As filed with the Securities and Exchange Registration No. 33-81216
Commission on February 12, 1997 Registration No. 811-2513
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
Post-Effective Amendment No. 7 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.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
<S> <C> <C>
1 Cover Page......................................... Cover Page
2 Definitions........................................ Definitions
3 Synopsis........................................... Prospectus Summary; Fee Table
4 Condensed Financial Information.................... Condensed Financial Information
5 General Description of Registrant, Depositor, and
Portfolio Companies................................ The Company; Variable Annuity Account C;
The Funds
6 Deductions and Expenses............................ Charges and Deductions; Distribution
7 General Description of Variable Annuity Contracts.. Purchase; Miscellaneous
8 Annuity Period..................................... Annuity Period
9 Death Benefit...................................... Death Benefit During Accumulation Period;
Death Benefit Payable During the Annuity
Period
10 Purchases and Contract Value....................... Purchase; Contract Valuation
11 Redemptions........................................ Right to Cancel; Withdrawals
12 Taxes.............................................. Tax Status
13 Legal Proceedings.................................. Miscellaneous - Legal Matters and
Proceedings
14 Table of Contents of the Statement of Additional
Information........................................ Contents of the Statement of Additional
Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FORM N-4 PART B (STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION) LOCATION
<S> <C> <C>
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and History
18 Services............................................. General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase of Contracts
20 Underwriters......................................... Offering and Purchase of Contracts
21 Calculation of Performance Data...................... Performance Data; Average Annual
Total Return Quotations
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements
</TABLE>
Part C (Other Information)
--------------------------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
================================================================================
The Contracts offered in connection with this Prospectus are group flexible
premium deferred variable annuity contracts ("Contracts") issued by Aetna Life
Insurance and Annuity Company (the "Company"). The Contracts are designed to
fund the State University of New York ("SUNY") Defined Contribution Retirement
Plan (the "SUNY Plan") and to accept transfers of amounts made to the
predecessor program which is qualified under Section 403(b) of the Code. Two
Contracts will be issued: one for transferred assets from the predecessor
Section 403(b) optional retirement program ("Rollover Contract"), and one for
ongoing contributions and transferred assets from the SUNY Plan, a plan
qualified under Sections 401(a) and 414(h) of the Code ("Modal Contract").
The Contracts provide that contributions may be allocated to one or more of the
Credited Interest Options or to one or more of the Subaccounts of Variable
Annuity Account C, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:
<TABLE>
<S> <C>
(bullet) Aetna Variable Fund (bullet) Fidelity VIP Equity-Income Portfolio
(bullet) Aetna Income Shares (bullet) Franklin Government Securities Trust
(bullet) Aetna Variable Encore Fund (bullet) Janus Aspen Aggressive Growth Portfolio
(bullet) Aetna Investment Advisers Fund, Inc. (bullet) Janus Aspen Growth Portfolio
(bullet) Alger American Growth Portfolio (bullet) Janus Aspen Short-Term Bond Portfolio
(bullet) Alger American Small Cap Portfolio (bullet) Janus Aspen Worldwide Growth Portfolio
(bullet) American Century VP Capital Appreciation (bullet) Lexington Emerging Markets Fund, Inc.
(formerly TCI Growth) (bullet) Lexington Natural Resources Trust
(bullet) Calvert Responsibly Invested Balanced (bullet) Neuberger & Berman Growth Portfolio
Portfolio (bullet) Scudder International Portfolio Class A
(bullet) Fidelity VIP II Asset Manager Portfolio Shares
(bullet) Fidelity VIP II Contrafund Portfolio
(bullet) Fidelity VIP II Index 500 Portfolio
</TABLE>
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account and the Fixed Plus Account. Except as
specifically mentioned, this Prospectus describes only investments through the
Separate Account. A brief description of each of the Credited Interest Options
is contained in Appendices to this Prospectus. Additional information concerning
the Guaranteed Accumulation Account is contained in a separate prospectus.
The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest
Options may be available under all Contracts. Please check with your employer
to determine option availability. (See "Investment Options.")
This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract through the Separate
Account. Additional information about the Separate Account is contained in a
Statement of Additional Information ("SAI") which has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Table of Contents for the SAI is printed on page____ of this Prospectus. An SAI
may be obtained at no charge by indicating the request on the enrollment form or
on the prospectus receipt contained in this Prospectus, or by calling the number
listed under the "Inquiries" section of the Prospectus Summary.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus and the Statement of Additional
Information are dated May 1, 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 3
PURCHASE 4
Contract Availability 4
Contract Purchase 4
Purchase Payments 4
Rights Under the Contract 4
Right to Cancel 4
CHARGES AND DEDUCTIONS 5
Daily Deductions from the Separate Account 5
Fund Expenses 5
Premium and Other Taxes 5
CONTRACT VALUATION 5
Account Value 5
Accumulation Units 5
Net Investment Factor 6
TRANSFERS 6
WITHDRAWALS 6
Reinvestment Privilege 7
ADDITIONAL WITHDRAWAL OPTIONS 7
DEATH BENEFIT DURING ACCUMULATION PERIOD 7
ANNUITY PERIOD 8
Annuity Period Elections 8
Annuity Options 8
Annuity Payments 9
Charges Deducted During the Annuity Period 9
Death Benefit Payable During the Annuity Period 9
TAX STATUS 10
Introduction 10
Taxation of the Company 10
Contracts Used With Certain Retirement Plans 10
MISCELLANEOUS 12
Distribution 12
Delay or Suspension of Payments 12
Performance Reporting 12
<PAGE>
Voting Rights 13
Modification of the Contract 13
Transfer of Ownership; Assignment 13
Legal Matters and Proceedings 13
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION 14
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT 15
APPENDIX II--FIXED PLUS ACCOUNT 16
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
================================================================================
The following terms are defined as they are used in this Prospectus:
Account: A record which identifies contract values accumulated on behalf of each
Participant during the Accumulation Period. One or more Employee Accounts and
Employer Accounts may be established for each Participant.
Account Value: The total dollar value of amounts held in an Account as of
each Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to
an Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before Annuity
payments begin.
Aetna Processing Office: The administrative headquarters for the SUNY Defined
Contribution Plan. The mailing address is P.O. Box 12894, Albany, New York
12212-2894.
Annuitant: The person on whose life or life expectancy the annuity payments
are based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Beneficiary(ies): The person or persons identified on the enrollment form who
are to receive any death benefit proceeds payable under the Contract.
Code: The Internal Revenue Code of 1986, amended.
Company (We, Us): Aetna Life Insurance and Annuity Company.
Contract: The group deferred, variable annuity contracts offered by this
Prospectus.
Contract Holder: The entity to which the Contract is issued. The Contract
Holder is the trustee of a multiple employer trust approved by the Company to
apply for and own the Contract as authorized by SUNY.
Credited Interest Options: The fixed interest options available under the
Contract. The Credited Interest Options currently consist of the Guaranteed
Accumulation Account and the Fixed Plus Account, each of which is described in
an Appendix to this Prospectus. Amounts allocated to the Credited Interest
Options are included in the Account Value.
Employee Account: An account established for each Participant. This Account
is credited with net Purchase Payments made by the Participant.
Employer Account: An account established for each Participant. This Account
will be credited with net Purchase Payments made by the employer.
Fund(s): An open-end registered management investment company whose shares
are purchased by the Separate Account to fund the benefits provided by the
Contract.
Modal Contract: A Contract that accepts Purchase Payments made pursuant to Code
Sections 401(a) and 414(h) and transferred funds attributable to Section 401(a)
and 414(h) contributions.
Participant (You): A person participating in the Plan.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
Plan(s): The SUNY Defined Contribution Plan (or any predecessor SUNY plan
qualified under Section 403(b) of the Code).
Plan Administrator: The individual or entity designated under the Plan who is
responsible for the interpretation and administration of the Plan. The
Company is not the Plan Administrator.
Purchase Payment(s): The gross payment(s) made to the Company under a
Contract.
Rollover Contract: A Contract that accepts Purchase Payments attributable to a
transfer of employer contributions and after-tax employee contributions made
pursuant to SUNY's Section 403(b) optional retirement program.
Separate Account: Variable Annuity Account C, a separate account established
by the Company for the purpose of funding variable annuity contracts issued
by the Company.
SUNY Plan: The State of New York Defined Contribution Retirement Plan.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
Valuation Date: The date and time at which the 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 designed to fund
the SUNY Plan and to accept transfers from SUNY's predecessor optional
retirement program which is qualified under Section 403(b) of the Code. The
Contracts are group flexible premium deferred variable annuity contracts under
which accounts are established for persons in the group.
Two Contracts have been issued: one for transferred assets under the
predecessor Section 403(b) program ("Rollover Contract"), and one for ongoing
contributions and transferred assets under the SUNY Plan qualified under
Sections 401(a) and 414(h) of the Code ("Modal Contract"). (See "Contract
Availability.")
