As filed with the Securities and Exchange Registration No. 33-75962*
Commission on April 17, 1998 Registration No. 811-2513
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
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POST-EFFECTIVE AMENDMENT NO. 14 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment To
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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Variable Annuity Account C of Aetna Life Insurance and Annuity Company
(Exact Name of Registrant)
Aetna Life Insurance and Annuity Company
(Name of Depositor)
151 Farmington Avenue, 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)
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It is proposed that this filing will become effective:
-------- immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1998 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 a prospectus relating
to the securities covered by the following earlier Registration Statement:
33-75978.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4 PART A (PROSPECTUS) LOCATION
ITEM NO.
<S> <C> <C>
1 Cover Page......................................... Cover Page
2 Definitions........................................ Definitions
3 Synopsis........................................... Prospectus Summary; Fee Table
4 Condensed Financial Information.................... Condensed Financial Information
5 General Description of Registrant, Depositor, and
Portfolio Companies................................ The Company; Variable Annuity Account C; The
Funds
6 Deductions and Expenses............................ Charges and Deductions; Distribution
7 General Description of Variable Annuity Contracts.. Purchase; Miscellaneous
8 Annuity Period..................................... Annuity Period
9 Death Benefit...................................... Death Benefit During Accumulation Period; Death
Benefit Payable During the Annuity Period
10 Purchases and Contract Value....................... Purchase; Contract Valuation
11 Redemptions........................................ Right to Cancel; Withdrawals
12 Taxes.............................................. Tax Status
13 Legal Proceedings.................................. Miscellaneous - Legal Matters and Proceedings
14 Table of Contents of the Statement of Additional
Information........................................ Contents of the Statement of Additional
Information
<PAGE>
<CAPTION>
FORM N-4 PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
ITEM NO.
<S> <C> <C>
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and History
18 Services............................................. General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase of Contracts
20 Underwriters......................................... Offering and Purchase of Contracts
21 Calculation of Performance Data...................... Performance Data; Average Annual Total
Return Quotations
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements
</TABLE>
Part C (Other Information)
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
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The Contracts offered in connection with this Prospectus are two group deferred
variable annuity contracts ("Contracts") issued by Aetna Life Insurance and
Annuity Company (the "Company"). One allows lump sum payments ("Single Purchase
Payment Contracts") and the other allows installment payments ("Installment
Purchase Payment Contracts"). The Contracts are available through participation
in the "Opportunity Plus" retirement programs which receive favorable tax
deferred treatment under Federal income tax law. (See "Purchase.") Interests in
these Contracts are offered to employees of school boards and public
universities in the state of New York.
The Contracts provide that contributions may be allocated to one or more of the
Credited Interest Options or to one or more of the Subaccounts of Variable
Annuity Account C, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:
[bullet] Aetna Ascent VP (formerly Aetna Ascent Variable Portfolio)
[bullet] Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers
Fund, Inc.)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP
[bullet] Aetna Crossroads VP (formerly Aetna Crossroads Variable
Portfolio)
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP
[bullet] Aetna Index Plus Bond VP
[bullet] Aetna Index Plus Large Cap VP (formerly Aetna Variable
Index Plus Portfolio)
[bullet] Aetna Index Plus Mid Cap VP
[bullet] Aetna Index Plus Small Cap VP
[bullet] Aetna Legacy VP (formerly Aetna Legacy Variable Portfolio)
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP
[bullet] Aetna Value Opportunity VP (formerly Aetna Variable
Capital Appreciation Portfolio)
[bullet] Calvert Social Balanced Portfolio (formerly Calvert
Responsibly Invested Balanced Portfolio)
[bullet] Fidelity VIP Equity-Income Portfolio
[bullet] Fidelity VIP High Income Portfolio
[bullet] Fidelity VIP II Asset Manager Portfolio
[bullet] Fidelity VIP II Contrafund Portfolio
[bullet] Fidelity VIP II Index 500 Portfolio
[bullet] Janus Aspen Aggressive Growth Portfolio
[bullet] Janus Aspen Growth Portfolio
[bullet] Janus Aspen Worldwide Growth Portfolio
[bullet] Lexington Emerging Markets Fund, Inc.
[bullet] Lexington Natural Resources Trust*
[bullet] MFS Total Return Series
[bullet] Oppenheimer Global Securities Fund
[bullet] Oppenheimer Strategic Bond Fund
[bullet] Portfolio Partners MFS Emerging Equities Portfolio
[bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Portfolio Partners MFS Value Equity Portfolio
[bullet] Portfolio Partners Scudder International Growth Portfolio
[bullet] Portfolio Partners T. Rowe Price Growth Equity Portfolio
* This Fund is only available for investment by Participants who established
an Account under the Contract before May 1, 1998. As soon as all such
Participants have redirected their allocations to other investment options,
the Fund will be closed to all new investment (except reinvested dividends and
capital gains earned on amounts already invested in the Fund through the
Separate Account and loan repayments automatically deposited into the Fund
pursuant to the Company's loan repayment procedures).
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account and the Fixed Account. Except as specifically
mentioned, this Prospectus describes only investments through the Separate
Account. A brief description of each of the Credited Interest Options is
contained in Appendices to this Prospectus. Additional information concerning
the Guaranteed Accumulation Account is contained in a separate prospectus.
The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest Options
may be available under all Contracts. Please check with your employer to
determine option availability. (See "Investment Options.")
This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract through the
Separate Account. Additional information about the Separate Account is
contained in a Statement of Additional Information ("SAI") which is available
at no charge. The SAI has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Table of Contents for
the SAI is printed on page 19 in this Prospectus. An SAI may be obtained by
indicating the request on the enrollment form or on the prospectus receipt
contained in this Prospectus, or by calling the number listed under the
"Inquiries" section of the Prospectus Summary. You may also obtain an SAI for
any of the Funds by calling that phone number.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER INFORMATION
ABOUT THE SEPARATE ACCOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (SEC) CAN BE FOUND IN THE SEC'S WEB SITE AT
http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED
MAY 1, 1998.
<PAGE>
TABLE OF CONTENTS
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS ............................................... DEFINITIONS - 1
PROSPECTUS SUMMARY ........................................ SUMMARY - 1
FEE TABLE ................................................. FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION ......................................... 1
THE COMPANY ............................................................. 1
VARIABLE ANNUITY ACCOUNT C .............................................. 1
INVESTMENT OPTIONS ...................................................... 1
The Funds ............................................................ 1
Credited Interest Options ............................................ 5
PURCHASE ................................................................ 5
Contract Availability ................................................ 5
Purchasing Interests in the Contract ................................. 5
Right to Cancel ...................................................... 5
CHARGES AND DEDUCTIONS .................................................. 6
Daily Deductions from the Separate Account ........................... 6
Maintenance Fee ...................................................... 6
Deferred Sales Charge ................................................ 6
Deferred Sales Charge Schedule for GAA for Certain New York Contracts 7
Fund Expenses ........................................................ 8
Premium and Other Taxes .............................................. 8
CONTRACT VALUATION ...................................................... 8
Account Value ........................................................ 8
Accumulation Units ................................................... 8
Net Investment Factor ................................................ 8
TRANSFERS ............................................................... 9
Telephone Transfers .................................................. 9
WITHDRAWALS ............................................................. 9
Reinvestment Privilege ............................................... 10
CONTRACT LOANS .......................................................... 10
SYSTEMATIC DISTRIBUTION OPTIONS ......................................... 10
DEATH BENEFIT DURING ACCUMULATION PERIOD ................................ 11
ANNUITY PERIOD .......................................................... 11
Annuity Period Elections ............................................. 11
Annuity Options ...................................................... 12
Annuity Payments ..................................................... 12
Charges Deducted During the Annuity Period ........................... 12
Death Benefit Payable During the Annuity Period ...................... 13
TAX STATUS .............................................................. 13
Introduction ......................................................... 13
Taxation of the Company .............................................. 13
Contracts Used with Certain Retirement Plans ......................... 13
MISCELLANEOUS ........................................................... 16
Opportunity Plus Processing Office ................................... 16
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Distribution ............................................. 16
Delay or Suspension of Payments .......................... 16
Performance Reporting .................................... 16
Voting Rights ............................................ 17
Changes in Beneficiary Designations ...................... 17
Modification of the Contract ............................. 17
Agreements with the Company .............................. 17
Legal Matters and Proceedings ............................ 18
Year 2000 ................................................ 18
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ......... 19
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT ................. 20
APPENDIX II--FIXED ACCOUNT .................................. 21
APPENDIX III--CONDENSED FINANCIAL INFORMATION ............... 22
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
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The following terms are defined as they are used in this Prospectus:
Account: A record established for each Participant to identify contract values
accumulated on each Participant's behalf during the Accumulation Period. For any
given Participant, the Account includes amounts held under an Installment
Purchase Payment Contract and a Single Purchase Payment Contract.
Account Value: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to an
Account are invested to fund future Annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Annuitant: The person on whose life or life expectancy the annuity payments are
based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which Annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Beneficiary(ies): The person or persons entitled to receive any death benefit
upon the death of the Participant.
Code: Internal Revenue Code of 1986, as amended.
Company (We, Us): Aetna Life Insurance and Annuity Company.
Contracts: The group deferred, variable annuity contracts offered by this
Prospectus.
Contract Holder: The person or entity to whom the Contract is issued. The
Contract Holder of the Contract is usually the employer.
Credited Interest Options: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account and the Fixed Account, each of which is described in an Appendix to this
Prospectus. Amounts allocated to the Credited Interest Options are included in
the Account Value.
Fund(s): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the Contract.
Home Office: The Company's principal executive offices, located at 151
Farmington Avenue, Hartford, Connecticut 06156.
NYSUT: New York State United Teachers Trust.
Opportunity Plus Processing Office: The Opportunity Plus administrative
headquarters. The mailing address is P.O. Box 12894, Albany, New York
12212-2894.
Participant (You): A person participating in a Plan maintained by an eligible
organization.
Plan(s): Tax-deferred retirement plans under Section 403(b) of the Code for
employees of public school systems.
Purchase Payment(s): The gross payment(s) made to the Company under a Contract.
- --------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
Purchase Payment Periods: For "Installment Purchase Payment Contracts," the
period of time for completion of the agreed upon annual number and amount of
Purchase Payments. For example, if it is determined that the Purchase Payment
Period will consist of 12 payments per year and only 11 payments are made, the
Purchase Payment Period is not completed until the twelfth Purchase Payment is
made.
Separate Account: Variable Annuity Account C, a separate account established by
the Company for the purpose of funding variable annuity contracts issued by the
Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
UUP: United University Professions.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange is open.
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DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
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CONTRACTS OFFERED
The two Contracts offered in connection with this Prospectus are group
deferred variable annuity contracts issued by Aetna Life Insurance and Annuity
Company (the "Company"). One allows lump sum payments ("Single Purchase Payment
Contracts") and the other allows installment payments ("Installment Purchase
Payment Contracts"). The purpose of the Contract is to accumulate values and to
provide benefits upon retirement for retirement plans under Section 403(b) of
the Code. The Contracts are available for school boards and public universities
in the State of New York, specifically for Participants who are members of
NYSUT and UUP.
The Contracts are available to Plans that include a variable annuity
contract alone or in conjunction with retail mutual funds for which Systemized
Benefits Administrators, Inc. ("SBA"), an affiliate of the Company, has agreed
to perform record keeping services and to provide consolidated statements. SBA
may receive compensation for these services, but such compensation will
generally not be charged to the Separate Account or deducted from a
Participant's Account under the Contract.
CONTRACT PURCHASE
The Contracts may be purchased by eligible organizations on behalf of a
group made up of their employees. Eligible employees may participate in the
Contract by completing the enrollment form and submitting it to the Opportunity
Plus Processing Office. Purchase Payments can be applied to the Contract either
through a lump-sum transfer from a pre-existing plan or through salary
reduction. (See "Purchase.")
FREE LOOK PERIOD
Contract Holders and Participants have the right to cancel their purchase
within 10 days after receiving the Contract or other document evidencing
interest in the Contract by returning it to the Opportunity Plus Processing
Office along with a written notice of cancellation. The amount received upon
cancellation will be the full value of Purchase Payments plus any increase or
minus any decrease in the Account Value allocated to the Subaccounts. (See
"Right to Cancel.")
INVESTMENT OPTIONS
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein, as designated by the
Participant. The Contracts allow investment in any or all of the Subaccounts, as
well as in the Credited Interest Options described below, subject to the
limitations described in "Investment Options". For a complete list of the Funds
available under the Contracts, a description of the investment objectives of
each of the Funds and their investment advisers, and a description of the
limitations on the number of investment options, see "Investment Options--The
Funds" in this Prospectus, as well as the prospectuses for each of the Funds.
The Contracts also provide for investment in Credited Interest Options
which allow you to earn fixed rates of interest. The fixed options available
under the Contracts are the Guaranteed Accumulation Account ("GAA") and the
Fixed Account. (See the Appendices to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges and an administrative charge), as well as any annual maintenance fee
and premium and other taxes. The Funds also incur certain fees and expenses
which are deducted directly from the Funds. A deferred sales charge may apply
upon a full or partial withdrawal of the Account Value. (See the Fee Table and
"Charges and Deductions.")
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SUMMARY - 1
<PAGE>
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, Account
Values may be transferred among the Subaccounts and the Credited Interest
Options without charge. Transfers can be requested in writing or by telephone in
accordance with the Company's transfer procedures. (See the Appendices for a
full description of the restrictions applicable to transfers made from the
Credited Interest Options.) (See "Transfers.")
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Company.
Certain charges may be assessed upon withdrawal. The withdrawal may also be
subject to income tax and a federal tax penalty. The Code restricts full and
partial withdrawals in some circumstances. (See "Withdrawals.")
The Contract also offers certain Systematic Distribution Options during the
Accumulation Period to persons meeting certain criteria. Systematic Distribution
Options may not be suitable in every situation. (See "Systematic Distribution
Options.")
LOANS
Participants under Section 403(b) Plans may request a loan from their
Account Value during the Accumulation Period. (See "Contract Loans.")
DEATH BENEFIT
A death benefit is payable if the Participant dies before the Annuity Date.
Death benefit proceeds will be paid to the Beneficiary in an amount equal to the
Account Value. Until the election of a method of payment, the Account Value will
remain invested under the Contract. The Beneficiary may elect to receive the
proceeds in a lump sum or under any of the payment options available under the
Contract. However, the Code requires that distributions begin within a certain
time period. (See "Death Benefit During Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
On the Annuity Date, you may elect to begin receiving Annuity payments.
Annuity payments can be made on either a fixed, variable or combination fixed
and variable basis. If a variable payout is selected, the payments will continue
to vary with the investment performance of the Subaccount(s) selected. The
Company reserves the right to limit the number of Subaccounts that may be
available during the Annuity Period. (See "Annuity Period.")
TAXES
Contributions and earnings are not generally taxed until you or your
Beneficiary(ies) actually receive a distribution from the Contract. A 10%
federal tax penalty and a 20% withholding for income tax may be imposed on
certain withdrawals. (See "Tax Status.")
INQUIRIES
Questions, inquiries or requests for additional information can be directed
to your agent or local representative, or you may contact the Company through
the Opportunity Plus Processing Office by writing to P.O. Box 12894, Albany, New
York 12212-2894, or by calling 1-800-OPP-INFO (1-800-677-4636). (See
"Miscellaneous--Opportunity Plus Processing Office.")
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SUMMARY - 2
<PAGE>
FEE TABLE
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This Fee Table describes the various charges and expenses associated with the
Contracts during the Accumulation Period. For amounts deducted during the
Annuity Period, see "Annuity Period--Charges Deducted During the Annuity
Period." No sales charge is paid upon purchase of the Contracts. For more
information regarding expenses paid out of the assets of a particular Fund, see
the Fund's prospectus.
CONTRACT HOLDER TRANSACTION EXPENSES
Deferred Sales Charge (as a percentage of the amount withdrawn).*
INSTALLMENT PURCHASE PAYMENT CONTRACTS:
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<TABLE>
<CAPTION>
Purchase Payment Deferred Sales
Periods Completed Charge Deduction
<S> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
10 or more 0%
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</TABLE>
<TABLE>
<S> <C>
Annual Contract Maintenance Fee ......... $5.00 **
</TABLE>
* The total amount deducted for the deferred sales charge will not exceed 8.5%
of the total Purchase Payments applied to the Account under the Installment
Purchase Payment Contract. For Single Purchase Payment Contracts, there is
no deduction for deferred sales charges. For Installment Purchase Payment
Contracts, the deferred sales charge is waived for amounts deposited in the
Subaccounts (or GAA) on or after April 1, 1995. (See "Charges and
Deductions--Deferred Sales Charge.")
** The maintenance fee is only applicable to Installment Purchase Payment
Contracts. Effective January 1, 1999 the quarterly maintenance fee will be
reduced to $0.00, thereby eliminating the maintenance fee charge.
SEPARATE ACCOUNT ANNUAL EXPENSES
(Daily deductions, equal to the percentage shown on an annual basis, made
from amounts allocated to the variable options under each Contract.) Separate
Account Annual Expenses are:
<TABLE>
<S> <C>
Mortality and Expense Risk Charge ......... 1.25%
Administrative Expense Charge ............. 0.00%***
-----
Total Separate Account Charges ........... 1.25%
=====
</TABLE>
*** We currently do not impose an Administrative Expense Charge. However, we
reserve the right to deduct a daily charge of not more than 0.25% per year
from the Subaccounts.
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FEE TABLE - 1
<PAGE>
ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, these figures are a percentage of each Fund's
average net assets and are based on figures for the year ended December 31,
1997. A Fund's "Other Expenses" include operating costs of the Fund. These
expenses are reflected in the Fund's net asset value and are not deducted from
the Account Value under the Contract.
<TABLE>
<CAPTION>
Investment
Advisory Fees(1) Other Expenses
(after expense (after expense Total Fund
reimbursement) reimbursement) Annual Expenses
------------------ ---------------- ----------------
<S> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.57% 0.23% 0.80%
Aetna Balanced VP, Inc.(3) 0.50% 0.10% 0.60%
Aetna Bond VP(3) 0.40% 0.10% 0.50%
Aetna Crossroads VP(2)(3) 0.55% 0.25% 0.80%
Aetna Growth and Income VP(3) 0.50% 0.09% 0.59%
Aetna Index Plus Bond VP(2)(3) 0.12% 0.33% 0.45%
Aetna Index Plus Large Cap VP(2)(3) 0.32% 0.23% 0.55%
Aetna Index Plus Mid Cap VP(2)(3) 0.27% 0.33% 0.60%
Aetna Index Plus Small Cap VP(2)(3) 0.27% 0.33% 0.60%
Aetna Legacy VP(2)(3) 0.49% 0.31% 0.80%
Aetna Money Market VP(3) 0.25% 0.10% 0.35%
Aetna Value Opportunity VP(2)(3) 0.20% 0.60% 0.80%
Calvert Social Balanced Portfolio(4) 0.69% 0.12% 0.81%
Fidelity VIP Equity-Income Portfolio(5) 0.50% 0.08% 0.58%
Fidelity VIP High Income Portfolio(5) 0.59% 0.12% 0.71%
Fidelity VIP II Asset Manager Portfolio(5) 0.55% 0.10% 0.65%
Fidelity VIP II Contrafund Portfolio(5) 0.60% 0.11% 0.71%
Fidelity VIP II Index 500 Portfolio(6) 0.24% 0.04% 0.28%
Janus Aspen Aggressive Growth Portfolio(7) 0.73% 0.03% 0.76%
Janus Aspen Growth Portfolio(7) 0.65% 0.05% 0.70%
Janus Aspen Worldwide Growth Portfolio(7) 0.66% 0.08% 0.74%
Lexington Emerging Markets Fund, Inc.(8) 0.85% 1.06% 1.91%
Lexington Natural Resources Trust 1.00% 0.25% 1.25%
MFS Total Return Series(9) 0.75% 0.25% 1.00%
Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
Oppenheimer Strategic Bond Fund 0.75% 0.08% 0.83%
Portfolio Partners MFS Emerging Equities Portfolio(10)(11) 0.68% 0.13% 0.81%
Portfolio Partners MFS Research Growth Portfolio(10)(11) 0.70% 0.15% 0.85%
Portfolio Partners MFS Value Equity Portfolio(10) 0.65% 0.25% 0.90%
Portfolio Partners Scudder International Growth Portfolio(10) 0.80% 0.20% 1.00%
Portfolio Partners T. Rowe Price Growth Equity Portfolio(10) 0.60% 0.15% 0.75%
</TABLE>
- ------------------
(1) Certain of the Fund advisers reimburse the Company for administrative costs
incurred in connection with administering the Funds as variable funding
options under the Contract. These reimbursements are paid out of the
investment advisory fees and are not charged to investors.
(2) Effective May 1, 1998, the Portfolios' adviser has agreed to waive a
portion of its fee or to reimburse certain expenses so that aggregate
expenses do not exceed the total expenses shown above. These fee
waiver/expense reimbursement arrangements will increase total return and
may be modified or terminated at any time.
Without these fee waiver/expense reimbursement arrangements Management Fees
and Total Expenses for the Portfolio would be higher. Management Fees and
Total Expenses would be as follows: 0.60% and 0.83% for Ascent VP; 0.60% and
0.85% for Crossroads VP; 0.30% and 0.63% for Index Plus Bond VP; 0.35% and
0.58% for Index Plus Large Cap VP; 0.40% and 0.73% for Index Plus Mid Cap
VP; 0.40% and 0.73% for Index Plus Small Cap VP; 0.60% and 0.91% for Legacy
VP and 0.60% and 1.20% for Value Opportunity VP, respectively.
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
(3) Prior to May 1, 1998, the investment adviser provided administrative
services to the Fund and assumed the Fund's ordinary recurring direct
costs under an Administrative Services Agreement. Effective May 1, 1998,
the investment adviser will continue to provide administrative services to
the Fund but will no longer assume all of the Fund's ordinary recurring
direct costs under the Administrative Services Agreement. The
Administrative Fee is 0.075% on the first $5 billion in assets and 0.050%
on all assets over $5 billion. The "Other Expenses" shown are not based on
actual figures for the year ended December 31, 1997, but reflect the fee
payable under the new Administrative Services Agreement and estimates of
the Fund's ordinary recurring direct costs.
Index Plus Bond VP, Index Plus Mid Cap VP, Index Plus Small Cap VP and Mid
Cap VP commenced operations in December 1997, therefore, estimates are
based on expenses incurred for similar funds. Actual expenses incurred may
be more or less than the amounts shown above.
(4) The figures above are based on expenses for the fiscal year 1997, and have
been restated to reflect an increase in transfer agency expenses of 0.01%
for the Portfolio expected to be incurred in 1998. "Management Fees"
includes a performance adjustment, which depending on performance, could
cause the fee to be as high as 0.85% or as low as 0.55%. "Other Expenses"
reflect an indirect fee of 0.03% (relating to an expense offset arrangement
with the Portfolio's custodian). Net fund operating expenses after
reductions for fees paid indirectly (again, restated) would be 0.78%.
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses would have been 0.57% for
Equity-Income Portfolio; 0.71% for High Income Portfolio; 0.64% for Asset
Manager Portfolio; and 0.68% for Contrafund Portfolio.
(6) The Fund's investment adviser agreed to reimburse a portion of Index 500
Portfolio's expenses during the period. Without this reimbursement, the
fund's management fee, other expenses and total expenses would have been
0.27%, 0.13% and 0.40%, respectively, for Index 500 Portfolio.
(7) Management fees for Aggressive Growth, Growth and Worldwide Growth
Portfolios reflect a reduced fee schedule effective July 1, 1997. The
management fees shown above are based on the new rate applied to net assets
as of December 31, 1997. Other expenses are based on gross expenses of the
Shares before expense offset arrangements for the fiscal year ended
December 31, 1997. The information for each Portfolio is net of fee waivers
or reductions from Janus Capital. Fee reductions for the Aggressive Growth,
Growth and Worldwide Growth Portfolios reduce the management fee to the
level of the corresponding Janus retail fund. Other waivers, if applicable,
are first applied against the management fee and then against other
expenses. Without such waivers or reductions, the Management Fee, Other
Expenses and Total Operating Expenses for the Shares would have been 0.74%,
0.04%, and 0.78% for Aggressive Growth Portfolio; 0.74%, 0.04%, and 0.78%
for Growth Portfolio; and 0.72%, 0.09%, and 0.81% for Worldwide Growth
Portfolio, respectively. Janus Capital may modify or terminate the waivers
or reductions at any time upon at least 90 days' notice to the Trustees.
(8) The Fund's investment adviser agreed to voluntarily limit the total
expenses of the Fund (excluding interest, taxes, brokerage commissions, and
extraordinary expenses, but including management fees and operating
expenses) to an annual rate of 1.75% of the Fund's average net assets
through April 30, 1997. For the period ending December 31, 1997, the Total
Fund Annual Expenses, after reimbursement, was 1.84%. Effective May 1,
1997, an expense limitation is no longer in effect. The Advisory Fees,
Other Expenses and Total Fund Annual Expenses shown above reflect the
actual expenses of the fund before reimbursement, as if such arrangement
had not been in effect at any time during 1997. The example shown in the
table above should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
(9) The adviser has agreed to bear expenses for each Series, subject to
reimbursement by each Series, such that each Series' "Other Expenses" shall
not exceed 0.25% of the average daily net assets of the Series during the
current fiscal year. Otherwise, "Other Expenses" for the MFS Total Return
Series would be 0.27% and "Total Fund Annual Expenses" would be 1.02% for
the Series. Each Series has an expense offset arrangement which reduces the
Series' custodian fee based upon the amount of cash maintained by the
Series with its custodian and dividend disbursing agent, and may enter into
other such arrangements and directed brokerage arrangements (which also
have the effect of reducing the Series' expenses). Any such fee reductions
are not reflected under "Other Expenses."
(10) Each Portfolio's aggregate expenses are contractually limited to the
advisory and administrative fees disclosed above. The investment adviser
will not seek an increase in its advisory or administrative fee at any time
prior to May 1, 1999.
(11) The advisory fee is 0.70% of the first $500 million in assets and 0.65% on
the excess.
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FEE TABLE - 3
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For the
purposes of these Examples, the maintenance fee of $5.00 that is deducted under
the Contract has been converted to a percentage of assets equal to 0.012%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
--------------------------------------- --------------------------------------
If you withdraw your entire Account If you do not withdraw your Account
Value at the end of the periods shown, Value, or if you annuitize at the end of
you would pay the following expenses, the periods shown, you would pay the
including any applicable deferred following expenses (no deferred sales
sales charge:* charge is reflected):**
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
-------- --------- --------- ---------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP(2) $72 $119 $169 $239 $21 $65 $111 $239
Aetna Balanced VP, Inc.(2) $70 $113 $159 $218 $19 $59 $101 $218
Aetna Bond VP(2) $70 $110 $154 $208 $18 $55 $ 96 $208
Aetna Crossroads VP(2) $72 $119 $169 $239 $21 $65 $111 $239
Aetna Growth and Income VP(2) $70 $113 $159 $217 $19 $58 $100 $217
Aetna Index Plus Bond VP $69 $109 $152 $202 $17 $54 $ 93 $202
Aetna Index Plus Large Cap VP(3) $70 $112 $157 $213 $18 $57 $ 98 $213
Aetna Index Plus Mid Cap VP(3) $70 $113 $159 $218 $19 $59 $101 $218
Aetna Index Plus Small Cap VP(3) $70 $113 $159 $218 $19 $59 $101 $218
Aetna Legacy VP(2) $72 $119 $169 $239 $21 $65 $111 $239
Aetna Money Market VP(2) $68 $106 $147 $191 $16 $51 $ 88 $191
Aetna Value Opportunity VP(3) $72 $119 $169 $239 $21 $65 $111 $239
Calvert Social Balanced Portfolio(4) $72 $119 $169 $240 $21 $65 $111 $240
Fidelity VIP Equity-Income Portfolio(5) $70 $113 $158 $216 $19 $58 $100 $216
Fidelity VIP High Income Portfolio $72 $117 $164 $230 $20 $62 $106 $230
Fidelity VIP II Asset Manager Portfolio $71 $115 $161 $223 $19 $60 $103 $223
Fidelity VIP II Contrafund Portfolio(5) $72 $117 $164 $230 $20 $62 $106 $230
Fidelity VIP II Index 500 Portfolio $67 $104 $143 $184 $16 $49 $ 84 $184
Janus Aspen Aggressive Growth Portfolio(6) $72 $118 $167 $235 $21 $63 $109 $235
Janus Aspen Growth Portfolio(6) $71 $116 $164 $229 $20 $62 $106 $229
Janus Aspen Worldwide Growth Portfolio(6) $72 $117 $166 $233 $20 $63 $108 $233
Lexington Emerging Markets Fund, Inc. $83 $151 $221 $348 $32 $98 $166 $348
Lexington Natural Resources Trust $77 $132 $190 $285 $25 $78 $134 $285
MFS Total Return Series $74 $125 $178 $260 $23 $71 $121 $260
Oppenheimer Global Securities(7) $72 $118 $167 $235 $21 $63 $109 $235
Oppenheimer Strategic Bond Portfolio(7) $73 $120 $170 $242 $21 $66 $112 $242
Portfolio Partners MFS Emerging Equities
Portfolio(8) $72 $119 $169 $240 $21 $65 $111 $240
Portfolio Partners MFS Research Growth
Portfolio(8) $73 $121 $171 $244 $21 $66 $113 $244
Portfolio Partners MFS Value Equity Portfolio(8) $73 $122 $174 $250 $22 $68 $116 $250
Portfolio Partners Scudder International
Growth Portfolio(8) $74 $125 $178 $260 $23 $71 $121 $260
Portfolio Partners T. Rowe Price Growth Equity
Portfolio(8) $72 $118 $166 $234 $20 $63 $108 $234
</TABLE>
*For Single Purchase Payment Accounts, there is no deduction for deferred sales
charges. For Installment Purchase Payment Accounts, the deferred sales charge
is waived for amounts deposited in the Subaccounts (or GAA) on or after April
1, 1995.
**This Example would not apply if a nonlifetime variable annuity option is
selected, and a lump sum settlement is requested within three years after
annuity payments start since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (Refer to Example A.)
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FEE TABLE - 4
<PAGE>
CONDENSED FINANCIAL INFORMATION
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Condensed Financial Information for the Separate Account is shown in
Appendix III.
THE COMPANY
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Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings,
Inc., which is in turn a wholly owned subsidiary of Aetna Retirement Services,
Inc. and an indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT C
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The Company established Variable Annuity Account C (the "Separate Account")
in 1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act") and meets the
definition of "separate account" under federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities arising out of any other
business we may conduct. Income, gains or losses of the Separate Account are
credited to or charged against the assets of the Separate Account without regard
to our other income, gains or losses. All obligations arising under the
Contracts are obligations of the Company.
INVESTMENT OPTIONS
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THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the enrollment form. In turn, the Subaccounts invest in the
corresponding Funds at net asset value. No more than 18 different investment
options may be selected at any one time, unless you have an outstanding loan, in
which case as of the date of this Prospectus no more than 18 different choices
of investment options may be made during the Accumulation Period. (For Contracts
with a loan, a higher total may be available in the future.) For the purpose of
either limit, each Fund, the Fixed Account, and each classification of GAA
counts as one option. If you have an outstanding loan and the limit applies over
the entire Accumulation Period , once an investment option is selected, it
counts towards the limit even if amounts are no longer allocated to that option.
Please check with your local representative or contact the Company at the
toll-free number in the "Inquiries" section of the Prospectus Summary to
determine if these limitations apply to you or to determine if you may select
more than 18 investment options during the Accumulation Period if you have a
loan.
The Contract Holder may decide to offer only a select number of Funds as
funding options under its Plan, or may decide to change which Funds it offers.
In addition, the Company may add, withdraw or substitute Funds, subject to the
conditions in the Contract and in compliance with regulatory requirements. The
availability of Funds may also be subject to applicable regulatory
authorization. Not all Funds may be available in all jurisdictions, under all
Contracts or in all Plans.
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1
<PAGE>
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
[bullet] Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers Fund, Inc.)
seeks to maximize investment return, consistent with reasonable safety
of principal by investing in a diversified portfolio of one or more of
the following asset classes: stocks, bonds and cash equivalents, based
on the investment adviser's judgment of which of those sectors or mix
thereof offers the best investment prospects.(1)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP seeks to maximize total return,
consistent with reasonable risk, through investments in a diversified
portfolio consisting primarily of debt securities.(1)
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP seeks to maximize
total return through investments in a diversified portfolio of common
stocks and securities convertible into common stock.(1)
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP seeks to provide
high current return, consistent with preservation of capital and
liquidity, through investment in high-quality money market instruments.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.(1)
[bullet] Aetna Generation Portfolios, Inc.--Aetna Ascent VP (formerly Aetna
Ascent Variable Portfolio) seeks to provide capital appreciation. The
Portfolio is designed for investors who have an investment horizon
exceeding 15 years and who have a high level of risk tolerance.(1)
[bullet] Aetna Generation Portfolios, Inc.-- Aetna Crossroads VP (formerly Aetna
Crossroads Variable Portfolio) seeks to provide total return (i.e.,
income and capital appreciation, both realized and unrealized). The
Portfolio is designed for investors who have an investment horizon
exceeding 10 years and who have a moderate level of risk tolerance.(1)
[bullet] Aetna Generation Portfolios, Inc.-- Aetna Legacy VP (formerly Aetna
Legacy Variable Portfolio) seeks to provide total return consistent
with preservation of capital. The Portfolio is designed for investors
who have an investment horizon exceeding five years and who have a low
level of risk tolerance.(1)
[bullet] Aetna Variable Portfolios, Inc.--Aetna Index Plus Bond VP seeks to
maximize total return consistent with preservation of capital primarily
through investment in a diversified portfolio of fixed income
securities, which will be chosen to substantially replicate the
characteristics of Lehman Brothers Aggregate Bond Index, an unmanaged
index comprised of approximately 6,000 securities.(1)
[bullet] Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP
(formerly Aetna Variable Index Plus Portfolio) seeks to outperform the
total return performance of publicly traded common stocks represented
by the S&P 500 Composite Stock Price Index.(1)
[bullet] Aetna Variable Portfolios, Inc.--Aetna Index Plus Mid Cap VP seeks to
outperform the total return performance of publicly traded common
stocks represented in the S&P 400.(1)
[bullet] Aetna Variable Portfolios, Inc.--Aetna Index Plus Small Cap VP seeks to
outperform the total return performance of publicly traded common
stocks represented by the S&P Small Cap 600 Index, a stock market index
composed of 600 common stocks selected by Standard and Poor's
Corporation.(1)
[bullet] Aetna Variable Portfolios, Inc.-- Aetna Value Opportunity VP (formerly
Aetna Variable Capital Appreciation Portfolio) seeks growth of capital
primarily through investment in a diversified portfolio of common
stocks and securities convertible into common stock.(1)
[bullet] Calvert Social Balanced Portfolio (formerly Calvert Responsibly
Invested Balanced Portfolio) is a nondiversified portfolio that seeks
to achieve a total return above the rate of inflation through an
actively managed, nondiversified portfolio of common and preferred
stocks, bonds and money market instruments which offer income and
capital growth opportunity and which satisfy the social criteria
established for the Portfolio.(2)
[bullet] Fidelity Investments Variable Insurance Products Fund--Equity-Income
Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In selecting investments, the Fund
also considers the potential for capital appreciation.(3)
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2
<PAGE>
[bullet] Fidelity Investments Variable Insurance Products Fund--High Income
Portfolio seeks to obtain a high level of current income by investing
primarily in high-yielding, lower-rated, fixed income securities, while
also considering growth of capital. Lower-rated corporate debt
obligations are commonly known as "junk bonds" or "high yield, high
risk bonds" and involve significant degree of risk (see the Fund's
prospectus for a discussion of the risk factors involved in investing
in lower-rated corporate debt obligations).(3)
[bullet] Fidelity Investments Variable Insurance Products Fund II--Asset Manager
Portfolio seeks high total return with reduced risk over the long-term
by allocating its assets among stocks, bonds and short-term money
market instruments.(3)
[bullet] Fidelity Investments Variable Insurance Products Fund II--Contrafund
Portfolio seeks maximum total return over the long term by investing
mainly in securities of companies whose value the investment adviser
believes is not fully recognized by the public.(3)
[bullet] Fidelity Investments Variable Insurance Products Fund II--Index 500
Portfolio seeks to provide investment results that correspond to the
total return of common stocks publicly traded in the United States by
duplicating the composition and total return of the Standard & Poor's
500 Composite Index of 500 stocks.(3)
[bullet] Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified
portfolio that seeks long-term growth of capital. The Portfolio pursues
its investment objective by normally investing at least 50% of its
equity assets in securities issued by medium-sized companies.
