As filed with the Securities and Exchange Registration No. 333-01107
Commission on February 19, 1998 Registration No. 811-2513
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
- --------------------------------------------------------------------------------
POST-EFFECTIVE AMENDMENT NO. 8 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment to
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
- --------------------------------------------------------------------------------
Variable Annuity Account C of Aetna Life Insurance and Annuity Company
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code: (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
60 days after filing pursuant to paragraph (a)(1) of Rule 485
- --------
X on May 1, 1998 pursuant to paragraph (a)(1) of Rule 485
- --------
<PAGE>
<TABLE>
<CAPTION>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
<S> <C> <C>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
1 Cover Page........................................... Cover Page
2 Definitions.......................................... Definitions
3 Synopsis............................................. Prospectus Summary; Fee Table
4 Condensed Financial Information...................... Condensed Financial Information; Appendix VII -
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 Fees During the Accumulation Period
7 General Description of Variable Annuity Contracts.... Purchase; Miscellaneous
8 Annuity Period....................................... Annuity Period
9 Death Benefit........................................ Death Benefit
10 Purchases and Contract Value......................... Purchase; Determining Individual Account
Current Value
11 Redemptions.......................................... Contract Rights; Additional Withdrawal Options
12 Taxes................................................ Tax Status
13 Legal Proceedings.................................... Miscellaneous - Legal Proceedings and Legal
Matters
14 Table of Contents of the Statement of Additional
Information.......................................... Statement of Additional Information - Table of
Contents
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
FORM N-4 PART B (STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION) LOCATION
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and History
18 Services............................................. General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase of Contracts
20 Underwriters......................................... Offering and Purchase of Contracts
21 Calculation of Performance Data...................... Performance Data; Average Annual Total
Return Quotations
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements
</TABLE>
Part C (Other Information)
--------------------------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Contracts offered in connection with this Prospectus are the Retirement Plus
and Voluntary Contracts, which are group deferred variable annuity contracts
(the "Contracts") issued by Aetna Life Insurance and Annuity Company
("Company"). See "Purchase." The Contracts are designed to fund plans that
provide for retirement income and are established under the Internal Revenue
Code of 1986, as amended ("Code"). Amounts held under a Contract may be entitled
to tax-deferred treatment under certain sections of the Code.
Each Contract allows values to accumulate under variable investment options or
credited interest options, or a combination of these investment options. They
also provide for the payment of annuity benefits on a variable or fixed basis,
or a combination thereof. The variable investment options ("Funds") currently
available through Variable Annuity Account C (the "Separate Account") under the
Contracts described in this Prospectus are as follows:
<TABLE>
<S> <C>
[bullet] Aetna Balanced VP (formerly known as Aetna [bullet] Calvert Social Balanced Portfolio (formerly
Investment Advisers Fund, Inc.) known as Calvert Responsibly Invested Portfolio)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP [bullet] Fidelity VIP Equity-Income Portfolio
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP [bullet] Fidelity VIP Growth Portfolio
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP [bullet] Fidelity VIP Overseas Portfolio
[bullet] Aetna Ascent VP [bullet] Fidelity VIP II Contrafund Portfolio
(formerly known as Aetna Ascent Variable Portfolio) [bullet] Janus Aspen Aggressive Growth Portfolio
[bullet] Aetna Crossroads VP [bullet] Janus Aspen Balanced Portfolio Portfolio)
(formerly known as Aetna Crossroads Variable [bullet] Janus Aspen Flexible Income Portfolio
[bullet] Aetna Legacy VP [bullet] Janus Aspen Growth Portfolio
(formerly known as Aetna Legacy Variable Portfolio) [bullet] Janus Aspen Worldwide Growth Portfolio
[bullet] Aetna Growth VP [bullet] Lexington Natural Resources Trust*
(formerly known as Aetna Variable Growth Portfolio) [bullet] Oppenheimer Global Securities
[bullet] Aetna High Yield VP [bullet] Oppenheimer Strategic Bond
[bullet] Aetna Index Plus Large Cap VP [bullet] Portfolio Partners MFS Emerging Equities Portfolio
(formerly known as Aetna Variable Index Plus Portfolio) [bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Aetna Index Plus Mid Cap VP [bullet] Portfolio Partners MFS Value Equity Portfolio
[bullet] Aetna Index Plus Small Cap VP [bullet] Portfolio Partners Scudder International Growth Portfolio
[bullet] Aetna International VP [bullet] Portfolio Partners T. Rowe Price Growth Equity Portfolio
[bullet] Aetna Real Estate Securities VP
[bullet] Aetna Small Company VP
(formerly known as Aetna Variable Small Company
Portfolio)
[bullet] Aetna Value Opportunity VP (formerly known as
Aetna Variable Capital Appreciation Portfolio)
</TABLE>
* This Fund is only available for investment by Participants who
established an Individual 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 available for the accumulation of values are the
Guaranteed Accumulation Account, the Fixed Plus Account and the Fixed Account.
The Guaranteed Accumulation Account and the Fixed Plus Account are offered only
in those jurisdictions in which they are approved. (See Appendices I, II and
III.) The Fixed Account is available for accumulation only in limited
circumstances. (See Appendix IV.) Except as specifically mentioned, this
Prospectus describes only the variable investment options of the Contracts.
Additional information about the Guaranteed Accumulation Account is also
contained in an accompanying prospectus.
The availability of the above Funds and credited interest options is subject to
applicable regulatory authorization. Not all Funds or credited interest options
are available in all jurisdictions, under all Plans or under a particular
Contract. Please check with your employer to determine option availability.
This Prospectus sets forth concisely the information about the Separate Account
that a prospective investor should know before investing. Additional information
about the Separate Account is contained in a Statement of Additional Information
("SAI") dated May 1, 1998, which has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Table of Contents for
the SAI is printed in this Prospectus. An SAI may be obtained without charge by
indicating the request on the enrollment form or on the enclosed prospectus
receipt for this Prospectus or by calling 1-800-525-4225. You may also obtain
our 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.
NO PERSON IS AUTHORIZED BY THE COMPANY TO GIVE INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFERS CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
THE PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1, 1998
<PAGE>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS................................................................ DEFINITIONS - 1
PROSPECTUS SUMMARY......................................................... SUMMARY - 1
FEE TABLE.................................................................. FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION ........................................................ 1
PERFORMANCE DATA ....................................................................... 1
THE COMPANY ............................................................................ 1
VARIABLE ANNUITY ACCOUNT C ............................................................. 1
THE FUNDS .............................................................................. 2
Mixed and Shared Funding ............................................................. 4
Fund Changes ......................................................................... 5
Fund Limitations ..................................................................... 5
PURCHASE ............................................................................... 5
The Contracts ........................................................................ 5
Eligible Contract Holders ............................................................ 5
Purchase By Exchange ................................................................. 5
Contract Charges and Fees Options .................................................... 5
Responsibilities of Contract Holders ................................................. 5
Enrollment of Participants ........................................................... 6
Contributions ........................................................................ 6
Contribution Limits for Contracts Used with 403(b) Plans ........................... 6
Contribution Limits for Contracts Used with 401(a)/401(k) Plans .................... 6
Distribution ......................................................................... 6
DETERMINING INDIVIDUAL ACCOUNT CURRENT VALUE ........................................... 7
Fund Record Units .................................................................... 7
Net Return Factor .................................................................... 7
Transfer Credits ..................................................................... 8
CONTRACT RIGHTS ........................................................................ 8
Right to Cancel ...................................................................... 8
Rights Under the Contracts ........................................................... 8
Rights Under the Retirement Plus Contract .......................................... 8
Rights Under the Voluntary Contract ................................................ 8
Rights to your Individual Account .................................................. 8
TRANSFERS AND ALLOCATION CHANGES ....................................................... 8
WITHDRAWALS ............................................................................ 9
Withdrawal Restrictions for Contracts Used with 403(b) Plans ......................... 9
Reinvestment Privilege ............................................................... 10
CONTRACT LOANS ......................................................................... 10
CHARGES AND FEES DURING THE ACCUMULATION PERIOD ........................................ 10
Annual Maintenance Fee ............................................................... 13
Withdrawal Fee ....................................................................... 13
Mortality and Expense Risk Charges ................................................... 14
Administrative Expense Charge ........................................................ 14
Fund Expenses ........................................................................ 15
Premium and Other Taxes .............................................................. 15
CHARGES AND FEES DURING THE ANNUITY PERIOD ............................................. 15
Mortality and Expense Risk Charges ................................................... 15
<PAGE>
Administrative Expense Charge ........................................................ 15
Withdrawal Fee ....................................................................... 15
SYSTEMATIC DISTRIBUTION OPTIONS ........................................................ 15
ANNUITY PERIOD ......................................................................... 16
Annuity Period Elections ............................................................. 16
Annuity Options ...................................................................... 18
DEATH BENEFIT .......................................................................... 18
Accumulation Period .................................................................. 18
Annuity Period ....................................................................... 18
TAX STATUS ............................................................................. 19
Introduction ......................................................................... 19
Taxation of the Company .............................................................. 19
Contracts Used With Certain Retirement Plans 19
MISCELLANEOUS .......................................................................... 21
Voting Rights ........................................................................ 21
Modification of the Contracts ........................................................ 22
Contract Holder Inquiries ............................................................ 22
Telephone Transfers .................................................................. 22
Payments ............................................................................. 22
Transfer of Ownership; Assignment .................................................... 22
Legal Proceedings .................................................................... 22
Legal Matters ........................................................................ 22
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION .................................... 24
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT ............................................ 25
APPENDIX II--FIXED PLUS ACCOUNT ........................................................ 27
APPENDIX III--FIXED PLUS ACCOUNT (Applicable only in limited circumstances) ............ 29
APPENDIX IV--FIXED ACCOUNT (Applicable only in limited circumstances) .................. 31
APPENDIX V--EMPLOYEE APPOINTMENT OF EMPLOYER AS AGENT UNDER AN
ANNUITY CONTRACT...................................................................... 32
APPENDIX VI--CONTRACTS ACQUIRED BY EXCHANGE ............................................ 33
APPENDIX VII--CONDENSED FINANCIAL INFORMATION .......................................... 35
</TABLE>
<PAGE>
DEFINITIONS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
As used in this Prospectus, the following terms have the meanings shown:
Accumulation Period: The period during which Net Contribution(s) are applied to
an Individual Account.
Adjusted Current Value: The Current Value of an Individual Account plus or minus
any applicable aggregate GA Account Market Value Adjustment, if applicable.
Aggregate Current Value: Current Value of Individual Accounts under a Contract
and other contracts of the same class as the Contract and covering employees of
the employer maintaining the Plan. Where such other contract becomes effective
after the date a Contract became effective, the aggregation will commence in
accordance with the Company's existing administrative practice, but in no event
later than the first day of the next succeeding anniversary date. Where such
other contract is in existence prior to, or on the date a Contract became
effective, the aggregation will commence on the date the Contract becomes
effective.
Annuitant: A person on whose life an Annuity payment is based under a Contract.
Annuity: Payments of income:
(a) For the life of one or two persons;
(b) For a stated period; or
(c) For some combination of (a) and (b).
Annuity Period: The period during which Annuity payments are made.
Annuity Unit: A measure of the value attributable to each Fund selected during
the Annuity Period.
Beneficiary: Under the Retirement Plus Contract the Contract Holder is the
Beneficiary. Under the Voluntary Contract, the Beneficiary is the person
designated to receive any benefits which remain under a Contract after a
Participant's death. The Participant designates a Beneficiary under a Voluntary
Contract by providing written notice to the Company on the appropriate form.
Code: Internal Revenue Code of 1986, as amended.
Company: Aetna Life Insurance and Annuity Company, sometimes referred to as "we"
or "us."
Contract(s): Either the Retirement Plus Contract or the Voluntary Contract
offered by this Prospectus or both.
Contract Holder: The entity to which a Contract is issued. The Contract Holder
is usually the employer.
Contribution: A payment received at the Company's Home Office and allocated to a
Contract.
Current Value: For an Individual Account during the Accumulation Period, the
Current Value is the total of:
(a) The amount, if any, in the Fixed Plus Account, with interest earned to
date; plus
(b) The amount, if any, in the GA Account with interest earned to date;
plus
(c) The amount, if any, in the Fixed Account with interest earned to date;
plus
(d) The value of all Fund Record Units, if any, as of the most recent
Valuation Period; less
(e) Any Maintenance Fee(s) due.
Distributor(s): The registered broker-dealer(s) which have entered into selling
agreements with the Company to offer and sell the Contracts. The Company may
also serve as a Distributor.
Employee Account: An Individual Account that will be credited with Participant
Contributions, specifically employee salary reduction Contributions.
Employer Account: An Individual Account that will be credited with the employer
Contributions.
- -------------------------------------------------------------------------------
DEFINITIONS - 1
<PAGE>
ERISA: Employee Retirement Income Security Act of 1974.
Fixed Account: An accumulation option with a guaranteed minimum interest rate
which is available for accumulation only in limited circumstances. See Appendix
IV.
Fixed Plus Account: An accumulation option with a guaranteed minimum interest
rate. The Company may credit a higher rate which is not guaranteed. See
Appendices II and III.
Fund Record Units: Units representing the portion of the Net Contribution(s)
applied to each Fund under the Separate Account.
Funds: The open-end registered management investment companies or separate
investment portfolio thereof, in which the Separate Account invests.
General Account: The account holding the assets of the Company, other than those
assets held in the Company's separate account(s).
Guaranteed Accumulation Account (GA Account or the GAA): An accumulation option
where the Company guarantees stipulated rate(s) of interest for a specified
period of time. See Appendix I.
Home Office: The Company's principal executive offices located at 151 Farmington
Avenue, Hartford, Connecticut 06156.
Individual Account(s): Account(s) established for each Participant under each
Contract in which he or she may be participating to keep a record of Current
Values and transactions.
Maintenance Fee: A maintenance fee will be charged for each Participant under
each Contract and will be deducted during the Accumulation Period from the sum
under each Contract of the Current Value of Participant's Individual Accounts
and upon full surrender of the Participant's Individual Accounts.
Market Value Adjustment: An adjustment to the amount withdrawn or transferred
from the Guaranteed Accumulation Account prior to the end of that Guaranteed
Term. The adjustment reflects the change in the value of the investment due to
changes in interest rates since the date of deposit. See Appendix I and the
prospectus for the Guaranteed Accumulation Account for a discussion of how the
market value adjustment is actually calculated.
Net Contributions: A Contribution less applicable premium taxes.
Participant: An eligible person participating in the Plan maintained by the
Contract Holder, for whom an Individual Account has been established by the
Contract Holder, referred to as "you."
Plan Beneficiary: The person entitled to receive benefits under the Plan in the
event of the Participant's death. Under the Voluntary Contract, the Beneficiary
is the Plan Beneficiary. Where the Plan utilizes the Retirement Plus Contract,
the Participant designates a Plan Beneficiary with the employer, pursuant to the
terms of the Plan.
Plan(s): The Plan named on the cover of a Contract established under Code
Section 403(b) or Sections 401(a)/401(k).
Retirement Plus Contract: The group deferred variable annuity contract offered
in connection with this Prospectus which allows for employer Contributions and
employee Contributions.
SEC: Securities and Exchange Commission.
Separate Account: Variable Annuity Account C, an account established by the
Company under Section 38a-433 of the Connecticut General Statutes, that buys and
holds shares of the Fund(s) available under a Contract.
Systematic Distribution Options: certain withdrawal options offered by the
Company under each Contract that are not considered annuity options.
Underwriter: The registered broker-dealer which contracts with other registered
broker-dealers on behalf of the Separate Account to offer and sell the
Contracts.
Valuation Period: The period of time from when the Company determines the
Accumulation Unit Value and Annuity Unit Value of a variable investment option
until the next time it determines such unit value. Currently, the calculation
occurs after the close of business of the New York
- -------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
Stock Exchange on any normal business day, Monday through Friday, that the New
York Stock Exchange is open.
Valuation Reserve: A reserve established pursuant to the insurance laws of
Connecticut to measure voting rights during the Annuity Period and the value of
a commutation right available under the "Payments for a Specified Period"
nonlifetime Annuity option when elected on a variable basis under a Contract.
Variable Annuity: An Annuity providing for the accumulation of values and/or for
Annuity payments which vary in dollar amount with investment results.
Voluntary Contract: The group deferred variable annuity contract offered in
connection with this Prospectus which allows only for employee Contributions.
Withdrawal Fee: If all or any portion of an Individual Account's Current Value
is withdrawn during the Accumulation Period, a percentage of the amount
withdrawn may be deducted so that the Company may recover sales and
administrative related expenses.
- -------------------------------------------------------------------------------
DEFINITIONS - 3
<PAGE>
PROSPECTUS SUMMARY
================================================================================
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group
deferred, variable annuity contracts. Under the Retirement Plus Contract,
Contributions may be made by the Contract Holder (generally, the employer) and
the Participants. Under the Voluntary Contract, Contributions may be made only
by Participants. See "The Contracts," "Contract Rights" and "Miscellaneous."
The Contracts are being offered in certain markets to fund Plans that are
adopted under Sections 401(a) (including 401(k)) or 403(b) of the Code. Amounts
held under the Plans may be entitled to tax-deferred treatment under the Code.
Under the Plans, Contributions made under the Plan are forwarded by the Contract
Holder to the Company.
PURCHASE
Each Contract may be purchased by eligible organizations on behalf of a
group made up of their employees. Eligible employees may participate in a
Contract by completing an enrollment form (and any other required forms) and
submitting it to the Company with an initial Contribution. See "Purchase."
WITHDRAWALS
Each Contract allows withdrawals of all or a portion of your Individual
Account Current Value during the Accumulation Period. Certain charges and fees
may be assessed upon withdrawal from either Contract. See "Charges and Fees
During the Accumulation Period." Limitations apply to withdrawals from the Fixed
Plus Account. See Appendices II and III. The Code restricts full and partial
withdrawals in certain circumstances. See "Tax Status - Contracts Used With
Certain Retirement Plans". Amounts withdrawn from the GAA may be subject to a
Market Value Adjustment. See Appendix I.
WITHDRAWAL FEE
Amounts withdrawn from either Contract may be subject to a Withdrawal Fee.
The maximum Withdrawal Fee that could be assessed on a full or partial
withdrawal is 8.5% of the total Contributions made to the Individual Account of
a Contract. See "Charges and Fees During the Accumulation Period--Withdrawal
Fee."
TAXES AND WITHHOLDING
A 10% federal tax penalty and a 20% withholding for income tax may be
imposed on certain withdrawals. See "Tax Status."
CONTRACT CHARGES
Certain charges are associated with each Contract; for example, mortality
and expense risk charges, administrative expense charges and Maintenance Fees.
The Funds are also subject to certain fees and expenses. Contributions may also
be subject to premium taxes. See "Charges and Fees During the Accumulation
Period" for a complete explanation of these charges.
FREE LOOK PERIOD
Contract Holders have the right to cancel their Contract and Participants
have the right to cancel their participation in a Contract within 10 days (or
longer if required by state law). Unless state law requires otherwise, the
Company will return the full amount of Contributions increased or decreased by
the investment performance of the variable funding options to which
Contributions were deposited.
- -------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
FEE TABLE
================================================================================
The purpose of the Fee Table is to assist Contract Holders in understanding the
various costs and expenses that may be borne, directly or indirectly, under each
Contract. The costs and expenses will be based upon the charges and fees option
the Contract Holder selects. The information listed reflects the charges due
under each Contract, as well as the fees and expenses deducted from the Funds.
Additional information regarding the charges and fees assessed under each
Contract can be found under "Contract Charges and Fees Options" and "Charges and
Fees During the Accumulation Period" in this Prospectus. Charges and expenses
shown do not take into account premium taxes that may be applicable. For more
information regarding expenses paid out of the assets of a particular Fund, see
the Fund's Prospectus.
CONTRACT HOLDER TRANSACTION EXPENSES
WITHDRAWAL FEE for withdrawals under each Contract (as a percentage of
amount withdrawn)(1):
Number of Years
Individual Account Has
Been Established Fee
---------------------- ---
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%
ANNUAL MAINTENANCE FEE(2)
Per Participant, Per Contract .................................. $20.00
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)
Mortality and Expense Risk Charge(3) ........................... 1.25%
Administrative Expense Charge(4) ............................... 0.25%
Total Separate Account Annual Expenses.......................... 1.50%
- --------------------
(1) This sets forth the Withdrawal Fee schedule for 10 years, the maximum
duration of the Withdrawal Fee. The total amount deducted for the
Withdrawal Fee will not exceed 8.5% of the Contributions made to an
Individual Account. See "Contract Charges and Fees Options" and "Charges
and Fees During the Accumulation Period--Withdrawal Fee" for instances in
which the Withdrawal Fee will only be charged for 5 years or not at all and
for a description of this charge.
(2) This represents the maximum annual Maintenance Fee that will be deducted
under a Contract. See "Contract Charges and Fees Options" and "Charges and
Fees During the Accumulation Period--Annual Maintenance Fee" for instances
in which this fee may be reduced and for a description of this charge. A
Maintenance Fee, to the extent permitted by state law, is also deducted
upon termination of an Individual Account.
(3) This represents the maximum mortality and expense risk charge that may be
deducted under a Contract. See "Contract Charges and Fees Options" and
"Charges and Fees During the Accumulation Period--Mortality and Expense
Risk Charges" for instances in which this fee may be reduced and for a
description of this charge.
(4) This represents the maximum annual administrative expense charge that will
be deducted under a Contract. See "Contract Charges and Fees Options" and
"Charges and Fees During the Accumulation Period--Administrative Expense
Charge" for instances in which this fee may be reduced and for a
description of this charge.
- -------------------------------------------------------------------------------
FEE TABLE -1
<PAGE>
FUND ANNUAL EXPENSES
The following table illustrates the advisory fees and other expenses applicable
to the Funds. Except as noted, the following figures are a percentage of average
net assets and, except where otherwise indicated, are based on figures for the
year ended December 31, 1997. A Fund's "Other Expenses" include operating costs
of the Fund. These expenses shown below are reflected in the Fund's net asset
value and are not deducted from the Individual Account Current 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 Balanced VP (2)
Aetna Bond VP (2)
Aetna Growth and Income VP (2)
Aetna Money Market VP(2)
Aetna Ascent VP (2)
Aetna Crossroads VP (2)
Aetna Legacy VP (2)
Aetna Growth VP (3)
Aetna High Yield VP(3)
Aetna Index Plus Large Cap VP (3)
Aetna Index Plus Mid Cap VP(3)
Aetna Index Plus Small Cap VP(3)
Aetna International VP(3)
Aetna Real Estate Securities VP(3)
Aetna Small Company VP (3)
Aetna Value Opportunity VP (3)
Calvert Social Balanced Portfolio (4)
Fidelity VIP Equity-Income Portfolio(5)
Fidelity VIP Growth Portfolio(5)
Fidelity VIP Overseas Portfolio(5)
Fidelity VIP II Contrafund Portfolio(5)
Janus Aspen Aggressive Growth Portfolio(6)
Janus Aspen Balanced Portfolio(6)
Janus Aspen Flexible Income Portfolio(6)
Janus Aspen Growth Portfolio (6)
Janus Aspen Worldwide Growth Portfolio(6)
Lexington Natural Resources Trust
Oppenheimer Global Securities
Oppenheimer Strategic Bond
Portfolio Partners MFS Emerging Equities Portfolio (7)
Portfolio Partners MFS Research Growth Portfolio (7)
Portfolio Partners MFS Value Equity Portfolio (7)
Portfolio Partners Scudder International Growth Portfolio(7)
Portfolio Partners T. Rowe Price Growth Equity Portfolio (7)
</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) For the fiscal year ended December 31, 1997, the Company 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 Company 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
"Other Expenses" shown are the actual expenses that would have been charged
to the Fund during 1997 in the absence of the Company's assumption of all
of the Fund's ordinary recurring direct costs.
(3) The Portfolios' adviser has agreed to waive a portion of its fee or to
reimburse the Portfolios for certain expenses so that aggregate expenses do
not exceed the following percentage of each Portfolio's net assets: 0.80%
for Growth VP and High Yield VP; 0.55% for Index Plus Large Cap VP; 0.60%
for Index Plus Mid Cap VP and Index Plus Small Cap VP; 1.15% for
International VP; 0.95% for Real Estate Securities VP and Small Company VP;
and 0.80% for Value Opportunity VP. Without such waiver or reimbursement,
aggregate expenses for the fiscal year ended December 31, 1997 would have
been ____% for Growth VP; ____% for Index Plus Large Cap VP; _____% for
Small Company VP; and ____% for Value Opportunity VP; and are estimated for
the current fiscal year to be ___% for High Yield VP; ____% for Index Plus
Mid Cap
- -------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
VP; ____% for Index Plus Small Cap VP; ____% for International VP;
and _____% for Real Estate Securities VP. These waiver/reimbursement
arrangements are voluntary and may be modified or eliminated at any time.
(4) "Investment Advisory Fees" include a performance adjustment, which could
cause the fee to be as high as XX% or as low as XX%, depending on
performance. "Other Expenses" reflect an indirect fee of XX (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 XX%.
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce expenses. In addition, certain funds have entered into arrangements
with their custodian and transfer agent whereby interest earned on
uninvested cash balances was used to reduce custodian and transfer agent
expenses. Including these reductions, the total operating expenses would
have been XX% for Equity Income Portfolio, XX% for Growth Portfolio, XX%
for Overseas Portfolio, XX% for Asset Manager Portfolio; and XX% for
Contrafund Portfolio.
(6) The fees and expenses shown above 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 other than the Flexible Income
Portfolio is net of fee waivers or reductions from Janus Capital. Fee
reductions for the Aggressive Growth, Balanced, Growth, and Worldwide
Growth Portfolios reduce the management fee to the level of the
corresponding Janus retail fund. Other waivers, if applicable, are first
applied against the management fee and then against other expenses. Without
such waivers or reductions, the Management Fee, Other Expenses and Total
Fund Annual Expenses would have been XX%, XX% and XX% for Aggressive Growth
Portfolio; XX%, XX% and XX% for Balanced Portfolio; XX%, XX% and XX% for
Growth Portfolio;; and XX%, XX% and XX% 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 Portfolio's
Board of Trustees.
(7) Each Portfolio's aggregate expenses are limited to the advisory fees and
administrative fees disclosed above through April 30, 1999. Without these
limitations, the aggregate expenses for the current period are estimated to
be as follows: __% for the MFS Emerging Equities Portfolio; __% for the MFS
Research Growth Portfolio; __% for the MFS Value Equity Portfolio; .__% for
the Scudder International Growth Portfolio; and __% for the T. Rowe Price
Growth Equity Portfolio.
- -------------------------------------------------------------------------------
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 $1000 investment in the Contract and a 5% return on assets. The
Examples assume that (i) a withdrawal charge will be applicable for a 10-year
period, (ii) a transfer credit will apply, and (iii) less than $500,000 in
assets will be held by the Company. Accordingly, the Individual Account is
subject to a mortality and expense risk charge of 1.25%, an administrative
expense charge of 0.25%, $15.00 annual Maintenance Fee as an annual charge of
- ----% of the assets held in the Separate Account under the Contracts, and a
Withdrawal Fee for 10 years. See "Charges and Fees During the Accumulation
Period."
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B*
--------- ----------
If you withdraw your entire If you do not withdraw your
Account Value at the end of the Account Value, or if you annuitize
periods shown, you would pay the at the end of the periods shown,
following expenses, including any you would pay the following
applicable deferred sales charge: expenses (no deferred sales charge
is reflected):*
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
Aetna Balanced VP
Aetna Bond VP
Aetna Growth and Income VP
Aetna Money Market VP
Aetna Ascent VP
Aetna Crossroads VP
Aetna Legacy VP
Aetna Growth VP
Aetna High Yield VP
Aetna Index Plus Large Cap VP
Aetna Index Plus Mid Cap VP
Aetna Index Plus Small Cap VP
Aetna International VP
Aetna Real Estate Securities VP
Aetna Small Company VP
Aetna Value Opportunity VP
Calvert Social Balanced Portfolio
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Fidelity VIP II Contrafund Portfolio
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Balanced Portfolio
Janus Aspen Flexible Income Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Lexington Natural Resources Trust
Oppenheimer Global Securities
Oppenheimer Strategic Bond
Portfolio Partners MFS Emerging Equities Portfolio
Portfolio Partners MFS Research Growth Portfolio
Portfolio Partners MFS Value Equity Portfolio
Portfolio Partners Scudder International Growth Portfolio
Portfolio Partners T. Rowe Price Growth Equity Portfolio
</TABLE>
* This Example would not apply if the Annuity Option of Payments for a Specified
Period of Time is selected, and a lump sum settlement is requested before five
years of payments have been made, 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 apply. (Refer to Example A.)