Contract Purchase
For each Contract, both an Employee Account and an Employer Account will
be established for each Participant. The Accounts are established when you
complete an enrollment form (and any other required forms) and forward them
to the Company through the Aetna Processing Office. (See "Purchase.")
Free Look Period
Participation under the Contract may be cancelled within 10 days after you
receive the Certificate by returning it to the Company along with a written
notice of cancellation. The amount you will receive upon cancellation will
reflect the investment performance of the Subaccounts into which your Purchase
Payments were deposited. In some cases this may be more or less than the amount
of your Purchase Payments. (See "Purchase--Right to Cancel.")
Investment Options
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein, as designated by the
Participant. The Contract allows investment in any or all of the Subaccounts, as
well as in the Credited Interest Options described below. 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") and the Fixed Plus
Account. (See the Appendices to this Prospectus.)
Charges and Deductions
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and an administrative expense charge), as well as premium and other
taxes. The Funds also incur certain fees and expenses which are deducted
directly from the Funds. (See the Fee Table and "Charges and Deductions.")
Transfers
Prior to the Annuity Date, and subject to certain limitations, Account
Values may be transferred among the Subaccounts and the Credited Interest
Options without charge. Transfers can be requested in writing or by telephone
in accordance with the Company's transfer procedures. (See the Appendices for
a full description of the restrictions applicable to transfers made from the
Credited Interest Options.) (See "Transfers.")
Withdrawals
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Aetna
Processing Office. A distribution can be made only if the Plan Administrator
certifies in writing that you are eligible, both as to the timing and form of
distribution. Limitations apply to withdrawals from the Fixed Plus Account.
The withdrawal may be subject to income tax and a federal tax penalty. (See
"Withdrawals.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period to persons meeting certain criteria. Additional
Withdrawal Options may not be suitable in every situation. (See "Additional
Withdrawal Options.")
Death Benefit
A death benefit is payable if the Participant dies before the Annuity Date.
Death benefit proceeds will be paid to the Beneficiary in an amount equal to the
Account Value. Until the election of a method of payment, the Account Value will
remain invested under the Contract as it was before the Participant's death. The
Beneficiary may elect to receive the proceeds in a lump sum or under any of the
payment options available under the Contract. However, the Code requires that
distributions begin within a certain time period. (See "Death Benefit During
Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity
Option selected. (See "Death Benefit Payable During the Annuity Period.")
The Annuity Period
On the Annuity Date, you may elect to begin receiving Annuity Payments.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will vary
with the investment performance of the Subaccount(s) selected. The Company
reserves the right to limit the number of Subaccounts that may be available
during the Annuity Period. (See "Annuity Period.")
Taxes
Contributions and earnings are not generally taxed until you or your
Beneficiary(ies) actually receive a distribution from the Contract. A 10%
federal tax penalty and 20% withholding for income tax may be imposed on
certain withdrawals. (See "Tax Status.")
Inquiries
The Company has established the Aetna Processing Office to provide
administrative support to SUNY Participants. This office will handle
enrollments, billing, transfers, redemptions, and inquiries for all SUNY
Participants. All forms and correspondence should be sent to:
Aetna Processing Office
P.O. Box 12894
Albany, New York 12212-2894
Telephone Number: 1-800-677-4636
- --------------------------------------------------------------------------------
SUMMARY - 2
<PAGE>
FEE TABLE
================================================================================
This Fee Table describes the charges and expenses associated with the Contract
during the Accumulation Period. For amounts deducted during the Annuity Period,
see "Annuity Period--Charges Deducted During the Annuity Period." The charges
and expenses shown below do not include premium taxes that may be applicable.
For more information regarding fees and expenses paid out of the assets of a
particular Fund, see the Fund's prospectus.
CHARGES AGAINST THE SEPARATE ACCOUNT. Each Subaccount pays these expenses out
of its assets. The charges are reflected in the Subaccount's daily
Accumulation Unit Value and are not charged directly to an Account. They
include:
Mortality and Expense Risk Charge 1.25%
Administrative Expense Charge 0.00%*
--------
Total Separate Account Charges 1.25%
========
* 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.
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 Other Total
Fees(1) Expenses Fund
(after expense (after expense Annual
reimbursement) reimbursement) Expenses
-------------- -------------- ----------
<S> <C> <C> <C>
Aetna Variable Fund(2) 0.50% 0.06% 0.56%
Aetna Income Shares(2) 0.40% 0.08% 0.48%
Aetna Variable Encore Fund(2) 0.25% 0.10% 0.35%
Aetna Investment Advisers Fund, Inc.(2) 0.50% 0.08% 0.58%
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 Asset Manager Portfolio(5) 0.71%
Fidelity VIP II Contrafund Portfolio(5) 0.61%
Fidelity VIP II Index 500 Portfolio(6) 0.00%
Fidelity VIP Equity-Income Portfolio 0.51%
Franklin Government Securities Trust(7) 0.63%
Janus Aspen Aggressive Growth Portfolio(8) 0.75%
Janus Aspen Growth Portfolio(8) 0.65%
Janus Aspen Short-Term Bond Portfolio(8) 0.00%
Janus Aspen Worldwide Growth Portfolio(8) 0.68%
Lexington Emerging Markets Fund, Inc.(9) 0.85%
Lexington Natural Resources Trust 1.00%
Neuberger & Berman Growth Portfolio(10) 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.
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
(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 %.
Net fund operating expenses after reductions 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
% for the Asset Manager Portfolio; and % for the Contrafund Portfolio.
(6) The Fund's expenses were voluntarily reduced by the Fund's investment
adviser. Absent reimbursement, the management fee, other expenses and total
expenses would have been %, % and %, respectively, for the Index
500 Portfolio.
(7) 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 any time
during 1996.
(8) The information for each Portfolio is net of fee waivers or reductions from
Janus Capital. Fee reductions for Aggressive Growth, Growth, and
Worldwide Growth Portfolios reduce the management fee to the level of the
corresponding Janus retail fund. Other waivers, if applicable, are first
applied against the management fee and then against other expenses. Without
such waivers or reductions, the Management Fee, Other Expenses, and Total
Fund Annual Expenses would have been %, % and % for Aggressive Growth
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.
(9) The Fund's investment adviser has agreed to voluntarily limit the total
expenses of the Fund (excluding interest, taxes, brokerage, and
extraordinary expenses, but including management fees and operating
expenses) to an annual rate of % of the Fund's average net assets
through . Without this agreement, the Fund's Investment Advisory Fee,
Total Other Expenses and Total Fund Annual Expenses would have been
%, % and % for the most recent fiscal year.
(10) Neuberger & Berman Advisers Management Trust (the "Trust") is divided into
portfolios ("Portfolios"), each of which invests all of its net investable
assets in a corresponding series ("Series") of Advisers Managers Trust.
Expenses in the table reflect expenses of the Portfolio and include the
Portfolio's pro rata portion of the operating expenses of the 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.)
[/R]
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
Hypothetical Illustration (Example)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets, you would have paid the following expenses on a $1,000
investment at the end of the applicable time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
--------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Alger American Growth Portfolio
Alger American Small Cap Portfolio
American Century VP Capital Appreciation
Calvert Responsibly Invested Balanced Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Contrafund Portfolio
Fidelity VIP II Index 500 Portfolio
Fidelity VIP Equity-Income Portfolio
Franklin Government Securities Trust
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Short-Term Bond Portfolio
Janus Aspen Worldwide Growth Portfolio
Lexington Emerging Markets Fund, Inc.
Lexington Natural Resources Trust
Neuberger & Berman Growth Portfolio
Scudder International Portfolio Class A Shares
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
================================================================================
The condensed financial information presented below for each of the years in the
ten-year period ended December 31, 1996 (as applicable), is derived from the
financial statements of the Account, which financial statements have been
audited by KPMG Peat Marwick LLP, independent auditors. The financial statements
as of and for the year ended December 31, 1996 and the independent auditors'
report thereon, are included in the Statement of Additional Information.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $ $105.558 $107.925 $102.383 $ 97.165
Value at end of period $137.869 $105.558 $107.925 $102.383
Increase (decrease) in value of
accumulation unit(1) 30.61% (2.19)% 5.41% 5.37%
Number of accumulation units
outstanding at end of period 6,364,000 13,966,072 21,148,863 24,201,565
AETNA INCOME SHARES
Value at beginning of period $40.173 $42.283 $39.038 $36.789
Value at end of period $46.913 $40.173 $42.283 $39.038
Increase (decrease) in value of
accumulation unit(1) 16.78% (4.99)% 8.31% 6.11%
Number of accumulation units
outstanding at end of period 2,377,622 5,108,720 8,210,666 8,507,292
AETNA VARIABLE ENCORE FUND
Value at beginning of period $36.271 $35.282 $34.619 $33.812
Value at end of period $37.988 $36.271 $35.282 $34.619
Increase (decrease) in value of
accumulation unit(1) 4.73% 2.80% 1.92% 2.39%
Number of accumulation units
outstanding at end of period 1,836,260 3,679,802 5,086,515 7,534,662
AETNA INVESTMENT ADVISERS FUND,
INC.
