the
restrictions applicable to transfers made from the Credited Interest
Options.) (See "Transfers.")
SUMMARY - 1
<PAGE>
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date, subject to Plan provisions, by properly completing a disbursement form
and sending it to the Company. Limitations apply to withdrawals from the
Credited Interest Options. A distribution can be made from certain Employer
Accounts and certain Employee Accounts (as provided by the Plan) only if the
Contract Holder certifies in writing that you are eligible, both as to timing
and form of distribution. The withdrawal will generally be subject to income
tax and may be subject to a federal tax penalty. The Code restricts full and
partial withdrawals in some circumstances. (See "Withdrawals.")
The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period to persons meeting certain criteria. Additional
Withdrawal Options are not available in all states and may not be suitable in
every situation. (See "Additional Withdrawal Options.")
LOANS
If allowed by the Plan, Participants may request a loan from their Account
Value during the Accumulation Period. (See "Contract Loans.")
DEATH BENEFIT
A death benefit is payable if the Participant dies before the Annuity
Date. Death benefit proceeds will be paid to the Beneficiary. Until the
election of a method of payment, the Account Value will remain invested under
the Contract. The Beneficiary may elect to receive the proceeds in a lump sum
or under any of the payment options available under the Contract. However,
the Code requires that distributions begin within a certain time period. (See
"Death Benefit During the Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity
Option selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
You may elect to begin receiving Annuity Payments on the Annuity Date. For
certain Employer and Employee Accounts, the Contract Holder must provide
written certification that the distribution is in accordance with the terms
of the Plan. (See "Rights Under the Contract.") Annuity Payments can be made
on either a fixed, variable or combination fixed and variable basis. If you
choose a variable payout, the payments will vary with the investment
performance of the Subaccount(s) selected. The Company reserves the right to
limit the number of Subaccounts that may be available during the Annuity
Period. (See "Annuity Period.")
TAXES
Contributions and earnings are not generally taxed until you or your
beneficiary(ies) actually receive a distribution from the Contract. A 10%
federal tax penalty and a 20% withholding for income tax may be imposed on
certain withdrawals. (See "Tax Status.")
INQUIRIES
Questions, inquiries or requests for additional information can be
directed to your agent or local representative, or you may contact the
Company as follows:
(bullet) Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-1277
Attention: Customer Service
(bullet) Call Customer Service:
1-800-525-4225 (for automated transfers
or changes in the allocation of Account
Values, call: 1-800-262-3862)
SUMMARY - 2
<PAGE>
FEE TABLE
This Fee Table describes the various charges and expenses associated with the
Contract. The charges and expenses shown below do not include premium taxes
that may be applicable. For more information regarding the expenses paid out
of the assets of a particular Fund, see the Fund's prospectus.
TABLE A--FOR MASTER CONTRACTS ISSUED OR ENDORSED
ON OR AFTER OCTOBER 1, 1996
1. CHARGES AGAINST THE SEPARATE ACCOUNT. Each Subaccount pays these expenses
out of its assets. The charges are reflected in the Subaccount's daily
Accumulation Unit Value and are not charged directly to an Account. They
include:
During the Accumulation Period:
Mortality and Expense Risk Charge 1.00%*
Administrative Expense Charge 0.00%**
----------
Total Separate Account Charges 1.00%
During the Annuity Period (All Contracts):
Mortality and Expense Risk Charge 1.25%
Administrative Expense Charge 0.00%**
----------
Total Separate Account Charges 1.25%
*The mortality and expense risk charge during the Accumulation Period is
0.75% for Contracts issued to Plans that meet certain criteria. See "Charges
and Deductions."
**We currently do not impose an Administrative Expense Charge. However, we
reserve the right to deduct a daily charge of not more than 0.25% per year
from the Subaccounts.
2. ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses
applicable to the Funds. A Fund's "Other Expenses" include operating costs of
the Fund. These expenses are reflected in the Fund's net asset value and are
not deducted from the Account Value under the Contract. (Except as noted, the
following figures are a percentage of average net assets and, except where
otherwise indicated, are based on figures for the year ended December 31,
1996.)
<TABLE>
<CAPTION>
Investment
Advisory Fees(1) Other Expenses
(after expense (after expense Total Fund
reimbursement reimbursement) Annual 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%
Aetna Variable Capital Appreciation Portfolio(2) 0.60% 0.15% 0.75%
Aetna Variable Growth Portfolio(2) 0.60% 0.15% 0.75%
Aetna Variable Index Plus Portfolio 0.35% 0.15% 0.50%
Aetna Variable Small Company Portfolio(2) 0.75% 0.15% 0.90%
Alger American Growth Portfolio 0.75%
Alger American Small Cap Portfolio 0.85%
American Century VP Capital Appreciation(3) 1.00%
Calvert Responsibly Invested Balanced Portfolio(4) 0.70%
Fidelity VIP II Contrafund Portfolio(5) 0.61%
Fidelity VIP Equity-Income Portfolio 0.51%
Fidelity VIP Growth Portfolio 0.61%
Fidelity VIP Overseas Portfolio 0.76%
FEE TABLE - 1
<PAGE>
Investment
Advisory Fees(1) Other Expenses
(after expense (after expense Total Fund
reimbursement reimbursement) Annual Expenses
---------------- ---------------- ----------------
Franklin Government Securities Trust(6) 0.63%
Janus Aspen Aggressive Growth Portfolio(7) 0.75%
Janus Aspen Balanced Portfolio(7) 0.82%
Janus Aspen Flexible Income Portfolio 0.65%
Janus Aspen Growth Portfolio(7) 0.65%
Janus Aspen Short-Term Bond Portfolio(7) 0.00%
Janus Aspen Worldwide Growth Portfolio(7) 0.68%
Lexington Natural Resources Trust 1.00%
Neuberger & Berman Growth Portfolio(8) 0.84%
Scudder International Portfolio Class A Shares 0.88%
</TABLE>
(1) Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds
as variable funding options under the Contract. These reimbursements are
paid out of the investment advisory fees and are not charged to
investors.
(2) The Company provides administrative services to the Funds and assumes the
Fund's ordinary recurring direct costs under an Administrative Services
Agreement. The "Other Expenses" shown reflect the fee payable under that
Agreement.
(3) 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.
(4) The Management and Advisory Fees are subject to a performance adjustment,
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
% (relating to an expense offset arrangement with the Portfolio's
custodian). Net fund operating expenses after reduction for fees paid
indirectly would be %.
(5) 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.
(6) 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 at
anytime during 1996.
(7) 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 Portfolio Operating Expenses would have been
%, %, and % for Aggressive Growth Portfolio; %, %,
% for Balanced Portfolio; %, % and % for Growth Portfolio;
%, % and % for Short-Term Bond Portfolio and %, % and
% for Worldwide Growth Portfolio; respectively. Janus Capital may
modify or terminate the waivers or reductions at any time upon 90 days'
notice to the Portfolio's Board of Trustees.
(8) Neuberger and 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 Portfolio's corresponding Series. The Portfolio pays Neuberger &
Berman Management Inc. ("NBMI") an administration fee based on the
Portfolio's net asset value. The corresponding Series of the Portfolio
pays NBMI a management fee based on the Series' average daily net assets.
Accordingly, this table combines management fees at the Series level and
administration fees at the Portfolio level in a unified fee rate. (See
"Expenses" in the Trust's prospectus.)
FEE TABLE - 2
<PAGE>
3. HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THESE EXAMPLES ARE PURELY HYPOTHETICAL. THEY 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.
Contracts with 1.00% Mortality and Expense Risk Charge.
Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets and an annual mortality and expense risk charge of
1.00%, you would have paid the following expenses on a $1,000 investment at the
end of the applicable time period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Aetna Variable Capital Appreciation Portfolio
Aetna Variable Growth Portfolio
Aetna Variable Index Plus Portfolio
Aetna Variable Small Company Portfolio
Alger American Growth Portfolio
Alger American Small Cap Portfolio
American Century VP Capital Appreciation
Calvert Responsibly Invested Balanced Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Franklin Government Securities Trust
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Short-Term Bond Portfolio
Janus Aspen Worldwide Growth Portfolio
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio Class A Shares
</TABLE>
Contracts with a 0.75% Mortality and Expense Risk Charge.
Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets and an annual mortality and expense risk chare of
0.75%, you would have paid the following expenses on a $1,000 investment at
the end of the applicable time period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Aetna Variable Capital Appreciation Portfolio
Aetna Variable Growth Portfolio
FEE TABLE - 3
<PAGE>
1 year 3 years 5 years 10 years
----------- ------------ ------------ -------------
Aetna Variable Index Plus Portfolio
Aetna Variable Small Company Portfolio
Alger American Growth Portfolio
Alger American Small Cap Portfolio
American Century VP Capital Appreciation
Calvert Responsibly Invested Balanced Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Franklin Government Securities Trust
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Short-Term Bond Portfolio
Janus Aspen Worldwide Growth Portfolio
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio Class A Shares
</TABLE>
TABLE B--FOR CONTRACTS ISSUED PRIOR TO OCTOBER 1, 1996
1. CHARGES AGAINST THE SEPARATE ACCOUNT. Each Subaccount pays these expenses
out of its assets. The charges are reflected in the Subaccount's daily
Accumulation Unit Value and are not charged directly to an Account. They
include:
Mortality and Expense Risk Charge 1.25%
Asset-Based Sales Charge 0.15%*
Administrative Expense Charge 0.00%**
----------
Total Separate Account Charges 1.40%
==========
*We will monitor the deductions applicable to each Account for the total
sales charges to ensure they will never exceed 8.5% of the total Purchase
Payments actually made to the Account. The sales charges apply during the
Accumulation Period only.
**We currently do not impose an Administrative Expense Charge. However, we
reserve the right to deduct a daily charge of not more than 0.25% per year
from the Subaccounts.
2. ANNUAL EXPENSES OF THE FUNDS
Please refer to "Annual Expenses of The Funds" under Table A for a full
illustration of the advisory fees and other expenses applicable to the Funds.
3. HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets, you would have paid the following expenses on a
$1,000 investment at the end of the applicable time period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
FEE TABLE - 4
<PAGE>
1 year 3 years 5 years 10 years
----------- ------------ ------------ -------------
Aetna Investment Advisers Fund, Inc.
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Aetna Variable Capital Appreciation Portfolio
Aetna Variable Growth Portfolio
Aetna Variable Index Plus Portfolio
Aetna Variable Small Company Portfolio
Alger American Growth Portfolio
Alger American Small Cap Portfolio
American Century VP Capital Appreciation
Calvert Responsibly Invested Balanced Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Franklin Government Securities Trust
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Short-Term Bond Portfolio
Janus Aspen Worldwide Growth Portfolio
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio Class A Shares
</TABLE>
FEE TABLE - 5
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
Table I
For Contracts with a 1.25% Mortality and Expense Risk Charge.
