As filed with the Securities and Exchange Registration No. 33-91846*
Commission on April 13, 1998 Registration No. 811-2513
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
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POST-EFFECTIVE AMENDMENT NO. 13 TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and Amendment To
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
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Variable Annuity Account C of Aetna Life Insurance and Annuity Company
(Exact Name of Registrant)
Aetna Life Insurance and Annuity Company
(Name of Depositor)
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
------
X on May 1, 1998 pursuant to paragraph (b) of Rule 485
------
*Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which includes
all the information which would currently be required in a prospectus relating
to the securities covered by the following earlier Registration Statement:
33-75976.
<PAGE>
VARIABLE ANNUITY ACCOUNT C
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-4
ITEM NO. PART A (PROSPECTUS) LOCATION
<S> <C> <C>
1 Cover Page.......................................... Cover Page
2 Definitions......................................... Definitions
3 Synopsis............................................ Prospectus Summary; Fee Table
4 Condensed Financial Information..................... Condensed Financial Information
5 General Description of Registrant, Depositor, and
Portfolio Companies................................. The Company; Variable Annuity
Account C; The Funds
6 Deductions and Expenses............................. Charges and Deductions; Distribution
7 General Description of Variable Annuity Contracts... Purchase; Miscellaneous
8 Annuity Period...................................... Annuity Period
9 Death Benefit....................................... Death Benefit During Accumulation
Period; Death Benefit Payable During
the Annuity Period
10 Purchases and Contract Value........................ Purchase; Contract Valuation
11 Redemptions......................................... Right to Cancel; Withdrawals
12 Taxes............................................... Tax Status
13 Legal Proceedings................................... Miscellaneous - Legal Matters and
Proceedings
14 Table of Contents of the Statement of Additional
Information......................................... Contents of the Statement of Additional
Information
<PAGE>
<CAPTION>
FORM N-4
ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
<S> <C> <C>
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and History
18 Services............................................. General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase of Contracts
20 Underwriters......................................... Offering and Purchase of Contracts
21 Calculation of Performance Data...................... Performance Data; Average Annual
Total Return Quotations
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements
</TABLE>
Part C (Other Information)
--------------------------
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
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The Contracts offered in connection with this Prospectus are group deferred
variable annuity contracts ("Contracts") issued by Aetna Life Insurance and
Annuity Company (the "Company"). The Contracts are designed to fund plans that
provide retirement income for employees of educational institutions. The
Contracts are available through participation in retirement programs which
receive favorable tax deferred treatment under Federal income tax law. (See
"Purchase.")
The Contracts provide that contributions may be allocated to one or more of the
Credited Interest Options or to one or more of the Subaccounts of Variable
Annuity Account C, a separate account of the Company. The Subaccounts invest
directly in shares of the following Funds:
[bullet] Aetna Ascent VP (formerly Aetna Ascent Variable Portfolio)
[bullet] Aetna Investment Advisers Fund, Inc. d/b/a Aetna Balanced VP
[bullet] Aetna Income Shares d/b/a Aetna Bond VP
[bullet] Aetna Crossroads VP (formerly Aetna Crossroads Variable Portfolio)
[bullet] Aetna Growth VP (formerly Aetna Variable Growth Portfolio)
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP
[bullet] Aetna High Yield VP
[bullet] Aetna Index Plus Large Cap VP (formerly Aetna Variable Index Plus
Portfolio)
[bullet] Aetna Index Plus Mid Cap VP
[bullet] Aetna Index Plus Small Cap VP
[bullet] Aetna International VP
[bullet] Aetna Legacy VP (formerly Aetna Legacy Variable Portfolio)
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP
[bullet] Aetna Real Estate Securities VP
[bullet] Aetna Small Company VP (formerly Aetna Variable Small
Company Portfolio)
[bullet] Aetna Value Opportunity VP (formerly Aetna Variable Capital
Appreciation Portfolio)
[bullet] Calvert Social Balanced Portfolio (formerly Calvert
Responsibly Invested Balanced Portfolio)
[bullet] Fidelity VIP Equity-Income Portfolio
[bullet] Fidelity VIP Growth Portfolio
[bullet] Fidelity VIP Overseas Portfolio
[bullet] Fidelity VIP II Contrafund Portfolio
[bullet] Janus Aspen Aggressive Growth Portfolio
[bullet] Janus Aspen Balanced Portfolio
[bullet] Janus Aspen Flexible Income Portfolio
[bullet] Janus Aspen Growth Portfolio
[bullet] Janus Aspen Worldwide Growth Portfolio
[bullet] Lexington Natural Resources Trust*
[bullet] Oppenheimer Global Securities Fund
[bullet] Oppenheimer Strategic Bond Fund
[bullet] Portfolio Partners MFS Emerging Equities Portfolio
[bullet] Portfolio Partners MFS Research Growth Portfolio
[bullet] Portfolio Partners MFS Value Equity Portfolio
[bullet] Portfolio Partners Scudder International Growth Portfolio
[bullet] Portfolio Partners T. Rowe Price Growth Equity Portfolio
* This Fund is only available for investment by Participants who established an
Account under the Contract before May 1, 1998. As soon as all such Participants
have redirected their allocations to other investment options, the Fund will be
closed to all new investment (except reinvested dividends and capital gains
earned on amounts already invested in the Fund through the Separate Account and
loan repayments automatically deposited into the Fund pursuant to the Company's
loan repayment procedures).
The Credited Interest Options currently available under the Contract are the
Guaranteed Accumulation Account, the Fixed Plus Account and the Fixed Account
(available for accumulation only in limited circumstances). Except as
specifically mentioned, this Prospectus describes only investments through the
Separate Account. A brief description of each of the Credited Interest Options
is contained in Appendices to this Prospectus. Additional information concerning
the Guaranteed Accumulation Account is contained in a separate prospectus.
The availability of the Funds and the Credited Interest Options is subject to
applicable regulatory authorization. Not all Funds or Credited Interest Options
may be available in all jurisdictions, under all Contracts, or under all Plans.
Please check with your employer to determine option availability. (See
"Investment Options.")
This Prospectus provides investors with the information that they should know
about the Separate Account before investing in the Contract. Additional
information about the Separate Account is contained in a Statement of Additional
Information ("SAI") which is available at no charge. The SAI has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
The Table of Contents for the SAI is printed on page 19 of this Prospectus. An
SAI may be obtained by indicating the request on the enrollment form or on the
prospectus receipt contained in this Prospectus, or by calling the number listed
under the "Inquiries" section of the Prospectus Summary. You may also obtain an
SAI for any of the Funds by calling that phone number.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
<PAGE>
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER INFORMATION
ABOUT THE SEPARATE ACCOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (SEC) CAN BE FOUND IN THE SEC'S WEB SITE AT http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED
MAY 1, 1998.
<PAGE>
TABLE OF CONTENTS
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
DEFINITIONS DEFINITIONS - 1
PROSPECTUS SUMMARY ................................................ SUMMARY - 1
FEE TABLE ....................................................... FEE TABLE - 1
CONDENSED FINANCIAL INFORMATION ............................................ 1
THE COMPANY ............................................................... 1
VARIABLE ANNUITY ACCOUNT C ................................................ 1
INVESTMENT OPTIONS ........................................................ 1
The Funds .............................................................. 1
Credited Interest Options .............................................. 5
PURCHASE .................................................................. 5
Contract Availability .................................................. 5
Purchasing Interests in the Contract ................................... 5
Rights Under the Contract .............................................. 6
Right to Cancel ........................................................ 6
CHARGES AND DEDUCTIONS .................................................... 6
Daily Deductions from the Separate Account ............................. 6
Mortality and Expense Risk Charge .................................... 6
Asset Based Sales Charge ............................................. 7
Administrative Expense Charge ........................................ 7
Fund Expenses .......................................................... 7
Premium and Other Taxes ................................................ 7
CONTRACT VALUATION ........................................................ 8
Account Value .......................................................... 8
Accumulation Units ..................................................... 8
Net Investment Factor .................................................. 8
TRANSFERS ................................................................. 8
Telephone Transfers .................................................... 9
Dollar Cost Averaging Program .......................................... 9
WITHDRAWALS ............................................................... 9
Reinvestment Privilege ................................................. 9
CONTRACT LOANS ............................................................ 10
SYSTEMATIC DISTRIBUTION OPTIONS ........................................... 10
DEATH BENEFIT DURING ACCUMULATION PERIOD .................................. 11
ANNUITY PERIOD ............................................................ 11
Annuity Period Elections ............................................... 11
Annuity Options ........................................................ 12
Duration of Annuity Payments ........................................... 13
Charges Deducted During the Annuity Period ............................. 13
Death Benefit Payable During the Annuity Period ........................ 13
TAX STATUS ................................................................ 13
Introduction ........................................................... 13
Taxation of the Company ................................................ 14
Contracts Used with Certain Retirement Plans ........................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
MISCELLANEOUS ............................................................. 16
Distribution ........................................................... 16
Delay or Suspension of Payments ........................................ 17
Performance Reporting .................................................. 17
Voting Rights .......................................................... 17
Changes in Beneficiary Designations .................................... 18
Modification of the Contract ........................................... 18
Legal Matters and Proceedings .......................................... 18
Year 2000 .............................................................. 18
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ....................... 19
APPENDIX I--GUARANTEED ACCUMULATION ACCOUNT ............................... 20
APPENDIX II--FIXED PLUS ACCOUNT ........................................... 21
APPENDIX III--FIXED PLUS ACCOUNT (Applicable Only In Limited Circumstances) 23
APPENDIX IV--FIXED PLUS ACCOUNT (Applicable Only In Limited Circumstances). 25
APPENDIX V--FIXED ACCOUNT (Applicable Only In Limited Circumstances) ...... 27
APPENDIX VI--CONTRACTS ACQUIRED BY EXCHANGE ............................... 28
APPENDIX VII--CONDENSED FINANCIAL INFORMATION ............................. 32
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE
OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
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- --------------------------------------------------------------------------------
The following terms are defined as they are used in this Prospectus:
Account: A record which identifies contract values accumulated on behalf of each
Participant during the Accumulation Period. One or more Employee Accounts and
Employer Accounts may be established for each Participant.
Account Value: The total dollar value of amounts held in an Account as of each
Valuation Date during the Accumulation Period.
Account Year: A period of twelve months measured from the date on which an
Account is established (the effective date) or from an anniversary of such
effective date.
Accumulation Period: The period during which Purchase Payment(s) credited to an
Account are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Annuitant: The person on whose life or life expectancy the annuity payments are
based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Beneficiary(ies): The person(s) entitled to receive any death benefit upon the
death of the Participant.
Code: Internal Revenue Code of 1986, as amended.
Company (We, Us): Aetna Life Insurance and Annuity Company.
Contract: The group deferred variable annuity contracts offered by this
Prospectus.
Contract Holder: The entity to whom the Contract is issued. The Contract Holder
is usually the employer.
Credited Interest Options: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Accumulation
Account and the Fixed Plus Account, each of which is described in an Appendix to
this Prospectus. The Fixed Account is an additional Credited Interest Option
described in an Appendix to this Prospectus; however, the Fixed Account is
available during accumulation only in limited circumstances. Amounts allocated
to the Credited Interest Options are included in the Account Value.
Employee Account: An account that is credited with payments derived from
employee salary reduction or salary deduction contributions (as provided for by
the Plan) and remitted to the Company by the employer on behalf of each
Participant.
Employer Account: An account that is credited with net Purchase Payments made
by the Contract Holder.
Fund(s): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the
Contract.
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Loan Account: An account established for record keeping purposes and credited
with the amount of any loan.
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DEFINITIONS - 1
<PAGE>
Master Contracts: Contracts used in conjunction with a group of affiliated
government institutions of higher education.
Participant (You): A person participating in a Plan maintained by an eligible
organization.
Plan(s): Tax-deferred retirement plans adopted by higher education systems for
their employees under Section 401(a) or Section 403(b) of the Code.
Purchase Payment(s): The gross payment(s) submitted to the Company under a
Contract.
Section 403(b) Contract: A Contract that accepts Purchase Payments made pursuant
to Code Section 403(b) and transferred funds attributable to Code Section
403(b).
Section 401(a) Contract: A Contract that accepts Purchase Payments made pursuant
to Code Section 401(a) and transferred funds attributable to Section 401(a)
contributions. Section 401(a) Contracts issued to some Plans may also accept
Purchase Payments made pursuant to Code Section 414(h) and transferred funds
attributable to Section 414(h).
Separate Account: Variable Annuity Account C, a separate account established by
the Company for the purpose of funding variable annuity contracts issued by the
Company.
Subaccount(s): The portion of the assets of the Separate Account that is
allocated to a particular Fund. Each Subaccount invests in the shares of only
one corresponding Fund.
Valuation Date: The date and time at which the value of the Accumulation Unit
Value and Annuity Unit Value of a Subaccount is calculated. Currently, this
calculation occurs after the close of business of the New York Stock Exchange on
any normal business day, Monday through Friday, that the New York Stock Exchange
is open.
- --------------------------------------------------------------------------------
DEFINITIONS - 2
<PAGE>
PROSPECTUS SUMMARY
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- --------------------------------------------------------------------------------
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are group deferred
variable annuity contracts issued by Aetna Life Insurance and Annuity Company
(the "Company"). The purpose of the Contract is to accumulate values and to
provide benefits upon retirement. The Contracts are available for institutions
of higher education to fund (1) tax-deferred annuity programs under Section
403(b) of the Code, and/or (2) qualified defined contribution plans under
Section 401(a) of the Code. Section 401 Contracts issued to some Plans may also
accept payments and transferred funds made pursuant to Section 414(h) of the
Code.
CONTRACT PURCHASE
The Contract may be purchased by institutions of higher education on behalf
of a group made up of their employees. One or more Contracts are issued to the
Contract Holder once we receive a completed master application form(s). Eligible
employees may participate in the Contract by completing the enrollment form (and
any other required forms) and submitting them to the Company in good order.
Depending upon the terms of the Plan, Purchase Payments can be applied to the
Contract either through a lump-sum transfer, through periodic salary reduction
or salary deduction, or through employer contributions. For each Contract, one
or more Employee Accounts will be established for contributions made by an
employee, and one or more Employer Accounts may be established for contributions
made by the employer on the employee's behalf. (See "Purchase.")
FREE LOOK PERIOD
You or the Contract Holder may cancel participation in the Contract within
10 days (longer if required by state law) after you receive the Contract or
other document evidencing your interest in the Contract by returning it to the
Company along with a written notice of cancellation. Unless state law requires
otherwise, the amount that will be received upon cancellation will reflect the
investment performance of the Subaccounts into which Purchase Payments were
deposited. The amount refunded may be more or less than the amount of Purchase
Payments. (See "Purchase-- Right to Cancel.")
INVESTMENT OPTIONS
The Company has established Variable Annuity Account C, a registered unit
investment trust, for the purpose of funding the variable portion of the
Contracts. The Separate Account is divided into Subaccounts which invest
directly in shares of the Funds described herein. The Contract allows investment
in any of the Subaccounts, as well as in the Credited Interest Options described
below. The total number of investment options that may be selected during the
Accumulation Period is limited. For a complete list of the Funds available under
the Contracts, a description of the investment objectives of each of the Funds
and their investment advisers, and a description of the limitations on the
number of investment options, see "Investment Options--The Funds" in this
Prospectus, as well as the prospectuses for each of the Funds.
The Contract also provides for investment in Credited Interest Options
which allow you to earn fixed rates of interest. The fixed options available
under the Contract are the Guaranteed Accumulation Account ("GAA"), the Fixed
Plus Account and the Fixed Account (available during accumulation only in
limited circumstances). (See the Appendices to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charges, an asset based sales charge and an administrative expense charge), as
well as premium and other taxes. Not all charges apply to all Contracts. The
Funds also incur certain fees and expenses which are deducted directly from the
Funds. (See the Fee Table and "Charges and Deductions.")
- --------------------------------------------------------------------------------
SUMMARY - 1
<PAGE>
TRANSFERS
Subject to certain limitations, Account Values may be transferred among the
Subaccounts and the Credited Interest Options without charge. Transfers can be
requested in writing or by telephone in accordance with the Company's transfer
procedures. (See the Appendices for a full description of the restrictions
applicable to transfers made from the Credited Interest Options.)
(See "Transfers.")
WITHDRAWALS
All or a part of the Account Value may be withdrawn prior to the Annuity
Date, subject to Plan provisions, by properly completing a disbursement form and
sending it to the Company. Limitations apply to withdrawals from the Credited
Interest Options. A distribution can be made from certain Employer Accounts and
certain Employee Accounts (as provided by the Plan) only if the Contract Holder
certifies in writing that you are eligible, both as to timing and form of
distribution. The withdrawal will generally be subject to income tax and may be
subject to a federal tax penalty. The Code restricts full and partial
withdrawals in some circumstances. (See "Withdrawals.")
The Contract also offers certain Systematic Distribution Options during
the Accumulation Period to persons meeting certain criteria. Systematic
Distribution Options are not available in all states and may not be suitable in
every situation. (See "Systematic Distribution Options.")
LOANS
If allowed by the Plan, Participants may request a loan from their Account
Value during the Accumulation Period. (See "Contract Loans.")
DEATH BENEFIT
A death benefit is payable if the Participant dies before the Annuity Date.
Death benefit proceeds will be paid to the Beneficiary. Until the election of a
method of payment, the Account Value will remain invested under the Contract.
The Beneficiary may elect to receive the proceeds in a lump sum or under any of
the payment options available under the Contract. However, the Code requires
that distributions begin within a certain time period. (See "Death Benefit
During the Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
You may elect to begin receiving Annuity Payments on the Annuity Date. For
certain Employer and Employee Accounts, the Contract Holder must provide written
certification that the distribution is in accordance with the terms of the Plan.
(See "Rights Under the Contract.") Annuity Payments can be made on either a
fixed, variable or combination fixed and variable basis. If you choose a
variable Annuity, the payments will vary with the investment performance of the
Subaccount(s) selected. The Company reserves the right to limit the number of
Subaccounts that may be available during the Annuity Period. (See "Annuity
Period.")
TAXES
Contributions and earnings are not generally taxed until you or your
beneficiary(ies) actually receive a distribution from the Contract. A 10%
federal tax penalty and a 20% withholding for income tax may be imposed on
certain withdrawals. (See "Tax Status.")
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SUMMARY - 2
<PAGE>
INQUIRIES
Questions, inquiries or requests for additional information can be directed
to your agent or local representative, or you may contact the Company as
follows:
[bullet] Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-1277
Attention: Customer Service
[bullet] Call Customer Service: 1-800-525-4225 (for automated transfers
or changes in the allocation of Account
Values, call: 1-800-262-3862)
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SUMMARY - 3
<PAGE>
FEE TABLE
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This Fee Table describes the various charges and expenses associated with the
Contract. The charges and expenses shown below do not include premium taxes that
may be applicable. For more information regarding the expenses paid out of the
assets of a particular Fund, see the Fund's prospectus.
TABLE A -- FOR MASTER CONTRACTS ISSUED OR ENDORSED
ON OR AFTER OCTOBER 1, 1996
1. CHARGES AGAINST THE SEPARATE ACCOUNT. Each Subaccount pays these expenses
out of its assets. The charges are reflected in the Subaccount's daily
Accumulation Unit Value and are not charged directly to an Account. They
include:
<TABLE>
<S> <C>
DURING THE ACCUMULATION PERIOD:
Mortality and Expense Risk Charge ......... 1.00%*
Administrative Expense Charge ............. 0.00%**
----
Total Separate Account Charges ........... 1.00%
=====
DURING THE ANNUITY PERIOD (ALL CONTRACTS):
Mortality and Expense Risk Charge ......... 1.25%
Administrative Expense Charge ............. 0.00%**
-----
Total Separate Account Charges ........... 1.25%
=====
</TABLE>
*The mortality and expense risk charge during the Accumulation Period may be
reduced for Contracts issued to Plans that meet certain criteria. See
"Charges and Deductions."
**We currently do not impose an Administrative Expense Charge. However, we
reserve the right to deduct a daily charge of not more than 0.25% per year
from the Subaccounts.
2. ANNUAL EXPENSES OF THE FUNDS
The following table illustrates the advisory fees and other expenses applicable
to the Funds. A Fund's "Other Expenses" include operating costs of the Fund.
These expenses are reflected in the Fund's net asset value and are not deducted
from the Account Value under the Contract. (Except as noted, the following
figures are a percentage of average net assets and, except where otherwise
indicated, are based on figures for the year ended December 31, 1997.)
<TABLE>
<CAPTION>
Investment
Advisory Fees(1) Other Expenses
(after expense (after expense Total Fund
reimbursement) reimbursement) Annual Expenses
------------------ ---------------- ----------------
<S> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.57% 0.23% 0.80%
Aetna Balanced VP, Inc. (3) 0.50% 0.10% 0.60%
Aetna Bond VP(3) 0.40% 0.10% 0.50%
Aetna Crossroads VP(2)(3) 0.55% 0.25% 0.80%
Aetna Growth VP(2)(3) 0.16% 0.64% 0.80%
Aetna Growth and Income VP(3) 0.50% 0.09% 0.59%
Aetna High Yield VP(2)(3) 0.47% 0.33% 0.80%
Aetna Index Plus Large Cap VP(2)(3) 0.32% 0.23% 0.55%
Aetna Index Plus Mid Cap VP(2)(3) 0.27% 0.33% 0.60%
Aetna Index Plus Small Cap VP(2)(3) 0.27% 0.33% 0.60%
Aetna International VP(2)(3) 0.77% 0.38% 1.15%
Aetna Legacy VP(2)(3) 0.49% 0.31% 0.80%
Aetna Money Market VP(3) 0.25% 0.10% 0.35%
</TABLE>
- --------------------------------------------------------------------------------
FEE TABLE - 1
<PAGE>
<TABLE>
<CAPTION>
Investment
Advisory Fees(1) Other Expenses
(after expense (after expense Total Fund
reimbursement) reimbursement) Annual Expenses
------------------ ---------------- ----------------
<S> <C> <C> <C>
Aetna Real Estate Securities VP(2)(3) 0.62% 0.33% 0.95%
Aetna Small Company VP(2)(3) 0.35% 0.60% 0.95%
Aetna Value Opportunity VP(2)(3) 0.20% 0.60% 0.80%
Calvert Social Balanced Portfolio(4) 0.69% 0.12% 0.81%
Fidelity VIP Equity-Income Portfolio(5) 0.50% 0.08% 0.58%
Fidelity VIP Growth Portfolio(5) 0.60% 0.09% 0.69%
Fidelity VIP Overseas Portfolio(5) 0.75% 0.17% 0.92%
Fidelity VIP II Contrafund Portfolio(5) 0.60% 0.11% 0.71%
Janus Aspen Aggressive Growth Portfolio(6) 0.73% 0.03% 0.76%
Janus Aspen Balanced Portfolio(6) 0.76% 0.07% 0.83%
Janus Aspen Flexible Income Portfolio 0.65% 0.10% 0.75%
Janus Aspen Growth Portfolio(6) 0.65% 0.05% 0.70%
Janus Aspen Worldwide Growth Portfolio(6) 0.66% 0.08% 0.74%
Lexington Natural Resources Trust 1.00% 0.25% 1.25%
Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
Oppenheimer Strategic Bond Fund 0.75% 0.08% 0.83%
Portfolio Partners MFS Emerging Equities Portfolio(7)(8) 0.68% 0.13% 0.81%
Portfolio Partners MFS Research Growth Portfolio(7)(8) 0.70% 0.15% 0.85%
Portfolio Partners MFS Value Equity Portfolio(7) 0.65% 0.25% 0.90%
Portfolio Partners Scudder International Portfolio(7) 0.80% 0.20% 1.00%
Portfolio Partners T. Rowe Price Growth Equity Portfolio(7) 0.60% 0.15% 0.75%
</TABLE>
(1) Certain of the Fund advisers reimburse the Company for administrative costs
incurred in connection with administering the Funds as variable funding
options under the Contract. These reimbursements are paid out of the
investment advisory fees and are not charged to investors.
(2) Effective May 1, 1998, the Portfolios' adviser has agreed to waive a portion
of its fee or to reimburse certain expenses so that aggregate expenses do
not exceed the total expenses shown above. These fee waiver/expense
reimbursement arrangements will increase total return and may be modified or
terminated at any time.
Without these fee waiver/expense reimbursement arrangements Management Fees
and Total Expenses for the Portfolio would be higher. Management Fees and
Total Expenses would be as follows: 0.60% and 0.83% for Ascent VP; 0.60% and
0.85% for Crossroads VP; 0.60% and 1.24% for Growth VP; 0.65% and 0.98% for
High Yield VP; 0.35% and 0.58% for Index Plus Large Cap VP; 0.40% and 0.73%
for Index Plus Mid Cap VP; 0.40% and 0.73% for Index Plus Small Cap VP;
0.85% and 1.23% for International VP; 0.60% and 0.91% for Legacy VP; 0.75%
and 1.08% for Real Estate Securities VP; 0.75% and 1.35% for Small Company
VP; and 0.60% and 1.20% for Value Opportunity VP, respectively.
(3) Prior to May 1, 1998, the investment adviser provided administrative
services to the Fund and assumed the Fund's ordinary recurring direct costs
under an Administrative Services Agreement. Effective May 1, 1998, the
investment adviser will continue to provide administrative services to the
Fund but will no longer assume all of the Fund's ordinary recurring direct
costs under the Administrative Services Agreement. The Administrative Fee is
0.075% on the first $5 billion in assets and 0.050% on all assets over $5
billion. The "Other Expenses" shown are not based on actual figures for the
year ended December 31, 1997, but reflect the fee payable under the new
Administrative Services Agreement and estimates of the Fund's ordinary
recurring direct costs.
High Yield VP, Index Plus Mid Cap VP, Index Plus Small Cap VP, International
VP and Real Estate Securities VP commenced operations in December 1997,
therefore, estimates are based on expenses incurred for similar funds.
Actual expenses incurred may be more or less than the amounts shown above.
(4) The figures above are based on expenses for the fiscal year 1997, and have
been restated to reflect an increase in transfer agency expenses of 0.01%
for the Portfolio expected to be incurred in 1998. "Management Fees"
includes a performance adjustment, which depending on performance, could
cause the fee to be as high as 0.85% or as low as 0.55%. "Other Expenses"
reflect an indirect fee of 0.03% (relating to an expense offset arrangement
with the Portfolio's custodian). Net fund operating expenses after
reductions for fees paid indirectly (again, restated) would be 0.78%.
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds have entered into
arrangements with their custodian whereby credits realized, as a result of
uninvested cash balances were used to reduce custodian expenses. Including
these reductions, the total operating expenses would have been 0.57% for
Equity-Income Portfolio; 0.67% for Growth Portfolio; 0.90% for Overseas
Portfolio; and 0.68% for Contrafund Portfolio.
- --------------------------------------------------------------------------------
FEE TABLE - 2
<PAGE>
(6) Management fees for Aggressive Growth, Balanced, Growth and Worldwide Growth
Portfolios reflect a reduced fee schedule effective July 1, 1997. The
management fees shown above are based on the new rate applied to net assets
as of December 31, 1997. Other expenses are based on gross expenses of the
Shares before expense offset arrangements for the fiscal year ended December
31, 1997. The information for each Portfolio is net of fee waivers or
reductions from Janus Capital. Fee reductions for the Aggressive Growth,
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 Operating Expenses for the Shares would have been
0.74%, 0.04%, and 0.78% for Aggressive Growth Portfolio; 0.77%, 0.06%, and
0.83% for Balanced Portfolio; 0.74%, 0.04%, and 0.78% for Growth Portfolio;
and 0.72%, 0.09%, and 0.81% for Worldwide Growth Portfolio, respectively.
Janus Capital may modify or terminate the waivers or reductions at any time
upon at least 90 days' notice to the Trustees.
(7) Each Portfolio's aggregate expenses are contractually limited to the
advisory fees and administrative fees disclosed above. The investment
advisor will not seek an increase in its advisory or administrative fee at
any time prior to May 1, 1999.
(8) The advisory fee is 0.70% of the first $500 million in assets and 0.65% on
the excess.
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FEE TABLE - 3
<PAGE>
3. HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THESE EXAMPLES ARE PURELY HYPOTHETICAL. THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets and an annual mortality and expense risk charge of
1.00%, you would have paid the following expenses on a $1,000 investment at the
end of the applicable time period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Aetna Ascent VP $ 18 $ 57 $ 97 $212
Aetna Balanced VP, Inc. $ 16 $ 50 $ 87 $190
Aetna Bond VP $ 15 $ 47 $ 82 $179
Aetna Crossroads VP $ 18 $ 57 $ 97 $212
Aetna Growth VP $ 18 $ 57 $ 97 $212
Aetna Growth and Income VP $ 16 $ 50 $ 87 $189
Aetna High Yield VP $ 18 $ 57 $ 97 $212
Aetna Index Plus Large Cap VP $ 16 $ 49 $ 84 $185
Aetna Index Plus Mid Cap VP $ 16 $ 50 $ 87 $190
Aetna Index Plus Small Cap VP $ 16 $ 50 $ 87 $190
Aetna International VP $ 22 $ 67 $115 $248
Aetna Legacy VP $ 18 $ 57 $ 97 $212
Aetna Money Market VP $ 14 $ 43 $ 74 $162
Aetna Real Estate Securities VP $ 20 $ 61 $105 $227
Aetna Small Company VP $ 20 $ 61 $105 $227
Aetna Value Opportunity VP $ 18 $ 57 $ 97 $212
Calvert Social Balanced Portfolio $ 18 $ 57 $ 98 $213
Fidelity VIP Equity-Income Portfolio $ 16 $ 50 $ 86 $188
Fidelity VIP Growth Portfolio $ 17 $ 53 $ 92 $200
Fidelity VIP Overseas Portfolio $ 19 $ 60 $104 $224
Fidelity VIP II Contrafund Portfolio $ 17 $ 54 $ 93 $202
Janus Aspen Aggressive Growth Portfolio $ 18 $ 55 $ 95 $207
Janus Aspen Balanced Portfolio $ 19 $ 58 $ 99 $215
Janus Aspen Flexible Income Portfolio $ 18 $ 55 $ 95 $206
Janus Aspen Growth Portfolio $ 17 $ 54 $ 92 $201
Janus Aspen Worldwide Growth Portfolio $ 18 $ 55 $ 94 $205
Lexington Natural Resources Trust $ 23 $ 70 $120 $258
Oppenheimer Global Securities Fund $ 18 $ 55 $ 95 $207
Oppenheimer Strategic Bond Fund $ 19 $ 58 $ 99 $215
Portfolio Partners MFS Emerging Equities Portfolio $ 18 $ 57 $ 98 $213
Portfolio Partners MFS Research Growth Portfolio $ 19 $ 58 $100 $217
Portfolio Partners MFS Value Equity Portfolio $ 19 $ 60 $103 $222
Portfolio Partners Scudder International Growth Portfolio $ 20 $ 63 $108 $233
Portfolio Partners T. Rowe Price Growth Equity Portfolio $ 18 $ 55 $ 95 $206
</TABLE>
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FEE TABLE - 4
<PAGE>
TABLE B--FOR CONTRACTS ISSUED PRIOR TO OCTOBER 1, 1996
1. CHARGES AGAINST THE SEPARATE ACCOUNT. Each Subaccount pays these expenses
out of its assets. The charges are reflected in the Subaccount's daily
Accumulation Unit Value and are not charged directly to an Account. They
include:
<TABLE>
<S> <C>
Mortality and Expense Risk Charge ......... 1.25%
Asset-Based Sales Charge .................. 0.15%*
Administrative Expense Charge ............. 0.00%**
----
Total Separate Account Charges ........... 1.40%
====
</TABLE>
* We will monitor the deductions applicable to each Account for the total sales
charges to ensure they will never exceed 8.5% of the total Purchase Payments
actually made to the Account. The sales charges apply during the Accumulation
Period only.
**We currently do not impose an Administrative Expense Charge. However, we
reserve the right to deduct a daily charge of not more than 0.25% per year
from the Subaccounts.
2. ANNUAL EXPENSES OF THE FUNDS
Please refer to "Annual Expenses of The Funds" under Table A for a full
illustration of the advisory fees and other expenses applicable to the Funds.
- --------------------------------------------------------------------------------
FEE TABLE - 5
<PAGE>
3. HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
Whether or not you withdraw or if you annuitize your Account, assuming a 5%
annual return on assets, you would have paid the following expenses on a $1,000
investment at the end of the applicable time period:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Aetna Ascent VP $ 22 $ 69 $118 $253
Aetna Balanced VP, Inc. $ 20 $ 63 $108 $233
Aetna Bond VP $ 19 $ 60 $103 $222
Aetna Crossroads VP $ 22 $ 69 $118 $253
Aetna Growth VP $ 22 $ 69 $118 $253
Aetna Growth and Income VP $ 20 $ 62 $107 $232
Aetna High Yield VP $ 22 $ 69 $118 $253
Aetna Index Plus Large Cap VP $ 20 $ 61 $105 $227
Aetna Index Plus Mid Cap VP $ 20 $ 63 $108 $233
Aetna Index Plus Small Cap VP $ 20 $ 63 $108 $233
Aetna International VP $ 26 $ 79 $136 $289
Aetna Legacy VP $ 22 $ 69 $118 $253
Aetna Money Market VP $ 18 $ 55 $ 95 $206
Aetna Real Estate Securities VP $ 24 $ 73 $126 $269
Aetna Small Company VP $ 24 $ 73 $126 $269
Aetna Value Opportunity VP $ 22 $ 69 $118 $253
Calvert Social Balanced Portfolio $ 22 $ 69 $118 $254
Fidelity VIP Equity-Income Portfolio $ 20 $ 62 $107 $231
Fidelity VIP Growth Portfolio $ 21 $ 65 $112 $242
Fidelity VIP Overseas Portfolio $ 24 $ 72 $124 $266
Fidelity VIP II Contrafund Portfolio $ 21 $ 66 $113 $244
Janus Aspen Aggressive Growth Portfolio $ 22 $ 68 $116 $249
Janus Aspen Balanced Portfolio $ 23 $ 70 $119 $256
Janus Aspen Flexible Income Portfolio $ 22 $ 67 $115 $248
Janus Aspen Growth Portfolio $ 21 $ 66 $113 $243
Janus Aspen Worldwide Growth Portfolio $ 22 $ 67 $115 $247
Lexington Natural Resources Trust $ 27 $ 82 $141 $298
Oppenheimer Global Securities Fund $ 22 $ 68 $116 $249
Oppenheimer Strategic Bond Fund $ 23 $ 70 $119 $256
Portfolio Partners MFS Emerging Equities Portfolio $ 22 $ 69 $118 $254
Portfolio Partners MFS Research Growth Portfolio $ 23 $ 70 $120 $258
Portfolio Partners MFS Value Equity Portfolio $ 23 $ 72 $123 $264
Portfolio Partners Scudder International Growth Portfolio $ 24 $ 75 $128 $274
Portfolio Partners T. Rowe Price Growth Equity Portfolio $ 22 $ 67 $115 $248
</TABLE>
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FEE TABLE - 6
<PAGE>
CONDENSED FINANCIAL INFORMATION
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Condensed financial information for the Accumulation Units under the
contracts is shown in Appendix VII.
