As filed with the Securities and Exchange Registration No. 33-75992
Commission on April 20, 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. 11 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
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
Depositor's Telephone Number, including Area Code: (860) 273-4686
Julie E. Rockmore, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, RE4A, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
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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
<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>
FORM N-4
ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION
15 Cover Page........................................... Cover page
16 Table of Contents.................................... Table of Contents
17 General Information and History...................... General Information and History
18 Services............................................. General Information and History;
Independent Auditors
19 Purchase of Securities Being Offered................. Offering and Purchase of Contracts
20 Underwriters......................................... Offering and Purchase of Contracts
21 Calculation of Performance Data...................... Performance Data; Average Annual
Total Return Quotations
22 Annuity Payments..................................... Annuity Payments
23 Financial Statements................................. Financial Statements of the Separate Account and
Financial Statements of the Company
</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 individual
Installment and Single Purchase Payment deferred variable annuity contracts
("Contracts") issued by Aetna Life Insurance and Annuity Company (the
"Company"). The Contracts are designed to provide for retirement income for
Contracts established under Section 408 of the Internal Revenue Code. (See
"Purchase.") Currently, the IRA is not available as a "Simple IRA" as defined
in Section 408(p) of the Internal Revenue Code.
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 known as Aetna Ascent Variable Portfolio)
[bullet] Aetna Balanced VP, Inc. (formerly known as Aetna Investment Advisers
Fund, Inc.)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP
[bullet] Aetna Crossroads VP (formerly known as Aetna Crossroads
[bullet] Aetna Growth VP (formerly known as 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 known as 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 known as 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 known as Aetna Variable Small Company
Portfolio)
[bullet] Aetna Value Opportunity VP (formerly known as Aetna Variable Capital
Appreciation Portfolio)
[bullet] Calvert Social Balanced Portfolio (formerly known as Calvert
Responsibly Invested 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] 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
The Credited Interest Options currently available under the Contracts are the
Guaranteed Interest Account, the Fixed Account and the Guaranteed Accumulation
Account. Except as specifically mentioned, this Prospectus describes only
investments through the Separate Account. A brief description of each of the
Credited Interest Options is contained in Appendices to this Prospectus and
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 or under all Contracts. (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 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 17 of this Prospectus. An SAI may be
obtained from the Company without charge by calling the number listed under the
"Inquiries" section of the Prospectus Summary. You may also obtain an SAI for
any of the Funds by calling that phone number.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF
THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE
READ AND RETAINED FOR FUTURE REFERENCE.
THIS PROSPECTUS, THE STATEMENT OF ADDITIONAL INFORMATION AND OTHER INFORMATION
ABOUT THE SEPARATE ACCOUNT REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (SEC) CAN BE FOUND IN THE SEC'S WEB SITE AT
http://www.sec.gov.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1,
1998.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
DEFINITIONS DEFINITIONS--1
PROSPECTUS SUMMARY SUMMARY--1
FEE TABLE FEE TABLE--1
CONDENSED FINANCIAL INFORMATION ......................................... 1
THE COMPANY ............................................................. 1
VARIABLE ANNUITY ACCOUNT C .............................................. 1
INVESTMENT OPTIONS ...................................................... 1
The Funds ............................................................ 1
Credited Interest Options ............................................ 4
PURCHASE ................................................................ 5
Contract Purchase and Availability ................................... 5
Purchase Payments .................................................... 5
Right to Cancel ...................................................... 5
CHARGES AND DEDUCTIONS .................................................. 6
Daily Deductions from the Separate Account ........................... 6
Mortality and Expense Risk Charge .................................. 6
Administrative Expense Charge ...................................... 6
Maintenance Fee ...................................................... 6
Reduction or Elimination of Maintenance Fee .......................... 6
Deferred Sales Charge ................................................ 6
Reduction or Elimination of the Deferred Sales Charge ................ 7
Fund Expenses ........................................................ 7
Premium and Other Taxes .............................................. 8
CONTRACT VALUATION ...................................................... 8
Contract Value ....................................................... 8
Accumulation Units ................................................... 8
Net Investment Factor ................................................ 8
TRANSFERS ............................................................... 9
WITHDRAWALS ............................................................. 9
Reinvestment Privilege ............................................... 9
SYSTEMATIC DISTRIBUTION OPTIONS ......................................... 10
DEATH BENEFIT DURING ACCUMULATION PERIOD ................................ 10
ANNUITY PERIOD .......................................................... 11
Annuity Period Elections ............................................. 11
Annuity Options ...................................................... 11
Annuity Payments ..................................................... 12
Charges Deducted During the Annuity Period ........................... 12
Death Benefit Payable During the Annuity Period ...................... 12
TAX STATUS .............................................................. 13
Introduction ......................................................... 13
Taxation of the Company .............................................. 13
Contracts Used with Certain Retirement Plans ......................... 13
Individual Retirement Annuities and Simplified Employee Pension Plans 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
MISCELLANEOUS ............................................... 14
Distribution ............................................. 14
Performance Reporting .................................... 15
Voting Rights ............................................ 15
Modification of the Contract ............................. 15
Involuntary Terminations ................................. 15
Legal Matters and Proceedings ............................ 16
Year 2000 ................................................ 16
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ......... 17
APPENDIX I--GUARANTEED INTEREST ACCOUNT ..................... 18
APPENDIX II--FIXED ACCOUNT .................................. 19
APPENDIX III--GUARANTEED ACCUMULATION ACCOUNT ............... 21
APPENDIX IV--CONDENSED FINANCIAL INFORMATION ................ 22
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY
PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN.
<PAGE>
DEFINITIONS
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The following terms are defined as they are used in this Prospectus:
Accumulation Period: The period during which Purchase Payment(s) credited to a
Contract are invested to fund future annuity payments.
Accumulation Unit: A measure of the value of each Subaccount before annuity
payments begin.
Annuitant: The person on whose life or life expectancy the annuity payments are
based.
Annuity: A series of payments for life, a definite period or a combination of
the two.
Annuity Date: The date on which annuity payments begin.
Annuity Period: The period during which annuity payments are made.
Annuity Unit: A measure of the value of each Subaccount selected during the
Annuity Period.
Beneficiary(ies): The person or persons designated by the Contract Holder who
are to receive any death benefit proceeds payable under the Contract.
Code: Internal Revenue Code of 1986, as amended.
Company (We, Us): Aetna Life Insurance and Annuity Company.
Contract: The individual deferred, variable annuity contracts offered by this
Prospectus.
Contract Holder (You): The person to whom the Contract is issued.
Contract Value: The dollar value of amounts held under the Contract as of each
Valuation Date during the Accumulation Period.
Contract Year: The period of 12 months measured from the Contract's effective
date or from any anniversary of such effective date.
Credited Interest Options: The fixed interest options under the Contract. The
Credited Interest Options currently consist of the Guaranteed Interest Account,
the Fixed Account and the Guaranteed Accumulation Account, each of which is
described in an Appendix to this Prospectus. Amounts allocated to the Credited
Interest Options are included in the Contract Value.
Fund(s): An open-end registered management investment company whose shares are
purchased by the Separate Account to fund the benefits provided by the
Contract.
Home Office: The Company's principal executive offices located at 151
Farmington Avenue, Hartford, Connecticut 06156.
Individual Retirement Annuity: An individual variable deferred annuity intended
to qualify under Code Section 408(b) or 408A.
Purchase Payment(s): The gross payment(s) submitted to the Company under a
Contract.
Purchase Payment Period: For "Installment Purchase Payment Contracts," the
period of time for completion of the agreed upon annual number and amount of
Purchase Payments. For example, if it is determined that the Purchase Payment
Period will consist of 12 payments per year and only 11 payments are made, the
Purchase Payment Period is not completed until the twelfth Purchase Payment is
made.
Roth IRA: An Individual Retirement Annuity intended to qualify under Code
Section 408A.
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DEFINITIONS - 1
<PAGE>
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 allocated to a
particular Fund. Each Subaccount invests in the shares of only one
corresponding Fund.
Valuation Date: The date and time at which the Accumulation Unit Value and
Annuity Unit Value of a Subaccount is calculated. Currently, this calculation
occurs after the close of business of the New York Stock Exchange on any normal
business day, Monday through Friday, that the New York Stock Exchange is open.
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DEFINITIONS - 2
<PAGE>
Prospectus Summary
CONTRACTS OFFERED
The Contracts offered in connection with this Prospectus are individual
deferred variable annuity contracts issued by Aetna Life Insurance and Annuity
Company (the "Company"). One allows single payments and the other allows
installment payments. The Plans are adopted by or on behalf of individuals
entitled to tax-deferred treatment under Section 408(b) of the Code ("IRA"),
and established for employees whose employer contributes to their IRA plan
pursuant to the Simplified Employee Pension Plan provisions of Section 408(k)
("SEP") of the Code. These Contracts may be purchased by completing the proper
application form and submitting it to the Distributor. (See "Contract
Purchase.")
This Contract has been approved by the Internal Revenue Service ("IRS") as
a prototype traditional IRA. It can therefore be used in an IRS model SEP. The
IRS approval, however, only pertains to whether the Contract meets the Code
requirements for IRAs and is not a determination of the merits of the Annuity
Contract. Currently, the IRA is not available as a "Simple IRA" as defined in
Section 408(p) of the Internal Revenue Code.
The Contract is also available as a Roth IRA in the state of New York
only, subject to state approval. A Roth IRA Contract is a special form of IRA
which can accept nondeductible annual contributions. Contributions to a
Simplified Employee Pension Plan ("SEP") are not permitted. The Contract can
also accept transfers and rollovers, but only from an Individual Retirement
Annuity/Individual Retirement Account, subject to ordinary income tax, or from
another Roth IRA. The Company reserves the right not to accept rollover
contributions to an existing Contract. The Contract has not been submitted to
the Internal Revenue Service ("IRS") as a prototype Roth IRA.
FREE LOOK PERIOD
You may cancel the Contract no later than 10 days after you receive it (or
as otherwise allowed by state law) by returning it to the Company with a
written notice of cancellation. We will produce a refund not later than seven
days after we receive the Contract and the written notice at our Home Office.
Cancellations requested after you receive the Contract will consist of a refund
of the Purchase Payment. (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 in this Prospectus. The Contract
allows investment in any or all of the Subaccounts, as well as in the Credited
Interest Options described below. The total number of investment options that
you may select 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 Interest Account ("GIA"), the Fixed
Account, and the Guaranteed Accumulation Account ("GAA"). (See the Appendices
to this Prospectus.)
CHARGES AND DEDUCTIONS
Certain charges are associated with these Contracts. These charges include
daily deductions from the Separate Account (the mortality and expense risk
charge and the administrative expense charge), as well as any annual
maintenance fee, allocation and transfer fees, and premium and other taxes. The
Funds also incur certain fees and expenses which are deducted directly from the
Funds. A deferred sales charge may apply upon a full or partial withdrawal of
the Contract Value. (See the Fee Table and "Charges and Deductions.")
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SUMMARY - 1
<PAGE>
TRANSFERS
Prior to the Annuity Date, and subject to certain limitations, Contract
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 Contract Value may be withdrawn prior to the Annuity
Date by properly completing a disbursement form and sending it to the Company.
Certain charges may be assessed upon withdrawal. (See "Withdrawals.")
The Contract 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.")
DEATH BENEFIT
A death benefit is payable if you die before the Annuity Date. Death
benefit proceeds will be paid to the Beneficiary in an amount equal to the
Contract Value. Until the election of a method of payment, the Contract Value
will remain invested under the Contract. The Beneficiary may elect to receive
the proceeds in a lump sum or under any of the payment options available under
the Contract. However, the Code requires that distributions begin within a
certain time period. (See "Death Benefit During Accumulation Period.")
After Annuity Payments have commenced, a death benefit may be payable to
the Beneficiary depending upon the terms of the Contract and the Annuity Option
selected. (See "Death Benefit Payable During the Annuity Period.")
THE ANNUITY PERIOD
You may elect to begin receiving Annuity Payments on the Annuity Date.
Annuity Payments can be made on either a fixed, variable or combination fixed
and variable basis. If you choose a variable payout, 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 may be imposed on certain withdrawals. Special rules apply
to distributions from a Roth IRA. (See "Tax Status.")
INQUIRIES
Questions, inquiries or requests for additional information can be
directed to your agent or local representative, or you may contact the Company
as follows:
[bullet] Write to: Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156-1258
Attention: Customer Service
[bullet] Call Customer Service: 1-800-531-4547 (for automated transfers
or changes in the allocation of Contract
Values, call: 1-800-262-3862)
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SUMMARY - 2
<PAGE>
FEE TABLE
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This Fee Table describes the various charges and expenses associated with
the Contract during the Accumulation Period. For amounts deducted during the
Annuity Period, see "Charges Deducted During the Annuity Period." No sales
charge is paid upon purchase of the Contract. Some expenses may vary as
explained under "Annuity Period--
Charges and Deductions." The charges and expenses shown below do not include
premium taxes that may be applicable. For more information regarding expenses
paid out of the assets of a particular Fund, see the Fund's prospectus.
CONTRACT HOLDER TRANSACTION EXPENSES
Deferred Sales Charge (as a percentage of the amount withdrawn).(1)
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT CONTRACTS
(EXCLUDING ROTH IRA CONTRACTS)
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Completed Purchase Deferred Sales
Payment Periods Charge Deduction
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<S> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
10 or more 0%
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</TABLE>
<TABLE>
<CAPTION>
SINGLE PURCHASE PAYMENT CONTRACTS
AND ALL ROTH IRA CONTRACTS
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Completed Contract Deferred Sales
Years Charge Deduction
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<S> <C>
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
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</TABLE>
<TABLE>
<S> <C>
Annual Contract Maintenance Fee ......... $ 20.00(2)
Allocation and Transfer Fees ............ $ 0.00(3)
</TABLE>
(1) The total amount deducted for the deferred sales charge will not exceed
8.5% of the total Purchase Payments applied to the Contract.
(2) The maintenance fee will generally be deducted annually from each
Installment Purchase Payment Contract. Under certain Contracts a
maintenance fee may also be deducted upon full withdrawal of the Account
Value. There is no maintenance fee under Single Purchase Payment
Contracts.
(3) The Company currently allows an unlimited number of transfers or allocation
changes without charge. However we reserve the right to assess a fee of
$10.00 for each transfer or allocation change in excess of 12 made during
each calendar year.
SEPARATE ACCOUNT ANNUAL EXPENSES
(Daily deductions, equal to the percentage shown on an annual basis, made
from amounts allocated to the variable options under each Contract.) Separate
Account Annual Expenses are:
<TABLE>
<S> <C>
Mortality and Expense Risk Charge. ............. 1.25%
Administrative Expense Charge. ................. 0.00%(4)
----
Total Separate Account Annual Expenses ......... 1.25%
----
</TABLE>
(4) We currently do not impose an Administrative Expense Charge. Howwever,
we reserve the right to deduct a daily charge of not more than 0.25% per
year from the Subaccounts.