The condensed financial information presented below for each of the years in the
four-year period ended December 31, 1996, is derived from the financial
statements of the Separate Account, which financial statements have been audited
by KPMG Peat Marwick LLP, independent auditors. The financial statements as of
and for the year ended December 31, 1996 and the independent auditors' report
thereon, are included in the Statement of Additional Information. The
Accumulation Unit Values and the percentage change in the value of an
accumulation unit reflect a mortality and expense risk charge of 1.25% and an
asset based sales charge of 0.15% for the periods shown. For Master Contracts
issued or endorsed on or after October 1, 1996, the mortality and expense risk
charge is 1.00% (0.75% if the Plan meets certain criteria) during the
Accumulation Period, and the asset based sales charge does not apply. (See Table
II.)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $ 10.823 $11.083 $10.531 $10.000(2)
Value at end of period $ 14.113 $10.823 $11.083 $10.531
Increase (decrease) in value of accumulation unit(1) 30.40% (2.35)% 5.24% 5.31%
Number of accumulation units outstanding at end of
period 121,691 77,511 37,807 3,948
AETNA INCOME SHARES
Value at beginning of period $ 10.536 $11.107 $10.271 $10.000(2)
Value at end of period $ 12.283 $10.536 $11.107 $10.271
Increase (decrease) in value of accumulation unit(1) 16.59% (5.14)% 8.14% 2.71%
Number of accumulation units outstanding at end of
period 20,427 14,482 4,936 416
AETNA VARIABLE ENCORE FUND
Value at beginning of period $ 10.523 $10.252 $10.076 $10.000(2)
Value at end of period $ 11.003 $10.523 $10.252 $10.076
Increase (decrease) in value of accumulation unit(1) 4.57% 2.64% 1.75% 0.76%
Number of accumulation units outstanding at end of
period 19,202 12,934 3,066 547
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of period $ 10.900 $11.109 $10.253 $10.000(2)
Value at end of period $ 13.693 $10.900 $11.109 $10.253
Increase (decrease) in value of accumulation unit(1) 25.62% (1.88)% 8.35% 2.53%
Number of accumulation units outstanding at end of
period 19,038 11,773 6,540 221
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $ 10.000(6)
Value at end of period $ 10.666
Increase (decrease) in value of accumulation unit(1) 6.66%
Number of accumulation units outstanding at end of
period 202
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $ 10.000(6)
Value at end of period 10.605
Increase (decrease) in value of accumulation unit(1) 6.05%
Number of accumulation units outstanding at end of
period 243
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $ 10.000(6)
Value at end of period $ 10.573
Increase (decrease) in value of accumulation unit(1) 5.73%
Number of accumulation units outstanding at end of
period 0
AETNA VARIABLE INDEX PLUS PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation unit(1)
Number of accumulation units outstanding at end of
period
AUV HISTORY - 1
<PAGE>
1996 1995 1994 1993 1992
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.365
Increase (decrease) in value of accumulation unit(1) 3.65%
Number of accumulation units outstanding at end of
period 7,966
ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period $ 9.461 $10.000 $10.000(3)
Value at end of period $13.463 $ 9.461 $10.000
Increase (decrease) in value of accumulation unit(1) 42.29% (5.39)% 0.00%
Number of accumulation units outstanding at end of
period 31,528 4,575 2
AMERICAN CENTURY VP CAPITAL APPRECIATION
Value at beginning of period $11.740 $12.046 $10.000(5)
Value at end of period $15.176 $11.740 $12.046
Increase (decrease) in value of accumulation unit(1) 29.27% (2.54)% 20.46%
Number of accumulation units outstanding at end of
period 24,826 15,078 4,104
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
Value at beginning of period $10.839 $11.352 $10.589 $10.000(2)
Value at end of period $13.870 $10.839 $11.352 $10.589
Increase (decrease) in value of accumulation unit(1) 27.96% (4.52)% 7.21% 5.89%
Number of accumulation units outstanding at end of
period 14,656 8,469 2,383 125
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.461
Increase (decrease) in value of accumulation unit(1) 4.61%
Number of accumulation units outstanding at end of
period 6,415
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $11.047
Increase (decrease) in value of accumulation unit(1) 10.47%
Number of accumulation units outstanding at end of
period 1,108
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.183
Increase (decrease) in value of accumulation unit(1) 1.83%
Number of accumulation units outstanding at end of
period 2,541
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $ 9.954
Increase (decrease) in value of accumulation unit(1) (0.46)%
Number of accumulation units outstanding at end of
period 191
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $10.294 $10.843 $10.214 $10.000(2)
Value at end of period $11.946 $10.294 $10.843 $10.214
Increase (decrease) in value of accumulation unit(1) 16.06% (5.06)% 6.16% 2.14%
Number of accumulation units outstanding at end of
period 16,226 10,738 4,409 470
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.577 $10.000(4)
Value at end of period $13.296 $10.577
Increase (decrease) in value of accumulation unit(1) 25.71% 5.77%
Number of accumulation units outstanding at end of
period 15,482 820
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.843
Increase (decrease) in value of accumulation unit(1) 8.43%
Number of accumulation units outstanding at end of
period 160
AUV HISTORY - 2
<PAGE>
1996 1995 1994 1993 1992
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10,000(7) $10.000
Value at end of period $12.054 $10.000
Increase (decrease) in value of accumulation unit(1) 20.54% 0.00%
Number of accumulation units outstanding at end of
period 745 0
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.872
Increase (decrease) in value of accumulation unit(1) 8.72%
Number of accumulation units outstanding at end of
period 166
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $10.316
Increase (decrease) in value of accumulation unit(1) 3.16%
Number of accumulation units outstanding at end of
period 24
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(8)
Value at end of period $10.952
Increase (decrease) in value of accumulation unit(1) 9.52%
Number of accumulation units outstanding at end of
period 11,128
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.496 $11.261 $10.196 $10.000(2)
Value at end of period $12.095 $10.496 $11.261 $10.196
Increase (decrease) in value of accumulation unit(1) 15.24% (6.79)% 10.45% 1.96%
Number of accumulation units outstanding at end of
period 8,348 7,350 2,438 165
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.055 $11.796 $10.927 $10.000(2)
Value at end of period $14.359 $11.055 $11.796 $10.927
Increase (decrease) in value of accumulation unit(1) 29.89% (6.28)% 7.95% 9.27%
Number of accumulation units outstanding at end of
period 35,941 21,935 7,403 477
SCUDDER INTERNATIONAL PORTFOLIO Class A Shares
Value at beginning of period $12.595 $12.883 $ 9.539 $10.000(2)
Value at end of period $13.799 $12.595 $12.883 $ 9.539
Increase (decrease) in value of accumulation unit(1) 9.56% (2.24)% 35.06% (4.81)%
Number of accumulation units outstanding at end of
period 38,067 22,036 4,560 281
</TABLE>
(1) The above figures are calculated by subtracting the beginning
Accumulation Unit value from the ending Accumulation Unit value during a
calendar year or period, and dividing the result by the beginning
Accumulation Unit value.
(2) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on July 20, 1992.
(3) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on September 17, 1993,
the date on which the Portfolio became available under the Contract.
(4) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during October 1994,
when funds were first received in this option.
(5) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on February 1, 1993.
(6) 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.
(7) Reflects less than a full year of performance activity. Funds were first
available in this option during March 1995.
(8) 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.
Table II to be provided by post-effective amendment.
AUV HISTORY - 3
<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
The Company established Variable Annuity Account C (the "Separate
Account") in 1976 as a segregated asset account for the purpose of funding
its variable annuity contracts. The Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act"),
and meets the definition of "separate account" under the federal securities
laws. The Separate Account is divided into "subaccounts" which do not invest
directly in stocks, bonds or other investments. Instead, each Subaccount buys
and sells shares of a corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities arising out of any other
business conducted by the Company. Income, gains or losses of the Separate
Account are credited to or charged against the assets of the Separate Account
without regard to our other income, gains or losses. All obligations arising
under the Contracts are our general corporate obligations.
INVESTMENT OPTIONS
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the enrollment form. In turn, the Subaccounts invest in the
corresponding Funds at net asset value. The total number of investment
options that you may select during the Accumulation Period is limited to 18.
Each Subaccount selected, the Fixed Account, each version of the Fixed Plus
Account (see Appendices II, III and IV) and each guaranteed term of GAA
counts as one option, even if you no longer have amounts allocated to that
option.
The Contract Holder may decide to offer only a select number of Funds
under its Plan. In addition, the Company may add, withdraw or substitute
Funds, subject to the conditions in the Contract and to compliance with
regulatory requirements. The availability of Funds may also be subject to
applicable regulatory authorization. Not all Funds may be available in all
jurisdictions, under all Contracts or in all Plans.
If the shares of any Fund should no longer be available for investment by
the Separate Account, or if in the judgment of the Company further
investments in such shares should become inappropriate under this type of
Contract, we may cease to make such Fund shares available for investment
under the Contract on a prospective basis. The Company may, alternatively,
substitute shares of another Fund for shares already acquired. The Company
reserves the right to substitute shares of another Fund for shares already
acquired without a proxy vote. Any elimination, substitution or addition of
Funds will be done in accordance with applicable state and federal securities
laws.
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve
their respective investment objectives. Except where otherwise noted, all of
the Funds are diversified, as defined in the 1940 Act.
1
<PAGE>
(bullet) Aetna Variable Fund seeks to maximize total return through
investments in a diversified portfolio of common stocks and
securities convertible into common stock.(1)
(bullet) Aetna Income Shares seeks to maximize total return, consistent with
reasonable risk, through investments in a diversified portfolio
consisting primarily of debt securities.(1)
(bullet) 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)
(bullet) 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)
(bullet) Aetna Generation Portfolios, Inc.--Aetna Ascent Variable Portfolio
seeks to provide capital appreciation by allocating its investments
among equities and fixed income securities. The Portfolio is managed
for investors who generally have an investment horizon exceeding 15
years, and who have a high level of risk tolerance.(1)
(bullet) 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)
(bullet) 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)
(bullet) Aetna Variable Portfolios, Inc.--Aetna Variable Capital Appreciation
Portfolio seeks growth of capital primarily through investment in a
diversified portfolio of common stocks and securities convertible
into common stock. The Portfolio will use a value-oriented approach
in an attempt to outperform the total return performance of publicly
traded common stocks represented by the S&P 500 Composite Stock
Price Index ("S&P 500"), a broad based stock market index composed
of 500 common stocks selected by the Standard & Poor's Corporation.
The Portfolio uses the S&P 500 as a comparative benchmark because it
represents approximately two- thirds of the total market value of
all U.S. common stocks, and is well known to investors.(1)
(bullet) Aetna Variable Portfolios, Inc.--Aetna Variable Growth Portfolio
seeks growth of capital through investment in a diversified
portfolio of common stocks and securities convertible into common
stocks believed to offer growth potential.(1)
(bullet) Aetna Variable Portfolios, Inc.--Aetna Variable Index Plus Portfolio
seeks to outperform the total return performance of publicly traded
common stocks represented by the S&P 500 Composite Stock Price Index
("S&P 500"), a broad-based stock market index composed of 500 common
stocks selected by the Standard & Poor's Corporation. The Portfolio
uses the S&P 500 as a comparative benchmark because it represents
approximately two-thirds of the total market value of all U.S.
common stocks, and is well known to investors.(1)
(bullet) Aetna Variable Portfolios, Inc.--Aetna Variable Small Company
Portfolio seeks growth of capital primarily through investment in a
diversified portfolio of common stocks and securities convertible
into common stocks of companies with smaller market capitalizations.
Companies with smaller market capitalizations generally will have
market capitalization at the time of purchases of $1 billion or
less.(1)
(bullet) 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)
(bullet) Alger American Fund--Alger American Small Capitalization Portfolio
seeks long-term capital appreciation. Except during temporary
defensive periods, the Portfolio invests at least 65% of its total
assets in equity securities of companies that, at the time of
purchase of such securities, have total market capitalization within
the range of companies included in the Russell 2000 Growth Index,
updated quarterly. The Russell 2000 Growth Index is designed to
track the
2
<PAGE>
performance of small capitalization companies. At the
range of market capitalization of these companies was $ million to
$ billion.(2)
(bullet) American Century Variable Portfolios, Inc.--American Century VP
Capital Appreciation 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.(3)
(bullet) 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.(4)
(bullet) 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.(5)
(bullet) 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.(5)
(bullet) 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.(5)
(bullet) Fidelity Investments Variable Insurance Products Fund--Overseas
Portfolio seeks long-term growth by investing mainly in foreign
securities (at least 65% of the Fund's total assets in securities of
issuers from at least three countries outside of North America).(5)
(bullet) Franklin Government Securities Trust seeks income through
investments in obligations of the U.S. Government or its agencies or
instrumentalities, primarily GNMA obligations.(6) (This Fund is only
available under limited circumstances.)
(bullet) Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified
portfolio that seeks long-term growth of capital in a manner
consistent with the preservation of capital. The Portfolio pursues
its investment objective by normally investing at least 50% of its
equity assets in securities issued by medium-sized companies.