THE COMPANY
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Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156.
The Company is a wholly owned subsidiary of Aetna Retirement Holdings,
Inc., which is in turn a wholly owned subsidiary of Aetna Retirement Services,
Inc. and an indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT C
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- --------------------------------------------------------------------------------
The Company established Variable Annuity Account C (the "Separate Account") in
1976 as a segregated asset account for the purpose of funding its variable
annuity contracts. The Separate Account is registered as a unit investment trust
under the Investment Company Act of 1940 (the "1940 Act"), and meets the
definition of "separate account" under the federal securities laws. The Separate
Account is divided into "subaccounts" which do not invest directly in stocks,
bonds or other investments. Instead, each Subaccount buys and sells shares of a
corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities arising out of any other
business conducted by the Company. Income, gains or losses of the Separate
Account are credited to or charged against the assets of the Separate Account
without regard to our other income, gains or losses. All obligations arising
under the Contracts are our obligations.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the enrollment form. In turn, the Subaccounts invest in the
corresponding Funds at net asset value. The 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. 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, the Fixed Plus Account, and each
classification of GAA counts as one option. If you have an outstanding loan the
limit applies over the entire Accumulation Period. Once an investment option is
selected, it counts towards the limit even if amounts are no longer allocated to
that option. Please check with your local representative or contact the Company
at the toll-free number in the "Inquiries" section of the Prospectus summary to
determine if these limitations apply to you or to determine if you may select
more than 18 investment options during the Accumulation Period if you have a
loan.
The Company may add, withdraw or substitute Funds, subject to the
conditions in the Contract and in compliance with regulatory requirements. The
- --------------------------------------------------------------------------------
1
<PAGE>
availability of the Funds may also be subject to applicable regulatory
authorization. Not all Funds may be available in all jurisdictions, under all
Contracts or in all Plans.
If the shares of any Fund should no longer be available for investment by
the Separate Account, or if in the judgment of the Company further investments
in such shares should become inappropriate under this type of Contract, we may
cease to make such Fund shares available for investment under the Contract on a
prospective basis. The Company may, alternatively, substitute shares of another
Fund for shares already acquired. The Company reserves the right to substitute
shares of another Fund for shares already acquired without a proxy vote. Any
elimination, substitution or addition of Funds will be done in accordance with
applicable state and federal securities laws.
The investment results of the Funds described below are likely to differ
significantly and there is no assurance that any of the Funds will achieve their
respective investment objectives. Except where otherwise noted, all of the Funds
are diversified, as defined in the 1940 Act.
[bullet] Aetna Balanced VP, Inc. (formerly Aetna Investment Advisers Fund,
Inc.) seeks to maximize investment return, consistent with reasonable
safety of principal by investing in a diversified portfolio of one or
more of the following asset classes: stocks, bonds and cash
equivalents, based on the investment adviser's judgment of which of
those sectors or mix thereof offers the best investment prospects.(1)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP seeks to maximize total return,
consistent with reasonable risk, through investments in a diversified
portfolio consisting primarily of debt securities.(1)
[bullet] Aetna Variable Fund d/b/a Aetna Growth and Income VP seeks to maximize
total return through investments in a diversified portfolio of common
stocks and securities convertible into common stock.(1)
[bullet] Aetna Variable Encore Fund d/b/a Aetna Money Market VP seeks to provide
high current return, consistent with preservation of capital and
liquidity, through investment in high-quality money market instruments.
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government.(1)
[bullet] Aetna Generation Portfolios, Inc.-Aetna Ascent VP (formerly Aetna
Ascent Variable Portfolio) seeks to provide capital appreciation. The
Portfolio is designed for investors who have an investment horizon
exceeding 15 years and who have a high level of risk tolerance.(1)
[bullet] Aetna Generation Portfolios, Inc.-Aetna Crossroads VP (formerly Aetna
Crossroads Variable Portfolio) seeks to provide total return (i.e.,
income and capital appreciation, both realized and unrealized). The
Portfolio is designed for investors who have an investment horizon
exceeding 10 years and who have a moderate level of risk tolerance.(1)
[bullet] Aetna Generation Portfolios, Inc.-Aetna Legacy VP (formerly Aetna
Legacy Variable Portfolio) seeks to provide total return consistent
with preservation of capital. The Portfolio is designed for investors
who have an investment horizon exceeding five years and who have a low
level of risk tolerance.(1)
[bullet] Aetna Variable Portfolios, Inc.-Aetna Growth VP (formerly Aetna
Variable Growth Portfolio) seeks growth of capital through investment
in a diversified portfolio of common stocks and securities convertible
into common stocks believed to offer growth potential.(1)
[bullet] Aetna Variable Portfolios, Inc.-Aetna 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 Standard and Poor's Corporation or lower than Baa3 by Moody's
Investors Service, Inc.(1)
[bullet] Aetna Variable Portfolios, Inc.-Aetna Index Plus Large Cap VP (formerly
Aetna Variable Index Plus Portfolio) seeks to outperform the total
return performance of publicly traded common stocks represented in the
S&P 500 Composite Stock Price Index.(1)
[bullet] Aetna Variable Portfolios, Inc.-Aetna Index Plus Mid Cap VP seeks to
outperform the total return performance of publicly traded common
stocks represented in the S&P 400.(1)
[bullet] Aetna Variable Portfolios, Inc.-Aetna Index Plus Small Cap VP seeks to
outperform the total return performance of publicly traded common
stocks represented by the S&P SmallCap 600 Index, a stock
- --------------------------------------------------------------------------------
2
<PAGE>
market index composed of 600 common stocks selected by Standard and
Poor's Corporation.(1)
[bullet] 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 United
States. Aetna International VP will not target any given level of
current income.(1)
[bullet] 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)
[bullet] Aetna Variable Portfolios, Inc.-Aetna Small Company VP (formerly Aetna
Variable Small Company Portfolio) seeks growth of capital primarily
through investment in a diversified portfolio of common stocks and
securities convertible into common stocks of companies with smaller
market capitalizations.(1)
[bullet] Aetna Variable Portfolios, Inc.-Aetna Value Opportunity VP (formerly
Aetna Variable Capital Appreciation Portfolio) seeks growth of capital
primarily through investment in a diversified portfolio of common
stocks and securities convertible into common stock.(1)
[bullet] Calvert Social Balanced Portfolio (formerly Calvert Responsibly
Invested Balanced Portfolio) is a nondiversified portfolio that seeks
to achieve a total return above the rate of inflation through an
actively managed, nondiversified portfolio of common and preferred
stocks, bonds and money market instruments which offer income and
capital growth opportunity and which satisfy the social criteria
established for the Portfolio.(2)
[bullet] Fidelity Investments Variable Insurance Products Fund--Equity-Income
Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In selecting investments, the fund
also considers the potential for capital appreciation.(3)
[bullet] Fidelity Investments Variable Insurance Products Fund--Growth Portfolio
seeks capital appreciation by investing mainly in common stocks,
although its investments are not restricted to any one type of
security.(3)
[bullet] Fidelity Investments Variable Insurance Products Fund--Overseas
Portfolio seeks long-term growth by investing mainly in foreign
securities (at least 65% of the Fund's total assets in securities of
foreign issuers. Foreign investments involve greater risks than U.S.
investments, including political and economic risks and the risk of
currency fluctuation.(3)
[bullet] Fidelity Investments Variable Insurance Products Fund II--Contrafund
Portfolio seeks maximum total return over the long term by investing
mainly in securities of companies whose value the investment adviser
believes is not fully recognized by the public.(3)
[bullet] Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified
portfolio that seeks long-term growth of capital. The Portfolio pursues
its investment objective by normally investing at least 50% of its
equity assets in securities issued by medium-sized companies.
Medium-sized companies are those whose market capitalizations fall
within the range of companies in the S&P MidCap 400 Index, which as of
December 31, 1997 included companies with capitalizations between
approximately $213 million and $13.7 billion, but which is expected to
change on a regular basis.(4)
[bullet] Janus Aspen Series--Balanced Portfolio seeks long-term capital growth,
consistent with 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 securities selected
primarily for their growth potential and 40%-60% of its assets in
securities selected primarily for their income potential.(4)
[bullet] Janus Aspen Series--Flexible Income Portfolio seeks to obtain maximum
total return, consistent with preservation of capital. The Portfolio
pursues its investment objective primarily through investments in
income-producing securities. 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).(4)
[bullet] Janus Aspen Series--Growth Portfolio seeks long-term growth of capital
in a manner consistent with the preservation of capital. The Portfolio
pursues its investment objective by investing primarily in common
stocks of issuers of any size. This Portfolio generally invests in
larger, more established issuers.(4)
[bullet] Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth
of capital in a manner
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3
<PAGE>
consistent with preservation of capital. The Portfolio pursues its
investment objective primarily through investments in common stocks of
foreign and domestic issuers.(4)
[bullet] Lexington Natural Resources Trust is a nondiversified portfolio that
seeks long-term growth of capital through investment primarily in
common stocks of companies which own or develop natural resources and
other basic commodities or supply goods and services to such companies.
This Fund is only available for investment by Participants who were
directing current allocations into the Fund as of 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 investments
(except reinvested dividends and capital gains earned on amounts
already invested in the Fund through the Separate Account and loan
repayments automatically deposited into the Fund pursuant to the
Company's loan repayment procedures).(5)
[bullet] Oppenheimer Global Securities Fund seeks long-term capital appreciation
by investing a substantial portion of its assets in securities of
foreign issuers, "growth-type" companies, cyclical industries and
special situations which are considered to have appreciation
possibilities but which may be considered to be speculative.(6)
[bullet] Oppenheimer Strategic Bond Fund seeks a high level of current income
principally derived from interest on debt securities and seeks to
enhance such income by writing covered call options on debt securities.
The Fund intends to invest principally in (i) foreign government and
corporate debt securities, (ii) securities of the U.S. Government and
its agencies and instrumentalities ("U.S. Government securities"), and
(iii) lower-rated high yield domestic debt securities, commonly known
as "junk bonds," which are subject to a greater risk of loss of
principal and nonpayment of interest than higher-rated securities.
These securities may be considered to be speculative. Current income is
not an objective.(6)
[bullet] Portfolio Partners MFS Emerging Equities Portfolio seeks to provide
long-term growth of capital. Dividend and interest income from
portfolio securities, if any, is incidental to the Portfolio's
investment objective.(7)(a)
[bullet] Portfolio Partners MFS Research Growth Portfolio seeks long-term
growth of capital and future income.(7)(a)
[bullet] Portfolio Partners MFS Value Equity Portfolio seeks capital
appreciation. Dividend income, if any, is a consideration incidental
to the Portfolio's objective of capital appreciation.(7)(a)
[bullet] Portfolio Partners Scudder International Growth Portfolio seeks
long-term growth of capital primarily through a diversified portfolio
of marketable foreign equity securities.(7)(b)
[bullet] Portfolio Partners T. Rowe Price Growth Equity Portfolio seeks
long-term growth of capital and, secondarily, to increase dividend
income by investing primarily in common stocks of well established
growth companies.(7)(c)
Investment Advisers for each of the Funds:
(1) Aeltus Investment Management, 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) Oppenheimerfunds, Inc.
(7) Aetna Life Insurance and Annuity Company (adviser):
(a) Massachusetts Financial Services Company (sub-adviser)
(b) Scudder Kemper Investments, Inc. (sub-adviser)
(c) T. Rowe Price Associates, Inc. (sub-adviser)
Risks Associated with Investment in the Funds. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The use
of certain derivatives may involve high risk of volatility to a Fund, and the
use of leverage in connection with such derivatives can also increase risk of
losses. Some of the Funds may also invest in foreign or international securities
which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential risks,
is found in the current prospectus for each Fund which is distributed with and
accompanies this Prospectus. You should read the Fund prospectuses and consider
carefully, and on a continuing basis, which Fund or combination of Funds is best
suited to your long-term investment objectives. Additional prospectuses and
Statements of Additional Information for this Prospectus and for each of the
Funds can be obtained from the Company's Home Office at the address and
telephone number listed under the "Inquiries" section of the Prospectus Summary.
- --------------------------------------------------------------------------------
4
<PAGE>
Conflicts of Interest (Mixed and Shared Funding). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued or sponsored by the Company or by third parties. This is referred to as
"mixed funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to identify
any material irreconcilable conflicts which might arise and to determine what
action, if any, should be taken to address such conflict.
CREDITED INTEREST OPTIONS
Purchase Payments may be allocated to one or more of the Credited Interest
Options available under the Contract as described below. The Contract Holder may
elect not to offer all Credited Interest Options under its Plan.
[bullet] The Guaranteed Accumulation Account (GAA) is a credited interest option
through which we guarantee stipulated rates of interest for stated
periods of time. Amounts must remain in the GAA for the full guaranteed
term to receive the quoted interest rates, or a market value adjustment
(which may be positive or negative) will be applied.
(See Appendix I).
[bullet] The Fixed Plus Account is a part of the Company's general account and
guarantees a minimum interest rate, as specified in the Contract. The
Company may credit higher interest rates in its discretion. Withdrawals
and transfers from the Fixed Plus Account are limited.
(See Appendices II, III and IV.)
[bullet] The Fixed Account is part of the Company's general account. The Fixed
Account guarantees a minimum interest rate, as specified in the
Contract. The Company may credit higher interest rates from time to
time. The Fixed Account is only available in limited circumstances.
Transfers from the Fixed Account are limited. (See Appendix V.)
PURCHASE
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CONTRACT AVAILABILITY
The Contracts are designed to fund Plans adopted by institutions of higher
education for their employees. The Plans may be (1) tax-deferred annuity
programs under Section 403(b) of the Code, and/or (2) qualified defined
contribution plans under Section 401(a) and 414(h) of the Code.
Eligible participants in the Plan seeking to invest and accumulate money
for retirement can purchase individual interests in group Contracts. The group
Contract is generally owned by the employer, and individual accounts are
established for each Participant. For each Contract, one or more Employee
Accounts will be established for contributions derived from employee salary
reduction or salary deduction (as provided for by the Plan), and one or more
Employer Accounts may be established for contributions made by the employer on
the employee's behalf.
PURCHASING INTERESTS IN THE CONTRACT
Eligible organizations may acquire both types (403(b) and 401(a)) of group
Contracts for its Plans(s) by submitting the appropriate master application
form(s) to the Company. Once we approve the application, a group Contract is
generally issued to the employer 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 Enrollment Materials 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
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five business days, based on the consent of the group Contract Holder, in which
case these Purchase Payments will be deposited in the Aetna Money Market VP
Subaccount until the forms are completed.
Purchase Payments will initially be allocated to the Subaccounts or
Credited Interest Options as specified by the Participant on the enrollment
form. Changes in such allocation may be made in writing or by telephone
transfer. Allocations must be in whole percentages, and there may be limitations
on the number of investment options that can be selected during the Accumulation
Period. (See "Transfers.") The Code imposes a maximum limit on annual Purchase
Payments which may be excluded from a Participant's gross income. (See "Tax
Status.")
RIGHTS UNDER THE CONTRACT
You have a right to the value of your Employee Account. You have a right
to the value of your Employer Account to the extent of your vested percentage
under the Plan as interpreted by the Contract Holder. Subject to the terms of
the Plan, you may select the investment options for your Employer Account and
your Employee Account. You may elect an Annuity option for your Account Value;
however, for your Employer and certain Employee Accounts (as provided in the
Plan), the Contract Holder must certify that you are eligible for a distribution
and that the form of Annuity is permitted under the terms of the Plan.
RIGHT TO CANCEL
The Contract or participation under the Contract may be canceled without
penalty by returning it (or other document evidencing your interest) to the
Company with a written notice of intent to cancel. In most states, you have ten
days to exercise this right; some states allow you a longer free-look period.
When we receive the request for cancellation, we will return the Account Value,
unless the laws of the state in which the Contract was issued require that we
return the initial Purchase Payment (if greater than the Account Value). In
states that do not require a return of Purchase Payments, the purchaser bears
the entire investment risk for amounts allocated among the Subaccounts during
the free look period. Account Values will be determined as of the Valuation Date
on which we receive the request for cancellation at our Home Office.
CHARGES AND DEDUCTIONS
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DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
Mortality and Expense Risk Charge. The Company makes a daily deduction
from each of the Subaccounts for the mortality and expense risk charge. For
Master Contracts issued on or after October 1, 1996 (and for Master Contracts
issued prior to that date that are endorsed to contain this provision), during
the Accumulation Period, the charge is equal, on an annual basis, to 1.00% of
the daily net assets of the Subaccounts. However, in certain circumstances where
the risk of adverse mortality and/or expense experience associated with a Master
Contract issued to a Plan on or after December 31, 1997 (and for Master
Contracts issued prior to that date that are endorsed to allow for a reduction
in the mortality and expense charge), may be reduced, subject to applicable
state regulatory approval, the mortality and expense risk charge applicable to
that Master Contract may also be reduced. Whether such a reduction is available
will be determined by the Company based upon consideration of some or all of the
following factors:
1) the size of the prospective group;
2) projected annual Purchase Payments for the number of Participants
estimated to choose the Contract;
3) the frequency of projected distributions;
4) the type and level of administrative and sales services to be
provided;
5) the retirement program design. For example, the retirement program
design, may favor the stability of invested assets and limit the
conditions for withdrawals, loans, and investment options available
which, in turn, will lower administrative expenses.
Prospective purchasers eligible for a reduction in the mortality and
expense risk charge will be notified of their eligibility and the amount of the
charge applicable to their Contract prior to the Company's acceptance of an
application for the Contract. Any reduction of the mortality and expense risk
charge will not be unfairly discriminatory against any person.
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For Master Contracts issued prior to October 1, 1996, the mortality and
expense risk charge during the Accumulation Period is equivalent to 1.25% per
year.
During the Annuity Period, for any Contract, the deduction for mortality
and expense risks is equivalent to 1.25% per year.
The mortality and expense risk charge compensates the Company for the
assumption of the mortality and expense risks under the Contract. The mortality
risks are those assumed for our promise to make lifetime payments according to
annuity rates specified in the Contract. The expense risk is the risk that the
actual expenses for costs incurred under the Contract will exceed the maximum
costs that can be charged under the Contract.
If the amount deducted for mortality and expense risks is not sufficient
to cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
Asset Based Sales Charge. There are no deductions from Purchase Payments
for sales commissions or related expenses. For Contracts issued prior to October
1, 1996 (except for Contracts that are endorsed to delete this provision), sales
commissions and expenses are advanced by the Company and recovered out of an
asset based sales charge that is deducted from the Account in an amount that
equals 0.15% on an annual basis. The deduction is made from amounts held in the
Subaccounts during the Accumulation Period only. We will monitor each Account to
ensure that the total sales charges will never exceed 8.5% of the total Purchase
Payments actually made to the Account.
If the asset based sales charges are insufficient to recover sales
commissions, such commissions would be recovered out of the Company's profits
from investment activities, including the mortality and expense risk charges
under the Contract. For sales commissions paid in connection with the sale of
the Contracts, see "Distribution."
Administrative Expense Charge. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge. The
administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of the
administrative services to be provided while the Contract is in force. The
Company does not expect to make a profit from this charge.
Under the Contract, the amount of the administrative expense charge may be
of an amount equal, on an annual basis, to a maximum of 0.25% of the daily net
assets of the Subaccounts. There is currently no administrative expense charge
during the Accumulation Period or Annuity Period. Once an Annuity Option is
elected, the charge will be established and will be effective during the entire
Annuity Period.
FUND EXPENSES
Each Fund incurs certain expenses which are paid out of its net assets.
These expenses include, among other things, the investment advisory or
"management" fee. The expenses of the Funds are set forth in the Fee Table in
this Prospectus and described more fully in the accompanying Fund prospectuses.
PREMIUM AND OTHER TAXES
Several states and municipalities impose a premium tax on Annuities. These
taxes currently range from 0% to 4%. The Company reserves the right to deduct
premium tax against Purchase Payments or Account Values, but no earlier than
when we have a tax liability under state law. The Company's current practice is
to deduct for premium taxes at the time of complete withdrawal or annuitization.
In addition to the premium tax, the Company reserves the right to assess a
charge for any state or federal taxes due against the Contract or the Separate
Account assets. (See "Tax Status.")
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CONTRACT VALUATION
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ACCOUNT VALUE
Until the Annuity Date, the Account Value is the total dollar value of
amounts held in your Account as of any Valuation Date. The Account Value at any
given time is based on the value of the units held in each Subaccount, plus the
value of amounts held in any of the Credited Interest Options.
ACCUMULATION UNITS
The value of your interests in a Subaccount is expressed as the number of
"Accumulation Units" that you hold multiplied by an "Accumulation Unit Value"
(or "AUV") for each unit. The AUV on any Valuation Date is determined by
multiplying the value on the immediately preceding Valuation Date by the net
investment factor of that Subaccount for the period between the immediately
preceding Valuation Date and the current Valuation Date. (See "Net Investment
Factor" below.) The Accumulation Unit Value will be affected by the investment
performance, expenses and charges of the applicable Fund and is reduced each day
by a percentage that accounts for the daily assessment of mortality and expense
risk charges, the asset based sales charge (if applicable) and the
administrative expense charge (if any).
Initial Purchase Payments will be credited to your Account at the AUV next
computed following our acceptance of the Enrollment Materials, as described
under "Purchase--Purchasing Interests in the Contract." Each subsequent Purchase
Payment (or amount transferred) received by the Company by the close of business
of the New York Stock Exchange will be credited to your Account at the AUV
computed on the next Valuation Date following our receipt of your payment or
transfer request. The value of an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance of
a Subaccount from one Valuation Date to the next. The net investment factor for
a Subaccount for any valuation period is equal to the sum of 1.0000 plus the net
investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current
Valuation Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation
of the Subaccount;
(d) divided by the total value of the Subaccount's Accumulation and
Annuity Units on the preceding Valuation Date;
(e) minus a daily charge for mortality and expense risks, administrative
expenses (if applicable), and asset based sales charges (if
applicable). (See "Charges and Deductions" for further details on the
charges pertaining to your Contract.)
The net investment rate may be either positive or negative.
TRANSFERS
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You can transfer amounts held under your Account from one Subaccount to another.
Transfers between the Credited Interest Options and the Subaccounts are subject
to certain restrictions. (See the Appendices.) A request for transfer can be
made either in writing or by telephone (see "Telephone Transfers" below). All
transfers must be in accordance with the terms of the Contract and your Plan, as
applicable.
The Company currently allows unlimited transfers of accumulated amounts to
available investment options without charge. However, the total number of
investment options that you may select during the Accumulation Period is
limited. (See "Investment Options--The Funds.") The minimum transfer amount is
$500. Any transfer will be based on the Accumulation Unit Value next determined
after the Company receives a valid transfer request at its Home Office.
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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).
DOLLAR COST AVERAGING PROGRAM
You may establish automated transfers of Account Values on a monthly or
quarterly basis through the Company's Dollar Cost Averaging Program. There is no
additional charge for the program. Dollar Cost Averaging is a system for
investing a fixed amount of money at regular intervals over a period of time.
Dollar Cost Averaging does not ensure a profit nor guarantee against loss in a
declining market. You should consider your financial ability to continue
purchases through periods of low price levels. Please refer to the "Inquiries"
section of the Prospectus Summary which describes how you can obtain further
information.
Effective May 1, 1998, dollar cost averaging is not permitted into the
Lexington Natural Resources Trust Subaccount.
WITHDRAWALS
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All or a portion of the Account Value may be withdrawn at any time during
the Accumulation Period, subject to the withdrawal restrictions under Section
403(b) Contracts described below, and subject to limitations on withdrawals from
the Credited Interest Options. The Contract may require that the Contract Holder
certify in writing that you are eligible both as to the timing and form of
distribution. To request a withdrawal, you must properly complete a disbursement
form and send it to our Home Office. Payments for withdrawal requests will be
made in accordance with SEC requirements, but normally not later than seven
calendar days following our receipt of a disbursement form. Withdrawals may be
requested in one of the following forms:
[bullet] Full Withdrawal of an Account: The amount paid for a full withdrawal
will be the Account Value allocated to the Subaccounts, the Guaranteed
Accumulation Account (plus or minus a market value adjustment) (see
Appendix I), and the Fixed Account, plus the amount available for
withdrawal from the Fixed Plus Account (see Appendices II, III and IV).
[bullet] Partial Withdrawals (Percentage or Specified Dollar Amount): The amount
paid will be the percentage of the Account Value or the dollar amount
requested; however, the amount available for withdrawal from the Fixed
Plus Account is limited (see Appendices II, III and IV).
For any partial withdrawal, amounts will be withdrawn proportionately from
each Subaccount or Credited Interest Option in which the Account is invested,
unless you request otherwise in writing. All amounts paid will be based on
Account Values as of the next Valuation Date after we receive a request for
withdrawal at our Home Office, or on such later date as the disbursement form
may specify. A 20 federal income tax may be withheld from amounts paid directly
to you. (See "Tax Status-- Contracts Used with Certain Retirement Plans.")
Withdrawal Restrictions from 403(b) Plans. Under Section 403(b)
Contracts, a withdrawal of salary reduction contributions and earnings on such
contributions is generally prohibited prior to your death, disability,
attainment of age 591/2, separation from service or financial hardship. (See
"Tax Status.")
REINVESTMENT PRIVILEGE
Within 30 days after a withdrawal, if allowed by law, a Participant may
elect to reinvest all or a portion of the proceeds received for the full
withdrawal of an Account. Reinvested amounts must be received by the Company
within 60 days of the withdrawal. Accumulation Units will be credited to the
Account for the amount
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reinvested. Reinvested amounts will be reallocated to the applicable investment
options in the same proportion as they were allocated at the time of withdrawal.
Accumulation Units will be credited to your Account based on the Accumulation
Unit Value next computed following our receipt of your request along with the
amount to be reinvested. The reinvestment privilege may be used only once. See
Appendix I for a discussion of amounts withdrawn from GAA and then reinvested.
If you are contemplating reinvestment, you should seek competent advice
regarding the tax consequences associated with such a transaction.
CONTRACT LOANS
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If allowed by the Plan, Participants may request a loan from their Account
Value during the Accumulation Period. Loans can only be made from those Account
Values held in the Subaccounts or from those Credited Interest Options that
allow loans. (See Appendices I, II and III.) A loan may be obtained by reviewing
and reading the terms of your loan agreement, properly completing a loan request
form and submitting it to the Company's Home Office.
SYSTEMATIC DISTRIBUTION OPTIONS
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The Company offers certain withdrawal options under the Contract that are
not considered annuity options ("Systematic Distribution Options"). To exercise
these options, your Account Value must meet the minimum dollar amounts and age
criteria applicable to that option. In addition, for Employer and certain
Employee Accounts, the Contract Holder must provide written certification that
the distribution is in accordance with the terms of the Plan. The Systematic
Distribution Options that may be available under the Contract include the
following:
[bullet] SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from your Account based on a payment method you select. It
is designed for those who want a periodic income while retaining
investment flexibility for amounts accumulated under a Contract. (This
option may not be elected if you have an outstanding contract loan.)
[bullet] ECO--Estate Conservation Option. ECO offers the same investment
flexibility as SWO but is designed for those who want to receive only
the minimum distribution that the Code requires each year. Under ECO,
the Company calculates the minimum distribution amount required by law
at the later of age 70-1/2 or retirement, or for 5% owners at age
70-1/2 and pays you that amount once a year. (See "Tax Status.")
[bullet] LEO--Life Expectancy Option. LEO is a distribution option under which a
portion of your Account Value will be automatically surrendered and
distributed each year, payable over a period equal to the life
expectancy of the Participant or the joint life expectancy of the
Participant and the designated Beneficiary.
Other Systematic Distribution Options may be added from time to time.
Information relating to any of the Systematic Distribution Options may be
obtained from your local representative or from the Company at its Home Office.
If you select one of the Systematic Distribution Options, you will retain
all of the rights and flexibility permitted under the Contract during the
Accumulation Period. Your Account Value will continue to be subject to the
charges and deductions described in this Prospectus. Taking a withdrawal under
one of these Systematic Distribution Options may have tax consequences. Any
person concerned about tax implications should consult a competent tax advisor
prior to electing an option.
Once you elect a Systematic Distribution Option, you may revoke it any
time by submitting a written request to our Home Office. Once an option is
revoked, it may not be elected again, nor may any other Systematic Distribution
Option be elected unless permitted by the Code. The Company reserves the right
to discontinue the availability of one or all of these Systematic Distribution
Options at any time, and/or to change the terms of future elections.
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DEATH BENEFIT DURING ACCUMULATION PERIOD
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The Contract provides that a death benefit is payable to the Beneficiary(ies)
upon the death of the Participant before the Annuity Date. If a lump-sum
distribution or an Annuity Option is elected within six months of the
Participant's death, a guaranteed death benefit is provided. For each Account,
the guaranteed death benefit is the greater of:
(a) the Account Value, plus any positive aggregate Market Value
Adjustment (MVA) that applies to amounts allocated to the Guaranteed
Accumulation Account (GAA), on the day the death notice and request
for payment are received in good order at our Home Office; or
(b) the sum of the net Purchase Payments made to each Account, minus
withdrawals made from the Account and any amount allocated to the
Loan Account.
If a lump-sum distribution or Annuity Option is elected six months or more
after your death, the Beneficiary will receive the Account Value, plus or minus
any MVA that would apply to any portion of the Account allocated to GAA. If a
full or partial withdrawal is made within six months after your death, the
Beneficiary will receive the Account Value, plus any positive MVA that would
apply to any portion of the Account allocated to GAA. The value of the Account
is determined as of the Valuation Date on which proof of death acceptable to us
and a request for payment are received at our Home Office.
Death benefit proceeds may be paid to the Beneficiary:
[bullet] in a lump sum; or
[bullet] in accordance with any of the Annuity Options available under the
Contract.
The Beneficiary may instead elect one of the following two options;
however, the Code limits how long the death benefit proceeds may be left in
these options (see below):
[bullet] to leave the Account Value invested in the Contract; or
[bullet] to leave the Account Value on deposit in the Company's general account,
and to receive monthly, quarterly, semi-annual or annual interest
payments at the interest rate then being credited on such deposits. The
balance on deposit can be withdrawn at any time or applied to an
Annuity Option.
When paying the Beneficiary, we will determine the Account Value on the
Valuation Date following the date on which we receive proof of death acceptable
to the Company. Interest, if any, will be paid from the date of death at a rate
no less than required by law. We will mail payment to the Beneficiary within
seven days after we receive proof of death and request for payment.
The Code requires that distribution of death proceeds begin within a
certain period of time. Generally, either payments must begin by December 31 of
the year following the year of your death, or the entire value of your benefits
must be distributed by December 31 of the fifth year following the year of your
death. If your Beneficiary is your spouse, he or she is not required to begin
distributions until the year you would have attained age 70-1/2. In no event may
payments extend beyond the life of the Beneficiary or any specified period
greater than the Beneficiary's life expectancy. If no elections are made, no
distributions will be made. Failure to commence distributions within the above
time periods can result in tax penalties. Regardless of the method of payment,
death benefit proceeds will generally be taxed to the Beneficiary in the same
manner as if you had received those payments. (See "Tax Status.")
ANNUITY PERIOD
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ANNUITY PERIOD ELECTIONS
The Code generally requires that minimum annual distributions of the
Account Value must begin by April 1st of the calendar year following the
calendar year in which a Participant attains age 70-1/2 (or retires, if later,
unless the Participant is a 5% owner). In addition, distributions must be in a
form and amount sufficient to satisfy the Code requirements. These requirements
may be satisfied by the election of certain Annuity Options or Systematic
Distribution Options. (See "Tax Status.")
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At least 30 days prior to the Annuity Date, you must notify us in writing
of the following:
[bullet] the date on which you would like to start receiving annuity payments;
[bullet] the Annuity Option under which you want your payments to be calculated
and paid; and
[bullet] the investment option(s) used to provide annuity payments (i.e., a
fixed annuity using the general account or any of the Subaccounts
available as of the Annuity Date).
For the Employer and certain Employee Accounts, the Contract Holder must
provide written certification that the distribution is in accordance with the
terms of the Plan. (See "Rights Under the Contract.")
Annuity Payments will not begin until you have selected an Annuity Date
and an Annuity Option. Until a date and option are elected the Account will
continue in the Accumulation Period. Annuity Payments will be made monthly,
unless a Participant elects otherwise. Once Annuity Payments begin, the Annuity
Option selected may not be changed. If your Plan requires, you may also be
required to submit the appropriate joint and survivor annuity waiver and spousal
consent form(s) to us. Transfers among Subaccounts during the Annuity Period are
only permitted under Master Contracts issued, or endorsed to allow such
transfers, on or after October 1, 1996. We reserve the right to limit such
transfers to four per year.
ANNUITY OPTIONS
You may choose one of the following Annuity Options:
Lifetime Annuity Options:
[bullet] Option 1--Life Annuity--An annuity with payments ending on the
Participant's death.
[bullet] Option 2--Life Annuity with Guaranteed Payments-- An annuity with
payments guaranteed for 5-30 years.
[bullet] Option 3--Life Annuity with Cash Refund Feature-- An annuity with a
cash refund feature. Payments may be guaranteed for the amount applied
to the Annuity option. If the Annuitant dies prior to the payment of
the amount applied to the Annuity Option (less any premium tax), any
remaining balance will be paid in one sum to the Beneficiary. This
option is only available on a fixed basis.
[bullet] Option 4--Life Annuity based upon the Lives of Two Annuitants--An
annuity will be paid during the lives of the Annuitant and a second
Annuitant. You may select either an Annuity with 100%, 66% or 50% of
the payment to continue after the first death, or an Annuity with 100%
of the payment to continue at the death of the second Annuitant and 50%
of the payment to continue at the death of the Annuitant.
[bullet] Option 5--Life Annuity based Upon the Lives of Two Annuitants with
Guaranteed Payments--An annuity with Payments for a minimum of 5-30
years, with 100% of the payment to continue after the first death.
[bullet] Option 6--Life Annuity Based Upon the Lives of Two Annuitants with a
Cash Refund Feature--An annuity with 100% of the payment to continue
after the first death with a cash refund feature. Payments are
guaranteed for the amount applied to the Annuity Option. If both
Annuitants die prior to the total payment of the amount applied to the
Annuity Option (less any premium tax), any remaining balance will be
paid in one sum to the beneficiary. This option is only available on a
fixed basis.
If Option 1 or 4 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 4, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity payments begin, the Participant cannot elect to receive another
form of benefit..
Non-lifetime Annuity Options:
[bullet] Option 1--Payments for a Specified Period-- payments will continue for
a specified period of time, as provided for under your Contract. Under
some Contracts, for amounts held in the Fixed Plus Account, the Annuity
must be paid on a fixed basis. (See Appendices II, III, IV, and VI to
determine if this applies to the Contract.)