Value at beginning of period $14.270 $14.519 $13.379 $12.736
Value at end of period $17.954 $14.270 $14.519 $13.379
Increase (decrease) in value of
accumulation unit(1) 25.82% (1.71)% 8.52% 5.05%
Number of accumulation units
outstanding at end of period 9,193,181 21,990,186 30,784,750 34,802,433
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period $10.000(13)
Value at end of period $11.715
Increase (decrease) in value of
accumulation unit(1) 17.15%
Number of accumulation units
outstanding at end of period 530,263
ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period $9.513 $10.072 $10.000(3)
Value at end of period $13.558 $ 9.513 $10.072
Increase (decrease) in value of
accumulation unit(1) 42.52% (5.55)% 0.72%
Number of accumulation units
outstanding at end of period 1,714,187 665,518 51,327
AMERICAN CENTURY VP CAPITAL
APPRECIATION*
Value at beginning of period $11.172 $11.443 $10.495 $10.000(12)
Value at end of period $14.464 $11.172 $11.443 $10.495
Increase (decrease) in value of
accumulation unit(1) 29.47% (2.37)% 9.03% 4.95%
Number of accumulation units
outstanding at end of period 1,784,552 1,608,362 1,016,894 232,832
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $77.845 $76.311 $59.871 $52.885 $50.760
Value at end of period $97.165 $77.845 $76.311 $59.871 $52.885
Increase (decrease) in value of
accumulation unit(1) 24.82% 2.01% 27.46% 13.21% 4.19%
Number of accumulation units
outstanding at end of period 20,948,226 18,362,906 17,142,820 16,455,396 16,497,406
AETNA INCOME SHARES
Value at beginning of period $31.192 $28.943 $25.574 $24.061 $23.308
Value at end of period $36.789 $31.192 $28.943 $25.574 $24.061
Increase (decrease) in value of
accumulation unit(1) 17.94% 7.77% 13.17% 6.29% 3.23%
Number of accumulation units
outstanding at end of period 7,844,412 6,984,793 6,202,834 5,955,293 5,372,271
AETNA VARIABLE ENCORE FUND
Value at beginning of period $32.138 $30.012 $27.783 $26.171 $24.812
Value at end of period $33.812 $32.138 $30.012 $27.783 $26.171
Increase (decrease) in value of
accumulation unit(1) 5.21% 7.08% 8.02% 6.16% 5.48%
Number of accumulation units
outstanding at end of period 8,430,082 10,220,110 8,286,033 8,154,644 7,326,151
AETNA INVESTMENT ADVISERS FUND,
INC.
Value at beginning of period $10.896 $10.437 $10.000(2)
Value at end of period $12.736 $10.896 $10.437
Increase (decrease) in value of
accumulation unit(1) 16.89% 4.40% 4.37%
Number of accumulation units
outstanding at end of period 22,898,099 17,078,985 9,535,986
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
AMERICAN CENTURY VP CAPITAL
APPRECIATION*
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
</TABLE>
[/R]
- --------------------------------------------------------------------------------
AUV HISTORY - 1
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO**
Value at beginning of period $ $13.990 $14.640 $13.726 $12.913
Value at end of period $17.951 $13.990 $14.640 $13.726
Increase (decrease) in value of
accumulation unit(1) 28.31% (4.44)% 6.66% 6.30%
Number of accumulation units
outstanding at end of period 856,361 743,464 705,415 503,006
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period $9.447 $10.000(5)
Value at end of period $10.912 $ 9.447
Increase (decrease) in value of
accumulation unit(1) 15.51% (5.53)%
Number of accumulation units
outstanding at end of period 1,316,916 1,254,504
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $11.763
Increase (decrease) in value of
accumulation unit(1) 17.63%
Number of accumulation units
outstanding at end of period 525,476
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $11.740
Increase (decrease) in value of
accumulation unit(1) 17.40%
Number of accumulation units
outstanding at end of period 290,547
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(14)
Value at end of period $11.617
Increase (decrease) in value of
accumulation unit(1) 16.17%
Number of accumulation units
outstanding at end of period 628,582
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $14.190 $14.929 $14.050 $13.219
Value at end of period $16.495 $14.190 $14.990 $14.050
Increase (decrease) in value of
accumulation unit 16.24% (4.95)% 6.26% 6.29%
Number of accumulation units
outstanding at end of period 809,414 804,457 960,629 810,155
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $12.169 $10.000(7)
Value at end of period $15.323 $12.169
Increase (decrease) in value of
accumulation unit(1) 25.91% 21.69%
Number of accumulation units
outstanding at end of period 1,280,953 393,553
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO**
Value at beginning of period $11.233 $10.568 $10.000(4)
Value at end of period $12.913 $11.233 $10.568
Increase (decrease) in value of
accumulation unit(1) 14.96% 6.29% 5.68%
Number of accumulation units
outstanding at end of period 355,851 148,576 20,710
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $11.545 $10.581 $10.000(6)
Value at end of period $13.219 $11.545 $10.581
Increase (decrease) in value of
accumulation unit 14.50% 9.11% 5.81%
Number of accumulation units
outstanding at end of period 627,552 178,761 25,258
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
</TABLE>
AUV HISTORY - 2
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(13)
Value at end of period $11.859
Increase (decrease) in value of
accumulation unit(1) 18.59%
Number of accumulation units
outstanding at end of period 109,717
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(13)
Value at end of period $10.393
Increase (decrease) in value of
accumulation unit(1) 3.93%
Number of accumulation units
outstanding at end of period 18,473
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(13)
Value at end of period $12.158
Increase (decrease) in value of
accumulation unit(1) 21.58%
Number of accumulation units
outstanding at end of period 314,653
LEXINGTON EMERGING MARKETS FUND, INC.
Value at beginning of period $8.772 $10.000(8)
Value at end of period $8.323 $8.772
Increase (decrease) in value of
accumulation unit(1) (5.12)% (12.28)%
Number of accumulation units
outstanding at end of period 371,156 144,750
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $9.412 $10.071 $9.193 $9.018
Value at end of period $10.862 $9.412 $10.071 $9.193
Increase (decrease) in value of
accumulation unit(1) 15.41% (6.54)% 9.55% 1.94%
Number of accumulation units
outstanding at end of period 530,562 533,016 341,771 198,338
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $13.398 $14.278 $13.536 $12.511
Value at end of period $17.430 $13.398 $14.278 $13.536
Increase (decrease) in value of
accumulation unit(1) 30.09% (6.16)% 5.48% 8.19%
Number of accumulation units
outstanding at end of period 2,359,090 2,107,525 1,927,674 1,346,898
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES***
Value at beginning of period $13.227 $13.508 $9.922 $10.239**
Value at end of period $14.515 $13.227 $13.508 $9.922
Increase (decrease) in value of
accumulation unit(1) 9.74% (2.08)% 36.14% (3.10)%
Number of accumulation units
outstanding at end of period 3,823,292 4,240,412 2,371,037 1,161,007
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
LEXINGTON EMERGING MARKETS FUND, INC.
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $9.608 $11.441 $10.000(9)
Value at end of period $9.018 $9.608 $11.441
Increase (decrease) in value of
accumulation unit(1) (6.14)% (16.02)% 14.41%
Number of accumulation units
outstanding at end of period 144,139 75,052 11,481
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $9.769 $10.772 $10.000(10)
Value at end of period $12.511 $ 9.769 $10.772
Increase (decrease) in value of
accumulation unit(1) 28.07% (9.31)% 7.72%
Number of accumulation units
outstanding at end of period 971,985 482,220 68,885
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES***
Value at beginning of period $9.256 $10.306 $10.000(11)
Value at end of period $10.239 $9.256 $10.306
Increase (decrease) in value of
accumulation unit(1) 10.62% (10.19)% 3.06%
Number of accumulation units
outstanding at end of period 779,667 317,829 32,902
</TABLE>
- --------------------------------------------------------------------------------
AUV HISTORY - 3
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
(1) The above figures are calculated by subtracting the beginning
Accumulation Unit value from the ending Accumulation Unit value during a
calendar year, and dividing the result by the beginning Accumulation
Unit value. These figures do not reflect the deferred sales charge or
the fixed dollar annual maintenance fee, if any. Inclusion of these
charges would reduce the investment results shown.
(2) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on June 23, 1989, the
date on which the Fund commenced operations.
(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 Portfolio became available under the Contract on March 15,
1994.
