As filed with the Securities and Exchange Registration No. 33-88720
Commission on February 21, 1997 Registration No. 811-2513
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Post-Effective Amendment No. 5 To
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
1 Cover Page............................. Cover Page
2 Definitions............................ Definitions
3 Synopsis............................... Prospectus Summary; Fee Table
4 Condensed Financial Information........ Condensed Financial
Information; Appendix IV -
Condensed Financial
Information
5 General Description of Registrant,
Depositor, and Portfolio Companies..... The Company; Variable Annuity
Account C; The Funds
6 Deductions and Expenses................ Charges and Deductions;
Distribution
7 General Description of Variable
Annuity Contracts...................... Purchase; Miscellaneous
8 Annuity Period......................... Annuity Period
9 Death Benefit.......................... Death Benefit During
Accumulation Period; Death
Benefit Payable During the
Annuity Period
10 Purchases and Contract Value........... Purchase; Contract Valuation
11 Redemptions............................ Right to Cancel; Withdrawals
12 Taxes.................................. Tax Status
13 Legal Proceedings...................... Miscellaneous - Legal Matters
and Proceedings
14 Table of Contents of the Statement
of Additional Information.............. Contents of the Statement of
Additional Information
<PAGE>
FORM N-4 PART B
ITEM NO. (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
15 Cover Page............................. Cover page
16 Table of Contents...................... Table of Contents
17 General Information and History........ General Information and
History
18 Services............................... General Information and
History; Independent Auditors
19 Purchase of Securities Being Offered... Offering and Purchase of
Contracts
20 Underwriters........................... Offering and Purchase of
Contracts
21 Calculation of Performance Data........ Performance Data; Average
Annual Total Return Quotations
22 Annuity Payments....................... Annuity Payments
23 Financial Statements................... Financial Statements
Part C (Other Information)
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
==============================================================================
The Contracts offered in connection with this Prospectus are group deferred
variable annuity contracts ("Contracts") issued by Aetna Life Insurance and
Annuity Company (the "Company"). The Contracts are available through
participation in large-case deferred compensation plans ("Plans") adopted by
state and local governments for their employees or independent contractors, or
both, under Section 457 of the Internal Revenue Code of 1986, as amended.
The Contracts provide that contributions may be allocated to one or more of
the Credited Interest Options or to one or more of the Subaccounts of Variable
Annuity Account C, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:
(bullet) Aetna Variable Fund
(bullet) Aetna Income Shares
(bullet) Aetna Variable Encore Fund
(bullet) Aetna Investment Advisers Fund, Inc.
(bullet) Aetna Ascent Variable Portfolio
(bullet) Aetna Crossroads Variable Portfolio
(bullet) Aetna Legacy Variable Portfolio
(bullet) Aetna Variable Capital Appreciation Portfolio
(bullet) Aetna Variable Growth Portfolio
(bullet) Aetna Variable Index Plus Portfolio
(bullet) Aetna Variable Small Company Portfolio
(bullet) Alger American Growth Portfolio
(bullet) Alger American Small Cap Portfolio
(bullet) American Century VP Capital Appreciation
(formerly TCI Growth)
(bullet) Calvert Responsibly Invested Balanced Portfolio
(bullet) Fidelity VIP II Contrafund Portfolio
(bullet) Fidelity VIP Equity-Income Portfolio
(bullet) Fidelity VIP Growth Portfolio
(bullet) Fidelity VIP Overseas Portfolio
(bullet) Franklin Government Securities Trust
(bullet) Janus Aspen Aggressive Growth Portfolio
(bullet) Janus Aspen Balanced Portfolio
(bullet) Janus Aspen Flexible Income Portfolio
(bullet) Janus Aspen Growth Portfolio
(bullet) Janus Aspen Short-Term Bond Portfolio
(bullet) Janus Aspen Worldwide Growth Portfolio
(bullet) Lexington Natural Resources Trust
(bullet) Neuberger & Berman Growth Portfolio
(bullet) Scudder International Portfolio Class A Shares
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account, the Fixed 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 in all jurisdictions, under all Contracts, or in all
Plans. Please check with your employer to determine option availability. (See
"Investment Options.")
This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract. Additional
information about the Separate Account is contained in a Statement of Additional
Information ("SAI") which is available at no charge. The SAI has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents for the SAI is printed on page of this Prospectus. An SAI
may be obtained by indicating the request on the enrollment form or on the
prospectus receipt contained in this Prospectus, or by calling the number listed
under the "Inquiries" section of the Prospectus Summary.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES
OF THE FUNDS AND GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THE SECURITIES OFFERED BY THIS PROSPECTUS 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 .......................................... 1
THE COMPANY .............................................................. 1
VARIABLE ANNUITY ACCOUNT C ............................................... 1
INVESTMENT OPTIONS ....................................................... 1
The Funds .............................................................. 1
Credited Interest Options .............................................. 4
PURCHASE ................................................................. 4
Contract Availability .................................................. 4
Contract Purchase ...................................................... 5
Purchase Payments ...................................................... 5
Right to Cancel ........................................................ 5
Transfer Credits ....................................................... 5
CHARGES AND DEDUCTIONS ................................................... 6
Daily Deductions from the Separate Account ............................. 6
Deferred Sales Charge .................................................. 6
Fund Expenses .......................................................... 7
Premium and Other Taxes ................................................ 7
CONTRACT VALUATION ....................................................... 7
Account Value .......................................................... 7
Accumulation Units ..................................................... 8
Net Investment Factor .................................................. 8
TRANSFERS ................................................................ 8
Dollar Cost Averaging Program .......................................... 8
WITHDRAWALS .............................................................. 9
ADDITIONAL WITHDRAWAL OPTIONS ............................................ 9
DEATH BENEFIT DURING ACCUMULATION PERIOD ................................. 10
ANNUITY PERIOD ........................................................... 10
Annuity Period Elections ............................................... 10
Annuity Options ........................................................ 11
Annuity Payments ....................................................... 11
Charges Deducted During the Annuity Period ............................. 12
Death Benefit Payable During the Annuity Period ........................ 12
TAX STATUS ............................................................... 12
Introduction ........................................................... 12
Taxation of the Company ................................................ 12
Contracts Used with Certain Retirement Plans ........................... 13
<PAGE>
MISCELLANEOUS ............................................................ 14
Voting Rights .......................................................... 14
Modification of the Contract ........................................... 14
Distribution ........................................................... 14
Performance Reporting .................................................. 15
Transfer of Ownership; Assignment ...................................... 15
Delay or Suspension of Payments ........................................ 15
Legal Matters and Proceedings .......................................... 15
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ...................... 16
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT .............................. 17
APPENDIX II--FIXED ACCOUNT ............................................... 18
APPENDIX III--FIXED PLUS ACCOUNT ......................................... 19
APPENDIX IV--CONDENSED FINANCIAL INFORMATION ............................. 21
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE>
DEFINITIONS
==============================================================================
As used in this Prospectus, the following terms have the meanings shown:
Account: A record which identifies contract values accumulated on behalf of
each Participant during the Accumulation Period.
Account Value: The total dollar value of amounts held in an Account as of any
Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to
an Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before Annuity
payments begin.
Annuitant: The person on whose life or life expectancy the Annuity payments
are based.
Annuity: A series of payments for life, for a definite period or a
combination of the two.
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.
Code: The Internal Revenue Code of 1986, as amended.
Company (We, Us): Aetna Life Insurance and Annuity Company.
Contracts: The group deferred, variable annuity contracts described in this
Prospectus.
Contract Beneficiary: The Contract Holder is the Contract Beneficiary.
Contract Holder: The entity which owns the Contract and to which the Contract
is issued.
Credited Interest Options: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account, the Fixed 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.
Fund(s): An open-end management investment company whose shares are purchased
by the Separate Account to fund the benefits provided by the Contracts.
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Participant (You): A person participating in a Plan maintained by an eligible
organization. The terms of the Plan govern Participant benefits.
Plan: Deferred compensation plan adopted by state and local governments for
their employees or independent contractors (or both) under Section 457 of the
Code.
Plan Beneficiary: The person entitled to receive benefits under the Plan in
the event of the Participant's death.
Purchase Payment(s): The gross payment(s) made to the Company under a
Contract.
Purchase Payment Periods: For "Installment Purchase Payment Accounts" the period
of time for completion of the agreed upon annual number and amount of Purchase
Payments. For example, if it is determined that the Purchase Payment Period will
consist of 12 payments per year and only 11 payments are made, the Purchase
Payment Period is not completed until the twelfth Purchase Payment is made.
Separate Account: Variable Annuity Account C, a separate account established
by the Company for the purpose of funding variable annuity contracts issued
by the Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
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 - 1
<PAGE>
PROSPECTUS SUMMARY
==============================================================================
Contracts Offered
The Contracts offered in connection with this Prospectus are group deferred
variable annuity contracts issued by Aetna Life Insurance and Annuity Company
(the "Company"). The purpose of the Contract is to accumulate values and to
provide benefits upon retirement. The Contracts are available in connection with
deferred compensation plans of state and local governments for their employees
or independent contractors, or both.
Contract Purchase
The Contract may be purchased by eligible organizations on behalf of a group
made up of their employees. An Account is established for eligible employees by
completing the enrollment form (and any other required forms) and submitting
them to the Company. Purchase Payments can be applied to the Contract either
through a lump-sum transfer from a pre-existing plan, through periodic salary
reductions or through periodic employer contributions. (See "Purchase.")
Free Look Period
Contract Holders have the right to cancel their Contract within 10 days after
receiving it (or as otherwise allowed by state law) by returning it to us along
with a written notice of cancellation. Unless state law requires otherwise, the
amount received upon cancellation under this provision will reflect the
investment performance of the Purchase Payments deposited in the Separate
Account while invested. In certain cases, this may be less than the amount of
the Purchase Payments. (See "Purchase--Right to Cancel.")
Investment Options
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in any or all of the Subaccounts, as well as in the Credited Interest Options
described below. The total number of investment options that may be selected
during the Accumulation Period is limited. For a complete list of the Funds
available under the Contracts a description of the investment objectives of each
of the Funds and their investment advisers, and a description of the limitation
in 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
earn fixed rates of interest. The fixed options available under the Contract are
the Guaranteed Accumulation Account ("GAA"), the Fixed Account, 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) and premium and other taxes. The Funds also
incur certain fees and expenses which are deducted directly from the Funds. A
deferred sales charge may apply upon a full or partial withdrawal of the Account
Value. (See the Fee Table and "Charges and Deductions.")
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
The Contract Holder may withdraw all or a part of the Account Value prior to
the Annuity Date by properly completing a disbursement form and sending it to
the Company. Limitations apply to withdrawals from the Fixed Plus Account.
Certain charges may be assessed upon withdrawal. The withdrawals may also be
subject to income tax. (See "Withdrawals.")
The Contract also offers certain Additional Withdrawal Options during the
Accumulation Period to persons meeting certain criteria. Additional
Withdrawal Options are not available in all states and may not be suitable in
every situation. (See "Additional Withdrawal Options.")
SUMMARY - 1
<PAGE>
Death Benefit
The Contract provides that a death benefit is payable to the Contract
Beneficiary upon the death of the Participant before the Annuity Date. The
Contract Holder may direct that we make such payment to the Plan Beneficiary.
The amount of the death benefit will be equal to the Account Value. Until the
election of a method of payment, the Account Value will remain invested under
the Contract. The Contract Holder, on behalf of a Plan 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 Contract Beneficiary depending upon the terms of the Contract and the
Annuity Option selected. (See "Annuity Period--Death Benefit Payable During
the Annuity Period.")
The Annuity Period
On the Annuity Date, the Contract Holder, on your behalf, may elect to begin
receiving Annuity Payments on either a fixed, variable or combination of 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 paid or made
available under the employer's Plan. Withholding for income tax may be
imposed on certain withdrawals. (See "Tax Status.")
Inquiries
Questions, inquiries or requests for additional information can be directed to
your agent or local representative, or you may contact the Company as follows:
(bullet) Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-1277
Attention: Customer Service
(bullet) Call Customer Service: 1-800-525-4225 (for automated transfers or
changes in the allocation of Account Values,
call: 1-800-262-3862)
SUMMARY - 2
<PAGE>
FEE TABLE
==============================================================================
This Fee Table describes the various charges and expenses associated with the
Contract during the Accumulation Period. For amounts deducted during the Annuity
Period, see "Annuity Period--Charges Deducted During the Annuity Period." No
sales charge is paid when the Contract is purchased. Some expenses may vary as
explained under "Charges and Deductions." The charges and expenses shown below
do not include premium taxes that may be applicable. For more information
regarding expenses paid out of assets of a particular Fund, see the Fund's
prospectus.
DIRECT CHARGES. These charges are deducted daily from the Account Value. They
include:
Deferred Sales Charge. The deferred sales charge is deducted as a percentage of
the amount withdrawn. The total amount deducted for the deferred sales charge
will not exceed 8.5% of the total Purchase Payments applied to the Account. The
amount of the deferred sales charge is calculated as follows:
Installment Purchase Payment Accounts
Purchase Payment
Periods Completed Deduction
------------------------------------- -------------
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
more than 10 0%
Single Purchase Payment Accounts
Account Years
Completed Deduction
------------------------------------- -------------
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
INDIRECT CHARGES. Each Subaccount pays these expenses out of its assets. The
charges are reflected in the Subaccount's daily Accumulation Unit Value and
are not charged directly to an Account. They include:
During the Accumulation Period:
Mortality and Expense Risk Charge ............................. 0.95%
Administrative Expense Charge ................................. 0.00%*
------
Total Separate Account Annual Expenses ..................... 0.95%
======
During the Annuity Period:
Mortality and Expense Risk Charge ............................. 1.25%
Administrative Expense Charge ................................. 0.00%*
------
Total Separate Account Annual Expenses ..................... 1.25%
======
* We currently do not impose an Administrative Expense Charge. However, we
reserve the right to deduct a daily charge from the Subaccounts equivalent on
an annual basis to not more than 0.25%.
FEE TABLE - 1
<PAGE>
Annual Expenses of the Funds
The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, 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. A Fund's "Other Expenses" include operating costs
of the Fund. These expenses are reflected in the Fund's net asset value and are
not deducted from the Account Value under the Contract.