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FEE TABLE - 1
<PAGE>
FUND ANNUAL EXPENSES
The following table illustrates the advisory fees and other expenses
applicable to the Funds. Except as noted, the following figures are a
percentage of average net assets based on figures for the year ended
December 31, 1997. A Fund's "Other Expenses" include operating costs of the
Fund. These expenses shown below are reflected in the Fund's net asset value
and are not deducted from the Individual Account Current Value under the
Contract.
<TABLE>
<CAPTION>
Investment
Advisory
Fees(1) Other Expenses Total Fund
(after expense (after expense Annual
reimbursement) reimbursement) 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%
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%
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 Growth Portfolio(7) 0.80% 0.20% 1.00%
Portfolio Partners T. Rowe Price Growth Equity Portfolio(7) 0.60% 0.15% 0.75%
</TABLE>
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(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.
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FEE TABLE - 2
<PAGE>
(3) Prior to May 1, 1998, the investment adviser provided administrative
services to the Fund and assumed the Fund's ordinary recurring direct
costs under an Administrative Services Agreement. Effective May 1, 1998,
the investment adviser will continue to provide administrative services to
the Fund but will no longer assume all of the Fund's ordinary recurring
direct costs under the Administrative Services Agreement. The
Administrative Fee is 0.075% on the first $5 billion in assets and 0.050%
on all assets over $5 billion. The "Other Expenses" shown are not based on
actual figures for the year ended December 31, 1997, but reflect the fee
payable under the new Administrative Services Agreement and estimates of
the Fund's ordinary recurring direct costs.
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.
(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 and administrative fees disclosed above. The investment adviser
will not seek an increase in its advisory or administrative fee at any
time prior to May 1, 1999.
(8) The advisory fee is 0.70% of the first $500 million in assets and 0.65% on
the excess.
- --------------------------------------------------------------------------------
FEE TABLE - 3
<PAGE>
HYPOTHETICAL ILLUSTRATION (EXAMPLE)
THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW.
The following Examples illustrate the expenses that would have been paid
assuming a $1,000 investment in the Contract and a 5% return on assets. For the
purposes of these Examples, the $20 maintenance fee has been converted to a
percentage of assets equal to 0.060%.
<TABLE>
<CAPTION>
EXAMPLE A EXAMPLE B
--------- ---------
If you withdraw your entire Contract If you do not withdraw your Contract
Value at the end of the periods shown, Value, or if you annuitize at the end of
you would pay the following expenses, the periods shown, you would pay the
including any applicable deferred sales following expenses (no deferred sales
charge: charge is reflected):*
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP $73 $121 $171 $244 $21 $66 $113 $244
Aetna Balanced VP, Inc. $71 $115 $161 $223 $19 $60 $103 $223
Aetna Bond VP $70 $112 $156 $213 $18 $57 $ 98 $213
Aetna Crossroads VP $73 $121 $171 $244 $21 $66 $113 $244
Aetna Growth VP $73 $121 $171 $244 $21 $66 $113 $244
Aetna Growth and Income VP $71 $114 $161 $222 $19 $60 $103 $222
Aetna High Yield VP $73 $121 $171 $244 $21 $66 $113 $244
Aetna Index Plus Large Cap VP $70 $113 $159 $218 $19 $58 $101 $218
Aetna Index Plus Mid Cap VP $71 $115 $161 $223 $19 $60 $103 $223
Aetna Index Plus Small Cap VP $71 $115 $161 $223 $19 $60 $103 $223
Aetna International VP $76 $131 $188 $280 $25 $77 $131 $280
Aetna Legacy VP $73 $121 $171 $244 $21 $66 $113 $244
Aetna Money Market VP $69 $108 $149 $197 $17 $52 $ 90 $197
Aetna Real Estate Securities VP $74 $125 $178 $260 $23 $71 $121 $260
Aetna Small Company VP $74 $125 $178 $260 $23 $71 $121 $260
Aetna Value Opportunity VP $73 $121 $171 $244 $21 $66 $113 $244
Calvert Social Balanced Portfolio $73 $121 $172 $245 $22 $66 $114 $245
Fidelity VIP Equity-Income Portfolio $71 $114 $160 $221 $19 $59 $102 $221
Fidelity VIP Growth Portfolio $72 $117 $166 $233 $20 $63 $108 $233
Fidelity VIP Overseas Portfolio $74 $124 $177 $256 $23 $70 $119 $256
Fidelity VIP II Contrafund Portfolio $72 $118 $167 $235 $21 $63 $109 $235
Janus Aspen Aggressive Growth Portfolio $72 $119 $169 $240 $21 $65 $111 $240
Janus Aspen Balanced Portfolio $73 $121 $172 $247 $22 $67 $115 $247
Janus Aspen Flexible Income Portfolio $72 $119 $169 $239 $21 $65 $111 $239
Janus Aspen Growth Portfolio $72 $118 $166 $234 $20 $63 $108 $234
Janus Aspen Worldwide Growth Portfolio $72 $119 $168 $238 $21 $64 $110 $238
Oppenheimer Global Securities Fund $72 $119 $169 $240 $21 $65 $111 $240
Oppenheimer Strategic Bond Fund $73 $121 $172 $247 $22 $67 $115 $247
Portfolio Partners MFS Emerging Equities
Portfolio $73 $121 $172 $245 $22 $66 $114 $245
Portfolio Partners MFS Research Growth Portfolio $73 $122 $173 $249 $22 $68 $116 $249
Portfolio Partners MFS Value Equity Portfolio $74 $123 $176 $254 $22 $69 $118 $254
Portfolio Partners Scudder International Growth
Portfolio $75 $126 $181 $265 $23 $72 $124 $265
Portfolio Partners T. Rowe Price Growth Equity
Portfolio $72 $119 $169 $239 $21 $65 $111 $239
</TABLE>
- ------------------
* This Example would not apply if a nonlifetime variable annuity option is
selected and a lump sum settlement is requested within three years after
annuity payments start since the lump sum payment will be treated as a
withdrawal during the Accumulation Period and will be subject to any deferred
sales charge that would then apply. (See Example A.)
- --------------------------------------------------------------------------------
FEE TABLE - 4
<PAGE>
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Condensed Financial Information for the Accumulation Units under the Contracts
is shown in Appendix IV.
THE COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Aetna Life Insurance and Annuity Company (the "Company") is the issuer of
the Contract, and as such, it is responsible for providing the insurance and
annuity benefits under the Contract. The Company is a stock life insurance
company organized under the insurance laws of the State of Connecticut in 1976.
Through a merger, it succeeded to the business of Aetna Variable Annuity Life
Insurance Company (formerly Participating Annuity Life Insurance Company, an
Arkansas life insurance company organized in 1954). The Company is engaged in
the business of issuing life insurance policies and variable annuity contracts
in all states of the United States. The Company's principal executive offices
are located at 151 Farmington Avenue, Hartford, Connecticut 06156. The Company
is a wholly owned subsidiary of Aetna Retirement Holdings, Inc., which is in
turn a wholly owned subsidiary of Aetna Retirement Services, Inc. and an
indirect wholly owned subsidiary of Aetna Inc.
VARIABLE ANNUITY ACCOUNT C
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Company established Variable Annuity Account C (the "Separate
Account") in 1976 as a segregated asset account for the purpose of funding its
variable annuity contracts. The Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act"), and
meets the definition of "separate account" under federal securities laws. The
Separate Account is divided into "Subaccounts" which do not invest directly in
stocks, bonds or other investments. Instead, each Subaccount buys and sells
shares of a corresponding Fund.
Although the Company holds title to the assets of the Separate Account,
such assets are not chargeable with liabilities of any other business conducted
by the Company. Income, gains or losses of the Separate Account are credited to
or charged against the assets of the Separate Account without regard to other
income, gains or losses of the Company. All obligations arising under the
Contracts are obligations of the Company.
INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE FUNDS
Purchase Payments may be allocated to one or more of the Subaccounts as
designated on the application. In turn, the Subaccounts invest in the
corresponding Funds at net asset value. The total number of investment options
that you may select during the Accumulation Period is limited to 18. Each
Subaccount, the Fixed Account, and each classification of GIA/GAA count as one
option once you have made an allocation to it, even if you no longer have
amounts allocated to that option.
The availability of Funds may be subject to applicable regulatory
authorization. In addition, the Company may add, withdraw or substitute Funds,
subject to the conditions in the Contract and in compliance with regulatory
requirements. Not all Funds may be available in all jurisdictions or under all
Contracts.
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
- --------------------------------------------------------------------------------
1
<PAGE>
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 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
- --------------------------------------------------------------------------------
2
<PAGE>
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 consistent with preservation of capital. The
Portfolio pursues its investment objective primarily through
investments in common stocks of foreign and domestic issuers.(4)
[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.(5)
[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.(5)
[bullet] Portfolio Partners, Inc.--MFS Emerging Equities Portfolio seeks to
provide long-term growth of capital. Dividend and interest income from
portfolio
- --------------------------------------------------------------------------------
3
<PAGE>
securities, if any, is incidental to the Portfolio's investment
objective.(6a)
[bullet] Portfolio Partners, Inc.--MFS Research Growth Portfolio seeks
long-term growth of capital and future income.(6a)
[bullet] Portfolio Partners, Inc.--MFS Value Equity Portfolio seeks capital
appreciation. Dividend income, if any, is a consideration incidental
to the Portfolio's objective of capital appreciation.(6a)
[bullet] Portfolio Partners, Inc.--Scudder International Growth Portfolio seeks
long-term growth of capital primarily through a diversified portfolio
of marketable foreign equity securities.(6b)
[bullet] Portfolio Partners, Inc.--T. Rowe Price Growth Equity Portfolio seeks
long-term growth of capital and, secondarily, to increase dividend
income by investing primarily in common stocks of well established
growth companies.(6c)
Investment Advisers for each of the Funds:
(1)Aeltus Investment Management Company, Inc.
(2)Calvert Asset Management Company, Inc.
(3)Fidelity Management & Research Company
(4)Janus Capital Corporation
(5)OppenheimerFunds, Inc.
(6)Aetna Life Insurance and Annuity (adviser);
(a) Massachusetts Financial Services Company (subadviser)
(b) Scudder Kemper Investments, Inc. (subadviser)
(c) T. Rowe Price Associates, Inc. (subadviser)
Risks Associated with Investment in the Funds. Some of the Funds may use
instruments known as derivatives as part of their investment strategies. The
use of certain derivatives may involve high risk of volatility to a Fund, and
the use of leverage in connection with such derivatives can also increase risk
of losses. Some of the Funds may also invest in foreign or international
securities which involve greater risks than U.S. investments.
More comprehensive information, including a discussion of potential
risks, is found in the current prospectus for each Fund which is distributed
with and accompanies this Prospectus. You should read the Fund prospectuses and
consider carefully, and on a continuing basis, which Fund or combination of
Funds is best suited to your long-term investment objectives. Additional
prospectuses and Statements of Additional Information for this Prospectus and
for each of the Funds can be obtained from the Company's Home Office at the
address and telephone number listed under the "Inquiries" section of the
Prospectus Summary.
Conflicts of Interest (Mixed and Shared Funding). Shares of the Funds are
sold to each of the Subaccounts for funding the variable annuity contracts
issued by the Company. Shares of the Funds may also be sold to other insurance
companies for the same purpose. This is referred to as "shared funding." Shares
of the Funds may also be used for funding variable life insurance contracts
issued by the Company or by third parties. This is referred to as "mixed
funding."
Because the Funds available under the Contract are sold to fund variable
annuity contracts and variable life insurance policies issued by us or by other
companies, certain conflicts of interest could arise. If a conflict of interest
were to occur, one of the separate accounts might withdraw its investment in a
Fund, which might force that Fund to sell portfolio securities at
disadvantageous prices, causing its per share value to decrease. Each Fund's
Board of Directors or Trustees has agreed to monitor events in order to
identify any material irreconcilable conflicts which might arise and 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.
[bullet] The Guaranteed Interest Account (GIA) 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. This Credited Interest Option is available in all states
except Washington and New York. (See Appendix I.)
[bullet] The Fixed Account is also a part of the Company's general account. The
Fixed Account guarantees a minimum interest rate, as specified in the
Contract. The Company may credit higher interest rates from
- --------------------------------------------------------------------------------
4
<PAGE>
time to time. Transfers from the Fixed Account are limited. (See
Appendix II.)
[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 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.
This credited interest option is offered in New York only. (See
Appendix III.)
PURCHASE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTRACT PURCHASE AND AVAILABILITY
The Contracts described in this Prospectus are individual deferred
variable annuity contracts designed to fund plans adopted by or on behalf of
individuals entitled to tax-deferred treatment under Section 408(b) of the Code
("IRA"), and plans established for employees whose employer contributes to
their IRA plan pursuant to the Simplified Employee Pension ("SEP") Plan
provisions of Section 408(k) of the Code. Currently, the IRA is not available
as a "Simple IRA" as defined in Section 408(p) of the Code. Subject to state
approval, the Contract is also available in the state of New York as a Roth
IRA. A Roth IRA Contract is a special form of IRA which can accept
nondeductible annual contributions. Contributions to a Simplified Employee
Pension Plan ("SEP") are not permitted. The Contract can also accept transfers
and rollovers, but only from an Individual Retirement Annuity/Individual
Retirement Account, subject to ordinary income tax, or from another Roth IRA.
The Company reserves the right not to accept rollover contributions to an
existing Contract.
These Contracts may be purchased by completing the proper application
form and submitting it to the Distributor. The Company must accept or reject
the application within two business days of receipt. If the application is
incomplete, the Company may hold any forms and accompanying Purchase Payments
for five days. Purchase Payments may be held for longer periods only with the
consent of the Contract Holder, pending the acceptance of the application. If
the application is rejected, the application and any Purchase Payments will be
returned to the Contract Holder.
PURCHASE PAYMENTS
Two types of Contracts are available. Continuing periodic payments will
be placed in "Installment Purchase Payments Contracts," and lump sum transfers
of amounts accumulated under a pre-existing plan may be placed in "Single
Purchase Payment Contracts" in accordance with the Company's procedures and
minimums in effect at the time of purchase.
The minimum Purchase Payment for a Single Payment Contract is $5,000.
Installment Purchase Payments must be at least $85 per month or $1,000 annually
for IRA and SEP Plans. (Monthly installments must be made via Automatic Bank
Check Plan.)
Allocation of Purchase Payments. Purchase Payments will initially be
allocated to the Subaccounts or Credited Interest Options as specified on the
application. 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 "Investment Options--the Funds.")
RIGHT TO CANCEL
You may cancel the Contract no later than 10 days after you receive it
(or as otherwise allowed by state law) by returning it to the Company with a
written notice of cancellation. We will produce a refund not later than seven
days after we receive the Contract and the written notice at our Home Office.