If a non-lifetime option is elected on a variable basis, the Participant,
with the consent of the Contract Holder, may request at any time during the
payment period that the present value of all or a portion of the remaining
variable payments be paid in one sum.
We may also offer additional Annuity Options under your Contract from time
to time.
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DURATION OF ANNUITY PAYMENTS
Annuity payments may not extend beyond (a) the life of the Participant,
(b) the joint lives of the Participant and Beneficiary, (c) a period greater
than the Participant's life expectancy, or (d) a period greater than the joint
life expectancies of the Participant and Beneficiary.
Amount of Each Annuity Payment. The amount of each payment depends on how
you allocate your Account Value between fixed and variable options. For Master
Contracts issued on or after October 1, 1996 (and Master Contracts issued prior
to that date that are endorsed to contain this provision), no election may be
made that would result in the first Annuity payment of less than $50, or total
yearly Annuity payments of less than $250. For Contracts issued prior to October
1, 1996, no election may be made that would result in the first Annuity payment
of less than $25, or total yearly Annuity payments of less than $125. If your
Account Value on the Annuity Date is insufficient to elect an option for the
minimum amount specified, a lump-sum payment must be elected.
If Annuity Payments are to be made on a variable basis, the first and
subsequent payments will vary depending on the assumed net investment rate
selected (3 1/2% or 5% per annum). Selection of a 5% rate causes a higher first
payment, but Annuity Payments will increase thereafter only to the extent that
the net investment rate exceeds 5% on an annualized basis. Annuity Payments
would decline if the rate were below 5%. Use of the 31/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate.)
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
During the Annuity Period, we will make a daily deduction of 1.25% for
mortality and expense risks from any amounts held on a variable basis.
Therefore, electing the non-lifetime option on a variable basis will result in a
deduction being made even though we assume no mortality risk. We may also deduct
a daily administrative charge from amounts held under the variable options. (See
"Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
If a Participant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 4 was elected, Annuity Payments will cease on
the death of the Participant under Option 1 or the death of the surviving
Annuitant under Option 4.
If Lifetime Option 2 or Option 5 was elected and the death of the
Participant under Option 2, or the surviving Annuitant under Option 5, occurs
prior to the end of the guaranteed minimum payment period, we will continue
payments to the Beneficiary unless the Beneficiary elects a lump sum.
If the non-lifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments will be paid to the
Beneficiary unless the Beneficiary elects a lump sum.
If the Participant dies after Annuity payments have begun and if there is
a death benefit payable under the Annuity option elected, the remaining value
must be distributed to the Beneficiary at least as rapidly as under the original
method of distribution.
Any lump-sum payment paid under the applicable lifetime or non-lifetime
Annuity options will be made within seven calendar days after acceptable proof
of death, and a request for payment are received at our Home Office. The value
of any death benefit proceeds will be determined as of the next Valuation Date
after we receive acceptable proof of death and a request for payment. Under
Options 2 and 5, such value will be reduced by any payments made after the date
of death.
TAX STATUS
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INTRODUCTION
The following provides a general discussion and is not intended as tax
advice. This discussion reflects the Company's understanding of current federal
income tax law. Such laws may change in the future, and it is possible that any
change could be retroactive (i.e., effective prior to the date of the change).
The Company makes no guarantee regarding the tax treatment of any contract or
transaction involving a Contract. The ultimate effect of federal income taxes on
the amounts held under a Contract, on Annuity payments, and on the economic
benefit to the Contract Holder,
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Participant or Beneficiary may depend upon the tax status of the individual
concerned, moreover, no attempt has been made to consider any applicable state
or other tax laws. Any person concerned about these tax implications should
consult a competent tax adviser before initiating any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase reserves
under the Contracts. Under existing federal income tax law, the Company believes
that the Separate Account investment income and realized net capital gains will
not be taxed to the extent that such income and gains are applied to increase
the reserves under the Contracts.
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) 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 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 relating to the Contracts
satisfy applicable laws, and should consult their legal counsel and tax adviser
regarding the suitability of the Contract.
Minimum Distribution Requirements. The Code has required distribution
rules for Section 403(b) and 401(a) Plans. Under 403(b) Plans, distributions of
amounts held as of December 31, 1986 must generally begin by the end of the
calendar year in which you attain age 75 or retire, if later. However, special
rules require that some or all of that balance be distributed earlier if any
distributions are taken in excess of the minimum required amount. For all
Participants, other than 5% owners, distributions under 401(a) 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, if 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 Beneficiary, or over a period not greater than your
life expectancy or the joint life expectancies of you and your Beneficiary.
If you die after the required minimum distribution has commenced,
distributions to your Beneficiary must be made at least as rapidly as under the
method of distribution in effect at the time of your death. However, if the
minimum required distribution is calculated each year based on your single life
expectancy or the joint life expectancies of you and your Beneficiary, the
regulations for Code Section 401(a)(9) provide specific rules for calculating
the minimum required distributions at your death. For example, if you have
elected ECO with the calculation based on your single life expectancy, and the
life expectancy is recalculated each year, your recalculated life expectancy
becomes zero in the calendar year following your death and the entire remaining
interest must be distributed to your beneficiary by December 31 of the year
following your death. However, a spousal beneficiary has certain rollover rights
which can only be exercised in the year of your death. The rules are complex and
you should consult your tax adviser before electing the method of calculation to
satisfy the minimum distribution requirements.
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If you die before the required minimum distribution has commenced, your
entire interest must be distributed by December 31 of the calendar year in which
the fifth anniversary of the date of your death occurs. Alternatively, payments
may be made over the life of the beneficiary or over a period not extending
beyond the life expectancy of the beneficiary provided the distribution begins
by December 31 of the calendar year following the calendar year of your death.
If the Beneficiary is your spouse, the distribution must begin on or before the
later of (1) December 31 of the calendar year following the calendar year of
your death, or (2) December 31 of the calendar year in which you would have
attained age 70-1/2.
If you fail to receive the minimum required distribution for any tax year,
a 50% excise tax is imposed on the required amount that was not distributed.
Taxation of Distributions. All distributions will be taxed as they are
received unless you made a rollover contribution of the distribution to another
plan of the same type or to a traditional individual retirement annuity/account
("IRA") in accordance with the Code, or unless you have made after-tax
contributions to the plan, which are not taxed upon distribution. The Code has
specific rules that apply, depending on the type of distribution received, if
after-tax contributions were made.
In general, payments received by your Beneficiaries after your death are
taxed in the same manner as if you had received those payments.
Pension and annuity distributions generally are subject to withholding for
the recipient's federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients may be provided
the opportunity to elect not to have tax withheld from distributions; however,
certain distributions from annuities are subject to mandatory 20% federal income
tax withholding. If the Participant or Beneficiary is a non-resident alien, any
withholding will be governed by Code Section 1441 based on the individual's
citizenship, the country of domicile and treaty status. 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 591/2, (b) you have
become disabled, (c) you have died, (d) you have separated from service with the
plan sponsor at or after age 55, (e) the distribution amount is rolled over into
another plan of the same type 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 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 medical expenses incurred by
you that qualify for deduction as specified in the Code. The Code may impose
other penalty taxes in other circumstances.
Section 403(b) Plans. Under Section 403(b), contributions made by public
school systems and 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 included 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.
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.
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If, pursuant to Revenue Ruling 90-24, the Company agrees to accept, under
any of the Contracts covered by this Prospectus, amounts transferred from a Code
Section 403(b)(7) custodial account, such amounts will be subject to the
withdrawal restrictions set forth in Code Section 403(b)(7)(A)(ii).
Generally, no amounts accumulated under the Contract will be taxable prior
to the time of actual distribution. However, the IRS has stated in published
rulings that a variable contract owner, including participants under Section
403(b) plans, will be considered the owner of separate account assets if the
owner possesses incidents of investment control over the assets. In these
circumstances, income and gains from the separate account assets would be
currently includable in the variable contract owner's gross income. The Treasury
announced that guidance would be issued in the future regarding the extent to
which owners could direct their investments among Subaccounts without being
treated as owners of the underlying assets of the Separate Account. It is
possible that the Treasury's position, when announced, may adversely affect the
tax treatment of existing contracts. The Company therefore reserves the right to
modify the Contract as necessary to attempt to prevent the owner from being
considered the federal tax owner of the assets of the Separate Account.
Section 401(a) Plans. Section 401(a) permits 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 included in gross income under Code Section
125 or 457. In addition, Purchase Payments will be excluded from a Participant's
gross income only if the 401(a) Plan meets certain nondiscrimination
requirements.
MISCELLANEOUS
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DISTRIBUTION
The Company will serve as the Principal Underwriter for the securities
sold by this Prospectus. The Company is registered as a broker-dealer with the
Securities and Exchange Commission and is a member of the National Association
of Securities Dealers, Inc. (NASD). As Underwriter, the Company will contract
with one or more registered broker-dealers ("Distributors"), including at least
one affiliate of the Company, to offer and sell the Contracts. All persons
offering and selling the Contracts must be registered representatives of the
Distributors and must also be licensed as insurance agents to sell variable
annuity contracts. These registered representatives may also provide services to
Participants in connection with establishing their Accounts under the Contract.
Payment of Commissions. Persons offering and selling the Contracts may
receive commissions in connection with the sale of the Contracts. The maximum
percentage amount that the Company will ever pay as commission with respect to
any given Purchase Payment is with respect to those made during the first year
of Purchase Payments under an Account. The percentage amount will range from 1%
to 6% of those Purchase Payments. The Company may also pay renewal commissions
on Purchase Payments made after the first year and asset-based service fees. The
average of all payments made by the Company is estimated to equal approximately
3% of the total Purchase Payments made over the life of an average Contract. In
addition, some sales personnel may receive various types of non-cash
compensation as special sales incentives, including trips and educational and/or
business seminars. Supervisory and other management personnel of the Company may
receive compensation that will vary based on the relative profitability to the
Company of the funding options you select. Funding options that invest in Funds
advised by the Company or its affiliates are
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generally more profitable to the Company. The Company may also reimburse the
Distributor for certain expenses. The name of the Distributor and the
registered representative responsible for your Account are set forth in your
enrollment materials. Commissions and sales related expenses are paid by the
Company and are not deducted from Purchase Payments. (See "Charges and
Deductions.")
Third Party Compensation Arrangements. Occasionally, we may pay
commissions and fees to Distributors which are affiliated or associated with the
Contract Holder or the Participants. We may also enter into agreements with some
entities associated with the Contract Holder or Participants in which we would
agree to pay the entity for certain services in connection with administering
the Contracts. In both these circumstances there may be an understanding that
the Distributor or entity would endorse the Company as a provider of the
Contract. You will be notified if you are purchasing a Contract that is subject
to these arrangements.
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the Exchange is restricted; (b) when an emergency
exists, as determined by the SEC, so that disposal of securities held in the
Subaccounts is not reasonably practicable or it is not reasonably practicable
for the Company fairly to determine the value of the Subaccount's assets; or (c)
during such other periods as the SEC may by order permit for the Protection of
investors. The conditions under which restricted trading or an emergency exists
shall be determined by the rules and regulations of the SEC.
PERFORMANCE REPORTING
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account. The Company may
advertise the "standardized average annual total returns" of the Subaccounts,
calculated in a manner prescribed by the SEC, as well as the "non-standardized
returns." "Standardized average annual total returns" are computed according to
a formula in which a hypothetical investment of $1,000 is applied to the
Subaccount and then related to the ending redeemable values over the most recent
one, five and ten-year periods (or since contributions were first received in
the Fund under the Separate Account, if less than the full period). Standardized
returns will reflect the reduction of all recurring charges during each period
(e.g., mortality and expense risk charges, asset based sales charges (if
applicable) and any administrative expense charge). The non-standardized figures
are computed in the same manner but 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 Subaccounts or the Funds. Further
details regarding performance reporting and advertising are described in the
Statement of Additional Information.
VOTING RIGHTS
In accordance with the Company's view of present applicable law, it will
vote the shares of each of the Funds held by the Separate Account at regular and
special meetings of Fund shareholders in accordance with instructions received
from persons having a voting interest in the Separate Account. Participants may
instruct the Contract Holder how to direct the Company to cast the votes for the
portion of the Account Value or valuation reserve attributable to their
Accounts. The Company will vote shares for which it has not received
instructions in the same proportion as it votes shares for which it has received
instructions.
Each person having a voting interest in the Separate Account will receive
periodic reports relating to the Fund(s) in which he or she has an interest, as
well as any proxy materials and a form on which to give voting instructions.
Voting instructions will be solicited by written communication at least 14 days
before such meeting. The number of votes to which each person may give direction
will be determined as of the record date set by the Fund.
The number of votes each Contract Holder or Participant, or Beneficiary as
applicable, may cast during the Accumulation Period is equal to the portion of
the Account Value to that Fund, divided by the net asset value of one share of
that Fund. During the Annuity Period, the number of votes is equal to the
valuation reserve applicable to the portion of the Contract attributable to that
Fund, divided by the net asset value of one share of that Fund. In determining
the number of votes, fractional votes will be recognized.
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CHANGES IN BENEFICIARY DESIGNATIONS
The designated Beneficiary may be changed at any time prior to the Annuity
Date, subject to limitations contained in the Code and other applicable laws.
Such change will not become effective until written notice of the change is
received by the Company.
MODIFICATION OF THE CONTRACT
Master Contracts Issued on or after October 1, 1996 (and Master Contracts
issued prior to that date that are endorsed to contain this provision). 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.
Contracts Issued Prior to October 1, 1996. The Company may change the
Contract as required by federal or state law. In addition, the Company may, upon
thirty days written notice to the Contract Holder, make other changes that would
apply only to individuals who become Participants under that Contract after the
effective date of such changes. If the Contract Holder does not agree to a
change, no new Participants will be covered under the Contract. Certain changes
will require the approval of appropriate state or federal regulatory
authorities.
LEGAL MATTERS AND PROCEEDINGS
The Company knows of no material legal proceedings pending to which the
Separate Account or the Company is a party or which would materially affect the
Separate Account. The validity of the securities offered by this Prospectus has
been passed upon by Counsel to the Company.
YEAR 2000
As a healthcare and financial services enterprise, Aetna Inc. (referred to
collectively with its affiliates and subsidiaries as Aetna), is dependent on
computer systems and applications to conduct its business. Aetna has developed
and is currently executing a comprehensive risk-based plan designed to make its
computer systems, applications and facilities Year 2000 ready. The plan covers
four stages including (i) inventory, (ii) assessment, (iii) remediation and (iv)
testing and certification. At year end 1997, Aetna, including the Company, had
substantially completed the inventory and assessment stages. The remediation
process is currently underway and targeted for completion by December 31, 1998.
Testing and certification of these systems and applications are targeted for
completion by mid-1999. The costs of these efforts will not affect the Separate
Account.
The Company, its affiliates and the mutual funds that serve as investment
options for the Separate Account also have relationships with investment
advisers, broker dealers, transfer agents, custodians or other securities
industry participants or other service providers that are not affiliated with
Aetna. Aetna, including the Company, is initiating communication with its
critical external relationships to determine the extent to which Aetna may be
vulnerable to such parties' failure to resolve their own Year 2000 issues. Where
practicable Aetna and the Company will assess and attempt to mitigate their
risks with respect to the failure of these parties to be Year 2000 ready. There
can be no assurance that failure of third parties to complete adequate
preparations in a timely manner, and any resulting systems interruptions or
other consequences, would not have an adverse effect, directly or indirectly, on
the Separate Account, including, without limitation, its operation or the
valuation of its assets and units.
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CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
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The Statement of Additional Information contains more specific information
on the Separate Account and the Contract, as well as the financial statements of
the Separate Account and the Company. A list of the contents of the SAI is set
forth below:
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
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APPENDIX I
GUARANTEED ACCUMULATION ACCOUNT
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The Guaranteed Accumulation Account ("GAA") is a Credited Interest Option
available during the Accumulation Period under the Contracts described in this
Prospectus. Amounts allocated to GAA are held by the Company as described in the
GAA prospectus. This Appendix is a summary of GAA and is not intended to replace
the GAA prospectus. You should read the accompanying GAA prospectus carefully
before investing.
GAA is a Credited Interest Option in which we guarantee stipulated rates of
interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full year's
interest. Interest is credited daily at a rate that will provide the guaranteed
annual effective yield for one year. This option guarantees the minimum interest
rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three
years, and Long-Term GAA has Guaranteed Terms from three to ten years.
Purchase Payments must remain in GAA for the full Guaranteed Term to
receive the quoted interest rates. Withdrawals or transfers from a Guaranteed
Term before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). An MVA reflects the change in the value of the investments
due to changes in interest rates since the date of deposit. When interest rates
increase after the date of deposit, the value of the investment decreases and
the MVA is negative. Conversely, when interest rates decrease after the date of
deposit, the value of the investment increases, and the MVA is positive. It is
possible that a negative MVA could result in the Participant receiving an amount
which is less than the amount paid into GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to
federal tax penalties or mandatory income tax withholding.
By notifying us at least 30 days prior to the Annuity Date, you may elect a
variable annuity and have amounts that have been accumulating under GAA
transferred to one or more of the Subaccounts available during the Annuity
Period. GAA cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGES
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
TRANSFERS
Transfers are permitted among Guaranteed Terms. However, amounts applied to
GAA may not be transferred to another Guaranteed Term of GAA, or to any other
Subaccount or Credited Interest Option available under the Contract, during the
deposit period or the 90 days after the close of the deposit period. We will
apply an MVA to transfers made before the end of a Guaranteed Term, unless such
transfer is due to the maturity of the Guaranteed Term.
CONTRACT LOANS
Loans may not be made against amounts held in GAA, although such value is
included in determining the Account Value against which a loan may be made.
REINVESTMENT PRIVILEGE
If amounts are withdrawn for GAA and are reinvested, they will be applied
to the current deposit period. Amounts are proportionately reinvested in the
same manner as they were allocated before the withdrawal. Any negative MVA
amount applied to a withdrawal is not included in the reinvestment.
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APPENDIX II
FIXED PLUS ACCOUNT
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The following summarizes material information concerning the Fixed Plus Account.
Amounts allocated to the Fixed Plus Account are held in the Company's general
account that supports general insurance and annuity obligations. Interests in
the Fixed Plus Account have not been registered with the SEC in reliance on
exemptions under the Securities Act of 1933, as amended. Disclosure in the
Prospectus regarding the Fixed Plus Account, may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of such statements. Disclosure in this Appendix
regarding the Fixed Plus Account has not been reviewed by the SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will never
fall below the guaranteed minimum. The Company's determination of interest rates
reflects the investment income earned on invested assets and the amortization of
any capital gains and/or losses realized on the sale of invested assets. Under
the Fixed Plus Account, the Company assumes the risk of investment gain or loss
by guaranteeing Account Values and promising a minimum interest rate and Annuity
Payment.
The Fixed Plus Account will reflect a compound interest rate credited by
us. The interest rate quoted is an annual effective yield. Amounts applied to
the Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
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.
The Company reserves the right to limit Purchase Payment(s) and/or
transfers to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day 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 any Systematic
Distribution Options.
The 20% limit is waived if the partial withdrawal 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 six months after the Participant's date of death. Any
such surrender or annuitization must also be made pro rata from all Subaccounts
and Credited Interest Options available under the Contract.
If a full withdrawal is requested, we will pay any amounts held in the
Fixed Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers, loans
or annuitizations made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
5. The balance of the Fixed Plus Account Value 12 months later.
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Once we receive a request for a full withdrawal, no further withdrawals,
loans 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. We will waive the Fixed Plus Account full
withdrawal provision if a full withdrawal is made:
(a) due to your death, before Annuity payments begin;
(b) due to the election or a fixed lifetime or non-lifetime Annuity option
or a variable lifetime Annuity option; or
(c) when the Fixed Plus Account value is $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the Account within the
prior 12 months);
(d) due to hardship from an unforeseeable emergency, as defined by the
Code, if the following conditions are met:
(1) the hardship is certified by the employer;
(2) the amount is paid directly to you; and
(3) the amount paid for all withdrawals due to hardship during the
previous 12-month period does not exceed 10% of the average value
of all Accounts during that same period; or
(e) due to your separation from service with the employer, provided that:
(1) the employer certifies that you have separated from service;
(2) the amount withdrawn is paid directly to you; and
(3) the amount paid for all partial and full withdrawals due to
separation from service during the previous 12-month period does not
exceed 20% of the average value of all Accounts under the Contract
during that same period.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of one of the
Systematic Distribution Options. The 20% limit on transfers will be waived when
the value in the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before the Annuity
Date, you may elect to have amounts which have been accumulating under the Fixed
Plus Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide lifetime variable Annuity Payments. For amounts which
have been accumulating under the Fixed Plus Account, a non-lifetime annuity
option may only be elected on a fixed basis.
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.
CONTRACT LOANS
If permitted under the Plan, loans may be made from Account Values held in
the Fixed Plus Account. See the loan agreement for a description of the amount
available and the consequences upon loan default if more than 20% of the Fixed
Plus Account Value is used for a loan.
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APPENDIX III
FIXED PLUS ACCOUNT
(APPLICABLE ONLY IN LIMITED CIRCUMSTANCES)
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The following summarizes material information concerning the Fixed Plus Account.
Amounts allocated to the Fixed Plus Account are held in the Company's general
account that supports general insurance and annuity obligations. Interests in
the Fixed Plus Account have not been registered with the SEC in reliance on
exemptions under the Securities Act of 1933, as amended. Disclosure in the
Prospectus regarding the Fixed Plus Account, may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of such statements. Disclosure in this Appendix
regarding the Fixed Plus Account has not been reviewed by the SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will never
fall below the guaranteed minimum. The Company's determination of interest rates
reflects the investment income earned on invested assets and the amortization of
any capital gains and/or losses realized on the sale of invested assets. Under
the Fixed Plus Account, the Company assumes the risk of investment gain or loss
by guaranteeing Account Values and promising a minimum interest rate and Annuity
Payment.
The Fixed Plus Account will reflect a compound interest rate credited by
us. The interest rate quoted is an annual effective yield. Amounts applied to
the Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account. We make no deductions from the
credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
Beginning on the tenth Account Year, we will credit amounts held in the
Fixed Plus Account with an interest rate that is at least 0.25% higher than the
then declared interest rate for the Fixed Plus Account for Accounts that have
not reached their tenth anniversary.
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.
The Company reserves the right to limit Purchase Payment(s) and/or
transfers to the Fixed Plus Account.
FIXED PLUS ACCOUNT WITHDRAWALS
The amount eligible for partial withdrawal is 20% of the amount held in the
Fixed Plus Account on the day 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 any Systematic
Distribution Options.
The 20% limit is waived if the partial withdrawal 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 six months after the Participant's date of death. Any
such surrender or annuitization must also be made pro rata from all Subaccounts
and Credited Interest Options available under the Contract.
If a full withdrawal is requested, we will pay any amounts held in the
Fixed Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers, or
loans made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
- --------------------------------------------------------------------------------
23
<PAGE>
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
5. The balance of the Fixed Plus Account Value 12 months later.
Once we receive a request for a full withdrawal, no further withdrawals,
loans 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. We will waive the Fixed Plus Account full
withdrawal provision if a full withdrawal is made due to (a) the Participant's
death within 6 months after the Participant's date of death before Annuity
payments begin and request for payment is received; (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, loans or annuitizations have been made from the Account within the
prior 12 months; or (d) the Participant's separation from service with the
employer (if the separation from service is certified by the employer and the
withdrawal request is received within 60 days of the date of termination)
subject to a 3% charge based on the entire Fixed Plus Account value. If the
Participant who separates from service chooses to have the five annual payments
of the Fixed Plus Account withdrawal, as described above, then no charge will be
assessed.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of one of the
Systematic Distribution Options. The 20% limit on transfers will be waived when
the value in the Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before the Annuity
Date, you may elect to have amounts which have been accumulating under the Fixed
Plus Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide lifetime variable Annuity Payments. For amounts which
have been accumulating under the Fixed Plus Account, a non-lifetime annuity
option may only be elected on a fixed basis.
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.
CONTRACT LOANS
If permitted under the Plan, loans may be made from Account Values held in
the Fixed Plus Account. See the loan agreement for a description of the amount
available and the consequences upon loan default if more than 20% of the Fixed
Plus Account Value is used for a loan.
- --------------------------------------------------------------------------------
24
<PAGE>
APPENDIX IV
FIXED PLUS ACCOUNT
(APPLICABLE ONLY IN LIMITED CIRCUMSTANCES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following summarizes material information concerning the Fixed Plus Account.
Amounts allocated to the Fixed Plus Account are held in the Company's general
account that supports general insurance and annuity obligations. Interests in
the Fixed Plus Account have not been registered with the SEC in reliance on
exemptions under the Securities Act of 1933, as amended. Disclosure in the
Prospectus regarding the Fixed Plus Account, may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of such statements. Disclosure in this Appendix
regarding the Fixed Plus Account has not been reviewed by the SEC.
The Fixed Plus Account guarantees that amounts allocated to this option
will earn the minimum interest rate specified in the 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 Purchase Payment values and promising a minimum interest rate
and Annuity payment.
Under certain emergency conditions, we may defer payment of a Fixed Plus
Account withdrawal value (a) for a period of up to 6 months or (b) as provided
by federal law.
During any calendar year, any withdrawals requested from an Account's Fixed
Plus Account value may not exceed 20% of the Account's Fixed Plus Account Value
as of the date the withdrawal request is received in good order at our Home
Office. The withdrawal value will be reduced by any Fixed Plus Account
withdrawal(s), transfer(s) or annuitizations previously made during the calendar
year.
The 20% limit is waived if the partial withdrawal is due to annuitization
or death. The waiver upon death will only be exercised once and must occur
within 6 months after the Participant's date of death.
In the event of an complete Account withdrawal, we will pay any Fixed Plus
Account withdrawal value from the Account with interest, in five annual payments
of:
1. One-fifth of the Fixed Plus Account withdrawal value minus any Fixed
Plus Account withdrawal(s), transfer(s) or annuitizations made during the
calendar year;
2. One-fourth of the remaining Fixed Plus Account withdrawal value 12
months later;
3. One third of the remaining Fixed Plus Account withdrawal value 12 months
later;
4. One-half of the remaining Fixed Plus Account withdrawal value 12 months
later; and
5. The balance of the Fixed Plus Account withdrawal value as the fifth and
final payment 12 months later.
Once we receive notification of an Account termination, no further
withdrawal(s) or transfer(s) will be permitted from the Fixed Plus Account.
We will waive the Fixed Plus Account full surrender provision if a full
withdrawal is made due to:
(a) the Participant's death within 6 months after the Participant's date of
death before Annuity payments begin and request for payment is received;
(b) the election of an Annuity option;
(c) if the Fixed Plus Account value is $3,500 or less (and no withdrawals,
transfers or annuitizations have been made from the Account during the
calendar year), the entire Fixed Plus Account value will be paid in one
sum.
- --------------------------------------------------------------------------------
25
<PAGE>
Amounts applied to the Fixed Plus Account will earn the interest rate in
effect when actually applied to the Fixed Plus Account.
MORTALITY AND EXPENSE RISK CHARGES
The Fixed Plus 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 Plus Account to any other available investment
option(s) are allowed once in each calendar year during the Accumulation Period.
The amount that may be transferred will be up to 20% of the amount held in the
Fixed Plus Account. We will waive the 20% transfer limit when the value in the
Fixed Plus Account is $1,000 or less.
By notifying us at our Home Office at least 30 days before annuity payments
begin, the Contract Holder, on your behalf, may elect to have amounts which have
been accumulating under the Fixed Plus Account transferred to one or more of the
Subaccounts available during the Annuity Period to provide variable annuity
payments under any of the lifetime or non-lifetime Annuity Options.
- --------------------------------------------------------------------------------
26
<PAGE>
APPENDIX V
FIXED ACCOUNT
(AVAILABLE ONLY IN LIMITED CIRCUMSTANCES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following summarizes material information concerning the Fixed Account.
Amounts allocated to the Fixed Account are held in the Company's general account
that supports general insurance and annuity obligations. Interests in the Fixed
Account have not been registered with the SEC in reliance on exemptions under
the Securities Act of 1933, as amended. Disclosure in the Prospectus regarding
the Fixed Account, may, however, be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of such statements. Disclosure in this Appendix regarding the Fixed
Account has not been reviewed by the SEC.
The Fixed Account guarantees the minimum interest rate specified in the
Contract. The Contract may credit a higher interest rate from time to time. The
current rate is subject to change at any time, but will never fall below the
guaranteed minimum. The Company's determination of interest rates reflects the
investment income earned on invested assets and the amortization of any capital
gains and/or losses realized on the sale of invested assets. Under the Fixed
Account, the Company assumes the risk of investment gain or loss by guaranteeing
Account Values and promising a minimum interest rate and Annuity Payment.
Under certain emergency conditions, we may defer payment of a Fixed Account
withdrawal value (a) for a period of up to six months, or (b) as provided by
federal law.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
The Fixed Account will reflect a compound interest rate credited by us. The
interest rate quoted is an annual effective yield. We make no deductions from
the credited interest rate for mortality and expense risks; these risks are
considered in determining the credited rate.
TRANSFERS AMONG INVESTMENT OPTIONS
Transfers from the Fixed Account to any other available investment
option(s) are allowed in each calendar year during the Accumulation Period. The
amount which may be transferred may vary at our discretion; however, it will
never be less than 10% of the amount held under the Fixed Account. Transfers to
the Fixed Plus Account will be permitted without regard to this limitation.
By notifying us at our Home Office at least 30 days before Annuity payments
begin, you may elect to have amounts which have been accumulating under the
Fixed Account transferred to one or more of the Subaccounts available during the
Annuity Period to provide variable Annuity Payments.
CONTRACT LOANS
Loans may be made from Account Values held in the Fixed Account.
- --------------------------------------------------------------------------------
27
<PAGE>
APPENDIX VI
CONTRACTS ACQUIRED BY EXCHANGE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Certain holders of contracts issued by the Company may exchange their
contract(s) (the "Exchanged Contracts") for the Contract (the "Acquired
Contract"). 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.
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, if
applicable, 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 and the Fixed Account, the
availability of the Fixed Account, and the tables on which Annuity payments are
based.
SPECIAL ACQUIRED CONTRACTS PROVISIONS
Except as follows, the terms of the Acquired Contracts are identical to the
Contracts described in the Prospectus:
DEFERRED SALES CHARGE
If the Exchanged Contract contained a deferred sales charge (DSC), Account
Values attributable to Exchanged Contracts, (other than amounts exchanged from
the Fixed Plus Account) are subject to a DSC upon withdrawal. The DSC will vary
according to the period of time between the effective date of the Individual
Account under the Exchanged Contract and the date of withdrawal as follows:
<TABLE>
<S> <C>
Deferred Sales Charge
If the Period of Time is (as a percentage of the amount withdrawn*)
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%
</TABLE>
* This sets forth the DSC schedule for 9 years, the maximum duration of the
DSC. The total amount deducted for the DSC will not exceed 8.5% of the total
Purchase Payments actually made to an Individual Account.
No DSC is deducted from any portion of the Individual Account which is
paid:
1. At the death of a Participant before Annuity payments start;
2. To provide Annuity benefits for a Participant under a Contract;
3. When the Individual Account Value is $3,500 or less and no withdrawals
have been taken from the Individual Account within the prior 12 months. If
there is more than one Individual Account under the Contract for a
Participant, then this provision will only apply when the total in all of
the Participant's Individual Accounts is $3,500 or less;
4. In an amount equal to or less than 10% of the Individual Account Value, as
part of the first partial withdrawal request in a calendar year to a
Participant who is at least age 591/2 and less than age 701/2. The
Individual Account Value is calculated as of the date the partial
withdrawal request is received in good order at the Company's Home Office.
Any outstanding loans from the Participant's Individual Account are
excluded when calculating the Individual Account Value. This waiver does
not apply to partial withdrawals due to loan defaults made from Individual
Account Values and does not apply to full withdrawal requests. This waiver
is not available for partial withdrawals requested when a Systematic
Distribution Option is in effect in the same calendar year; or
- --------------------------------------------------------------------------------
28
<PAGE>
5. On account of a Participant's separation from service. The Contract Holder
must submit documentation satisfactory to the Company to confirm that the
Participant is no longer providing services to the employer.
FIXED ACCOUNT
If made available under the Acquired Contract, the Fixed Account is an
investment option available only for amounts previously held in the Fixed
Account under the Exchanged Contract. For details about the Fixed Account
including restrictions on withdrawals and transfers, see Appendix V. In addition
to the conditions specified in Appendix V regarding when the Company may defer
payment of a Fixed Account withdrawal value, if allowed by state law, the
Company may pay any Fixed Account withdrawal requested from the Contract in
equal payments, with interest, over a period not to exceed 60 months when:
1. 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
2. The sum of the current Fixed Account withdrawal requested and the total of
all Fixed Account withdrawals from the Contract or any Account under the
Contract within the past 12 months exceeds 20% of the amount in the Fixed
Account on the day prior to the current surrender.
Interest, as used above, will not be more than two percentage points below
any rate determined prospectively by the Board of Directors for the class of
Contract. In no event will the interest rate be less than the minimum stated in
the Contract.
FIXED PLUS ACCOUNT
All amounts transferred or allocated to the Fixed Plus Account on or after
the Acquired Contract effective date will be subject to the Fixed Plus Account
rules described below.
The following summarizes material information concerning the Fixed Plus
Account. Amounts allocated to the Fixed Plus Account are held in the Company's
general account that supports general insurance and annuity obligations.
Interests in the Fixed Plus Account have not been registered with the SEC in
reliance on exemptions under the Securities Act of 1933, as amended. Disclosure
in the Prospectus regarding the Fixed Plus Account, may, however, be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of such statements. Disclosure in this Appendix
regarding the Fixed Plus Account has not been reviewed by the SEC.
The Fixed Plus Account guarantees the minimum Fixed Plus interest rate
specified in the Contract. The Company may credit a higher interest rate from
time to time. The current rate is subject to change at any time, but will never
fall below the guaranteed minimum. The Company's determination of interest rates
reflects the investment income earned on invested assets and the amortization of
any capital gains and/or losses realized on the sale of invested assets. Under
the Fixed Plus Account, the Company assumes the risk of investment gain or loss
by guaranteeing Account Values and promising a minimum interest rate and Annuity
Payment.
The Fixed Plus Account will reflect a compound interest rate credited by
us. The interest rate quoted is an annual effective yield. Amounts applied to
the Fixed Plus Account will earn the Fixed Plus interest rate in effect when
actually applied to the Fixed Plus Account.
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited rate.
Under certain emergency conditions, we may defer payment of a Fixed Plus
Account withdrawal value (a) for a period of up to 6 months; or (b) as provided
by federal law.
The Company reserves the right to limit Purchase Payment(s) and/or
transfers to the Fixed Plus Account.
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29
<PAGE>
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 any Systematic
Distribution Options.
The 20% limit is waived if the partial withdrawal is due to annuitization
or death of the Participant. The waiver upon death may only be exercised once
and must occur within six months after the Participant's date of death and
before the Annuity Date. Any such withdrawal or annuitization must also be made
pro rata from all Subaccounts and Credited Interest Options available under the
Contract.