<TABLE>
<CAPTION>
Investment
Advisory
Fees (after Other Expenses
expense (after expense Total Fund
reimbursement)(1) reimbursement) Annual Expenses
------------------ -------------- ----------------
<S> <C> <C> <C>
Aetna Variable Fund(2) 0.50% 0.06% 0.56%
Aetna Income Shares(2) 0.40% 0.08% 0.48%
Aetna Variable Encore Fund(2) 0.25% 0.10% 0.35%
Aetna Investment Advisers Fund, Inc.(2) 0.50% 0.08% 0.58%
Aetna Ascent Variable Portfolio(2) 0.60% 0.15% 0.75%
Aetna Crossroads Variable Portfolio(2) 0.60% 0.15% 0.75%
Aetna Legacy Variable Portfolio(2) 0.60% 0.15% 0.75%
Aetna Variable Capital Appreciation Portfolio(2) 0.60% 0.15% 0.75%
Aetna Variable Growth Portfolio(2) 0.60% 0.15% 0.75%
Aetna Variable Index Plus Portfolio(2) 0.35% 0.15% 0.50%
Aetna Variable Small Company Portfolio(2) 0.75% 0.15% 0.90%
Alger American Small Cap Portfolio 0.85% % %
Alger American Growth Portfolio 0.75% % %
American Century VP Capital Appreciation(3) 1.00% 0.00% 1.00%
Calvert Responsibly Invested Balanced Portfolio(4) 0.70% % %
Fidelity VIP II Contrafund Portfolio(5) 0.61% % %
Fidelity VIP Equity-Income Portfolio 0.51% % %
Fidelity VIP Growth Portfolio 0.61% % %
Fidelity VIP Overseas Portfolio 0.76% % %
Franklin Government Securities Trust(6) 0.63% % %
Janus Aspen Aggressive Growth Portfolio(7) 0.75% % %
Janus Aspen Balanced Portfolio(7) 0.82% % %
Janus Aspen Flexible Income Portfolio 0.65% % %
Janus Aspen Growth Portfolio(7) 0.65% % %
Janus Aspen Short-Term Bond Portfolio(7) 0.00% % %
Janus Aspen Worldwide Growth Portfolio(7) 0.68% % %
Lexington Natural Resources Trust 1.00% % %
Neuberger & Berman Growth Portfolio(8) 0.84% % %
Scudder International Portfolio Class A Shares 0.88% % %
</TABLE>
(1)Certain of the unaffiliated Fund advisers reimburse the Company for
administrative costs incurred in connection with administering the Funds as
variable funding options under the Contract. These reimbursements are paid
out of the investment advisory fees and are not charged to investors.
(2)The Company provides administrative services to the Fund and assumes the
Fund's ordinary recurring direct costs under an Administrative Services
Agreement. The "Other Expenses" shown reflect the fee payable under that
Agreement.
(3)The Portfolio's investment adviser pays all expenses of the Portfolio except
brokerage commissions, taxes, interest, fees, expenses of the non-interested
person directors (including counsel fees) and extraordinary expenses. These
expenses have historically represented a very small percentage (less than
0.01%) of total net assets in a fiscal year.
(4)The Management and Advisory Fees are subject to a performance adjustment
which could cause the fee to be as high as 0.85% or as low as 0.55%,
depending on performance. "Other Expenses" reflect an indirect fee of
%. Net fund operating expenses after reduction for fees paid indirectly
would be %.
(5)A portion of the brokerage commission the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have been
% for the Contrafund Portfolio.
(6)An expense reimbursement arrangement was in effect until February 1, 1996;
however it is no longer in effect. The advisory fee and total annual expenses
shown above reflect the actual expenses of the Fund before reimbursement, as
if such arrangement had not been in effect at any time during 1996.
(7)The information for each Portfolio (other than the Flexible Income Portfolio)
is net of fee waivers or reductions from Janus Capital. Fee reductions for
the Aggressive Growth, Balanced, Growth, and Worldwide Growth Portfolios
reduce the management fee to the level of the corresponding Janus retail
fund. Other waivers, if applicable, are first applied against management fee
and then against other expenses. The expense figures shown are net of certain
expense waivers from Janus Capital Corporation. Without such waivers, the
Investment Advisory Fees, Other Expenses and Total Fund Annual Expenses for
the Portfolios for the fiscal year ended December 31, 1996 would have been:
%, % and %, respectively, for Janus Aspen Aggressive Growth Portfolio; %, %
and %, respectively, for Janus Aspen Balanced Portfolio; %, % and %,
respectively, for Janus Aspen Growth Portfolio; %, % and %, respectively,
for Janus Aspen Short-Term Bond Portfolio; and %, % and %, respectively, for
Janus Aspen Worldwide Growth Portfolio. Janus Capital may modify or terminate
the waivers or reductions at any time upon 90 days' notice to the Portfolio's
Board of Trustees.
FEE TABLE - 2
<PAGE>
(8)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.)
FEE TABLE - 3
<PAGE>
Hypothetical Illustration (Example)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets.
<TABLE>
<CAPTION>
EXAMPLE A
-------------------------------------------------
If you withdraw your entire Account Value
at the end of the periods shown, you
would pay the following expenses, including
any applicable deferred sales charge:
1 year 3 years 5 years 10 years
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Aetna Variable Fund $ $ $ $
Aetna Income Shares $ $ $ $
Aetna Variable Encore Fund $ $ $ $
Aetna Investment Advisers Fund, Inc. $ $ $ $
Aetna Ascent Variable Portfolio $ $ $ $
Aetna Crossroads Variable Portfolio $ $ $ $
Aetna Legacy Variable Portfolio $ $ $ $
Aetna Variable Capital Appreciation Portfolio $ $ $ $
Aetna Variable Growth Portfolio $ $ $ $
Aetna Variable Index Plus Portfolio $ $ $ $
Aetna Variable Small Company Portfolio $ $ $ $
Alger American Growth Portfolio $ $ $ $
Alger American Small Cap Portfolio $ $ $ $
American Century VP Capital Appreciation $ $ $ $
Calvert Responsibly Invested Balanced Portfolio $ $ $ $
Fidelity VIP II Contrafund Portfoliio $ $ $ $
Fidelity VIP Equity-Income Portfolio $ $ $ $
Fidelity VIP Growth Portfolio $ $ $ $
Fidelity VIP Overseas Portfolio $ $ $ $
Franklin Government Securities Trust $ $ $ $
Janus Aspen Aggressive Growth Portfolio $ $ $ $
Janus Aspen Balanced Portfolio $ $ $ $
Janus Aspen Flexible Income Portfolio $ $ $ $
Janus Aspen Growth Portfolio $ $ $ $
Janus Aspen Short-Term Bond Portfolio $ $ $ $
Janus Aspen Worldwide Growth Portfolio $ $ $ $
Lexington Natural Resources Trust $ $ $ $
Neuberger & Berman Growth Portfolio $ $ $ $
Scudder International Portfolio Class A Shares $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE B
-------------------------------------------------
If you do not withdraw your Account Value, or if
you annuitize at the end of the periods shown,
you would pay the following expenses (no deferred
sales charge is reflected):*
1 year 3 years 5 years 10 years
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Aetna Variable Fund $ $ $ $
Aetna Income Shares $ $ $ $
Aetna Variable Encore Fund $ $ $ $
Aetna Investment Advisers Fund, Inc. $ $ $ $
Aetna Ascent Variable Portfolio $ $ $ $
Aetna Crossroads Variable Portfolio $ $ $ $
Aetna Legacy Variable Portfolio $ $ $ $
Aetna Variable Capital Appreciation Portfolio $ $ $ $
Aetna Variable Growth Portfolio $ $ $ $
Aetna Variable Index Plus Portfolio $ $ $ $
Aetna Variable Small Company Portfolio $ $ $ $
Alger American Growth Portfolio $ $ $ $
Alger American Small Cap Portfolio $ $ $ $
American Century VP Capital Appreciation $ $ $ $
Calvert Responsibly Invested Balanced Portfolio $ $ $ $
Fidelity VIP II Contrafund Portfoliio $ $ $ $
Fidelity VIP Equity-Income Portfolio $ $ $ $
Fidelity VIP Growth Portfolio $ $ $ $
Fidelity VIP Overseas Portfolio $ $ $ $
Franklin Government Securities Trust $ $ $ $
Janus Aspen Aggressive Growth Portfolio $ $ $ $
Janus Aspen Balanced Portfolio $ $ $ $
Janus Aspen Flexible Income Portfolio $ $ $ $
Janus Aspen Growth Portfolio $ $ $ $
Janus Aspen Short-Term Bond Portfolio $ $ $ $
Janus Aspen Worldwide Growth Portfolio $ $ $ $
Lexington Natural Resources Trust $ $ $ $
Neuberger & Berman Growth Portfolio $ $ $ $
Scudder International Portfolio Class A Shares $ $ $ $
</TABLE>
*This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump-sum settlement is requested before a minimum number of
years of payments (as specified in the Contract) have been completed, since the
lump-sum payment will be treated as a withdrawal during the Accumulation Period
and will be subject to any deferred sales charge that would then apply. (Refer
to Example A.)
FEE TABLE - 4
<PAGE>
CONDENSED FINANCIAL INFORMATION
==============================================================================
Condensed Financial Information for the Separate Account is shown in
Appendix IV.
THE COMPANY
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of the
Contract, and as such, it is responsible for providing the insurance and annuity
benefits under the Contract. The Company is a stock life insurance company
organized under the insurance laws of the State of Connecticut in 1976. Through
a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance
Company (formerly Participating Annuity Life Insurance Company), an Arkansas
life insurance company organized in 1954. The Company is engaged in the business
of issuing life insurance policies and variable annuity contracts in all states
of the United States. The Company's principal executive offices are located at
151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings,
Inc., which is in turn a wholly owned subsidiary of Aetna Retirement
Services, Inc. and an indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT C
==============================================================================
The Company established Variable Annuity Account C (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of "separate account" under federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets of the Separate Account, such
assets are not chargeable with liabilities arising out of any other business
conducted by the Company. Income, gains or losses of the Separate Account are
credited to or charged against the assets of the Separate Account without regard
to other income, gains or losses of the Company. All obligations arising under
the Contracts are general corporate obligations of the Company.
INVESTMENT OPTIONS
==============================================================================
The Funds
The Contract Holder (or you, if allowed by the Contract Holder) may allocate
Purchase Payments 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 may be selected
during the Accumulation Period is limited to 18. Each Subaccount selected, the
Fixed Account, the Fixed Plus Account and each guaranteed term of the Guaranteed
Accumulation Account counts as one option, even if you no longer have accounts
allocated to that option.
The Contract Holder may decide to offer only a select number of Funds under
its Plan. In addition, the Company may add, withdraw or substitute Funds,
subject to the conditions in the Contract and to compliance with regulatory
requirements. The availability of the Funds may also be subject to applicable
regulatory authorization. Not all Funds may be available in all jurisdictions,
under all Contracts or in all Plans.
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)
1
<PAGE>
(bullet) Aetna Variable Encore Fund seeks to provide high current return,
consistent with preservation of capital and liquidity, through
investment in high quality "money market" instruments. An investment in
the Fund is neither insured nor guaranteed by the U.S.
Government.(1)
(bullet) Aetna Investment Advisers Fund, Inc. is a managed fund which seeks
to maximize investment return consistent with reasonable safety of
principal by investing in one or more of the following asset
classes: stocks, bonds and cash equivalents, based on the Company's
judgment of which of those sectors or mix thereof offers the best
investment prospects.(1)
(bullet) Aetna Generation Portfolios, Inc.--Aetna Ascent Variable Portfolio
seeks to provide capital appreciation by allocating its investments
among equities and fixed income securities. The Portfolio is managed
for investors who generally have an investment horizon exceeding 15
years, and who have a high level of risk tolerance.(1)
(bullet) Aetna Generation Portfolios, Inc--Aetna Crossroads Variable Portfolio
seeks to provide total return (i.e., income and capital appreciation,
both realized and unrealized) by allocating its investments among
equities and fixed income securities. The Portfolio is managed for
investors who generally have an investment horizon exceeding 10 years
and who have a moderate level of risk tolerance.(1)
(bullet) Aetna Generation Portfolios, Inc.--Aetna Legacy Variable Portfolio
seeks to provide total return consistent with preservation of capital
by allocating its investments among equities and fixed income
securities. The Portfolio is managed for investors who generally have
an investment horizon exceeding five years and who have a low level of
risk tolerance.(1)
(bullet) Aetna Variable Portfolios, Inc.--Aetna Variable Capital Appreciation
Portfolio seeks growth of capital primarily through investment in a
diversified portfolio of common stocks and securities convertible into
common stock. The Portfolio will use a value-oriented approach in an
attempt to outperform the total return performance of publicly traded
common stocks represented by the S & P 500 Composite Stock Price Index
("S & P 500"), a broad based stock market index composed of 500 common
stocks selected by the Standard & Poor's Corporation. The Portfolio
uses the S & P 500 as a comparative benchmark because it represents
approximately two-thirds of the total market value of all U.S. common
stocks, and is well known to investors.(1)
(bullet) Aetna Variable Portfolios, Inc.--Aetna Variable Growth Portfolio seeks
growth of capital through investment in a diversified portfolio of
common stocks and securities convertible into common stocks believed to
offer growth potential.(1)
(bullet) Aetna Variable Portfolios, Inc.--Aetna Variable Index Plus Portfolio
seeks to outperform the total return performance of publicly traded
common stocks represented by the S & P 500.(1)
(bullet) Aetna Variable Portfolios, Inc.--Aetna Variable Small Company Portfolio
seeks growth of capital primarily through investment in a diversified
portfolio of common stocks and securities convertible into common
stocks of companies with smaller market capitalizations. Companies with
smaller market capitalization generally will have market capitalization
at the time of purchase of $1 billion or less.(1)
(bullet) Alger American Fund--Alger American Growth Portfolio seeks long-term
capital appreciation by investing in a diversified, actively managed
portfolio of equity securities. The Portfolio primarily invests in
equity securities of companies which have a market capitalization of $1
billion or greater.(2)
(bullet) Alger American Fund--Alger American Small Capitalization Portfolio
seeks long-term capital appreciation. Except during temporary defensive
periods, the Portfolio invests at least 65% of its total assets in
equity securities of companies that, at the time of purchase of the
securities, have total market capitalization within the range of
companies included in the Russell 2000 Growth Index, updated quarterly.
The Russell 2000 Growth Index is designed to track the performance of
small capitalization companies. At , the range of market capitalization
of these companies was $ million to $ billion.(2)
(bullet) American Century VP Capital Appreciation (formerly 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 non-diversified
portfolio that seeks growth of capital through investment in
enterprises that make a significant
2
<PAGE>
contribution to society through their products and services and
through the way they do business.(4)
(bullet) Fidelity Investments' Variable Insurance Products Fund II--Contrafund
Portfolio seeks maximum total return over the long term by investing
mainly in equity securities of companies that are undervalued or
out-of-favor.(5)
(bullet) Fidelity Investments' Variable Insurance Products Fund-Equity-Income
Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In selecting investments, the Fund
also considers the potential for capital appreciation.(5)
(bullet) Fidelity Investments' Variable Insurance Products Fund-- Growth
Portfolio seeks capital appreciation by investing mainly in common
stocks, although its investments are not restricted to any one type of
security.(5)
(bullet) Fidelity Investments' Variable Insurance Products Fund--Overseas
Portfolio seeks long-term growth by investing mainly in foreign
securities (at least 65% of the Fund's total assets in securities of
issuers from at least three countries outside of North America).(5)
(bullet) Franklin Government Securities Trust seeks income through
investments in obligations of the U.S. Government or its agencies or
instrumentalities, primarily GNMA obligations.(6)
(bullet) Janus Aspen Series--Aggressive Growth Portfolio is a non-diversified
portfolio that seeks long-term growth of capital in a manner consistent
with the preservation of capital. The Portfolio pursues its investment
objective by normally investing at least 50% of its equity assets in
securities issued by medium-sized companies. Medium-sized companies are
those whose market capitalizations fall within the range of companies
in the S&P MidCap 400 Index, which as of included companies with
capitalizations between approximately $ million and $ billion, but
which is expected to change on a regular basis.(7)
(bullet) Janus Aspen Series--Balanced Portfolio seeks long-term capital growth,
consistent with preservation of capital and balanced by current income.
