As filed with the Securities and Exchange Registration No. 33-75986*
Commission on February 12, 1998 Registration No. 811-2513
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 15 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
(Exact Name of Registrant)
Aetna Life Insurance and Annuity Company
(Name of Depositor)
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on ________________ pursuant to paragraph (b) of Rule 485
* Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which
includes all the information which would currently be required in
prospectuses relating to securities covered by the following earlier
Registration Statements: 33-75970; 33-75954; and 33-75956.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
LOCATION - PROSPECTUS DATED MAY 1, 1997
AND AS AMENDED BY SUPPLEMENTS DATED
FORM N-4 AUGUST 21, 1997 AND FEBRUARY 12, 1998
ITEM NO. PART A (PROSPECTUS)
<S> <C> <C>
1 Cover Page............................ Cover Page, and as amended
2 Definitions........................... Definitions
3 Synopsis.............................. Prospectus Summary; Fee Table, and as
amended
4 Condensed Financial Information....... Condensed Financial Information, and as
amended
5 General Description of Registrant,
Depositor, and Portfolio The Company; Variable Annuity Account
Companies............................. C; The Funds, and as amended
6 Deductions............................ Charges and Deductions, and as amended;
Distribution
7 General Description of Variable
Annuity Contracts..................... Purchase; Miscellaneous, and as amended
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 Contents of the Statement of Additional
Additional Information................ Information
<PAGE>
LOCATION - STATEMENT OF
FORM N-4 PART B (STATEMENT OF ADDITIONAL ADDITIONAL INFORMATION DATED
ITEM NO. INFORMATION) FEBRUARY 12, 1998
15 Cover Page................................. Cover page
16 Table of Contents.......................... Table of Contents
17 General Information and History............ General Information and History
18 Services................................... General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered....... Offering and Purchase of
Contracts
20 Underwriters............................... Offering and Purchase of
Contracts
21 Calculation of Performance Data............ Performance Data; Average Annual
Total Return Quotations
22 Annuity Payments........................... Annuity Payments
23 Financial Statements....................... Financial Statements
</TABLE>
PART C (OTHER INFORMATION)
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PARTS A AND B
The Prospectus is incorporated into Part A of this Post-Effective Amendment No.
15, respectively, by reference to Post-Effective Amendment No. 13 to the
Registration Statement on Form N-4 (File No. 33-75986), as filed electronically
on April 11, 1997 (Accession No. 0000950146-97-000582) and by a Supplement to
the Prospectus dated August 21, 1997, as contained in Post-Effective Amendment
No. 14 to the Registration Statement on Form N-4 (File No. 33-75986), as filed
electronically on August 19, 1997 (Accession No. 0000950146-97-001302) and by a
Supplement to the Prospectus dated February 12, 1998 which is included in this
filing. A Statement of Additional Information dated February 12, 1998 is
included in Part B of Post-Effective Amendment No. 15.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
Aetna Life Insurance and Annuity Company
Group Variable Annuity Contracts Available under Section 403(b) and 401(a)
Supplement dated February 12, 1998 to Prospectus dated May 1, 1997
and as supplemented on August 21, 1997
The information herein updates and amends the information contained in the
Prospectus dated May 1, 1997 and as amended by supplement dated August 21, 1997
(the 'Prospectus') and should be read with that Prospectus.
This footnote replaces the information contained in the Prospectus dated May 1,
1997 and as amended by supplement dated August 21, 1997 as follows:
[bullet] Cover-Lexington Natural Resources Trust
This Fund will be removed from the list of Funds after all participants have
directed money allocated to this Subaccount to other available options.
[bullet] Charges and Deductions - Page 6
The first paragraph under "Mortality and Expense Risk Charge" is replaced by the
following:
Mortality and Expense Risk Charge. The Company makes a daily deduction from each
of the Subaccounts for the mortality and expense risk charge. The charge is
equal, on an annual basis, to 1.25% of the average daily net assets of the
Subaccounts and compensates the Company for the assumption of the mortality and
expense risks under the Contract. The mortality risks are those assumed for our
promise to make lifetime payments according to annuity rates specified in the
Contract. The expense risk is the risk that the actual expenses for costs
incurred under the Contract will exceed the maximum costs that can be charged
under the Contract. The mortality and expense risk charge may be reduced for a
Contract Holder under various conditions as agreed to by us and the Contract
Holder in writing. Whether such a reduction is available will be determined by
the Company based upon consideration of some or all of the following factors:
[bullet] The size of the prospective group.
[bullet] The number of eligible participants and the program's participation
rate.
[bullet] The projected annual Purchase Payments for the number of Participants
estimated to choose the Contract.
[bullet] The frequency of projected distributions.
[bullet] The type and level of administrative and sales services to be provided.
[bullet] The Contract Holder's support and involvement in the communication,
enrollment, and Participant education.
[bullet] The frequency, consistency and method of submitting Purchase Payments.
x.75986-97 February 1998
<PAGE>
[bullet] The retirement program design. For example, the program may favor the
stability of invested assets and limit the conditions for withdrawals,
loans and investment options which in turn will lower administrative
expenses.
[bullet] The type and level of other factors that affect the overall
administrative expense.
Prospective purchasers eligible for a reduction in the mortality and expense
risk charge will be notified of their eligibility and the amount of the charge
applicable to their Contract prior to the Company's acceptance of an application
for the Contract. We may also make reductions, after the Contract has been
issued, according to the Company's rules in effect at the time there is a
material change in any of the above factors. We will notify the Contract Holder
of any reduction prior to it occurring. Any reduction of the mortality and
expense risk charge will not be unfairly discriminatory against any person.
[bullet] Charges and Deductions - Maintenance Fee - Page 6
The last paragraph under "Reduction or Elimination of the Maintenance Fee",
which begins on page 7, is replaced with the following:
Any reduction or elimination of maintenance fees will not be unfairly
discriminatory against any person. We will make any reduction in annual
maintenance fees according to our own rules in effect at the time an application
for a Contract is approved. We may also make reductions, after the Contract has
been issued, according to the Company's rules in effect at the time there is a
material change in any of the above factors. We will notify the Contract Holder
of any reduction prior to it occurring. We reserve the right to change these
rules from time to time.
[bullet] Condensed Financial Information - Page AUV History - 1 through AUV
History 4
The following tables supplement the Condensed Financial Information found on
pages AUV History 1-4 in the prospectus:
Each table shows unaudited data derived from the financial statements of the
Separate Account for the nine-month period ended September 30, 1997. The data in
each table is based on a different level of the total Separate Account charges
as indicated.
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
TABLE I
(FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.25%)
================================================================================
The condensed financial information presented below is derived from the
financial statements of the Separate Account interim financials for the period
ended September 30, 1997 and is unaudited.
Period ended
September 30, 1997
(unaudited)
AETNA VARIABLE FUND
Value at beginning of period $17.302
Value at end of period $22.644
Increase (decrease) in value 30.87%
of accumulation unit(1)
Number of accumulation units 176,229,616.3
outstanding at end of
period
AETNA INCOME SHARES
Value at beginning of period $12.377
Value at end of period $13.050
Increase (decrease) in value 5.44%
of accumulation unit(1)
Number of accumulation units 17,311,240.8
outstanding at end of
period
AETNA VARIABLE ENCORE FUND
Value at beginning of period $11.473
Value at end of period $11.826
Increase (decrease) in value 3.08%
of accumulation unit(1)
Number of accumulation units 12,215,448.7
outstanding at end of
period
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of period $15.551
Value at end of period $18.496
Increase (decrease) in value 18.94%
of accumulation unit(1)
Number of accumulation units 34,235,851.8
outstanding at end of
period
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of period $13.025
Value at end of period $15.621
Increase (decrease) in value 19.93%
of accumulation unit(1)
Number of accumulation units 3,076,293.2
outstanding at end of
period
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of period $12.450
Value at end of period $14.554
Increase (decrease) in value 16.90%
of accumulation unit(1)
Number of accumulation units 2,164,194.8
outstanding at end of
period
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of period $11.930
Value at end of period $13.469
Increase (decrease) in value 12.89%
of accumulation unit(1)
Number of accumulation units 1,218,437.4
outstanding at end of
period
AETNA VARIABLE CAPITAL APPRECIATION PORTFOLIO
Value at beginning of period $12.913
Value at end of period $13.377
Increase (decrease) in value 3.59%(2)
of accumulation unit(1)
Number of accumulation units 489.1
outstanding at end of
period
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
Period
ended
September 30,
1997
(unaudited)
AETNA VARIABLE GROWTH PORTFOLIO
Value at beginning of $11.635
period
Value at end of period $13.845
Increase (decrease) in 18.99%(3)
value of accumulation
unit(1)
Number of accumulation 16.2
units outstanding at
end of period
AETNA VARIABLE INDEX PLUS PORTFOLIO
Value at beginning of $10.924
period
Value at end of period $14.100
Increase (decrease) in 29.08%
value of accumulation
unit(1)
Number of accumulation 3,863,969.9
units outstanding
at end of period
AETNA VARIABLE SMALL COMPANY PORTFOLIO
Value at beginning of $12.299
period
Value at end of period $14.081
Increase (decrease) in 14.49%(4)
value of accumulation
unit(1)
Number of accumulation 160.7
units outstanding at
end of period
ALGER AMERICAN GROWTH PORTFOLIO (5)
Value at beginning of $11.370
period
Value at end of period $14.668
Increase (decrease) in 29.01%
value of accumulation
unit(1)
Number of accumulation 8,052,764.60
units outstanding at
end of period
ALGER AMERICAN SMALL CAP PORTFOLIO (5)
Value at beginning of $13.838
period
Value at end of period $16.286
Increase (decrease) in 17.70%
value of accumulation
unit(1)
Number of accumulation 16,557,231.9
units outstanding at
end of period
AMERICAN CENTURY VP CAPITAL APPRECIATION* (5)
Value at beginning of $14.395
period
Value at end of period $15.849
Increase (decrease) in 10.10%
value of accumulation
unit(1)
Number of accumulation 11,870,358.8
units outstanding at
end of period
CALVERT SOCIAL BALANCED PORTFOLIO**
Value at beginning of $15.044
period
Value at end of period $17.769
Increase (decrease) in 18.11%
value of accumulation
unit(1)
Number of accumulation 1,446,488.2
units outstanding at
end of period
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of $12.518
period
Value at end of period $15.573
Increase (decrease) in 24.41%
value of
accumulation unit(1)
Number of accumulation 6,599,576.9
units outstanding at
end of period
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of $11.402
period
Value at end of period $14.061
Increase (decrease) in 23.32%
value of accumulation
unit(1)
Number of accumulation 6,082,316.8
units outstanding at
end of period
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
Period ended
September 30,
1997
(unaudited)
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of $11.137
period
Value at end of period $13.186
Increase (decrease) in 18.40%
value of accumulation
unit(1)
Number of accumulation 715,460.3
units outstanding at
end of period
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of $12.455
period
Value at end of period $15.518
Increase (decrease) in 24.59%
value of accumulation
unit(1)
Number of accumulation 10,271,212.2
units outstanding at
end of period
FRANKLIN GOVERNMENT SECURITIES TRUST (5)
Value at beginning of $12.088
period
Value at end of period $12.826
Increase (decrease) in 6.11%
value of accumulation
unit(1)
Number of accumulation 802,112.3
units outstanding at
end of period
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of $14.202
period
Value at end of period $15.566
Increase (decrease) in 9.61%
value of accumulation
unit(1)
Number of accumulation 9,114,364.7
units outstanding at
end of period
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of $12.449
period
Value at end of period $14.725
Increase (decrease) in 18.28%
value of accumulation
unit(1)
Number of accumulation 1,720,444.0
units outstanding at
end of period
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of $13.022
period
Value at end of period $13.976
Increase (decrease) in 7.32%
value of accumulation
unit(1)
Number of accumulation 804,369.4
units outstanding at
end of period
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of $12.716
period
Value at end of period $15.629
Increase (decrease) in 22.91%
value of accumulation
unit(1)
Number of accumulation 2,859,604.1
units outstanding at
end of period
JANUS ASPEN SHORT-TERM BOND PORTFOLIO (5)
Value at beginning of $10.600
period
Value at end of period $11.032
Increase (decrease) in 4.08%
value of accumulation
unit(1)
Number of accumulation 105,021.0
units outstanding at
end of period
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of $13.860
period
Value at end of period $17.395
Increase (decrease) in 25.51%
value of accumulation
unit(1)
Number of accumulation 16,418,633.6
units outstanding at
end of period
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
LEXINGTON NATURAL RESOURCES TRUST ***
Value at beginning of $14.686
period
Value at end of period $17.973
Increase (decrease) in 22.38%
value of accumulation
unit(1)
Number of accumulation 1,830,284.10
units outstanding at
end of period
NEUBERGER & BERMAN GROWTH PORTFOLIO (5)
Value at beginning of $15.461
period
Value at end of period $20.200
Increase (decrease) in 30.65%
value of accumulation
unit(1)
Number of accumulation 2,901,208.0
units outstanding at
end of period
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES (5)
Value at beginning of $15.781
period
Value at end of period $18.079
Increase (decrease) in 14.56%
value of accumulation
unit(1)
Number of accumulation 6,514,240.6
units outstanding at
end of period
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year
or shorter period, if indicated, 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) Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during August 1997 when the Fund
became available under the Contracts, when funds were first received in
this option or when the applicable daily asset charge was first utilized.
(3) Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during June 1997 when the Fund
became available under the Contract, when funds were first received in this
option or when the applicable daily asset charge was first utilized.
(4) Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during July 1997 when the Fund
became available under the Contract, when funds were first received in this
option or when the applicable daily asset charge was first utilized.
(5) This Fund has been replaced effective November 28, 1997 as described in the
supplement dated August 21, 1997.
* Formerly TCI Portfolios, Inc.--TCI Growth.
** Formerly Calvert Responsibly Invested Balanced Portfolio.
*** This Fund will be removed from the list of Funds after all participants have
directed money allocated to this Subaccount to other available options.
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
TABLE II
(FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.50%,
INCLUDING A 0.25% ADMINISTRATIVE EXPENSE CHARGE BEGINNING APRIL 7, 1997)
================================================================================
The condensed financial information presented below for the period ending
September 30, 1997 (unaudited) is supplemental to the Condensed Financial
Information for the ten-year period ended December 31, 1996 (audited) in the
Prospectus.
Period ended
September 30, 1997
(unaudited)
AETNA VARIABLE FUND
Value at beginning of $17.861
period
Value at end of period $22.617
Increase (decrease) in 26.63%(2)
value of accumulation
unit(1)
Number of accumulation 1,690,604.1
units outstanding at
end of period
AETNA INCOME SHARES
Value at beginning of $12.302
period
Value at end of period $13.035
Increase (decrease) in 5.96%(2)
value of accumulation
unit(1)
Number of accumulation 209,867.7
units outstanding at
end of period
AETNA VARIABLE ENCORE FUND
Value at beginning of $11.592
period
Value at end of period $11.812
Increase (decrease) in 1.90%(2)
value of accumulation
unit(1)
Number of accumulation 170,630.1
units outstanding at
end of period
AETNA INVESTMENT ADVISERS FUND, INC.
Value at beginning of $15.674
period
Value at end of period $18.474
Increase (decrease) in 17.86%(2)
value of accumulation
unit(1)
Number of accumulation 494,075.9
units outstanding at
end of period
AETNA ASCENT VARIABLE PORTFOLIO
Value at beginning of $13.020
period
Value at end of period $15.603
Increase (decrease) in 19.84%(2)
value of accumulation
unit(1)
Number of accumulation 24,326.4
units outstanding at
end of period
AETNA CROSSROADS VARIABLE PORTFOLIO
Value at beginning of $12.449
period
Value at end of period $14.537
Increase (decrease) in 16.77%(2)
value of accumulation
unit(1)
Number of accumulation 28,712.4
units outstanding at
end of period
AETNA LEGACY VARIABLE PORTFOLIO
Value at beginning of $11.873
period
Value at end of period $13.453
Increase (decrease) in 13.31%(2)
value of accumulation
unit(1)
Number of accumulation 14,692.8
units outstanding at
end of period
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
Period ended
September 30, 1997
(unaudited)
AETNA VARIABLE INDEX PLUS PORTFOLIO
Value at beginning of $11.345
period
Value at end of period $14.084
Increase (decrease) in 24.14%(2)
value of accumulation
unit(1)
Number of accumulation 21,737.0
units outstanding at
end of period
ALGER AMERICAN GROWTH PORTFOLIO (3)
Value at beginning of $11.648
period
Value at end of period $14.650
Increase (decrease) in 25.77%(2)
value of accumulation
unit(1)
Number of accumulation 76,881.5
units outstanding at
end of period
ALGER AMERICAN SMALL CAP PORTFOLIO (3)
Value at beginning of $12.621
period
Value at end of period $16.267
Increase (decrease) in 28.89%(2)
value of accumulation
unit(1)
Number of accumulation 115,240.5
units outstanding at
end of period
AMERICAN CENTURY VP CAPITAL APPRECIATION* (3)
Value at beginning of $12.646
period
Value at end of period $15.830
Increase (decrease) in 25.18%(2)
value of accumulation
unit(1)
Number of accumulation 146,028.4
units outstanding at
end of period
CALVERT SOCIAL BALANCED PORTFOLIO**
Value at beginning of $14.934
period
Value at end of period $17.748
Increase (decrease) in 18.84%(2)
value of accumulation
unit(1)
Number of accumulation 21,044.1
units outstanding at
end of period
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of $12.711
period
Value at end of period $15.555
Increase (decrease) in 22.37%(2)
value of accumulation
unit(1)
Number of accumulation 119,864.4
units outstanding at
end of period
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of $11.373
period
Value at end of period $14.044
Increase (decrease) in 23.49%(2)
value of accumulation
unit(1)
Number of accumulation 94,675.7
units outstanding at
end of period
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of $11.253
period
Value at end of period $13.170
Increase (decrease) in 17.04%(2)
value of accumulation
unit(1)
Number of accumulation 7,727.2
units outstanding at
end of period
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
Period ended
September 30, 1997
(unaudited)
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of $12.388
period
Value at end of period $15.499
Increase (decrease) in 25.11%(2)
value of accumulation
unit(1)
Number of accumulation 155,500.0
units outstanding at
end of period
FRANKLIN GOVERNMENT SECURITIES TRUST (3)
Value at beginning of $12.112
period
Value at end of period $12.811
Increase (decrease) in 5.77%(2)
value of accumulation
unit(1)
Number of accumulation 9,655.0
units outstanding at
end of period
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of $12.594
period
Value at end of period $15.547
Increase (decrease) in 23.45%(2)
value of accumulation
unit(1)
Number of accumulation 75,489.5
units outstanding at
end of period
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of $12.760
period
Value at end of period $14.707
Increase (decrease) in 15.26%(2)
value of accumulation
unit(1)
Number of accumulation 18,986.1
units outstanding at
end of period
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of $13.025
period
Value at end of period $13.959
Increase (decrease) in 7.17%(2)
value of accumulation
unit(1)
Number of accumulation 12,816.5
units outstanding at
end of period
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of $12.975
period
Value at end of period $15.611
Increase (decrease) in 20.32%(2)
value of accumulation
unit(1)
Number of accumulation 51,538.3
units outstanding at
end of period
JANUS ASPEN SHORT-TERM BOND PORTFOLIO (3)
Value at beginning of $10.691
period
Value at end of period $11.019
Increase (decrease) in 3.07%(2)
value of accumulation
unit(1)
Number of accumulation 1,797.2
units outstanding at
end of period
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of $14.439
period
Value at end of period $17.374
Increase (decrease) in 20.33%(2)
value of accumulation
unit(1)
Number of accumulation 157,920.3
units outstanding at
end of period
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
================================================================================
Period ended
September 30, 1997
(unaudited)
LEXINGTON NATURAL RESOURCES TRUST ***
Value at beginning of $13.756
period
Value at end of period $17.952
Increase (decrease) in 30.50%(2)
value of accumulation
unit(1)
Number of accumulation 23,581.4
units outstanding at
end of period
NEUBERGER & BERMAN GROWTH PORTFOLIO (3)
Value at beginning of $16.162
period
Value at end of period $20.175
Increase (decrease) in 24.83%(2)
value of accumulation
unit(1)
Number of accumulation 21,254.7
units outstanding at
end of period
SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES (3)
Value at beginning of $15.781
period
Value at end of period $18.058
Increase (decrease) in 14.43%(2)
value of accumulation
unit(1)
Number of accumulation 44,160.4
units outstanding at
end of period
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year
or shorter period, if indicated, 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) Reflects less than a full period of performance activity. The initial
Accumulation Unit Value was established during April 1997 when the fund
became available under the Contract, when funds were first received in this
option or when the applicable daily asset charge was first utilized.
(3) This Fund has been replaced effective November 28, 1997 as described in the
supplement dated August 21, 1997.
* Formerly TCI Portfolios, Inc.--TCI Growth.
** Formerly Calvert Responsibly Invested Balanced Portfolio.
*** This Fund will be removed from the list of Funds after all participants
have directed money allocated to this Subaccount to other available options.
<PAGE>
The following information is added as its own subsection to the end of the
section entitled `Miscellaneous' on page 18 of the prospectus:
Year 2000
Aetna Inc. (referred to collectively with its subsidiaries and affiliates as
"Aetna"), has developed and is currently executing a plan to make its computer
systems and applications accommodate date-sensitive information relating to the
Year 2000. The plan covers four stages including (i) inventory, (ii) assessment,
(iii) remediation and (iv) testing and certification. Aetna is currently in the
assessment or remediation stages of its plan for the systems and applications
related to the Separate Account, including those relating to the Company, and
Aeltus Investment Management, Inc., the subadviser to most Aetna affiliated
mutual funds. Testing and certification of these systems is targeted for
competition by mid 1999. The costs of these efforts will not affect the Separate
Account.
The Company, its affiliates and the mutual funds that serve as investment
options for the Separate Account also have relationships with investment
advisers, broker dealers, transfer agents, custodians or other securities
industry participants or other service providers that are not affiliated with
Aetna. Aetna is currently examining its relationship with third parties as part
of its Year 2000 plan. While the Company believes that United States securities
industry participants generally are preparing their computer systems and
applications to accommodate Year 2000 date-sensitive information, preparation by
third parties is outside the Company's control. There can be no assurance that
failure of third parties to complete adequate preparations in a timely manner,
and any resulting systems interruptions or other consequences, would not have an
adverse effect, directly or indirectly, on the Separate Account, including,
without limitation, its operation or the valuation of its assets and units.
X.75986-97 February 1998
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated February 12, 1998
Group Variable Annuity Contracts Available under Section 403(b) and 401(a)
RETIREMENT PLUS
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 and as amended by supplements dated August
21, 1997 and February 12, 1998.
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........................................... 2
Variable Annuity Account C................................................ 2
Offering and Purchase of Contracts........................................ 3
Performance Data.......................................................... 3
General.............................................................. 3
Average Annual Total Return Quotations............................... 4
Annuity Payments.......................................................... 7
Sales Material and Advertising............................................ 8
Independent Auditors...................................................... 8
Financial Statements of the Separate Account.............................. S-1
Financial Statements of Aetna Life Insurance and Annuity Company.......... F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1996, the Company had
$30.1 billion invested through its products, including $15.0 billion in its
separate accounts (of which the Company oversees the management of $10.5
billion) and $1.1 billion in its mutual funds offered outside of its separate
accounts. As of December 31, 1995, it ranked among the top 2% of all U.S. life
insurance companies based on assets. 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. Purchase Payments made under the Contract may be
allocated to one or more of the Subaccounts. Each Subaccount invests in the
shares of only one of the Funds listed below. 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 or under all Plans.
2
<PAGE>
The Funds currently available under the Contract are as follows:
<TABLE>
<S> <C>
Aetna Variable Fund Fidelity VIP Growth Portfolio
Aetna Income Shares Fidelity VIP Overseas Portfolio
Aetna Variable Encore Fund Janus Aspen Aggressive Growth Portfolio
Aetna Investment Advisers Fund, Inc. Janus Aspen Balanced Portfolio
Aetna Ascent Variable Portfolio Janus Aspen Flexible Income Portfolio
Aetna Crossroads Variable Portfolio Janus Aspen Growth Portfolio
Aetna Legacy Variable Portfolio Janus Aspen Worldwide Growth Portfolio
Aetna Variable Capital Appreciation Portfolio Lexington Natural Resources Trust*
Aetna Variable Growth Portfolio Portfolio Partners, Inc. MFS Emerging Equities Portfolio
Aetna Variable Index Plus Portfolio Portfolio Partners, Inc. MFS Research Growth Portfolio
Aetna Variable Small Company Portfolio Portfolio Partners, Inc. MFS Value Equity Portfolio
Calvert Social Balanced Portfolio** Portfolio Partners, Inc. Scudder International Growth Portfolio
Fidelity VIP II Contrafund Portfolio Portfolio Partners, Inc. T. Rowe Price Growth Equity Portfolio
Fidelity VIP Equity-Income Portfolio
</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.
* This Fund will be removed from the list of Funds as soon as all participants
have redirected their allocations to other available investment options.
** Formerly Calvert Responsibly Invested Balanced Portfolio.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the sections titled "Purchase" and "Contract Valuation."
PERFORMANCE DATA
General
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as the "non-standardized total
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
3
<PAGE>
from the result which is then expressed as a percentage, carried to at least the
nearest hundredth of a percent. The standardized figures use the actual returns
of the Fund since the date the Fund was first available under the Separate
Account and then adjust them to reflect the deduction of all recurring charges
under the Contracts during each period (e.g., mortality and expense risk
charges, maintenance fees, administrative expense charges and deferred sales
charges). These charges will be deducted on a pro rata basis in the case of
fractional periods. The maintenance fee is converted to a percentage of assets
based on the average account size under the Contracts described in the
prospectus. The total return figures shown below may be different from the
actual historical total return under your Contract because for periods prior to
1994, the Subaccount's investment performance reflected the investment
performance of the underlying Fund plus any cash held by the Subaccount.
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, and may include returns calculated from the
Fund's inception date and/or the date the Fund was added to the Separate
Account.
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
Table A shown below, reflects the average annual standardized and
non-standardized total return quotation figures for the periods ended
September 30, 1997 for the Subaccounts available as of September 30, 1997 under
Single Payment Accounts issued by the Company (as indicated on the table not all
such Funds are currently available). Table B reflects the average annual
standardized and non-standardized total return quotation figures for the periods
ended September 30, 1997 for the Subaccounts available as of September 30, 1997
under Installment Payment Accounts with a $15 annual maintenance fee (as
indicated on the table not all such Funds are currently available). The Company
may also advertise total return quotations for Installment Payment Accounts with
a $7.50 maintenance fee. Both sets of returns shown below reflect the 0.25%
administrative expense charge applicable to some Contracts. The Company may also
advertise total return quotations where the administrative expense charge is not
reflected. In both sets of tables shown below, for those Subaccounts where
results are not available for the full calendar period indicated, the percentage
shown is an average annual return since the date the contributions were first
received in the Fund under the Separate Account (in the case of standardized
performance) or since inception of the Fund (in the case of non-standardized
performance). Percentage returns for less than a full period are denoted with
an asterisk.