- -------------------------------------------------------------------------------
FEE TABLE - 4
<PAGE>
CONDENSED FINANCIAL INFORMATION
================================================================================
Condensed Financial Information for the Separate Account is shown in
Appendix VII.
PERFORMANCE DATA
================================================================================
From time to time, the Company may advertise different types of historical
performance for the variable funding options of the Separate Account available
under the Contracts described in this Prospectus. The Company may advertise the
"standardized average annual total returns" of the variable funding options,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
return." Both methods are described below. Further information is contained in
the SAI.
"Standardized average annual total returns" are computed according to a
formula in which a hypothetical investment of $1,000 is applied to the variable
investment options under the Contracts 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 deduction of
all recurring charges during each period based either on the fee schedule under
the Contract that generates the lowest return, or based on an actual fee
schedule applicable to a particular Contract Holder, if different.
"Non-standardized returns" will be calculated in a similar manner, except
that non-standardized figures will not reflect the deduction of any applicable
Withdrawal Fee (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 also be calculated from
the Fund's inception date.
The Company may also advertise certain ratings, rankings or other
information related to the Company, the variable investment options or the
Funds. Further details regarding performance reporting and advertising are
described in the Statement of Additional Information.
THE COMPANY
================================================================================
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc.
which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc.
and an indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT C
================================================================================
Variable Annuity Account C is a separate account established by the Company
in 1976 pursuant to the insurance laws of the State of Connecticut. The Separate
Account was formed for the purpose of segregating assets attributable to the
variable portions of the Contracts from other assets of the Company. The
Separate Account is registered as a unit investment trust under the Investment
Company Act of 1940, and meets the definition of "separate account" under
federal securities laws.
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 the Company 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 other income, gains or losses of the Company. All obligations
arising under the Contracts are obligations of the Company.
- -------------------------------------------------------------------------------
1
<PAGE>
THE FUNDS
================================================================================
The Contract Holder will designate some or all of the mutual funds
described below as variable funding options under the Contracts. Except where
noted, all of the Funds are diversified as defined in the Investment Company Act
of 1940.
The Contract Holder may decide to offer only a select number of Funds under
its Plan. 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.
o Aetna Balanced VP (formerly known as Aetna Investment Advisers Fund, Inc..)
is a managed fund which seeks to maximize investment return consistent with
reasonable safety of principal by investing in one or more of the following
asset classes: stocks, bonds and cash equivalents based on the Company's
judgment of which of those sectors or mix thereof offers the best
investment prospects.(1)
o 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)
o 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)
o 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)
o Aetna Generation Portfolios, Inc.--Aetna Ascent VP (formerly known as Aetna
Ascent Variable Portfolio) seeks to provide capital appreciation by
allocating its investments among equities and fixed income securities. The
Portfolio is managed for investors who generally have an investment horizon
exceeding 15 years and who have a high level of risk tolerance.
See the Fund's prospectus for a description of the risks involved.(1)
o Aetna Generation Portfolios, Inc.-- Aetna Crossroads VP (formerly known as
Aetna Crossroads Variable Portfolio) seeks to provide total return (i.e.,
income and capital appreciation, both realized and unrealized) by
allocating its investments among equities and fixed income securities. The
Portfolio is managed for investors who generally have an investment horizon
exceeding 10 years and who have a moderate level of risk tolerance.(1)
o Aetna Generation Portfolios, Inc.-- Aetna Legacy VP (formerly known as
Aetna Legacy Variable Portfolio) seeks to provide total return consistent
with preservation of capital by allocating its investments among equities
and fixed income securities. The Portfolio is managed for investors who
generally have an investment horizon exceeding five years and who have a
low level of risk tolerance.(1)
o Aetna Variable Portfolios, Inc.--Aetna Growth VP (formerly known as Aetna
Variable Growth Portfolio) seeks growth and capital through investment in a
diversified portfolio of common stocks and securities convertible into
common stocks believed to offer growth potential. (1)
o Aetna Variable Portfolios, Inc.--Aetna High Yield VP seeks high current
income and growth of capital primarily through investment in a diversified
portfolio of fixed income securities rated lower than BBB- by S&P or lower
than Baa3 by Moody's.
o Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP (formerly
known as Aetna Variable Index Plus Portfolio) seeks to outperform the total
return performance of publicly traded common stocks represented by the S&P
500. (1)
o Aetna Variable Portfolios, Inc.--Aetna Index Plus Mid Cap VP seeks growth
of capital primarily through investment in a diversified portfolio
consisting of common stocks included in the S&P Mid Cap 400 Index (S&P
400)(1)
o 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 600 Small Cap Index (S&P 600), a stock market index
composed of 600 common stocks selected by S&P. (1)
o Aetna Variable Portfolios, Inc.--Aetna International VP seeks long-term
capital growth primarily through investment in a diversified portfolio of
common stocks principally traded in countries outside of the U.S. This Fund
will not target any given level of current income.(1)
o Aetna Variable Portfolios, Inc.--Aetna Real Estate Securities VP seeks
maximum total return primarily through investment in a diversified
portfolio of equity securities issued by real estate companies, the
majority of which are real estate investment trusts (REITs).(1)
o Aetna Variable Portfolios, Inc.--Aetna Small Company VP (formerly known as
Aetna Variable Small Company Portfolio) seeks growth of capital primarily
through investment in a diversified portfolio of common stocks and
securities convertible into common stocks of companies with
- -------------------------------------------------------------------------------
2
<PAGE>
smaller market capitalizations. Companies with smaller market
capitalizations generally will have market capitalization at the time of
purchase of $1 billion or less. (1)
o Aetna Variable Portfolios, Inc.-- Aetna Value Opportunity VP (formerly
known as Aetna Variable Capital Appreciation Portfolio) seeks growth of
capital primarily through investment in a diversified portfolio of common
stocks and securities convertible into common stock. The Portfolio will use
a value-oriented approach in an attempt to outperform the total return
performance of publicly traded common stocks represented by the S&P 500
Composite Stock Price Index ("S&P 500"), a broad based stock market index
composed of 500 common stocks selected by the Standard & Poor's
Corporation. The Portfolio uses the S&P 500 as a comparative benchmark
because it represents approximately two-thirds of the total market value of
all U.S. common stocks, and is well known to investors.(1)
o Calvert Social Balanced Portfolio (formerly known as Calvert Responsibly
Invested 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)
o 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)
o Fidelity Investments' Variable Insurance Products Fund--Growth Portfolio
seeks capital appreciation by investing mainly in common stocks, although
its investments are not restricted to any one type of security.(3)
o Fidelity Investments' Variable Insurance Products Fund--Overseas Portfolio
seeks long-term growth by investing in foreign securities (at least 65% of
the Fund's total assets in securities of issuers from at least three
countries outside of North America). Foreign investments involve greater
risks than U.S. investments, including political and economic risks and the
risk of currency fluctuation.(3)
o Fidelity Investments' Variable Insurance Products Fund II--Contrafund
Portfolio seeks maximum total return over the long term by investing mainly
in equity securities of companies that are undervalued or out-of-favor. (3)
o Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified
portfolio that seeks long-term growth of capital in a manner consistent
with the preservation of capital. The Portfolio pursues its investment
objective by normally investing at least 50% of its equity assets in
securities issued by medium-sized companies. Medium-sized companies are
those whose market capitalizations fall within the range of companies in
the S&P Midcap 400 Index, which as of December 30, 1997 included companies
with capitalizations between approximately $______million and
$_____billion, but which is expected to change on a regular basis.(4)
o Janus Aspen Series--Balanced Portfolio seeks long-term capital growth
consistent with the preservation of capital and balanced by current income.
The Portfolio pursues its investment objective by, under normal
circumstances, investing 40%-60% of its assets in equity securities
selected primarily for their growth potential and 40%-60% of its assets in
fixed-income securities selected primarily for their income potential. (4)
o Janus Aspen Series--Flexible Income Portfolio seeks to obtain maximum total
return, consistent with preservation of capital. Total return is expected
to result from a combination of current income and capital appreciation.
The Portfolio invests in all types of income producing securities and may
have substantial holdings of debt securities rated below investment grade
(e.g. junk bonds). High yield, high risks securities involve certain risks.
See the Fund's prospectus for a discussion of these risks (4)
o Janus Aspen Series--Growth Portfolio seeks long-term growth of capital
consistent with the preservation of capital. The Portfolio pursues its
investment objective by investing primarily in companies of any size. (4)
o Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growthof
capital in a manner consistent with the preservation of capital, primarily
through investments in common stocks of foreign and domestic issuers. (4)
o 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.(5)
(This Fund is only available for investment by Participants who established
an Individual Account under the Contract before May 1, 1998. As soon as all
such Participants have redirected their allocations to other investment
options, the
- -------------------------------------------------------------------------------
3
<PAGE>
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.)
o Oppenheimer Global Securities 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. Current
income is not an objective. These securities may be considered to be
speculative. (6)
o Oppenheimer Strategic Bond 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
intends to invest principally in (i) foreign government and corporate debt
securities, (ii) 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. (6)
o Portfolio Partners MFS Emerging Equities Portfolio seeks long-term growth
of capital by investing primarily in common stocks issued by companies that
its subadviser believes are early in their life-cycle but which have the
potential to become major enterprises (emerging growth companies). (7a)
o Portfolio Partners MFS Research Growth Portfolio seeks long-term growth of
capital and future income by investing primarily in common stocks or
securities convertible into common stocks issued by companies that the
subadviser believes to possess better-than-average prospects for long-term
growth, and, to a lesser extent, in income-producing securities including
bonds and preferred stock. (7a)
o Portfolio Partners MFS Value Equity Portfolio seeks capital appreciation
by investing primarily in common stocks. (7a)
o Portfolio Partners Scudder International Growth Portfolio seeks long-term
growth of capital primarily through a diversified portfolio of marketable
foreign equity securities. (7b)
o Portfolio Partners T. Rowe Price Growth Equity Portfolio seeks long-term
growth of capital and, secondarily, seeks to increase dividend income by
investing primarily in common stocks issued by a diversified group of
well-established growth companies. (7c)
Investment Advisers for each of the Funds:
(1) Aeltus Investment Management Company, Inc.
(2) Calvert Asset Management Company, Inc.
(3) Fidelity Management & Research Company
(4) Janus Capital Corporation
(5) Lexington Management Corporation (adviser); Market Systems Research
Advisors, Inc. (subadviser)
(6) Oppenheimer Funds, Inc.
(7) Aetna Life Insurance and Annuity Company (adviser);
(a) Massachusetts Financial Services Company (subadviser)
(b) Scudder, Stevens & Clark, Inc. (subadviser)
(c) T. Rowe Price Associates, Inc. (subadviser)
There is no assurance that the Funds will achieve their investment
objectives. Participants bear the full investment risk of investments in the
Funds selected.
Some of the Funds may invest in instruments known as derivatives as part of
their investment strategies, as described in their respective prospectuses. The
use of certain derivatives such as inverse floaters and principal only debt
instruments may involve higher risk of volatility to a Fund. The use of leverage
in connection with derivatives can also increase risk of losses. See the
prospectus for the Funds for a discussion of the risks associated with an
investment in those funds.
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. Contract Holders and Participants should read the
accompanying prospectuses carefully before investing. Additional prospectuses
and the Statements of Additional Information for this Prospectus and each of the
Funds can be obtained from the Company's Home Office at the address and
telephone number listed on the cover of this Prospectus.
MIXED AND SHARED FUNDING
Shares of the Funds are available to insurance company separate accounts
which fund variable annuity contracts and variable life insurance policies,
including the Contracts described in this Prospectus. Because Fund shares are
offered to separate
- -------------------------------------------------------------------------------
4
<PAGE>
accounts of both affiliated and unaffiliated insurance companies, it is
conceivable that, in the future, it may not be advantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in
these Funds simultaneously, since the interests of such policyowners or
contractholders may differ. Although neither the Company nor the Funds currently
foresee any such disadvantages either to variable life insurance or to variable
annuity policyowners, each Fund's Board of Trustees/Directors has agreed to
monitor events in order to identify any material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken in
response thereto. If such a conflict were to occur, one of the separate accounts
might withdraw its investment in a Fund. This might force that Fund to sell
portfolio securities at disadvantageous prices.
FUND CHANGES
The Company reserves the right, subject to compliance with appropriate
state and federal laws, to change the Fund(s) in which the Separate Account
invests, and/or replace the shares of any Fund(s) held in the Separate Account
with shares of any other Fund(s).
FUND LIMITATIONS
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.
Under some Contracts, 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 purposes of either
limit, each Fund, the Fixed Account, each version of the Fixed Plus Account (see
Appendices II and III), 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 on the cover of
this Prospectus 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 Company reserves the right to limit the funding options available
during the Annuity Period.
PURCHASE
================================================================================
THE CONTRACTS
The Contracts are group deferred, variable annuity contracts. Under the
Retirement Plus Contract, Contributions may be made by the Contract Holder
(generally, the employer) and the Participants. The Contract Holder, or any
person designated by the Contract Holder, may exercise the rights under the
Retirement Plus Contract. The Contract Holder may, by written direction, allow
Participants to select the investment options for the Contract Holder
Contributions and Participant Contributions. Under the Voluntary Contract,
Contributions may be made only by Participants. Each Participant may exercise
the rights under the Voluntary Contract with respect to the Participant's
Individual Accounts. See "Contract Rights" and "Miscellaneous."
ELIGIBLE CONTRACT HOLDERS
An organization eligible to establish tax-deferred annuity plans under
Section 403(b) or Sections 401(a)/401(k) of the Code may acquire either or both
of the Contracts for its Plan by filling out the appropriate master application
forms and returning them to the Company or to a Distributor for delivery to the
Company. Once we approve the application, a group Contract is issued to the
organization as Contract Holder.
PURCHASE BY EXCHANGE
Certain organizations which own contracts issued by the Company may
exchange their existing contract(s) for either or both of the Contracts. See
Appendix VI.
CONTRACT CHARGES AND FEES OPTIONS
Your Contract's charges and fees will depend in part upon the Aggregate
Current Value and in part upon choices made by your Contract Holder. Each
Contract offers a Contract Holder the flexibility to choose a charges and fees
structure during the Accumulation Period that will best suit the needs of its
Participants. For a description of the Contracts' charges and fees, see "Charges
and Fees During the Accumulation Period."
RESPONSIBILITIES OF CONTRACT HOLDERS
The Contract Holder is responsible for maintaining all Participant vesting
percentages and records, ensuring that the Plan meets certain nondiscrimination
requirements imposed by the Code, and ensuring employee Contributions do not
exceed the maximum limits imposed by the Code
If a Contract is used to fund an ERISA Plan, the Contract Holder must:
(a) provide written certification to the Company of the satisfaction of
applicable requirements for ERISA tax-deferred annuity plans, and
(b) certify that all distributions are made in accordance with the terms of
the Plan, and, if applicable, the requirements of the Code.
- -------------------------------------------------------------------------------
5
<PAGE>
ENROLLMENT OF PARTICIPANTS
Eligible organizations may acquire the Contract by submitting an
application to the Company. Once we approve the application, a group Contract is
issued to the employer or association as the group Contract Holder. Participants
may purchase interests in a group Contract by submitting an enrollment form to
the Company.
The Company must accept or reject the application or enrollment form within
two business days of receipt. If the enrollment materials are incomplete, the
Company may hold any forms and accompanying Purchase Payments for five days.
Purchase Payments may be held for a longer period pending acceptance of the
forms only with consent of the Participant, or under certain circumstances
described below, with the consent of the group 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 investment option until the forms are
completed.
After accepting your application, we will establish one or more Individual
Accounts to track Contributions and transactions. If you and your employer make
Contributions under a Retirement Plus Contract, we may establish an Employee
Account and an Employer Account. For any lump sum Contribution under either
Contract, we may establish a separate Individual Account for that Contribution.
CONTRIBUTIONS
Under a Contract, Contributions may be made on an installment basis or one
or more lump sum Contribution(s) may be made. The Company reserves the right not
to accept any Contribution. Each Contribution is forwarded to the Company
through a Distributor.
Net Contribution(s) may accumulate (a) on a variable basis by allocation to
one or more of the available Funds; (b) on a fixed basis under the GA Account;
(c) on a fixed basis under the Fixed Plus Account; and (d) in a combination of
any of the available investment options. See Appendices I, II and III. Not all
Funds or credited interest options are available in all jurisdictions or under a
particular Contract. The Fixed Account is available only for Net Contribution(s)
previously allocated to a fixed account under a contract exchanged for a
Contract. See Appendix IV. The Net Contribution(s) must be allocated to the
respective options in increments of whole percentage amounts.
Contribution Limits for Contracts Used with 403(b) Plans
The Code imposes a maximum limit on annual Contributions which may be
excluded from your gross income. That limit must be calculated in accordance
with Sections 403(b), 415 and 402(g) of the Code. See "Tax Status - Contracts
Used With Certain Retirement Plans". It is the Contract Holder's responsibility
to determine compliance with these requirements and other provisions of the
Plan. See "Rights Under the Contracts."
Contribution Limits for Contracts Used with 401(a)/401(k) Plans
The Code imposes a maximum limit on annual Contributions that may be
excluded from a Participant's gross income. Such limit must be calculated under
the Plan by the Contract Holder in accordance with Sections 402(g) and 415 of
the Code. See "Tax Status - Contracts Used With Certain Retirement Plans". It is
the Contract Holder's responsibility to determine compliance with these
requirements and other provisions of the Plan. See "Rights Under the Contracts".
DISTRIBUTION
The Company will serve as Underwriter for the securities sold by
this Prospectus. The Company is registered as a broker-dealer with the SEC 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 Individual Accounts under a Contract.
Persons offering and selling the Contracts may receive commissions in
connection with the sale of a Contract. The sales commission will range from 1%
to 4% of the first year Contributions. The Company may also pay renewal
commissions on Contributions made after the first year and asset-based service
- -------------------------------------------------------------------------------
6
<PAGE>
fees. The average of all payments made by the Company is estimated to equal
approximately 3% of the total Contributions 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 Individual Account are set forth on your enrollment form.
Commissions and sales related expenses are paid by the Company and are not
deducted from Contributions. See "Charges and Fees During the Accumulation
Period--Withdrawal Fee."
Occasionally, we may pay commissions and fees to Distributors which are
affiliated or associated with the Contract Holder or the Participants. We may
also enter into agreements with some entities associated with the Contract
Holder or Participants in which we would agree to pay the association for
certain services in connection with administering the Contracts. In both these
circumstances there may be an understanding that the Distributor or association
would endorse the Company as a provider of the Contracts. You will be notified
if a Contract is subject to these arrangements.
DETERMINING INDIVIDUAL ACCOUNT CURRENT VALUE
================================================================================
The Current Value of your Individual Account as of the most recent
Valuation Period, is determined by adding the value of any Fund Record Units
attributed to the Fund(s) you have selected to the value, with interest earned
to date, of any amounts invested in the Fixed Plus Account, the GAA and/or the
Fixed Account, less any Maintenance Fee(s) due.
FUND RECORD UNITS
A Contribution that is directed to one or more of the Funds is deposited in
the Separate Account and credited to your Individual Account in the form of Fund
Record Units for each Fund selected. The number of Fund Record Units credited is
determined by dividing the applicable portion of the Contribution by that
Contract's Fund Record Unit value of the appropriate Fund. The value of Fund
Record Units attributable to the Funds will be affected by the investment
performance, expenses and charges of those Funds. Generally, if the net asset
value of the Fund increases, so does the Fund Record Unit value; however,
performance of the Separate Account is reduced by charges and fees under a
Contract.
The Fund Record Unit value used is that next computed following the date on
which a Contribution is received, provided the Contribution is received by us by
the close of business of the New York Stock Exchange, unless the application has
not been accepted. In that event, Contributions will be credited at the Fund
Record Unit Value next determined after acceptance of the application. Shares of
the Funds are purchased by the Separate Account at the net asset value next
determined by the Fund following receipt of Contributions by the Separate
Account.
Fund Record Units are valued separately for each Fund. Therefore, if you
elect to have a Contribution invested in a combination of Funds, you will have
Fund Record Units credited from more than one source.
NET RETURN FACTOR
The value of a Fund Record Unit for any Valuation Period is calculated by
multiplying the Fund Record Unit value for the immediately preceding Valuation
Period by the net return factor of the appropriate investment option for the
Current Valuation Period.
The net return factor is calculated separately for each Fund in which
assets of the Separate Account are invested. It is determined by adding
1.0000000 to the net return rate.
The net return rate is equal to:
(a) The value of the shares of the Fund held by the Separate Account at
the end of a Valuation Period; minus
(b) The value of the shares of the Fund held by the Separate Account at
the start of the Valuation Period; plus or minus
(c) Taxes (or reserves for taxes) on the Separate Account (if any);
(d) Divided by the total value of the Fund Record Units and Fund Annuity
Units of the Separate Account at the start of the Valuation Period;
(e) Minus a Separate Account charge at an annual effective rate as shown in
a Contract for mortality and expense risks and profit and a daily
administrative expense charge which will not exceed the amount shown on
- -------------------------------------------------------------------------------
7
<PAGE>
Contract Schedule I on an annual basis.
The net return rate may be more or less than zero.
TRANSFER CREDITS
If a Contract Holder is transferring to the Company assets held by another
provider of funding for a Plan, a transfer credit is applied to the Individual
Accounts, subject to certain conditions (and state approval). This benefit is
provided on a nondiscriminatory basis if your Contract is eligible. In certain
circumstances, a Contract Holder may elect to forego the transfer credit and the
Contract will be subject to lower charges and fees. See "Charges and Fees During
the Accumulation Period--Option B." The transfer credit will be credited to the
Fixed Plus Account. See Appendices II and III.
Once transfer credit amounts are applied to the Individual Accounts, all
provisions of the Contract apply. If a transfer credit is due under a Contract,
you will be provided with additional information specific to the Contract.
CONTRACT RIGHTS
================================================================================
RIGHT TO CANCEL
The Contract Holder may cancel a Contract and you may cancel your interest
in a Contract, no later than ten days after receiving it (or as otherwise
allowed by state law) by returning it, along with a written notice of
cancellation, to us. Within seven days after we receive the Contract and the
written notice at our Home Office, we will return your Current Value, unless the
laws of the state in which the Contract was issued require that we return
Contributions (if greater than your Current Value). In states that do not
require a return of Contributions, you bear the entire investment risk for
amounts allocated among the variable funding options during the free look
period.
RIGHTS UNDER THE CONTRACTS
Your rights and the Contract Holder's rights are set forth in each Contract
purchased by the Contract Holder. You should consult with your employer to
determine which Contract your employer has purchased and you should refer to
that Contract to determine your rights. Benefits payable to you subject to the
terms and conditions of the Plan. The Company is not a party to the Plan.
Rights Under the Retirement Plus Contract. Under the Retirement Plus
Contract, the rights rest with the Contract Holder (generally the employer). The
Contract Holder may, by written direction, allow Participants to select the
investment options for the Employer Account and Employee Account. The exercise
of other rights under the Retirement Plus Contract must be made by the Contract
Holder on your behalf. You have no rights to direct the Company as to payments
under the Contract unless countersigned by the Contract Holder.
For the Retirement Plus Contract, the Contract Holder and each Participant
must agree in writing to the terms and conditions of the Contract, to have the
Contract Holder make choices under the Contract, and to be bound by the Contract
Holder's direction to the Company. See Appendix V.
Rights Under the Voluntary Contract. You may make any choices, subject to
the terms of your Plan, under the Voluntary Contract with respect to your
Individual Accounts.
Rights to your Individual Account. For Contracts used with a 403(b) Plan,
you have a nonforfeitable right to the value of your Contributions pursuant to
Code Section 403(b) and the terms of the Plan as interpreted by the Contract
Holder. For Contracts used with a 401(a)/401(k) Plan, your right to
Contributions derived from your Contributions must be nonforfeitable in order
for the Plan to qualify for favorable tax treatment afforded to 401(a)/401(k)
Plans under the Code. You have a nonforfeitable right to the value of your
Individual Account to which your employer's Contributions are credited pursuant
to the terms of, and to the extent of your vested percentage under, the Plan as
interpreted by the Contract Holder.
TRANSFERS AND ALLOCATION CHANGES
================================================================================
Before the Annuity Period, the allocation of future Net Contributions among
the allowable investment options under a Contract may be changed. There is no
limit on the number of these changes. Each Contract also allows any number of
transfers of not less than $500 among funding options during the calendar year,
without charge. The total number of funding options that may be invested in at
any one time or during the Accumulation Period may be limited. (See "The
Funds--Fund Limitations.")
Subject to state regulatory approval, transfers during the
- -------------------------------------------------------------------------------
8
<PAGE>
Annuity Period are permitted, however, we reserve the right to limit such
transfers to four per year.
Any transfer involving a Fund where the request is received by us by the
close of business of the New York Stock Exchange will be based on the Fund
Record Unit value next determined after we receive a valid request at our Home
Office.
Transfers from the Fixed Plus Account are limited. See Appendices I, II,
III and IV for more information on transfers from the GAA, the Fixed Plus
Account and the Fixed Account.
WITHDRAWALS
================================================================================
Each Contract allows the withdrawal of all or a portion of an Individual
Account Adjusted Current Value during the Accumulation Period. To do so, we must
receive a properly completed disbursement form in our Home Office. Disbursement
forms are available from us and our representatives.
Withdrawals may be requested in one of the following four ways:
o Full Withdrawal from a Contract: The amount paid will be the sum of the
Individual Accounts allocated to the Funds, the GAA (plus or minus the
Market Value Adjustment), and the Fixed Account, minus any applicable
Withdrawal Fee and Maintenance Fee due plus one-fifth of the sum of the
Individual Accounts allocated to the Fixed Plus Account*, minus any Fixed
Plus Account withdrawals, transfers or annuitizations made in the prior 12
months.
o Full Withdrawal from an Individual Account: The amount paid will be the
Individual Account allocated to the Funds, the GAA (plus or minus the
Market Value Adjustment), and the Fixed Account, minus any applicable
Withdrawal Fee and Maintenance Fee due plus one-fifth of the Individual
Account allocated to the Fixed Plus Account*, minus any Fixed Plus Account
withdrawals, transfers, loan or annuitizations made in the prior 12
months.**
o Partial Withdrawal (Percentage): The amount paid will be the percentage of
the Individual Account Current Value requested minus any applicable
Withdrawal Fee.** However, amounts withdrawn from the Fixed Plus Account
may not exceed 20% minus any Fixed Plus Account*** withdrawals, transfers
or annuitizations in the prior 12 months.
o Partial Withdrawal (Specific Dollar Amount): The amount paid will be the
dollar amount requested. However, the amount withdrawn from the Individual
Account will equal the dollar amount requested plus any applicable
Withdrawal Fee.** The amount withdrawn from the Fixed Plus Account may not
exceed 20% minus any Fixed Plus Account*** withdrawals, transfers or
annuitizations in the prior 12 months.
* The balance of the amount held in the Fixed Plus Account will be paid
in four annual installments. Under certain circumstances, the entire
amount held in the Fixed Plus Account will be paid in one lump sum (or
used to provide Annuity payments) rather than in annual installments.
See Appendices II and III for more information.
** A 20% income tax may be withheld from amounts paid directly to you.
See "Tax Status-Contracts Used With Certain Retirement Plans".
*** The 20% limit is waived under certain circumstances. See Appendices II
and III for more information.
All amounts paid will be based on Individual Account Current Values as of
the end of the Valuation Period in which the request is received, in good order
in our Home Office. For any partial withdrawal, unless otherwise requested,
partial withdrawals are satisfied by withdrawing amounts on a pro rata basis
from each investment option in which the Individual Account is invested.
WITHDRAWAL RESTRICTIONS FOR CONTRACTS USED WITH 403(B) PLANS AND 401(K) PLANS
Code Section 403(b) and 401(k) Plans impose restrictions on full or partial
withdrawals. See "Tax Status - Contracts Used With Certain Retirement Plans".