Cancellations requested after you receive the Contract will consist of a refund
of the Purchase Payment.
- --------------------------------------------------------------------------------
5
<PAGE>
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT
Mortality and Expense Risk Charge. The Company makes a daily deduction
from each of the Subaccounts for the mortality and expense risk charge. The
charge is equal, on an annual basis, to 1.25% of the daily net assets of the
Subaccounts and compensates the Company for the assumption of mortality and
expense risks under the Contract. The mortality risks are those assumed for our
promise to make lifetime payments according to annuity rates specified in the
Contract. The expense risk is the risk that the actual expenses for costs
incurred under the Contract will exceed the maximum costs that can be charged
under the Contract.
If the amount deducted for mortality and expense risks is not sufficient
to cover the mortality costs and expense shortfalls, the loss is borne by the
Company. If the deduction is more than sufficient, the excess may be used to
recover distribution expenses relating to the Contracts and as a source of
profit to the Company. The Company expects to make a profit from the mortality
and expense risk charge.
Administrative Expense Charge. The Company reserves the right to make a
deduction from each of the Subaccounts for an administrative expense charge.
The administrative expense charge compensates the Company for administrative
expenses that exceed revenues from the maintenance fee described below. The
charge is set at a level which does not exceed the average expected cost of the
administrative services to be provided while the Contract is in force. The
Company does not expect to make a profit from this charge.
The Contract allows the Company to assess an administrative expense
charge of up to 0.25% of the daily net assets of the Subaccounts. Currently,
there is no administrative expense charge during the Accumulation Period or
Annuity Period. If this charge is established for the Annuity Period before you
begin to receive Annuity payments, it will apply to you.
MAINTENANCE FEE
During the Accumulation Period, the Company will deduct an annual
maintenance fee of $20 from the Installment Purchase Payment Contract Value.
The maintenance fee is to reimburse the Company for some of its administrative
expenses relating to the establishment and maintenance of the Contract. There
is no maintenance fee under Single Purchase Payment Contracts.
The maintenance fee is determined annually based on the Contract Value on
the last day of the Contract Year. The maintenance fee will be deducted on a
pro rata basis from each Subaccount or Credited Interest Option in which you
have an interest.
REDUCTION OR ELIMINATION OF THE MAINTENANCE FEE
The maintenance fee may be reduced or eliminated when sales of the
Contracts are made to individuals or to a group of individuals in such a manner
that results in savings of administrative expenses. The entitlement to such a
reduction will be based on:
(1) the size and type of group of individuals to whom the Contract is offered;
and
(2) the amount of expected Purchase Payments.
Any reduction or elimination of the maintenance fees will not be unfairly
discriminatory against any person. We will make any reduction in the annual
maintenance fees according to our own rules in effect at the time an
application for a Contract is approved. We reserve the right to change these
rules from time to time.
DEFERRED SALES CHARGE
Withdrawals of all or a portion of the Account Value may be subject to a
deferred sales charge. The deferred sales charge is a percentage of the amount
withdrawn from the Subaccounts, the Fixed Account, the Guaranteed Accumulation
Account and the Guaranteed Interest Account.
- --------------------------------------------------------------------------------
6
<PAGE>
For Installment Purchase Payment Contracts (IPPC), other than IPPC Roth
IRAs, the deferred sales charge is based on the number of completed Purchase
Payment Periods. For Single Purchase Payment Contracts, and all Roth IRAs, it
is based on the number of Contract Years that have elapsed since the Purchase
Payments were made. The amount of the deferred sales charge is determined in
accordance with the schedule set forth in the following tables:
<TABLE>
<CAPTION>
INSTALLMENT PURCHASE PAYMENT CONTRACTS
(EXCLUDING ROTH IRA CONTRACTS):
- --------------------------------------------------
Purchase Payment Deferred Sales
Periods Completed Charge Deduction
- ----------------- ----------------
<S> <C>
Less than 5 5%
5 or more but less than 7 4%
7 or more but less than 9 3%
9 or more but less than 10 2%
10 or more 0%
- --------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SINGLE PURCHASE PAYMENT CONTRACTS AND ALL
ROTH IRA CONTRACTS:
- --------------------------------------------------
Contract Years Deferred Sales
Completed Charge Deduction
- -------------- ----------------
<S> <C>
Less than 5 5%
5 or more but less than 6 4%
6 or more but less than 7 3%
7 or more but less than 8 2%
8 or more but less than 9 1%
9 or more 0%
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</TABLE>
A deferred sales charge will not be deducted from any portion of the
Contract Value if the withdrawal is:
[bullet] applied to provide Annuity benefits;
[bullet] paid due to your death;
[bullet] withdrawn on or after the tenth anniversary of the effective date of
the Installment Purchase Payment Contract;
[bullet] withdrawn due to the election of a Systematic Distribution Option (see
"Systematic Distribution Options");
[bullet] paid where the Contract Value is $2,500 or less and no amount has been
withdrawn from that Contract within the prior 12 months; or
[bullet] in the case of any Installment Purchase Payment Contract, withdrawn in
part or in full provided you are at least age 59-1/2 and nine Purchase
Payment Periods have been completed.
REDUCTION OR ELIMINATION OF THE DEFERRED SALES CHARGE
We may reduce or eliminate the deferred sales charge when sales of the
Contracts are made to individuals or a group of individuals in such a manner
that results in savings of sales expenses. The entitlement to such a reduction
in the deferred sales charge will be based on the following:
(1) the size and type of group of individuals to whom the Contract is offered;
(2) the amount of expected Purchase Payments; and
(3) whether there is a prior or existing relationship with the Company such as
being an employee of the Company or an affiliate, receiving distributions or
making internal transfers from other Contracts issued by the Company, or
making transfers of amounts held under qualified plans sponsored by the
Company or an affiliate.
Any reduction or elimination of the deferred sales charge will not be
unfairly discriminatory against any person.
Free Withdrawal. Up to 10% of the current Contract Value may be withdrawn
annually without a deferred sales charge. This applies only to the first
partial withdrawal in each calendar year. The 10% amount will be calculated
using the Contract Value on the date of withdrawal. This provision is only
available if you are between the ages of 59-1/2 and 70-1/2.
The deduction for the deferred sales charge will not exceed 8.5% of the
total Purchase Payments actually made to the Contract. The Company does not
anticipate that the deferred sales charge will cover all sales and
administrative expenses which it incurs in connection with the Contract. The
difference will be covered by the general assets of the Company which are
attributable, in part, to the mortality and expense risk charge under the
Contract described above.
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.
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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 Contract Values at any time,
but no earlier than when we have a tax liability under state law. The Company's
current practice is to deduct for premium taxes at the time of complete
withdrawal or annuitization. In addition to the premium tax, the Company
reserves the right to assess a charge for any state or federal taxes due
against the Contract or the Separate Account assets. (See "Tax Status.")
Any municipal premium tax assessed at a rate in excess of 1% will be
deducted from the Purchase Payment(s) or from the amount applied to an Annuity
Option based upon our determination of when such tax is due. We will absorb any
municipal premium tax that is assessed at 1% or less. We reserve the right,
however, to reflect this added expense in our annuity purchase rates for
residents of such municipalities.
CONTRACT VALUATION
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CONTRACT VALUE
Until the Annuity Date, the Contract Value is the total dollar value of
amounts held in the Account as of any Valuation Date. The Contract 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 the mortality and
expense risk charge and the administrative expense charge (if any).
Initial Purchase Payments will be credited to your Contract at the AUV
next computed following our acceptance of the application as described under
"Purchase--Contract Purchase and Availability." Each subsequent Purchase
Payment (or amount transferred) received by the Company by the close of
business of the New York Stock Exchange will be credited to your Contract at
the AUV next computed following our receipt of your payment or transfer
request. The value of an Accumulation Unit may increase or decrease.
NET INVESTMENT FACTOR
The net investment factor is used to measure the investment performance
of a Subaccount from one Valuation Date to the next. The net investment factor
for a Subaccount for any valuation period is equal to the sum of 1.0000 plus
the net investment rate. The net investment rate equals:
(a) the net assets of the Fund held by the Subaccount on the current
Valuation Date, minus
(b) the net assets of the Fund held by the Subaccount on the preceding
Valuation Date, plus or minus
(c) taxes or provisions for taxes, if any, attributable to the operation
of the Subaccount;
(d) divided by the total value of the Subaccounts Accumulation and Annuity
Units on the preceding Valuation Date;
(e) minus a daily charge at the annual effective rate of 1.25% for
mortality and expense risks and up to 0.25% (currently 0%) as an
administrative expense charge.
The net investment rate may be either positive or negative.
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<PAGE>
TRANSFERS
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At any time prior to the Annuity Date, you can transfer amounts held under
your Contract from one Subaccount to another. Transfers between the Credited
Interest Options and the Subaccounts are subject to certain restrictions. (See
Appendices I, II and III.) A request for transfer can be made either in writing
or by telephone. All transfers must be in accordance with the terms of the
Contract.
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.") In addition, we reserve the
right to assess a fee of $10.00 for each transfer or allocation change in
excess of 12 made during each calendar year. Any transfer will be based on the
Accumulation Unit Value next determined after the Company receives a valid
transfer request at its Home Office. Transfers are not available during the
Annuity Period.
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.
WITHDRAWALS
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All or a portion of the Contract Value may be withdrawn at any time
during the Accumulation Period. To request a withdrawal, you must properly
complete a disbursement form and send it to 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 the Contract: The amount paid for a full withdrawal
will be the Contract Value minus any applicable deferred sales charge
and maintenance fee.
[bullet] Partial Withdrawals (Percentage): The amount paid will be the
percentage of the Contract Value requested minus any applicable
deferred sales charge.
[bullet] Partial Withdrawal (Specified Dollar Amount): The amount paid will be
the dollar amount requested. However, the amount withdrawn from the
Contract will equal the amount requested plus any applicable deferred
sales charge. For any partial withdrawal, amounts will be withdrawn
proportionately from each Subaccount or Credited Interest Option in
which the Account is invested, unless you request otherwise in
writing. All amounts paid will be based on Contract 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.
REINVESTMENT PRIVILEGE
Within 30 days after a withdrawal, if allowed by law you 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 Contract for the
amount reinvested, as well as any maintenance fee and deferred sales charge
imposed at the time of withdrawal. Any maintenance fee which falls due after
the withdrawal and before the reinvestment will be deducted from the amounts
reinvested. Reinvested amounts will be reallocated to the applicable investment
options in the same proportion as they were allocated at the time of
withdrawal. Accumulation Units will be credited to your Contract based on the
Accumulation Unit Value next computed following our receipt of your request
along
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9
<PAGE>
with the amount to be reinvested. The reinvestment privilege may be used only
once. See Appendix I and III for a discussion of amounts withdrawn from GIA or
GAA and then reinvested. If you are contemplating reinvestment, you should seek
competent advice regarding the tax consequences associated with such a
transaction.
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 Contract Value must meet the minimum dollar amounts and age
criteria applicable to that option.
The Systematic Distribution Options currently available under the
Contract include the following:
[bullet] SWO--Systematic Withdrawal Option. SWO is a series of partial
withdrawals from your Contract based on a payment method you select.
It is designed for those who want a periodic income while retaining
investment flexibility for amounts accumulated under a Contract.
[bullet] ECO--Estate Conservation Option. ECO offers the same investment
flexibility as SWO but is designed for those who want to receive only
the minimum distribution that the Code requires each year. Under ECO,
the Company calculates the minimum distribution amount required by law
at age 70-1/2, and pays you that amount once a year. (See "Tax
Status.") ECO is not available under the Roth IRA Contract.
Other Systematic Distribution Options may be added from time to time.
Additional information relating to any of the Systematic Distribution Options
may be obtained from your local representative or from the Company at its Home
Office.
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 Contract 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.
DEATH BENEFIT DURING ACCUMULATION PERIOD
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The Contract provides that a death benefit is payable to the
Beneficiary(ies) if you die before the Annuity Date. The amount of the death
benefit will be equal to the Contract Value. If allowed by the Code, 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; or
[bullet] under any Systematic Distribution Option available under the Contract
(if the beneficiary is your spouse).
The Beneficiary may instead elect one of the following two options;
however, the Code limits how long the death benefit proceeds may be left in
these options (see below):
[bullet] to leave the Contract Value invested in the Contract; or to leave the
Contract 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 Contract 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 acceptable to the Company.
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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 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
For the Contracts described in this Prospectus, other than a Roth IRA
Contract, the Code requires that minimum annual distributions of the Contract
Value begin by April 1st of the calendar year following the calendar year in
which you attain age 70-1/2. For Roth IRAs, the minimum distribution rules do
not apply prior to your death.
Distributions must be in a form and amount sufficient to satisfy the Code
requirements. These requirements may be satisfied by the election of certain
Annuity Options or Systematic Distribution Options. (See "Tax Status.")
At least 30 days prior to the Annuity Date, you must notify us in writing
of the following:
[bullet] the date on which you would like to start receiving Annuity payments;
[bullet] the Annuity Option under which you want your payments to be calculated
and paid;
[bullet] whether the payments are to be made monthly, quarterly, semi-annually
or annually; and
[bullet] the investment option(s) used to provide Annuity payments (i.e., a
fixed Annuity using the general account or any of the Subaccounts
available at the time of annuitization). As of the date of this
Prospectus, Aetna Growth and Income VP, Aetna Bond VP and Aetna
Balanced VP, Inc. are the only Subaccounts available.
Annuity Payments will not begin until an Annuity Option has been
selected. Until a date and option are elected, the Contract will continue in
the Accumulation Period. Once Annuity Payments begin, the Annuity Option may
not be changed, nor may transfers be made among the investment option(s)
selected.
ANNUITY OPTIONS
You may choose one of the following Annuity Options. You may make or
change your selection at any time prior to 30 days before the Annuity Date. We
may also offer additional Annuity Options under your Contract from time to
time.
Lifetime Annuity Options:
[bullet] Option 1--Life Annuity--An Annuity with payments ending on the
Annuitant's death.
[bullet] Option 2--Life Annuity with Guaranteed Payments-- An Annuity with
payments guaranteed for 5, 10, 15 or 20 years, or such other periods as
the Company may offer at the time of annuitization.
[bullet] Option 3--Life Income based Upon the Lives of Two Payees--An Annuity
will be paid during the lives of the Annuitant and a second Annuitant,
with 100%, 66 2/3% or 50% of the payment to continue after the first
death, or 100% of the payment to continue at the death of the second
Annuitant and 50% of the payment to continue at the death of the
Annuitant.
[bullet] Option 4--Life Income based Upon the Lives of Two Payees--An Annuity
with payments for a minimum of 120 months, with 100% of the payment to
continue after the first death.