Medium- sized companies are those whose market capitalizations fall
within the range of companies in the S & P Midcap 400 Index, which
as of included companies with capitalizations between
approximately $ million and $ billion, but which is expected
to change on a regular basis.(7)
(bullet) Janus Aspen Series--Balanced Portfolio seeks long-term capital
growth, consistent with preservation of capital and balanced by
current income. The Portfolio pursues its investment objective by
investing 40%-60% of its assets in equity securities selected
primarily for their growth potential and 40%-60% of its assets in
fixed-income securities selected primarily for their income
potential.(7)
(bullet) 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).(7)
(bullet) Janus Aspen Series--Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital. The
Portfolio pursues its investment objective by investing in common
stocks of companies of any size.(7)
(bullet) 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.(7)
(bullet) Janus Aspen Series--Worldwide Growth Portfolio seeks long-term
growth of capital in a manner consistent with preservation of
capital. The Portfolio pursues its investment objective primarily
through investments in common stocks of foreign and domestic
issuers.(7)
(bullet) 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.(8)
(bullet) Neuberger & Berman Advisers Management Trust-- Growth Portfolio
seeks capital appreciation without regard to income. The Portfolio
generally invests in securities believed to to have the maximum
potential for long-term capital appreciation. The Portfolio expects
to be
3
<PAGE>
almost fully invested in common stocks, often of companies that may
be temporarily out of favor in the market.(9)
(bullet) 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.(10)
Investment Advisers for each of the Funds:
(1) Aetna Life Insurance and Annuity Company (adviser);
Aeltus Investment Management, Inc.
(sub-adviser)
(2) Fred Alger Management, Inc.
(3) American Century Investment Management, Inc.
(4) Calvert Asset Management Company, Inc.
(5) Fidelity Management & Research Company
(6) Franklin Advisers, Inc.
(7) Janus Capital Corporation
(8) Lexington Management Corporation (adviser);
Market Systems Research Advisors, Inc. (subadviser)
(9) Neuberger & Berman Management Inc. (Investment Manager);
Neuberger & Berman, L.P. (Sub-Adviser)
(10) Scudder, Stevens & Clark, Inc.
Risks Associated with Investment in the Funds. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The
use of certain derivatives may involve high risk of volatility to a Fund, and
the use of leverage in connection with such derivatives can also increase
risk of losses. Some of the Funds may also invest in foreign or international
securities which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential risks,
is found in the respective Fund prospectuses which accompany this Prospectus.
You should read the Fund prospectuses and consider carefully, and on a
continuing basis, which Fund or combination of Funds is best suited to your
long-term investment objectives.
Conflicts of Interest (Mixed and Shared Funding). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other
insurance companies for the same purpose. This is referred to as "shared
funding." Shares of the Funds may also be used for funding variable life
insurance contracts issued or sponsored by the Company or by third parties.
This is referred to as "mixed funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by
other companies, certain conflicts of interest could arise. If a conflict of
interest were to occur, one of the separate accounts might withdraw its
investment in a Fund, which might force that Fund to sell portfolio
securities at disadvantageous prices, causing its per share value to
decrease. Each Fund's Board of Directors or Trustees has agreed to monitor
events in order to identify any material irreconcilable conflicts which might
arise and to determine what action, if any, should be taken to address such
conflict.
CREDITED INTEREST OPTIONS
Purchase Payments may be allocated to one or more of the Credited Interest
Options available under the Contract as described below. The Contract Holder
may elect not to offer all Credited Interest Options under its Plan.
(bullet) The Guaranteed Accumulation Account (GAA) is a credited interest
option through which we guarantee stipulated rates of interest for
stated periods of time. Amounts must remain in the GAA for the full
guaranteed term to receive the quoted interest rates, or a market
value adjustment (which may be positive or negative) will be
applied. (See Appendix I.)
(bullet) The Fixed Plus Account is a part of the Company's general account
and guarantees a minimum interest rate, as specified in the
Contract. The Company may credit higher interest rates in its
discretion. Withdrawals and transfers from the Fixed Plus Account
are limited. (See Appendices II, III and IV.)
(bullet) The Fixed Account is part of the Company's general account. The
Fixed Account guarantees a minimum interest rate, as specified in
the Contract. The Company may credit higher interest rates from time
to time. The Fixed Account is only available in limited
circumstances. Transfers from the Fixed Account are limited. (See
Appendix V.)
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PURCHASE
CONTRACT AVAILABILITY
The Contracts are designed to fund Plans adopted by institutions of higher
education for their employees. The Plans may be (1) tax-deferred annuity
programs under Section 403(b) of the Code, and/or (2) qualified defined
contribution plans under Section 401(a) and 414(h) of the Code.
Eligible participants in the Plan seeking to invest and accumulate money
for retirement can purchase individual interests in group Contracts. The
group Contract is generally owned by the employer, and individual accounts
are established for each Participant. For each Contract, one or more Employee
Accounts will be established for contributions derived from employee salary
reduction or salary deduction (as provided for by the Plan), and one or more
Employer Accounts may be established for contributions made by the employer
on the employee's behalf.
PURCHASING INTERESTS IN THE CONTRACT
Eligible organizations may acquire both types (403(b) and 401(a)) of group
Contracts for its Plans(s) by submitting the appropriate master application
form(s) to the Company. Once we approve the application, a group Contract is
generally issued to the employer as the group Contract Holder. Participants
may purchase interests in a group Contract by submitting an enrollment form
to the Company.
The Company must accept or reject the enrollment 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 only with the consent of the
Participant, or under limited circumstances, with the consent of the Contract
Holder pending acceptance of the form. If we agree to hold Purchase Payments
for longer than the five business days based on the consent of the Contract
Holder, the Purchase Payments will be deposited in the Aetna Variable Encore
Fund Subaccount until the forms are completed.
Purchase Payments will initially be allocated to the Subaccounts or
Credited Interest Options as specified by the Participant on the enrollment
form. Changes in such allocation may be made in writing or by telephone
transfer. Allocations must be in whole percentages, and there may be
limitations on the number of investment options that can be selected during
the Accumulation Period. (See "Transfers.") The Code imposes a maximum limit
on annual Purchase Payments which may be excluded from a Participant's gross
income. (See "Tax Status.")
RIGHTS UNDER THE CONTRACT
You have a nonforfeitable right to the value of your Employee Account. You
have a nonforfeitable right to the value of your Employer Account to the
extent of your vested percentage under the Plan as interpreted by the
Contract Holder. Subject to the terms of the Plan, you may select the
investment options for your Employer Account and your Employee Account. You
may elect an Annuity option for your Account Value; however, for your
Employer and certain Employee Accounts (as provided in the Plan), the
Contract Holder must certify that you are eligible for a distribution and
that the form of Annuity is permitted under the terms of the Plan.
RIGHT TO CANCEL
The Contract or participation under the Contract may be canceled without
penalty by returning it (or other document evidencing your interest) to the
Company with a written notice of intent to cancel. In most states, you have
ten days to exercise this right; some states allow you a longer free-look
period. When we receive the request for cancellation, we will return the
Account Value, unless the laws of the state in which the Contract was issued
require that we return the initial Purchase Payment (if greater than the
Account Value). In states that do not require a return of Purchase Payments,
the purchaser bears the entire investment risk for amounts allocated among
the Subaccounts during the free look period. Account Values will be
determined as of the Valuation Date on which we receive the request for
cancellation at our Home Office.
CHARGES AND DEDUCTIONS
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
Mortality and Expense Risk Charge. The Company makes a daily deduction from
each of the Subaccounts for the mortality and expense risk charge. For Master
Contracts issued on or after October 1, 1996 (and for Master Contracts issued
prior to that date that are endorsed to contain this provision), during the
Accumulation Period, the charge is equal, on an annual basis, to 1.00% of the
daily net assets of the Subaccounts. However, for Master
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Contracts issued to Plans that meet the following criteria, the charge during
the Accumulation Period is equal on an annual basis to 0.75% of daily net
assets of the Subaccounts:
- --the employer requires that we distribute the Contracts through salaried
enrollers;
- --both employer and Participant contributions are mandatory; and
- --the Plan has existing assets of at least $300 million in an Optional
Retirement Plan.
For Master Contracts issued prior to October 1, 1996, the mortality and
expense risk charge during the Accumulation Period is equivalent to 1.25% per
year.
During the Annuity Period, for any Contract, the deduction for mortality and
expense risks is equivalent to 1.25% per year.
The mortality and expense risk charge compensates the Company for the
assumption of the mortality and expense risks under the Contract. The
mortality risks are those assumed for our promise to make lifetime payments
according to annuity rates specified in the Contract. The expense risk is the
risk that the actual expenses for costs incurred under the Contract will
exceed the maximum costs that can be charged under the Contract.
If the amount deducted for mortality and expense risks is not sufficient
to cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the
mortality and expense risk charge.
Asset Based Sales Charge. There are no deductions from Purchase Payments for
sales commissions or related expenses. For Contracts issued prior to October
1, 1996 (except for Contracts that are endorsed to delete this provision),
sales commissions and expenses are advanced by the Company and recovered out
of an asset based sales charge that is deducted from the Account in an amount
that equals 0.15% on an annual basis. The deduction is made from amounts held
in the Subaccounts during the Accumulation Period only. We will monitor each
Account to ensure that the total sales charges will never exceed 8.5% of the
total Purchase Payments actually made to the Account.
If the asset based sales charges are insufficient to recover sales
commissions, such commissions would be recovered out of the Company's profits
from investment activities, including the mortality and expense risk charges
under the Contract. For sales commissions paid in connection with the sale of
the Contracts, see "Distribution."
Administrative Expense Charge. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge.
The administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of
the administrative services to be provided while the Contract is in force.
The Company does not expect to make a profit from this charge.
Under the Contract, the amount of the administrative expense charge may be
of an amount equal, on an annual basis, to a maximum of 0.25% of the daily
net assets of the Subaccounts. There is currently no administrative expense
charge during the Accumulation Period or Annuity Period. Once an Annuity
Option is elected, the charge will be established and will be effective
during the entire Annuity Period.
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund
prospectuses.
PREMIUM AND OTHER TAXES
Several states and municipalities impose a premium tax on Annuities. These
taxes currently range from 0% to 4%. The Company reserves the right to deduct
premium tax against Purchase Payments or Account Values, but no earlier than
when we have a tax liability under state law. The Company's current practice
is to deduct for premium taxes at the time of complete withdrawal or
annuitization. In addition to the premium tax, the Company reserves the right
to assess a charge for any state or federal taxes due against the Contract or
the Separate Account assets. (See "Tax Status.")
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CONTRACT VALUATION
ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in your Account as of any Valuation Date. The Account Value at
any given time is based on the value of the units held in each Subaccount,
plus the value of amounts held in any of the Credited Interest Options.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the
investment performance, expenses and charges of the applicable Fund and is
reduced each day by a percentage that accounts for the daily assessment of
mortality and expense risk charges, the asset based sales charge (if
applicable) and the administrative expense charge (if any).
Initial Purchase Payments will be credited to your Account at the AUV
computed on the next Valuation Date following our acceptance of the
enrollment materials, as described under "Purchase--Purchasing Interests in
the Contract." Each subsequent Purchase Payment (or amount transferred)
received by the Company by the close of business of The New York Stock
Exchange will be credited to your Account at the AUV computed on the next
Valuation Date following our receipt of your payment or transfer request. The
value of an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance of
a Subaccount from one Valuation Date to the next. The net investment factor
for a Subaccount for any valuation period is equal to the sum of 1.0000 plus
the net investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current
Valuation Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation of
the Subaccount;
(d) divided by the total value of the Subaccount's Accumulation and Annuity
Units on the preceding Valuation Date;
(e) minus a daily charge for mortality and expense risks, administrative
expenses (if applicable), and asset based sales charges (if applicable).
(See "Charges and Deductions" for further details on the charges
pertaining to your Contract.)
The net investment rate may be either positive or negative.
TRANSFERS
You can transfer amounts held under your Account from one Subaccount to
another. Transfers between the Credited Interest Options and the Subaccounts
are subject to certain restrictions. (See the Appendices.) A request for
transfer can be made either in writing or by telephone. The telephone
transfer privilege is available automatically; no special election is
necessary. All transfers must be in accordance with the terms of the Contract
and your Plan, as applicable.
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge. However, the total number of
investment options that you may select during the Accumulation Period is
limited. (See "Investment Options--The Funds.") The minimum transfer amount
is $500. Any transfer will be based on the Accumulation Unit Value next
determined after the Company receives a valid transfer request at its Home
Office.
DOLLAR COST AVERAGING PROGRAM
You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program. Dollar
Cost Averaging is a system for investing a fixed amount of money at regular
intervals over a period of time. Dollar Cost Averaging does not ensure a
profit nor guarantee against loss in a declining market. You should consider
your financial ability to continue purchases through periods of low price
levels. Please refer to the "Inquiries" section of the Prospectus Summary
which describes how you can obtain further information.