4
<PAGE>
TABLE A
<TABLE>
<CAPTION>
|-----------------------------------------|------------------
SINGLE PAYMENT ACCOUNT: | | DATE
($0 MAINTENANCE FEE) | STANDARDIZED | CONTRIBUTIONS
| | FIRST RECEIVED
| | UNDER SEPARATE
| | ACCOUNT
- ---------------------------------------------|-----------------------------------------|------------------
SUBACCOUNT 1 Year 5 Years 10 Years
<S> <C> <C> <C> <C>
34.45% 16.33% 12.84% (2)
Aetna Variable Fund
---------------------------------------------------------------------------------------------------------
2.25% 4.30% 7.94% (2)
Aetna Income Shares
- ---------------------------------------------------------------------------------------------------------
(1.31%) 2.30% 4.43% (2)
Aetna Variable Encore Fund
- ---------------------------------------------------------------------------------------------------------
17.28% 11.82% 10.58%* 04/03/89
Aetna Investment Advisers Fund, Inc.
- ---------------------------------------------------------------------------------------------------------
22.21% 19.67%* N/A 07/31/95
Aetna Ascent Variable Portfolio
- ---------------------------------------------------------------------------------------------------------
17.47% 16.48%* N/A 07/04/95
Aetna Crossroads Variable Portfolio
- ---------------------------------------------------------------------------------------------------------
11.99% 11.83%* N/A 07/31/95
Aetna Legacy Variable Portfolio
- ---------------------------------------------------------------------------------------------------------
15.67%* N/A N/A 05/30/97
Aetna Variable Capital Appreciation
Portfolio
- ---------------------------------------------------------------------------------------------------------
18.71%* N/A N/A 05/03/97
Aetna Variable Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
27.99%* N/A N/A 10/31/96
Aetna Variable Index Plus Portfolio
- ---------------------------------------------------------------------------------------------------------
18.12%* N/A N/A 05/30/97
Aetna Variable Small Company Portfolio
- ---------------------------------------------------------------------------------------------------------
26.20% 22.42%* N/A 10/31/94
Alger American Growth Portfolio
(3)
- ---------------------------------------------------------------------------------------------------------
7.15% 11.83%* N/A 09/30/93
Alger American Small Cap Portfolio
(3)
- ---------------------------------------------------------------------------------------------------------
American Century VP Capital (5.25%) 7.51% 7.96%* 08/31/92
Appreciation (3)
- ---------------------------------------------------------------------------------------------------------
15.61% 10.96% 10.12%* 05/31/89
Calvert Social Balanced Portfolio (1)
- ---------------------------------------------------------------------------------------------------------
27.81% 24.44%* N/A 05/31/95
Fidelity VIP II Contrafund Portfolio
- ---------------------------------------------------------------------------------------------------------
25.33% 20.13%* N/A 05/31/94
Fidelity VIP Equity-Income Portfolio
- ---------------------------------------------------------------------------------------------------------
18.90% 19.96%* N/A 05/31/94
Fidelity VIP Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
17.13% 8.44%* N/A 05/31/94
Fidelity VIP Overseas Portfolio
- ---------------------------------------------------------------------------------------------------------
3.22% 4.01% 6.58%* 06/30/89
Franklin Government Securities Trust
(3)
- ---------------------------------------------------------------------------------------------------------
0.67% 17.69%* N/A 06/30/94
Janus Aspen Aggressive Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
15.45% 16.90%* N/A 06/30/95
Janus Aspen Balanced Portfolio
- ---------------------------------------------------------------------------------------------------------
5.85% 10.00%* N/A 10/31/94
Janus Aspen Flexible Income Portfolio
- ---------------------------------------------------------------------------------------------------------
19.01% 21.22%* N/A 06/30/95
Janus Aspen Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
0.39% 1.98%* N/A 07/31/95
Janus Aspen Short-Term Bond Portfolio
(3)
- ---------------------------------------------------------------------------------------------------------
24.76% 25.59%* N/A 05/31/95
Janus Aspen Worldwide Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
29.46% 11.26% 10.19%* 10/14/91
Lexington Natural Resources Trust (4)
- ---------------------------------------------------------------------------------------------------------
29.03% 13.07% 10.24%* 05/31/89
Neuberger & Berman Growth Portfolio
(3)
- ---------------------------------------------------------------------------------------------------------
Scudder International Portfolio 13.71% 11.43% 8.05%* 07/31/89
Class A Shares (3)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included and methodology used in the Standardized and Non-Standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
5
<PAGE>
TABLE A
<TABLE>
<CAPTION>
|-----------------------------------------|-----------------
SINGLE PAYMENT ACCOUNT: | | FUND
($0 MAINTENANCE FEE) | NON-STANDARDIZED |INCEPTION
| | DATE
| |
- ---------------------------------------------|-----------------------------------------|-----------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
41.53% 27.63% 17.28% 12.84%
Aetna Variable Fund 05/01/75
- ---------------------------------------------------------------------------------------------------------
7.63% 7.67% 5.16% 7.94%
Aetna Income Shares 05/15/73
- ---------------------------------------------------------------------------------------------------------
3.89% 4.02% 3.14% 4.43%
Aetna Variable Encore Fund 08/01/75
- ---------------------------------------------------------------------------------------------------------
23.45% 18.94% 12.74% 10.98%*
Aetna Investment Advisers Fund, Inc. 04/03/89
- ---------------------------------------------------------------------------------------------------------
28.64% 23.26%* N/A N/A
Aetna Ascent Variable Portfolio 07/05/95
- ---------------------------------------------------------------------------------------------------------
23.66% 19.18%* N/A N/A
Aetna Crossroads Variable Portfolio 07/05/95
- ---------------------------------------------------------------------------------------------------------
17.89% 14.79%* N/A N/A
Aetna Legacy Variable Portfolio 07/05/95
- ---------------------------------------------------------------------------------------------------------
41.44%* N/A N/A N/A
Aetna Variable Capital Appreciation 12/13/96
Portfolio
- ---------------------------------------------------------------------------------------------------------
39.70%* N/A N/A N/A
Aetna Variable Growth Portfolio 12/13/96
- ---------------------------------------------------------------------------------------------------------
39.77% 38.80%* N/A N/A
Aetna Variable Index Plus Portfolio 09/16/96
- ---------------------------------------------------------------------------------------------------------
38.23%* N/A N/A N/A
Aetna Variable Small Company Portfolio 12/27/96
- ---------------------------------------------------------------------------------------------------------
32.85% 25.65% 21.53% 18.75%
Alger American Growth Portfolio 01/09/89
(3)
- ---------------------------------------------------------------------------------------------------------
12.79% 20.71% 16.44% 18.89%*
Alger American Small Cap Portfolio 09/21/88
(3)
- ---------------------------------------------------------------------------------------------------------
(0.26%) 10.53% 8.62% 9.49%
American Century VP Capital Appreciation 11/20/87
(3)
- ---------------------------------------------------------------------------------------------------------
21.70% 18.29% 11.87% 9.09%
Calvert Social Balanced Portfolio (1) 09/02/86
- ---------------------------------------------------------------------------------------------------------
34.53% 29.83%* N/A N/A
Fidelity VIP II Contrafund Portfolio 01/03/95
- ---------------------------------------------------------------------------------------------------------
31.93% 22.45% 19.68% 12.35%
Fidelity VIP Equity-Income Portfolio 10/09/86
- ---------------------------------------------------------------------------------------------------------
25.16% 23.71% 19.58% 12.99%
Fidelity VIP Growth Portfolio 10/09/86
- ---------------------------------------------------------------------------------------------------------
23.30% 11.47% 12.80% 7.05%
Fidelity VIP Overseas Portfolio 02/13/87
- ---------------------------------------------------------------------------------------------------------
8.65% 8.08% 4.86% 6.89%*
Franklin Government Securities Trust 02/17/89
(3)
- ---------------------------------------------------------------------------------------------------------
5.97% 15.39% 18.21%* N/A
Janus Aspen Aggressive Growth Portfolio 9/13/93
- ---------------------------------------------------------------------------------------------------------
21.52% 17.88% 15.01%* N/A
Janus Aspen Balanced Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------
11.42% 11.59% 8.21%* N/A
Janus Aspen Flexible Income Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------
25.27% 22.37% 17.42%* N/A
Janus Aspen Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------
5.67% 4.80% 3.29%* N/A
Janus Aspen Short-Term Bond Portfolio 09/13/93
(3)
---------------------------------------------------------------------------------------------------------
31.33% 25.38% 23.77%* N/A
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------
36.27% 17.62% 12.17% 10.95%*
Lexington Natural Resources Trust (4) 10/14/91
- ---------------------------------------------------------------------------------------------------------
35.82% 21.32% 14.24% 10.11%
Neuberger & Berman Growth Portfolio 09/10/84
(3)
- ---------------------------------------------------------------------------------------------------------
19.70% 10.67% 12.57% 7.52%
Scudder International Portfolio Class A 05/01/87
Shares (3)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included and methodology used in the Standardized and Non-Standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
6
<PAGE>
TABLE B
<TABLE>
<CAPTION>
|-----------------------------------------|-----------------
PAYMENT ACCOUNT: | | DATE
($15 MAINTENANCE FEE) | STANDARDIZED | CONTRIBUTIONS
| | FIRST RECEIVED
| | UNDER SEPARATE
| | ACCOUNT
- ---------------------------------------------|-----------------------------------------|-----------------
SUBACCOUNT 1 Year 5 Years 10 Years
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
34.33% 15.96% 12.72% (2)
Aetna Variable Fund
- ---------------------------------------------------------------------------------------------------------
2.12% 3.96% 7.82% (2)
Aetna Income Shares
- ---------------------------------------------------------------------------------------------------------
(1.43%) 1.96% 4.30% (2)
Aetna Variable Encore Fund
- ---------------------------------------------------------------------------------------------------------
17.15% 11.46% 10.18%* 04/03/89
Aetna Investment Advisers Fund, Inc.
- ---------------------------------------------------------------------------------------------------------
22.08% 19.55%* N/A 07/31/95
Aetna Ascent Variable Portfolio
- ---------------------------------------------------------------------------------------------------------
17.35% 16.36%* N/A 07/04/95
Aetna Crossroads Variable Portfolio
- ---------------------------------------------------------------------------------------------------------
11.87% 11.70%* N/A 07/31/95
Aetna Legacy Variable Portfolio
- ---------------------------------------------------------------------------------------------------------
15.54%* N/A N/A 05/30/97
Aetna Variable Capital Appreciation
Portfolio
- ---------------------------------------------------------------------------------------------------------
18.59%* N/A N/A 05/30/97
Aetna Variable Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
27.86%* N/A N/A 10/31/96
Aetna Variable Index Plus Portfolio
- ---------------------------------------------------------------------------------------------------------
17.99%* N/A N/A 05/30/97
Aetna Variable Small Company Portfolio
- ---------------------------------------------------------------------------------------------------------
26.08% 22.29%* N/A 10/31/94
Alger American Growth Portfolio
(3)
- ---------------------------------------------------------------------------------------------------------
7.02% 11.71%* N/A 09/30/93
Alger American Small Cap Portfolio
(3)
- ---------------------------------------------------------------------------------------------------------
American Century VP Capital (5.37%) 7.39% 7.83%* 08/31/92
Appreciation (3)
- ---------------------------------------------------------------------------------------------------------
15.49% 10.60% 9.72%* 09/30/93
Calvert Social Balanced Portfolio (1)
- ---------------------------------------------------------------------------------------------------------
27.68% 24.31%* N/A 05/31/95
Fidelity VIP II Contrafund Portfolio
- ---------------------------------------------------------------------------------------------------------
25.20% 20.01%* N/A 05/31/94
Fidelity VIP Equity-Income Portfolio
- ---------------------------------------------------------------------------------------------------------
18.78% 19.84%* N/A 05/31/94
Fidelity VIP Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
17.01% 8.31%* N/A 05/31/94
Fidelity VIP Overseas Portfolio
- ---------------------------------------------------------------------------------------------------------
3.09% 3.67%* N/A 06/07/89
Franklin Government Securities Trust
(3)
- ---------------------------------------------------------------------------------------------------------
0.54% 17.56%* N/A 06/30/94
Janus Aspen Aggressive Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
15.32% 16.77%* N/A 06/30/95
Janus Aspen Balanced Portfolio
- ---------------------------------------------------------------------------------------------------------
5.72% 9.87%* N/A 10/31/94
Janus Aspen Flexible Income Portfolio
- ---------------------------------------------------------------------------------------------------------
18.88% 21.10%* N/A 06/30/95
Janus Aspen Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
0.26% 1.85%* N/A 07/31/95
Janus Aspen Short-Term Bond Portfolio
(3)
- ---------------------------------------------------------------------------------------------------------
24.63% 29.46%* N/A 05/31/95
Janus Aspen Worldwide Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
29.33% 10.90% 9.87% 10/14/91
Lexington Natural Resources Trust (4)
- ---------------------------------------------------------------------------------------------------------
28.90% 12.95% 10.11% 05/31/89
Neuberger & Berman Growth Portfolio
(3)
- ---------------------------------------------------------------------------------------------------------
13.59% 11.30% 7.92% 07/31/89
Scudder International Portfolio Class A
Shares (3)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included and methodology used in the Standardized and Non-Standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
7
<PAGE>
TABLE B
<TABLE>
<CAPTION>
|----------------------------------------|-------------------
PAYMENT ACCOUNT: | | FUND
($15 MAINTENANCE FEE) | NON-STANDARDIZED | INCEPTION
| | DATE
| |
- ---------------------------------------------|----------------------------------------|-------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years |
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
41.40% 27.50% 17.16% 12.72%
Aetna Variable Fund 05/01/75
- ---------------------------------------------------------------------------------------------------------
7.50% 7.55% 5.03% 7.82%
Aetna Income Shares 05/15/73
- ---------------------------------------------------------------------------------------------------------
3.76% 3.90% 3.02% 4.30%
Aetna Variable Encore Fund 08/01/75
- ---------------------------------------------------------------------------------------------------------
23.33% 18.82% 12.61% 10.85%*
Aetna Investment Advisers Fund, Inc. 04/03/89
- ---------------------------------------------------------------------------------------------------------
28.51% 23.13%* N/A N/A
Aetna Ascent Variable Portfolio 07/05/95
- ---------------------------------------------------------------------------------------------------------
23.53% 19.05%* N/A N/A
Aetna Crossroads Variable Portfolio 07/05/95
- ---------------------------------------------------------------------------------------------------------
17.76% 14.67%* N/A N/A
Aetna Legacy Variable Portfolio 07/05/95
- ---------------------------------------------------------------------------------------------------------
41.31%* N/A N/A N/A
Aetna Variable Capital Appreciation 12/13/96
Portfolio
- ---------------------------------------------------------------------------------------------------------
39.58%* N/A N/A N/A
Aetna Variable Growth Portfolio 12/13/96
- ---------------------------------------------------------------------------------------------------------
39.64% 38.68%* N/A N/A
Aetna Variable Index Plus Portfolio 09/16/96
- ---------------------------------------------------------------------------------------------------------
38.11%* N/A N/A N/A
Aetna Variable Small Company Portfolio 12/27/96
- ---------------------------------------------------------------------------------------------------------
32.72% 25.53% 21.41% 18.63%*
Alger American Growth Portfolio 01/09/89
(3)
- ---------------------------------------------------------------------------------------------------------
12.66% 20.58% 16.31% 18.77%*
Alger American Small Cap Portfolio 09/21/88
(3)
- ---------------------------------------------------------------------------------------------------------
(0.39%) 10.41% 8.50% 9.37%*
American Century VP Capital Appreciation 11/20/87
(3)
- ---------------------------------------------------------------------------------------------------------
21.57% 18.17% 11.75% 8.97%
Calvert Social Balanced Portfolio (1) 09/02/86
- ---------------------------------------------------------------------------------------------------------
34.41% 29.71%* N/A N/A
Fidelity VIP II Contrafund Portfolio 01/03/95
- ---------------------------------------------------------------------------------------------------------
31.80% 22.32% 19.56% 12.22%
Fidelity VIP Equity-Income Portfolio 10/09/86
- ---------------------------------------------------------------------------------------------------------
25.03% 23.59% 19.46% 12.87%
Fidelity VIP Growth Portfolio 10/09/86
- ---------------------------------------------------------------------------------------------------------
23.17% 11.35% 12.67% 6.92%
Fidelity VIP Overseas Portfolio 02/13/87
- ---------------------------------------------------------------------------------------------------------
8.52% 7.96% 4.74% 6.85%*
Franklin Government Securities Trust 02/17/89
(3)
- ---------------------------------------------------------------------------------------------------------
5.84% 15.26% 18.09%* N/A
Janus Aspen Aggressive Growth Portfolio 9/13/93
- ---------------------------------------------------------------------------------------------------------
21.40% 17.76% 14.89%* N/A
Janus Aspen Balanced Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------
11.29% 11.46% 8.08%* N/A
Janus Aspen Flexible Income Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------
25.14% 22.25% 17.29%* N/A
Janus Aspen Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------
5.55% 4.67% 3.16%* N/A
Janus Aspen Short-Term Bond Portfolio 09/13/93
(3)
- ---------------------------------------------------------------------------------------------------------
31.20% 25.26% 23.65%* N/A
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ---------------------------------------------------------------------------------------------------------
36.14% 17.49% 12.05% 10.82%*
Lexington Natural Resources Trust (4) 10/14/91
- ---------------------------------------------------------------------------------------------------------
35.69% 21.19% 14.11% 9.98%
Neuberger & Berman Growth Portfolio 09/10/84
(3)
- ---------------------------------------------------------------------------------------------------------
19.57% 10.54% 12.45% 7.39%
Scudder International Portfolio Class A 05/01/87
Shares (3)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the Tables for an explanation of the
charges included and methodology used in the Standardized and Non-Standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
(1) Formerly Calvert Responsibly Invested Balanced Portfolio
(2) Fund has been available through the Separate Account for more than 10
years.
(3) This Fund has been replaced effective November 28, 1997 as described in the
supplement dated August 21, 1997.
(4) This Fund will be removed from the list of Funds after all participants
have redirected their allocations to other investment options
8
<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 on which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of
9
<PAGE>
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.
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. We may illustrate in advertisements the performance of the
underlying funds, if accompanied by performance which also shows the performance
of such funds reduced by applicable charges under the Separate Account. We may
also show in advertisements the portfolio holdings of the underlying funds,
updated at various intervals. From time to time, we will quote articles from
newspapers and magazines or other publications or reports, including, but not
limited to The Wall Street Journal, Money magazine, USA Today and The VARDS
Report.
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Contract Holders or Participants. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments, including comparison
between the Contracts and the characteristics of and market for such financial
instruments.
10
<PAGE>
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.
11
<PAGE>
VARIABLE ANNUITY ACCOUNT C
FINANCIAL STATEMENTS
Index
Statement of Assets and Liabilities as of September 30, 1997 ............ S-2
Statements of Operations and Changes in Net Assets for the nine months
ended September 30, 1997 and 1996 (unaudited) ........................... S-5
Condensed Financial Information for the nine-month period
ended September 30, 1997 (unaudited) .................................... S-6
Notes to Financial Statements - September 30, 1997(unaudited) ........... S-18
Statement of Assets and Liabilities - December 31, 1996 ................. S-23
Statements of Operations and Changes in Net Assets
for the years ended December 31, 1996 and 1995 .......................... S-26
Notes to Financial Statements - December 31, 1996 ....................... S-27
Independent Auditors' Report ............................................ S-33
S-1
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - September 30, 1997 (Unaudited):
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 157,470,058 shares (cost $4,846,667,490) ................... $6,455,191,974
Aetna Income Shares; 26,683,356 shares (cost $343,667,758)...................... 348,854,057
Aetna Variable Encore Fund; 17,860,183 shares (cost $231,990,442) ............... 235,448,441
Aetna Investment Advisers Fund, Inc.; 58,900,102 shares (cost $799,973,150) ..... 971,886,137
Aetna GET Fund, Series B; 5,188,852 shares (cost $57,741,523) ................... 83,656,293
Aetna GET Fund, Series C; 18,953,127 shares (cost $191,427,859) ................. 235,665,110
Aetna Ascent Variable Portfolio; 4,182,601 shares (cost $53,042,912) ............ 63,162,796
Aetna Crossroads Variable Portfolio; 3,102,103 shares (cost $37,588,568) ........ 43,314,846
Aetna Legacy Variable Portfolio; 1,959,386 shares (cost $22,726,832) ............ 24,769,132
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio; 12,825 shares (cost $179,144) .. 183,294
Aetna Variable Growth Portfolio; 5,081 shares (cost $66,991) .................. 71,841
Aetna Variable Index Plus Portfolio; 4,572,380 shares (cost $56,720,268) ...... 64,971,160
Aetna Variable Small Company Portfolio; 46,819 shares (cost $609,943) ......... 654,607
Alger American Funds:
Growth Portfolio; 3,741,548 shares (cost $125,976,508) ........................ 165,675,750
Small Capitalization Portfolio; 8,108,026 shares (cost $306,797,499) .......... 378,320,483
American Century Investments Capital Appreciation Fund; 24,062,942 shares
(cost $231,325,737) ..................... ..................................... 267,579,920
Calvert Responsibly Invested Balanced Fund; 24,556,059 shares (cost $41,258,909) 51,936,064
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 7,349,478 shares (cost $144,395,757) ................. 174,917,568
Growth Portfolio; 3,225,941 shares (cost $97,087,233) ......................... 120,650,175
Overseas Portfolio; 714,093 shares (cost $13,208,581) ......................... 14,688,898
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 1,246,519 shares (cost $18,467,084) .................. 21,976,134
Contrafund Portfolio; 11,576,407 shares (cost $180,500,727) ................... 233,843,413
Index 500 Portfolio; 461,497 shares (cost $41,189,790) ........................ 51,369,251
Franklin Government Securities Trust; 1,967,888 shares (cost $25,519,270) ....... 25,976,119
Janus Aspen Series:
Aggressive Growth Portfolio; 9,966,004 shares (cost $167,509,389) .............. 201,113,963