If a full withdrawal is requested, we will pay any amounts held in the
Fixed Plus Account, with interest, in five annual payments equal to:
1. One-fifth of the Fixed Plus Account Value on the day the request is
received, reduced by any Fixed Plus Account withdrawals, transfers, loans
or annuitizations made during the prior 12 months;
2. One-fourth of the remaining Fixed Plus Account Value 12 months later;
3. One-third of the remaining Fixed Plus Account Value 12 months later;
4. One-half of the remaining Fixed Plus Account Value 12 months later; and
5. The balance of the Fixed Plus Account Value 12 months later.
Once we receive a request for a full withdrawal, no further withdrawals,
loans 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. We will waive the Fixed Plus Account full
withdrawal provision if a full withdrawal is made:
(a) due to your death, before Annuity payments begin;
(b) due to the election of an Annuity option;
(c) when the Fixed Plus Account value is $3,500 or less (and no
withdrawal, loans, transfers or annuitizations have been made from the
Account within the prior 12 months);
(d) due to hardship if the following conditions are met:
(1) the hardship is certified by the employer;
(2) the amount is paid directly to you; and
(3) the amount paid for all withdrawals due to hardship during the
previous 12-month period does not exceed 10% of the average value
of all Accounts during that same period; or
(e) due to your separation from service with the employer, provided that:
(1) the employer certifies that you have separated from service;
(2) the amount withdrawn is paid directly to you; and
(3) the amount paid for all partial and full withdrawals due to
separation from service during the previous 12-month period does
not exceed 20% of the average value of all Accounts under the
Contract during that same period.
TRANSFERS AMONG INVESTMENT OPTIONS
The amount eligible for transfer from the Fixed Plus Account is 20% of the
amount held in the Fixed Plus Account on the day we receive a written request,
reduced by any Fixed Plus Account withdrawals, transfers, loans or
annuitizations made during the prior 12 months. In calculating the 20% limit, we
reserve the right to include payments made due to the election of one of the
Systematic Distribution Options. The 20% limit on transfers will be waived when
the value in the Fixed Plus Account is $1,000 or less on the date the request is
received in good order at the Home Office.
By notifying us at our Home Office at least 30 days before the Annuity
Date, you may elect to have amounts which have been accumulating under the Fixed
Plus Account transferred to one or more of the Subaccounts available
- --------------------------------------------------------------------------------
30
<PAGE>
during the Annuity Period to provide lifetime variable Annuity Payments. For
amounts which have been accumulating under the Fixed Plus Account, a nonlifetime
annuity option may only be elected on a fixed basis.
ADDITIONAL WITHDRAWAL OPTIONS
Certain withdrawal options may not be elected if you have requested a Fixed
Plus Account transfer or withdrawal within the prior 12 month period.
CONTRACT LOANS
If permitted under the Plan, loans may be made from Account Values held in
the Fixed Plus Account. See the loan agreement for a description of the amount
available and the consequences upon loan default if more than 20% of the Fixed
Plus Account Value is used for a loan.
- --------------------------------------------------------------------------------
31
<PAGE>
APPENDIX VII
CONDENSED FINANCIAL INFORMATION
TABLE I
FOR CONTRACTS WITH A 1.25% MORTALITY AND EXPENSE RISK CHARGE
(Selected data for accumulation units outstanding throughout each period)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The condensed financial information presented below for each of the years in the
six-year period ended December 31, 1997, is derived from the financial
statements of the Separate Account, which have been audited by KPMG Peat Marwick
LLP, independent auditors. The financial statements and the independent
auditors' report thereon for the year ended December 31, 1997 are included in
the Statement of Additional Information. The Accumulation Unit Values and the
percentage change in the value of an accumulation unit reflect a mortality and
expense risk charge of 1.25% and an asset based sales charge of 0.15% for the
periods shown. For Master Contracts issued or endorsed on or after October 1,
1996, the mortality and expense risk charge is 1.00% (less if the Plan meets
certain criteria) during the Accumulation Period, and the asset based sales
charge does not apply. (See Table II)
<TABLE>
<CAPTION>
1997 1996
------------ ----------------
<S> <C> <C>
AETNA ASCENT VP
Value at beginning of period $12.996 $10.666
Value at end of period $15.363 $12.996
Increase (decrease) in value of accumulation unit(1) 18.22% 21.84%
Number of accumulation units outstanding at end of period 1,608 2,058
AETNA BALANCED VP, INC.
Value at beginning of period $15.548 $13.693
Value at end of period $18.777 $15.548
Increase (decrease) in value of accumulation unit(1) 20.77% 13.55%
Number of accumulation units outstanding at end of period 5,383 21,915
AETNA BOND VP
Value at beginning of period $12.546 $12.283
Value at end of period $13.397 $12.546
Increase (decrease) in value of accumulation unit(1) 6.78% 2.14%
Number of accumulation units outstanding at end of period 10,766 27,007
AETNA CROSSROADS VP
Value at beginning of period $12.422 $10.605
Value at end of period $14.400 $12.422
Increase (decrease) in value of accumulation unit(1) 15.93% 17.14%
Number of accumulation units outstanding at end of period 492 1,088
AETNA GROWTH AND INCOME VP
Value at beginning of period $17.318 $14.113
Value at end of period $22.179 $17.318
Increase (decrease) in value of accumulation unit(1) 28.07% 22.71%
Number of accumulation units outstanding at end of period 18,367 157,726
AETNA INDEX PLUS LARGE CAP VP
Value at beginning of period $10.919 $10.000(4)
Value at end of period $14.414 $10.919
Increase (decrease) in value of accumulation unit(1) 32.01% 9.19%
Number of accumulation units outstanding at end of period 908 5
AETNA LEGACY VP
Value at beginning of period $11.903 $11.049(4)
Value at end of period $13.439 $11.903
Increase (decrease) in value of accumulation unit(1) 12.90% 7.73%
Number of accumulation units outstanding at end of period 422 13
AETNA MONEY MARKET VP
Value at beginning of period $11.431 $11.003
Value at end of period $11.888 $11.431
Increase (decrease) in value of accumulation unit(1) 4.00% 3.89%
Number of accumulation units outstanding at end of period 13,511 37,703
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period $15.400 $13.870
Value at end of period $18.234 $15.400
Increase (decrease) in value of accumulation unit(1) 18.40% 11.04%
Number of accumulation units outstanding at end of period 3,858 18,957
<CAPTION>
1995 1994 1993 1992
---------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
AETNA ASCENT VP
Value at beginning of period $10.000(2)
Value at end of period $10.666
Increase (decrease) in value of accumulation unit(1) 6.66%
Number of accumulation units outstanding at end of period 202
AETNA BALANCED VP, INC.
Value at beginning of period $10.900 $11.109 $10.253 $10.000(3)
Value at end of period $13.693 $10.900 $11.109 $10.253
Increase (decrease) in value of accumulation unit(1) 25.62% (1.88%) 8.35% 2.53%
Number of accumulation units outstanding at end of period 19,038 11,773 6,540 221
AETNA BOND VP
Value at beginning of period $10.536 $11.107 $10.271 $10.000(3)
Value at end of period $12.283 $10.536 $11.107 $10.271
Increase (decrease) in value of accumulation unit(1) 16.59% (5.14%) 8.14% 2.71%
Number of accumulation units outstanding at end of period 20,427 14,482 4,936 416
AETNA CROSSROADS VP
Value at beginning of period $10.000(2)
Value at end of period 10.605
Increase (decrease) in value of accumulation unit(1) 6.05%
Number of accumulation units outstanding at end of period 243
AETNA GROWTH AND INCOME VP
Value at beginning of period $10.823 $11.083 $10.531 $10.000(3)
Value at end of period $14.113 $10.823 $11.083 $10.531
Increase (decrease) in value of accumulation unit(1) 30.40% (2.35%) 5.24% 5.31%
Number of accumulation units outstanding at end of period 121,691 77,511 37,807 3,948
AETNA INDEX PLUS LARGE CAP 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 LEGACY VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation unit(1)
Number of accumulation units outstanding at end of period
AETNA MONEY MARKET VP
Value at beginning of period $10.523 $10.252 $10.076 $10.000(3)
Value at end of period $11.003 $10.523 $10.252 $10.076
Increase (decrease) in value of accumulation unit(1) 4.57% 2.64% 1.75% 0.76%
Number of accumulation units outstanding at end of period 19,202 12,934 3,066 547
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period $10.839 $11.352 $10.589 $10.000(3)
Value at end of period $13.870 $10.839 $11.352 $10.589
Increase (decrease) in value of accumulation unit(1) 27.96% (4.52%) 7.21% 5.89%
Number of accumulation units outstanding at end of period 14,656 8,469 2,383 125
</TABLE>
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32
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
1997 1996
------------------ ------------
<S> <C> <C>
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $12.447 $11.047
Value at end of period $15.723 $12.447
Increase (decrease) in value of accumulation unit(1) 26.32% 12.68%
Number of accumulation units outstanding at end of period 4,198 14,151
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $11.516 $10.183
Value at end of period $14.021 $11.516
Increase (decrease) in value of accumulation unit(1) 21.75% 13.09%
Number of accumulation units outstanding at end of period 2,634 13,493
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $11.111 $9.954
Value at end of period $12.222 $11.111
Increase (decrease) in value of accumulation unit(1) 9.99% 11.62%
Number of accumulation units outstanding at end of period 445 776
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $12.511 $10.461
Value at end of period $15.315 $12.511
Increase (decrease) in value of accumulation unit(1) 22.40% 19.60%
Number of accumulation units outstanding at end of period 5,306 15,206
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $14.151 $13.296
Value at end of period $15.720 $14.151
Increase (decrease) in value of accumulation unit(1) 11.09% 6.43%
Number of accumulation units outstanding at end of period 3,915 34,853
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $12.421 $10.843
Value at end of period $14.954 $12.421
Increase (decrease) in value of accumulation unit(1) 20.39% 14.55%
Number of accumulation units outstanding at end of period 166 2,590
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $12.976 $12.054
Value at end of period $14.299 $12.976
Increase (decrease) in value of accumulation unit(1) 10.20% 7.66%
Number of accumulation units outstanding at end of period 241 2,552
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $12.698 $10.872
Value at end of period $15.368 $12.698
Increase (decrease) in value of accumulation unit(1) 21.03% 16.79%
Number of accumulation units outstanding at end of period 1,586 7,503
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $13.934 $10.952
Value at end of period $16.782 $13.934
Increase (decrease) in value of accumulation unit(1) 20.44% 27.22%
Number of accumulation units outstanding at end of period 6,494 21,176
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $15.132 $12.095
Value at end of period $15.987 $15.132
Increase (decrease) in value of accumulation unit(1) 5.65% 25.11%
Number of accumulation units outstanding at end of period 2,417 11,145
PORTFOLIO PARTNERS MFS EMERGING EQUITIES PORTFOLIO
Value at beginning of period $15.082
Value at end of period $14.893
Increase (decrease) in value of accumulation unit(1) ( 1.24)%(8)
Number of accumulation units outstanding at end of period 7,291
PORTFOLIO PARTNERS MFS RESEARCH GROWTH PORTFOLIO
Value at beginning of period $13.953
Value at end of period $13.682
Increase (decrease) in value of accumulation unit(1) ( 1.94)%(8)
Number of accumulation units outstanding at end of period 9,637
<CAPTION>
1995 1994 1993 1992
---------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.047
Increase (decrease) in value of accumulation unit(1) 10.47%
Number of accumulation units outstanding at end of period 1,108
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.183
Increase (decrease) in value of accumulation unit(1) 1.83%
Number of accumulation units outstanding at end of period 2,541
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $9.954
Increase (decrease) in value of accumulation unit(1) (0.46%)
Number of accumulation units outstanding at end of period 191
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.461
Increase (decrease) in value of accumulation unit(1) 4.61%
Number of accumulation units outstanding at end of period 6,415
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $10.577 $10.000(5)
Value at end of period $13.296 $10.577
Increase (decrease) in value of accumulation unit(1) 25.71% 5.77%
Number of accumulation units outstanding at end of period 15,482 820
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.843
Increase (decrease) in value of accumulation unit(1) 8.43%
Number of accumulation units outstanding at end of period 160
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10.000(6)
Value at end of period $12.054
Increase (decrease) in value of accumulation unit(1) 20.54%
Number of accumulation units outstanding at end of period 745
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $10.872
Increase (decrease) in value of accumulation unit(1) 8.72%
Number of accumulation units outstanding at end of period 166
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $10.000(7)
Value at end of period $10.952
Increase (decrease) in value of accumulation unit(1) 9.52%
Number of accumulation units outstanding at end of period 11,128
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $10.496 $11.261 $10.196 $10.000(3)
Value at end of period $12.095 $10.496 $11.261 $10.196
Increase (decrease) in value of accumulation unit(1) 15.24% (6.79%) 10.45% 1.96%
Number of accumulation units outstanding at end of period 8,348 7,350 2,438 165
PORTFOLIO PARTNERS MFS EMERGING EQUITIES PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation unit(1)
Number of accumulation units outstanding at end of period
PORTFOLIO PARTNERS MFS RESEARCH GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of accumulation unit(1)
Number of accumulation units outstanding at end of period
</TABLE>
- --------------------------------------------------------------------------------
33
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992
------------------- ------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
PORTFOLIO PARTNERS MFS VALUE EQUITY PORTFOLIO
Value at beginning of period $18.976
Value at end of period $19.248
Increase (decrease) in value of accumulation unit(1) 1.43%(8)
Number of accumulation units outstanding at end of period 8,824
PORTFOLIO PARTNERS SCUDDER INTERNATIONAL GROWTH PORTFOLIO
Value at beginning of period $16.577
Value at end of period $16.782
Increase (decrease) in value of accumulation unit(1) 1.24%(8)
Number of accumulation units outstanding at end of period 4,333
PORTFOLIO PARTNERS T. ROWE PRICE GROWTH EQUITY PORTFOLIO
Value at beginning of period $14.357
Value at end of period $14.647
Increase (decrease) in value of accumulation unit(1) 2.03%(8)
Number of accumulation units outstanding at end of period 2,583
</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 at $10.000 during August 1995, when
the Fund became available under the Contract.
(3) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 on July 20, 1992.
(4) 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.
(5) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during October 1994, when
funds were first received in this option.
(6) Reflects less than a full year of performance activity. Funds were first
available in this option during March 1995.
(7) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established at $10.000 during July 1995, when
the Fund became available under the Contract.
(8) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
- --------------------------------------------------------------------------------
34
<PAGE>
CONDENSED FINANCIAL INFORMATION
TABLE II
FOR CONTRACTS WITH A 1.00% MORTALITY AND EXPENSE RISK CHARGE (Selected
data for accumulation units outstanding throughout each period)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The condensed financial information presented below for each of the years in the
two-year period ended December 31, 1997, is derived from the financial
statements of the Separate Account, which have been audited by KPMG Peat Marwick
LLP, independent auditors. The financial statements and the independent
auditors' report thereon for the year ended December 31, 1997 are included in
the Statement of Additional Information. The Accumulation Unit Values and the
percentage change in the value of an accumulation unit reflect a mortality and
expense risk charge of 1.00% and for the periods shown. For Master Contracts
issued prior to October 1, 1996, the mortality and expense risk charge is 1.25%
during the Accumulation Period. (See Table I)
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
<S> <C> <C>
AETNA ASCENT VP
Value at beginning of period $11.468 $10.000
Value at end of period $13.613 $11.468
Increase (decrease) in value of accumulation unit(1) 18.70% 14.68%(2)
Number of accumulation units outstanding at end of period 14,463 13
AETNA BALANCED VP, INC.
Value at beginning of period $13.054
Value at end of period $13.215
Increase (decrease) in value of accumulation unit(1) 1.23%(3)
Number of accumulation units outstanding at end of period 57,738
AETNA BOND VP
Value at beginning of period $10.500 $10.000
Value at end of period $11.258 $10.500
Increase (decrease) in value of accumulation unit(1) 7.22% 5.00%(2)
Number of accumulation units outstanding at end of period 64,958 679
AETNA CROSSROADS VP
Value at beginning of period $12.945
Value at end of period $12.970
Increase (decrease) in value of accumulation unit(1) 0.19%(4)
Number of accumulation units outstanding at end of period 2,786
AETNA GROWTH AND INCOME VP
Value at beginning of period $11.465 $10.000
Value at end of period $14.744 $11.465
Increase (decrease) in value of accumulation unit(1) 28.60% 14.65%(2)
Number of accumulation units outstanding at end of period 362,675 13,125
AETNA INDEX PLUS LARGE CAP VP
Value at beginning of period $14.289
Value at end of period $14.491
Increase (decrease) in value of accumulation unit(1) 1.41%(5)
Number of accumulation units outstanding at end of period 29
AETNA LEGACY VP
Value at beginning of period $12.242
Value at end of period $12.358
Increase (decrease) in value of accumulation unit(1) 0.95%(6)
Number of accumulation units outstanding at end of period 64
AETNA MONEY MARKET VP
Value at beginning of period $10.274 $10.000
Value at end of period $10.729 $10.274
Increase (decrease) in value of accumulation unit(1) 4.43% 2.74%(2)
Number of accumulation units outstanding at end of period 65,496 1,551
CALVERT SOCIAL BALANCED PORTFOLIO
Value at beginning of period $12.982
Value at end of period $12.983
Increase (decrease) in value of accumulation unit(1) 0.01%(7)
Number of accumulation units outstanding at end of period 25,620
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $13.438
Value at end of period $13.718
Increase (decrease) in value of accumulation unit(1) 2.08%(7)
Number of accumulation units outstanding at end of period 29,808
</TABLE>
- --------------------------------------------------------------------------------
35
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
1997 1996
-------------------- ---------------------
<S> <C> <C>
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $10.358 $10.000
Value at end of period $12.663 $10.358
Increase (decrease) in value of accumulation unit(1) 22.25% 3.58%(2)
Number of accumulation units outstanding at end of period 61,043 21
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $11.818
Value at end of period $11.774
Increase (decrease) in value of accumulation unit(1) (0.37)%(5)
Number of accumulation units outstanding at end of period 1,294
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $11.239 $10.000
Value at end of period $13.814 $11.239
Increase (decrease) in value of accumulation unit(1) 22.91% 12.39%(2)
Number of accumulation units outstanding at end of period 139,417 20,020
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $9.507 $10.000
Value at end of period $10.604 $9.507
Increase (decrease) in value of accumulation unit(1) 11.54% (4.93%)(2)
Number of accumulation units outstanding at end of period 106,350 17,055
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $13.490
Value at end of period $13.420
Increase (decrease) in value of accumulation unit(1) (0.52)%(7)
Number of accumulation units outstanding at end of period 5,846
JANUS ASPEN FLEXIBLE INCOME PORTFOLIO
Value at beginning of period $10.857
Value at end of period $12.059
Increase (decrease) in value of accumulation unit(1) 11.07%(8)
Number of accumulation units outstanding at end of period 12,527
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.929
Value at end of period $13.231
Increase (decrease) in value of accumulation unit(1) 21.07%(8)
Number of accumulation units outstanding at end of period 17,098
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $11.366 $10.000
Value at end of period $13.746 $11.366
Increase (decrease) in value of accumulation unit(1) 20.94% 13.66%(2)
Number of accumulation units outstanding at end of period 207,630 36,305
LEXINGTON NATURAL RESOURCES TRUST
Value at beginning of period $13.838
Value at end of period $12.072
Increase (decrease) in value of accumulation unit(1) (12.77)%(7)
Number of accumulation units outstanding at end of period 12,963
PORTFOLIO PARTNERS MFS EMERGING EQUITIES PORTFOLIO
Value at beginning of period $10.054
Value at end of period $9.932
Increase (decrease) in value of accumulation unit(1) (1.21)%(5)
Number of accumulation units outstanding at end of period 180,890
PORTFOLIO PARTNERS MFS RESEARCH GROWTH PORTFOLIO
Value at beginning of period $8.890
Value at end of period $8.720
Increase (decrease) in value of accumulation unit(1) (1.91)%(5)
Number of accumulation units outstanding at end of period 55,616
PORTFOLIO PARTNERS MFS VALUE EQUITY PORTFOLIO
Value at beginning of period $12.287
Value at end of period $12.467
Increase (decrease) in value of accumulation unit(1) 1.47%(5)
Number of accumulation units outstanding at end of period 68,968
</TABLE>
- --------------------------------------------------------------------------------
36
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
1997 1996
------------------- ------
<S> <C> <C>
PORTFOLIO PARTNERS SCUDDER INTERNATIONAL GROWTH PORTFOLIO
Value at beginning of period $11.367
Value at end of period $11.512
Increase (decrease) in value of accumulation unit(1) 1.27%(5)
Number of accumulation units outstanding at end of period 80,978
PORTFOLIO PARTNERS T. ROWE PRICE GROWTH EQUITY PORTFOLIO
Value at beginning of period $13.052
Value at end of period $13.321
Increase (decrease) in value of accumulation unit(1) 2.06%(5)
Number of accumulation units outstanding at end of period 65,906
</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 April 1996 when the
fund/portfolio 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. Funds were first
received in this option during July 1997.
(4) Reflects less than a full year of performance activity. Funds were first
received in this option during September 1997
(5) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
(6) Reflects less than a full year of performance activity. Funds were first
received in this option during February 1997.
(7) Reflects less than a full year of performance activity. Funds were first
received in this option during October 1997.
(8) Reflects less than a full year of performance activity. Funds were first
received in this option during January 1997.
- --------------------------------------------------------------------------------
37
<PAGE>
For Master Applications Only
I hereby acknowledge receipt of an Account C Group Deferred Variable Annuity
prospectus dated May 1, 1998, as well as all current prospectuses pertaining to
the variable investment options available under the Contracts.
- --- Please send an Account C Statement of Additional Information (Form No.
SAI.91846-98) dated May 1, 1998.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
PROS.91846-98
- --------------------------------------------------------------------------------
<PAGE>
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
Statement of Additional Information dated May 1, 1998
Group Variable Annuity Contracts for Optional Retirement Programs
and Retirement Programs for Educational Institutions
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the current prospectus for Variable Annuity Account C (the
"Separate Account") dated May 1, 1998.
A free prospectus is available upon request from the local Aetna Life Insurance
and Annuity Company office or by writing to or calling:
Aetna Life Insurance and Annuity Company
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..............................................2
Variable Annuity Account C...................................................2
Offering and Purchase of Contracts...........................................3
Performance Data.............................................................3
General.................................................................3
Average Annual Total Return Quotations..................................4
Annuity Payments.............................................................10
Sales Material and Advertising...............................................11
Independent Auditors.........................................................11
Financial Statements of the Separate Account.................................S-1
Financial Statements of Aetna Life Insurance and Annuity Company.............F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1997, the Company had
$40.7 billion invested through its products, including $ 22.3 billion in its
separate accounts (of which the Company or an affiliate oversees the management
of $ 17.6 billion) and $ 1.3 billion in its mutual funds offered outside of its
separate accounts. As of December 31, 1996, it ranked among the top 2% of all
U.S. life insurance companies based on assets. The Company is a wholly owned
subsidiary of Aetna Retirement Holdings, Inc., which is in turn a wholly owned
subsidiary of Aetna Retirement Services, Inc., and an indirect wholly owned
subsidiary of Aetna Inc. The Company is engaged in the business of issuing life
insurance policies and annuity contracts in all states of the United States. The
Company's Home Office is located at 151 Farmington Avenue, Hartford, Connecticut
06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges, asset-based sales charge 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. The Separate Account
has no custodian. However, the Funds in whose shares the assets of the Separate
Account are invested each have custodians, as discussed in their respective
prospectuses.
VARIABLE ANNUITY ACCOUNT C
Variable Annuity Account C (the "Separate Account") is a separate account
established by the Company for the purpose of funding variable annuity contracts
issued by the Company. The Separate Account is registered with the Securities
and Exchange Commission as a unit investment trust under the Investment Company
Act of 1940, as amended. Purchase Payments made under the Contract may be
allocated to one or more of the Subaccounts. Each Subaccount invests in the
shares of only one of the Funds listed below. The Company may make additions to,
deletions from or substitutions of available investment options as permitted by
law and subject to the conditions of the Contract. The availability of the Funds
is subject to applicable regulatory authorization. Not all Funds are available
in all jurisdictions, under all Contracts, or under all Plans.
2
<PAGE>
<TABLE>
The Funds currently available under the Contract are as follows:
<S> <C>
Aetna Ascent VP (Formerly Aetna Ascent Variable Portfolio) Calvert Social Balanced Portfolio (Formerly Calvert
Responsibly Invested Balanced Portfolio)
Aetna Balanced VP, Inc. (Formerly Aetna Investment Advisers Fidelity VIP Equity-Income Portfolio
Fund, Inc. )
Aetna Income Shares d/b/a Aetna Bond VP Fidelity VIP Growth Portfolio
Aetna Crossroads VP (Formerly Aetna Crossroads Variable Fidelity VIP Overseas Portfolio
Portfolio)
Aetna Growth VP (Formerly Aetna Variable Growth Portfolio) Fidelity VIP II Contrafund Portfolio
Aetna Variable Fund d/b/a Aetna Growth and Income VP Janus Aspen Aggressive Growth Portfolio
Aetna High Yield VP Janus Aspen Balanced Portfolio
Aetna Index Plus Large Cap VP (Formerly Aetna Variable Janus Aspen Flexible Income Portfolio
Index Plus Portfolio)
Aetna Index Plus Mid Cap VP Janus Aspen Growth Portfolio
Aetna Index Plus Small Cap VP Janus Aspen Worldwide Growth Portfolio
Aetna International VP Lexington Natural Resources Trust*
Aetna Legacy VP (Formerly Aetna Legacy Variable Portfolio) Portfolio Partners, Inc. MFS Emerging Equities Portfolio
Aetna Variable Encore Fund d/b/a Aetna Money Market VP Portfolio Partners, Inc. MFS Research Growth Portfolio
Aetna Real Estate Securities VP Portfolio Partners, Inc. MFS Value Equity Portfolio
Aetna Small Company VP (Formerly Aetna Variable Small Portfolio Partners, Inc. Scudder International Growth
Company Portfolio) Portfolio
Aetna Value Opportunity VP (Formerly Aetna Variable Capital Portfolio Partners, Inc. T. Rowe Price Growth Equity
Appreciation Portfolio) Portfolio
</TABLE>
* This Fund is only available for investment by Participants who established
an Account under the Contract before May 1, 1998. As soon as all such
Participants have redirected their allocations to other investment options,
the Fund will be closed to all new investment (except reinvested dividends and
capital gains earned on amounts already invested in the Fund through the
Separate Account and loan repayments automatically deposited into the Fund
pursuant to the Company's loan repayment procedures).
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, is contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
prospectus under the sections titled "Purchase" and "Contract Valuation."
PERFORMANCE DATA
General
From time to time, the Company may advertise different types of historical
performance for the Subaccounts of the Separate Account available under the
Contracts issued by the Company in connection with Plans described in the
prospectus. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized returns",
calculated in an identical manner but including additional periods.
The standardized total return figures are computed according to a formula in
which a hypothetical initial Purchase Payment of $1,000 is applied to the
various Subaccounts under the Contract, and then related to the ending
redeemable values over one, five and ten year periods (or fractional periods
thereof). The redeemable value is then divided by the initial investment and
this quotient is taken to the Nth root (N represents the number of years in the
period) and 1 is subtracted from the result which is then expressed as a
percentage, carried to at least the nearest hundredth of a percent. The
standardized figures use the actual returns of the Fund since the date
3
<PAGE>
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 (as applicable) (e.g., mortality and expense risk
charges, asset-based sales charges and administrative expense charges). These
charges will be deducted on a pro rata basis in the case of fractional periods.
The total return figures shown below may be different from the actual historical
total return under your Contract because for periods prior to 1994, the
Subaccount's investment performance was based on the performance of the
underlying Fund plus any cash held by the Subaccount.
The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations. The non-standardized figures may also include monthly, quarterly,
year-to-date and three-year periods and may include returns calculated from the
Fund's inception date and/or the date contributions were first received in the
Separate Account.
Investment results of the Subaccounts will fluctuate over time, and any
presentation of the Subaccounts' total return quotations for any prior period
should not be considered as a representation of how the Subaccounts will perform
in any future period. Additionally, your Account Value upon redemption may be
more or less than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
Table A below reflects the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1997 for each
of the Subaccounts available for Contracts issued on or after October 1, 1996
and assumes a mortality and expense risk charge of 1.00%. Table B reflects
average annual standardized and non-standardized return quotation figures for
the periods ended December 31, 1997 for each of the Subaccounts available for
Contracts issued prior to October 1, 1996 and assumes a mortality and expense
risk charge of 1.25% and an asset based sales charge of 0.15%. 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 it commenced operations; and one based on performance through November 26,
1997 of the fund it replaced under many Company contracts and after November 26,
1997 based on the performance of the Portfolio Partners portfolio. Not all of
the replaced funds shown may have been available under your particular Contract.
In both tables shown below, for those Subaccounts where results are not
available for the full calendar period indicated, the percentage shown is an
average annual return since the date the Fund was first added to the Separate
Account (in the case of standardized performance) or the Fund's inception date
(in the case of non-standardized performance). Percentages reflecting partial
periods are denoted with an asterisk.
4
<PAGE>
Table A
FOR MASTER CONTRACTS ISSUED OR ENDORSED ON OR AFTER OCTOBER 1, 1996
(ASSUMES A MORTALITY AND EXPENSE RISK CHARGE OF 1.00%)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Date
Contributions
Single Payment Account First
($0 Maintenance Fee) STANDARDIZED Received
Under the
Separate
Account
- ----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years Inception*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.70% 19.91% 07/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 21.26% 13.30% 11.40% 04/03/89
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 7.22% 5.87% 8.14%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 16.40% 17.32% 07/04/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 19.17% 05/30/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.60% 16.54% 15.48%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.56% 32.39% 10/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 13.37% 13.52% 07/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.43% 3.78% 4.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 20.84% 05/30/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 20.98% 05/30/97
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 18.88% 11.78% 10.79% 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.83% 21.45% 05/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 22.25% 20.35% 05/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 10.45% 7.72% 05/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.91% 24.07% 05/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.54% 19.11% 06/30/94
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.89% 18.93% 06/30/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.65% 12.47% 10/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.53% 21.26% 06/30/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.94% 27.53% 05/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 6.08% 9.68% 8.46% 10/14/91
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (1.22%) 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners
MFS Emerging Equities(3) 8.14% 10.70% 09/30/93
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (1.91%) 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners
MFS Research Growth(3) (3.92%) 4.77% 6.34% 08/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 1.47% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners
MFS Value Equity(3) 25.09% 11.88% 10.53% 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 1.27% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 7.91% 12.57% 8.18% 07/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 2.06% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners
T. Rowe Price Growth Equity(3) 26.97% 22.31% 10/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
* Reflects performance from the date contributions were first received in the
Fund under the Separate Account.
(1) These Funds have been available through the Separate Account for more than
ten years.
(2) The current yield for the Subaccount for the 7-day period ended
December 31, 1997 (on an annualized basis) was 4.48%. The current yield reflects
the deduction of all charges under the Contract that are deducted from the total
return quotations shown above.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Date Contributions First Received Under Separate Account" refers to the
applicable date for the replaced Fund.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Single Payment Account NON-STANDARDIZED Fund
($0 Maintenance Fee) Inception
Date
- ----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.70% 20.63% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 21.26% 20.32% 13.30% 11.40% 04/03/89
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 7.22% 8.78% 5.87% 8.14%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 16.40% 17.32% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 31.68% 31.65% 12/13/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.60% 27.55% 16.54% 15.48%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.56% 33.25% 09/16/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 13.37% 13.82% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.43% 4.58% 3.78% 4.90%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 33.15% 34.10% 12/27/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.97% 38.50% 12/13/96
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.88% 19.42% 11.78% 11.30%
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.83% 24.28% 18.97% 15.57%
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 22.25% 23.00% 16.84% 16.03%
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 10.45% 10.36% 12.99% 8.54%
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.91% 26.93% 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.54% 14.59% 18.04% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.89% 19.77% 15.14% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.65% 13.62% 8.94% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.53% 22.47% 16.51% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.94% 24.90% 21.70% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 6.08% 15.55% 9.68% 8.46% 10/14/91
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 21.21% 12.68% 17.63% 11.15% 11/12/90
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.62% 10.89% 6.57% 05/03/93
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging
Equities Portfolio (1.22%) 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners
MFS Emerging Equities(3) 8.14% 16.81% 11.10% 17.81% 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research
Growth Portfolio (1.91%) 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
Portfolio Partners MFS Research Growth(3) (3.92%) 5.71% 4.77% 7.64%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value
Equity Portfolio 1.33% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners
MFS Value Equity(3) 25.09% 20.80% 11.88% 13.51%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International
Growth Portfolio 1.49% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class
A/Portfolio Partners Scudder International Growth(3) 7.91% 10.49% 12.57% 10.68%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price
Growth Equity Portfolio 1.94% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners
T. Rowe Price Growth Equity(3) 26.97% 24.38% 18.57% 18.52% 01/09/89
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
** Reflects performance from the
Fund's inception date.
(1) These Funds have been in operation for more than ten
years.
(2) The current yield for the Subaccount for the 7-day period ended
December 31, 1997 (on an annualized basis) was 4.48%. The current yield reflects
the deduction of all charges under the Contract that are deducted from the total
return quotations shown above.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Fund Inception Date" refers to the applicable date for the replaced Fund. If no
date is shown, the replaced Fund has been in operation for more than ten years.
6
<PAGE>
Table B
FOR MASTER CONTRACTS ISSUED PRIOR TO OCTOBER 1, 1996
(ASSUMES A MORTALITY AND EXPENSE RISK CHARGE OF 1.25%
AND AN ASSET BASED SALES CHARGE OF 0.15%)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Date
Contributions
Single Payment Account First
($0 Maintenance Fee) STANDARDIZED Received
Under the
Separate
Account
- -----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years Inception*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.22% 19.41% 07/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.77% 12.84% 10.95% 04/03/89
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.79% 5.44% 7.70%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 15.93% 16.84% 07/04/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 18.88% 05/30/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.07% 16.06% 15.01%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.01% 31.85% 10/31/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 12.90% 13.05% 07/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.00% 3.35% 4.47%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 20.55% 05/30/97
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 20.69% 05/30/97
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 18.40% 11.32% 10.34% 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.32% 20.95% 05/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 21.75% 19.86% 05/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 9.99% 7.28% 05/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.41% 23.56% 05/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.09% 18.63% 06/30/94
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.39% 18.44% 06/30/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.20% 12.02% 10/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.03% 20.77% 06/30/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.44% 27.01% 05/31/95
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 5.65% 9.22% 8.01% 10/14/91
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (1.26%) 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners
MFS Emerging Equities(3) 7.70% 10.24% 09/30/93
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (1.95%) 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners
MFS Research Growth (34.32%) 4.34% 5.90% 08/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 1.43% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners
MFS Value Equity(3) 24.58% 11.43% 10.08% 05/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 1.24% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio
Partners Scudder International Growth(3) 7.46% 12.11% 7.74% 07/31/89
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 2.03% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price
Growth Equity(3) 26.45% 21.81% 10/31/94
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance.