The Portfolio pursues its investment objective by investing 40%-60% of
its assets in securities selected primarily for their growth potential
and 40%-60% of its assets in securities selected primarily for their
income potential.(7)
(bullet) Janus Aspen Series--Flexible Income Portfolio seeks to obtain maximum
total return, consistent with preservation of capital. Total return is
expected to result from a combination of current income and capital
appreciation. The Portfolio invests in all types of income producing
securities and may have substantial holding of debt securities rated
below investment grade (e.g., junk bonds).(7)
(bullet) Janus Aspen Series--Growth Portfolio seeks long-term growth of capital
in a manner consistent with the preservation of capital. The Portfolio
pursues its investment objective by investing in common stocks of
companies of any size.(7)
(bullet) Janus Aspen Series--Short-Term Bond Portfolio seeks as high a level of
current income as is consistent with preservation of capital. The
Portfolio pursues its investment objective by investing primarily in
short-and intermediate-term fixed income securities.(7)
(bullet) Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth
of capital in a manner consistent with preservation of capital. The
Portfolio pursues its investment objective primarily through
investments in common stocks of foreign and domestic issuers.(7)
(bullet) Lexington Natural Resources Trust is a non-diversified 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. (subadviser)
(2) Fred Alger Management, Inc.
(3) American Century Investment Management, Inc.
(4) Calvert Asset Management Company, Inc.
(5) Fidelity Management & Research Company
(6) Franklin Advisers, Inc.
(7) Janus Capital Corporation
(8) Lexington Management Corporation (adviser);
Market Systems Research Advisors, Inc. (subadviser)
3
<PAGE>
(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. (The Contract Holder
may elect not to offer all Credited Interest Options under its Plan.)
(bullet) The Guaranteed Accumulation Account (GAA) is a credited interest option
through which we guarantee stipulated rates of interest for stated
periods of time. Amounts must remain in the GAA for the full guaranteed
term to 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 Account is a part of the Company's general account. The Fixed
Account guarantees a minimum interest rate, as specified in the
Contract. The Company may credit higher interest rates from time to
time. Transfers from the Fixed Account are limited. (See Appendix II.)
(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 III.)
PURCHASE
==============================================================================
Contract Availability
The Contracts are designed for Plans established by organizations for their
deferred compensation plans under Section 457 of the Code. The Contract is
generally owned by the employer, and an Account is established for each
Participant, as directed by the Contract Holder, to identify contract values
during the Accumulation Period. A Participant's record under the Contract is
known as his or her "Account."
Prior to the August 20, 1996 enactment of the Small Business Job Protection
Act of 1996 (the "Small Business Act"), all amounts of compensation deferred
under Plans, all property and rights purchased with such amounts, and all income
attributable to such amounts, property or rights remained solely the property
and rights of the employer (without being restricted to the provision of
benefits under the Plan), subject only to the claims of the employer's general
creditors. Under the Small Business Act, Plans are required to hold all assets
and income in trust (or a custodial account or annuity contract) for the
exclusive benefit of participants and their beneficiaries. Plans that were in
existence on August 20, 1996 are allowed until January 1, 1999 to meet this
requirement. Until such time as a Plan meets the Small Business Act's trust
requirement the Contract will be part of the employer's general assets, subject
to the claims of its general creditors, and benefits available to you will be
backed only by the general assets of
4
<PAGE>
the employer. Some of the options and elections available under the Contract
may not be available to you under the provisions of your Plan. Contact your
employer for information regarding your Plan.
Contract Purchase
Eligible organizations may acquire a Contract by submitting an application to
the Company. Once we approve the application, a group Contract is issued to the
employer as the Contract Holder. The Company will establish an Account for a
Participant upon receipt of an enrollment form.
The Company must accept or reject an application or enrollment form within
two business days of receipt. If a form is incomplete, the Company may hold any
forms and accompanying Purchase Payments for five days. Purchase Payments may be
held for longer periods pending acceptance of the forms only with the consent of
the Participant, or under limited circumstances, with the consent of the
Contract Holder. If we agree to hold Purchase Payments for longer than the five
business days based on the consent of the Contract Holder, they will be
deposited in the Aetna Variable Encore Fund Subaccount until the forms are
completed.
Purchase Payments
Generally, two types of Purchase Payments may be made under the Contract, and
depending upon which type of payment is made, different Accounts may be
established for each payment type. Continuing, periodic payments will be placed
in "Installment Purchase Payment Accounts." Installment Purchase Payments must
be at least $50 per month ($600 annually) per Participant. No payment may be
less than $25. Lump-sum transfers of amounts accumulated under a pre-existing
plan may be placed in "Single Purchase Payment Accounts" in accordance with the
Company's procedures and minimums in effect at the time of purchase. The Code
imposes a maximum limit on annual Purchase Payments which may be excluded from a
Participant's gross income. (See "Tax Status.")
Allocation of Purchase Payments. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified by the
Contract Holder (or you, if authorized by the Contract Holder) on the
enrollment form. Changes in such allocation may be made in writing or by
telephone transfer. Allocations must be in whole percentages, and there may
be limitations on the number of investment options that can be selected
during the Accumulation Period. (See "Transfers.")
Right to Cancel
The Contract Holder may cancel participation under the Contract without penalty
by returning it to the Company with a written notice of cancellation. In most
states, Contract Holders have ten days to exercise this right; some states allow
a longer free-look period. When we receive the request for cancellation, we will
return the Account Value, unless the laws of the state in which the Contract was
issued require that we return the initial Purchase Payment (if greater than the
Account Value). In states that do not require a return of Purchase Payments, the
purchaser bears the entire investment risk for amounts allocated among the
Subaccounts during the free look period. Account Values will be determined as of
the Valuation Date on which we receive the request for cancellation at our Home
Office.
Transfer Credits
The Company may provide a transfer credit on "transferred assets," subject to
certain conditions and state approvals. Transferred assets are the value of
contributions made on your behalf under this Plan or a prior plan before such
amounts are applied to this Contract. The transfer credit will equal a
percentage of the transferred assets applied to the Contract that remain in the
Contract after a specified period of time. Once a transfer credit is applied to
the Contract, all provisions of the Contract apply. This benefit is provided on
a nondiscriminatory basis. If a transfer credit is due under the Contract, you
will be provided with additional information specific to the Contract.
5
<PAGE>
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 0.95% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of mortality and expense risks
under the Contract. During the Annuity Period, the deduction for the mortality
and expense risks is equivalent to 1.25% per year. 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 expense relating to the Contracts and as a source of profit
for 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 charge compensates the Company for administrative expenses
incurred in administering 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 of
an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation Period or Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
Deferred Sales Charge
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of the amount
withdrawn from the Subaccounts, the Fixed Account or the Guaranteed Accumulation
Account. No deferred sales charge is deducted from amounts withdrawn from the
Fixed Plus Account.
For Installment Purchase Payment Accounts, the deferred sales charge is based
on the number of completed Purchase Payment Periods. For Single Purchase Payment
Accounts, it is based on the number of Account Years that have elapsed since the
Account's effective date. The amount of the deferred sales charge is determined
in accordance with the schedule set forth in the following tables:
Installment Purchase Payment Accounts:
Purchase Payment Deferred Sales
Periods Completed Charge Deduction
-------------------------------- ---------------------
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
more than 10 0%
Single Purchase Payment Accounts:
Account Years Deferred Sales
Completed Charge Deduction
------------------------------- ---------------------
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
If you transfer the total account value under another deferred compensation
annuity contract issued by the Company to an Account under this Contract, the
effective date of the new Account will be the same effective date as the former
contract for purposes of calculating the applicable deferred sales charge under
this Contract.
A deferred sales charge will not be deducted from any portion of the Account
Value which is:
(bullet) applied to provide Annuity benefits;
(bullet) withdrawn on or after the tenth anniversary of the effective date of
the Account;
(bullet) withdrawn due to a hardship resulting from an unforeseeable
emergency, as specified in the Code;
(bullet) paid due to your death before Annuity payments begin;
(bullet) withdrawn due to the election of an Additional Withdrawal Option
(see "Additional Withdrawal Options");
6
<PAGE>
(bullet) paid where the Account Value is $3,500 or less and no amount has been
withdrawn or used to purchase Annuity benefits during the prior 12
months;
(bullet) withdrawn due to the Participant's separation from service with the
employer (the Contract Holder must submit documentation satisfactory to
the Company confirming that the Participant is no longer providing
services to the employer); or
(bullet) withdrawn from an Installment Purchase Payment Account by a Participant
who is at least age 59-1/2 and who has completed nine Purchase Payment
Periods.
The deduction for the deferred sales charge will not exceed 8.5% of the total
Purchase Payments actually made to the Account. The Company does not anticipate
that the deferred sales charge will cover all sales and administrative expenses
which it incurs in connection with the Contract; the difference will be covered
by the general assets of the Company which are attributable, in part, to the
mortality and expense risk charge described above.
Reduction or Elimination of the Deferred Sales Charge. For a particular Plan,
we may reduce, waive or eliminate the deferred sales charge. Any reduction,
waiver or elimination of such charges will reflect differences or expected
differences in the amounts of unrecovered distribution costs or services of the
types that the charge is intended to defray. When considering whether to reduce
or eliminate such charges or to grant such a waiver, we will take into account
factors which may include the following:
(bullet) the number of participants under the Plan;
(bullet) the expected level of assets or cash flow under the Plan;
(bullet) the level of agent involvement in sales activities;
(bullet) the level of our sales-related expenses;
(bullet) the specific distribution provisions under the Plan;
(bullet) the Plan's purchase of one or more other variable annuity contracts
from us and the features of those contracts;
(bullet) the level of employer involvement in determining eligibility for
distributions under the Contract; and
(bullet) our assessment of financial risk to the Company relating to
surrenders.
Any reduction, waiver or elimination of deferred sales charges will not be
unfairly discriminatory against any person.
We may also negotiate provisions regarding the deferred sales charge with
respect to Contracts issued to certain employer groups or associations which
have negotiated on behalf of its employees. All variations in, or elimination
of, provisions regarding the deferred sales charge resulting from such
negotiations will be offered uniformly to all employees within the group. For
specific information on fees applicable to your Account, please call the number
listed under the "Inquiries" section.
We will make any reduction in deferred sales charge according to our own
rules in effect at the time an application for a Contract is approved. We
reserve the right to change these rules from time to time.
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 illustrated in the Fee Table in this
Prospectus and described more fully in the accompanying Fund prospectuses.
Premium and Other Taxes
Several states and municipalities impose a premium tax on Annuities. These taxes
currently range from 0% to 4%. The Company reserves the right to deduct premium
tax against Purchase Payments or Account Values 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.
CONTRACT VALUATION
==============================================================================
Account Value
Until the Annuity Date, the Account Value is the total dollar value of amounts
held in the Account as of any Valuation Date. The Account Value at any given
time is based on the value of the units held in each Subaccount, plus the value
of amounts held in any of the Credited Interest Options.
7
<PAGE>
Accumulation Units
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each day
by a percentage that accounts for the daily assessment of mortality and expense
risk charges and the administrative expense charge (if any).
Initial Purchase Payments will be credited to your Contract at the AUV
computed on the next Valuation Date following our acceptance of the application
or enrollment form, 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 0.95% for mortality
and expense risks during the Accumulation Period and 1.25% for mortality
and expense risks during the Annuity Period, and up to 0.25% as an
administrative expense charge.
The net investment rate may be either positive or negative.
TRANSFERS
==============================================================================
At any time prior to the Annuity Date, the Contract Holder, or you (if
permitted by the Contract Holder), can transfer amounts held under the Contract
from one Subaccount to another. Transfers between the Credited Interest Options
and the Subaccounts are subject to certain restrictions. (See Appendices I, II
and III.) 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. (See "Investment Options--The Funds.")
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge. The transfer amount may not be 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
available during the Annuity Period except for Plans that have not had their
Contracts endorsed to include additional Annuity Options. (See "Annuity
Period--Annuity Options.")
Dollar Cost Averaging Program
You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program, if
available under your Plan. Dollar Cost Averaging is a system for investing a
fixed amount of money at regular intervals over a period of time. Dollar Cost
Averaging does not ensure a profit nor guarantee against loss in a declining
market. You should consider your financial ability to continue purchases through
periods of low price levels. Please refer to the "Inquiries" section of the
Prospectus Summary, which describes how you can obtain further information.
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WITHDRAWALS
==============================================================================
Subject to the limitations on withdrawals from the Fixed Plus Account, the
Contract Holder may withdraw all or a portion of the Account Value at any time
during the Accumulation Period. To request a withdrawal, the Contract Holder, on
your behalf, must properly complete a disbursement form and send it to our Home
Office. Payments for withdrawal requests will be made in accordance with SEC
requirements, but normally not later than seven calendar days following our
receipt of a disbursement form. Under Section 457, pay-out elections may not be
changed once payments have commenced.
Withdrawals may be requested in one of the following forms:
(bullet) Full Withdrawal of the Contract or an Account: The amount paid upon a
full withdrawal will be the Account Value(s) allocated to the
Subaccounts, the Guaranteed Accumulation Account (plus or minus a
market value adjustment) (see Appendix I), and the Fixed Account, minus
any applicable deferred sales charge, plus the amount available for
withdrawal from the Fixed Plus Account (see Appendix III).
(bullet) Partial Withdrawals (Percentage): The amount paid will be the
percentage of the Account Value(s) requested minus any applicable
deferred sales charge; however, the amount available for withdrawal
from the Fixed Plus Account is limited (see Appendix III).
(bullet) Partial Withdrawal (Specified Dollar Amount): The amount paid will be
the dollar amount requested. However, the amount withdrawn from the
Account will equal the amount requested plus any applicable deferred
sales charge. The amount available for withdrawal from the Fixed Plus
Account is limited (see Appendix III).
For any partial withdrawal, amounts will be withdrawn proportionately from
each Subaccount or Credited Interest Option in which the Account is invested,
unless otherwise requested in writing. All amounts paid will be based on Account
Values as of the next Valuation Date after we receive a request for withdrawal
at our Home Office, or on such later date as the disbursement form may specify.
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, the Account Value must meet the minimum dollar amounts and age criteria
applicable to that option.
The Additional Withdrawal Options currently available under the Contract
include the following:
(bullet) SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from the 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.