If Option 1 or 3 is elected, it is possible that only one Annuity Payment
will be made if the Annuitant under Option 1, or the surviving Annuitant under
Option 3, should die prior to the due date of the second Annuity Payment. Once
lifetime Annuity Payments begin, the Annuitant cannot elect to receive another
form of benefit.
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<PAGE>
Nonlifetime Annuity Options:
[bullet] Option 1--Payments for a Specified Period-- payments will continue for
a specified period of time, as provided for under your Contract.
An Annuity may be selected on a fixed or variable basis and payments be
made for 3 to 30 years, as selected. If this option is elected on a variable
basis, the Annuitant may request at any time during the payment period that the
present value of all or any portion of the remaining variable payments be paid
in one sum. However, any lump-sum elected before three years of payments have
been completed will be treated as a withdrawal during the Accumulation Period
and any applicable deferred sales charge will be assessed. (See "Charges and
Deductions--Deferred Sales Charge.")
We may also offer additional Annuity Options under your Contract from
time to time.
ANNUITY PAYMENTS
Date Payouts Start. When payments start, the age of the Annuitant plus
the number of years for which payments are guaranteed must not exceed 95.
Except for Roth IRAs, annuity payments may not extend beyond (a) the life of
the Annuitant, (b) the joint lives of the Annuitant and Beneficiary, (c) a
period certain greater than the Annuitant's life expectancy, or (d) a period
certain greater than the joint life expectancies of the Annuitant and
Beneficiary.
Amount of Each Annuity Payment. The amount of each payment depends on how
you allocate your Contract Value between fixed and variable payouts. No
election may be made that would result in the first Annuity payment of less
than $20, or total yearly Annuity payments of less than $100. If your Contract
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 3-1/2% assumed rate causes a
lower first payment, but subsequent payments would increase more rapidly or
decline more slowly as changes occur in the net investment rate. (See the
Statement of Additional Information for further discussion on the impact of
selecting an assumed net investment rate).
CHARGES DEDUCTED DURING THE ANNUITY PERIOD
We make a daily deduction for mortality and expense risks from any
amounts held on a variable basis. Therefore, electing the nonlifetime option on
a variable basis will result in a deduction being made even though we assume no
mortality risk. We may also deduct a daily administrative expense charge from
amounts held under the variable options. (See "Charges and Deductions.")
DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD
If an Annuitant dies after Annuity Payments have begun, any death benefit
payable will depend on the terms of the Contract and the Annuity Option
selected. If Option 1 or Option 3 was elected, Annuity Payments will cease on
the death of the Annuitant under Option 1 or the death of the surviving
Annuitant under Option 3.
If Lifetime Option 2 or Option 4 was elected and the death of the
Annuitant under Option 2, or the surviving Annuitant under Option 4, occurs
prior to the end of the guaranteed minimum payment period, we will pay to the
Beneficiary in a lump sum, unless otherwise requested, the present value of the
guaranteed Annuity payments remaining.
If the nonlifetime option was elected, and the Annuitant dies before all
payments are made, the value of any remaining payments may be paid in a
lump-sum to the Beneficiary (unless otherwise requested), and no deferred sales
charge will be imposed.
If the Annuitant dies after Annuity payments have begun and if there is a
death benefit payable under the Annuity option elected, the remaining value
must be distributed to the Beneficiary at least as rapidly as under the
original method of distribution.
Any lump-sum payment paid under the applicable lifetime or nonlifetime
Annuity options will be made within seven calendar days after proof of death
acceptable to us, and a request for payment are received at our Home Office.
The value of any death benefit proceeds will be determined as of the next
Valuation Date after we receive acceptable proof of death and a request for
payment. Under Options 2 and 4, such value will be reduced by any payments made
after the date of death.
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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 or Beneficiary may depend upon the tax status of
the individual concerned. Any person concerned about these tax implications
should consult a competent tax advisor before initiating any transaction.
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since
the Separate Account is not an entity separate from the Company, it will not be
taxed separately as a "regulated investment company" under the Code. Investment
income and realized capital gains are automatically applied to increase
reserves under the Contracts. Under existing federal income tax law, the
Company believes that the Separate Account investment income and realized net
capital gains will not be taxed to the extent that such income and gains are
applied to increase the reserves under the Contracts.
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 retirement plans
qualified under Sections 408(b), 408(k) or 408A of the Code. The tax rules
applicable to participants and beneficiaries in 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.
Purchasers are responsible for determining that contributions, distributions
and other transactions with respect to the Contracts satisfy applicable laws,
and should consult their legal counsel and tax advisor regarding the
suitability of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(b) of the Code permits eligible individuals to contribute to
a traditional "Individual Retirement Annuity" (hereinafter referred to as a
"traditional IRA") on either a pre-tax and/or after-tax basis. Also,
distributions from certain other types of qualified plans may be "rolled over"
on a tax-deferred basis into a traditional IRA. Employers may establish
Simplified Employee Pension (SEP) plans and make contributions to a traditional
IRA on behalf of their employees.
Section 408A of the Code permits eligible individuals to contribute to a
Roth "Individual Retirement Annuity" (hereinafter referred to as a "Roth IRA")
on an after-tax basis. Distributions from one Roth IRA may be rolled over to
another Roth IRA. If you meet certain eligibility requirements, distributions
from a traditional IRA may be rolled over to a Roth IRA. The amount you would
have included in gross income if you took a distribution from your traditional
IRA is included in your gross income.
The sale of a Contract for use with any type of IRA requires special
disclosure mandated by the Internal Revenue Code, and purchasers of an IRA
Contract will be provided with supplemental information as required by the
Code. A Contract issued as an IRA will be amended as necessary to conform to
the requirements of the Code. Purchasers should seek competent advice as to the
suitability of the Contract as an IRA.
Taxation of Distributions. All distributions from a traditional IRA will
be taxed as ordinary income unless nondeductible contributions were made to the
IRA or the distribution is rolled over to another retirement plan in accordance
with the terms of the Code.
Any distribution from a Roth IRA is not taxable to you if it is a
"qualified" distribution. A "qualified"
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distribution is any distribution made after you have attained age 59-1/2, or on
account of your death or disability, or for a qualified first-time home
purchase. A distribution will not be treated as "qualified" if it is made
within the 5-taxable year period beginning with the first taxable year for
which a contribution was made. If a distribution is not "qualified", the
accumulated earnings are includible in income. Distributions are treated as
made from contributions first.
Distributions are generally 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 generally are provided
the opportunity to elect not to have tax withheld from distributions.
In general, payments received by your beneficiaries after your death are
taxed in the same manner as if you have received those payments, except that a
limited death benefit exclusion may apply for payments due to deaths occurring
on or before August 20, 1996. This exclusion no longer applies to payments due
to deaths occurring after August 20, 1996.
The Code imposes a 10% penalty tax on the taxable portion of any
distribution from a traditional or Roth IRA unless (a) you have attained age
59-1/2, (b) you have died, (c) you have become disabled as defined by the Code,
(d) the distribution amount is rolled over in accordance with the terms of the
Code, (e) it is paid in a series of substantially equal periodic payments (at
least annually) over your life expectancy or the joint lives or joint life
expectancies of you and a designated Beneficiary, (f) the distribution equals
unreimbursed medical expenses that qualify for a deduction as specified in the
Code, (g) the distribution is used to pay for health insurance premiums for
certain unemployed individuals, (h) the amount withdrawn is for a qualified
first-time home purchase or (i) the amount withdrawn is for higher education
expenses.
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 ("SEC") and is a member of the National
Association of Securities Dealers, Inc. (NASD). As underwriter, the Company
will contract with one or more registered broker-dealers ("Distributors"),
including at least one affiliate of the Company, to offer and sell the
Contracts. All persons offering and selling the Contracts must be registered
representatives of the Distributors and must also be licensed as insurance
agents to sell variable annuity contracts. These registered representatives may
also provide services in connection with establishing 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 a Contract. The percentage amount will range from 2%
to 4% of those Purchase Payments. The Company may also pay renewal commissions
on Purchase Payments made after the first year and service fees. The average of
all payments made by the Company is estimated to equal approximately 3% of the
total Purchase Payments made over the life of an average Contract. In addition,
some sales personnel may receive various types of non-cash compensation as
special sales incentives, including trips and educational and/or business
seminars. Supervisory and other management personnel of the Company may receive
compensation that will vary based on the relative profitability to the Company
of the funding options you select. Funding options that invest in Funds advised
by the Company or its affiliates are generally more profitable to the Company.
The Company may also reimburse the Distributor for certain expenses. The name
of the Distributor and the registered representative responsible for your
Contract are set forth on your application. Commissions and sales related
expenses are paid by the Company and are not deducted from Purchase Payments.
(See "Charges and Deductions--Deferred Sales Charge.")
DELAY OR SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of payment
for any benefit or values (a) on any Valuation Date on which the New York Stock
Exchange ("Exchange") is closed (other than customary weekend and holiday
closings) or when trading on the
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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 the date 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 charge, annual
maintenance fees, administrative expense charge (if any) and any applicable
deferred sales charge). "Non-standardized returns" will be calculated in a
similar manner, except that non-standardized figures will not reflect the
deduction of any applicable deferred sales charge (which would decrease the
level of performance shown if reflected in these calculations). The
non-standardized figures may also include monthly, quarterly, year-to-date and
three-year periods and may be calculated from the inception date of the Fund.
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. 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 that you may cast during the Accumulation Period is
equal to the portion of the Contract Value attributable to that Fund, divided
by the net asset value of one share of that Fund. During the Annuity Period,
the number of votes is equal to the valuation reserve applicable to the portion
of the Contract attributable to that Fund, divided by the net asset value of
one share of that Fund. In determining the number of votes, fractional votes
will be recognized.
MODIFICATION OF THE CONTRACT
The Company may modify the Contract when it deems an amendment
appropriate, by giving written notice to you 30 days before the effective date
of the change. The most likely reason for a change to the Contract would be to
ensure compliance with applicable law. Certain changes will require the
approval of appropriate state or federal regulatory authorities.
INVOLUNTARY TERMINATIONS
Subject to state regulatory approval, following the completion of two
Contract Years in which no Purchase Payments have been made, the Company
reserves the right to pay the full Contract Value to the Contract Holder if the
Contract Value is less than $1,500, provided the Company gives the Contract
Holder 90 days written notice. Such Contract Value paid may not be reinstated.
The full Contract Value payable to the Contract Holder will not be reduced by
any deferred sales charge, and amounts withdrawn from GIA, if applicable, will
not receive a reduced rate of interest. Amounts withdrawn from GIA will receive
a guaranteed effective annual yield to the date of Contract termination as if
the amounts had remained in GIA until the end of a Guaranteed Term. (See
Appendix I.)
- --------------------------------------------------------------------------------
15
<PAGE>
Amounts surrendered from GAA will receive the greater of:
(a) The aggregate MVA amount from all Guaranteed Terms prior to the end of
those terms; or
(b) The applicable portion of the Contract Value in GAA.
This provision does not apply for any Contract that has elected an
Annuity Option.
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.
- --------------------------------------------------------------------------------
16
<PAGE>
CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Statement of Additional Information contains more specific
information on the Separate Account and the Contract, as well as the financial
statements of the Separate Account and the Company. A list of the contents of
the SAI is set forth below:
General Information and History
Variable Annuity Account C
Offering and Purchase of Contracts
Performance Data
General
Average Annual Total Return Quotations
Annuity Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of the Company
- --------------------------------------------------------------------------------
17
<PAGE>
APPENDIX I
GUARANTEED INTEREST ACCOUNT
(AVAILABLE IN ALL STATES EXCEPT WASHINGTON AND NEW YORK)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Guaranteed Interest Account ("GIA") is a Credited Interest Option
available during the Accumulation Period. Amounts allocated to the GIA are
held by the Company as described in the GIA disclosure brochure. Interests in
GIA have not been registered with the SEC in reliance on exemptions under the
Securities Act of 1933, as amended. Disclosure in this Prospectus regarding GIA
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 Guaranteed Interest
Account has not been reviewed by the SEC.
GIA is a Credited Interest Option under which we guarantee stipulated
rates of interest for stated periods of time. Interest is credited daily at a
rate that will provide the guaranteed effective yield by the end of the stated
period.
During a stated period of time, amounts may be applied to any or all
available Guaranteed Terms within the Short-Term and Long-Term Classifications.
The Short-Term Classification consists of all Guaranteed Terms of 3 years or
less and the Long-Term Classification consists of all Guaranteed Terms of 10
years or less, but greater than 3 years.
As long as amounts are not withdrawn before the end of a stated term, we
will pay the guaranteed rate of interest. If amounts are withdrawn or
transferred before the end of a stated period of time, except if pursuant to
the Company's termination of the Contract (see "Miscellaneous--Involuntary
Termination of the Contract,") we will pay a reduced rate of interest, but
never less than the minimum stated in the Contract.
As a Guaranteed Term matures, assets accumulating under GIA may be (a)
transferred to a new Guaranteed Term, (b) transferred to the other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge and/or tax liabilities.
MORTALITY AND EXPENSE RISK CHARGE
We make no deductions from the credited interest rate for mortality and
expense risks; these risks are considered in determining the credited interest
rate.
TRANSFERS
Transfers are permitted from Guaranteed Terms of one Classification to
available Guaranteed Terms of another Classification. We will apply a reduced
rate of interest to amounts transferred prior to the end of a Guaranteed Term.
Transfers of GIA values due to a maturity are not subject to a reduced rate of
interest.
By notifying us at our Home Office at least 30 days before Annuity
payments begin, you may elect to have amounts that have been accumulating under
GIA transferred to one or more of the funds currently available during the
Annuity Period, to provide variable Annuity payments. GIA cannot be used as an
investment option during the Annuity Period.
REINVESTMENT PRIVILEGE
Any amounts reinvested in GIA will be applied to the current deposit
period. Amounts are proportionately reinvested to the Classifications in the
same manner as they were allocated before the withdrawal.
- --------------------------------------------------------------------------------
18
<PAGE>
APPENDIX II
FIXED ACCOUNT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following summarizes material information concerning the Fixed
Account. Amounts allocated to the Fixed Account are held in the Company's
general account that supports general insurance and annuity obligations.
Interests in the Fixed Account have not been registered with the SEC in
reliance on exemptions under the Securities Act of 1933, as amended. Disclosure
in the Prospectus regarding the Fixed Account, may, however, be subject to
certain generally applicable provisions of the federal securities laws relating
to the accuracy and completeness of such statements. Disclosure in this
Appendix regarding the Fixed Account has not been reviewed by the SEC.
The Fixed Account guarantees the minimum interest rate specified in the
Contract. These minimum interest rates cannot be changed by the Company;
however, the Company 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 the Fixed Account, the Company
assumes the risk of investment gain or loss by guaranteeing Contract 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.