- -------------------------------------------------------------------------------
9
<PAGE>
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 Individual Account. Reinvested amounts must be received by the
Company within 60 days of the withdrawal. Any Maintenance Fee and Withdrawal Fee
charged at the time of the withdrawal on the amount being reinvested will be
included in the reinstatement. Any Maintenance Fee which falls due after the
withdrawal and before the reinstatement will be deducted from the amount
reinstated. Any Market Value Adjustment deducted from GA Account withdrawals
will not be included in the reinstatement. Amounts will be reinstated among the
Fixed Plus Account, the GA Account, and/or the Fund(s) for the Separate Account
in the same proportion as they were at the time of withdrawal. Any amounts
reinstated to the GA Account will be credited to terms available during the
then-current Deposit Period. The number of Fund Record Units reinstated will be
based on the Fund Record Unit Value(s) next computed after receipt in good order
at the Company's Home Office of the reinstatement request and the amount to be
reinvested.
CONTRACT LOANS
================================================================================
During the Accumulation Period, loans from the Individual Account are
available from Contracts used with 403(b) plans, and from Contracts used with
401(a) plans to the extent provided in the Contract. Under the Retirement Plus
Contract, a loan may be restricted to your Employee Account unless the Contract
Holder has authorized loans from the value of the Employer Account (check with
the Contract Holder to see if this is available). Loans can only be made from
the Current Value held in the Funds, the Fixed Plus Account and/or the Fixed
Account. See Appendices II, III and IV. A loan may be requested by reviewing and
reading the terms of your loan application, properly completing a loan request
form and submitting it to the Company's Home Office. Some restrictions may apply
under the Code and/or due to Company administrative practices..
CHARGES AND FEES DURING THE ACCUMULATION PERIOD
================================================================================
The amount of the charges and fees that will be assessed under a Contract
will be based upon the charges and fees option
selected by the Contract Holder. See "Contract Charges and Fees Options." You
should consult your employer to determine which charges and fees option applies
to your Individual Accounts.
Based upon its prior experience with similar annuity contracts, the Company
has determined that its costs of administering a Contract will fluctuate with
the amount of the Aggregate Current Value, the average Contributions per
Participant transferred under a Contract, and whether a Withdrawal Fee is
charged. The charges and fees for the initial Contract year will be based on the
estimated year-end Aggregate Current Value, as determined by the Company. If
your charges and fees change on your Contract Anniversary (because of an
increase or decrease in the Aggregate Current Value), a new Fund Record Unit
value might apply and the Fund Record Units might have to be adjusted so that
the Current Value of your Individual Account would stay the same. If you invest
in one of the series of the Aetna GET Fund, the GET Fund guarantee will be
recalculated so that the new guarantee would be equivalent to the original
guarantee.
A Contract Holder may elect whether a Withdrawal Fee will be applicable
under a Contract, and if so, whether the Withdrawal Fee will be applicable for a
5-year period or a 10-year period. When a Withdrawal Fee is not charged, the
Company has determined that more Individual Account transactions occur, and as a
result, in some circumstances the Company imposes a greater administrative
expense charge and Maintenance Fee charge. The 5-year period and 10-year period
Withdrawal Fees are as follows:
FIVE-YEAR WITHDRAWAL PERIOD:
Number of Years
Individual Account
Has Been Established Fee
-------------------- ---
Less than 1 5%
1 or more but less than 2 4%
2 or more but less than 3 3%
3 or more but less than 4 2%
4 or more but less than 5 1%
5 or more 0%
- -------------------------------------------------------------------------------
10
<PAGE>
TEN-YEAR WITHDRAWAL PERIOD:
Number of Years
Individual Account
Has Been Established Fee
-------------------- ---
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%
For Contracts issued in the State of New York only the Ten-Year Withdrawal
Period Fee Schedule will be available. Additionally, for those New York
Contracts under which the GAA is selected as a funding option, the withdrawal
fee imposed under the Ten-Year Withdrawal Period (as set forth in the schedule
above), will never be greater than (a) 7% of amounts withdrawn from investment
options other than the GAA, plus (b) 7% of amounts withdrawn from the GAA,
reduced (but not below zero) by one percent for each year the contract has been
in force.
The following schedule illustrates the withdrawal fee imposed if the
Ten-Year Withdrawal Period is selected for Contracts issued in the States of
Oregon and Texas:
Number of Years
Individual Account
Has Been Established Fee
-------------------- ---
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
In selecting a charges and fees option, a Contract Holder should consider
the composition and needs of its Participants to determine which option is most
appropriate.
Option A
A Contract Holder may select any of the charges and fees elections under
Option A below. Under Option A, a transfer credit may apply to transfers to the
Company of assets not previously held by the Company. See "Determining
Individual Account Current Value--Transfer Credits" and Appendices II and III.
If a Contract is acquired by exchange, and a transfer credit will apply, then
for existing Participants of the exchanged contract, the Option A charges and
fees schedule set forth below with a Withdrawal Fee for 10 years will apply. See
Appendix VI. New Participants of a Contract acquired by exchange will be subject
to the charges and fees schedule selected by the Contract Holder.
The charges and fees shown below for Contract Holders are the maximum
Contract charges which will apply. There are conditions under which these
charges and fees may be reduced for certain Contract Holders. See "Reduction of
Mortality and Expense Risk and/or Administrative Charges" and "Reduction or
Elimination of the Maintenance Fee."
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
OPTION "A" CHARGES Assets Assets Assets Assets Assets
Less $500,000 $1,000,001 $5,000,001 Greater
than to to to than
$500,000 $1,000,000 $5,000,000 $15,000,000 $15,000,000
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WITHDRAWAL FEE FOR 10 YEARS
- -------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Charge 1.25% 1.15% 1.05% 1.00% 0.95%
- -------------------------------------------------------------------------------------------------------------------------------
Administrative Expense Charge 0.25% 0.15% 0.10% 0.05% 0.00%
- -------------------------------------------------------------------------------------------------------------------------------
Maintenance Fee $15 $15 $0 $0 $0
- -------------------------------------------------------------------------------------------------------------------------------
WITHDRAWAL FEE FOR 5 YEARS
- -------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Charge 1.25% 1.25% 1.15% 1.10% 1.05%
- -------------------------------------------------------------------------------------------------------------------------------
Administrative Charge 0.25% 0.15% 0.10% 0.05% 0.00%
- -------------------------------------------------------------------------------------------------------------------------------
Maintenance Fee $15 $15 $0 $0 $0
- -------------------------------------------------------------------------------------------------------------------------------
NO WITHDRAWAL FEE
- -------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Charge 1.25% 1.25% 1.15% 1.10% 1.05%
- -------------------------------------------------------------------------------------------------------------------------------
Administrative Charge 0.25% 0.20% 0.15% 0.10% 0.05%
- -------------------------------------------------------------------------------------------------------------------------------
Maintenance Fee $20 $20 $10 $10 $10
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
11
<PAGE>
Option B
- --------------------------------------------------------------------------------
Charges and fees elections under Option B are available if:
a) the Company will receive all future allocations of assets of the
Contract Holder's Plan(s); and
b) the Contract Holder is transferring assets to the Company in an
amount which satisfies the then current rules of the Company, applied
in a nondiscriminatory manner.
If a Contract is acquired by exchange, then for existing Participants of
the exchanged contract, the Option B charges and fees schedule set forth below
with a Withdrawal Fee for 10 years will apply. See Appendix VI. New Participants
of a Contract acquired by exchange will be subject to the charges and fees
schedule selected by the Contract Holder. If a Contract Holder selects a charges
and fees election under Option B, no transfer credit will apply.
The charges and fees shown below for Contract Holders are the maximum
Contract charges which will apply. There are conditions under which these
charges and fees may be reduced for certain Contract Holders. See "Reduction of
Mortality and Expense Risk and/or Administrative Charges" and "Reduction or
Elimination of the Maintenance Fee."
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
OPTION "B" CHARGES Assets Assets Assets Assets Assets
Less $500,000 $1,000,001 $5,000,001 Greater
than to to to than
$500,000 $1,000,000 $5,000,000 $15,000,000 $15,000,000
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WITHDRAWAL FEE FOR 10 YEARS
- -------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Charge 1.15% 1.05% 0.95% 0.90% 0.85%
- -------------------------------------------------------------------------------------------------------------------------------
Administrative Expense Charge 0.25% 0.15% 0.10% 0.05% 0.00%
Maintenance Fee $15 $15 $0 $0 $0
WITHDRAWAL FEE FOR 5 YEARS
- -------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Charge 1.15% 1.15% 1.05% 1.00% 0.95%
- -------------------------------------------------------------------------------------------------------------------------------
Administrative Charge 0.25% 0.15% 0.10% 0.05% 0.00%
Maintenance Fee $15 $15 $0 $0 $0
NO WITHDRAWAL FEE
- -------------------------------------------------------------------------------------------------------------------------------
Mortality and Expense Charge 1.15% 1.15% 1.05% 1.00% 0.95%
- -------------------------------------------------------------------------------------------------------------------------------
Administrative Charge 0.25% 0.20% 0.15% 0.10% 0.05%
Maintenance Fee $20 $20 $10 $10 $10
</TABLE>
- -------------------------------------------------------------------------------
12
<PAGE>
The following describes the charges and fees that we may deduct during the
Accumulation Period from the Individual Accounts under each Contract.
ANNUAL MAINTENANCE FEE
An annual Maintenance Fee is charged for each Participant and is deducted
from the sum of the Current Value of your Individual Accounts under a Contract.
This fee is to reimburse the Company for some of its administrative expenses
relating to the establishment and maintenance of the Individual Account. Because
the annual Maintenance Fee is based, in part, on the amount of the Aggregate
Current Value, the annual Maintenance Fee may change on each contract
anniversary.
The Maintenance Fee is deducted from your Individual Accounts on the
Contract anniversary date (or, if not a valuation date, on the next valuation
date). Under the Retirement Plus Contract, the Contract Holder may elect that
the entire Maintenance Fee be deducted from only one Individual Account--either
the Employee Account or the Employer Account. Alternatively, the Maintenance Fee
may be billed to the employer at or prior to such deduction under the Retirement
Plus Contract. A Maintenance Fee, to the extent permitted by state law, is also
deducted upon the full withdrawal of a Participant's Individual Accounts. We
deduct this fee from each investment option in the same proportion that the
values held under each option have to the total value under the Individual
Account. No Maintenance Fee is deducted from a separate Individual Account
established for the purpose of a lump sum Contribution .
REDUCTION OR ELIMINATION OF THE MAINTENANCE FEE
The annual Maintenance Fee may be reduced or eliminated for Contract
Holders having an Aggregate Current Value greater than $1 million under various
conditions as agreed to by us and by the Contract Holder in writing. Any
reduction or elimination of the annual Maintenance Fee will reflect differences
in administrative costs and services after taking into consideration factors
such as the following:
o the characteristics and nature of the group to which a Contract is issued;
o the number of eligible Participants and the program's participation rate;
o the level of the Company's anticipated expenses in administering the
Contract on an ongoing basis.
We will determine any reduction or elimination of Maintenance Fees on a
basis that is not unfairly discriminatory. We will make any reduction in annual
Maintenance Fees according to the Company's own rules in effect at the time an
application for a Contract is approved and/or at the time of Contract
anniversary. We reserve the right to change these rules from time to time.
WITHDRAWAL FEE
There are no deductions from Contributions for sales commissions or related
expenses. Sales commissions and expenses are advanced by the Company and
recovered out of any Withdrawal Fees or, if Withdrawal Fees are insufficient,
out of its profits from investment activities, including the mortality and
expense risk charges under a Contract. The total amount deducted for the
Withdrawal Fee will not exceed 8.5% of the Contributions made to an Individual
Account. For sales commissions paid in connection with the sale of a Contract,
see "Contract Purchase--Distribution." If applicable, the Withdrawal Fee will
apply to withdrawals from the Funds, the GA Account or the Fixed Account. No
Withdrawal Fee will be deducted from the Fixed Plus Account. There are
additional restrictions and deductions on withdrawals. See "Contract
Rights--Withdrawals."
A Withdrawal Fee is not deducted from any portion of the Individual Account
Current Value under a Contract which is:
(a) withdrawn due to the Participant's separation from service with the
Contract Holder (the Contract Holder must submit documentation
satisfactory to the Company confirming the Participant is no longer
providing services to the employer);
(b) applied to provide Annuity benefits under a Contract;
(c) withdrawn on or after the tenth anniversary of the effective date of
the Individual Account if a ten-year duration for Withdrawal Fees has
been elected, or on or after the fifth anniversary if a five-year
duration has been elected;
(d) paid due to the death of the Participant before Annuity payments under
a Contract begin;
(e) withdrawn due to the election of any Systematic Distribution Option
under a Contract (see "Systematic Distribution Options");
(f) withdrawn due to financial hardship, as specified in the Code;
- -------------------------------------------------------------------------------
13
<PAGE>
(g) paid where the Individual Account Current Value is $3,500 or less and
no amount has been withdrawn, taken as a loan or used to purchase
Annuity benefits during the prior 12 months; or
(h) paid in an amount of up to 10 of the Individual Account Current Value.
This applies only to the first partial withdrawal in each calendar
year. The 10% amount will be calculated using the Individual Account
Current Value on the date the request is received, in good order, in
the Home Office. This provision is available to Participants who are
between the ages of 59 1/2 and 70 1/2. Any loans outstanding on an
Individual Account are excluded from the Individual Account Current
Value when calculating the 10% amount. This provision is not applicable
to a full withdrawal of the Individual Account, or to partial
withdrawals due to loan defaults. See "Contract Rights--Contract
Loans." This provision may not be exercised if SWO is elected. See
"Systematic Distribution Options".
(i) withdrawal due to a transfer of the Individual Account Current Value to
another retirement product offered by the Company under the Contract
Holder's Plan under various conditions as agreed to by us and by the
Contract Holder in writing.
Although no Withdrawal Fee is deducted in the above instances, the amount
withdrawn may, however, be includible in gross income and subject to the 10%
federal penalty tax. See "Tax Status--Contracts Used With Certain Retirement
Plans"
MORTALITY AND EXPENSE RISK CHARGES
We make a daily deduction from any portion of an Individual Account Current
Value allocated to the Funds under a Contract for mortality and expense risks.
The mortality risk charge is to compensate us for the risk we assume when we
promise to continue making payments for the lives of individual Annuitants
according to Annuity rates specified in the tables at the time Annuity payments
begin. The expense risk charge is to compensate us for the risk that actual
expenses for costs incurred under a Contract will exceed the maximum costs that
can be charged under the Contract. Because it is based, in part, on the amount
of the Aggregate Current Value, the charge for mortality and expense risks may
change on each contract anniversary.
Based on our actuarial determination, we do not anticipate that the
Withdrawal Fee will cover all sales and administrative expenses which we will
incur in connection with a Contract. Also, we do not intend to profit from
either the annual Maintenance Fee or the administrative expense charge, if
imposed. We do hope to profit from the daily deduction for mortality and expense
risks. Any such profit, as well as any other profit realized by us and held in
the general account (which supports insurance and annuity obligations), would be
available for any proper corporate purpose, including, but not limited to,
payment of sales and distribution expenses.
ADMINISTRATIVE EXPENSE CHARGE
We deduct a daily charge for administrative expenses from any portion of an
Individual Account Current Value allocated to the Funds to reimburse the Company
for some of the expenses we incur for administering a Contract. Because it is
based, in part, on the amount of the Aggregate Current Value, the administrative
expense charge may change on each contract anniversary.
REDUCTION OF MORTALITY AND EXPENSE RISK AND/OR ADMINISTRATIVE CHARGES
Mortality and expense risk and/or administrative charges may be reduced
from the maximum shown in the table for each Aggregate Current Value for a
Contract Holder under various conditions as agreed to by us and by the Contract
Holder in writing. Any reduction to the mortality and expense risk and/or
administrative charges will reflect differences in expenses for administration
after taking into consideration factors such as the following:
o The Plan design. For example, the Plan design may favor stability of
invested assets and limit the conditions for withdrawals, loans, and
investment options available which in turn will lower administrative
expenses.
o The number of eligible Participants and the program's participation rate.
o The frequency, consistency and method of submitting Contributions and loan
repayments.
o The projected annual Contributions for all Participants in the program.
o The method and extent of onsite services such as enrollment and ongoing
Participant services.
o The Contract Holder's support and involvement in the communication,
enrollment, Participant education, and other administrative services.
o The type and level of other factors that affect the
- -------------------------------------------------------------------------------
14
<PAGE>
overall administrative expense.
We will determine any reduction of mortality and expense risk and/or
administrative expense charges on a basis that is not unfairly discriminatory.
We will make any reduction in mortality and expense risk and/or administrative
charges according to the Company's rules in effect at the time an application
for a Contract is approved and/or at the time of Contract anniversary. We
reserve the right to change these rules from time to time.
FUND EXPENSES
Each Fund has an investment adviser. An investment advisory fee, based on
the Fund's average net assets, is deducted from the assets of each Fund and paid
to the investment adviser.
Most expenses incurred in the operations of the Funds are borne by that
Fund. Fund advisers may reimburse the Funds they advise for some or all of these
expenses. For further details of each Fund's expenses, you and the Contract
Holder should read the accompanying prospectus for each Fund and refer to the
Fee Table in this Prospectus.
PREMIUM AND OTHER TAXES
Several states and municipalities impose a premium tax on Annuities.
Currently such taxes range from 0% to 4%. The Company reserves the right to
deduct premium tax against Contributions or Current Values at any time, but no
earlier than when due under state law. The Company's current practice is to
deduct for premium taxes at the time of complete withdrawal or annuitization. In
addition to premium tax, the Company reserves the right to assess a charge for
any state or federal taxes due against a Contract or the Separate Account
assets.
CHARGES AND FEES DURING THE ANNUITY PERIOD
================================================================================
This section describes the charges and fees that we may deduct during the
Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
During the Annuity Period a daily charge for mortality and expense risks
equal to an annual effective rate of 1.25% may be deducted from any portion of
an Individual Account allocated to the Funds.
ADMINISTRATIVE EXPENSE CHARGE
During the Annuity Period, a daily charge for administrative expenses equal
to an annual effective rate of up to 0.25% may be deducted from any portion
of an Individual Account under a Contract allocated to the Funds.
WITHDRAWAL FEE
A Withdrawal Fee will apply during the Annuity Period if a non-lifetime
Annuity Option is elected on a variable basis and the remaining value is
withdrawn prior to the minimum number of years specified in the Contract. See
"Annuity Period--Annuity Options."
SYSTEMATIC DISTRIBUTION OPTIONS
================================================================================
The Company offers certain withdrawal options under each Contract that are
not considered annuity options ("Systematic Distribution Options"). To exercise
these options, the Current Value must meet the minimum dollar amounts and you
must satisfy the age criteria applicable to that option.
- -------------------------------------------------------------------------------
15
<PAGE>
The Systematic Distribution Options currently available under the Contract
include the following:
o SWO--Systematic Withdrawal Option. SWO is a series of partial withdrawals
from your Individual 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.)
o 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 its Home
Office. For Contracts issued in the state of New York, no Market Value
Adjustment will be imposed on withdrawals from the GA Account for ECO.
If one of the Systematic Distribution Options is selected, your Account
will retain all of the rights and flexibility permitted under the Contract
during the Accumulation Period. Your Current 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 elected, a Systematic Distribution Option , may be revoked at any time
by submitting a written request to our Home Office. Once an option is revoked,
it may not be elected again, nor may any other Systematic Distribution Option be
elected unless permitted by the Code. The Company reserves the right to
discontinue the availability of one or all of those Systematic Distribution
Options at any time, and/or to change the terms of future elections.
ANNUITY PERIOD
================================================================================
ANNUITY PERIOD ELECTIONS
We must receive in writing the Annuity start date and Annuity option you
have elected (for details, see the Statement of Additional Information). Until a
date and option are elected, your Individual Accounts will continue in the
Accumulation Period.
We must receive written notice at least 30 days before Annuity payments
begin electing or changing (a) the date on which Annuity payments are to begin,
(b) the Annuity option, (c) whether the payments are to be made monthly,
quarterly, semiannually or annually, and (d) the investment option(s) used to
provide Annuity payments (i.e., a fixed annuity using the general account, or a
variable annuity using any of the funds available at the time of annuitization).
Under the Retirement Plus Contract, the Contract Holder, on your behalf, must
provide such written notice to us. Once Annuity Payments begin, the Annuity
Option may not be changed. Subject to state regulatory approval, transfers
during the Annuity Period are allowed; however, we reserve the right to limit
such transfers to four per year.
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 (3
1/2% per annum, unless a 5% annual rate is elected). Selection of a 5% rate
causes a higher first payment, but Annuity payments will increase thereafter
only to the extent the net investment rate exceeds 5% on an annualized basis.
Annuity payments would decline if the rate were below 5%. Use of the 3 1/2%
assumed rate causes a lower first payment, but subsequent payments would
increase more rapidly or decline more slowly as changes occur in the net
investment rate. (See the Statement of Additional Information for details
regarding the selection of a net investment rate.)
No election may be made that would result in a first Annuity payment or
total yearly Annuity payments of less than the minimum amounts specified in the
Contract. If the combined value of the Employer and Employee Accounts is
insufficient to elect an option for the minimum amount specified, a lump sum
payment must be elected.
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) your life, (b) the joint lives
of you and your Plan Beneficiary, (c) a period certain greater than your life
expectancy, or (d) a period certain greater than the joint life expectancies of
you and your Plan Beneficiary.
- -------------------------------------------------------------------------------
16
<PAGE>
The Code has required distribution rules for Section 403(b), 401(a) and
401(k) Plans. See "Tax Status - Contracts Used With Certain Retirement Plans".
In determining the amount of benefit payments, the minimum distribution
incidental death benefit rule described in IRS regulations* must be satisfied.
This distribution rule does not apply to certain 403(b) Plans if Annuity Option
3 is elected and your spouse is the second Annuitant. See "Annuity
Period--Annuity Options."
You will be subject to a 50% federal penalty tax on the amount of
distribution required each year that is not distributed under the Code's minimum
distribution rules.
* This rule assures that any death benefits payable under the Plan are
incidental to the primary purpose of the Plan which is to provide
retirement benefits to the Participant. The amount to be distributed under
this rule is determined based on the Participant's age and tables contained
in the IRS regulations.
If you elect a Variable Annuity Option, your Individual Account will be
allocated to the Separate Account and the Company will make a daily deduction
for mortality and expense risks. See "Charges and Fees During the Accumulation
Period--Mortality and Expense Risk Charges." Therefore, electing the nonlifetime
option on a variable basis will result in a deduction being made even though the
Company assumes no mortality risk. During the Accumulation Period, the Company
will also deduct daily a charge for administrative expenses. See "Charges and
Fees During the Annuity Period--Administrative Expense Charge."
ANNUITY OPTIONS
You or, under the Retirement Plus Contract, the Contract Holder on your behalf,
may choose one of the following Annuity options:
o Option 1--Payments for a Stated Period of Time--An Annuity will be paid for
5 to 30 years.
For amounts held in the Fixed Plus Account the Annuity must be paid on a
fixed basis. 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 before five years of payments have been made,
it will be subject to any Withdrawal Fee, if applicable. (See "Charges and
Fees During the Accumulation Period.")
o Option 2--Life Income Based on the Life of the Annuitant--Payments will be
made until the death of the Annuitant. When this option is chosen, a choice
from the following must be made:
(a) payments cease at the death of the Annuitant;
(b) payments may be guaranteed for 5-30 years; or
(c) cash refund: if the Annuitant dies, the Plan Beneficiary will receive a
lump sum payment equal to the amount applied to the Annuity option
(less any premium tax) less the total amount of Fixed Annuity payments
paid prior to such death. This cash refund feature is only available if
the total amount applied to the Annuity option is allocated to a Fixed
Annuity.
o Option 3--Life Income Based Upon the Lives of Two Annuitants--An Annuity
will be paid during the lives of the Annuitant and a joint Annuitant.
Payments will continue until both Annuitants have died. When this option is
chosen, a choice of the following must be made:
(a) 100% of the payment to continue after the first death;
(b) 66 2/3% of the payment to continue after the first death;
(c) 50% of the payment to continue after the first death;
(d) 100% of the payment to continue after the first death with a guarantee
of 5-30 years;
(e) 100% of the payment to continue at the death of the second Annuitant
and 50% of the payment to continue at the death
of the Annuitant; or
(f) 100% of the payment to continue after the first death with a cash
refund feature. If the Annuitant and joint Annuitant die, the Plan
Beneficiary will receive a lump sum payment equal to the amount applied
to the Annuity option (less any premium tax) less the total amount of
Fixed Annuity payments paid prior to such death. This cash refund
feature is only available if the total amount applied to the Annuity
option is allocated to a Fixed Annuity.
o Option 4--Payments of Interest on Sum Left with the Company (if available
under the Contract)--This Option may be used only by the Plan Beneficiary
when the Participant dies before the Company 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 the Company at interest. The
Contract Holder, on behalf of the Plan Beneficiary, may later tell the
Company to:
Pay a portion or all of the sum held by the Company; or
- -------------------------------------------------------------------------------
17
<PAGE>
Apply a portion or all of the sum held by the Company to any Annuity Option
above.
If the Plan Beneficiary is the Participant's surviving spouse, the lump-sum
payment may be deferred to a date not later than when the Participant would
have attained age 70-1/2.
If the Plan Beneficiary is not a spouse, the Contract Holder must tell the
Company to pay the full sum within 5 years after the death of the
Participant.
If a Fixed Annuity is chosen under option 1, option 2 a) or b) or option 3
a) or d), the Participant may elect an annual increase of one, two or three
percent compounded annually.
We may also offer additional Annuity Options under your Contract from time
to time.
Payments under any lifetime Annuity option will be determined without
regard to the sex of the Annuitant(s). Such Annuity payments will be based
solely on the age of the Annuitant(s).
If a lifetime option is elected without a guaranteed minimum payment
period, it is possible that only one Annuity payment will be made if the
Annuitant under Option 2, or the surviving Annuitant under Option 3, should die
prior to the due date of the second Annuity payment.
Once lifetime Annuity payments begin, neither the Contract Holder nor the
Annuitant can elect to receive a lump sum settlement.
DEATH BENEFIT
================================================================================
ACCUMULATION PERIOD
A portion or all of any death proceeds may be (a) paid to the Plan
Beneficiary in a lump sum; (b) applied to any of the Annuity Options; (c)
subject to applicable provisions of the Code, left in the variable investment
options; (d) if the Plan Beneficiary is your spouse, paid under a Systematic
Distribution Option; or (e) subject to applicable provisions of the Code, left
on deposit in the Company's general account and the Plan Beneficiary may receive
monthly, quarterly, semiannual or annual interest payments at the interest rate
then currently being credited on such deposits. The balance on deposit can be
withdrawn at any time or applied under any Annuity Option. See "Annuity
Period--Annuity Options." Under the Retirement Plus Contract, any death proceeds
will be paid as directed by the Contract Holder. Any lump sum payment paid
during the Accumulation Period or under the applicable lifetime or nonlifetime
Annuity options will normally be mailed to the Contract Holder, or to the Plan
Beneficiary,(if requested by the Contract Holder), within seven calendar days
after proof of death acceptable to the Company and a request for payment on a
form acceptable to the Company is received at our Home Office in good order.
Until the election of method of payment, amounts will remain invested as
they were before the death, and the Beneficiary will assume all nonforfeitable
rights under a Contract. The Code requires that distributions begin within a
certain time period. If the Plan Beneficiary is your surviving spouse and the
Plan allows, the Plan Beneficiary has until you would have attained age 70 1/2
to begin Annuity payments, to receive a lump sum distribution, or to begin
receiving distributions under a Systematic Distribution Option. If your Plan
Beneficiary is not your surviving spouse, either Annuity payments must begin by
December 31 of the year following the year of your death, or the entire value
must be distributed by December 31 of the fifth year following the year of your
death. In no event may payments to any Plan Beneficiary extend beyond the life
of the Plan Beneficiary or any period certain greater than the Plan
Beneficiary's life expectancy. Failure to commence distribution within the above
time periods can result in tax penalties.
If a lump sum distribution is elected, the Plan Beneficiary will receive
the value of the Individual Account determined as of the Valuation Period in
which proof of death acceptable to us and a request for payment on a form
acceptable to the Company is received at our Home Office in good order. The
distribution is taxed in the same manner as a full surrender. If an Annuity
Option is elected, the value applied to the Annuity Option is determined in the
same manner, and the proceeds are taxed in the same manner as the annuity
payments. If amounts are left in the variable investment options, the Individual
Account Current Value will continue to be affected by the investment performance
of the investment option(s) selected. If amounts are left on deposit in the
general account, the principal amount is guaranteed, but interest payments may
vary. In general, regardless of the method of payment, payments received by your
beneficiaries after your death are taxed in the same manner as if you had
received those payments. (See "Tax Status.")