Balanced Portfolio; 1,910,644 shares (cost $28,471,889) ........................ 32,920,404
Flexible Income Portfolio; 1,037,664 shares (cost $11,729,980) ................. 12,151,048
Growth Portfolio; 3,953,698 shares (cost $61,148,323) .......................... 74,052,772
Short-Term Bond Portfolio; 261,201 shares (cost $2,650,036) .................... 2,669,471
Worldwide Growth Portfolio; 17,325,145 shares (cost $338,868,153) .............. 421,174,265
Lexington Emerging Markets Fund; 631,129 shares (cost $6,604,164) ................ 7,074,956
Lexington Natural Resources Trust Fund; 2,896,157 shares (cost $40,423,275) ..... 49,784,937
Neuberger and Berman Advisers Management Trust -
Growth Portfolio; 3,875,576 shares (cost $92,709,258) ......................... 120,995,489
Scudder Variable Life Investment Fund -
International Portfolio; 14,845,251 shares (cost $180,700,815) ................ 222,084,960
---------------
NET ASSETS (cost $8,798,945,257)................................................... $11,178,785,728
===============
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period:
(Notes 1 and 5)
S-2
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - September 30, 1997
(Unaudited & continued):
Aetna Variable Fund:
Annuity contracts in accumulation ............................................... $ 6,157,535,606
Annuity contracts in payment period ............................................. 297,656,368
Aetna Income Shares:
Annuity contracts in accumulation ............................................... 342,649,672
Annuity contracts in payment period ............................................. 6,204,385
Aetna Variable Encore Fund:
Annuity contracts in accumulation ............................................... 235,448,441
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation ............................................... 951,931,761
Annuity contracts in payment period ............................................. 19,954,376
Aetna GET Fund, Series B:
Annuity contracts in accumulation ............................................... 83,656,293
Aetna GET Fund, Series C:
Annuity contracts in accumulation ............................................... 235,665,110
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation ............................................... 63,162,796
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation ............................................... 43,314,846
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation ............................................... 24,713,871
Annuity contracts in payment period ............................................. 55,261
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio:
Annuity contracts in accumulation ............................................... 183,294
Aetna Variable Growth Portfolio:
Annuity contracts in accumulation ............................................... 71,841
Aetna Variable Index Plus Portfolio:
Annuity contracts in accumulation ............................................... 64,893,731
Annuity contracts in payment period ............................................. 77,429
Aetna Variable Small Company Portfolio:
Annuity contracts in accumulation ............................................... 654,607
Alger American Funds:
Growth Portfolio:
Annuity contracts in accumulation ............................................... 165,675,750
Small Capitalization Portfolio:
Annuity contracts in accumulation ............................................... 378,293,554
Annuity contracts in payment period ............................................. 26,929
American Century Investments Capital Appreciation Fund:
Annuity contracts in accumulation ............................................... 267,579,920
Calvert Responsibly Invested Balanced Fund:
Annuity contracts in accumulation ............................................... 51,936,064
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation ............................................... 174,917,568
Growth Portfolio:
Annuity contracts in accumulation ............................................... 120,650,175
Overseas Portfolio:
Annuity contracts in accumulation ............................................... 14,688,898
S-3
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - September 30, 1997 (Unaudited &
continued):
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation ............................................... $ 21,976,134
Contrafund Portfolio:
Annuity contracts in accumulation ............................................... 233,843,413
Index 500 Portfolio:
Annuity contracts in accumulation ............................................... 51,369,251
Franklin Government Securities Trust Fund:
Annuity contracts in accumulation ............................................... 25,976,119
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ............................................... 201,113,963
Balanced Portfolio:
Annuity contracts in accumulation ............................................... 32,920,404
Flexible Income Portfolio:
Annuity contracts in accumulation ............................................... 12,151,048
Growth Portfolio:
Annuity contracts in accumulation ............................................... 74,014,473
Annuity contracts in payment period ............................................. 38,299
Short-Term Bond Portfolio:
Annuity contracts in accumulation ............................................... 2,669,471
Worldwide Growth Portfolio:
Annuity contracts in accumulation ............................................... 421,050,709
Annuity contracts in payment period ............................................. 123,556
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ............................................... 7,074,956
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ............................................... 49,784,937
Neuberger and Berman Advisers Management Trust -
Growth Portfolio:
Annuity contracts in accumulation ............................................... 120,995,489
Scudder Variable Life Investment Fund - International Portfolio:
Annuity contracts in accumulation ............................................... 222,084,960
---------------
$11,178,785,728
===============
</TABLE>
See Notes to Financial Statements
S-4
<PAGE>
Variable Annuity Account C
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
(Unaudited) (Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ................................................. $421,026,326 $ 205,528,954
Expenses: (Notes 2 and 5)
Valuation Period Deductions ............................... (86,917,437) (67,710,773
--------------- ---------------
Net investment income ........................................ 334,108,889 137,818,181
--------------- ---------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ........................................ 724,699,160 1,083,592,483
Cost of investments sold ................................... 641,443,662 816,952,968
--------------- ---------------
Net realized gain ........................................ 83,255,498 266,639,515
Net unrealized gain on investments: (Note 5)
Beginning of period ........................................ 612,391,085 594,083,184
End of period .............................................. 2,379,840,471 912,670,192
--------------- ---------------
Net change in unrealized gain ............................ 1,767,449,386 318,587,008
--------------- ---------------
Net realized and unrealized gain on investments .............. 1,850,704,884 585,226,523
--------------- ---------------
Net increase in net assets resulting from operations ......... 2,184,813,773 723,044,704
--------------- ---------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments .................. 760,186,157 690,194,659
Sales and administrative charges deducted by the Company ..... (2,764) (52,018)
--------------- ---------------
Net variable annuity contract purchase payments .......... 760,183,393. 690,142,641
Transfer from the Company for mortality guarantee adjustments 1,822,537 2,502,311
Transfers (to) from the Company's fixed account options ...... 125,996,030 144,295,730
Redemptions by contract holders .............................. (350,901,432) (240,215,680)
Annuity Payments ............................................. (22,297,860) (14,903,958)
Other ........................................................ (86,033,076) (161,039)
--------------- ---------------
Net increase in net assets from unit transactions (Note 5) 428,769,592 581,660,005
--------------- ---------------
Change in net assets ......................................... 2,613,583,365 1,304,704,709
NET ASSETS:
Beginning of period .......................................... 8,565,202,363 6,632,117,659
--------------- ---------------
End of period ................................................ $11,178,785,728 $ 7,936,822,368
=============== ===============
</TABLE>
S-5
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund:
Qualified I $222.444 $291.253 30.93% 162,023.8 47,189,833
Qualified III 169.448 221.763 30.87% 1,803,180.2 399,878,934
Qualified V 17.318 22.637 30.72% 200,026.7 4,528,046
Qualified VI 17.302 22.644 30.87% 176,229,616.3 3,990,485,982
Qualified VII 16.291 21.330 30.93% 9,999,052.6 213,284,241
Qualified VIII 16.068 21.027 30.87% 36,850.3 774,864
Qualified IX 15.938 20.914 31.22%(5) 21,604.6 451,844
Qualified X (1.15) 17.357 22.733 30.97% 468,553.2 10,651,528
Qualified X (1.25) 17.302 22.644 30.87% 21,797,751.6 493,581,182
Qualified XI 17.352 22.760 31.17% 5,091,201.4 115,877,337
Qualified XII (0.95) 11.469 15.044 31.17% 3,370,945.2 50,711,677
Qualified XII (1.00) 11.465 15.033 31.12% 43,029.9 646,882
Qualified XII (1.05) 12.312 15.023 22.02%(2) 27,457.1 412,485
Qualified XII (1.15) 11.805 15.002 27.08%(1) 477,622.3 7,165,313
Qualified XII (1.20) 13.746 14.992 9.06%(6) 7.7 115
Qualified XII (1.25) 12.851 14.981 16.57%(4) 720.8 10,799
Qualified XII (1.30) 12.519 14.971 19.59%(4) 2,529.0 37,861
Qualified XII (1.50) 11.429 14.929 30.63% 34,433.0 514,060
Qualified XIII 17.333 22.736 31.17% 7,524,729.3 171,079,009
Qualified XV 17.304 22.698 31.17% 8,054,894.9 182,828,450
Qualified XVI 17.861 22.617 26.63%(3) 1,690,604.1 38,235,722
Qualified XVII 19.673 22.662 15.19%(5) 6,219,046.1 140,933,828
Qualified XVIII 19.673 22.662 15.19%(5) 7,465,035.1 169,169,991
Qualified XIX 253.000 291.484 15.21%(5) 125,386.4 36,548,079
Qualified XX 192.674 221.939 15.19%(5) 231,583.4 51,397,410
Qualified XXI 180.495 222.042 23.02%(4) 140,244.6 31,140,132
Annuity contracts in payment period 297,656,368
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares:
Qualified I $47.405 $51.187 7.98% 20,291.0 1,038,645
Qualified III 46.913 50.603 7.87% 695,310.1 35,184,784
Qualified V 12.546 13.213 5.32% 32,292.2 426,664
Qualified VI 12.377 13.050 5.44% 17,311,240.8 225,914,081
Qualified VII 11.440 12.068 5.49% 186,873.2 2,255,177
Qualified VIII 11.398 12.018 5.44% 2,568.1 30,863
Qualified IX 11.489 12.143 5.69%(5) 1,750.2 21,253
Qualified X (1.15) 12.416 13.102 5.52% 99,804.0 1,307,584
Qualified X (1.25) 12.377 13.050 5.44% 2,514,459.2 32,814,040
Qualified XI 12.413 13.117 5.68% 298,935.1 3,921,261
Qualified XII (0.95) 10.503 11.100 5.68% 183,494.7 2,036,744
Qualified XII (1.00) 10.500 11.092 5.64% 8,475.5 94,011
Qualified XII (1.05) 10.587 11.084 4.69%(2) 9,714.3 107,677
Qualified XII (1.15) 10.476 11.069 5.66%(1) 73,232.3 810,604
Qualified XII (1.30) 10.974 11.046 0.66%(6) 255.6 2,824
Qualified XII (1.50) 10.442 11.015 5.49%(1) 2,456.2 27,056
Qualified XIII 12.399 13.103 5.68% 449,713.4 5,892,656
Qualified XV 12.379 13.081 5.68% 494,668.4 6,470,945
Qualified XVI 12.302 13.035 5.96%(3) 209,867.7 2,735,522
Qualified XVII 12.629 13.056 3.38%(5) 457,722.7 5,976,193
Qualified XVIII 12.629 13.056 3.38%(5) 793,518.8 10,360,467
Qualified XIX 49.527 51.212 3.40%(5) 21,077.7 1,079,425
Qualified XX 48.971 50.627 3.38%(5) 43,613.2 2,208,013
Qualified XXI 48.310 50.667 4.88%(4) 38,154.9 1,933,183
Annuity contracts in payment period 6,204,385
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund:
Qualified I $40.069 $41.320 3.12% 37,745.6 1,559,655
Qualified III 39.528 40.744 3.08% 453,183.3 18,464,317
Qualified V 11.431 11.769 2.95% 60,161.6 708,018
Qualified VI 11.473 11.826 3.08% 12,215,448.7 144,459,701
Qualified VII 11.386 11.741 3.12% 329,921.0 3,873,731
S-6
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund (continued):
Qualified VIII $11.050 $11.389 3.07% 1,985.5 22,613
Qualified IX 11.326 11.696 3.27%(5) 2,747.4 32,134
Qualified X (1.15) 11.510 11.873 3.15% 110,459.9 1,311,496
Qualified X (1.25) 11.473 11.826 3.08% 2,020,958.8 23,899,827
Qualified XI 11.506 11.887 3.31% 272,005.9 3,233,325
Qualified XII (0.95) 10.277 10.617 3.31% 52,931.4 561,984
Qualified XII (1.00) 10.274 10.610 3.27% 877.8 9,313
Qualified XII (1.05) 10.322 10.602 2.71%(2) 1,109.8 11,767
Qualified XII (1.15) 10.264 10.588 3.15% 43,509.0 460,662
Qualified XII (1.30) 10.358 10.566 2.01%(3) 14,158.5 149,595
Qualified XII (1.50) 10.249 10.536 2.80%(1) 11,378.2 119,885
Qualified XIII 11.494 11.874 3.31% 303,520.2 3,604,005
Qualified XV 11.475 11.854 3.31% 553,297.1 6,558,948
Qualified XVI 11.592 11.812 1.90%(3) 170,630.1 2,015,453
Qualified XVII 11.674 11.826 1.30%(5) 617,770.0 7,305,739
Qualified XVIII 11.674 11.826 1.30%(5) 946,418.7 11,192,332
Qualified XIX 40.781 41.320 1.32%(5) 23,327.6 963,902
Qualified XX 40.220 40.744 1.30%(5) 101,624.8 4,140,560
Qualified XXI 40.046 40.795 1.87%(4) 19,352.5 789,482
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.:
Qualified I $20.511 $24.407 18.99% 80,461.8 1,963,872
Qualified III 20.419 24.287 18.94% 2,100,178.7 51,006,610
Qualified V 15.548 18.471 18.80% 42,461.3 784,292
Qualified VI 15.551 18.496 18.94% 34,235,851.8 633,235,046
Qualified VII 14.948 17.787 18.99% 320,012.9 5,692,040
Qualified VIII 14.437 17.171 18.93% 3,524.4 60,518
Qualified IX 14.381 17.151 19.26%(5) 2,864.6 49,129
Qualified X (1.15) 15.600 18.569 19.03% 202,968.3 3,768,904
Qualified X (1.25) 15.551 18.496 18.94% 6,807,459.7 125,912,511
Qualified XI 15.596 18.592 19.21% 766,106.0 14,243,131
Qualified XII (0.95) 10.902 12.995 19.21% 805,978.7 10,473,913
Qualified XII (1.05) 12.677 12.977 2.37%(6) 1,718.1 22,296
Qualified XII (1.15) 11.130 12.959 16.43%(1) 237,517.2 3,078,040
Qualified XII (1.25) 11.921 12.941 8.56%(5) 38.0 492
Qualified XII (1.30) 11.717 12.932 10.37%(5) 425.0 5,496
Qualified XII (1.50) 11.009 12.896 17.14%(1) 6,560.5 84,606
Qualified XIII 15.579 18.571 19.21% 1,503,708.6 27,925,920
Qualified XV 15.553 18.541 19.21% 1,131,727.2 20,982,793
Qualified XVI 15.674 18.474 17.86%(3) 494,075.9 9,127,618
Qualified XVII 16.739 18.511 10.59%(5) 457,413.6 8,467,155
Qualified XVIII 16.739 18.511 10.59%(5) 786,964.3 14,567,449
Qualified XIX 22.085 24.427 10.60%(5) 156,835.8 3,831,008
Qualified XX 21.980 24.306 10.58%(5) 190,216.5 4,623,418
Qualified XXI 20.723 24.317 17.34%(4) 494,524.4 12,025,503
Annuity contracts in payment period 19,954,376
- -----------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B:
Qualified III $15.634 $21.182 35.49% 58,829.6 1,246,149
Qualified VI 15.634 21.182 35.49% 2,825,334.1 59,847,227
Qualified X (1.25) 15.634 21.182 35.49% 334,511.1 7,085,732
Qualified XI 15.679 21.291 35.79% 351,332.8 7,480,380
Qualified XII (1.20) 11.541 13.148 13.92%(5) 2,167.6 28,501
Qualified XII (1.40) 12.575 13.130 4.41%(6) 1,060.3 13,922
Qualified XIII 15.662 21.268 35.79% 111,939.4 2,380,762
Qualified XVI 16.070 21.157 31.66%(3) 1,050.3 22,222
Qualified XVII 18.062 21.182 17.27%(5) 33,837.1 716,750
Qualified XV 15.636 21.233 35.79% 227,695.2 4,834,650
- -----------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C:
Qualified III $10.241 $12.409 21.17% 886,252.9 10,997,443
S-7
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C (continued):
Qualified V $10.236 $12.388 21.02% 2,613.0 32,370
Qualified VI 10.241 12.409 21.17% 15,759,212.5 195,554,838
Qualified XI 10.250 12.448 21.44% 1,062,811.8 13,229,413
Qualified XII (1.20) 10.250 12.448 21.44% 50,028.0 622,727
Qualified XII (1.25) 10.248 12.441 21.40% 29,160.5 362,789
Qualified XII (1.40) 10.403 12.422 19.41%(1) 4,912.1 61,017
Qualified XII (1.75) 12.001 12.377 3.13%(6) 496.0 6,138
Qualified XIII 10.250 12.448 21.44% 608,189.2 7,570,472
Qualified XV 10.242 12.439 21.44% 390,713.5 4,859,928
Qualified XVI 10.413 12.394 19.02%(3) 46,117.2 571,581
Qualified XVII 11.359 12.409 9.24%(5) 144,766.3 1,796,394
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio:
Qualified I $11.678 $14.012 19.99% 347.4 4,867
Qualified III 13.291 15.621 17.53%(2) 22.8 357
Qualified V 12.996 15.567 19.79% 8,547.0 133,055
Qualified VI 13.025 15.621 19.93% 3,076,293.2 48,055,509
Qualified VIII 13.024 15.619 19.93% 77.3 1,207
Qualified X (1.15) 13.415 16.101 20.02% 42,570.0 685,428
Qualified X (1.25) 13.395 16.065 19.93% 514,097.3 8,258,938
Qualified XI 13.063 15.702 20.20% 54,418.7 854,469
Qualified XII (0.95) 11.472 13.789 20.20% 54,847.1 756,296
Qualified XII (1.00) 11.468 13.780 20.16% 1,638.3 22,575
Qualified XII (1.05) 11.629 13.770 18.41%(2) 20,975.9 288,839
Qualified XII (1.15) 11.525 13.751 19.31%(1) 2,535.4 34,864
Qualified XII (1.25) 12.564 13.732 9.30%(5) 120.5 1,655
Qualified XII (1.30) 11.759 13.722 16.69%(4) 599.5 8,226
Qualified XII (1.50) 11.422 13.684 19.80%(1) 9,387.8 128,465
Qualified XIII 13.049 15.685 20.20% 140,197.1 2,198,943
Qualified XV 13.027 15.659 20.20% 67,412.6 1,055,587
Qualified XVI 13.020 15.603 19.84%(3) 24,326.4 379,554
Qualified XVII 13.971 15.639 11.94%(5) 8,880.1 138,873
Qualified XVIII 14.368 16.083 11.94%(5) 9,643.2 155,090
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio:
Qualified III $12.577 $14.554 15.72%(2) 324.2 4,718
Qualified V 12.422 14.504 16.76% 2,383.3 34,567
Qualified VI 12.450 14.554 16.90% 2,164,194.8 31,497,777
Qualified VIII 12.449 14.552 16.89% 300.6 4,374
Qualified X (1.15) 12.763 14.931 16.99% 29,089.7 434,352
Qualified X (1.25) 12.744 14.898 16.90% 368,583.0 5,491,114
Qualified XI 12.486 14.629 17.16% 62,924.3 920,522
Qualified XII (0.95) 11.146 13.059 17.16% 53,860.2 703,341
Qualified XII (1.00) 12.945 13.050 0.81%(8) 13.6 177
Qualified XII (1.05) 11.292 13.041 15.49%(2) 9,223.2 120,275
Qualified XII (1.15) 11.182 13.022 16.46%(1) 4,157.5 54,140
Qualified XII (1.25) 12.024 13.004 8.15%(5) 38.0 495
Qualified XII (1.30) 11.380 12.995 14.19%(4) 546.9 7,108
Qualified XII (1.50) 11.093 12.959 16.82%(1) 26,458.0 342,876
Qualified XIII 12.473 14.613 17.16% 80,290.9 1,173,302
Qualified XV 12.452 14.589 17.16% 89,393.7 1,304,152
Qualified XVI 12.449 14.537 16.77%(3) 28,712.4 417,381
Qualified XVII 13.199 14.570 10.39%(5) 47,304.5 689,237
Qualified XVIII 13.511 14.914 10.38%(5) 7,706.4 114,937
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio:
Qualified III $12.296 $13.469 9.54%(4) 56.0 754
Qualified V 11.903 13.422 12.76% 312.6 4,196
Qualified VI 11.930 13.469 12.89% 1,218,437.4 16,410,878
Qualified X (1.15) 12.000 13.557 12.98% 66,923.8 907,317
S-8
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio (continued) :
Qualified X (1.25) $11.982 $13.527 12.89% 291,893.0 3,948,570
Qualified XI 11.965 13.538 13.15% 28,962.1 392,095
Qualified XII (0.95) 10.905 12.339 13.15% 8,798.3 108,559
Qualified XII (1.05) 11.009 12.322 11.93%(2) 4,677.9 57,638
Qualified XII (1.15) 10.927 12.304 12.60%(1) 19,312.8 237,632
Qualified XII (1.30) 11.401 12.279 7.70%(5) 37.0 454
Qualified XII (1.50) 10.835 12.245 13.01%(3) 11,440.6 140,087
Qualified XIII 11.953 13.524 13.15% 45,095.5 609,882
Qualified XV 11.932 13.501 13.15% 66,058.1 891,852
Qualified XVI 11.873 13.453 13.31%(3) 14,692.8 197,657
Qualified XVII 12.496 13.484 7.91%(5) 15,768.9 212,625
Qualified XVIII 12.551 13.543 7.90%(5) 43,837.9 593,674
Annuity contracts in payment period 55,261
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Apreciation Portfolio:
Qualified VI $12.913 $13.377 3.59%(7) 489.1 6,543
Qualified X (1.15) 12.904 13.383 3.71%(7) 1,510.0 20,209
Qualified X (1.25) 10.977 13.377 21.86%(4) 11,094.9 148,415
Qualified XII (1.05) 12.796 13.390 4.64%(7) 2.3 31
Qualified XII (1.15) 13.244 13.383 1.05%(8) 7.4 98
Qualified XII (1.50) 12.103 13.361 10.39%(6) 598.6 7,997
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio:
Qualified VI $11.635 $13.845 18.99%(5) 16.2 224
Qualified XII (1.05) 13.184 13.858 5.11%(7) 5.3 73
Qualified XII (1.15) 13.348 13.852 3.78%(8) 31.8 440
Qualified X (1.25) 11.137 13.845 24.32%(4) 5,135.6 71,103
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio:
Qualified V $10.919 $14.077 28.93% 913.6 12,861
Qualified VI 10.924 14.100 29.08% 3,863,969.9 54,483,374
Qualified VIII 11.099 14.099 27.03%(3) 59.2 834
Qualified X (1.15) 11.403 14.115 23.78%(1) 7,684.2 108,463
Qualified X (1.25) 10.924 14.100 29.08% 133,179.5 1,877,879
Qualified XI 10.934 14.145 29.37% 126,743.9 1,792,740
Qualified XII (0.95) 10.934 14.145 29.37% 35,774.4 506,014
Qualified XII (1.05) 14.043 14.130 0.62%(6) 431.5 6,097
Qualified XII (1.15) 11.663 14.115 21.02%(1) 3,773.5 53,264
Qualified XII (1.20) 13.642 14.108 3.42%(6) 8.1 114
Qualified XII (1.25) 14.070 14.100 0.21%(8) 1.7 24
Qualified XII (1.30) 11.470 14.093 22.87%(3) 6,315.7 89,007
Qualified XII (1.50) 11.374 14.064 23.65%(1) 2,429.2 34,164
Qualified XIII 10.934 14.145 29.37% 150,222.3 2,124,832
Qualified XV 10.925 14.134 29.37% 236,503.6 3,342,755
Qualified XVI 11.345 14.084 24.14%(3) 21,737.0 306,134
Qualified XVII 12.748 14.105 10.64%(5) 11,001.5 155,174
Annuity contracts in payment period 77,429
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio:
Qualified VI $12.299 $14.081 14.49%(6) 160.7 2,263
Qualified X (1.15) 11.541 14.088 22.07%(5) 9,220.5 129,898
Qualified X (1.25) 10.816 14.081 30.19%(4) 37,033.5 521,475
Qualified XII (1.05) 12.485 14.095 12.90%(6) 35.3 498
Qualified XII (1.15) 13.709 14.088 2.76%(8) 26.6 375
Qualified XII (1.50) 13.952 14.064 0.80%(8) 7.0 98
- -----------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio:
Qualified III $13.113 $16.916 29.01% 1,234,611.3 20,885,277
Qualified V 11.583 14.926 28.85% 34,204.2 510,516
Qualified VI 11.370 14.668 29.01% 8,052,764.6 118,113,933
Qualified VIII 11.608 14.975 29.01% 2,350.4 35,197
S-9
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
Growth Portfolio (continued):
Qualified X (1.15) $12.756 $16.469 29.10% 45,497.9 749,288
Qualified X (1.25) 12.736 16.431 29.01% 721,108.4 11,848,444
Qualified XI 11.403 14.743 29.30% 198,137.5 2,921,165
Qualified XII (0.95) 10.495 13.569 29.30% 151,038.5 2,049,490
Qualified XII (1.00) 10.491 13.560 29.25% 29,020.8 393,520
Qualified XII (1.05) 11.241 13.550 20.54%(2) 13,791.1 186,876
Qualified XII (1.15) 10.962 13.532 23.44%(1) 36,788.6 497,811
Qualified XII (1.30) 10.486 13.503 28.77%(3) 1,522.6 20,561
Qualified XII (1.50) 10.749 13.466 25.28%(1) 3,408.5 45,899
Qualified XIII 11.390 14.727 29.30% 208,447.4 3,069,819
Qualified XV 11.371 14.703 29.30% 177,258.6 2,606,161
Qualified XVI 11.648 14.650 25.77%(3) 76,881.5 1,126,312
Qualified XVII 12.631 14.668 16.13%(5) 21,825.3 320,122
Qualified XVIII 14.149 16.431 16.13%(5) 17,975.8 295,359
- -----------------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio:
Qualified III $13.949 $16.417 17.69% 2,577,220.3 42,310,172
Qualified V 13.829 16.256 17.56% 104,622.4 1,700,763
Qualified VI 13.838 16.286 17.70% 16,557,231.9 269,654,191
Qualified VIII 14.498 17.062 17.69% 10,396.6 177,388
Qualified X (1.15) 13.883 16.352 17.78% 108,360.0 1,771,915
Qualified X (1.25) 13.838 16.286 17.70% 1,417,992.8 23,093,697
Qualified XI 13.878 16.370 17.96% 543,814.8 8,902,342
Qualified XII (0.95) 9.187 10.837 17.96% 393,674.6 4,266,220
Qualified XII (1.00) 9.184 10.829 17.91% 21,731.0 235,334
Qualified XII (1.05) 9.089 10.822 19.07%(2) 14,192.7 153,592
Qualified XII (1.15) 9.175 10.807 17.79% 149,889.8 1,619,834
Qualified XII (1.25) 8.660 10.792 24.62%(4) 83.6 902
Qualified XII (1.30) 8.225 10.784 31.11%(4) 3,191.2 34,415
Qualified XII (1.50) 9.250 10.754 16.26%(1) 1,961.5 21,095
Qualified XIII 13.863 16.352 17.96% 599,399.9 9,801,627
Qualified XV 13.840 16.325 17.96% 680,348.0 11,106,800
Qualified XVI 12.621 16.267 28.89%(3) 115,240.5 1,874,586
Qualified XVII 13.334 16.286 22.14%(5) 50,772.1 826,884
Qualified XVIII 13.334 16.286 22.14%(5) 45,547.7 741,798
Annuity contracts in payment period 26,929
- -----------------------------------------------------------------------------------------------------------------------------
American Century Investments Capital Appreciation Fund:
Qualified I $9.428 $10.385 10.15% 603.1 6,263
Qualified III 12.480 13.740 10.10% 243,325.2 3,343,297
Qualified III * 13.650 15.029 13.74% 1,102,967.1 16,576,436
Qualified V 14.299 15.725 9.97% 44,329.8 697,067
Qualified VI 14.395 15.849 10.10% 11,870,358.8 188,129,399
Qualified VII 12.125 13.356 10.15% 46,743.0 624,285
Qualified VIII 12.143 13.368 10.09% 11,057.4 147,821
Qualified IX 11.903 13.130 10.31%(5) 1,240.9 16,293
Qualified X (1.15) 14.440 15.910 10.18% 62.1 988
Qualified X (1.25) 14.395 15.849 10.10% 1,265,845.8 20,061,972
Qualified XI 14.437 15.930 10.35% 434,884.6 6,927,911
Qualified XII (0.95) 9.079 10.018 10.35% 408,970.2 4,097,240
Qualified XII (1.05) 9.410 10.004 6.31%(6) 590.7 5,909
Qualified XII (1.15) 9.516 9.991 4.99%(1) 116,999.3 1,168,893
Qualified XII (1.30) 7.842 9.970 27.14%(4) 1,570.1 15,653
Qualified XII (1.50) 9.388 9.942 5.90%(1) 386.6 3,844
Qualified XIII 14.421 15.913 10.35% 330,370.5 5,257,229
Qualified XV 14.397 15.887 10.35% 654,760.8 10,401,953
Qualified XVI 12.646 15.830 25.18%(3) 146,028.4 2,311,583
Qualified XVII 13.551 15.849 16.96%(5) 58,116.9 921,076
Qualified XVIII 13.551 15.849 16.96%(5) 101,495.7 1,608,571
Qualified XIX 8.877 10.385 16.99%(5) 41,828.5 434,385
Qualified XX 11.748 13.740 16.96%(5) 32,273.1 443,434
S-10
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