* Reflects performance from the date contributions were first received in the
Fund under the Separate Account.
(1) These Funds have been available through the Separate Account for more than
ten years.
(2) The current yield for the Subaccount for the 7-day period ended
December 31, 1997 (on an annualized basis) was 4.08%. The current yield reflects
the deduction of all charges under the Contract that are deducted from the total
return quotations shown above.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Date Contributions First Received Under Separate Account" refers to the
applicable date for the replaced Fund.
7
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Single Payment Account Fund
($0 Maintenance Fee) NON-STANDARDIZED Inception
Date
- ----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.22% 20.14% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.77% 19.83% 12.84% .95% 04/03/89
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.79% 8.34% 5.44% 7.70%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 15.93% 16.84% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 31.15% 31.11% 12/13/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.07% 27.02% 16.06% 15.01%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.01% 32.70% 09/16/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 12.90% 13.35% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.00% 4.15% 3.35% 4.47%
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 32.61% 33.55% 12/27/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.41% 37.94% 12/13/96
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.40% 18.94% 11.32% 10.85%
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.32% 23.77% 18.49% 15.10%
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 21.75% 22.50% 16.36% 15.56%
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 9.99% 9.91% 12.53% 8.09%
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.41% 26.41% 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.09% 14.12% 17.56% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.39% 19.28% 14.68% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.20% 13.16% 8.50% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.03% 21.97% 16.03% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.44% 24.39% 21.20% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 5.65% 15.06% 9.22% 8.01% 10/14/91
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20.71% 12.22% 17.15% 10.69% 11/12/90
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.18% 10.43% 6.13% 05/03/93
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging
Equities Portfolio (1.26%) 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners
MFS Emerging Equities(3) 7.70% 16.33% 10.64% 17.33% 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research
Growth Portfolio (1.95%) 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
Portfolio Partners MFS Research Growth(3) (4.32%) 5.28% 4.34% 7.20%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value
Equity Portfolio 1.29% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners
MFS Value Equity(3) 24.58% 20.31% 11.43% 13.05%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International
Growth Portfolio 1.45% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class
A/Portfolio Partners Scudder International
Growth(3) 7.46% 10.04% 12.11% 10.23%
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price
Growth Equity Portfolio 1.90% 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners
T. Rowe Price Growth Equity(3) 26.45% 23.87% 18.09% 18.04% 01/09/89
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the discussion preceding the tables for an explanation of the
charges included and methodology used in the standardized and non-standardized
figures. These figures represent historical performance and should not be
considered a projection of future performance. ** Reflects performance from the
Fund's inception date.
(1) These Funds have been in operation for more than ten
years.
(2) The current yield for the Subaccount for the 7-day period ended
December 31, 1997 (on an annualized basis) was 4.08%. The current yield reflects
the deduction of all charges under the Contract that are deducted from the total
return quotations shown above.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners Portfolio after that
date. The replaced Fund may not have been available under all Contracts. The
"Fund Inception Date" refers to the applicable date for the replaced Fund. If no
date is shown, the replaced Fund has been in operation for more than ten years.
8
<PAGE>
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Account is determined using
Accumulation Unit values as of the tenth Valuation Date before the first Annuity
payment is due. Such value (less any applicable premium tax) is applied to
provide an Annuity in accordance with the Annuity and investment options
elected.
The Annuity option tables found in the Contract show, for each form of Annuity,
the amount of the first Annuity payment for each $1,000 of value applied.
Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s)
fluctuates with the investment experience of the selected investment option(s).
The first payment and subsequent payments also vary depending on the assumed net
investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a
higher first payment, but Annuity payments will increase thereafter only to the
extent that the net investment rate increases by more than 5% on an annual
basis. Annuity payments would decline if the rate failed to increase by 5%. Use
of the 3.5% assumed rate causes a lower first payment, but subsequent payments
would increase more rapidly or decline more slowly as changes occur in the net
investment rate.
When the Annuity Period begins, the Annuitant is credited with a fixed number of
Annuity Units (which does not change thereafter) in each of the designated
investment options. This number is calculated by dividing (a) by (b), where (a)
is the amount of the first Annuity payment based on a particular investment
option, and (b) is the then current Annuity Unit value for that investment
option. As noted, Annuity Unit values fluctuate from one Valuation Date to the
next; such fluctuations reflect changes in the net investment factor for the
appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company
time to process Annuity payments) and a mathematical adjustment which offsets
the assumed net investment rate of 3.5% or 5% per annum.
The operation of all these factors can be illustrated by the following
hypothetical example. These procedures will be performed separately for the
investment options selected during the Annuity Period.
EXAMPLE:
Assume that, at the date Annuity payments are to begin, there are 3,000
Accumulation Units credited under a particular Contract or Account and that the
value of an Accumulation Unit for the tenth Valuation Date prior to retirement
was $13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Date in which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date in which the second payment is due.
9
<PAGE>
The second monthly payment is then determined by multiplying the number of
Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359,
which produces a payment of $276.07.
*If an assumed net investment rate of 5% is elected, the appropriate factor to
neutralize such assumed rate would be .9998663.
SALES MATERIAL AND ADVERTISING
The Company may include hypothetical illustrations in its sales literature that
explain the mathematical principles of dollar cost averaging, compounded
interest, tax deferred accumulation, and the mechanics of variable annuity
contracts. The Company may also discuss the difference between variable annuity
contracts and other types of savings or investment products, including, but not
limited to, personal savings accounts and certificates of deposit.
We may distribute sales literature that compares the percentage change in
Accumulation Unit values for any of the Subaccounts to established market
indices such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average or to the percentage change in values of other management
investment companies that have investment objectives similar to the Subaccount
being compared.
We may publish in advertisements and reports, the ratings and other information
assigned to us by one or more independent rating organizations such as A.M. Best
Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors
Services, Inc. The purpose of the ratings is to reflect our financial strength
and/or claims-paying ability. We may also quote ranking services such as
Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable
Insurance Products Performance Analysis Service (VIPPAS), which rank variable
annuity or life Subaccounts or their underlying funds by performance and/or
investment objective. We may categorize the underlying Funds in terms of the
asset classes they represent and use such 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.
10
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
Index
Statement of Assets and Liabilities as of December 31, 1997.................S-2
Statements of Operations and Changes in Net Assets for the
year ended December 31, 1997.......... .....................................S-5
Notes to Financial Statements December 31, 1997.............................S-6
Independent Auditors' Report................................................S-17
S-1
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at net asset value: (Note 1)
Aetna Variable Fund; 189,402,635 shares (cost $5,932,019,068) ........................ $ 6,370,594,954
Aetna Income Shares; 29,481,519 shares (cost $379,976,337) ........................... 378,848,309
Aetna Variable Encore Fund; 17,984,272 shares (cost $234,633,355) .................... 240,346,197
Aetna Investment Advisers Fund, Inc.; 61,720,862 shares (cost $848,048,432) .......... 989,547,679
Aetna GET Fund, Series B; 5,058,054 shares (cost $56,606,586) ........................ 79,552,932
Aetna GET Fund, Series C; 18,780,804 shares (cost $190,080,319) ...................... 236,822,693
Aetna Ascent Variable Portfolio; 5,107,825 shares (cost $66,607,510) ................. 72,115,304
Aetna Crossroads Variable Portfolio; 3,801,191 shares (cost $47,125,006) ............. 49,739,310
Aetna Legacy Variable Portfolio; 2,710,978 shares (cost $32,214,576) ................. 32,802,912
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio; 171,171 shares (cost $2,313,642) ..... 2,039,640
Aetna Variable Growth Portfolio; 111,560 shares (cost $1,335,706) ................... 1,098,483
Aetna Variable Index Plus Portfolio; 5,933,809 shares (cost $76,210,503) ............ 83,175,077
Aetna Variable Small Company Portfolio; 388,120 shares (cost $5,122,912) ............ 4,956,212
Calvert Social Balanced Portfolio; 27,469,430 shares (cost $47,247,774) .............. 54,444,411
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio; 7,855,657 shares (cost $156,737,051) ....................... 190,735,350
Growth Portfolio; 3,457,071 shares (cost $105,862,746) .............................. 128,257,345
Overseas Portfolio; 700,480 shares (cost $13,223,729) ............................... 13,449,206
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio; 1,288,137 shares (cost $19,277,286) ........................ 23,199,341
Contrafund Portfolio; 12,866,038 shares (cost $206,330,826) ......................... 256,548,805
Index 500 Portfolio; 504,605 shares (cost $46,209,224) .............................. 57,721,771
Janus Aspen Series:
Aggressive Growth Portfolio; 10,248,197 shares (cost $174,115,177) .................. 210,600,444
Balanced Portfolio; 2,143,788 shares (cost $32,647,487) ............................. 37,451,981
Flexible Income Portfolio; 1,252,635 shares (cost $14,374,926) ...................... 14,756,039
Growth Portfolio; 4,330,541 shares (cost $68,345,213) ............................... 80,028,403
Worldwide Growth Portfolio; 18,350,150 shares (cost $366,705,134).................... 429,210,001
Lexington Emerging Markets Fund; 649,673 shares (cost $6,756,872)..................... 5,788,593
Lexington Natural Resources Trust Fund; 2,881,672 shares (cost $41,178,832)........... 42,965,725
Portfolio Partners, Inc. (PPI):
PPI MFS Emerging Equities Portfolio; 8,228,209 shares (cost $356,891,357)............. 352,990,165
PPI MFS Research Growth Portfolio; 23,381,050 shares (cost $231,196,214).............. 227,029,997
PPI MFS Value Equity Portfolio; 3,887,887 shares (cost $114,649,620).................. 116,286,704
PPI Scudder International Growth Portfolio; 14,375,874 shares (cost $199,666,185)..... 202,699,815
PPI T. Rowe Price Growth Equity Portfolio; 3,885,589 shares (cost $166,078,985) ...... 169,450,553
---------------
NET ASSETS (cost $10,239,788,590) ..................................................... $11,155,254,351
===============
Net assets represented by:
Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 5)
Aetna Variable Fund:
Annuity contracts in accumulation .................................................... $ 6,078,549,136
Annuity contracts in payment period .................................................. 292,045,818
Aetna Income Shares:
Annuity contracts in accumulation .................................................... 372,629,553
Annuity contracts in payment period .................................................. 6,218,756
</TABLE>
S-2
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
Aetna Variable Encore Fund:
Annuity contracts in accumulation ...................... $ 240,346,197
Aetna Investment Advisers Fund, Inc.:
Annuity contracts in accumulation ...................... 968,354,403
Annuity contracts in payment period .................... 21,193,276
Aetna GET Fund, Series B:
Annuity contracts in accumulation ...................... 79,552,932
Aetna GET Fund, Series C:
Annuity contracts in accumulation ...................... 236,822,693
Aetna Ascent Variable Portfolio:
Annuity contracts in accumulation ...................... 72,115,304
Aetna Crossroads Variable Portfolio:
Annuity contracts in accumulation ...................... 49,739,310
Aetna Legacy Variable Portfolio:
Annuity contracts in accumulation ...................... 32,749,254
Annuity contracts in payment period .................... 53,658
Aetna Variable Portfolios, Inc.:
Aetna Variable Capital Appreciation Portfolio:
Annuity contracts in accumulation ...................... 2,039,640
Aetna Variable Growth Portfolio:
Annuity contracts in accumulation ...................... 1,098,483
Aetna Variable Index Plus Portfolio:
Annuity contracts in accumulation ...................... 83,098,319
Annuity contracts in payment period .................... 76,758
Aetna Variable Small Company Portfolio:
Annuity contracts in accumulation ...................... 4,956,212
Calvert Social Balanced Portfolio:
Annuity contracts in accumulation ...................... 54,444,411
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio:
Annuity contracts in accumulation ...................... 190,735,350
Growth Portfolio:
Annuity contracts in accumulation ...................... 128,257,345
Overseas Portfolio:
Annuity contracts in accumulation ...................... 13,449,206
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio:
Annuity contracts in accumulation ...................... 23,199,341
Contrafund Portfolio:
Annuity contracts in accumulation ...................... 256,548,805
Index 500 Portfolio:
Annuity contracts in accumulation ...................... 57,721,771
Janus Aspen Series:
Aggressive Growth Portfolio:
Annuity contracts in accumulation ...................... 210,600,444
Balanced Portfolio:
Annuity contracts in accumulation ...................... 37,451,981
Flexible Income Portfolio:
Annuity contracts in accumulation ...................... 14,756,039
Growth Portfolio:
Annuity contracts in accumulation ...................... 79,992,417
Annuity contracts in payment period .................... 35,986
</TABLE>
S-3
<PAGE>
Variable Annuity Account C
Statement of Assets and Liabilities - December 31, 1997 (continued):
<TABLE>
<S> <C>
Worldwide Growth Portfolio:
Annuity contracts in accumulation ........... $ 429,093,163
Annuity contracts in payment period ......... 116,838
Lexington Emerging Markets Fund:
Annuity contracts in accumulation ........... 5,788,593
Lexington Natural Resources Trust Fund:
Annuity contracts in accumulation ........... 42,965,725
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio:
Annuity contracts in accumulation ........... 352,966,999
Annuity contracts in payment period ......... 23,166
PPI MFS Research Growth Portfolio:
Annuity contracts in accumulation ........... 227,029,997
PPI MFS Value Equity Portfolio:
Annuity contracts in accumulation ........... 116,286,704
PPI Scudder International Growth Portfolio:
Annuity contracts in accumulation ........... 202,699,815
PPI T. Rowe Price Growth Equity Portfolio:
Annuity contracts in accumulation ........... 169,450,553
---------------
$11,155,254,351
===============
</TABLE>
See Notes to Financial Statements
S-4
<PAGE>
Variable Annuity Account C
Statements of Operations and Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
------------------- -----------------
<S> <C> <C>
INVESTMENT INCOME:
Income: (Notes 1, 3 and 5)
Dividends ............................................................ $ 1,552,106,208 $ 712,854,599
Expenses: (Notes 2 and 5)
Valuation period deductions .......................................... (120,867,375) (93,446,331)
--------------- --------------
Net investment income ................................................. 1,431,238,833 619,408,268
--------------- --------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on sales of investments: (Notes 1, 4 and 5)
Proceeds from sales .................................................. 2,013,561,413 2,060,808,031
Cost of investments sold ............................................. 1,773,010,971 1,547,239,509
--------------- --------------
Net realized gain ................................................... 240,550,442 513,568,522
Net unrealized gain on investments: (Note 5)
Beginning of year .................................................... 612,391,085 594,083,184
End of year .......................................................... 915,465,761 612,391,085
--------------- --------------
Net change in unrealized gain ....................................... 303,074,676 18,307,901
--------------- --------------
Net realized and unrealized gain on investments ....................... 543,625,118 531,876,423
--------------- --------------
Net increase in net assets resulting from operations .................. 1,974,863,951 1,151,284,691
--------------- --------------
FROM UNIT TRANSACTIONS:
Variable annuity contract purchase payments ........................... 1,039,130,530 951,293,520
Sales and administrative charges deducted by the Company .............. (17,373) (61,783)
--------------- --------------
Net variable annuity contract purchase payments ...................... 1,039,113,157 951,231,737
Transfer from the Company for mortality guarantee adjustments ......... 2,085,609 3,247,064
Transfers from the Company's fixed account options .................... 166,510,610 187,508,331
Transfers to the Company's other variable annuity accounts ............ (88,238,000) 0
Redemptions by contract holders ....................................... (474,257,152) (339,383,183)
Annuity Payments ...................................................... (31,253,253) (20,948,181)
Other ................................................................. 1,227,066 144,245
--------------- --------------
Net increase in net assets from unit transactions (Note 5) ........... 615,188,037 781,800,013
--------------- --------------
Change in net assets .................................................. 2,590,051,988 1,933,084,704
NET ASSETS:
Beginning of year ..................................................... 8,565,202,363 6,632,117,659
--------------- --------------
End of year ........................................................... $11,155,254,351 $8,565,202,363
=============== ==============
</TABLE>
See Notes to Financial Statements
S-5
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997
1. Summary of Significant Accounting Policies
Variable Annuity Account C (the "Account") is a separate account
established by Aetna Life Insurance and Annuity Company (the "Company") and
is registered under the Investment Company Act of 1940 as a unit investment
trust. The Account is sold exclusively for use with variable annuity
contracts that are qualified under the Internal Revenue Code of 1986, as
amended.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported therein. Although actual results
could differ from these estimates, any such differences are expected to be
immaterial to the net assets of the Account.
a. Valuation of Investments
Investments in the following Funds are stated at the closing net asset
value per share as determined by each Fund on December 31, 1997:
Aetna Variable Fund
Aetna Income Shares
Aetna Variable Encore Fund
Aetna Investment Advisers Fund, Inc.
Aetna GET Fund, Series B
Aetna GET Fund, Series C
Aetna Ascent Variable Portfolio
Aetna Crossroads Variable Portfolio
Aetna Legacy Variable Portfolio
Aetna Variable Portfolios, Inc.:
[bullet] Aetna Variable Capital Appreciation Portfolio
[bullet] Aetna Variable Growth Portfolio
[bullet] Aetna Variable Index Plus Portfolio
[bullet] Aetna Variable Small Company Portfolio
Calvert Social Balanced Portfolio
Fidelity Investments Variable Insurance Products Fund:
[bullet] Equity-Income Portfolio
[bullet] Growth Portfolio
[bullet] Overseas Portfolio
Fidelity Investments Variable Insurance Products
Fund II:
[bullet] Asset Manger Portfolio
[bullet] Contrafund Portfolio
[bullet] Index 500 Portfolio
Janus Aspen Series:
[bullet] Aggressive Growth Portfolio
[bullet] Balanced Portfolio
[bullet] Flexible Income Portfolio
[bullet] Growth Portfolio
[bullet] Worldwide Growth Portfolio
Lexington Emerging Markets Fund
Lexington Natural Resources Trust Fund
Portfolio Partners, Inc.:
[bullet] PPI MFS Emerging Equities Portfolio
[bullet] PPI MFS Research Growth Portfolio
[bullet] PPI MFS Value Equity Portfolio
[bullet] PPI Scudder International Growth Portfolio
[bullet] PPI T. Rowe Price Growth Equity Portfolio
b. Other
Investment transactions are accounted for on a trade date basis and
dividend income is recorded on the ex-dividend date. The cost of
investments sold is determined by specific identification.
c. Federal Income Taxes
The operations of the Account form a part of, and are taxed with, the total
operations of the Company which is taxed as a life insurance company under
the Internal Revenue Code of 1986, as amended.
d. Annuity Reserves
Annuity reserves held in the Account are computed for currently payable
contracts according to the Progressive Annuity, a49, 1971 Individual
Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983 Group
Annuity Mortality tables using various assumed interest rates not to exceed
seven percent. Mortality experience is monitored by the Company. Charges to
annuity reserves for mortality experience are reimbursed to the Company if
the reserves required are less than originally estimated. If additional
reserves are required, the Company reimburses the Account.
2. Valuation Period Deductions
Deductions by the Account for mortality and expense risk charges are made
in accordance with the terms of the contracts and are paid to the Company.
3. Dividend Income
On an annual basis, the Funds distribute substantially all of their taxable
income and realized capital gains to their shareholders. Distributions to
the Account are automatically reinvested in shares of the Funds. The
Account's proportionate share of each Fund's undistributed net investment
income (distributions in excess of net investment income) and accumulated
net realized gain (loss) on investments is included in net unrealized gain
(loss) in the Statements of Operations and Changes in Net Assets.
4. Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments other than
short-term investments for the years ended December 31, 1997 and 1996
aggregated $4,059,988,283 and $2,013,561,413; $3,462,016,312 and
$2,060,808,031, respectively.
S-6
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Variable Fund: $1,291,034,822 ($ 68,500,273)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Income Shares: 22,258,737 (4,263,839)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 9,635,587 (2,938,575)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 128,304,517 (10,844,018)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 13,341,021 (1,078,816)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 3,678,012 (3,257,441)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 4,541,482 (578,657)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 3,316,159 (392,434)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 1,788,369 (229,584)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Variable Portfolios Inc:
Aetna Variable Capital Appreciation Portfolio: 312,433 (2,197)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio: 249,335 (1,093)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 3,327,658 (542,532)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio: 269,004 (5,868)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: (1) 1,199,482 (1,526,918)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------
Small Capitalization Portfolio: 11,721,861 (3,575,543)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Variable Fund: $205,088,291 $150,120,010 $ 54,968,281
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Income Shares: 46,789,033 49,260,722 (2,471,689)
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 206,958,669 210,166,945 (3,208,276)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 37,558,168 27,770,494 9,787,674
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 7,648,728 4,940,723 2,708,005
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 13,972,003 11,896,317 2,075,686
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 498,613 380,091 118,522
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 409,248 325,568 83,680
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 2,265,127 2,019,840 245,287
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Variable Portfolios Inc:
Aetna Variable Capital Appreciation Portfolio: 123,165 113,851 9,314
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Variable Growth Portfolio: 80,207 72,190 8,017
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 29,980,862 29,823,433 157,429
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
Aetna Variable Small Company Portfolio: 478,457 428,319 50,138
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: (1) 169,481,196 134,718,793 34,762,403
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 403,516,606 343,440,431 60,076,175
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$327,744,944 $438,575,885 $110,830,941 $ 75,435,966
$4,694,078,344 $6,078,549,136
212,746,872 292,045,818
- -----------------------------------------------------------------------------------------------------------------------
(9,314,233) (1,128,028) 8,186,205 (4,710,418)
354,233,289 372,629,553
5,616,023 6,218,756
- -----------------------------------------------------------------------------------------------------------------------
(750,036) 5,712,842 6,462,878 (14,909,883)
245,304,466 240,346,197
- -----------------------------------------------------------------------------------------------------------------------
97,219,569 141,499,248 44,279,679 2,724,400
800,532,626 968,354,403
14,762,802 21,193,276
- -----------------------------------------------------------------------------------------------------------------------
17,286,695 22,946,346 5,659,651 (6,139,082)
65,062,153 79,552,932
- -----------------------------------------------------------------------------------------------------------------------
2,983,885 46,742,374 43,758,489 (8,490,216)
199,058,163 236,822,693
- -----------------------------------------------------------------------------------------------------------------------
1,716,824 5,507,794 3,790,970 42,582,396
21,660,591 72,115,304
- -----------------------------------------------------------------------------------------------------------------------
838,329 2,614,303 1,775,974 30,197,010
14,758,921 49,739,310
- -----------------------------------------------------------------------------------------------------------------------
112,482 588,337 475,855 21,455,983
9,067,002 32,749,254
0 53,658
- -----------------------------------------------------------------------------------------------------------------------
0 (274,002) (274,002) 1,994,092
0 2,039,640
- -----------------------------------------------------------------------------------------------------------------------
0 (237,223) (237,223) 1,079,447
0 1,098,483
- -----------------------------------------------------------------------------------------------------------------------
80,325 6,964,574 6,884,249 62,694,836
10,653,437 83,098,319
0 76,758
- -----------------------------------------------------------------------------------------------------------------------
0 (166,700) (166,700) 4,809,638
0 4,956,212
- -----------------------------------------------------------------------------------------------------------------------
6,730,808 0 (6,730,808) (132,576,331)
104,872,172 0
- -----------------------------------------------------------------------------------------------------------------------
39,364,541 0 (39,364,541) (352,729,122)
323,871,170 0
0 0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
S-8
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- -------------------------------------------------------------------------------------------
<S> <C> <C>
American Century Investments -
Capital Appreciation Fund: (2) $ 5,882,464 ($ 2,974,651)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 3,787,208 (578,804)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 11,536,379 (1,844,101)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Growth Portfolio: 3,033,640 (1,277,878)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Overseas Portfolio: 762,691 (144,474)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 2,134,313 (253,981)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Contrafund Portfolio: 4,376,096 (2,382,593)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Index 500 Portfolio: 890,215 (515,853)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Franklin Government Securities Trust: (3) 1,578,341 (279,189)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 0 (2,188,842)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Balanced Portfolio: 940,676 (329,511)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Flexible Income Portfolio: 757,640 (131,213)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Growth Portfolio: 1,871,919 (768,752)
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: (4) 64,108 (25,465)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 5,510,563 (4,109,527)
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Investments -
Capital Appreciation Fund: (2) $347,378,690 $348,986,817 ($ 1,608,127)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio: 1,767,421 1,342,657 424,764
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 2,876,456 2,187,102 689,354
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,967,157 1,268,813 698,344
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 6,265,740 5,529,606 736,134
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 1,353,806 1,132,813 220,993
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Contrafund Portfolio: 989,526 754,795 234,731
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 2,042,782 1,517,607 525,175
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust: (3) 35,001,358 34,302,739 698,619
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 16,697,333 12,596,723 4,100,610
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Balanced Portfolio: 1,236,230 981,509 254,721
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 4,035,296 3,816,553 218,743
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,933,431 1,461,183 472,248
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: (4) 5,452,797 5,400,161 52,636
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 16,620,763 10,266,465 6,354,298
Annuity contracts in accumulation
Annuity contracts in payment period
- -------------------------------------------------------------------------------------------------------------
</TABLE>
S-9
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 8,139,519 $0 ($8,139,519) ($339,404,560)
$346,244,393 $0
- ----------------------------------------------------------------------------------------------------------------
2,963,927 7,196,636 4,232,709 6,589,199
39,989,335 54,444,411
- ----------------------------------------------------------------------------------------------------------------
10,675,870 33,998,298 23,322,428 50,561,862
106,469,428 190,735,350
- ----------------------------------------------------------------------------------------------------------------
5,256,264 22,394,599 17,138,335 28,222,857
80,442,047 128,257,345
- ----------------------------------------------------------------------------------------------------------------
649,630 225,478 (424,152) 4,069,619
8,449,388 13,449,206
- ----------------------------------------------------------------------------------------------------------------
2,502,591 3,922,056 1,419,465 2,575,422
17,103,129 23,199,341
- ----------------------------------------------------------------------------------------------------------------
15,161,493 50,217,979 35,056,486 100,377,564
118,886,521 256,548,805
- ----------------------------------------------------------------------------------------------------------------
2,304,865 11,512,547 9,207,682 26,383,649
21,230,903 57,721,771
- ----------------------------------------------------------------------------------------------------------------
405,959 0 (405,959) (24,948,755)
23,356,943 0
- ----------------------------------------------------------------------------------------------------------------
17,668,916 36,485,267 18,816,351 16,995,758
172,876,567 210,600,444
- ----------------------------------------------------------------------------------------------------------------
751,567 4,804,494 4,052,927 17,251,901
15,281,267 37,451,981
- ----------------------------------------------------------------------------------------------------------------
140,666 381,113 240,447 5,252,958
8,417,464 14,756,039
- ----------------------------------------------------------------------------------------------------------------
2,192,571 11,683,190 9,490,619 28,161,560
40,800,809 79,992,417
0 35,986
- ----------------------------------------------------------------------------------------------------------------
(6,468) 0 6,468 (1,788,353)
1,690,606 0
- ----------------------------------------------------------------------------------------------------------------
16,710,390 62,504,868 45,794,478 203,261,915
172,398,274 429,093,163
0 116,838
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
S-10
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Year Ended December 31, 1997
Valuation
Period
Dividends Deductions
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Lexington Emerging Markets Fund: $4,375 ($79,412)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 1,239,038 (531,930)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: (5) 8,158,940 (1,195,227)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio: 0 (406,682)
Annuity contracts in accumulation
Annuity contracts in payment period
- -----------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 0 (262,081)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 0 (133,426)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
PPI MFS Scudder International Growth Portfolio: 0 (235,626)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
PPI MFS T. Rowe Price Growth Equity Portfolio: 0 (193,734)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: (6) 4,599,123 (2,286,635)
Annuity contracts in accumulation
- -----------------------------------------------------------------------------------------
Total Variable Annuity Account C $1,552,106,208 ($ 120,867,375)
========================================================================================
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Year Ended December 31, 1997
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lexington Emerging Markets Fund: $1,639,618 $1,424,729 $214,889
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 14,866,827 11,618,994 3,247,833
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: (5) 128,039,479 103,983,767 24,055,712
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Portfolio Partners, Inc.:
PPI MFS Emerging Equities Portfolio: 3,797,005 3,880,012 (83,007)
Annuity contracts in accumulation
Annuity contracts in payment period
- ---------------------------------------------------------------------------------------------------------
PPI MFS Research Growth Portfolio: 1,453,829 1,486,006 (32,177)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
PPI MFS Value Equity Portfolio: 928,145 929,114 (969)
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
PPI MFS Scudder International Growth Portfolio: 13,091,485 12,881,912 209,573
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
PPI MFS T. Rowe Price Growth Equity Portfolio: 891,088 887,544 3,544
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: (6) 278,386,778 238,895,623 39,491,155
Annuity contracts in accumulation
- ---------------------------------------------------------------------------------------------------------
Total Variable Annuity Account C $2,013,561,413 $1,773,010,971 $240,550,442
=========================================================================================================
</TABLE>
(1) Effective November 28, 1997, this funds assets were transferred to the PPI
T. Rowe Price Growth Equity Portfolio.
(2) Effective November 28, 1997, this funds assets were transferred to the PPI
MFS Research Growth Portfolio.
(3) Effective November 28, 1997, this funds assets were transferred to Aetna
Income Shares.
(4) Effective November 28, 1997, this funds assets were transferred to the Aetna
Variable Encore Fund.
(5) Effective November 28, 1997, this funds assets were transferred to the PPI
MFS Value Equity Portfolio.
(6) Effective November 28, 1997, this funds assets were transferred to the PPI
Scudder International Growth Portfolio.