ANNUITY PERIOD
If an Annuitant dies after Annuity payments have begun, any death benefit
payable will depend upon the terms of a Contract and the Annuity option
selected.
If Annuity Option 2 or 3 was elected without a guaranteed minimum payment
period under a Contract, Annuity payments will cease upon the death of the
Annuitant under a Life Annuity or the death of the surviving Annuitant under
Option 3.
- -------------------------------------------------------------------------------
18
<PAGE>
Under a Contract, if Annuity Option 2 or 3 was elected with a guaranteed
minimum payment period and the death of the Annuitant under Annuity Option 2 or
the surviving Annuitant under Option 3 occurs prior to the end of that period,
we will pay to the person designated by the Contract Holder in a lump sum
(unless otherwise requested) the present value of the guaranteed Annuity
payments remaining. Such value will be determined as of the Valuation Period in
which proof of death acceptable to us and a request for payment are received at
our Home Office. The value will be reduced by any payments made after the date
of death.
If Annuity Option 2 was elected with a guaranteed minimum payment period
under a Contract and the Annuitant dies before all guaranteed payments are made,
the value of any remaining payments may be paid in a lump sum to your Plan
Beneficiary and no Withdrawal Fee will be imposed. Such value will be determined
as of the Valuation Period in which proof of death acceptable to us and a
request for payment on a form acceptable to the Company are received at our Home
Office in good order.
If the Annuitant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining values
must be distributed to your designated Plan 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 normally be made within seven calendar days after proof of
death, acceptable to us, and a request for payment are received at our Home
Office.
TAX STATUS
================================================================================
Introduction
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
The Company makes no guarantee regarding the tax treatment of any Contract or
transaction involving a Contract. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Annuity payments, and on the economic
benefit to the Contract Holder, Participant or Plan Beneficiary may depend upon
the tax status of the individual concerned. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction.
Taxation of the Company
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Account's investment income and realized net capital gains
will not be taxed to the extent that such income and gains are applied to
increase the reserves under the Contracts.
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, and
Section 401(a) and Section 401(k) plans. The tax rules applicable to retirement
plans vary according to the type of plan and the terms and conditions of the
plan.
The Company makes no attempt to provide more than general information about
use of the Contracts with the various types of retirement plans. Participants as
well as Plan Beneficiaries are cautioned that the rights of any person to any
benefits under the Contracts may be subject to the terms and conditions of the
plans themselves, in addition to the terms and conditions of the Contracts
issued in connection with such plans. Some retirement plans are subject to
limitations on distribution and other requirements that are not incorporated in
the Contracts. Purchasers are responsible for determining that Contributions ,
distributions and other transactions with respect to the Contracts satisfy
applicable laws, and should consult their legal counsel and tax adviser
regarding the suitability of the Contract.
Minimum Distribution Requirements. The Code has required distribution rules
for Section 403(b), 401(a) and 401(k) Plans. Under 403(b) Plans, distributions
of amounts held as of December 31, 1986 must generally begin by the end of the
calendar year in which you attain age 75 or retire, if later. However, special
rules require that some or all of that balance be distributed earlier if any
distributions are taken in excess of the minimum required amount. For all
Participants, other than 5% owners, distributions under 401(a) and 401(k) Plans,
and distributions attributable to Contributions under Section 403(b) Plans on or
after January 1, 1987 (including any earnings on the entire Account Value after
that date), must generally begin by April 1 of the calendar year following the
calendar year in which you attain age 70 1/2 or retire, whichever occurs later.
For 5% owners, such distributions must begin by April 1st of the calendar year
following the calendar year in which you attain age 70 1/2.
In general, annuity payments must be distributed over your life or the
joint lives of you and your Plan Beneficiary, or over a period not greater than
your life expectancy or the joint life expectancies of you and your Plan
Beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your Plan Beneficiary must be made at least as rapidly as under
the method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your Plan Beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your Plan Beneficiary by December 31 of the year
following your death. However, a spousal Plan Beneficiary has certain rollover
rights which can only be exercised in the year of your death. The rules are
complex and you should consult your tax adviser before electing the method of
calculation to satisfy the minimum distribution requirements.
If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year
containing the fifth anniversary of the date of your death. Alternatively,
payments may be made over the life of the Plan Beneficiary or over a period not
extending beyond the life expectancy of the Plan Beneficiary provided the
distribution begins by December 31 of the calendar year following the calendar
year of your death, or December 31 of the calendar year in which you would have
attained age 70 1/2.
If you fail to receive the minimum required distribution for any tax year,
a 50% excise tax is imposed on the required amount that was not distributed.
Taxation of Distributions. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to another
plan of the same type or to an
- -------------------------------------------------------------------------------
19
<PAGE>
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 Plan 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 federal income tax
withholding. We will report to the IRS the taxable portion of all distributions.
The Code imposes a 10% penalty tax on the taxable portion of any
distribution unless made when (a) you have attained age 59-1/2, (b) you have
become disabled, (c) you have died, (d) you have separated from service with the
plan sponsor at or after age 55, (e) the distribution amount is rolled over into
another plan of the same type or to an IRA in accordance with the terms of the
Code, or (f) the distribution amount is made in substantially equal periodic
payments (at least annually) over your life or life expectancy or the joint
lives or joint life expectancies of you and your Plan Beneficiary, provided you
have separated from service with the plan sponsor. In addition, the penalty tax
does not apply for the amount of a distribution equal to unreimbursed medical
expenses incurred by you that qualify for deduction as specified in the Code.
The Code may impose other penalty taxes in other circumstances.
Section 403(b) Plans. Under Code Section 403(b), Contributions made by
public school systems or nonprofit healthcare organizations and other Section
501(c)(3) tax exempt organizations to purchase annuity contracts for their
employees are generally excludable from the gross income of the employee.
In order to be excludable from taxable income, total annual Contributions
made by you and your employer cannot exceed either of two limits set by the
Code. The first limit, under Section 415, is generally the lesser of 25% of your
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 Section 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 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 a Participant's
gross income only if the Plan meets certain nondiscrimination 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 Plan,
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
contract owner possesses incidents of investment control over the assets. In
these circumstances, income and gains from the separate account assets would be
currently includable in the variable contract owner's gross income. The Treasury
announced that guidance would be issued in the future regarding the extent to
which owners
- -------------------------------------------------------------------------------
20
<PAGE>
could direct their investments among Subaccounts without being treated as owners
of the underlying assets of the Separate Account. It is possible that the
Treasury's position, when announced, may adversely affect the tax treatment of
existing contracts. The Company therefore reserves the right to modify the
Contract as necessary to attempt to prevent the owner from being considered the
federal tax owner of the assets of the Separate Account.
Section 401(a) and 401(k) Plans. Section 401(a) and 401(k) permits certain
employers to establish various types of retirement plans for employees, and
permits self-employed individuals to establish various types of retirement plans
for themselves and for their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax consequences to the Plan, to the Participant or to both may result
if this Contract is assigned or transferred to any individual except to a
Participant as a means to provide benefit payments.
The Code imposes a maximum limit on annual Purchase Payments that may be
excluded from a Participant's gross income. Such limit must be calculated under
the Plan by the employer in accordance with Section 415 of the Code. This limit
is generally the lesser of 25% of your compensation or $30,000. 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 Section
125 or 457. The limit applies to your Contributions as well as any Contributions
made by your employer on your behalf. There is an additional limit that
specifically limits your salary reduction Contributions under a 401(k) Plan to
generally no more than $10,000 annually (subject to indexing). Your own limits
may be higher or lower, depending on certain conditions. In addition, Purchase
Payments will be excluded from a Participant's gross income only if the Plan
meets certain nondiscrimination requirements.
Code Section 401(k) restricts distribution from the 401(k) Employee Account
and possibly all or a portion of the 401(k) Employer Account, if such amounts
are included in determining compliance with certain nondiscrimination
requirements under the Code.
Subject to the terms of the Plan, distribution of these restricted amounts
may only occur upon retirement, death of the employee, attainment of age 59 1/2,
disability, separation from service, financial hardship, termination of the Plan
in certain circumstances or upon disposition of substantially all of the
employer's assets or of a subsidiary. In addition, income attributable to salary
reduction Contributions and credited on or after January 1, 1989 may not be
distributed in the case of hardship.
MISCELLANEOUS
================================================================================
VOTING RIGHTS
Each Contract Holder may direct us in the voting of shares at meetings of
shareholders of the appropriate Fund(s). The number of votes to which each
Contract Holder may give direction will be determined as of the record date.
The number of votes each Contract Holder is entitled to direct with respect
to a particular Fund during the Accumulation Period is equal to the portion of
the sum of all Current Values of a Contract attributable to that Fund divided by
the net asset value of one share of that Fund. During the Annuity Period, the
number of votes is equal to the Valuation Reserve applicable to the portion of a
Contract attributable to that Fund, divided by the net asset value of one share
of that Fund. In determining the number of votes, fractional votes will be
recognized. Where the value of a Contract or Valuation Reserve relates to more
than one Fund, the calculation of votes will be performed separately for each
Fund.
Participants and Annuitants have a fully vested (100%) interest in the
value of the Individual Accounts which are credited with Participant
Contributions. Participants and Annuitants also have a nonforfeitable (vested)
right to the value of the Employer Account pursuant to the terms of, and to the
extent of their vested percentage under the Plan. Therefore, such Participants
and Annuitants may instruct the Contract Holder how to direct us to cast the
votes for the portion of the Current Value or Valuation Reserve attributable to
their Individual Accounts. Votes attributable to those Participants and
Annuitants who do not instruct the Contract Holder will be cast by us in the
same proportion as votes for which instructions have been received by the
Contract Holder. Votes attributable to Contract Holders who do not direct us
will be cast by us in the same proportion as the votes for which we have
received directions.
Contract Holders, or Participants and Annuitants entitled to instruct the
casting of votes, will receive a notice of each meeting of shareholders,
together with any proxy solicitation materials, and
- -------------------------------------------------------------------------------
21
<PAGE>
a statement of the number of votes attributable to their participation under a
Contract and stating the right to instruct the Contract Holder how such votes
shall be cast.
MODIFICATION OF THE CONTRACTS
Only an authorized officer of the Company may change the terms of this
Contract. The Company reserves the right to modify this Contract to meet the
requirements of applicable state and federal laws or regulations. The Company
will notify the Contract Holder and Participants in writing of any changes.
The Company may change the tables for determining the amount of Annuity
benefit payments attributable only to Contributions accepted after the effective
date of change, without Contract Holder consent. Such a change will not become
effective earlier than twelve months after (1) the effective date of the
Contract, or (2) the effective date of a previous change. The Company will
notify the Contract Holder in writing at least thirty (30) days before the
effective date of the change. The Company may not make changes which adversely
affect the Annuity benefits attributable to Contributions already made to the
Contract.
CONTRACT HOLDER INQUIRIES
A Contract Holder or a Participant may direct inquiries to a local
representative of the Distributor or may write directly to us at the address
shown on the cover page of this prospectus.
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).
PAYMENTS
Payments for withdrawal requests (subject to the limitations on withdrawals
from the Fixed Plus Account described in Appendices II and III) will be made in
accordance with SEC requirements, but normally not later than seven calendar
days after a properly completed disbursement form is received at our Home Office
or within seven calendar days of the date the withdrawal form may specify.
Payments may be delayed for: (a) any period in which the New York Stock Exchange
("Exchange") is closed (other than customary weekend and holiday closings) or in
which trading on the Exchange is restricted; (b) any period in which an
emergency exists where disposal of securities held by the Funds is not
reasonably practicable or is not reasonably practicable for the value of the
assets of the Funds to be fairly determined; or (c) such other periods as the
SEC may by order permit for the protection of Contract Holders and Participants.
The conditions under which restricted trading or an emergency exists shall be
determined by the rules and regulations of the SEC.
TRANSFER OF OWNERSHIP; ASSIGNMENT
Unless contrary to applicable law, assignment of a Contract or an
Individual Account is prohibited.
LEGAL PROCEEDINGS
We know of no material legal proceedings pending to which the Separate
Account is a party, nor which would materially affect the Separate Account.
LEGAL MATTERS
The validity of the securities offered by this Prospectus has been passed
upon by Counsel to the Company.
YEAR 2000
Aetna Inc. (referred to collectively with its subsidiaries and affiliates
as "Aetna"), has developed and is currently executing a plan to make its
computer systems and applications accommodate date-sensitive information
relating to the Year 2000. The plan covers four stages including (i) inventory,
(ii) assessment, (iii) remediation and (iv) testing and certification. Aetna is
currently in the assessment or remediation stages of its plan for the systems
and applications related to the Separate Account, including those relating to
the Company, and Aeltus Investment Management, Inc., the subadviser to most
Aetna affiliated mutual funds. Testing and certification of these systems is
targeted for 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 is currently examining its relationships with third parties as part
of its Year 2000 plan. While the Company believes that United States securities
industry participants generally are preparing their computer systems and
applications to accommodate Year 2000
- -------------------------------------------------------------------------------
22
<PAGE>
date-sensitive information, preparation by third parties is outside the
Company's control. There can be no assurance that failure of third parties to
complete adequate preparations in a timely manner, and any resulting systems
interruptions or other consequences, would not have an adverse effect, directly
or indirectly, on the Separate Account, including, without limitation, its
operation or the valuation of its assets and units.
- -------------------------------------------------------------------------------
23
<PAGE>
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
================================================================================
The following items are the contents of the Statement of Additional
Information:
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Performance of Similarly Managed Funds
Annuity Payments
Sales Material
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of Aetna Life Insurance and Annuity Company
- -------------------------------------------------------------------------------
24
<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 under some Contracts during the Accumulation Period. All amounts
allocated to Long-Term Classifications of GAA are held in a nonunitized separate
account. In addition, if approved in your jurisdiction, amounts allocated to or
automatically rolling over to Short-Term Classifications of GAA on or after
September 1, 1998 are held in the nonunitized separate account. If and to the
extent provided in the applicable Contracts, assets of the nonunitized separate
account are not chargeable with liabilities of any other business conducted by
the Company, and income, gains and losses of the nonunitized separate account
are credited to or charged against the assets of the separate account without
regard to other income, gains or losses of the Company. The Company intends to
amend all Contracts covered by this Prospectus in order to provide that the
assets of the nonunitized separate account are "insulated" from other Company
liabilities as described above.
Amounts allocated to Short-Term Classifications of GAA prior to September 1,
1998 (and amounts allocated to or rolling over to Short-Term Classifications of
GAA on or after that date but prior to necessary state approval) are held in the
Company's general account that supports insurance and annuity obligations. These
general account assets may be charged with liabilities arising out of any other
business of the Company.
The GAA is a credited interest option in which we guarantee stipulated
rates of interest for stated periods of time on amounts directed to the GAA. The
interest rate stipulated is an annual effective yield; that is, it reflects a
full year's interest. Interest is credited daily at a rate that will provide the
guaranteed annual effective yield over the period of one year. This option
guarantees the minimum interest rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years and Long-Term GAA has Guaranteed Terms from more than three and up to ten
years.
Purchase Payments must remain in the 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"). For Contracts issued in New York, no MVA applies upon the
election of the Estate Conservation Option or the Systemic Withdrawal Option. 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 that is less
than the amount paid into the GAA.
As a Guaranteed Term matures assets accumulating under the GAA may be (a)
transferred to a new Guaranteed Term, if available under the Contract, (b)
transferred to other available investment options, or (c) withdrawn. Amounts
withdrawn may be subject to a Withdrawal Fee, federal tax penalties or mandatory
income tax withholding and a Maintenance Fee.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts which have been accumulating under the GAA
transferred to one or more of the Funds available during the Annuity Period. GAA
cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
The Company makes 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
the 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 during the end of a Guaranteed Term,
unless such transfer is due to
- -------------------------------------------------------------------------------
25
<PAGE>
the maturity of the Guaranteed Term.
CONTRACT LOANS
Loans may not be made against amounts held in the GAA, although such value
is included in determining the value of the Individual Account against which a
loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn from the 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.
- -------------------------------------------------------------------------------
26
<PAGE>
APPENDIX II
FIXED PLUS ACCOUNT
================================================================================
After receipt of any required regulatory approval in a given state, all
Contracts issued in that state will provide for the availability of this Fixed
Plus Account investment option.
The following summarizes material information concerning the Fixed Plus Account
that is offered as an option under the Contracts. Additional information may by
found in your certificate or Contract. Amounts allocated to the Fixed Plus
Accounts are held in the Company's general account that supports insurance and
annuity obligations. Interests in the Fixed Plus Account have not been
registered with the SEC in reliance on exemptions under the Securities Act of
1933, as amended. Disclosure in this prospectus regarding the Fixed Plus
Account, however, may be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of the
statements. Disclosure in this Appendix regarding the Fixed Plus Account has not
been reviewed by the SEC.
The Fixed Plus Account guarantees that amounts allocated to this option
will earn the minimum Fixed Plus interest rate specified in a Contract. We may
credit a higher interest rate from time to time. The Company's determination of
interest rates reflects the investment income earned on invested assets and the
amortization of any capital gains and/or losses realized on the sale of invested
assets. Under this option, we assume the risk of investment gain or loss by
guaranteeing Net Contribution values and promising a minimum interest rate and
Annuity payment.
The Fixed Plus Account will reflect a compound interest rate credited by
us. The interest rate quoted is an annual effective yield. Amounts applied to
the Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
The Company reserves the right to limit Net Contribution(s) and/or
transfers to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day our Home Office receives a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of a Systematic
Distribution Option. The 20% limit is waived if the partial withdrawal is taken
pro rata from each investment option in which the Individual Account invests;
and is due to annuitization under a fixed lifetime or non-lifetime Annuity
option, or a variable lifetime Annuity option, or due to death. The waiver upon
death will only be exercised once and must occur within 6 months after the
Participant's date of death. In addition, subject to state regulatory approval,
the 20% limit is waived if the partial withdrawal is due to hardship from an
unforeseeable emergency, as defined by the Code, and if the following conditions
are met: i) the hardship is certified; ii) the partial withdrawal is taken pro
rata from each investment option in which the Individual Account invests; iii)
the amount is paid directly to you; and iv) the amount paid for all withdrawals
due to hardship during the previous 12-month period does not exceed 10% of the
average value of all Accounts during that same period.
If a full withdrawal is requested, we will pay any amounts held in the
Fixed Plus Account, with interest, in five annual payments equal to:
o One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, loan,
transfers or annuitizations made in the prior 12 months;
o One-fourth of the then remaining Fixed Plus Account Value 12 months
later;
o One-third of the then remaining Fixed Plus Account Value 12 months
later;
o One-half of the then remaining Fixed Plus Account Value 12 months
later; and
o The balance of the Fixed Plus Account Value 12 months later.
We will waive this payout provision for a Fixed Plus Account full surrender
if a full withdrawal is made due to:
(a) the Participant's death, before Annuity payments begin and request for
payment is received within 6 months after the Participant's date of
death;
(b) the election of a fixed lifetime or non-lifetime Annuity option or
a variable lifetime Annuity option; or
- -------------------------------------------------------------------------------
27
<PAGE>
(c) if the Fixed Plus Account Value is $3,500 or less and no withdrawals,
transfers, loan or annuitizations have been made from the Account
within the prior 12 months.
or
(d) Subject to state regulatory approval, due to your separation from
service with the employer, provided that:
(1) the employer certifies that you have separated from service;
(2) the amount is withdrawn within one year from separation from
service or, if withdrawn after one year from separation from
service, the amount withdrawn is paid directly to you; and
(3) the amount paid for all withdrawals due to separation from service
during the previous 12-month period does not exceed 20% of the
average value of all Accounts under the Contract during that same
period.
Once we receive a request for a full withdrawal from an Account, no further
withdrawals or transfers will be permitted from the Fixed Plus Account. A full
withdrawal from the Fixed Plus Account may be canceled at any time before the
end of the five-payment period.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day our Home Office receives a
written request, reduced by any Fixed Plus Account withdrawals, transfers, loan
or annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of a Systematic
Distribution Option . The 20% limit on transfers will be waived when the value
in the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts which have been accumulating under the
Fixed Plus Account transferred to one or more of the Funds available during the
Annuity Period to provide lifetime Variable Annuity payments.
SWO
The Systematic Withdrawal Option may not be elected if you have requested a
Fixed Plus Account transfer or withdrawal within the prior 12 month period.
LOANS
Loans may be made from those Individual Account Current Values held in the
Fixed Plus Account. A 5% default charge may be assessed on amounts loaned from,
but not repaid to the Fixed Plus Account. The default charge will apply to
borrowed amounts that exceed the amount eligible for withdrawal at the time the
loan is made.
TRANSFER CREDITS
The Company provides a transfer credit in certain circumstances. See
"Transfer Credits". The Transfer Credit is a specified percentage of the assets
transferred to the Company under a Contract that remain in the Individual
Accounts for the period of time specified by the Company, plus the interest that
would have been credited had that amount been deposited in the Fixed Plus
Account on the first business day of the calendar month following its
calculation. The transfer credit is applied to the Current Value held in the
Fixed Plus Account.
- -------------------------------------------------------------------------------
28
<PAGE>
APPENDIX III
FIXED PLUS ACCOUNT
(Applicable only in limited circumstances)
================================================================================
The Fixed Plus Account described below will be available as an investment option
for all Contributions under Contracts issued in a given state until the Company
obtains any required state regulatory approval to offer the Fixed Plus Account
investment option described in Appendix II. Subject to state regulatory
approval, certain Contracts under which the Fixed Plus Account described below
is an investment option may be endorsed to (i) provide that no new Contributions
or transfers may be made to the Fixed Plus Account described below; or (2) make
the Fixed Plus Account investment option described in Appendix II applicable to
all new and existing Contributions to the Fixed Plus Account.
The following summarizes material information concerning the Fixed Plus Account
that is offered as an option under the Contracts. Additional information may be
found in your certificate or contract. Amounts allocated to the Fixed Plus
Accounts are held in the Company's general account that supports insurance and
annuity obligations. Interests in the Fixed Plus Account have not been
registered with the SEC in reliance on exemptions under the Securities Act of
1933, as amended. Disclosure in this prospectus regarding the Fixed Plus
Account, however, may be subject to certain generally applicable provisions of
the federal securities laws relating to the accuracy and completeness of the
statements. Disclosure in this Appendix regarding the Fixed Plus Account has not
been reviewed by the SEC.
The Fixed Plus Account guarantees that amounts allocated to this option
will earn the minimum Fixed Plus interest rate specified in a Contract. We may
credit a higher interest rate from time to time. The Company's determination of
interest rates reflects the investment income earned on invested assets and the
amortization of any capital gains and/or losses realized on the sale of invested
assets. Under this option, we assume the risk of investment gain or loss by
guaranteeing Net Contribution values and promising a minimum interest rate and
Annuity payment.
The Fixed Plus Account will reflect a compound interest rate credited by
us. The interest rate quoted is an annual effective yield. Amounts applied to
the Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
Beginning on the tenth Individual Account Year, we will credit amounts held
in the Fixed Plus Account with an interest rate that is at least 0.25% higher
than the then-declared interest rate for the Fixed Plus Accounts for Individual
Accounts that have not reached their tenth anniversary.
The Company reserves the right to limit Net Contribution(s) and/or
transfers to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day our Home Office receives a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loan or annuitizations
made in the prior 12 months. In calculating the 20% limit, we reserve the right
to include payments made due to the election of a Systematic Distribution
Option. The 20% limit is waived if the partial withdrawal is taken pro rata from
each investment option in which the Individual Account invests; and is due to
annuitization under a fixed lifetime or non-lifetime Annuity option, or a
variable lifetime Annuity option, or due to death. The waiver upon death will
only be exercised once and must occur within 6 months after the Participant's
date of death.
If a full withdrawal is requested, we will pay any amounts held in the
Fixed Plus Account, with interest, in five annual payments equal to:
- -------------------------------------------------------------------------------
29
<PAGE>
o One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, loan,
transfers or annuitizations made in the prior 12 months;
o One-fourth of the then remaining Fixed Plus Account Value 12 months
later;
o One-third of the then remaining Fixed Plus Account Value 12 months
later;
o One-half of the then remaining Fixed Plus Account Value 12 months
later; and
o The balance of the Fixed Plus Account Value 12 months later.
We will waive this payout provision for a Fixed Plus Account full surrender
if a full withdrawal is made due to:
(a) the Participant's death, before Annuity payments begin and request for
payment is received within 6 months after the Participant's date of
death;
(b) the election of a fixed lifetime or non-lifetime Annuity option or a
variable lifetime Annuity option; or
(c) if the Fixed Plus Account Value is $3,500 or less and no withdrawals,
transfers, loan or annuitizations have been made from the Account
within the prior 12 months.
Once we receive a request for a full withdrawal from an Account, no further
withdrawals or transfers will be permitted from the Fixed Plus Account. A full
withdrawal from the Fixed Plus Account may be canceled at any time before the
end of the five-payment period.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day our Home Office receives a
written request, reduced by any Fixed Plus Account withdrawals, transfers, loan
or annuitizations made in the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of a Systematic
Distribution Option. The 20% limit on transfers will be waived when the value in
the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts which have been accumulating under the
Fixed Plus Account transferred to one or more of the Funds available during the
Annuity Period to provide lifetime Variable Annuity payments.
SWO
The Systematic Withdrawal Option may not be elected if you have requested a
Fixed Plus Account transfer or withdrawal within the prior 12 month period.
LOANS
Loans may be made from those Individual Account Current Values held in the
Fixed Plus Account. A 5% default charge may be assessed on amounts loaned from,
but not repaid to the Fixed Plus Account. The default charge will apply to
borrowed amounts that exceed the amount eligible for withdrawal at the time the
loan is made.
TRANSFER CREDITS
The Company provides a transfer credit in certain circumstances. See
"Transfer Credits". The Transfer Credit is a specified percentage of the assets
transferred to the Company under a Contract that remain in the Individual
Accounts for the period of time specified by the Company, plus the interest that
would have been credited had that amount been deposited in the Fixed Plus
Account on the first business day of the calendar month following its
calculation. The transfer credit is applied to the Current Value held in the
Fixed Plus Account.
- -------------------------------------------------------------------------------
30
<PAGE>
APPENDIX IV
FIXED ACCOUNT
(Applicable only in limited circumstances)
================================================================================
If made available under your Contract, the Fixed Account is an investment option
available only for amounts previously allocated to a Fixed Account under
contracts that are exchanged into one or more of the Contracts. See Appendix VI.
No new Contributions or transfers to the Fixed Account will be allowed.
The following summarizes material information concerning the Fixed Account.
Additional information may be found in your certificate or Contract. Amounts
allocated to the Fixed Account are held in the Company's general account.
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 this
prospectus regarding the Fixed Account, however, may be subject to certain
generally applicable provisions of the Federal Securities Laws relating to the
accuracy and completeness of the statements. Disclosure in this Appendix
regarding the Fixed Account has not been reviewed by the SEC.
The Fixed Account guarantees that amounts allocated to this option will
earn the minimum interest rate specified in the Contract. (This minimum interest
rate cannot be changed by the Company.) We may credit a higher interest rate
from time to time. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under this option,
we assume the risk of investment gain or loss by guaranteeing Net Purchase
Payment values and promising a minimum interest rate and Annuity payment.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to 6 months or (b) as provided by
federal law.
In addition, if allowed by state law, we may pay any Fixed Account
withdrawal value in equal payments, with interest, over a period not to exceed
60 months, when:
(a) the Fixed Account withdrawal value for the Contract or for the total
of the Accounts under the Contract exceeds $250,000 on the day prior
to the withdrawal; and
(b) the sum of the current Fixed Account withdrawal and the total of all
Fixed Account withdrawals from the Contract or any Account under the
Contract within the past 12 calendar months exceeds 20% of the amount
in the Fixed Account on the day prior to the current withdrawal.
Interest, as used above, will not be more than two percentage points below
any rate determined prospectively by the Board of Directors for this class of
Contract. In no event will the interest rate be less than the minimum stated in
the Contract.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
MORTALITY AND EXPENSE RISK CHARGES
The Fixed Account will reflect a compound interest rate credited by us. The
interest rate quoted is an annual effective yield. We make no deductions from
the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers from the Fixed Account to any other available investment
option(s) are allowed in each calendar year during the Accumulation Period. The
amount that may be transferred may vary at our discretion; however, it will
never be less than 10% of the amount held under the Fixed Account. Transfers to
the Fixed Plus Account will be permitted without regard to this limitation.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, the Contract Holder, on your behalf, may elect to have amounts which have
been accumulating under the Fixed Account transferred to one or more of the
Funds available during the Annuity Period to provide Variable Annuity payments.