(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 age 70-1/2 or retirement, if later, and pays you
that amount once a year. (See "Tax Status.")
Other Additional Withdrawal Options may be added from time to time.
Additional information relating to any of the Additional Withdrawal Options may
be obtained from your local representative or from the Company at its Home
Office.
If you select one of the Additional Withdrawal Options, your Account will
retain all of the rights and flexibility permitted under the Contract during the
Accumulation Period. The 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 elected, an Additional Withdrawal Option may be revoked by the Contract
Holder at any time by submitting a written request to our Home Office. Any
revocation will apply only to the amount not yet paid. Once an option is
revoked, it may not be elected again, nor may any other Additional Withdrawal
Options be elected. To determine whether the Additional Withdrawal Options are
available under your Plan, and to assess the terms and conditions that may
apply,
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<PAGE>
you should check with your employer. 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 Contract
Beneficiary upon the death of the Participant before the Annuity Date. The
Contract Holder may direct that we make such payment to the Plan Beneficiary.
The amount of the death benefit will be equal to the Account Value. Death
benefit proceeds may be paid to the Contract Beneficiary:
(bullet) in a lump sum;
(bullet) in accordance with any of the Annuity Options available under the
Contract; or
(bullet) under any Additional Withdrawal Options available under the Contract
(if the Plan Beneficiary is your spouse).
The Contract Holder, on behalf of a Plan 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 Contract Beneficiary, we will determine the Account Value on
the Valuation Date following the date on which we receive proof of death
acceptable to the Company. Interest, if any, will be paid from the date of death
at a rate no less than required by law. We will mail payment to the Contract
Holder, or to the Plan Beneficiary, if requested by the Contract Holder, within
seven days after we receive proof of death.
The Code requires that distribution of death proceeds begin within a certain
period of time. Generally, if your Plan Beneficiary is not your spouse, 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 Plan 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 (not to exceed 15 years for a non-spousal 457 Plan Beneficiary) of
the Plan Beneficiary or any period certain greater than the Plan 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 Plan Beneficiary in the same manner as if you had received those
payments. (See "Tax Status.") Also, for 457 Plans, any distribution payable over
a period of more than one year must be made in substantially non-increasing
amounts.
ANNUITY PERIOD
==============================================================================
Annuity Period Elections
For the types of Contracts described in this prospectus the Code requires that
minimum annual distributions of the Account Value must begin by April 1st of the
calendar year following the calendar year in which a Participant attains age
70-1/2 or retires, if later. 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, the Contract Holder must notify
us in writing of the following:
(bullet) the date on which you would like to start receiving annuity
payments;
(bullet) the Annuity Option under which you want your payments to be
calculated and paid;
(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). The investment option(s)
available may vary by Plan.
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<PAGE>
Annuity payments will not begin until an Annuity Option has been selected.
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. Transfers may be made among investment option(s) during the Annuity
Period except for those Plans that have not had their Contracts endorsed to
include additional Annuity Options. (See Annuity Options, below.) During the
Annuity Period, the maximum number of allowable transfers is four.
Annuity Options
The Contract Holder 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 5-30 years, or such other periods as the
Company may make available at the time of annuitization.
(bullet) *Option 3--Life Annuity with Cash Refund Feature--An Annuity with a
cash refund feature. If the Annuitant dies, the beneficiary will
receive a lump sum payment equal to the amount applied to the Annuity
option (less any premium tax) less the total amount of Fixed Annuity
payments paid prior to such death. This cash refund feature is only
available if the total amount applied to the Annuity option is
allocated to this feature.
(bullet) Option 4--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.
(bullet) Option 5--Life Income Based Upon the Lives of Two Payees--An annuity
with payments for a minimum of 5-30 years, with 100% of the payment to
continue after the first death.
(bullet) *Option 6--Life Income Based Upon Lives of Two Payees with Cash Refund
Feature--An annuity with 100% of the payment to continue after the
first death with a cash refund feature. If the Annuitant and joint
Annuitant die, the beneficiary will receive a lump sum payment equal to
the amount applied to the Annuity option (less any premium tax) less
the total amount of Fixed Annuity payments paid prior to such death.
This cash refund feature is only available if the total amount applied
to the Annuity option is allocated to this feature.
If Option 1 or 4 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 4, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Annuitant cannot elect to receive a
lump-sum settlement.
* These options are available only to those Plans that have had their
Contracts endorsed to include such additional options.
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.
If a nonlifetime option is elected on a variable basis, the Annuitant may
request at any time during the payment period that the present value of all or
any portion of the remaining variable payments be paid in one sum. However, any
lump-sum elected before a minimum number of years of payments (as specified in
the Contract) have been completed will be treated as a withdrawal during the
Accumulation Period and any applicable deferred sales charge will be assessed.
(See "Charges and Deductions--Deferred Sales Charge.") The nonlifetime option
is not available on a variable basis under a Contract which provides for
immediate Annuity benefits.
We may also offer additional Annuity Options under the Contract from time
to time.
Annuity Payments
Date Payouts Start. When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95. Annuity
payments may not extend beyond (a) the life of the Annuitant, (b) the joint
lives of the Annuitant and beneficiary, (c) a period certain greater than the
Annuitant's life expectancy, or (d) a period certain greater than the joint life
expectancies of the Annuitant and beneficiary.
Amount of Each Annuity Payment. The amount of each payment depends on the
Account Value, how it is allocated between fixed and variable payouts and the
Annuity Option chosen. No election may be made that would result in the first
Annuity payment of less than the minimum stated in your Contract. If the Account
Value on the Annuity Date is insufficient to elect an option for the minimum
amount specified, a lump-sum payment must be elected.
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<PAGE>
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 charge from amounts held under
the variable options. (See "Charges and Deductions.")
Death Benefit Payable During the Annuity Period
If a Participant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 4 was elected, Annuity Payments will cease on
the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 4.
If Lifetime Option 2 or Option 5 was elected and the death of the Annuitant
under Option 2, or the surviving Annuitant under Option 5, occurs prior to the
end of the guaranteed minimum payment period, we will pay to the Contract
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 Contract Beneficiary (unless otherwise requested), and no deferred sales
charge will be imposed.
If the Participant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the Plan Beneficiary at least as rapidly as under the original
method of distribution and in substantially nonincreasing amounts.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at our Home Office. The
value of any death benefit proceeds will be determined as of the next Valuation
Date after we receive acceptable proof of death and a request for payment. Under
Options 2 and 5, such value will be reduced by any payments made after the date
of death.
TAX STATUS
==============================================================================
Introduction
The following provides a general discussion and is not intended as tax advice.
This discussion reflects the Company's understanding of current federal income
tax law. Such laws may change in the future, and it is possible that any change
could be retroactive (i.e., effective prior to the date of the change). The
Company makes no guarantee regarding the tax treatment of any Contract or
transaction involving a Contract. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Annuity Payments, and on the economic
benefit to the Contract Holder, Participant or beneficiary may depend upon the
tax status of the individual concerned. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction.
Taxation of the Company
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Account's investment income and realized net capital gains
will not be taxed to the extent that such income and gains are applied to
increase the reserves under the Contracts.
The Company does not anticipate that it will incur any federal income tax
liability attributable to the Separate Account and, therefore, the Company does
not intend to make provisions for any such taxes. However, if changes in the
federal tax laws or interpretations thereof result in the
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<PAGE>
Company being taxed on income or gains attributable to the Separate Account,
then the Company may impose a charge against the Separate Account (with respect
to some or all Contracts) in order to set aside provisions to pay such taxes.
Contracts Used with Certain Retirement Plans
In General: The Contract is designed for use with Section 457 plans. The tax
rules applicable to retirement plans vary according to the terms and
conditions of the plan.
The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants as
well as beneficiaries are cautioned that the rights of any person to any
benefits under the Contracts may be subject to the terms and conditions of the
plans themselves, in addition to the terms and conditions of the Contract issued
in connection with such plans. Some retirement plans are subject to distribution
and other requirements that are not incorporated in the provisions of 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 457 Plans. Distributions must generally begin by April 1 of
the calendar year following the calendar year in which you attain age 70-1/2
or retire, whichever occurs later.
In general, annuity payments must be distributed over your life or the joint
lives of you and your Plan Beneficiary, or over a period not greater than your
life expectancy or the joint life expectancies of you and your beneficiary.
Also, any distribution payable over a period of more than one year must be made
in substantially non-increasing amounts.
If you die after the required minimum distribution has commenced,
distributions to your Plan 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 Plan Beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your beneficiary by December 31 of the year
following your death. 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 Plan Beneficiary or over a period not
extending beyond the life expectancy of the Plan Beneficiary (not to exceed 15
years for a non-spousal beneficiary), provided the distribution begins by
December 31 of the calendar year following the calendar year of your death, or
December 31 of the calendar year in which you would have attained age 70-1/2.
If you fail to receive the minimum required distribution for any tax year, a
50% excise tax is imposed on the required amount that was not distributed.
Section 457 Plans: Section 457 provides for certain deferred compensation
plans. These plans may be offered with respect to service for state governments,
local governments, political subdivisions, agencies, instrumentalities and
certain affiliates of such entities, and tax exempt organizations. These plans
are subject to various restrictions on contributions and distributions. The
plans may permit participants to specify the form of investment for their
deferred compensation account. Prior to the August 20, 1996 enactment of the
Small Business Job Protection Act of 1996 (the "Small Business Act"), all
compensation deferred under the plans, all property and rights purchased with
such amounts, and all income attributable to such amounts, property or rights
remained solely the property and rights of the employer (without being
restricted to the provision of benefits) subject only to the claims of the
employer's general creditors. For that reason, depending on the terms of the
particular plan, the employer may have been entitled to draw on deferred amounts
for purposes unrelated to its Section 457 plan obligations.
Under the Small Business Act, plans maintained by State or local governments,
their political subdivisions, agencies, instrumentalities and certain affiliates
will be required to hold all assets and income of the Plan in trust for the
exclusive benefit of plan participants and their beneficiaries. For purposes of
meeting the new requirement, custodial accounts and annuity contracts are
13
<PAGE>
treated as trusts. State and local government plans that were in existence on
August 20, 1996 are allowed a transition period that ends January 1, 1999 to
comply with the new requirement. In general, all amounts received under a
Section 457 plan are taxable and reportable to the IRS as taxable income. This
includes payments for death benefits, periodic and nonperiodic distributions.
Also, all amounts, except death benefit proceeds, are subject to federal income
tax withholding as wages. If we make payments directly to a Participant on
behalf of the employer as Contract Holder, we will withhold federal taxes (and
state taxes, if applicable).
The Code imposes a maximum limit on annual Purchase Payments which may be
excluded from your gross income. Such limit is generally the lesser of $7,500,
as adjusted to reflect changes in the cost of living, or 33-1/3% of your
includible compensation (25% of gross compensation).
MISCELLANEOUS
==============================================================================
Voting Rights
Each Contract Holder may direct us in the voting of shares at meetings of
shareholders of the appropriate Fund(s). The number of votes to which each
Contract Holder may give direction will be determined as of the record date.
The number of votes each Contract Holder is entitled to direct with respect
to a particular Fund during the Accumulation Period is equal to the portion of
the current value of the Contract attributable to that Fund, divided by the net
asset value of one share of that Fund. During the Annuity Period, the number of
votes is equal to the valuation reserve applicable to the portion of 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. Where the value of the Contract or valuation reserve relates to more
than one Fund, the calculation of votes will be performed separately for each
Fund.
Each Contract Holder will receive a notice of each meeting of shareholders of
that Fund, together with any proxy solicitation materials, and a statement of
the number of votes attributable to the Contract. Votes attributable to Contract
Holders who do not direct us will be cast by us in the same proportion as the
votes for which we have received directions.
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 with respect to new
Participants, no new Participants will be covered under the Contract and we
reserve the right to discontinue accepting Purchase Payments to existing
Accounts. By mutual consent, the Company and Contract Holder may also agree to
make changes to the Contract that would apply to existing Participants. Certain
changes to the Contract will require the approval of appropriate state or
federal regulatory authorities.
Distribution
The Company will serve as 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.
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. That percentage amount will range from 1% to 6% of those
Purchase Payments. The Company may also pay renewal commissions on Purchase
Payments made after the first year and asset-based service fees. The average of
all payments made by the Company is estimated to equal approximately 3% of the
total Purchase Payments made over the life of an average Contract. In addition,
some sales personnel may receive various types of non-cash compensation as
special sales incentives, including trips and educational and/or business
seminars. Supervisory and other management personnel of the Company may receive
compensation that will vary based on the relative
14
<PAGE>
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 actual expenses. The name of the Distributor and the registered
representative responsible for your Account are set forth on your enrollment
form. Commissions and sales related expenses are paid by the Company and are not
deducted from Purchase Payments. (See "Charges and Deductions--Deferred Sales
Charge.")
Occasionally, we may pay commissions and fees to Distributors which are
affiliated or associated with the Contract Holder or the Participants. We may
also enter into agreements with some entities associated with the Contract
Holder or Participants in which we would agree to pay the entity for certain
services in connection with administering the Contracts. In both these
circumstances there may be an understanding that the Distributor or entity would
endorse the Company as a provider of the Contract. You will be notified if you
are purchasing a Contract that is subject to these arrangements.
Performance Reporting
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount and then related to the ending redeemable values over the most recent
one, five and ten-year periods (or since inception, if less than ten years).
Standardized returns will reflect the reduction of all recurring charges during
each period (e.g., mortality and expense risk charges, the administrative
expense charge (if any) and any applicable deferred sales charge). "Non-
standardized returns" will be calculated in a similar manner, except that
non-standardized figures will not reflect the deduction of any applicable
deferred sales charge (which would decrease the level of performance shown if
reflected in these calculations). The nonstandardized figures may also include a
monthly, quarterly, year-to-date and three-year periods.
The Company may also advertise certain ratings, rankings or other information
related to the Company, the Subaccounts or the Funds. Further details regarding
performance reporting and advertising are described in the SAI.
Transfer of Ownership; Assignment
Unless contrary to applicable law, assignment of the Contract or Account is
prohibited.
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.
Legal Matters and Proceedings
The Company knows of no material legal proceedings pending to which the Separate
Account or the Company is a party or which would materially affect the Separate
Account. The validity of the securities offered by this Prospectus has been
passed upon by Counsel to the Company.
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CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
==============================================================================
The Statement of Additional Information contains more specific information on
the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Dollar Cost Averaging
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
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APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
==============================================================================
The Guaranteed Accumulation Account ("GAA") is a credited interest option
available during the Accumulation Period under the Contract discussed in this
Prospectus. Amounts allocated to the Long-Term Classifications of GAA are held
in a noninsulated, nonunitized separate account. Amounts allocated to the
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 over the period of one year. This option guarantees the
minimum interest rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term Classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from 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 investment
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 you receiving an amount that 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 the other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge and/or federal tax liability, and a maintenance fee.