S-11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$102,991 ($968,279) ($1,071,270) $1,874,530
$4,845,481 $5,788,593
- ------------------------------------------------------------------------------------------------------------------------
3,997,171 1,786,893 (2,210,278) 17,376,715
23,844,347 42,965,725
- ------------------------------------------------------------------------------------------------------------------------
9,459,521 0 (9,459,521) (116,641,588)
95,081,684 0
- ------------------------------------------------------------------------------------------------------------------------
0 (3,901,193) (3,901,193) 357,381,047
0 352,966,999
0 23,166
- ------------------------------------------------------------------------------------------------------------------------
0 (4,166,217) (4,166,217) 231,490,472
0 227,029,997
- ------------------------------------------------------------------------------------------------------------------------
0 1,637,084 1,637,084 114,784,015
0 116,286,704
- ------------------------------------------------------------------------------------------------------------------------
0 3,033,630 3,033,630 199,692,238
0 202,699,815
- ------------------------------------------------------------------------------------------------------------------------
0 3,371,568 3,371,568 166,269,175
0 169,450,553
- ------------------------------------------------------------------------------------------------------------------------
29,299,509 0 (29,299,509) (204,019,879)
191,515,746 0
- ------------------------------------------------------------------------------------------------------------------------
$612,391,085 $915,465,761 $303,074,676 $615,188,037 $8,565,202,363 $11,155,254,351
========================================================================================================================
</TABLE>
S-12
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Variable Fund: $515,238,366 ($54,321,686)
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------
Aetna Income Shares: 23,144,319 (4,611,478)
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 14,058,252 (2,878,790)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 72,699,670 (9,562,496)
Annuity contracts in accumulation
Annuity contracts in payment period
- ----------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 5,304,368 (1,100,778)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 969,084 (280,865)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 963,171 (137,931)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 797,511 (106,179)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 595,666 (63,355)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 57,328 (16,537)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: 2,138,198 (966,404)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 1,173,212 (3,731,877)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Fund: 3,000,539 (425,159)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 2,269,871 (994,896)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Growth Portfolio: 2,304,888 (707,334)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Overseas Portfolio: 115,737 (82,498)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 955,910 (196,386)
Annuity contracts in accumulation
- ----------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Variable Fund: $1,237,963,630 $841,837,896 $396,125,734
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------
Aetna Income Shares: 155,474,786 153,469,788 2,004,998
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------
Aetna Variable Encore Fund: 175,207,017 167,163,639 8,043,378
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Investment Advisers Fund, Inc.: 223,353,174 160,905,519 62,447,655
Annuity contracts in accumulation
Annuity contracts in payment period
- --------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series B: 25,117,816 18,596,857 6,520,959
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna GET Fund, Series C: 229,569 224,240 5,329
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Ascent Variable Portfolio: 514,612 443,710 70,902
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Crossroads Variable Portfolio: 755,620 679,118 76,502
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Legacy Variable Portfolio: 1,206,903 1,119,490 87,413
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Aetna Variable Index Plus Portfolio: 356,603 338,531 18,072
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Alger American Funds:
Growth Portfolio: 3,326,813 3,149,890 176,923
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Small Capitalization Portfolio: 24,333,106 17,577,100 6,756,006
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Calvert Responsibly Invested Balanced Fund: 1,793,014 1,429,393 363,621
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund:
Equity-Income Portfolio: 3,851,613 3,166,678 684,935
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Growth Portfolio: 623,639 453,561 170,078
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Overseas Portfolio: 2,280,928 2,065,136 215,792
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
Fidelity Investments Variable Insurance Products Fund II:
Asset Manager Portfolio: 2,016,939 1,797,456 219,483
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$267,567,573 $327,744,944 $60,177,371 $39,664,335
$3,805,891,355 $4,694,078,344
144,049,741 212,746,872
- --------------------------------------------------------------------------------------------------------------------------
3,230,862 (9,314,233) (12,545,095) (34,151,027)
380,937,626 354,233,289
5,069,969 5,616,023
- --------------------------------------------------------------------------------------------------------------------------
9,204,418 (750,036) (9,954,454) 5,744,394
230,291,686 245,304,466
- --------------------------------------------------------------------------------------------------------------------------
122,622,603 97,219,569 (25,403,034) (7,904,062)
713,304,833 800,532,626
9,712,862 14,762,802
- --------------------------------------------------------------------------------------------------------------------------
13,423,804 17,286,695 3,862,891 (22,661,545)
73,136,258 65,062,153
- --------------------------------------------------------------------------------------------------------------------------
0 2,983,885 2,983,885 195,380,730
0 199,058,163
- --------------------------------------------------------------------------------------------------------------------------
105,405 1,716,824 1,611,419 14,244,294
4,908,736 21,660,591
- --------------------------------------------------------------------------------------------------------------------------
68,967 838,329 769,362 9,552,968
3,668,757 14,758,921
- --------------------------------------------------------------------------------------------------------------------------
36,214 112,482 76,268 6,451,330
1,919,680 9,067,002
- --------------------------------------------------------------------------------------------------------------------------
0 80,325 80,325 10,514,249
0 10,653,437
- --------------------------------------------------------------------------------------------------------------------------
(285,937) 6,730,808 7,016,745 58,052,710
38,454,000 104,872,172
- --------------------------------------------------------------------------------------------------------------------------
38,038,924 39,364,541 1,325,617 77,101,765
241,246,447 323,871,170
- --------------------------------------------------------------------------------------------------------------------------
2,175,908 2,963,927 788,019 7,573,554
28,688,761 39,989,335
- --------------------------------------------------------------------------------------------------------------------------
2,759,687 10,675,870 7,916,183 58,569,396
38,023,939 106,469,428
- --------------------------------------------------------------------------------------------------------------------------
505,388 5,256,264 4,750,876 46,205,811
27,717,728 80,442,047
- --------------------------------------------------------------------------------------------------------------------------
163,196 649,630 486,434 3,994,936
3,718,987 8,449,388
- --------------------------------------------------------------------------------------------------------------------------
1,530,985 2,502,591 971,606 782,358
14,370,158 17,103,129
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
Variable Annuity Account C
Notes to Financial Statements - December 31, 1997 (continued):
5. Supplemental Information to Statements of Operations and Changes in Net
Assets (continued):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year Ended December 31, 1996
Valuation
Period
Dividends Deductions
- -------------------------------------------------------------------------------------
<S> <C> <C>
Contrafund Portfolio: $357,388 ($910,633)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Index 500 Portfolio: 219,199 (139,391)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Franklin Government Securities Trust: 1,223,061 (290,354)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 1,589,459 (1,739,222)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Balanced Portfolio: 238,807 (87,725)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Flexible Income Portfolio: 499,929 (72,736)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Growth Portfolio: 630,364 (245,877)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 61,378 (14,453)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 1,725,690 (1,035,043)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 0 (55,554)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 80,144 (231,100)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: 8,437,018 (1,199,983)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: 4,063,525 (2,264,627)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund: 47,942,547 (4,974,984)
Annuity contracts in accumulation
- -------------------------------------------------------------------------------------
Total Variable Annuity Account C $712,854,599 ($ 93,446,331)
=====================================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Year Ended December 31, 1996
Proceeds Cost of Net
from Investments Realized
Sales Sold Gain (Loss)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contrafund Portfolio: $1,299,964 $1,078,898 $221,066
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Index 500 Portfolio: 1,105,697 943,071 162,626
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Franklin Government Securities Trust: 5,788,894 5,646,267 142,627
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Janus Aspen Series:
Aggressive Growth Portfolio: 4,803,682 3,702,615 1,101,067
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Balanced Portfolio: 1,671,701 1,511,274 160,427
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Flexible Income Portfolio: 1,541,843 1,429,353 112,490
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Growth Portfolio: 1,130,979 963,703 167,276
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Short-Term Bond Portfolio: 726,351 729,002 (2,651)
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Worldwide Growth Portfolio: 1,942,344 1,492,553 449,791
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Lexington Emerging Markets Fund: 905,228 870,164 35,064
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust Fund: 7,649,108 6,026,027 1,623,081
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Neuberger and Berman Advisers Management Trust -
Growth Portfolio: 15,336,623 13,853,081 1,483,542
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Scudder Variable Life Investment Fund -
International Portfolio: 26,981,873 22,523,390 4,458,483
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc. - Growth Fund: 131,517,962 112,052,109 19,465,853
Annuity contracts in accumulation
- --------------------------------------------------------------------------------------------------------
Total Variable Annuity Account C $2,060,808,031 $1,547,239,509 $513,568,522
========================================================================================================
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Net Unrealized Net
Gain (Loss) Net Increase (Decrease) Net Assets
----------- Change in In Net Assets ----------
Beginning End Unrealized from Unit Beginning End
of Year of Year Gain (Loss) Transactions of Year of Year
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$285,166 $15,161,493 $14,876,327 $73,985,256
$30,357,117 $118,886,521
- ----------------------------------------------------------------------------------------------------------------------
223,865 2,304,865 2,081,000 15,496,325
3,411,144 21,230,903
- ----------------------------------------------------------------------------------------------------------------------
831,241 405,959 (425,282) 664,776
22,042,115 23,356,943
- ----------------------------------------------------------------------------------------------------------------------
13,091,398 17,668,916 4,577,518 79,952,029
87,395,716 172,876,567
- ----------------------------------------------------------------------------------------------------------------------
60,530 751,567 691,037 12,773,551
1,505,170 15,281,267
- ----------------------------------------------------------------------------------------------------------------------
167,581 140,666 (26,915) 4,046,573
3,858,123 8,417,464
- ----------------------------------------------------------------------------------------------------------------------
145,978 2,192,571 2,046,593 33,135,966
5,066,487 40,800,809
- ----------------------------------------------------------------------------------------------------------------------
(354) (6,468) (6,114) 1,108,236
544,210 1,690,606
- ----------------------------------------------------------------------------------------------------------------------
786,497 16,710,390 15,923,893 139,287,080
16,046,863 172,398,274
- ----------------------------------------------------------------------------------------------------------------------
(46,118) 102,991 149,109 1,627,816
3,089,046 4,845,481
- ----------------------------------------------------------------------------------------------------------------------
1,277,740 3,997,171 2,719,431 5,442,307
14,210,484 23,844,347
- ----------------------------------------------------------------------------------------------------------------------
11,656,721 9,459,521 (2,197,200) (937,272)
89,495,579 95,081,684
- ----------------------------------------------------------------------------------------------------------------------
12,783,439 29,299,509 16,516,070 4,017,712
164,724,583 191,515,746
- ----------------------------------------------------------------------------------------------------------------------
91,671,503 8,139,519 (83,531,984) (57,916,538)
425,259,499 346,244,393
- ----------------------------------------------------------------------------------------------------------------------
$ 594,083,184 $612,391,085 $ 18,307,901 $ 781,800,013 $6,632,117,659 $8,565,202,363
======================================================================================================================
</TABLE>
S-16
<PAGE>
Independent Auditors' Report
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contract Owners of Variable Annuity Account C:
We have audited the accompanying statement of assets and liabilities of Aetna
Life Insurance and Annuity Company Variable Annuity Account C (the "Account")
as of December 31, 1997, and the related statements of operations and changes
in net assets for each of the years in the two-year period then ended and
condensed financial information for the year ended December 31, 1997. These
financial statements and condensed financial information are the responsibility
of the Account's management. Our responsibility is to express an opinion on
these financial statements and condensed financial information based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and condensed financial information. Our procedures
included confirmation of securities owned as of December 31, 1997, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of Aetna Life Insurance and Annuity Company Variable Annuity Account C
as of December 31, 1997, the results of its operations and changes in its net
assets for each of the years in the two-year period then ended and condensed
financial information for the year ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 27, 1998
S-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
Index to Consolidated Financial Statements
------------------------------------------
Page
Independent Auditors' Report F-2
Consolidated Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995 F-3
Consolidated Balance Sheets as of December 31, 1997
and 1996 F-4
Consolidated Statements of Changes in Shareholder's Equity
for the Years Ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
Independent Auditors' Report
The Shareholder and Board of Directors
Aetna Life Insurance and Annuity Company:
We have audited the accompanying consolidated balance sheets of Aetna Life
Insurance and Annuity Company and Subsidiary as of December 31, 1997 and 1996,
and the related consolidated statements of income, changes in shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aetna Life Insurance
and Annuity Company and Subsidiary at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 3, 1998
F-2
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Income
(millions)
Years Ended December 31,
--------------------------------
1997 1996 1995
------- ------- -------
Revenue:
Premiums $267.1 $133.6 $212.7
Charges assessed against policyholders 475.0 396.5 318.9
Net investment income 1,080.5 1,045.6 1,004.3
Net realized capital gains 36.0 19.7 41.3
Other income 39.7 45.4 42.0
------- ------- -------
Total revenue 1,898.3 1,640.8 1,619.2
------- ------- -------
Benefits and expenses:
Current and future benefits 1,127.8 968.6 997.2
Operating expenses 347.4 342.2 310.8
Amortization of deferred policy
acquisition costs 128.4 69.8 48.0
Severance and facilities charges -- 61.3 --
------- ------- -------
Total benefits and expenses 1,603.6 1,441.9 1,356.0
------- ------- -------
Income before income taxes 294.7 198.9 263.2
Income taxes 89.4 57.8 87.3
------- ------- -------
Net income $205.3 $141.1 $175.9
======= ======= =======
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Balance Sheets
(millions, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
Assets 1997 1996
- ------ ---- ----
<S> <C> <C>
Investments:
Debt securities available for sale, at fair value
(amortized cost: $12,912.2 and $12,539.1) $13,463.8 $12,905.5
Equity securities, available for sale:
Nonredeemable preferred stock (cost: $131.7 and $107.6) 147.6 119.0
Investment in affiliated mutual funds (cost: $78.1 and $77.3) 83.0 81.1
Common stock (cost: $0.2 and $0.0) .6 .3
Short-term investments 95.6 34.8
Mortgage loans 12.8 13.0
Policy loans 469.6 399.3
--------- --------
Total investments 14,273.0 13,553.0
Cash and cash equivalents 565.4 459.1
Accrued investment income 163.0 159.0
Premiums due and other receivables 63.7 26.6
Deferred policy acquisition costs 1,654.6 1,515.3
Reinsurance loan to affiliate 397.2 628.3
Other assets 46.8 33.7
Separate accounts assets 22,982.7 15,318.3
--------- --------
Total assets $40,146.4 $31,693.3
========= ========
Liabilities and Shareholder's Equity
Liabilities:
Future policy benefits $3,763.7 $3,617.0
Unpaid claims and claim expenses 38.0 28.9
Policyholders' funds left with the Company 11,143.5 10,663.7
--------- --------
Total insurance reserve liabilities 14,945.2 14,309.6
Other liabilities 312.8 354.7
Income taxes:
Current 12.4 20.7
Deferred 72.0 80.5
Separate accounts liabilities 22,970.0 15,318.3
--------- --------
Total liabilities 38,312.4 30,083.8
--------- --------
Shareholder's equity:
Common stock, par value $50 (100,000 shares
authorized; 55,000 shares issued and outstanding) 2.8 2.8
Paid-in capital 418.0 418.0
Accumulated other comprehensive income 92.9 60.5
Retained earnings 1,320.3 1,128.2
--------- --------
Total shareholder's equity 1,834.0 1,609.5
--------- --------
Total liabilities and shareholder's equity $40,146.4 $31,693.3
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Changes in Shareholder's Equity
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Shareholder's equity, beginning of year $1,609.5 $1,583.0 $1,088.5
Comprehensive income
Net income 205.3 141.1 175.9
Other comprehensive income, net of tax
Unrealized gains (losses) on securities ($50.1
million, $(110.8) million and $494.6 million, 32.4 (72.0) 321.5
pretax, respectively)
-------- -------- --------
Total comprehensive income 237.7 69.1 497.4
-------- -------- --------
Capital contributions -- 10.4 0.0
Other changes 4.1 (49.5) 0.0
Common stock dividends (17.3) (3.5) (2.9)
-------- -------- --------
Shareholder's equity, end of year $1,834.0 $1,609.5 $1,583.0
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna Retirement Holdings, Inc.)
Consolidated Statements of Cash Flows
(millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $205.3 $141.1 $175.9
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
(Increase) decrease in accrued investment income (4.0) 16.5 (33.3)
(Increase) decrease in premiums due and other receivables (33.3) 1.6 25.4
Increase in policy loans (70.3) (60.7) (89.9)
Increase in deferred policy acquisition costs (139.3) (174.0) (177.0)
Decrease in reinsurance loan to affiliate 231.1 27.2 34.8
Net increase in universal life account balances 286.4 243.2 393.4
(Decrease) increase in other insurance reserve liabilities (249.6) (211.5) 79.0
Net (decrease) increase in other liabilities and other assets (41.7) 3.1 13.0
Decrease in income taxes (31.4) (26.7) (4.5)
Net accretion of discount on investments (66.4) (68.0) (66.4)
Net realized capital gains (36.0) (19.7) (41.3)
Other, net -- 1.1 --
-------- -------- --------
Net cash provided by (used for) operating activities 50.8 (126.8) 309.1
-------- -------- --------
Cash Flows from Investing Activities:
Proceeds from sales of:
Debt securities available for sale 5,311.3 5,182.2 4,207.2
Equity securities 103.1 190.5 180.8
Mortgage loans 0.2 8.7 10.7
Limited partnership -- -- 26.6
Investment maturities and collections of:
Debt securities available for sale 1,212.7 885.2 583.9
Short-term investments 89.3 35.0 106.1
Cost of investment purchases in:
Debt securities available for sale (6,732.8) (6,534.3) (6,034.0)
Equity securities (113.3) (118.1) (170.9)
Short-term investments (149.9) (54.7) (24.7)
Mortgage loans -- -- (21.3)
Other, net -- (17.6) --
-------- -------- --------
Net cash used for investing activities (279.4) (423.1) (1,135.6)
-------- -------- --------
Cash Flows from Financing Activities:
Deposits and interest credited for investment contracts 1,621.2 1,579.5 1,884.5
Withdrawals of investment contracts (1,256.3) (1,146.2) (1,109.6)
Capital contribution to Separate Account (25.0) -- --
Return of capital from Separate Account 12.3 -- --
Capital contribution from HOLDCO -- 10.4 --
Dividends paid to shareholder (17.3) (3.5) (2.9)
-------- -------- --------
Net cash provided by financing activities 334.9 440.2 772.0
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 106.3 (109.7) (54.5)
Cash and cash equivalents, beginning of year 459.1 568.8 623.3
-------- -------- --------
Cash and cash equivalents, end of year $565.4 $459.1 $568.8
======== ======== ========
Supplemental cash flow information:
Income taxes paid, net $119.6 $85.5 $92.8
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Aetna Life Insurance and Annuity Company and its wholly owned subsidiary
(collectively, the "Company") are providers of financial services and life
insurance products in the United States. The Company has two business
segments: financial services and individual life insurance.
Financial services products include annuity contracts that offer a variety
of funding and payout options for individual and employer-sponsored
retirement plans qualified under Internal Revenue Code Sections 401, 403,
408 and 457, and non-qualified annuity contracts. These contracts may be
deferred or immediate ("payout annuities"). Financial services also include
investment advisory services and pension plan administrative services.
Individual life insurance products include universal life, variable
universal life, traditional whole life and term insurance.
Basis of Presentation
---------------------
The consolidated financial statements include Aetna Life Insurance and
Annuity Company and its wholly owned subsidiary, Aetna Insurance Company of
America. Aetna Life Insurance and Annuity Company is a wholly owned
subsidiary of Aetna Retirement Holdings, Inc. ("HOLDCO"). HOLDCO is a
wholly owned subsidiary of Aetna Retirement Services, Inc., whose ultimate
parent is Aetna Inc. ("Aetna").
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. Certain reclassifications have
been made to 1996 and 1995 financial information to conform to the 1997
presentation.
New Accounting Standard
-----------------------
As of December 31, 1997 the Company adopted Financial Accounting Standard
("FAS") No. 130, Reporting Comprehensive Income. This statement establishes
standards for the reporting and presentation of comprehensive income and
its components in a full set of financial statements. Comprehensive income
encompasses all changes in shareholder's equity (except those arising from
transactions with shareholders) and includes net income and net unrealized
capital gains or losses on available-for-sale securities. As this new
standard only requires additional information in a financial statement, it
does not affect the Company's financial position or results of operations.
Future Application of Accounting Standards
------------------------------------------
Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities
FAS No. 125, Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities, was issued in June 1996 and provides
accounting and reporting standards for transfers of financial assets and
extinguishments of liabilities.
F-7
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Future Application of Accounting Standards (Continued)
FAS No. 125 is effective for 1997 financial statements; however, certain
provisions relating to accounting for repurchase agreements and securities
lending are not effective until January 1, 1998. Provisions effective in
1997 did not have a material effect on the Company's financial position or
results of operations. The Company does not expect adoption of this
statement for provisions effective in 1998 to have a material effect on its
financial position or results of operations.
Accounting by Insurance and Other Enterprises for Insurance-Related
Assessments
In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments, which provides guidance for
determining when an insurance or other enterprise should recognize a
liability for guaranty-fund and other insurance related assessments and
guidance for measuring the liability. This statement is effective for 1999
financial statements with early adoption permitted. The Company does not
expect adoption of this statement to have a material effect on its
financial position or results of operations.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from reported results
using those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, money market instruments
and other debt issues with a maturity of 90 days or less when purchased.
Investments
Debt and equity securities are classified as available for sale and carried
at fair value. These securities are written down (as realized capital
losses) for other than temporary declines in value. Unrealized capital
gains and losses related to available for sale investments, other than
amounts allocable to experience rated contractholders, are reflected in
shareholder's equity, net of related taxes.
Fair values for debt and equity securities are based on quoted market
prices or dealer quotations. Where quoted market prices or dealer
quotations are not available, fair values are measured utilizing quoted
market prices for similar securities or by using discounted cash flow
methods. Cost for mortgage-backed securities is adjusted for unamortized
premiums and discounts, which are amortized using the interest method over
the estimated remaining term of the securities, adjusted for anticipated
prepayments.
F-8
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
The company engages in securities lending whereby certain securities from
its portfolio are loaned to other institutions for short periods of time.
Initial collateral, primarily cash, is required at a rate of 102% of the
market value of a loaned domestic security and 105% of the market value of
a loaned foreign security. The collateral is deposited by the borrower with
a lending agent, and retained and invested by the lending agent according
to the Company's guidelines to generate additional income. The market value
of the loaned securities is monitored on a daily basis with additional
collateral obtained or refunded as the market value of the loaned
securities fluctuates. At December 31, 1997 and 1996, the Company loaned
securities (which are reflected as invested assets) with a market value of
approximately $385.1 million and $444.7 million, respectively.
Purchases and sales of debt and equity securities are recorded on the trade
date.
The investment in affiliated mutual funds represents an investment in Aetna
managed mutual funds which have been seeded by the Company, and is carried
at fair value.
Mortgage loans and policy loans are carried at unpaid principal balances,
net of impairment reserves. Sales of mortgage loans are recorded on the
closing date.
Short-term investments, consisting primarily of money market instruments
and other debt issues purchased with a maturity of 91 days to one year, are
considered available for sale and are carried at fair value, which
approximates amortized cost.
The Company utilizes futures contracts, swap agreements and warrants for
other than trading purposes in order to manage investment returns and price
risk and to align maturities, interest rates, and funds availability with
its obligations. (Refer to Note 3.)
Futures contracts are carried at fair value and require daily cash
settlement. Changes in the fair value of futures contracts that qualify as
hedges are deferred and recognized as an adjustment to the hedged asset or
liability. Deferred gains or losses on such futures contracts are amortized
over the life of the acquired asset or liability as a yield adjustment or
through net realized capital gains or losses upon disposal of an asset.
Changes in the fair value of futures contracts that do not qualify as
hedges are recorded in net realized capital gains or losses. Hedge
designation requires specific asset or liability identification, a
probability at inception of high correlation with the position underlying
the hedge, and that high correlation be maintained throughout the hedge
period. If a hedging instrument ceases to be highly correlated with the
position underlying the hedge, hedge accounting ceases at that date and
excess gains and losses on the hedging instrument are reflected in net
realized capital gains or losses.
Interest rate swap agreements which are designated as interest rate risk
management instruments at inception are accounted for using the accrual
method. Accordingly, the difference between amounts
F-9
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Investments (Continued)
paid and received on such agreements is reported in net investment income.
There is no recognition in the Consolidated Balance Sheets for changes in
the fair value of the agreement.
Warrants represent the right to purchase specific securities and are
accounted for as hedges. Upon exercise, the cost of the warrants are added
to the basis of the securities purchased.
Deferred Policy Acquisition Costs
Certain costs of acquiring insurance business are deferred. These costs,
all of which vary with and are primarily related to the production of new
and renewal business, consist principally of commissions, certain expenses
of underwriting and issuing contracts, and certain agency expenses. For
fixed ordinary life contracts, such costs are amortized over expected
premium-paying periods (up to 20 years). For universal life and certain
annuity contracts, such costs are amortized in proportion to estimated
gross profits and adjusted to reflect actual gross profits over the life of
the contracts (up to 20 years). Deferred policy acquisition costs are
written off to the extent that it is determined that future policy premiums
and investment income or gross profits are not adequate to cover related
losses and expenses.
Insurance Reserve Liabilities
Future policy benefits include reserves for universal life, immediate
annuities with life contingent payouts and traditional life insurance
contracts. Reserves for universal life contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon.
Reserves for immediate annuities with life contingent payouts and
traditional life insurance contracts are computed on the basis of assumed
investment yield, mortality, and expenses, including a margin for adverse
deviations. Such assumptions generally vary by plan, year of issue and
policy duration. Reserve interest rates range from 2.25% to 12.00% for all
years presented. Investment yield is based on the Company's experience.
Mortality and withdrawal rate assumptions are based on relevant Aetna
experience and are periodically reviewed against both industry standards
and experience.
Policyholders' funds left with the Company include reserves for deferred
annuity investment contracts and immediate annuities without life
contingent payouts. Reserves on such contracts are equal to cumulative
deposits less charges and withdrawals plus credited interest thereon (rates
range from 3.50% to 9.50% for all years presented) net of adjustments for
investment experience that the Company is entitled to reflect in future
credited interest. Reserves on contracts subject to experience rating
reflect the rights of contractholders, plan participants and the Company.
Unpaid claims for all lines of insurance include benefits for reported
losses and estimates of benefits for losses incurred but not reported.
F-10
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies (Continued)
Premiums, Charges Assessed Against Policyholders, Benefits and Expenses
For universal life and certain annuity contracts, charges assessed against
policyholders' funds for the cost of insurance, surrender charges,
actuarial margin and other fees are recorded as revenue in charges assessed
against policyholders. Other amounts received for these contracts are
reflected as deposits and are not recorded as revenue. Life insurance
premiums, other than premiums for universal life and certain annuity
contracts, are recorded as premium revenue when due. Related policy
benefits are recorded in relation to the associated premiums or gross
profit so that profits are recognized over the expected lives of the
contracts. When annuity payments with life contingencies begin under
contracts that were initially investment contracts, the accumulated balance
in the account is treated as a single premium for the purchase of an
annuity and reflected as an offsetting amount in both premiums and current
and future benefits in the Consolidated Statements of Income.
Separate Accounts
Assets held under variable universal life and variable annuity contracts
are segregated in Separate Accounts and are invested, as designated by the
contractholder or participant under a contract, in shares of mutual funds
which are managed by the Company, or other selected mutual funds not
managed by the Company.
Separate Accounts assets and liabilities are carried at fair value except
for those relating to a guaranteed interest option. Since the Company bears
the investment risk where the contract is held to maturity, the assets of
the Separate Account supporting the guaranteed interest option are carried
at an amortized cost of $658.6 million for 1997 (fair value $668.7 million)
and $515.6 million for 1996 (fair value $523.0 million). Reserves relating
to the guaranteed interest option are maintained at fund value and reflect
interest credited at rates ranging from 4.10% to 8.00% in both 1997 and in
1996.
Separate Accounts assets and liabilities are shown as separate captions in
the Consolidated Balance Sheets. Deposits, investment income and net
realized and unrealized capital gains and losses of the Separate Accounts
are not reflected in the Consolidated Statements of Income (with the
exception of realized capital gains and losses on the sale of assets
supporting the guaranteed interest option). The Consolidated Statements of
Cash Flows do not reflect investment activity of the Separate Accounts.
Income Taxes
The Company is included in the consolidated federal income tax return of
Aetna. The Company is taxed at regular corporate rates after adjusting
income reported for financial statement purposes for certain items.
Deferred income tax expenses/benefits result from changes during the year
in cumulative temporary differences between the tax basis and book basis of
assets and liabilities.
F-11
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments
Debt securities available for sale as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $1,219.7 $74.0 $0.1 $1,293.6
States, municipalities and political
subdivisions 0.3 -- -- 0.3
U.S. corporate securities:
Financial 2,370.7 84.6 1.3 2,454.0
Food & fiber 195.4 9.3 -- 204.7
Healthcare & consumer products 728.5 27.0 2.6 752.9
Media & broadcast 252.9 14.7 0.1 267.5
Natural resources 143.5 5.5 - 149.0
Transportation & capital goods 528.2 33.2 0.1 561.3
Utilities 521.3 23.5 0.9 543.9
Other corporate securities 96.9 3.2 - 100.1
---------- -------- -------- -----------
Total U.S. corporate securities 4,837.4 201.0 5.0 5,033.4
Foreign Securities:
Government 612.5 36.7 23.6 625.6
Utilities 177.5 28.7 -- 206.2
Other 857.9 27.7 42.8 842.8
---------- -------- -------- -----------
Total foreign securities 1,647.9 93.1 66.4 1,674.6
Residential mortgage-backed securities:
Pass-throughs 784.4 71.3 2.0 853.7
Collateralized mortgage obligations 2,280.5 137.4 2.0 2,415.9
---------- -------- -------- -----------
Total residential mortgage-
backed securities 3,064.9 208.7 4.0 3,269.6
Commercial/Multifamily mortgage-
backed securities 1,127.8 34.0 0.4 1,161.4
Other asset-backed securities 1,014.2 17.1 0.4 1,030.9
---------- -------- -------- -----------
Total Debt Securities $12,912.2 $627.9 $76.3 $13,463.8
========== ======== ======== ===========
</TABLE>
F-12
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Debt securities available for sale as of December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ------
(millions)
<S> <C> <C> <C> <C>
U.S. government and government
agencies and authorities $1,072.4 $20.5 $4.5 $1,088.4
States, municipalities and political
subdivisions 6.0 1.2 -- 7.2
U.S. corporate securities:
Financial 2,143.4 43.1 9.7 2,176.8
Food & fiber 198.2 4.6 1.3 201.5
Healthcare & consumer products 735.9 20.2 6.3 749.8
Media & broadcast 274.9 7.0 2.8 279.1
Natural resources 187.7 4.5 0.4 191.8
Transportation & capital goods 521.9 22.0 1.8 542.1
Utilities 448.8 14.8 2.8 460.8
Other corporate securities 141.5 3.0 -- 144.5
--------- --------- -------- ---------
Total U.S. corporate securities 4,652.3 119.2 25.1 4,746.4
Foreign Securities:
Government 758.6 36.0 5.7 788.9
Utilities 187.8 16.1 -- 203.9
Other 945.5 30.9 6.3 970.1
--------- -------- --------- ---------
Total foreign securities 1,891.9 83.0 12.0 1,962.9
Residential mortgage-backed securities:
Pass-throughs 792.2 78.3 3.1 867.4
Collateralized mortgage obligations 2,227.8 94.9 13.7 2,309.0
--------- --------- -------- ---------
Total residential mortgage-
backed securities 3,020.0 173.2 16.8 3,176.4
Commercial/Multifamily mortgage-
backed securities 1,008.7 24.8 5.6 1,027.9
Other asset-backed securities 887.8 10.7 2.2 896.3
--------- -------- --------- --------
Total Debt Securities $12,539.1 $432.6 $66.2 $12,905.5
========= ======== ========= ========
</TABLE>
F-13
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
At December 31, 1997 and 1996, net unrealized appreciation of $551.6
million and $366.4 million, respectively, on available-for-sale debt
securities included $429.3 million and $288.5 million, respectively,
related to experience rated contracts, which were not reflected in
shareholder's equity but in future policy benefits and policyholders' funds
left with the Company.
The carrying and fair value of debt securities for the year ended December
31, 1997 are shown below by contractual maturity. Actual maturities may
differ from contractual maturities because securities may be restructured,
called, or prepaid.
Amortized Fair
Cost Value
--------- ------
(millions)
Due to mature:
One year or less $367.3 $367.6
After one year through five years 2,165.1 2,195.4
After five years through ten years 2,367.3 2,407.0
After ten years 2,805.6 3,031.9
Mortgage-backed securities 4,192.7 4,431.0
Other asset-backed securities 1,014.2 1,030.9
--------- ---------
Total $12,912.2 $13,463.8
========= =========
At December 31, 1997 and 1996, debt securities carried at $8.2 million and
$7.6 million, respectively, were on deposit as required by regulatory
authorities.
The Company did not have any investments in a single issuer, other than
obligations of the U.S. government, with a carrying value in excess of 10%
of the Company's shareholder's equity at December 31, 1997.
F-14
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Included in the Company's debt securities were residential collateralized
mortgage obligations ("CMOs") supporting the following:
<TABLE>
<CAPTION>
1997 1996
--------------------- ------------------------
Fair Amortized Fair Amortized
Value Cost Value Cost
-------- -------- -------- --------
(millions)
<S> <C> <C> <C> <C>
Total residential CMOs(1) $2,415.9 $2,280.5 $2,309.0 $2,227.8
======== ======== ======== ========
Percentage of total:
Supporting experience rated products 81.6% 84.2%
Supporting remaining products 18.4% 15.8%
----- -----
100.0% 100.0%
===== =====
</TABLE>
(1) At December 31, 1997 and 1996, approximately 73% and 71%,
respectively, of the Company's residential CMO holdings were
backed by government agencies such as GNMA, FNMA, FHLMC.
There are various categories of CMOs which are subject to different degrees
of risk from changes in interest rates and, for nonagency-backed CMOs,
defaults. The principal risks inherent in holding CMOs are prepayment and
extension risks related to dramatic decreases and increases in interest
rates resulting in the repayment of principal from the underlying mortgages
either earlier or later than originally anticipated. At December 31, 1997
and 1996, approximately 4% and 3%, respectively, of the Company's CMO
holdings were invested in types of CMOs which are subject to more
prepayment and extension risk than traditional CMOs (such as interest- or
principal-only strips).
F-15
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
2. Investments (Continued)
Investments in equity securities available for sale were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
(millions)
1997
Equity Securities $210.0 $21.3 $0.1 $231.2
====== ===== ==== ======
1996
Equity Securities $184.9 $16.3 $0.8 $200.4
====== ===== ==== ======
3. Financial Instruments
Estimated Fair Value
--------------------
The carrying values and estimated fair values of certain of the Company's
financial instruments at December 31, 1997 and 1996 were as follows:
1997 1996
-------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- ------ -------- -----
(millions)
Assets:
Mortgage loans $ 12.8 $ 12.4 $ 13.0 $ 13.2
Liabilities:
Investment contract
liabilities:
With a fixed maturity $ 1,030.3 $1,005.4 $1,014.1 $1,028.8
Without a fixed
maturity 10,113.2 9,587.5 9,649.6 9,427.6
Fair value estimates are made at a specific point in time, based on
available market information and judgments about the financial instrument,
such as estimates of timing and amount of future cash flows. Such estimates
do not reflect any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates cannot
be substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument. In
evaluating the Company's management of interest rate, price and liquidity
risks, the fair values of all assets and liabilities should be taken into
consideration, not only those presented above.
F-16
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Estimated Fair Value (Continued)
The following valuation methods and assumptions were used by the Company in
estimating the fair value of the above financial instruments:
Mortgage loans: Fair values are estimated by discounting expected mortgage
loan cash flows at market rates which reflect the rates at which similar
loans would be made to similar borrowers. The rates reflect management's
assessment of the credit quality and the remaining duration of the loans.
Investment contract liabilities (included in policyholders' funds left with
the Company):
With a fixed maturity: Fair value is estimated by discounting cash flows at
interest rates currently being offered by, or available to, the Company for
similar contracts.
Without a fixed maturity: Fair value is estimated as the amount payable to
the contractholder upon demand. However, the Company has the right under
such contracts to delay payment of withdrawals which may ultimately result
in paying an amount different than that determined to be payable on demand.
Off-Balance-Sheet and Other Financial Instruments (including Derivative
Instruments)
The Company uses off-balance-sheet and other financial instruments
primarily to manage portfolio risks, including interest rate,
prepayment/call, credit, price, and liquidity risks. In 1997 and 1996,
Treasury futures contracts were used to manage interest rate risk in the
Company's bond portfolio; and, in 1996, stock index futures contracts were
used to manage price risk in the Company's equity portfolio. In 1996 and
1995, interest rate swaps and forward commitments to enter into interest
rate swaps, respectively, were also used to manage interest rate risk in
the Company's bond portfolio.
Futures Contracts:
Futures contracts represent commitments to either purchase or sell
securities at a specified future date and at a specified price or yield.
Futures contracts trade on organized exchanges and, therefore, have minimal
credit risk. Cash settlements are made daily based on changes in the prices
of the underlying assets. There were no futures contracts open as of
December 31, 1997 and 1996.
Interest Rate Swaps:
Under interest rate swaps, the Company agrees with other parties to
exchange interest amounts calculated by reference to an agreed notional
principal amount. Generally, no cash is exchanged at the outset of the
contract and no principal payments are made. A single net payment is
usually made by one counterparty at each due date or upon termination of
the contract. The Company would be
F-17
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
3. Financial Instruments (Continued)
Off-Balance-Sheet and Other Financial Instruments (Including Derivative
Instruments) (Continued)
exposed to credit-related losses in the event of nonperformance by
counterparties to financial instruments, however, the Company controls its
exposure to credit risk through credit approvals, credit limits and regular
monitoring procedures. The credit exposure of interest rate swaps is
represented by the fair value (market value) of contracts with a positive
fair value (market value) at the reporting date. There were no interest
rate swap agreements open as of December 31, 1997 and 1996.
During 1995, the Company received $0.4 million for writing call options on
underlying securities. The Company did not write any call options in 1997
and 1996.
Warrants:
Warrants are instruments giving the Company the right, but not the
obligation to buy a security at a given price during a specified period. As
of December 31, 1997 and 1996, the Company had open warrants to purchase
equity securities with a fair value of $0.6 million and $0.3 million,
respectively.
Debt Instruments with Derivative Characteristics:
The Company also had investments in certain debt instruments with
derivative characteristics, including those whose market value is at least
partially determined by, among other things, levels of or changes in
domestic and/or foreign interest rates (short or long term), exchange
rates, prepayment rates, equity markets or credit ratings/spreads. The
amortized cost and fair value of these securities, included in the debt
securities portfolio, as of December 31, 1997 was as follows:
Amortized Fair
Cost Value
--------- ----
(millions)
Residential collateralized mortgage
obligations $2,280.5 $2,415.9
Principal-only strips (included above) 59.0 67.0
Interest-only strips (included above) 12.8 24.3
Other structured securities with derivative
characteristics (1) 107.4 105.2
(1) Represents non-leveraged instruments whose fair values and credit
risk are based on underlying securities, including fixed income
securities and interest rate swap agreements.
F-18
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
4. Net Investment Income
Sources of net investment income were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $962.8 $945.3 $891.5
Nonredeemable preferred stock 13.7 5.9 4.2
Investment in affiliated
mutual funds 4.9 14.3 14.9
Mortgage loans 1.3 2.2 1.4
Policy loans 19.9 18.4 13.7
Reinsurance loan to affiliate 37.5 44.1 46.5
Cash equivalents 44.2 29.4 38.9
Other 10.0 2.1 8.4
-------- -------- --------
Gross investment income 1,094.3 1,061.7 1,019.5
Less investment expenses (13.8) (16.1) (15.2)
-------- -------- --------
Net investment income $1,080.5 $1,045.6 $1,004.3
======== ======== ========
Net investment income includes amounts allocable to experience rated
contractholders of $823.1 million, $787.6 million and $744.2 million for
the years ended December 31, 1997, 1996 and 1995, respectively. Interest
credited to contractholders is included in current and future benefits.