CONTRACT LOANS
Loans may be made from those Individual Account Current Values held in the
Fixed Account.
- -------------------------------------------------------------------------------
31
<PAGE>
APPENDIX V
EMPLOYEE APPOINTMENT OF EMPLOYER
AS AGENT UNDER AN ANNUITY CONTRACT
(FOR RETIREMENT PLUS CONTRACTS)
================================================================================
My employer has adopted a plan under Internal Revenue Code Sections 403(b)
or 401(a)/401(k) ("Plan") and has purchased an Aetna Life Insurance and Annuity
Company ("Company") Retirement Plus group variable annuity contract ("Contract")
as the funding vehicle. Contributions under this Plan will be made by me through
salary reduction to an Employee Account, and by my employer to an Employer
Account.
By electing to participate in my employer's Plan, I voluntarily appoint my
employer, who is the Contract Holder, as my agent for the purposes of all
transactions under the Contract in accordance with the terms of the Plan. The
Company is not a party to the Plan and does not interpret the Plan provisions.
As a Participant in the Plan, I understand and agree to the following terms
and conditions:
o I own the value of my Employee Account subject to the restrictions of
Sections 403(b) or 401(k) and the terms of the Plan. Subject to the
terms of the vesting schedule in the Plan and the restrictions of
Sections 403(b) or 401(k), I have ownership in the value of my Employer
Account.
o I understand that the Company will process transactions only with my
employer's written direction to the Company. I agree to be bound by my
employer's interpretation of the Plan provisions and its written
direction to the Company.
o My employer may permit me to make investment selections under the
Employee Account and/or the Employer Account directly with the Company
under the terms of the Contract. Without my employer's written
permission, I will be unable to make any investment selections under
the Contract.
o On my behalf, my employer may request a loan in accordance with the
terms of the Contract and the provisions of the Plan. The Company will
make payment of the loan amount directly to me. I will be responsible
for making repayments directly to the Company in a timely manner.
o In the event of my death, my employer is the named Beneficiary under
the terms of the Contract. I have the right to name a personal
Beneficiary as determined under the terms of the Plan and file that
Beneficiary election with my employer. It is my employer's
responsibility to direct the Company to properly pay any death
benefits.
- -------------------------------------------------------------------------------
32
<PAGE>
APPENDIX VI
CONTRACTS ACQUIRED BY EXCHANGE
================================================================================
Certain holders of contracts issued by the Company may exchange their
contract(s) (the "Exchanged Contracts") for either or both of the Contracts (the
"Acquired Contract(s)"). The contracts eligible for exchange are existing group
tax-deferred annuity contracts issued by the Company of the same class as the
Contracts. The Company will not assess any charges or deductions in connection
with an exchange. See "Deferred Sales Charges" below. Upon an exchange, the
rights of the Exchanged Contract holder and participants under the Exchanged
Contract will be governed by the Acquired Contract(s).
DIFFERENCES BETWEEN EXCHANGED CONTRACTS AND ACQUIRED CONTRACTS
The terms of the Acquired Contracts vary from the Exchanged Contracts and
it may or may not be advantageous to make an exchange. Contract Holders and
Participants should review the Acquired Contract and an Exchanged Contract to
determine all the differences. Some differences relate to the minimum guaranteed
interest rates for the GAA, Fixed Plus Account and the Fixed Account, the
availability of the Fixed Account (see Appendix IV), the operation of the Fixed
Plus Account (see Appendix II and Appendix III), the annuity options, and the
tables on which Annuity payments are based.
SPECIAL ACQUIRED CONTRACTS PROVISIONS
Except as follows, terms of the Acquired Contracts are identical to the
Contracts described in the Prospectus:
Transfer Credit
If a new participant under an Acquired Contract transfers to the Company
assets not previously held by the Company, the new participant may receive a
transfer credit. Participants of an Exchanged Contract in effect for less than a
period of time specified by the Company who transferred assets not previously
held by the Company may also receive a transfer credit. See "Transfer Credit."
Deferred Sales Charge
Under the Acquired Contract, new Participants of the Acquired Contract will
be subject to the Withdrawal Fee elected by the Contract Holder. See "Charges
and Fees During the Annuity Period". The Withdrawal Fee for existing
Participants of an Exchanged Contract, however, will be subject to the deferred
sales charges outlined below and as previously set forth in their Exchanged
Contract unless such charges are reduced or eliminated. See "Reduction or
Elimination of the Deferred Sales Charge" below. In general, deferred sales
charges may be deducted from amounts withdrawn during the first 10 Purchase
Payment Periods completed (if the Exchanged Contract is an Installment Purchase
Payment Contract) or 9 Account Years (if the Exchanged Contract is a Single
Purchase Payment Contract), as set forth in the table below. In some cases, the
deferred sales charge will be based on Account Years for both Installment
Purchase Payment Contracts and for Single Purchase Payment Contracts. Please
refer to the Contract endorsement relating to the exchange to obtain more
specific information. Consult the Exchanged Contract to determine whether it is
an Installment Payment Contract or Single Purchase Payment Contract. For
purposes of determining if a deferred sales charge applies under an Acquired
Contract, amounts received under an Exchanged Contract will be credited for the
period of time during which the amount was held under an Exchanged Contract.
Reduction or Elimination of the Deferred Sales Charge
For a particular Plan, we may reduce, waive or eliminate the deferred sales
charge for existing Participants of a Contract acquired by exchange. Any
reduction, waiver or elimination of such charges will reflect differences or
expected differences in the amounts of unrecovered distribution costs or
services of the types that the charges are intended to defray. When considering
whether to reduce or eliminate such charges or to grant such a waiver, we will
take into account factors which may include the following:
o the level of the Company's sales-related expenses;
o the specific distribution provisions of the Plan;
o the level of employer involvement in determining eligibility for
distributions under the Contract; and
- -------------------------------------------------------------------------------
33
<PAGE>
o the Company's assessment of financial risk to the Company relating to
withdrawals.
We will determine any reduction, waiver or elimination of deferred sales charges
on a basis that is not unfairly discriminatory. We will make any reduction in
deferred sales charge according to the Company's rules in effect at the time an
application for an Acquired Contract is approved. We reserve the right to change
these rules from time to time.
The following tables reflect the deferred sales charge deduction as a
percentage of the amount withdrawn from the Funds, GAA and the Fixed Account:
INSTALLMENT PURCHASE PAYMENT ACCOUNT:
Purchase Payment Deferred Sales
Periods Completed* Charge Deduction
------------------ ----------------
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or 10 2%
More than 10 0%
* For some Contracts, the deferred sales charge for Installment Purchase Payment
Accounts will be based on Account Years. Please refer to the Contract
endorsement relating to the exchange.
SINGLE PURCHASE PAYMENT ACCOUNT:
Account Years Deferred Sales
Completed Charge Deduction
--------- ----------------
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
The deduction for the deferred sales charge will not exceed 8.5% of the
total Purchase Payments actually made to an Individual Account.
The deferred sales charge will apply to withdrawals during the Accumulation
Period. It will apply during the Annuity Period if a non-lifetime Annuity option
is elected on a variable basis and the remaining value is withdrawn before five
years of Annuity payments have been completed.
FIXED PLUS ACCOUNT
For Acquired Contracts that allow investment in the Fixed Plus Account
described in Appendix III, there is a one-time election for Individual Accounts
established with Net Contributions from exchanged Company Contracts.
1) During a specified period beginning on the Contract effective date,
Participants will have a one-time opportunity to elect, by giving
notice to the Company, to have all amounts held in the Fixed Plus
Account be subject to the Fixed Plus Account rules described in
Appendix II. Participants who make the election described in the
preceding sentence will not be entitled to be credited, beginning on
the tenth anniversary of the effective date of their Individual
Account, with an interest rate that is higher than the then declared
rate for Individual Accounts before the tenth anniversary on any
amounts held in the Fixed Plus Account (See Appendix III). An election
made pursuant to this provision may not be revoked.
2) For Participants who do not make the election allowed under 1) above,
amounts attributable to their balances in the Fixed Plus Account on the
Contract effective date will remain subject to the rules described in
Appendix III until such time as they are transferred to another
investment option or withdrawn.
- -------------------------------------------------------------------------------
34
<PAGE>
APPENDIX VII
CONDENSED FINANCIAL INFORMATION
TABLE I
FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 0.95%
(Selected data for accumulation units outstanding throughout each period)
================================================================================
For Contracts with total Separate Account Charges of 0.95% the condensed
financial information presented below for the year or period ended December 31,
1997, is derived from the financial statements of the Account, which financial
statements have been audited by KPMG Peat Marwick LLP, independent auditors. The
financial statements and the independent auditors' report thereon are included
in the Statement of Additional Information.
<TABLE>
1997 1996
---- ----
<S> <C> <C>
AETNA BALANCED VP
Value at beginning of period $10.000(2)
Value at end of period $10.902
Increase (decrease) in value of accumulation unit(1) 9.02%(2)
Number of accumulation units outstanding at end of period 702,222
AETNA BOND VP
Value at beginning of period $10.000(2)
Value at end of period $10.503
Increase (decrease) in value of accumulation unit(1) 5.03%(2)
Number of accumulation units outstanding at end of period 161,765
AETNA GROWTH AND INCOME VP
Value at beginning of period $10.000(2)
Value at end of period $11.469
Increase (decrease) in value of accumulation unit(1) 14.69%(2)
Number of accumulation units outstanding at end of period 2,876,728
AETNA MONEY MARKET VP
Value at beginning of period $10.000(2)
Value at end of period $10.277
Increase (decrease) in value of accumulation unit(1) 2.77%(2)
Number of accumulation units outstanding at end of period 39,811
AETNA ASCENT VP
Value at beginning of period $10.000(2)
Value at end of period $11.472
Increase (decrease) in value of accumulation unit(1) 14.72%(2)
Number of accumulation units outstanding at end of period 20,237
AETNA CROSSROADS VP
Value at beginning of period $10.000(2)
Value at end of period $11.146
Increase (decrease) in value of accumulation unit(1) 11.46%(2)
Number of accumulation units outstanding at end of period 7,882
AETNA LEGACY VP
Value at beginning of period $10.000(2)
Value at end of period $10.905
Increase (decrease) in value of accumulation unit(1) 9.05%(2)
Number of accumulation units outstanding at end of period 61
- -------------------------------------------------------------------------------
35
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
1997 1996
---- ----
AETNA GROWTH VP
Value at beginning of period $10.000(3)
Value at end of period $10.934
Increase (decrease) in value of accumulation unit(1) 9.34%(3)
Number of accumulation units outstanding at end of period 2,697
AETNA INDEX PLUS LARGE CAP VP
Value at beginning of period $10.000(3)
Value at end of period $10.934
Increase (decrease) in value of accumulation unit(1) 9.34%(3)
Number of accumulation units outstanding at end of period 2,697
AETNA SMALL COMPANY 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 VALUE OPPORTUNITY 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
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.924
Increase (decrease) in value of accumulation unit(1) 9.24%(2)
Number of accumulation units outstanding at end of period 19,808
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.819
Increase (decrease) in value of accumulation unit(1) 8.19%(2)
Number of accumulation units outstanding at end of period 27,639
- -------------------------------------------------------------------------------
36
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
1997 1996
---- ----
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.362
Increase (decrease) in value of accumulation unit(1) 3.62%(2)
Number of accumulation units outstanding at end of period 54,133
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.664
Increase (decrease) in value of accumulation unit(1) 6.64%(2)
Number of accumulation units outstanding at end of period 3,820
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.243
Increase (decrease) in value of accumulation unit(1) 12.43%(2)
Number of accumulation units outstanding at end of period 95,199
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $9.510
Increase (decrease) in value of accumulation unit(1) (4.90)%(2)
Number of accumulation units outstanding at end of period 125,232
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.105
Increase (decrease) in value of accumulation unit(1) 11.05%(2)
Number of accumulation units outstanding at end of period 9,188
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10.000(3)
Value at end of period $10.902
Increase (decrease) in value of accumulation unit(1) 9.02%(3)
Number of accumulation units outstanding at end of period 1,402
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.891
Increase (decrease) in value of accumulation unit(1) 8.91%(2)
Number of accumulation units outstanding at end of period 39,841
- -------------------------------------------------------------------------------
37
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued
1997 1996
---- ----
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.370
Increase (decrease) in value of accumulation unit(1) 13.70%(2)
Number of accumulation units outstanding at end of period 151,935
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.000(2)
Value at end of period $11.383
Increase (decrease) in value of accumulation unit(1) 13.83%(2)
Number of accumulation units outstanding at end of period 5,295
</TABLE>
- --------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year
or period, and dividing the result by the beginning Accumulation Unit
value.
(2) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established during May 1996 when the fund
became available under the Contract, when funds were first received in this
option or when the applicable daily asset charge was first utilized.
(3) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established during August 1996 when the fund
became available under the Contract, when funds were first received in this
option or when the applicable daily asset charge was first utilized.
- -------------------------------------------------------------------------------
38
<PAGE>
CONDENSED FINANCIAL INFORMATION
TABLE II
FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.00%
(Selected data for accumulation units outstanding throughout each period)
================================================================================
For Contracts with total Separate Account Charges of 1.00% the condensed
financial information presented below for the year or period ended December 31,
1997, is derived from the financial statements of the Account, which financial
statements have been audited by KPMG Peat Marwick LLP, independent auditors. The
financial statements and the independent auditors' report thereon are included
in the Statement of Additional Information.
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
AETNA BOND VP
Value at beginning of period $10.000(2)
Value at end of period $10.500
Increase (decrease) in value of accumulation unit(1) 5.00%(2)
Number of accumulation units outstanding at end of period 679
AETNA GROWTH AND INCOME VP
Value at beginning of period $10.000(2)
Value at end of period $11.465
Increase (decrease) in value of accumulation unit(1) 14.65%(2)
Number of accumulation units outstanding at end of period 13,125
AETNA MONEY MARKET VP
Value at beginning of period $10.000(2)
Value at end of period $10.274
Increase (decrease) in value of accumulation unit(1) 2.74%(2)
Number of accumulation units outstanding at end of period 1,551
AETNA ASCENT VP
Value at beginning of period $10.000(2)
Value at end of period $11.468
Increase (decrease) in value of accumulation unit(1) 14.68%(2)
Number of accumulation units outstanding at end of period 13
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.358
Increase (decrease) in value of accumulation unit(1) 3.58%(2)
Number of accumulation units outstanding at end of period 21
- -------------------------------------------------------------------------------
39
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
1997 1996
---- ----
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.239
Increase (decrease) in value of accumulation unit(1) 12.39%(2)
Number of accumulation units outstanding at end of period 20,020
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $9.507
Increase (decrease) in value of accumulation unit(1) (4.93)%(2)
Number of accumulation units outstanding at end of period 17,055
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.366
Increase (decrease) in value of accumulation unit(1) 13.66%(2)
Number of accumulation units outstanding at end of period 36,305
</TABLE>
- --------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year
or period, and dividing the result by the beginning Accumulation Unit
value.
(2) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established during May 1996 when the fund
became available under the Contract, when funds were first received in this
option or when the applicable daily asset charge was first utilized.
- -------------------------------------------------------------------------------
40
<PAGE>
CONDENSED FINANCIAL INFORMATION
TABLE III
FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.15%
(Selected data for accumulation units outstanding throughout each period)
================================================================================
For Contracts with total Separate Account Charges of 1.15% the condensed
financial information presented below for the year or period ended December 31,
1997, is derived from the financial statements of the Account, which financial
statements have been audited by KPMG Peat Marwick LLP, independent auditors. The
financial statements and the independent auditors' report thereon are included
in the Statement of Additional Information.
<TABLE>
1997 1996
---- ----
<S> <C> <C>
AETNA MONEY MARKET VP
Value at beginning of period $10.000(2)
Value at end of period $10.264
Increase (decrease) in value of accumulation unit(1) 2.64%(2)
Number of accumulation units outstanding at end of period 9,856
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.805
Increase (decrease) in value of accumulation unit(1) 8.05%(2)
Number of accumulation units outstanding at end of period 4,215
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.348
Increase (decrease) in value of accumulation unit(1) 3.48%(2)
Number of accumulation units outstanding at end of period 4,472
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.228
Increase (decrease) in value of accumulation unit(1) 12.28%(2)
Number of accumulation units outstanding at end of period 4,169
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $9.498
Increase (decrease) in value of accumulation unit(1) (5.02)%(2)
Number of accumulation units outstanding at end of period 4,932
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.090
Increase (decrease) in value of accumulation unit(1) 10.90%(2)
Number of accumulation units outstanding at end of period 13
- -------------------------------------------------------------------------------
41
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
1997 1996
---- ----
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.355
Increase (decrease) in value of accumulation unit(1) 13.55%(2)
Number of accumulation units outstanding at end of period 9
</TABLE>
- --------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year
or period, and dividing the result by the beginning Accumulation Unit
value.
(2) Reflects less than a full year of performance activity. The initial
Accumulation Units value was established during May 1996 when the fund
became available under the Contract, when funds were first received in this
option or when the applicable daily asset charge was first utilized.
- -------------------------------------------------------------------------------
42
<PAGE>
CONDENSED FINANCIAL INFORMATION
TABLE IV
FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT CHARGES OF 1.50%
(Selected data for accumulation units outstanding throughout each period)
================================================================================
For Contracts with total Separate Account Charges of 1.50% the condensed
financial information presented below for the year or period ended December 31,
1997, is derived from the financial statements of the Account, which financial
statements have been audited by KPMG Peat Marwick LLP, independent auditors. The
financial statements and the independent auditors' report thereon are included
in the Statement of Additional Information.
<TABLE>
1997 1996
---- ----
<S> <C> <C>
AETNA GROWTH AND INCOMEVP
Value at beginning of period $10.000(2)
Value at end of period $11.429
Increase (decrease) in value of accumulation unit(1) 14.29%(2)
Number of accumulation units outstanding at end of period 5
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $9.477
Increase (decrease) in value of accumulation unit(1) (5.23)%(2)
Number of accumulation units outstanding at end of period 9
</TABLE>
- --------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year
or period, and dividing the result by the beginning Accumulation Unit
value.
(2) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established during may 1996 when the fund
became available under the Contract, when funds were first received in this
option or when the applicable daily asset charge was first utilized.
- -------------------------------------------------------------------------------
43
<PAGE>
For Master Applications Only
I hereby acknowledge receipt of an Account C prospectus for Retirement Plus and
Voluntary Tax-Deferred Annuity Plans 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.01107-98) dated May 1, 1998.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
PROS.01107-98
- -------------------------------------------------------------------------------
44
<PAGE>
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Statement of Additional Information dated May 1, 1998
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current Prospectus dated May 1, 1998. The Contracts
offered in connection with the Prospectus are the Retirement Plus Contract and
Voluntary Contract funded through Variable Annuity Account C (the "Separate
Account"). A free Prospectus is available upon request from the local Aetna Life
Insurance and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
Customer Service
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-525-4225
Read the Prospectus before you invest. Unless otherwise indicated, terms used in
this Statement of Additional Information shall have the same meaning as in the
Prospectus.
TABLE OF CONTENTS
Page
General Information and History.................................... 1
Variable Annuity Account C......................................... 1
Offering and Purchase of Contracts................................. 2
Performance Data................................................... 2
General...................................................... 2
Average Annual Total Return Quotations....................... 3
Performance of Similarly Managed Mutual Funds ..................... 6
Annuity Payments................................................... 7
Sales Material and Advertising..................................... 8
Independent Auditors............................................... 8
Financial Statements of the Separate Account....................... S-1
Financial Statements of Aetna Life Insurance and Annuity Company... F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1997, the Company had
$-- billion invested through its products, including $-- billion in its separate
accounts (of which the Company or an affiliate oversees the management of $--
billion) and $-- billion in its mutual funds offered outside of its separate
accounts. As of December 31, 1997, it ranked among the top -% of all U.S. life
insurance companies based on assets. The Company is a wholly owned subsidiary of
Aetna Retirement Holdings, Inc., which is in turn a wholly owned subsidiary of
Aetna Retirement Services, Inc., and an indirect wholly owned subsidiary of
Aetna Inc. The Company is engaged in the business of issuing life insurance
policies and annuity contracts in all states of the United States and in the
District of Columbia. 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 a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges and administrative expense
charge, if any, described in the Prospectus, all expenses incurred in the
operations of the Separate Account are borne by the Company. (See "Charges and
Deductions" in the Prospectus.) The Company receives reimbursement for certain
administrative costs from some 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. Please refer to the
prospectuses of the individual Funds in whose shares the assets of the Separate
Account are invested regarding the custodians for those Funds.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C is a separate account established by the Company for
the purpose of funding variable annuity contracts issued by the Company. The
Separate Account is registered with the Securities and Exchange Commission as a
unit investment trust under the Investment Company Act of 1940, as amended. The
assets of the Separate Account will be invested exclusively in shares of the
mutual funds described in the Prospectus ("Funds"). Purchase Payments made under
the Contract may be allocated to one or more of the Funds. 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 or under all Contracts.
1
<PAGE>
The Funds currently available under the Contract are as follows:
o Aetna Balanced VP (formerly known as Aetna Investment Advisers Fund, Inc.)
o Aetna Income Shares d/b/a Aetna Bond VP
o Aetna Variable Fund d/b/a Aetna Growth and Income VP
o Aetna Variable Encore Fund d/b/a Aetna Money Market VP
o Aetna Ascent VP (formerly known as Aetna Ascent Variable Portfolio)
o Aetna Crossroads VP (formerly known as Aetna Crossroads Variable Portfolio)
o Aetna Legacy VP (formerly known as Aetna Legacy Variable Portfolio)
o Aetna Growth VP (formerly known as Aetna Variable Growth Portfolio)
o Aetna High Yield VP
o Aetna Index Plus Large Cap VP
(formerly known as Aetna Variable Index Plus Portfolio)
o Aetna Index Plus Mid Cap VP
o Aetna Index Plus Small Cap VP
o Aetna International VP
o Aetna Real Estate Securities VP
o Aetna Small Company VP (formerly known as Aetna Variable Small
Company Portfolio)
o Aetna Value Opportunity VP (formerly known as Aetna Variable
Capital Appreciation Portfolio)
o Calvert Social Balanced Portfolio (formerly known as
Calvert Responsibly Invested Portfolio)
o Fidelity VIP Equity-Income Portfolio
o Fidelity VIP Growth Portfolio
o Fidelity VIP Overseas Portfolio
o Fidelity VIP II Contrafund Portfolio
o Janus Aspen Aggressive Growth Portfolio
o Janus Aspen Balanced Portfolio Portfolio)
o Janus Aspen Flexible Income Portfolio
o Janus Aspen Growth Portfolio
o Janus Aspen Worldwide Growth Portfolio
o Lexington Natural Resources Trust*
o Oppenheimer Global Securities
o Oppenheimer Strategic Bond
o Portfolio Partners MFS Emerging Equities Portfolio
o Portfolio Partners MFS Research Growth Portfolio
o Portfolio Partners MFS Value Equity Portfolio
o Portfolio Partners Scudder International Growth Portfolio
o Portfolio Partners T. Rowe Price Growth Equity Portfolio
*This Fund is only available for investment by Participants who established an
Individual 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).
A complete description of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectus and statement 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 "Determining Individual
Account Current Value."
PERFORMANCE DATA
General
From time to time, the Company may advertise different types of historical
performance for the variable options 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 and for the periods prescribed by the
Securities and Exchange Commission (the "standardized total return"), as well as
the "non-standardized total return," 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 variable options 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
2
<PAGE>
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 recurring
charges under the Contracts during each period (e.g., mortality and expense risk
charges, any applicable administrative expense charge, the maintenance fee and
the withdrawal fee). 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 non-standardized total return figures will be calculated in a similar
manner, except that they will not reflect any applicable withdrawal fee (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
Funds inception date and/or the date contributions were first received in the
Fund under the Separate Account.
The total return quotations are based upon historical earnings and are not
necessarily representative of future performance. Investment results of the
Funds will fluctuate over time, and any presentation of the Funds' total return
quotations for any prior period should not be considered as a representation of
how the Funds will perform in any future period. Additionally, your Current
Value upon redemption may be more or less than your original cost.
Average Annual Total Return Quotations - Standardized and Non-Standardized
The tables below reflect the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1997 for the
variable investment options under the Contracts issued by the Company. The
standardized returns (Table A) assume a mortality and expense risk charge of
1.25%, a $15 annual maintenance fee and a withdrawal fee for ten years. The
non-standardized returns (Table B) assume the same charges but do not include
the withdrawal fee. The Company may also advertise returns based on other fee
schedules that apply to a particular Contract Holder. These fee schedules may
result in higher returns than those shown.
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.
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 the average annual return since the date contributions were first
received in the Fund under the Separate Account. For nonstandardized
performance, the "Since Inception" column shows average annual total return
since the Fund's inception date.
3
<PAGE>
TABLE A
<TABLE>
<CAPTION>
----------------------------------------------------- -----------------------
STANDARDIZED DATE CONTRIBUTIONS
FIRST RECEIVED UNDER
SEPARATE ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SUBACCOUNT 1 Year 5 Years 10 Years Since
Inception*
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Balanced VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Bond VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Growth and Income VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Money Market VP (1)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Ascent VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Crossroads VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Legacy VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Growth VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Index Plus Large Cap VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Small Company VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Aetna Value Opportunity VP
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Calvert Social Balanced Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Fidelity VIP II Contrafund Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Fidelity VIP Equity-Income Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Fidelity VIP Growth Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Fidelity VIP Overseas Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Janus Aspen Aggressive Growth
Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Janus Aspen Balanced Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Janus Aspen Flexible Income Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Janus Aspen Growth Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Janus Aspen Worldwide Growth Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Lexington Natural Resources Trust
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Portfolio Partners MFS Emerging
Equities Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Alger American Small Cap Portfolio /
PPI-MFS Emerging Equities Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Portfolio Partners MFS Research
Growth Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
American Century VP Capital
Appreciation Portfolio / PPI-MFS
Research Growth Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Portfolio Partners MFS Value Equity
Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Neuberger & Berman AMT Growth
Portfolio / PPI-MFS Value Equity
Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Portfolio Partners Scudder
International Growth Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Scudder International Portfolio Class
A Shares / PPI-Scudder International
Growth Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Portfolio Partners T. Rowe Price
Growth Equity Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
Alger American Growth Portfolio /
PPI-T. Rowe Price Growth Equity
Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ ---------------------
</TABLE>
Please refer to the discussion preceding Table A 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) The current yield for the fund for the 7-day period ended December 31, 1997
was _____% on a standardized basis.
(2) The historical performance of a fund comparable to this Portfolio, adjusted
to include all applicable charges under the Contracts, is presented on page
XX of this Statement of Additional Information.
(3) The fund first listed was replaced with the applicable PPI 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 PPI 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.
4
<PAGE>
TABLE B
<TABLE>
<CAPTION>
----------------------------------------------------------------------------- ---------
NONSTANDARDIZED FUND INCEPTION
DATE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Since
Inception**
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Balanced VP 04/03/89
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Bond VP 05/15/73
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Growth and Income VP 05/01/75
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Money Market VP (1) 08/01/75
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Ascent VP 07/05/95
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Crossroads VP 07/05/95
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Legacy VP 07/05/95
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Growth VP 05/30/97
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Index Plus Large Cap VP 09/16/96
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Small Company VP 05/30/97
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Aetna Value Opportunity VP 05/30/97
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Calvert Social Balanced Portfolio 09/02/86
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Fidelity VIP II Contrafund Portfolio 01/03/95
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Fidelity VIP Equity-Income Portfolio 10/09/86
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Fidelity VIP Growth Portfolio 10/09/86
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Fidelity VIP Overseas Portfolio 02/13/87
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Janus Aspen Aggressive Growth 09/13/93
Portfolio
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Janus Aspen Balanced Portfolio 09/13/93
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Janus Aspen Flexible Income Portfolio 09/13/93
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Janus Aspen Growth Portfolio 09/13/93
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Lexington Natural Resources Trust 10/14/91
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Portfolio Partners MFS Emerging 11/28/97
Equities Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Alger American Small Cap Portfolio / 09/21/88
PPI-MFS Emerging Equities Portfolio
(3)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Portfolio Partners MFS Research 11/28/97
Growth Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
American Century VP Capital 11/20/87
Appreciation Portfolio / PPI-MFS
Research Growth Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Portfolio Partners MFS Value Equity 11/28/97
Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Neuberger & Berman AMT Growth 09/10/84
Portfolio / PPI-MFS Value Equity
Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Portfolio Partners Scudder 1/28/97
International Growth Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Scudder International Portfolio Class 05/01/87
A Shares / PPI-Scudder International
Growth Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Portfolio Partners T. Rowe Price 11/28/97
Growth Equity Portfolio (2)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
Alger American Growth Portfolio / 01/09/89
PPI-T. Rowe Price Growth Equity
Portfolio (3)
- --------------------------------------- -------------- ------------- ------------- ------------ -------------- ----------------
</TABLE>
Please refer to the discussion preceding Table A 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) The current yield for the Fund for the 7-day period ended December 31, 1997
was ___% on a nonstandardized basis.