In addition, if allowed by state law, the Company may pay any Fixed
Account withdrawal value in equal payments, with interest, over a period not to
exceed 60 months, when:
(a) the amount held in the Fixed Account under this Contract exceeds
$250,000 on the day prior to the current withdrawal ($500,000 for
Contracts issued prior to August 1988); and
(b) the sum of the current Fixed Account withdrawal and the total of all
Fixed Account withdrawals from the Contract within the past 12 calendar
months exceeds 20% of the amount in the Fixed Account on the day prior
to the current withdrawal.
Interest, as used above, will not be more than two percentage points below
any rate determined prospectively by the Board of Directors for this class of
Contract. In no event will the interest rate be less than the minimum stated in
the Contract.
Amounts applied to the Fixed Account will earn the interest rate in effect
when actually applied to the Fixed Account.
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
options(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.
- --------------------------------------------------------------------------------
19
<PAGE>
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. Additionally,
any remaining balance in the Fixed Account under the Contract may be
transferred by you in its entirety to any other investment option(s) if:
(a) the Current Value in the Fixed Account is $2,000 or less; or
(b) the maximum percentage allowed was transferred from the Fixed Account
in each of the four consecutive calendar years and no additional Net
Purchase Payment(s) have been allocated to the Fixed Account during
that same time period.
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.
- --------------------------------------------------------------------------------
20
<PAGE>
APPENDIX III
GUARANTEED ACCUMULATION ACCOUNT
(OFFERED IN NEW YORK ONLY)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Appendix is a summary of GAA and is not intended to replace the GAA
prospectus. You should read the accompanying GAA prospectus carefully before
investing.
The Guaranteed Accumulation Account ("GAA") is a credited interest option
available during the Accumulation Period. Amounts allocated to the GAA are held
by the Company as described in the GAA prospectus.
GAA is a Credited Interest Option in which we guarantee stipulated rates
of interest for stated periods of time on amounts directed to GAA. The interest
rate stipulated is an annual effective yield; that is, it reflects a full
year's interest. Interest is credited daily at a rate that will provide the
guaranteed annual effective yield for one year. This option guarantees the
minimum interest rate specified in the Contract.
During a specified period of time (the "deposit period"), amounts may be
applied to any or all available Guaranteed Terms within the Short-Term and
Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to
three years, and Long-Term GAA has Guaranteed Terms from three to ten years.
Purchase Payments must remain in GAA for the full Guaranteed Term to
receive the quoted interest rates. Withdrawals or transfers from a Guaranteed
Term before the end of that Guaranteed Term may be subject to a market value
adjustment ("MVA"). An MVA reflects the change in the value of the investments
due to changes in interest rates since the date of deposit. When interest rates
increase after the date of deposit, the value of the investment decreases and
the MVA is negative. Conversely, when interest rates decrease after the date of
deposit, the value of the investment increases, and the MVA is positive. It is
possible that a negative MVA could result in your receipt of an amount which is
less than the amount paid into GAA.
As a Guaranteed Term matures, assets accumulating under GAA may be (a)
transferred to a new Guaranteed Term, (b) transferred to other available
investment options, or (c) withdrawn. Amounts withdrawn may be subject to a
deferred sales charge and/or federal tax penalties or mandatory income tax
withholding.
By notifying us at least 30 days prior to the Annuity Date, you may elect
a variable annuity and have amounts that have been accumulating under GAA
transferred to one or more of the Subaccounts available during the Annuity
Period. GAA cannot be used as an investment option during the Annuity Period.
MORTALITY AND EXPENSE RISK CHARGE
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.
REINVESTMENT PRIVILEGE
If amounts are withdrawn from GAA and 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.
- --------------------------------------------------------------------------------
21
<PAGE>
APPENDIX IV
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The condensed financial information presented below for each of the
periods in the ten-year period ended December 31, 1997 (as applicable), is
derived from the financial statements of the Separate Account, which have been
audited by KPMG Peat Marwick LLP, independent auditors. The financial
statements and the independent auditors' report thereon for the year ended
December 31, 1997 are included in the Statement of Additional Information.
TABLE I
(For Contracts with Separate Account Charges of 1.25% annually)
<TABLE>
<CAPTION>
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
AETNA ASCENT VP
Value at beginning of period $13.395 $10.976 $10.000(2)
Value at end of period $15.860 $13.395 $10.976
Increase (decrease) in value of
accumulation unit(1) 18.40% 22.04% 9.76%
Number of accumulation units
outstanding at end of
period 554,873 201,475 49,748
AETNA BALANCED VP, INC
Value at beginning of period $15.551 $17.954 $14.288 $14.519
Value at end of period $18.811 $15.551(3) $17.954 $14.288
Increase (decrease) in value of
accumulation unit(1) 20.96% (3) 25.65% (1.59)%
Number of accumulation units
outstanding at end of
period 6,663,594 7,803,572 9,193,181 21,990,186
AETNA BOND VP
Value at beginning of period $12.377 $46.913 $40.173 $42.283
Value at end of period $13.238 $12.377(5) $46.913 $40.173
Increase (decrease) in value of
accumulation unit(1) 6.96% (5) 16.78% (4.99)%
Number of accumulation units
outstanding at end of
period 2,482,652 3,717,900 2,377,622 5,108,720
AETNA CROSSROADS VP
Value at beginning of period $12.744 $10.862 $10.000(2)
Value at end of period $14.797 $12.744 $10.862
Increase (decrease) in value of
accumulation unit(1) 16.11% 17.32% 8.62%
Number of accumulation units
outstanding at end of
period 424,250 165,860 47,204
AETNA GROWTH VP
Value at beginning of period $11.137
Value at end of period $13.173
Increase (decrease) in value of
accumulation unit(1) 18.28%(6)
Number of accumulation units
outstanding at end of
period 21,371
AETNA GROWTH AND INCOME VP
Value at beginning of period $17.302 $137.869 $105.558 $107.925
Value at end of period $22.194 $17.302(7) $137.869 $105.558
Increase (decrease) in value of
accumulation unit(1) 28.28% (7) 30.61% (2.19)%
Number of accumulation units
outstanding at end of
period 21,842,444 29,130,769 6,364,000 13,966,072
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
AETNA ASCENT VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
AETNA BALANCED VP, INC.
Value at beginning of period $13.379 $12.736 $10.896 $10.437 $10.000(4)
Value at end of period $14.519 $13.379 $12.736 $10.896 $10.437
Increase (decrease) in value of
accumulation unit(1) 8.52% 5.05% 16.89% 4.40% 4.37%
Number of accumulation units
outstanding at end of
period 30,784,750 34,802,433 22,898,099 17,078,985 9,535,986
AETNA BOND VP
Value at beginning of period $39.038 $36.789 $31.192 $28.943 $25.574
Value at end of period $42.283 $39.038 $36.789 $31.192 $28.943
Increase (decrease) in value of
accumulation unit(1) 8.31% 6.11% 17.94% 7.77% 13.17%
Number of accumulation units
outstanding at end of
period 8,210,666 8,507,292 7,844,412 6,984,793 6,202,834
AETNA CROSSROADS VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
AETNA GROWTH VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
AETNA GROWTH AND INCOME VP
Value at beginning of period $102.383 $97.165 $77.845 $76.311 $59.871
Value at end of period $107.925 $102.383 $97.165 $77.845 $76.311
Increase (decrease) in value of
accumulation unit(1) 5.41% 5.37% 24.82% 2.01% 27.46%
Number of accumulation units
outstanding at end of
period 21,148,863 24,201,565 20,948,226 18,362,906 17,142,820
<CAPTION>
1988
----
<S> <C>
AETNA ASCENT VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
AETNA BALANCED VP, INC
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
AETNA BOND VP
Value at beginning of period $24.061
Value at end of period $25.574
Increase (decrease) in value of
accumulation unit(1) 6.29%
Number of accumulation units
outstanding at end of
period 5,955,293
AETNA CROSSROADS VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
AETNA GROWTH VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
AETNA GROWTH AND INCOME VP
Value at beginning of period $52.885
Value at end of period $59.871
Increase (decrease) in value of
accumulation unit(1) 13.21%
Number of accumulation units
outstanding at end of
period 16,455,396
</TABLE>
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22
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
AETNA INDEX PLUS LARGE CAP VP
Value at beginning of period $10.924 $10.000(8)
Value at end of period $14.444 $10.924
Increase (decrease) in value of
accumulation unit(1) 32.23% 9.24%(8)
Number of accumulation units
outstanding at end of
period 159,461 13,142
AETNA LEGACY VP
Value at beginning of period $11.982 $10.626 $10.000(2)
Value at end of period $13.550 $11.982 $10.626
Increase (decrease) in value of
accumulation unit(1) 13.08% 12.76% 6.26%
Number of accumulation units
outstanding at end of
period 382,217 188,303 20,531
AETNA MONEY MARKET VP
Value at beginning of period $11.473 $37.988 $36.271 $35.282
Value at end of period $11.951 $11.473(9) $37.988 $36.271
Increase (decrease) in value of
accumulation unit(1) 4.16% (9) 4.73% 2.80%
Number of accumulation units
outstanding at end of
period 2,227,782 3,510,588 1,826,260 3,679,802
AETNA SMALL COMPANY VP
Value at beginning of period $10.816
Value at end of period $13.654
Increase (decrease) in value of
accumulation unit(1) 26.24%(6)
Number of accumulation units
outstanding at end of
period 71,911
AETNA VALUE OPPORTUNITY VP
Value at beginning of period $10.977
Value at end of period $13.261
Increase (decrease) in value of
accumulation unit(1) 20.81%(6)
Number of accumulation units
outstanding at end of
period 33,295
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $15.664 $13.880 $10.403 $10.000
Value at end of period $19.818 $15.664 $13.880 $10.403
Increase (decrease) in value of
accumulation unit(1) 26.52% 12.86% 33.42% 4.03%(10)
Number of accumulation units
outstanding at end of
period 1,311,211 1,166,495 766,360 100,574
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $15.858 $14.000 $10.472 $10.000
Value at end of period $19.339 $15.858 $14.000 $10.472
Increase (decrease) in value of
accumulation unit(1) 21.95% 13.27% 33.69% 4.72%(10)
Number of accumulation units
outstanding at end of
period 1,110,079 994,616 612,992 121,070
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $11.473 $10.262 $9.474 $10.000
Value at end of period $12.640 $11.473 $10.262 $9.474
Increase (decrease) in value of
accumulation unit(1) 10.17% 11.80% 8.32% (5.26)%(10)
Number of accumulation units
outstanding at end of
period 221,450 182,533 166,303 54,387
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
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 $34.619 $33.812 $32.138 $30.012 $27.783 $26.171
Value at end of period $35.282 $34.619 $33.812 $32.138 $30.012 $27.783
Increase (decrease) in value of
accumulation unit(1) 1.92% 2.39% 5.21% 7.08% 8.02% 6.16%
Number of accumulation units
outstanding at end of
period 5,086,515 7,534,662 8,430,082 10,220,110 8,286,033 8,154,644
AETNA SMALL COMPANY VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
AETNA VALUE OPPORTUNITY VP
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period
Value at end of period
Increase (decrease) in value of
accumulation unit(1)
Number of accumulation units
outstanding at end of
period
FIDELITY VIP OVERSEAS 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>
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23
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $13.994 $11.681
Value at end of period $17.156 $13.994
Increase (decrease) in value of
accumulation unit(1) 22.60% 19.79%
Number of accumulation units
outstanding at end of
period 811,557 500,034
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $13.710 $12.861
Value at end of period $15.254 $13.710
Increase (decrease) in value of
accumulation unit(1) 11.27% 6.60%
Number of accumulation units
outstanding at end of
period 493,462 495,557
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $12.917 $11.259
Value at end of period $15.576 $12.917
Increase (decrease) in value of
accumulation unit(1) 20.58% 14.73%
Number of accumulation units
outstanding at end of
period 241,028 127,631
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $13.599 $11.626
Value at end of period $16.485 $13.599
Increase (decrease) in value of
accumulation unit(1) 21.22% 16.98%
Number of accumulation units
outstanding at end of
period 376,501 250,918
JANUS ASPEN WORLDWIDE GROWTH
PORTFOLIO
Value at beginning of period $15.566 $12.216
Value at end of period $18.779 $15.566
Increase (decrease) in value of
accumulation unit(1) 20.64% 27.43%
Number of accumulation units
outstanding at end of
period 1,206,175 526,646
PORTFOLIO PARTNERS MFS EMERGING
EQUITIES PORTFOLIO
Value at beginning of period $15.114
Value at end of period $14.927
Increase (decrease) in value of
accumulation unit(1) (1.24)%(12)
Number of accumulation units
outstanding at end of
period 1,368,373
PORTFOLIO PARTNERS MFS RESEARCH
GROWTH PORTFOLIO
Value at beginning of period $14.067
Value at end of period $13.795
Increase (decrease) in value of
accumulation unit(1) (1.93)%(12)
Number of accumulation units
outstanding at end of
period 1,200,982
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FIDELITY VIP II CONTRAFUND
PORTFOLIO
Value at beginning of period $10.000(11)
Value at end of period $11.681
Increase (decrease) in value of
accumulation unit(1) 16.81%
Number of accumulation units
outstanding at end of
period 174,259
JANUS ASPEN AGGRESSIVE GROWTH
PORTFOLIO
Value at beginning of period $10.000(11)
Value at end of period $12.861
Increase (decrease) in value of
accumulation unit(1) 28.61%
Number of accumulation units
outstanding at end of
period 167,920
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.259
Increase (decrease) in value of
accumulation unit(1) 12.59%
Number of accumulation units
outstanding at end of
period 34,072
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $10.000(2)
Value at end of period $11.626
Increase (decrease) in value of
accumulation unit(1) 16.26%
Number of accumulation units
outstanding at end of
period 78,126
JANUS ASPEN WORLDWIDE GROWTH
PORTFOLIO
Value at beginning of period $10.000(11)
Value at end of period $12.216
Increase (decrease) in value of
accumulation unit(1) 22.16%
Number of accumulation units
outstanding at end of
period 65,384
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>
- --------------------------------------------------------------------------------
24
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO PARTNERS SCUDDER INTERNATIONAL GROWTH PORTFOLIO
Value at beginning of period $16.776
Value at end of period $16.986
Increase (decrease) in value of
accumulation unit(1) 1.25%(12)
Number of accumulation units
outstanding at end of
period 516,231
PORTFOLIO PARTNERS T. ROWE PRICE GROWTH EQUITY PORTFOLIO
Value at beginning of period $15.809
Value at end of period $16.131
Increase (decrease) in value of
accumulation unit(1) 2.04%(12)
Number of accumulation units
outstanding at end of
period 701,952
</TABLE>
- ------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value during a calendar year,
and dividing the result by the beginning Accumulation Unit value. These
figures do not reflect the deferred sales charge or the fixed dollar annual
maintenance fee, if any. Inclusion of these charges would reduce the
investment results shown.
(2) Reflects less than a full year of performance activity. Funds were first
available in this option during June 1995.