Medium-sized companies are those whose market capitalizations fall
within the range of companies in the S&P Midcap 400 Index, which as of
December 31, 1997 included companies with capitalizations between
approximately $213 million and $13.7 billion, but which is expected to
change on a regular basis.(4)
[bullet] Janus Aspen Series--Growth Portfolio seeks long-term growth of capital
in a manner consistent with the preservation of capital. The Portfolio
pursues its investment objective by investing primarily in common
stocks of issuers of any size. This Portfolio generally invests in
larger, more established issuers.(4)
[bullet] Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth
of capital in a manner consistent with the preservation of capital.
The Portfolio pursues its investment objective primarily through
investments in common stocks of foreign and domestic issuers.(4)
[bullet] Lexington Emerging Markets Fund, Inc. seeks long-term growth of capital
primarily through investment in equity securities of companies
domiciled in, or doing business in emerging countries and emerging
markets. Investments in emerging markets involve risks not present in
domestic markets. See the Fund's prospectus for information on risks
inherent in this investment.(5)
[bullet] Lexington Natural Resources Trust is a nondiversified portfolio that
seeks long-term growth of capital through investment primarily in
common stocks of companies which own or develop natural resources and
other basic commodities, or supply goods and services to such
companies.
This Fund is only available for investment by Participants who
established an Account under the Contract before May 1, 1998. As soon
as all such Participants have redirected their allocations to other
investment options, the Fund will be closed to all new investment
(except reinvested dividends and capital gains earned on amounts
already invested in the Fund through the Separate Account and loan
repayments automatically deposited into the Fund pursuant to the
Company's loan repayment procedures).(5)
[bullet] MFS Total Return Series seeks to provide above average income (compared
to a portfolio invested entirely in equity securities) consistent with
the prudent employment of capital. Its secondary objective is to
provide a reasonable opportunity for growth of capital and income.
Under normal market conditions, at least 25% of the Total Return
Series' assets will be invested in fixed-income securities, and at
least 40% and no more than 75% of the Series' assets will be invested
in equity securities.(6)
[bullet] Oppenheimer Global Securities Fund seeks long-term capital appreciation
by investing a substantial portion of its assets in securities of
foreign issuers, "growth-type" companies, cyclical industries and
special situations which are considered to have appreciation
possibilities but which maybe considered to be speculative.(7)
[bullet] Oppenheimer Strategic Bond Fund seeks a high level of current income
principally derived from interest on debt securities and seeks to
enhance such income by writing covered call options on debt securities.
The Fund
- --------------------------------------------------------------------------------
3
<PAGE>
intends to invest principally in (i) foreign government and corporate
debt securities, (ii) securities of the U.S. Government and its
agencies and instrumentalities ("U.S. Government securities"), and
(iii) lower-rated high yield domestic debt securities, commonly known
as "junk bonds," which are subject to a greater risk of loss of
principal and nonpayment of interest than higher-rated securities.
These securities may be considered to be speculative. Current income is
not an objective.(7)
[bullet] Portfolio Partners, Inc.--MFS Emerging Equities Portfolio seeks to
provide long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Portfolio's
investment objective.(8a)
[bullet] Portfolio Partners, Inc.--MFS Research Growth Portfolio seeks long-term
growth of capital and future income.(8a)
[bullet] Portfolio Partners, Inc.--MFS Value Equity Portfolio seeks capital
appreciation. Dividend income, if any, is a consideration incidental to
the Portfolio's objective of capital appreciation.(8a)
[bullet] Portfolio Partners, Inc.--Scudder International Growth Portfolio seeks
long-term growth of capital primarily through a diversified portfolio
of marketable foreign equity securities.(8b)
[bullet] Portfolio Partners, Inc.--T. Rowe Price Growth Equity Portfolio seeks
long-term growth of capital and, secondarily, to increase dividend
income by investing primarily in common stocks of well established
growth companies.(8c)
Investment Advisers for each of the Funds:
(1) Aeltus Investment Management, Inc.
(2) Calvert Asset Management Company, Inc.
(3) Fidelity Management & Research Company
Bankers Trust Company (subadviser)
(4) Janus Capital Corporation
(5) Lexington Management Corporation (adviser); Market Systems Research
Advisors, Inc.
(subadviser-Natural Resources Trust only)
(6) Massachusetts Financial Services Company ("MFS")
(7) OppenheimerFunds, Inc.
(8) Aetna Life Insurance and Annuity Company (adviser);
(a) Massachusetts Financial Services Company (subadviser)
(b) Scudder Kemper Investments, Inc. (subadviser)
(c) T. Rowe Price Associates, Inc. (subadviser)
Risks Associated with Investment in the Funds. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential risks,
is found in the current prospectus for each Fund which is distributed with and
accompanies this Prospectus. You should read the Fund prospectuses and consider
carefully, and on a continuing basis, which Fund or combination of Funds is best
suited to your long-term investment objectives. Additional prospectuses and
Statements of Additional Information for this Prospectus and for each of the
Funds can be obtained from the Company's Home Office at the address and
telephone number listed under the "Inquiries" section of the Prospectus Summary.
Conflicts of Interest (Mixed and Shared Funding). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued by the Company or by third parties. This is referred to as "mixed
funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to identify
any material irreconcilable conflicts which might arise and
- --------------------------------------------------------------------------------
4
<PAGE>
to determine what action, if any, should be taken to address such conflict.
CREDITED INTEREST OPTIONS
Purchase Payments may be allocated to one or more of the Credited Interest
Options available under the Contracts as described below. The Contract Holder
may elect not to offer all Credited Interest Options under its Plan. The
Credited Interest Options currently available under the Contract include the
Guaranteed Accumulation Account and the Fixed Account.
[bullet] The Guaranteed Accumulation Account (GAA) is a credited interest option
through which we guarantee stipulated rates of interest for stated
periods of time. Amounts must remain in the GAA for the full guaranteed
term to receive the quoted interest rates, or a market value adjustment
(which may be positive or negative) will be applied. (See Appendix I.)
[bullet] The Fixed Account is a part of the Company's general account. The Fixed
Account guarantees a minimum interest rate, as specified in the
Contract. The Company may credit higher interest rates from time to
time. Transfers from the Fixed Account are limited. (See Appendix II.)
PURCHASE
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CONTRACT AVAILABILITY
The Contracts are designed to allow the accumulation of assets and to
provide retirement benefits under retirement plans under Section 403(b) of the
Code by school boards and public universities in the state of New York, for
Participants who are members of NYSUT or UUP.
Two group contracts may be issued to cover all present and future
Participants. The group Contracts are generally owned by the employer and
individual Accounts are established for each Participant. Single Purchase
Payment Contracts are issued for lump-sum transfers to us of amounts accumulated
under a pre-existing Plan. Installment Purchase Payment Contracts are
established to accept continuing periodic payments. We reserve the right to set
a minimum Purchase Payment on Single Purchase Payment Contracts. Lump Sum
transfers below this minimum will be applied to an Installment Purchase Payment
Contract.
Under the Plans, the employer has no right, title or interest in the
amounts held under the Contract or in the Account; Participants make all
elections under the Contract.
PURCHASING INTERESTS IN THE CONTRACT
Eligible organizations may acquire Contracts by submitting an application
to the Opportunity Plus Processing Office at 18 Corporate Woods Boulevard,
Fourth Floor, Albany, New York 12211. Once we approve the forms, the Contract
will be issued to the employer as the group Contract Holder. Participants may
purchase interests in a group Contract by submitting enrollment materials to the
Opportunity Plus Processing Office.
The Company must accept or reject the application or enrollment forms
within two business days of receipt. If the forms are incomplete, the Company
may hold any forms and accompanying Purchase Payments for five days. Purchase
Payments may be held for longer periods pending acceptance of the forms only
with the consent of the Participant, or under certain circumstances, with the
consent of the Contract Holder. Under limited circumstances the Company may
agree, with respect to a particular Plan, to hold Purchase Payments for longer
than the five business days, based on the consent of the group Contract Holder,
in which case these Purchase Payments will be deposited in the Aetna Money
Market VP Subaccount until the forms are completed.
Allocation of Purchase Payments. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified by the
Participant on the enrollment form. Changes in such allocation may be made in
writing or by telephone transfer. Allocations must be in whole percentages.
RIGHT TO CANCEL
Contract Holders and Participants have the right to cancel their purchase
within 10 days of receiving the Contract (or other document evidencing your
interest) by returning it to the Opportunity Plus Processing Office with a
written notice of intent to cancel. When we receive your request for
cancellation, we will return your Account Value. You bear the entire investment
risk for amounts allocated among the Subaccounts during the free look period.
Account Values will be determined as of the Valuation Date on which we receive
your request for cancellation at the Opportunity Plus Processing Office.
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5
<PAGE>
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
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DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
Mortality and Expense Risk Charge. The Company makes a daily deduction from
each of the Subaccounts for the mortality and expense risk charge. The charge is
equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts
and compensates the Company for the assumption of the mortality and expense
risks under the Contract. The mortality risks are those assumed for our promise
to make lifetime payments according to annuity rates specified in the Contract.
The expense risk is the risk that the actual expenses for costs incurred under
the Contract will exceed the maximum costs that can be charged under the
Contract.
If the amount deducted for mortality and expense risks is not sufficient to
cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
Administrative Expense Charge. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge. The
administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of the
administrative services to be provided while the Contract is in force. The
Company does not expect to make a profit from this charge.
Under the Contract, the amount of the administrative expense charge may be
of an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation Period or Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee from the Account Value. The maintenance fee is to reimburse the
Company for some of its administrative expenses relating to the establishment
and maintenance of the Accounts.
The maintenance fee is currently $5 on an annual basis, with one fourth of
this fee ($1.25) deducted during the first month after the end of each calendar
quarter. Effective January 1, 1999, the quarterly maintenance fee will be
reduced to $0.00, thereby eliminating the maintenance fee charge. The
maintenance fee will be deducted on a pro rata basis from each investment option
in which you have an interest.
DEFERRED SALES CHARGE
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of the amounts
withdrawn from the Subaccounts, the Fixed Account and the Guaranteed
Accumulation Account.
For Installment Purchase Payment Contracts, the deferred sales charge is
based on the number of completed Purchase Payment Periods. There is no deferred
sales charge provision on Single Purchase Payment Contracts. However, if amounts
are transferred from a Single Purchase Payment Contract to an Installment
Purchase Payment Contract, the applicable deferred sales charge provisions apply
to all amounts in the Installment Purchase Payment Contract.
For Installment Purchase Payment Contracts, the amount of the deferred
sales charge is determined in accordance with the schedule set forth in the
following table:
INSTALLMENT PURCHASE PAYMENT CONTRACTS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Purchase Payment Deferred Sales
Periods Completed Charge Deduction
- ------------------------------ -----------------
<S> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
10 or more 0%
- --------------------------------------------------------------------------------
</TABLE>
In addition, if a nonlifetime Annuity Option is elected on a variable basis
and the remaining value is withdrawn before three years of Annuity payments have
- --------------------------------------------------------------------------------
6
<PAGE>
been completed, the applicable deferred sales charge will be assessed (see
"Annuity Options").
The deduction for the deferred sales charge will not exceed 8.5% of the
total Purchase Payments actually made to the Account. The Company does not
anticipate that the deferred sales charge will cover all sales and
administrative expenses which it incurs in connection with the Contract. The
difference will be covered by the general assets of the Company which are
attributable, in part, to mortality and expense risk charges under the Contract
described above.
Generally, if you transfer the total account value under another similar
annuity contract issued by the Company to an Account under this Contract, the
effective date of the new Account will be the same effective date as your former
contract for the purpose of calculating the applicable deferred sales charge
under this Contract.
A deferred sales charge will not be deducted from any portion of the
Account Value if the withdrawal is:
[bullet] applied to provide Annuity benefits;
[bullet] taken on or after the tenth anniversary of the effective date of the
Account;
[bullet] paid due to your death before Annuity payments begin;
[bullet] made due to the election of an Systematic Distribution Option (see
"Systematic Distribution Options");
[bullet] paid where the Account Value is $2,500 or less and no amount has been
withdrawn, taken as a loan, or used to purchase Annuity benefits during
the prior 12 months;
[bullet] taken from an Installment Purchase Payment Contract by a Participant
who is at least age 59 1/2 and who has completed nine Purchase Payment
Periods;
[bullet] withdrawn due to disability as specified in the Code;
[bullet] withdrawn due to financial hardship as specified in the Code;
[bullet] withdrawn due to separation from service while meeting the age and
service requirements to receive benefits under the New York State
Teachers' or Employees' Retirement Systems (even if you are not a
member of either system); or
[bullet] withdrawn from the portion of the Account Value invested in the
Subaccount(s) and/or GAA attributable to Purchase Payments made on or
after April 1, 1995. This waiver does not apply to amounts deposited in
the Fixed Account. If amounts are deposited in a Subaccount or GAA and
then transferred to the Fixed Account, the waiver would no longer
apply. If amounts are deposited in the Fixed Account and then
transferred to a Subaccount or GAA, the waiver would not apply to
amounts that came from the Fixed Account. No deferred sales charge
would be assessed unless and until these amounts are withdrawn from the
Account. For any withdrawal, the Account Value of the Purchase
Payment(s) made on or after April 1, 1995 will be withdrawn first.
Then, the remaining Account Value will be used to satisfy the
disbursement request.
Free Withdrawals. For Participants between the ages of 591/2 and 701/2, up
to 10% of the current Account Value may be withdrawn during each calendar year
without imposition of a deferred sales charge. The free withdrawal applies only
to the first partial withdrawal in each calendar year. The 10% amount will be
based on the Account Value calculated on the Valuation Date next following our
receipt of your request for withdrawal. Any outstanding contract loans are
excluded from the Account Value when calculating the 10% free withdrawal amount.
This provision does not apply to a full withdrawal of the Account, or to partial
withdrawals due to a default on a contract loan (see "Contract Loans"). This
provision may not be exercised if ECO or SWO is elected. (See "Systematic
Distribution Options.")
In the instances cited above, no deferred sales charge is deducted.
However, the amount withdrawn may be subject to the 10% federal penalty tax.
(See "Tax Status.")
DEFERRED SALES CHARGE SCHEDULE FOR GAA FOR CERTAIN NEW YORK CONTRACTS
The following deferred sales charge schedule applies for withdrawals from
the Guaranteed Accumulation Account, where available, for Installment Purchase
Payment Master Contracts which are issued after July 29, 1993 in the State of
New York. This schedule is based on the number of completed Account Years, as
follows:
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Completed Deferred Sales
Account Years Charge Deduction
- ----------------------------- -----------------
<S> <C>
Less than 3 5%
3 or more but less than 4 4%
4 or more but less than 5 3%
5 or more but less than 6 2%
6 or more but less than 7 1%
7 or more 0%
- --------------------------------------------------------------------------------
</TABLE>
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.
PREMIUM AND OTHER TAXES
Currently, there is no premium tax on annuities under New York regulations.
However, if the state does impose a premium tax, it would be deducted from the
amount applied to an Annuity option. We reserve the right to deduct a state
premium tax at any time from the Purchase Payment(s) or from the Account Value
at any time, but no earlier than when we have a tax liability under state law.
(See "Tax Status.")
CONTRACT VALUATION
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ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in any of the Credited Interest Options.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each day
by a percentage that accounts for the daily assessment of mortality and expense
risk charges and the administrative expense charge (if any).
Initial Purchase Payments will be credited to your Contract at the AUV next
computed following our acceptance of the enrollment materials, as described
under "Purchase--Purchasing Interests in the Contract." Each subsequent Purchase
Payment (or amount transferred) received by the Company by the close of business
of the New York Stock Exchange will be credited to your Contract at the AUV next
computed following our receipt of your payment or transfer request. The value of
an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance of
a Subaccount from one Valuation Date to the next. The net investment factor for
a Subaccount for any valuation period is equal to the sum of 1.0000 plus the net
investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current Valuation
Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation of the
Subaccount;
(d) divided by the total value of the Subaccounts' Accumulation and Annuity
Units the preceding Valuation Date;
(e) minus a daily charge at the annual effective rate of 1.25% for mortality
and expense risks and up to 0.25% as an administrative expense charge
(currently 0%).
The net investment rate may be either positive or negative.
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8
<PAGE>
TRANSFERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
At any time prior to the Annuity Date, you can transfer amounts held under
the Contracts from one Subaccount to another. Transfers between the Credited
Interest Options and the Subaccounts are subject to certain restrictions. (See
Appendices I and II.) A request for transfer can be made either in writing or by
telephone. (See "Telephone Transfers" below.) All transfers must be in
accordance with the terms of the Contracts and your Plan, as applicable.
TELEPHONE TRANSFERS
Subject to the Contract Holder's approval, you automatically have the right
to make transfers among Funds by telephone. We have enacted procedures to
prevent abuses of Account transactions by telephone including requiring the use
of a personal identification number (PIN) to execute transactions. You are
responsible for safeguarding your PIN, and for keeping Account information
confidential. Although the Company's failure to follow reasonable procedures may
result in the Company's liability for any losses due to unauthorized or
fraudulent telephone transfers, the Company will not be liable for following
instructions communicated by telephone which it reasonably believes to be
genuine. Any losses incurred pursuant to actions taken by the Company in
reliance on telephone instructions reasonably believed to be genuine shall be
borne by you. To ensure authenticity, we record all calls on the 800 line. Note:
All Account information and transactions permitted are subject to the terms of
the Plan(s).
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge. The minimum transfer amount may not
be less than $500. The total number of investment options in which you may
invest during the Accumulation Period is limited. (See "Investment Options--The
Funds.") Any transfer will be based on the Accumulation Unit Value next
determined after the Company receives a valid transfer request at the
Opportunity Plus Processing Office. Transfers are not available during the
Annuity Period.
WITHDRAWALS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Subject to the withdrawal restrictions under Section 403(b) Contracts
described below, all or a portion of the Account Value may be withdrawn at any
time during the Accumulation Period. To request a withdrawal, you must properly
complete a disbursement form and send it to the Opportunity Plus Processing
Office. Payments for withdrawal requests will be made in accordance with SEC
requirements, but normally not later than seven calendar days following our
receipt of a disbursement form in good order.
Withdrawals may be requested as in one of the following forms:
[bullet] Full Withdrawal of an Account: The amount paid upon a full withdrawal
will be the full Account Value, minus any applicable deferred sales
charge and maintenance fee due.
[bullet] Partial Withdrawals (Percentage): The amount paid will be the
percentage of the Account Value requested minus any applicable deferred
sales charge.
[bullet] Partial Withdrawal (Specified Dollar Amount): The amount paid will be
the dollar amount requested. However, the amount withdrawn from the
Account will equal the amount requested plus any applicable deferred
sales charge.
For any partial withdrawal, amounts will be withdrawn proportionately from
each Subaccount or Credited Interest Option in which the Account is invested,
unless you request otherwise in writing. All amounts paid will be based on
Account Values as of the next Valuation Date after we receive a request for
withdrawal at our Home Office, or on such later date as the disbursement form
may specify. A 20% federal income tax may be withheld from amounts paid directly
to you. (See "Tax Status--Contracts Used with Certain Retirement Plans.")
Withdrawal Restrictions from 403(b) Plans. Under Section 403(b) Contracts,
a withdrawal of salary reduction contributions and earnings on such
contributions is generally prohibited prior to the
- --------------------------------------------------------------------------------
9
<PAGE>
Participant's death, disability, attainment of age 591/2, separation from
service or financial hardship. (See "Tax Status.")
REINVESTMENT PRIVILEGE
Within 30 days after a withdrawal, if allowed by law, a Participant may
elect to reinvest all or a portion of the proceeds received for the full
withdrawal of an Account. Reinvested amounts must be received by the Company
within 60 days of the withdrawal. Accumulation Units will be credited to the
Account for the amount reinvested, as well as any maintenance fee and any
deferred sales charge imposed at the time of withdrawal. Any maintenance fee
which falls due after the withdrawal and before the reinvestment will be
deducted from the amounts reinvested. Reinvested amounts will be reallocated to
the applicable investment options in the same proportion as they were allocated
at the time of withdrawal. Accumulation Units will be credited to your Account
based on the Accumulation Unit Value next computed following our receipt of your
request along with the amount to be reinvested. The reinvestment privilege may
be used only once. See Appendix I for a discussion of amounts withdrawn from GAA
and then reinvested. If you are contemplating reinvestment, you should seek
competent advice regarding the tax consequences associated with such a
transaction.
CONTRACT LOANS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
During the Accumulation Period, Participants may request a loan from their
Account Value. Loans can only be taken from those Account Values held in the
Subaccounts or from those Credited Interest Options that allow loans. (See
Appendices I and II.) A loan may be requested by reviewing and reading the terms
of the loan agreement, properly completing a loan request form and submitting it
to the Opportunity Plus Processing Office. Some restrictions may apply under the
Code and/or due to Company administrative practices.
SYSTEMATIC DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Systematic Distribution Options"). To exercise
these options, your Account Value must meet the minimum dollar amounts and age
criteria applicable to that option.
The Systematic Distribution Options currently available under the Contract
include the following:
[bullet] SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from your Account based on a payment method you select. It
is designed for those who want a periodic income while retaining
investment flexibility for amounts accumulated under a Contract. This
option may not be elected if you have an outstanding contract loan.
[bullet] ECO--Estate Conservation Option. ECO offers the same investment
flexibility as SWO but is designed for those who want to receive only
the minimum distribution that the Code requires each year. Under ECO,
the Company calculates the minimum distribution amount required by law
at the later of age 70 1/2 or retirement, or for 5% owners at age
70 1/2 and pays you that amount once a year. (See "Tax Status.")
Other Systematic Distribution Options may be added from time to time.
Additional information relating to any of the Systematic Distribution Options
may be obtained from your local representative or from the Company at the
Opportunity Plus Processing Office.
If you select one of the Systematic Distribution Options, you will retain
all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus. Taking a withdrawal under
one of these Systematic Distribution Options may have tax consequences. Any
person concerned about tax implications should consult a competent tax advisor
prior to electing an option.
Once you elect an Systematic Distribution Option, you may revoke it any
time by submitting a written request to the Opportunity Plus Processing Office.
Once an option is revoked, it may not be elected again, nor may any other
Systematic Distribution Options be
- --------------------------------------------------------------------------------
10
<PAGE>
elected unless permitted by the Code. The Company reserves the right to
discontinue the availability of one or all of these Systematic Distribution
Options at any time, and/or to change the terms of future elections.
DEATH BENEFIT DURING ACCUMULATION PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Contract provides that a death benefit is payable to the
Beneficiary(ies) upon the death of the Participant before the Annuity Date. The
amount of the death benefit will be equal to the Account Value. Death benefit
proceeds may be paid to the Beneficiary:
[bullet] in a lump sum;
[bullet] in accordance with any of the Annuity Options available under the
Contract; or
[bullet] under any Systematic Distribution Options available under the Contract
(if the Beneficiary is your spouse).
The Beneficiary may instead elect one of the following two options;
however, the Code limits how long the death benefit proceeds may be left in
these options (see below):
[bullet] to leave the Account Value invested in the Contract; or
[bullet] to leave the Account Value on deposit in the Company's general account,
and to receive monthly, quarterly, semi-annual or annual interest
payments at the interest rate then being credited on such deposits. The
balance on deposit can be withdrawn at any time or applied to an
Annuity Option. When paying the Beneficiary, we will determine the
Account Value on the Valuation Date following the date on which we
receive proof of death acceptable to the Company. Interest, if any,
will be paid from the date of death at a rate no less than required by
law. We will mail payment to the Beneficiary within seven days after we
receive proof of death and a claim for payment in good order.
The Code requires that distribution of death proceeds begin within a
certain period of time. Generally, either annuity payments must begin by
December 31 of the year following the year of your death, or the entire value of
your benefits must be distributed by December 31 of the fifth year following the
year of your death. If your Beneficiary is your spouse, he or she is not
required to begin distributions until the year you would have attained age
701/2. In no event may payments extend beyond the life expectancy of the
Beneficiary or any period greater than the Beneficiary's life expectancy.
If no elections are made, no distributions will be made. Failure to
commence distributions within the above time periods can result in tax
penalties.
Regardless of the method of payment, death benefit proceeds will generally
be taxed to the Beneficiary in the same manner as if you had received those
payments. (See "Tax Status.")
ANNUITY PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUITY PERIOD ELECTIONS
The Code generally requires that minimum annual distributions of the
Account Value must begin by April 1st of the calendar year following the
calendar year in which a Participant attains age 701/2, or retires, if later. In
addition, distributions must be in a form and amount sufficient to satisfy the
Code requirements. These requirements may be satisfied by the election of
certain Annuity Options or Systematic Distribution Options. (See "Tax Status.")
At least 30 days prior to the Annuity Date, you must notify us in writing
of the following:
[bullet] the date on which you would like to start receiving annuity payments;
[bullet] the Annuity Option under which you want your payments to be calculated
and paid;
[bullet] whether the payments are to be made monthly, quarterly, semi-annually
or annually; and
[bullet] the investment option(s) used to provide annuity payments (i.e., a
fixed annuity using the general account or any of the Subaccounts
available at the time of annuitization). As of the date of this
Prospectus, Aetna Growth and Income VP, Aetna Bond VP and Aetna
Balanced VP, Inc. are the only Subaccounts available.
Annuity payments will not begin until you have selected an Annuity option.
Until a date and option are
- --------------------------------------------------------------------------------
11
<PAGE>
elected, the Account will continue in the Accumulation Period. Once Annuity
payments begin, the Annuity option may not be changed, nor may transfers be made
among the investment option(s) selected.
ANNUITY OPTIONS
You may choose one of the following Annuity Options:
Lifetime Annuity Options:
[bullet] Option 1--Life Annuity--An annuity with payments ending on the
Annuitant's death.
[bullet] Option 2--Life Annuity with Guaranteed Payments-- An annuity with
payments guaranteed for 5, 10, 15 or 20 years, or such other periods as
the Company may offer at the time of annuitization.
[bullet] Option 3--Life Income based Upon the Lives of Two Payees--An annuity
will be paid during the lives of the Annuitant and a second Annuitant,
with 100%, 662/3% or 50% of the payment to continue after the first
death, or 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of the
Annuitant.
[bullet] Option 4--Life Income based Upon the Lives of Two Payees--An annuity
with payments for a minimum of 120 months, with 100% of the payment to
continue after the first death.
If Option 1 or 3 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 3, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Annuitant cannot elect to receive another
form of benefit.
Nonlifetime Annuity Options:
[bullet] Option 1--Payments for a Specified Period-- payments will continue for
a specified period of time, as provided for under your Contract.
Under the Nonlifetime Option, an annuity may be selected on a fixed or
variable basis and payments may be made for 3-30 years. If this option is
elected on a variable basis, the Annuitant may request at any time during the
payment period that the present value of all or any portion of the remaining
variable payments be paid in one sum. However, under an Installment Purchase
Payment Contract, any lump-sum elected before three years of payments have been
completed will be treated as a withdrawal during the Accumulation Period and any
applicable deferred sales charge will be assessed. (See "Charges and
Deductions--Deferred Sales Charge.")
We may also offer additional Annuity Options under the Contract from time
to time.
ANNUITY PAYMENTS
Date Payouts Start. When payments start, the age of the Annuitant plus the
number of years for which payments are guaranteed must not exceed 95. Annuity
payments may not extend beyond (a) the life of the Annuitant, (b) the joint
lives of the Annuitant and Beneficiary, (c) a period certain greater than the
Annuitant's life expectancy, or (d) a period certain greater than the joint life
expectancies of the Annuitant and Beneficiary.
Amount of Each Annuity Payment. The amount of each payment depends on the
size of your Account Value, how you allocate it between fixed and variable
payouts, and the Annuity option chosen. No election may be made that would
result in the first Annuity payment of less than $20, or total yearly Annuity
payments of less than $100. If your Account Value on the Annuity Date is
insufficient to elect an option for the minimum amount specified, a lump-sum
payment must be elected.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (31/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 31/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further information on the impact of
selecting a particular net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any amounts
held on a variable basis. Therefore, electing the nonlifetime option on a
variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily
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12
<PAGE>
administrative charge from amounts held under the variable options. (See
"Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
If an Annuitant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity option
selected. If Option 1 or Option 3 was elected, Annuity Payments will cease on
the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 3.
If Lifetime Option 2 or Option 4 was elected and the death of the Annuitant
under Option 2, or the surviving Annuitant under Option 4, occurs prior to the
end of the guaranteed minimum payment period, we will pay to the Beneficiary in
a lump sum, unless otherwise requested, the present value of the guaranteed
annuity payments remaining.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a lump-sum
to the Beneficiary (unless otherwise requested), and no deferred sales charge
will be imposed.
If the Annuitant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value must
be distributed to the Beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at our Home Office. The
value of any death benefit proceeds will be determined as of the next Valuation
Date after we receive acceptable proof of death and a request for payment. Under
Options 2 and 4, such value will be reduced by any payments made after the date
of death.
TAX STATUS
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INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
The Company makes no guarantee regarding the tax treatment of any contract or
transaction involving a Contract. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Annuity Payments, and on the economic
benefit to the Contract Holder, Participant or Beneficiary may depend upon the
tax status of the individual concerned. Moreover, no attempt has been made to
consider any applicable state or other tax laws. Any person concerned about
these tax implications should consult a competent tax advisor before initiating
any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Account investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.
Accordingly, the Company does not anticipate that it will incur any federal
income tax liability attributable to the Separate Account and, therefore, the
Company does not intend to make provisions for any such taxes. However, if
changes in the federal tax laws or interpretation thereof result in the Company
being taxed on income or gains attributable to the Separate Account, then the
Company may impose a charge against the Separate Account (with respect to some
or all Contracts) in order to set aside provisions to pay such taxes.
CONTRACTS USED WITH CERTAIN RETIREMENT PLANS
In General. The Contract is designed for use with Section 403(b) plans. The
tax rules applicable to retirement plans vary according to the type of plan and
the terms and conditions of the plan.
The Company makes no attempt to provide more than general information about
use of the Contracts
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13
<PAGE>
with the various types of retirement plans. Participants as well as
Beneficiaries are cautioned that the rights of any person to any benefits under
the Contracts may be subject to the terms and conditions of the plans
themselves, in addition to the terms and conditions of the Contracts issued in
connection with such plans. Some retirement plans are subject to limitations on
distribution and other requirements that are not incorporated in the Contracts.
Purchasers are responsible for determining that contributions, distributions and
other transactions with respect to the Contracts satisfy applicable laws, and
should consult their legal counsel and tax advisor regarding the suitability of
the Contract.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems to purchase annuity contracts for their employees are generally
excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual contributions
made by you and your employer cannot exceed either of two limits set by the
Code. The first limit, under Section 415, is generally the lesser of 25% of your
compensation or $30,000. Compensation means your compensation from the employer
sponsoring the Plan and for years beginning after December 31, 1997, includes
any elective deferrals under Code Section 402(g) and any amounts not includible
in gross income under Code Sections 125 or 457. The second limit, which is the
exclusion allowance under Section 403(b), is usually calculated according to a
formula that takes into account your length of employment, any pretax
contributions you and your employer have already made under the Plan and any
pretax contributions to certain other retirement plans. These two limits apply
to your contributions as well as to any contributions made by your employer on
your behalf. There is an additional limit that specifically limits your salary
reduction contributions to generally no more than $10,000 annually (subject to
indexing); your own limit may be higher or lower, depending on certain
conditions. In addition Purchase Payments will be excluded from your gross
income only if the Plan meets certain non-discrimination requirements.
Code Section 403(b)(11) restricts the distribution under Section 403(b)
contracts of: (1) salary reduction contributions made after December 31, 1988;
(2) earnings on those contributions; and (3) earnings during such period on
amounts held as of December 31, 1988. Subject to the terms of the Plans,
distribution of those amounts may only occur upon death of the employee,
attainment of age 591/2, separation from service, disability, or financial
hardship. In addition, income attributable to salary reduction contributions may
not be distributed in the case of hardship.
If, pursuant to Revenue Ruling 90-24, the Company agrees to accept, under
any of the Contracts covered by this Prospectus, amounts transferred from a Code
Section 403(b)(7) custodial account, such amounts will be subject to the
withdrawal restrictions set forth in Code Section 403(b)(7)(A)(ii).