(2) The historical performance of a fund comparable to this Portfolio, adjusted
to include all applicable charges under the Contracts, is presented on page
XX of this Statement of Additional Information.
(3) The fund first listed was replaced with the applicable PPI 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 PPI 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.
5
<PAGE>
PERFORMANCE OF SIMILARLY MANAGED MUTUAL FUNDS
The portfolios of Portfolio Partners, Inc. (the "Portfolios") commenced
operations on November 28, 1997 and have a limited performance record. Each
Portfolio, however, has substantially the same investment objective, policies
and strategies as one or more existing mutual funds ("Comparable Mutual Funds")
that are either sold directly to the public or through variable products,
advised by MFS, Scudder or T. Rowe Price, as the case may be.
The historical performance of the Funds that are comparable to the
Portfolios, adjusted to include all applicable charges under the Contracts, is
presented below. Investors should not consider the performance of the Comparable
Mutual Funds as an indication of the future performance of a similarly managed
Portfolio. The performance figures shown below reflect the deduction of the
historical fees and expenses paid by each Comparable Mutual Fund, and not those
to be paid by the Portfolio. These figures also assume that the following
charges under the Contracts are deducted: a mortality and expense risk charge of
1.25%; an administrative expense charge of 0.25%; a $15 annual maintenance fee;
and a withdrawal fee for ten years. To the extent permitted by applicable law or
regulatory authorities, the Company may also show in sales literature and
marketing materials returns based on other fee schedules that apply to a
particular Contract Holder, and may also show returns that do not include the
effect of a withdrawal fee. The results shown below reflect the reinvestment of
dividends and distributions, and were calculated in the same manner that will be
used by each Portfolio to calculate its own performance.
The following table shows average annualized total returns of the Comparable
Mutual Funds, adjusted to reflect Contract charges as described above, for the
stated periods ending December 31, 1997, as well as a comparison with the
performance of the applicable benchmark.*
<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
MFS Emerging Growth Fund (Class A)(1)
(Model for MFS Emerging Equities) (2)
- ------------------------------------------------------ ------ ------- ------- --------
Russell 2000
- ------------------------------------------------------ ------ ------- ------- --------
S&P 500
- ------------------------------------------------------ ------ ------- ------- --------
MFS Research Fund (Class A)(1)
(Model for MFS Research Growth) (3)
- ------------------------------------------------------ ------ ------- ------- --------
S&P 500
- ------------------------------------------------------ ------ ------- ------- --------
MFS Value Fund (Class A) (1)
(Model for MFS Value Equity)(4)
- ------------------------------------------------------ ------ ------- ------- --------
S&P 500
- ------------------------------------------------------ ------ ------- ------- --------
Scudder VLIF International
Portfolio (Model for Scudder International Growth)
- ------------------------------------------------------ ------ ------- ------- --------
MSCI EAFE
- ------------------------------------------------------ ------ ------- ------- --------
Scudder International Fund
(Model for Scudder International Growth)
- ------------------------------------------------------ ------ ------- ------- --------
MSCI EAFE
- ------------------------------------------------------ ------ ------- ------- --------
T. Rowe Price Growth Stock
Fund (Model for T. Rowe Price Growth Equity)
- ------------------------------------------------------ ------ ------- ------- --------
S&P 500
- -------------------------------------------------------------------------------------------------------
</TABLE>
* The S&P 500 (Standard & Poor's 500) Index is a value-weighted, unmanaged
index of 500 widely held stocks considered to be representative of the stock
market in general. The Russell 2000 Index is a value-weighted, unmanaged index
of small capitalization stocks. Both indices assume reinvestment of all
dividends. The Morgan Stanley Capital International-Europe, Australia, Far East
(MSCI EAFE) Index is an unmanaged, market value-weighted average of the
performance of more than 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East.
1 Class A share performance includes the performance of the Fund's Class B
shares for periods prior to the commencement of offering of Class A shares on
September 13, 1993, adjusted to include Class A's 5.75% front-end sales charge,
but not adjusted to reflect differences in internal operating expenses.
2 MFS also manages another fund with substantially the same investment
objective, policies and strategies as those of Portfolio Partners - MFS Emerging
Equities. The performance of that fund, MFS Variable Insurance Trust - Emerging
Growth Series, was not included in the chart because it has been in existence
only since July 24, 1995, and thus has a much shorter track record than MFS
Emerging Growth Fund (Class A). The performance of MFS Variable Insurance Trust
- - Emerging Growth Series for the one-year period ending December 31, 1997, was
_____%.
3 MFS also manages another fund with substantially the same investment
objective, policies and strategies as those of Portfolio Partners - MFS Research
Growth. The performance of that fund, MFS Variable Insurance Trust - Research
Series, was not included in the chart because it has been in existence only
since July 26, 1995, and thus has a much shorter track record than MFS Research
Fund (Class A). The performance of MFS Variable Insurance Trust - Research
Series for the one-year period ending December 31, 1997, was ____%.
4 MFS also manages another fund with substantially the same investment
objective, policies and strategies as those of Portfolio Partners - MFS Value
Equity. The performance of that fund, MFS Variable Insurance Trust - Value
Series, was not included in the chart because it has been in existence only
since August 14, 1996, and thus has a much shorter track record than MFS Value
Fund (Class A). The performance of MFS Variable Insurance Trust - Value Series
for the one year period ending December 31, 1997, was ____%.
6
<PAGE>
ANNUITY PAYMENTS
When Variable Annuity payments are to begin, the value of the Individual Account
is determined using Fund Annuity Unit values as of the tenth Valuation Period
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 Variable Annuity payment for each $1,000 of value
applied. Thereafter, Variable Annuity payments fluctuate as the Fund 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
Fund 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 Fund Annuity Unit value for that investment
option. As noted, Fund Annuity Unit values fluctuate from one Valuation Period
to the next; such fluctuations reflect changes in the net investment factor for
the appropriate Fund(s) (with a ten Valuation Period 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 Fund
Annuity Units credited under a particular Contract or Account and that the value
of a Fund Annuity Unit for the tenth Valuation Period prior to retirement was
$13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly Variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of a Fund Annuity Unit for the Valuation Period in
which the first payment was due was $13.400000. When this value is divided into
the first monthly payment, the number of Fund Annuity Units is determined to be
20.414. The value of this number of Fund Annuity Units will be paid in each
subsequent month.
If the net investment factor with respect to the appropriate Fund is 1.0015000
as of the tenth Valuation Period 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 Fund Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Fund Annuity Unit value for the prior Valuation Period (assume such value to be
$13.504376) to produce a Fund Annuity Unit value of $13.523359 for the Valuation
Period in which the second payment is due.
7
<PAGE>
The second monthly payment is then determined by multiplying the number of Fund
Annuity Units by the current Fund 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 variable investment options 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 the underlying Funds in terms of the
asset classes they represent and use categories in marketing materials 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.
8
<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-12
<PAGE>
Form No. SAI.01107-98 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
* To be filed by amendment
(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) Group Combination Annuity Contract (Nonparticipating)
(A001RP95)(3)
(4.2) Group Combination Annuity Certificate (Nonparticipating)
(A007RC95)(3)
(4.3) Group Combination Annuity Contract (Nonparticipating)
(A020RV95)(3)
(4.4) Group Combination Annuity Certificate (Nonparticipating)
(A027RV95)(3)
(4.5) Endorsement for Exchanged Contracts (EINRP95)(3)
(4.6) Endorsement for Exchanged Contracts (EINRV95)(3)
(4.7) Endorsement for 401(a) Plans(3)
(4.8) Endorsement (GET 9/96) for Contracts A001RP95 and A020RV95(4)
(4.9) Form of Endorsement (E1OMNI97) to Contract A001RP95(5)
<PAGE>
(4.10) Endorsement (E2OMNI97) to Contract A001RP95(5)
(4.11) Endorsement (3OMNI97) to Contract A001RP95(5)
(4.12) Endorsement (E1FXPL97) to Contract A001RP95(5)
(4.13) Endorsement (E2FXPL97) to Contracts A001RP95 and A020RV95(5)
(4.14) Endorsement (E3FXPL97) to Contracts A001RP95 and A020RV95(5)
(4.15) Endorsement (EINRP97) to Contract A001RP95(5)
(4.16) Endorsement (E4OMNI97) to Contract A001RP95(5)
(4.17) Endorsement (EINRV97) to Contract A020RV95(5)
(4.18) Endorsement (E1PAY97) to Contracts A001RP95 and A020RV95(5)
(4.19) Endorsement (E2PAY97) to Contracts A001RP95 and A020RV95(5)
(4.20) Endorsement (E1FXPY97) to Contracts A001RP95 and A020RV95
(4.21) Form of Endorsement (E4OMNI98)
(5) Variable Annuity Contract Application (300-MOP-IB)(6)
(6.1) Certification of Incorporation of Aetna Life Insurance and
Annuity Company(7)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(8)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance
and Annuity Company(9)
(7) Not applicable
(8.1) Fund Participation Agreement among Calvert Responsibly
Invested Balanced Portfolio, Calvert Asset Management Company,
Inc. and Aetna Life Insurance and Annuity Company dated
December 1, 1997
(8.2) Service Agreement between Calvert Asset Management Company,
Inc. and Aetna Life Insurance and Annuity Company Dated
December 1, 1997
(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(8)
(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) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors
<PAGE>
Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1,1996(8)
(8.7) 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)
(8.8) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995(12)
(8.9) 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)
(8.10) Fund Participation Agreement among Janus Aspen Series and
Aetna Life Insurance and Annuity Company and Janus Capital
Corporation dated December 8, 1997(13)
(8.11) Service Agreement between Janus Capital Corporation and Aetna
Life Insurance and Annuity Company dated December 8, 1997(13)
(8.12) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Lexington Management Corporation regarding
Natural Resources Trust dated December 1, 1988 and amended
February 11, 1991(2)
(8.13) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Oppenheimer Variable Annuity Account Funds
and Oppenheimer Funds, Inc.(14)
(8.14) Service Agreement between Oppenheimer Funds, Inc. and Aetna
Life Insurance and Annuity Company(14)
(9) Opinion and Consent of Counsel *
(10) Consent of Independent Auditors*
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data(15)
(14) Not applicable
(15.1) Powers of Attorney(16)
(15.2) Authorization for Signatures(2)
*To be filed by amendment
1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
22, 1996 (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 Registration Statement on Form N-4 (File No.
333-01107), as filed electronically on February 21, 1996 (Accession No.
0000950146-96-000241).
4. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on
August 6, 1996 (Accession No. 0000912057-96-016381).
<PAGE>
5. Incorporated by reference to Post-Effective Amendment No. 4 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on
February 26, 1997 (Accession No. 0000950146-97-000241).
6. Incorporated by reference to Post-Effective Amendment No. 11 to
Registration Statement on Form N-4 (File No. 33-91846), as filed
electronically on August 19, 1997 (Accession No. 0000950146-97-001307).
7. Incorporated by reference to Post-Effective Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-60477), as filed electronically on April
15, 1996 (Accession No. 0000950146-96-000534).
8. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 11, 1997 (Accession No. 0000950146-97-000159).
9. 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).
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).
12. 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).
13. Incorporated by reference to Post-Effective Amendment No. 10 to
Registration Statement on Form N-4 (File No. 33-75992), as filed
electronically on December 31, 1997 (Accession No. 0000950146-97-001982).
14. Incorporated by reference to Post-Effective Amendment No. 27 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on April 16, 1997 (Accession No. 0000950146-97-000617).
15. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form N-4 (File No. 33-88720), as filed electronically on
November 30, 1995 (Accession No. 0000912057-95-010609).
16. Incorporated by reference to Pre-Effective Amendment No. 1 to Registration
Statement on Form S-6 (File No. 333-27337), as filed electronically on
December 9, 1997 (Accession No. 0000950146-97-0001872).
<PAGE>
Item 25. Directors and Officers of the Depositor
Name and Principal
Business Address* Positions and Offices with Depositor
- ------------------ ------------------------------------
Thomas J. McInerney Director and President
Timothy A. Holt Director, Senior Vice President and Chief Financial
Officer
J. Scott Fox Director and Senior Vice President
John Y. Kim Director and Senior Vice President
Shaun P. Mathews Director and Senior Vice President
Thomas P. Waldron Director
Deborah Koltenuk Vice President and Treasurer, Corporate Controller
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and 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. 16
to the Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 9, 1998 (Accesssion No. 0000950146-98-000179).
Item 27. Number of Contract Owners
As of December 31, 1997, there were 632,743 individuals holding interests
in variable annuity contracts funded through Variable Annuity Account C.
<PAGE>
Item 28. Indemnification
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a party. The
corporation's obligation to provide such indemnification does not apply unless
(1) the individual has met the standard of conduct set forth in Section 33-771;
and (2) a determination is made (by majority vote of a quorum of the board of
directors who were not parties to the proceeding, or if a quorum cannot be
obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; or (3) the court, upon
application by the individual, determines in view of all the circumstances that
such person is reasonably entitled to be indemnified. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. has
procured insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 29. Principal Underwriter
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (Aetna) also
acts as the investment adviser, only, for Aetna Series Fund, Inc., and
the principal underwriter and investment adviser for Portfolio
Partners, Inc., Aetna Variable Encore Fund, Aetna Variable Fund, Aetna
Generation Portfolios, Inc., Aetna Income Shares, Aetna Investment
Advisers Fund, Inc., Aetna GET Fund, and Aetna Variable Portfolios,
Inc. (all management investment companies registered under the
Investment Company Act of 1940 (1940 Act)). Effective May 1, 1998,
Aetna will no longer be the investment adviser for Aetna Series Fund,
Inc., Aetna Variable Encore Fund, Aetna Variable Fund, Aetna Generation
Portfolios, Inc., Aetna Income Shares, Aetna Investment Advisers Fund,
Inc., Aetna GET Fund, and Aetna Variable Portfolios, Inc. Additionally,
Aetna acts as the principal underwriter and depositor for Variable Life
Account B of Aetna, Variable Annuity Account C of Aetna and Variable
Annuity Account G of Aetna (separate accounts of Aetna registered as
unit
<PAGE>
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.
(c) Compensation as of December 31, 1997:*
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Name of Net Underwriting Compensation on
Principal Underwriter Discounts and Redemption or Brokerage
Commissions Annuitization Commissions Compensation**
Aetna Life Insurance $__________ $___________
and Annuity Company
</TABLE>
* To be filed by amendment
** 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 B.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
Not applicable
Item 32. Undertakings
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
<PAGE>
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and will comply
with the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) P. 78,904 at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account C of Aetna Life Insurance and
Annuity Company has duly caused this Post-Effective Amendment to its
Registration Statement on Form N-4 (File No. 333-01107) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Hartford,
State of Connecticut, on the 19th day of February, 1998.
VARIABLE ANNUITY ACCOUNT C OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY
COMPANY
(Depositor)
By: Thomas J. McInerney*
-----------------------------------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 8 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>
Thomas J. McInerney* Director and President )
- ------------------------------------ (principal executive officer) )
Thomas J. McInerney )
)
Timothy A. Holt* Director, Senior Vice President )
- ------------------------------------ and Chief Financial Officer )
Timothy A. Holt )
) February
J. Scott Fox* Director ) 19, 1998
- ------------------------------------ )
J. Scott Fox )
)
John Y. Kim* Director )
- ------------------------------------ )
John Y. Kim )
<PAGE>
Shaun P. Mathews* Director )
- ------------------------------------ )
Shaun P. Mathews )
)
Thomas P. Waldron Director )
- ------------------------------------ )
Thomas P. Waldron )
)
Deborah Koltenuk* Vice President and Treasurer, )
- ------------------------------------ Corporate Controller )
Deborah Koltenuk )
</TABLE>
By: /s/ Julie E. Rockmore
- -----------------------------------------------------------
Julie E. Rockmore
*Attorney-in-Fact
<PAGE>
<TABLE>
<CAPTION>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
<S> <C> <C>
Exhibit No. Exhibit Page
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and Annuity Company *
establishing Variable Annuity Account C
99-B.3.1 Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and Related Selling Agreement *
99-B.4.1 Group Combination Annuity Contract (Nonparticipating) (A001RP95) *
99-B.4.2 Group Combination Annuity Certificate (Nonparticipating) (A007RC95) *
99-B.4.3 Group Combination Annuity Contract (Nonparticipating) (A020RV95) *
99-B.4.4 Group Combination Annuity Certificate (Nonparticipating) (A027RV95) *
99-B.4.5 Endorsement for Exchanged Contracts (EINRP95) *
99-B.4.6 Endorsement for Exchanged Contracts (EINRV95) *
99-B.4.7 Endorsement for 401(a) Plans *
99-B.4.8 Endorsement (GET 9/96) for Contracts A001RP95 and *
A020RV95
99-B.4.9 Endorsement (E1OMNI97) to Contract A001RP95 *
99-B.4.10 Endorsement (E2OMNI97) to Contract A001RP95 *
99-B.4.11 Endorsement (3OMNI97) to Contract A001RP95 *
99-B.4.12 Endorsement (E1FXPL97) to Contract A001RP95 *
99-B.4.13 Endorsement (E2FXPL97) to Contracts A001RP95 and A020RV95 *
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<S> <C> <C>
Exhibit No. Exhibit Page
99-B.4.14 Endorsement (E3FXPL97) to Contract A001RP95 *
99-B.4.15 Endorsement (EINRP97) to Contract A001RP95 *
99-B.4.16 Endorsement (E4OMNI97) to Contract A001RP95 *
99-B.4.17 Endorsement (EINRV97) to Contract A020RV95 *
99-B.4.18 Endorsement (E1PAY97) to Contracts A001RP95 and *
A020RV95
99-B.4.19 Endorsement (E2PAY97) to Contracts A001RP95 and *
A020RV95
99-B.4.20 Endorsement (E1FXPY97) to Contracts A001RP95 and A020RV95 ----
99-B.4.21 Form of Endorsement (E4OMNI98) ----
99-B.5 Variable Annuity Contract Application (300-MOP-IB) *
99-B.6.1 Certification of Incorporation of Aetna Life Insurance and Annuity Company *
99-B.6.2 Amendment of Certificate of Incorporation of Aetna Life Insurance and Annuity *
Company
99-B.6.3 By-Laws as amended September 17, 1997 of Aetna Life Insurance and Annuity Company *
99-B.8.1 Fund Participation Agreement 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 ----
</TABLE>
*Incorporated by reference
<PAGE>
<TABLE>
<S> <C> <C>
Exhibit No. Exhibit Page
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
99-B.8.6 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Variable Insurance Products Fund
II and Fidelity Distributors Corporation dated February
1, 1994 and amended on December 15, 1994, February 1,
1995, May 1, 1995, January 1, 1996 and March 1,1996
99-B.8.7 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.8.8 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>
<S> <C> <C>
Exhibit No. Exhibit Page
99-B.8.9 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.8.10 Fund Participation Agreement among Janus Aspen Series and Aetna Life Insurance *
and Annuity Company and Janus Capital Corporation dated December 8, 1997
99-B.8.11 Service Agreement between Janus Capital Corporation and Aetna Life Insurance and *
Annuity Company dated December 8, 1997
99-B.8.12 Fund Participation Agreement between Aetna Life Insurance and Annuity Company and *
Lexington Management Corporation regarding Natural Resources Trust dated December
1, 1988 and amended February 11, 1991
99-B.8.13 Fund Participation Agreement between Aetna Life Insurance and Annuity Company and *
Oppenheimer Variable Annuity Account Funds and Oppenheimer Funds, Inc.
99-B.8.14 Service Agreement between Oppenheimer Funds, 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
**To be filed by amendment
E1FXPY97
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract and Certificate are hereby endorsed as follows:
In the section entitled Fixed Plus Account in Contract Schedule I:
Replace the Minimum Guaranteed Interest Rate provision with the following:
Minimum Guaranteed Interest Rate:
3% (effective annual rate of return).
Replace the Full Withdrawal provision with the following:
Full Withdrawal:
The Payment of Fixed Plus Account Full Withdrawal provision will be
waived when the withdrawal is:
a) Due to the Participant's death before Annuity payments begin and
request for payment is received within six (6) months after the
Participant's date of death;
b) Used to purchase Annuity benefits;
c) When the amount in the Fixed Plus Account is $3,500 or less and no
amount has been surrendered, transferred, taken as a loan or used to
purchase Annuity benefits during the prior 12 months;
d) Due to hardship from an unforeseeable emergency, as defined by the
Code, if the following conditions are met:
1) the hardship is certified by the employer;
2) the amount is paid directly to the Participant ; and
3) the amount paid for all withdrawals due to hardship during the
previous 12 month period does not exceed 10% of the average
value of all Accounts under the Contract during that same
period; or
e) Due to separation from service with the employer, provided that:
1) the employer certifies that the Participant has separated from
service;
2) the amount is withdrawn within one year from separation from
service or, if withdrawn after one year from separation from
service, the amount withdrawn is paid directly to the
Participant; and
3) the amount paid for all partial and full withdrawals due to
separation from service during the previous 12 month period does
not exceed 20% of the average value of all Accounts under the
Contract during that same period.
Replace the section entitled Annuity Option 2 under Contract Schedule II with
the following:
Annuity Option 1:
For amounts invested in the Fixed Account, GA Account or one or more of
the Fund(s), the number of years must be at least five (5) and not more
than thirty (30) and the Annuity may be a Fixed or Variable Annuity.
For amounts invested in the Fixed Plus Account, the number of years must
be at least five (5) and not more than thirty (30) and the Annuity must be
a Fixed Annuity.
In the Annuity Provisions section of the Contract:
E1FXPY97
<PAGE>
Add the following to the Choices provision:
c) At the request of the Owner, all or any portion of the amount allocated
to a Fund may be transferred from any Fund to any other allowable Fund.
During the Annuity period, the maximum number of allowable transfers in
a calendar year is four. Aetna reserves the right to change the number
of allowable transfers.
Transfer requests must be expressed as a percentage of the allocation
among the Funds of the amount upon which the Variable Annuity will be
based. Aetna may establish a minimum transfer amount. Transfers will be
processed as of the Valuation Date next following the date when a
transfer request is received in good order at Aetna's Home Office.
Revise paragraph e) under the Choices provision as follows:
e) Once elected, an Annuity option may not be revoked, except for option 1
when elected on a variable basis.
Replace paragraph a) under Terms of Annuity Options with the following:
a) No choice of any Annuity option may be made if the first payment would
be less than $50 or if the total payments in a year would be less
than $250.
Replace the last sentence in paragraph b) under Terms of Annuity Options with
the following:
The Annuity rates for options 2 and 3 are based on mortality from
1983 Table a.
Replace the first sentence in the Death Provision with the following:
When an Annuitant dies under options 2 and 3, the present value of any
remaining guaranteed payments will be paid in one sum or payments will
continue at the direction of the Contract Holder, in accordance with the
Plan.
Delete the last paragraph in the Death Provision.
Replace the Annuity Options provision with the following:
Annuity Options:
The Contract Holder may direct Aetna to make payments according to one
of the following options.
Option 1 -- Payments for a Stated Period of Time -- An Annuity will be
paid for 5 to 30 years.
If payments for this option are made under a Variable Annuity, the
present value of any remaining payments may be withdrawn at any time.
If a withdrawal is requested prior to the minumum number of years
specified on Contract Schedule II, it will be subject to any withdrawal
fee, if applicable (see Contract Schedule I).
Option 2 -- Life Income Based on the Life of the Annuitant - Payments
will be made until the death of the Annuitant. When this option is
chosen, a choice from the following must be made:
a) payments cease at the death of the Annuitant;
b) payments may be guaranteed for 5 - 30 years; or
c) cash refund: if the Annuitant dies, the beneficiary will receive a
lump sum payment equal to the amount applied to the Annuity option
(less any premium tax) less the total amount of Fixed Annuity payments
paid prior to such death. This cash refund feature is only available if
the total amount applied to the Annuity option is allocated to a
Fixed Annuity.
Option 3 - Life Income Based Upon the Lives of Two Annuitants - An
Annuity will be paid during the lives of the Annuitant and a joint
Annuitant. Payments will continue until both Annuitants have died. When
this option is chosen, a choice of the following must be made:
a) 100% of the payment to continue after the first death;
b) 66 2/3% of the payment to continue after the first death;
c) 50% of the payment to continue after the first death;
<PAGE>
d) 100% of the payment to continue after the first death with a
guarantee of 5 - 30 years;
e) 100% of the payment to continue at the death of the second Annuitant
and 50% of the payment to continue at the death of the Annuitant; or
f) 100% of the payment to continue after the first death with a cash
refund feature. If the Annuitant and joint Annuitant die, the
beneficiary will receive a lump sum payment equal to the amount applied
to the Annuity option (less any premium tax) less the total amount of
Fixed Annuity payments paid prior to such death. This cash refund
feature is only available if the total amount applied to the Annuity
option is allocated to a Fixed Annuity.
If a Fixed Annuity is chosen under option 1, option 2 a) or b) or option
3 a) or d), the Participant may elect an annual increase of one, two or
three percent compounded annually.
Other Options -- Aetna may make other options available as allowed by the
laws of the state in which this Contract is delivered.
Replace the tables at the end of the Annuity Provisions section of the
Contract and Certificate with the following tables:
<PAGE>
<TABLE>
<CAPTION>
OPTION 1
Payments for a Stated Period of Time
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 17.91 18 5.96
6 15.14 19 5.73
7 13.16 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 18.12 18 6.20
6 15.35 19 5.97
7 13.38 20 5.75
8 11.90 21 5.56
9 10.75 22 5.39
10 9.83 23 5.24
11 9.09 24 5.09
12 8.46 25 4.96
13 7.94 26 4.84
14 7.49 27 4.73
15 7.10 28 4.63
16 6.76 29 4.53
17 6.47 30 4.45
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 18.74 18 6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION 2
Life Income
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Years
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted Age of Cash
Annuitant None 5 10 15 20 Refund
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.05 $4.05 $4.03 $3.99 $3.93 $3.89
51 4.12 4.11 4.09 4.05 3.99 3.94
52 4.19 4.19 4.16 4.11 4.04 4.00
53 4.27 4.26 4.23 4.18 4.10 4.06
54 4.35 4.34 4.31 4.25 4.16 4.12
55 4.44 4.42 4.39 4.32 4.22 4.19
56 4.53 4.51 4.47 4.40 4.29 4.26
57 4.62 4.61 4.56 4.48 4.35 4.33
58 4.72 4.71 4.65 4.56 4.42 4.41
59 4.83 4.81 4.75 4.64 4.49 4.49
60 4.95 4.93 4.86 4.73 4.55 4.57
61 5.07 5.05 4.97 4.83 4.62 4.66
62 5.20 5.17 5.08 4.92 4.69 4.76
63 5.34 5.31 5.20 5.02 4.76 4.85
64 5.49 5.45 5.33 5.12 4.83 4.96
65 5.65 5.61 5.47 5.22 4.89 5.06
66 5.82 5.77 5.61 5.33 4.96 5.18
67 6.01 5.94 5.75 5.44 5.02 5.30
68 6.20 6.13 5.91 5.54 5.08 5.42
69 6.41 6.33 6.07 5.65 5.14 5.56
70 6.64 6.54 6.23 5.76 5.19 5.70
71 6.88 6.76 6.41 5.86 5.24 5.84
72 7.14 7.00 6.59 5.97 5.28 6.00
73 7.43 7.26 6.77 6.06 5.32 6.16
74 7.73 7.53 6.96 6.16 5.35 6.33
75 8.06 7.82 7.14 6.25 5.38 6.51
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Years
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Adjusted
Age of Annuitant None 5 10 15 20
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Years
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Adjusted
Age of Annuitant None 5 10 15 20
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 5.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ----------------------------- -------------- -------------- ------------- --------------- ------------- -------------
Adjusted Ages
- ----------------------------- Option 3d
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e Option 3f
Annuitant Guaranteed
- --------------- ------------- -------------- -------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.03 $3.69
55 55 3.88 4.25 4.47 3.87 4.14 3.87
55 60 3.99 4.44 4.71 3.98 4.20 3.98
60 55 3.99 4.44 4.71 3.98 4.42 3.98
60 60 4.24 4.71 4.99 4.23 4.57 4.23
60 65 4.38 4.97 5.32 4.38 4.65 4.38
65 60 4.38 4.97 5.32 4.38 4.93 4.38
65 65 4.72 5.33 5.70 4.71 5.14 4.72
65 70 4.93 5.68 6.15 4.91 5.27 4.91
70 65 4.93 5.68 6.15 4.91 5.66 4.91
70 70 5.40 6.21 6.70 5.36 5.96 5.38
70 75 5.69 6.68 7.32 5.62 6.13 5.66
75 70 5.69 6.68 7.32 5.62 6.67 5.66
75 75 6.37 7.45 8.15 6.23 7.12 6.33
75 80 6.78 8.11 8.99 6.54 7.36 6.71
- --------------- ------------- -------------- -------------- ------------- --------------- ------------- -------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION 3
Life Income for Two Annuitants
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ---------------------------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted Ages Option 3d
- ----------------- ----------------
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e
Annuitant Guaranteed
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTION 3
Life Income for Two Annuitants
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ---------------------------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted Ages Option 3d
- ----------------- ----------------
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e
Annuitant Guaranteed
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
<PAGE>
Endorsed and made a part of the Contract and Certificate effective on the date,
after any required state approval, as of which it is issued by Aetna.