American Century Investments Capital Appreciation Fund (continued):
Qualified XXI $10.495 $13.757 31.08% 318,262.0 4,378,420
- -----------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Portfolio:
Qualified III $19.965 $23.581 18.11% 913,634.5 21,544,348
Qualified V 15.400 18.168 17.97% 20,968.0 380,952
Qualified VI 15.044 17.769 18.11% 1,446,488.2 25,702,708
Qualified VIII 13.668 16.143 18.11% 4,978.9 80,373
Qualified XI 15.088 17.861 18.38% 63,567.1 1,135,349
Qualified XII (0.95) 10.924 12.932 18.38% 32,293.1 417,615
Qualified XII (1.05) 12.278 12.914 5.18%(6) 2,165.0 27,959
Qualified XII (1.15) 11.071 12.896 16.48%(1) 34,435.0 444,079
Qualified XII (1.30) 11.742 12.869 9.60%(5) 38.9 501
Qualified XII (1.50) 10.955 12.834 17.15%(1) 1,125.3 14,441
Qualified XIII 15.071 17.841 18.38% 43,765.0 780,820
Qualified XV 15.046 17.812 18.38% 54,460.3 970,023
Qualified XVI 14.934 17.748 18.84%(3) 21,044.1 373,486
Qualified XVII 19.178 17.769 (7.35)%(5) 3,568.6 63,410
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Qualified III $13.110 $16.310 24.41% 1,945,860.7 31,736,912
Qualified V 12.447 15.467 24.26% 25,710.8 397,666
Qualified VI 12.518 15.573 24.41% 6,599,576.9 102,776,154
Qualified VIII 12.474 15.518 24.40% 2,069.8 32,119
Qualified X (1.15) 15.705 19.553 24.50% 189,559.0 3,706,439
Qualified X (1.25) 15.664 19.488 24.41% 1,297,229.9 25,280,078
Qualified XI 12.554 15.653 24.69% 178,053.1 2,787,133
Qualified XII (0.95) 10.819 13.490 24.69% 66,574.5 898,073
Qualified XII (1.05) 11.435 13.471 17.80%(2) 31,132.3 419,385
Qualified XII (1.15) 10.805 13.452 24.50% 33,265.9 447,504
Qualified XII (1.30) 10.942 13.424 22.68%(3) 5,809.5 77,989
Qualified XII (1.50) 10.905 13.387 22.76%(1) 8,607.3 115,227
Qualified XIII 12.541 15.636 24.69% 111,225.4 1,739,160
Qualified XV 12.520 15.610 24.69% 97,295.8 1,518,824
Qualified XVI 12.711 15.555 22.37%(3) 119,864.4 1,864,434
Qualified XVII 14.065 15.573 10.72%(5) 47,051.9 732,745
Qualified XVIII 17.600 19.488 10.73%(5) 19,896.0 387,728
- -----------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Qualified I $10.770 $13.288 23.38% 448.8 5,964
Qualified III 11.843 14.246 20.29%(1) 21.8 310
Qualified V 11.516 14.185 23.17% 19,818.8 281,133
Qualified VI 11.402 14.061 23.32% 6,082,316.8 85,524,344
Qualified VIII 11.541 14.232 23.31% 2,691.6 38,306
Qualified X (1.15) 15.900 19.623 23.41% 86,591.7 1,699,149
Qualified X (1.25) 15.858 19.557 23.32% 1,101,514.2 21,541,971
Qualified XI 11.435 14.134 23.60% 156,646.4 2,213,981
Qualified XII (0.95) 10.362 12.807 23.60% 93,597.1 1,198,695
Qualified XII (1.00) 10.358 12.798 23.55% 33,837.5 433,056
Qualified XII (1.05) 10.988 12.789 16.39%(2) 19,549.3 250,019
Qualified XII (1.15) 10.348 12.771 23.41% 34,706.0 443,246
Qualified XII (1.25) 11.704 12.754 8.97%(5) 70.2 896
Qualified XII (1.30) 10.724 12.745 18.85%(4) 1,739.9 22,175
Qualified XII (1.50) 10.537 12.709 20.61%(1) 2,877.5 36,571
Qualified XIII 11.423 14.118 23.60% 166,188.7 2,346,295
Qualified XV 11.404 14.095 23.60% 180,049.9 2,537,766
Qualified XVI 11.373 14.044 23.49%(3) 94,675.7 1,329,657
Qualified XVII 12.498 14.061 12.51%(5) 30,818.8 433,347
Qualified XVIII 17.382 19.557 12.51%(5) 16,019.7 313,292
- -----------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio:
Qualified V $11.111 $13.141 18.26% 3,603.4 47,351
S-11
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio (continued):
Qualified VI $11.137 $13.186 18.40% 715,460.3 9,434,067
Qualified VIII 11.370 13.184 15.95%(2) 80.5 1,061
Qualified X (1.15) 11.503 13.630 18.49% 27,317.9 372,350
Qualified X (1.25) 11.473 13.585 18.40% 217,344.9 2,952,522
Qualified XI 11.169 13.254 18.67% 26,556.2 351,975
Qualified XII (0.95) 10.664 12.655 18.67% 9,309.7 117,809
Qualified XII (1.05) 10.798 12.637 17.03%(2) 4,887.0 61,757
Qualified XII (1.15) 10.662 12.619 18.35%(1) 5,369.1 67,755
Qualified XII (1.25) 12.512 12.602 0.72%(8) 3.2 40
Qualified XII (1.30) 11.785 12.593 6.86%(4) 311.4 3,921
Qualified XII (1.50) 10.566 12.558 18.85%(1) 68.2 857
Qualified XIII 11.157 13.240 18.67% 40,548.8 536,848
Qualified XV 11.138 13.218 18.67% 45,252.6 598,129
Qualified XVI 11.253 13.170 17.04%(3) 7,727.2 101,769
Qualified XVII 12.518 13.186 5.34%(5) 1,611.0 21,243
Qualified XVIII 12.896 13.585 5.34%(5) 1,431.4 19,445
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Qualified III $12.349 $14.450 17.01% 1,520,868.2 21,976,134
- -----------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio:
Qualified III $14.092 $17.557 17.56% 2,393,187.1 42,017,100
Qualified V 12.511 15.570 24.44% 55,369.1 862,073
Qualified VI 12.455 15.518 24.59% 10,271,212.2 159,385,118
Qualified VIII 12.538 15.621 24.58% 2,366.4 36,965
Qualified X (1.15) 14.016 17.476 24.68% 25,037.4 437,560
Qualified X (1.25) 13.994 17.435 24.59% 779,489.9 13,590,296
Qualified XI 12.491 15.598 24.87% 145,006.0 2,261,743
Qualified XII (0.95) 11.243 14.039 24.87% 161,291.0 2,264,338
Qualified XII (1.00) 11.239 14.029 24.82% 59,516.5 834,964
Qualified XII (1.05) 12.865 14.019 8.97%(6) 3,868.6 54,235
Qualified XII (1.15) 11.228 14.000 24.69% 44,361.3 621,054
Qualified XII (1.20) 12.889 13.990 8.54%(6) 8.2 115
Qualified XII (1.25) 11.902 13.980 17.46%(4) 263.7 3,687
Qualified XII (1.30) 11.031 13.971 26.65%(3) 5,925.0 82,776
Qualified XII (1.50) 11.436 13.932 21.83%(1) 7,419.7 103,372
Qualified XIII 12.477 15.581 24.87% 289,280.8 4,507,181
Qualified XV 12.457 15.555 24.87% 230,413.3 3,584,028
Qualified XVI 12.388 15.499 25.11%(3) 155,500.0 2,410,111
Qualified XVII 13.443 15.518 15.44%(5) 28,126.5 436,457
Qualified XVIII 15.104 17.435 15.43%(5) 20,088.6 350,242
- -----------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio:
Qualified III $14.240 $18.216 27.92% 2,819,948.8 51,369,251
- -----------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust Fund:
Qualified III $16.952 $17.987 6.11% 737,426.3 $13,264,424
Qualified V 12.258 12.991 5.98% 21,473.3 278,955
Qualified VI 12.088 12.826 6.11% 802,112.3 10,288,170
Qualified VIII 11.396 12.091 6.10% 7,866.1 95,112
Qualified XI 12.123 12.892 6.35% 34,822.1 448,943
Qualified XII (0.95) 10.525 11.193 6.35% 6,217.8 69,595
Qualified XII (1.15) 10.515 11.162 6.15%(1) 15,616.4 174,309
Qualified XII (1.50) 10.669 11.108 4.11%(4) 286.0 3,177
Qualified XIII 12.110 12.878 6.35% 9,028.6 116,275
Qualified XV 12.090 12.857 6.35% 67,825.2 872,032
Qualified XVI 12.112 12.811 5.77%(3) 9,655.0 123,690
Qualified XVII 12.462 12.826 2.92%(5) 18,823.4 241,436
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio:
Qualified III $16.334 $17.903 9.61% 1,892,745.5 33,886,741
S-12
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio (continued):
Qualified V $14.151 $15.492 9.48% 43,354.9 671,650
Qualified VI 14.202 15.566 9.61% 9,114,364.7 141,873,535
Qualified VIII 14.199 15.562 9.60% 4,164.8 64,814
Qualified X (1.15) 13.733 15.063 9.69% 16,732.3 252,039
Qualified X (1.25) 13.710 15.027 9.61% 495,120.4 7,440,040
Qualified XI 14.243 15.646 9.85% 235,082.2 3,678,149
Qualified XII (0.95) 9.510 10.447 9.85% 221,571.3 2,314,767
Qualified XII (1.00) 9.507 10.440 9.81% 39,456.6 411,919
Qualified XII (1.05) 8.894 10.433 17.30%(2) 38,121.9 397,708
Qualified XII (1.15) 9.498 10.418 9.69% 69,793.9 727,116
Qualified XII (1.25) 9.646 10.404 7.86%(5) 66.3 690
Qualified XII (1.30) 8.944 10.396 16.23%(4) 2,148.3 22,335
Qualified XII (1.50) 9.477 10.367 9.40% 11,663.4 120,919
Qualified XIII 14.227 15.629 9.85% 199,811.2 3,122,892
Qualified XV 14.204 15.603 9.85% 277,879.7 4,335,812
Qualified XVI 12.594 15.547 23.45%(3) 75,489.5 1,173,657
Qualified XVII 14.156 15.566 9.96%(5) 26,563.6 413,486
Qualified XVIII 13.666 15.027 9.96%(5) 13,688.5 205,693
- -----------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio:
Qualified III $12.453 $14.729 18.28% 6,894.9 101,554
Qualified V 12.421 14.674 18.14% 4,979.1 73,064
Qualified VI 12.449 14.725 18.28% 1,720,444.0 25,333,153
Qualified VIII 12.448 14.722 18.27% 1,054.4 15,523
Qualified X (1.15) 12.938 15.314 18.37% 24,214.0 370,817
Qualified X (1.25) 12.917 15.279 18.28% 216,035.9 3,300,765
Qualified XI 12.485 14.801 18.55% 43,421.8 642,671
Qualified XII (0.95) 11.105 13.164 18.55% 27,040.5 355,963
Qualified XII (1.00) 13.490 13.146 (2.55%) 9,825.2 129,159
Qualified XII (1.15) 11.090 13.128 18.37% 12,288.0 161,311
Qualified XII (1.30) 12.113 13.100 8.15%(5) 240.6 3,152
Qualified XII (1.50) 11.136 13.064 17.31%(1) 2,509.6 32,785
Qualified XIII 12.472 14.785 18.55% 48,184.4 712,385
Qualified XV 12.451 14.760 18.55% 75,799.4 1,118,800
Qualified XVI 12.760 14.707 15.26%(3) 18,986.1 279,231
Qualified XVII 13.573 14.725 8.49%(5) 6,324.2 93,122
Qualified XVIII 14.084 15.279 8.48%(5) 12,890.4 196,950
- -----------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio:
Qualified III $13.074 $14.031 7.32% 5,354.7 75,131
Qualified V 12.976 13.910 7.19% 4,516.1 62,819
Qualified VI 13.022 13.976 7.32% 804,369.4 11,241,863
Qualified VIII 13.020 13.973 7.32% 157.9 2,206
Qualified XI 13.060 14.048 7.56% 9,443.8 132,666
Qualified XII (0.95) 10.902 11.727 7.56% 4,060.8 47,619
Qualified XII (1.00) 10.857 11.718 7.93%(1) 2,902.9 34,018
Qualified XII (1.05) 11.571 11.710 1.20%(6) 248.3 2,907
Qualified XII (1.15) 10.882 11.694 7.46%(1) 3,421.2 40,007
Qualified XII (1.50) 10.955 11.637 6.23%(3) 104.3 1,213
Qualified XIII 13.046 14.033 7.56% 13,320.9 186,929
Qualified XV 13.024 14.009 7.56% 10,032.0 140,542
Qualified XVI 13.025 13.959 7.17%(3) 12,816.5 178,909
Qualified XVII 13.448 13.976 3.93%(5) 301.9 4,219
- -----------------------------------------------------------------------------------------------------------------------------
Growth Portfolio:
Qualified III $13.872 $17.051 22.91% 999,388.5 17,040,283
Qualified V 12.698 15.589 22.77% 9,413.5 146,742
Qualified VI 12.716 15.629 22.91% 2,859,604.1 44,694,133
Qualified VIII 12.725 15.640 22.91% 1,320.8 20,657
Qualified X (1.15) 13.621 16.755 23.01% 5,744.3 96,244
Qualified X (1.25) 13.599 16.716 22.91% 350,921.6 5,865,886
Qualified XI 12.753 15.710 23.19% 74,094.3 1,164,024
S-13
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
Growth Portfolio (continued):
Qualified XII (0.95) $10.891 $13.416 23.19% 64,075.2 859,659
Qualified XII (1.00) 10.929 13.407 22.67%(1) 4,456.6 59,750
Qualified XII (1.05) 13.078 13.398 2.45%(6) 3,758.2 50,352
Qualified XII (1.15) 11.138 13.379 20.12%(1) 18,643.9 249,442
Qualified XII (1.25) 13.270 13.361 0.69%(8) 4.0 53
Qualified XII (1.30) 10.962 13.351 21.79%(3) 563.3 7,521
Qualified XII (1.50) 11.002 13.314 21.01%(1) 5,816.4 77,441
Qualified XIII 12.739 15.693 23.19% 84,671.3 1,328,742
Qualified XV 12.718 15.667 23.19% 80,539.2 1,261,797
Qualified XVI 12.975 15.611 20.32%(3) 51,538.3 804,554
Qualified XVII 13.985 15.629 11.76%(5) 6,132.4 95,846
Qualified XVIII 14.957 16.716 11.76%(5) 11,447.2 191,347
Annuity contracts in payment period 38,299
- -----------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio:
Qualified III $10.671 $11.107 4.08% 70,149.4 779,139
Qualified V 10.576 10.994 3.96% 611.3 6,720
Qualified VI 10.600 11.032 4.08% 105,021.0 1,158,613
Qualified X (1.25) 10.561 10.992 4.08% 24,716.1 271,675
Qualified XI 10.631 11.089 4.31% 4,612.0 51,142
Qualified XII (0.95) 10.366 10.813 4.31% 462.7 5,003
Qualified XII (1.05) 10.722 10.798 0.71%(6) 54.9 593
Qualified XII (1.15) 10.353 10.783 4.16% 520.2 5,610
Qualified XII (1.50) 10.444 10.731 2.75%(3) 799.3 8,577
Qualified XIII 10.619 11.077 4.31% 27,342.7 302,876
Qualified XV 10.703 11.059 3.33%(3) 4,020.5 44,462
Qualified XVI 10.691 11.019 3.07%(3) 1,797.2 19,803
Qualified XVII 10.850 11.032 1.68%(5) 387.4 4,274
Qualified XVIII 10.810 10.992 1.68%(5) 999.3 10,984
- -----------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio:
Qualified III $15.493 $19.445 25.51% 3,603,130.3 70,062,887
Qualified V 13.934 17.467 25.36% 79,434.7 1,387,505
Qualified VI 13.860 17.395 25.51% 16,418,633.6 285,605,841
Qualified VIII 13.819 17.344 25.50% 2,863.0 49,654
Qualified X (1.15) 15.592 19.583 25.60% 52,700.7 1,032,057
Qualified X (1.25) 15.566 19.537 25.51% 1,201,799.6 23,479,921
Qualified XI 13.900 17.485 25.79% 473,042.9 8,271,083
Qualified XII (0.95) 11.370 14.302 25.79% 315,193.4 4,507,947
Qualified XII (1.00) 11.366 14.292 25.74% 82,112.0 1,173,566
Qualified XII (1.05) 12.089 14.282 18.14%(2) 54,501.7 778,410
Qualified XII (1.15) 11.355 14.263 25.60% 59,886.1 854,125
Qualified XII (1.20) 13.856 14.253 2.87%(6) 8.2 117
Qualified XII (1.25) 13.125 14.243 8.52%(5) 97.1 1,383
Qualified XII (1.30) 11.961 14.233 19.00%(3) 1,407.1 20,027
Qualified XII (1.50) 11.483 14.193 23.60%(1) 14,593.0 207,124
Qualified XIII 13.885 17.466 25.79% 548,017.7 9,571,591
Qualified XV 13.862 17.437 25.79% 501,974.0 8,752,839
Qualified XVI 14.439 17.374 20.33%(3) 157,920.3 2,743,771
Qualified XVII 15.828 17.395 9.90%(5) 59,317.0 1,031,833
Qualified XVIII 17.777 19.537 9.90%(5) 77,750.3 1,519,030
Annuity contracts in payment period 123,556
- -----------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund:
Qualified III $8.832 $9.737 10.24% 726,609.7 7,074,956
- -----------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund:
Qualified III $13.611 $16.658 22.38% 643,300.3 10,716,018
Qualified V 15.132 18.497 22.24% 13,355.4 247,029
Qualified VI 14.686 17.973 22.38% 1,830,284.1 32,896,255
Qualified VIII 12.606 15.581 23.60%(1) 1,766.3 27,520
Qualified XI 14.729 18.066 22.66% 70,559.8 1,274,728
Qualified XII (0.95) 11.383 13.962 22.66% 36,313.3 507,012
S-14
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
- -----------------------------------------------------------------------------------------------------------------------------
Value Increase(Decrease) Units
Per Unit in Value of Outstanding Reserves
Beginning End of Accumulation at End at End
of Period Period Unit of Period of Period
- -----------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund (continued):
Qualified XII (1.05) $12.407 $13.943 12.38%(6) 374.6 5,223
Qualified XII (1.15) 11.865 13.923 17.35%(1) 12,402.7 172,689
Qualified XII (1.25) 11.717 13.904 18.67%(5) 34.6 481
Qualified XII (1.30) 10.678 13.894 30.12%(3) 62.3 866
Qualified XII (1.50) 11.712 13.856 18.31%(1) 817.8 11,331
Qualified XIII 14.713 18.046 22.66% 73,869.5 1,333,068
Qualified XV 14.688 18.016 22.66% 109,314.3 1,969,439
Qualified XVI 13.756 17.952 30.50%(3) 23,581.4 423,330
Qualified XVII 15.221 17.973 18.08%(5) 11,124.9 199,950
- -----------------------------------------------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio:
Qualified III $18.786 $24.544 30.65% 2,011,809.5 49,378,714
Qualified V 15.451 20.163 30.50% 51,235.6 1,033,044
Qualified VI 15.461 20.200 30.65% 2,901,208.0 58,603,360
Qualified VIII 13.293 17.366 30.64% 9,557.3 165,973
Qualified XI 15.506 20.304 30.95% 190,103.2 3,859,810
Qualified XII (0.95) 9.970 13.055 30.95% 58,171.6 759,449
Qualified XII (1.05) 12.203 13.037 6.83%(6) 615.4 8,023
Qualified XII (1.15) 10.285 13.019 26.58%(1) 76,898.3 1,001,146
Qualified XII (1.30) 11.315 12.992 14.82%(5) 134.3 1,745
Qualified XII (1.50) 10.219 12.956 26.78%(3) 24.2 313
Qualified XIII 15.489 20.282 30.95% 79,849.2 1,619,478
Qualified XV 15.463 20.248 30.95% 197,587.4 4,000,739
Qualified XVI 16.162 20.175 24.83%(3) 21,254.7 428,824
Qualified XVII 17.467 20.200 15.65%(5) 6,676.9 134,872
- -----------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio:
Qualified III $16.453 $18.849 14.55% 3,328,134.0 62,730,464
Qualified V 15.616 17.869 14.42% 57,122.6 1,020,716
Qualified VI 15.781 18.079 14.56% 6,514,240.6 117,771,920
Qualified VIII 13.298 15.233 14.55% 18,899.2 287,892
Qualified X (1.15) 15.830 18.149 14.65% 38,517.4 699,056
Qualified X (1.25) 15.781 18.079 14.56% 520,730.7 9,414,367
Qualified XI 15.827 18.172 14.82% 308,751.9 5,610,744
Qualified XII (0.95) 10.672 12.254 14.82% 214,295.1 2,625,881
Qualified XII (1.05) 10.837 12.237 12.92%(2) 5,504.3 67,353
Qualified XII (1.15) 10.658 12.220 14.65% 74,623.2 911,863
Qualified XII (1.25) 11.626 12.203 4.96%(4) 119.3 1,456
Qualified XII (1.30) 11.793 12.194 3.40%(5) 148.1 1,806
Qualified XII (1.50) 10.566 12.160 15.09%(1) 2,430.8 29,560
Qualified XIII 15.810 18.153 14.82% 295,402.2 5,362,311
Qualified XV 15.784 18.122 14.82% 484,025.6 8,771,709
Qualified XVI 15.781 18.058 14.43%(3) 44,160.4 797,427
Qualified XVII 17.350 18.079 4.20%(5) 10,477.1 189,417
Qualified XVIII 17.350 18.079 4.20%(5) 20,062.7 362,717
Qualified XXI 16.946 18.872 11.37%(4) 287,634.3 5,428,303
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Applies only to participants of the Opportunity Plus program and Multiple
Options Portfolio
Qualified I Individual contracts issued prior to May 1, 1975 in connection
with "Qualified Corporate Retirement Plans" established
pursuant to Section 401 of the Internal Revenue Code ("Code");
Tax-Deferred Annuity Plans" established by the public school
systems and tax-exempt organizations pursuant to Section
403(b) of the Code, and certain Individual Retirement Annuity
Plans established by or on behalf of individuals pursuant to
section 408(b) of the Code; Individual contracts issued prior
to November 1, 1975 in connection with "H.R. 10 Plans"
established by persons entitled to the benefits of the
Self-Employed Individuals Tax Retirement Act of 1962, as
amended; allocated group contracts issued
S-15
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
prior to May 1, 1975 in connection with Qualified Corporate
Retirement Plans; and group contracts issued prior to October
1, 1978 in connection with Tax-Deferred Annuity Plans.
Qualified III Individual contracts issued in connection with Tax-Deferred
Annuity Plans and Individual Retirement Annuity Plans since May
1, 1975, H.R. 10 Plans since November 1, 1975; group contracts
issued since October 1, 1978 in connection with Tax-Deferred
Annuity Plans and group contracts issued since May 1, 1979 in
connection with "Deferred Compensation Plans" adopted by state
and local governments and H.R. 10 Plans.
Qualified V Group AetnaPlus contracts issued since August 28, 1992 in
connection with Optional Retirement Plans" established pursuant
to Section 403(b) or 401(a) of the Internal Revenue Code.
Qualified VI Group AetnaPlus contracts issued in connection with
Tax-Deferred Annuity Plans and Retirement Plus Plans since
August 28, 1992.
Qualified VII Certain existing contracts that were converted to ACES, an
administrative system (previously valued under Qualified I).
Qualified VIII Group AetnaPlus" contracts issued in connection with
Tax-Deferred Annuity Plans and "deferred Compensation Plans"
adopted by state and local governments since June 30, 1993.
Qualified IX Certain large group contracts (Jumbo) that were converted to
ACES, an administrative system (previously valued under
Qualified VI).
Qualified X Individual Retirement Annuity and Simplified Employee Pension
Plans issued or converted to ACES, an administrative system.
Qualified XI Certain large group contracts issued in connection with
"Deferred Compensation Plans" adopted by state and local
governments since January 1996.
Qualified XII Group "Deferred Compensation Plan" contracts shown
separately by applicable daily charge.
Qualified XIII Certain existing contracts issued in connection with
Tax-Deferred Annuity Plans and Retirement Plus Plans issued
through product exchange (previously valued under Qualified
VI).
Qualified XIV Certain existing contracts issued in connection with
Tax-Deferred Annuity Plans that were converted to ACES, an
administrative system (previously valued under Qualified III).
Qualified XV Certain existing contracts issued in connection with
Tax-Deferred Annuity Plans (previously valued under Qualified
VI).
Qualified XVI Group Aetna Plus contracts issued in connection with
Deferred Compensation Plans having contract modifications
effective April 7, 1997.
Qualified XVII Group Aetna Plus contracts issued in connection with
Deferred Compensation Plans having contract modifications
effective May 29, 1997.
Qualified XVIII Group Aetna Plus contracts issued in connection with
Deferred Compensation Plans having contract modifications
effective May 29, 1997.
Qualified XIX Group Aetna Plus contracts issued in connection with
Deferred Compensation Plans having contract modifications
effective May 29, 1997.
Qualified XX Group Aetna Plus contracts issued in connection with
Deferred Compensation Plans having contract modifications
effective May 29, 1997.
Qualified XXI Group 457 contracts issued in connection with Deferred
Compensation Plans issued to employees of the County of San
Jose.
S-16
<PAGE>
Variable Annuity Account C
Condensed Financial Information - Period Ended September 30, 1997
(Unaudited & continued):
Notes to Condensed Financial Information:
(1) - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during January 1997 when the fund
became available under the contract, when funds were first received in
this option or when the applicable daily asset charge was first utilized.
(2) - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during February 1997 when the fund
became available under the contract, when funds were first received in
this option or when the applicable daily asset charge was first utilized.
(3) - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during April 1997 when the fund
became available under the contract, when funds were first received in
this option or when the applicable daily asset charge was first utilized.
(4) - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during May 1997 when the fund
became available under the contract, when funds were first received in
this option or when the applicable daily asset charge was first utilized.
(5) - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during June 1997 when the fund
became available under the contract, when funds were first received in
this option or when the applicable daily asset charge was first utilized.
(6) - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during July 1997 when the fund
became available under the contract, when funds were first received in
this option or when the applicable daily asset charge was first utilized.
(7) - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during August 1997 when the fund
became available under the contract, when funds were first received in
this option or when the applicable daily asset charge was first utilized.
(8) - Reflects less than a full year of performance activity. The initial
Accumulation Unit Value was established during September 1997 when the
fund became available under the contract, when funds were first received
in this option or when the applicable daily asset charge was first
utilized.
S-17
See Notes to Financial Statements
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - September 30, 1997 (Unaudited)
1. Summary of Significant Accounting Policies
Variable Annuity Account C ("Account") is a separate account established by
Aetna Life Insurance and Annuity Company and is registered under the
Investment Company Act of 1940 as a unit investment trust. The Account is
sold exclusively for use with variable annuity contracts that are qualified
under the Internal Revenue Code of 1986, as amended.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on September 30, 1997:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna GET Fund, Series B
Aetna GET Fund, Series C
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Aetna Variable Portfolios, Inc.:
[bullet] Aetna Variable Capital Appreciation Portfolio
[bullet] Aetna Variable Growth Portfolio
[bullet] Aetna Variable Index Plus Portfolio
[bullet] Aetna Variable Small Company Portfolio
Alger American Funds:
[bullet] Growth Portfolio
[bullet] Small Capitalization Portfolio
American Century Investments - Capital Appreciation Fund
Calvert Responsibly Invested Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
[bullet] Equity-Income Portfolio
[bullet] Growth Portfolio
[bullet] Overseas Portfolio
Fidelity Investments Variable Insurance Products Fund II:
[bullet] Asset Manger Portfolio
[bullet] Contrafund Portfolio
[bullet] Index 500 Portfolio
Franklin Government Securities Trust
Janus Aspen Series:
[bullet] Aggressive Growth Portfolio
[bullet] Balanced Portfolio
[bullet] Flexible Income Portfolio
[bullet] Growth Portfolio
[bullet] Short-Term Bond Portfolio
[bullet] Worldwide Growth Portfolio
Lexington Fund Emerging Markets Fund
Lexington Natural Resources Trust Fund
Neuberger & Berman Advisers Management Trust -
Growth Portfolio
Scudder Variable Life Investment Fund -
International Portfolio
b. Other
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of Aetna Life Insurance and Annuity Company ("Company") which is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended.
S-18
<PAGE>
Notes to Financial Statements - September 30, 1997 (Unaudited & continued):
d. Annuity Reserves
Annuity reserves held in the Separate Accounts are computed for currently
payable contracts according to the Progressive Annuity, a49, 1971
Individual Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983
Group Annuity Mortality tables using various assumed interest rates not to
exceed seven percent. Mortality experience is monitored by the Company.
Charges to annuity reserves for mortality experience are reimbursed to the
Company if the reserves required are less than originally estimated. If
additional reserves are required, the Company reimburses the Account.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
3. Dividend Income
On an annual basis, the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income (distributions in excess of net investment income) and accumulated
net realized gain (loss) on investments is included in net unrealized gain
(loss) in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the years ended September 30, 1997 and September
30, 1996 aggregated $1,487,577,640 and $724,699,160; $1,802,994,048 and
$1,083,592,483, respectively.