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WITHDRAWALS
All or a portion of the Account Value may be withdrawn at any time during
the Accumulation Period, subject to the withdrawal restrictions under Section
403(b) Contracts described below, and subject to limitations on withdrawals
from the Credit Interest Options. The Contract may require that the Contract
Holder certify in writing that you are eligible both as to the timing and
form of distribution. To request a withdrawal, you must properly complete a
disbursement form and send it to our Home Office. Payments for withdrawal
requests will be made in accordance with SEC requirements, but normally not
later than seven calendar days following our receipt of a disbursement form.
Withdrawals may be requested in one of the following forms:
(bullet) Full Withdrawal of an Account: The amount paid for a full withdrawal
will be the Account Value allocated to the Subaccounts, the
Guaranteed Accumulation Account (plus or minus a market value
adjustment) (see Appendix I), and the Fixed Account, plus the amount
available for withdrawal from the Fixed Plus Account (see Appendices
II, III and IV).
(bullet) Partial Withdrawals (Percentage or Specified Dollar Amount): The
amount paid will be the percentage of the Account Value or the
dollar amount requested; however, the amount available for
withdrawal from the Fixed Plus Account is limited (see Appendices II,
III and IV).
For any partial withdrawal, amounts will be withdrawn proportionately from
each Subaccount or Credited Interest Option in which the Account is invested,
unless you request otherwise in writing. All amounts paid will be based on
Account Values as of the next Valuation Date after we receive a request for
withdrawal at our Home Office, or on such later date as the disbursement form
may specify. A 20% federal income tax may be withheld from amounts paid
directly to you. (See "Tax Status-- Contracts Used with Certain Retirement
Plans.")
Withdrawal Restrictions from 403(b) Plans. Under Section 403(b) Contracts, a
withdrawal of salary reduction contributions and earnings on such
contributions is generally prohibited prior to your death, disability,
attainment of age 59-1/2, separation from service or financial hardship. (See
"Tax Status.")
REINVESTMENT PRIVILEGE
You may elect to reinvest all or a portion of the proceeds received from a
full withdrawal of your Account within 30 days after such withdrawal has been
made. Accumulation Units will be credited to the Account for the amount
reinvested. Reinvested amounts will be reallocated to the applicable
investment options in the same proportion as they were allocated at the time
of withdrawal. Accumulation Units will be credited to your Account based on
the Accumulation Unit Value next computed following our receipt of your
request along with the amount to be reinvested. The reinvestment privilege
may be used only once. See Appendix I for a discussion of amounts withdrawn
from GAA and then reinvested. If you are contemplating reinvestment, you
should seek competent advice regarding the tax consequences associated with
such a transaction.
CONTRACT LOANS
If allowed by the Plan, Participants may request a loan from their Account
Value during the Accumulation Period. Loans can only be made from those
Account Values held in the Subaccounts or from those Credited Interest
Options that allow loans. (See Appendices I, II and III.) A loan may be
obtained by reviewing and reading the terms of your loan agreement, properly
completing a loan request form and submitting it to the Company's Home
Office.
ADDITIONAL WITHDRAWAL OPTIONS
The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Additional Withdrawal Options"). To exercise
these options, your Account Value must meet the minimum dollar amounts and
age criteria applicable to that option. In addition, for Employer and certain
Employee Accounts, the Contract Holder must provide written certification
that the distribution is in accordance with the terms of the Plan. The
Additional Withdrawal Options that may be available under the Contract
include the following:
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(bullet) SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from your Account based on a payment method you select.
It is designed for those who want a periodic income while retaining
investment flexibility for amounts accumulated under a Contract.
(This option may not be elected if you have an outstanding contract
loan.)
(bullet) 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 the later of age 70-1/2 or retirement, or for 5%
owners at age 70-1/2 and pays you that amount once a year. (See "Tax
Status.")
(bullet) LEO--Life Expectancy Option. LEO is a distribution option under
which a portion of your Account Value will be automatically
surrendered and distributed each year, payable over a period equal
to the life expectancy of the Participant or the joint life
expectancy of the Participant and the designated Beneficiary.
Other Additional Withdrawal Options may be added from time to time.
Information relating to any of the Additional Withdrawal Options may be
obtained from your local representative or from the Company at its Home
Office.
If you select one of the Additional Withdrawal Options, you will retain
all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus. Taking a withdrawal
under one of these Additional Withdrawal Options may have tax consequences.
Any person concerned about tax implications should consult a competent tax
advisor prior to electing an option.
Once you elect an Additional Withdrawal Option, you may revoke it any time
by submitting a written request to our Home Office. Once an option is
revoked, it may not be elected again, nor may any other Additional Withdrawal
Option be elected unless permitted by the Code. The Company reserves the
right to discontinue the availability of one or all of these Additional
Withdrawal Options at any time, and/or to change the terms of future
elections.
DEATH BENEFIT DURING ACCUMULATION PERIOD
The Contract provides that a death benefit is payable to the
Beneficiary(ies) upon the death of the Participant before the Annuity Date.
If a lump-sum distribution or an Annuity Option is elected within six months
of the Participant's death, a guaranteed death benefit is provided. For each
Account, the guaranteed death benefit is the greater of:
(a) the Account Value, plus any positive aggregate Market Value Adjustment
(MVA) that applies to amounts allocated to the Guaranteed Accumulation
Account (GAA), on the day the death notice and request for payment are
received in good order at our Home Office; or
(b) the sum of the net Purchase Payments made to each Account, minus the
total of all withdrawals or annuitizations made from the Account and any
amount allocated to the Loan Account.
If a lump-sum distribution or Annuity Option is elected six months or more
after your death, the Beneficiary will receive the Account Value, plus or
minus any MVA that would apply to any portion of the Account allocated to
GAA. If a full or partial withdrawal is made within six months after your
death, the Beneficiary will receive the Account Value, plus any positive MVA
that would apply to any portion of the Account allocated to GAA. The value of
the Account is determined as of the Valuation Date on which proof of death
acceptable to us and a request for payment are received at our Home Office.
Death benefit proceeds may be paid to the Beneficiary:
(bullet) in a lump sum; or
(bullet) in accordance with any of the Annuity Options available under the
Contract.
The Beneficiary may instead elect one of the following two options;
however, the Code limits how long the death benefit proceeds may be left in
these options (see below):
(bullet) to leave the Account Value invested in the Contract; or
(bullet) to leave the Account Value on deposit in the Company's general
account, and to receive monthly, quarterly, semi- annual or annual
interest payments at the interest rate then being credited on such
deposits. The balance on deposit can be withdrawn at any time or
applied to an Annuity Option.
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When paying the Beneficiary, we will determine the Account Value on the
Valuation Date following the date on which we receive proof of death
acceptable to the Company. Interest, if any, will be paid from the date of
death at a rate no less than required by law. We will mail payment to the
Beneficiary within seven days after we receive proof of death and request for
payment.
The Code requires that distribution of death proceeds begin within a
certain period of time. Generally, either payments must begin by December 31
of the year following the year of your death, or the entire value of your
benefits must be distributed by December 31 of the fifth year following the
year of your death. If your Beneficiary is your spouse, he or she is not
required to begin distributions until the year you would have attained age
70-1/2. In no event may payments extend beyond the life of the Beneficiary or
any specified period greater than the Beneficiary's life expectancy. If no
elections are made, no distributions will be made. Failure to commence
distributions within the above time periods can result in tax penalties.
Regardless of the method of payment, death benefit proceeds will generally be
taxed to the Beneficiary in the same manner as if you had received those
payments. (See "Tax Status.")
ANNUITY PERIOD
ANNUITY PERIOD ELECTIONS
The Code generally requires that minimum annual distributions of the
Account Value must begin by April 1st of the calendar year following the
calendar year in which a Participant attains age 70-1/2 (or retires, if
later, unless the Participant is a 5% owner). In addition, distributions must
be in a form and amount sufficient to satisfy the Code requirements. These
requirements may be satisfied by the election of certain Annuity Options or
Additional Withdrawal Options. (See "Tax Status.")
At least 30 days prior to the Annuity Date, you must notify us in writing
of the following:
(bullet) the date on which you would like to start receiving annuity
payments;
(bullet) the Annuity Option under which you want your payments to be
calculated and paid; and
(bullet) the investment option(s) used to provide annuity payments (i.e., a
fixed annuity using the general account or any of the Subaccounts
available at the time of annuitization).
For the Employer and certain Employee Accounts, the Contract Holder must
provide written certification that the distribution is in accordance with the
terms of the Plan. (See "Rights Under the Contract.")
Annuity Payments will not begin until you have selected an Annuity Date
and an Annuity Option. Until a date and option are elected the Account will
continue in the Accumulation Period. Annuity Payments will be made monthly,
unless a Participant elects otherwise. Once Annuity Payments begin, the
Annuity Option selected may not be changed. If your Plan requires, you may
also be required to submit the appropriate joint and survivor annuity waiver
and spousal consent form(s) to us. Transfers among Subaccounts during the
Annuity Period are only permitted under Master Contracts issued, or endorsed
to allow such transfers, on or after October 1, 1996. We reserve the right to
limit such transfers to four per year.
ANNUITY OPTIONS
You may choose one of the following Annuity Options:
LIFETIME ANNUITY OPTIONS:
(bullet) Option 1--Life Annuity--An annuity with payments ending on the
Participant's death.
(bullet) Option 2--Life Annuity with Guaranteed Payments--An annuity with
payments guaranteed for 5-30 years.
(bullet) Option 3--Life Annuity with Cash Refund Feature--An annuity with a
cash refund feature. Payments may be guaranteed for the amount
applied to the Annuity option. If the Annuitant dies prior to the
payment of the amount applied to the Annuity Option (less any
premium tax), any remaining balance will be paid in one sum to the
Beneficiary. This option is only available on a fixed basis.
(bullet) Option 4--Life Annuity based upon the Lives of Two Annuitants--An
annuity will be paid during the lives of the Annuitant and a second
Annuitant. You may select either an Annuity with 100%, 66-2/3% or
50% of the payment to continue after the first death, or an Annuity
with 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.
(bullet) Option 5--Life Annuity based Upon the Lives of Two Annuitants with
Guaranteed Payments--An annuity with Payments for a minimum of 5-30
years, with 100% of the payment to continue after the first death.
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(bullet) Option 6--Life Annuity Based Upon the Lives of Two Annuitants with a
Cash Refund Feature--An annuity with 100% of the payment to continue
after the first death with a cash refund feature. Payments are
guaranteed for the amount applied to the Annuity Option. If both
Annuitants die prior to the total payment of the amount applied to
the Annuity Option (less any premium tax), any remaining balance
will be paid in one sum to the beneficiary. This option is only
available on a fixed basis.
If Option 1 or 4 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant
under Option 4, should die prior to the due date of the second Annuity
Payment. Once lifetime Annuity payments begin, the Participant cannot elect
to receive a lump-sum settlement.
Nonlifetime Annuity Options:
(bullet) Option 1--Payments for a Specified Period--payments will continue
for a specified period of time, as provided for under your Contract.
Under some Contracts, for amounts held in the Fixed Plus Account,
the Annuity must be paid on a fixed basis. (See Appendices II, III
and IV to determine if this applies to the Contract.)
If a nonlifetime option is elected on a variable basis, the Participant,
with the consent of the Contract Holder, may request at any time during the
payment period that the present value of all or a portion of the remaining
variable payments be paid in one sum. The nonlifetime option is not available
on a variable basis under a Contract which provides for immediate Annuity
benefits.
We may also offer additional Annuity Options under your Contract from time
to time.
DURATION OF ANNUITY PAYMENTS
Annuity payments may not extend beyond (a) the life of the Participant,
(b) the joint lives of the Participant and Beneficiary, (c) a period greater
than the Participant's life expectancy, or (d) a period greater than the
joint life expectancies of the Participant and Beneficiary.
Amount of Each Annuity Payment. The amount of each payment depends on how you
allocate your Account Value between fixed and variable payouts. For Master
Contracts issued on or after October 1, 1996 (and Master Contracts issued
prior to that date that are endorsed to contain this provision), no election
may be made that would result in the first Annuity payment of less than $50,
or total yearly Annuity payments of less than $250. For Contracts issued
prior to October 1, 1996, no election may be made that would result in the
first Annuity payment of less than $25, or total yearly Annuity payments of
less than $125. If your Account Value on the Annuity Date is insufficient to
elect an option for the minimum amount specified, a lump-sum payment must be
elected.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3-1/2% or 5% per annum). Selection of a 5% rate causes a higher
first payment, but Annuity Payments will increase thereafter only to the
extent that the net investment rate exceeds 5% on an annualized basis.