(3) The Accumulation Unit value was converted to $14.126 on May 3, 1996, when
the Contracts were migrated to a different administrative system.
Immediately prior to that date, the Accumulation Unit value of the Fund was
$18.549. On the date of conversion, additional units were issued so that
account values were not changed as a result of the conversion. The
percentage change in the Accumulation Unit value from the beginning of the
year to the date of conversion was 3.31%; the percentage changes in the
Accumulation Unit value from the date of conversion to the end of the year
was 10.09%.
(4) The initial Accumulation Unit value was established at $10.000 on June 23,
1989, the date on which the Fund commenced operations.
(5) The Accumulation Unit value was converted to $11.726 on May 3, 1996, when
the Contracts were migrated to a different administrative system.
Immediately prior to that date, the Accumulation Unit value of the Fund was
$45.469. On the date of conversion, additional units were issued so that
account values were not changed as a result of the conversion. The
percentage change in the Accumulation Unit value from the beginning of the
year to the date of conversion was (3.08)%; the percentage change in the
Accumulation Unit value from the date of conversion to the end of the year
was 5.55%.
(6) Reflects less than a full year of performance activity. Funds were first
received in this option during May 1997.
(7) The Accumulation Unit value was converted to $14.862 on May 3, 1996, when
the Contracts were migrated to a different administrative system.
Immediately prior to that date, the Accumulation Unit value of the Fund was
$145.549. On the date of conversion, additional units were issued so that
account values were not changed as a result of the conversion. The
percentage change in the Accumulation Unit value from the beginning of the
year to the date of conversion was 5.57%; the percentage change in the
Accumulation Unit value from the date of conversion to the end of the year
was 16.42%.
(8) Reflects less than a full year of performance activity. The initial
Accumulation Unit value was established during August 1996, when the
Portfolio became available under the Contract, when funds were first
received in this option or when the applicable daily asset charge was first
utilized.
(9) The Accumulation Unit value was converted to $11.175 on May 3, 1996, when
the Contracts were migrated to a different administrative system.
Immediately prior to that date, the Accumulation Unit value of the Fund was
$38.501. On the date of conversion, additional units were issued so that
account values were not changed as a result of the conversion. The
percentage change in the Accumulation Unit value from the beginning of the
year to the date of conversion was 1.35%; the percentage change in the
Accumulation Unit value from the date of conversion to the end of the year
was 2.67%.
(10) Reflects less than a full year of performance activity. Funds were first
received in this option during May 1994.
(11) Reflects less than a full year of performance activity. Funds were first
available in this option during May 1995.
(12) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
- --------------------------------------------------------------------------------
25
<PAGE>
CONDENSED FINANCIAL INFORMATION
(Selected data for accumulation units outstanding throughout each period)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The condensed financial information presented below for the 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.
TABLE II
(For Contracts containing limits on fees)
<TABLE>
<CAPTION>
1997
----
<S> <C>
AETNA ASCENT VP
Value at beginning of period $14.368
Value at end of period $15.892
Increase (decrease) in value of accumulation unit(1) 10.61%(2)
Number of accumulation units outstanding at end of period 11,211
AETNA BALANCED VP, INC
Value at beginning of period $16.739
Value at end of period $18.837
Increase (decrease) in value of accumulation unit(1) 12.53%(2)
Number of accumulation units outstanding at end of period 772,954
AETNA BOND VP
Value at beginning of period $12.629
Value at end of period $13.249
Increase (decrease) in value of accumulation unit(1) 4.91%(2)
Number of accumulation units outstanding at end of period 765,835
AETNA CROSSROADS VP
Value at beginning of period $13.511
Value at end of period $14.827
Increase (decrease) in value of accumulation unit(1) 9.74%(2)
Number of accumulation units outstanding at end of period 8,405
AETNA GROWTH AND INCOME VP
Value at beginning of period $19.673
Value at end of period $22.226
Increase (decrease) in value of accumulation unit(1) 12.97%(2)
Number of accumulation units outstanding at end of period 7,364,497
AETNA LEGACY VP
Value at beginning of period $12.551
Value at end of period $13.577
Increase (decrease) in value of accumulation unit(1) 8.18%(2)
Number of accumulation units outstanding at end of period 43,694
AETNA MONEY MARKET VP
Value at beginning of period $11.674
Value at end of period $11.951
Increase (decrease) in value of accumulation unit(1) 2.37%(2)
Number of accumulation units outstanding at end of period 936,223
</TABLE>
- --------------------------------------------------------------------------------
26
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997
----
<S> <C>
FIDELITY VIP EQUITY-INCOME PORTFOLIO
Value at beginning of period $17.600
Value at end of period $19.818
Increase (decrease) in value of accumulation unit(1) 12.60%(2)
Number of accumulation units outstanding at end of period 18,378
FIDELITY VIP GROWTH PORTFOLIO
Value at beginning of period $17.382
Value at end of period $19.399
Increase (decrease) in value of accumulation unit(1) 11.26%(2)
Number of accumulation units outstanding at end of period 17,640
FIDELITY VIP OVERSEAS PORTFOLIO
Value at beginning of period $12.896
Value at end of period $12.640
Increase (decrease) in value of accumulation unit(1) (1.99)%(2)
Number of accumulation units outstanding at end of period 1,362
FIDELITY VIP II CONTRAFUND PORTFOLIO
Value at beginning of period $15.104
Value at end of period $17.156
Increase (decrease) in value of accumulation unit(1) 13.59%(2)
Number of accumulation units outstanding at end of period 21,463
JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO
Value at beginning of period $13.666
Value at end of period $15.254
Increase (decrease) in value of accumulation unit(1) 11.62%(2)
Number of accumulation units outstanding at end of period 14,273
JANUS ASPEN BALANCED PORTFOLIO
Value at beginning of period $14.084
Value at end of period $15.576
Increase (decrease) in value of accumulation unit(1) 10.60%(2)
Number of accumulation units outstanding at end of period 12,861
JANUS ASPEN GROWTH PORTFOLIO
Value at beginning of period $14.957
Value at end of period $16.485
Increase (decrease) in value of accumulation unit(1) 10.22%(2)
Number of accumulation units outstanding at end of period 13,239
JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO
Value at beginning of period $17.777
Value at end of period $18.779
Increase (decrease) in value of accumulation unit(1) 5.64%(2)
Number of accumulation units outstanding at end of period 67,098
PORTFOLIO PARTNERS MFS EMERGING EQUITIES
PORTFOLIO
Value at beginning of period $15.114
Value at end of period $14.927
Increase (decrease) in value of accumulation unit(1) (1.24)%(3)
Number of accumulation units outstanding at end of period 40,758
PORTFOLIO PARTNERS MFS RESEARCH GROWTH
PORTFOLIO
Value at beginning of period $14.067
Value at end of period $13.795
Increase (decrease) in value of accumulation unit(1) (1.93)%(3)
Number of accumulation units outstanding at end of period 91,613
</TABLE>
- --------------------------------------------------------------------------------
27
<PAGE>
CONDENSED FINANCIAL INFORMATION (continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997
-------------------
<S> <C>
PORTFOLIO PARTNERS SCUDDER INTERNATIONAL
GROWTH PORTFOLIO
Value at beginning of period $16.776
Value at end of period $16.986
Increase (decrease) in value of accumulation unit(1) 1.25%(3)
Number of accumulation units outstanding at end of period 10,054
PORTFOLIO PARTNERS T. ROWE PRICE GROWTH
EQUITY PORTFOLIO
Value at beginning of period $15.809
Value at end of period $16.131
Increase (decrease) in value of accumulation unit(1) 2.04%(3)
Number of accumulation units outstanding at end of period 17,219
</TABLE>
- ------------------
(1) The above figures are calculated by subtracting the beginning Accumulation
Unit value from the ending Accumulation Unit value, and dividing the result
by the beginning Accumulation Unit value. These figures do not reflect the
deferred sales charge or the fixed dollar annual maintenance fee, if any.
Inclusion of these charges would reduce the investment results shown.
(2) Reflects less than a full year of performance activity. Funds were first
received in this option during June 1997.
(3) Reflects less than a full year of performance activity. Funds were first
received in this option during November 1997.
- --------------------------------------------------------------------------------
28
<PAGE>
Please Attach to Your Application
I hereby acknowledge receipt of an Account C Individual Variable Annuity
Contract Prospectus dated May 1, 1998 for Individual Retirement Annuities and
Simplified Employee Pension Plans, as well as all current prospectuses
pertaining to the variable investment options available under the Contracts.
______ Please send an Account C Statement of Additional Information (Form No.
SAI.75992-98) dated May 1, 1998.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
PROS. 75992-98
<PAGE>
- --------------------------------------------------------------------------------
VARIABLE ANNUITY ACCOUNT C
OF
AETNA LIFE INSURANCE AND ANNUITY COMPANY
- --------------------------------------------------------------------------------
Statement of Additional Information dated May 1, 1998
Variable Annuity Contracts for Individual Retirement Annuities under
Section 408(b) and Section 408A, and Simplified Employee Pension Plans
under Section 408(k)
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
1-800-531-4547
Read the Prospectus before you invest. Terms used in this Statement of
Additional Information shall have the same meaning as in the Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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........................................................ 12
Sales Material and Advertising.......................................... 13
Independent Auditors.................................................... 14
Financial Statements of the Separate Account............................ S-1
Financial Statements of Aetna Life Insurance and Annuity Company........ F-1
</TABLE>
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Life Insurance and Annuity Company (the "Company") is a stock life
insurance company which was organized under the insurance laws of the State of
Connecticut in 1976. Through a merger, it succeeded to the business of Aetna
Variable Annuity Life Insurance Company (formerly Participating Annuity Life
Insurance Company organized in 1954). As of December 31, 1997, the Company
(ALIAC) had $40.7 billion invested through its products, including $22.3 billion
in its separate accounts (of which the Company, or an affiliate oversees the
management of $17.6 billion) and $1.3 billion in its mutual funds offered
outside of its separate accounts. The Company is ranked among the top 2% of all
U.S. life insurance companies based on assets as of December 31, 1996. The
Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc., which
is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc., and an
indirect wholly owned subsidiary of Aetna Inc. The Company is engaged in the
business of issuing life insurance policies and annuity contracts in all states
of the United States and in the District of Columbia. The Company's Home Office
is located at 151 Farmington Avenue, Hartford, Connecticut 06156.
In addition to serving as the principal underwriter and the depositor for the
Separate Account, the Company is also a registered investment adviser under the
Investment Advisers Act of 1940, and a registered broker-dealer under the
Securities Exchange Act of 1934. The Company provides investment advice to
several of the registered management investment companies offered as variable
investment options under the Contracts funded by the Separate Account (see
"Variable Annuity Account C" below).
Other than the mortality and expense risk charges and administrative expense
charge described in the Prospectus, all expenses incurred in the operations of
the Separate Account are borne by the Company. (See "Charges and Deductions" in
the Prospectus.) The Company receives reimbursement for certain administrative
costs from some advisers of the Funds used as funding options under the
Contract. These fees generally range up to 0.25%.
The assets of 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 in the Contract. The availability of the Funds
is subject to applicable regulatory authorization. Not all Funds are available
in all jurisdictions or under all Contracts.
2
<PAGE>
The Funds currently available under the Contract are as follows:
[bullet] Aetna Ascent VP (formerly known as Aetna Ascent Variable Portfolio)
[bullet] Aetna Balanced VP, Inc. (formerly known as Aetna Investment
Advisers Fund, Inc.)
[bullet] Aetna Income Shares d/b/a Aetna Bond VP
[bullet] Aetna Crossroads VP (formerly known as Aetna Crossroads Variable
Portfolio)
[bullet] Aetna Growth VP (formerly known as 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 known as 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 known as 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 known as Aetna Variable Small Company
Portfolio)
[bullet] Aetna Value Opportunity VP (formerly known as Aetna Variable Capital
Appreciation Portfolio)
[bullet] Calvert Social Balanced Portfolio (formerly known as Calvert
Responsibly Invested 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] 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
Complete descriptions of each of the Funds, including their investment
objectives, policies, risks and fees and expenses, are contained in the
prospectuses and statements of additional information for each of the Funds.
OFFERING AND PURCHASE OF CONTRACTS
The Company is both the depositor and the principal underwriter for the
securities sold by the Prospectus. The Company offers the Contracts through life
insurance agents licensed to sell variable annuities who are registered
representatives of the Company or of other registered broker-dealers who have
sales agreements with the Company. The offering of the Contracts is continuous.
A description of the manner in which Contracts are purchased may be found in the
Prospectus under the section 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. The Company may advertise the "standardized average annual total
returns," calculated in a manner prescribed by the Securities and Exchange
Commission (the "standardized return"), as well as "non-standardized returns,"
both of which are described below.
The standardized and non-standardized total return figures are computed
according to a formula in which a hypothetical initial Purchase Payment of
$1,000 is applied to the various Subaccounts under the Contract, and then
related to the ending redeemable values over one, five and ten year periods (or
fractional periods thereof). The redeemable value is then divided by the initial
investment and this quotient is taken to the Nth root (N represents the number
of years in the period) and 1 is subtracted from the result which is then
expressed as a percentage, carried to at least the nearest hundredth of a
percent. The standardized figures use the actual returns of the Fund since the
date contributions were first received in the Fund under the Separate Account
and then adjust them to
3
<PAGE>
reflect the deduction of all recurring charges during each period (e.g.,
mortality and expense risk charges, maintenance fees, administrative expense
charges, and deferred sales charges). These charges will be deducted on a pro
rata basis in the case of fractional periods. The maintenance fee is converted
to a percentage of assets based on the average account size under the Contracts
described in the Prospectus. The total return figures shown below may be
different from the actual historical total return under your Contract because
for periods prior to 1994, the Subaccount's investment performance was based on
the performance of the underlying Fund plus any cash held by the Subaccount.
The non-standardized figures will be calculated in a similar manner, except that
they will not reflect the deduction of any applicable deferred sales charge
(which would decrease the level of performance shown if reflected in these
calculations). The non-standardized figures may also include monthly, quarterly,
year-to-date and three-year periods, and may include returns calculated from the
Fund's inception date and/or the date contributions were first received in the
Fund under the Separate Account.
Investment results of the Funds will fluctuate over time, and any presentation
of the Subaccounts' total return quotations for any prior period should not be
considered as a representation of how the Subaccounts will perform in any future
period. Additionally, the Contract Value upon redemption may be more or less
than your original cost.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - Standardized and Non-Standardized
The tables below reflect the average annual standardized and non-standardized
total return quotation figures for the periods ended December 31, 1997 for the
Subaccounts under the Contract. Tables A and B reflect the average annual
standardized and non-standardized total return quotation figures for the periods
ended December 31, 1997 for the Subaccounts under a Single Payment Account with
a $0 maintenance fee and an Installment Payment Account with a $20 annual
maintenance fee, respectively.