[GRAPHIC OMITTED]
President
/s/ Dan Kearney
President
E1FXPY97
Aetna Life Insurance and Annuity Company
ENDORSEMENT
The Contract and Certificate are hereby endorsed as follows:
I. The following provisions apply only to Individual Accounts established with
Net Contributions from exchanged Aetna contracts.
1. The Guaranteed Interest Rate section of the Specifications is replaced with
the following: There is a guaranteed interest rate for Contributions(s) held
in the Fixed Plus Account and the Fixed Account (see Contract Schedule I).
2. Where the Transfer Credit endorsement is made a part of the Contract, the
Transfer Credit will be applied to Transferred Assets deposited into an
exchanged contract which are transferred into an acquired contract, as well
as to Transferred Assets deposited into an acquired contract up until the
one year anniversary of the first Net Contribution to the exchanged
contract.
3. Add the following section to Contract Schedule I:
Fixed Account
- --------------------------------------------------------------------------------
Minimum Guaranteed Interest Rate:
3% (effective annual rate of return).
4. Replace the section entitled Separate Account and GA Account under Contract
Schedule I with the following:
Separate Account, Fixed Account and GA Account
- --------------------------------------------------------------------------------
Withdrawal Fee:
For each withdrawal from an Individual Account, the Withdrawal Fee will
vary according to the length of time in years from the Individual
Account(s) effective date for the Individual Account being surrendered.
The number of years completed equals the total number completed under
this Contract and under other Aetna Contracts from which Net
Contributions to this Contract have been transferred (exchanged
Contracts). For each withdrawal, the fee will be as follows:
Length of Time from Individual Withdrawal Fee
Account(s) Effective Date (Years)
Fewer than 5 5%
5 or more, but fewer than 7 4%
7 or more, but fewer than 9 3%
9 or more, but fewer than 10 2%
10 or more 0%
E40MNI98
Page 1
<PAGE>
For each withdrawal from an Individual Account maintained pursuant to a
lump-sum payment, the Withdrawal Fee will vary according to the length
of time in years from the Individual Account(s) effective date for the
Individual Account being surrendered. The number of years completed
equals the total number completed under this Contract and under other
Aetna Contracts from which Net Contributions to this Contract have been
transferred (exchanged Contracts). For each withdrawal, the fee will be
as follows:
Length of Time from Individual
Account(s) Effective Date (Years) Withdrawal Fee
Fewer than 5 years 5%
5 or more, but fewer than 6 years 4%
6 or more, but fewer than 7 years 3%
7 or more, but fewer than 8 years 2%
8 or more, but fewer than 9 years 1%
9 or more years 0%
The Withdrawal Fee will not be deducted from any portion of the
Individual Account Current Value which is paid:
o Due to the Participant's death before Annuity payments begin;
o Used to purchase Annuity benefits;
o Due to the election of the Estate Conservation Option (ECO) or the
Systematic Withdrawal Option (SWO) (see Section IV);
o In an amount equal to or less than 10% of the Individual Account
Current Value, as part of the first partial withdrawal request in a
calendar year to a Participant who is at least age 59 1/2 and less
than 70 1/2. The Individual Account Current Value is calculated as of
the date the partial withdrawal request is received in good order at
Aetna's Home Office. Any outstanding loans from the Individual Account
are excluded when calculating the Individual Account Current Value.
This provision does not apply to partial withdrawal due to loan
defaults made from the Individual Account and does not apply to full
withdrawal requests. This provision may not be exercised if SWO is
elected;
o When the Individual Account(s) Current Value is $3,500 or less and no
amount has been withdrawn, taken as a loan or used to purchase Annuity
benefits during the prior 12 months;
o To relieve a Participant's "financial hardship," as may be allowed for
Annuity Contracts under Section 403(b) of the Code or other applicable
Internal Revenue Service rules or regulations; or
o On account of a Participant's separation from service. The Contract
Holder must submit documentation satisfactory to Aetna to confirm that
the Participant is no longer providing services to the employer.
The Withdrawal Fee will never exceed 8 1/2% of the total Contributions
made to the Individual Account.
The Withdrawal Fee may be reduced, waived or eliminated for Individual
Accounts acquired by exchange to reflect the differences or expected
differences in the amounts of unrecovered distribution costs or services
of the types that the charges are intended to defray.
5. Replace the section entitled Separate Account, GA Account, and the Fixed
Plus Account under
Contract Schedule I with the following:
Separate Account, GA Account, Fixed Account and Fixed Plus Account
- --------------------------------------------------------------------------------
Transfers:
An unlimited number of Transfers may be made during the Accumulation Period.
Page 2
<PAGE>
Maintenance Fee:
An annual Maintenance Fee may be charged, as determined by the value of
total assets held by Aetna under this Contract and other Aetna Contracts
of the same class issued to the Contract Holder, on each anniversary
date of this Contract. The Maintenance Fee may go up or down each year.
Where applicable, the Maintenance Fee will be charged for each
Participant in the Contract.
Total Assets Maintenance Fee
--------------------------------------- -------------------------------
Less than $500,000 $15.00
500,000 - 1,000,000 $15.00
1,000,001 - 5,000,000 $0.00
5,000,001 - 15,000,000 $0.00
Greater than 15,000,000 $0.00
Initial charges will be based on Aetna's estimated expenses of
administration and estimated year end asset level for the Contract
Holder.
Systematic Withdrawal Option (SWO):
The Specified Payment or Specified Percentage may not be greater than
20% of the Individual Account's Current Value at the time of election.
The Specified Period may not be less than 5 years.
Loan Interest Rate:
a) Plans subject to ERISA: a Loan Interest Rate is set on the first
business day of each month. For each loan, the initial Loan Interest
Rate is equal to the Monthly Average Corporates for the calendar
month beginning two months before the calendar month in which the
Loan Effective Date occurs. The initial Loan Interest Rate is
effective for a period of not less than three months and not more
than one year. The period is specified in the loan agreement. For
each period, the Loan Interest Rate is adjusted if the new rate is
at least 0.5% higher or lower than the previous rate. The
Participant will receive reasonable notification of any change to
the Loan Interest Rate.
b) Plans not subject to ERISA: 6% on an annual basis.
See Section I. - DEFINITIONS for explanations.
6. Replace the section entitled Annuity Option 2 under Contract Schedule II
with the following:
Annuity Option 1:
For amounts invested in the Fixed Account, GA Account or one or more of
the Fund(s), the number of years must be at least five (5) and not more
than thirty (30) and the Annuity may be a Fixed or Variable Annuity.
For amounts invested in the Fixed Plus Account, the number of years must
be at least five (5) and not more than thirty (30) and the Annuity must
be a Fixed Annuity.
7. Add the following Definition:
Fixed Account:
If available under your contract, the Fixed Account is an accumulation
option with a guaranteed minimum interest rate shown on the Contract
Schedule I. Aetna may credit a higher rate which is not guaranteed.
8. Replace the definition entitled Current Value with the following:
Current Value:
For an Individual Account, the Current Value is the total of:
a) The amount, if any, in the Fixed Plus Account, with interest earned
to date;
b) The amount, if any, in the GA Account, with interest earned to date;
Page 3
<PAGE>
c) The amount, if any in the Fixed Account, with interest earned to
date;
d) The value of all Fund Record Units, if any, as of the most recent
Valuation Period; plus
e) Any amount due to experience credits; less
f) Any Maintenance Fee(s) due.
9. Replace the definition entitled Transfer with the following:
Transfer:
The movement of invested amounts among the available Fund(s), the Fixed
Plus Account the Fixed Account and the GA Account during the
Accumulation Period.
10. Replace the section entitled Net Contributions with the following:
Net Contribution(s):
The Net Contribution equals the actual Contribution less any applicable
premium tax. Generally, Aetna will deduct the premium tax when Annuity
benefits are purchased (See Section V). If Aetna determines that under
applicable state law, it must pay a premium tax when the Contribution is
received, or at any other time, it may deduct the tax at that time. The
Net Contribution(s) may be allocated among the following investment
options:
a) The Fixed Plus Account; and
b) The Fund(s) in which the Separate Account invests.
The Fixed Account is an investment option available only for Net
Contributions previously allocated to the Fixed Account under Aetna
Contracts that are exchanged into this Contract. Contracts that maintain
the Fixed Account may not be eligible for reduced charges to the
Separate Account.
The GA Account is an investment option available only for Net
Contributions previously allocated to the GA Account under Aetna
Contracts that are exchanged into this Contract.
The Contract Holder must tell Aetna the percentage of all Net
Contributions to allocate to one or more of the investment options. The
Contract Holder or, if permitted by the Contract Holder, the Participant
may change the allocation of future Net Contributions at any time,
without charge. Aetna reserves the right to require a minimum
Contribution amount per Individual Account.
11. Replace the section entitled Transfer(s) with the following:
Transfer(s):
Before an Annuity option is elected, all or any portion of the Adjusted
Current Value of the Individual Account may be transferred from any
Fund, or the GA Account:
a) To any other allowable Fund; or
b) To the Fixed Plus Account.
No Transfers will be allowed into the Fixed Account or GA Account.
Transfer requests can be submitted as a percentage or as a dollar
amount. Aetna may establish a minimum transfer amount. Within a
Guaranteed Term classification, the amount transferred will be withdrawn
from the oldest Deposit Period, then from the next oldest, and so on
until the amount requested is satisfied.
Amounts applied to Guaranteed Terms of the GA Account may not be
transferred to the Funds, the Fixed Plus Account or to another
Guaranteed Term during the Deposit Period or 90 days after the close of
the Deposit Period except for Matured Term Value(s) during the calendar
month following the Term's Maturity Date.
Transfers from Guaranteed Terms of the GA Account are subject to the MVA
provisions of 3.08.
Each Calendar year, 10% of the Current Value held in the Fixed Account
may be transferred to any Fund(s). Such transfer will be without charge
and will not be allowed under an Annuity Option. Transfers will be
permitted to the Fixed Plus Account without regard to these limitations.
At its discretion, Aetna may allow Contract Holders to transfer a larger
percentage and/or take multiple transfers in a calendar year. If Aetna
so allows, Aetna reserves the right to reinstate the transfer
limitations without notice.
Page 4
<PAGE>
During each rolling twelve (12) month period, up to 20% of the Current
Value held in the Fixed Plus Account may be transferred to one or more
of the Fund(s). The 20% limit is reduced by any partial withdrawals,
loans or amounts used to purchase an Annuity during the twelve (12)
month period. Aetna reserves the right to include amounts paid under ECO
and SWO provisions for purposes of applying this 20% limit. This limit
is waived when the balance in the Fixed Plus Account is $1,000 or less
on the date the Transfer request is received in good order at Aetna's
Home Office.
The Contract Holder, or Participant if authorized in writing by the
Contract Holder, may make an unlimited number of Transfers during the
Accumulation Period.
12. Replace the section entitled Notice to the Contract Holder with the
following:
Notice to the Contract Holder:
Each year, Aetna will notify the Contract Holder of:
a) The value of any amounts held in:
1) The Fixed Plus Account,
2) The GA Account,
3) The Fixed Account, and
4) The Fund(s) for the Separate Account;
b) The number of any Fund record units;
c) The Fund record unit Value(s);
d) The Loan Account balance; and
e) The amount available for withdrawal.
This information will be as of a date no more than sixty (60) days
before the date of the notice.
13. Replace the section entitled Withdrawal Value with the following:
Withdrawal Value:
After deduction of the Maintenance Fee (if any), the amount payable by
Aetna upon the withdrawal of any portion of an Individual Account from
the Fund(s), the Fixed Account or the GA Account shall be reduced by a
Withdrawal Fee, if applicable. The Withdrawal Fee will be in accordance
with the Withdrawal Fee table in Contract Schedule I.
No Withdrawal Fee is deducted from any portion of the Current Value
which is paid from the Fixed Plus Account.
For a partial or full withdrawal from any Individual Account, Aetna must
receive written direction from the Contract Holder on a form acceptable
to Aetna. If the Contract is subject to ERISA, this direction must
include certification that all of the REA waiver and spousal consent
requirements have been satisfied. Aetna may defer payment of the
withdrawal value until appropriate Contract Holder certification is
received.
14. Replace the section entitled Withdrawal Fee Applicable to Funds and GA
Account with the following:
Withdrawal Fee Applicable to Funds, the Fixed Account and GA Account:
A Withdrawal Fee (Deferred Sales Charge) may apply to withdrawals from
the GA Account, the Fixed Account and/or Funds. For each withdrawal, the
withdrawal fee will be determined as shown on Contract Schedule I.
Page 5
<PAGE>
During each rolling 12-month period, up to 20% of the Current Value in
the Fixed Plus Account may be withdrawn as a partial surrender. This 20%
limit is reduced by any amount(s) transferred, taken as a loan or used
to purchase an Annuity during the 12 month period. The 20% limit
applicable to partial surrenders from the Fixed Plus Account will be
waived when the partial surrender is due to one of the conditions set
forth in Contract Schedule I. The waiver will apply provided the partial
surrender is taken pro-rata from the Fixed Plus Account, the GA Account,
and the Fund(s). Aetna reserves the right to include amounts paid under
the ECO and SWO provisions for purposes of applying the 20% limit.
However, the SWO provision is not available if the Contract Holder on
behalf of the Participant requested a Fixed Plus Account Transfer or
surrender within the current 12 month period.
15. Replace the fourth sentence of the section entitled Reinstatement with
the following:
Amounts will be reinstated among the Fixed Plus Account, the GA Account,
the Fixed Account and/or the Fund(s) for the Separate Account in the
same proportion as they were at the time of withdrawal.
16. Replace a) under the section entitled Estate Conservation Option with the
following:
a) With the Estate Conservation Option (ECO) a portion of the
Individual Account Current Value is automatically surrendered and
distributed each year without incurring a Withdrawal Fee. Each
payment will be withdrawn from the Individual Account in the same
proportion as assets are held in the Funds, the GA Account, the
Fixed Account and the Fixed Plus Account on the date the payment is
made.
17. Replace a) under the section entitled Systematic Withdrawal Option with
the following:
a) With the Systematic Withdrawal Option (SWO) a portion of the
Individual Account Current Value is automatically distributed each
year without incurring a Withdrawal Fee. A SWO payment will be
calculated on the Individual Account's Current Value. Each payment
will be withdrawn from the Individual Account in the same proportion
as assets are held in the Funds, the GA Account, the Fixed Account
and the Fixed Plus Account on the date the payment is made. SWO
payments may not be elected if a loan is outstanding under an
Individual Account.
18. All amounts held in an exchanged Contract's GA Account on the effective date
of an acquired Contract will remain in effect and be subject to the same
terms and conditions as under the exchanged Contract until the Maturity Date
of all Guaranteed Terms. On or after the Maturity Date of any Guaranteed
Term, the Matured Term Value may not be reinvested in the GA Account but may
be transferred or allocated to any other available investment option under
the Contract. If no specific allocation direction is given by the Contract
Holder prior to the Maturity Date of a particular Guaranteed Term, the
Matured Term Value will be transferred to a Fund available under the
acquired Contract that has a money market investment objective.
II. The following provisions apply to amounts attributable to Net Contributions
made to the Contract on or after the Contract effective date.
1. In the section entitled Fixed Plus Account in Contract Schedule I:
Replace the Minimum Guaranteed Interest Rate provision with the
following:
Minimum Guaranteed Interest Rate:
3% (effective annual rate of return).
2. Replace the Full Withdrawal provision with the following:
Full Withdrawal:
The Payment of Fixed Plus Account Full Withdrawal provision will be
waived when the withdrawal is:
a) Due to the Participant's death before Annuity payments begin and
request for payment is received within six (6) months after the
Participant's date of death;
b) Used to purchase Annuity benefits;
c) When the amount in the Fixed Plus Account is $3,500 or less and no
amount has been surrendered, transferred, taken as a loan or used
to purchase Annuity benefits during the prior 12 months;
Page 6
<PAGE>
d) Due to hardship from an unforeseeable emergency, as defined by the
Code, if the following conditions are met:
1) the hardship is certified by the employer;
2) the amount is paid directly to the Participant; and
3) the amount paid for all withdrawals due to hardship during
the previous 12 month period does not exceed 10% of the
average value of all Accounts under the Contract during that
same period; or
e) Due to separation from service with the employer, provided that:
1) the employer certifies that the Participant has separated from
service;
2) the amount is withdrawn within one year from separation from
service or, if withdrawn after one year from separation from
service, the amount withdrawn is paid directly to the
Participant; and
3) the amount paid for all partial and full withdrawals due to
separation from service during the previous 12 month period
does not exceed 20% of the average value of all Accounts under
the Contract during that same period.
III. All amounts transferred or allocated to the Fixed Plus Account on or after
the Contract effective date will be subject to the Fixed Plus Account rules
applicable to amounts attributable to Net Contributions made to the
Contract on or after that date.
IV. One-time election for Individual Accounts established with Net
Contributions from exchanged Aetna Contracts.
a) During the [three (3)] month period beginning on the Contract
effective date, Participants will have a one-time opportunity to
elect, by giving notice to Aetna, to have all amounts held in the
Fixed Plus Account be subject to the Fixed Plus Account rules
applicable to amounts attributable to Net Contributions made to
the Contract on or after the Contract effective date. Participants
who make the election described in the preceding sentence will not
be entitled to be credited, beginning on the tenth anniversary of
the effective date of their Individual Account, with an interest
rate that is higher than the then declared rate for Individual
Accounts before the tenth anniversary on any amounts held in the
Fixed Plus Account. An election made pursuant to this provision
may not be revoked.
b) For Participants who do not make the election allowed under IV(a)
above, amounts attributable to their balances in the Fixed Plus
Account on the Contract effective date will remain subject to the
rules described in the Contract (without giving effect to Part II
of this endorsement) until such time as they are transferred to
another investment option or withdrawn.
V. In the Annuity Provisions section:
Add the following to the Choices provision:
c) At the request of the Owner, all or any portion of the amount
allocated to a Fund may be transferred from any Fund to any other
allowable Fund. During the Annuity period, the maximum number of
allowable transfers in a calendar year is four. Aetna reserves the
right to change the number of allowable transfers.
Transfer requests must be expressed as a percentage of the
allocation among the Funds of the amount upon which the Variable
Annuity will be based. Aetna may establish a minimum transfer
amount. Transfers will be processed as of the Valuation Date next
following the date when a transfer request is received in good
order at Aetna's Home Office.
Revise paragraph e) under the Choices provision as follows:
a) Once elected, an Annuity option may not be revoked, except for
option 1 when elected on a variable basis.
Replace paragraph a) under Terms of Annuity Options with the following:
Page 7
<PAGE>
a) Once elected, an Annuity option may not be revoked, except for
option 1 when elected on variable basis.
Replace paragraph a) under Terms of Annuity Options with following:
No choice of any Annuity option may be made if the first payment
would be less than $50 or if the total payments in a year would
be less than $250.
Replace the last sentence in paragraph b) under Terms of Annuity Options
with the following:
The Annuity rates for options 2 and 3 are based on mortality from
1983 Table a.
Replace the first sentence in the Death Provision with the following:
When an Annuitant dies under options 2 and 3, the present value of
any remaining guaranteed payments will be paid in one sum or
payments will continue at the direction of the Contract Holder, in
accordance with the Plan.
Delete the last paragraph in the Death Provision.
Replace the Annuity Options provision with the following:
Annuity Options:
The Contract Holder may direct Aetna to make payments according to one
of the following options.
Option 1 -- Payments for a Stated Period of Time -- An Annuity
will be paid for 5 to 30 years.
If payments for this option are made under a Variable Annuity, the
present value of any remaining payments may be withdrawn at any
time. If a withdrawal is requested prior to the minimum number of
years specified on Contract Schedule II, it will be subject to any
withdrawal fee, if applicable (see Contract Schedule I).
Option 2 -- Life Income Based on the Life of the Annuitant -
Payments will be made until the death of the Annuitant. When this
option is chosen, a choice from the following must be made:
a) payments cease at the death of the Annuitant;
b) payments may be guaranteed for 5 - 30 years; or
c) cash refund: if the Annuitant dies, the beneficiary will
receive a lump sum payment equal to the amount applied to the
Annuity option (less any premium tax) less the total amount of
Fixed Annuity payments paid prior to such death. This cash refund
feature is only available if the total amount applied to the
Annuity option is allocated to a Fixed Annuity.
Option 3 - Life Income Based Upon the Lives of Two Annuitants - An
Annuity will be paid during the lives of the Annuitant and a joint
Annuitant. Payments will continue until both Annuitants have died.
When this option is chosen, a choice of the following must be
made:
a) 100% of the payment to continue after the first death;
b) 66 2/3% of the payment to continue after the first death;
c) 50% of the payment to continue after the first death;
d) 100% of the payment to continue after the first death with a
guarantee of 5 - 30 years;
e) 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of the
Annuitant; or
f) 100% of the payment to continue after the first death with a
cash refund feature. If the Annuitant and joint Annuitant die, the
beneficiary will receive a lump sum payment equal to the amount
applied to the Annuity option (less any premium tax) less the
total amount of Fixed Annuity payments paid prior to such death.
This cash refund feature is only available if the total amount
applied to the Annuity option is allocated to a Fixed Annuity.
If a Fixed Annuity is chosen under option 1, option 2 a) or b) or option
3 a) or d), the Participant may elect an annual increase of one, two or
three percent compounded annually.
Other Options -- Aetna may make other options available as allowed by
the laws of the state in which this Contract is delivered.
Page 8
<PAGE>
Replace the tables at the end of the Annuity Provisions section of the
Contract and Certificate with the following tables:
Page 9
<PAGE>
<TABLE>
<CAPTION>
OPTION 1
Payments for a Stated Period of Time
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 17.91 18 5.96
6 15.14 19 5.73
7 13.16 20 5.51
8 11.68 21 5.32
9 10.53 22 5.15
10 9.61 23 4.99
11 8.86 24 4.84
12 8.24 25 4.71
13 7.71 26 4.59
14 7.26 27 4.47
15 6.87 28 4.37
16 6.53 29 4.27
17 6.23 30 4.18
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
Page 10
<PAGE>
<TABLE>
<CAPTION>
OPTION 1
Payments for a Stated Period of Time
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 18.12 18 6.20
6 15.35 19 5.97
7 13.38 20 5.75
8 11.90 21 5.56
9 10.75 22 5.39
10 9.83 23 5.24
11 9.09 24 5.09
12 8.46 25 4.96
13 7.94 26 4.84
14 7.49 27 4.73
15 7.10 28 4.63
16 6.76 29 4.53
17 6.47 30 4.45
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
<TABLE>
<CAPTION>
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Monthly Monthly
Years Payment Years Payment
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
5 18.74 18 6.94
6 15.99 19 6.71
7 14.02 20 6.51
8 12.56 21 6.33
9 11.42 22 6.17
10 10.51 23 6.02
11 9.77 24 5.88
12 9.16 25 5.76
13 8.64 26 5.65
14 8.20 27 5.54
15 7.82 28 5.45
16 7.49 29 5.36
17 7.20 30 5.28
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
Page 11
<PAGE>
<TABLE>
<CAPTION>
OPTION 2
Life Income
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
Payments Guaranteed for a Stated Period of Years
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted Age of Cash
Annuitant None 5 10 15 20 Refund
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
50 $4.05 $4.05 $4.03 $3.99 $3.93 $3.89
51 4.12 4.11 4.09 4.05 3.99 3.94
52 4.19 4.19 4.16 4.11 4.04 4.00
53 4.27 4.26 4.23 4.18 4.10 4.06
54 4.35 4.34 4.31 4.25 4.16 4.12
55 4.44 4.42 4.39 4.32 4.22 4.19
56 4.53 4.51 4.47 4.40 4.29 4.26
57 4.62 4.61 4.56 4.48 4.35 4.33
58 4.72 4.71 4.65 4.56 4.42 4.41
59 4.83 4.81 4.75 4.64 4.49 4.49
60 4.95 4.93 4.86 4.73 4.55 4.57
61 5.07 5.05 4.97 4.83 4.62 4.66
62 5.20 5.17 5.08 4.92 4.69 4.76
63 5.34 5.31 5.20 5.02 4.76 4.85
64 5.49 5.45 5.33 5.12 4.83 4.96
65 5.65 5.61 5.47 5.22 4.89 5.06
66 5.82 5.77 5.61 5.33 4.96 5.18
67 6.01 5.94 5.75 5.44 5.02 5.30
68 6.20 6.13 5.91 5.54 5.08 5.42
69 6.41 6.33 6.07 5.65 5.14 5.56
70 6.64 6.54 6.23 5.76 5.19 5.70
71 6.88 6.76 6.41 5.86 5.24 5.84
72 7.14 7.00 6.59 5.97 5.28 6.00
73 7.43 7.26 6.77 6.06 5.32 6.16
74 7.73 7.53 6.96 6.16 5.35 6.33
75 8.06 7.82 7.14 6.25 5.38 6.51
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
Page 12
<PAGE>
<TABLE>
<CAPTION>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
Payments Guaranteed for a Stated Period of Years
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Adjusted
Age of Annuitant None 5 10 15 20
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
50 $4.34 $4.34 $4.31 $4.27 $4.22
51 4.41 4.40 4.38 4.33 4.27
52 4.48 4.47 4.45 4.40 4.32
53 4.56 4.55 4.52 4.46 4.38
54 4.64 4.63 4.59 4.53 4.44
55 4.72 4.71 4.67 4.60 4.50
56 4.81 4.80 4.75 4.67 4.56
57 4.91 4.89 4.84 4.75 4.62
58 5.01 4.99 4.93 4.83 4.69
59 5.12 5.10 5.03 4.92 4.75
60 5.23 5.21 5.13 5.00 4.82
61 5.36 5.33 5.24 5.09 4.88
62 5.49 5.45 5.35 5.19 4.95
63 5.63 5.59 5.47 5.28 5.02
64 5.78 5.73 5.60 5.38 5.08
65 5.94 5.89 5.73 5.48 5.15
66 6.11 6.05 5.87 5.58 5.21
67 6.29 6.22 6.02 5.69 5.27
68 6.49 6.41 6.17 5.79 5.33
69 6.70 6.60 6.33 5.90 5.38
70 6.92 6.81 6.49 6.00 5.43
71 7.17 7.04 6.66 6.10 5.48
72 7.43 7.27 6.84 6.20 5.52
73 7.71 7.53 7.02 6.30 5.55
74 8.02 7.80 7.20 6.39 5.59
75 8.35 8.08 7.38 6.48 5.62
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
Page 13
<PAGE>
<TABLE>
<CAPTION>
OPTION 2
Life Income
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
Payments Guaranteed for a Stated Period of Years
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Adjusted
Age of Annuitant None 5 10 15 20
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C> <C>
50 $5.26 $5.25 $5.22 $5.17 $5.11
51 5.33 5.32 5.28 5.23 5.15
52 5.40 5.38 5.34 5.29 5.20
53 5.47 5.45 5.41 5.35 5.26
54 5.54 5.53 5.48 5.41 5.31
55 5.63 5.61 5.56 5.47 5.36
56 5.71 5.69 5.63 5.54 5.42
57 5.80 5.78 5.72 5.61 5.47
58 5.90 5.88 5.81 5.69 5.53
59 6.01 5.98 5.90 5.77 5.59
60 6.12 6.09 6.00 5.85 5.65
61 6.24 6.21 6.10 5.93 5.71
62 6.37 6.33 6.21 6.02 5.77
63 6.51 6.46 6.33 6.11 5.83
64 6.66 6.60 6.45 6.20 5.89
65 6.82 6.75 6.57 6.30 5.95
66 6.99 6.91 6.71 6.39 6.01
67 7.17 7.08 6.85 6.49 6.06
68 7.36 7.27 6.99 6.59 6.12
69 7.57 7.46 7.15 6.69 6.17
70 7.80 7.67 7.30 6.78 6.21
71 8.05 7.89 7.47 6.88 6.25
72 8.31 8.13 7.64 6.97 6.29
73 8.59 8.38 7.81 7.06 6.33
74 8.90 8.64 7.99 7.15 6.36
75 9.23 8.93 8.16 7.23 6.38
- -------------------- ------------------ ------------------- ------------------ ------------------ -------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
Page 14
<PAGE>
<TABLE>
<CAPTION>
OPTION 3
Life Income for Two Annuitants
Amount of Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- ----------------------------- -------------- -------------- ------------- --------------- ------------- -------------
Adjusted Ages
- ----------------------------- Option 3d
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e Option 3f
Annuitant Guaranteed
- --------------- ------------- -------------- -------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
55 50 $3.69 $4.05 $4.27 $3.69 $4.03 $3.69
55 55 3.88 4.25 4.47 3.87 4.14 3.87
55 60 3.99 4.44 4.71 3.98 4.20 3.98
60 55 3.99 4.44 4.71 3.98 4.42 3.98
60 60 4.24 4.71 4.99 4.23 4.57 4.23
60 65 4.38 4.97 5.32 4.38 4.65 4.38
65 60 4.38 4.97 5.32 4.38 4.93 4.38
65 65 4.72 5.33 5.70 4.71 5.14 4.72
65 70 4.93 5.68 6.15 4.91 5.27 4.91
70 65 4.93 5.68 6.15 4.91 5.66 4.91
70 70 5.40 6.21 6.70 5.36 5.96 5.38
70 75 5.69 6.68 7.32 5.62 6.13 5.66
75 70 5.69 6.68 7.32 5.62 6.67 5.66
75 75 6.37 7.45 8.15 6.23 7.12 6.33
75 80 6.78 8.11 8.99 6.54 7.36 6.71
- --------------- ------------- -------------- -------------- ------------- --------------- ------------- -------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
Page 15
<PAGE>
<TABLE>
<CAPTION>
OPTION 3
Life Income for Two Annuitants
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ---------------------------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted Ages
- ----------------- ---------------- Option 3d
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e
Annuitant Guaranteed
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $3.97 $4.35 $4.56 $3.97 $4.31
55 55 4.16 4.54 4.76 4.15 4.42
55 60 4.27 4.73 5.00 4.26 4.48
60 55 4.27 4.73 5.00 4.26 4.70
60 60 4.51 4.99 5.27 4.50 4.84
60 65 4.66 5.25 5.61 4.65 4.93
65 60 4.66 5.25 5.61 4.65 5.22
65 65 4.99 5.61 5.99 4.98 5.42
65 70 5.19 5.97 6.44 5.17 5.54
70 65 5.19 5.97 6.44 5.17 5.93
70 70 5.67 6.49 6.99 5.62 6.23
70 75 5.95 6.96 7.61 5.87 6.40
75 70 5.95 6.96 7.61 5.87 6.95
75 75 6.64 7.73 8.43 6.48 7.40
75 80 7.04 8.39 9.29 6.79 7.64
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
Page 16
<PAGE>
<TABLE>
<CAPTION>
OPTION 3
Life Income for Two Annuitants
Amount of First Monthly Payment for Each $1,000
After Deduction of any Charge for Premium Taxes
Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ---------------------------------- --------------- ---------------- ---------------- --------------- ----------------
Adjusted Ages
- ----------------- ---------------- Option 3d
Annuitant Second Option 3a Option 3b Option 3c 10 Years Option 3e
Annuitant Guaranteed
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
55 50 $4.88 $5.26 $5.48 $4.88 $5.23
55 55 5.04 5.44 5.66 5.04 5.32
55 60 5.15 5.63 5.91 5.14 5.38
60 55 5.15 5.63 5.91 5.14 5.59
60 60 5.37 5.87 6.16 5.37 5.72
60 65 5.52 6.14 6.51 5.51 5.80
65 60 5.52 6.14 6.51 5.51 6.10
65 65 5.83 6.49 6.87 5.82 6.29
65 70 6.04 6.84 7.34 6.00 6.41
70 65 6.04 6.84 7.34 6.00 6.81
70 70 6.49 7.35 7.87 6.44 7.08
70 75 6.77 7.84 8.51 6.68 7.25
75 70 6.77 7.84 8.51 6.68 7.81
75 75 7.45 8.60 9.33 7.27 8.25
75 80 7.86 9.28 10.20 7.57 8.49
- ----------------- ---------------- --------------- ---------------- ---------------- --------------- ----------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex.