Generally, no amounts accumulated under the Contract will be taxable prior
to the time of actual distribution. However, the IRS has stated in published
rulings that a variable contract owner, including participants under Section
403(b) Plans, will be considered the owner of separate account assets if the
owner possesses incidents of investment control over the assets. In these
circumstances, income and gains from the separate account assets would be
currently includible in the variable contract owner's gross income. The Treasury
announced that guidance would be issued in the future regarding the extent to
which owners could direct their investments among Subaccounts without being
treated as owners of the underlying assets of the Separate Account. It is
possible that the Treasury's position, when announced, may adversely affect the
tax treatment of existing contracts. The Company therefore reserves the right to
modify the Contract as necessary to attempt to prevent the owner from being
considered the federal tax owner of the assets of the Separate Account.
Minimum Distribution Requirements. The Code has required distribution rules
for Section 403(b) Plans. Under 403(b) Plans, distributions of amounts held as
of December 31, 1986 must generally begin by the end of the calendar year in
which you attain age 75 or retire, if later. However, special rules require that
some or all of that balance be distributed earlier if any distributions are
taken in excess of the minimum required amount. For Participants other than 5%
owners, distributions attributable to contributions under Section 403(b) Plans
on or after January 1, 1987 (including any earnings on the entire Account Value
after that date), must generally begin by April 1 of the calendar year following
the calendar year in which you attain age 701/2 or retire, whichever occurs
later. For 5% owners, such
- --------------------------------------------------------------------------------
14
<PAGE>
distributions must begin April 1st of the calendar year following the calendar
year in which you attain age 701/2.
In general, annuity payments must be distributed over your life or the
joint lives of you and your Beneficiary, or over a period not greater than your
life expectancy or the joint life expectancies of you and your Beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your Beneficiary must be made at least as rapidly as under the
method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your Beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your Beneficiary by December 31 of the year
following your death. However, a spousal Beneficiary has certain rollover rights
which can only be exercised in the year of your death. The rules are complex and
you should consult your tax advisor before electing the method of calculation to
satisfy the minimum requirements.
If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year
containing the fifth anniversary of the date of your death. Alternatively,
payments may be made over the life of the Beneficiary or over a period not
extending beyond the life expectancy of the Beneficiary provided the
distribution begins by December 31 of the calendar year following the calendar
year of your death. If the Beneficiary is your spouse, the distribution must
begin on or before the later of (1) December 31 of the calendar year following
the calendar year of your death, or (2) December 31 of the calendar year in
which you would have attained age 70 1/2.
If you fail to receive the minimum required distribution for any tax year,
a 50% excise tax is imposed on the required amount that was not distributed.
Taxation of Distributions. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to another
plan of the same type or to traditional individual retirement annuity/account
("IRA") in accordance with the Code, or unless you have made after-tax
contributions to the Plan, which are not taxed upon distribution. The Code has
specific rules that apply, depending on the type of distribution received, if
after-tax contributions were made.
In general, payments received by your Beneficiaries after your death are
taxed in the same manner as if you had received those payments, except that a
limited death benefit exclusion may apply to payments made for deaths occurring
on or before August 20, 1996.
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from annuities are subject to mandatory 20% federal income
tax withholding. We will report to the IRS the taxable portion of all
distributions. If the Participant or Beneficiary is a non-resident alien any
withholding will be governed by Code Section 1441 based on the individual's
citizenship, the country of domicile and treaty status.
The Code imposes a 10% penalty tax on the taxable portion of any
distribution unless made when (a) you have attained age 591/2, (b) you have
become disabled, (c) you have died, (d) you have separated from service with the
plan sponsor at or after age 55, (e) the distribution amount is rolled over into
another plan of the same type in accordance with the terms of the Code, or (f)
the distribution amount is made in substantially equal periodic payments (at
least annually) over your life or life expectancy or the joint lives or joint
life expectancies of you and your plan Beneficiary, provided you have separated
from service with the plan sponsor. In addition, the penalty tax does not apply
for the amount of a distribution equal to unreimbursed medical expenses incurred
by you that qualify for deduction as specified in the Code. The Code may impose
other penalty taxes in other circumstances.
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15
<PAGE>
MISCELLANEOUS
- --------------------------------------------------------------------------------
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OPPORTUNITY PLUS PROCESSING OFFICE
We have established the Opportunity Plus Processing Office to provide
administrative support to Participants of the Opportunity Plus Program. This
office will handle enrollments, billing, transfers, redemptions and inquiries
for all Opportunity Plus Participants. All forms and correspondence should be
sent to:
Aetna Life Insurance and Annuity Company
Opportunity Plus Processing Office
P.O. Box 12894
Albany, New York 12212-2894
Telephone Number: 1-800-677-4636
DISTRIBUTION
The Company will serve as the Principal Underwriter for the securities sold
by this Prospectus. The Company is registered as a broker-dealer with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers, Inc. (NASD). As Underwriter, the Company will contract
with one or more registered broker-dealers ("Distributors"), including at least
one affiliate of the Company, to offer and sell the Contracts. All persons
offering and selling the Contracts must be registered representatives of the
Distributors and must also be licensed as insurance agents to sell variable
annuity contracts. These registered representatives may also provide services to
Participants in connection with establishing their Accounts under the Contract.
Payment of Commissions. Persons offering and selling the Contracts may
receive commissions in connection with the sale of the Contracts. The maximum
percentage amount that the Company will ever pay as commission with respect to
any given Purchase Payment is with respect to those made during the first year
of Purchase Payments under an Account. The percentage amount will range from 1%
to 4% of those Purchase Payments. The Company may also pay renewal commissions
on Purchase Payments made after the first year and asset-based service fees. The
average of all payments made by the Company is estimated to equal approximately
3% of the total Purchase Payments made over the life of an average Contract. In
addition, some sales personnel may receive various types of non-cash
compensation as special sales incentives, including trips and educational and/or
business seminars. Supervisory and other management personnel of the Company may
receive compensation that will vary based on the relative profitability to the
Company of the funding options you select. Funding options that invest in Funds
advised by the Company or its affiliates are generally more profitable to the
Company. The Company may also reimburse the Distributor for certain expenses.
The name of the Distributor and the registered representative responsible for
your Account are set forth in your enrollment materials. Commissions and sales
related expenses are paid by the Company and are not deducted from Purchase
Payments. (See "Charges and Deductions--Deferred Sales Charge.")
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or it is not reasonably practicable
for the Company fairly to determine the value of the Subaccount's assets; or (c)
during such other periods as the SEC may by order permit for the protection of
investors. The conditions under which restricted trading or an emergency exists
shall be determined by the rules and regulations of the SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount and then related to the ending redeemable values over the most recent
one, five and ten-year periods (or since contributions were first received in
the Fund under the Separate Account, if less than the full period). Standardized
returns will reflect the reduction of all recurring charges during each period
(e.g., mortality and expense risk charges, annual maintenance
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16
<PAGE>
fees, administrative expense charge (if any) and any applicable deferred sales
charge). "Non-standardized returns" will be calculated in a similar manner,
except that non-standardized figures will not reflect the deduction of any
applicable deferred sales charge (which would decrease the level of performance
shown if reflected in these calculations). The non-standardized figures may also
include monthly, quarterly, year-to-date and three-year periods and may include
performance from the Fund's inception date.
The Company may also advertise certain ratings, rankings or other
information related to the Company, the Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.
VOTING RIGHTS
In accordance with the Company's view of present applicable law, it will
vote the shares of each of the Funds held by the Separate Account at regular and
special meetings of Fund shareholders in accordance with instructions received
from each Contract Holder. Participants have a fully vested (100%) interest in
the benefits provided under the Contract and may instruct the Contract Holder
how to direct the Company to cast the votes for the portion of the Account Value
or valuation reserve attributable to their individual Accounts. Currently, for
group contracts used with Section 403(b) plans, the Company obtains participant
voting instructions directly from the Participants, subject to receipt of
authorization from the Contract Holder to accept such instructions. The Company
will vote shares for which it has not received instructions in the same
proportion as it votes shares for which it has received instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest, as
well as any proxy materials and a form on which to give voting instructions.
Voting instructions will be solicited by written communication at least 14 days
before such meeting. The number of votes to which each person may give direction
will be determined as of the record date set by the Fund.
The number of votes each Contract Holder or Participant, as applicable, may
cast during the Accumulation Period is equal to the portion of the Account Value
to that Fund, divided by the net asset value of one share of that Fund. During
the Annuity Period, the number of votes is equal to the valuation reserve
applicable to the portion of the Contract attributable to that Fund, divided by
the net asset value of one share of that Fund. In determining the number of
votes, fractional votes will be recognized.
CHANGES IN BENEFICIARY DESIGNATIONS
The designated Beneficiary may be changed at any time. Such change will not
become effective until written notice of the change is received by the Company.
MODIFICATION OF THE CONTRACT
The Company may change the Contract as required by federal or state law. In
addition, the Company may, upon 30 days written notice to the Contract Holder,
make other changes to the Contracts that would apply only to individuals who
become Participants under that Contract after the effective date of such
changes. If the Contract Holder does not agree to a change, no new Participants
will be covered under the Contract. Certain changes will require the approval of
appropriate state or federal regulatory authorities.
AGREEMENTS WITH THE COMPANY
NYSUT Benefit Trust, a non-profit trust organized and existing under the
laws of the State of New York and operating for the benefit of Members and
agency fee payors of the New York State United Teachers and the Company entered
into an arrangement which calls for NYSUT Benefit Trust to sponsor the
Opportunity Plus program and for the Company to provide educational programs
focused on financial planning for retirement. The educational program is
provided to all Members including agency fee payors. Trained personnel have been
hired by the Company to conduct these programs exclusively for Members. NYSUT
Benefit Trust is reimbursed for direct out-of-pocket expenses incurred in the
promotion of the Opportunity Plus program up to a maximum of $40,000 per year.
In addition, the Company will pay NYSUT Benefit Trust $46,000 per month through
1998. NYSUT Benefit Trust utilizes these amounts to enhance benefits to the
membership.
The Company compensates UUP $48,000 per year for the use of on-site campus
facilities, the endorsement of the Opportunity Plus program and for the use of
UUP payroll slots.
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17
<PAGE>
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Counsel to the Company.
YEAR 2000
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as Aetna), is dependent on
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
computer systems, applications and facilities Year 2000 ready. The plans covers
four stages including (i) inventory, (ii) assessment, (iii) remediation and (iv)
testing and certification. At year end 1997, Aetna, including the Company, had
substantially completed the inventory and assessment stages. The remediation
process is currently underway and targeted for completion by December 31, 1998.
Testing and certification of these systems and applications are targeted for
completion 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, including the Company, is initiating communication with its
critical external relationships to determine the extent to which Aetna may be
vulnerable to such parties' failure to resolve their own Year 2000 issues. Where
practicable Aetna and the Company will assess and attempt to mitigate their
risks with respect to the failure of these parties' to be Year 2000 ready. 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.
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<PAGE>
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
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The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements
of the Separate Account and the Company. A list of the contents of the SAI is
set forth below:
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
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<PAGE>
APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Appendix is a summary of GAA and is not intended to replace the GAA
prospectus. You should read the accompanying GAA prospectus carefully before
investing.
The Guaranteed Accumulation Account ("GAA") is a credited interest option
available during the Accumulation Period. Amounts allocated to GAA are held by
the Company as described in the GAA prospectus.
GAA is a Credited Interest Option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. This option guarantees the minimum interest
rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from three to ten years.
Purchase Payments must remain in GAA for the full Guaranteed Term to
receive the quoted interest rates. Withdrawals or transfers from a Guaranteed
Term before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). An MVA reflects the change in the value of the investments
due to changes in interest rates since the date of deposit. When interest rates
increase after the date of deposit, the value of the investment decreases and
the MVA is negative. Conversely, when interest rates decrease after the date of
deposit, the value of the investment increases, and the MVA is positive. It is
possible that a negative MVA could result in the Participant receiving an amount
which is less than the amount paid into GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge and/or federal tax penalties or mandatory income tax
withholding.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under GAA
transferred to one or more of the Subaccounts available during the Annuity
Period. GAA cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Transfers are permitted among Guaranteed Terms. However, amounts applied to
GAA may not be transferred to another Guaranteed Term of GAA, or to any other
Subaccount or Credited Interest Option available under the Contract, during the
deposit period or the 90 days after the close of the deposit period. We will
apply an MVA to transfers made before the end of a Guaranteed Term, unless such
transfer is due to the maturity of the Guaranteed Term.
CONTRACT LOANS
Loans may not be made against amounts held in GAA, although such value is
included in determining the Account Value against which a loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn from GAA and reinvested, they will be applied to
the current deposit period. Amounts are proportionately reinvested to the
classifications in the same manner as they were allocated before the withdrawal.
Any negative MVA amount applied to a withdrawal is not included in the
reinvestment.
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20
<PAGE>
APPENDIX II
FIXED ACCOUNT
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The following summarizes material information concerning the Fixed Account.
Amounts allocated to the Fixed Account are held in the Company's general account
that supports general insurance and annuity obligations. Interests in the Fixed
Account have not been registered with the SEC in reliance on exemptions under
the Securities Act of 1933, as amended. Disclosure in the Prospectus regarding
the Fixed Account, may, however, be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of such statements. Disclosure in this Appendix regarding the Fixed
Account has not been reviewed by the SEC.
The Fixed Account guarantees the minimum interest rate specified in the
Contract. The Company may credit a higher interest rate from time to time. The
current rate is subject to change at any time, but will never fall below the
guaranteed minimum. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under the Fixed
Account, the Company assumes the risk of investment gain or loss by guaranteeing
Account Values and promising a minimum interest rate and Annuity Payment. The
Fixed Account is available under Installment Purchase Payment Contracts only.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as provided by
federal law.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
The Fixed Account will reflect a compound interest rate credited by us. The
interest rate quoted is an annual effective yield. We make no deductions from
the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
If a withdrawal is made from the Fixed Account, a deferred sales charge may
apply. See "Charges and Deductions--Deferred Sales Charge."
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers from the Fixed Account to any other available investment
options(s) are allowed in each calendar year during the Accumulation Period.
There is no limit on the number of transfers that you can make out of the Fixed
Account in a calendar year; however, the amount you are allowed to transfer from
the Fixed Account is the current value of your Fixed Account multiplied by the
current maximum percentage of the transfer allowed (the "window") minus any
previous transfers made during the calendar year. We will waive the transfer
limit when the value in the Fixed Account is $1000 or less.
By notifying us at the Opportunity Plus Processing Office at least 30 days
before Annuity payments begin, you may elect to have amounts which have been
accumulating under the Fixed Account transferred to one or more of the
Subaccounts available during the Annuity Period to provide variable Annuity
Payments.
CONTRACT LOANS
Loans may be made from Account Values held in the Fixed Account.
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21
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APPENDIX III
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
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The condensed financial information presented below for each of the years in
the ten-year period ended December 31, 1997 (as applicable), is derived from the
financial statements of the Separate Account, which have been audited by KPMG
Peat Marwick LLP, independent auditors. The financial statements and the
independent auditors' report thereon for the year ended December 31, 1997 are
included in the Statement of Additional Information.
<TABLE>
<CAPTION>
1997 1996 1995 1994
-------------------- ---------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
AETNA ASCENT VP
Value at beginning of period $13.291
Value at end of period $15.422
Increase (decrease) in value of
accumulation unit(1) 16.04%(2)
Number of accumulation units
outstanding at end of period 380
AETNA BALANCED VP, INC.
Value at beginning of period $20.419 $17.954 $14.270 $14.519
Value at end of period $24.700 $20.419 $17.954 $14.270
Increase (decrease) in value of
accumulation unit(1) 20.96% 13.73% 25.82% (1.71)%
Number of accumulation units
outstanding at end of period 2,160,305 2,716,641 9,193,181 21,990,186
AETNA BOND VP
Value at beginning of period $47.992 $46.913 $40.173 $42.283
Value at end of period $51.330 $47.992 $46.913 $40.173
Increase (decrease) in value of
accumulation unit(1) 6.96% 2.30% 16.78% (4.99)%
Number of accumulation units
outstanding at end of period 959,336 835,724 2,377,622 5,108,720
AETNA CROSSROADS VP
Value at beginning of period $12.577
Value at end of period $14.456
Increase (decrease) in value of
accumulation unit(1) 14.94%(2)
Number of accumulation units
outstanding at end of period 873
AETNA GROWTH AND INCOME VP
Value at beginning of period $169.448 $137.869 $105.558 $107.925
Value at end of period $217.359 $169.448 $137.869 $105.558
Increase (decrease) in value of
accumulation unit(1) 28.27% 22.91% 30.61% (2.19)%
Number of accumulation units
outstanding at end of period 1,826,355 2,071,139 6,364,000 13,966,072
AETNA LEGACY VP
Value at beginning of period $12.296
Value at end of period $13.491
Increase (decrease) in value of
accumulation unit(1) 9.72%(4)
Number of accumulation units
outstanding at end of period 2,279
AETNA MONEY MARKET VP
Value at beginning of period $39.528 $37.988 $36.271 $35.282
Value at end of period $41.174 $39.528 $37.988 $36.271
Increase (decrease) in value of
accumulation unit(1) 4.16% 4.05% 4.73% 2.80%
Number of accumulation units
outstanding at end of period 455,502 597,656 1,836,260 3,679,802
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period $19.965 $17.951 $13.990 $14.640
Value at end of period $23.675 $19.965 $17.951 $13.990
Increase (decrease) in value of
accumulation unit(1) 18.59% 11.22% 28.31% (4.44)%
Number of accumulation units
outstanding at end of period 929,282 898,279 856,361 743,464
<CAPTION>
1993 1992 1991 1990 1989
----------------- ----------------- ----------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
AETNA ASCENT VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
AETNA BALANCED VP, INC.
Value at beginning of period $13.379 $12.736 $10.896 $10.437 $10.000(3)
Value at end of period $14.519 $13.379 $12.736 $10.896 $10.437
Increase (decrease) in value of
accumulation unit(1) 8.52% 5.05% 16.89% 4.40% 4.37%
Number of accumulation units
outstanding at end of period 30,784,750 34,802,433 22,898,099 17,078,985 9,535,986
AETNA BOND VP
Value at beginning of period $39.038 $36.789 $31.192 $28.943 $25.574
Value at end of period $42.283 $39.038 $36.789 $31.192 $28.943
Increase (decrease) in value of
accumulation unit(1) 8.31% 6.11% 17.94% 7.77% 13.17%
Number of accumulation units
outstanding at end of period 8,210,666 8,507,292 7,844,412 6,984,793 6,202,834
AETNA CROSSROADS VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
AETNA GROWTH AND INCOME VP
Value at beginning of period $102.383 $97.165 $77.845 $76.311 $59.871
Value at end of period $107.925 $102.383 $97.165 $77.845 $76.311
Increase (decrease) in value of
accumulation unit(1) 5.41% 5.37% 24.82% 2.01% 27.46%
Number of accumulation units
outstanding at end of period 21,148,863 24,201,565 20,948,226 18,362,906 17,142,820
AETNA LEGACY VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
AETNA MONEY MARKET VP
Value at beginning of period $34.619 $33.812 $32.138 $30.012 $27.783
Value at end of period $35.282 $34.619 $33.812 $32.138 $30.012
Increase (decrease) in value of
accumulation unit(1) 1.92% 2.39% 5.21% 7.08% 8.02%
Number of accumulation units
outstanding at end of period 5,086,515 7,534,662 8,430,082 10,220,110 8,286,033
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period $13.726 $12.913 $11.233 $10.568 $10.000(5)
Value at end of period $14.640 $13.726 $12.913 $11.233 $10.568
Increase (decrease) in value of
accumulation unit(1) 6.66% 6.30% 14.96% 6.29% 5.68%
Number of accumulation units
outstanding at end of period 705,415 503,006 355,851 148,576 20,710
<CAPTION>
1988
----------------
<S> <C>
AETNA ASCENT VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
AETNA BALANCED VP, INC.
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
AETNA BOND VP
Value at beginning of period $24.061
Value at end of period $25.574
Increase (decrease) in value of
accumulation unit(1) 6.29%
Number of accumulation units
outstanding at end of period 5,955,293
AETNA CROSSROADS VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
AETNA GROWTH AND INCOME VP
Value at beginning of period $52.885
Value at end of period $59.871
Increase (decrease) in value of
accumulation unit(1) 13.21%
Number of accumulation units
outstanding at end of period 16,455,396
AETNA LEGACY VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
AETNA MONEY MARKET VP
Value at beginning of period $26.171
Value at end of period $27.783
Increase (decrease) in value of
accumulation unit(1) 6.16%
Number of accumulation units
outstanding at end of period 8,154,644
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
</TABLE>
- --------------------------------------------------------------------------------
22
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ---------------- -----------------
<S> <C> <C> <C>
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $13.110 $11.617 $10.000(6)
Value at end of period $16.587 $13.110 $11,617
Increase (decrease) in value of
accumulation unit(1) 26.52% 12.86% 16.17%
Number of accumulation units
outstanding at end of period 2,139,178 1,454,755 628,582
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $11.843
Value at end of period $14.087
Increase (decrease) in value of
accumulation unit(1) 18.95%(7)
Number of accumulation units
outstanding at end of period 29
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period $12.349 $10.912 $9.447
Value at end of period $14.715 $12.349 $10.912
Increase (decrease) in value of
accumulation unit(1) 19.16% 13.17% 15.51%
Number of accumulation units
outstanding at end of period 1.576,603 1.384,927 1,316,916
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $14.092 $11.763 $10.000(6)
Value at end of period $17.276 $14.092 $11.763
Increase (decrease) in value of
accumulation unit(1) 22.59% 19.79% 17.63%
Number of accumulation units
outstanding at end of period 2,706,862 1,522,169 525,476
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period $14.240 $11.740 $10.000(6)
Value at end of period $18.662 $14.240 $11.740
Increase (decrease) in value of
accumulation unit(1) 31.05% 21.29% 17.40%
Number of accumulation units
outstanding at end of period 3,093,080 1,490,937 290,547
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $16.334 $15.323 $12.169
Value at end of period $18.174 $16.334 $15.323
Increase (decrease) in value of
accumulation unit(1) 11.26% 6.60% 25.91%
Number of accumulation units
outstanding at end of period 1,939,607 1,893,718 1,280,953
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $13.872 $11.859 $10.000(10)
Value at end of period $16.816 $13.872 $11.859
Increase (decrease) in value of
accumulation unit(1) 21.22% 16.98% 18.59%
Number of accumulation units
outstanding at end of period 1,109,942 663,945 109,717
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $15.493 $12.158 $10.000(10)
Value at end of period $18.690 $15.493 $12.158
Increase (decrease) in value of
accumulation unit(1) 20.64% 27.43% 21.58%
Number of accumulation units
outstanding at end of period 3,873,511 2,090,908 314,653
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $13.611 $10.862 $9.412
Value at end of period $14.403 $13.611 $10.862
Increase (decrease) in value of
accumulation unit(1) 5.82% 25.31% 15.41%
Number of accumulation units
outstanding at end of period 650,486 587,248 530,562
<CAPTION>
1994 1993 1992 1991 1990 1989
------------------ ------------- ----------- ----------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period $10.000(8)
Value at end of period $9.447
Increase (decrease) in value of
accumulation unit(1) (5.53)%
Number of accumulation units
outstanding at end of period 1,254,504
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(9)
Value at end of period $12.169
Increase (decrease) in value of
accumulation unit(1) 21.69%
Number of accumulation units
outstanding at end of period 393,553
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.071 $9.193 $9.018 $9.608 $11.441 $10.000(5)
Value at end of period $9.412 $10.071 $9.193 $9.018 $9.608 $11.441
Increase (decrease) in value of
accumulation unit(1) (6.54)% 9.55% 1.94% (6.14)% (16.02)% 14.41%
Number of accumulation units
outstanding at end of period 533,016 341,771 198,338 144,139 75,052 11,481
<CAPTION>
1988
-----
<S> <C>
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP II ASSET MANAGER PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
FIDELITY VIP II INDEX 500 PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of period
</TABLE>
- --------------------------------------------------------------------------------
23
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997
------------
<S> <C>
PORTFOLIO PARTNERS--MFS EMERGING EQUITIES PORTFOLIO
Value at beginning of period $15.236
Value at end of period $15.046
Increase (decrease) in value of
accumulation unit(1) (1.24)%(11)
Number of accumulation units
outstanding at end of period 2,707,904
PORTFOLIO PARTNERS--MFS RESEARCH GROWTH PORTFOLIO
Value at beginning of period $12.195
Value at end of period $11.960
Increase (decrease) in value of
accumulation unit(1) (1.93)%(11)
Number of accumulation units
outstanding at end of period 232,418
PORTFOLIO PARTNERS--MFS VALUE EQUITY PORTFOLIO
Value at beginning of period $23.106
Value at end of period $23.440
Increase (decrease) in value of
accumulation unit(1) 1.45%(11)
Number of accumulation units
outstanding at end of period 2,018,219
PORTFOLIO PARTNERS--SCUDDER INTERNATIONAL GROWTH PORTFOLIO
Value at beginning of period $17.490
Value at end of period $17.709
Increase (decrease) in value of
accumulation unit(1) 1.25%(11)
Number of accumulation units
outstanding at end of period 3,237,710
PORTFOLIO PARTNERS--T. ROWE PRICE GROWTH EQUITY PORTFOLIO
Value at beginning of period $16.276
Value at end of period $16.608
Increase (decrease) in value of
accumulation unit(1) 2.04%(11)
Number of accumulation units
outstanding at end of period 1,317,058
</TABLE>
- ------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charges or the fixed dollar
annual maintenance fee, if any. Inclusion of these charges would reduce the
investment results shown.
(2) Reflects less than a full year of performance activity. Funds were first
received in this option during February 1997.
(3) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on June 23, 1989, the
date on which the Fund commenced operations.
(4) Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
(5) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on May 31, 1989, the
date on which the Fund became available under the Contract.
(6) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during May 1995, when
the Fund became available under the Contract.
(7) Reflects less than a full year of performance activity. Funds were first
received in this option during January 1997.
(8) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during March 1994, when
funds were first received under this option.
(9) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during June 1994, when
funds were first received in this option.
(10) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during July 1995, when
the Fund became available under the Contract.
(11) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
- --------------------------------------------------------------------------------
24
<PAGE>
For Master Applications Only
I hereby acknowledge receipt of an Account C "Opportunity Plus" Group Deferred
Variable Annuity prospectus dated May 1, 1998, as well as all current
prospectuses pertaining to the variable investment options available under the
Contracts.
- --- Please send an Account C Statement of Additional Information (Form No.
SAI.75962-98) dated May 1, 1998.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
PROS.75962-98
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1998
for
OPPORTUNITY PLUS
Group Variable Multiple Option Annuity Contracts
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, 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
Opportunity Plus Processing Office
P. O. Box 12894
Albany, New York 12212-2894
1-800-677-4636
Read the prospectus before you invest. Unless otherwise indicated, terms used in
this Statement of Additional Information have the same meaning as in the
prospectus.
TABLE OF CONTENTS
Page
General Information and History........................................ 2
Variable Annuity Account C............................................. 3
Offering and Purchase of Contracts..................................... 3
Performance Data....................................................... 4
General............................................................ 4
Average Annual Total Return Quotations............................. 4
Annuity Payments....................................................... 10
Sales Material and Advertising......................................... 11
Independent Auditors................................................... 11
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, 1997, the Company
(ALIAC) had $40.7 billion invested through its products, including $22.3 billion
in its separate accounts (of which the Company or an affiliate oversees the
management of $17.6 billion) and $1.3 billion in its mutual funds offered
outside of its separate accounts. The Company is ranked among the top 2% of all
U.S. life insurance companies based on assets as of December 31, 1996. The
Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc., which
is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc., and an
indirect wholly owned subsidiary of Aetna Inc. The Company is engaged in the
business of issuing life insurance policies and annuity contracts in all states
of the United States. The Company's Home Office is located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
The Company has established the Opportunity Plus Processing Office to provide
administrative support to Contract Holders and Participants investing in the
Opportunity Plus Contract. This office will handle enrollments, billing,
transfers, redemptions, and inquiries for all Opportunity Plus Contract Holders
and Participants. All forms and correspondence should be sent to:
Aetna Life Insurance and Annuity Company
Opportunity Plus Processing Office
P. O. Box 12894
Albany, New York 12212-2894
Telephone number: 1-800-677-4636
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 advisers 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.
2
<PAGE>
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 substitution of available variable investment options as
permitted by law and subject to the conditions of the Contract. The availability
of the Funds is subject to applicable regulatory authorization. Not all Funds
are available in all jurisdictions, under all Contracts, or under all Plans. The
Funds currently available under the Contract are as follows:
[bullet] Aetna Ascent VP (formerly Aetna Ascent Variable Portfolio)
[bullet] Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers
Fund, Inc.)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP
[bullet] Aetna Crossroads VP (formerly Aetna Crossroads Variable Portfolio)
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP
[bullet] Aetna Index Plus Bond VP
[bullet] Aetna Index Plus Large Cap VP (formerly Aetna Variable Index Plus
Portfolio)
[bullet] Aetna Index Plus Mid Cap VP
[bullet] Aetna Index Plus Small Cap VP
[bullet] Aetna Legacy VP (formerly Aetna Legacy Variable Portfolio)
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP
[bullet] Aetna Value Opportunity VP (formerly Aetna Variable Capital
Appreciation Portfolio)
[bullet] Calvert Social Balanced Portfolio (formerly Calvert Responsibly
Invested Balanced Portfolio)
[bullet] Fidelity VIP Equity-Income Portfolio
[bullet] Fidelity VIP High Income Portfolio
[bullet] Fidelity VIP II Asset Manager Portfolio
[bullet] Fidelity VIP II Contrafund Portfolio
[bullet] Fidelity VIP II Index 500 Portfolio
[bullet] Janus Aspen Aggressive Growth Portfolio
[bullet] Janus Aspen Growth Portfolio
[bullet] Janus Aspen Worldwide Growth Portfolio
[bullet] Lexington Emerging Markets Fund, Inc.
[bullet] Lexington Natural Resources Trust*
[bullet] MFS Total Return Series
[bullet] Oppenheimer Global Securities Fund
[bullet] Oppenheimer Strategic Bond Fund
[bullet] Portfolio Partners MFS Emerging Equities Portfolio
[bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Portfolio Partners MFS Value Equity Portfolio
[bullet] Portfolio Partners Scudder International Growth
Portfolio
[bullet] Portfolio Partners T. Rowe Price Growth Equity
Portfolio
* This Fund is only available for investment by Participants who established an
Account under the Contract before May 1, 1998. As soon as all such Participants
have redirected their allocations to other investment options, the Fund will be
closed to all new investment (except reinvested dividends and capital gains
earned on amounts already invested in the Fund through the Separate Account and
loan repayments automatically deposited into the Fund pursuant to the Company's
loan repayment procedures).
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the sections titled "Purchase" and "Contract Valuation."
3
<PAGE>
PERFORMANCE DATA
General
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized returns,"
both of which are described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, five and ten year periods (or
fractional periods thereof). The redeemable value is then divided by the initial
investment and this quotient is taken to the Nth root (N represents the number
of years in the period) and 1 is subtracted from the result which is then
expressed as a percentage, carried to at least the nearest hundredth of a
percent. The standardized figures use the actual returns of the Fund since the
date contributions were first received in the Fund under the Separate Account
and then adjust them to reflect the deduction of all applicable recurring
charges under the Contracts during each period (e.g., mortality and expense risk
charges, applicable 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 was based on the 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 contributions were first received in the
Fund under 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
The tables shown below represent each type of Contract provided for in this
Statement of Additional Information. The first two tables reflect the average
annual standardized and non-standardized total return quotation figures for the
period ended December 31, 1997 for the Subaccounts under Single Payment
Contracts issued by the Company. The third and fourth tables reflect the average
annual standardized and non-standardized total return quotation figures for the
period ended December 31, 1997 for the Subaccounts under Installment Payment
Contracts with a $5 annual maintenance fee, deducted quarterly. For those
Subaccounts where results are not available for the full calendar period
indicated, performance for such partial periods is shown in the column labeled
"Since Inception." For standardized performance, the "Since Inception" column
shows average annual return since the date contributions were first received in
4
<PAGE>
the Fund under the Separate Account. For nonstandardized performance, the "Since
Inception" column shows average annual total return since the Fund's inception
date.
For the Subaccounts funded by the Portfolio Partners portfolios, two sets of
performance returns are shown for each Subaccount : one showing performance
based solely on the performance of the Portfolio Partners portfolio from
November 28, 1997, the date the Portfolio commenced operations; and one
quotation based on (a) performance through November 26, 1997 of the fund it
replaced under many Company contracts and; (b) after November 26, 1997, based on
the Performance of the Portfolio Partners portfolio.
5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date
Contributions
First
Received
Under the
Single Payment Account STANDARDIZED Separate
($0 Maintenance Fee) Account
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years Inception*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.41% 19.60% 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.96% 13.02% 11.12% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.96% 5.61% 7.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 16.11% 17.03% 07/04/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.28% 16.24% 15.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.23% 32.06% 10/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 13.08% 13.23% 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.17% 3.52% 4.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 20.81% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 18.59% 11.50% 10.52% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.52% 21.15% 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 19.15% 11.84% 03/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.60% 23.76% 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 31.05% 26.71% 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.27% 18.82% 06/30/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.22% 20.96% 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.64% 27.22% 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. (12.65%) (7.43%) 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 5.82% 9.39% 8.19% 10/14/91
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (1.24%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 7.87% 10.42% 09/30/93
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (1.93%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (4.17%) 4.51% 6.07% 08/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 1.45% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 24.78% 11.61% 10.26% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 1.25% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 7.64% 12.29% 7.92% 07/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 2.04% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth 26.66% 22.00% 10/31/94
Equity(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.
* Reflects performance from the date contributions were first received in the
Fund under the Separate Account.
(1) These Funds have been available through the Separate Account for more than
ten years.