For the Subaccounts funded by the Portfolio Partners portfolios, two sets of
performance returns are shown for each Subaccount: one showing performance based
solely on the performance of the Portfolio Partners portfolio from November 28,
1997, the date the Portfolio commenced operations; and one quotation based on
(a) performance through November 26, 1997 of the fund it replaced under many
Company contracts and; (b) after November 26, 1997, based on the performance of
the Portfolio Partners portfolio.
For those Subaccounts where results are not available for the full calendar
period indicated, performance for such partial periods is shown in the column
labeled "Since Inception". For standardized performance, the "Since Inception"
column shows the average annual return since the date contributions were first
received in the Fund under the Separate Account For nonstandardized performance,
the "Since Inception" column shows average annual total return since the Fund's
inception date.
4
<PAGE>
TABLE A (Part I)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Date
Contributions
First
Received
Under the
Single Payment Account Separate
($0 Maintenance Fee) STANDARDIZED Account
- ------------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Years 10 Years Inception*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 12.49% 17.10% 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 14.91% 12.10% 11.00% 04/03/89
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 1.61% 4.75% 7.87%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 10.31% 14.64% 07/04/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 13.05% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 21.86% 15.30% 15.19%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 25.61% 26.38% 10/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 7.43% 10.86% 07/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) (1.04%) 2.68% 4.64%
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 14.63% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 14.77% 05/30/97
- ------------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 12.66% 10.59% 10.39% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20.19% 19.43% 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 15.85% 18.35% 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 4.66% 5.92% 05/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 16.47% 21.33% 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 5.70% 17.09% 06/30/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 14.56% 16.23% 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 4.85% 10.39% 10/31/94
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 15.16% 18.51% 06/30/95
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 14.60% 24.72% 05/31/95
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (6.18%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 2.48% 9.10% 09/30/93
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (6.83%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (8.96%) 3.66% 5.26% 08/31/92
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio (3.63%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 18.54% 10.69% 10.12% 05/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio (3.81%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 2.25% 11.37% 7.79% 07/31/89
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio (3.06%) 11/28/97
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners T. Rowe Price Growth Equity(3) 20.32% 20.04% 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 4.23%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above except the maximum 5% deferred sales charge.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio
5
<PAGE>
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.
6
<PAGE>
TABLE A (Part II)
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
Fund
Single Payment Account Inception
($0 Maintenance Fee) NON-STANDARDIZED Date
- --------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.41% 20.33% 07/05/95
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.96% 20.02% 13.02% 11.13% 04/03/89
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.96% 8.51% 5.61% 7.87%
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 16.11% 17.03% 07/05/95
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 31.35% 31.32% 12/13/96
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.28% 27.23% 16.24% 15.19%
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.23% 32.91% 09/16/96
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 13.08% 13.53% 07/05/95
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.17% 4.32% 3.52% 4.64%
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 32.82% 33.76% 12/27/96
- --------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.63% 38.16% 12/13/96
- --------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.59% 19.12% 11.49% 11.03%
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.52% 23.97% 18.68% 15.28%
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 21.95% 22.69% 16.55% 15.74%
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 10.17% 10.09% 12.71% 8.27%
- --------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.60% 26.61% 01/03/95
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.27% 14.30% 17.75% 09/13/93
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.58% 19.47% 14.86% 09/13/93
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.37% 13.34% 8.67% 09/13/93
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.22% 22.16% 16.22% 09/13/93
- --------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.64% 24.59% 21.40% 09/13/93
- --------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20.90% 12.40% 17.34% 10.87% 11/12/90
- --------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.36% 10.61% 6.30% 05/03/93
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (1.25%) 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners
MFS Emerging Equities(3) 7.87% 16.52% 10.82% 17.51% 09/21/88
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (1.94%) 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
Portfolio Partners MFS Research Growth(3) (4.16%) 5.45% 4.51% 7.38%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 1.30% 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
Portfolio Partners MFS Value Equity(3) 24.78% 20.50% 11.60% 13.23%
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 1.46% 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/
Portfolio Partners Scudder International Growth(3) 7.64% 10.22% 12.29% 10.41%
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 1.91% 11/28/97
- --------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners
T. Rowe Price Growth Equity(3) 26.66% 24.07% 18.27% 18.22% 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 4.23%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above. As in the table above, the maximum 5% deferred
sales charge is not reflected.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio Partners
7
<PAGE>
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>
<TABLE>
TABLE B (Part l)
- -----------------------------------------------------------------------------------------------------------------------------------
Date
Contributions
First
Received
Under the
Installment Payment Account Separate
($20 Maintenance Fee) STANDARDIZED Account
- -----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 5 Year 10 Year Inception*
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP 12.43% 17.04% 07/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 14.85% 11.81% 10.42% 04/03/89
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 1.55% 4.47% 7.81%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 10.25% 14.58% 07/04/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 21.80% 15.00% 15.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 12.99% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 25.55% 26.32% 10/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 7.37% 10.80% 07/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) (1.10%) 2.40% 4.58%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 14.57% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 14.71% 05/30/97
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 12.60% 10.30% 9.80% 05/31/89
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20.13% 19.37% 05/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 15.79% 18.29% 05/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 4.60% 5.86% 05/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 16.41% 21.27% 05/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 5.64% 17.03% 06/30/94
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 14.50% 16.17% 06/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 4.79% 10.33% 10/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 15.10% 18.45% 06/30/95
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 14.54% 24.66% 05/31/95
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (6.24%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners MFS Emerging Equities(3) 2.42% 9.04% 09/30/93
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (6.89%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/Portfolio Partners MFS
Research Growth(3) (9.02%) 3.38% 5.00% 08/31/92
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio (3.69%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/Portfolio Partners MFS Value Equity(3) 18.48% 10.40% 9.54% 05/31/89
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio (3.87%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/Portfolio Partners Scudder
International Growth(3) 2.19% 11.08% 7.20% 07/31/89
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio (3.12%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners
T. Rowe Price Growth Equity(3) 20.26% 19.98% 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 4.170%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above except the maximum 5% deferred sales charge.
9
<PAGE>
(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.
10
<PAGE>
TABLE B (Part II)
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
Fund
Installment Payment Account Inception
($20 Maintenance Fee) NON-STANDARDIZED Date
- -----------------------------------------------------------------------------------------------------------------------------------
SUBACCOUNT 1 Year 3 Years 5 Years 10 Years Inception**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent VP 18.35% 20.27% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20.90% 19.96% 12.96% 11.07% 04/03/89
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Bond VP(1) 6.90% 8.45% 5.55% 7.81%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 16.05% 16.97% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP(1) 28.22% 27.17% 16.18% 15.13%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 31.29% 31.26% 12/13/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 32.17% 32.85% 09/16/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 13.02% 13.47% 07/05/95
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP(1)(2) 4.11% 4.26% 3.46% 4.58%
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 32.76% 33.70% 12/27/96
- -----------------------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 37.57% 38.10% 12/13/96
- -----------------------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio(1) 18.53% 19.06% 11.43% 10.97%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio(1) 26.46% 23.91% 18.62% 15.22%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(1) 21.89% 22.63% 16.49% 15.68%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(1) 10.11% 10.03% 12.65% 8.21%
- -----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 22.54% 26.55% 01/03/95
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 11.21% 14.24% 17.69% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20.52% 19.41% 14.80% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 10.31% 13.28% 8.61% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 21.16% 22.10% 16.16% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20.58% 24.53% 21.34% 09/13/93
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20.84% 12.34% 17.28% 10.81% 11/12/90
- -----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 7.30% 10.55% 6.24% 05/03/93
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio (1.31%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/
Portfolio Partners MFS Emerging Equities(3) 7.81% 16.46% 10.76% 17.45% 09/21/88
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio (2.00%) 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
Portfolio Partners MFS Research Growth(3) (4.22%) 5.39% 4.45% 7.32%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 1.24% 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/
Portfolio Partners MFS Value Equity(3) 24.72% 20.44% 11.54% 13.17%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 1.40% 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/
Portfolio Partners Scudder International Growth(3) 7.58% 10.16% 12.23% 10.35%
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 1.85% 11/28/97
- -----------------------------------------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners
T. Rowe Price Growth Equity(3) 26.60% 24.01% 18.21% 18.16% 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 4.170%. The current yield reflects the
deduction of all charges under the Contract that are deducted from the total
return quotations shown above. As in the table above, the maximum 5% deferred
sales charge is not reflected.
(3) The Fund first listed was replaced with the applicable Portfolio Partners
Portfolio after the close of business on November 26, 1997. The performance
shown is based on the performance of the replaced Fund until November 26, 1997,
and the performance of the applicable Portfolio
11
<PAGE>
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.
ANNUITY PAYMENTS
When Annuity payments are to begin, the value of the Contract 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 commence, there are 3,000
Accumulation Units credited under a particular Contract and that the value of an
Accumulation Unit for the tenth Valuation Date prior to retirement was
$13.650000. This produces a total value of $40,950.
Assume also that no premium tax is payable and that the Annuity table in the
Contract provides, for the option elected, a first monthly variable Annuity
payment of $6.68 per $1000 of value applied; the Annuitant's first monthly
payment would thus be 40.950 multiplied by $6.68, or $273.55.
Assume then that the value of an Annuity Unit for the Valuation Date on which
the first payment was due was $13.400000. When this value is divided into the
first monthly payment, the number of Annuity Units is determined to be 20.414.
The value of this number of Annuity Units will be paid in each subsequent month.
If the net investment factor with respect to the appropriate Subaccount is
1.0015000 as of the tenth Valuation Date preceding the due date of the second
monthly payment, multiplying this factor by .9999058* (to neutralize the assumed
net investment rate of 3.5% per annum built into the number of Annuity Units
determined above) produces a result of 1.0014057. This is then multiplied by the
Annuity Unit value for the prior Valuation Date (assume such value to be
$13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation
Date on which the second payment is due.
12
<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. 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.
13
<PAGE>
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the
independent auditors for the Separate Account and for the Company. The services
provided to the Separate Account include primarily the examination of the
Separate Account's financial statements and review of filings made with the SEC.
14
<PAGE>
FINANCIAL STATEMENTS
VARIABLE ANNUITY ACCOUNT C
Index
<TABLE>
<S> <C>
Statement of Assets and Liabilities.................................. S-2
Statements of Operations and Changes in Net Assets................... S-5
Notes to Financial Statements ....................................... S-6
Independent Auditors' Report......................................... S-17
</TABLE>
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>
$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)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- ------
(millions)
<S> <C> <C>
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
========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
(millions)
<S> <C> <C> <C> <C>
1997
Equity Securities $210.0 $21.3 $0.1 $231.2
====== ===== ==== ======
1996
Equity Securities $184.9 $16.3 $0.8 $200.4
====== ===== ==== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
-------------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
--------- ------ -------- -----
(millions)
<S> <C> <C> <C> <C>
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
</TABLE>
Fair value estimates are made at a specific point in time, based on
available market information and judgments about the financial instrument,
such as estimates of timing and amount of future cash flows. Such estimates
do not reflect any premium or discount that could result from offering for
sale at one time the Company's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates cannot
be substantiated by comparison to independent markets, nor can the
disclosed value be realized in immediate settlement of the instrument. In
evaluating the Company's management of interest rate, price and liquidity
risks, the fair values of all assets and liabilities should be taken into
consideration, not only those presented above.
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:
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
--------- ----
(millions)
<S> <C> <C>
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
</TABLE>
(1) Represents non-leveraged instruments whose fair values and credit
risk are based on underlying securities, including fixed income
securities and interest rate swap agreements.
F-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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(millions)
<S> <C> <C> <C>
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
======== ======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(millions)
<S> <C> <C> <C>
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
====== ======== ======
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- ----
(millions)
<S> <C> <C> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(millions)
<S> <C> <C> <C>
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
===== ======= ======
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(millions)
<S> <C> <C> <C>
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
==== ==== =====
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(millions)
<S> <C> <C> <C>
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
===== ====== ======
</TABLE>
(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:
<TABLE>
<CAPTION>
(Millions) Reserve Positions
----------------------------------- ---------- ---------
<S> <C> <C>
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
========== =========
</TABLE>
(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:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(millions)
<S> <C> <C> <C>
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
===== ===== =====
</TABLE>
Income taxes were different from the amount computed by applying the
federal income tax rate to income before income taxes for the following
reasons:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(millions)
<S> <C> <C> <C>
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
======= ======= ========
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996
---- ----
(millions)
<S> <C> <C>
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
========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
(millions)
<S> <C> <C> <C>
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
========= ========= =========
</TABLE>
(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>
VARIABLE ANNUITY ACCOUNT C
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A:
Condensed Financial Information
(2) Included in Part B:
Financial Statements of Variable Annuity Account C:
- Statement of Assets and Liabilities as of December 31,
1997
- Statements of Operations and Changes in Net Assets for the
years ended December 31, 1997 and 1996
- Notes to Financial Statements
- Independent Auditors' Report
Financial Statements of the Depositor:
- Independent Auditors' Report
- Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995
- Consolidated Balance Sheets as of December 31, 1997 and
1996
- Consolidated Statements of Changes in Shareholder's Equity
for the years ended December 31, 1997, 1996 and 1995
- Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995
- Notes to Consolidated Financial Statements
(b) Exhibits
(1) Resolution of the Board of Directors of Aetna Life Insurance
and Annuity Company establishing Variable Annuity Account C(1)
(2) Not applicable
(3.1) Broker-Dealer Agreement(2)
(3.2) Alternative Form of Wholesaling Agreement and Related Selling
Agreement(2)
(4.1) Variable Annuity Contract (I-CDA-HD)(3)
(4.2) Variable Annuity Contract (GIH-CDA-HB) and (IMT-CDA-HO)(4)
(4.3) Variable Annuity Contract (IST-CDA-HO)(5)
(4.4) Variable Annuity Contract (I-CDA-HD(XC))(5)
(4.5) Endorsement (EIP-SDOTHD-97) to Contract I-CDA-HD(6)
(4.6) Endorsement (EIP-SDOTHD-97(NY)) to Contract I-CDA-HD(XC)(6)
(4.7) Endorsement (EIP-SDOTPM-97(NY)) to Contracts IMT-CDA-HO and
IST-CDA-HO(6)
(4.8) Endorsement (EIP-SDOTPM-97) to Contracts IMT-CDA-HO and
IST-CDA-HO(6)
<PAGE>
(4.9) Endorsement (EFUND97) to Contracts IMT-CDA-HO and
IST-CDA-HO(7)
(4.10) Endorsement (EIRA-ROTH-97 (NY)) to Contract I-CDA-HD(XC)(8)
(4.11) Schedule (ISIRA-97 (XC)) to Contract I-CDA-HD(XC)(8)
(5) Variable Annuity Contract Application (710.00.16H)(3)
(6.1) Certification of Incorporation of Aetna Life Insurance and
Annuity Company(9)
(6.2) Amendment of Certificate of Incorporation of Aetna Life
Insurance and Annuity Company(3)
(6.3) By-Laws as amended September 17, 1997 of Aetna Life Insurance
and Annuity Company(10)
(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(11)
(8.2) Service Agreement between Calvert Asset Management Company,
Inc. and Aetna Life Insurance and Annuity Company dated
December 1, 1997(11)
(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(3)
(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(12)
(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(13)
(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(14)
(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(3)
(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
<PAGE>
on December 15, 1994, February 1, 1995, May 1, 1995, January
1, 1996 and March 1, 1996(12)
(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(15)
(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(14)
(8.11) Service Agreement between Aetna Life Insurance and Annuity
Company and Fidelity Investments Institutional Operations
Company dated as of November 1, 1995(16)
(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(8)
(8.14) Service Agreement between Janus Capital Corporation and Aetna
Life Insurance and Annuity Company dated December 8, 1997(8)
(8.15) Fund Participation Agreement between Aetna Life Insurance and
Annuity Company and Oppenheimer Variable Annuity Account Funds
and Oppenheimer Funds, Inc.(17)
(8.16) Service Agreement between Oppenheimer Funds, Inc. and Aetna
Life Insurance and Annuity Company(17)
(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(14)
(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).