S-19
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - September 30, 1997 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in
Net Assets - Nine-Month Period Ended September 30, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century Investments -
Capital Appreciation Fund: $5,882,464 ($2,459,568) $108,055,955 $116,981,149 ($8,925,194)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Fund: 0 (409,355) 1,487,625 1,149,524 338,101
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 11,536,379 (1,263,997) 1,848,858 1,442,808 406,050
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 3,033,640 (882,486) 1,405,956 914,279 491,677
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 762,691 (101,298) 3,578,314 3,157,453 420,861
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 2,134,313 (180,936) 1,001,802 857,248 144,554
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 4,376,096 (1,599,200) 881,116 682,953 198,163
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 890,215 (341,055) 1,489,648 1,151,809 337,839
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust: 1,578,341 (224,731) 5,841,326 5,758,278 83,048
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (1,542,424) 13,676,774 10,535,127 3,141,647
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 624,077 (218,316) 759,170 626,469 132,701
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 391,008 (88,043) 2,740,259 2,613,154 127,105
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,656,682 (522,905) 1,301,918 1,014,920 286,998
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 64,108 (20,061) 1,680,155 1,659,552 20,603
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 4,595,478 (2,774,517) 7,266,281 4,531,063 2,735,218
Annuity contracts in accumulation
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 4,375 (59,620) 1,246,382 1,055,906 190,476
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-20A
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Net
Net Unrealized Net Increase (Decrease)
Gain (Loss) Change in In Net Assets Net Assets
Beginning End Unrealized from Unit Beginning End
of Period of Period Gain (Loss) Transactions of Period of Period
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$8,139,519 $36,254,183 $28,114,664 ($101,276,839)
$346,244,393 $267,579,920
- ---------------------------------------------------------------------------------------------------------------
2,963,927 10,677,155 7,713,228 4,304,755
39,989,335 51,936,064
- ---------------------------------------------------------------------------------------------------------------
10,675,870 30,521,811 19,845,941 37,923,767
106,469,428 174,917,568
- ---------------------------------------------------------------------------------------------------------------
5,256,264 23,562,942 18,306,678 19,258,619
80,442,047 120,650,175
- ---------------------------------------------------------------------------------------------------------------
649,630 1,480,318 830,688 4,326,568
8,449,388 14,688,898
- ---------------------------------------------------------------------------------------------------------------
2,502,591 3,509,050 1,006,459 1,768,615
17,103,129 21,976,134
- ---------------------------------------------------------------------------------------------------------------
15,161,493 53,342,687 38,181,194 73,800,639
118,886,521 233,843,413
- ---------------------------------------------------------------------------------------------------------------
2,304,865 10,179,461 7,874,596 21,376,753
21,230,903 51,369,251
- ---------------------------------------------------------------------------------------------------------------
405,959 456,848 50,889 1,131,629
23,356,943 25,976,119
- ---------------------------------------------------------------------------------------------------------------
17,668,916 33,604,573 15,935,657 10,702,516
172,876,567 201,113,963
- ---------------------------------------------------------------------------------------------------------------
751,567 4,448,514 3,696,947 13,403,728
15,281,267 32,920,404
- ---------------------------------------------------------------------------------------------------------------
140,666 421,068 280,402 3,023,112
8,417,464 12,151,048
- ---------------------------------------------------------------------------------------------------------------
2,192,571 12,904,449 10,711,878 21,119,310
40,800,809 74,014,473
0 38,299
- ---------------------------------------------------------------------------------------------------------------
(6,468) 19,436 25,904 888,311
1,690,606 2,669,471
- ---------------------------------------------------------------------------------------------------------------
16,710,390 82,306,112 65,595,722 178,624,090
172,398,274 421,050,709
0 123,556
- ---------------------------------------------------------------------------------------------------------------
102,991 470,791 367,800 1,726,444
4,845,481 7,074,956
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
S-20B
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - September 30, 1997 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in
Net Assets - Nine-Month Period Ended September 30, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $240,514,362 ($49,507,584) $173,563,621 $129,140,625 $44,422,996
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 9,340,172 (3,167,422) 38,183,031 40,314,677 (2,131,646)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 9,635,587 (2,210,248) 153,817,605 158,021,784 (4,204,179)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 81,276,361 (7,902,515) 27,336,099 20,500,357 6,835,742
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 12,838,401 (775,118) 5,052,294 3,288,566 1,763,728
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 1,814,609 (2,357,164) 9,941,787 8,672,183 1,269,604
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 533,725 (374,531) 306,551 247,282 59,269
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 379,509 (252,336) 163,192 137,230 25,962
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 246,736 (142,451) 1,656,681 1,495,046 161,635
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Portfolios Inc:
Aetna Variable Capital Appreciation Portfolio: 0 (394) 96,351 87,462 8,889
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio: 0 (243) 79,578 71,627 7,951
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 0 (318,544) 29,568,723 29,462,142 106,581
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio: 0 (1,262) 126,874 104,365 22,509
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: 1,199,482 (1,192,346) 4,609,781 3,712,724 897,057
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 11,721,861 (2,829,398) 43,085,126 27,808,414 15,276,712
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-21A
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Net
Net Unrealized Net Increase (Decrease)
Gain (Loss) Change in In Net Assets Net Assets
Beginning End Unrealized from Unit Beginning End
of Period of Period Gain (Loss) Transactions of Period of Period
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$327,744,944 $1,608,524,484 $1,280,779,540 $32,157,444
$4,694,078,344 $6,157,535,606
212,746,872 297,656,368
- -------------------------------------------------------------------------------------------------------------------
(9,314,233) 5,186,299 14,500,532 (29,536,891)
354,233,289 342,649,672
5,616,023 6,204,385
- -------------------------------------------------------------------------------------------------------------------
(750,036) 3,457,999 4,208,035 (17,285,220)
245,304,466 235,448,441
- -------------------------------------------------------------------------------------------------------------------
97,219,569 171,912,987 74,693,418 1,687,703
800,532,626 951,931,761
14,762,802 19,954,376
- -------------------------------------------------------------------------------------------------------------------
17,286,695 25,914,770 8,628,075 (3,860,946)
65,062,153 83,656,293
- -------------------------------------------------------------------------------------------------------------------
2,983,885 44,237,251 41,253,366 (5,373,468)
199,058,163 235,665,110
- -------------------------------------------------------------------------------------------------------------------
1,716,824 10,119,883 8,403,059 32,880,683
21,660,591 63,162,796
- -------------------------------------------------------------------------------------------------------------------
838,329 5,726,279 4,887,950 23,514,840
14,758,921 43,314,846
- -------------------------------------------------------------------------------------------------------------------
112,482 2,042,300 1,929,818 13,506,392
9,067,002 24,713,871
0 55,261
- -------------------------------------------------------------------------------------------------------------------
0 4,150 4,150 170,649
0 183,294
- -------------------------------------------------------------------------------------------------------------------
0 4,850 4,850 59,283
0 71,841
- -------------------------------------------------------------------------------------------------------------------
80,325 8,250,892 8,170,567 46,359,119
10,653,437 64,893,731
0 77,429
- -------------------------------------------------------------------------------------------------------------------
0 44,664 44,664 588,696
0 654,607
- -------------------------------------------------------------------------------------------------------------------
6,730,808 39,699,242 32,968,434 26,930,951
104,872,172 165,675,750
- -------------------------------------------------------------------------------------------------------------------
39,364,541 71,522,984 32,158,443 (1,878,305)
323,871,170 378,293,554
0 26,929
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
S-21B
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - September 30, 1997 (Unaudited & continued):
5. Supplemental Information to Statements of Operations and Changes in
Net Assets - Nine-Month Period Ended September 30, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lexington Natural Resources Trust Fund: $1,237,592 ($383,470) $11,350,110 $8,861,815 $2,488,295
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: 8,158,940 (953,708) 11,735,395 9,229,195 2,506,200
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: 4,599,123 (1,860,192) 59,764,823 46,156,473 13,608,350
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account C $421,026,326 ($86,917,437) $724,699,160 $641,443,662 $83,255,498
=================================================================================================================================
</TABLE>
S-22A
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Net
Net Unrealized Net Increase (Decrease)
Gain (Loss) Change in In Net Assets Net Assets
Beginning End Unrealized from Unit Beginning End
of Period of Period Gain (Loss) Transactions of Period of Period
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$3,997,171 $9,361,662 $5,364,491 $17,233,682
$23,844,347 $49,784,937
- -----------------------------------------------------------------------------------------------------------------
9,459,521 28,286,231 18,826,710 (2,624,337)
95,081,684 120,995,489
- -----------------------------------------------------------------------------------------------------------------
29,299,509 41,384,145 12,084,636 2,137,297
191,515,746 222,084,960
- -----------------------------------------------------------------------------------------------------------------
$612,391,085 $2,379,840,471 $1,767,449,386 $428,769,563 $8,565,202,363 $11,178,785,728
=================================================================================================================
</TABLE>
S-22B
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1996:
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 151,485,109 shares (cost $4,579,080,272) ............................. $4,906,825,216
Aetna Income Shares; 28,507,123 shares (cost $369,163,545)................................ 359,849,312
Aetna Variable Encore Fund; 18,592,739 shares (cost $246,054,502) ......................... 245,304,466
Aetna Investment Advisers Fund, Inc.; 53,928,968 shares (cost $718,075,860) ............... 815,295,428
Aetna GET Fund, Series B; 4,575,463 shares (cost $47,775,458) ............................. 65,062,153
Aetna GET Fund, Series C; 19,458,746 shares (cost $196,074,278) ........................... 199,058,163
Aetna Ascent Variable Portfolio; 1,716,448 shares (cost $19,943,767) ...................... 21,660,591
Aetna Crossroads Variable Portfolio; 1,232,084 shares (cost $13,920,592) .................. 14,758,921
Aetna Legacy Variable Portfolio; 805,622 shares (cost $8,954,520) ......................... 9,067,002
Aetna Variable Index Plus Portfolio; 976,838 shares (cost $10,573,112) .................... 10,653,437
Alger American Funds:
Growth Portfolio; 3,054,826 shares (cost $98,141,364) ................................... 104,872,172
Small Capitalization Portfolio; 7,916,675 shares (cost $284,506,629) .................... 323,871,170
Calvert Responsibly Invested Balanced Fund; 22,541,903 shares (cost $37,025,408) .......... 39,989,335
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 5,062,740 shares (cost $95,793,557) ............................ 106,469,428
Growth Portfolio; 2,583,239 shares (cost $75,185,783) ................................... 80,442,047
Overseas Portfolio; 448,481 shares (cost $7,799,758) .................................... 8,449,388
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 1,010,226 shares (cost $14,600,538) ............................ 17,103,129
Contrafund Portfolio; 7,179,138 shares (cost $103,725,028) .............................. 118,886,521
Index 500 Portfolio; 238,202 shares (cost $18,926,038) .................................. 21,230,903
Franklin Government Securities Trust; 1,774,843 shares (cost $22,950,984) .................. 23,356,943
Janus Aspen Series:
Aggressive Growth Portfolio; 9,477,882 shares (cost $155,207,650) ....................... 172,876,567
Balanced Portfolio; 1,034,616 shares (cost $14,529,701) ................................. 15,281,267
Flexible Income Portfolio; 748,885 shares (cost $8,276,798) ............................. 8,417,464
Growth Portfolio; 2,630,613 shares (cost $38,608,238) ................................... 40,800,809
Short-Term Bond Portfolio; 169,569 shares (cost $1,697,074) ............................. 1,690,606
Worldwide Growth Portfolio; 8,868,224 shares (cost $155,687,884) ........................ 172,398,274
Lexington Emerging Markets Fund; 480,702 shares (cost $4,742,490) ......................... 4,845,481
Lexington Natural Resources Trust Fund; 1,668,604 shares (cost $19,847,176) ............... 23,844,347
Neuberger and Berman Advisers Management Trust -
Growth Portfolio; 3,688,195 shares (cost $85,622,163) ................................... 95,081,684
Scudder Variable Life Investment Fund -
International Portfolio; 14,454,018 shares (cost $162,216,238) .......................... 191,515,746
TCI Portfolios Inc. - Growth Fund; 33,812,929 shares (cost $338,104,873) .................... 346,244,393
--------------
NET ASSETS (cost $7,952,811,278)............................................................ $8,565,202,363
==============
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 5)
Aetna Variable Fund:
Annuity contracts in accumulation.......................................................... $4,694,078,344
Annuity contracts in payment period........................................................ 212,746,872
Aetna Income Shares:
Annuity contracts in accumulation.......................................................... 354,233,289
Annuity contracts in payment period........................................................ 5,616,023
Aetna Variable Encore Fund:
Annuity contracts in accumulation.......................................................... 245,304,466
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation.......................................................... 800,532,626
Annuity contracts in payment period........................................................ 14,762,802
</TABLE>
S-23
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1996 (continued):
<TABLE>
<S> <C>
Aetna GET Fund, Series B:
Annuity contracts in accumulation......................................................... $65,062,153
Aetna GET Fund, Series C:
Annuity contracts in accumulation......................................................... 199,058,163
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation......................................................... 21,660,591
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation......................................................... 14,758,921
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation......................................................... 9,067,002
Aetna Variable Index Plus Portfolio:
Annuity contracts in accumulation......................................................... 10,653,437
Alger American Funds:
Growth Portfolio:
Annuity contracts in accumulation......................................................... 104,872,172
Small Capitalization Portfolio:
Annuity contracts in accumulation......................................................... 323,871,170
Calvert Responsibly Invested Balanced Fund:
Annuity contracts in accumulation......................................................... 39,989,335
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation......................................................... 106,469,428
Growth Portfolio:
Annuity contracts in accumulation......................................................... 80,442,047
Overseas Portfolio:
Annuity contracts in accumulation......................................................... 8,449,388
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation......................................................... 17,103,129
Contrafund Portfolio:
Annuity contracts in accumulation......................................................... 118,886,521
Index 500 Portfolio:
Annuity contracts in accumulation......................................................... 21,230,903
Franklin Government Securities Trust Fund:
Annuity contracts in accumulation......................................................... 23,356,943
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation......................................................... 172,876,567
Balanced Portfolio:
Annuity contracts in accumulation......................................................... 15,281,267
Flexible Income Portfolio:
Annuity contracts in accumulation......................................................... 8,417,464
Growth Portfolio:
Annuity contracts in accumulation......................................................... 40,800,809
Short-Term Bond Portfolio:
Annuity contracts in accumulation......................................................... 1,690,606
Worldwide Growth Portfolio:
Annuity contracts in accumulation......................................................... 172,398,274
Lexington Emerging Markets Fund:
Annuity contracts in accumulation......................................................... 4,845,481
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation......................................................... 23,844,347
Neuberger and Berman Advisers Management Trust -
Growth Portfolio:
Annuity contracts in accumulation......................................................... 95,081,684
Scudder Variable Life Investment Fund - International Portfolio:
Annuity contracts in accumulation......................................................... 191,515,746
</TABLE>
S-24
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1996 (continued):
<TABLE>
<S> <C>
TCI Portfolios, Inc. - Growth Fund:
Annuity contracts in accumulation......................................................... $346,244,393
--------------
$8,565,202,363
==============
</TABLE>
See Notes to Financial Statements
S-25
<PAGE>
Variable Annuity Account C
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ..................................................... $712,854,599 $730,430,612
Expenses: (Notes 2 and 5)
Valuation Period Deductions ................................... (93,446,331) (71,090,542)
-------------- --------------
Net investment income ............................................ 619,408,268 659,340,070
-------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales ............................................ 2,060,808,031 570,154,582
Cost of investments sold ....................................... 1,547,239,509 409,480,615
-------------- --------------
Net realized gain ............................................ 513,568,522 160,673,967
Net unrealized gain on investments: (Note 5)
Beginning of year .............................................. 594,083,184 73,479,233
End of year .................................................... 612,391,085 594,083,184
-------------- --------------
Net change in unrealized gain ................................ 18,307,901 520,603,951
-------------- --------------
Net realized and unrealized gain on investments .................. 531,876,423 681,277,918
-------------- --------------
Net increase in net assets resulting from operations ............. 1,151,284,691 1,340,617,988
-------------- --------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ...................... 951,293,520 771,594,245
Sales and administrative charges deducted by the Company ......... (61,783) (98,694)
-------------- --------------
Net variable annuity contract purchase payments............... 951,231,737 771,495,551
Transfer from the Company for mortality guarantee adjustments .... 3,247,064 3,678,430
Transfers (to) from the Company's fixed account options .......... 187,508,331 (44,377,350)
Redemptions by contract holders .................................. (339,383,183) (287,945,984)
Annuity Payments ................................................. (20,948,181) (14,807,537)
Other ............................................................ 144,245 1,144,770
-------------- --------------
Net increase in net assets from unit transactions (Note 5) ... 781,800,013 429,187,880
-------------- --------------
Change in net assets ............................................. 1,933,084,704 1,769,805,868
NET ASSETS:
Beginning of year ................................................ 6,632,117,659 4,862,311,791
-------------- --------------
End of year ...................................................... $8,565,202,363 $6,632,117,659
============== ==============
</TABLE>
See Notes to Financial Statements
S-26
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1996
1. Summary of Significant Accounting Policies
Variable Annuity Account C ("Account") is a separate account established by
Aetna Life Insurance and Annuity Company and is registered under the
Investment Company Act of 1940 as a unit investment trust. The Account is
sold exclusively for use with variable annuity contracts that are qualified
under the Internal Revenue Code of 1986, as amended.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on December 31, 1996:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna GET Fund, Series B
Aetna GET Fund, Series C
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Aetna Variable Index Plus Portfolio
Alger American Funds:
[bullet] Growth Portfolio
[bullet] Small Capitalization Portfolio
Calvert Responsibly Invested Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
[bullet] Equity-Income Portfolio
[bullet] Growth Portfolio
[bullet] Overseas Portfolio
Fidelity Investments Variable Insurance Products Fund II:
[bullet] Asset Manager Portfolio
[bullet] Contrafund Portfolio
[bullet] Index 500 Portfolio
Franklin Government Securities Trust
Janus Aspen Series:
[bullet] Aggressive Growth Portfolio
[bullet] Balanced Portfolio
[bullet] Flexible Income Portfolio
[bullet] Growth Portfolio
[bullet] Short-Term Bond Portfolio
[bullet] Worldwide Growth Portfolio
Lexington Fund Emerging Markets Fund
Lexington Natural Resources Trust Fund
Neuberger & Berman Advisers Management Trust -
Growth Portfolio
Scudder Variable Life Investment Fund -
International Portfolio
TCI Portfolios, Inc. - Growth Fund
b. Other
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of Aetna Life Insurance and Annuity Company ("Company") which is
taxed as a life insurance company under the Internal Revenue Code of 1986,
as amended.
S-27
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1996 (continued):
d. Annuity Reserves
Annuity reserves held in the Separate Accounts are computed for currently
payable contracts according to the Progressive Annuity, a49, 1971
Individual Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983
Group Annuity Mortality tables using various assumed interest rates not to
exceed seven percent. Mortality experience is monitored by the Company.
Charges to annuity reserves for mortality experience are reimbursed to the
Company if the reserves required are less than originally estimated. If
additional reserves are required, the Company reimburses the Account.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
3. Dividend Income
On an annual basis, the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income (distributions in excess of net investment income) and accumulated
net realized gain (loss) on investments is included in net unrealized gain
(loss) in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the years ended December 31, 1996 and December
31, 1995 aggregated $3,462,016,312 and $2,060,808,031; $1,658,682,532 and
$570,154,582, respectively.