Rates for ages not shown will be provided on request and will be computed
on a basis consistent with the rates in the above tables.
</TABLE>
Page 17
<PAGE>
Endorsed and made a part of the Contract and Certificate on the effective date
of the Contract.
/S/ Thomas J. McInerney, President
E40MNI98
FUND PARTICIPATION AGREEMENT
among
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
and
CALVERT ASSET MANAGEMENT COMPANY, INC.
and
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Aetna Life Insurance and Annuity Company (the "Company"), CALVERT
RESPONSIBLY INVESTED BALANCED PORTFOLIO (the "Fund") and CALVERT ASSET
MANAGEMENT COMPANY, INC. (the "Adviser") hereby agree to an arrangement whereby
the Fund shall be made available to serve as underlying investment media for
Variable Annuity or Variable Life Contracts ("Contracts") to be issued by the
Company.
1. Establishment of Accounts; Availability of Fund.
(a) The Company represents that it has established Variable Annuity
Accounts B, C, D and Variable Life Account B and may establish such
other accounts as may be set forth in Schedule A attached hereto and as
may be amended from time to time with the mutual consent of the parties
hereto (the "Accounts"), each of which is a separate account under
Connecticut Insurance law, and has registered or will register each of
the Accounts (except for such Accounts for which no such registration
is required) as a unit investment trust under the Investment Company
Act of 1940 (the "1940 Act"), to serve as an investment vehicle for the
Contracts. Each Contract provides for the allocation of net amounts
received by the Company to an Account for investment in the shares of
one or more specified open-end management investment companies
available through that Account as underlying investment media.
Selection of a particular investment management company and changes
therein from time to time are made by the participant, beneficiary or
Contract owner, as applicable under a particular Contract.
(b) The Adviser represents and warrants that the investments of the series
of the Fund (each designated a "Portfolio") specified in Schedule B
attached hereto (as may be amended from time to time with the mutual
consent of the parties hereto) will at all times be adequately
diversified within the meaning of Section 817(h) of the Internal
Revenue Code of 1986, as amended (the "Code"), and the Regulations
thereunder, and that at all times while this Agreement is in effect,
all beneficial interests will be owned by one or more insurance
companies or by any other party permitted under Section 1.817-5(f)(3)
of the Regulations promulgated under the Code or by the successor
<PAGE>
thereto, or by any other party permitted under a Revenue Ruling or
private letter ruling granted by the Internal Revenue Service.
2. Pricing Information; Orders; Settlement.
(a) The Fund will make Fund shares available to be purchased by the
Company, and will accept redemption orders from the Company, on behalf
of each Account at the net asset value applicable to each order on
those days on which the Fund calculates its net asset value (a
"Business Day"). Fund shares shall be purchased and redeemed in such
quantity and at such time determined by the Company to be necessary to
meet the requirements of those Contracts for which the Fund serve as
underlying investment media, provided, however, that the Board of
Directors of the Fund (hereinafter the "Directors") may upon reasonable
notice to the Company, refuse to sell shares of any Portfolio to any
person, or suspend or terminate the offering of shares of any Portfolio
if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Directors, acting in
good faith and in the best interests of the shareholders of any
Portfolio and is acting in compliance with their fiduciary obligations
under federal and/or any applicable state laws.
(b) The Fund will provide to the Company closing net asset value, dividend
and capital gain information at the close of trading each day that the
New York Stock Exchange (the "Exchange") is open (each such day a
"Business Day"), and in no event later than 7:00 p.m. Eastern Standard
Time on such Business Day. The Company will send via facsimile or
electronic transmission to the Fund or its specified agent orders to
purchase and/or redeem Fund shares by 10:00 a.m. Eastern Standard Time
the following business day. Payment for net purchases will be wired by
the Company to an account designated by the Fund to coincide with the
order for shares of the Fund.
(c) The Fund hereby appoints the Company as its agent for the limited
purpose of accepting purchase and redemption orders for Fund shares
relating to the Contracts from Contract owners or participants. Orders
from Contract owners, participants or beneficiaries received from any
distributor of the Contracts (including affiliates of the Company) by
the Company, acting as agent for the Fund, prior to the close of the
Exchange on any given business day will be executed by the Fund at the
net asset value determined as of the close of the Exchange on such
Business Day, provided that the Fund receives written (or facsimile)
notice of such order by 10 a.m. Eastern Standard Time on the next
following Business Day. Any orders received by the Company acting as
agent on such day but after the close of the Exchange will be executed
by the Fund at the net asset value determined as of the close of the
Exchange on the next business day following the day of receipt of such
order, provided that the Fund receives written (or facsimile) notice of
such order by
2
<PAGE>
10 a.m. Eastern Standard Time within two days following the day of
receipt of such order.
(d) Payments for net redemptions of shares of the Fund will be wired by the
Fund to an account designated by the Company. Payments for net
purchases of the Fund will be wired by the Company to an account
designated by the Fund on the same Business Day the Company places an
order to purchase Fund shares. Payments shall be in federal funds
transmitted by wire.
(e) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other party),
and shall not be liable in the event that an error is a result of any
misinformation supplied by the other party.
(f) The Company agrees to purchase and redeem the shares of the Portfolios
named in Schedule B offered by the then current prospectus and
statement of additional information of the Fund in accordance with the
provisions of such prospectus and statement of additional information.
The Company shall not permit any person other than a Contract owner,
participant or beneficiary to give instructions to the Company which
would require the Company to redeem or exchange shares of the Fund.
This provision shall not be construed to prohibit the Company from
substituting shares of another fund, as permitted by law.
3. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses incident
to the performance by the Fund under this Agreement shall be paid by
the Fund or the Adviser, including the cost of registration of Fund
shares with the Securities and Exchange Commission (the "SEC") and in
states where required. The Fund and Adviser shall pay no fee or other
compensation to the Company under this Agreement, and the Company shall
pay no fee or other compensation to the Fund or Adviser, except as
provided herein and in Schedule C attached hereto and made a part of
this Agreement as may be amended from time to time with the mutual
consent of the parties hereto. All expenses incident to performance by
each party of its respective duties under this Agreement shall be paid
by that party, unless otherwise specified in this Agreement.
(b) The Fund or the Adviser shall provide to the Company Post Script files
of periodic fund reports to shareholders and other materials that are
required by law to be sent to Contract owners. In addition, the Fund or
the Adviser shall provide the Company with a sufficient quantity of its
prospectuses, statements of additional information and any supplements
to any of these materials, to be used in connection with the offerings
and transactions contemplated by this
3
<PAGE>
Agreement. In addition, the Fund shall provide the Company with a
sufficient quantity of its proxy material that is required to be sent
to Contract owners. The Adviser shall be permitted to review and
approve the typeset form of such material prior to such printing
provided such material has been provided by the Adviser to the Company
within a reasonable period of time prior to typesetting.
(c) In lieu of the Fund's or Adviser's providing printed copies of
prospectuses, statements of additional information and any supplements
to any of these materials, the Company shall have the right to request
that the Fund transmit a copy of such materials in an electronic format
(Post Script files), which the Company may use to have such materials
printed together with similar materials of other Account funding media
that the Company or any distributor will distribute to existing or
prospective Contract owners, participants or beneficiaries.
4. Representations.
The Company agrees that it and its agents shall not, without the written
consent of the Fund or the Adviser, make representations concerning the Fund, or
its shares except those contained in the then current prospectuses and in
current printed sales literature approved by or deemed approved by the Fund or
the Adviser.
5. Termination.
This Agreement shall terminate as to the sale and issuance of new Contracts:
(a) at the option of either the Company, the Adviser or the Fund, upon
sixty days advance written notice to the other parties;
(b) at the option of the Company, upon one week advance written notice to
the Adviser and the Fund, if Fund shares are not available for any
reason to meet the requirement of Contracts as determined by the
Company. Reasonable advance notice of election to terminate shall be
furnished by Company;
(c) at the option of either the Company, the Adviser or the Fund,
immediately upon institution of formal proceedings against the
broker-dealer or broker-dealers marketing the Contracts, the Account,
the Company, the Fund or the Adviser by the National Association of
Securities Dealers, Inc. (the "NASD"), the SEC or any other regulatory
body;
(d) upon the determination of the Accounts to substitute for the Fund's
shares the shares of another investment company in accordance with the
terms of the applicable Contracts. The Company will give 60 days
written notice to the Fund and the Adviser of any decision to replace
the Fund's' shares;
4
<PAGE>
(e) upon assignment of this Agreement, unless made with the written consent
of all other parties hereto;
(f) if Fund shares are not registered, issued or sold in conformance with
Federal law or such law precludes the use of Fund shares as an
underlying investment medium for Contracts issued or to be issued by
the Company. Prompt notice shall be given by the appropriate party
should such situation occur.
6. Continuation of Agreement.
Termination as the result of any cause listed in Section 5 shall not affect
the Fund's obligation to furnish its shares to Contracts then in force for which
its shares serve or may serve as the underlying medium unless such further sale
of Fund shares is prohibited by law or the SEC or other regulatory body, or is
determined by the Directors to be necessary to remedy or eliminate an
irreconcilable conflict pursuant to Section 10 hereof.
7. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to the Fund prepared by
the Company or its agents for use in marketing its Contracts will be
submitted to the Fund or its designee for review before such material
is submitted to any regulatory body for review. No such material shall
be used if the Fund or its designee reasonably object to such use in
writing, transmitted by facsimile within two business days after
receipt of such material.
(b) At the Company's request, the Fund will provide additional copies of
its financials as soon as available to the Company and at least one
complete copy of all registration statements, prospectuses, statements
of additional information, annual and semi-annual reports, proxy
statements and/or all amendments or supplements to any of the above
that relate to the Fund promptly after the filing of such document with
the SEC or other regulatory authorities. At the Adviser's request, the
Company will provide to the Adviser at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, and all
amendments or supplements to any of the above that relate to the
Account promptly after the filing of such document with the SEC or
other regulatory authority.
(c) The Fund or the Adviser will provide via Excel spreadsheet diskette
format or in electronic transmission to the Company at least quarterly
portfolio information necessary to update Fund profiles within seven
business days following the end of each quarter.
5
<PAGE>
(d) The Adviser will reimburse the Company for any incorrect information
provided to the Company under this Section as provided for in Schedule
C.
8. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on Fund shares
held by registered separate accounts to all Contract owners and
participants to the extent the SEC continues to interpret the 1940 Act
as requiring such privileges. The Company shall provide pass-through
voting privileges on Fund shares held by unregistered separate accounts
to all Contract owners.
(b) The Company will distribute to Contract owners, participants and
beneficiaries, as appropriate, all proxy material furnished by the Fund
and will vote Fund shares in accordance with instructions received from
such Contract owners, participants and beneficiaries. If and to the
extent required by law, the Company, with respect to each group
Contract and in each Account, shall vote Fund shares for which no
instructions have been received in the same proportion as shares for
which such instructions have been received. The Company and its agents
shall not oppose or interfere with the solicitation of proxies for Fund
shares held for such Contract owners, participants and beneficiaries.
9. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Adviser, and its
directors, officers, employees, agents and each person, if any, who
controls the Fund or its Adviser within the meaning of the Securities
Act of 1933 (the "1933 Act") against any losses, claims, damages or
liabilities to which the Fund or any such director, officer, employee,
agent, or controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement, prospectus or sales literature of the
Company or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or arise
out of or as a result of conduct, statements or representations (other
than statements or representations contained in the prospectuses or
sales literature of the Fund) of the Company or its agents, with
respect to the sale and distribution of Contracts for which Fund shares
are the underlying investment. The Company will reimburse any legal or
other expenses reasonably incurred by the Fund or any such director,
officer, employee, agent, investment adviser, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, claim,
damage or
6
<PAGE>
liability arises out of or is based upon (i) an untrue statement or
omission or alleged omission made in such Registration Statement or
prospectus in conformity with written materials furnished to the
Company by the Fund specifically for use therein or (ii) the willful
misfeasance, bad faith, or gross negligence by the Fund or Adviser in
the performance of its duties or the Fund's or Adviser's reckless
disregard of obligations or duties under this Agreement or to the
Company, whichever is applicable. This indemnity agreement will be in
addition to any liability which Company may otherwise have.
(b) The Adviser agree to indemnify and hold harmless the Company and its
directors, officers, employees, agents and each person, if any, who
controls the Company within the meaning of the 1933 Act against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, employee, agent or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement,
prospectuses or sales literature of the Fund or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or material fact required
to be stated therein or necessary to make the statements therein not
misleading. The Adviser will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer,
employee, agent, or controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action;
provided, however, that the Adviser will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or omission or alleged omission
made in such Registration Statement or prospectuses which are in
conformity with written materials furnished to the Adviser by the
Company specifically for use therein.
(c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
under this Section 9. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish to, assume the
defense thereof, with counsel satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party
of its election to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section 9 for
any legal or other
7
<PAGE>
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
10. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive relief,
as amended, filed by the Fund on and with the SEC and the order issued
by the SEC dated 11/21/88 (File No. 812-7095) in response thereto (the
"Shared Funding Exemptive Order"). The Company has reviewed the
conditions to the requested relief set forth in such application for
exemptive relief. As set forth in such application, the Directors will
monitor the Fund for the existence of any material irreconcilable
conflict between the interests of the contractholders of all separate
accounts ("Participating Companies") investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (i) an action by any state insurance regulatory authority;
(ii) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar actions by
insurance, tax or securities regulatory authorities; (iii) an
administrative or judicial decision in any relevant proceeding; (iv)
the manner in which the investments of any portfolio are being managed;
(v) a difference in voting instructions given by variable annuity
contractholders and variable life insurance contractholders; or (vi) a
decision by an insurer to disregard the voting instructions of
contractholders. The Board shall promptly inform the Company if it
determines that an irreconcilable material conflict exists and the
implications thereof.
(b) The Company will report any potential or existing conflicts of which it
is aware to the Directors. The Company will assist the Directors in
carrying out its responsibilities under the Shared Funding Exemptive
Order by providing the Directors with all information reasonably
necessary for the Directors to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to inform
the Directors whenever contractholder voting instructions are
disregarded.
(c) If a majority of the Directors, or a majority of its disinterested
Directors, determines that a material irreconcilable conflict exists
with regard to contractholder investments in a Fund, the Directors
shall give prompt notice to all Participating Companies. If the
Directors determines that the Company is responsible for causing or
creating said conflict, the Company shall at its sole cost and expense,
and to the extent reasonably practicable (as determined by a majority
of the disinterested Directors), take such action as is necessary to
remedy or eliminate the irreconcilable material conflict. Such
necessary action may include but shall not be limited to:
8
<PAGE>
(i) withdrawing the assets allocable to the Account from the Fund and
reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contractholders and as
appropriate, segregating the assets of any appropriate group
(i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Companies)
that votes in favor of such segregation, or offering to the
affected contractholders the option of making such a change;
and/or
(ii) establishing a new registered management investment company or
managed separate account.
(d) If a material irreconcilable conflict arises as a result of a decision
by the Company to disregard its contractholder voting instructions and
said decision represents a minority position or would preclude a
majority vote by all of its contractholders having an interest in the
Fund, the Company at its sole cost, may be required, at the Directors'
election, to withdraw an Account's investment in the Fund and terminate
this Agreement; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the
disinterested Directors.
(e) For the purpose of this Section 10, a majority of the disinterested
Directors shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will the
Fund be required to establish a new funding medium for any Contract.
The Company shall not be required by this Section 10 to establish a new
funding medium for any Contract if an offer to do so has been declined
by vote of a majority of the Contract owners, participants or
beneficiaries materially adversely affected by the irreconcilable
material conflict.
11. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision hereof,
may be amended, waived, discharged or terminated orally, but only by an
instrument in writing signed by all parties hereto.
(b) Notices. All notices and other communications hereunder shall be given
or made in writing and shall be delivered personally, or sent by telex,
telecopier or registered or certified mail, postage prepaid, return
receipt requested or recognized overnight courier service to the party
or parties to whom they are directed at the following addresses, or at
such other addresses as may be designated by notice from such party to
all other parties.
9
<PAGE>
To the Company:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Julie E. Rockmore, Counsel
To the Fund:
Calvert Group, Ltd.
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland 20814
Attn: Legal Department
Any notice, demand or other communication given in a manner prescribed in
this subsection (b) shall be deemed to have been delivered on receipt.
(c) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective permitted
successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by signing
any such counterpart.
(e) Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
(f) Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties hereto and supersedes all prior
agreement and understandings relating to the subject matter hereof.
(g) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Connecticut.
(h) It is understood by the parties that this Agreement is not an exclusive
arrangement in any respect.
10
<PAGE>
(i) The terms of this Agreement and the Schedules thereto will be held
confidential by each party except to the extent that either party or
its counsel may deem it necessary to disclose such terms.
12. Limitation on Liability of Trustees, etc.
This Agreement has been executed on behalf of the Fund by the undersigned
officer of the Fund in his or her capacity as an officer of the Fund and on
behalf of the Advisor by an undersigned officer of the Advisor in his or her
capacity as an officer of the Advisor. Any obligations imposed on the Fund by
this Agreement shall be binding upon the assets and property of the Fund only
and shall not be binding on any Director, officer or shareholder of the Fund
individually.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers effective as of the 1st day of December, 1997.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Laurie M. LeBlanc
----------------------------------------------
Name: Laurie M. LeBlanc
Title: Vice President
Date: December 8, 1997
------------------------------------------
CALVERT RESPONSIBILITY INVESTED
BALANCED PORTFOLIO
By: /s/ Susan Walker Bender
----------------------------------------------
Name: Susan Walker Bender
Title: Assistant Secretary
Date: November 26, 1997
------------------------------------------
CALVERT ASSET MANAGEMENT
COMPANY, INC.
By: /s/ Susan Walker Bender
----------------------------------------------
Name: Susan Walker Bender
Title: Associate General Counsel
Date: November 26, 1997
11
SERVICE AGREEMENT
WITH
CALVERT ASSET MANAGEMENT COMPANY, INC.
AGREEMENT, effective as of December 1, 1997, between Calvert Asset
Management Company, Inc. (the "Adviser"), a Delaware corporation, and Aetna Life
Insurance and Annuity Company (the "Company"), a Connecticut corporation, for
the provision of described administrative services by the Company in connection
with the sale of shares of the CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
(the "Fund") as described in the Fund Participation Agreement dated December 1,
1997 between the Company, the Fund and the Adviser (the "Fund Participation
Agreement").
In consideration of their mutual promises, the Adviser and the Company agree as
follows:
1. The Company agrees to provide the following services to the Adviser:
a. responding to inquiries from owners of the Company variable annuity
contracts and variable life insurance policies using the Funds as an
investment vehicle ("Contractholders") regarding the services performed
by the Company that relate to the Funds;
b. providing information to Adviser and Contractholders with respect to
Fund shares attributable to Contractholder accounts;
c. communicating directly with Contractholders concerning the Funds'
operations;
d. providing such other similar services as Adviser may reasonably request
pursuant to Adviser's agreement with the Funds to the extent permitted
under applicable federal and state requirements.
2. (a) Administrative services to Contractholders, owners and participants
shall be the responsibility of the Company and shall not be the
responsibility of the Fund or the Adviser. The Adviser recognizes the
Company as the sole shareholder of Fund shares issued under the Fund
Participation Agreement, and that substantial savings will be derived
in administrative expenses, such as significant reductions in postage
expense and shareholder communications, by virtue of having a sole
shareholder for each of the Accounts rather than multiple shareholders.
In consideration of the savings resulting from such arrangement, and to
compensate the Company for its costs, the Adviser agrees to pay to the
Company and the Company agrees to accept as full compensation for all
services rendered hereunder an amount described in Schedule A
<PAGE>
attached hereto and made a part of this Agreement as may be amended
from time to time with the mutual consent of the parties hereto.
(b) The parties agree that the Adviser's payments to the Company are for
administrative services only and do not constitute payment in any
manner for investment advisory services or for costs of distribution.
(c) For the purposes of computing the administrative fee reimbursement
contemplated by this Section 2, the average aggregate amount invested
by the Company over a one month period shall be computed by totaling
the Company's aggregate investment (share net asset value multiplied by
total number of shares held by the Company) on each business day during
the month and dividing by the total number of business days during each
month.
(d) The Fund will calculate the reimbursement of administrative expenses at
the end of each month and will make such reimbursement to the Company
within 30 days thereafter. The reimbursement payment will be
accompanied by a statement showing the calculation of the monthly
amounts payable by the Adviser and such other supporting data as may be
reasonably requested by the Company. Payment will be wired by the
Adviser to an account designated by the Company.
3. The Company agrees to indemnify and hold harmless the Adviser and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of the
Company under this Agreement or a breach of a material provision of this
Agreement, except to the extent such loss, liability or expense is the
result of the Adviser's misfeasance, bad faith or gross negligence in the
performance of its duties.
4. The Adviser agrees to indemnify and hold harmless the Company and its
directors, officers, and employees from any and all loss, liability and
expense resulting from any gross negligence or willful wrongful act of the
Adviser under this Agreement or a breach of a material provision under this
Agreement, except to the extent such loss, liability or expense is the
result of the Company's own willful misfeasance, bad faith or gross
negligence in the performance of its duties.
5. Either party may terminate this Agreement, without penalty, (i) on sixty
(60) days written notice to the other party, for any cause or without cause,
or (ii) on reasonable notice to the other party, if it is not permissible to
continue the arrangement described herein under laws, rules or regulations
applicable to either party or the Fund, or if the Participation Agreement is
terminated.
6. The terms of this arrangement will be held confidential by each party except
to the extent that either party or its counsel may deem it necessary to
disclose this arrangement.
2
<PAGE>
7. This Agreement represents the entire Agreement of the parties on the subject
matter hereof and it cannot be amended or modified except in writing, signed
by the parties. This Agreement may be executed in one or more separate
counterparts, all of which, when taken together, shall constitute one and
the same Agreement.
8. All notices and other communications hereunder shall be given or made in
writing and shall be delivered personally, or sent by telex, telecopier or
registered or certified mail, postage prepaid, return receipt requested or
recognized overnight courier service to the party to whom they are directed
at the following addresses, or at such other addresses as may be designated
by notice from such party to the other party.
To Aetna:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Attention: Julie E. Rockmore, Counsel
To Calvert Asset Management Company, Inc.
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland, 2014
Attention: Legal Department
Any notice, demand or other communication given in a manner prescribed in this
Section 8 shall be deemed to have been delivered on receipt.
IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to
be executed by their authorized officers as of the day and year first above
written.
CALVERT ASSET MANAGEMENT AETNA LIFE INSURANCE AND
COMPANY, INC. ANNUITY COMPANY
By: /s/ Susan Walker Bender By: /s/ Laurie M. LeBlanc
--------------------------- -------------------------------
Name: Susan Walker Bender Name: Laurie M. LeBlanc
Title: Associate General Counsel Title: Vice President
Date: November 26, 1997 Date: December 8, 1997
3
<PAGE>
CALVERT ASSET MANAGEMENT
COMPANY, INC.
By: /s/ Susan Walker Bender
-------------------------------
Name: Susan Walker Bender
Title: Associate General Counsel
Date: November 26, 1997
AETNA LIFE INSURANCE AND
ANNUITY COMPANY
By: /s/ Laurie M. LeBlanc
-------------------------------
Name: Laurie M. LeBlanc
Title: Vice President
Date: December 8, 1997
4