Annuity Payments would decline if the rate were below 5%. Use of the 3-1/2%
assumed rate causes a lower first payment, but subsequent payments would
increase more rapidly or decline more slowly as changes occur in the net
investment rate. (See the Statement of Additional Information for further
discussion on the impact of selecting an assumed net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
During the Annuity Period, we will make a daily deduction of 1.25% for
mortality and expense risks from any amounts held on a variable basis.
Therefore, electing the nonlifetime option on a variable basis will result in
a deduction being made even though we assume no mortality risk. We may also
deduct a daily administrative charge from amounts held under the variable
options. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
If a Participant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 4 was elected, Annuity Payments will cease on
the death of the Participant under Option 1 or the death of the surviving
Annuitant under Option 4.
If Lifetime Option 2 or Option 5 was elected and the death of the
Participant under Option 2, or the surviving Annuitant under Option 5, occurs
prior to the end of the guaranteed minimum payment period, we will continue
payments to the Beneficiary unless the Beneficiary elects a lump sum.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments will be paid to the
Beneficiary unless the Beneficiary elects a lump sum.
If the Participant dies after Annuity payments have begun and if there is
a death benefit payable under the Annuity option elected, the remaining value
must be
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distributed to the Beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after acceptable
proof of death, and a request for payment are received at our Home Office.
The value of any death benefit proceeds will be determined as of the next
Valuation Date after we receive acceptable proof of death and a request for
payment. Under Options 2 and 5, such value will be reduced by any payments
made after the date of death.
TAX STATUS
INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current
federal income tax law. Such laws may change in the future, and it is
possible that any change could be retroactive (i.e., effective prior to the
date of the change). The Company makes no guarantee regarding the tax
treatment of any contract or transaction involving a Contract. The ultimate
effect of federal income taxes on the amounts held under a Contract, on
Annuity payments, and on the economic benefit to the Contract Holder,
Participant or Beneficiary may depend upon the tax status of the individual
concerned. Any person concerned about these tax implications should consult a
competent tax adviser before initiating any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code.
Investment income and realized capital gains are automatically applied to
increase reserves under the Contracts. Under existing federal income tax law,
the Company believes that the Separate Account investment income and realized
net capital gains will not be taxed to the extent that such income and gains
are applied to increase the reserves under the Contracts.
The Company does not anticipate that it will incur any federal income tax
liability attributable to the Separate Account and, therefore, the Company
does not intend to make provisions for any such taxes. However, if changes in
the federal tax laws or interpretation thereof result in the Company being
taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to
some or all Contracts) in order to set aside provisions to pay such taxes.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
In General. The Contract is designed for use with Section 403(b) plans and
Section 401(a) plans. The tax rules applicable to retirement plans vary
according to the type of plan and the terms and conditions of the plan.
The Company makes no attempt to provide more than general information
about use of the Contracts with the various types of retirement plans.
Participants as well as Beneficiaries are cautioned that the rights of any
person to any benefits under the Contracts may be subject to the terms and
conditions of the plans themselves, in addition to the terms and conditions
of the Contracts issued in connection with such plans. Some retirement plans
are subject to limitations on distribution and other requirements that are
not incorporated in the Contracts. Purchasers are responsible for determining
that contributions, distributions and other transactions relating to the
Contracts satisfy applicable laws, and should consult their legal counsel and
tax adviser regarding the suitability of the Contract.
Minimum Distribution Requirements. The Code has required distribution rules
for Section 403(b) and 401(a) Plans. Under 403(b) Plans, distributions of
amounts held as of December 31, 1986 must generally begin by the end of the
calendar year in which you attain age 75 or retire, if later. However,
special rules require that some or all of that balance be distributed earlier
if any distributions are taken in excess of the minimum required amount. For
all Participants, other than 5% owners, distributions under 401(a) Plans, and
distributions attributable to contributions under Section 403(b) Plans on or
after January 1, 1987 (including any earnings on the entire Account Value
after that date), must generally begin by April 1 of the calendar year
following the calendar year in which you attain age 70-1/2 or retire, if
later. For 5% owners, such distributions must begin April 1st of the calendar
year following the calendar year in which you attain age 70-1/2.
In general, annuity payments must be distributed over your life or the
joint lives of you and your beneficiary, or
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over a period not greater than your life expectancy or the joint life
expectancies of you and your beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your beneficiary must be made at least as rapidly as under
the method of distribution in effect at the time of your death. However, if
the minimum required distribution is calculated each year based on your
single life expectancy or the joint life expectancies of you and your
beneficiary, the regulations for Code Section 401(a)(9) provide specific
rules for calculating the minimum required distributions at your death. For
example, if you have elected ECO with the calculation based on your single
life expectancy, and the life expectancy is recalculated each year, your
recalculated life expectancy becomes zero in the calendar year following your
death and the entire remaining interest must be distributed to your
beneficiary by December 31 of the year following your death. However, a
spousal beneficiary has certain rollover rights which can only be exercised
in the year of your death. The rules are complex and you should consult your
tax adviser before electing the method of calculation to satisfy the minimum
distribution requirements.
If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year in
which the fifth anniversary of the date of your death occurs. Alternatively,
payments may be made over the life of the beneficiary or over a period not
extending beyond the life expectancy of the beneficiary provided the
distribution begins by December 31 of the calendar year following the
calendar year of your death. If the Beneficiary is your spouse, the
distribution must begin on or before the later of (1) December 31 of the
calendar year following the calendar year of your death, or (2) December 31
of the calendar year in which you would have attained age 70-1/2.
If you fail to receive the minimum required distribution for any tax year,
a 50% excise tax is imposed on the required amount that was not distributed.
Taxation of Distributions. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to
another plan of the same type or to an individual retirement annuity/account
("IRA") in accordance with the Code, or unless you have made after- tax
contributions to the plan, which are not taxed upon distribution. The Code
has specific rules that apply, depending on the type of distribution
received, if after-tax contributions were made.
In general, payments received by your beneficiaries after your death are
taxed in the same manner as if you had received those payments.
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to
the type of distribution and the recipient's tax status. Recipients may be
provided the opportunity to elect not to have tax withheld from
distributions; however, certain distributions from annuities are subject to
mandatory federal income tax withholding. We will report to the IRS the
taxable portion of all distributions.
The Code imposes a 10% penalty tax on the taxable portion of any
distribution unless made when (a) you have attained age 59-1/2, (b) you have
become disabled, (c) you have died, (d) you have separated from service with
the plan sponsor at or after age 55, (e) the distribution amount is rolled
over into another plan of the same type or to an IRA in accordance with the
terms of the Code, or (f) the distribution amount is made in substantially
equal periodic payments (at least annually) over your life or life expectancy
or the joint lives or joint life expectancies of you and your plan
beneficiary, provided you have separated from service with the plan sponsor.
In addition, the penalty tax does not apply for the amount of a distribution
equal to unreimbursed medical expenses incurred by you that qualify for
deduction as specified in the Code. The Code may impose other penalty taxes
in other circumstances.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems and Section 501(c)(3) tax exempt organizations to purchase
annuity contracts for their employees are generally excludable from the gross
income of the employee.
In order to be excludable from taxable income, total annual contributions
made by you and your employer cannot exceed either of two limits set by the
Code. The first limit, under Section 415, is generally the lesser of 25% of
your includable compensation or $30,000. The second limit, which is the
exclusion allowance under Section 403(b), is usually calculated according to
a formula that takes into account your length of employment and any pretax
contributions to certain other retirement plans. These two limits apply to
your contributions as well as to any contributions made by your employer on
your behalf. There is an additional limit that specifically limits your
salary reduction contributions to generally no more than $9,500 annually
(subject to indexing); your own limit may be higher or lower, depending on
certain conditions.
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Section 403(b)(11) restricts the distribution under Section 403(b)
contracts of: (1) salary reduction contributions made after December 31,
1988; (2) earnings on those contributions; and (3) earnings during such
period on amounts held as of December 31, 1988. Distribution of those amounts
may only occur upon death of the employee, attainment of age 59-1/2,
separation from service, disability, or financial hardship. In addition,
income attributable to salary reduction contributions may not be distributed
in the case of hardship.
If, pursuant to Revenue Ruling 90-24, the Company agrees to accept, under
any of the Contracts covered by this Prospectus, amounts transferred from a
Code Section 403(b)(7) custodial account, such amounts will be subject to the
withdrawal restrictions set forth in Code Section 403(b)(7)(A)(ii).
Generally, no amounts accumulated under the Contract will be taxable prior
to the time of actual distribution. However, the IRS has stated in published
rulings that a variable contract owner, including participants under Section
403(b) plans, will be considered the owner of separate account assets if the
owner possesses incidents of investment control over the assets. In these
circumstances, income and gains from the separate account assets would be
currently includable in the variable contract owner's gross income. The
Treasury announced that guidance would be issued in the future regarding the
extent to which owners could direct their investments among Subaccounts
without being treated as owners of the underlying assets of the Separate
Account. It is possible that the Treasury's position, when announced, may
adversely affect the tax treatment of existing contracts. The Company
therefore reserves the right to modify the Contract as necessary to attempt
to prevent the owner from being considered the federal tax owner of the
assets of the Separate Account.
Section 401(a) Plans. Section 401(a) permits certain employers to establish
various types of retirement plans for employees, and permits self-employed
individuals to establish various types of retirement plans for themselves and
for their employees. These retirement plans may permit the purchase of the
Contracts to accumulate retirement savings under the plans. Adverse tax
consequences to the Plan, to the Participant or to both may result if this
Contract is assigned or transferred to any individual except to a Participant
as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a Participant's gross income. Such limit must be calculated
under the Plan by the employer in accordance with Section 415 of the Code.
This limit is generally the lesser of 25% of your compensation or $30,000. In
addition, Purchase Payments will be excluded from a Participant's gross
income only if the 401(a) Plan meets certain nondiscrimination requirements.
MISCELLANEOUS
DISTRIBUTION
The Company will serve as the Principal Underwriter for the securities
sold by this Prospectus. The Company is registered as a broker-dealer with
the Securities and Exchange Commission and is a member of the National
Association of Securities Dealers, Inc. (NASD). As Underwriter, the Company
will contract with one or more registered broker-dealers ("Distributors"),
including at least one affiliate of the Company, to offer and sell the
Contracts. All persons offering and selling the Contracts must be registered
representatives of the Distributors and must also be licensed as insurance
agents to sell variable annuity contracts. These registered representatives
may also provide services to Participants in connection with establishing
their Accounts under the Contract.
Payment of Commissions. Persons offering and selling the Contracts may
receive commissions in connection with the sale of the Contracts. The maximum
percentage amount that the Company will ever pay as commission with respect
to any given Purchase Payment is with respect to those made during the first
year of Purchase Payments under an Account. The percentage amount will range
from 1% to 6% of those Purchase Payments. The Company may also pay renewal
commissions on Purchase Payments made after the first year and asset-based
service fees. The average of all payments made by the Company is estimated to
equal approximately 3% of the total Purchase Payments made over the life of
an average Contract. In addition, some sales personnel may receive various
types of non-cash compensation as special sales incentives, including trips
and educational and/or business seminars. Supervisory and other management
personnel of the Company may receive compensation that will vary based on the
relative profitability to the Company of the funding options you select.
Funding options that invest in Funds advised by the Company or its affiliates
are generally more profitable to
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the Company. The Company may also reimburse the Distributor for certain
expenses. The name of the Distributor and the registered representative
responsible for your Account are set forth in your enrollment materials.
Commissions and sales related expenses are paid by the Company and are not
deducted from Purchase Payments. (See "Charges and Deductions.")
Third Party Compensation Arrangements. Occasionally, we may pay commissions
and fees to Distributors which are affiliated or associated with the Contract
Holder or the Participants. We may also enter into agreements with some
entities associated with the Contract Holder or Participants in which we
would agree to pay the entity for certain services in connection with
administering the Contracts. In both these circumstances there may be an
understanding that the Distributor or entity would endorse the Company as a
provider of the Contract. You will be notified if you are purchasing a
Contract that is subject to these arrangements.