By notifying us at our Home Office 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
Amounts applied to a Guaranteed Term during a deposit period may not be
transferred to any other funding option or to another Guaranteed Term during
that deposit period or for 90 days after the close of that deposit period.
Transfers are permitted from Guaranteed Terms of one classification to available
Guaranteed Terms of another classification. We will apply an MVA to GAA
transfers made before the end of a Guaranteed Term. Transfers of GAA values due
to a maturity are not subject to an MVA.
17
<PAGE>
APPENDIX II
FIXED ACCOUNT
==============================================================================
The following summarizes material information concerning the Fixed Account.
Amounts allocated to the Fixed Account are held in the Company's general account
that supports general insurance and annuity obligations. Interests in the Fixed
Account have not been registered with the SEC in reliance on exemptions under
the Securities Act of 1933, as amended. Disclosure in the Prospectus regarding
the Fixed Account, may, however, be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of such statements. Disclosure in this Appendix regarding the Fixed
Account has not been reviewed by the SEC.
The Fixed Account guarantees the minimum interest rate specified in the
Contract. The Company may credit a higher interest rate from time to time. The
current rate is subject to change at any time, but will never fall below the
guaranteed minimum. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under the Fixed
Account, the Company assumes the risk of investment gain or loss by guaranteeing
Account Values and promising a minimum interest rate and Annuity Payment.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as provided by
federal law.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
The Fixed Account will reflect a compound interest rate credited by us. The
interest rate quoted is an annual effective yield. We make no deductions from
the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
If a withdrawal is made from the Fixed Account, a deferred sales charge
may apply. (See "Charges and Deductions--Deferred Sales Charge.")
Transfers Among Investment Options
Transfers from the Fixed Account to any other available investment option(s) are
allowed in each calendar year during the Accumulation Period. The amount which
may be transferred may vary at our discretion; however, it will never be less
than 10% of the amount held under the Fixed Account. Transfers to the Fixed Plus
Account (if available under the Contract) will be permitted without regard to
this limitation.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts which have been accumulating under the
Fixed Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide variable Annuity Payments.
18
<PAGE>
APPENDIX III
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 insurance and annuity obligations. Interests in
the Fixed Plus Account have not been registered with the SEC in reliance on
exemptions under the Securities Act of 1933, as amended. Disclosure in this
Prospectus regarding the Fixed Plus Account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of the statements. Disclosure in this Appendix
regarding the Fixed Plus Account has not been reviewed by the SEC.
Fixed Plus Account
The Fixed Plus Account guarantees that amounts allocated to this option will
earn the minimum Fixed Plus interest rate specified in the Contract. We may
credit a higher interest rate from time to time. Our determination of interest
rates reflects the investment income earned on invested assets and the
amortization of any capital gains and/or losses realized on the sale of invested
assets. Under this option, we assume the risk of investment gain or loss by
guaranteeing Net Purchase Payment values and promising a minimum interest rate
and Annuity payment.
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. For Contracts issued to the State
of Mississippi Deferred Compensation Plan, for a period of time not to exceed
two years, or until full reimbursement is obtained if less than two years, the
interest rate credited on the Fixed Plus Account will be reduced by an amount
equal to approximately .001% to reimburse the State for costs associated with
the evaluation of the Plan.
Beginning on the tenth Account Year, we will credit amounts held in the Fixed
Plus Account with an interest rate that is at least 0.25% higher than the
then-declared interest rate for the Fixed Plus Accounts for Accounts that have
not reached their tenth anniversary.
We reserve the right to limit Net Purchase Payment(s) and/or transfers to the
Fixed Plus Account.
Fixed Plus Account Withdrawals
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day we receive a written request in our Home Office,
reduced by any Fixed Plus Account withdrawals, transfers or annuitizations made
in the prior 12 months. In calculating the 20% limit, we reserve the right to
include payments made due to the election of any Additional Withdrawal Option.
The 20% limit is waived if the partial withdrawal is due to annuitization,
death, unforeseeable emergency (when the conditions specified under (d) below
are met), or separation from service (when the conditions specified under (e)
below are met). For this waiver to apply, any such partial withdrawal must also
be made pro rata from all funding options used under the Account.
If a full withdrawal is requested, we will pay any amounts held in the Fixed
Plus Account in five annual payments that will be 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 in the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account value twelve months later;
3. One-third of the remaining Fixed Plus Account value twelve months later;
4. One-half of the remaining Fixed Plus Account value twelve months later;
and
5. The balance of the Fixed Plus Account value twelve months later.
19
<PAGE>
Once we receive a request for a full withdrawal from an Account, no further
withdrawals or transfers will be permitted from the Fixed Plus Account.
A full withdrawal from the Fixed Plus Account may be cancelled at any time
before the end of the five-payment period.
We will waive the Fixed Plus Account full withdrawal provision, if the
withdrawal is made:
(a) due to your death, before Annuity payments begin;
(b) due to the election of an Annuity option;
(c) when the Fixed Plus Account value is $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the Account within the
prior 12 months);
(d) due to hardship from an unforeseeable emergency, as defined by the
Code, if the following conditions are met:
(1) the hardship is certified by the employer;
(2) the amount is paid directly to you or is paid to the employer for
purposes of annuitization under the State of Mississippi Deferred
Compensation Plan; and
(3) the amount paid for all withdrawals due to hardship during the previous
12-month period does not exceed 10% of the average value of all
Accounts during that same period or,
(e) due to your separation from service with the employer provided that:
(1) the employer certifies that you have separated from service;
(2) the amount withdrawn is paid directly to you; and
(3) the amount paid for all partial and full withdrawals due to separation
from service during the previous 12-month period does not exceed 20%
of the average value of all Accounts under the Contract during that
same period.
Transfers Among Investment Options
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request in
our Home Office, reduced by any Fixed Plus Account withdrawals, transfers or
annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of any of the
Additional Withdrawal Options. We will waive the 20% transfer limit when the
value in the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, the Contract Holder may elect to have amounts which have been
accumulating under the Fixed Plus Account transferred to one or more of the
Subaccounts available during the Annuity Period, to provide variable Annuity
payments.
SWO
The Systematic Withdrawal Option may not be elected if you have requested a
Fixed Plus Account transfer or withdrawal within the prior 12-month period.
20
<PAGE>
APPENDIX IV
CONDENSED FINANCIAL INFORMATION
AETNA PLUS CONTRACTS
(Selected data for accumulation units outstanding throughout each period)
==============================================================================
TABLE I--For Plans That Became Covered Under this Prospectus on
January 15, 1996
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 Separate Account, which financial statements have
been audited by KPMG Peat Marwick LLP, independent auditors. The financial
statements as of and for the year ended December 31, 1996 and the independent
auditors' report thereon, are included in the SAI. The Accumulation Unit Values
and the percentage change in the value of an accumulation unit reflect a
mortality and expense risk charge of 1.25% until January 15, 1996, when the
mortality and expense risk charge was reduced to 0.95% during the Accumulation
Period. It will increase to 1.25% during the Annuity Period.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $10.778 $11.020 $10.454 $97.165
Value at end of period $14.077 $10.778 $11.020 $10.454(2)
Increase (decrease) in value of
accumulation unit(1) 30.61% (2.20)% 5.41% (2)
Number of accumulation units
outstanding at end of period 188,964,022 114,733,035 44,166,470 21,250
AETNA INCOME SHARES
Value at beginning of period $10.360 $10.905 $10.068 $36.789
Value at end of period $12.098 $10.360 $10.905 $10.068(3)
Increase (decrease) in value of
accumulation unit(1) 16.78% (5.00)% 8.31% (3)
Number of accumulation units
outstanding at end of period 21,379,976 11,713,354 4,084,142 3,870
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.528 $ 10.241 $10.048 $33.812
Value at end of period $11.026 $ 10.528 $10.241 $10.048(4)
Increase (decrease) in value of
accumulation unit(1) 4.73% 2.80% 1.92% (4)
Number of accumulation units
outstanding at end of period 12,999,680 7,673,528 2,766,044 825
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of period $10.868 $11.057 $10.189 $12.736
Value at end of period $13.673 $10.868 $11.057 $10.189(6)
Increase (decrease) in value of
accumulation unit(1) 25.81% (1.71)% 8.52% (6)
Number of accumulation units
outstanding at end of period 38,152,395 23,139,604 11,368,365 11,508
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.673
Increase (decrease) in value of
accumulation unit(1) 6.73%
Number of accumulation units
outstanding at end of period 393,053
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.612
Increase (decrease) in value of
accumulation unit(1) 6.12%
Number of accumulation units
outstanding at end of period 294,673
</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(5)
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
AETNA ASCENT VARIABLE 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
AETNA CROSSROADS VARIABLE 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>
21
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
==============================================================================
TABLE I (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.580
Increase (decrease) in value of
accumulation unit(1) 5.80%
Number of accumulation units
outstanding at end of period 143,637
AETNA VARIABLE INDEX PLUS PORTFOLIO
Value at beginning of period Value at end of
period Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.157
Increase (decrease) in value of
accumulation unit(1) 1.57%
Number of accumulation units
outstanding at end of period 2,832,440
ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period $ 9.437 $9.959 $10.000(8)
Value at end of period $13.450 $9.437 $ 9.959
Increase (decrease) in value of
accumulation unit(1) 42.52% (5.24)% (0.41)%
Number of accumulation units
outstanding at end of period 15,036,765 6,339,407 781,836
AMERICAN CENTURY VP CAPITAL APPRECIATION*
Value at beginning of period $11.781 $12.069 $10.692 $10.000(9)
Value at end of period $15.253 $11.781 $12.069 $10.692
Increase (decrease) in value of
accumulation unit(1) 29.47% (2.39)% 12.88% 6.92%
Number of accumulation units
outstanding at end of period 21,986,645 12,853,828 3,667,821 2,254
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO**
Value at beginning of period $10.554 $11.036 $10.278 $10.000(9)
Value at end of period $13.527 $10.554 $11.036 $10.278
Increase (decrease) in value of
accumulation unit(1) 28.17% (4.37)% 7.37% 2.78%
Number of accumulation units
outstanding at end of period 966,098 521,141 144,168 2,556
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.397
Increase (decrease) in value of
accumulation unit(1) 3.97%
Number of accumulation units
outstanding at end of period 2,116,732
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $11.092
Increase (decrease) in value of
accumulation unit(1) 10.92%
Number of accumulation units
outstanding at end of period 1,660,304
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.066
Increase (decrease) in value of
accumulation unit(1) 0.66%
Number of accumulation units
outstanding at end of period 1,833,794
</TABLE>
22
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
==============================================================================
TABLE I (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $ 9.961
Increase (decrease) in value of
accumulation unit(1) (0.39)%
Number of accumulation units outstanding
at end of period 196,090
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $10.119 $10.642 $10.008 $10.000(9)
Value at end of period $11.762 $10.119 $10.642 $10.008
Increase (decrease) in value of
accumulation unit(1) 16.24% (4.91)% 6.33% 0.08%
Number of accumulation units outstanding
at end of period 717,760 325,365 167,137 5,559
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.581 $10.000(10)
Value at end of period $13.322 $10.581
Increase (decrease) in value of
accumulation unit(1) 25.91% 5.81%
Number of accumulation units outstanding
at end of period 4,887,060 753,862
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.850
Increase (decrease) in value of
accumulation unit(1) 8.50%
Number of accumulation units outstanding
at end of period 93,304
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $ 9.873 $10.000(10)
Value at end of period $12.077 $ 9.873
Increase (decrease) in value of
accumulation unit(1) 22.33% (1.27)%
Number of accumulation units outstanding
at end of period 315,361 28,543
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.870
Increase (decrease) in value of
accumulation unit(1) 8.70%
Number of accumulation units outstanding
at end of period 259,196
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.323
Increase (decrease) in value of
accumulation unit(1) 3.23%
Number of accumulation units outstanding
at end of period 32,696
</TABLE>
23
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
==============================================================================
TABLE I (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.877
Increase (decrease) in value of accumulation
unit(1) 8.77%
Number of accumulation units outstanding at end
of period 1,036,040
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.154 $10.877 $ 9.832 $10.000(9)
Value at end of period $11.720 $10.154 $10.877 $ 9.832
Increase (decrease) in value of accumulation
unit(1) 15.42% (6.65)% 10.63% (1.68)%
Number of accumulation units outstanding at end
of period 711,892 703,676 135,614 561
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.026 $11.747 $10.864 $10.000(9)
Value at end of period $14.345 $11.026 $11.747 $10.864
Increase (decrease) in value of accumulation
unit(1) 30.10% (6.14)% 8.13% 8.64%
Number of accumulation units outstanding at end
of period 3,331,218 1,865,104 546,559 10,645
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES
Value at beginning of period $12.687 $12.957 $ 9.578 $10.000(9)
Value at end of period $13.923 $12.687 $12.957 $ 9.578
Increase (decrease) in value of accumulation
unit(1) 9.74% (2.08)% 35.28% (4.22)%
Number of accumulation units outstanding at end
of period 7,323,208 6,558,946 1,020,233 5,232
</TABLE>
(1)The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charges or the fixed dollar
annual maintenance fee, if any. Inclusion of these charges would reduce
the investment results shown.
(2)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $97.817. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 0.67%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 4.54%.
(3)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $38.521. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 4.70%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.68%.
(4)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $34.397. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 1.73%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.48%.
(5)The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(6)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $13.118. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 2.99%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 1.89%.
(7)Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during August 1995,
when the Fund became available under the Contract.
(8)The initial Accumulation Unit value was established at $10.000 on
September 17, 1993, the date on which the Portfolio became available under
the Contract.
(9)The initial Accumulation Unit value was established at $10.000 on August
21, 1992, the date on which the Fund/Portfolio became available under the
Contract.
(10)The initial Accumulation Unit value was established at $10.000 during
October 1994, when the funds were first received in this option.