S-28
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1996 (continued):
5. Supplemental Information to Statements of Operations and Changes in
Net Assets - Year Ended December 31, 1996
<TABLE>
<CAPTION>
Net Unrealized
Valuation Proceeds Cost of Net Gain (Loss)
Period from Investments Realized Beginning
Dividends Deductions Sales Sold Gain (Loss) of Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund: $515,238,366 ($54,321,686) $1,237,963,630 $841,837,896 $396,125,734 $267,567,573
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 23,144,319 (4,611,478) 155,474,786 153,469,788 2,004,998 3,230,862
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 14,058,252 (2,878,790) 175,207,017 167,163,639 8,043,378 9,204,418
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 72,699,670 (9,562,496) 223,353,174 160,905,519 62,447,655 122,622,603
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 5,304,368 (1,100,778) 25,117,816 18,596,857 6,520,959 13,423,804
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 969,084 (280,865) 229,569 224,240 5,329 0
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 963,171 (137,931) 514,612 443,710 70,902 105,405
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 797,511 (106,179) 755,620 679,118 76,502 68,967
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 595,666 (63,355) 1,206,903 1,119,490 87,413 36,214
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 57,328 (16,537) 356,603 338,531 18,072 0
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: 2,138,198 (966,404) 3,326,813 3,149,890 176,923 (285,937)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 1,173,212 (3,731,877) 24,333,106 17,577,100 6,756,006 38,038,924
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Fund: 3,000,539 (425,159) 1,793,014 1,429,393 363,621 2,175,908
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 2,269,871 (994,896) 3,851,613 3,166,678 684,935 2,759,687
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 2,304,888 (707,334) 623,639 453,561 170,078 505,388
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 115,737 (82,498) 2,280,928 2,065,136 215,792 163,196
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 955,910 (196,386) 2,016,939 1,797,456 219,483 1,530,985
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 357,388 (910,633) 1,299,964 1,078,898 221,066 285,166
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 219,199 (139,391) 1,105,697 943,071 162,626 223,865
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust: 1,223,061 (290,354) 5,788,894 5,646,267 142,627 831,241
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-29
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1996 (continued):
5. Supplemental Information to Statements of Operations and Changes in
Net Assets - Year Ended December 31, 1996
<TABLE>
<CAPTION>
Net
Net Unrealized Net Increase(Decrease)
Gain (Loss) Change in In Net Assets Net Assets
End Unrealized from Unit Beginning End
of Year Gain (Loss) Transactions of Year of Year
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Variable Fund: $327,744,944 $60,177,371 $39,664,335
Annuity contracts in accumulation $3,805,891,355 $4,694,078,344
Annuity contracts in payment period 144,049,741 212,746,872
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Income Shares: (9,314,233) (12,545,095) (34,151,027)
Annuity contracts in accumulation 380,937,626 354,233,289
Annuity contracts in payment period 5,069,969 5,616,023
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: (750,036) (9,954,454) 5,744,394
Annuity contracts in accumulation 230,291,686 245,304,466
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 97,219,569 (25,403,034) (7,904,062)
Annuity contracts in accumulation 713,304,833 800,532,626
Annuity contracts in payment period 9,712,862 14,762,802
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 17,286,695 3,862,891 (22,661,545)
Annuity contracts in accumulation 73,136,258 65,062,153
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 2,983,885 2,983,885 195,380,730
Annuity contracts in accumulation 0 199,058,163
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 1,716,824 1,611,419 14,244,294
Annuity contracts in accumulation 4,908,736 21,660,591
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 838,329 769,362 9,552,968
Annuity contracts in accumulation 3,668,757 14,758,921
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 112,482 76,268 6,451,330
Annuity contracts in accumulation 1,919,680 9,067,002
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 80,325 80,325 10,514,249
Annuity contracts in accumulation 0 10,653,437
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: 6,730,808 7,016,745 58,052,710
Annuity contracts in accumulation 38,454,000 104,872,172
- -----------------------------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 39,364,541 1,325,617 77,101,765
Annuity contracts in accumulation 241,246,447 323,871,170
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Fund: 2,963,927 788,019 7,573,554
Annuity contracts in accumulation 28,688,761 39,989,335
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 10,675,870 7,916,183 58,569,396
Annuity contracts in accumulation 38,023,939 106,469,428
- -----------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 5,256,264 4,750,876 46,205,811
Annuity contracts in accumulation 27,717,728 80,442,047
- -----------------------------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 649,630 486,434 3,994,936
Annuity contracts in accumulation 3,718,987 8,449,388
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 2,502,591 971,606 782,358
Annuity contracts in accumulation 14,370,158 17,103,129
- -----------------------------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 15,161,493 14,876,327 73,985,256
Annuity contracts in accumulation 30,357,117 118,886,521
- -----------------------------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 2,304,865 2,081,000 15,496,325
Annuity contracts in accumulation 3,411,144 21,230,903
- -----------------------------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust: 405,959 (425,282) 664,776
Annuity contracts in accumulation 22,042,115 23,356,943
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-30
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1996 (continued):
5. Supplemental Information to Statements of Operations and Changes in
Net Assets - Year Ended December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation Proceeds Cost of Net
Period from Investments Realized
Dividends Deductions Sales Sold Gain (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Janus Aspen Series:
Aggressive Growth Portfolio: $1,589,459 ($1,739,222) $4,803,682 $3,702,615 $1,101,067
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 238,807 (87,725) 1,671,701 1,511,274 160,427
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 499,929 (72,736) 1,541,843 1,429,353 112,490
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 630,364 (245,877) 1,130,979 963,703 167,276
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 61,378 (14,453) 726,351 729,002 (2,651)
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 1,725,690 (1,035,043) 1,942,344 1,492,553 449,791
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 0 (55,554) 905,228 870,164 35,064
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 80,144 (231,100) 7,649,108 6,026,027 1,623,081
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: 8,437,018 (1,199,983) 15,336,623 13,853,081 1,483,542
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: 4,063,525 (2,264,627) 26,981,873 22,523,390 4,458,483
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund: 47,942,547 (4,974,984) 131,517,962 112,052,109 19,465,853
Annuity contracts in accumulation
- ------------------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account C $712,854,599 ($93,446,331) $2,060,808,031 $1,547,239,509 $513,568,522
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net Net
Unrealized Net Increase (Decrease)
Gain (Loss) Change in In Net Assets Net Assets
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Janus Aspen Series:
Aggressive Growth Portfolio: $13,091,398 $17,668,916 $4,577,518 $79,952,029
Annuity contracts in accumulation $87,395,716 $172,876,567
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 60,530 751,567 691,037 12,773,551
Annuity contracts in accumulation 1,505,170 15,281,267
- ------------------------------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 167,581 140,666 (26,915) 4,046,573
Annuity contracts in accumulation 3,858,123 8,417,464
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Portfolio: 145,978 2,192,571 2,046,593 33,135,966
Annuity contracts in accumulation 5,066,487 40,800,809
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: (354) (6,468) (6,114) 1,108,236
Annuity contracts in accumulation 544,210 1,690,606
S-31
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 786,497 16,710,390 15,923,893 139,287,080
Annuity contracts in accumulation 16,046,863 172,398,274
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: (46,118) 102,991 149,109 1,627,816
Annuity contracts in accumulation 3,089,046 4,845,481
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 1,277,740 3,997,171 2,719,431 5,442,307
Annuity contracts in accumulation 14,210,484 23,844,347
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: 11,656,721 9,459,521 (2,197,200) (937,272)
Annuity contracts in accumulation 89,495,579 95,081,684
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: 12,783,439 29,299,509 16,516,070 4,017,712
Annuity contracts in accumulation 164,724,583 191,515,746
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund: 91,671,503 8,139,519 (83,531,984) (57,916,538)
Annuity contracts in accumulation 425,259,499 346,244,393
- ------------------------------------------------------------------------------------------------------------------------------------
Total Variable Annuity Account C $594,083,184 $612,391,085 $18,307,901 $781,800,013 $6,632,117,659 $8,565,202,363
===================================================================================================================================
</TABLE>
S-32
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Life Insurance and Annuity Company and Contract
Owners of Variable Annuity Account C:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account C (the "Account") as
of December 31, 1996, and the related statements of operations and changes in
net assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1996. These financial
statements and condensed financial information are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements and condensed financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Life Insurance and Annuity Company Variable Annuity Account C
as of December 31, 1996, the results of its operations and the changes in its
net assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1996 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
S-33
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Statements of Income for the three and nine months ended September 30, 1997
and 1996 (unaudited) ................................................................. F-2
Consolidated Balance Sheets as of September 30, 1997 (unaudited) and December 31, 1996 F-3
Consolidated Statements of Changes in Shareholder's Equity for the nine months ended
September 30, 1997 and 1996 (unaudited) ............................................. F-4
Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and
1996 (unaudited) ...................................................................... F-5
Condensed Notes to Consolidated Financial Statements as of September 30, 1997 (unaudited) F-7
Independent Auditors' Report ............................................................ F-10
Consolidated Statements of Income for the Years Ended December 31, 1996, 1995 and 1994 F-11
Consolidated Balance Sheets as of December 31, 1996 and 1995 ........................... F-12
Consolidated Statements of Changes in Shareholder's Equity for the Years Ended December
31, 1996, 1995 and 1994 .............................................................. F-13
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and F-14
1994
Notes to Consolidated Financial Statements ............................................. F-16
</TABLE>
F-1
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
September 30, September 30,
----------------- ------------------
(unaudited) (unaudited)
1997 1996 1997 1996
-------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Revenue:
Premiums $ 68.2 $ 35.5 $ 200.1 $ 99.9
Charges assessed against policyholders 127.7 99.1 350.2 289.3
Net investment income 269.5 259.7 804.9 771.8
Net realized capital gains 8.8 0.1 17.9 17.2
Other income 9.6 9.4 28.8 34.6
------- ------- --------- ---------
Total revenue 483.8 403.8 1,401.9 1,212.8
Benefits and expenses:
Current and future benefits 286.5 245.6 853.4 719.1
Operating expenses 84.5 84.6 247.3 261.3
Amortization of deferred policy acquisition costs 40.1 17.9 92.4 46.6
Severance and facilities charges -- 47.3 -- 61.3
------- ------- --------- ---------
Total benefits and expenses 411.1 395.4 1,193.1 1,088.3
Income before income taxes 72.7 8.4 208.8 124.5
Income taxes 21.3 1.4 63.9 34.3
------- ------- --------- ---------
Net income $ 51.4 $ 7.0 $ 144.9 $ 90.2
======= ======= ========= =========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------- -------------
Assets (unaudited)
- ----------------------------------------------------------------- ---------------
<S> <C> <C>
Investments:
Debt securities available for sale, at fair value
(amortized cost:$12,736.4 and $12,539.1) $13,257.1 $12,905.5
Equity securities, available for sale:
Nonredeemable preferred stock (cost: $143.4 and $107.6) 166.5 119.0
Investment in affiliated mutual funds (cost: $42.0 and $77.3) 55.1 81.1
Common stock .8 .3
Short-term investments 111.8 34.8
Mortgage loans 12.9 13.0
Policy loans 453.7 399.3
---------- ----------
Total investments 14,057.9 13,553.0
Cash and cash equivalents 614.2 459.1
Accrued investment income 183.0 159.0
Premiums due and other receivables 37.3 26.6
Deferred policy acquisition costs 1,620.6 1,515.3
Reinsurance loan to affiliate 474.4 628.3
Other assets 40.1 33.7
Separate accounts assets 21,494.5 15,318.3
---------- ----------
Total assets $38,522.0 $31,693.3
========== ==========
Liabilities and Shareholder's Equity
- ----------------------------------------------------------------
Liabilities:
Future policy benefits $ 3,757.8 $ 3,617.0
Unpaid claims and claim expenses 28.0 28.9
Policyholders' funds left with the Company 11,074.5 10,663.7
---------- ----------
Total insurance reserve liabilities 14,860.3 14,309.6
Other liabilities 295.2 354.7
Income taxes:
Current 37.1 20.7
Deferred 74.8 80.5
Separate accounts liabilities 21,468.6 15,318.3
---------- ----------
Total liabilities 36,736.0 30,083.8
========== ==========
Shareholder's equity:
Common stock, par value $50 (100,000 shares authorized; 55,000
shares issued and outstanding) 2.8 2.8
Paid-in capital 418.0 418.0
Net unrealized capital gains 96.7 60.5
Retained earnings 1,268.5 1,128.2
---------- ----------
Total shareholder's equity 1,786.0 1,609.5
---------- ----------
Total liabilities and shareholder's equity $38,522.0 $31,693.3
========== ==========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
9 Months Ended September 30,
----------------------------
(unaudited) (unaudited)
1997 1996
---------- -------------
Shareholder's equity, beginning of year $1,609.5 $ 1,583.0
Net change in unrealized capital gains (losses) 36.2 (93.4)
Net income 144.9 90.2
Common stock dividends (8.3) (1.5)
Other changes 3.7 --
-------- ----------
Shareholder's equity, end of period $1,786.0 $ 1,578.3
======== ==========
See Condensed Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
9 Months Ended September 30,
----------------------------
(unaudited) (unaudited)
1997 1996
------------ -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 144.9 $ 90.2
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Increase in accrued investment income (24.0) (13.0)
Increase in premiums due and other receivables (8.8) (2.3)
Increase in policy loans (54.4) (29.5)
Increase in deferred policy acquisition costs (105.3) (127.2)
Decrease in reinsurance loan to affiliate 153.9 22.1
Net increase in universal life account balances 224.1 172.5
Decrease in other insurance reserve liabilities (165.5) (125.2)
Net (decrease) increase in other liabilities and other assets (122.4) 126.8
Decrease in income taxes (3.9) (23.5)
Net accretion of discount on investments (51.9) (51.1)
Net realized capital gains (17.9) (17.2)
--------- ----------
Net cash (used for) provided by operating activities (31.2) 22.6
--------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 3,828.5 3,830.6
Equity securities 61.3 114.5
Mortgage loans 0.1 8.6
Investment maturities and collections of:
Debt securities available for sale 966.8 681.8
Short-term investments 43.2 21.5
Cost of investment purchases in:
Debt securities available for sale (4,811.0) (4,996.5)
Equity securities (53.6) (63.7)
Short-term investments (120.1) (35.5)
Other, net -- (9.1)
--------- ----------
Net cash used for investing activities (84.8) (447.8)
--------- ----------
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows (Continued)
(millions)
<TABLE>
<CAPTION>
9 Months Ended September 30,
----------------------------
(unaudited) (unaudited)
1997 1996
----------- --------------
<S> <C> <C>
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts $1,230.2 $ 1,140.6
Withdrawals of investment contracts (925.8) (860.7)
Dividends paid to shareholder (8.3) (1.5)
Capital contribution to Separate Account (25.0) --
------- ----------
Net cash provided by financing activities 271.1 278.4
------- ----------
Net increase (decrease) in cash and cash equivalents 155.1 (146.8)
Cash and cash equivalents, beginning of period 459.1 568.8
------- ----------
Cash and cash equivalents, end of period $ 614.2 $ 422.0
------- ----------
Supplemental cash flow information:
Income taxes paid, net $ 68.7 $ 61.4
======= ==========
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Unaudited Consolidated Financial Statements
1. Basis of Presentation
The consolidated financial statements include Aetna Life Insurance and Annuity
Company and its wholly owned subsidiaries, Aetna Insurance Company of America
and Aetna Private Capital, Inc. (collectively, the "Company"). Aetna Life
Insurance and Annuity Company is a wholly owned subsidiary of Aetna Retirement
Holdings, Inc. ("HOLDCO"). HOLDCO is a wholly owned subsidiary of Aetna
Retirement Services, Inc., whose ultimate parent is Aetna Inc. ("Aetna").
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and are unaudited. Certain
reclassifications have been made to 1996 financial information to conform to
the 1997 presentation. These interim statements necessarily rely heavily on
estimates, including assumptions as to annualized tax rates. In the opinion of
management, all adjustments necessary for a fair statement of results for the
interim periods have been made. All such adjustments are of a normal, recurring
nature. The accompanying condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and related
notes as presented in the Company's 1996 Annual Report on Form 10-K. Certain
financial information that is normally included in annual financial statements
prepared in accordance with generally accepted accounting principles, but that
is not required for interim reporting purposes, has been condensed or omitted.
2. Future Application of Accounting Standards
Financial Accounting Standard ("FAS") No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, was issued in
June 1996 and provides accounting and reporting standards for transfers of
financial assets and extinguishments of liabilities.
FAS No. 125 is effective for 1997 financial statements; however, certain
provisions relating to accounting for repurchase agreements and securities
lending are not effective until January 1, 1998. Provisions effective in 1997
did not have a material effect on the Company's financial position or results
of operations. The Company does not expect adoption of this statement for
provisions effective in 1998 to have a material effect on its financial
position or results of operations.
FAS No. 130, Reporting Comprehensive Income, was issued in June 1997 and
establishes standards for the reporting and presentation of comprehensive
income and its components in a full set of financial statements. Comprehensive
income encompasses all changes in shareholder's equity (except those arising
from transactions with owners) and includes net income, net unrealized capital
gains or losses on available for sale securities. As this new standard only
requires additional information in a financial statement, it will not affect
the Company's financial position or results of operations. FAS No. 130 is
effective for fiscal years beginning after December 15, 1997, with earlier
application permitted. The Company is currently evaluating the presentation
alternatives permitted by the statement.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
2. Future Application of Accounting Standards (Continued)
FAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, was issued in June 1997 and establishes standards for the
reporting of information relating to operating segments in annual financial
statements, as well as disclosure of selected information in interim financial
reports. This statement supersedes FAS No. 14, Financial Reporting for Segments
of a Business Enterprise, which requires reporting segment information by
industry and geographic area (industry approach). Under FAS No. 131, operating
segments are defined as components of a company for which separate financial
information is available and is used by management to allocate resources and
assess performance (management approach). This statement is effective for
year-end 1998 financial statements. Interim financial information will be
required beginning in 1999 (with comparative 1998 information). The Company
does not anticipate that this standard will significantly impact the
composition of its current operating segments, which are consistent with the
management approach.
3. Financial Instruments
The Company engages in hedging activities to manage interest rate and price
risks. Such hedging activities have principally consisted of using off-balance
sheet instruments such as futures and forward contracts and interest rate swap
agreements. There were no such contracts or agreements open as of September 30,
1997.
4. Severance and Facilities Charges
In the second quarter of 1996, the Company was allocated severance and
facilities reserves from Aetna to reflect actions taken or to be taken to
reduce the level of corporate expenses and other costs previously absorbed by
Aetna's property-casualty operations.
In the third quarter of 1996, the Company established severance and facilities
reserves in the Financial Services and Individual Life Insurance segments to
reflect actions taken or to be taken in order to make its businesses more
competitive.
Activity for the nine months ended September 30, 1997 within the severance and
facilities reserves (pretax, in millions) and positions eliminated related to
such actions were as follows:
Reserve Positions
---------- ----------
Balance at December 31, 1996 ...... $ 47.9 524
Actions taken (1) .................. (19.5) (129)
-------- -----
Balance at September 30, 1997 ...... $ 28.4 395
======== =====
(1) Includes $9.9 million of severance-related actions and $7.0 million of
corporate allocation-related actions.
The Company's severance actions are expected to be substantially completed by
March 31, 1998. The corporate allocation actions and vacating of certain leased
office space are expected to be substantially completed in 1997.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Condensed Notes to Unaudited Consolidated Financial Statements (Continued)
5. Related Party Transactions
Effective December 31, 1988, the Company entered into a reinsurance agreement
with Aetna Life Insurance Company ("Aetna Life") in which substantially all of
the nonparticipating individual life and annuity business written by Aetna Life
prior to 1981 was assumed by the Company. Effective January 1, 1997, this
agreement has been amended to transition (based on underlying investment
rollover in Aetna Life) from a modified coinsurance to a coinsurance
arrangement. As a result of this change, reserves will be ceded to the Company
from Aetna Life as investment rollover occurs and the loan previously
established will be reduced.
6. Litigation
The Company is involved in numerous lawsuits arising, for the most part, in the
ordinary course of its business operations. While the ultimate outcome of
litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related reserves
established, it is not expected to result in liability for amounts material to
the financial condition of the Company, although it may adversely affect
results of operations in future periods.
7. Dividends
On June 27, 1997 and August 15, 1997, the Company paid a $5.3 million and $3.0
million, respectively, dividend to HOLDCO. The additional amount of dividends
that may be paid by the Company to HOLDCO in 1997 without prior approval by the
Insurance Commissioner of the State of Connecticut is $62.8 million.
F-9
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of income, changes in
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life
Insurance and Annuity Company and Subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 4, 1997
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Revenue:
Premiums $ 133.6 $ 212.7 $ 191.6
Charges assessed against policyholders 396.5 318.9 279.0
Net investment income 1,045.6 1,004.3 917.2
Net realized capital gains 19.7 41.3 1.5
Other income 45.4 42.0 10.3
--------- --------- ---------
Total revenue 1,640.8 1,619.2 1,399.6
Benefits and expenses:
Current and future benefits 968.6 997.2 921.5
Operating expenses 342.2 310.8 225.7
Amortization of deferred policy acquisition costs 69.8 48.0 31.5
Severance and facilities charges 61.3 -- --
--------- --------- ---------
Total benefits and expenses 1,441.9 1,356.0 1,178.7
--------- --------- ---------
Income before income taxes 198.9 263.2 220.9
Income taxes 57.8 87.3 75.6
--------- --------- ---------
Net income $ 141.1 $ 175.9 $ 145.3
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)--
<TABLE>
<CAPTION>
December 31,
-------------------------
Assets 1996 1995
- ------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Investments:
Debt securities, available for sale:
(amortized cost: $12,539.1 and $11,923.7) $12,905.5 $12,720.8
Equity securities, available for sale:
Non-redeemable preferred stock (cost: $107.6 and $51.3) 119.0 57.6
Investment in affiliated mutual funds (cost: $77.3 and $173.4) 81.1 191.8
Common stock (cost: $0.0 and $6.9) 0.3 8.2
Short-term investments 34.8 15.1
Mortgage loans 13.0 21.2
Policy loans 399.3 338.6
---------- -----------
Total investments 13,553.0 13,353.3
Cash and cash equivalents 459.1 568.8
Accrued investment income 159.0 175.5
Premiums due and other receivables 26.6 37.3
Deferred policy acquisition costs 1,515.3 1,341.3
Reinsurance loan to affiliate 628.3 655.5
Other assets 33.7 26.2
Separate Accounts assets 15,318.3 10,987.0
---------- -----------
Total assets $31,693.3 $27,144.9
========== ===========
Liabilities and Shareholder's Equity
- -----------------------------------------------------------------
Liabilities:
Future policy benefits $ 3,617.0 $ 3,594.6
Unpaid claims and claim expenses 28.9 27.2
Policyholders' funds left with the Company 10,663.7 10,500.1
---------- -----------
Total insurance reserve liabilities 14,309.6 14,121.9
Other liabilities 354.7 257.2
Income taxes:
Current 20.7 26.2
Deferred 80.5 169.6
Separate Accounts liabilities 15,318.3 10,987.0
---------- -----------
Total liabilities 30,083.8 25,561.9
---------- -----------
Shareholder's equity:
Common stock, par value $50 (100,000 shares authorized; 55,000
shares issued and outstanding) 2.8 2.8
Paid-in capital 418.0 407.6
Net unrealized capital gains 60.5 132.5
Retained earnings 1,128.2 1,040.1
---------- -----------
Total shareholder's equity 1,609.5 1,583.0
---------- -----------
Total liabilities and shareholder's equity $31,693.3 $27,144.9
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1996 1995 1994
---------- ------------- -------------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $1,583.0 $ 1,088.5 $ 1,246.7
Capital contributions 10.4 -- --
Net change in unrealized capital gains (losses) (72.0) 321.5 (303.5)
Net income 141.1 175.9 145.3
Other changes (49.5) -- --
Common stock dividends declared (3.5) (2.9) --
-------- ---------- ----------
Shareholder's equity, end of year $1,609.5 $ 1,583.0 $ 1,088.5
======== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 141.1 $ 175.9 $ 145.3
Adjustments to reconcile net income to net cash
(used for) provided by operating activities:
Decrease (increase) in accrued investment income 16.5 (33.3) (17.5)
Decrease in premiums due and other receivables 1.6 25.4 1.3
Increase in policy loans (60.7) (89.9) (46.0)
Increase in deferred policy acquisition costs (174.0) (177.0) (105.9)
Decrease in reinsurance loan to affiliate 27.2 34.8 27.8
Net increase in universal life account balances 243.2 393.4 164.7
(Decrease) increase in other insurance reserve liabilities (211.5) 79.0 75.1
Net increase in other liabilities and other assets 3.1 13.0 52.5
Decrease in income taxes (26.7) (4.5) (10.3)
Net accretion of discount on investments (68.0) (66.4) (77.9)
Net realized capital gains (19.7) (41.3) (1.5)
Other, net 1.1 -- (1.0)
---------- ---------- ----------
Net cash (used for) provided by operating activities (126.8) 309.1 206.6
---------- ---------- ----------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,182.2 4,207.2 3,593.8
Equity securities 190.5 180.8 93.1
Mortgage loans 8.7 10.7 --
Limited partnership -- 26.6 --
Investment maturities and collections of:
Debt securities available for sale 885.2 583.9 1,289.2
Short-term investments 35.0 106.1 30.4
Cost of investment purchases in:
Debt securities available for sale (6,534.3) (6,034.0) (5,621.4)
Equity securities (118.1) (170.9) (162.5)
Short-term investments (54.7) (24.7) (106.1)
Mortgage loans -- (21.3) --
Limited partnership -- -- (25.0)
Other, net (17.6) -- --
---------- ---------- ----------
Net cash used for investing activities (423.1) (1,135.6) (908.5)
---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows (Continued)
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,579.5 1,884.5 1,737.8
Withdrawals of investment contracts (1,146.2) (1,109.6) (948.7)
Additional capital contributions 10.4 -- --
Dividends paid to shareholder (3.5) (2.9) --
---------- ---------- ---------
Net cash provided by financing activities 440.2 772.0 789.1
---------- ---------- ---------
Net (decrease) increase in cash and cash equivalents (109.7) (54.5) 87.2
Cash and cash equivalents, beginning of year 568.8 623.3 536.1
---------- ---------- ---------
Cash and cash equivalents, end of year $ 459.1 $ 568.8 $ 623.3
========== ========== =========
Supplemental cash flow information:
Income taxes paid, net $ 85.5 $ 92.8 $ 85.9
========== ========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries
(collectively, the "Company") is a provider of financial services and life
insurance products in the United States. The Company has two business segments:
financial services and individual life insurance.
Financial services products include annuity contracts that offer a variety of
funding and payout options for individual and employer-sponsored retirement
plans qualified under Internal Revenue Code Sections 401, 403, 408 and 457, and
non-qualified annuity contracts. These contracts may be deferred or immediate
("payout annuities"). Financial services also include investment advisory
services, financial planning and pension plan administrative services.
Individual life insurance products include universal life, variable universal
life, traditional whole life and term insurance.
Basis of Presentation
The consolidated financial statements include Aetna Life Insurance and Annuity
Company and its wholly owned subsidiaries, Aetna Insurance Company of America
and Aetna Private Capital, Inc. Aetna Life Insurance and Annuity Company is a
wholly owned subsidiary of Aetna Retirement Holdings, Inc. ("HOLDCO"). HOLDCO
is a wholly owned subsidiary of Aetna Retirement Services, Inc., whose ultimate
parent is Aetna Inc. ("Aetna").
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. Certain reclassifications have been
made to 1995 and 1994 financial information to conform to the 1996
presentation.
Future Application of Accounting Standards
Financial Accounting Standard ("FAS") No. 125 , Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, was issued in
June 1996. This statement provides accounting and reporting standards for
transfers of financial assets and extinguishments of liabilities. Transactions
covered by this statement would include securitizations, sales of partial
interests in assets, repurchase agreements and securities lending. This
statement requires that after a transfer of financial assets, an entity would
recognize any assets it controls and liabilities it has incurred. An entity
would not recognize assets when control has been surrendered or liabilities
have been satisfied. Portions of this statement are effective for each of 1997
and 1998 financial statements and early adoption is not permitted. The Company
does not expect adoption of this statement to have a material effect on its
financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from reported results using those estimates.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments and
other debt issues with a maturity of 90 days or less when purchased.
Investments
All of the Company's debt and equity securities are classified as available for
sale and carried at fair value. These securities are written down (as realized
capital losses) for other than temporary declines in value. Unrealized capital
gains and losses related to available for sale investments, other than amounts
allocable to experience rated contractholders, are reflected in shareholder's
equity, net of related taxes.
Fair values for debt and equity securities are based on quoted market prices or
dealer quotations. Where quoted market prices or dealer quotations are not
available, fair values are measured utilizing quoted market prices for similar
securities or by using discounted cash flow methods. Cost for mortgage-backed
securities is adjusted for unamortized premiums and discounts, which are
amortized using the interest method over the estimated remaining term of the
securities, adjusted for anticipated prepayments.
Purchases and sales of debt and equity securities are recorded on the trade
date.
The investment in affiliated mutual funds primarily represents an investment in
the Aetna Series Fund, Inc., a retail mutual fund which has been seeded by the
Company, and is carried at fair value.
Mortgage loans and policy loans are carried at unpaid principal balances, net
of impairment reserves. Sales of mortgage loans are recorded on the closing
date.
Short-term investments, consisting primarily of money market instruments and
other debt issues purchased with a maturity of 91 days to one year, are
considered available for sale and are carried at fair value, which approximates
amortized cost.
Futures contracts are carried at fair value and require daily cash settlement.
Changes in the fair value of futures contracts that qualify as hedges are
deferred and recognized as an adjustment to the hedged asset or liability.
Deferred gains or losses on such futures contracts are amortized over the life
of the acquired asset or liability as a yield adjustment or through net
realized capital gains or losses upon disposal of an asset. Changes in the fair
value of futures contracts that do not qualify as hedges are recorded in net
realized capital gains or losses. Hedge designation requires specific asset or
liability identification, a probability at inception of high correlation with
the position underlying the hedge, and that high correlation be maintained
throughout the hedge period. If a hedging instrument ceases to be highly
correlated with the position underlying the hedge, hedge accounting ceases at
that date and excess gains and losses on the hedging instrument are reflected
in net realized capital gains or losses.
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Swap agreements which are designated as interest rate risk management
instruments at inception are accounted for using the accrual method.
Accordingly, the difference between amounts paid and received on such
agreements is reported in net investment income. There is no recognition in the
Consolidated Balance Sheets for changes in the fair value of the agreement.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business are deferred. These costs, all of
which vary with and are primarily related to the production of new and renewal
business, consist principally of commissions, certain expenses of underwriting
and issuing contracts, and certain agency expenses. For fixed ordinary life
contracts, such costs are amortized over expected premium-paying periods (up to
20 years). For universal life and certain annuity contracts, such costs are
amortized in proportion to estimated gross profits and adjusted to reflect
actual gross profits over the life of the contracts (up to 20 years).
Deferred policy acquisition costs are written off to the extent that it is
determined that future policy premiums and investment income or gross profits
are not adequate to cover related losses and expenses.
Insurance Reserve Liabilities
Future Policy Benefits include reserves for universal life, immediate annuities
with life contingent payouts and traditional life insurance contracts. Reserves
for universal life contracts are equal to cumulative deposits less charges and
withdrawals plus credited interest thereon. Reserves for immediate annuities
with life contingent payouts and traditional life insurance contracts are
computed on the basis of assumed investment yield, mortality, and expenses,
including a margin for adverse deviations. Such assumptions generally vary by
plan, year of issue and policy duration. Reserve interest rates range from
2.25% to 12.00%. Investment yield is based on the Company's experience.
Mortality and withdrawal rate assumptions are based on relevant Aetna
experience and are periodically reviewed against both industry standards and
experience.
Policyholders' Funds Left With the Company include reserves for deferred
annuity investment contracts and immediate annuities without life contingent
payouts. Reserves on such contracts are equal to cumulative deposits less
charges and withdrawals plus credited interest thereon (rates range from 4.00%
to 7.00%), net of adjustments for investment experience that the Company is
entitled to reflect in future credited interest. Reserves on contracts subject
to experience rating reflect the rights of contractholders, plan participants
and the Company.
Unpaid claims for all lines of insurance include benefits for reported losses
and estimates of benefits for losses incurred but not reported.
Premiums, Charges Assessed Against Policyholders, Benefits and Expenses
For universal life and certain annuity contracts, charges assessed against
policyholders' funds for the cost of insurance, surrender charges, actuarial
margin and other fees are recorded as revenue in
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
charges assessed against policyholders. Other amounts received for these
contracts are reflected as deposits and are not recorded as revenue. Life
insurance premiums, other than premiums for universal life and certain annuity
contracts, are recorded as premium revenue when due. Related policy benefits
are recorded in relation to the associated premiums or gross profit so that
profits are recognized over the expected lives of the contracts. When annuity
payments begin under contracts with life contingent payouts that were initially
investment contracts, the accumulated balance in the account is treated as a
single premium for the purchase of an annuity, reflected as an offsetting
amount in both premiums and current and future benefits in the Consolidated
Statements of Income.
Separate Accounts
Assets held under variable universal life and variable annuity contracts are
segregated in Separate Accounts and are invested, as designated by the
contractholder or participant under a contract, in shares of Aetna Variable
Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment
Advisers Fund, Inc., Aetna GET Fund, the Aetna Series Fund Inc., or the Aetna
Generation Funds (collectively, "Funds"), which are managed by the Company, or
other selected mutual funds not managed by the Company.
Separate Accounts assets and liabilities are carried at fair value except for
those relating to a guaranteed interest option. Since the Company bears the
investment risk where the contract is held to maturity, the assets of the
Separate Account supporting the guaranteed interest option are carried at an
amortized cost of $515.6 million for 1996 (fair value $523.0 million) and
$322.2 million for 1995 (fair value $343.9 million). Reserves relating to the
guaranteed interest option are maintained at fund value and reflect interest
credited at rates ranging from 4.10% to 8.00% in 1996 and 4.50% to 8.38% in
1995.
Separate Accounts assets and liabilities are shown as separate captions in the
Consolidated Balance Sheets. Deposits, investment income and net realized and
unrealized capital gains and losses of the Separate Accounts are not reflected
in the Consolidated Statements of Income (with the exception of realized
capital gains and losses on the sale of assets supporting the guaranteed
interest option). The Consolidated Statements of Cash Flows do not reflect
investment activity of the Separate Accounts.