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York
Stock Exchange ("Exchange") is closed (other than customary weekend and
holiday closings) or when trading on the Exchange is restricted; (b) when an
emergency exists, as determined by the SEC, so that disposal of securities
held in the Subaccounts is not reasonably practicable or it is not reasonably
practicable for the Company fairly to determine the value of the Subaccount's
assets; or (c) during such other periods as the SEC may by order permit for
the protection of investors. The conditions under which restricted trading or
an emergency exists shall be determined by the rules and regulations of the
SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the
"non-standardized returns." "Standardized average annual total returns" are
computed according to a formula in which a hypothetical investment of $1,000
is applied to the Subaccount and then related to the ending redeemable values
over the most recent one, five and ten-year periods (or since inception, if
less than ten years). Standardized returns will reflect the reduction of all
recurring charges during each period (e.g., mortality and expense risk
charges, asset based sales charges (if applicable) and any administrative
expense charge). The non-standardized figures are computed in the same manner
but may also include monthly, quarterly, year-to- date and three-year
periods.
The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.
VOTING RIGHTS
In accordance with the Company's view of present applicable law, it will
vote the shares of each of the Funds held by the Separate Account at regular
and special meetings of Fund shareholders in accordance with instructions
received from persons having a voting interest in the Separate Account.
Participants may instruct the Contract Holder how to direct the Company to
cast the votes for the portion of the Account Value or valuation reserve
attributable to their Accounts. The Company will vote shares for which it has
not received instructions in the same proportion as it votes shares for which
it has received instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest,
as well as any proxy materials and a form on which to give voting
instructions. Voting instructions will be solicited by written communication
at least 14 days before such meeting. The number of votes to which each
person may give direction will be determined as of the record date set by the
Fund.
The number of votes each Contract Holder or Participant, or Beneficiary as
applicable, may cast during the Accumulation Period is equal to the portion
of the Account Value to that Fund, divided by the net asset value of one
share of that Fund. During the Annuity Period, the number of votes is equal
to the valuation reserve applicable to the portion of the Contract
attributable to that Fund, divided by the net asset value of one share of
that Fund. In determining the number of votes, fractional votes will be
recognized.
CHANGES IN BENEFICIARY DESIGNATIONS
The designated Beneficiary may be changed at any time prior to the Annuity
Date, subject to limitations contained in the Code and other applicable laws.
Such change will not become effective until written notice of the change is
received by the Company.
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MODIFICATION OF THE CONTRACT
Master Contracts Issued on or after October 1, 1996 (and Master Contracts
issued prior to that date that are endorsed to contain this provision). 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.
Contracts Issued Prior to October 1, 1996. The Company may change the
Contract as required by federal or state law. In addition, the Company may,
upon thirty days written notice to the Contract Holder, make other changes
that would apply only to individuals who become Participants under that
Contract after the effective date of such changes. If the Contract Holder
does not agree to a change, no new Participants will be covered under the
Contract. Certain changes will require the approval of appropriate state or
federal regulatory authorities.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect
the Separate Account. The validity of the securities offered by this
Prospectus has been passed upon by Counsel to the Company.
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CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements
of the Separate Account and the Company. A list of the contents of the SAI is
set forth below:
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
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APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
The Guaranteed Accumulation Account ("GAA") is a Credited Interest Option
available during the Accumulation Period under the Contracts described in
this Prospectus. Amounts allocated to Long-Term Classifications of GAA are
held in a noninsulated, nonunitized separate account. Amounts allocated to
Short-Term Classifications of GAA are held in the Company's general account.
This Appendix is a summary of GAA and is not intended to replace the GAA
prospectus. You should read the accompanying GAA prospectus carefully before
investing.
GAA is a Credited Interest Option in which we guarantee stipulated rates
of interest for stated periods of time on amounts directed to GAA. The
interest rate stipulated is an annual effective yield; that is, it reflects a
full year's interest. Interest is credited daily at a rate that will provide
the guaranteed annual effective yield for one year. This option guarantees
the minimum interest rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to
three years, and Long-Term GAA has Guaranteed Terms from three to ten years.
Purchase Payments must remain in GAA for the full Guaranteed Term to
receive the quoted interest rates. Withdrawals or transfers from a Guaranteed
Term before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). An MVA reflects the change in the value of the
investments due to changes in interest rates since the date of deposit. When
interest rates increase after the date of deposit, the value of the
investment decreases and the MVA is negative. Conversely, when interest rates
decrease after the date of deposit, the value of the investment increases,
and the MVA is positive. It is possible that a negative MVA could result in
the Participant receiving an amount which is less than the amount paid into
GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to
federal tax penalties or mandatory income tax withholding.
By notifying us at least 30 days prior to the Annuity Date, you may elect
a variable annuity and have amounts that have been accumulating under GAA
transferred to one or more of the Subaccounts available during the Annuity
Period. GAA cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Transfers are permitted among Guaranteed Terms. However, amounts applied
to GAA may not be transferred to another Guaranteed Term of GAA, or to any
other Subaccount or Credited Interest Option available under the Contract,
during the deposit period or the 90 days after the close of the deposit
period. We will apply an MVA to transfers made before the end of a Guaranteed
Term, unless such transfer is due to the maturity of the Guaranteed Term.
CONTRACT LOANS
Loans may not be made against amounts held in GAA, although such value is
included in determining the Account Value against which a loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn for GAA and are reinvested, they will be applied
to the current deposit period. Amounts are proportionately reinvested in the
same manner as they were allocated before the withdrawal. Any negative MVA
amount applied to a withdrawal is not included in the reinvestment.
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APPENDIX II
FIXED PLUS ACCOUNT
The following summarizes material information concerning the Fixed Plus
Account. Amounts allocated to the Fixed Plus Account are held in the
Company's general account that supports general insurance and annuity
obligations. Interests in the Fixed Plus Account have not been registered
with the SEC in reliance on exemptions under the Securities Act of 1933, as
amended. Disclosure in the Prospectus regarding the Fixed Plus Account, may,
however, be subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of such statements.
Disclosure in this Appendix regarding the Fixed Plus Account has not been
reviewed by the SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will
never fall below the guaranteed minimum. The Company's determination of
interest rates reflects the investment income earned on invested assets and
the amortization of any capital gains and/or losses realized on the sale of
invested assets. Under the Fixed Plus Account, the Company assumes the risk
of investment gain or loss by guaranteeing Account Values and promising a
minimum interest rate and Annuity Payment.
The Fixed Plus Account will reflect a compound interest rate credited by
us. The interest rate quoted is an annual effective yield. Amounts applied to
the Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
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.
The Company reserves the right to limit Purchase Payment(s) and/or
transfers to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in
the Fixed Plus Account on the day our Home Office receives a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of any
Additional Withdrawal Options.
The 20% limit is waived if the partial withdrawal is due to annuitization
or death. The waiver upon death will only be exercised once and must occur
within six months after the Participant's date of death. Any such surrender
or annuitization must also be made pro rata from all Subaccounts and Credited
Interest Options available under the Contract.
If a full withdrawal is requested, we will pay any amounts held in the
Fixed Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers,
loans or annuitizations made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
5. The balance of the Fixed Plus Account Value 12 months later.
Once we receive a request for a full withdrawal, no further withdrawals,
loans or transfers will be permitted from the Fixed Plus Account. A full
withdrawal from the Fixed Plus Account may be cancelled at any time before
the end of the five-payment period. We will waive the Fixed Plus Account full
withdrawal provision if a full withdrawal is made:
(a) due to your death, before Annuity payments begin;
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(b) due to the election of an Annuity option;
(c) when the Fixed Plus Account value is $3,500 or less (and no
withdrawals, transfers or annuitizations have been made from the
Account within the prior 12 months);
(d) due to hardship from an unforeseeable emergency, as defined by the
Code, if the following conditions are met:
(1) the hardship is certified by the employer;
(2) the amount is paid directly to you; and
(3) the amount paid for all withdrawals due to hardship during the
previous 12-month period does not exceed 10% of the average value
of all Accounts during that same period; or
(e) due to your separation from service with the employer, provided that:
(1) the employer certifies that you have separated from service;
(2) the amount withdrawn is paid directly to you; and
(3) the amount paid for all partial and full withdrawals due to
separation from service during the previous 12- month period does
not exceed 20% of the average value of all Accounts under the
Contract during that same period.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written
request, reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months. In calculating the 20% limit,
we reserve the right to include payments made due to the election of one of
the Additional Withdrawal Options. The 20% limit on transfers will be waived
when the value in the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before the Annuity
Date, you may elect to have amounts which have been accumulating under the
Fixed Plus Account transferred to one or more of the Subaccounts available
during the Annuity Period to provide lifetime variable Annuity Payments. For
amounts which have been accumulating under the Fixed Plus Account, a
nonlifetime annuity option may only be elected on a fixed basis.
SWO
The Systematic Withdrawal Option may not be elected if you have requested
a Fixed Plus Account transfer or withdrawal within the prior 12 month period.
CONTRACT LOANS
If permitted under the Plan, loans may be made from Account Values held in
the Fixed Plus Account. See the loan agreement for a description of the
amount available and the consequences upon loan default if more than 20% of
the Fixed Plus Account Value is used for a loan.
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APPENDIX III
FIXED PLUS ACCOUNT
(APPLICABLE ONLY IN LIMITED CIRCUMSTANCES)
The following summarizes material information concerning the Fixed Plus
Account. Amounts allocated to the Fixed Plus Account are held in the
Company's general account that supports general insurance and annuity
obligations. Interests in the Fixed Plus Account have not been registered
with the SEC in reliance on exemptions under the Securities Act of 1933, as
amended. Disclosure in the Prospectus regarding the Fixed Plus Account, may,
however, be subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of such statements.
Disclosure in this Appendix regarding the Fixed Plus Account has not been
reviewed by the SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will
never fall below the guaranteed minimum. The Company's determination of
interest rates reflects the investment income earned on invested assets and
the amortization of any capital gains and/or losses realized on the sale of
invested assets. Under the Fixed Plus Account, the Company assumes the risk
of investment gain or loss by guaranteeing Account Values and promising a
minimum interest rate and Annuity Payment.
The Fixed Plus Account will reflect a compound interest rate credited by
us. The interest rate quoted is an annual effective yield. Amounts applied to
the Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
Beginning on the tenth Account Year, we will credit amounts held in the
Fixed Plus Account with an interest rate that is at least 0.25% higher than
the then declared interest rate for the Fixed Plus Account for Accounts that
have not reached their tenth anniversary.
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.
The Company reserves the right to limit Purchase Payment(s) and/or
transfers to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in
the Fixed Plus Account on the day our Home Office receives a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of any
Additional Withdrawal Options.
The 20% limit is waived if the partial withdrawal is due to annuitization
or death. The waiver upon death will only be exercised once and must occur
within six months after the Participant's date of death. Any such surrender
or annuitization must also be made pro rata from all Subaccounts and Credited
Interest Options available under the Contract.
If a full withdrawal is requested, we will pay any amounts held in the
Fixed Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers,
loans or annuitizations made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
5. The balance of the Fixed Plus Account Value 12 months later.
21
<PAGE>
Once we receive a request for a full withdrawal, no further withdrawals,
loans or transfers will be permitted from the Fixed Plus Account. A full
withdrawal from the Fixed Plus Account may be cancelled at any time before
the end of the five-payment period. We will waive the Fixed Plus Account full
withdrawal provision if a full withdrawal is made due to (a) the
Participant's death within 6 months after the Participant's date of death
before Annuity payments begin and request for payment is received; (b) the
election of an Annuity option; or (c) if the Fixed Plus Account value is
$3,500 or less and no withdrawals, transfers, loans or annuitizations have
been made from the Account within the prior 12 months; or (d) the
Participant's separation from service with the employer (if the separation
from service is certified by the employer and the withdrawal request is
received within 60 days of the date of termination) subject to a 3% charge
based on the entire Fixed Plus Account value. If the Participant who
separates from service chooses to have the five annual payments of the Fixed
Plus Account withdrawal, as described above, then no charge will be assessed.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written
request, reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months. In calculating the 20% limit,
we reserve the right to include payments made due to the election of one of
the Additional Withdrawal Options. The 20% limit on transfers will be waived
when the value in the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before the Annuity
Date, you may elect to have amounts which have been accumulating under the
Fixed Plus Account transferred to one or more of the Subaccounts available
during the Annuity Period to provide lifetime variable Annuity Payments. For
amounts which have been accumulating under the Fixed Plus Account, a
nonlifetime annuity option may only be elected on a fixed basis.