* Formerly TCI Growth
** Formerly Calvert Socially Responsible Series.
24
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
===============================================================================
TABLE II--For Plans That Became Covered Under this Prospectus on May 25, 1996
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 Separate Account, which financial statements have
been audited by KPMG Peat Marwick LLP, independent auditors. The financial
statements as of and for the year ended December 31, 1996 and the independent
auditors' report thereon, are included in the SAI. The Accumulation Unit Values
and the percentage change in the value of an accumulation unit reflect a
mortality and expense risk charge of 1.25% until May 25, 1996, when the
mortality and expense risk charge was reduced to 0.95% during the Accumulation
Period. It will increase to 1.25% during the Annuity Period.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $10.778 $11.020 $10.454 $97.165
Value at end of period $14.077 $10.778 $11.020 $10.454(2)
Increase (decrease) in value of
accumulation unit(1) 30.61% (2.20)% 5.41% (2)
Number of accumulation units
outstanding at end of period 188,964,022 114,733,035 44,166,470 21,250
AETNA INCOME SHARES
Value at beginning of period $10.360 $10.905 $10.068 $36.789
Value at end of period $12.098 $10.360 $10.905 $10.068(3)
Increase (decrease) in value of
accumulation unit(1) 16.78% (5.00)% 8.31% (3)
Number of accumulation units
outstanding at end of period 21,379,976 11,713,354 4,084,142 3,870
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.528 $10.241 $10.048 $33.812
Value at end of period $11.026 $10.528 $10.241 $10.048(4)
Increase (decrease) in value of
accumulation unit(1) 4.73% 2.80% 1.92% (4)
Number of accumulation units
outstanding at end of period 12,999,680 7,673,528 2,766,044 825
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of period $10.868 $11.057 $10.189 $12.736
Value at end of period $13.673 $10.868 $11.057 $10.189(6)
Increase (decrease) in value of
accumulation unit(1) 25.81% (1.71)% 8.52% (6)
Number of accumulation units
outstanding at end of period 38,152,395 23,139,604 11,368,365 11,508
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.673
Increase (decrease) in value of
accumulation unit(1) 6.73%
Number of accumulation units
outstanding at end of period 393,053
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.612
Increase (decrease) in value of
accumulation unit(1) 6.12%
Number of accumulation units
outstanding at end of period 294,673
</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(5)
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
AETNA ASCENT VARIABLE 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
AETNA CROSSROADS VARIABLE 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>
25
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
==============================================================================
TABLE II (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.580
Increase (decrease) in value of
accumulation unit(1) 5.80%
Number of accumulation units
outstanding at end of period 143,637
AETNA VARIABLE INDEX PLUS PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.157
Increase (decrease) in value of
accumulation unit(1) 1.57%
Number of accumulation units
outstanding at end of period 2,832,440
ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period $ 9.437 $9.959 $10.000(8)
Value at end of period $13.450 $9.437 $ 9.959
Increase (decrease) in value of
accumulation unit(1) 42.52% (5.24)% (0.41)%
Number of accumulation units
outstanding at end of period 15,036,765 6,339,407 781,836
AMERICAN CENTURY VP CAPITAL APPRECIATION*
Value at beginning of period $11.781 $12.069 $10.692 $10.000(9)
Value at end of period $15.253 $11.781 $12.069 $10.692
Increase (decrease) in value of
accumulation unit(1) 29.47% (2.39)% 12.88% 6.92%
Number of accumulation units
outstanding at end of period 21,986,645 12,853,828 3,667,821 2,254
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO**
Value at beginning of period $10.554 $11.036 $10.278 $10.000(9)
Value at end of period $13.527 $10.554 $11.036 $10.278
Increase (decrease) in value of
accumulation unit(1) 28.17% (4.37)% 7.37% 2.78%
Number of accumulation units
outstanding at end of period 966,098 521,141 144,168 2,556
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.397
Increase (decrease) in value of
accumulation unit(1) 3.97%
Number of accumulation units
outstanding at end of period 2,116,732
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $11.092
Increase (decrease) in value of
accumulation unit(1) 10.92%
Number of accumulation units
outstanding at end of period 1,660,304
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.066
Increase (decrease) in value of
accumulation unit(1) 0.66%
Number of accumulation units
outstanding at end of period 1,833,794
</TABLE>
26
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
==============================================================================
TABLE II (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $ 9.961
Increase (decrease) in value of
accumulation unit(1) (0.39)%
Number of accumulation units outstanding
at end of period 196,090
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $10.119 $10.642 $10.008 $10.000(9)
Value at end of period $11.762 $10.119 $10.642 $10.008
Increase (decrease) in value of
accumulation unit(1) 16.24% (4.91)% 6.33% 0.08%
Number of accumulation units outstanding
at end of period 717,760 325,365 167,137 5,559
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.581 $10.000(10)
Value at end of period $13.322 $10.581
Increase (decrease) in value of
accumulation unit(1) 25.91% 5.81%
Number of accumulation units outstanding
at end of period 4,887,060 753,862
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.850
Increase (decrease) in value of
accumulation unit(1) 8.50%
Number of accumulation units outstanding
at end of period 93,304
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $ 9.873 $10.000(10)
Value at end of period $12.077 $ 9.873
Increase (decrease) in value of
accumulation unit(1) 22.33% (1.27)%
Number of accumulation units outstanding
at end of period 315,361 28,543
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.870
Increase (decrease) in value of
accumulation unit(1) 8.70%
Number of accumulation units outstanding
at end of period 259,196
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.323
Increase (decrease) in value of
accumulation unit(1) 3.23%
Number of accumulation units outstanding
at end of period 32,696
</TABLE>
27
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
TABLE II (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.877
Increase (decrease) in value of accumulation
unit(1) 8.77%
Number of accumulation units outstanding at end
of period 1,036,040
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.154 $10.877 $ 9.832 $10.000(9)
Value at end of period $11.720 $10.154 $10.877 $ 9.832
Increase (decrease) in value of accumulation
unit(1) 15.42% (6.65)% 10.63% (1.68)%
Number of accumulation units outstanding at end
of period 711,892 703,676 135,614 561
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.026 $11.747 $10.864 $10.000(9)
Value at end of period $14.345 $11.026 $11.747 $10.864
Increase (decrease) in value of accumulation
unit(1) 30.10% (6.14)% 8.13% 8.64%
Number of accumulation units outstanding at end
of period 3,331,218 1,865,104 546,559 10,645
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES
Value at beginning of period $12.687 $12.957 $ 9.578 $10.000(9)
Value at end of period $13.923 $12.687 $12.957 $ 9.578
Increase (decrease) in value of accumulation
unit(1) 9.74% (2.08)% 35.28% (4.22)%
Number of accumulation units outstanding at end
of period 7,323,208 6,558,946 1,020,233 5,232
</TABLE>
(1)The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charges or the fixed dollar
annual maintenance fee, if any. Inclusion of these charges would reduce
the investment results shown.
(2)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $97.817. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 0.67%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 4.54%.
(3)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $38.521. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 4.70%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.68%.
(4)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $34.397. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 1.73%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.48%.
(5)The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(6)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $13.118. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 2.99%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 1.89%.
(7)Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during August 1995,
when the Fund became available under the Contract.
(8)The initial Accumulation Unit value was established at $10.000 on
September 17, 1993, the date on which the Portfolio became available under
the Contract.
(9)The initial Accumulation Unit value was established at $10.000 on August
21, 1992, the date on which the Fund/Portfolio became available under the
Contract.
(10)The initial Accumulation Unit value was established at $10.000 during
October 1994, when the funds were first received in this option.
* Formerly TCI Growth
** Formerly Calvert Socially Responsible Series.
28
<PAGE>
(Selected data for accumulation units outstanding throughout each period)
==============================================================================
TABLE III--For Plans That Became Covered Under this Prospectus on
November 1, 1996
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 Separate Account, which financial statements have
been audited by KPMG Peat Marwick LLP, independent auditors. The financial
statements as of and for the year ended December 31, 1996 and the independent
auditors' report thereon, are included in the SAI. The Accumulation Unit Values
and the percentage change in the value of an accumulation unit reflect a
mortality and expense risk charge of 1.25% until November 1, 1996, when the
mortality and expense risk charge was reduced to 0.95% during the Accumulation
Period. It will increase to 1.25% during the Annuity Period.
<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 1,826,260 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
AMERICAN CENTURY VP CAPITAL APPRECIATION*
Value at beginning of period $10.213 $10.463 $10.000(3)
Value at end of period $13.224 $10.213 $10.463
Increase (decrease) in value of
accumulation unit(1) 29.47% (2.39)% 4.63%
Number of accumulation units
outstanding at end of period 4,184,701 12,096,731 12,272,152
</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
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>
(1)The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charge or the fixed dollar
annual maintenance fee, if any. Inclusion of these charges would reduce
the investment results shown.
(2)The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(3)The initial Accumulation Unit value was established at $10.000 on
February 1, 1993, the date on which the Portfolio became available
under the Contract.
* Formerly TCI Growth.
29
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
==============================================================================
(Selected data for accumulation units outstanding throughout each period)
TABLE IV--For Plans That Became Covered Under this
Prospectus on or after December 16, 1996
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 Separate Account, which financial statements have
been audited by KPMG Peat Marwick LLP, independent auditors. The financial
statements as of and for the year ended December 31, 1996 and the independent
auditors' report thereon, are included in the SAI. For plans converted to this
product on December 16, 1996, the Accumulation Unit Values and the percentage
change in the value of an accumulation unit reflect a mortality and expense risk
charge of 1.25% until December 16, 1996, when the mortality and expense risk
charge was reduced to 0.95% during the Accumulation Period. It will increase to
1.25% during the Annuity Period. The class of Accumulation Unit Value shown
below will also be used for plans converted to this product after December 16,
1996 and for all new Contracts issued under this Prospectus; however, the
Condensed Financial Information for periods prior to December 16, 1996 will not
be applicable.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AETNA VARIABLE FUND
Value at beginning of period $10.778 $11.020 $10.454 $97.165
Value at end of period $14.077 $10.778 $11.020 $10.454(2)
Increase (decrease) in value of
accumulation unit(1) 30.61% (2.20)% 5.41% %(2)
Number of accumulation units
outstanding at end of period 188,964,022 114,733,035 44,166,470 21,250
AETNA INCOME SHARES
Value at beginning of period $10.360 $10.905 $10.068 $36.789
Value at end of period $12.098 $10.360 $10.905 $10.068(3)
Increase (decrease) in value of
accumulation unit(1) 16.78% (5.00)% 8.31% %(3)
Number of accumulation units
outstanding at end of period 21,379,976 11,713,354 4,084,142 3,870
AETNA VARIABLE ENCORE FUND
Value at beginning of period $10.528 $10.241 $10.048 $33.812
Value at end of period $11.026 $10.528 $10.241 $10.048(4)
Increase (decrease) in value of
accumulation unit(1) 4.73% 2.80% 1.92% %(4)
Number of accumulation units
outstanding at end of period 12,999,680 7,673,528 2,766,044 825
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of period $10.868 $11.057 $10.189 $12.736
Value at end of period $13.673 $10.868 $1.057 $10.189(6)
Increase (decrease) in value of
accumulation unit(1) 25.81% (1.71)% 8.52% %(6)
Number of accumulation units
outstanding at end of period 38,152,395 23,139,604 11,368,365 11,508
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.673
Increase (decrease) in value of
accumulation unit(1) 6.73%
Number of accumulation units
outstanding at end of period 393,053
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.612
Increase (decrease) in value of
accumulation unit(1) 6.12%
Number of accumulation units
outstanding at end of period 294,673
</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(5)
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
AETNA ASCENT VARIABLE 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
AETNA CROSSROADS VARIABLE 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>
30
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
=============================================================================
TABLE IV (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.580
Increase (decrease) in value of
accumulation unit(1) 5.80%
Number of accumulation units
outstanding at end of period 143,637
AETNA VARIABLE INDEX PLUS PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
ALGER AMERICAN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.157
Increase (decrease) in value of
accumulation unit(1) 1.57%
Number of accumulation units
outstanding at end of period 2,832,440
ALGER AMERICAN SMALL CAP PORTFOLIO
Value at beginning of period $ 9.437 $ 9.959 $10.000(8)
Value at end of period $13.450 $ 9.437 $ 9.959
Increase (decrease) in value of
accumulation unit(1) 42.52% (5.24)% (0.41)%
Number of accumulation units
outstanding at end of period 15,036,765 6,339,407 781,836
AMERICAN CENTURY VP CAPITAL APPRECIATION*
Value at beginning of period $11.781 $12.069 $10.692 $10.000(9)
Value at end of period $15.253 $11.781 $12.069 $10.692
Increase (decrease) in value of
accumulation unit(1) 29.47% (2.39)% 12.88% 6.92%
Number of accumulation units
outstanding at end of period 21,986,645 12,853,828 3,667,821 2,254
CALVERT RESPONSIBLY INVESTED
BALANCED PORTFOLIO**
Value at beginning of period $10.554 $11.036 $10.278 $10.000(9)
Value at end of period $13.527 $10.554 $11.036 $10.278
Increase (decrease) in value of
accumulation unit(1) 28.17% (4.37)% 7.37% 2.78%
Number of accumulation units
outstanding at end of period 966,098 521,141 144,168 2,556
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.397
Increase (decrease) in value of
accumulation unit(1) 3.97%
Number of accumulation units
outstanding at end of period 2,116,732
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $11.092
Increase (decrease) in value of
accumulation unit(1) 10.92%
Number of accumulation units
outstanding at end of period 1,660,304
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.066
Increase (decrease) in value of
accumulation unit(1) 0.66%
Number of accumulation units
outstanding at end of period 1,833,794
</TABLE>
31
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
==============================================================================
TABLE IV (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $ 9.961
Increase (decrease) in value of
accumulation unit(1) (0.39)%
Number of accumulation units outstanding
at end of period 196,090
FRANKLIN GOVERNMENT SECURITIES TRUST
Value at beginning of period $10.119 $10.642 $10.008 $10.000(9)
Value at end of period $11.762 $10.119 $10.642 $10.008
Increase (decrease) in value of
accumulation unit(1) 16.24% (4.91)% 6.33% 0.08%
Number of accumulation units outstanding
at end of period 717,760 325,365 167,137 5,559
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.581 $10.000(10)
Value at end of period $13.322 $10.581
Increase (decrease) in value of
accumulation unit(1) 25.91% 5.81%
Number of accumulation units outstanding
at end of period 4,887,060 753,862
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.850
Increase (decrease) in value of
accumulation unit(1) 8.50%
Number of accumulation units outstanding
at end of period 93,304
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $ 9.873 $10.000(10)
Value at end of period $12.077 $ 9.873
Increase (decrease) in value of
accumulation unit(1) 22.33% (1.27)%
Number of accumulation units outstanding
at end of period 315,361 28,543
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.870
Increase (decrease) in value of
accumulation unit(1) 8.70%
Number of accumulation units outstanding
at end of period 259,196
JANUS ASPEN SHORT-TERM BOND PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.323
Increase (decrease) in value of
accumulation unit(1) 3.23%
Number of accumulation units outstanding
at end of period 32,696
</TABLE>
32
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
==============================================================================
TABLE IV (continued)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.877
Increase (decrease) in value of accumulation
unit(1) 8.77%
Number of accumulation units outstanding at end
of period 1,036,040
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.154 $10.877 $ 9.832 $10.000(9)
Value at end of period $11.720 $10.154 $10.877 $ 9.832
Increase (decrease) in value of accumulation
unit(1) 15.42% (6.65)% 10.63% (1.68)%
Number of accumulation units outstanding at end
of period 711,892 703,676 135,614 561
NEUBERGER & BERMAN GROWTH PORTFOLIO
Value at beginning of period $11.026 $11.747 $10.864 $10.000(9)
Value at end of period $14.345 $11.026 $11.747 $10.864
Increase (decrease) in value of accumulation
unit(1) 30.10% (6.14)% 8.13% 8.64%
Number of accumulation units outstanding at end
of period 3,331,218 1,865,104 546,559 10,645
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES
Value at beginning of period $12.687 $12.957 $ 9.578 $10.000(9)
Value at end of period $13.923 $12.687 $12.957 $ 9.578
Increase (decrease) in value of accumulation
unit(1) 9.74% (2.08)% 35.28% (4.22)%
Number of accumulation units outstanding at end
of period 7,323,208 6,558,946 1,020,233 5,232
</TABLE>
(1)The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charges or the fixed dollar
annual maintenance fee, if any. Inclusion of these charges would reduce
the investment results shown.