(2) The current yield for the Subaccount for the 7-day period ended December
31, 1997 (on an annualized basis) was 4.23%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the
total return quotations shown above.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26,
1997, and the performance of the applicable Portfolio Partners Portfolio
after that date. The replaced Fund may not have been available under all
Contracts. The "Date Contributions First Received Under Separate Account"
refers to the applicable date for the replaced Fund.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Single Payment Account Fund
($0 Maintenance Fee) NON-STANDARDIZED Inception
Date
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.41% 20.33% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.96% 20.01% 13.02% 11.12% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.96% 8.51% 5.61% 7.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 16.11% 17.03% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.28% 27.22% 16.24% 15.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.23% 32.91% 09/16/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 13.08% 13.53% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.17% 4.32% 3.52% 4.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.63% 38.16% 12/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.59% 19.13% 11.50% 11.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.52% 23.97% 18.68% 15.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(1) 16.21% 15.98% 12.50% 11.41%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 19.15% 15.92% 11.58% 11.35% 09/06/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.60% 26.61% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 31.05% 29.15% 18.43% 18.40% 08/27/92
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.27% 14.30% 17.75% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.22% 22.16% 16.22% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.64% 24.59% 21.40% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. (12.65%) (4.19%) (3.41%) 03/30/94
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 5.82% 15.24% 9.39% 8.19% 10/14/91
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 19.79% 19.45% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20.90% 12.40% 17.34% 10.87% 11/12/90
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.36% 10.61% 6.30% 05/03/93
===================================================================================================================================
Portfolio Partners MFS Emerging Equities Portfolio (1.25%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 7.87% 16.52% 10.82% 17.51% 09/21/88
===================================================================================================================================
Portfolio Partners MFS Research Growth Portfolio (1.94%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (4.17%) 5.45% 4.51% 7.38%
===================================================================================================================================
Portfolio Partners MFS Value Equity Portfolio 1.30% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 24.78% 20.50% 11.61% 13.23%
===================================================================================================================================
Portfolio Partners Scudder International Growth Portfolio 1.46% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 7.64% 10.22% 12.29% 10.41%
===================================================================================================================================
Portfolio Partners T. Rowe Price Growth Equity Portfolio 1.91% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth 26.66% 24.07% 18.27% 18.22% 01/09/89
Equity(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.
** Reflects performance from the Fund's inception date.
(1) These Funds have been in operation for more than ten years.
(2) The current yield for the Subaccount for the 7-day period ended December
31, 1997 (on an annualized basis) was 4.23%. The current yield reflects
the deduction of all charges under the Contract that are deducted from the
total return quotations shown above.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26,
1997, and the performance of the applicable Portfolio Partners Portfolio
after that date. The replaced Fund may not have been available under all
Contracts. The "Fund Inception Date" refers to the applicable date for the
replaced Fund. If no date is shown, the replaced Fund has been in operation
for more than ten years.
7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date
Contributions
Installment Payment Account First
($5 Maintenance Fee) STANDARDIZED Received
Under the
Separate
Account
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 12.47% 17.08% 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 14.90% 11.85% 10.46% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 1.60% 4.52% 7.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 10.29% 14.63% 07/04/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 21.85% 15.04% 15.18%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 25.60% 26.37% 10/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 7.42% 10.85% 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) (1.06%) 2.45% 4.63%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 14.75% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 12.65% 10.35% 9.85% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20.18% 19.42% 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 13.18% 10.31% 03/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 16.46% 21.32% 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 24.49% 24.21% 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 5.69% 17.08% 06/30/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 15.15% 18.50% 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 14.59% 24.71% 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. (17.03%) (8.93%) 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0.52% 8.26% 7.29% 10/14/91
====================================================================================================================================
Portfolio Partners MFS Emerging Equities Portfolio (6.19%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 2.47% 9.08% 09/30/93
====================================================================================================================================
Portfolio Partners MFS Research Growth Portfolio (6.85%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (8.97%) 3.43% 5.04% 08/31/92
====================================================================================================================================
Portfolio Partners MFS Value Equity Portfolio (3.64%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 18.53% 10.46% 9.59% 05/31/89
====================================================================================================================================
Portfolio Partners Scudder International Growth Portfolio (3.82%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 2.24% 11.13% 7.25% 07/31/89
====================================================================================================================================
Portfolio Partners T. Rowe Price Growth Equity Portfolio (3.07%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth 20.31% 20.03% 10/31/94
Equity(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.
* Reflects performance from the date contributions were first received in the
Fund under the Separate Account.
(1) These Funds have been available through the Separate Account for more than
ten years.
(2) The current yield for the Subaccount for the 7-day period ended December
31, 1997 (on an annualized basis) was 4.218%. The current yield reflects
the deduction of all charges under the Contract that are deducted from the
total return quotations shown above except the maximum 5% deferred sales
charge.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26,
1997, and the performance of the applicable Portfolio Partners Portfolio
after that date. The replaced Fund may not have been available under all
Contracts. The "Date Contributions First Received Under Separate Account"
refers to the applicable date for the replaced Fund.
8
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Installment Payment Account Fund
($5 Maintenance Fee) NON-STANDARDIZED Inception
Date
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.39% 20.32% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.95% 20.00% 13.01% 11.11% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.94% 8.50% 5.59% 7.85%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 16.10% 17.01% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.26% 27.21% 16.23% 15.18%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.21% 32.90% 09/16/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 13.07% 13.52% 07/05/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.15% 4.31% 3.51% 4.63%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.62% 38.15% 12/13/96
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.57% 19.11% 11.49% 11.01%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.51% 23.96% 18.66% 15.27%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio(1) 16.19% 15.97% 12.49% 11.40%
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 19.14% 15.91% 11.57% 11.33% 09/06/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.59% 26.60% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 31.04% 29.13% 18.42% 18.39% 08/27/92
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.25% 14.29% 17.73% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.21% 22.15% 16.21% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.62% 24.58% 21.39% 09/13/93
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. (12.66%) (4.20%) (3.42%) 03/30/94
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 5.81% 15.23% 9.38% 8.17% 10/14/91
- ------------------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 19.78% 19.44% 01/03/95
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20.89% 12.39% 17.32% 10.86% 11/12/90
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.34% 10.60% 6.29% 05/03/93
====================================================================================================================================
Portfolio Partners MFS Emerging Equities Portfolio (1.26%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 7.86% 16.51% 10.81% 17.50% 09/21/88
====================================================================================================================================
Portfolio Partners MFS Research Growth Portfolio (1.95%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (4.18%) 5.44% 4.50% 7.36%
====================================================================================================================================
Portfolio Partners MFS Value Equity Portfolio 1.29% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 24.76% 20.49% 11.59% 13.22%
====================================================================================================================================
Portfolio Partners Scudder International Growth Portfolio 1.45% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 7.62% 10.20% 12.27% 10.39%
====================================================================================================================================
Portfolio Partners T. Rowe Price Growth Equity Portfolio 1.90% 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth 26.64% 24.06% 18.26% 18.21% 01/09/89
Equity(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.
** Reflects performance from the Fund's inception date.
(1) These Funds have been in operation for more than ten years.
(2) The current yield for the Subaccount for the 7-day period ended December
31, 1997 (on an annualized basis) was 4.218%. The current yield reflects
the deduction of all charges under the Contract that are deducted from the
total return quotations shown above. As in the table above, the maximum 5%
deferred sales charge is not reflected.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26,
1997, and the performance of the applicable Portfolio Partners Portfolio
after that date. The replaced Fund may not have been available under all
Contracts. The "Fund Inception Date" refers to the applicable date for the
replaced Fund. If no date is shown, the replaced Fund has been in operation
for more than ten years.
9
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date before the first annuity
payment is due. Such value (less any applicable premium tax) is applied to
provide an Annuity in accordance with the annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first annuity payment for each $1,000 of value applied.
Thereafter, variable annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Contract or Account and that the
value of an Accumulation Unit for the tenth Valuation Date prior to retirement
was $13.650000. This produces a total value of $40,950.
Also assume 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 $1,000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Date on which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date on which the second payment is due.
10
<PAGE>
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. We may categorize funds in terms of the asset classes they
represent and use such categories in marketing material for the Contracts. We
may illustrate in advertisements the performance of the underlying funds, if
accompanied by performance which also shows the performance of such funds
reduced by applicable charges under the Separate Account. We may also show in
advertisements the portfolio holdings of the underlying funds, updated at
various intervals. From time to time, we will quote articles from newspapers and
magazines or other publications or reports, including, but not limited to The
Wall Street Journal, Money magazine, USA Today and The VARDS Report.
The Company may provide in advertising, sales literature, periodic publications
or other materials information on various topics of interest to current and
prospective Contract Holders or Participants. These topics may include the
relationship between sectors of the economy and the economy as a whole and its
effect on various securities markets, investment strategies and techniques (such
as value investing, market timing, dollar cost averaging, asset allocation,
constant ratio transfer and account rebalancing), the advantages and
disadvantages of investing in tax-deferred and taxable investments, customer
profiles and hypothetical purchase and investment scenarios, financial
management and tax and retirement planning, and investment alternatives to
certificates of deposit and other financial instruments, including comparison
between the Contracts and the characteristics of and market for such financial
instruments.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and the review of filings made with the
SEC.
11
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
Index
Statement of Assets and Liabilities...................................... S-2
Statements of Operations and Changes in Net Assets....................... S-5
Notes to Financial Statements ........................................... S-6
Independent Auditors' Report............................................. S-17
S-1
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 189,402,635 shares (cost $5,932,019,068) ........................ $ 6,370,594,954
Aetna Income Shares; 29,481,519 shares (cost $379,976,337) ........................... 378,848,309
Aetna Variable Encore Fund; 17,984,272 shares (cost $234,633,355) .................... 240,346,197
Aetna Investment Advisers Fund, Inc.; 61,720,862 shares (cost $848,048,432) .......... 989,547,679
Aetna GET Fund, Series B; 5,058,054 shares (cost $56,606,586) ........................ 79,552,932
Aetna GET Fund, Series C; 18,780,804 shares (cost $190,080,319) ...................... 236,822,693
Aetna Ascent Variable Portfolio; 5,107,825 shares (cost $66,607,510) ................. 72,115,304
Aetna Crossroads Variable Portfolio; 3,801,191 shares (cost $47,125,006) ............. 49,739,310
Aetna Legacy Variable Portfolio; 2,710,978 shares (cost $32,214,576) ................. 32,802,912
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio; 171,171 shares (cost $2,313,642) ..... 2,039,640
Aetna Variable Growth Portfolio; 111,560 shares (cost $1,335,706) ................... 1,098,483
Aetna Variable Index Plus Portfolio; 5,933,809 shares (cost $76,210,503) ............ 83,175,077
Aetna Variable Small Company Portfolio; 388,120 shares (cost $5,122,912) ............ 4,956,212
Calvert Social Balanced Portfolio; 27,469,430 shares (cost $47,247,774) .............. 54,444,411
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 7,855,657 shares (cost $156,737,051) ....................... 190,735,350
Growth Portfolio; 3,457,071 shares (cost $105,862,746) .............................. 128,257,345
Overseas Portfolio; 700,480 shares (cost $13,223,729) ............................... 13,449,206
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 1,288,137 shares (cost $19,277,286) ........................ 23,199,341
Contrafund Portfolio; 12,866,038 shares (cost $206,330,826) ......................... 256,548,805
Index 500 Portfolio; 504,605 shares (cost $46,209,224) .............................. 57,721,771
Janus Aspen Series:
Aggressive Growth Portfolio; 10,248,197 shares (cost $174,115,177) .................. 210,600,444
Balanced Portfolio; 2,143,788 shares (cost $32,647,487) ............................. 37,451,981
Flexible Income Portfolio; 1,252,635 shares (cost $14,374,926) ...................... 14,756,039
Growth Portfolio; 4,330,541 shares (cost $68,345,213) ............................... 80,028,403
Worldwide Growth Portfolio; 18,350,150 shares (cost $366,705,134).................... 429,210,001
Lexington Emerging Markets Fund; 649,673 shares (cost $6,756,872)..................... 5,788,593
Lexington Natural Resources Trust Fund; 2,881,672 shares (cost $41,178,832)........... 42,965,725
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio; 8,228,209 shares (cost $356,891,357)............. 352,990,165
PPI MFS Research Growth Portfolio; 23,381,050 shares (cost $231,196,214).............. 227,029,997
PPI MFS Value Equity Portfolio; 3,887,887 shares (cost $114,649,620).................. 116,286,704
PPI Scudder International Growth Portfolio; 14,375,874 shares (cost $199,666,185)..... 202,699,815
PPI T. Rowe Price Growth Equity Portfolio; 3,885,589 shares (cost $166,078,985) ...... 169,450,553
---------------
NET ASSETS (cost $10,239,788,590) ..................................................... $11,155,254,351
===============
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 5)
Aetna Variable Fund:
Annuity contracts in accumulation .................................................... $ 6,078,549,136
Annuity contracts in payment period .................................................. 292,045,818
Aetna Income Shares:
Annuity contracts in accumulation .................................................... 372,629,553
Annuity contracts in payment period .................................................. 6,218,756
</TABLE>
S-2
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
Aetna Variable Encore Fund:
Annuity contracts in accumulation ...................... $ 240,346,197
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation ...................... 968,354,403
Annuity contracts in payment period .................... 21,193,276
Aetna GET Fund, Series B:
Annuity contracts in accumulation ...................... 79,552,932
Aetna GET Fund, Series C:
Annuity contracts in accumulation ...................... 236,822,693
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation ...................... 72,115,304
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation ...................... 49,739,310
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation ...................... 32,749,254
Annuity contracts in payment period .................... 53,658
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio:
Annuity contracts in accumulation ...................... 2,039,640
Aetna Variable Growth Portfolio:
Annuity contracts in accumulation ...................... 1,098,483
Aetna Variable Index Plus Portfolio:
Annuity contracts in accumulation ...................... 83,098,319
Annuity contracts in payment period .................... 76,758
Aetna Variable Small Company Portfolio:
Annuity contracts in accumulation ...................... 4,956,212
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation ...................... 54,444,411
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation ...................... 190,735,350
Growth Portfolio:
Annuity contracts in accumulation ...................... 128,257,345
Overseas Portfolio:
Annuity contracts in accumulation ...................... 13,449,206
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation ...................... 23,199,341
Contrafund Portfolio:
Annuity contracts in accumulation ...................... 256,548,805
Index 500 Portfolio:
Annuity contracts in accumulation ...................... 57,721,771
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ...................... 210,600,444
Balanced Portfolio:
Annuity contracts in accumulation ...................... 37,451,981
Flexible Income Portfolio:
Annuity contracts in accumulation ...................... 14,756,039
Growth Portfolio:
Annuity contracts in accumulation ...................... 79,992,417
Annuity contracts in payment period .................... 35,986
</TABLE>
S-3
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
Worldwide Growth Portfolio:
Annuity contracts in accumulation ........... $ 429,093,163
Annuity contracts in payment period ......... 116,838
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ........... 5,788,593
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ........... 42,965,725
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation ........... 352,966,999
Annuity contracts in payment period ......... 23,166
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation ........... 227,029,997
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation ........... 116,286,704
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation ........... 202,699,815
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation ........... 169,450,553
---------------
$11,155,254,351
===============
</TABLE>
See Notes to Financial Statements
S-4
<PAGE>
Variable Annuity Account C
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
------------------- -----------------
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ............................................................ $ 1,552,106,208 $ 712,854,599
Expenses: (Notes 2 and 5)
Valuation period deductions .......................................... (120,867,375) (93,446,331)
--------------- --------------
Net investment income ................................................. 1,431,238,833 619,408,268
--------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales .................................................. 2,013,561,413 2,060,808,031
Cost of investments sold ............................................. 1,773,010,971 1,547,239,509
--------------- --------------
Net realized gain ................................................... 240,550,442 513,568,522
Net unrealized gain on investments: (Note 5)
Beginning of year .................................................... 612,391,085 594,083,184
End of year .......................................................... 915,465,761 612,391,085
--------------- --------------
Net change in unrealized gain ....................................... 303,074,676 18,307,901
--------------- --------------
Net realized and unrealized gain on investments ....................... 543,625,118 531,876,423
--------------- --------------
Net increase in net assets resulting from operations .................. 1,974,863,951 1,151,284,691
--------------- --------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ........................... 1,039,130,530 951,293,520
Sales and administrative charges deducted by the Company .............. (17,373) (61,783)
--------------- --------------
Net variable annuity contract purchase payments ...................... 1,039,113,157 951,231,737
Transfer from the Company for mortality guarantee adjustments ......... 2,085,609 3,247,064
Transfers from the Company's fixed account options .................... 166,510,610 187,508,331
Transfers to the Company's other variable annuity accounts ............ (88,238,000) 0
Redemptions by contract holders ....................................... (474,257,152) (339,383,183)
Annuity Payments ...................................................... (31,253,253) (20,948,181)
Other ................................................................. 1,227,066 144,245
--------------- --------------
Net increase in net assets from unit transactions (Note 5) ........... 615,188,037 781,800,013
--------------- --------------
Change in net assets .................................................. 2,590,051,988 1,933,084,704
NET ASSETS:
Beginning of year ..................................................... 8,565,202,363 6,632,117,659
--------------- --------------
End of year ........................................................... $11,155,254,351 $8,565,202,363
=============== ==============
</TABLE>
See Notes to Financial Statements
S-5
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997
1. Summary of Significant Accounting Policies
Variable Annuity Account C (the "Account") is a separate account
established by Aetna Life Insurance and Annuity Company (the "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, 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
Calvert Social 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
Janus Aspen Series:
[bullet] Aggressive Growth Portfolio
[bullet] Balanced Portfolio
[bullet] Flexible Income Portfolio
[bullet] Growth Portfolio
[bullet] Worldwide Growth Portfolio
Lexington Emerging Markets Fund
Lexington Natural Resources Trust Fund
Portfolio Partners, Inc.:
[bullet] PPI MFS Emerging Equities Portfolio
[bullet] PPI MFS Research Growth Portfolio
[bullet] PPI MFS Value Equity Portfolio
[bullet] PPI Scudder International Growth Portfolio
[bullet] PPI T. Rowe Price Growth Equity 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 the Company which is taxed as a life insurance company under
the Internal Revenue Code of 1986, as amended.
d. Annuity Reserves
Annuity reserves held in the Account 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, 1997 and 1996
aggregated $4,059,988,283 and $2,013,561,413; $3,462,016,312 and
$2,060,808,031, respectively.
S-6
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Variable Fund: $1,291,034,822 ($ 68,500,273)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Income Shares: 22,258,737 (4,263,839)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 9,635,587 (2,938,575)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 128,304,517 (10,844,018)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 13,341,021 (1,078,816)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 3,678,012 (3,257,441)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 4,541,482 (578,657)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 3,316,159 (392,434)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 1,788,369 (229,584)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Variable Portfolios Inc:
Aetna Variable Capital Appreciation Portfolio: 312,433 (2,197)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio: 249,335 (1,093)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 3,327,658 (542,532)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio: 269,004 (5,868)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: (1) 1,199,482 (1,526,918)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Small Capitalization Portfolio: 11,721,861 (3,575,543)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Variable Fund: $205,088,291 $150,120,010 $ 54,968,281
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Income Shares: 46,789,033 49,260,722 (2,471,689)
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 206,958,669 210,166,945 (3,208,276)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 37,558,168 27,770,494 9,787,674
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 7,648,728 4,940,723 2,708,005
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 13,972,003 11,896,317 2,075,686
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 498,613 380,091 118,522
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 409,248 325,568 83,680
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 2,265,127 2,019,840 245,287
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Variable Portfolios Inc:
Aetna Variable Capital Appreciation Portfolio: 123,165 113,851 9,314
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio: 80,207 72,190 8,017
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 29,980,862 29,823,433 157,429
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio: 478,457 428,319 50,138
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: (1) 169,481,196 134,718,793 34,762,403
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 403,516,606 343,440,431 60,076,175
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In 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>
$327,744,944 $438,575,885 $110,830,941 $ 75,435,966
$4,694,078,344 $6,078,549,136
212,746,872 292,045,818
- -----------------------------------------------------------------------------------------------------------------------
(9,314,233) (1,128,028) 8,186,205 (4,710,418)
354,233,289 372,629,553
5,616,023 6,218,756
- -----------------------------------------------------------------------------------------------------------------------
(750,036) 5,712,842 6,462,878 (14,909,883)
245,304,466 240,346,197
- -----------------------------------------------------------------------------------------------------------------------
97,219,569 141,499,248 44,279,679 2,724,400
800,532,626 968,354,403
14,762,802 21,193,276
- -----------------------------------------------------------------------------------------------------------------------
17,286,695 22,946,346 5,659,651 (6,139,082)
65,062,153 79,552,932
- -----------------------------------------------------------------------------------------------------------------------
2,983,885 46,742,374 43,758,489 (8,490,216)
199,058,163 236,822,693
- -----------------------------------------------------------------------------------------------------------------------
1,716,824 5,507,794 3,790,970 42,582,396
21,660,591 72,115,304
- -----------------------------------------------------------------------------------------------------------------------
838,329 2,614,303 1,775,974 30,197,010
14,758,921 49,739,310
- -----------------------------------------------------------------------------------------------------------------------
112,482 588,337 475,855 21,455,983
9,067,002 32,749,254
0 53,658
- -----------------------------------------------------------------------------------------------------------------------
0 (274,002) (274,002) 1,994,092
0 2,039,640
- -----------------------------------------------------------------------------------------------------------------------
0 (237,223) (237,223) 1,079,447
0 1,098,483
- -----------------------------------------------------------------------------------------------------------------------
80,325 6,964,574 6,884,249 62,694,836
10,653,437 83,098,319
0 76,758
- -----------------------------------------------------------------------------------------------------------------------
0 (166,700) (166,700) 4,809,638
0 4,956,212
- -----------------------------------------------------------------------------------------------------------------------
6,730,808 0 (6,730,808) (132,576,331)
104,872,172 0
- -----------------------------------------------------------------------------------------------------------------------
39,364,541 0 (39,364,541) (352,729,122)
323,871,170 0
0 0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-8
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- -------------------------------------------------------------------------------------------
<S> <C> <C>
American Century Investments -
Capital Appreciation Fund: (2) $ 5,882,464 ($ 2,974,651)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 3,787,208 (578,804)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 11,536,379 (1,844,101)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Growth Portfolio: 3,033,640 (1,277,878)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Overseas Portfolio: 762,691 (144,474)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 2,134,313 (253,981)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Contrafund Portfolio: 4,376,096 (2,382,593)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Index 500 Portfolio: 890,215 (515,853)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Franklin Government Securities Trust: (3) 1,578,341 (279,189)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (2,188,842)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Balanced Portfolio: 940,676 (329,511)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Flexible Income Portfolio: 757,640 (131,213)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Growth Portfolio: 1,871,919 (768,752)
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: (4) 64,108 (25,465)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 5,510,563 (4,109,527)
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Investments -
Capital Appreciation Fund: (2) $347,378,690 $348,986,817 ($ 1,608,127)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 1,767,421 1,342,657 424,764
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 2,876,456 2,187,102 689,354
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,967,157 1,268,813 698,344
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 6,265,740 5,529,606 736,134
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 1,353,806 1,132,813 220,993
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 989,526 754,795 234,731
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 2,042,782 1,517,607 525,175
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust: (3) 35,001,358 34,302,739 698,619
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 16,697,333 12,596,723 4,100,610
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 1,236,230 981,509 254,721
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 4,035,296 3,816,553 218,743
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,933,431 1,461,183 472,248
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: (4) 5,452,797 5,400,161 52,636
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 16,620,763 10,266,465 6,354,298
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------------
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In 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>
$ 8,139,519 $0 ($8,139,519) ($339,404,560)
$346,244,393 $0
- ----------------------------------------------------------------------------------------------------------------
2,963,927 7,196,636 4,232,709 6,589,199
39,989,335 54,444,411
- ----------------------------------------------------------------------------------------------------------------
10,675,870 33,998,298 23,322,428 50,561,862
106,469,428 190,735,350
- ----------------------------------------------------------------------------------------------------------------
5,256,264 22,394,599 17,138,335 28,222,857
80,442,047 128,257,345
- ----------------------------------------------------------------------------------------------------------------
649,630 225,478 (424,152) 4,069,619
8,449,388 13,449,206
- ----------------------------------------------------------------------------------------------------------------
2,502,591 3,922,056 1,419,465 2,575,422
17,103,129 23,199,341
- ----------------------------------------------------------------------------------------------------------------
15,161,493 50,217,979 35,056,486 100,377,564
118,886,521 256,548,805
- ----------------------------------------------------------------------------------------------------------------
2,304,865 11,512,547 9,207,682 26,383,649
21,230,903 57,721,771
- ----------------------------------------------------------------------------------------------------------------
405,959 0 (405,959) (24,948,755)
23,356,943 0
- ----------------------------------------------------------------------------------------------------------------
17,668,916 36,485,267 18,816,351 16,995,758
172,876,567 210,600,444
- ----------------------------------------------------------------------------------------------------------------
751,567 4,804,494 4,052,927 17,251,901
15,281,267 37,451,981
- ----------------------------------------------------------------------------------------------------------------
140,666 381,113 240,447 5,252,958
8,417,464 14,756,039
- ----------------------------------------------------------------------------------------------------------------
2,192,571 11,683,190 9,490,619 28,161,560
40,800,809 79,992,417
0 35,986
- ----------------------------------------------------------------------------------------------------------------
(6,468) 0 6,468 (1,788,353)
1,690,606 0
- ----------------------------------------------------------------------------------------------------------------
16,710,390 62,504,868 45,794,478 203,261,915
172,398,274 429,093,163
0 116,838
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
S-10
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Lexington Emerging Markets Fund: $4,375 ($79,412)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 1,239,038 (531,930)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: (5) 8,158,940 (1,195,227)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio: 0 (406,682)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 0 (262,081)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 0 (133,426)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
PPI MFS Scudder International Growth Portfolio: 0 (235,626)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
PPI MFS T. Rowe Price Growth Equity Portfolio: 0 (193,734)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: (6) 4,599,123 (2,286,635)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Total Variable Annuity Account C $1,552,106,208 ($ 120,867,375)
========================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lexington Emerging Markets Fund: $1,639,618 $1,424,729 $214,889
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 14,866,827 11,618,994 3,247,833
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: (5) 128,039,479 103,983,767 24,055,712
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio: 3,797,005 3,880,012 (83,007)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 1,453,829 1,486,006 (32,177)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 928,145 929,114 (969)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
PPI MFS Scudder International Growth Portfolio: 13,091,485 12,881,912 209,573
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
PPI MFS T. Rowe Price Growth Equity Portfolio: 891,088 887,544 3,544
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: (6) 278,386,778 238,895,623 39,491,155
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Total Variable Annuity Account C $2,013,561,413 $1,773,010,971 $240,550,442
=========================================================================================================
</TABLE>
(1) Effective November 28, 1997, this funds assets were transferred to the PPI
T. Rowe Price Growth Equity Portfolio.
(2) Effective November 28, 1997, this funds assets were transferred to the PPI
MFS Research Growth Portfolio.
(3) Effective November 28, 1997, this funds assets were transferred to Aetna
Income Shares.
(4) Effective November 28, 1997, this funds assets were transferred to the Aetna
Variable Encore Fund.
(5) Effective November 28, 1997, this funds assets were transferred to the PPI
MFS Value Equity Portfolio.
(6) Effective November 28, 1997, this funds assets were transferred to the PPI
Scudder International Growth Portfolio.