SWO
The Systematic Withdrawal Option may not be elected if you have requested
a Fixed Plus Account transfer or withdrawal within the prior 12 month period.
CONTRACT LOANS
If permitted under the Plan, loans may be made from Account Values held in
the Fixed Plus Account. See the loan agreement for a description of the
amount available and the consequences upon loan default if more than 20% of
the Fixed Plus Account Value is used for a loan.
22
<PAGE>
APPENDIX IV
FIXED PLUS ACCOUNT
(APPLICABLE ONLY IN LIMITED CIRCUMSTANCES)
The following summarizes material information concerning the Fixed Plus
Account. Amounts allocated to the Fixed Plus Account are held in the
Company's general account that supports general insurance and annuity
obligations. Interests in the Fixed Plus Account have not been registered
with the SEC in reliance on exemptions under the Securities Act of 1933, as
amended. Disclosure in the Prospectus regarding the Fixed Plus Account, may,
however, be subject to certain generally applicable provisions of the federal
securities laws relating to the accuracy and completeness of such statements.
Disclosure in this Appendix regarding the Fixed Plus Account has not been
reviewed by the SEC.
The Fixed Plus Account guarantees that amounts allocated to this option
will earn the minimum interest rate specified in the Contract. We may credit
a higher interest rate from time to time. The Company's determination of
interest rates reflects the Investment income earned on invested assets and
the amortization of any capital gains and/or losses realized on the sale of
invested assets. Under this option, we assume the risk of investment gain or
loss by guaranteeing Net Purchase Payment values and promising a minimum
interest rate and Annuity payment.
Under certain emergency conditions, we may defer payment of a Fixed Plus
Account withdrawal value (a) for a period of up to 6 months or (b) as
provided by federal law.
During any calendar year, any withdrawals requested from an Account's
Fixed Plus Account value may not exceed 20% of the Account's Fixed Plus
Account Value as of the date the withdrawal request is received in good order
at our Home Office. The withdrawal value will be reduced by any Fixed Plus
Account withdrawal(s), transfer(s) or annuitizations previously made during
the calendar year.
The 20% limit is waived if the partial withdrawal is due to annuitization
or death. The waiver upon death will only be exercised once and must occur
within 6 months after the Participant's date of death.
In the event of an complete Account withdrawal, we will pay any Fixed Plus
Account withdrawal value from the Account with interest, in five annual
payments of:
1. One-fifth of the Fixed Plus Account withdrawal value minus any Fixed
Plus Account withdrawal(s), transfer(s) or annuitizations made during
the calendar year;
2. One-fourth of the remaining Fixed Plus Account withdrawal value 12
months later;
3. One third of the remaining Fixed Plus Account withdrawal value 12
months later;
4. One-half of the remaining Fixed Plus Account withdrawal value 12 months
later; and
5. The balance of the Fixed Plus Account withdrawal value as the fifth and
final payment 12 months later.
Once we receive notification of an Account termination, no further
withdrawal(s) or transfer(s) will be permitted from the Fixed Plus Account.
We will waive the Fixed Plus Account full surrender provision if a full
withdrawal is made due to:
(a) the Participant's death within 6 months after the Participant's date
of death before Annuity payments begin and request for payment is
received;
(b) the election of an Annuity option;
(c) if the Fixed Plus Account value is $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the Account during the
calendar year), the entire Fixed Plus Account value will be paid in
one sum.
Amounts applied to the Fixed Plus Account will earn the interest rate in
effect when actually applied to the Fixed Plus Account.
23
<PAGE>
MORTALITY AND EXPENSE RISK CHARGES
The Fixed Plus 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 Plus Account to any other available investment
option(s) are allowed once in each calendar year during the Accumulation
Period. The amount that may be transferred will be up to 20% of the amount
held in the Fixed Plus Account. We will waive the 20% transfer limit 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, the Contract Holder, on your behalf, may elect to have
amounts which have been accumulating under the Fixed Plus Account transferred
to one or more of the Subaccounts available during the Annuity Period to
provide variable annuity payments under any of the lifetime or nonlifetime
Annuity Options.
24
<PAGE>
APPENDIX V
FIXED ACCOUNT
(AVAILABLE ONLY IN LIMITED CIRCUMSTANCES)
The following summarizes material information concerning the Fixed Account.
Amounts allocated to the Fixed Account are held in the Company's general
account that supports general insurance and annuity obligations. Interests in
the Fixed Account have not been registered with the SEC in reliance on
exemptions under the Securities Act of 1933, as amended. Disclosure in the
Prospectus regarding the Fixed Account, may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to
the accuracy and completeness of such statements. Disclosure in this Appendix
regarding the Fixed Account has not been reviewed by the SEC.
The Fixed Account guarantees the minimum interest rate specified in the
Contract. The Contract may credit a higher interest rate from time to time.
The current rate is subject to change at any time, but will never fall below
the guaranteed minimum. The Company's determination of interest rates
reflects the investment income earned on invested assets and the amortization
of any capital gains and/or losses realized on the sale of invested assets.
Under the Fixed Account, the Company assumes the risk of investment gain or
loss by guaranteeing Account Values and promising a minimum interest rate and
Annuity Payment.
Under certain emergency conditions, we may defer payment of a Fixed
Account withdrawal value (a) for a period of up to six months, or (b) as
provided by federal law.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
The Fixed Account will reflect a compound interest rate credited by us.
The interest rate quoted is an annual effective yield. We make no deductions
from the credited interest rate for mortality and expense risks; these risks
are considered in determining the credited rate.
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 which may be transferred may vary at our discretion; however, it
will never be less than 10% of the amount held under the Fixed Account.
Transfers to the Fixed Plus Account will be permitted without regard to this
limitation.
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 Account transferred to one or more of the Subaccounts
available during the Annuity Period to provide variable Annuity Payments.
CONTRACT LOANS
Loans may be made from Account Values held in the Fixed Account.
25
<PAGE>
For Master Applications Only
I hereby acknowledge receipt of an Account C Group Deferred Variable Annuity
prospectus dated May 1, 1997, as well as all current prospectuses pertaining
to the variable investment options available under the Contracts.
_________ Please send an Account C Statement of Additional Information
(Form No. SAI.91846-97) dated May 1, 1997.
- -------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- -------------------------------------------------------------------------------
DATE
Form No. PROS. 91846-97
<PAGE>
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Statement of Additional Information dated May 1, 1997
Group Variable Annuity Contracts
for Optional Retirement Programs and Retirement Programs for Higher Education
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account C (the
"Separate Account") dated May 1, 1997.
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..............................................2
Variable Annuity Account C...................................................2
Offering and Purchase of Contracts...........................................3
Performance Data.............................................................3
General.................................................................3
Average Annual Total Return Quotations..................................4
Annuity Payments.............................................................7
Sales Material and Advertising...............................................8
Independent Auditors.........................................................8
Financial Statements of the Separate Account.................................S-1
Financial Statements of Aetna Life Insurance and Annuity Company.............F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1996, the Company had
assets of $___ billion (subject to $___ billion of customer and other
liabilities, $___ billion of shareholder equity) which includes $__ billion in
assets held in the Company's separate accounts. The Company had $___ billion in
assets under management, including $__ billion in its mutual funds. As of
______________, it ranked among the top __% 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. The Company's Home Office is located at 151
Farmington Avenue, Hartford, Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges, asset-based sales charge and
administrative expense charge, if any, described in the prospectus, all expenses
incurred in the operations of the Separate Account are borne by the Company.
(See "Charges and Deductions" in the prospectus.) The Company receives
reimbursement for certain administrative costs from some unaffiliated sponsors
of the Funds used as funding options under the Contract. These fees generally
range up to 0.25%.
The assets of the Separate Account are held by the Company. The Separate Account
has no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested each have custodians, as discussed in their respective
prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of each of the Subaccounts of the Separate
Account will be invested exclusively in shares of the Funds described in the
Prospectus. Purchase Payments made under the Contract may be allocated to one or
more of the Subaccounts. The Company may make additions to, deletions from or
substitutions of available investment options as permitted by law and subject to
the conditions of the Contract. The availability of the Funds is subject to
applicable regulatory authorization. Not all Funds are available in all
jurisdictions, under all Contracts, or under all Plans.
2
<PAGE>
<TABLE>
The Funds currently available under the Contract are as follows:
<S><C> <C>
Aetna Variable Fund Calvert Responsibly Invested Balanced Portfolio
Aetna Income Shares Fidelity VIP II Contrafund Portfolio
Aetna Variable Encore Fund Fidelity VIP Equity-Income Portfolio
Aetna Investment Advisers Fund, Inc. Fidelity VIP Growth Portfolio
Aetna Ascent Variable Portfolio Fidelity VIP Overseas Portfolio
Aetna Crossroads Variable Portfolio Franklin Government Securities Trust
Aetna Legacy Variable Portfolio Janus Aspen Aggressive Growth Portfolio
Aetna Variable Capital Appreciation Portfolio Janus Aspen Balanced Portfolio
Aetna Variable Growth Portfolio Janus Aspen Flexible Income Portfolio
Aetna Variable Index Plus Portfolio Janus Aspen Growth Portfolio
Aetna Variable Small Company Portfolio Janus Aspen Short-Term Bond Portfolio
Alger American Growth Portfolio Janus Aspen Worldwide Growth Portfolio
Alger American Small Cap Portfolio Lexington Natural Resources Trust
American Century VP Capital Appreciation Neuberger & Berman Growth Portfolio
(formerly TCI Growth) Scudder International Portfolio Class A Shares
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the sections titled "Purchase" and "Contract Valuation."
PERFORMANCE DATA
General
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
Prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized returns",
calculated in an identical manner but including additional periods.
The standardized total return figures are computed according to a formula in
which a hypothetical initial Purchase Payment of $1,000 is applied to the
various Subaccounts under the Contract, and then related to the ending
redeemable values over one, five and ten year periods (or fractional periods
thereof). The redeemable value is then divided by the initial investment and
this quotient is taken to the Nth root (N represents the number of years in the
period) and 1 is subtracted from the result which is then expressed as
3
<PAGE>
a percentage, carried to at least the nearest hundredth of a percent. The
standardized figures reflect the deduction of all recurring charges during each
period (as applicable) (e.g., mortality and expense risk charges, asset-based
sales charges and administrative expense charges). These charges will be
deducted on a pro rata basis in the case of fractional periods.
The non-standardized figures use the same formula, but may be computed to
include monthly, quarterly, year-to-date and three-year periods.
If a Fund was in existence prior to the date it became available under the
Contract, standardized and non-standardized total returns may include periods
prior to such date. These figures are calculated by adjusting the actual returns
of the Fund to reflect the charges that would have been assessed under the
Contract had that Fund been available under the Contract during that period.
Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, your Account Value upon redemption may be
more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The tables below reflect the average annual standardized and non-standardized
total return quotation figures for the period ended December 31, 1996 for each
of the Subaccounts available under the Contract. For those Subaccounts where
results are not available for the full calendar period indicated, the percentage
shown is an average annual return since inception (denoted with an *).
Table I reflects performance returns for Contracts issued or endorsed on or
after October 1, 1996, which include a mortality and expense risk charge of
100%. The Company may also advertise returns for such Contracts based on a
mortality and expense risk charge of 0.75%, where applicable. Table II reflects
performance returns for Contracts issued prior to October 1, 1996, which include
a mortality and expense risk charge of 1.25% and an asset based sales charge of
0.15%.