(2)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $97.817. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 0.67%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 4.54%.
(3)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $38.521. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 4.70%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.68%.
(4)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $34.397. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 1.73%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 0.48%.
(5)The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(6)The Accumulation Unit value was converted to $10.000 on August 21, 1992
upon the commencement of a new administrative system. Immediately prior to
that date, the Accumulation Unit value of the Fund was $13.118. On the
date of conversion, additional units were issued so that account values
were not changed as a result of the conversion. The percentage change in
the Accumulation Unit value from the beginning of the year to the date of
conversion was 2.99%; the percentage change in the Accumulation Unit value
from the date of conversion to the end of the year was 1.89%.
(7)Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during August 1995,
when the Fund became available under the Contract.
(8)The initial Accumulation Unit value was established at $10.000 on
September 17, 1993, the date on which the Portfolio became available under
the Contract.
(9)The initial Accumulation Unit value was established at $10.000 on August
21, 1992, the date on which the Fund/Portfolio became available under the
Contract.
(10)The initial Accumulation Unit value was established at $10.000 during
October 1994, when the funds were first received in this option.
* Formerly TCI Growth
** Formerly Calvert Socially Responsible Series.
33
<PAGE>
For Master Applications Only
I hereby acknowledge receipt of an Account C Group Deferred Variable Annuity
prospectus dated May 1, 1997 for Section 457 Public Employer Deferred
Compensation Plans, 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.
PROS.88720-97) dated May 1, 1997.
- ------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- ------------------------------------------------------------------------------
DATE
PROS.88720-97
<PAGE>
- ------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- ------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1997
AetnaPlus Contracts
Group Variable Annuity Contracts Available under Section 457
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account C (the
"Separate Account") dated May 1, 1997.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-525-4225
Read the prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the prospectus.
TABLE OF CONTENTS
Page
General Information and History....................................... 1
Variable Annuity Account C............................................ 1
Offering and Purchase of Contracts.................................... 2
Performance Data...................................................... 2
General......................................................... 2
Average Annual Total Return Quotations.......................... 3
Annuity Payments...................................................... 5
Sales Material and Advertising........................................ 6
Independent Auditors.................................................. 7
Financial Statements of the Separate Account.......................... S-1
Financial Statements of Aetna Life Insurance and Annuity Company...... F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the Company) is a stock life insurance
company which was organized under the insurance laws of the State of Connecticut
in 1976. Through a merger, it succeeded to the business of Aetna Variable
Annuity Life Insurance Company (formerly Participating Annuity Life Insurance
Company organized in 1954). As of December 31, 1996, the Company had assets of
$___ billion (subject to $___ billion of customer and other liabilities, $___
billion of shareholder equity) which includes $___ billion in assets held in the
Company's separate accounts. The Company had $___ billion in assets under
management, including $__ billion in its mutual funds. As of ______________, it
ranked among the top __% of all U.S. life insurance companies by size. The
Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc., which
is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc. and an
indirect wholly owned subsidiary of Aetna Inc. The Company is engaged in the
business of issuing life insurance policies and annuity contracts in all states
of the United States. The Company's Home Office is located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges and administrative expense
charge described in the prospectus, all expenses incurred in the operations of
the Separate Account are borne by the Company. See "Charges and Deductions" in
the prospectus. The Company receives reimbursement for certain administrative
costs from some unaffiliated sponsors of the Funds used as funding options under
the Contract. These fees generally range up to 0.25%.
The assets of the Separate Account are held by the Company. The Separate Account
has no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested each have custodians, as discussed in their respective
prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of each of the Subaccounts of the Separate
Account will be invested exclusively in shares of the Funds described in the
prospectus. Purchase Payments made under the Contract may be allocated to one or
more of the Subaccounts. The Company may make additions to, deletions from or
substitutions of available investment options as permitted by law and subject to
the conditions of the Contract. The availability of the Funds is subject to
applicable regulatory authorization. Not all Funds are available in all
jurisdictions, under all Contracts, or under all Plans.
1
<PAGE>
The Funds currently available under the Contract are as follows:
<TABLE>
<S> <C>
Aetna Variable Fund Calvert Responsibly Invested Balanced Portfolio
Aetna Income Shares Fidelity VIP II Contrafund Portfolio
Aetna Variable Encore Fund Fidelity VIP Equity-Income Portfolio
Aetna Investment Advisers Fund, Inc. Fidelity VIP Growth Portfolio
Aetna Ascent Variable Portfolio Fidelity VIP Overseas Portfolio
Aetna Crossroads Variable Portfolio Franklin Government Securities Trust
Aetna Legacy Variable Portfolio Janus Aspen Aggressive Growth Portfolio
Aetna Variable Capital Appreciation Portfolio Janus Aspen Balanced Portfolio
Aetna Variable Growth Portfolio Janus Aspen Flexible Income Portfolio
Aetna Variable Index Plus Portfolio Janus Aspen Growth Portfolio
Aetna Variable Small Company Portfolio Janus Aspen Short-Term Bond Portfolio
Alger American Growth Portfolio Janus Aspen Worldwide Growth Portfolio
Alger American Small Cap Portfolio Lexington Natural Resources Trust
American Century VP Capital Appreciation Neuberger & Berman Growth Portfolio
(formerly TCI Growth) Scudder International Portfolio Class A Shares
</TABLE>
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are 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 "Account Values."
PERFORMANCE DATA
GENERAL
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized returns,"
both of which are described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, 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 figures reflect the deduction of all recurring charges
during each period (e.g.,
2
<PAGE>
mortality and expense risk charges as if the charge had been 0.95% during all
periods shown, administrative expense charges, and deferred sales charges).
These charges will be deducted on a pro rata basis in the case of fractional
periods. (The mortality and expense risk charge will increase to 1.25% during
the Annuity Period.) If you had invested in a Contract where the mortality and
expense risk charge was reduced from 1.25% to 0.95%, your actual performance
would have been lower than the figures shown. See the applicable Condensed
Financial Information table in the prospectus for the actual increase or
decrease in the value of an Accumulation Unit for those periods when the
mortality and expense risk charge was 1.25%.
The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations). The non-standardized figures may also include monthly, quarterly,
year-to-date and three-year periods.
If a Fund was in existence prior to the date it became available under the
Contract, standardized and non-standardized total returns may include periods
prior to 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 (under the current charge structure) had that Fund been available under
the Contract during that period.
Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, the Account Value upon redemption may be
more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The tables shown below represent the variations in contract payment type under
different plans. They reflects the average annual standardized and
non-standardized total return quotation figures for the periods ended December
31, 1996 for the Subaccounts. 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 *).
3
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SINGLE PURCHASE PAYMENT FUND
ACCOUNT 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
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio 09/12/96
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital
Appreciation 11/20/87
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced
Portfolio 09/04/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 10/22/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 11/07/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 02/13/87
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth
Portfolio 9/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth
Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio
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.
4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
INSTALLMENT PAYMENT FUND
ACCOUNT 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
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio 07/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio 09/12/96
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth Portfolio 01/08/89
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap Portfolio 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital
Appreciation 11/20/87
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced
Portfolio 09/04/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 10/22/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 11/07/86
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 02/13/87
- ----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust 05/30/89
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 9/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Short-Term Bond Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Growth Portfolio 12/31/85
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio
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 Account and that the value of an
Accumulation Unit for the tenth Valuation Date prior to retirement was
$13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Date in which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date 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 Subaccounts
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. We may illustrate in advertisements the performance of the
underlying funds, if accompanied by performance which also shows the performance
of such funds reduced by applicable charges under the Separate Account. We may
also show in advertisements the portfolio holdings of the underlying funds,
updated at various intervals. From time to time, we will quote articles from
newspapers and magazines or other publications or reports, including, but not
limited to The Wall Street Journal, Money magazine, USA Today and The VARDS
Report.
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Contract Holders or Participants. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments, including comparison
between the Contracts and the characteristics of and market for such financial
instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
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.88720-97 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 Statements of Income for the years ended
December 31, 1996, 1995 and 1994 - Consolidated Balance
Sheets as of December 31, 1996 and 1995 - Consolidated
Statements of Changes in Shareholder's Equity for the
years ended December 31, 1996, 1995 and 1994
- Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance
and Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3.1) Form of Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and Related Selling
Agreement(2)
(4.1) Form of Variable Annuity Contract (G-CDA-HF)(3)
(4.2) Form of Variable Annuity Contract (GLID-CDA-HO)(4)
(4.2a) Endorsement (E3KSDC96) to Variable Annuity Contract
GLID-CDA-HO(5)
(4.2b) Endorsement (EMETHO96) to Variable Annuity Contract
GLID-CDA-HO(6)
(4.2c) Endorsement (ENEMHF96) to Variable Annuity Contract
G-CDA-HF(6)
(4.2d) Endorsement (EGET-IC(R)) to Variable Annuity Contract
G-CDA-HF(6)
(4.2e) Endorsement (EGETE-IC(R)) to Variable Annuity Contract
GLID-CDA-HO(6)
(4.2f) Form of Endorsement (E2ME96) to Variable Annuity Contract
GLID-CDA-HO
(5) Form of Variable Annuity Contract Application (300-GTD-IA)(7)
<PAGE>
(6.1) Certification of Incorporation and By-Laws of Aetna Life
Insurance and Annuity Company(8)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(9)
(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(6)
(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(9)
(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(9)
(8.6) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995(6)
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Franklin Advisers, Inc. dated January 31,
1989(2)
(8.8) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Janus Aspen Series dated April 19, 1994
and amended March 1, 1996(2)
(8.9) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Lexington Management Corporation
regarding Natural Resources Trust dated December 1, 1988 and
amended February 11, 1991(2)
(8.10) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Advisers Management Trust (now Neuberger &
Berman Advisers Management Trust) dated April 14, 1989 and as
assigned and modified on May 1, 1995(2)
(8.11) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Scudder Variable Life Investment Fund
dated April 27, 1992 and amended February 19, 1993 and August
13, 1993(2)
<PAGE>
(8.12) Amendment dated as of February 20, 1996 to Fund Participation
Agreement between Aetna Life Insurance and Annuity Company and
Scudder Variable Life Investment Fund dated April 27, 1992 as
amended February 19, 1993 and August 13, 1993(6)
(8.13) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Investors Research Corporation and TCI
Portfolios, Inc. dated July 29, 1992 and amended December 22,
1992 and June
1, 1994(2)
(9) Opinion of Counsel*
(10.1) Consent of Independent Auditors*
(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(9)
(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. 33-75964), as filed on
February 24, 1995.
4. Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-88722), as filed
electronically on November 30, 1995.
5. Incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-88720), as filed
electronically on April 22, 1996.
6. Incorporated by reference to Post-Effective Amendment No. 3 to
Registration Statement on Form N-4 (File No. 33-88720), as filed
electronically on June 28, 1996.
7. Incorporated by reference to Post-Effective Amendment No. 3 to
Registration Statement on Form N-4 (File No. 33-75982), as filed on
February 24, 1995.
8. 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.
9. 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.
10. Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-4 (File No. 33-88720), as filed
electronically on November 30, 1996.
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
Daniel P. Kearney Director and President
Timothy A. Holt Director, Senior Vice President and Chief Financial
Officer
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Vice President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
Deborah Koltenuk Vice President and Treasurer, Corporate Controller
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:
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
Aetna Life $1,325,661 $96,924,599
Insurance and
Annuity Company
* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs
incurred in the sales and administration of the contracts issued under
Variable Annuity Account C.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
Not applicable
Item 32. Undertakings
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
(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
<PAGE>
(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 caused this Post-Effective Amendment No. 5 to its
Registration Statement on Form N-4 (File No. 33-88720) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford,
State of Connecticut, on the 21st day of February, 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. 5 to the Registration Statement on Form N-4 (File No. 33-88720) has been
signed by the following persons in the capacities and on the dates indicated.
Signature Title Date
Daniel P. Kearney* Director and President )
- -------------------------- (principal executive )
Daniel P. Kearney officer) )
)
Timothy A. Holt* Director, Senior Vice ) February
- ------------------------- President and ) 21, 1997
Timothy A. Holt Chief Financial Officer )
)
Christopher J. Burns* Director )
- -------------------------- )
Christopher J. Burns )
)
Laura R. Estes* Director )
- -------------------------- )
Laura R. Estes )
)
Gail P. Johnson* Director )
- -------------------------- )
Gail P. Johnson )
)
<PAGE>
John Y. Kim* Director )
- -------------------------- )
John Y. Kim )
)
Shaun P. Mathews* Director )
- -------------------------- )
Shaun P. Mathews )
)
Glen Salow* Director )
- -------------------------- )
Glen Salow )
)
Creed R. Terry* Director )
- -------------------------- )
Creed R. Terry )
)
Deborah Koltenuk* Vice President and )
- -------------------------- Treasurer, Corporate )
Deborah Koltenuk Controller )
By: /s/Julie E. Rockmore
----------------------------
*Julie E. Rockmore
Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
Exhibit No. Exhibit Page
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance
and Annuity Company establishing Variable Annuity Account C *
99-B.3.1 Form of Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and Related
Selling Agreement *
99-B.4.1 Form of Variable Annuity Contract (G-CDA-HF) *
99-B.4.2 Form of Variable Annuity Contract (GLID-CDA-HO) *
99-B.4.2a Endorsement (E3K5DC96) to Variable Annuity Contract *
GLID-CDA-HO
99-B.4.2b Endorsement (EMETHO96) to Variable Annuity Contract *
GLID-CDA-HO
99-B.4.2c Endorsement (ENEMHF96) to Variable Annuity Contract G-CDA-HF *
99-B.4.2d Endorsement (EGET-IC(R)) to Variable Annuity Contract G-CDA-HF *
99-B.4.2e Endorsement (EGETE-IC(R)) to Variable Annuity Contract *
GLID-CDA-HO
99-B.4.2f Form of Endorsement (E2ME96) to Variable Annuity Contract
GLID-CDA-HO ---
99-B.5 Form of Variable Annuity Contract Application (300-GTD-IA) *
99-B.6.1 Certification of Incorporation and By-Laws of Depositor *
99-B.6.2 Amendment of Certificate of Incorporation of Depositor *
99-B.8.1 Fund Participation Agreement (Amended and Restated) between
Aetna Life Insurance and Annuity Company, Alger American Fund
and Fred Alger Management, Inc. dated March 31, 1995 *
*Incorporated by reference
**To be filed by amendment
<PAGE>
Exhibit No. Exhibit Page
99-B.8.2 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Calvert Asset Management
Company (Calvert Responsibly Invested Balanced Portfolio,
formerly Calvert Socially Responsible Series) dated March
13, 1989 and amended December 12, 1993
99-B.8.3 Second Amendment dated January 1, 1996 to Fund *
Participation Agreement between Aetna Life Insurance
and Annuity Company and Calvert Asset Management Company
(Calvert Responsibly Invested Balanced Portfolio,
formerly Calvert Socially Responsible Series) dated March
13, 1989 and amended December 27, 1993
99-B.8.4 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, 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
*Incorporated by reference
**To be filed by amendment
<PAGE>
Exhibit No. Exhibit Page
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 and Advisers Management Trust (now
Neuberger & Berman Advisers Management Trust) dated April
14, 1989 and as assigned and modified on May 1, 1995
99-B.8.11 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company and Scudder Variable Life Investment
Fund dated April 27, 1992 and amended February
19, 1993 and August 13, 1993
99-B.8.12 Amendment dated as of February 20, 1996 to Fund *
Participation Agreement between Aetna Life Insurance
and Annuity Company and Scudder Variable Life Investment
Fund dated April 27, 1992 as amended February 19, 1993
and August 13, 1995
99-B.8.13 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Investors Research Corporation and
TCI Portfolios, Inc. dated July 29, 1992 and
amended December 22, 1992 and June 1, 1994
99-B.9 Opinion of Counsel **
99-B.10.1 Consent of Independent Auditors **
99-B.10.2 Consent of Counsel **
99-B.13 Schedule for Computation of Performance Data *
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
27 Financial Data Schedule **
*Incorporated by reference
**To be filed by amendment
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract is hereby endorsed as follows:
Delete Section 2.a) of Endorsement form EAMAR-HD and replace it with the
following language:
a) Delete the paragraph entitled Deductions From The Separate Account
and The Funds on the Specifications page and replace it with the
following:
Deductions From The Separate Account - There will be deductions
for mortality and expense risks and administrative fees. If the
dollar amounts of Variable Annuity payments are not to decrease,
Aetna must earn a gross return on the assets of the Separate
Account of:
- 4.75% on an annual basis, plus an annual return of up to .25%
needed to offset the
administrative charge set at the time Annuity payments
commenced, if an Assumed Annual Net
Return Rate of 3.5% is chosen: or,
- 6.25% on an annual basis, plus an annual return of up to .25%
needed to offset the administrative charge set at the time
Annuity payments commenced, if an Assumed Annual Net Return
Rate of 5% is chosen.