S-11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In 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>
$102,991 ($968,279) ($1,071,270) $1,874,530
$4,845,481 $5,788,593
- ------------------------------------------------------------------------------------------------------------------------
3,997,171 1,786,893 (2,210,278) 17,376,715
23,844,347 42,965,725
- ------------------------------------------------------------------------------------------------------------------------
9,459,521 0 (9,459,521) (116,641,588)
95,081,684 0
- ------------------------------------------------------------------------------------------------------------------------
0 (3,901,193) (3,901,193) 357,381,047
0 352,966,999
0 23,166
- ------------------------------------------------------------------------------------------------------------------------
0 (4,166,217) (4,166,217) 231,490,472
0 227,029,997
- ------------------------------------------------------------------------------------------------------------------------
0 1,637,084 1,637,084 114,784,015
0 116,286,704
- ------------------------------------------------------------------------------------------------------------------------
0 3,033,630 3,033,630 199,692,238
0 202,699,815
- ------------------------------------------------------------------------------------------------------------------------
0 3,371,568 3,371,568 166,269,175
0 169,450,553
- ------------------------------------------------------------------------------------------------------------------------
29,299,509 0 (29,299,509) (204,019,879)
191,515,746 0
- ------------------------------------------------------------------------------------------------------------------------
$612,391,085 $915,465,761 $303,074,676 $615,188,037 $8,565,202,363 $11,155,254,351
========================================================================================================================
</TABLE>
S-12
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Variable Fund: $515,238,366 ($54,321,686)
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------
Aetna Income Shares: 23,144,319 (4,611,478)
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 14,058,252 (2,878,790)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 72,699,670 (9,562,496)
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 5,304,368 (1,100,778)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 969,084 (280,865)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 963,171 (137,931)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 797,511 (106,179)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 595,666 (63,355)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 57,328 (16,537)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: 2,138,198 (966,404)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 1,173,212 (3,731,877)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Fund: 3,000,539 (425,159)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 2,269,871 (994,896)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Growth Portfolio: 2,304,888 (707,334)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Overseas Portfolio: 115,737 (82,498)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 955,910 (196,386)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Variable Fund: $1,237,963,630 $841,837,896 $396,125,734
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 155,474,786 153,469,788 2,004,998
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 175,207,017 167,163,639 8,043,378
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 223,353,174 160,905,519 62,447,655
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 25,117,816 18,596,857 6,520,959
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 229,569 224,240 5,329
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 514,612 443,710 70,902
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 755,620 679,118 76,502
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 1,206,903 1,119,490 87,413
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 356,603 338,531 18,072
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: 3,326,813 3,149,890 176,923
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 24,333,106 17,577,100 6,756,006
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Fund: 1,793,014 1,429,393 363,621
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 3,851,613 3,166,678 684,935
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Growth Portfolio: 623,639 453,561 170,078
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 2,280,928 2,065,136 215,792
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 2,016,939 1,797,456 219,483
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In 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>
$267,567,573 $327,744,944 $60,177,371 $39,664,335
$3,805,891,355 $4,694,078,344
144,049,741 212,746,872
- --------------------------------------------------------------------------------------------------------------------------
3,230,862 (9,314,233) (12,545,095) (34,151,027)
380,937,626 354,233,289
5,069,969 5,616,023
- --------------------------------------------------------------------------------------------------------------------------
9,204,418 (750,036) (9,954,454) 5,744,394
230,291,686 245,304,466
- --------------------------------------------------------------------------------------------------------------------------
122,622,603 97,219,569 (25,403,034) (7,904,062)
713,304,833 800,532,626
9,712,862 14,762,802
- --------------------------------------------------------------------------------------------------------------------------
13,423,804 17,286,695 3,862,891 (22,661,545)
73,136,258 65,062,153
- --------------------------------------------------------------------------------------------------------------------------
0 2,983,885 2,983,885 195,380,730
0 199,058,163
- --------------------------------------------------------------------------------------------------------------------------
105,405 1,716,824 1,611,419 14,244,294
4,908,736 21,660,591
- --------------------------------------------------------------------------------------------------------------------------
68,967 838,329 769,362 9,552,968
3,668,757 14,758,921
- --------------------------------------------------------------------------------------------------------------------------
36,214 112,482 76,268 6,451,330
1,919,680 9,067,002
- --------------------------------------------------------------------------------------------------------------------------
0 80,325 80,325 10,514,249
0 10,653,437
- --------------------------------------------------------------------------------------------------------------------------
(285,937) 6,730,808 7,016,745 58,052,710
38,454,000 104,872,172
- --------------------------------------------------------------------------------------------------------------------------
38,038,924 39,364,541 1,325,617 77,101,765
241,246,447 323,871,170
- --------------------------------------------------------------------------------------------------------------------------
2,175,908 2,963,927 788,019 7,573,554
28,688,761 39,989,335
- --------------------------------------------------------------------------------------------------------------------------
2,759,687 10,675,870 7,916,183 58,569,396
38,023,939 106,469,428
- --------------------------------------------------------------------------------------------------------------------------
505,388 5,256,264 4,750,876 46,205,811
27,717,728 80,442,047
- --------------------------------------------------------------------------------------------------------------------------
163,196 649,630 486,434 3,994,936
3,718,987 8,449,388
- --------------------------------------------------------------------------------------------------------------------------
1,530,985 2,502,591 971,606 782,358
14,370,158 17,103,129
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
- -------------------------------------------------------------------------------------
<S> <C> <C>
Contrafund Portfolio: $357,388 ($910,633)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Index 500 Portfolio: 219,199 (139,391)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Franklin Government Securities Trust: 1,223,061 (290,354)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 1,589,459 (1,739,222)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Balanced Portfolio: 238,807 (87,725)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Flexible Income Portfolio: 499,929 (72,736)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Growth Portfolio: 630,364 (245,877)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 61,378 (14,453)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 1,725,690 (1,035,043)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 0 (55,554)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 80,144 (231,100)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: 8,437,018 (1,199,983)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: 4,063,525 (2,264,627)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund: 47,942,547 (4,974,984)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Total Variable Annuity Account C $712,854,599 ($ 93,446,331)
=====================================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contrafund Portfolio: $1,299,964 $1,078,898 $221,066
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 1,105,697 943,071 162,626
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust: 5,788,894 5,646,267 142,627
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 4,803,682 3,702,615 1,101,067
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Balanced Portfolio: 1,671,701 1,511,274 160,427
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 1,541,843 1,429,353 112,490
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,130,979 963,703 167,276
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 726,351 729,002 (2,651)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 1,942,344 1,492,553 449,791
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 905,228 870,164 35,064
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 7,649,108 6,026,027 1,623,081
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: 15,336,623 13,853,081 1,483,542
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: 26,981,873 22,523,390 4,458,483
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund: 131,517,962 112,052,109 19,465,853
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Total Variable Annuity Account C $2,060,808,031 $1,547,239,509 $513,568,522
========================================================================================================
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In 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>
$285,166 $15,161,493 $14,876,327 $73,985,256
$30,357,117 $118,886,521
- ----------------------------------------------------------------------------------------------------------------------
223,865 2,304,865 2,081,000 15,496,325
3,411,144 21,230,903
- ----------------------------------------------------------------------------------------------------------------------
831,241 405,959 (425,282) 664,776
22,042,115 23,356,943
- ----------------------------------------------------------------------------------------------------------------------
13,091,398 17,668,916 4,577,518 79,952,029
87,395,716 172,876,567
- ----------------------------------------------------------------------------------------------------------------------
60,530 751,567 691,037 12,773,551
1,505,170 15,281,267
- ----------------------------------------------------------------------------------------------------------------------
167,581 140,666 (26,915) 4,046,573
3,858,123 8,417,464
- ----------------------------------------------------------------------------------------------------------------------
145,978 2,192,571 2,046,593 33,135,966
5,066,487 40,800,809
- ----------------------------------------------------------------------------------------------------------------------
(354) (6,468) (6,114) 1,108,236
544,210 1,690,606
- ----------------------------------------------------------------------------------------------------------------------
786,497 16,710,390 15,923,893 139,287,080
16,046,863 172,398,274
- ----------------------------------------------------------------------------------------------------------------------
(46,118) 102,991 149,109 1,627,816
3,089,046 4,845,481
- ----------------------------------------------------------------------------------------------------------------------
1,277,740 3,997,171 2,719,431 5,442,307
14,210,484 23,844,347
- ----------------------------------------------------------------------------------------------------------------------
11,656,721 9,459,521 (2,197,200) (937,272)
89,495,579 95,081,684
- ----------------------------------------------------------------------------------------------------------------------
12,783,439 29,299,509 16,516,070 4,017,712
164,724,583 191,515,746
- ----------------------------------------------------------------------------------------------------------------------
91,671,503 8,139,519 (83,531,984) (57,916,538)
425,259,499 346,244,393
- ----------------------------------------------------------------------------------------------------------------------
$ 594,083,184 $612,391,085 $ 18,307,901 $ 781,800,013 $6,632,117,659 $8,565,202,363
======================================================================================================================
</TABLE>
S-16
<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, 1997, 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, 1997. 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 and condensed financial information. Our procedures
included confirmation of securities owned as of December 31, 1997, 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, 1997, the results of its operations and 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, 1997 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 27, 1998
S-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
Index to Consolidated Financial Statements
------------------------------------------
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 F-3
Consolidated Balance Sheets as of December 31, 1997
and 1996 F-4
Consolidated Statements of Changes in Shareholder's Equity
for the Years Ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiary as of December 31, 1997 and 1996,
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, 1997. 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 statements 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 Subsidiary at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 3, 1998
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
Years Ended December 31,
--------------------------------
1997 1996 1995
------- ------- -------
Revenue:
Premiums $267.1 $133.6 $212.7
Charges assessed against policyholders 475.0 396.5 318.9
Net investment income 1,080.5 1,045.6 1,004.3
Net realized capital gains 36.0 19.7 41.3
Other income 39.7 45.4 42.0
------- ------- -------
Total revenue 1,898.3 1,640.8 1,619.2
------- ------- -------
Benefits and expenses:
Current and future benefits 1,127.8 968.6 997.2
Operating expenses 347.4 342.2 310.8
Amortization of deferred policy
acquisition costs 128.4 69.8 48.0
Severance and facilities charges -- 61.3 --
------- ------- -------
Total benefits and expenses 1,603.6 1,441.9 1,356.0
------- ------- -------
Income before income taxes 294.7 198.9 263.2
Income taxes 89.4 57.8 87.3
------- ------- -------
Net income $205.3 $141.1 $175.9
======= ======= =======
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
Assets 1997 1996
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities available for sale, at fair value
(amortized cost: $12,912.2 and $12,539.1) $13,463.8 $12,905.5
Equity securities, available for sale:
Nonredeemable preferred stock (cost: $131.7 and $107.6) 147.6 119.0
Investment in affiliated mutual funds (cost: $78.1 and $77.3) 83.0 81.1
Common stock (cost: $0.2 and $0.0) .6 .3
Short-term investments 95.6 34.8
Mortgage loans 12.8 13.0
Policy loans 469.6 399.3
--------- --------
Total investments 14,273.0 13,553.0
Cash and cash equivalents 565.4 459.1
Accrued investment income 163.0 159.0
Premiums due and other receivables 63.7 26.6
Deferred policy acquisition costs 1,654.6 1,515.3
Reinsurance loan to affiliate 397.2 628.3
Other assets 46.8 33.7
Separate accounts assets 22,982.7 15,318.3
--------- --------
Total assets $40,146.4 $31,693.3
========= ========
Liabilities and Shareholder's Equity
Liabilities:
Future policy benefits $3,763.7 $3,617.0
Unpaid claims and claim expenses 38.0 28.9
Policyholders' funds left with the Company 11,143.5 10,663.7
--------- --------
Total insurance reserve liabilities 14,945.2 14,309.6
Other liabilities 312.8 354.7
Income taxes:
Current 12.4 20.7
Deferred 72.0 80.5
Separate accounts liabilities 22,970.0 15,318.3
--------- --------
Total liabilities 38,312.4 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
Accumulated other comprehensive income 92.9 60.5
Retained earnings 1,320.3 1,128.2
--------- --------
Total shareholder's equity 1,834.0 1,609.5
--------- --------
Total liabilities and shareholder's equity $40,146.4 $31,693.3
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $1,609.5 $1,583.0 $1,088.5
Comprehensive income
Net income 205.3 141.1 175.9
Other comprehensive income, net of tax
Unrealized gains (losses) on securities ($50.1
million, $(110.8) million and $494.6 million, 32.4 (72.0) 321.5
pretax, respectively)
-------- -------- --------
Total comprehensive income 237.7 69.1 497.4
-------- -------- --------
Capital contributions -- 10.4 0.0
Other changes 4.1 (49.5) 0.0
Common stock dividends (17.3) (3.5) (2.9)
-------- -------- --------
Shareholder's equity, end of year $1,834.0 $1,609.5 $1,583.0
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $205.3 $141.1 $175.9
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
(Increase) decrease in accrued investment income (4.0) 16.5 (33.3)
(Increase) decrease in premiums due and other receivables (33.3) 1.6 25.4
Increase in policy loans (70.3) (60.7) (89.9)
Increase in deferred policy acquisition costs (139.3) (174.0) (177.0)
Decrease in reinsurance loan to affiliate 231.1 27.2 34.8
Net increase in universal life account balances 286.4 243.2 393.4
(Decrease) increase in other insurance reserve liabilities (249.6) (211.5) 79.0
Net (decrease) increase in other liabilities and other assets (41.7) 3.1 13.0
Decrease in income taxes (31.4) (26.7) (4.5)
Net accretion of discount on investments (66.4) (68.0) (66.4)
Net realized capital gains (36.0) (19.7) (41.3)
Other, net -- 1.1 --
-------- -------- --------
Net cash provided by (used for) operating activities 50.8 (126.8) 309.1
-------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,311.3 5,182.2 4,207.2
Equity securities 103.1 190.5 180.8
Mortgage loans 0.2 8.7 10.7
Limited partnership -- -- 26.6
Investment maturities and collections of:
Debt securities available for sale 1,212.7 885.2 583.9
Short-term investments 89.3 35.0 106.1
Cost of investment purchases in:
Debt securities available for sale (6,732.8) (6,534.3) (6,034.0)
Equity securities (113.3) (118.1) (170.9)
Short-term investments (149.9) (54.7) (24.7)
Mortgage loans -- -- (21.3)
Other, net -- (17.6) --
-------- -------- --------
Net cash used for investing activities (279.4) (423.1) (1,135.6)
-------- -------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,621.2 1,579.5 1,884.5
Withdrawals of investment contracts (1,256.3) (1,146.2) (1,109.6)
Capital contribution to Separate Account (25.0) -- --
Return of capital from Separate Account 12.3 -- --
Capital contribution from HOLDCO -- 10.4 --
Dividends paid to shareholder (17.3) (3.5) (2.9)
-------- -------- --------
Net cash provided by financing activities 334.9 440.2 772.0
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 106.3 (109.7) (54.5)
Cash and cash equivalents, beginning of year 459.1 568.8 623.3
-------- -------- --------
Cash and cash equivalents, end of year $565.4 $459.1 $568.8
======== ======== ========
Supplemental cash flow information:
Income taxes paid, net $119.6 $85.5 $92.8
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(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 subsidiary
(collectively, the "Company") are providers 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 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 subsidiary, Aetna Insurance Company of
America. 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 1996 and 1995 financial information to conform to the 1997
presentation.
New Accounting Standard
-----------------------
As of December 31, 1997 the Company adopted Financial Accounting Standard
("FAS") No. 130, Reporting Comprehensive Income. This statement 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 shareholders) and includes net income and net unrealized
capital gains or losses on available-for-sale securities. As this new
standard only requires additional information in a financial statement, it
does not affect the Company's financial position or results of operations.
Future Application of Accounting Standards
------------------------------------------
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
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.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Future Application of Accounting Standards (Continued)
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.
Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments
In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments, which provides guidance for
determining when an insurance or other enterprise should recognize a
liability for guaranty-fund and other insurance related assessments and
guidance for measuring the liability. This statement is effective for 1999
financial statements with early adoption 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.
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
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.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
The company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Initial collateral, primarily cash, is required at a rate of 102% of the
market value of a loaned domestic security and 105% of the market value of
a loaned foreign security. The collateral is deposited by the borrower with
a lending agent, and retained and invested by the lending agent according
to the Company's guidelines to generate additional income. The market value
of the loaned securities is monitored on a daily basis with additional
collateral obtained or refunded as the market value of the loaned
securities fluctuates. At December 31, 1997 and 1996, the Company loaned
securities (which are reflected as invested assets) with a market value of
approximately $385.1 million and $444.7 million, respectively.
Purchases and sales of debt and equity securities are recorded on the trade
date.
The investment in affiliated mutual funds represents an investment in Aetna
managed mutual funds which have 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.
The Company utilizes futures contracts, swap agreements and warrants for
other than trading purposes in order to manage investment returns and price
risk and to align maturities, interest rates, and funds availability with
its obligations. (Refer to Note 3.)
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.
Interest rate 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
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
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.
Warrants represent the right to purchase specific securities and are
accounted for as hedges. Upon exercise, the cost of the warrants are added
to the basis of the securities purchased.
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% for all
years presented. 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 3.50% to 9.50% for all years presented) 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.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
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 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 with life contingencies begin under
contracts that were initially investment contracts, the accumulated balance
in the account is treated as a single premium for the purchase of an
annuity and 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 mutual 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 $658.6 million for 1997 (fair value $668.7 million)
and $515.6 million for 1996 (fair value $523.0 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 both 1997 and in
1996.
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-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(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, 1997 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 $1,219.7 $74.0 $0.1 $1,293.6
States, municipalities and political
subdivisions 0.3 -- -- 0.3
U.S. corporate securities:
Financial 2,370.7 84.6 1.3 2,454.0
Food & fiber 195.4 9.3 -- 204.7
Healthcare & consumer products 728.5 27.0 2.6 752.9
Media & broadcast 252.9 14.7 0.1 267.5
Natural resources 143.5 5.5 - 149.0
Transportation & capital goods 528.2 33.2 0.1 561.3
Utilities 521.3 23.5 0.9 543.9
Other corporate securities 96.9 3.2 - 100.1
---------- -------- -------- -----------
Total U.S. corporate securities 4,837.4 201.0 5.0 5,033.4
Foreign Securities:
Government 612.5 36.7 23.6 625.6
Utilities 177.5 28.7 -- 206.2
Other 857.9 27.7 42.8 842.8
---------- -------- -------- -----------
Total foreign securities 1,647.9 93.1 66.4 1,674.6
Residential mortgage-backed securities:
Pass-throughs 784.4 71.3 2.0 853.7
Collateralized mortgage obligations 2,280.5 137.4 2.0 2,415.9
---------- -------- -------- -----------
Total residential mortgage-
backed securities 3,064.9 208.7 4.0 3,269.6
Commercial/Multifamily mortgage-
backed securities 1,127.8 34.0 0.4 1,161.4
Other asset-backed securities 1,014.2 17.1 0.4 1,030.9
---------- -------- -------- -----------
Total Debt Securities $12,912.2 $627.9 $76.3 $13,463.8
========== ======== ======== ===========
</TABLE>
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(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, 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 corporate securities 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-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
At December 31, 1997 and 1996, net unrealized appreciation of $551.6
million and $366.4 million, respectively, on available-for-sale debt
securities included $429.3 million and $288.5 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.
The carrying and fair value of debt securities for the year ended December
31, 1997 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 $367.3 $367.6
After one year through five years 2,165.1 2,195.4
After five years through ten years 2,367.3 2,407.0
After ten years 2,805.6 3,031.9
Mortgage-backed securities 4,192.7 4,431.0
Other asset-backed securities 1,014.2 1,030.9
--------- ---------
Total $12,912.2 $13,463.8
========= =========
At December 31, 1997 and 1996, debt securities carried at $8.2 million and
$7.6 million, respectively, were on deposit as required by regulatory
authorities.
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, 1997.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Included in the Company's debt securities were residential collateralized
mortgage obligations ("CMOs") supporting the following:
<TABLE>
<CAPTION>
1997 1996
--------------------- ------------------------
Fair Amortized Fair Amortized
Value Cost Value Cost
-------- -------- -------- --------
(millions)
<S> <C> <C> <C> <C>
Total residential CMOs(1) $2,415.9 $2,280.5 $2,309.0 $2,227.8
======== ======== ======== ========
Percentage of total:
Supporting experience rated products 81.6% 84.2%
Supporting remaining products 18.4% 15.8%
----- -----
100.0% 100.0%
===== =====
</TABLE>
(1) At December 31, 1997 and 1996, approximately 73% and 71%,
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, 1997
and 1996, approximately 4% and 3%, respectively, of the Company's CMO
holdings were invested in types of CMOs which are subject to more
prepayment and extension risk than traditional CMOs (such as interest- or
principal-only strips).
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Investments in equity securities available for sale were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
(millions)
1997
Equity Securities $210.0 $21.3 $0.1 $231.2
====== ===== ==== ======
1996
Equity Securities $184.9 $16.3 $0.8 $200.4
====== ===== ==== ======
3. Financial Instruments
Estimated Fair Value
--------------------
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1997 and 1996 were as follows:
1997 1996
-------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- ------ -------- -----
(millions)
Assets:
Mortgage loans $ 12.8 $ 12.4 $ 13.0 $ 13.2
Liabilities:
Investment contract
liabilities:
With a fixed maturity $ 1,030.3 $1,005.4 $1,014.1 $1,028.8
Without a fixed
maturity 10,113.2 9,587.5 9,649.6 9,427.6
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.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Estimated Fair Value (Continued)
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
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 1997 and 1996,
Treasury futures contracts were used to manage interest rate risk in the
Company's bond portfolio; and, in 1996, 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
securities at a specified future date and at a specified price or yield.
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, 1997 and 1996.
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
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Off-Balance-Sheet and Other Financial Instruments (Including Derivative
Instruments) (Continued)
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, 1997 and 1996.
During 1995, the Company received $0.4 million for writing call options on
underlying securities. The Company did not write any call options in 1997
and 1996.
Warrants:
Warrants are instruments giving the Company the right, but not the
obligation to buy a security at a given price during a specified period. As
of December 31, 1997 and 1996, the Company had open warrants to purchase
equity securities with a fair value of $0.6 million and $0.3 million,
respectively.
Debt Instruments with Derivative Characteristics:
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, 1997 was as follows:
Amortized Fair
Cost Value
--------- ----
(millions)
Residential collateralized mortgage
obligations $2,280.5 $2,415.9
Principal-only strips (included above) 59.0 67.0
Interest-only strips (included above) 12.8 24.3
Other structured securities with derivative
characteristics (1) 107.4 105.2
(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-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(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:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $962.8 $945.3 $891.5
Nonredeemable preferred stock 13.7 5.9 4.2
Investment in affiliated
mutual funds 4.9 14.3 14.9
Mortgage loans 1.3 2.2 1.4
Policy loans 19.9 18.4 13.7
Reinsurance loan to affiliate 37.5 44.1 46.5
Cash equivalents 44.2 29.4 38.9
Other 10.0 2.1 8.4
-------- -------- --------
Gross investment income 1,094.3 1,061.7 1,019.5
Less investment expenses (13.8) (16.1) (15.2)
-------- -------- --------
Net investment income $1,080.5 $1,045.6 $1,004.3
======== ======== ========
Net investment income includes amounts allocable to experience rated
contractholders of $823.1 million, $787.6 million and $744.2 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Interest
credited to contractholders is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively.
The amount of dividends that may be paid to the shareholder in 1998 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$77.6 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
$80.5 million, $57.8 million and $70.0 million for the years ended December
31, 1997, 1996 and 1995, respectively. Statutory capital and surplus was
$778.7 million and $713.6 million as of December 31, 1997 and 1996,
respectively.
As of December 31, 1997 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.
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations
Realized capital gains or losses are the difference between the carrying
value and sale proceeds of specific investments sold.
Net realized capital gains on investments were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $22.5 $11.1 $32.8
Equity securities 9.9 8.6 8.3
Other 3.6 -- 0.2
------ -------- ------
Pretax realized capital gains $36.0 $19.7 $41.3
====== ======== ======
After tax realized capital gains $23.2 $13.0 $25.8
====== ======== ======
Net realized capital gains of $96.1 million, $53.1 million and $61.1
million for 1997, 1996 and 1995, respectively, allocable to experience
rated contracts, were deducted from net realized capital gains and an
offsetting amount was reflected in policyholders' funds left with the
Company. Net unamortized gains were $138.1 million and $53.3 million at
December 31, 1997 and 1996, respectively.
Proceeds from the sale of available-for-sale debt securities and the
related gross gains and losses were as follows:
1997 1996 1995
----- ----- ----
(millions)
Proceeds on Sales $5,311.3 $5,182.2 $4,207.2
Gross Gains 25.8 24.3 44.6
Gross Losses 3.3 13.2 11.8
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in shareholder's equity related to changes in accumulated other
comprehensive income (unrealized capital gains and losses on securities)
(excluding those related to experience rated contractholders) were as
follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $44.3 $(100.1) $255.9
Equity securities 5.6 (10.5) 27.3
Limited partnership -- -- 1.8
----- ------- ------
49.9 (110.6) 285.0
Increase (decrease) in deferred
income taxes (See Note 8) 17.5 (38.6) (36.5)
----- ------- ------
Net changes in accumulated other
comprehensive income $32.4 $(72.0) $321.5
===== ======= ======
Net unrealized capital gains allocable to experience rated contracts of
$356.7 million and $72.6 million at December 31, 1997 and $245.2 million
and $43.3 million at December 31, 1996 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 accumulated other comprehensive
income, which are net of amounts allocable to experience rated
contractholders, at December 31:
1997 1996 1995
---- ---- ----
(millions)
Debt securities
Gross unrealized capital gains $140.6 $101.7 $179.3
Gross unrealized capital losses (18.4) (23.8) (1.3)
----- ----- -----
122.2 77.9 178.0
Equity securities
Gross unrealized capital gains 21.2 16.3 27.2
Gross unrealized capital losses (0.1) (0.8) (1.2)
---- ---- -----
21.1 15.5 26.0
Deferred income taxes (See Note 8) 50.4 32.9 71.5
---- ---- -----
Net accumulated other
comprehensive income $92.9 $60.5 $132.5
==== ==== =====
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in accumulated other comprehensive income related to changes in
unrealized gains (losses) on securities (excluding those related to
experience rated contractholders) were as follows:
1997 1996 1995
---- ---- ----
(millions)
Unrealized holding gains (losses)
arising during the period (1) $98.8 $(14.8) $390.5
Less: reclassification adjustment
for gains and other items included
in net income (2) 66.4 57.2 69.0
----- ------ ------
Net unrealized gains (losses)
on securities $32.4 $(72.0) $321.5
===== ====== ======
(1) Pretax unrealized holding gains (losses) arising during the
period were $152.0 million, ($22.8) million and $600.8 million
for 1997, 1996 and 1995, respectively.
(2) Pretax reclassification adjustments for gains and other items
included in net income were $102.4 million, $87.7 million and
$107.5 million for 1997, 1996 and 1995, respectively.
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.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
7. Severance and Facilities Charges (Continued)
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,
which were sold in April 1996. The cost allocated to the Company associated
with this charge was $9.1 million after tax ($14.0 million pretax).
Activity for 1997 and 1996 within the severance and facilities reserve
(pretax, in millions) and the number of positions eliminated related to
such actions were as follows:
(Millions) Reserve Positions
----------------------------------- ---------- ---------
Balance at December 31, 1995 $ -- --
Severance and facilities charges 47.3 702
Corporate Allocation 14.0 --
Actions taken (1) (13.4) (178)
---------- ---------
Balance at December 31, 1996 47.9 524
Actions taken (1) (27.1) (163)
---------- ---------
Balance at December 31, 1997 $20.8 361
========== =========
(1) Includes $15.9 million and $8.0 million in 1997 and 1996,
respectively, of severance-related actions and $7.9 million and $4.1
million in 1997 and 1996, respectively, of corporate
allocation-related actions.
The Company's severance actions are expected to be substantially completed
by September 30, 1998. The corporate allocation actions were substantially
completed in 1997.
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes
The Company is included in the consolidated federal income tax return, the
Illinois Unitary return and the Connecticut and the New York combined state
income tax returns of Aetna. Aetna allocates to each member an amount
approximating the tax it would have incurred were it not a member of the
consolidated group, and credits the member for the use of its tax saving
attributes used in the consolidated federal income tax return.
Income taxes for the years ended December 31, consist of:
1997 1996 1995
---- ---- ----
(millions)
Current taxes:
Income Taxes:
Federal income tax $64.5 $50.9 $82.9
State income tax 3.7 3.7 3.2
Net realized capital gains 45.6 25.3 28.5
----- ---- ----
113.8 79.9 114.6
----- ---- -----
Deferred taxes (benefits):
Income taxes:
Federal 8.4 (3.5) (14.4)
Net realized capital gains (losses) (32.8) (18.6) (12.9)
----- ----- -----
(24.4) (22.1) (27.3)
----- ----- -----
Total $89.4 $57.8 $87.3
===== ===== =====
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
1997 1996 1995
---- ---- ----
(millions)
Income before income taxes $294.7 $198.9 $263.2
Tax rate 35% 35% 35%
------- ------- -------
Application of the tax rate 103.1 69.6 92.1
------- ------- -------
Tax effect of:
State income tax, net of
federal benefit 2.4 2.4 2.1
Excludable dividends (15.9) (8.7) (9.3)
Other, net (0.2) (5.5) 2.4
------- ------- --------
Income taxes $89.4 $57.8 $87.3
======= ======= ========
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(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:
1997 1996
---- ----
(millions)
Deferred tax assets:
Insurance reserves $415.8 $344.6
Unrealized gains allocable to
experience rated contracts 150.1 100.8
Investment losses 6.6 7.5
Postretirement benefits other
than pensions 26.3 27.0
Deferred compensation 31.2 25.0
Pension (3.6) 7.6
Restructuring charge 9.5 17.6
Depreciation 3.9 2.6
Other 8.8 9.1
--------- --------
Total gross assets 648.6 541.8
Deferred tax liabilities:
Deferred policy acquisition costs 515.6 482.1
Market discount 5.1 6.8
Net unrealized capital gains 200.5 133.7
Other (0.6) (0.3)
--------- ---------
Total gross liabilities 720.6 622.3
--------- ---------
Net deferred tax liability $72.0 $80.5
========= =========
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. As of December 31, 1997 and 1996, 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, 1997. 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.
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
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.
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 amounts that are tax-deductible. As of
December 31, 1997, 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 $2.7 million, $4.3
million and $6.1 million for the years ended December 31, 1997, 1996 and
1995, respectively.
Employee Postretirement Benefits - In addition to providing pension
benefits, Aetna currently provides certain health care and life insurance
benefits 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. There is a cap on the
portion of the cost paid by the Company relating to medical and dental
benefits. 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 1997, 1996 and 1995 were $2.7
million, $1.8 million and $1.4 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. In 1997,
other changes in shareholder's equity includes an additional $0.8 million
reduction reflecting revisions to the allocation of these accrued
liabilities.
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.
F-26
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans (Continued)
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 1997, 1996 and 1995 were $0.6 million,
$0.7 million and $0.8 million, respectively.
Incentive Savings Plan - Substantially all employees are eligible to
participate in a savings plan under which designated contributions, which
may be invested in common stock of Aetna or certain other investments, are
matched, up to 5% of compensation, by Aetna. Pretax charges to operations
for the incentive savings plan were $4.4 million, $5.4 million and $4.9
million in 1997, 1996 and 1995, respectively.
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 1997, 1996
and 1995, were $2.9 million, $8.1 million and $6.3 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. In 1997, other changes in
shareholder's equity include an additional increase of $2.3 million
reflecting revisions to the allocation of the deferred tax benefit.
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 0.10% to
1.90% of their average daily net assets. The Company also receives fees
from Aetna managed mutual funds for serving as investment adviser. Under
the advisory agreements, these funds pay the Company a daily fee which, on
an annual basis, ranges, depending on the fund, from 0.25% to 0.85% of
their average daily net assets. The Company also receives fees (expressed
as a percentage of the average daily net assets) from some of its funds 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 mutual funds,
included in charges assessed against policyholders, amounted to $271.2
million, $186.8 million and $128.1 million in 1997, 1996 and 1995,
respectively. The Company may waive advisory fees at its discretion.
F-27
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
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 for affiliated mutual funds and adviser for 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 0.06% to 0.55% of the average daily net assets
under management. For the years ended December 31, 1997 and 1996, the
Company paid $45.5 million and $16.0 million in such fees.
The Company may, from time to time, make reimbursements to an Aetna managed
mutual fund for some or all of its operating expenses. Reimbursement
arrangements may be terminated at any time without notice.
Since 1981, all domestic individual non-participating life insurance of
Aetna and its subsidiaries has been issued by the Company. Effective
December 31, 1988, the Company entered into a reinsurance agreement with
Aetna Life Insurance Company ("Aetna Life") in which substantially all of
the non-participating individual life and annuity business written by Aetna
Life prior to 1981 was assumed by the Company. A $6.1 million and a $108.0
million commission, paid by the Company to Aetna Life in 1996 and 1988,
respectively, was capitalized as deferred policy acquisition costs. 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. 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. The
Company maintained insurance reserves of $574.5 million ($397.2 million
relating to the modified coinsurance agreement and $177.3 million relating
to the coinsurance agreement) and $628.3 million as of December 31, 1997
and 1996, respectively, relating to the business assumed. The fair value of
the loan relating to assets held by Aetna Life was $412.3 million and
$625.3 million as of December 31, 1997 and 1996, respectively, and is based
upon the fair value of the underlying assets. Premiums of $176.7 million,
$25.3 million and $28.0 million and current and future benefits of $183.9
million, $39.5 million and $43.0 million were assumed in 1997, 1996 and
1995, respectively.
Investment income of $37.5 million, $44.1 million and $46.5 million was
generated from the reinsurance loan to affiliate in 1997, 1996 and 1995,
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 $32.5 million and
$28.9 million were maintained for this contract as of December 31, 1997 and
1996, 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
F-28
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
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 $5.9 million, $5.2 million and $3.2 million for 1997, 1996 and 1995,
respectively.
Effective October 1, 1997, the Company entered into a reinsurance agreement
with Aetna Life to assume amounts in excess of $0.2 million for certain of
its participating life insurance, on a yearly renewable term basis. Premium
amounts related to this agreement were $0.7 million in 1997.
The Company received a capital contribution of $10.4 million in cash from
HOLDCO in 1996. The Company received no capital contributions in 1997 or
1995.
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively. 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 $37.0 million and $2.8 million
due from affiliates in 1997 and 1996, respectively. Other liabilities
include $1.2 million and $10.7 million due to affiliates for 1997 and 1996,
respectively.
As of December 31, 1997, Aetna transferred to the Company $2.5 million
based on its decision not to settle state tax liabilities for the years
1996 and 1997. This amount has been reported as an other increase in
retained earnings.
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.
F-29
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
11. Reinsurance (Continued)
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>
1997
----
Premiums:
Life Insurance $ 35.7 $15.1 $177.4 $198.0
Accident and Health Insurance 5.6 5.6 -- --
Annuities 67.9 -- 1.2 69.1
------- ------------- ----------- ---------
Total earned premiums $109.2 $20.7 $178.6 $267.1
======= ============= =========== =========
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
======= ============= =========== =========
</TABLE>
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, 1997, the
Company had commitments to purchase investments of $38.7 million. The fair
value of the investments at December 31, 1997 approximated $39.0 million.
F-30
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingent Liabilities (Continued)
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:
1997 1996 1995
--------- --------- ---------
(millions)
Revenue:
Financial Services $1,277.9 $1,195.1 $1,211.3
Individual Life Insurance 620.4 445.7 407.9
--------- --------- ---------
Total revenue $1,898.3 $1,640.8 $1,619.2
========= ========= =========
Income before income taxes: (2)
Financial Services $188.2 $129.9 $160.1
Individual Life Insurance 106.5 83.0 103.1
--------- --------- ---------
Total income before
income taxes $294.7 $212.9 $263.2
========= ========= =========
Net income: (2)
Financial Services $137.5 $94.3 $113.8
Individual Life Insurance 67.8 55.9 62.1
--------- --------- ---------
Net income $205.3 $150.2 $175.9
========= ========= =========
Assets under management: (3)
Financial Services (4) $37,609.3 $27,268.1 $22,534.4
Individual Life Insurance 3,096.1 2,830.5 2,590.9
--------- --------- ---------
Total assets under management 40,705.4 $30,098.6 $25,125.3
========= ========= =========
(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 $551.5 million,
$366.4 million and $797.1 million at December 31, 1997, 1996 and
1995, respectively.
(4) The December 31, 1997 balance includes the transfer of $4,078.5
million of assets under management that were previously reported
by an affiliate.
F-31
<PAGE>
Form No. SAI.75962-98 ALIAC Ed. May 1998
<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,
1997
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1997 and 1996
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
- Consolidated Balance Sheets as of December 31, 1997 and
1996
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1997, 1996 and 1995
- Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
- 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)
(3.2) Alternative Form of Wholesaling Agreement and Related Selling
Agreement(2)
(4.1) Variable Annuity Contract (G-TDA-HH(XC/M))(3)
(4.2) Variable Annuity Contract (G-TDA-HH(XC/S))(3)
(4.3) Variable Annuity Certificate GTCC-HH(XC/M)
(4.4) Variable Annuity Certificate GTCC-HH(XC/S)
(4.5) Endorsement EGET-IC(R) to Contracts G-TDA-HH(XC/M) and
G-TDA-HH(XC/S)(2)
(4.6) Endorsement (ENYSUTMF97) to Contract G-TDA-HH(XC/M)(4)
(4.7) Endorsement (ENYSUTMF97(S)) to Contract G-TDA-HH(XC/S)(4)
(4.8) Endorsement (ENYSTSDO97) to Contracts G-TDA-HH(XC/M) and
G-TDA-HH(SC/S)(4)
<PAGE>
(4.9) Endorsement EGAA(5/98) NY to Contracts G-TDA-HH(XC/M) and
G-TDA-HH(XC/S) and Certificates GTCC-HH(XC/M) and
GTCC-HH(XC/S)
(5) Variable Annuity Contract Application (300-TDA-HH(XC))(5)
(6.1) Certification of Incorporation of Aetna Life Insurance and
Annuity Company(6)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(7)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance
and Annuity Company(8)
(7) Not applicable
(8.1) Fund Participation Agreement among Calvert Responsibly
Invested Balanced Portfolio, Calvert Asset Management Company,
Inc. and Aetna Life Insurance and Annuity Company dated
December 1, 1997(9)
(8.2) Service Agreement between Calvert Asset Management Company,
Inc. and Aetna Life Insurance and Annuity Company dated
December 1, 1997(9)
(8.3) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelity
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996 and March 1, 1996(7)
(8.4) 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(10)
(8.5) Sixth Amendment dated 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(11)
(8.6) Form of Seventh Amendment dated as of May 1, 1998 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, May 1, 1997 and November 6, 1997(12)
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996(7)
(8.8) 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(10)
<PAGE>
(8.9) Sixth Amendment dated as of January 20, 1998 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, March 1, 1996 and May 1, 1997(13)
(8.10) Form of Seventh Amendment dated as of May 1, 1998 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, March 1, 1996, May 1, 1997 and January 20,
1998(12)
(8.11) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995(14)
(8.12) 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(10)
(8.13) Fund Participation Agreement among Janus Aspen Series and
Aetna Life Insurance and Annuity Company and Janus Capital
Corporation dated December 8, 1997(15)
(8.14) Service Agreement between Janus Capital Corporation and Aetna
Life Insurance and Annuity Company dated December 8, 1997(15)
(8.15) Fund Participation Agreement between Aetna Life Insurance
Company and Lexington Management Corporation regarding Natural
Resources Trust dated December 1, 1988 and amended February
11, 1991(2)
(8.16) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Lexington Emerging Markets Fund, Inc. and
Lexington Management Corporation (its investment advisor)
dated April 28, 1994(16)
(8.17) Fund Participation Agreement among MFS Variable Insurance
Trust, Aetna Life Insurance and Annuity Company and
Massachusetts Financial Services Company(17)
(8.18) First Amendment dated September 3, 1996 to Fund Participation
Agreement among MFS Variable Insurance Trust, Aetna Life
Insurance and Annuity Company and Massachusetts Financial
Services Company(18)
(8.19) Second Amendment dated March 14, 1997 to Fund Participation
Agreement among MFS Variable Insurance Trust, Aetna Life
Insurance and Annuity Company and Massachusetts Financial
Services Company(19)
(8.20) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Oppenheimer Variable Annuity Account Funds
and OppenheimerFunds, Inc.(19)
(8.21) Service Agreement between OppenheimerFunds, Inc. and Aetna
Life Insurance and Annuity Company(19)
(9) Opinion and Consent of Counsel
<PAGE>
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data
(14) Not applicable
(15.1) Powers of Attorney(12)
(15.2) Authorization for Signatures(2)
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. 6 to Registration
Statement on Form N-4 (File No. 33-75962), as filed electronically on April
17, 1996 (Accession No. 0000912057-96-006579).
4. Incorporated by reference to Post-Effective Amendment No. 11 to
Registration Statement on Form N-4 (File No. 33-75962), as filed
electronically on April 14, 1997 (Accession No. 0000950146-97-000590).
5. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-75962), as filed
electronically on August 20, 1997 (Accession No. 0000950146-97-001318)
6. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed electronically on April
15, 1996 (Accession No. 0000950146-96-000534).
7. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 11, 1997 (Accession No. 0000950146-97-000159).
8. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-91846), as filed
electronically on October 30, 1997 (Accession No. 0000950146-97-001589).
9. Incorporated by reference to Post-Effective Amendment No. 8 to
Registration Statement on Form N-4 (File No. 333-01107), as filed
electronically on February 19, 1998 (Accession No. 0000950146-98-000248).
10. 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).
11. 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).
<PAGE>
12. Incorporated by reference to Post-Effective Amendment No. 9 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on
April 7, 1998 (Accession No. 0000950146-98-000564).