5. Dividend Restrictions and Shareholder's Equity
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively.
The amount of dividends that may be paid to the shareholder in 1998 without
prior approval by the Insurance Commissioner of the State of Connecticut is
$77.6 million.
The Insurance Department of the State of Connecticut (the "Department")
recognizes as net income and shareholder's capital and surplus those
amounts determined in conformity with statutory accounting practices
prescribed or permitted by the Department, which differ in certain respects
from generally accepted accounting principles. Statutory net income was
$80.5 million, $57.8 million and $70.0 million for the years ended December
31, 1997, 1996 and 1995, respectively. Statutory capital and surplus was
$778.7 million and $713.6 million as of December 31, 1997 and 1996,
respectively.
As of December 31, 1997 the Company does not utilize any statutory
accounting practices which are not prescribed by state regulatory
authorities that, individually or in the aggregate, materially affect
statutory capital and surplus.
F-19
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations
Realized capital gains or losses are the difference between the carrying
value and sale proceeds of specific investments sold.
Net realized capital gains on investments were as follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $22.5 $11.1 $32.8
Equity securities 9.9 8.6 8.3
Other 3.6 -- 0.2
------ -------- ------
Pretax realized capital gains $36.0 $19.7 $41.3
====== ======== ======
After tax realized capital gains $23.2 $13.0 $25.8
====== ======== ======
Net realized capital gains of $96.1 million, $53.1 million and $61.1
million for 1997, 1996 and 1995, respectively, allocable to experience
rated contracts, were deducted from net realized capital gains and an
offsetting amount was reflected in policyholders' funds left with the
Company. Net unamortized gains were $138.1 million and $53.3 million at
December 31, 1997 and 1996, respectively.
Proceeds from the sale of available-for-sale debt securities and the
related gross gains and losses were as follows:
1997 1996 1995
----- ----- ----
(millions)
Proceeds on Sales $5,311.3 $5,182.2 $4,207.2
Gross Gains 25.8 24.3 44.6
Gross Losses 3.3 13.2 11.8
F-20
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in shareholder's equity related to changes in accumulated other
comprehensive income (unrealized capital gains and losses on securities)
(excluding those related to experience rated contractholders) were as
follows:
1997 1996 1995
---- ---- ----
(millions)
Debt securities $44.3 $(100.1) $255.9
Equity securities 5.6 (10.5) 27.3
Limited partnership -- -- 1.8
----- ------- ------
49.9 (110.6) 285.0
Increase (decrease) in deferred
income taxes (See Note 8) 17.5 (38.6) (36.5)
----- ------- ------
Net changes in accumulated other
comprehensive income $32.4 $(72.0) $321.5
===== ======= ======
Net unrealized capital gains allocable to experience rated contracts of
$356.7 million and $72.6 million at December 31, 1997 and $245.2 million
and $43.3 million at December 31, 1996 are reflected on the Consolidated
Balance Sheets in policyholders' funds left with the Company and future
policy benefits, respectively, and are not included in shareholder's
equity.
Shareholder's equity included the following accumulated other comprehensive
income, which are net of amounts allocable to experience rated
contractholders, at December 31:
1997 1996 1995
---- ---- ----
(millions)
Debt securities
Gross unrealized capital gains $140.6 $101.7 $179.3
Gross unrealized capital losses (18.4) (23.8) (1.3)
----- ----- -----
122.2 77.9 178.0
Equity securities
Gross unrealized capital gains 21.2 16.3 27.2
Gross unrealized capital losses (0.1) (0.8) (1.2)
---- ---- -----
21.1 15.5 26.0
Deferred income taxes (See Note 8) 50.4 32.9 71.5
---- ---- -----
Net accumulated other
comprehensive income $92.9 $60.5 $132.5
==== ==== =====
F-21
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
6. Capital Gains and Losses on Investment Operations (Continued)
Changes in accumulated other comprehensive income related to changes in
unrealized gains (losses) on securities (excluding those related to
experience rated contractholders) were as follows:
1997 1996 1995
---- ---- ----
(millions)
Unrealized holding gains (losses)
arising during the period (1) $98.8 $(14.8) $390.5
Less: reclassification adjustment
for gains and other items included
in net income (2) 66.4 57.2 69.0
----- ------ ------
Net unrealized gains (losses)
on securities $32.4 $(72.0) $321.5
===== ====== ======
(1) Pretax unrealized holding gains (losses) arising during the
period were $152.0 million, ($22.8) million and $600.8 million
for 1997, 1996 and 1995, respectively.
(2) Pretax reclassification adjustments for gains and other items
included in net income were $102.4 million, $87.7 million and
$107.5 million for 1997, 1996 and 1995, respectively.
7. Severance and Facilities Charges
Severance and facilities charges during 1996, as described below, included
the following (pretax):
<TABLE>
<CAPTION>
Vacated
Asset Leased Corporate
(Millions) Severance Write-off Property Other Allocation Total
-------------------------- --------- --------- --------- ----- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Financial Services $29.1 $1.0 $1.3 $1.7 $ -- $33.1
Individual Life Insurance 12.5 0.4 0.5 0.8 -- 14.2
Corporate Allocation -- -- -- -- 14.0 14.0
--------- --------- --------- ----- ---------- ---------
Total Company $41.6 $1.4 $1.8 $2.5 $14.0 $61.3
-------------------------- --------- --------- --------- ----- ---------- ---------
</TABLE>
In the third quarter of 1996, the Company recorded a $30.7 million after
tax ($47.3 million pretax) charge principally related to actions taken or
expected to be taken to improve its cost structure relative to its
competitors. The severance portion of the charge is based on a plan to
eliminate 702 positions (primarily customer service, sales and information
technology support staff). The facilities portion of the charge is based on
a plan to consolidate sales/service field offices.
F-22
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
7. Severance and Facilities Charges (Continued)
In addition to the above charge, Aetna recorded a facilities and severance
charge in the second quarter of 1996, primarily as a result of actions
taken or expected to be taken to reduce the level of corporate expenses and
other costs previously absorbed by Aetna's property-casualty operations,
which were sold in April 1996. The cost allocated to the Company associated
with this charge was $9.1 million after tax ($14.0 million pretax).
Activity for 1997 and 1996 within the severance and facilities reserve
(pretax, in millions) and the number of positions eliminated related to
such actions were as follows:
(Millions) Reserve Positions
----------------------------------- ---------- ---------
Balance at December 31, 1995 $ -- --
Severance and facilities charges 47.3 702
Corporate Allocation 14.0 --
Actions taken (1) (13.4) (178)
---------- ---------
Balance at December 31, 1996 47.9 524
Actions taken (1) (27.1) (163)
---------- ---------
Balance at December 31, 1997 $20.8 361
========== =========
(1) Includes $15.9 million and $8.0 million in 1997 and 1996,
respectively, of severance-related actions and $7.9 million and $4.1
million in 1997 and 1996, respectively, of corporate
allocation-related actions.
The Company's severance actions are expected to be substantially completed
by September 30, 1998. The corporate allocation actions were substantially
completed in 1997.
F-23
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes
The Company is included in the consolidated federal income tax return, the
Illinois Unitary return and the Connecticut and the New York combined state
income tax returns of Aetna. Aetna allocates to each member an amount
approximating the tax it would have incurred were it not a member of the
consolidated group, and credits the member for the use of its tax saving
attributes used in the consolidated federal income tax return.
Income taxes for the years ended December 31, consist of:
1997 1996 1995
---- ---- ----
(millions)
Current taxes:
Income Taxes:
Federal income tax $64.5 $50.9 $82.9
State income tax 3.7 3.7 3.2
Net realized capital gains 45.6 25.3 28.5
----- ---- ----
113.8 79.9 114.6
----- ---- -----
Deferred taxes (benefits):
Income taxes:
Federal 8.4 (3.5) (14.4)
Net realized capital gains (losses) (32.8) (18.6) (12.9)
----- ----- -----
(24.4) (22.1) (27.3)
----- ----- -----
Total $89.4 $57.8 $87.3
===== ===== =====
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
1997 1996 1995
---- ---- ----
(millions)
Income before income taxes $294.7 $198.9 $263.2
Tax rate 35% 35% 35%
------- ------- -------
Application of the tax rate 103.1 69.6 92.1
------- ------- -------
Tax effect of:
State income tax, net of
federal benefit 2.4 2.4 2.1
Excludable dividends (15.9) (8.7) (9.3)
Other, net (0.2) (5.5) 2.4
------- ------- --------
Income taxes $89.4 $57.8 $87.3
======= ======= ========
F-24
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The tax effects of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 are presented below:
1997 1996
---- ----
(millions)
Deferred tax assets:
Insurance reserves $415.8 $344.6
Unrealized gains allocable to
experience rated contracts 150.1 100.8
Investment losses 6.6 7.5
Postretirement benefits other
than pensions 26.3 27.0
Deferred compensation 31.2 25.0
Pension (3.6) 7.6
Restructuring charge 9.5 17.6
Depreciation 3.9 2.6
Other 8.8 9.1
--------- --------
Total gross assets 648.6 541.8
Deferred tax liabilities:
Deferred policy acquisition costs 515.6 482.1
Market discount 5.1 6.8
Net unrealized capital gains 200.5 133.7
Other (0.6) (0.3)
--------- ---------
Total gross liabilities 720.6 622.3
--------- ---------
Net deferred tax liability $72.0 $80.5
========= =========
Net unrealized capital gains and losses are presented in shareholder's
equity net of deferred taxes. As of December 31, 1997 and 1996, no
valuation allowances were required for unrealized capital gains and losses.
The "Policyholders' Surplus Account," which arose under prior tax law, is
generally that portion of a life insurance company's statutory income that
has not been subject to taxation. As of December 31, 1983, no further
additions could be made to the Policyholders' Surplus Account for tax
return purposes under the Deficit Reduction Act of 1984. The balance in
such account was approximately $17.2 million at December 31, 1997. This
amount would be taxed only under certain conditions. No income taxes have
been provided on this amount since management believes the conditions under
which such taxes would become payable are remote.
F-25
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
8. Income Taxes (Continued)
The Internal Revenue Service ("Service") has completed examinations of the
consolidated federal income tax returns of Aetna through 1990. Discussions
are being held with the Service with respect to proposed adjustments.
Management believes there are adequate defenses against, or sufficient
reserves to provide for, any such adjustments. The Service has commenced
its examinations for the years 1991 through 1994.
9. Benefit Plans
Employee Pension Plans - The Company, in conjunction with Aetna, has
noncontributory defined benefit pension plans covering substantially all
employees. The plans provide pension benefits based on years of service and
average annual compensation (measured over 60 consecutive months of highest
earnings in a 120-month period). Contributions are determined using the
Projected Unit Credit Method and, for qualified plans subject to ERISA
requirements, are limited to amounts that are tax-deductible. As of
December 31, 1997, Aetna's accrued pension cost has been allocated to its
subsidiaries, including the Company, under an allocation based on eligible
salaries. Data on a separate company basis regarding the proportionate
share of the projected benefit obligation and plan assets is not available.
The accumulated benefit obligation and plan assets are recorded by Aetna.
As of the measurement date (i.e., September 30), the accumulated plan
assets exceeded accumulated plan benefits. Allocated pretax charges to
operations for the pension plan (based on the Company's total salary cost
as a percentage of Aetna's total salary cost) were $2.7 million, $4.3
million and $6.1 million for the years ended December 31, 1997, 1996 and
1995, respectively.
Employee Postretirement Benefits - In addition to providing pension
benefits, Aetna currently provides certain health care and life insurance
benefits for retired employees. A comprehensive medical and dental plan is
offered to all full-time employees retiring at age 50 with 15 years of
service or at age 65 with 10 years of service. There is a cap on the
portion of the cost paid by the Company relating to medical and dental
benefits. Retirees are generally required to contribute to the plans based
on their years of service with Aetna. The costs to the Company associated
with the Aetna postretirement plans for 1997, 1996 and 1995 were $2.7
million, $1.8 million and $1.4 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$77.7 million of accrued liabilities, primarily related to the pension and
postretirement benefit plans described above, that had been previously
recorded by Aetna. The after tax amount of this transfer (approximately
$50.5 million) is reported as a reduction in retained earnings. In 1997,
other changes in shareholder's equity includes an additional $0.8 million
reduction reflecting revisions to the allocation of these accrued
liabilities.
Agent Pension Plans - The Company, in conjunction with Aetna, has a
non-qualified pension plan covering certain agents. The plan provides
pension benefits based on annual commission earnings. As of the measurement
date (i.e., September 30), the accumulated plan assets exceeded accumulated
plan benefits.
F-26
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
9. Benefit Plans (Continued)
Agent Postretirement Benefits - The Company, in conjunction with Aetna,
also provides certain postretirement health care and life insurance
benefits for certain agents. The costs to the Company associated with the
agents' postretirement plans for 1997, 1996 and 1995 were $0.6 million,
$0.7 million and $0.8 million, respectively.
Incentive Savings Plan - Substantially all employees are eligible to
participate in a savings plan under which designated contributions, which
may be invested in common stock of Aetna or certain other investments, are
matched, up to 5% of compensation, by Aetna. Pretax charges to operations
for the incentive savings plan were $4.4 million, $5.4 million and $4.9
million in 1997, 1996 and 1995, respectively.
Stock Plans - Aetna has a stock incentive plan that provides for stock
options, deferred contingent common stock or equivalent cash awards or
restricted stock to certain key employees. Executive and middle management
employees may be granted options to purchase common stock of Aetna at or
above the market price on the date of grant. Options generally become 100%
vested three years after the grant is made, with one-third of the options
vesting each year. Aetna does not recognize compensation expense for stock
options granted at or above the market price on the date of grant under its
stock incentive plans. In addition, executives may be granted incentive
units which are rights to receive common stock or an equivalent value in
cash. The incentive units may vest within a range from 0% to 175% at the
end of a four year period based on the attainment of performance goals. The
costs to the Company associated with the Aetna stock plans for 1997, 1996
and 1995, were $2.9 million, $8.1 million and $6.3 million, respectively.
As of December 31, 1996, Aetna transferred to the Company approximately
$1.1 million of deferred tax benefits related to stock options. This amount
is reported as an increase in retained earnings. In 1997, other changes in
shareholder's equity include an additional increase of $2.3 million
reflecting revisions to the allocation of the deferred tax benefit.
10. Related Party Transactions
The Company is compensated by the Separate Accounts for bearing mortality
and expense risks pertaining to variable life and annuity contracts. Under
the insurance contracts, the Separate Accounts pay the Company a daily fee
which, on an annual basis, ranges, depending on the product, from 0.10% to
1.90% of their average daily net assets. The Company also receives fees
from Aetna managed mutual funds for serving as investment adviser. Under
the advisory agreements, these funds pay the Company a daily fee which, on
an annual basis, ranges, depending on the fund, from 0.25% to 0.85% of
their average daily net assets. The Company also receives fees (expressed
as a percentage of the average daily net assets) from some of its funds for
providing administration services, and from The Aetna Series Fund for
providing shareholder services and promoting sales. The amount of
compensation and fees received from the Separate Accounts and mutual funds,
included in charges assessed against policyholders, amounted to $271.2
million, $186.8 million and $128.1 million in 1997, 1996 and 1995,
respectively. The Company may waive advisory fees at its discretion.
F-27
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
The Company acts as an investment adviser for its affiliated mutual funds.
Since August 1996, Aeltus Investment Management, Inc. ("Aeltus"), a wholly
owned subsidiary of HOLDCO and an affiliate of the Company, has been acting
as Subadvisor for affiliated mutual funds and adviser for most of the
General Account assets. Fees paid by the Company to Aeltus, included in
both charges assessed against policyholders and net investment income, on
an annual basis, range from 0.06% to 0.55% of the average daily net assets
under management. For the years ended December 31, 1997 and 1996, the
Company paid $45.5 million and $16.0 million in such fees.
The Company may, from time to time, make reimbursements to an Aetna managed
mutual fund for some or all of its operating expenses. Reimbursement
arrangements may be terminated at any time without notice.
Since 1981, all domestic individual non-participating life insurance of
Aetna and its subsidiaries has been issued by the Company. Effective
December 31, 1988, the Company entered into a reinsurance agreement with
Aetna Life Insurance Company ("Aetna Life") in which substantially all of
the non-participating individual life and annuity business written by Aetna
Life prior to 1981 was assumed by the Company. A $6.1 million and a $108.0
million commission, paid by the Company to Aetna Life in 1996 and 1988,
respectively, was capitalized as deferred policy acquisition costs. In
consideration for the assumption of this business, a loan was established
relating to the assets held by Aetna Life which support the insurance
reserves. Effective January 1, 1997, this agreement has been amended to
transition (based on underlying investment rollover in Aetna Life) from a
modified coinsurance to a coinsurance arrangement. As a result of this
change, reserves will be ceded to the Company from Aetna Life as investment
rollover occurs and the loan previously established will be reduced. The
Company maintained insurance reserves of $574.5 million ($397.2 million
relating to the modified coinsurance agreement and $177.3 million relating
to the coinsurance agreement) and $628.3 million as of December 31, 1997
and 1996, respectively, relating to the business assumed. The fair value of
the loan relating to assets held by Aetna Life was $412.3 million and
$625.3 million as of December 31, 1997 and 1996, respectively, and is based
upon the fair value of the underlying assets. Premiums of $176.7 million,
$25.3 million and $28.0 million and current and future benefits of $183.9
million, $39.5 million and $43.0 million were assumed in 1997, 1996 and
1995, respectively.
Investment income of $37.5 million, $44.1 million and $46.5 million was
generated from the reinsurance loan to affiliate in 1997, 1996 and 1995,
respectively.
On December 16, 1988, the Company assumed $25.0 million of premium revenue
from Aetna Life for the purchase and administration of a life contingent
single premium variable payout annuity contract. In addition, the Company
also is responsible for administering fixed annuity payments that are made
to annuitants receiving variable payments. Reserves of $32.5 million and
$28.9 million were maintained for this contract as of December 31, 1997 and
1996, respectively.
Effective February 1, 1992, the Company increased its retention limit per
individual life to $2.0 million and entered into a reinsurance agreement
with Aetna Life to reinsure amounts in excess of this
F-28
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
10. Related Party Transactions (Continued)
limit, up to a maximum of $8.0 million on any new individual life business,
on a yearly renewable term basis. Premium amounts related to this agreement
were $5.9 million, $5.2 million and $3.2 million for 1997, 1996 and 1995,
respectively.
Effective October 1, 1997, the Company entered into a reinsurance agreement
with Aetna Life to assume amounts in excess of $0.2 million for certain of
its participating life insurance, on a yearly renewable term basis. Premium
amounts related to this agreement were $0.7 million in 1997.
The Company received a capital contribution of $10.4 million in cash from
HOLDCO in 1996. The Company received no capital contributions in 1997 or
1995.
The Company paid $17.3 million and $3.5 million in cash dividends to HOLDCO
in 1997 and 1996, respectively. In 1995, the Company dividended $2.9
million in the form of two of its subsidiaries, Systematized Benefits
Administrators, Inc. and Aetna Investment Services, Inc., to Aetna
Retirement Services, Inc. (the Company's former parent).
Premiums due and other receivables include $37.0 million and $2.8 million
due from affiliates in 1997 and 1996, respectively. Other liabilities
include $1.2 million and $10.7 million due to affiliates for 1997 and 1996,
respectively.
As of December 31, 1997, Aetna transferred to the Company $2.5 million
based on its decision not to settle state tax liabilities for the years
1996 and 1997. This amount has been reported as an other increase in
retained earnings.
Substantially all of the administrative and support functions of the
Company are provided by Aetna and its affiliates. The financial statements
reflect allocated charges for these services based upon measures
appropriate for the type and nature of service provided.
11. Reinsurance
The Company utilizes indemnity reinsurance agreements to reduce its
exposure to large losses in all aspects of its insurance business. Such
reinsurance permits recovery of a portion of losses from reinsurers,
although it does not discharge the primary liability of the Company as
direct insurer of the risks reinsured. The Company evaluates the financial
strength of potential reinsurers and continually monitors the financial
condition of reinsurers. Only those reinsurance recoverables deemed
probable of recovery are reflected as assets on the Company's Consolidated
Balance Sheets.
F-29
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
11. Reinsurance (Continued)
The following table includes premium amounts ceded/assumed to/from
affiliated companies as discussed in Note 10 above.
<TABLE>
<CAPTION>
Ceded to Assumed
Direct Other from Other Net
Amount Companies Companies Amount
(millions)
------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
1997
----
Premiums:
Life Insurance $ 35.7 $15.1 $177.4 $198.0
Accident and Health Insurance 5.6 5.6 -- --
Annuities 67.9 -- 1.2 69.1
------- ------------- ----------- ---------
Total earned premiums $109.2 $20.7 $178.6 $267.1
======= ============= =========== =========
1996
----
Premiums:
Life Insurance $ 34.6 $11.2 $25.3 $ 48.7
Accident and Health Insurance 6.3 6.3 -- --
Annuities 84.3 -- 0.6 84.9
------- ------------- ----------- ---------
Total earned premiums $125.2 $17.5 $25.9 $133.6
======= ============= =========== =========
1995
----
Premiums:
Life Insurance $ 28.8 $ 8.6 $28.0 $ 48.2
Accident and Health Insurance 7.5 7.5 -- --
Annuities 164.0 -- 0.5 164.5
------- ------------- ----------- ---------
Total earned premiums $200.3 $16.1 $28.5 $212.7
======= ============= =========== =========
</TABLE>
12. Commitments and Contingent Liabilities
Commitments
Through the normal course of investment operations, the Company commits to
either purchase or sell securities or money market instruments at a
specified future date and at a specified price or yield. The inability of
counterparties to honor these commitments may result in either higher or
lower replacement cost. Also, there is likely to be a change in the value
of the securities underlying the commitments. At December 31, 1997, the
Company had commitments to purchase investments of $38.7 million. The fair
value of the investments at December 31, 1997 approximated $39.0 million.
F-30
<PAGE>
AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARY
(A wholly owned subsidiary of Aetna
Retirement Holdings, Inc.)
Notes to Consolidated Financial Statements (Continued)
12. Commitments and Contingent Liabilities (Continued)
Litigation
The Company is involved in numerous lawsuits arising, for the most part, in
the ordinary course of its business operations. While the ultimate outcome
of litigation against the Company cannot be determined at this time, after
consideration of the defenses available to the Company and any related
reserves established, it is not expected to result in liability for amounts
material to the financial condition of the Company, although it may
adversely affect results of operations in future periods.
13. Segment Information (1)
The Company's operations are reported through two major business segments:
Financial Services and Individual Life Insurance. Summarized financial
information for the Company's principal operations was as follows:
1997 1996 1995
--------- --------- ---------
(millions)
Revenue:
Financial Services $1,277.9 $1,195.1 $1,211.3
Individual Life Insurance 620.4 445.7 407.9
--------- --------- ---------
Total revenue $1,898.3 $1,640.8 $1,619.2
========= ========= =========
Income before income taxes: (2)
Financial Services $188.2 $129.9 $160.1
Individual Life Insurance 106.5 83.0 103.1
--------- --------- ---------
Total income before
income taxes $294.7 $212.9 $263.2
========= ========= =========
Net income: (2)
Financial Services $137.5 $94.3 $113.8
Individual Life Insurance 67.8 55.9 62.1
--------- --------- ---------
Net income $205.3 $150.2 $175.9
========= ========= =========
Assets under management: (3)
Financial Services (4) $37,609.3 $27,268.1 $22,534.4
Individual Life Insurance 3,096.1 2,830.5 2,590.9
--------- --------- ---------
Total assets under management 40,705.4 $30,098.6 $25,125.3
========= ========= =========
(1) The 1996 results include severance and facilities charges of
$30.7 million, after tax. Of this charge $21.5 million related to
the Financial Services segment and $9.2 million related to the
Individual Life Insurance segment.
(2) Excludes any effect of the corporate facilities and severance
charge recorded in 1996 which is not directly allocable to the
Financial Services and Individual Life Insurance segments. (Refer
to Note 7).
(3) Excludes net unrealized capital gains (losses) of $551.5 million,
$366.4 million and $797.1 million at December 31, 1997, 1996 and
1995, respectively.
(4) The December 31, 1997 balance includes the transfer of $4,078.5
million of assets under management that were previously reported
by an affiliate.
F-31
<PAGE>
Form No. SAI.91846-98 ALIAC Ed. May 1998
<PAGE>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Statement of Assets and Liabilities as of December 31,
1997
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1997 and 1996
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
- Consolidated Balance Sheets as of December 31, 1997 and
1996
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1997, 1996 and 1995
- Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance
and Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3.1) Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesale Agreement and Related Selling
Agreement(2)
(4.1) Variable Annuity Contract (G-CDA-IB(ATORP)) and Endorsement
(EGET-IC(R))(3)
(4.2) Variable Annuity Contract and Certificate (G-CDA-95(TORP) and
(GTCC-95(TORP))(3)
(4.3) Variable Annuity Contract (G-CDA-IB(AORP)) and Endorsement
(EGET-IC(R))(3)
(4.4) Variable Annuity Contract and Certificate (G-CDA-95(ORP) and
(GTCC-95(ORP))(3)
(4.5) Variable Annuity Contracts and Certificate (G-CDA-ORP),
(CDA-IB(TORP)) and (GTCC-95(TORP))(3)
(4.6) Variable Annuity Contract (G-CDA-96(TORP))(4)
<PAGE>
(4.7) Endorsement (GET 9/96) to Variable Annuity Contract
G-CDA-95(TORP), GTCC95(TORP), G-CDA-95(ORP) and
GTCC-95(ORP)(4)
(5) Variable Annuity Contract Application (300-MOP-96)
(6.1) Certification of Incorporation of Aetna Life Insurance and
Annuity Company(5)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(6)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance
and Annuity Company(7)
(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)
(8.2) Service Agreement between Calvert Asset Management Company,
Inc. and Aetna Life Insurance and Annuity Company Dated
December 1, 1997(8)
(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(9)
(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(10)
(8.6) Form of Seventh Amendment dated as of May 1, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund and Fidelty
Distributors Corporation dated February 1, 1994 and amended on
December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996, May 1, 1997 and November 6, 1997(11)
(8.7) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1,1996(6)
(8.8) Fifth Amendment dated as of May 1, 1997 to the Fund
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996(9)
<PAGE>
(8.9) Sixth Amendment dated as of January 20, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996, March 1, 1996 and May 1, 1997(12)
(8.10) Form of Seventh Amendment dated as of May 1, 1998 to the Fund
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelty Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996, March 1, 1996, May 1, 1997 and January 20,
1998(11)
(8.11) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995(13)
(8.12) Amendment dated January 1, 1997 to Service Agreement between
Aetna Life Insurance and Annuity Company and Fidelity
Investments Institutional Operations Company dated as of
November 1, 1995(12)
(8.13) Fund Participation Agreement among Janus Aspen Series and
Aetna Life Insurance and Annuity Company and Janus Capital
Corporation dated December 8, 1997(14)
(8.14) Service Agreement between Janus Capital Corporation and Aetna
Life Insurance and Annuity Company dated December 8, 1997(14)
(8.15) 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)
(8.16) Fund Participation Agreement dated as of March 11, 1997
between Aetna Life Insurance and Annuity Company and
Oppenheimer Variable Annuity Account Funds and Oppenheimer
Funds, Inc.(15)
(8.17) Service Agreement dated as of March 11, 1997 between
Oppenheimer Funds, Inc. and Aetna Life Insurance and Annuity
Company(15)
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(11) Not applicable
(12) Not applicable
(13) Schedule for Computation of Performance Data
(14) Not applicable
(15.1) Powers of Attorney(11)
(15.2) Authorization for Signatures(2)
1. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
22, 1996 (Accession No. 0000950146-96-000563).
2. Incorporated by reference to Post-Effective Amendment No. 5 to Registration
Statement on Form N-4 (File No. 33-75986), as filed electronically on April
12, 1996 (Accession No. 0000912057-96-006383).
3. Incorporated by reference to Post-Effective Amendment No. 3 to Registration
Statement on Form N-4 (File No. 33-91846), as filed electronically on April
15, 1996 (Accession No. 0000912057-96-006418).
<PAGE>
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).
5. 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).
6. 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).
7. 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. 0000950146-97-0001589).
8. Incorporated by reference to Post-Effective Amendment No. 8 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on
February 19, 1998 (Accession No. 0000950146-98-000248).
9. Incorporated by reference to Post-Effective Amendment No. 30 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on September 29, 1997 (Accession No. 0000950146-97-001485).
10. Incorporated by Reference to Post-Effective Amendment No. 16 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on February 9, 1998 (Accession No. 0000950146-98-000179).
11. Incorporated by reference to Post-Effective Amendment No. 9 to Registration
Statement on Form N-4 (File No. 333-01107), as filed electronically on
April 7, 1998 (Accession No. 00009501-98-000564).
12. Incorporated by Reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on
February 24, 1998 (Accession No. 0000950146-98-000267).
13. 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).
14. 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).
15. Incorporated by reference to Post-Effective Amendment No. 27 to
Registration Statement on Form N-4 (File No. 33-34370), as filed
electronically on April 16, 1997 (Accession No. 0000950146-97-000617).
<PAGE>
Item 25. Directors and Officers of the Depositor
- ------------------------------------------------
Name and Principal
Business Address* Positions and Offices with Depositor
- ----------------- ------------------------------------
Thomas J. McInerney Director and President
Catherine H. Smith Director, Chief Financial Officer and Senior Vice
President
Shaun P. Mathews Director and Senior Vice President
Deborah Koltenuk Vice President and Treasurer, Corporate Controller
Frederick D. Kelsven Vice President and Chief Compliance Officer
Kirk P. Wickman Vice President, General Counsel and Corporate
Secretary
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
Item 26. Persons Controlled by or Under Common Control with the Depositor or
- ----------------------------------------------------------------------------
Registrant
----------
Incorporated herein by reference to Item 26 of Post-Effective Amendment No.
9 to the Registration Statement on Form N-4 (File No. 333-01107), as filed
electronically on April 7, 1998 (Accession No.0000950146-98-000564).
Item 27. Number of Contract Owners
- ----------------------------------
As of February 28, 1998, there were 614,013 individuals holding interests
in variable annuity contracts funded through Variable Annuity Account C.
Item 28. Indemnification
- ------------------------
Reference is hereby made to Section 33-771(f) of the Connecticut General
Statutes ("C.G.S.") regarding indemnification of directors and Section 33-776(4)
regarding indemnification of officers, employees and agents of Connecticut
corporations. These statutes provide in general that Connecticut corporations
incorporated prior to January 1, 1997 shall indemnify their officers, directors,
employees and agents against "liability" (defined as the obligation to pay a
judgment, settlement, penalty, fine, excise tax in the case of an employee
benefit plan or reasonable expenses incurred with respect to a proceeding). In
the case of a proceeding by or in the right of the corporation, indemnification
is limited to reasonable expenses incurred in connection with the proceeding
against the corporation to which the individual was named a
<PAGE>
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 principal underwriter and investment adviser for Portfolio
Partners, Inc., Aetna Variable Encore Fund, Aetna Variable Fund, Aetna
Generation Portfolios, Inc., Aetna Income Shares, Aetna Balanced VP,
Inc. (formerly Aetna Investment Advisers Fund, Inc.), Aetna GET Fund,
and Aetna Variable Portfolios, Inc. (all management investment
companies registered under the Investment Company Act of 1940 (1940
Act)). Effective May 1, 1998, Aetna will no longer be the investment
adviser for Aetna Variable Encore Fund, Aetna Variable Fund, Aetna
Generation Portfolios, Inc., Aetna Income Shares, Aetna Balanced VP,
Inc. (formerly Aetna Investment Advisers Fund, Inc.), Aetna GET Fund
and Aetna Variable Portfolios, Inc. Additionally, Aetna acts as the
principal underwriter and depositor for Variable Life Account B of
Aetna, Variable Annuity Account B of Aetna and Variable Annuity Account
G of Aetna (separate accounts of Aetna registered as unit investment
trusts under the 1940 Act). Aetna is also the principal underwriter for
Variable Annuity Account I of Aetna Insurance Company of America (AICA)
(a separate account of AICA registered as a unit investment trust under
the 1940 Act).
(b) See Item 25 regarding the Depositor.
<PAGE>
(c) Compensation as of December 31, 1997:
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemption or Brokerage
Underwriter Commissions Annuitization Commissions Compensation*
- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Aetna Life Insurance
and Annuity Company $1,987,454 $124,603,039
</TABLE>
* Compensation shown in column 5 includes deductions for mortality and expense
risk guarantees and contract charges assessed to cover costs incurred in the
sales and administration of the contracts issued under Variable Annuity
Account C.
Item 30. Location of Accounts and Records
- -----------------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules under it relating to the securities
described in and issued under this Registration Statement are located at the
home office of the Depositor as follows:
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156
Item 31. Management Services
- ----------------------------
Not applicable
Item 32. Undertakings
- ---------------------
Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement on
Form N-4 as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never more than
sixteen months old for as long as payments under the variable annuity
contracts may be accepted;
(b) to include as part of any application to purchase a contract offered by
a prospectus which is part of this registration statement on Form N-4,
a space that an applicant can check to request a Statement of
Additional Information; and
<PAGE>
(c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form N-4 promptly
upon written or oral request.
(d) The Company hereby represents that it is relying upon and complies with
the provisions of Paragraphs (1) through (4) of the SEC Staff's
No-Action Letter dated November 22, 1988 with respect to language
concerning withdrawal restrictions applicable to plans established
pursuant to Section 403(b) of the Internal Revenue Code. See American
Counsel of Life Insurance; SEC No-Action Letter, [1989 Transfer Binder]
Fed. SEC. L. Rep. (CCH) P. 78,904 at 78,523 (November 22, 1988).
(e) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(f) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act
of 1940, the Registrant, Variable Annuity Account C of Aetna Life Insurance and
Annuity Company, certifies that it meets the requirements of Securities Act Rule
485(b) for effectiveness of this Post-Effective Amendment to its Registration
Statement on Form N-4 (File No. 33-91846) and has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hartford, State of Connecticut, on the
13th day of April, 1998.