(4) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on May 31, 1989, the
date on which the Fund became available under the Contract.
(5) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during March 1994,
when funds were first received under this option.
(6) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on June 7, 1989, the
date on which the Fund became available under the Contract.
(7) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during June 1994,
when funds were first received in this option.
(8) 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.
(9) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on May 31, 1989, the
date on which the Fund became available under the Contract.
(10) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on May 31, 1989, the
date on which the Portfolio became available under the Contract.
(11) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on July 5, 1989, the
date on which the Portfolio became available under the Contract.
(12) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on September 21,
1992, the date on which the Portfolio became available under the
Contract.
(13) 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.
(14) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during May 1995, when
the Fund became available under the Contract.
*Formerly TCI Portfolios, Inc.--TCI Growth.
**Formerly Calvert Socially Responsible Series.
***Formerly T. Rowe Price International Equity Fund. On April 27, 1992,
the Fund's assets were liquidated and merged into Scudder Variable Life
Investment Fund--Managed International Portfolio. The Accumulation Unit
value following the merger was $10.051.
- --------------------------------------------------------------------------------
AUV HISTORY - 4
<PAGE>
THE COMPANY
================================================================================
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of the
Contract, and as such, it is responsible for providing the insurance and annuity
benefits under the Contract. The Company is a stock life insurance company
organized under the insurance laws of the State of Connecticut in 1976. Through
a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance
Company (formerly Participating Annuity Life Insurance Company, an Arkansas life
insurance company organized in 1954). The Company is engaged in the business of
issuing life insurance policies and variable annuity contracts in all states of
the United States. The Company's principal executive offices are located at 151
Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings,
Inc., which is in turn a wholly owned subsidiary of Aetna Retirement
Services, Inc. and an indirect wholly owned subsidiary of Aetna 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 the "separate account" under federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets of the Separate Account, such
assets are not chargeable with liabilities arising out of any other business
conducted by the Company. Income, gains or losses of the Separate Account are
credited or charged against the assets of the Separate Account without regard to
other income, gains or losses. All obligations arising under the Contracts are
our general corporate obligations.
INVESTMENT OPTIONS
================================================================================
The Funds
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the enrollment form. In turn, the Subaccounts invest in the
corresponding Funds at net asset value. The total number of investment options
that you may select during the Accumulation Period is limited to 18. Each
Subaccount selected, the Fixed Plus Account and each guaranteed term of GAA
counts as one option, even if you no longer have amounts allocated to that
option.
SUNY 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 applicable to regulatory authorization. Not
all Funds may be available in all jurisdictions, under all Contracts or in all
Plans.
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
(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)
- --------------------------------------------------------------------------------
1
<PAGE>
(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) 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 on the Russell 2000 Growth Index, updated quarterly.
The Russell 2000 Growth Index is designed to track the 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 (formerly TCI Portfolios, Inc.--TCI Growth) 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--Asset
Manager Portfolio seeks high total return with reduced risk over the
long-term by allocating its assets among stocks, bonds and short-term
fixed-income instruments.(5)
(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 II--Index 500
Portfolio seeks to provide investment results that correspond to the
total return of common stocks publicly traded in the United States by
duplicating the composition and total return of the Standard & Poor's
Composite Index of 500 stocks.(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) Franklin Government Securities Trust seeks income through
investments in obligations of the U.S. Government or its agencies or
instrumentalities, primarily GNMA obligations.(6)
(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 of between approximately $ million and $
billion, but which is expected to change on a regular basis.(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 Emerging Markets Fund, Inc. seeks long-term growth of
capital primarily through investment in equity
- --------------------------------------------------------------------------------
2
<PAGE>
securities of companies domiciled in, or doing business in emerging
countries and emerging markets. Investments in emerging markets
involve risks not present in domestic markets. See the Fund's
prospectus for information on risks inherent in this investment.(8)
(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 have the maximum potential for
long-term capital appreciation. The Portfolio expects to be almost
fully invested in common stocks, often of companies that may be
temporarily out of favor in the market.(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, Inc.
(6) Franklin Advisers, Inc.
(7) Janus Capital Corporation
(8) Lexington Management Corporation (adviser); Market
Systems Research Advisors, Inc. (subadviser-Natural
Resources Trust only)
(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 by the Company or by third parties. This is referred to as "mixed
funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to identify
any material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict.
Credited Interest Options
Purchase Payments may be allocated to one or more of the Credited Interest
Options available under the Contract, as described below. SUNY may elect not
to offer all Credited Interest Options under its Plan.
(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 received 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 also a part of the Company's general account
and guarantees a minimum interest rate, as specified in the Contract.
The Company may credit higher interest rates in its discretion.
Withdrawals and transfers from the Fixed Plus Account are limited. (See
Appendix II.)
- --------------------------------------------------------------------------------
3
<PAGE>
PURCHASE
================================================================================
Contract Availability
The Contracts are designed to fund the SUNY Plan and to accept transfers of
amounts made to the predecessor program which is qualified under Section 403(b)
of the Code. Two Contracts have been issued: one for transferred assets from the
predecessor Section 403(b) SUNY optional retirement program ("Rollover
Contract"), and one for ongoing contributions and transferred assets from a plan
qualified under Sections 401(a) and 414(h) of the Code ("Modal Contract").
Contracts are issued in allocated form which means that one or more
individual accounts are established for each Participant. Two accounts will be
established under each Contract: an Employer Account and an Employee Account.
Under a Rollover Contract, Purchase Payments attributable to a transfer of
after-tax employee contributions made to the predecessor 403(b) SUNY optional
retirement program are allocated to the Employee Account, and Purchase Payments
attributable to a transfer of employer contributions made to the predecessor
Section 403(b) SUNY optional retirement program are allocated to the Employer
Account.
Under a Modal Contract, ongoing Purchase Payments made pursuant to Section
414(h) of the Code and transferred funds attributable to Code Section 414(h)
contributions from another investment provider under the SUNY Plan are allocated
to the Employee Account, and ongoing Purchase Payments made pursuant to Section
401(a) of the Code and transferred funds attributable to Code Section 401(a)
contributions from another investment provider under the SUNY Plan are allocated
to the Employer Account. (See also "Tax Status.")
Contract Purchase
Employees of SUNY may fill out an enrollment form (or forms) and return it to
the Company for review, acceptance or rejection. The Company must accept or
reject the enrollment form within two business days of receipt. If the
enrollment materials are incomplete, the Company may hold any forms and
accompanying Purchase Payments for five days. Purchase Payments may be held for
longer periods pending acceptance of the forms only with consent of the
Participant, or under limited circumstances, with the consent of the Contract
Holder. If we agree to hold Purchase Payments for longer than the five business
days based on the consent of the Contract Holder, the Purchase Payments will be
deposited in the Aetna Variable Encore Fund Subaccount until the forms are
completed.
Purchase Payments
As discussed above, Purchase Payments can be applied to the Contracts either
through a lump-sum transfer of existing plan assets, or through ongoing
contributions. For Modal Contracts, the Code imposes a maximum limit on annual
Purchase Payments that may be contributed to a 401(a) Plan on your behalf. (See
"Tax Status.")
Allocation of Purchase Payments. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified by the
Participant on the enrollment form. Changes in such allocation may be made in
writing or by telephone transfer. Allocations must be in whole percentages.
(See "Transfers.")
Rights Under the Contract
You have a nonforfeitable right to the value of your Employee Account and
Employer Account, as determined by the Plan Administrator in accordance with the
terms of the Plan. You may select the investment options to be used for
allocations to both your Employee and Employer Accounts. You may elect an
Annuity Option, subject to Plan Administrator certification that you are
eligible for a distribution and that the form of annuity is permitted under the
terms of the Plan.
Right to Cancel
Participation under the Contract may be cancelled without penalty by
returning the certificate to the Aetna Processing Office with a written notice
of your intent to cancel. You have ten days to exercise this right. We will
produce a refund of the Purchase Payment (plus or minus any increase or decrease
in value) not later than seven days after we receive the certificate and the
written notice at the Aetna Processing Office.
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CHARGES AND DEDUCTIONS
================================================================================
Daily Deductions from the Separate Account
Mortality and Expense Risk Charge. The Company makes a daily deduction from
each of the Subaccounts for the mortality and expense risk charge. The charge is
equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of the mortality and expense
risks under the Contract. The mortality risks are those assumed for our promise
to make lifetime payments according to annuity rates specified in the Contract.
The expense risk is the risk that the actual expenses for costs incurred under
the Contract will exceed the maximum costs that can be charged under the
Contract.
If the amount deducted for mortality and expense risks is not sufficient to
cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
Administrative Expense Charge. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge. The
administrative expense charge compensates the Company for its administrative
expenses incurred in connection with the Contract. The charge is set at a level
which does not exceed the average expected cost of the administrative services
to be provided while the Contract is in force. The Company does not expect to
make a profit from this charge.