4
<PAGE>
<TABLE>
<CAPTION>
Table I
FOR MASTER CONTRACTS ISSUED OR ENDORSED ON OR AFTER OCTOBER 1, 1996
(ASSUMES A MORTALITY AND EXPENSE RISK CHARGE OF 1.00%)
---------------------------------- -------------------------------------------- -----------
FUND
STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
--------------------------------------- ---------------------------------- -------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Variable Fund 04/30/75
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Income Shares 06/01/78
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Variable Encore Fund 09/01/75
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Investment Advisers Fund, Inc. 06/23/89
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Ascent Variable Portfolio 07/03/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Crossroads Variable Portfolio 07/03/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Legacy Variable Portfolio 07/03/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Variable Index Plus Portfolio 09/12/96
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Alger American Growth Portfolio 01/08/89
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Alger American Small Cap Portfolio 09/21/88
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
American Century VP Capital
Appreciation 11/20/87
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Calvert Responsibly Invested Balanced
Portfolio 09/30/86
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Fidelity VIP II Contrafund Portfolio 01/03/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Fidelity VIP Equity-Income Portfolio 10/22/86
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Fidelity VIP Growth Portfolio 11/07/86
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Fidelity VIP Overseas Portfolio 02/13/87
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Franklin Government Securities Trust 05/30/89
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Aggressive Growth 9/13/93
Portfolio
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Balanced Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Flexible Income Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Growth Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Short-Term Bond Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Worldwide Growth Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Lexington Natural Resources Trust 10/14/91
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Neuberger & Berman Growth Portfolio 12/31/85
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Scudder International Portfolio Class
A Shares 04/30/87
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These figures
represent historical performance and should not be considered a projection of
future performance.
5
<PAGE>
<TABLE>
<CAPTION>
Table II
FOR MASTER CONTRACTS ISSUED PRIOR TO OCTOBER 1, 1996
(ASSUMES A MORTALITY AND EXPENSE RISK CHARGE OF 1.25%
AND AN ASSET BASED SALES CHARGE OF 0.15%)
---------------------------------- -------------------------------------------- -----------
FUND
STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
--------------------------------------- ---------------------------------- -------------------------------------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Variable Fund 04/30/75
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Income Shares 06/01/78
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Variable Encore Fund 09/01/75
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Investment Advisers Fund, Inc. 06/23/89
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Ascent Variable Portfolio 07/03/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Crossroads Variable Portfolio 07/03/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Legacy Variable Portfolio 07/03/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Aetna Variable Index Plus Portfolio 09/12/96
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Alger American Growth Portfolio 01/08/89
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Alger American Small Cap Portfolio 09/21/88
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
American Century VP Capital
Appreciation 11/20/87
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Calvert Responsibly Invested Balanced
Portfolio 09/30/86
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Fidelity VIP II Contrafund Portfolio 01/03/95
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Fidelity VIP Equity-Income Portfolio 10/22/86
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Fidelity VIP Growth Portfolio 11/07/86
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Fidelity VIP Overseas Portfolio 02/13/87
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Franklin Government Securities Trust 05/30/89
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Aggressive Growth 9/13/93
Portfolio
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Balanced Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Flexible Income Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Growth Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Short-Term Bond Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Janus Aspen Worldwide Growth Portfolio 09/13/93
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Lexington Natural Resources Trust 10/14/91
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Neuberger & Berman Growth Portfolio 12/31/85
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
Scudder International Portfolio Class
A Shares 04/30/87
--------------------------------------- ---------- ----------- ----------- ----------- ---------- ---------- ---------- -----------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included in the Standardized and Non-Standardized figures. These figures
represent historical performance and should not be considered a projection of
future performance.
6
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date before the first Annuity
payment is due. Such value (less any applicable premium tax) is applied to
provide an Annuity in accordance with the Annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Contract or Account and that the
value of an Accumulation Unit for the tenth Valuation Date prior to retirement
was $13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Date in which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date in which the second payment is due.
7
<PAGE>
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. We may illustrate in advertisements the performance of the
underlying funds, if accompanied by performance which also shows the performance
of such funds reduced by applicable charges under the Separate Account. We may
also show in advertisements the portfolio holdings of the underlying funds,
updated at various intervals. From time to time, we will quote articles from
newspapers and magazines or other publications or reports, including, but not
limited to The Wall Street Journal, Money magazine, USA Today and The VARDS
Report.
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Contract Holders or Participants. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments, including comparison
between the Contracts and the characteristics of and market for such financial
instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
8
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
Index
Independent Auditors' Report................................................S-
Statement of Assets and Liabilities.........................................S-
Statement of Operations.....................................................S-
Statements of Changes in Net Assets.........................................S-
Notes to Financial Statements ..............................................S-
Condensed Financial Information.............................................S-
S-1
FINANCIAL STATEMENTS OF VARIABLE ANNUITY ACCOUNT C AND AETNA LIFE
INSURANCE AND ANNUITY COMPANY TO BE FILED BY AMENDMENT
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT C
VARIABLE ANNUITY CONTRACTS
issued by
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Hartford, Connecticut
Form No. SAI.91846-97 ALIAC Ed. May 1997
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:*
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Independent Auditors' Report
- Statement of Assets and Liabilities as of December 31, 1996
- Statement of Operations for the year ended December 31, 1996
- Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995
- Notes to Financial Statements
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Balance Sheets as of December 31, 1996 and 1995
- Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1996, 1995 and 1994
- Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance
and Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3.1) Form of Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and Related Selling
Agreement(2)
(4.1) Form of Variable Annuity Contract (G-CDA-IB(ATORP)) and
Endorsement (EGET-IC(R))(3)
(4.2) Form of Variable Annuity Contract and Certificate
(G-CDA-95(TORP) and (GTCC-95(TORP))(3)
(4.3) Form of Variable Annuity Contract (G-CDA-IB(AORP)) and
Endorsement (EGET-IC(R))(3)
(4.4) Form of Variable Annuity Contract and Certificate
(G-CDA-95(ORP) and (GTCC-95(ORP))(3)
(4.5) Form of Variable Annuity Contract (GCDA-96(TORP))(4)
<PAGE>
(4.6) Endorsement (GET/96) to Form of Variable Annuity Contract
G-CDA-95(TORP), GTCC95(TORP), G-CDA-95(ORP), GTCC-95(ORP)(4)
(5) Form of Variable Annuity Contract Application (300-MOP-IB)(5)
(6.1) Certification of Incorporation and By-Laws of Aetna Life
Insurance and Annuity Company(6)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(7)
(7) Not applicable
(8.1) Fund Participation Agreement (Amended and Restated) between
Aetna Life Insurance and Annuity Company, Alger American Fund
and Fred Alger Management, Inc. dated March 31, 1995(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(8)
(8.4) Third amendment dated February 11, 1997 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 and
January 1, 1996(9)
(8.5) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996 and March 1, 1996(7)
(8.6) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1. 1995, May 1, 1995,
January 1, 1996 and March 1,1996(7)
(8.7) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995(8)
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989(2)
(8.9) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994
and amended March 1, 1996(2)
<PAGE>
(8.10) 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)
(8.11) 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)
(8.12) 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)
(8.13) 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(8)
(8.14) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended December 27,
1992 and June 1, 1994(2)
(9) Opinion of Counsel*
(10.1) Consent of Independent Auditors*
(10.2) Consent of Counsel*
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data(10)
(14) Not applicable
(15.1) Powers of Attorney(7)
(15.2) Authorization for Signatures(2)
(27) Financial Data Schedule*
*To be filed by amendment
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 Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on April
15, 1996.
4. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on
August 6, 1996.
5. Incorporated by reference to Registration Statement on Form N-4 (File No.
33-91846), as filed on May 1, 1995.
6. 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.
<PAGE>
7. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 11, 1997.
8. 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.
9. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on
February 26, 1997.
10. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on
August 16, 1995.
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
Daniel P. Kearney Director and President
Timothy A. Holt Director, 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
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and
Secretary
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant
Incorporated herein by reference to Item 26 of Post-Effective Amendment No.
12 to the Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 11, 1997.
<PAGE>
Item 27. Number of Contract Owners
As of December 31,1996, there were 600,951 individuals holding interests in
variable annuity contracts funded through Variable Annuity Account C.
Item 28. Indemnification
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by majority vote of a quorum of the board of
directors who were not parties to the proceeding, or if a quorum cannot be
obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; 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. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. 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.
Item 29. Principal Underwriter
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also
acts as the principal underwriter and investment adviser 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, and Aetna Variable
Portfolios, Inc. (all registered management investment companies under
the 1940 Act). Additionally, ALIAC acts as the principal underwriter
and depositor for Variable Life Account B and Variable Annuity Accounts
B and G (separate accounts of ALIAC registered as unit investment
<PAGE>
trusts under the 1940 Act). ALIAC is also the principal underwriter for
Variable Annuity Account I (a separate account of Aetna Insurance
Company of America registered as a unit investment trust under the 1940
Act).
(b) See Item 25 regarding the Depositor.
(c) Compensation as of December 31, 1996:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ----------- ------------- ----------- -------------
<S> <C> <C>
Aetna Life $1,325,661 $96,924,599
Insurance and
Annuity
Company
</TABLE>
* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs
incurred in the sales and administration of the contracts issued under
Variable Annuity Account C.
Item 30. Location of Accounts and Records
All 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) P. 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.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<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 Post-Effective Amendment No. 9 to its
Registration Statement on Form N-4 (File No. 33-91846) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford,
State of Connecticut, on the 27th day of February, 1997.
VARIABLE ANNUITY ACCOUNT C OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Depositor)
By: Daniel P. Kearney*
-----------------------------------------
Daniel P. Kearney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 9 to the Registration Statement on Form N-4 (File No. 33-91846) has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Daniel P. Kearney* Director and President )
- ------------------------------------ )
Daniel P. Kearney (principal executive officer) )
)
Timothy A. Holt* Director, Senior Vice President and ) February
- ----------------------------------- )
Timothy A. Holt Chief Financial Officer ) 27, 1997
)
Christopher J. Burns* Director )
- ------------------------------------ )
Christopher J. Burns )
)
Laura R. Estes* Director )
- ------------------------------------ )
Laura R. Estes )
)
Gail P. Johnson* Director )
- ------------------------------------ )
Gail P. Johnson )
)
John Y. Kim* Director )
- ------------------------------------ )
John Y. Kim )
)
<PAGE>
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 )
</TABLE>
By:/s/Julie E. Rockmore
---------------------------
*Julie E. Rockmore
Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and Annuity *
Company establishing Variable Annuity Account C
99-B.3.1 Form of Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesale Agreement and Related Selling Agreement *
99-B.4.1 Form of Variable Annuity Contract (G-CDA-IB(ATORP) and Endorsement *
(EGET-IC(R))
99-B.4.2 Form of Variable Annuity Contract and Certificate *
(G-CDA-95(TORP) and (GTCC-95(TORP))
99-B.4.3 Form of Variable Annuity Contract (G-CDA-IB(AORP) and Endorsement *
(EGET-IC(R))
99-B.4.4 Form of Variable Annuity Contract and Certificate *
(G-CDA-95(ORP) and (GTCC-95(ORP))
99-B.4.5 Form of Variable Annuity Contract (GCDA-96(TORP)) *
99-B.4.6 Endorsement (GET/96) to Form of Variable Annuity Contract *
G-CDA-95(TORP), GTCC95(TORP), G-CDA-95(ORP), GTCC-95(ORP)
99-B.5 Form of Variable Annuity Contract Application (300-MOP-IB) *
99-B.6.1 Certification of Incorporation and By-Laws of Depositor *
99-B.6.2 Amendment of Certificate of Incorporation 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 27, 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 Third amendment dated February 11, 1997 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 and January 1, 1996
99-B.8.5 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Variable Insurance Products Fund
and Fidelity Distributors Corporation dated February 1,
1994 and amended on December 15, 1994, February 1, 1995,
May 1, 1995, January 1, 1996 and March 1, 1996
99-B.8.6 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Variable Insurance Products Fund
II and Fidelity Distributors Corporation dated February
1, 1994 and amended on December 15, 1994, February 1.
1995, May 1, 1995, January 1, 1996 and March 1,1996
99-B.8.7 Service Agreement between Aetna Life Insurance and Annuity Company and *
Fidelity Investments Institutional Operations Company dated as of November
1, 1995
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
99-B.8.8 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company and Franklin Advisers, Inc. dated January 31, 1989
99-B.8.9 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.8.10 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company and Lexington Management Corporation regarding Natural Resources
Trust dated December 1, 1988 and amended February 11, 1991
99-B.8.11 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.8.12 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.8.13 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.8.14 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company, Investors Research Corporation and TCI Portfolios, Inc. dated July
29, 1992 and amended December 27, 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 **
*Incorporated by reference
**To be filed by amendment
<PAGE>
Exhibit No. Exhibit Page
99-B.13 Schedule for Computation of Performance Data *
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule **
*Incorporated by reference
**To be filed by amendment
</TABLE>