VARIABLE ANNUITY ACCOUNT C OF AETNA
LIFE INSURANCE AND ANNUITY COMPANY
(Registrant)
By: AETNA LIFE INSURANCE AND ANNUITY COMPANY
(Depositor)
By: Thomas J. McInerney*
---------------------------------------
Thomas J. McInerney
President
As required by the Securities Act of 1933, this Post-Effective Amendment
No. 13 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
)
Catherine H. Smith* Director and Chief Financial Officer ) April
- ---------------------------------
Catherine H. Smith ) 13, 1998
)
Shaun P. Mathews* Director )
- ---------------------------------
Shaun P. Mathews )
)
Deborah Koltenuk* Vice President and Treasurer, Corporate Controller )
- ---------------------------------
Deborah Koltenuk )
</TABLE>
By: /s/Mary Katherine Johnson
------------------------------------------------------------
Mary Katherine Johnson
*Attorney-in-Fact
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.1 Resolution of the Board of Directors of Aetna Life Insurance and Annuity *
Company establishing Variable Annuity Account C
99-B.3.1 Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesale Agreement and Related Selling Agreement *
99-B.4.1 Variable Annuity Contract (G-CDA-IB(ATORP) and Endorsement (EGET-IC(R)) *
99-B.4.2 Variable Annuity Contract and Certificate *
(G-CDA-95(TORP) and (GTCC-95(TORP))
99-B.4.3 Variable Annuity Contract (G-CDA-IB(AORP) and Endorsement (EGET-IC(R)) *
99-B.4.4 Variable Annuity Contract and Certificate
(G-CDA-95(ORP) and (GTCC-95(ORP)) *
99-B.4.5 Variable Annuity Contracts and Certificate (G-CDA-ORP), (CDA-IB(TORP)) and *
(GTCC-95(TORP))
99-B.4.6 Variable Annuity Contract (G-CDA-96(TORP)) *
99-B.4.7 Endorsement (GET 9/96) to Variable Annuity Contracts and Certificates *
G-CDA-95(TORP), GTCC95(TORP), G-CDA-95(ORP) and GTCC-95(ORP)
99-B.5 Variable Annuity Contract Application (300-MOP-96)
---
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
*Incorporated by reference
<PAGE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.6.3 By-Laws as amended September 17, 1997 of Aetna Life Insurance and Annuity *
Company
99-B.8.1 Fund Participation Agreement among Calvert Responsibly Invested Balanced *
Portfolio, Calvert Asset Management Company, Inc. and Aetna Life Insurance
and Annuity Company dated December 1, 1997
99-B.8.2 Service Agreement between Calvert Asset Management Company, Inc. and Aetna *
Life Insurance and Annuity Company Dated December 1, 1997
99-B.8.3 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company, Variable Insurance Products Fund and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15, 1994,
February 1, 1995, May 1, 1995, January 1, 1996 and March 1, 1996
99-B.8.4 Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance
Products Fund and Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996 and March 1, 1996
99-B.8.5 Sixth Amendment dated November 6, 1997 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance
Products Fund and Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1,
1996, March 1, 1996 and May 1, 1997
99-B.8.6 Form of Seventh Amendment dated as of May 1, 1998 to the Fund Participation *
Agreement between Aetna Life Insurance and Annuity Company, Variable Insurance
Products Fund and Fidelity Distributors Corporation dated February 1, 1994 and
amended on December 15, 1994, February 1, 1995, May 1, 1995, January 1, 1996,
March 1, 1996, May 1, 1997 and November 6, 1997
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company, Variable Insurance Products Fund II and Fidelity Distributors
Corporation dated February 1, 1994 and amended on December 15, 1994,
February 1, 1995, May 1, 1995, January 1, 1996 and March 1,1996
*Incorporated by reference
<PAGE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.8.8 Fifth Amendment dated as of May 1, 1997 to the Fund Participation Agreement *
between Aetna Life Insurance and Annuity Company, Variable Insurance
Products Fund II and Fidelity Distributors Corporation dated February 1,
1994 and amended on December 15, 1994, February 1, 1995, May 1, 1995,
January 1, 1996 and March 1, 1996
99-B.8.9 Sixth Amendment dated as of January 20, 1998 to the Fund Participation *
Agreement between Aetna Life Insurance and Annuity Company, Variable
Insurance Products Fund II and Fidelity Distributors Corporation dated
February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1,
1995, January 1, 1996, March 1, 1996 and May 1, 1997
99-B.8.10 Form of Seventh Amendment dated as of May 1, 1998 to the Fund Participation *
Agreement between Aetna Life Insurance and Annuity Company, Variable
Insurance Products Fund II and Fidelity Distributors Corporation dated
February 1, 1994 and amended on December 15, 1994, February 1, 1995, May 1,
1995, January 1, 1996, March 1, 1996, May 1, 1997 and January 20, 1998
99-B.8.11 Service Agreement between Aetna Life Insurance and Annuity Company and *
Fidelity Investments Institutional Operations Company dated as of November
1, 1995
99-B.8.12 Amendment dated January 1, 1997 to Service Agreement between Aetna Life *
Insurance and Annuity Company and Fidelity Investments Institutional
Operations Company dated as of November 1, 1995
99-B.8.13 Fund Participation Agreement among Janus Aspen Series and Aetna Life *
Insurance and Annuity Company and Janus Capital Corporation dated December
8, 1997
99-B.8.14 Service Agreement between Janus Capital Corporation and Aetna Life *
Insurance and Annuity Company dated December 8, 1997
99-B.8.15 Fund Participation Agreement between Aetna Life Insurance and Annuity *
Company and Lexington Management Corporation regarding Natural Resources
Trust dated December 1, 1988 and amended February 11, 1991
*Incorporated by reference
<PAGE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
99-B.8.16 Fund Participation Agreement dated as of March 11, 1997 between Aetna Life *
Insurance and Annuity Company and Oppenheimer Variable Annuity Account
Funds and Oppenheimer Funds, Inc.
99-B.8.17 Service Agreement dated as of March 11, 1997 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
<TABLE>
<CAPTION>
APPLICATION FORM Aetna Life Insurance and Annuity Company
Group Annuity Contracts 151 Farmington Avenue, Hartford, CT 06156-8022
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CLIENT 1. Name of applicant/employer
-------------------------------------------------------------------------------------------------------------
INFORMATION 2. Address
-------------------------------------------------------------------------------------------------------------
City State ZIP Code
-------------------------------------------------------------------------------------------------------------
3. Tax Identification No.
-------------------------------------------------------------------------------------------------------------
4. Name of plan (if any)
-------------------------------------------------------------------------------------------------------------
5. Type of plan and section of Internal Revenue Code (if any) under which plan is to qualify:
|_| 403(b) Public School System |_| 457 Public Employer |_| Non-457 Tax-Exempt Deferred
Tax-Deferred Annuity Deferred Compensation Compensation (for select manage-
ment and highly compensated
employees)
Optional Retirement Plan for Higher Education
|_| 403(b) |_| 401(a)
|_| 403(b) for 501(c)(3) Organization
Tax-Deferred Annuity (Organizations formed after |_| 457 Tax-Exempt Deferred
10/9/69 must have IRS ruling regarding 501(c)(3) status) Compensation (for select manage-
|_| Retirement Plus |_| Healthcare Retirement Plus ment and highly compensated
employees)
|_| 401(a) for 501(c)(3) Organization (Organizations
formed after 10/9/69 must have IRS ruling regarding |_| Other: _____________________
501(c)(3) status)
|_| Retirement Plus |_| Healthcare Retirement Plus
|_| 401(k) for 501(c)(3) Organization (Organizations
formed after 10/9/69 must have IRS ruling regarding
501(c)(3) status)
ACCOUNT INFORMATION |_| Retirement Plus |_| Healthcare Retirement Plus
-------------------------------------------------------------------------------------------------------------
6. Is this contract subject to ERISA Title I?
|_| Yes |_| No If yes, Plan anniversary Month _____ Day _____ Plan Beginning Date ______
----------------------------------------------------------- -------------------------------------------------
7. Contract is to be:
|_| Allocated |_| Unallocated 8. Contract effective date
-------------------------------------------------------------------------------------------------------------
9. GAA Maturity Notices should be mailed to:
|_| Participants |_| Employer |_| Participants and Employer
-------------------------------------------- --------------------- ---------------------- -------------------
10. Will this contract change or replace
any existing life insurance or
annuity contract? If yes, please Date to be
|_| Yes |_| No provide Carrier Name Account Number canceled
-------------------------------------------------------------------------------------------------------------
11. Special Requests:
Healthcare 501(c)(3) Organizations:
Withdrawal Fee: |_| 10 year |_| 5 year |_| None
Transfer Bonus: |_| 2% (Option A) |_| None (Option B)
(300-MOP-96)
<PAGE>
-------------------------------------------------------------------------------------------------------------
12. Participants may elect the investment allocation for:
INVESTMENT OPTIONS |_| Employer and Employee contributions |_| Employee contributions only |_| None Contract Holder elects
-------------------------------------------------------------------------------------------------------------
13. For Employer directed allocations: Enter the percentage of payment and the investment option
chosen for allocation purposes.
|_| Employer Modal Contributions:_____________________________________________________________________
|_| Employee Modal Contributions:_____________________________________________________________________
|_| Transferred Assets:_______________________________________________________________________________
-------------------------------------------------------------------------------------------------------------
I understand that amounts withdrawn from a GAA Term may be subject to a market value adjustment prior to the
maturity date of that Term as specified in the contract. I further understand that Annuity payments and
account values, (if any), when based on the investment experience of a separate account, are variable and not
guaranteed as to fixed dollar amount.
Dated at _________________________________ this __________________ day of _______________ 19____.
City and State
--------------------------------------------------------- ---------------------------------------------
Witness Contract Holder
Home Office Use: Accepted _________
-------------------------------------------------------------------------------------------------------------
PRODUCER'S Do you have any reason to believe any existing life insurance or annuity contract will be modified or
NOTE: replaced if this contract is issued? |_| Yes |_| No
---------------------------------------------------
Signature of Producer
-------------------------------------------------------------------------------------------------------------
Corrections and amendments (Home Office Use Only). Errors and omissions may be corrected by the Company but
no change in plan, classification, amount, age at issue, or extra benefits shall be made without written
consent of the Contract Holder. (N/A in W.VA.)
-------------------------------------------------------------------------------------------------------------
---------------------------------------------------
Affix Prospectus
Receipt Here
---------------------------------------------------
</TABLE>
[AETNA LOGO]
[AETNA LETTERHEAD]
151 Farmington Avenue
Hartford, CT 06156
Julie E. Rockmore
Counsel
Law Division, RE4A
April 13, 1998 Investments & Financial Services
(860) 273-4686
Fax: (860) 273-8340
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Aetna Life Insurance and Annuity Company and its Variable Annuity Account C
Post-Effective Amendment No. 13 to Registration Statement on Form N-4
Prospectus Title: Group-Deferred Variable Annuity Contracts for use with
Optional Retirement Programs (Section 403(b) and 401(a))
File Nos.: 33-91846* and 811-2513
Dear Sir or Madam:
The undersigned serves as counsel to Aetna Life Insurance and Annuity Company, a
Connecticut life insurance company (the "Company"). It is my understanding that
the Company, as depositor, has registered an indefinite amount of securities
(the "Securities") under the Securities Act of 1933 (the "Securities Act") as
provided in Rule 24f-2 under the Investment Company Act of 1940 (the "Investment
Company Act").
In connection with this opinion, I have reviewed the N-4 Registration Statement,
as amended to the date hereof, and this Post-Effective Amendment No. 13. I have
also examined originals or copies, certified or otherwise identified to my
satisfaction, of such documents, trust records and other instruments I have
deemed necessary or appropriate for the purpose of rendering this opinion. For
purposes of such examination, I have assumed the genuineness of all signatures
on original documents and the conformity to the original of all copies.
- --------
* Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has
included a combined prospectus under this Registration Statement which
includes all the information which would currently be required in a prospectus
relating to the securities covered by the following earlier Registration
Statement: 33-75976.
<PAGE>
I am admitted to practice law in Connecticut, and do not purport to be an expert
on the laws of any other state. My opinion herein as to any other law is based
upon a limited inquiry thereof which I have deemed appropriate under the
circumstances.
Based upon the foregoing, and, assuming the Securities are sold in accordance
with the provisions of the prospectus, I am of the opinion that the Securities
being registered will be legally issued and will represent binding obligations
of the Company.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/Julie E. Rockmore
Julie E. Rockmore
Consent of Independent Auditors
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contractholders of Aetna Variable Annuity Account C:
We consent to the use of our reports dated February 3, 1998 and February 27,
1998 included in this Post-Effective Amendment No. 13 to Registration Statement
(No. 33-91846) on Form N-4 and to the references to our firm under the headings
"Condensed Financial Information" in the prospectus and "Independent Auditors"
in the statement of additional information.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
April 13, 1998
SCHEDULE FOR COMPUTATION OF TOTAL RETURN CALCULATIONS
TOTAL RETURN CALCUALTION (STANDARDIZED)
The standardized rate represents fund performance for the most recent 1-year,
5-year and 10-year periods. The "1-year rate" represents fund performance for
the period January 1, 1997 through December 31, 1997; the "5-year rate" is for
the period January 1, 1993 through December 31, 1997; the "10-year rate" is for
the period January 1, 1988 through December 31, 1997. "Since inception" figures
assume the redemption on December 31, 1997 of values attributable to a $1,000
payment made on the date contributions were first received in the fund under the
separate account.
The formula used in the computation of the total return calculation is as
follows:
Formula
P(1 + T) (n) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of 1, 5, or 10 year
periods (or a fractional portion thereof) of a hypothetical
$1,000 payment made at the beginning of the 1, 5, or 10 year
periods
The total returns reflect the deduction of all recurring charges during each
period (e.g., mortality and expense risk charges, maintenance fees,
administrative charges (if applicable) and deferred sales charges).
TOTAL RETURN CALCULATION (NON-STANDARDIZED)
The non-standardized rate represents fund performance for the most recent
1-year, 3-year, 5-year and 10-year periods. The "1-year rate" represents fund
performance for the period January 1, 1997 through December 31, 1997; the
"3-year rate" is for the period January 1, 1995 through December 31, 1997; the
"5-year rate" is for the period January 1, 1993 through December 31, 1997; and
the "10-year rate" is for the period January 1, 1988 through December 31, 1997.
The non-standardized figures will be calculated in a manner similar to the one
discussed above for the standardized figures, except that non-standardized
figures will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations), and the "since inception" figures assume the redemption on
December 31, 1997 of values attributable to a $1,000 payment made on the
inception dates of the funds.
For an illustration of the Computation of the Total Return Quotations, both
Standardized and Non-Standardized, see attached.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Maintenance One Year One Year One Year
Fund Name Fee As of Date As of AUV as of Date as of AUV w/DSC
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 0 12/31/97 13.612759 12/31/96 11.468093 18.70%
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0 12/31/97 13.215304 12/31/96 10.898091 21.26%
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0 12/31/97 11.25842 12/31/96 10.500005 7.22%
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0 12/31/97 12.969786 12/31/96 11.142182 16.40%
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0 12/31/97 14.744058 12/31/96 11.465432 28.60%
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 0 12/31/97 13.197304 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0 12/31/97 14.490862 12/31/96 10.931904 32.56%
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0 12/31/97 12.358389 12/31/96 10.901374 13.37%
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0 12/31/97 10.728735 12/31/96 10.27405 4.43%
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0 12/31/97 13.679292 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0 12/31/97 13.285534 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0 12/31/97 12.982911 12/31/96 10.920784 18.88%
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0 12/31/97 13.717663 12/31/96 10.815444 26.83%
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0 12/31/97 12.663493 12/31/96 10.35844 22.25%
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0 12/31/97 11.773785 12/31/96 10.660292 10.45%
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0 12/31/97 13.813665 12/31/96 11.239122 22.91%
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0 12/31/97 10.604462 12/31/96 9.507019 11.54%
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 0 12/31/97 13.419669 12/31/96 11.10109 20.89%
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0 12/31/97 12.058995 12/31/96 10.898467 10.65%
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0 12/31/97 13.230816 12/31/96 10.887291 21.53%
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0 12/31/97 13.746044 12/31/96 11.366196 20.94%
- -----------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0 12/31/97 12.071765 12/31/96 11.379574 6.08%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 0 12/31/97 9.931618 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 0 12/31/97 9.931618 12/31/96 9.18399 8.14%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 0 12/31/97 8.71997 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 0 12/31/97 8.71997 12/31/96 9.076145 (3.92%)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 0 12/31/97 12.467345 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 0 12/31/97 12.467345 12/31/96 9.966885 25.09%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 0 12/31/97 11.512083 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 0 12/31/97 11.512083 12/31/96 10.668743 7.91%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 0 12/31/97 13.321092 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 0 12/31/97 13.321092 12/31/96 10.491369 26.97%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Five Year Five Year Five Year Ten Year Ten Year Ten Year Inception
as of Date as of AUV w/ DSC as of Date as of AUV w/DSC Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 07/31/95 07/31/95 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 12/31/92 7.07721 13.30% 04/03/89 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 12/31/92 8.464304 5.87% 12/31/87 5.149612 8.14%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 07/04/95 07/04/95 07/04/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 12/31/92 6.859816 16.54% 12/31/87 3.496406 15.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 05/30/97 05/30/97 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 10/31/96 10/31/96 10/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 07/31/95 07/31/95 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 12/31/92 8.912865 3.78% 12/31/87 6.649675 4.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 05/30/97 05/30/97 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 05/30/97 05/30/97 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 12/31/92 7.441026 11.78% 05/31/89 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 05/31/94 05/31/94 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 05/31/94 05/31/94 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 05/31/94 05/31/94 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 05/31/95 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 06/30/94 06/30/94 06/30/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 06/30/95 06/30/95 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10/31/94 10/31/94 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 06/30/95 06/30/95 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 05/31/95 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 12/31/92 7.607303 9.68% 10/14/91 10/14/91
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap
PPI-MFS Emerging Equities 09/30/93 09/30/93 09/30/93
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 12/31/92 6.907269 4.77% 08/31/92 08/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 12/31/92 7.110758 11.88% 05/31/89 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 12/31/92 6.36982 12.57% 07/31/89 07/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 11/28/97 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 10/31/94 10/31/94 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Separate
Inception Inception Account One Year
AUV w/DSC Charge Free Out DSC
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 8.774368 19.91% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 5.140234 11.40% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 8.708957 17.32% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 11.074271 19.17% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 10.445663 32.39% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 9.094443 13.52% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 11.319983 20.84% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 10.981216 20.98% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 5.38428 10.79% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 6.833185 21.45% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 6.516808 20.35% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 9.018115 7.72% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 7.908035 24.07% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 5.745506 19.11% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 8.69426 18.93% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 8.31023 12.47% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 8.164637 21.26% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 7.328603 27.53% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 7.286289 8.46% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 10.054131 (1.22%) 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 6.447171 10.70% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 8.889636 (1.91%) 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 6.283641 6.34% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 12.286686 1.47% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 5.277526 10.53% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11.367215 1.27% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 5.936443 8.18% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 13.051824 2.06% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 7.040006 22.31% 100 0 0.00%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Three Five Year Ten Year Inception
Year DSC DSC DSC DSC
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Ascent VP 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0.00% 0.00% 0.00% 0.00%
Portfolio Partners
MFS Emerging Equities Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 0.00% 0.00% 0.00% 0.00%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Maintenance One Year One Year
Fund Name Fee As of Date As of AUV as of Date as of AUV
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 0 12/31/97 13.612759 12/31/96 11.468093
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0 12/31/97 13.215304 12/31/96 10.898091
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0 12/31/97 11.25842 12/31/96 10.500005
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0 12/31/97 12.969786 12/31/96 11.142182
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0 12/31/97 14.744058 12/31/96 11.465432
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 0 12/31/97 13.197304 12/31/96 10.022028
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0 12/31/97 14.490862 12/31/96 10.931904
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0 12/31/97 12.358389 12/31/96 10.901374
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0 12/31/97 10.728735 12/31/96 10.27405
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0 12/31/97 13.679292 12/31/96 10.273466
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0 12/31/97 13.285534 12/31/96 9.629144
- -------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0 12/31/97 12.982911 12/31/96 10.920784
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0 12/31/97 13.717663 12/31/96 10.815444
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0 12/31/97 12.663493 12/31/96 10.35844
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0 12/31/97 11.773785 12/31/96 10.660292
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0 12/31/97 13.813665 12/31/96 11.239122
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0 12/31/97 10.604462 12/31/96 9.507019
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 0 12/31/97 13.419669 12/31/96 11.10109
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0 12/31/97 12.058995 12/31/96 10.898467
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0 12/31/97 13.230816 12/31/96 10.887291
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0 12/31/97 13.746044 12/31/96 11.366196
- -------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0 12/31/97 12.071765 12/31/96 11.379574
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0 12/31/97 14.973375 12/31/96 12.353603
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 0 12/31/97 15.48594 12/31/96 14.388892
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 0 12/31/97 9.931618 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 0 12/31/97 9.931618 12/31/96 9.18399
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 0 12/31/97 8.71997 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 0 12/31/97 8.71997 12/31/96 9.076145
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 0 12/31/97 12.467345 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 0 12/31/97 12.467345 12/31/96 9.966885
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 0 12/31/97 11.512083 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 0 12/31/97 11.512083 12/31/96 10.668743
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 0 12/31/97 13.321092 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 0 12/31/97 13.321092 12/31/96 10.491369
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
One Year Three Year Three Year Three Year Five Year
Fund Name w/out DSC as of Date as of AUV w/out DSC as of Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.70% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 21.26% 12/30/94 7.587154 20.32% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 7.22% 12/30/94 8.745242 8.78% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 16.40% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 28.60% 12/30/94 7.10582 27.55% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 31.68% 12/13/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.56% 09/16/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 13.37% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 4.43% 12/30/94 9.380312 4.58% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 33.15% 12/27/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.97% 12/13/96
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 18.88% 12/30/94 7.622624 19.42% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.83% 12/30/94 7.146501 24.28% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 22.25% 12/30/94 6.805182 23.00% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 10.45% 12/30/94 8.75868 10.36% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.91% 01/03/95
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.54% 12/30/94 7.047911 14.59% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.89% 12/30/94 7.811251 19.77% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.65% 12/30/94 8.220904 13.62% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.53% 12/30/94 7.203189 22.47% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.94% 12/30/94 7.055167 24.90% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 6.08% 12/30/94 7.825102 15.55% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 21.21% 12/30/94 10.464987 12.68% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.62% 12/30/94 11.357963 10.89% 05/03/93
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 8.14% 12/30/94 6.231476 16.81% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth (3.92%) 12/30/94 7.381763 5.71% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 25.09% 12/30/94 7.072151 20.80% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 7.91% 12/30/94 8.534265 10.49% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 26.97% 12/31/94 6.923392 24.38% 12/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Five Year Five Year Ten Year Ten Year Ten Year Inception
Fund Name as of AUV w/out DSC as of Date as of AUV w/out DSC Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 07/05/95 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 7.07721 13.30% 04/03/89 04/03/89
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 8.464304 5.87% 12/31/87 5.149612 8.14%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 07/05/95 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 6.859816 16.54% 12/31/87 3.496406 15.48%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 12/13/96 12/13/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 09/16/96 09/16/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 07/05/95 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 8.912865 3.78% 12/31/87 6.649675 4.90%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 12/27/96 12/27/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 12/13/96 12/13/96
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 7.441026 11.78% 12/31/87 4.449328 11.30%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 5.755399 18.97% 12/31/87 3.227189 15.57%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 5.816449 16.84% 12/31/87 2.863753 16.03%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 6.394375 12.99% 12/31/87 5.189852 8.54%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 01/03/95 01/03/95
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 7.607303 9.68% 10/14/91 10/14/91
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 6.648533 17.63% 11/12/90 11/12/90
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 05/03/93 05/03/93
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 5.868592 11.10% 09/21/88 09/21/88
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 6.907269 4.77% 12/31/87 4.174983 7.64%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 7.110758 11.88% 12/31/87 3.511218 13.51%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 6.36982 12.57% 12/31/87 4.173037 10.68%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 5.684281 18.57% 01/09/89 01/09/89
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Separate
Inception Inception Account
Fund Name AUV w/out DSC Charge Free Out
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Ascent VP 8.527588 20.63% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 5.140234 11.40% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 8.708957 17.32% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 9.882679 31.65% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 10 33.25% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 8.949892 13.82% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 10.16017 34.10% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 9.431396 38.50% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 6.768335 26.93% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 5.198531 18.04% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 7.319452 15.14% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 8.345686 8.94% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 6.860645 16.51% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 5.909683 21.70% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 7.286289 8.46% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 7.044292 11.15% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 11.511814 6.57% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 10.054682 (1.22%) 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 2.17187 17.81% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 8.890123 (1.91%) 100 0
- ----------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 12.304049 1.33% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11.343319 1.49% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 13.067828 1.94% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 2.899578 18.52% 100 0
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Maintenance One Year One Year
Fund Name Fee As of Date As of AUV as of Date as of AUV
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 0 12/31/97 15.362974 12/31/96 12.995693
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0 12/31/97 18.777121 12/31/96 15.547928
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0 12/31/97 13.396944 12/31/96 12.545772
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0 12/31/97 14.400283 12/31/96 12.421884
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0 12/31/97 22.178679 12/31/96 17.317583
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 0 12/31/97 13.157858 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0 12/31/97 14.414086 12/31/96 10.918586
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0 12/31/97 13.439245 12/31/96 11.903471
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0 12/31/97 11.888191 12/31/96 11.431128
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0 12/31/97 13.638404 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0 12/31/97 13.245833 05/30/97
- --------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0 12/31/97 18.233575 12/31/96 15.400426
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0 12/31/97 15.722844 12/31/96 12.447255
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0 12/31/97 14.021453 12/31/96 11.516304
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0 12/31/97 12.221797 12/31/96 11.111379
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0 12/31/97 15.314603 12/31/96 12.51147
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0 12/31/97 15.720014 12/31/96 14.15106
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 0 12/31/97 14.953863 12/31/96 12.420988
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0 12/31/97 14.299488 12/31/96 12.976416
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0 12/31/97 15.367682 12/31/96 12.697557
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0 12/31/97 16.782334 12/31/96 13.93378
- --------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0 12/31/97 15.986716 12/31/96 15.131971
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 0 12/31/97 14.89312 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 0 12/31/97 14.89312 12/31/96 13.828568
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 0 12/31/97 13.681879 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 0 12/31/97 13.681879 12/31/96 14.299279
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 0 12/31/97 19.247996 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 0 12/31/97 19.247996 12/31/96 15.450768
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 0 12/31/97 16.781849 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 0 12/31/97 16.781849 12/31/96 15.616339
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 0 12/31/97 14.647496 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 0 12/31/97 14.647496 12/31/96 11.583369
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
One Year Three Year Three Year Three Year Five Year
Fund Name w/out DSC as of Date as of AUV w/out DSC as of Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.22% 07/31/95 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.77% 12/31/92 10.263406 12.84% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 6.79% 12/31/92 10.280143 5.44% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 15.93% 07/04/95 07/04/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 28.07% 12/31/92 10.532407 16.06% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 05/30/97 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.01% 10/31/96 10/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 12.90% 07/31/95 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 4.00% 12/31/92 10.080265 3.35% 12/31/87
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 05/30/97 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 05/30/97 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 18.40% 12/31/92 10.665957 11.32% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 26.32% 05/31/94 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 21.75% 05/31/94 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 9.99% 05/31/94 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.41% 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.09% 06/30/94 06/30/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.39% 06/30/95 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.20% 10/31/94 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.03% 06/30/95 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.44% 05/31/95 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 5.65% 12/31/92 10.287038 9.22% 10/14/91
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 7.70% 09/30/93 09/30/93
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth (4.32%) 12/31/92 11.061508 4.34% 08/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 24.58% 12/31/92 11.204999 11.43% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 7.46% 12/31/92 9.476586 12.11% 07/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 11/28/97 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 26.45% 10/31/94 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Inception Inception Inception Account Free Out
Fund Name as of AUV w/DSC Date AUV w/DSC Charge
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Ascent VP 07/31/95 10.001484 19.41% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 04/03/89 7.569003 10.95% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 6.382948 7.70% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 07/04/95 9.76908 16.84% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 5.478398 15.01% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 05/30/97 11.067831 18.88% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 10/31/96 10.440059 31.85% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 07/31/95 9.987991 13.05% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 7.675795 4.47% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 05/30/97 11.31339 20.55% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 05/30/97 10.974826 20.69% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 05/31/89 7.831369 10.34% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 05/31/94 7.947324 20.95% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 05/31/94 7.322313 19.86% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 05/31/94 9.499571 7.28% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 05/31/95 8.860193 23.56% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 06/30/94 8.639524 18.63% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 06/30/95 9.787705 18.44% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10/31/94 9.982415 12.02% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 06/30/95 9.580611 20.77% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 05/31/95 9.042179 27.01% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 10/14/91 9.902152 8.01% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 11/28/97 15.082415 (1.26%) 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 09/30/93 9.837477 10.24% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 11/28/97 13.95325 (1.95%) 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 08/31/92 10.076315 5.90% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 11/28/97 18.976097 1.43% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 05/31/89 8.43879 10.08% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11/28/97 16.576806 1.24% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 07/31/89 8.9566 7.74% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 11/28/97 14.356718 2.03% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 10/31/94 7.841899 21.81% 140 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
One Year Three Five Year Ten Year Inception
Fund Name DSC Year DSC DSC DSC DSC
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 0.00% 0.00% 0.00% 0.00% 0.00%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Maintenance One Year
Fund Name Fee As of Date As of AUV as of Date
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aetna Ascent VP 0 12/31/97 15.362974 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0 12/31/97 18.777121 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 0 12/31/97 13.396944 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0 12/31/97 14.400283 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0 12/31/97 22.178679 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 0 12/31/97 13.157858 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0 12/31/97 14.414086 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0 12/31/97 13.439245 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0 12/31/97 11.888191 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0 12/31/97 13.638404 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0 12/31/97 13.245833 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0 12/31/97 18.233575 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0 12/31/97 15.722844 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0 12/31/97 14.021453 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0 12/31/97 12.221797 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0 12/31/97 15.314603 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0 12/31/97 15.720014 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 0 12/31/97 14.953863 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0 12/31/97 14.299488 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0 12/31/97 15.367682 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0 12/31/97 16.782334 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 0 12/31/97 15.986716 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0 12/31/97 22.523646 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 0 12/31/97 23.29469 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 0 12/31/97 14.89312 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 0 12/31/97 14.89312 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 0 12/31/97 13.681879 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 0 12/31/97 13.681879 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 0 12/31/97 19.247996 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 0 12/31/97 19.247996 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 0 12/31/97 16.781849 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 0 12/31/97 16.781849 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 0 12/31/97 14.647496 11/28/97
- -------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 0 12/31/97 14.647496 12/31/96
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
One Year One Year Three Year Three Year Three Year Five Year
Fund Name as of AUV w/out DSC as of Date as of AUV w/out DSC as of Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 12.995693 18.22% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 15.547928 20.77% 12/30/94 10.913387 19.83% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 12.545772 6.79% 12/30/94 10.534801 8.34% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 12.421884 15.93% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 17.317583 28.07% 12/30/94 10.821243 27.02% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 10.033073 31.15% 12/13/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 10.918586 32.01% 09/16/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 11.903471 12.90% 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 11.431128 4.00% 12/30/94 10.522558 4.15% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 10.284789 32.61% 12/27/96
- ----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 9.639742 37.41% 12/13/96
- ----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 15.400426 18.40% 12/30/94 10.837234 18.94% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 12.447255 26.32% 12/30/94 8.291934 23.77% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 11.516304 21.75% 12/30/94 7.628053 22.50% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 11.111379 9.99% 12/30/94 9.204175 9.91% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 12.51147 22.41% 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 14.15106 11.09% 12/30/94 10.576536 14.12% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 12.420988 20.39% 12/30/94 8.811489 19.28% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 12.976416 10.20% 12/30/94 9.868449 13.16% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 12.697557 21.03% 12/30/94 8.469549 21.97% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 13.93378 20.44% 12/30/94 8.719647 24.39% 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 15.131971 5.65% 12/30/94 10.495287 15.06% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 18.659145 20.71% 12/30/94 15.937002 12.22% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 21.733365 7.18% 12/30/94 17.296911 10.43% 05/03/93
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 11/28/97 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 13.828568 7.70% 12/30/94 9.459604 16.33% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 11/28/97 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 14.299279 (4.32%) 12/30/94 11.725036 5.28% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 11/28/97 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 15.450768 24.58% 12/30/94 11.053238 20.31% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11/28/97 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 15.616339 7.46% 12/30/94 12.594452 10.04% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 11/28/97 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 11.583369 26.45% 12/31/94 7.706676 23.87% 12/31/92
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Five Year Five Year Ten Year Ten Year Ten Year
Fund Name as of AUV w/out DSC as of Date as of AUV w/out DSC
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 07/05/95 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 10.263406 12.84% 04/03/89
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 10.280143 5.44% 12/31/87 6.382948 7.70%
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 10.532407 16.06% 12/31/87 5.478398 15.01%
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 12/13/96
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 09/16/96
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 07/05/95
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 10.080265 3.35% 12/31/87 7.675795 4.47%
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 12/27/96
- ----------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 12/13/96
- ----------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 10.665957 11.32% 12/31/87 6.508769 10.85%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 6.732279 18.49% 12/31/87 3.852556 15.10%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 6.573108 16.36% 12/31/87 3.302783 15.56%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 6.77413 12.53% 12/31/87 5.611765 8.09%
- ----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 01/03/95
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93
- ----------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 10.287038 9.22% 10/14/91
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 10.20815 17.15% 11/12/90
- ----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 05/03/93
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 8.981865 10.64% 09/21/88
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Research Growth Portfolio 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 11.061508 4.34% 12/31/87 6.823672 7.20%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 11.204999 11.43% 12/31/87 5.646406 13.05%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International
Growth Portfolio 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 9.476586 12.11% 12/31/87 6.336345 10.23%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth
Equity Portfolio 11/28/97
- ----------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 6.379018 18.09% 01/09/89
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Separate
Inception Inception Inception Account
Fund Name Date AUV w/out DSC Charge Free Out
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 07/05/95 9.72321 20.14% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 04/03/89 7.569003 10.95% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 07/05/95 9.76908 16.84% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 12/13/96 9.895684 31.11% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 09/16/96 10 32.70% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 07/05/95 9.832578 13.35% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 12/27/96 10.171936 33.55% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 12/13/96 9.443792 37.94% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 01/03/95 7.59553 26.41% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 09/13/93 7.842371 17.56% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 09/13/93 8.300551 14.68% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 09/13/93 10.071627 8.50% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 09/13/93 8.109671 16.03% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 09/13/93 7.342466 21.20% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Lexington Natural Resources Trust 10/14/91 9.902152 8.01% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 11/12/90 10.910999 10.69% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 05/03/93 17.650937 6.13% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Emerging Equities Portfolio 11/28/97 15.08358 (1.26%) 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
PPI-MFS Emerging Equities 09/21/88 3.382519 17.33% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS
Research Growth Portfolio 11/28/97 13.954328 (1.95%) 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
PPI -MFS Research Growth 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
MFS Value Equity Portfolio 11/28/97 19.003341 1.29% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
PPI-MFS Value Equity 140
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
Scudder International Growth Portfolio 11/28/97 16.54233 1.45% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Scudder International
Portfolio Class A/
PPI-Scudder International Growth 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners
T. Rowe Price Growth Equity Portfolio 11/28/97 14.374645 1.90% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/
PPI-T. Rowe Price Growth Equity 01/09/89 3.306763 18.04% 140 0
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