Under the Contract, the amount of the administrative expense charge may be an
amount equal, on an annual basis, to a maximum of 0.25% of the daily net assets
of the Subaccounts. There is currently no administrative expense charge during
the Accumulation Period or Annuity Period. Once an Annuity Option is elected,
the charge will be established and will be effective during the entire Annuity
Period.
Fund Expenses
Each Fund incurs certain expenses which are paid out of its net assets. These
expenses include, among other things, the investment advisory or "management"
fee. The expenses of the Funds are set forth in the Fee Table in this Prospectus
and described more fully in the accompanying Fund prospectuses.
Premium and Other Taxes
Several states and municipalities impose a premium tax on Annuities. These
taxes currently range from 0% to 4%; however, there is currently no premium tax
on annuity contracts issued in the state of New York. In states that do impose a
premium tax, the Company reserves the right to deduct the tax from Purchase
Payments or Account Values at any time, but no earlier than when we have a tax
liability under state law. The Company's current practice is to deduct for
premium taxes at the time of complete withdrawal or annuitization. In addition
to the premium tax, the Company reserves the right to assess a charge for any
state or federal taxes due against the Contract or the Separate Account assets.
(See "Tax Status.")
CONTRACT VALUATION
================================================================================
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 and the administrative charge (if any).
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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--Contract Purchase". 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 the preceding Valuation Date;
(e) minus a daily charge at the annual effective rate of 1.25% for mortality
and expense risks and up to 0.25% as an administrative expense charge
(currently 0%).
The net investment rate may be either positive or negative.
TRANSFERS
================================================================================
At any time prior to the Annuity Date, you can transfer amounts held under
your Accounts from one Subaccount to another. Transfers between the Credited
Interest Options and the Subaccounts are subject to certain restrictions (See
Appendices I and II). A request for transfer can be made either in writing or by
telephone. The telephone transfer privilege is available automatically; no
special election is necessary. All transfers must be in accordance with the
terms of the Contract and your Plan, as applicable.
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge, provided that the transfer amount
is not less than $500. The total number of investment options in which you may
invest during the Accumulation Period is limited. (See "Investment Options--The
Funds.") Any transfer will be based on the Accumulation Unit Value next
determined after the Company receives a valid transfer request at its Home
Office. Transfers are not available during the Annuity Period.
WITHDRAWALS
================================================================================
You may withdraw all or a portion of the Account Value during the
Accumulation Period, subject to Plan Administrator certification in writing that
you are eligible, both as to the timing and form of distribution. Payments for
withdrawal requests will be made in accordance with SEC requirements, but
normally not later than seven calendar days following our receipt of a
disbursement form.
Withdrawals may be requested in one of the following forms:
(bullet) Full Withdrawal of an Account: The amount paid for a full withdrawal
will be the Account Value allocated to the Subaccounts and the,
Guaranteed Accumulation Account (plus or minus a market value
adjustment) (see Appendix I), plus the amount available for withdrawal
from the Fixed Plus Account (see Appendix II).
(bullet) Partial Withdrawals: The amount paid will be the percentage or dollar
amount of the Account Value requested; however, the amount available
for withdrawal from the Fixed Plus Account is limited (see Appendix
II).
For any partial withdrawal, amounts will be withdrawn proportionately from
the Subaccounts or Credited Interest Option in which the Account is invested,
unless you request otherwise. All amounts paid will be based on Account Values
as of the next Valuation Date after we receive a request for withdrawal at our
Home Office, or on such later
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date as the disbursement form may specify. A 20% federal income tax may be
withheld from amounts paid directly to you. (See "Tax Status--Contracts Used
with Certain Retirement Plans.")
Reinvestment Privilege
You may elect to reinvest all or a portion of the proceeds received from a
full withdrawal of your Account within 30 days after such withdrawal has been
made. Accumulation Units will be credited to the Account for the amount
reinvested. Reinvested amounts will be reallocated to the applicable investment
options in the same proportion as they were allocated at the time of withdrawal.
Accumulation Units will be credited to your Account based on the Accumulation
Unit Value next computed following our receipt of your request along with the
amount to be reinvested. The reinvestment privilege may be used only once. See
Appendix I for a discussion of amounts withdrawn from GAA and then reinvested.
If you are contemplating reinvestment, you should seek competent advice
regarding the tax consequences associated with such a transaction.
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:
(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.")
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. The amount of the
death benefit will be equal to the Account Value. 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; or
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(bullet) under any Additional Withdrawal Options available under the Contract
(if the Beneficiary is your spouse).
The Beneficiary may instead elect one of the following two options; however,
the Code limits how long the death benefit proceeds may be left in these options
(see below):
(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.
When paying the Beneficiary, we will determine the Account Value on the
Valuation Date following the date on which the Aetna Processing Office receives
proof of death acceptable to the Company. Interest, if any, will be paid from
the date of death at a rate no less than required by law. We will mail payment
to the Beneficiary within seven days after we receive proof of death and the
request for payment.
The Code requires that distribution of death proceeds begin within a certain
period of time. Generally, either payments must begin by December 31 of the year
following the year of your death, or the entire value of your benefits must be
distributed by December 31 of the fifth year following the year of your death.
If your Beneficiary is your spouse, he or she is not required to begin
distributions until the year you would have attained age 70-1/2. In no event may
payments extend beyond the life expectancy of the Beneficiary or any period
certain greater than the Beneficiary's life expectancy. If no elections are
made, no distributions will be made. Failure to commence distributions within
the above time periods can result in tax penalties. Regardless of the method of
payment, death benefit proceeds will generally be taxed to the Beneficiary in
the same manner as if you had received those payments. (See "Tax Status.")
ANNUITY PERIOD
================================================================================
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 you attain age 70-1/2 or retire, whichever is later. In addition,
distributions must be in a form and amount sufficient to satisfy the Code
requirements. These requirements may be satisfied by the election of certain
Annuity Options or Additional Withdrawal Options. (See "Tax Status.")
At least 30 days prior to the Annuity Date, you must notify the Aetna
Processing Office in writing of the following:
(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;
(bullet) whether the payments are to be made monthly, quarterly,
semi-annually or annually; 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). As of the date of this
Prospectus, Aetna Variable Fund, Aetna Income Shares and Aetna
Investment Advisers Fund, Inc. are the only Subaccounts available.
(See "Annuity Options.")
Annuity payments will not begin until you have selected an Annuity Option.
Until a date and option are elected, the Account will continue in the
Accumulation Period. Once Annuity payments begin, the Annuity Option may not be
changed, nor may transfers be made among the investment option(s) selected.
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
Annuitant's death.
(bullet) Option 2--Life Annuity with Guaranteed Payments--An annuity with
payments guaranteed for 5, 10, 15 or 20 years, or such other periods as
the Company may offer at the time of annuitization.
(bullet) Option 3--Life Income based Upon the Lives of Two Payees--An annuity
will be paid during the lives of the Annuitant and a second Annuitant,
with 100%, 66-2/3% or 50% of the payment to continue after the first
death, or 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of the
Annuitant.
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(bullet) Option 4--Life Income based Upon the Lives of Two Payees--An annuity
with payments for a minimum of 120 months, with 100% of the payment to
continue after the first death.
If Option 1 or 3 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 3, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Annuitant cannot elect to receive a
lump-sum settlement.
Nonlifetime Annuity Options:
(bullet) Option 1--Payments for a Specified Period--payments will continue for a
specified period of time, as provided for under your Contract.
Under the nonlifetime option, the type of annuity (fixed or variable) and the
number of years that may be selected are determined by the investment options
used prior to annuitization. For amounts held in the Fixed Plus Account, the
Annuity must be paid on a fixed basis and payments may be made for 6-30 years.
For amounts held in the Subaccounts or the Guaranteed Accumulation Account, an
annuity may be selected on a fixed or variable basis and payments may be made
for 3-30 years. If this option is elected on a variable basis, the Annuitant may
request at any time during the payment period that the present value of all or
any portion of the remaining variable payments be paid in one sum.
We may also offer additional Annuity Options under your Contract from time to
time.
Annuity Payments
Duration of Annuity Payments. Annuity Payments may not extend beyond (a) the
life of the Annuitant, (b) the joint lives of the Annuitant and Beneficiary, (c)
a period certain greater than the Annuitant's life expectancy, or (d) a period
certain greater than the joint life expectancies of the Annuitant and
Beneficiary.
Amount of Each Annuity Payment. The amount of each payment depends on how you
allocate your Account Value between fixed and variable payouts. No election may
be made that would result in the first Annuity Payment of less than $20, or
total yearly Annuity Payments of less than $100. If your Account Value on the
Annuity Date is insufficient to elect an option for the minimum amount
specified, a lump-sum payment must be elected.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3-1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 3-1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)
Charges Deducted During the Annuity Period
We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative expense charge from
amounts held under the variable options. (See "Charges and Deductions.")