Delete the entire Section entitled Change of Contract by Aetna and
replace it with the following:
Aetna and the Owner may mutually agree to change the terms of this
Contract. Any such change will not affect the amount or terms of any
Annuity which began prior to such change. Otherwise, as mutually agreed
to by Aetna and the Owner, changes may apply to all Participants
covered under this Contract. If the Owner and Aetna fail to agree to
changes to the Contract proposed by Aetna which apply to new
Participants after the effective date of change, Aetna reserves the
right to stop accepting new deposits under the Contract. This Contract
is also subject to change as may be necessary to comply with federal or
state laws without the consent of the Owner.
Delete Section 2.b) of Endorsement form EAMAR-HD and replace it with the
following language:
b) Delete the paragraph under the section titled Investment
Increment Factors - Separate Account and insert the following:
Investment Increment Factors are those items used to determine a
Fund's Net Return Factor for each Valuation Period. The Net Return
Factors are used to compute all Separate Account values and
payments for any Fund.
The Net Return Factor for each Fund is equal to 1.000000 plus the
Net Return Rate.
The Net Return Rate is equal to:
a) The value of the shares of the Fund held by the Separate
Account at the end of a Valuation Period; minus
b) the value of the shares of the Fund held by the Separate
Account at the start of the Valuation Period; plus or minus
c) taxes (or reserves for taxes on the Separate Account (if
any); divided by
d) the total value of the Fund Record Units and Fund Annuity
Units of the Separate Account at the start of the Valuation
Period: minus
<PAGE>
a) a daily actuarial charge at an annual rate of .95% during the
accumulation period and 1.25% during the Annuity period for
Annuity mortality and expense risks and profit; and a daily
administrative charge which will not exceed .25% during the
accumulation period and a daily administrative charge which
will not exceed .25% during the Annuity period.
A Net Return Rate may be more or less than 0.
The value of a share of the Fund is equal to the net assets of the
Fund divided by the number of shares outstanding.
The administrative charge may be changed annually except for
amounts which have been used to purchase an Annuity. This charge
will not exceed .25%.
Delete Sections 2.e) and 2.f) of Endorsement EAMAR-HD.
Delete the Annuity Tables under the Section entitled Annuity Provisions and
replace with the following Tables:
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ------------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
- ------------------------------------------------------------------------------
5 17.91 18 5.96
6 15.14 19 5.73
7 13.16 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
- ------------------------------------------------------------------------------
<PAGE>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ------------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
- ------------------------------------------------------------------------------
5 18.12 18 6.20
6 15.35 19 5.97
7 13.38 20 5.75
8 11.90 21 5.56
9 10.75 22 5.39
10 9.83 23 5.24
11 9.09 24 5.09
12 8.46 25 4.96
13 7.94 26 4.84
14 7.49 27 4.73
15 7.10 28 4.63
16 6.76 29 4.53
17 6.47 30 4.45
- --------------------------------------------------------------------------------
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ------------------------------------------------------------------------------
Monthly Monthly
Years Payment Years Payment
- ------------------------------------------------------------------------------
5 18.74 18 6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
- --------------------------------------------------------------------------------
<PAGE>
OPTION 2
Life Income
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Years
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20 Cash
Annuitant Refund
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.05 $4.05 $4.03 $3.99 $3.93 $3.89
51 4.12 4.11 4.09 4.05 3.99 3.94
52 4.19 4.19 4.16 4.11 4.04 4.00
53 4.27 4.26 4.23 4.18 4.10 4.06
54 4.35 4.34 4.31 4.25 4.16 4.12
55 4.44 4.42 4.39 4.32 4.22 4.19
56 4.53 4.51 4.47 4.40 4.29 4.26
57 4.62 4.61 4.56 4.48 4.35 4.33
58 4.72 4.71 4.65 4.56 4.42 4.41
59 4.83 4.81 4.75 4.64 4.49 4.49
60 4.95 4.93 4.86 4.73 4.55 4.57
61 5.07 5.05 4.97 4.83 4.62 4.66
62 5.20 5.17 5.08 4.92 4.69 4.76
63 5.34 5.31 5.20 5.02 4.76 4.85
64 5.49 5.45 5.33 5.12 4.83 4.96
65 5.65 5.61 5.47 5.22 4.89 5.06
66 5.82 5.77 5.61 5.33 4.96 5.18
67 6.01 5.94 5.75 5.44 5.02 5.30
68 6.20 6.13 5.91 5.54 5.08 5.42
69 6.41 6.33 6.07 5.65 5.14 5.56
70 6.64 6.54 6.23 5.76 5.19 5.70
71 6.88 6.76 6.41 5.86 5.24 5.84
72 7.14 7.00 6.59 5.97 5.28 6.00
73 7.43 7.26 6.77 6.06 5.32 6.16
74 7.73 7.53 6.96 6.16 5.35 6.33
75 8.06 7.82 7.14 6.25 5.38 6.51
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Years
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Adjusted
Age of Annuitant None 5 10 15 20
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
<PAGE>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Years
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Adjusted
Age of Annuitant None 5 10 15 20
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
50 $5.26 $5.25 $5.22 $ 5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 5.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------- Option 3d
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e Option 3f
Annuitant Guaranteed
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.03 $3.69
55 55 3.88 4.25 4.47 3.87 4.14 3.87
55 60 3.99 4.44 4.71 3.98 4.20 3.98
60 55 3.99 4.44 4.71 3.98 4.42 3.98
60 60 4.24 4.71 4.99 4.23 4.57 4.23
60 65 4.38 4.97 5.32 4.38 4.65 4.38
65 60 4.38 4.97 5.32 4.38 4.93 4.38
65 65 4.72 5.33 5.70 4.71 5.14 4.72
65 70 4.93 5.68 6.15 4.91 5.27 4.91
70 65 4.93 5.68 6.15 4.91 5.66 4.91
70 70 5.40 6.21 6.70 5.36 5.96 5.38
70 75 5.69 6.68 7.32 5.62 6.13 5.66
75 70 5.69 6.68 7.32 5.62 6.67 5.66
75 75 6.37 7.45 8.15 6.23 7.12 6.33
75 80 6.78 8.11 8.99 6.54 7.36 6.71
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------- Option 3d
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e
Annuitant Guaranteed
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
<PAGE>
OPTION 3
Life Income for Two Annuitants
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Adjusted Ages
- -------------------------------- Option 3d
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e
Annuitant Guaranteed
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
<PAGE>
Delete Section 3.(c) of Endorsement EFFP-ID(G) under the Section entitled
Deposit, Reserve, and Surrender Provisions and replace it with the following:
c) Guaranteed Interest Rate - Fixed Annuity: 3.0% under the Annuity
Provisions.
Delete the following paragraphs that were added to Section 5 entitled Other
Terms of Annuity Options under the Annuity Provisions of the Contract in
Endorsement EFFP-ID(G):
When Annuity payments start, the age of the Annuitant plus the number of
years for payments are guaranteed must not exceed 95.
Assumed annual net return rate is the interest rate used to determine the
amount of the first Annuity payment under a Variable Annuity. The Separate
Account must earn this rate plus enough to cover the mortality and expense
risk charges and administrative charges if future Variable Annuity payments
are to remain level.
Replace Section 1. entitled Choices to be Made under the Section entitled
Annuity Provisions with the following:
1) Choices to be Made
The Owner may tell Aetna to pay the Individual Account Reserve (minus
any charges for premium taxes) as a premium for an Annuity under
options 1, 2, or 3.
When an option is chosen, the Owner must designate whether the Annuity
will be:
a) a Fixed Annuity;
b) a Variable Annuity; or
c) a combination of (a) and (b).
If a Fixed Annuity is chosen, the Annuity purchase rate for the option
chosen will reflect at least the minimum guaranteed interest rate of 3.0%.
Where a Variable Annuity is chosen, the Owner must elect an assumed annual
net return rate of 3.5% or 5.0%. If not elected, Aetna will use an assumed
annual net return rate of 3.5%. The assumed annual net return rate is the
interest rate used to determine the amount of the first Annuity payment
under a Variable Annuity.
If a Variable Annuity is chosen, the owner must allocate the amount among
the allowable Funds. Aetna reserves the right to allow no more than four
Funds to be selected at any one time.
Delete Sections 4, 5 and 6 under the section entitled Annuity Provisions, and
replace with the following Sections 4, 5, 6 and 7:
4) Fund Transfers During the Annuity Period
At the request of the Owner, all or any portion of the amount allocated
to a Fund may be transferred from any Fund to any other allowable Fund.
During the Annuity period, the maximum number of allowable transfers in
a calendar year is four. Aetna reserves the right to change the number
of allowable transfers.
Transfer requests must be expressed as a percentage of the allocation
among the Funds of the amount upon which the Variable Annuity will be
based. Aetna may establish a minimum transfer amount. Transfers will be
processed as of the Valuation Date next following the date when a
transfer request is received in good order at Aetna's Home Office.
5) Annuity Options
Option 1 - Payments for a Stated Period of Time - An Annuity will be
paid for 5 to 30 years. If payments for this option are made under a
Variable Annuity, the present value of all or a portion of any
remaining guaranteed payments may be withdrawn at any time. If a
withdrawal is requested within 5 years after the start of payments, it
will be treated as a surrender.
Option 2 - Life Income Based on the Life of the Annuitant - Payments
will be made until the death of the Annuitant. When this option is
chosen, a choice from the following must be made:
a) payments cease at the death of the Annuitant;
<PAGE>
b) payments may be guaranteed for 5 - 30 years; or
c) cash refund: if the Annuitant dies, the beneficiary will receive a
lump sum payment equal to the amount applied to the Annuity option
(less any premium tax) less the total amount of Fixed Annuity
payments paid prior to such death. This cash refund feature is
only available if the total amount applied to the Annuity option
is allocated to this feature.
Option 3 - Life Income Based Upon the Lives of Two Annuitants - An
Annuity will be paid during the lives of the Annuitant and a second
Annuitant. Payments will continue until both Annuitants have died.
When this option is chosen, a choice of the following must be made:
a) 100% of the payment to continue after the first death;
b) 66 2/3% of the payment to continue after the first death;
c) 50% of the payment to continue after the first death;
d) 100% of the payment to continue after the first death with a
guarantee of 5 - 30 years;
e) 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of the
Annuitant; or
f) 100% of the payment to continue after the first death with a cash
refund feature. If the Annuitant and joint Annuitant die, the
beneficiary will receive a lump sum payment equal to the amount
applied to the Annuity option (less any premium tax) less the
total amount of Fixed Annuity payments paid prior to such death.
This cash refund feature is only available if the total amount
applied to the Annuity option is allocated to this feature.
Other Options - Aetna may make other options available as allowed by
the laws of the state in which this Contract is delivered.
6) Other Terms of Annuity Options
a) Generally, the first Annuity payment must be made as required by
federal law.
b) Payments will be made on a monthly basis unless the owner
requests otherwise.
c) No choice of any Annuity option may be made if the first payment
would be less than $50 or if the total payments in a year would be
less than $250 (unless otherwise required by state law).
d) For purposes of calculating the guaranteed first payment of a
Variable Annuity or the payments for a Fixed Annuity, the
Annuitant's and second Annuitant's adjusted age will be used.
The Annuitant's and second Annuitant's adjusted age is his or her
age as of the birthday closest to the Annuity commencement date
reduced by one year for Annuity commencement dates occurring
during the period of time from July 1, 1992 through December 31,
1999. The Annuitant's and second Annuitant's age will be reduced
by two years for Annuity commencement dates occurring during the
period of time from January 1, 2000 through December 31, 2009. The
Annuitant's and second Annuitant's age will be reduced by one
additional year for Annuity commencement dates occurring in each
succeeding decade.
e) If a Fixed Annuity under option 1, 2 or 3 is elected, Aetna will
use the applicable current settlement option rate if it will
provide higher Fixed Annuity payments.
f) When Annuity payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed
95.
7) Death Benefit
<PAGE>
Upon the death of the Annuitant(s), any remaining guaranteed payments
will continue to the beneficiary unless the beneficiary elects to
receive the present value of any remaining guaranteed payments in a
lump sum. Such payments will be paid at least as rapidly as under the
method of distribution then in effect. If the beneficiary dies while
receiving payments, the present value of any remaining guaranteed
payments will be paid in one sum to the beneficiary's estate.
The interest rate used to determine the first Annuity payment will be
used to calculate the present value. The present value will be
determined as of the Valuation Period in which proof of death
acceptable to Aetna and a request for payment is received at Aetna's
Home Office.
Endorsed and made a part of the Contract on the effective date of the Contract.
/s/ David Kearney
-------------------------------
President
Aetna Life Insurance and Annuity Company