Income Taxes
The Company is included in the consolidated federal income tax return of Aetna.
The Company is taxed at regular corporate rates after adjusting income reported
for financial statement purposes for certain items. Deferred income tax
expenses/benefits result from changes during the year in cumulative temporary
differences between the tax basis and book basis of assets and liabilities.
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments
Debt securities available for sale as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------ ------------ ----------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities $ 1,072.4 $ 20.5 $ 4.5 $ 1,088.4
States, municipalities and political subdivisions 6.0 1.2 -- 7.2
U.S. corporate securities:
Financial 2,143.4 43.1 9.7 2,176.8
Food & fiber 198.2 4.6 1.3 201.5
Healthcare & consumer products 735.9 20.2 6.3 749.8
Media & broadcast 274.9 7.0 2.8 279.1
Natural resources 187.7 4.5 0.4 191.8
Transportation & capital goods 521.9 22.0 1.8 542.1
Utilities 448.8 14.8 2.8 460.8
Other 141.5 3.0 -- 144.5
---------- ------- ------ ----------
Total U.S. corporate securities 4,652.3 119.2 25.1 4,746.4
Foreign Securities:
Government 758.6 36.0 5.7 788.9
Utilities 187.8 16.1 -- 203.9
Other 945.5 30.9 6.3 970.1
---------- ------- ------ ----------
Total foreign securities 1,891.9 83.0 12.0 1,962.9
Residential mortgage-backed securities:
Pass-throughs 792.2 78.3 3.1 867.4
Collateralized mortgage obligations 2,227.8 94.9 13.7 2,309.0
---------- ------- ------ ----------
Total residential mortgage-backed securities 3,020.0 173.2 16.8 3,176.4
Commercial/Multifamily mortgage-backed securities 1,008.7 24.8 5.6 1,027.9
Other asset-backed securities 887.8 10.7 2.2 896.3
---------- ------- ------ ----------
Total Debt Securities $12,539.1 $432.6 $66.2 $12,905.5
========== ======= ====== ==========
</TABLE>
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Debt securities available for sale as of December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------ ------------ -----------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government agencies and
authorities $ 539.5 $ 47.5 $ -- $ 587.0
States, municipalities and political subdivisions 41.4 12.4 -- 53.8
U.S. Corporate securities:
Financial 2,764.4 110.3 2.1 2,872.6
Food & fiber 310.8 20.8 0.6 331.0
Healthcare & consumer products 766.0 59.2 0.2 825.0
Media & broadcast 191.7 10.0 -- 201.7
Natural resources 186.9 12.6 0.2 199.3
Transportation & capital goods 602.4 46.7 0.2 648.9
Utilities 454.4 27.8 1.0 481.2
Other 119.9 10.2 -- 130.1
---------- ------- ------ -----------
Total U.S. corporate securities 5,396.5 297.6 4.3 5,689.8
Foreign securities:
Government 316.4 26.1 2.0 340.5
Utilities 236.3 32.9 -- 269.2
Other 749.9 60.5 3.5 806.9
---------- ------- ------ -----------
Total foreign securities 1,302.6 119.5 5.5 1,416.6
Residential mortgage-backed securities:
Pass-throughs 556.7 99.2 1.8 654.1
Collateralized mortgage obligations 2,383.9 167.6 2.2 2,549.3
---------- ------- ------ -----------
Total residential mortgage-backed securities 2,940.6 266.8 4.0 3,203.4
Commercial/multifamily mortgage-backed securities 741.9 32.3 0.2 774.0
Other asset-backed securities 961.2 35.5 0.5 996.2
---------- ------- ------ -----------
Total Debt Securities $11,923.7 $811.6 $14.5 $ 12,720.8
========== ======= ====== ===========
</TABLE>
At December 31, 1996 and 1995, net unrealized appreciation of $366.4 million
and $797.1 million, respectively, on available for sale debt securities
included $288.5 million and $619.1 million, respectively, related to experience
rated contracts, which were not reflected in shareholder's equity but in Future
Policy Benefits and Policyholders' Funds Left With the Company.
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
The amortized cost and fair value of debt securities for the year ended
December 31, 1996 are shown below by contractual maturity. Actual maturities
may differ from contractual maturities because securities may be restructured,
called, or prepaid.
Amortized Fair
Cost Value
----------- ----------
(millions)
Due to mature:
One year or less ........................ $ 424.4 $ 425.7
After one year through five years ...... 2,162.4 2,194.2
After five years through ten years ...... 2,467.4 2,509.6
After ten years ........................ 2,568.4 2,675.4
Mortgage-backed securities ............... 4,028.7 4,204.3
Other asset-backed securities ............ 887.8 896.3
---------- ----------
Total ................................. $12,539.1 $12,905.5
========== ==========
The Company engages in securities lending whereby certain securities from its
portfolio are loaned to other institutions for short periods of time.
Collateral, primarily cash, which is in excess of the market value of the
loaned securities, is deposited by the borrower with a lending agent, and
retained and invested by the lending agent to generate additional income for
the Company. The market value of the loaned securities is monitored on a daily
basis with additional collateral obtained or refunded as the market value
fluctuates. At December 31, 1996 and 1995, the Company had loaned securities
(which are reflected as invested assets) with a market value of approximately
$444.7 million and $264.5 million, respectively.
At December 31, 1996 and 1995, debt securities carried at $7.6 million and $7.4
million, respectively, were on deposit as required by regulatory authorities.
The carrying value of non-income producing investments was $0.9 million and
$0.1 million at December 31, 1996 and 1995, respectively.
The Company did not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10% of
the Company's shareholder's equity at December 31, 1996.
Included in the Company's total debt securities were residential collateralized
mortgage obligations ("CMOs") supporting the following:
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
<TABLE>
<CAPTION>
1996 1995
-------------------------- ------------------------
Fair Amortized Fair Amortized
Value Cost Value Cost
------------ ----------- ----------- ----------
(millions)
<S> <C> <C> <C> <C>
Total residential CMOs (1) $2,309.0 $2,227.8 $2,549.4 $2,383.9
=========== ========= =========== =========
Percentage of total:
Supporting experience rated products 84.2% 85.3%
Supporting remaining products 15.8% 14.7%
----------- -----------
100.0% 100.0%
=========== ===========
</TABLE>
(1) At December 31, 1996 and 1995, approximately 71% and 81%, respectively, of
the Company's residential CMO holdings were backed by government agencies
such as GNMA, FNMA, FHLMC.
There are various categories of CMOs which are subject to different degrees of
risk from changes in interest rates and, for nonagency-backed CMOs, defaults.
The principal risks inherent in holding CMOs are prepayment and extension risks
related to dramatic decreases and increases in interest rates resulting in the
repayment of principal from the underlying mortgages either earlier or later
than originally anticipated.
At December 31, 1996 and 1995, approximately 68% and 79%, respectively, of the
Company's CMO holdings were in planned amortization class ("PAC") and
sequential structure tranches, which are subject to less prepayment and
extension risk than other types of CMO instruments. At December 31, 1996 and
1995, approximately 3% of the Company's CMO holdings were in the interest-only
("IOs") and principal-only ("POs") tranches, which are subject to more
prepayment and extension risks than other types of CMO instruments. Remaining
CMO holdings are in other tranches that have prepayment and extension risks
which fall between the degree of risk associated with PACs and sequentials, and
IOs and POs.
Investments in available for sale equity securities were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------ ------------ --------
(millions)
1996
- -----------------
Equity Securities $184.9 $16.3 $0.8 $ 200.4
------- ------ ----- --------
1995
- -----------------
Equity Securities $231.6 $27.2 $1.2 $ 257.6
------- ------ ----- --------
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments
Estimated Fair Value
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -----------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------- ----------- ---------- ----------
(millions)
<S> <C> <C> <C> <C>
Assets:
Mortgage loans $ 13.0 $ 13.2 $ 21.2 $ 21.9
Liabilities:
Investment contract liabilities:
With a fixed maturity $ 1,014.1 $ 1,028.8 $ 989.1 $1,001.2
Without a fixed maturity 9,649.6 9,427.6 9,511.0 9,298.4
</TABLE>
Fair value estimates are made at a specific point in time, based on available
market information and judgments about the financial instrument, such as
estimates of timing and amount of future cash flows. Such estimates do not
reflect any premium or discount that could result from offering for sale at one
time the Company's entire holdings of a particular financial instrument, nor do
they consider the tax impact of the realization of unrealized gains or losses.
In many cases, the fair value estimates cannot be substantiated by comparison
to independent markets, nor can the disclosed value be realized in immediate
settlement of the instrument. In evaluating the Company's management of
interest rate, price and liquidity risks, the fair values of all assets and
liabilities should be taken into consideration, not only those presented above.
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
Mortgage loans: Fair values are estimated by discounting expected mortgage loan
cash flows at market rates which reflect the rates at which similar loans would
be made to similar borrowers. The rates reflect management's assessment of the
credit quality and the remaining duration of the loans.
Investment contract liabilities (included in Policyholders' Funds Left With the
Company):
With a fixed maturity: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
Without a fixed maturity: Fair value is estimated as the amount payable to the
contractholder upon demand. However, the Company has the right under such
contracts to delay payment of withdrawals which may ultimately result in paying
an amount different than that determined to be payable on demand.
Off-Balance-Sheet and Other Financial Instruments (including Derivative
Financial Instruments)
The Company uses off-balance-sheet and other financial instruments primarily to
manage portfolio risks, including interest rate, prepayment/call, credit,
price, and liquidity risks. In 1996, Treasury
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
futures contracts were used to manage interest rate risk in the Company's bond
portfolio and stock index futures contracts were used to manage price risk in
the Company's equity portfolio. In 1996 and 1995, interest rate swaps and
forward commitments to enter into interest rate swaps, respectively, were also
used to manage interest rate risk in the Company's bond portfolio.
Futures Contracts:
Futures contracts represent commitments to either purchase or sell underlying
assets at a specified future date. Futures contracts trade on organized
exchanges and, therefore, have minimal credit risk. Cash settlements are made
daily based on changes in the prices of the underlying assets. There were no
futures contracts open as of December 31, 1996 and 1995.
Interest Rate Swaps:
Under interest rate swaps, the Company agrees with other parties to exchange
interest amounts calculated by reference to an agreed notional principal
amount. Generally, no cash is exchanged at the outset of the contract and no
principal payments are made. A single net payment is usually made by one
counterparty at each due date or upon termination of the contract. The Company
would be exposed to credit-related losses in the event of nonperformance by
counterparties to financial instruments, however, the Company controls its
exposure to credit risk through credit approvals, credit limits and regular
monitoring procedures. The credit exposure of interest rate swaps is
represented by the fair value (market value) of contracts with a positive fair
value (market value) at the reporting date. There were no interest rate swap
agreements open as of December 31, 1996. At December 31, 1995, the Company had
an open forward swap agreement with a notional amount of $100.0 million and a
fair value of $0.1 million.
During 1995, the Company received $0.4 million for writing call options on
underlying securities. The Company did not write any call options in 1996. As
of December 31, 1996 and 1995, there were no option contracts outstanding.
The Company also had investments in certain debt instruments with derivative
characteristics, including those whose market value is at least partially
determined by, among other things, levels of or changes in domestic and/or
foreign interest rates (short or long term), exchange rates, prepayment rates,
equity markets or credit ratings/spreads. The amortized cost and fair value of
these securities, included in the debt securities portfolio, as of December 31,
1996 was as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
----------- ----------
(millions)
<S> <C> <C>
Residential collateralized mortgage obligations ..................... $ 2,227.8 $2,309.0
Principal-only strips (included above) .............................. 44.5 53.3
Interest-only strips (included above) .............................. 10.3 22.8
Other structured securities with derivative characteristics (1) ...... 126.3 129.2
</TABLE>
(1) Represents non-leveraged instruments whose fair values and credit risk are
based on underlying securities, including fixed income securities and
interest rate swap agreements.
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
4. Net Investment Income
Sources of net investment income were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -----------
(millions)
<S> <C> <C> <C>
Debt securities $ 945.3 $ 891.5 $ 823.9
Preferred stock 5.9 4.2 3.9
Investment in affiliated mutual funds 14.3 14.9 5.2
Mortgage loans 2.2 1.4 1.4
Policy loans 18.4 13.7 11.5
Reinsurance loan to affiliate 44.1 46.5 51.5
Cash equivalents 29.4 38.9 29.5
Other 2.1 8.4 6.7
--------- --------- --------
Gross investment income 1,061.7 1,019.5 933.6
Less investment expenses (16.1) (15.2) (16.4)
--------- --------- --------
Net investment income $ 1,045.6 $ 1,004.3 $ 917.2
========= ========= ========
</TABLE>
Net investment income includes amounts allocable to experience rated
contractholders of $787.6 million, $744.2 million and $677.1 million for the
years ended December 31, 1996, 1995 and 1994, respectively. Interest credited
to contractholders is included in Current and Future Benefits.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $3.5 million in cash dividends to HOLDCO in 1996. In 1995, the
Company dividended $2.9 million in the form of two of its subsidiaries,
Systematized Benefits Administrators, Inc. and Aetna Investment Services, Inc.,
to Aetna Retirement Services, Inc. (the Company's former parent).
The amount of dividends that may be paid to the shareholder in 1997 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$71.1 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus those amounts
determined in conformity with statutory accounting practices prescribed or
permitted by the Department, which differ in certain respects from generally
accepted accounting principles. Statutory net income was $57.8 million, $70.0
million and $64.9 million for the years ended December 31, 1996, 1995 and 1994,
respectively. Statutory capital and surplus was $713.6 million and $670.7
million as of December 31, 1996 and 1995, respectively.
As of December 31, 1996 the Company does not utilize any statutory accounting
practices which are not prescribed by state regulatory authorities that,
individually or in the aggregate, materially affect statutory capital and
surplus.
Realized capital gains or losses are the difference between the carrying value
and sale proceeds of specific investments sold.
F-26
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Net realized capital gains on investments were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- ------
(millions)
<S> <C> <C> <C>
Debt securities $ 11.1 $ 32.8 $ 1.0
Equity securities 8.6 8.3 0.2
Mortgage loans -- 0.2 0.3
------- ------- ------
Pretax realized capital gains $ 19.7 $ 41.3 $ 1.5
------- ------- ------
After tax realized capital gains $ 13.0 $ 25.8 $ 1.0
======= ======= ======
</TABLE>
Net realized capital gains of $53.1 million and $61.1 million for 1996 and
1995, respectively, and net realized capital losses of $29.1 million for 1994,
allocable to experience rated contracts, were deducted from net realized
capital gains (losses) and an offsetting amount was reflected in policy-holder
funds' left with the Company. Net unamortized gains were $53.3 million and $7.3
million at December 31, 1996 and 1995, respectively.
Changes to the mortgage loan valuation reserve and writedowns on debt
securities for other than temporary declines in value are included in net
realized capital gains (losses) and amounted to $(3.3) million, $3.1 million
and $1.1 million, of which $(3.2) million, $2.2 million and $0.8 million were
allocable to experience rated contractholders, for the years ended December 31,
1996, 1995 and 1994, respectively. There was no valuation reserve for mortgage
loans at December 31, 1996 or at December 31, 1995.
Proceeds from the sale of available for sale debt securities and the related
gross gains and losses were as follows:
1996 1995 1994
----------- ----------- ----------
(millions)
Proceeds on Sales $ 5,182.2 $ 4,207.2 $3,593.8
Gross gains 24.3 44.6 26.6
Gross losses 13.2 11.8 25.6
Changes in shareholder's equity related to changes in unrealized capital gains
(losses), (excluding those related to experience rated contractholders), were
as follows:
F-27
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
<TABLE>
<CAPTION>
1996 1995 1994
----------------- ----------- ------------
(millions)
<S> <C> <C> <C>
Debt securities $ (100.1) $ 255.9 $ (242.1)
Equity securities (10.5) 27.3 (13.3)
Limited partnership -- 1.8 (1.8)
---------- -------- ---------
(110.6) 285.0 (257.2)
Deferred income taxes (See Note 8) (38.6) (36.5) 46.3
---------- -------- ---------
Net change in unrealized capital gains (losses) $ (72.0) $ 321.5 $ (303.5)
========== ======== =========
</TABLE>
Net unrealized capital gains allocable to experience rated contracts of $245.2
million and $43.3 million at December 31, 1996 and $515.0 million and $104.1
million at December 31, 1995 are reflected on the Consolidated Balance Sheets
in Policyholders' Funds Left With the Company and Future Policy Benefits,
respectively, and are not included in shareholder's equity.
Shareholder's equity included the following unrealized capital gains (losses),
which are net of amounts allocable to experience rated contractholders, at
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
(millions)
<S> <C> <C> <C>
Debt securities
Gross unrealized capital gains $ 101.7 $ 179.3 $ 27.4
Gross unrealized capital losses (23.8) (1.3) (105.2)
-------- -------- ---------
77.9 178.0 (77.8)
Equity securities
Gross unrealized capital gains 16.3 27.2 6.5
Gross unrealized capital losses (0.8) (1.2) (7.9)
-------- -------- ---------
15.5 26.0 (1.4)
Limited Partnership -- -- --
Gross unrealized capital gains -- -- --
Gross unrealized capital losses -- -- (1.8)
-------- -------- ---------
-- -- (1.8)
Deferred income taxes (See Note 8) 32.9 71.5 108.0
-------- -------- ---------
Net unrealized capital gains (losses) $ 60.5 $ 132.5 $ (189.0)
======== ======== =========
</TABLE>
F-28
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
7. Severance and Facilities Charges
Severance and facilities charges during 1996, as described below, included the
following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Leased Corporate
(Millions) Severance Write-Off Property Other Allocation Total
- --------------------------- ----------- ----------- ---------- ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Financial Services $ 29.1 $ 1.0 $ 1.3 $ 1.7 $ -- $ 33.1
Individual Life Insurance 12.5 0.4 0.5 0.8 -- 14.2
Corporate Allocation -- -- -- -- 14.0 14.0
------- ------ ------ ------ ------ -------
Total Company $ 41.6 $ 1.4 $ 1.8 $ 2.5 $14.0 $ 61.3
- -------------------------- ------- ------ ------ ------ ------ -------
</TABLE>
In the third quarter of 1996, the Company recorded a $30.7 million after tax
($47.3 million pretax) charge principally related to actions taken or expected
to be taken to improve its cost structure relative to its competitors. The
severance portion of the charge is based on a plan to eliminate 702 positions
(primarily customer service, sales and information technology support staff).
The facilities portion of the charge is based on a plan to consolidate
sales/service field offices.
In addition to the above charge, Aetna recorded a facilities and severance
charge in the second quarter of 1996, primarily as a result of actions taken or
expected to be taken to reduce the level of corporate expenses and other costs
previously absorbed by Aetna's property-casualty operations. The cost allocated
to the Company associated with this charge was $9.1 million after tax ($14.0
million pretax).
The activity during 1996 within the severance and facilities reserve (pretax,
in millions) and the number of positions eliminated related to such actions
were as follows:
Reserve Positions
- --------------------------------- --------- ----------
Beginning of year $ -- --
Severance and facilities charges 47.3 702
Corporate Allocation 14.0 --
Actions taken (1) (13.4) (178)
------- -----
End of year $ 47.9 524
- --------------------------------- ------- -----
(1) Includes $8.0 million of severance-related actions and $4.1 million of
corporate allocation-related actions.
The Company's severance actions are expected to be substantially completed by
March 31, 1998. The corporate allocation actions and the vacating of the leased
office space are expected to be substantially completed in 1997.
8. Income Taxes
The Company is included in the consolidated federal income tax return and
combined Connecticut and New York state income tax returns of Aetna. Aetna
allocates to each member an amount approximating the
F-29
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
tax it would have incurred were it not a member of the consolidated group, and
credits the member for the use of its tax saving attributes used in the
consolidated returns.
Income taxes for the years ended December 31, consist of:
1996 1995 1994
------- ------- ------
(millions)
Current taxes (benefits):
Income Taxes:
Federal $ 50.9 $ 82.9 $ 78.7
State 3.7 3.2 4.4
Net realized capital gains (losses) 25.3 28.5 (33.2)
------ ------ ------
79.9 114.6 49.9
------ ------ ------
Deferred taxes (benefits):
Income Taxes:
Federal ( 3.5) (14.4) ( 8.0)
Net realized capital gains (losses) (18.6) (12.9) 33.7
------ ------ ------
(22.1) (27.3) 25.7
------ ------ ------
Total $ 57.8 $ 87.3 $ 75.6
====== ====== ======
Income taxes were different from the amount computed by applying the federal
income tax rate to income before income taxes for the following reasons:
1996 1995 1994
------- ------- -------
(millions)
Income before income taxes $198.9 $263.2 $220.9
Tax rate 35% 35% 35%
------ ------ ------
Application of the tax rate 69.6 92.1 77.3
------ ------ ------
Tax effect of:
State income tax, net of federal benefit 2.4 2.1 2.9
Excludable dividends (8.7) (9.3) (8.6)
Other, net (5.5) 2.4 4.0
------ ------ ------
Income taxes $ 57.8 $ 87.3 $ 75.6
====== ====== ======
F-30
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities at December 31 are presented below:
1996 1995
------- -----
(millions)
Deferred tax assets:
Insurance reserves $344.6 $290.4
Unrealized gains allocable to experience rated contracts 100.8 216.7
Investment losses 7.5 7.3
Postretirement benefits other than pensions 27.0 7.7
Deferred compensation 25.0 18.9
Pension 7.6 5.7
Other 29.3 9.2
------ ------
Total gross assets 541.8 555.9
Deferred tax liabilities:
Deferred policy acquisition costs 482.1 433.0
Market discount 6.8 4.4
Net unrealized capital gains 133.7 288.2
Other (0.3) (0.1)
------ ------
Total gross liabilities 622.3 725.5
------ ------
Net deferred tax liability $ 80.5 $169.6
====== ======
Net unrealized capital gains and losses are presented in shareholder's equity
net of deferred taxes. Valuation allowances are provided when it is not
considered more likely than not that deferred tax assets will be realized. As
of December 31, 1996 and 1995, no valuation allowances were required for
unrealized capital gains and losses.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that has
not been subject to taxation. As of December 31, 1983, no further additions
could be made to the Policyholders' Surplus Account for tax return purposes
under the Deficit Reduction Act of 1984. The balance in such account was
approximately $17.2 million at December 31, 1996. This amount would be taxed
only under certain conditions. No income taxes have been provided on this
amount since management believes the conditions under which such taxes would
become payable are remote.
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1990. Discussions are
being held with the Service with respect to proposed adjustments. Management
believes there are adequate defenses against, or sufficient reserves to provide
for, any such adjustments. The Service has commenced its examinations for the
years 1991 through 1994.
F-31
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans
Employee Pension Plans--The Company, in conjunction with Aetna, has
noncontributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over 60 consecutive months of highest
earnings in a 120-month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to the amounts that are tax-deductible. As of
December 31, 1996, Aetna's accrued pension cost has been allocated to its
subsidiaries, including the Company, under an allocation based on eligible
salaries. Data on a separate company basis regarding the proportionate share of
the projected benefit obligation and plan assets is not available. The
accumulated benefit obligation and plan assets are recorded by Aetna. As of the
measurement date (i.e., September 30), the accumulated plan assets exceeded
accumulated plan benefits. Allocated pretax charges to operations for the
pension plan (based on the Company's total salary cost as a percentage of
Aetna's total salary cost) were $4.3 million, $6.1 million and $5.5 million for
the years ended December 31, 1996, 1995 and 1994, respectively.
Employee Postretirement Benefits--In addition to providing pension benefits,
Aetna currently provides certain health care and life insurance benefits,
subject to certain caps, for retired employees. A comprehensive medical and
dental plan is offered to all full-time employees retiring at age 50 with 15
years of service or at age 65 with 10 years of service. Retirees are generally
required to contribute to the plans based on their years of service with Aetna.
The costs to the Company associated with the Aetna postretirement plans for
1996, 1995 and 1994 were $1.8 million, $1.4 million and $1.0 million,
respectively.
As of December 31, 1996, Aetna transferred to the Company approximately $77.7
million of accrued liabilities, primarily related to the pension and
postretirement benefit plans described above, that had been previously recorded
by Aetna. The after tax amount of this transfer (approximately $50.5 million)
is reported as a reduction in retained earnings.
Agent Pension Plans--The Company, in conjunction with Aetna, has a
non-qualified pension plan covering certain agents. The plan provides pension
benefits based on annual commission earnings. As of the measurement date (i.e.,
September 30), the accumulated plan assets exceeded accumulated plan benefits.
Agent Postretirement Benefits--The Company, in conjunction with Aetna, also
provides certain postretirement health care and life insurance benefits for
certain agents. The costs to the Company associated with the agents'
postretirement plans for 1996, 1995 and 1994 were $0.7 million, $0.8 million
and $0.7 million, respectively.
Incentive Savings Plan--Substantially all employees are eligible to participate
in a savings plan under which designated contributions, which may be invested
in common stock of Aetna or certain other investments, are matched, up to 5% of
compensation, by Aetna. Pretax charges to operations for the incentive savings
plan were $5.4 million, $4.9 million and $3.3 million in 1996, 1995 and 1994,
respectively.
F-32
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans (Continued)
Stock Plans--Aetna has a stock incentive plan that provides for stock options,
deferred contingent common stock or equivalent cash awards or restricted stock
to certain key employees. Executive and middle management employees may be
granted options to purchase common stock of Aetna at or above the market price
on the date of grant. Options generally become 100% vested three years after
the grant is made, with one-third of the options vesting each year. Aetna does
not recognize compensation expense for stock options granted at or above the
market price on the date of grant under its stock incentive plans. In addition,
executives may be granted incentive units which are rights to receive common
stock or an equivalent value in cash. The incentive units may vest within a
range from 0% to 175% at the end of a four year period based on the attainment
of performance goals. The costs to the Company associated with the Aetna stock
plans for 1996, 1995 and 1994, were $8.1 million, $6.3 million and $1.7
million, respectively. As of December 31, 1996, Aetna transferred to the
Company approximately $1.1 million of deferred tax benefits related to stock
options. This amount is reported as an increase in retained earnings.
10. Related Party Transactions
The Company is compensated by the Separate Accounts for bearing mortality and
expense risks pertaining to variable life and annuity contracts. Under the
insurance contracts, the Separate Accounts pay the Company a daily fee which,
on an annual basis, ranges, depending on the product, from .10% to 1.90% of
their average daily net assets. The Company also receives fees from the
variable life and annuity mutual funds and The Aetna Series Fund for serving as
investment adviser. Under the advisory agreements, the Funds pay the Company a
daily fee which, on an annual basis, ranges, depending on the fund, from .25%
to .85% of their average daily net assets. The Company also receives fees
(expressed as a percentage of the average daily net assets) from the variable
life and annuity mutual funds and The Aetna Series Fund for providing
administration services, and from The Aetna Series Fund for providing
shareholder services and promoting sales. The amount of compensation and fees
received from the Separate Accounts and Funds, included in Charges Assessed
Against Policyholders, amounted to $185.4 million, $128.1 million and $104.6
million in 1996, 1995 and 1994, respectively. The Company may waive advisory
fees at its discretion.