Death Benefit Payable During the Annuity Period
If an Annuitant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 3 was elected, Annuity Payments will cease on
the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 3.
If Lifetime Option 2 or Option 4 was elected and the death of the Annuitant
under Option 2, or the surviving Annuitant under Option 4, occurs prior to the
end of the guaranteed minimum payment period, we will pay to the Beneficiary in
a lump sum, unless otherwise requested, the present value of the guaranteed
annuity payments remaining.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a lump-sum
to the beneficiary (unless otherwise requested).
If the Annuitant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at the Aetna Processing
Office. Under Options 2 and 4, the value of any death benefit proceeds will be
determined as of the next Valuation Date after we receive acceptable proof of
death and a request for payment. Such value will be reduced by any payments made
after the date of death.
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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.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretation thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
Contracts Used With Certain Retirement Plans
In General. The Contracts are designed to provide retirement benefits to
Participants of the SUNY Plan. Purchase Payments made under Sections 401(a),
414(h) and 403(b) of the Code are permitted under the Contracts.
The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants as
well as beneficiaries are cautioned that the rights of any person to any
benefits under the Contracts may be subject to the terms and conditions of the
plans themselves, in addition to the terms and conditions of the Contracts
issued in connection with such plans. Some retirement plans are subject to
limitations on distribution and other requirements that are not incorporated in
the Contracts. Purchasers are responsible for determining that contributions,
distributions and other transactions with respect to the Contracts satisfy
applicable laws, and should consult their legal counsel and tax adviser
regarding the suitability of the Contract.
Minimum Distribution Requirements. The Code has required distribution rules
for Section 403(b) and 401(a) plans. Under 403(b) plans, distributions of
amounts held as of December 31, 1986 must generally begin by the end of the
calendar year in which you attain age 75 or retire, if later. However, special
rules require that some or all of that balance be distributed earlier if any
distributions are taken in excess of the minimum required amount. For
Participants other than 5% owners, distributions under 401(a) plans, and
distributions attributable to contributions under Section 403(b) plans made on
or after January 1, 1987 (including any earnings on the entire Account Value
after that date), must generally begin by April 1 of the calendar year following
the calendar year in which you attain age 70-1/2 or retire, whichever occurs
later. 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 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
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your death and the entire remaining interest must be distributed to your
beneficiary by December 31 of the year following your death. However, a spousal
beneficiary has certain rollover rights which can only be exercised in the year
of your death. The rules are complex and you should consult your tax adviser
before electing the method of calculation to satisfy the minimum distribution
requirements.
If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year
containing the fifth anniversary of the date of your death. Alternatively,
payments may be made over the life of the beneficiary or over a period not
extending beyond the life expectancy of the beneficiary provided the
distribution begins by December 31 of the calendar year following the calendar
year of your death. If the Beneficiary is your spouse, distribution must begin
by the later of December 31 of the calendar year following the calendar year of
your death or December 31 of the calendar year in which you would have attained
age 70-1/2.
If you fail to receive the minimum required distribution for any tax year, a
50% excise tax is imposed on the required amount that was not distributed.
Taxation of Distributions. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to another
plan of the same type or to an individual retirement annuity/account ("IRA") in
accordance with the Code, or unless you have made after-tax contributions to the
plan, which are not taxed upon distribution. The Code has specific rules that
apply, depending on the type of distribution received, if after-tax
contributions were made.
In general, payments received by your beneficiaries after your death are
taxed in the same manner as if you have received those payments, except that a
limited death benefit exclusion may apply to payments made for deaths occuring
on or before August 20, 1996.
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from annuities are subject to mandatory federal income tax
withholding. We will report to the IRS the taxable portion of all distributions.
The Code imposes a 10% penalty tax on the taxable portion of any distribution
unless made when (a) you have attained age 59-1/2, (b) you have become disabled,
(c) you have died, (d) you have separated from service with the plan sponsor at
or after age 55, (e) the distribution amount is rolled over into another plan of
the same type in accordance with the terms of the Code, or (f) the distribution
amount is made in substantially equal periodic payments (at least annually) over
your life or life expectancy or the joint lives or joint life expectancies of
you and your plan beneficiary, provided you have separated from service with the
plan sponsor. In addition, the penalty tax does not apply for the amount of a
distribution equal to unreimbursed medical expenses incurred by you that qualify
for deduction as specified in the Code. The Code may impose other penalty taxes
in other circumstances.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems to purchase annuity contracts for their employees are generally
excludable from the gross income of the employee.
Generally, no amounts accumulated under the Contract will be taxable prior to
the time of actual distribution. However, the IRS has stated in published
rulings that a variable contract owner, including participants under Section
403(b) Plans, will be considered the owner of separate account assets if the
owner possesses incidents of investment control over the assets. In these
circumstances, income and gains from the separate account assets would be
currently includable in the variable contract owner's gross income. The Treasury
announced that guidance would be issued in the future regarding the extent to
which owners could direct their investments among Subaccounts without being
treated as owners of the underlying assets of the Separate Account. It is
possible that the Treasury's position, when announced, may adversely affect the
tax treatment of existing contracts. The Company therefore reserves the right to
modify the Contract as necessary to attempt to prevent the owner from being
considered the federal tax owner of the assets of the Separate Account.
Section 401(a) Plans. Section 401(a) permits corporate employers to establish
various types of retirement plans for employees, and permits self-employed
individuals to establish various types of retirement plans for themselves and
for their employees. These retirement plans may permit the purchase of the
Contracts to accumulate retirement savings under the plans. Adverse tax
consequences to the plan, to the participant or to both
- --------------------------------------------------------------------------------
11
<PAGE>
may result if this Contract is assigned or transferred to any individual except
to a participant as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a Participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of your compensation or $30,000. In addition,
Purchase Payments will be excluded from a Participant's gross income only if the
401(a) plan meets certain nondiscrimination requirements.
Section 414(h) Plans. Under Section 414(h) of the Code, where a governmental
employer "picks up" plan contributions otherwise designated as employee
contributions, the contributions are treated as employer contributions. The
414(h) contributions are excluded from the employee's taxable income and are not
subject to federal income tax withholding.
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 4% of those Purchase Payments. The Company may also pay renewal commissions
on Purchase Payments made after the first year and asset-based service fees. The
average of all payments made by the Company is estimated to equal approximately
3% of the total Purchase Payments made over the life of an average Contract. 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 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 association for certain services in connection with administering the
Contracts. In both these circumstances there may be an understanding that the
Distributor or association would endorse the Company as a provider of the
Contract. You will be notified if you are purchasing a Contract that is subject
to these arrangements.
Delay or Suspension of Payments
The Company reserves the right to suspend or postpone the date of payment for
any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or 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
- --------------------------------------------------------------------------------
12
<PAGE>
SEC, as well as the "non-standardized returns." "Standardized average annual
total returns" and "non-standardized average annual total returns" are computed
according to a formula in which a hypothetical investment of $1,000 is applied
to the Subaccount and then related to the ending redeemable values over the most
recent one, five and ten-year periods (or since inception, if less than ten
years). Standardized and non-standardized returns will reflect the reduction of
all recurring charges during each period (e.g., mortality and expense risk
charges and any administrative expense charge). The non-standardized figures may
also include monthly, quarterly, year-to-date or three-year periods.
The Company may also advertise certain ratings, rankings or other information
related to the Company, the Subaccounts or the Funds. Further details regarding
performance reporting and advertising are described in the Statement of
Additional Information.
Voting Rights
In accordance with the Company's view of present applicable law, it will vote
the shares of each of the Funds held by the Separate Account at regular and
special meetings of Fund shareholders in accordance with instructions received
from persons having a voting interest in the Separate Account. Participants and
Annuitants have a fully vested (100%) interest in the benefits provided under
the Contract and may instruct 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. Currently, the Company obtains participant
voting instructions directly from the participants, subject to the receipt of
authorization from the Contract Holder to accept such instructions. The Company
will vote shares for which it has not received instructions in the same
proportion as it votes shares for which it has received instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest, as
well as any proxy materials and a form on which to give voting instructions.
Voting instructions will be solicited by written communication at least 14 days
before such meeting. The number of votes to which each person may give direction
will be determined as of the record date set by the Fund.
The number of votes which the Contract Holder or the Participant, as
applicable, may cast during the Accumulation Period is equal to the portion of
the Account Value to that Fund, divided by the net asset value of one share of
that Fund. During the Annuity Period, the number of votes is equal to the
valuation reserve applicable to the portion of the Contract attributable to that
Fund, divided by the net asset value of one share of that Fund. In determining
the number of votes, fractional votes will be recognized.