13. Incorporated by Reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on
February 24, 1998 (Accession No. 0000950146-98-0000267).
14. 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).
15. 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).
16. Incorporated by reference to Post-Effective Amendment No. 22 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on April 22, 1996 (Accession No. 0000912057-96-006805).
17. Incorporated by reference Post-Effective Amendment No. 26 to Registration
Statement on Form N-4 (File No. 33-34370), as filed electronically on
February 21, 1997 (Accession No. 0000950146-97-000226).
18. Incorporated by reference to Post-Effective Amendment No. 24 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on September 16, 1996 (Accession No. 0000912057-96-020393).
19. Incorporated by reference to Post-Effective Amendment No. 27 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on April 16, 1997 (Accession No. 0000950146-97-000617).
<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
Shaun P. Mathews Director and Senior Vice President
Catherine H. Smith Director, Chief Financial Officer and Senior
Vice President
Deborah Koltenuk Vice President and Treasurer, Corporate
Controller
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and
Corporate 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.
9 to the Registration Statement on Form N-4 (File No. 333-01107), as filed
electronically on April 7, 1998 (Accession No. 0000950146-98-000564).
Item 27. Number of Contract Owners
As of February 28, 1998, there were 614,013 individuals holding interests
in variable annuity contracts funded through Variable Annuity Account C.
Item 28. Indemnification
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
<PAGE>
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 principal underwriter and investment adviser for Portfolio
Partners, Inc., Aetna Variable Encore Fund, Aetna Variable Fund, Aetna
Generation Portfolios, Inc., Aetna Income Shares, Aetna Balanced VP,
Inc. (formerly 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)). Effective May 1, 1998, Aetna will no longer be the investment
adviser for Aetna Variable Encore Fund, Aetna Variable Fund, Aetna
Generation Portfolios, Inc., Aetna Income Shares, Aetna Balanced VP,
Inc. (formerly Aetna Investment Advisers Fund, Inc.), Aetna GET Fund
and Aetna Variable Portfolios, Inc. 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).
(b) See Item 25 regarding the Depositor.
<PAGE>
(c) Compensation as of December 31, 1997:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Aetna Life Insurance $1,987,454 $124,603,039
and Annuity Company
</TABLE>
* Compensation shown in column 5 includes deductions for mortality and
expense risk guarantees and contract charges assessed to cover costs
incurred in the sales and administration of the contracts issued under
Variable Annuity Account C.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
and
Opportunity Plus Processing Office
18 Corporate Woods Blvd., Fourth Floor
Albany, NY 12211
Item 31. Management Services
Not applicable
Item 32. Undertakings
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
<PAGE>
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and complies with
the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) P. 78,904 at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, Variable Annuity Account C of Aetna Life Insurance and
Annuity Company, 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. 33-75962) and has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hartford, State of Connecticut, on the
17th day of April, 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. 14 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C> <C>
Thomas J. McInerney* Director and President )
- ------------------------------------ (principal executive officer) )
Thomas J. McInerney )
)
Shaun P. Mathews* Director ) April
- ------------------------------------ )
Shaun P. Mathews ) 17, 1998
)
Catherine H. Smith* Director and Chief Financial Officer )
- ------------------------------------ )
Catherine H. Smith )
)
Deborah Koltenuk* Vice President and Treasurer, Corporate Controller )
- ------------------------------------ )
Deborah Koltenuk )
</TABLE>
By: /s/ Julie E. Rockmore
-----------------------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and Annuity *
Company establishing Variable Annuity Account C
99-B.3.1 Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and Related Selling Agreement *
99-B.4.1 Variable Annuity Contract (G-TDA-HH(XC/M)) *
99-B.4.2 Variable Annuity Contract (G-TDA-HH(XC/S)) *
99-B.4.3 Variable Annuity Certificate GTCC-HH(XC/M) ----------------
99-B.4.4 Variable Annuity Certificate GTCC-HH(XC/S) ----------------
99-B.4.5 Endorsement EGET-IC(R) to Contracts G-TDA-HH (XC/M) and G-TDA-HH(XC/S) *
99-B.4.6 Endorsement (ENYSUTMF97) to Contract G-TDA-HH(XC/M) *
99-B.4.7 Endorsement (ENYSUTMF97(S)) to Contract *
G-TDA-HH(XC/S)
99-B.4.8 Endorsement (ENYSTSDO97) to Contracts G-TDA-HH(XC/M) and G-TDA-HH(SC/S) *
99-B.4.9 Endorsement EGAA(5/98) NY to Contracts G-TDA-HH(XC/M) and G-TDA-HH(XC/S)
and Certificates GTCC-HH(XC/M) and GTCC-HH(XC/S) ----------------
99-B.5 Variable Annuity Contract Application (300-TDA-HH(XC)) *
99-B.6.1 Certification of Incorporation of Aetna Life Insurance and Annuity Company *
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
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 among Calvert Responsibly Invested Balanced *
Portfolio, Calvert Asset Management Company, Inc. and Aetna Life Insurance
and Annuity Company dated December 1, 1997
99-B.8.2 Service Agreement between Calvert Asset Management Company, Inc. and Aetna *
Life Insurance and Annuity Company dated December 1, 1997
99-B.8.3 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.8.4 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.8.5 Sixth Amendment dated 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
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.8.6 Form of Seventh Amendment dated as of May 1, 1998 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, May 1, 1997 and November 6, 1997
99-B.8.7 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.8.8 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.8.9 Sixth Amendment dated as of January 20, 1998 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, March 1, 1996 and May 1, 1997
99-B.8.10 Form of Seventh Amendment dated as of May 1, 1998 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, March 1, 1996, May 1, 1997 and January 20, 1998
99-B.8.11 Service Agreement between Aetna Life Insurance and Annuity Company and *
Fidelity Investments Institutional Operations Company dated as of November
1, 1995
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.8.12 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.8.13 Fund Participation Agreement among Janus Aspen Series and Aetna Life *
Insurance and Annuity Company and Janus Capital Corporation dated December
8, 1997
99-B.8.14 Service Agreement between Janus Capital Corporation and Aetna Life *
Insurance and Annuity Company dated December 8, 1997
99-B.8.15 Fund Participation Agreement between Aetna Life Insurance Company and *
Lexington Management Corporation regarding Natural Resources Trust dated
December 1, 1988 and amended February 11, 1991
99-B.8.16 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company, Lexington Emerging Markets Fund, Inc. and Lexington Management
Corporation (its investment advisor) dated April 28, 1994
99-B.8.17 Fund Participation Agreement among MFS Variable Insurance Trust, Aetna *
Life Insurance and Annuity Company and Massachusetts Financial Services
Company
99-B.8.18 First Amendment dated September 3, 1996 to Fund Participation Agreement *
among MFS Variable Insurance Trust, Aetna Life Insurance and Annuity
Company and Massachusetts Financial Services Company
99-B.8.19 Second Amendment dated March 14, 1997 to Fund Participation Agreement *
among MFS Variable Insurance Trust, Aetna Life Insurance and Annuity
Company and Massachusetts Financial Services Company
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.8.20 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company and Oppenheimer Variable Annuity Account Funds and Oppenheimer
Funds, Inc.
99-B.8.21 Service Agreement between OppenheimerFunds, Inc. and Aetna Life Insurance *
and Annuity Company
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 *
</TABLE>
*Incorporated by reference
Aetna Life Insurance and Annuity Company
Customer Relations Department, PFSD OPPORTUNITY PLUS
Home Office: 151 FARMINGTON AVE. PROCESSING OFFICE
HARTFORD, CONNECTICUT 06156 P.O. BOX 12894
(203) 273-2131 ALBANY, NEW YORK
12212-2894
Herein called Aetna
Certificate of Group Annuity Coverage
To the Employee:
Aetna certifies that coverage is in force for you under the stated Group Annuity
Contract and Certificate numbers. All data shown here is taken from Aetna
records and is based upon information furnished by you.
This Certificate is a summary of the Group Annuity Contract provisions. It
replaces any and all prior certificates, riders or amendments issued to you
under the stated Contract and Certificate numbers. This Certificate is for
information only and is not a part of the Contract.
THE VARIABLE FEATURES OF THE GROUP
CONTRACT ARE DESCRIBED IN PARTS
III AND IV.
RIGHT TO CANCEL
The Contract Holder may cancel this Certificate within 10 days of receiving it
by returning this Certificate along with a written notice to Aetna at the
Processing Office at the above address or to the agent from whom it was
purchased. Within 7 days after it receives the notice of cancellation and this
Certificate at its Processing Office, Aetna will return the entire consideration
paid plus any increase or minus any decrease in the cash value of any funds
allocated to the Separate Account.
/s/ Susan E. Schechter /s/ Dan Kearney
Secretary President
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THIS CERTIFICATE CONTAINS A MARKET-VALUE ADJUSTMENT
FORMULA. APPLICATION OF A MARKET-VALUE ADJUSTMENT MAY RESULT IN EITHER AN
INCREASE OR DECREASE IN THE CASH VALUE. THE MARKET-VALUE ADJUSTMENT FORMULA DOES
NOT APPLY TO A GUARANTEED TERM AT THE TERM OF ITS MATURITY.
GTCC-HH (XC/M)
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SPECIFICATIONS
Guaranteed Interest Rate - There are guaranteed interest rates for Purchase
Payment(s) held in the General Account. (See 1.03.)
Surrender Fee - There will be a charge deducted for early surrender. (See 3.14.)
Deductions from the Separate
Account - There will be deductions
for mortality and expense risks
and administrative fees. (See
3.06.)
Deduction from Purchase Payment(s) - Purchase Payment(s) are subject to a
deduction for premium taxes, if any. (See 3.01.)
If Variable Annuity Payments are not to decrease, Aetna must earn a gross return
on the assets of the Separate Account of:
[bullet] 5.0% on an annual basis set at the time Annuity payments commence
if an Assumed Annual Net Return Rate of 3.5% is chosen; or
[bullet] 6.50% on an annual basis set at the time Annuity payments
commence if an Assumed Annual Net Return Rate of 5% is chosen.
NOTHING IN THE GROUP ANNUITY CONTRACT INVALIDATES OR IMPAIRS ANY RIGHT
GRANTED TO THE CERTIFICATE HOLDER.
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CONTRACT HOLDER GROUP ANNUITY CONTRACT NO.
- ---------------------------------- ---------------------------------------------
YOUR NAME CERTIFICATE NO.
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TABLE OF CONTENTS
I. GENERAL DEFINITIONS
Page
1.01 Annuitant..........................................................5
1.02 Annuity............................................................5
1.03 Fixed Account......................................................5
1.04 Fixed Annuity......................................................5
1.05 Fund(s)............................................................5
1.06 General Account....................................................5
1.07 Guaranteed Accumulation Account....................................5
1.08 Plan...............................................................5
1.09 Purchase Payments..................................................5
1.10 REA Plan...........................................................5
1.11 Separate Account...................................................5
1.12 Valuation Period...................................................5
1.13 Variable Annuity...................................................6
II. GENERAL PROVISIONS
2.01 Change of Contract.................................................7
2.02 Non-Participating Contract.........................................7
2.03 Payments...........................................................7
2.04 Control of Contract................................................7
2.05 Designation of Beneficiary.........................................7
2.06 Misstatements and Adjustments......................................7
2.07 Incontestability...................................................7
2.08 Grace Period.......................................................7
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
3.01 Net Purchase Payment(s)............................................8
3.02 Individual Account.................................................8
3.03 Guaranteed Accumulation Account (GA Account).......................8
3.04 Maintenance Fee...................................................10
3.05 Fund(s) Record Units Value - Separate Account.....................10
3.06 Fund(s) Record Unit Value - Separate Account......................10
3.07 Current Value.....................................................10
3.08. Loan Value........................................................11
3.09 Transfer of Current Value from the Funds or GA Account............12
3.10 Transfer of Current Value from the Fixed Account..................13
3.11 Notice to You.....................................................13
3.11 Sum Payable at Death (Before Annuity Payments Start)..............13
3.12 Annuity Payments to Beneficiary...................................14
3.14 Surrender Value...................................................14
3.15 Payment of Surrender Value........................................14
3.16 Reinstatement.....................................................14
3.17 Payment of Current Value..........................................14
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IV. ANNUITY PROVISIONS
Page
4.01 Choices to be Made................................................15
4.02 Terms of Annuity Options..........................................15
4.03 Variable Annuity Payments.........................................16
4.04 Annuity Options...................................................16
V. FEE SCHEDULE
5.01 Maintenance Fee...................................................17
5.02 Surrender Fee.....................................................17
5.03 Table of Values - Fixed Account...................................17
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I. GENERAL DEFINITIONS
1.01. Annuitant - A person on whose life an Annuity has been effected under the
Contract.
1.02. Annuity - Payment of an income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.03. Fixed Account - An accumulation option with a guaranteed minimum interest
rate of 4%. Aetna may credit a higher rate which is not guaranteed.
1.04. Fixed Annuity - An Annuity with payments which do not vary in amount.
1.05. Fund(s) - The open-end registered management investment companies (mutual
funds) made available by Aetna under the Contract.
These funds currently are:
[bullet] Aetna Variable Fund, a conservative common stock fund;
[bullet] Aetna Income Shares, a bond fund;
[bullet] Aetna Variable Encore fund, a money market fund;
[bullet] Aetna Guaranteed Equity Trust, a dynamic hedged portfolio fund;
[bullet] Franklin Government Securities Trust, a government bond fund;
[bullet] Advisers Management Trust, a growth common stock fund;
[bullet] Lexington Gold Trust, a gold fund;
[bullet] Calvert Socially Responsible Series, a socially responsible
common stock fund; or
[bullet] T. Rowe Price International Equity Fund, an international stock
fund.
Additional information regarding these Fund is available in each
Fund prospectus.
1.06. General Account- The Account holding the assets of Aetna, other than those
assets held in the Separate Account.
1.07 Guaranteed Accumulation Account (GA Account) - An accumulation option
which guarantees a stipulated rate of interest for a specified period of
time. Amounts withdrawn before the end of the Guaranteed Term may be
subject to a Market Value Adjustment.
1.08 Participant - A person who participates in the Opportunity Plus program.
1.09. Plan - The Opportunity Plus program named on the Specifications. Aetna is
not bound by the terms of the Plan.
1.10. Purchase Payments - Payments made to Aetna.
1.11. Separate Account - Variable Annuity Account C is a separate account set up
by Aetna under the Connecticut Insurance Laws which purchases shares of
the Fund(s).
1.12. Valuation Period (Period) - The period of time from the end of one
business day on the New York Stock Exchange to the end of the next
business day.
1.13. Variable Annuity - Any Annuity with payments which vary with the net
investment results of Separate Account C.
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II. GENERAL PROVISIONS
2.01. Change of Contract: Only an authorized officer of Aetna may change the
terms of the Group Annuity Contract. Aetna will notify the Contract Holder
in writing at least 30 days before the effective date of any change. Any
change will not affect the amount or terms of any Annuity which begins
before the change.
2.02. Nonparticipating Contract: You, your beneficiary or the Contract Holder
will not have a right to share in the earnings of Aetna.
2.03. Payments: Aetna will make Annuity payments as and when due. Aetna will
make other payments within 7 days of receipt at its Home Office of a
written claim for payment which is in good order, except as provided in
3.12.
2.04. Control of Contract: This is a Contract between the Contract Holder and
Aetna only to satisfy the "purchase" requirements of Section 403(b)(1) of
the Internal Revenue Code of 1954, as amended. The Contract Holder has no
right, title, or interest in the amounts held under the Contract either by
reason of remitting Purchase Payments or applying for this Contract.
You own all amounts held in your Individual Account. You may make any
choices allowed by the Contract for your Individual Account. Choices made
under the Contract must be in writing. Until receipt of such choices in
the Home Office of Aetna, Aetna may rely on any previous choices made. The
Contract, this Certificate, and your Individual Account shall not be
subject to the claims of any creditors. The Contract, this Certificate and
your Individual Account are nonassignable except to Aetna in the event of
a loan, and nontransferable. In the event a loan against an Individual
Account is requested, however, the Current Value of your Individual
Account necessary to cover the loan amount plus interest must be assigned
to Aetna. The Contract Holder will inform you as to when and where the
Contract may be examined.
2.05. Designation of Beneficiary: Each Participant shall name a beneficiary. The
beneficiary may be changed at any time.
2.06. Misstatements and Adjustments: If Aetna finds the age of any payee to be
misstated, the correct facts will be used to adjust payments.
2.07. Incontestability: Aetna cannot cancel this Contract because of any error
of fact on the application.
2.08. Grace Period: This Contract will remain in effect even if Purchase
Payments are not continued.
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III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
3.01. Net Purchase Payment(s): The actual Purchase Payment less any state
premium tax.
The Net Purchase Payment(s) will be credited among:
(a) The Fixed Account;
(b) The Guaranteed Accumulation Account;
(c) The Fund(s) in which the Separate Account invests.
Aetna must be told by you the percentage of the Net Purchase Payment(s) to
be applied to each investment above.
During any calendar year, you may tell Aetna to change the investment mix
four times. If additional changes are allowed, each may be subject to a
fee of up to $10.
3.02. Individual Account: Aetna will maintain an Individual Account for you.
3.03 Guaranteed Accumulation Account (GA Account): An accumulation option which
guarantees a stipulated rate of interest for a specified period of time
(See (c) below). Amounts withdrawn before the end of the Guaranteed Term
may be subject to a Market Value Adjustment (See (f) below).
(a) Guaranteed Deposit Period (Deposit Period) - The period of time,
usually a calendar month during which Net Purchase Payment(s) are
accepted in the GA Account for a Guaranteed Term.
(b) Guaranteed Term (Term) - A period of time, including the Deposit
Period, for which interest rates are guaranteed on the Net Purchase
Payment(s) made to the GA Account. The Term may vary for each Purchase
Payment and will be from approximately 1 to 5 years from the date the
Deposit Period ends.
(c) Guaranteed GA Account Interest Rates (Guaranteed Rates) - An interest
rate will be declared at the start of a Deposit Period and guaranteed
by Aetna for a Term; this interest rate will never be less than 4%.
Aetna will add interest daily. Aetna may declare higher interim
Guaranteed Rates for:
(1) The Deposit Period and 12 months following the close of a Deposit
Period; and
(2) Any subsequent 12-month period until the end of the Term. The last
period of the Term may be from 10-12 months.
(d) Withdrawals - Amounts withdrawn from the GA Account before the end of
the Term may be subject to a Market Value Adjustment (See (f) below).
Withdrawals will be made from the Term with the oldest Deposit Period.
During the Deposit Period and the 90 days following the close of the
Deposit Period, any amounts applied to the GA Account during that
Deposit Period may not be withdrawn unless due to:
(1) A surrender; or
(2) To pay a premium for an Annuity Option.
(e) Reinvestment - The Participant will receive a thirty day notice that
Term(s) are about to mature. This thirty day notice will be mailed at
least 15 days but not more than 45 days prior to the
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beginning of each thirty day period. At least 18 days before the end
of a Term, the Participant will be mailed a notice of the next
available Guaranteed Rates and Term. Amounts may be withdrawn from the
ending Term on its final day without a Market Value Adjustment. Aetna
must receive written notice of such election at the Opportunity Plus
Processing Office at least three (3) business days before the end of
the Term. Otherwise, amounts in the ending Term will be subject to the
new Term and will be subject to the new Guaranteed Rates.
(f) Market Value Adjustment - There will be a Market Value Adjustment for
a withdrawal from the GA Account before the end of a Term when due to:
(1) A transfer;
(2) A surrender; or
(3) A payment of an Annuity premium for Annuity Option 2.
The amount of the withdrawal will be adjusted to a market value amount
as described below. The market value amount will be equal to the amount
withdrawn multiplied by the following ratio:
x
---
365
(1+i)
------------
x
---
365
(1+j)
------------
Where:
[bullet] i is the Deposit Period Yield;
[bullet] j is the Current Yield; and
[bullet] x is the number of days from the Wednesday of the week
of withdrawal to the last day of the Term.
The Deposit Period Yield will be determined as follows:
[bullet] At the close of the last business day of each week of the
Deposit Period, a yield will be computed as the average of the
yields on that day of U.S. Treasury Notes which mature in the
last quarter of the Term.
[bullet] The Deposit Period Yield is then the average of those yields
for the Deposit Period. If withdrawal is made prior to the
close of the Deposit Period, it is the average of those yields
on each week preceding withdrawal.
The Current Yield is the average of the yields on the last business day
of the week preceding withdrawal on the same U.S. Treasury Notes
included in the Deposit Period Yield.
In the event that no U.S. Treasury Notes exist which mature in the last
quarter of the Term, Aetna reserves the right to use the next available
U.S. Treasury Notes that mature in a following quarter.
There will be no Market Value Adjustment for withdrawals made to:
[bullet] Satisfy the terms of the Sum Payable at Death provision; or
[bullet] Pay a premium for Annuity Options 3 or 4.
Aetna shall make any change that affects the Market Value Adjustment
with at least 30 days' advance written notice to the Contract Holder.
Any such change shall become effective for any new Term and for any
present or future Participant.
3.04. Maintenance Fee The Maintenance Fee (see 5.01) will be deducted from the
Current Value on each anniversary of your
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Individual Account Effective Date and upon surrender of your entire
Individual Account.
3.05. Fund(s) Record Units - Separate Account: The portion of the Net Purchase
Payment(s) applied to the Separate Account will determine the number of
Fund(s) Record Units. This number is equal to the Net Purchase Payment
applied to the Fund divided by the Fund(s) Record Unit Value (see 3.05)
for the Valuation Period in which the Purchase Payment is received in good
order.
3.06. Fund(s) Record Unit Value - Separate Account: A Fund(s) Record Unit Value
is computed by multiplying the Net Return Factor for the current Valuation
Period by the Fund(s) Record Unit Value for the previous Period. The
dollar value of a Fund(s) Record Units, Separate Account assets, and
Variable Annuity payments may go up or down due to investment gain or
loss.
The calculation to determine the Net Return Factor includes deductions
totaling 1.25% on an actual basis for Annuity mortality and expense risks
and profit and a daily administrative charge which will not exceed .25% on
an annual basis. The administrative charge may be changed annually except
for amounts which have been used to purchase an Annuity.
3.07. Current Value: The Current Value is the value of your Individual Account
at the end of a Valuation Period and is equal to:
(a) Any amounts in the Fixed Account, including Fixed Account interest
added by Aetna; plus
(b) Any amounts in the GA Account, including GA Account interest added by
Aetna; plus
(c) The sum of any Separate Account Record Unit value(s); less
(d) Any Maintenance Fee(s) due.
Current Value does not include amounts used to purchase an Annuity.
3.08. Loan Value: During the accumulation period, a Participant may request a
loan from his or her Individual Account by submitting a loan request form
to the Opportunity Plus Processing Office. A loan may not be requested
within 12 months from the date of any prior loan. The following conditions
must also be met:
(a) The minimum Individual Account Current Value must be $5,000. The loan
amount must be at least $3,500. The loan amount may not exceed the
lesser of:
(1) 50% of the vested Individual Account Current Value reduced by the
outstanding loan balance on the date on which the loan is made; or
(2) $50,000 reduced by the highest outstanding balance of loans within
the preceding 12 months ending on the day before the loan is made.
However, if the Individual Account Current Value is between $5,000
and $20,000, the loan amount is the lesser of:
(3) 75% of the vested Individual Account Current Value reduced by the
outstanding loan balance on the date on which the loan is made, or
(4) $10,000 reduced by the outstanding loan balance on the date on
which the loan is made.
Loans can be made from those Individual Account values held in the
Fund(s) and the
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Fixed Loans may not be made against amounts held in the GA Account
although such values are included in the determination of Individual
Account Current Value. If a Participant intends to request a loan
against any portion of the GA Account, that portion must be
transferred to any of the other Fund(s) or to the Fixed Account.
Amounts transferred from the GA Account will be subject to the
Withdrawals and Market Value Adjustment provisions. Aetna reserves the
right to restrict or limit the amount that may be borrowed from any
investment option at any time. However, the full value of all
investment options is included in the determination of Individual
Account value.
Loans may not be made against amounts held in the GA Account although
such values are included in the determination of Individual Account
Current Value. If a Participant intends to request a loan against any
portion of the GA Account, that portion must be transferred to any of
the other Fund(s) or to the Fixed Account. Amounts transferred from the
GA Account will be subject to the Withdrawals and Market Value
Adjustment provisions.
Aetna reserves the right to restrict or limit the amount that may be
borrowed from any investment option at any time. However, the full
value of all investment options is included in the determination of
Individual Account value.
When a loan is made, the number of accumulation units equal to the loan
amount will be withdrawn from the Individual Account. Accumulation
units taken from the Individual Account to provide a loan do not
participate in the investment experience of the related investment
options. Unless instructed otherwise, the amount withdrawn will be
allocated on the pro rata basis among the Fixed Account and the
Fund(s).
(b) Loan interest payable to Aetna will accrue on a daily basis at the
rate of 1% annually unless a higher rate is required by law.
(c) Principal and interest on loans will be amortized over a 5-year term.
However, principal and interest on loans taken for the acquisition of
the Participant's principal residence will be amortized over a period
of 1 to 20 whole years, as elected by the Participant. The projected
final repayment must be no later than the end of the calendar year in
which the Participant attains age 70.
(d) Repayment of principal and interest is required at 3-month intervals.
A bill in the amount of the quarterly repayment due will be mailed to
the Participant in advance of the payment due date. The repayment due
date will coincide with the loan effective date. The loan effective
date will be the date the Opportunity Plus Processing office in
Albany, New York receives the loan request form in good order. Payment
will be due within 30 days of the repayment due date.
(e) Unless otherwise specified, the repayments of principal will be
allocated among the current investment options including the current
GA Account Deposit Period.
The Participant may specify the allocation of the principal repayments
among the same contract investment options and in the same proportion
as when the loan was initially made.
(f) If a partial surrender is taken from a Participant's Individual
Account due to non-payment of a billed quarterly installment, the date
of the surrender will be the first business day following
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the last day of the month in which the repayment was due.
(g) If a repayment is received in excess of a billed amount, the excess
will be applied towards the principal portion of the outstanding loan.
Payments received which are less than the billed amount will be
returned to the Participant.
(h) Prepayment of the entire loan will be allowed. At the time of
prepayment, Aetna will bill the Participant for any accrued interest.
Aetna will consider the loan paid when this accrued interest is paid.
(i) If an Individual Account is surrendered with an outstanding loan
balance, accrued interest and any applicable deferred sales charge
will be deducted from the surrender amount. If an Individual Account
with an outstanding loan balance is surrendered due to the
Participant's death or the election of an Annuity Option, accrued
interest will be deducted from the surrender amount.
(j) If the Participant's Individual Account Reserve falls below an amount
equal to 25% of the total loans outstanding, repayment of all
outstanding loans may be required.
The amount payable by Aetna upon the total surrender of an Individual
Account with a loan(s) outstanding shall be reduced by accrued
interest and if applicable, a deferred sales charge on the loan
amount.
3.09. Transfer of Current Value from the Funds or GA Account: Before an Annuity
Option is elected, all or any portion of the Current Value may be
transferred from any Fund to any other Fund, to the Fixed Account, or to
the GA Account's current Deposit Period. Any portion of the Current Value
in the GA Account may be transferred to any Fund or to the Fixed Account.
Transfers from the GA Account are subject to the Withdrawal and Market
Value Adjustment provisions.
Four transfers of Current Value (excluding transfers from the GA Account
at the end of a Guaranteed Term) can be made during a calendar year
period. If additional transfers are allowed, each may be subject to a fee
of up to $10.
3.10. Transfer of Current Value from the Fixed Account: 10% of the Current Value
held in the Fixed Account may be transferred to any Fund(s). Such transfer
will be:
(a) Without charge;
(b) Allowed once per calendar year; and
(c) Not allowed under an Annuity Option.
Aetna may, on a temporary basis, allow any larger percent to be
transferred. The Current Value of the Fixed Account, as used above, is the
value when the request is received at the Home Office of Aetna.
3.11. Notice to You: Aetna will notify you each year of:
(a) The value of any amounts held in:
(1) The Fixed Account;
(2) The GA Account; and
(3) The Fund(s) for the Separate Account; and
(b) The number of any Fund(s) Record Units;
(c) The Fund(s) Record Unit Value(s); and
(d) The Surrender Value of these amounts.
Such number or values will be as of a date no more than 60 days before the
date of the notice.
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The sum paid will be the Current Value on the date the notice is received
at Aetna's Home Office. The amount paid from the Fixed Account will not be
less than the Net Purchase Payment(s) allocated to the Fixed Account under
your Individual Account (less any prior transfers (see 3.08.) surrenders,
Maintenance Fees, or amounts used to purchase Annuity Options). Your
beneficiary, if a spouse, may choose to apply all or any portion of the
payment to an Annuity Option. If the beneficiary is not a spouse, all of
the payment must either be applied only to Annuity Option 1 or 2 within
one year of your death, or be paid to the beneficiary within 5 years of
your death (see Part IV). If no beneficiary exists, the payment will be
made to your estate.
3.12. Sum Payable at Death (Before Annuity Payments Start): The Current Value
payable under the terms of this section will be reduced by the amount of
the accrued interest on any outstanding loan. Aetna will pay the Current
Value to the beneficiary if:
(1) The Participant dies before Annuity payments start; and
(2) The notice of death is received in good order by Aetna.
The sum paid will be the Current Value on the date the notice is received
at the Opportunity Plus Processing Office.
The amount paid from the Fixed Account will not be less than the Net
Purchase Payment(s) allocated to the Fixed Account under the Participant's
Individual Account (less any prior transfers (see 3.11), surrenders,
Maintenance Fees, or amounts used to purchase Annuity Options). The
beneficiary, if a spouse, may choose to apply all or any portion of the
payment to an Annuity Option. If the beneficiary is not a spouse, all of
the payment must either be applied only to Annuity Option 1 or 2 within
one year of the Participant's death or be paid to the beneficiary within 5
years of the death of the Participant (see Part IV). If no beneficiary
exists, the payment will be made to the estate of the Participant.
3.13. Annuity Payments to Beneficiary: In no event may any payments to the
beneficiary under an Annuity Option extend beyond:
(a) The life of the beneficiary; or
(b) Any certain period greater than the beneficiary's life expectancy.
3.14. Surrender Value: After deduction of the Maintenance Fee (if any), the
amount paid by Aetna upon the surrender of any portion of your Individual
Account shall be reduced by a Surrender Fee.
The Surrender Fee on a total surrender of an Individual Account will not
exceed 9.0% of the actual Purchase Payments made to that Account, and will
not be greater than that allowable under Section 4223(e)(4) of the New
York State Insurance Law.
For REA Plan (See 1.09), Aetna may defer payment of the Surrender Value
until appropriate waiver and spousal consent forms are received.
The amount payable by Aetna upon the total surrender of an Individual
Account with a loan(s) outstanding shall be reduced by accrued interest
and if applicable, a deferred sales charge on the loan amount.
3.15. Payment of Surrender Value: Under certain emergency conditions, Aetna may
defer payment:
(a) For a period of up to 6 months (unless not allowed by state law); and
(b) As provided by federal law.
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3.16. Reinstatement: Certain surrender amounts may be reinstated to the Contract
according to the terms stated in the Contract.
3.17. Payment of Current Value: Aetna may pay in a lump sum any Current Value if
Purchase Payments have not been received for three full years and the
Current Value is less than $2,000. Such Current Value paid may not be
reinstated.
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IV. ANNUITY PROVISIONS
4.01. Choices to be Made: Aetna will pay the Current Value (minus any premium
tax) as a premium for an Annuity under Option 4 with no guaranteed period.
You may elect any other Annuity Option by telling Aetna to pay all or any
portion of the Current Value (minus any premium tax) as a premium for an
Annuity under Option 2, 3 or 4 (see 4.04). The first Annuity payment must
generally be made no later than the first day of the month following your
75th birthday. Aetna may be told to make the first Annuity payment during
any prior month.
For a REA Plan (See 1.09.), any election of an Annuity Option other than
Option 4 must be accompanied by the appropriate waiver and spousal consent
forms.
When an Option is chosen, Aetna must also be told if payments are to be
made other than monthly and to pay:
(a) A Fixed Annuity using the General Account; or
(b) A Variable Annuity using any of the Fund(s) made available by Aetna
for Annuity purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, Aetna will add interest daily at an annual
rate no less than 3.5%. Aetna may add interest daily at any higher rate.
If a Variable Annuity is chosen, an Assumed Annual Net Return Rate of 5%
may be chosen. If not chosen, Aetna will use an Assumed Annual Net Return
Rate of 3.5%.
4.02. Terms of Annuity Options: Specific terms governing the Annuity Options and
a table of Annuity rates for each Annuity Option can be found in the
Contract. The annuity rates do not differ by sex.
If a Fixed Annuity under Option 2, 3 or 4 is chosen and a larger payment
would result from applying the surrender value to a single premium
immediate annuity currently offered by Aetna to the same class of
Annuitants, Aetna will make the larger payment.
4.03. Variable Annuity Payments: The amount of the first Variable Annuity
Payment will be divided by the appropriate Fund(s) Annuity Unit Value on
the tenth Valuation Period before the date the first payment is due to
determine the number of each Fund Annuity Units. The number of each Fund
Annuity Units remains fixed. Each future payment is equal to the sum of
the products of each Fund Annuity Unit Value multiplied by the appropriate
number of units. The Fund Annuity Unit Value on the tenth Valuation Period
prior to the due date of the payment is used.
Payments shall not be changed due to changes in the mortality or expense
results or administrative charges.
4.04. Annuity Options:
Option 1 - Payment of Interest on Sum Left with Aetna - This Option may be
used only by your beneficiary if you die before Aetna has started paying
an Annuity. A portion or all of the sum paid upon your death may be held
under this Option and will be held in the General Account of Aetna at
interest (see 4.01). Your beneficiary may later tell Aetna to:
(a) Pay a portion or all of the sum held by Aetna; or
(b) Apply a portion or all of the sum held by Aetna to any Annuity Option
below.
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Option 2 - Payments for a Stated Period of Time - An Annuity will be paid
for the number of years chosen. The number of years must be at least 3 and
not more than 30. This Option can only be elected on a fixed basis.
Option 3 - Life Income - An Annuity will be paid for the life of the
Annuitant. If also chosen, Aetna will guarantee payments for 60, 120, 180,
or 240 months.