The Company acts as an investment adviser for its affiliated mutual funds.
Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
owned subsidiary of HOLDCO and an affiliate of the Company, has been acting as
Subadvisor of all affiliated mutual funds and of most of the General Account
assets. Fees paid by the Company to Aeltus, included in both Charges Assessed
Against Policyholders and Net Investment Income, on an annual basis, range from
.06% to .55% of the average daily net assets under management. For the year
ended December 31, 1996, the Company paid $16.0 million in such fees.
The Company may, from time to time, make reimbursements to a Fund for some or
all of its operating expenses. Reimbursement arrangements may be terminated at
any time without notice.
F-33
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
Since 1981, all domestic individual non-participating life insurance of Aetna
and its subsidiaries has been issued by the Company. Effective December 31,
1988, the Company entered into a reinsurance agreement with Aetna Life
Insurance Company ("Aetna Life") in which substantially all of the non-
participating individual life and annuity business written by Aetna Life prior
to 1981 was assumed by the Company. A $108.0 million commission, paid by the
Company to Aetna Life in 1988, was capitalized as deferred policy acquisition
costs. An additional $6.1 million commission, paid by the Company to Aetna Life
in 1996, was capitalized as deferred policy acquisition costs. The Company
maintained insurance reserves of $628.3 million and $655.5 million as of
December 31, 1996 and 1995, respectively, relating to the business assumed. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance reserves.
The loan is being reduced in accordance with the decrease in the reserves. The
fair value of this loan was $625.3 million and $663.5 million as of December
31, 1996 and 1995, respectively, and is based upon the fair value of the
underlying assets. Premiums of $25.3 million, $28.0 million and $32.8 million
and current and future benefits of $39.5 million, $43.0 million and $43.8
million were assumed in 1996, 1995 and 1994, respectively.
Investment income of $44.1 million, $46.5 million and $51.5 million was
generated from the reinsurance loan to affiliate in 1996, 1995 and 1994,
respectively. Net income of approximately $8.1 million, $18.4 million and $25.1
million resulted from this agreement in 1996, 1995 and 1994, respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue from
Aetna Life for the purchase and administration of a life contingent single
premium variable payout annuity contract. In addition, the Company also is
responsible for administering fixed annuity payments that are made to
annuitants receiving variable payments. Reserves of $28.9 million and $28.0
million were maintained for this contract as of December 31, 1996 and 1995,
respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement with
Aetna Life to reinsure amounts in excess of this limit, up to a maximum of $8.0
million on any new individual life business, on a yearly renewable term basis.
Premium amounts related to this agreement were $5.2 million, $3.2 million and
$1.3 million for 1996, 1995 and 1994, respectively.
The Company received a capital contribution of $10.4 million in cash from
HOLDCO in 1996. The Company received no capital contributions in 1995 or 1994.
The Company paid $3.5 million in cash dividends to HOLDCO in 1996. In 1995, the
Company dividended $2.9 million in the form of two of its subsidiaries,
Systematized Benefits Administrators, Inc. and Aetna Investment Services, Inc.,
to Aetna Retirement Services, Inc. (the Company's former parent).
Premiums due and other receivables include $2.8 million and $5.7 million due
from affiliates in 1996 and 1995, respectively. Other liabilities include $10.7
million and $12.4 million due to affiliates for 1996 and 1995, respectively.
F-34
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
Substantially all of the administrative and support functions of the Company
are provided by Aetna and its affiliates. The financial statements reflect
allocated charges for these services based upon measures appropriate for the
type and nature of service provided.
11. Reinsurance
The Company utilizes indemnity reinsurance agreements to reduce its exposure to
large losses in all aspects of its insurance business. Such reinsurance permits
recovery of a portion of losses from reinsurers, although it does not discharge
the primary liability of the Company as direct insurer of the risks reinsured.
The Company evaluates the financial strength of potential reinsurers and
continually monitors the financial condition of reinsurers. Only those
reinsurance recoverables deemed probable of recovery are reflected as assets on
the Company's Consolidated Balance Sheets.
The following table includes premium amounts ceded/assumed to/from affiliated
companies as discussed in Note 10 above.
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
--------- ----------- ------------ --------
(millions)
<S> <C> <C> <C> <C>
1996
- ----
Premiums:
Life Insurance $ 34.6 $ 11.2 $ 25.3 $ 48.7
Accident and Health Insurance 6.3 6.3 -- --
Annuities 84.3 -- 0.6 84.9
-------- ------- ------- --------
Total earned premiums $ 125.2 $ 17.5 $ 25.9 $ 133.6
======== ======= ======= ========
1995
- ----
Premiums:
Life Insurance $ 28.8 $ 8.6 $ 28.0 $ 48.2
Accident and Health Insurance 7.5 7.5 -- --
Annuities 164.0 -- 0.5 164.5
-------- ------- ------- --------
Total earned premiums $ 200.3 $ 16.1 $ 28.5 $ 212.7
======== ======= ======= ========
1994
- ----
Premiums:
Life Insurance $ 27.3 $ 6.0 $ 32.8 $ 54.1
Accident and Health Insurance 9.3 9.3 -- --
Annuities 137.3 -- 0.2 137.5
-------- ------- ------- --------
Total earned premiums $ 173.9 $ 15.3 $ 33.0 $ 191.6
======== ======= ======= ========
</TABLE>
F-35
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingent Liabilities
Commitments
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a specified
future date and at a specified price or yield. The inability of counterparties
to honor these commitments may result in either higher or lower replacement
cost. Also, there is likely to be a change in the value of the securities
underlying the commitments. At December 31, 1996, the Company had commitments
to purchase investments of $17.9 million. The fair value of the investments at
December 31, 1996 approximated $18.3 million.
Litigation
The Company is involved in numerous lawsuits arising, for the most part, in the
ordinary course of its business operations. While the ultimate outcome of
litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related reserves
established, it is not expected to result in liability for amounts material to
the financial condition of the Company, although it may adversely affect
results of operations in future periods.
13. Segment Information (1)
The Company's operations are reported through two major business segments:
Financial Services and Individual Life Insurance.
Summarized financial information for the Company's principal operations was as
follows:
(Millions) 1996 1995 1994
- ------------------------------------ ----------- ----------- ----------
Revenue:
Financial Services $ 1,195.1 $ 1,211.3 $1,013.5
Individual Life Insurance 445.7 407.9 386.1
---------- ---------- ----------
Total revenue $ 1,640.8 $ 1,619.2 $1,399.6
- ----------------------------------- ---------- ---------- ----------
Income before income taxes: (2)
Financial Services $ 129.9 $ 160.1 $ 122.5
Individual Life Insurance 83.0 103.1 98.4
---------- ---------- ----------
Total income before income taxes $ 212.9 $ 263.2 $ 220.9
- ----------------------------------- ---------- ---------- ----------
Net income: (2)
Financial Services $ 94.3 $ 113.8 $ 85.5
Individual Life Insurance 55.9 62.1 59.8
---------- ---------- ----------
Net income $ 150.2 $ 175.9 $ 145.3
- ----------------------------------- ---------- ---------- ----------
F-36
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
13. Segment Information (1) (Continued)
Assets under management: (3)
Financial Services $ 27,268.1 $ 22,534.4 $18,122.9
Individual Life Insurance 2,830.5 2,590.9 2,220.5
- -------------------------------- ----------- ----------- -----------
Total assets under management $ 30,098.6 $ 25,125.3 $20,343.4
- -------------------------------- ----------- ----------- -----------
(1) The 1996 results include severance and facilities charges of $30.7
million, after tax. Of this charge $21.5 million related to the Financial
Services segment and $9.2 million related to the Individual Life Insurance
segment.
(2) Excludes any effect of the corporate facilities and severance charge
recorded in 1996 which is not directly allocable to the Financial Services and
Individual Life Insurance segments. (Refer to Note 7).
(3) Excludes net unrealized capital gains (losses) of $366.4 million, $797.1
million and $(386.4) million at December 31, 1996, 1995 and 1994, respectively.
F-37
<PAGE>
Form No. SAI.75986-97 ALIAC Ed. February 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:
- Statement of Assets and Liabilities as of December 31, 1996
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1996 and 1995
- Notes to Financial Statements
- Independent Auditors' Report
- Unaudited Statement of Assets and Liabilities as of September
30, 1997
- Unaudited Statements of Operations and Changes in Net Assets
for the nine-month period ended September 30, 1997
- Notes to Unaudited 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
- Unaudited Consolidated Statements of Income for the three and
nine-month periods ended September 30, 1997 and 1996
- Unaudited Consolidated Balance Sheet as of September 30, 1997
and 1996
- Unaudited Consolidated Statements of Changes in Shareholder's
Equity for the nine-month periods ended September 30, 1997 and
1996
- Unaudited Consolidated Statements of Cash Flows for the
nine-month periods ended September 30, 1997 and 1996
- Unaudited Condensed 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) Broker-Dealer Agreement(2)
<PAGE>
(3.2) Alternative Form of Wholesaling Agreement and Related Selling
Agreement(2)
(4.1) Variable Annuity Contract (G-CDA-IA(RP))(2)
(4.2) Variable Annuity Contract (G-CDA-IA(RPM/XC))(2)
(4.3) Variable Annuity Contract (G-CDA-HF)(3)
(4.4) Endorsement (EGET-IC(R)) to Contracts G-CDA-IA(RP) and
G-CDA-HF(2)
(4.5) Endorsement (EGETE-IC(R)) to Contract G-CDA-IA(RPM/XC)(4)
(4.6) Endorsement (EGHDHFRPSDO97) to Contracts G-CDA-HF and
G-CDA-IA(RP)(5)
(4.7) Endorsement E-HF-97MN to Contract G-CDA-HF
(5) Variable Annuity Contract Application (300-GTD-IA)(6)
(6.1) Certification of Incorporation of Aetna Life Insurance and
Annuity Company(7)
(6.2) Amendment of Certificate of Incorporation of Aetna Life Insurance
and Annuity Company(8)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance and
Annuity Company(9)
(7) Not applicable
(8.1) 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)
(8.2) 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(10)
(8.3) Third Amendment dated February 11, 1997 to Fund Participation
Agreement between Aetna Life Insurance and Annuity Company and
Calvert Asset Management Company (Calvert Responsibly Invested
Balanced Portfolio, formerly Calvert Socially Responsible Series)
dated March 13, 1989 and amended December 27, 1993 and January 1,
1996(11)
(8.4) Fourth Amendment dated February 28, 1997 to Fund Participation
Agreement between Aetna Life Insurance and Annuity Company and
Calvert Asset Management Company (Calvert Responsibly Invested
Balanced Portfolio, formerly Calvert Socially Responsible Series)
dated March 13, 1989 and amended December 27, 1993, January 1,
1996 and February 11, 1997(3)
(8.5) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996
and March 1, 1996(8)
(8.6) Fifth Amendment dated as of May 1, 1997 to the Fund Participation
Agreement between Aetna Life Insurance and Annuity Company,
Variable Insurance Products
<PAGE>
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)
(8.7) Sixth Amendment dated as of November 6, 1997 to the 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, March 1, 1996 and May 1, 1997(12)
(8.8) 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(8)
(8.9) Fifth Amendment dated as of May 1, 1997 to the 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)
(8.10) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations Company
dated as of November 1, 1995(10)
(8.11) Amendment dated January 1, 1997 to Service Agreement between
Aetna Life Insurance and Annuity Company and Fidelity Investments
Institutional Operations Company dated as of November 1, 1995(9)
(8.12) Fund Participation Agreement among Janus Aspen Series and Aetna
Life Insurance and Annuity Company and Janus Capital Corporation
dated December 8, 1997(13)
(8.13) Service Agreement between Janus Capital Corporation and Aetna
Life Insurance and Annuity Company dated December 8, 1997(13)
(8.14) 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)
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Computation of Performance Data(14)
(14) Not applicable
(15.1) Powers of Attorney(15)
(15.2) Authorization for Signatures(2)
<PAGE>
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 (Accession No. 0000950146-96-000563).
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 (Accession No. 0000912057-96-006383).
3. Incorporated by reference to Post-Effective Amendment No. 14 to Registration
Statement on Form N-4 (File No. 33-75964), as filed electronically on July
29, 1997 (Accession No. 0000950146-97-001101).
4. Incorporated by reference to Post-Effective Amendment No. 8 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on August
30, 1996.
5. Incorporated by reference to Post-Effective Amendment No. 13 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
11, 1997 (Accession No. 000095014-97-000582)
6. Incorporated by reference to Post-Effective Amendment No. 14 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on August
19, 1997 (Accession No. 0000950146-97-001302).
7. 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 (Accession No. 0000950146-96-000534).
8. 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 (Accession No. 0000950146-97-001589).
9. Incorporated by reference to Post-Effective Amendment No. 30 to Registration
Statement on Form N-4 (File No. 33-34370), as filed electronically on
September 29, 1997 (Accession No. 0000950146-97-001485).
10. 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 (Accession No. 0000928389-96-000136).
11. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on
February 26, 1997 (Accession No. 0000950146-97-000241).
12. Incorporated by reference to Post-Effective Amendment No. 16 to Registration
Statement on Form N-4 (File No. 33-75964), as filed electronically on
February 9, 1998 (Accession No. 0000950146-98-000179).
13. Incorporated by reference to Post-Effective Amendment No. 10 to Registration
Statement on Form N-4 (File No. 33-75992), as filed electronically on
December 31, 1997 (Accession No. 0000950146-97-001982).
14. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 33-75964), as filed on April 28, 1995.
15. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 333-27337), as filed electronically on
December 9, 1997 (Accession No. 0000950146-97-001872).
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
- ----------------- ------------------------------------
Thomas J. McInerney Director and President
Timothy A. Holt Director, Senior Vice President and Chief
Financial Officer
J. Scott Fox Director and Senior Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Senior Vice President
Thomas P. Waldron Director
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.
16 to the Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 9, 1998 (Accession No. 0000950146-98-000179).
Item 27. Number of Contract Owners
As of December 31, 1997, there were 632,743 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 (Aetna) also
acts as the investment adviser for Aetna Series Fund, Inc. and the
principal underwriter and investment adviser for Portfolio Partners,
Inc., Aetna Variable Encore Fund, Aetna Variable Fund, Aetna Generation
Portfolios, Inc., Aetna Income Shares, Aetna Investment Advisers Fund,
Inc., Aetna GET Fund, and Aetna Variable Portfolios, Inc. (all
management investment companies registered under the Investment Company
Act of 1940 (1940 Act)). Additionally, Aetna acts as the principal
underwriter and depositor for Variable Life Account B of Aetna, Variable
Annuity Account B of Aetna and Variable Annuity Account G of Aetna
(separate accounts of Aetna registered as unit investment trusts under
the 1940 Act). Aetna is also the principal underwriter for Variable
Annuity Account I of Aetna Insurance Company of America (AICA) (a
separate account of AICA registered as a unit investment trust under the
1940 Act).
<PAGE>
(b) See Item 25 regarding the Depositor.
(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;
<PAGE>
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4, a
space that an applicant can check to request a Statement of Additional
Information; and
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and complies with
the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) [Paragraph]78,904 at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by
the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account C of Aetna Life Insurance and
Annuity Company, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this Post-Effective Amendment to its Registration
Statement on Form N-4 (File No. 33-75986) and has duly caused this
Post-Effective Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford,
State of Connecticut, on the 12th day of February, 1998.
VARIABLE ANNUITY ACCOUNT C OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Depositor)
By: Thomas J. McInerney*
----------------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Post-Effective Amendment No.
15 to the Registration Statement on Form N-4 (File No. 33-75986) has been signed
by the following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Thomas J. McInerney* Director and President )
- ------------------------- (principal executive officer) )
Thomas J. McInerney )
)
Timothy A. Holt* Director and Chief Financial Officer ) February
- ------------------------- )
Timothy A. Holt ) 12, 1997
)
J. Scott Fox* Director )
- ------------------------- )
J. Scott Fox )
)
John Y. Kim* Director )
- ------------------------- )
John Y. Kim )
<PAGE>
Shaun P. Mathews* Director )
- ------------------------- )
Shaun P. Mathews )
)
Thomas P. Waldron* Director )
- ------------------------- )
Thomas P. Waldron )
)
Deborah Koltenuk* Vice President and Treasurer, )
- ------------------------- Corporate Controller )
Deborah Koltenuk )
By: /s/ Mary Katherine Johnson
-----------------------------------
Mary Katherine Johnson
*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 Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and Related *
Selling Agreement
99-B.4.1 Variable Annuity Contract (G-CDA-IA(RP)) *
99-B.4.2 Variable Annuity Contract (G-CDA-IA(RPM/XC)) *
99-B.4.3 Variable Annuity Contract (G-CDA-HF) *
99-B.4.4 Endorsement (EGET-IC(R)) to Contracts G-CDA-IA(RP) and *
G-CDA-HF
99-B.4.5 Endorsement (EGETE-IC(R)) to Contract G-CDA-IA (RPM/XC) *
99-B.4.6 Endorsement (EGHDHFRPSDO97) to Contracts G-CDA-HF and *
G-CDA-IA(RP)
99-B.4.7 Endorsement (E-HF-97MN) to Contract G-CDA-HF _____
99-B.5 Variable Annuity Contract Application (300-GTD-IA) *
99-B.6.1 Certification of Incorporation of Aetna Life Insurance and *
Annuity Company
99-B.6.2 Amendment of Certificate of Incorporation of Aetna Life *
Insurance and Annuity Company
99-B.6.3 By-Laws as amended September 17, 1997 of Aetna Life *
Insurance and Annuity Company
99-B.8.1 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
*Incorporated by reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.8.2 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.8.3 Third Amendment dated February 11, 1997 to Fund *
Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company
(Calvert Responsibly Invested Balanced Portfolio, formerly
Calvert Socially Responsible Series) dated March 13, 1989
and amended December 27, 1993 and January 1, 1996
99-B.8.4 Fourth Amendment dated February 28, 1997 to Fund *
Participation Agreement between Aetna Life Insurance and
Annuity Company and Calvert Asset Management Company
(Calvert Responsibly Invested Balanced Portfolio, formerly
Calvert Socially Responsible Series) dated March 13, 1989
and amended December 27, 1993, January 1, 1996 and February
11, 1997
99-B.8.5 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Variable Insurance Products Fund and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996
99-B.8.6 Fifth Amendment dated as of May 1, 1997 to the 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.8.7 Sixth Amendment dated as of November 6, 1997 to the 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, March 1, 1996 and May 1, 1997
99-B.8.8 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
*Incorporated by Reference
<PAGE>
Exhibit No. Exhibit Page
- ----------- ------- ----
99-B.8.9 Fifth Amendment dated as of May 1, 1997 to the 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.8.10 Service Agreement between Aetna Life Insurance and Annuity *
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995
99-B.8.11 Amendment dated January 1, 1997 to Service Agreement between *
Aetna Life Insurance and Annuity Company and Fidelity
Investments Institutional Operations Company dated as of
November 1, 1995
99-B.8.12 Fund Participation Agreement among Janus Aspen Series and *
Aetna Life Insurance and Annuity Company and Janus Capital
Corporation dated December 8, 1997
99-B.8.13 Service Agreement between Janus Capital Corporation and *
Aetna Life Insurance and Annuity Company dated December 8,
1997
99-B.8.14 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.9 Opinion and Consent of Counsel ______
99-B.10 Consent of Independent Auditors ______
99-B.13 Schedule for Computation of Performance Data *
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
*Incorporated by reference
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract and Certificate are hereby endorsed as follows:
Section 3.08 Net Return Factor(s) - Separate Account is amended by restating
paragraph (e) as follows:
(e) a daily actuarial charge at an annual rate of [1.25%] for Annuity
mortality and expense risks and profit; and a daily administrative
charge which will not exceed .25% on an annual basis.
Section 4.02 Terms of Annuity Options is amended by restating paragraph (c) as
follows:
(c) No choice of any Annuity option may be made if the first payment would
be less than $50 per month or if the total payments in a year would be
less than $250.
Section 4.02 Terms of Annuity Options is amended by restating the first sentence
of paragraph (e) as follows:
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.
Section 4.02 Terms of Annuity Options is amended by adding paragraph (g) as
follows:
(g) At the request of the Participant, all or any portion of the Current
Value may be transferred from any Fund to any other allowable Fund.
Aetna reserves the right to allow no more than four Funds to be
selected at any one time. Fund transfers will be processed as of the
Valuation Period following receipt of a transfer request in good order
at Aetna's Home Office. During the Annuity period, the maximum number
of allowable transfers in a calendar year is four. Aetna reserves the
right to increase the number of allowable transfers.
Fund transfer requests must be expressed as a percentage of each Funds
allocation to the Annuity payment. Aetna may establish a minimum
transfer amount.
E-HF-97MN
1
<PAGE>
Section 4.03 Death of Annuitant/Beneficiary is amended and restated as follows:
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.
Section 4.06 Annuity Options is amended by deleting Option 1 - Payment of
Interest on Sum Left with Aetna.
Section 4.06 Annuity Options is amended by restating the second and third
paragraphs of Option 2 as follows:
The number of years chosen must be at least five and not more than 30 and
the Annuity may be a Fixed or Variable Annuity.
Section 4.06 Annuity Options is amended by restating Option 3 as follows:
Option 3 -- Life Income -- An Annuity will be paid for the life of the
Annuitant. When this option is chosen, a choice of the following guarantees
is also available:
(a) Aetna will guarantee payments for 5-30 years; or
(b) Cash Refund Guarantee -- payments will be guaranteed for the amount
applied to the Annuity Option. If the Annuitant dies prior to the
payment of the amount applied to the Annuity Option (less any premium
tax), any remaining balance will be paid in one sum to the beneficiary.
This choice is available only on a fixed basis.
Section 4.06 Annuity Options is amended by adding paragraphs (e) and (f) and a
new paragraph following paragraph (f) to Option 4 as follows:
(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.
(f) 100% of the payment to continue after the first death. Payments are
guaranteed for the amount applied to the Annuity Option (less any
premium tax), any remaining balance will be paid in one sum to the
beneficiary. This option is only available on a fixed basis.
E-HF-97MN
2
<PAGE>
If a Fixed Annuity option is chosen under Option 2, Option 3(a) or Option
4(a) or (d), then the Participant may elect a payment increase of 1, 2 or
3%, compounded annually. An election of such payment increase will result in
an adjustment of the policy guarantees by an actuarially equivalent payment
factor.
Section 4.06 Annuity Options is amended by restating the annuity tables as
follows:
E-HF-97MN
3
<PAGE>
OPTION 2
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
-----------------------------------------------
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
-------------------------------------------------
E-HF-97MN
4
<PAGE>
OPTION 2
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 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
------------------------------------------
E-HF-97MN
5
<PAGE>
OPTION 3
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
- ----------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20 Cash
Annuitant Refund
- ----------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------
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.
E-HF-97MN
6
<PAGE>
OPTION 3
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
- ----------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20
Annuitant
- ----------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------
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.
E-HF-97MN
7
<PAGE>
OPTION 3
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
- --------------------------------------------------------------------------------
Adjusted
Age of None 5 10 15 20
Annuitant
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.
E-HF-97MN
8
<PAGE>
OPTION 4
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%
- --------------------------------------------------------------------------------
Adjusted Ages
- --------------------- Option 4d
Second Option Option Option 10 Years Option Option
Annuitant Annuitant 4a 4b 4c Guaranteed 4e 4f
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.
E-HF-97MN
9
<PAGE>
OPTION 4
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%
- --------------------------------------------------------------------------------
Adjusted Ages
- ----------------------- Option 4d
Second 10 Years
Annuitant Annuitant Option 4a Option 4b Option 4c Guaranteed Option 4e
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.
E-HF-97MN
10
<PAGE>
OPTION 4
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%
- --------------------------------------------------------------------------------
Adjusted Ages
- ----------------------- Option 4d
Second 10 Years
Annuitant Annuitant Option 4a Option 4b Option 4c Guaranteed Option 4e
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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.
E-HF-97MN
11
<PAGE>
Section 6.01 entitled Maintenance Fee is deleted and replaced with the following
statement:
The Maintenance Fee will be -$0-.
Section 6.02 entitled Surrender Fee is amended by adding the following to the
last paragraph:
(h) On account of a Participant's separation from service. The
Contract Holder must submit documentation satisfactory to Aetna
to confirm that the Participant is no longer providing services
to the employer.
Endorsed and made a part of the Contract and Certificate on the Effective Date
of the Contract and Certificate.
/s/ Thomas J. McInerney
----------------------------------
Thomas J. McInerney, President
E-HF-97MN
12
[Aetna letterhead] 151 Farmington Avenue
[Aetna logo] Hartford, CT 06156
Opinion and Consent of Counsel Julie E. Rockmore
Counsel
Law Division, RE4A
February 12, 1998 Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Aetna Life Insurance and Annuity Company and its Variable Annuity
Account C
Post-Effective Amendment No. 15 to Registration Statement on Form N-4
Prospectus Title: Group Variable Annuity Contracts for use with
Tax-Deferred Annuity Plans (Section 403(b)) and Defined
Contribution Plans (Section 401(a))
File Nos. 33-75986* and 811-2513
Dear Sir or Madam:
The undersigned serves as counsel to Aetna Life Insurance and Annuity Company, a
Connecticut life insurance company (the "Company"). It is my understanding that
the Company, as depositor, has registered an indefinite amount of securities
(the "Securities") under the Securities Act of 1933 (the "Securities Act") as
provided in Rule 24f-2 under the Investment Company Act of 1940 (the "Investment
Company Act").
In connection with this opinion, I have reviewed the N-4 Registration Statement,
as amended to the date hereof, and this Post-Effective Amendment No. 15. I have
also examined originals or copies, certified or otherwise identified to my
satisfaction, of such documents, trust records and other instruments I have
deemed necessary or appropriate for the purpose of rendering this opinion. For
purposes of such examination, I have assumed the genuineness of all signatures
on original documents and the conformity to the original of all copies.
I am admitted to practice law in Connecticut, and do not purport to be an expert
on the laws of any other state. My opinion herein as to any other law is based
upon a limited inquiry thereof which I have deemed appropriate under the
circumstances.
- --------
* Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which
includes all the information which would currently be required in
prospectuses relating to securities covered by the following earlier
Registration Statements: 33-75970; 33-75954; and 33-75956.
<PAGE>
Based upon the foregoing, and, assuming the Securities are sold in accordance
with the provisions of the prospectus, I am of the opinion that the Securities
being registered will be legally issued and will represent binding obligations
of the Company.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Julie E. Rockmore
- -------------------------------
Julie E. Rockmore
Consent of Independent Auditors
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contractholders of Aetna Variable Annuity Account C:
We consent to the use of our reports dated February 4, 1997 and February 14,
1997 included herein Registration Statement (No. 33-75986) on Form N-4 and to
the reference to our firm under the heading "Independent Auditors" in the
statement of additional information.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 12, 1998