Modification of the Contract
The Company may change the Contract as required by federal or state law. In
addition, the Company may, upon 30 days written notice to the Contract Holder,
make other changes to the Contracts that would apply only to individuals who
become Participants under that Contract after the effective date of such
changes. If the Contract Holder does not agree to a change, no new Participants
will be covered under the Contract. Certain changes will require the approval of
appropriate state or federal regulatory authorities.
Transfer of Ownership; Assignment
No assignment of a Contract will be binding on us unless made in writing and
sent to us at our Aetna Processing Office. The Company will use reasonable
procedures to confirm that the assignment is authentic, including verification
of signature. If the Company fails to follow its procedures, it would be liable
for any losses to you directly resulting from the failure. Otherwise, we are not
responsible for the validity of any assignment. The rights of the Contract
Holder and the interest of the Annuitant and any Beneficiary will be subject to
the rights of any assignee of record.
Legal Matters and Proceedings
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Counsel to the Company.
- --------------------------------------------------------------------------------
13
<PAGE>
CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
The Statement of Additional Information contains more specific information on
the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
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
- --------------------------------------------------------------------------------
14
<PAGE>
APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
================================================================================
The Guaranteed Accumulation Account ("GAA") is a credited interest option
available during the Accumulation Period under the Contracts discussed in this
Prospectus. Amounts allocated to Long-Term Classifications of GAA are held in a
noninsulated, nonunitized separate account. Amounts allocated to Short-Term
Classifications of GAA are held in the Company's general account. This Appendix
is a summary of GAA and is not intended to replace the GAA prospectus. You
should read the accompanying GAA prospectus carefully before investing.
GAA is a credited interest option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. This option guarantees the minimum interest
rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be applied
to any or all available Guaranteed Terms within the Short-Term and Long-Term
classifications. Short-Term GAA has Guaranteed Terms from one to three years,
and Long-Term GAA has Guaranteed Terms from three to ten years.
Purchase Payments must remain in GAA for the full Guaranteed Term to receive the
quoted interest rates. Withdrawals or transfers from a Guaranteed Term before
the end of that Guaranteed Term may be subject to a market value adjustment
("MVA"). An MVA reflects the change in the value of the investments due to
changes in interest rates since the date of deposit. When interest rates
increase after the date of deposit, the value of the investment decreases and
the MVA is negative. Conversely, when interest rates decrease after the date of
deposit, the value of the investment increases, and the MVA is positive. It is
possible that a negative MVA could result in the Participant receiving an amount
which is less than the amount paid into GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to
federal tax penalties or mandatory income tax withholding.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under GAA
transferred to one or more of the Subaccounts available during the Annuity
Period. GAA cannot be used as an investment option during the Annuity Period.
Mortality and Expense Risk Charges
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
Transfers
Transfers are permitted among Guaranteed Terms. However, amounts applied to
GAA may not be transferred to another Guaranteed Term of GAA, or to any other
Subaccount or credited interest option available under the Contract, during the
deposit period or the 90 days after the close of the deposit period. We will
apply an MVA to transfers made before the end of a Guaranteed Term, unless such
transfer is due to the maturity of the Guaranteed Term.
Reinvestment Privilege
If amounts are withdrawn from GAA and reinvested, they will be applied to the
current deposit period. Amounts are proportionately reinvested in the same
manner as they were allocated before the withdrawal. Any negative MVA amount
applied to a withdrawal is not included in the reinvestment.
- --------------------------------------------------------------------------------
15
<PAGE>
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.
Beginning in the tenth Account Year, we will credit amounts held in the Fixed
Plus Account with an interest rate that is at least 0.25% higher than the
then-declared interest rate for the Fixed Plus Account for Accounts that have
not reached their tenth anniversary.
Fixed Plus Account Withdrawals
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day a written request is received at the Aetna
Processing Office. Such amount will be reduced by any Fixed Plus Account
withdrawals, transfers or annuitizations made during the prior 12 months. In
calculating the 20% limit, we reserve the right to include payments made due to
the election of any Additional Withdrawal Options.
If a full withdrawal is requested, we will pay any amounts held in the Fixed
Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers or
annuitizations made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
5. The balance of the Fixed Plus Account Value 12 months later.
Once we receive a request for a full withdrawal, no further withdrawals or
transfers will be permitted from the Fixed Plus Account. A full withdrawal from
the Fixed Plus Account may be cancelled at any time before the end of the
five-payment period. We will waive the Fixed Plus Account full withdrawal
provision and pay the Account Value in a lump sum if a full withdrawal is made
(a) due to the Participant's death before the Annuity Date; (b) due to the
election of an Annuity option; (c) if the Fixed Plus Account value is $3,500 or
less and the amount withdrawn is to be transferred to another investment program
under the SUNY Plan and no withdrawals, transfers or annuitizations have been
made from the Account within the prior 12 months; or (d) when the Account Value
is $4,000 or less and the amount withdrawn is paid to the Participant in a lump
sum.
- --------------------------------------------------------------------------------
16
<PAGE>
Alternative Payment of Contract Surrender Value
As an alternative to the payment of Fixed Plus Account Values described
above, the Contract Holder may elect the following. If the Contract Holder
intends to surrender the entire Contract, the Company must be notified of such
intent no less than 60 days prior to the proposed withdrawal date. Within 30
days of its receipt of such notice, the Company will supply the Contract Holder
with the specific period and interest rate that would apply to a complete
surrender of the Contract under option (b) below. The Contract Holder must then
irrevocably elect, in writing, to receive the total of all current Account
Values invested in the Fixed Plus Account in either (a) the manner described
under "Fixed Plus Account Withdrawals" above; or (b) level, annual payments for
a period not to exceed ten years.
If alternative (b) is elected, the interest credited to the Fixed Plus
Account may be reduced up to 1.5% from the interest rate being credited upon the
date of withdrawal. This interest rate will remain constant throughout the
payment period.
Transfers Among Investment Options
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request,
reduced by any Fixed Plus Account withdrawals, transfers or annuitizations made
during the prior 12 months. 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 the Aetna Processing Office at least 30 days before the
Annuity Date, you may elect to have amounts which have been accumulating under
the Fixed Plus Account transferred to one or more of the Subaccounts available
during the Annuity Period to provide lifetime variable Annuity Payments.
17
<PAGE>
For Master Applications Only
I hereby acknowledge receipt of an Account C State University of New York "SUNY"
Group Deferred Variable Annuity prospectus dated May 1, 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.81216-97) dated May 1, 1997.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
PROS.81216-97
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1997
Group Variable Annuity Contracts issued to
The State University of New York ("SUNY") Defined Contribution Retirement Plan
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account C (the
"Separate Account") dated May 1, 1997 describing contracts issued in connection
with the Defined Contribution Plan for the State University of New York.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Processing Office
P.O. Box 12894
Albany, New York 12212-2894
1-800-677-4636
Read the prospectus before you invest. Unless otherwise indicated, terms used in
this Statement of Additional Information shall have the same meaning as in the
prospectus.
TABLE OF CONTENTS
Page
General Information and History.............................................2
Variable Annuity Account C..................................................2
Offering and Purchase of Contracts..........................................3
Performance Data............................................................3
General................................................................3
Average Annual Total Return Quotations.................................5
Annuity Payments............................................................6
Sales Material and Advertising..............................................7
Independent Auditors........................................................7
Financial Statements of the Separate Account................................S-1
Financial Statements of Aetna Life Insurance and Annuity Company............F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 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).
The Company has established the Aetna Processing Office to provide
administrative support to the Contract Holder and Participants of the State
University of New York Defined Contribution Retirement Plan ("SUNY"). This
office will handle enrollments, billing, transfers, redemptions, and inquiries
for all SUNY Contract Holders and Participants. All forms and correspondence
should be sent to the address listed on the cover of this Statement of
Additional Information.
Other than the mortality and expense risk charges and administrative expense
charge, if any, described in the prospectus, all expenses incurred in the
operations of the Separate Account are borne by the Company. (See "Charges and
Deductions" in the prospectus.) The Company receives reimbursement for certain
administrative costs from some unaffiliated sponsors of the Funds used as
funding options under the Contract. These fees generally range up to 0.25%.
The assets of the Separate Account are held by the Company. The Separate Account
has no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested each have custodians, as discussed in their respective
prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of each of the Subaccounts of the Separate
Account will be invested exclusively in shares of the Funds described in the
prospectus. Purchase Payments made under the Contract may be allocated to one or
more of the Subaccounts. The Company may make additions to, deletions from or
substitutions of available investment options as permitted by law and subject to
the conditions in the Contract. The availability of the Funds is subject to
applicable regulatory authorization.