Option 4 - Life Income for Two Payees - An Annuity will be paid during the
lives of the Annuitant and a second Annuitant. At the death of either,
payments will continue to the survivor. When this Option is chosen, a
choice must be made of:
(a) 100% of the payment to continue to the survivor;
(b) 66-2/3% of the payment to continue to the survivor;
(c) 50% of the payment to continue to the survivor; or
(d) Payments for a minimum of 120 months with 100% of the payment to
continue to the survivor.
Other Options - Aetna may make other options available as allowed by the
laws of the state in which the Contract is delivered.
15
<PAGE>
V. FEE SCHEDULE
TAX DEFERRED ANNUITY PLAN
5.01. Maintenance Fee: The Maintenance Fee will be $15 per Individual Account.
5.02. Surrender Fee:
For each surrender from your Individual Account, the Surrender Fee will
vary according to the number of Purchase Payment Cycles completed for your
Individual Account being surrendered. The number and amount of Purchase
Payments to be made in a year is chosen by you. A Purchase Payment Cycle
is completed when this number and amount of Purchase Payments have been
made. The number of Purchase Payment Cycles completed may not be greater
than the number of whole years since your Individual Account was
established. For each surrender, the Fee will be as follows:
Number of Purchase Payment Cycles Completed Surrender Fee
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or 10 2%
More than 10 0%
No Surrender Fee is deducted from any portion of the Individual Account
which is paid:
(a) At the death of a Participant before Annuity payments start;
(b) As a premium for an Annuity for a Participant under this Contract;
(c) After a Participant has reached age 59-1/2 and 9 or more Purchase
Payment Cycles have been completed for the Individual Account being
surrendered;
(d) After the tenth anniversary of the Effective Date of the Individual
Account;
(e) Due to disability as defined by the Internal Revenue Service for Tax
Deferred Annuities;
(f) As a result of financial hardship as defined by the Internal Revenue
Service for Tax Deferred Annuities; or
(g) At retirement, when a Participant becomes eligible to begin receiving
benefits under the New York State Teachers' or Employees' Retirement
Systems.
5.03. Table of Values - Fixed Account:
The values in the following table only apply to annual Purchase Payments
of $1,000.
The Paid-Up Annuity Benefit assumes the Current Value has accumulated in
the Fixed Account at the Guaranteed Interest Rate until age 65 and is
applied to Option 3 with a stated period of 120 months.
16
<PAGE>
The Surrender Value assumes the Purchase Payments are credited to the
Fixed Account at the Guaranteed Interest Rate at the beginning of each
Contract year. The Maintenance Fee and applicable Surrender Fee are
deducted.
The values would be different for other Purchase Payment amounts if
Purchase Payments are not made when due, if partial surrenders are made,
if Aetna adds interest at a rate greater than the Guaranteed Interest
Rate-Fixed Account, or if the Annuity payment rates change.
17
<PAGE>
TABLE OF VALUES
FOR A $1,000 ANNUAL PURCHASE PAYMENT
APPLIED AT THE GUARANTEED INTEREST RATE-FIXED ACCOUNT
AGE OF ISSUE: 35
End of Paid-Up Annuity
Contract Benefit at Age 65 Surrender
Year (Monthly Income) Value
1 $18.32 $ 974
2 35.93 1,986
3 52.86 3,040
4 69.15 4,135
5 84.80 5,330
6 99.86 6,527
7 114.33 7,853
8 128.25 9,161
9 141.64 10,630
10 154.51 12,060
11 166.88 13,547
12 178.78 15,093
13 190.22 16,702
14 201.22 18,374
15 211.80 20,114
16 221.97 21,923
17 231.75 23,804
18 241.15 25,761
19 250.19 28,363
20 258.89 30,523
25 297.59 42,687
30 329.40 57,487
18
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Customer Relations Department, PFSD OPPORTUNITY PLUS
Home Office: 151 FARMINGTON AVE. PROCESSING OFFICE
HARTFORD, CONNECTICUT 06156 P.O. BOX 12894
(203) 273-2131 ALBANY, NEW YORK
12212-2894
CERTIFICATE OF GROUP ANNUITY COVERAGE
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT,
WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT,
ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
GTCC-HH (XC/M)
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Customer Relations Department, PFSD OPPORTUNITY PLUS
Home Office: 151 FARMINGTON AVE. PROCESSING OFFICE
HARTFORD, CONNECTICUT 06156 P.O. BOX 12894
(203) 273-2131 ALBANY, NEW YORK
12212-2894
Herein called Aetna.
Certificate of Group Annuity Coverage
To the Employee:
This Certificate describes the Group Annuity Contract issued to the Contract
Holder to meet the liabilities of its Retirement Plan. All data shown here is
taken from Aetna records and is based upon information furnished by the Contract
Holder.
This Certificate is a summary of the Group Annuity Contract provisions. It
replaces any and all prior certificates, riders, or amendments issued to you
under the stated Contract and Certificate numbers. This Certificate is for
information only and is not a part of the Contract.
THE VARIABLE FEATURES OF THE GROUP CONTRACT ARE DESCRIBED IN PARTS III AND IV.
RIGHT TO CANCEL
The Contract Holder may cancel this Certificate within 10 days of receiving it
by returning this Certificate along with a written notice to Aetna at the
Processing Office at the above address or to the agent from whom it was
purchased. Within 7 days after it receives the notice of cancellation and this
Certificate at its Processing Office, Aetna will return the entire consideration
paid plus any increase or minus any decrease in the cash value of any funds
allocated to the Separate Account.
/s/ George N. Gingold /s/ John J. Martin
Secretary President
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN
BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE
VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. THIS
CERTIFICATE CONTAINS A MARKET-VALUE ADJUSTMENT FORMULA.
APPLICATION OF A MARKET-VALUE ADJUSTMENT MAY RESULT IN EITHER AN
INCREASE OR DECREASE IN THE CASH VALUE. THE MARKET-VALUE
ADJUSTMENT FORMULA DOES NOT APPLY TO A GUARANTEED TERM AT THE
TIME OF ITS MATURITY.
GTCC-HH (XC/S)
<PAGE>
SPECIFICATIONS
If Variable Annuity Payments are not to decrease, Aetna must earn a gross return
on the assets of the Separate Account of:
[bullet] 5.0% on an annual basis set at the time Annuity payments commence if an
Assumed Annual Net Return Rate of 3.5% is chosen; or
[bullet] 6.50% on an annual basis set at the time Annuity payments commence if
an Assumed Annual Net Return Rate of 5% is chosen.
NOTHING IN THE GROUP ANNUITY CONTRACT INVALIDATES OR IMPAIRS ANY
RIGHT GRANTED TO THE CERTIFICATE HOLDER.
- --------------------------------------------------------------------------------
PLAN
- --------------------------------- ----------------------------------------------
CONTRACT HOLDER GROUP ANNUITY CONTRACT NO.
- --------------------------------- ----------------------------------------------
PARTICIPANT CERTIFICATE NO.
- --------------------------------- ----------------------------------------------
<PAGE>
TABLE OF CONTENTS
I. GENERAL DEFINITIONS
Page
1.01 Annuitant...........................................................2
1.02 Annuity.............................................................2
1.03 Fixed Annuity.......................................................2
1.04 Fund(s).............................................................2
1.05 General Account.....................................................2
1.06 Guaranteed Accumulation Account.....................................2
1.07 Participant.........................................................2
1.08 Plan................................................................2
1.09 Purchase Payments...................................................2
1.10 Separate Account....................................................2
1.11 Valuation Period (Period)...........................................2
1.12 Variable Annuity....................................................3
1.13 Contract Holder.....................................................3
II. GENERAL PROVISIONS
2.01 Change of Contract..................................................4
2.02 NonParticipating Contract...........................................4
2.03 Payments............................................................4
2.04 Control of Contract.................................................4
2.05 Beneficiary.........................................................4
2.06 Misstatements and Adjustments.......................................4
2.07 Incontestability....................................................4
2.08 Grace Period........................................................4
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
3.01 Net Purchase Payment(s).............................................5
3.02 Guaranteed Accumulation Account (GA Account)........................5
3.03 Fund(s) Record Units-- Separate Account.............................6
3.04 Fund(s) Record Unit Value-- Separate Account........................7
3.05 Current Value.......................................................7
3.06 Loan Value..........................................................7
3.07 Transfer of Current Value from the Funds or GA Account..............9
3.08 Sum Payable at Death (Before Annuity Payments Start)................9
3.09 Annuity Payments to Beneficiary.....................................9
3.10 Surrender Value....................................................10
3.11 Payment of Surrender Value.........................................10
3.12 Reinstatement......................................................10
IV. ANNUITY PROVISIONS
4.01 Choices to be Made.................................................11
4.02 Terms of Annuity Options...........................................11
4.03 Death of Annuitant/Beneficiary.....................................12
4.04 Fund(s) Annuity Units-- Separate Account...........................12
4.05 Fund(s) Annuity Unit Value-- Separate Account......................12
4.06 Annuity Options....................................................13
<PAGE>
I. GENERAL DEFINITIONS
1.01. Annuitant -- A person on whose life an Annuity has been effected under
this Contract.
1.02. Annuity -- Payment of an income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
1.03. Fixed Annuity -- An Annuity with payments which do not vary in amount.
1.04. Fund(s) -- The open-end registered management investment companies (mutual
funds) made available by Aetna under the Contract.
These Funds currently are:
[bullet] Aetna Variable Fund, a conservative common stock fund;
[bullet] Aetna Income Shares, a bond fund;
[bullet] Aetna Variable Encore Fund, a money market fund;
[bullet] Aetna Guaranteed Equity Trust, a dynamic hedged portfolio fund;
[bullet] Franklin Government Securities Trust, a government bond fund;
[bullet] Advisers Management Trust, a growth common stock fund;
[bullet] Lexington Gold Trust, a gold fund;
[bullet] Calvert Socially Responsible Series, a socially responsible
common stock fund; or
[bullet] T. Rowe Price International Equity Fund, an international stock
fund.
Additional information regarding these Funds is available in each Fund
prospectus.
1.05. General Account -- The Account holding the assets of Aetna, other than
those assets held in the Separate Accounts.
1.06. Guaranteed Accumulation Account (GA Account)-- An accumulation option
which guarantees a stipulated rate of interest for a specified period of
time. Amounts withdrawn before the end of the Guaranteed Term may be
subject to a Market Value Adjustment.
1.07. Participant -- A person who participates in the Opportunity Plus program.
1.08. Plan -- The Opportunity Plus program named on the Specifications. Aetna is
not bound by the terms of the Plan.
1.09. Purchase Payments -- Payments made to Aetna.
1.10. Separate Account -- Variable Annuity Account C is a separate account set
up by Aetna under the Connecticut Insurance Laws which purchases shares of
the Fund(s).
1.11. Valuation Period (Period) -- The period of time from the end of one
business day on the New York Stock Exchange to the end of the next
business day.
1.12. Variable Annuity -- Any Annuity with payments which vary with the net
investment results of Separate Account C.
1.13. Contract Holder -- The employer sponsoring the Plan named on the
specifications page.
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II. GENERAL PROVISIONS
2.01. Change of Contract Only an authorized officer of Aetna may change the
terms of the Group Annuity Contract. Aetna will notify the Contract Holder
in writing at least 30 days before the effective date of any change. Any
change will not affect the amount or terms of any Annuity which begins
before the change.
2.02. NonParticipating Contract: You, your beneficiary or the Contract Holder
will not have a right to share in the earnings of Aetna.
2.03. Payments Aetna will make Annuity payments as and when due. Aetna will make
other payments within 7 days of receipt at its Home Office of a written
claim for payment which is in good order, except as provided in 3.12.
2.04. Control of Contract This is a Contract between the Contract Holder and
Aetna only to satisfy the "purchase" requirements of Section 403(b)(1) of
the Internal Revenue Code of 1954, as amended. The Contract Holder has no
right, title, or interest in the amounts held under the Contract either by
reason of remitting Purchase Payments or applying for this Contract.
You own all amounts held in your Individual Account. You may make any
choices allowed by the Contract for your Individual Account. Choices made
under the Contract must be in writing. Until receipt of such choices in
the Home Office of Aetna, Aetna may rely on any previous choices made. The
Contract, this Certificate, and your Individual Account shall not be
subject to the claims of any creditors. The Contract, this Certificate and
your Individual Account are nonassignable except to Aetna in the event of
a loan, and nontransferable. In the event a loan against an Individual
Account is requested, however, the Current Value of your Individual
Account necessary to cover the loan amount plus interest must be assigned
to Aetna. The Contract Holder will inform you as to when and where the
Contract may be examined.
2.05. Designation of Beneficiary Each Participant shall name a beneficiary. The
beneficiary may be changed at any time.
2.06. Misstatements and Adjustments If Aetna finds the age of any payee to be
misstated, the correct facts will be used to adjust payments.
2.07. Incontestability Aetna cannot cancel this Contract because of any error of
fact on the application.
2.08. Grace Period This Contract will remain in effect even if Purchase Payments
are not continued.
3
<PAGE>
III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS
3.01. Net Purchase Payment(s): The Net Purchase Payment(s) is the actual
Purchase Payment less any state premium tax.
The Net Purchase Payment(s) will be credited to:
(a) The Guaranteed Accumulation Account; and
(b) The Fund(s) in which the Separate Account invests.
Aetna must be told by the Contract Holder or Authorized Designee the
percentage of the Net Purchase payment(s) to be applied to each investment
above.
3.02. Guaranteed Accumulation Account (GA Account): An accumulation option which
guarantees a stipulated rate of interest for a specified period of time
(See (c) below). Amounts withdrawn before the end of the Guaranteed Term
may be subject to a Market Value Adjustment (See (f) below).
(a) Guaranteed Deposit Period (Deposit Period) -- The period of time,
usually a calendar month during which Net Purchase Payment(s) are
accepted in the GA Account for a Guaranteed Term.
(b) Guaranteed Term (Term) -- A period of time, including the Deposit
Period, for which interest rates are guaranteed on the Net Purchase
Payment(s) made to the GA Account. The Term may vary for each Purchase
Payment and will be from approximately 1 to 5 years from the date the
Deposit Period ends.
(c) Guaranteed GA Account Interest Rates (Guaranteed Rates) -- An interest
rate will be declared at the start of a Deposit Period and guaranteed
by Aetna for a Term; this interest rate will never be less than 4%.
Aetna will add interest daily.
Aetna may declare higher interim Guaranteed Rates for:
(1) The Deposit Period and 12 months following the close of a Deposit
Period; and
(2) Any subsequent 12-month period until the end of the Term. The last
period of the Term may be from 10-12 months.
(d) Withdrawals -- Amounts withdrawn from the GA Account before the end of
the Term may be subject to a Market Value Adjustment (See (f) below).
Withdrawals will be made from the Term with the oldest Deposit Period.
During the Deposit Period and the 90 days following the close of the
Deposit Period, any amounts applied to the GA Account during that
Deposit Period may not be withdrawn unless due to:
(1) A surrender; or
(2) To pay a premium for an Annuity Option.
(e) Reinvestment -- The Participant will receive a thirty day notice that
Term(s) are about to mature. This thirty day notice will be mailed at
least 15 days but not more than 45 days prior to the beginning of each
thirty day period. At least 18 days before the end of a Term, the
Participant will be mailed a notice of the next available Guaranteed
Rates and Term. Amounts may be withdrawn from the ending Term on its
final day without
4
<PAGE>
a Market Value Adjustment. Aetna must receive written notice of such
election at the Opportunity Plus Processing Office at least three (3)
business days before the end of the Term. Otherwise, amounts in the
ending Term will be subject to the new Term and will be subject to the
new Guaranteed Rates.
(f) Market Value Adjustment -- There will be a Market Value Adjustment for
a withdrawal from the GA Account before the end of a Term when due to:
(1) A transfer;
(2) A surrender; or
(3) A payment of an Annuity premium for Annuity Option 2.
The amount of the withdrawal will be adjusted to a market value amount
as described below. The market value amount will be equal to the amount
withdrawn, multiplied by the following ratio:
x
---
365
(1+i)
---------
x
---
365
(1+j)
---------
Where:
[bullet] i is the Deposit Period Yield;
[bullet] j is the Current Yield; and
[bullet] x is the number of days from the Wednesday of the week of
withdrawal to the last day of the Term.
The Deposit Period Yield will be determined as follows:
[bullet] At the close of the last business day of each week of the
Deposit Period, a yield will be computed as the average of the
yields on that day of U.S. Treasury Notes which mature in the
last quarter of the Term.
[bullet] The Deposit Period Yield is then the average of those yields
for the Deposit Period. If a withdrawal is made prior to the
close of the Deposit Period, it is the average of those yields
on each week preceding the withdrawal.
The Current Yield is the average of the yields on the last business day
of the week preceding withdrawal on the same U.S. Treasury Notes
included in the Deposit Period Yield.
In the event that no U.S. Treasury Notes exist which mature in the last
quarter of the Term, Aetna reserves the right to use the next available
U.S. Treasury Notes that mature in a following quarter.
There will be no Market Value Adjustment for withdrawals made to:
[bullet] Satisfy the terms of the Sum Payable at Death provision; or
[bullet] Pay a premium for Annuity Options 3 or 4.
Aetna shall make any change that affects the Market Value Adjustment
with at least 30 days' advance written notice to the Contract Holder.
Any such change shall become effective for any new Term and for any
present or future Participant.
3.03. Fund(s) Record Units -- Separate Account: The portion of the Net Purchase
Payment applied to the Separate Account will determine the number of
Fund(s) Record Units. This number is equal to the Net
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<PAGE>
Purchase Payment applied to the Fund divided by the Fund(s) Record Unit
Value (see 3.08) for the Valuation Period in which the Purchase Payment is
received in good order.
3.04. Fund(s) Record Unit Value -- Separate Account: A Fund(s) Record Unit Value
is computed by multiplying the Net Return Factor for the current Valuation
Period by the Fund(s) Record Unit Value for the previous Period. The
dollar value of a Fund(s) Record Units, Separate Account assets, and
Variable Annuity payments may go up or down due to investment gain or
loss.
The calculation to determine the Net Return Factor includes deductions
totaling 1.25% on an annual basis for Annuity mortality expense risks and
profit and a daily administrative charge which will not exceed .25% on an
annual basis. The administrative charge may be changed annually except for
amounts which have been used to purchase an Annuity.
3.05. Current Value: The Current Value is equal to:
(a) Any amounts in the Fixed Account, including Fixed Account interest
added by Aetna; plus
(b) Any amounts in the GA Account, including GA Account interest added by
Aetna; plus
(c) The sum of any Separate Account Record Unit value(s); less
(d) Any Maintenance Fee(s) due.
Current Value does not include amounts used to purchase an Annuity.
3.06 Loan Value: During the accumulation period, a Participant may request a
loan from his or her Individual Account by submitting a loan request form
to the Opportunity Plus Processing Office. A loan may not be requested
within 12 months from the date of any prior loan. The following conditions
must also be met:
(a) The minimum Individual Account Current Value must be $5,000. The loan
amount must be at least $3,500. The loan amount may not exceed the
lesser of:
(1) 50% of the vested Individual Account Current Value reduced by the
outstanding loan balance on the date on which the loan is made; or
(2) $50,000 reduced by the highest outstanding balance of loans within
the preceding 12 months ending on the day before the loan is made.
However, if the Individual Account Current Value is between $5,000 and
$20,000, the loan amount is the lesser of:
(1) 75% of the vested Individual Account Current Value reduced by the
outstanding loan balance on the date on which
the loan is made, or
(2) $10,000 reduced by the outstanding loan balance on the date on
which the loan is made.
GTC Loans can be made from those Individual Account values held in the
Fund(s).
Loans may not be made against amounts held in the GA Account although such
values are included in the determination of Individual Account Current
Value. If a Participant intends to request a loan against
6
<PAGE>
any portion of the GA Account, that portion must be transferred to any of
the other Fund(s) or to the Fixed Account. Amounts transferred from the GA
Account will be subject to the Withdrawals and Market Value Adjustment
provisions.
Aetna reserves the right to restrict or limit the amount that may be
borrowed from any investment option at any time. However, the full value
of all investment options is included in the determination of Individual
Account value.
When a loan is made, the number of accumulation units equal to the loan
amount will be withdrawn from the Individual Account. Accumulation units
taken from the Individual Account to provide a loan do not participate in
the investment experience of the related investment options. Unless
instructed otherwise, the amount withdrawn will be allocated on a pro rata
basis among the Fixed Account and the Fund(s).
(b) Loan interest payable to Aetna will accrue on a daily basis at the
rate of 1% annually unless a higher rate is required by law.
(c) Principal and interest on loans will be amortized over a 5-year term.
However, principal and interest on loans taken for the acquisition of
the Participant's principal residence will be amortized over a period
of 1 to 20 whole years, as elected by the Participant. The projected
final repayment must be no later than the end of the calendar year in
which the Participant attains age 70.
(d) Repayment of principal and interest is required at 3-month intervals.
A bill in the amount of the quarterly repayment due will be mailed to
the Participant in advance of the payment due date. The repayment due
date will coincide with the loan effective date. The loan effective
date will be the date the Opportunity Plus Processing Office in
Albany, New York receives the loan request form in good order. Payment
will be due within 30 days of the repayment due date.
(e) Unless otherwise specified, the repayments of principal will be
allocated among the current investment options including the current
GA Account Deposit Period.
The Participant may specify the allocation of the principal repayments
among the same contract investment options and in the same proportion
as when the loan was initially made.
(f) If a partial surrender is taken from a Participant's Individual
Account due to nonpayment of a billed quarterly installment, the date
of the surrender will be the first business day following the last day
of the month in which the repayment was due.
(g) If a repayment is received in excess of a billed amount, the excess
will be applied towards the principal portion of the outstanding loan.
Payments received which are less than the billed amount will be
returned to the Participant.
(h) Prepayment of the entire loan will be allowed. At the time of
prepayment, Aetna will bill the Participant for any accrued interest.
Aetna will consider the loan paid when this accrued interest is paid.
(i) If an Individual Account is surrendered with an outstanding loan
balance, accrued interest will be deducted from the surrender amount.
If an Individual Account with an outstanding loan
7
<PAGE>
balance is surrendered due to the Participant's death or the election
of an Annuity Option, accrued interest will be deducted from the
surrender amount.
(j) If the Participant's Individual Account Reserve falls below an amount
equal to 25% of the total loans outstanding, repayment of all
outstanding loans may be required.
The amount payable by Aetna upon the total surrender of an Individual
Account with a loan(s) outstanding shall be reduced by accrued
interest on the loan amount.
3.07. Transfer of Current Value from the Funds or GA Account: Before an Annuity
Option is elected, all or any portion of the Current Value may be
transferred from any Fund to any other Fund, or to the GA Account's
current Deposit Period.
Four transfers of Current Value (excluding transfers from the GA Account
at the end of a Guaranteed Term) can be made during a calendar year
period. If Aetna allows additional transfers, each may be subject to a fee
of up to $10.
Notice to the Participant: Aetna will notify the Participant each year of:
(a) The value of any amounts held in the Fund(s) for the Separate Account.
(b) The number of any Fund(s) Record Units:
(c) The Fund(s) Record Unit Value(s); and
(d) The Surrender Value of these amounts.
Such number or values will be as of a date no more than 60 days before the
date of the notice.
3.08. Sum Payable at Death (Before Annuity Payments Start): The Current Value
payable under the terms of this section will be reduced by the amount of
the accrued interest on any outstanding loan. Aetna will pay the Current
Value to the beneficiary if:
(1) The Participant dies before Annuity payments start; and
(2) The notice of death is received in good order by Aetna.
The sum paid will be the Current Value on the date the notice is
received at the Opportunity Plus Processing Office. The beneficiary,
if a spouse, may choose to apply all or any portion of the payment to
an Annuity Option. If the beneficiary is not a spouse, all of the
payment must either be applied only to Annuity Option 1 or 2 within
one year of the Participant's death or be paid to the beneficiary
within 5 years of the death of the Participant (see Part IV). If no
beneficiary exists, the payment will be made to the estate of the
Participant.
3.09. Annuity Payments to Beneficiary: In no event may any payments to the
beneficiary under an Annuity Option extend beyond:
(a) The life of the beneficiary; or
(b) Any certain period greater than the beneficiary's life expectancy.
3.10. Surrender Value: The amount payable by Aetna upon the surrender of any
portion of the Individual Account(s) shall be the total amount of purchase
payments.
3.11. Payment of Surrender Value: Under certain emergency conditions, Aetna may
defer payment:
(a) For a period of up to 6 months (unless not allowed by state law); or
8
<PAGE>
(b) As provided by federal law.
3.12. Reinstatement: All or a portion of the proceeds of a full surrender of
this Contract may be reinvested within 30 days after the surrender if
allowed by law. Any Maintenance Fee charged at the time of surrender on
the amount being reinvested will be included in the reinstatement. Any
Market Value Adjustment deducted from GA Account surrenders will not be
included in the reinstatement. Amounts will be reinstated among the GA
Account and Separate Account in the same proportion as they were at the
time of surrender. Any amounts reinstated to the GA Account will be
credited to the current Deposit Period. The number of Record Units
reinstated will be based on the Record Unit Value(s) next computed after
receipt at Aetna's Home Office of the reinstatement request and the amount
to be reinvested.
Reinstatement is permitted only once.
9
<PAGE>
IV. ANNUITY PROVISIONS
4.01. Choices to be Made: The Participant shall determine when to begin payments
and may tell Aetna to pay all or any portion of the Current Value (minus
any premium tax) as a premium for an Annuity under Option 2, 3 or 4 (see
4.06). The first Annuity payment must generally be made by the April first
following the year in which the Participant turns 70 1/2 or such later
date as may be allowed under federal law or regulations. In no event may
any payments to the Annuitant under an Annuity Option extend beyond:
(a) The life of the Annuitant;
(b) The lives of the Annuitant and second Annuitant;
(c) A period certain greater than the Annuitant's life expectancy,
determined as of the date payments are to commence; or
(d) A period certain greater than the life expectancies of the Annuitant
and the second Annuitant, determined as of the date payments are to
commence.
When an Option is chosen, Aetna must also be told if payments are to be
made other than monthly and to pay:
(a) A Fixed Annuity using the General Account; or
(b) A Variable Annuity using any of the Fund(s) made available by Aetna
for Annuity purposes; or
(c) A combination of (a) and (b).
If a Fixed Annuity is chosen, Aetna will add interest daily at an annual
rate no less than 3.5%. Aetna may add interest daily at any higher rate.
If a Variable Annuity is chosen, an Assumed Annual Net Return Rate of 5%
may be chosen. If not chosen, Aetna will use an Assumed Annual Net Return
Rate of 3.5%.
With the exception of Option 2 on a variable basis, once elected, an
Annuity Option may not be revoked.
4.02. Terms of Annuity Options:
(a) When payments start, the age of the Annuitant plus the number of years
for which payments are guaranteed must not exceed 95.
(b) The present value of the expected payments to the Annuitant when
payments start shall be more than 50% of the present value of the
total expected payments to be made; this restriction does not apply if
Option 4 is chosen and the second Annuitant is the spouse of the
Annuitant.
(c) No choice of any Annuity Option may be made if the first payment would
be less than $20 or if the total payments in a year would be less than
$100.
(d) If a Fixed Annuity under Option 2, 3 or 4 is chosen and a larger
payment would result from applying the Surrender Value to a current
Aetna single premium immediate Annuity, Aetna will make the larger
payment.
(e) Age, where used in the following tables, means age on the birthday
closest to the date of the first payment.
The Annuity rates for Options 3 and 4 are based on mortality from 1983
Table a. The Annuity rates do not differ by sex. A more complete
description of the
10
<PAGE>
rates has been filed with the office of the New York Department of
Insurance.
(f) Assumed Annual Net Return Rate is the interest rate used to determine
the amount of the first Annuity payment under a Variable Annuity. The
Separate Account must earn this rate plus enough to cover the
mortality and expense risk and administrative fee charges if future
Variable Annuity payments are to remain level.
4.03. Death of Annuitant/Beneficiary: When an Annuitant dies under Options 2 and
3, the present value of any remaining guaranteed payments will be paid in
one sum to the beneficiary, or upon election by the beneficiary, any
remaining payments will continue to the beneficiary. If no beneficiary
exists, the present value of any remaining guaranteed payments will be
paid in one sum to the estate of the Annuitant.
In no event may any payments to the beneficiary under an Annuity Option
extend beyond:
(a) The life of the beneficiary, determined as of the date payments are to
commence; or
(b) Any certain period greater than the beneficiary's life expectancy
determined as of the date payments are to commence.
If a beneficiary dies while under Option 1 or while receiving Annuity
payments, the present value of any remaining payments will be paid in one
sum to the estate of the beneficiary. The interest rate used to determine
the first payment will be used to calculate the present value.
4.04. Fund(s) Annuity Units -- Separate Account: The number of Fund(s) Annuity
Units is based on the amount of the first Variable Annuity payment which
is equal to:
(a) The portion of the Current Value (minus any premium tax) applied to
pay a Variable Annuity; divided by
(b) 1,000; multiplied by
(c) The payment rate for the Option chosen.
Such amount, or portion, of the Variable Payment will be divided by the
appropriate Fund(s) Annuity Unit Value (See 4.05) on the tenth Valuation
Period before the due date of the first payment to determine the number of
each Fund(s) Annuity Units. The number of each Fund(s) Annuity Units
remains fixed. Each future payment is equal to the sum of the products of
each Fund(s) Annuity Unit Value multiplied by the appropriate number of
Units. The Fund(s) Annuity Unit Value on the tenth Valuation Period prior
to the due date of the payment is used.
4.05. Fund(s) Annuity Unit Value -- Separate Account: For any Valuation Period a
Fund(s) Annuity Unit Value is equal to:
(a) The Value for the previous Period; multiplied by
(b) The Net Return Factor(s) (see 3.06) for the Period; multiplied by
(c) A factor to reflect the Assumed Annual Net Return Rate.
The factor for 3.5% per year is .9999058; for 5% per year it is .9998663.
The dollar value of a Fund(s) Annuity Unit Values and payments may go up
or down due to investment gain or loss.
11
<PAGE>
If Variable Annuity payments are not to decrease, Aetna must earn a gross
return on the assets of the Separate Account of:
[bullet] 50% on an annual basis plus an annual return of up to .25% needed
to offset the administrative charge set at the time Annuity
payments commence if an Assumed Annual Net Return Rate of 3.5% is
chosen; or
[bullet] 6.5% on an annual basis plus an annual return of up to .25%
needed to offset the administrative charge set at the time
Annuity payments commence if an Assumed Annual Net Return Rate of
5% is chosen.
Payments shall not be changed due to changes in the mortality or expense
results or administrative charges.
4.06. Annuity Options:
Option 1 -- Payment of Interest on Sum Left with Aetna -- This Option may
be used only by the beneficiary when the Participant dies before Aetna has
started paying an Annuity. A portion or all of the sum paid upon death may
be held under this Option and will be held in the General Account of Aetna
at interest (See 4.01). The beneficiary may later tell Aetna to:
(a) Pay a portion or all of the sum held by Aetna; or
(b) Apply a portion or all of the sum held by Aetna to any Annuity Option
below.
Option 2 -- Payments for a Stated Period of Time -- An Annuity will be
paid for the number of years chosen. The number of years must be at least
3 and not more than 30.
If payments for this Option are made under a Variable Annuity, the present
value of any remaining payments may be withdrawn at any time. If a
withdrawal is requested within 3 years after the start of payments, it
will be treated as a surrender (See 3.15).
Option 3 -- Life income -- An Annuity will be paid for the life of the
Annuitant. If also chosen, Aetna will guarantee payments for 60, 120, 180,
or 240 months.
Option 4 -- Life Income for Two Payees -- An Annuity will be paid during
the lives of the Annuitant and a second Annuitant. At the death of either,
payments will continue to the survivor. When this Option is chosen, a
choice must be made of:
(a) 100% of the payment to continue to the survivor;
(b) 66-2/3% of the payment to continue to the survivor;
(c) 50% of the payment to continue to the survivor;
(d) Payments for a minimum of 120 months, with 100% of the payment to
continue to the survivor; or
(e) 100% of the payment to continue to the survivor if the survivor is the
Annuitant and 50% of the payment to continue to the survivor if the
survivor is the second Annuitant.
Other Options -- Aetna may make other options available as allowed by the
laws of the state in which this Contract is delivered.
12
<PAGE>
OPTION 2
PAYMENTS FOR A STATED PERIOD OF TIME
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5%
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Years of Amount of Years of Amount of Years of Amount of
Payments Payments Payments Payments Payments Payments
3 $ 29.19 13 $ 7.94 22 $ 5.39
4 22.27 14 7.49 23 5.24
5 18.12 15 7.10 24 5.09
6 15.35 16 6.76 25 4.96
7 13.38 17 6.47 26 4.84
8 11.90 18 6.20 27 4.73
9 10.75 19 5.97 28 4.63
10 9.83 20 5.75 29 4.53
11 9.09 21 5.56 30 4.45
12 8.46
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
Years of Amount of Years of Amount of Years of Amount of
Payments Payments Payments Payments Payments Payments
3 $ 29.80 13 $ 8.64 22 $ 6.17
4 22.89 14 8.20 23 6.02
5 18.74 15 7.82 24 5.88
6 15.99 16 7.49 25 5.76
7 14.02 17 7.20 26 5.65
8 12.56 18 6.94 27 5.54
9 11.42 19 6.71 28 5.45
10 10.51 20 6.51 29 5.36
11 9.77 21 6.33 30 5.28
12 9.16
13
<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 Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Months
Age of
Annuitant None 60 120 180 240
--------- ---- -- --- --- ---
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 for ages not shown will be provided on request
and will be computed on a basis consistent with the
rates in the above tables.
14
<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 Months
Age of
Annuitant None 60 120 180 240
---------- -------- -------- --------- --------- ------
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 for ages not shown will be provided on
request and will be computed on a basis consistent
with the rates in the above tables.