2
<PAGE>
The Funds currently available under the Contract are as follows:
<TABLE>
<S> <C>
Aetna Variable Fund Fidelity VIP II Index 500 Portfolio
Aetna Income Shares Fidelity VIP Equity-Income Portfolio
Aetna Variable Encore Fund Franklin Government Securities Trust
Aetna Investment Advisers Fund, Inc. Janus Aspen Aggressive Growth Portfolio
Alger American Growth Portfolio Janus Aspen Growth Portfolio
Alger American Small Cap Portfolio Janus Aspen Short-Term Bond Portfolio
American Century VP Capital Appreciation Janus Aspen Worldwide Growth Portfolio
(formerly TCI Growth) Lexington Emerging Markets Fund, Inc.
Calvert Responsibly Invested Balanced Portfolio Lexington Natural Resources Trust
Fidelity VIP II Asset Manager Portfolio Neuberger & Berman Growth Portfolio
Fidelity VIP II Contrafund Portfolio Scudder International Portfolio Class A Shares
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the sections titled "Purchase" and "Contract Valuation."
PERFORMANCE DATA
General
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized returns,"
calculated in an identical manner but including additional periods.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, five and ten year periods (or
fractional periods thereof). The 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 a percentage, carried to at least the nearest hundredth of a
percent. The standardized and non-standardized figures reflect the deduction of
all recurring charges during each period (e.g., mortality and expense risk
charges and any applicable administrative expense charges).
3
<PAGE>
These charges will be deducted on a pro rata basis in the case of fractional
periods. The non-standardized figures may be computed to include monthly,
quarterly, year-to-date and three-year periods.
If a Fund was in existence prior to the date it became available under the
Contract, standardized and non-standardized total returns may include periods
prior to such date. These figures are calculated by adjusting the actual returns
of the Fund to reflect the charges that would have been assessed under the
Contract had that Fund been available under the Contract during that period.
Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, the Account Value upon redemption may be
more or less than your original cost.
4
<PAGE>
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The table below reflects the average annual standardized and non-standardized
total return quotation figures for the period ended December 31, 1996 for the
Subaccounts under the Contract issued by the Company. For those Subaccounts
where results are not available for the full calendar period indicated, the
percentage shown is an average annual return since inception (denoted with an
*).
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FUND
STANDARDIZED NON-STANDARDIZED INCEPTION
DATE
- -----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 04/30/75
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares 06/01/78
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund 09/01/75
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc. 06/23/89
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital
Appreciation 11/20/87
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced
Portfolio 09/04/86
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager 09/06/89
Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 01/03/95
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 08/27/92
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 10/22/86
- -----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth 9/13/93
Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
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 Emerging Markets Fund, Inc. 03/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 10/14/91
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- -----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio
Class A Shares 05/01/87
- -----------------------------------------------------------------------------------------------------------------------------------
</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>
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 on which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date on which the second payment is due.
6
<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, 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.
7
<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-__
FINANCIAL STATEMENTS OF VARIABLE ANNUITY ACCOUNT C AND AETNA LIFE
INSURANCE AND ANNUITY COMPANY TO BE FILED BY AMENDMENT
S-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT C
VARIABLE ANNUITY CONTRACTS
issued by
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Form No. SAI.81216-97 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-401-IB(X/M))(3)
(4.2) Form of Variable Annuity Contract (G-CDA-IB(XC/SM))(3)
(4.3) Endorsement (EGET-IC(R)) to Contracts G-401-IB(X/M) and
G-CDA-IB(XC/SM)(4)
(4.4) Form of Endorsement (ESUNYSDO97) to Contracts G-CDA-IB(XC/SM)
and G-401-IB(XM)
(5) Form of Variable Annuity Contract Application (300-MOP-IB)(5)
(6.1) Certificate 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)
<PAGE>
(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) 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)
(8.5) 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)
(8.6) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995(8)
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989(2)
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994
and amended March 1, 1996(2)
(8.9) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Lexington Management Corporation regarding
Natural Resources Trust dated December 1, 1988 and amended
February 11, 1991(2)
(8.10) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Lexington Emerging Markets Fund, Inc. and
Lexington Management Corporation dated April 28, 1994(9)
(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)
<PAGE>
(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 22,
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. 33-81216), as filed electronically on April
17, 1996.
4. 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.
5. Incorporated by reference to Post-Effective Amendment No. 1 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.
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. 22 to
Registration Statement on Form N-4 (File No.
33-34370), as filed electronically on April 22, 1996.
10. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-81216), as filed on April 28, 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.
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.
<PAGE>
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
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.
<PAGE>
(c) Compensation as of December 31, 1996:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Underwriter Discounts and Redemption or Brokerage
Commissions Annuitization Commissions Compensation*
<S> <C> <C> <C> <C>
Aetna Life Insurance $1,325,661 $96,924,599
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
and
Aetna Processing Office
18 Corporate Woods Blvd., Fourth Floor
P.O. Box 12894
Albany, New York 12212-2894
Item 31. Management Services
- ----------------------------
Not applicable
<PAGE>
Item 32. Undertakings
- ---------------------
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) 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.
(e) 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. 7 to its
Registration Statement on Form N-4 (File No. 33-81216) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford,
State of Connecticut, on the 12th 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. 7 to the Registration Statement on Form N-4 (File No. 33-81216) has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Daniel P. Kearney* Director and President )
- ------------------------------------ (principal executive officer) )
Daniel P. Kearney
)
Timothy A. Holt* Director, Senior Vice President and ) February
- ----------------------------------- Chief Financial Officer ) 12, 1997
Timothy A. Holt
)
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 Wholesaling Agreement and Related Selling Agreement *
99-B.4.1 Form of Variable Annuity Contract (G-401-IB(X/M)) *
99-B.4.2 Form of Variable Annuity Contract (G-CDA-IB(XC/SM)) *
99-B.4.3 Endorsement (EGET-IC(R)) to Contracts G-401-IB(X/M) and G-CDA-IB(XC/SM) *
99-B.4.4 Form of Endorsement (ESUNYSDO97) to Contracts
G-CDA-IB(XC/SM) and G-401-IB(X/M)
---
99-B.5 Form of Variable Annuity Contract Application (300-MOP-IB) *
99-B.6.1 Certificate 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
99-B.8.2 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company and Calvert Asset Management Company (Calvert Responsibly Invested
Balanced Portfolio, formerly Calvert Socially Responsible Series) dated
March 13, 1989 and amended December 12, 1993
*Incorporated by reference
**To be filed by amendment
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.8.3 Second Amendment dated January 1, 1996 to Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company and Calvert Asset
Management Company (Calvert Responsibly Invested Balanced Portfolio,
formerly Calvert Socially Responsible Series) dated March 13, 1989 and
amended December 27, 1993
99-B.8.4 Fund Participation Agreement between Aetna Life Insurance
and Annuity Company, 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.8.5 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.8.6 Service Agreement between Aetna Life Insurance and Annuity Company and *
Fidelity Investments Institutional Operations Company dated as of November
1, 1995
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company and Franklin Advisers, Inc. dated January 31, 1989
99-B.8.8 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company and Janus Aspen Series dated April 19, 1994 and amended March 1, 1996
99-B.8.9 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company and Lexington Management Corporation regarding Natural Resources
Trust dated December 1, 1988 and amended February 11, 1991
99-B.8.10 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company, Lexington Emerging Markets Fund, Inc. and Lexington Management
Corporation dated April 28, 1994
*Incorporated by reference
**To be filed by amendment
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
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 22, 1992 and June 1, 1994
99-B.9 Opinion of Counsel **
99-B.10.1 Consent of Independent Auditors **
99-B.10.2 Consent of Counsel **
99-B.13 Schedule for Computation of Performance Data *
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule **
</TABLE>
*Incorporated by reference
**To be filed by amendment
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
The following language will be added to Section III (Purchase Payment,
Current Value, and Surrender Provisions) of the contract.
Without further amendment of this Contract, Aetna may, from time to
time, establish and make available for election by the Contract Holder, one
or more Individual Account systematic distribution options (SDO). When an
SDO election is in effect as to any Individual Account, automatic
withdrawals will be made from the Individual Account. No Surrender Fees
apply to such automatic withdrawals made under an SDO. A Market Value
Adjustment may apply depending on the terms of the SDO.
Any SDO offered by Aetna will be subject to the following criteria:
(a) any SDO established by Aetna will be made available among similarly
situated contracts uniformly and on the basis of objective criteria
consistently applied;
(b) the availability of any SDO may be limited by terms and conditions
applicable to the election of such SDO; and
(c) Aetna may discontinue the availability of an SDO at any time. Except
to the extent required in order to comply with the applicable law, any
such discontinuance shall not apply to any Individual Accounts as to
which an election under such SDO is in effect at the time of such
SDO's discontinuance.
Endorsed and made a part of the Contract on the effective date of the Contract.
/s/ Dan Kearney
President
Aetna Life Insurance and Annuity Company
ESUNYSD097