15
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
100% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 3.69 $ 3.75 $ 3.81 $ 3.84 $ 3.87 $ 3.90 $ 3.91 $ 3.92 $ 3.92
50 3.75 3.89 3.97 4.04 4.09 4.13 4.15 4.17 4.18
55 3.81 3.97 4.16 4.27 4.35 4.42 4.47 4.50 4.51
60 3.84 4.04 4.27 4.51 4.66 4.78 4.86 4.92 4.95
65 3.87 4.09 4.35 4.66 4.99 5.19 5.35 5.46 5.53
70 3.90 4.13 4.42 4.78 5.19 5.67 5.95 6.17 6.31
75 3.91 4.15 4.47 4.86 5.35 5.95 6.64 7.04 7.34
80 3.92 4.17 4.50 4.92 5.46 6.17 7.04 8.04 8.63
85 3.92 4.18 4.51 4.95 5.53 6.31 7.34 8.63 10.05
</TABLE>
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 4.63 $ 4.68 $ 4.73 $ 4.77 $ 4.80 $ 4.82 $ 4.84 $ 4.85 $ 4.86
50 4.68 4.80 4.88 4.95 5.00 5.04 5.06 5.08 5.10
55 4.73 4.88 5.04 5.15 5.24 5.30 5.35 5.39 5.41
60 4.77 4.95 5.15 5.37 5.52 5.63 5.72 5.79 5.83
65 4.80 5.00 5.24 5.52 5.83 6.04 6.20 6.31 6.39
70 4.82 5.04 5.30 5.63 6.04 6.49 6.77 6.99 7.15
75 4.84 5.06 5.35 5.72 6.20 6.77 7.45 7.86 8.16
80 4.85 5.08 5.39 5.79 6.31 6.99 7.86 8.84 9.43
85 4.86 5.10 5.41 5.83 6.39 7.15 8.16 9.43 10.86
</TABLE>
16
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
662/3% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 3.94 $ 4.05 $ 4.18 $ 4.32 $ 4.48 $ 4.66 $ 4.84 $ 5.02 $ 5.19
50 4.05 4.20 4.35 4.51 4.69 4.89 5.09 5.30 5.49
55 4.18 4.35 4.54 4.73 4.95 5.18 5.42 5.65 5.87
60 4.32 4.51 4.73 4.99 5.25 5.53 5.82 6.11 6.37
65 4.48 4.69 4.95 5.25 5.61 5.97 6.33 6.69 7.02
70 4.66 4.89 5.18 5.53 5.97 6.49 6.96 7.43 7.88
75 4.84 5.09 5.42 5.82 6.33 6.96 7.73 8.39 9.02
80 5.02 5.30 5.65 6.11 6.69 7.43 8.39 9.54 10.46
85 5.19 5.49 5.87 6.37 7.02 7.88 9.02 10.46 12.15
</TABLE>
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 4.87 $ 4.99 $ 5.12 $ 5.27 $ 5.44 $ 5.64 $ 5.86 $ 6.09 $ 6.30
50 4.99 5.12 5.26 5.43 5.63 5.85 6.09 6.33 6.57
55 5.12 5.26 5.44 5.63 5.85 6.11 6.38 6.65 6.92
60 5.27 5.43 5.63 5.87 6.14 6.44 6.75 7.07 7.38
65 5.44 5.63 5.85 6.14 6.49 6.84 7.23 7.62 8.00
70 5.64 5.85 6.11 6.44 6.84 7.35 7.84 8.34 8.83
75 5.86 6.09 6.38 6.75 7.23 7.84 8.60 9.28 9.93
80 6.09 6.33 6.65 7.07 7.62 8.34 9.28 10.42 11.35
85 6.30 6.57 6.92 7.38 8.00 8.83 9.93 11.35 13.04
</TABLE>
17
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
50% TO THE SURVIVOR
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 4.07 $ 4.22 $ 4.40 $ 4.61 $ 4.87 $ 5.17 $ 5.49 $ 5.84 $ 6.18
50 4.22 4.37 4.56 4.79 5.06 5.39 5.75 6.13 6.51
55 4.40 4.56 4.76 5.00 5.31 5.66 6.06 6.49 6.91
60 4.61 4.79 5.00 5.27 5.61 6.01 6.46 6.95 7.43
65 4.87 5.06 5.31 5.61 5.99 6.44 6.96 7.54 8.11
70 5.17 5.39 5.66 6.01 6.44 6.99 7.61 8.29 9.00
75 5.49 5.75 6.06 6.46 6.96 7.61 8.43 9.29 10.17
80 5.84 6.13 6.49 6.95 7.54 8.29 9.29 10.54 11.71
85 6.18 6.51 6.91 7.43 8.11 9.00 10.17 11.71 13.57
</TABLE>
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 5.01 $ 5.15 $ 5.33 $ 5.56 $ 5.83 $ 6.17 $ 6.55 $ 6.98 $ 7.40
50 5.15 5.29 5.48 5.71 6.01 6.36 6.78 7.23 7.68
55 5.33 5.48 5.66 5.91 6.23 6.61 7.05 7.54 8.05
60 5.56 5.71 5.91 6.16 6.51 6.93 7.42 7.96 8.53
65 5.83 6.01 6.23 6.51 6.87 7.34 7.89 8.51 9.16
70 6.17 6.36 6.61 6.93 7.34 7.87 8.51 9.23 10.00
75 6.55 6.78 7.05 7.42 7.89 8.51 9.33 10.20 11.14
80 6.98 7.23 7.54 7.96 8.51 9.23 10.20 11.44 12.64
85 7.40 7.68 8.05 8.53 9.16 10.00 11.14 12.64 14.51
</TABLE>
18
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND LAST SURVIVOR ANNUITY
100% TO THE SURVIVOR
120 MONTHS MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 3.69 $ 3.75 $ 3.80 $ 3.84 $ 3.87 $ 3.89 $ 3.91 $ 3.91 $ 3.92
50 3.75 3.89 3.97 4.04 4.09 4.13 4.15 4.16 4.17
55 3.80 3.97 4.15 4.26 4.35 4.41 4.46 4.48 4.49
60 3.84 4.04 4.26 4.50 4.65 4.76 4.84 4.89 4.91
65 3.87 4.09 4.35 4.65 4.98 5.17 5.31 5.41 5.46
70 3.89 4.13 4.41 4.76 5.17 5.62 5.87 6.05 6.15
75 3.91 4.15 4.46 4.84 5.31 5.87 6.48 6.79 6.98
80 3.91 4.16 4.48 4.89 5.41 6.05 6.79 7.50 7.83
85 3.92 4.17 4.49 4.91 5.46 6.15 6.98 7.83 8.50
</TABLE>
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 4.63 $ 4.68 $ 4.73 $ 4.77 $ 4.80 $ 4.82 $ 4.84 $ 4.85 $ 4.85
50 4.68 4.80 4.88 4.94 4.99 5.03 5.06 5.07 5.08
55 4.73 4.88 5.04 5.14 5.23 5.29 5.34 5.37 5.38
60 4.77 4.94 5.14 5.37 5.51 5.62 5.70 5.75 5.78
65 4.80 4.99 5.23 5.51 5.82 6.00 6.15 6.24 6.30
70 4.82 5.03 5.29 5.62 6.00 6.44 6.68 6.86 6.96
75 4.84 5.06 5.34 5.70 6.15 6.68 7.27 7.57 7.76
80 4.85 5.07 5.37 5.75 6.24 6.86 7.57 8.26 8.58
85 4.85 5.08 5.38 5.78 6.30 6.96 7.76 8.58 9.23
</TABLE>
19
<PAGE>
OPTION 4
LIFE INCOME FOR TWO PAYEES
JOINT AND 1/2 CONTINGENT LIFE INCOME ANNUITY
NO MINIMUM PERIOD
AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000
AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 3.86 $ 3.89 $ 3.93 $ 3.94 $ 3.96 $ 3.97 $ 3.98 $ 3.98 $ 3.98
50 4.02 4.10 4.15 4.18 4.21 4.23 4.24 4.25 4.26
55 4.22 4.31 4.42 4.48 4.53 4.57 4.59 4.61 4.61
60 4.43 4.56 4.70 4.84 4.93 4.99 5.04 5.07 5.09
65 4.69 4.84 5.02 5.22 5.42 5.54 5.63 5.69 5.73
70 4.99 5.17 5.39 5.65 5.93 6.23 6.40 6.52 6.60
75 5.33 5.54 5.82 6.14 6.52 6.95 7.40 7.64 7.81
80 5.70 5.96 6.29 6.69 7.17 7.75 8.41 9.08 9.45
85 6.07 6.38 6.75 7.24 7.84 8.59 9.49 10.51 11.50
</TABLE>
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
<TABLE>
<CAPTION>
Age of Age of Second Annuitant
Annuitant 45 50 55 60 65 70 75 80 85
- --------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $ 4.80 $ 4.83 $ 4.86 $ 4.88 $ 4.89 $ 4.90 $ 4.91 $ 4.92 $ 4.92
50 4.95 5.02 5.06 5.10 5.13 5.15 5.16 5.17 5.18
55 5.14 5.23 5.32 5.38 5.43 5.46 5.49 5.51 5.52
60 5.36 5.47 5.59 5.72 5.80 5.86 5.91 5.95 5.97
65 5.63 5.77 5.93 6.10 6.29 6.41 6.50 6.56 6.60
70 5.96 6.12 6.31 6.54 6.81 7.08 7.25 7.37 7.46
75 6.35 6.54 6.77 7.06 7.42 7.81 8.25 8.49 8.66
80 6.79 7.01 7.30 7.66 8.11 8.65 9.28 9.93 10.29
85 7.26 7.53 7.86 8.29 8.85 9.55 10.41 11.39 12.37
</TABLE>
These Annuity rates are based on mortality from 1983 Tables a.
20
<PAGE>
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Customer Relations Department, PFSD OPPORTUNITY PLUS
Home Office: 151 FARMINGTON AVE. PROCESSING OFFICE
HARTFORD, CONNECTICUT 06156 P.O. BOX 12894
(203) 273-2131 ALBANY, NEW YORK
12212-2894
CERTIFICATE OF GROUP ANNUITY COVERAGE
ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT,
WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT,
ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
GTCC-HH (XC/S)
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company
Endorsement
The Contract and Certificate are endorsed as follows.
Delete the definition of Nonunitized Separate Account and replace it with the
following:
Nonunitized Separate Account
A separate account, established by Aetna under Section 38a-433 of the
Connecticut General Statutes, that holds assets for GA Account Guaranteed Terms
of more than three years and, on and after September 1, 1998, amounts allocated
or transferred to Guaranteed Terms of three years or less. There are no discrete
units for this Account. The Contract Holder or Participant, as applicable, does
not participate in the investment gain or loss from assets held in the
Nonunitized Separate Account. Such gain or loss is borne entirely by Aetna. The
assets of the Nonunitized Separate Account, to the extent of reserves and other
contract liabilities, may not be charged with other Aetna liabilities.
Prior to September 1,1998, amounts held in a Guaranteed Term of three years or
less will be held in the General Account as provided by Section 3.03 (h), and
will remain in the General Account until the applicable Guaranteed Term's
Maturity Date. If such amounts are reinvested on such Maturity Date as provided
by Section 3.03(f), such amounts will be reinvested in a Guaranteed Term in the
Nonunitized Separate Account.
Endorsed and made part of the Contract and the Certificate on the latest of May
1, 1998, the date the endorsement is approved, or on the effective date of the
Contract or Certificate.
/s/Thomas J. McInerney
Thomas J. McInerney, President
EGAA (5/98) NY
[Aetna logo] 151 Farmington Avenue
[Aetna letterhead] Hartford, CT 06156
Julie E. Rockmore
Counsel
Law Division, RE4A
April 17, 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. 14 to Registration Statement on Form N-4
Prospectus Title: Opportunity Plus - Group Variable Multiple Option
Annuity Contracts
File Nos. 33-75962* 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. 14. 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.
- --------
* Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which
includes all the information which would currently be required in a
prospectus relating to the securities covered by the following earlier
Registration Statement: 33-75978.
<PAGE>
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.
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
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 3, 1998 and February 27,
1998 included herein in this Post-Effective Amendment No. 14 to Registration
Statement (No. 33-75962) on Form N-4 and to the references to our firm under the
headings "Condensed Financial Information" in the prospectus and "Independent
Auditors" in the statement of additional information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Hartford, Connecticut
April 17, 1998
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
TOTAL RETURN CALCULATION (STANDARDIZED)
The standardized rate represents fund performance for the most recent 1-year,
5-year and 10-year periods. The "1-year rate" represents fund performance for
the period January 1, 1997 through December 31, 1997; the "5-year rate" is for
the period January 1, 1993 through December 31, 1997; the "10-year rate" is for
the period January 1, 1988 through December 31, 1997. "Since inception" figures
assume the redemption on December 31, 1997 of values attributable to a $1,000
payment made on the date contributions were first received in the fund under the
separate account.
The formula used in the computation of the total return calculation is as
follows:
Formula
P(1 + T) (n) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of 1,
5, or 10 year periods (or a fractional
portion thereof) of a hypothetical $1,000
payment made at the beginning of the 1, 5,
or 10 year periods
The total returns reflect the deduction of all recurring charges during each
period (e.g., mortality and expense risk charges, maintenance fees,
administrative charges (if applicable) and deferred sales charges).
TOTAL RETURN CALCULATION (NON-STANDARDIZED)
The non-standardized rate represents fund performance for the most recent
1-year, 3-year, 5-year and 10-year periods. The "1-year rate" represents fund
performance for the period January 1, 1997 through December 31, 1997; the
"3-year rate" is for the period January 1, 1995 through December 31, 1997; the
"5-year rate" is for the period January 1, 1993 through December 31, 1997; and
the "10-year rate" is for the period January 1, 1988 through December 31, 1997.
The non-standardized figures will be calculated in a manner similar to the one
discussed above for the standardized figures, except that non-standardized
figures will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations), and the "since inception" figures assume the redemption on
December 31, 1997 of values attributable to a $1,000 payment made on the
inception dates of the funds.
For an illustration of the Computation of the Total Return Quotations, both
Standardized and Non-Standardized, see attached.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 0 12/31/97
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Five Year Five Year Five Year Ten Year
As of AUV as of Date as of AUV w/ DSC as of Date as of AUV w/ DSC as of Date
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.422351 12/31/96 13.025091 18.41% 07/31/95 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------
24.699589 12/31/96 20.419229 20.96% 12/31/92 13.394677 13.02% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------
51.32967 12/31/96 47.991699 6.96% 12/31/92 39.07696 5.61% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------
14.455937 12/31/96 12.449984 16.11% 07/04/95 07/04/95
- ------------------------------------------------------------------------------------------------------------------------------
217.358795 12/31/96 169.447517 28.28% 12/31/92 102.413645 16.24% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------
14.443996 12/31/96 10.92378 32.23% 10/31/96 10/31/96
- ------------------------------------------------------------------------------------------------------------------------------
13.491194 12/31/96 11.930407 13.08% 07/31/95 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------
41.174241 12/31/96 39.527962 4.17% 12/31/92 34.634794 3.52% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------
10 05/30/97 05/30/97 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------
23.675239 12/31/96 19.964634 18.59% 12/31/92 13.739101 11.50% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------
16.586583 12/31/96 13.110102 26.52% 05/31/94 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------
14.714768 12/31/96 12.349485 19.15% 03/31/94 03/31/94
- ------------------------------------------------------------------------------------------------------------------------------
17.276438 12/31/96 14.091691 22.60% 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------
18.661582 12/31/96 14.239971 31.05% 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------
18.174408 12/31/96 16.33436 11.27% 06/30/94 06/30/94
- ------------------------------------------------------------------------------------------------------------------------------
16.815889 12/31/96 13.87196 21.22% 06/30/95 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------
18.690071 12/31/96 15.49294 20.64% 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------
7.714731 12/31/96 8.832164 (12.65%) 10/31/94 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
14.403346 12/31/96 13.611465 5.82% 12/31/92 9.194452 9.39% 10/14/91
- ------------------------------------------------------------------------------------------------------------------------------
15.046484 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
15.046484 12/31/96 13.948647 7.87% 09/30/93 09/30/93
- ------------------------------------------------------------------------------------------------------------------------------
13.081901 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
13.081901 12/31/96 13.650371 (4.17%) 12/31/92 10.492364 4.51% 08/31/92
- ------------------------------------------------------------------------------------------------------------------------------
23.440467 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
23.440467 12/31/96 18.786112 24.78% 12/31/92 13.537122 11.61% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------
17.709081 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
17.709081 12/31/96 16.452845 7.64% 12/31/92 9.920987 12.29% 07/31/89
- ------------------------------------------------------------------------------------------------------------------------------
16.608063 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
16.608063 12/31/96 13.112832 26.66% 10/31/94 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Inception Inception Inception Account One Year Three Year
as of AUV w/ DSC Date AUV w/ DSC Charge Free Out DSC DSC
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 10.001436 19.60% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
04/03/89 9.819619 11.12% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
24.07106 7.87% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
07/04/95 9.767843 17.03% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
52.849953 15.19% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
10/31/96 10.442242 32.06% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
07/31/95 9.987927 13.23% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
26.164035 4.64% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
05/30/97 8.277708 20.81% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
05/31/89 10.030486 10.52% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
05/31/94 8.33616 21.15% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
03/31/94 9.667053 11.84% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
05/31/95 9.954082 23.76% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
05/31/95 10.116433 26.71% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
06/30/94 9.932873 18.82% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
06/30/95 10.441661 20.96% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
05/31/95 10.028634 27.22% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
10/31/94 9.850547 (7.43%) 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
10/14/91 8.833264 8.19% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 15.23553 (1.24%) 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
09/30/93 9.871585 10.42% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 13.339448 (1.93%) 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
08/31/92 9.552864 6.07% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 23.106013 1.45% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
05/31/89 10.13716 10.26% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 17.490182 1.25% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
07/31/89 9.325456 7.92% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 16.276016 2.04% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
10/31/94 8.846804 22.00% 125 0 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Five Year DSC Ten Year DSC Inception DSC
- ------------------------------------------------------------------------
<S> <C> <C>
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
0.00% 0.00% 0.00%
- ------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 0 12/31/97
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Three Year Three Year Three Year Five Year
As of AUV as of Date as of AUV w/out DSC as of Date as of AUV w/out DSC as of Date
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.422351 12/31/96 13.025091 18.41% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------
24.699589 12/31/96 20.419229 20.96% 12/30/94 14.288446 20.01% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
51.32967 12/31/96 47.991699 6.96% 12/30/94 40.173187 8.51% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
14.455937 12/31/96 12.449984 16.11% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------
217.358795 12/31/96 169.447517 28.28% 12/30/94 05.558306 27.22% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
14.443996 12/31/96 10.92378 32.23% 09/16/96
- -----------------------------------------------------------------------------------------------------------------------
13.491194 12/31/96 11.930407 13.08% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------
41.174241 12/31/96 39.527962 4.17% 12/30/94 36.269952 4.32% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
10 12/31/96 7.26596 37.63% 12/13/96
- -----------------------------------------------------------------------------------------------------------------------
23.675239 12/31/96 19.964634 18.59% 12/30/94 14.00435 19.13% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
16.586583 12/31/96 13.110102 26.52% 12/30/94 8.705724 23.97% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
20.283619 12/31/96 17.454995 16.21% 12/30/94 13.00197 15.98% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
14.714768 12/31/96 12.349485 19.15% 12/30/94 9.446394 15.92% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
17.276438 12/31/96 14.091691 22.60% 01/03/95
- -----------------------------------------------------------------------------------------------------------------------
18.661582 12/31/96 14.239971 31.05% 12/30/94 8.663868 29.15% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
18.174408 12/31/96 16.33436 11.27% 12/30/94 12.169459 14.30% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------
16.815889 12/31/96 13.87196 21.22% 12/30/94 9.223457 22.16% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------
18.690071 12/31/96 15.49294 20.64% 12/30/94 9.664491 24.59% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------
7.714731 12/31/96 8.832164 (12.65%) 12/30/94 8.772436 (4.19%) 03/30/94
- -----------------------------------------------------------------------------------------------------------------------
14.403346 12/31/96 13.611465 5.82% 12/30/94 9.410581 15.24% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
20.140556 12/31/96 16.812841 19.79% 01/03/95
- -----------------------------------------------------------------------------------------------------------------------
19.862554 12/31/96 16.428363 20.90% 12/30/94 13.986753 12.40% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
20.542493 12/31/96 19.135018 7.36% 12/30/94 15.180234 10.61% 05/03/93
- -----------------------------------------------------------------------------------------------------------------------
15.046484 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------
15.046484 12/31/96 13.948647 7.87% 12/30/94 9.511453 16.52% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
13.081901 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------
13.081901 12/31/96 13.650371 (4.17%) 12/30/94 11.157308 5.45% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
23.440467 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------
23.440467 12/31/96 18.786112 24.78% 12/30/94 13.396515 20.50% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
17.709081 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------
17.709081 12/31/96 16.452845 7.64% 12/30/94 13.226715 10.22% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
16.608063 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------
16.608063 12/31/96 13.112832 26.66% 12/31/94 8.696596 24.07% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Five Year Five Year Ten Year Ten Year Ten Year Inception Inception Inception
as of AUV w/out DSC as of Date as of AUV w/out DSC Date AUV w/out DSC
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
07/05/95 07/05/95 9.721985 20.33%
- -----------------------------------------------------------------------------------------------------------------------------
13.394677 13.02% 04/03/89 04/03/89 9.819619 11.12%
- -----------------------------------------------------------------------------------------------------------------------------
39.07696 5.61% 12/31/87 24.07106 7.87%
- -----------------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 9.767843 17.03%
- -----------------------------------------------------------------------------------------------------------------------------
102.413645 16.24% 12/31/87 52.849953 15.19%
- -----------------------------------------------------------------------------------------------------------------------------
09/16/96 09/16/96 10 32.91%
- -----------------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 9.831316 13.53%
- -----------------------------------------------------------------------------------------------------------------------------
34.634794 3.52% 12/31/87 26.164035 4.64%
- -----------------------------------------------------------------------------------------------------------------------------
12/13/96 12/13/96 7.11767 38.16%
- -----------------------------------------------------------------------------------------------------------------------------
13.739101 11.50% 12/31/87 8.317833 11.03%
- -----------------------------------------------------------------------------------------------------------------------------
7.045899 18.68% 12/31/87 4.000147 15.28%
- -----------------------------------------------------------------------------------------------------------------------------
11.25643 12.50% 12/31/87 6.886267 11.41%
- -----------------------------------------------------------------------------------------------------------------------------
8.506632 11.58% 09/06/89 09/06/89 6.018963 11.35%
- -----------------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 8.527906 26.61%
- -----------------------------------------------------------------------------------------------------------------------------
8.010874 18.43% 08/27/92 08/27/92 7.568026 18.40%
- -----------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 9.005012 17.75%
- -----------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.813298 16.22%
- -----------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.121389 21.40%
- -----------------------------------------------------------------------------------------------------------------------------
03/30/94 03/30/94 8.789093 (3.41%)
- -----------------------------------------------------------------------------------------------------------------------------
9.194452 9.39% 10/14/91 10/14/91 8.833264 8.19%
- -----------------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 11.835198 19.45%
- -----------------------------------------------------------------------------------------------------------------------------
8.9304 17.34% 11/12/90 11/12/90 9.51272 10.87%
- -----------------------------------------------------------------------------------------------------------------------------
05/03/93 05/03/93 15.449865 6.30%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 15.236574 (1.25%)
- -----------------------------------------------------------------------------------------------------------------------------
9.002341 10.82% 09/21/88 09/21/88 3.367245 17.51%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 13.340362 (1.94%)
- -----------------------------------------------------------------------------------------------------------------------------
10.492364 4.51% 12/31/87 6.421298 7.38%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 23.138984 1.30%
- -----------------------------------------------------------------------------------------------------------------------------
13.537122 11.61% 12/31/87 6.767791 13.23%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 17.453654 1.46%
- -----------------------------------------------------------------------------------------------------------------------------
9.920987 12.29% 12/31/87 6.580901 10.41%
- -----------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 16.296197 1.91%
- -----------------------------------------------------------------------------------------------------------------------------
7.175613 18.27% 01/09/89 01/09/89 3.696424 18.22%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -------------------------------
Separate
Account Free Out
Charge
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
125 0
- -------------------------------
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Maintenance
Fund Name Fee As of Date
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Aetna Bond VP 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 5 12/31/97
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Five Year Five Year Five Year Ten Year
As of AUV as of Date as of AUV w/ DSC as of Date as of AUV w/ DSC as of Date
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.422351 12/31/96 13.025091 12.47% 07/31/95 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------
24.699589 12/31/96 20.419229 14.90% 12/31/92 13.394677 11.85% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------
51.32967 12/31/96 47.991699 1.60% 12/31/92 39.07696 4.52% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------
14.455937 12/31/96 12.449984 10.29% 07/04/95 07/04/95
- ------------------------------------------------------------------------------------------------------------------------------
217.358795 12/31/96 169.447517 21.85% 12/31/92 102.413645 15.04% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------
14.443996 12/31/96 10.92378 25.60% 10/31/96 10/31/96
- ------------------------------------------------------------------------------------------------------------------------------
13.491194 12/31/96 11.930407 7.42% 07/31/95 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------
41.174241 12/31/96 39.527962 (1.06%) 12/31/92 34.634794 2.45% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------
10 05/30/97 05/30/97 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------
23.675239 12/31/96 19.964634 12.65% 12/31/92 13.739101 10.35% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------
16.586583 12/31/96 13.110102 20.18% 05/31/94 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------
14.714768 12/31/96 12.349485 13.18% 03/31/94 03/31/94
- ------------------------------------------------------------------------------------------------------------------------------
17.276438 12/31/96 14.091691 16.46% 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------
18.661582 12/31/96 14.239971 24.49% 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------
18.174408 12/31/96 16.33436 5.69% 06/30/94 06/30/94
- ------------------------------------------------------------------------------------------------------------------------------
16.815889 12/31/96 13.87196 15.15% 06/30/95 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------
18.690071 12/31/96 15.49294 14.59% 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------
7.714731 12/31/96 8.832164 (17.03%) 10/31/94 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
14.403346 12/31/96 13.611465 0.52% 12/31/92 9.194452 8.26% 10/14/91
- ------------------------------------------------------------------------------------------------------------------------------
15.046484 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
15.046484 12/31/96 13.948647 2.47% 09/30/93 09/30/93
- ------------------------------------------------------------------------------------------------------------------------------
13.081901 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
13.081901 12/31/96 13.650371 (8.97%) 12/31/92 10.492364 3.43% 08/31/92
- ------------------------------------------------------------------------------------------------------------------------------
23.440467 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
23.440467 12/31/96 18.786112 18.53% 12/31/92 13.537122 10.46% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------
17.709081 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
17.709081 12/31/96 16.452845 2.24% 12/31/92 9.920987 11.13% 07/31/89
- ------------------------------------------------------------------------------------------------------------------------------
16.608063 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------
16.608063 12/31/96 13.112832 20.31% 10/31/94 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Inception Inception Inception Account Free Out One Year Three
as of AUV w/ DSC Date AUV w/ DSC Charge DSC Year DSC
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 10.001436 17.08% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
04/03/89 9.819619 10.46% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
24.07106 7.85% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
07/04/95 9.767843 14.63% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
52.849953 15.18% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
10/31/96 10.442242 26.37% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
07/31/95 9.987927 10.85% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
26.164035 4.63% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
05/30/97 8.277708 14.75% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
05/31/89 10.030486 9.85% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
05/31/94 8.33616 19.42% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
03/31/94 9.667053 10.31% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
05/31/95 9.954082 21.32% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
05/31/95 10.116433 24.21% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
06/30/94 9.932873 17.08% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
06/30/95 10.441661 18.50% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
05/31/95 10.028634 24.71% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
10/31/94 9.850547 (8.93%) 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
10/14/91 8.833264 7.29% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
11/28/97 15.23553 (6.19%) 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
09/30/93 9.871585 9.08% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
11/28/97 13.339448 (6.85%) 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
08/31/92 9.552864 5.04% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
11/28/97 23.106013 (3.64%) 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
05/31/89 10.13716 9.59% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
11/28/97 17.490182 (3.82%) 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
07/31/89 9.325456 7.25% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
11/28/97 16.276016 (3.07%) 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
10/31/94 8.846804 20.03% 125 0 5.00% 5.00%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- -----------------------------------------------------
Five Year Ten Year Inception
DSC DSC DSC
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
5.00% 0.00% 5.00%
- -----------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Maintenance One Year
Fund Name Fee As of Date As of AUV as of Date
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Ascent VP 5 12/31/97 15.422351 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 5 12/31/97 24.699589 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 5 12/31/97 51.32967 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 5 12/31/97 14.455937 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 5 12/31/97 217.358795 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 5 12/31/97 14.443996 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 5 12/31/97 13.491194 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 5 12/31/97 41.174241 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 5 12/31/97 10 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 5 12/31/97 23.675239 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 5 12/31/97 16.586583 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 5 12/31/97 20.283619 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 5 12/31/97 14.714768 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 5 12/31/97 17.276438 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Index 500 Portfolio 5 12/31/97 18.661582 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 5 12/31/97 18.174408 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 5 12/31/97 16.815889 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 5 12/31/97 18.690071 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund, Inc. 5 12/31/97 7.714731 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 5 12/31/97 14.403346 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
MFS Total Return Series 5 12/31/97 20.140556 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 5 12/31/97 19.862554 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 5 12/31/97 20.542493 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 5 12/31/97 15.046484 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 5 12/31/97 15.046484 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 5 12/31/97 13.081901 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI-MFS Research Growth 5 12/31/97 13.081901 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 5 12/31/97 23.440467 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 5 12/31/97 23.440467 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 5 12/31/97 17.709081 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder
International Growth 5 12/31/97 17.709081 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 5 12/31/97 16.608063 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 5 12/31/97 16.608063 12/31/96
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
One Year One Year Three Year Three Year Three Year Five Year
as of AUV w/out DSC as of Date as of AUV w/out DSC as of Date
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
13.025091 18.39% 07/05/95
- ---------------------------------------------------------------------------------------------
20.419229 20.95% 12/30/94 14.288446 20.00% 12/31/92
- ---------------------------------------------------------------------------------------------
47.991699 6.94% 12/30/94 40.173187 8.50% 12/31/92
- ---------------------------------------------------------------------------------------------
12.449984 16.10% 07/05/95
- ---------------------------------------------------------------------------------------------
169.44752 28.26% 12/30/94 105.558306 27.21% 12/31/92
- ---------------------------------------------------------------------------------------------
10.92378 32.21% 09/16/96
- ---------------------------------------------------------------------------------------------
11.930407 13.07% 07/05/95
- ---------------------------------------------------------------------------------------------
39.527962 4.15% 12/30/94 36.269952 4.31% 12/31/92
- ---------------------------------------------------------------------------------------------
7.26596 37.62% 12/13/96
- ---------------------------------------------------------------------------------------------
19.964634 18.57% 12/30/94 14.00435 19.11% 12/31/92
- ---------------------------------------------------------------------------------------------
13.110102 26.51% 12/30/94 8.705724 23.96% 12/31/92
- ---------------------------------------------------------------------------------------------
17.454995 16.19% 12/30/94 13.00197 15.97% 12/31/92
- ---------------------------------------------------------------------------------------------
12.349485 19.14% 12/30/94 9.446394 15.91% 12/31/92
- ---------------------------------------------------------------------------------------------
14.091691 22.59% 01/03/95
- ---------------------------------------------------------------------------------------------
14.239971 31.04% 12/30/94 8.663868 29.13% 12/31/92
- ---------------------------------------------------------------------------------------------
16.33436 11.25% 12/30/94 12.169459 14.29% 09/13/93
- ---------------------------------------------------------------------------------------------
13.87196 21.21% 12/30/94 9.223457 22.15% 09/13/93
- ---------------------------------------------------------------------------------------------
15.49294 20.62% 12/30/94 9.664491 24.58% 09/13/93
- ---------------------------------------------------------------------------------------------
8.832164 (12.66%) 12/30/94 8.772436 (4.20%) 03/30/94
- ---------------------------------------------------------------------------------------------
13.611465 5.81% 12/30/94 9.410581 15.23% 12/31/92
- ---------------------------------------------------------------------------------------------
16.812841 19.78% 01/03/95
- ---------------------------------------------------------------------------------------------
16.428363 20.89% 12/30/94 13.986753 12.39% 12/31/92
- ---------------------------------------------------------------------------------------------
19.135018 7.34% 12/30/94 15.180234 10.60% 05/03/93
- ---------------------------------------------------------------------------------------------
11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------
13.948647 7.86% 12/30/94 9.511453 16.51% 12/31/92
- ---------------------------------------------------------------------------------------------
11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------
13.650371 (4.18%) 12/30/94 11.157308 5.44% 12/31/92
- ---------------------------------------------------------------------------------------------
11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------
18.786112 24.76% 12/30/94 13.396515 20.49% 12/31/92
- ---------------------------------------------------------------------------------------------
11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------
16.452845 7.62% 12/30/94 13.226715 10.20% 12/31/92
- ---------------------------------------------------------------------------------------------
11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------
13.112832 26.64% 12/31/94 8.696596 24.06% 12/31/92
- ---------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Separate
Five Year Five Year Ten Year Ten Year Ten Year Inception Inception Inception Account Free
as of AUV w/out DSC as of Date as of AUV w/out DSC Date AUV w/out DSC Charge Out
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
07/05/95 07/05/95 9.721985 20.32% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
13.394677 13.01% 04/03/89 04/03/89 9.819619 11.11% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
39.07696 5.59% 12/31/87 24.07106 7.85% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 9.767843 17.01% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
102.413645 16.23% 12/31/87 52.849953 15.18% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
09/16/96 09/16/96 10 32.90% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 9.831316 13.52% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
34.634794 3.51% 12/31/87 26.164035 4.63% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
12/13/96 12/13/96 7.11767 38.15% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
13.739101 11.49% 12/31/87 8.317833 11.01% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
7.045899 18.66% 12/31/87 4.000147 15.27% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
11.25643 12.49% 12/31/87 6.886267 11.40% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
8.506632 11.57% 09/06/89 09/06/89 6.018963 11.33% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 8.527906 26.60% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
8.010874 18.42% 08/27/92 08/27/92 7.568026 18.39% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 9.005012 17.73% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.813298 16.21% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.121389 21.39% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
03/30/94 03/30/94 8.789093 (3.42%) 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
9.194452 9.38% 10/14/91 10/14/91 8.833264 8.17% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 11.835198 19.44% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
8.9304 17.32% 11/12/90 11/12/90 9.51272 10.86% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
05/03/93 05/03/93 15.449865 6.29% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 15.236574 (1.26%) 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
9.002341 10.81% 09/21/88 09/21/88 3.367245 17.50% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 13.340362 (1.95%) 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
10.492364 4.50% 12/31/87 6.421298 7.36% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 23.138984 1.29% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
13.537122 11.59% 12/31/87 6.767791 13.22% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 17.453654 1.45% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
9.920987 12.27% 12/31/87 6.580901 10.39% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 16.296197 1.90% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
7.175613 18.26% 01/09/89 01/09/89 3.696424 18.21% 125 0
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