<PAGE>
3. 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).
4. Incorporated by reference to Post-Effective Amendment No. 6 to Registration
Statement on Form N-4 (File No. 33-75980), as filed electronically on
February 12, 1997 (Accession No. 0000950146-97-000171).
5. Incorporated by reference to Post-Effective Amendment No. 7 to Registration
Statement on Form N-4 (File No. 33-75992), as filed electronically on
February 13, 1997 (Accession No. 0000950146-97-000181).
6. Incorporated by reference to Post-Effective Amendment No. 8 to Registration
Statement on Form N-4 (File No. 33-75992), as filed electronically on April
14, 1997 (Accession No. 0000950146-97-000591).
7. Incorporated by reference to Post-Effective Amendment No. 14 to
Registration Statement on Form N-4 (File No. 33-75964), as filed
electronically on July 29, 1997 (Accession No. 0000950146-97-01101).
8. 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).
9. 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).
10. Incorporated by reference to Post-Effective Amendment No. 12 to
Registration Statement on Form N-4 (File No. 33-91846), as filed
electronically on October 30, 1997 (Accession No. 0000950146-97-001589).
11. 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).
12. 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).
13. 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).
14. Incorporated by reference to Post-Effective Amendment No. 9 to Registration
Statement on Form No. N-4 (File No. 333-01107), as filed electronically on
April 7, 1998 (Accession No. 0000950146-98-00564).
15. Incorporated by Reference to Post-Effective Amendment No. 7 to Registration
Statement on Form S-6 (File No. 33-75248), as filed electronically on
February 24, 1998 (Accession No. 0000950146-98-0000267).
16. 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).
<PAGE>
17. 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
<TABLE>
<CAPTION>
Name and Principal
Business Address* Positions and Offices with Depositor
<S> <C>
Thomas J. McInerney Director and President
Shaun P. Mathews Director and Senior Vice President
Director, Chief Financial Officer and Senior Vice
Catherine H. Smith 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
</TABLE>
* 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
<PAGE>
with the proceeding against the corporation to which the individual was named a
party. The corporation's obligation to provide such indemnification does not
apply unless (1) the individual has met the standard of conduct set forth in
Section 33-771; and (2) a determination is made (by majority vote of a quorum of
the board of directors who were not parties to the proceeding, or if a quorum
cannot be obtained, by a committee of the board selected as described in Section
33-775(b)(2); by special legal counsel selected by the board of directors or
members thereof as described in Section 33-775(b)(3); by shareholders) that the
individual met the standard set forth in Section 33-771; or (3) the court, upon
application by the individual, determines in view of all the circumstances that
such person is reasonably entitled to be indemnified. Also, unless limited by
its Certificate of Incorporation, a corporation must indemnify an individual who
was wholly successful on the merits or otherwise against reasonable expenses
incurred by him in connection with a proceeding to which he was a party because
of his relationship as director, officer, employee or agent of the corporation.
The statute does specifically authorize a corporation to procure indemnification
insurance on behalf of an individual who is or was a director, officer, employer
or agent of the corporation. Consistent with the statute, Aetna Inc. has
procured insurance from Lloyd's of London and several major United States excess
insurers for its directors and officers and the directors and officers of its
subsidiaries, including the Depositor.
Item 29. Principal Underwriter
(a) In addition to serving as the principal underwriter and depositor for
the Registrant, Aetna Life Insurance and Annuity Company (Aetna) also
acts as the 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)
Net Underwriting Compensation on
Name of Discounts and Redemption or Brokerage
Principal 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) Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(e) Aetna Life Insurance and Annuity Company represents that the fees and
charges deducted under the contracts covered by this registration
statement, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed
by the insurance company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Variable Annuity Account C of Aetna Life Insurance and
Annuity Company, 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. 33-75992) and has 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 20th 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. 11 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 )
)
Shaun P. Mathews* Director ) April
- ---------------------- )
Shaun P. Mathews ) 20, 1998
)
Catherine H. Smith* Director and Chief Financial Officer )
- ---------------------- )
Catherine H. Smith )
)
Deborah Koltenuk* Vice President and Treasurer, )
- ---------------------- Corporate Controller )
Deborah Koltenuk )
By: /s/ Mary Katherine Johnson
--------------------------
Mary Katherine Johnson
*Attorney-in-Fact
</TABLE>
<PAGE>
VARIABLE ANNUITY ACCOUNT C
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Page
<S> <C> <C>
99-B.1 Resolution of the Board of Directors of Aetna Life *
Insurance and Annuity Company establishing Variable Annuity
Account C
99-B.3.1 Broker-Dealer Agreement *
99-B.3.2 Alternative Form of Wholesaling Agreement and Related *
Selling Agreement
99-B.4.1 Variable Annuity Contract (I-CDA-HD) *
99-B.4.2 Variable Annuity Contract (GIH-CDA-HB) and (IMT-CDA-HO) *
99-B.4.3 Variable Annuity Contract (IST-CDA-HO) *
99-B.4.4 Variable Annuity Contract (I-CDA-HD(XC)) *
99-B.4.5 Endorsement (EIP-SDOTHD-97) to Contract IA-CDA-HD *
99-B.4.6 Endorsement (EIP-SDOTHD-97(NY)) to Contract I-CDA-HD(XC) *
99-B.4.7 Endorsement (EIP-SDOTPM-97(NY)) to Contracts IMT-CDA-HO and *
IST-CDA-HO
99-B.4.8 Endorsement (EIP-SDOTPM-97) to Contracts IMT-CDA-HO and *
IST-CDA-HO
99-B.4.9 Endorsement (EFUND97) to Contracts IMT-CDA-HO and *
IST-CDA-HO
99-B.4.10 Endorsement (EIRA-ROTH-97 (NY)) to Contract I-CDA-HD(XC) *
99-B.4.11 Schedule (ISIRA-97 (XC)) to Contract I-CDA-HD(XC) *
99-B.5 Variable Annuity Contract Application (710.00.16H) *
*Incorporated by reference
<PAGE>
Exhibit
No. Exhibit Page
99-B.6.1 Certification of Incorporation of Aetna Life Insurance and *
Annuity Company
99-B.6.2 Amendment of Certificate of Incorporation of Aetna Life *
Insurance and Annuity Company
99-B.6.3 By-Laws as amended September 17, 1997 of Aetna Life *
Insurance and Annuity Company
99-B.8.1 Fund Participation Agreement among Calvert Responsibly *
Invested Balanced Portfolio, Calvert Asset Management
Company, Inc. and Aetna Life Insurance and Annuity Company
dated December 1, 1997
99-B.8.2 Service Agreement between Calvert Asset Management Company, *
Inc. and Aetna Life Insurance and Annuity Company dated
December 1, 1997
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
*Incorporated by reference
<PAGE>
Exhibit
No. Exhibit Page
99-B.8.6 Form of Seventh Amendment dated as of May 1, 1998 to the *
Fund Participation Agreement between Aetna Life Insurance
and Annuity Company, Variable Insurance Products Fund and
Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1,
1995, January 1, 1996, March 1, 1996, May 1, 1997 and
November 6, 1997
99-B.8.7 Fund Participation Agreement between Aetna Life Insurance *
and Annuity Company, Variable Insurance Products Fund II
and Fidelity Distributors Corporation dated February 1,
1994 and amended on December 15, 1994, February 1, 1995,
May 1, 1995, January 1, 1996 and March 1,1996
99-B.8.8 Fifth Amendment dated as of May 1, 1997 to the Fund *
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1,
1995, January 1, 1996 and March 1, 1996
99-B.8.9 Sixth Amendment dated as of January 20, 1998 to the Fund *
Participation Agreement between Aetna Life Insurance and
Annuity Company, Variable Insurance Products Fund II and
Fidelity Distributors Corporation dated February 1, 1994
and amended on December 15, 1994, February 1, 1995, May 1,
1995, January 1, 1996, March 1, 1996 and May 1, 1997
99-B.8.10 Form of Seventh Amendment dated as of May 1, 1998 to the *
Fund Participation Agreement between Aetna Life Insurance
and Annuity Company, Variable Insurance Products Fund II
and Fidelity Distributors Corporation dated February 1,
1994 and amended on December 15, 1994, February 1, 1995,
May 1, 1995, January 1, 1996, March 1, 1996, May 1, 1997
and January 20, 1998
*Incorporated by reference
<PAGE>
Exhibit
No. Exhibit Page
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 Oppenheimer Variable Annuity
Account Funds and Oppenheimer Funds, Inc.
99-B.8.16 Service Agreement between Oppenheimer Funds, Inc. and Aetna *
Life Insurance and Annuity Company
99-B.9 Opinion and Consent of Counsel ______
99-B.10 Consent of Independent Auditors ______
99-B.13 Schedule for Computation of Performance Data ______
99-B.15.1 Powers of Attorney *
99-B.15.2 Authorization for Signatures *
</TABLE>
*Incorporated by reference
[Aetna Letterhead] 151 Farmington Avenue
[Aetna Logo] Hartford, CT 06156
April 20, 1998 Julie E. Rockmore
Counsel
Law Division, RE4A
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. 11 to Registration Statement on Form N-4
Prospectus Title: Individual Retirement Planning Variable Annuity Contracts
for: Individual Retirement Annuities (Section 408(b)), and Simplified
Employee Pension Plans (Section 408(k))
File Nos. 33-75992 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. 11. I have
also examined originals or copies, certified or otherwise identified to my
satisfaction, of such documents, trust records and other instruments I have
deemed necessary or appropriate for the purpose of rendering this opinion. For
purposes of such examination, I have assumed the genuineness of all signatures
on original documents and the conformity to the original of all copies.
I am admitted to practice law in Connecticut, and do not purport to be an expert
on the laws of any other state. My opinion herein as to any other law is based
upon a limited inquiry thereof which I have deemed appropriate under the
circumstances.
<PAGE>
Based upon the foregoing, and, assuming the Securities are sold in accordance
with the provisions of the prospectus, I am of the opinion that the Securities
being registered will be legally issued and will represent binding obligations
of the Company.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Julie E. Rockmore
Julie E. Rockmore
Consent of Independent Auditors
The Board of Directors of Aetna Life Insurance and Annuity Company and
Contractholders of Aetna Variable Annuity Account C:
We consent to the use of our reports dated February 3, 1998 and February 27,
1998 included in this Post-Effective Amendment No. 11 to Registration
Statement (No. 33-75992) 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 20, 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>
- ------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aetna Ascent VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Bond VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Growth VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Legacy VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Money Market VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Small Company VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0 12/31/97
- ------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Alger American Small Cap/Portfolio Partners-MFS Emerging Equities 0 12/31/97
- ------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/
Portfolio Partners-MFS Research Growth 0 12/31/97
- ------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 0 12/31/97
- ------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/
Portfolio Partners-Scudder International Growth 0 12/31/97
- ------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 0 12/31/97
- ------------------------------------------------------------------------------------------------
Alger American Growth/Portfolio Partners-T. Rowe Price Growth Equity 0 12/31/97
- ------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
One Year One Year One Year Five Year Five Year Five Year Ten Year
As of AUV as of Date as of AUV w/ DSC as of Date as of AUV w/ DSC as of Date
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.860404 12/31/96 13.39505 12.49% 07/31/95 07/31/95
- --------------------------------------------------------------------------------------------------------------
18.810623 12/31/96 15.550804 14.91% 12/31/92 10.200069 12.10% 04/03/89
- --------------------------------------------------------------------------------------------------------------
13.237538 12/31/96 12.376698 1.61% 12/31/92 10.077053 4.75% 12/31/87
- --------------------------------------------------------------------------------------------------------------
14.797481 12/31/96 12.74414 10.31% 07/04/95 07/04/95
- --------------------------------------------------------------------------------------------------------------
22.193956 12/31/96 17.301856 21.86% 12/31/92 10.455961 15.30% 12/31/87
- --------------------------------------------------------------------------------------------------------------
13.173224 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------
14.443996 12/31/96 10.92378 25.61% 10/31/96 10/31/96
- --------------------------------------------------------------------------------------------------------------
13.549966 12/31/96 11.982379 7.43% 07/31/95 07/31/95
- --------------------------------------------------------------------------------------------------------------
11.950985 12/31/96 11.473149 (1.04%) 12/31/92 10.052882 2.68% 12/31/87
- --------------------------------------------------------------------------------------------------------------
13.654334 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------
13.261304 05/30/97 05/30/97 05/30/97
- --------------------------------------------------------------------------------------------------------------
22.602836 12/31/96 19.060303 12.66% 12/31/92 13.118853 10.59% 05/31/89
- --------------------------------------------------------------------------------------------------------------
19.81826 12/31/96 15.664424 20.19% 05/31/94 05/31/94
- --------------------------------------------------------------------------------------------------------------
19.33878 12/31/96 15.858254 15.85% 05/31/94 05/31/94
- --------------------------------------------------------------------------------------------------------------
12.639846 12/31/96 11.473085 4.66% 05/31/94 05/31/94
- --------------------------------------------------------------------------------------------------------------
17.156285 12/31/96 13.99368 16.47% 05/31/95 05/31/95
- --------------------------------------------------------------------------------------------------------------
15.254122 12/31/96 13.709721 5.70% 06/30/94 06/30/94
- --------------------------------------------------------------------------------------------------------------
15.576473 12/31/96 12.917487 14.56% 06/30/95 06/30/95
- --------------------------------------------------------------------------------------------------------------
23.227542 12/31/96 21.044724 4.85% 10/31/94 10/31/94
- --------------------------------------------------------------------------------------------------------------
16.485456 12/31/96 13.599378 15.16% 06/30/95 06/30/95
- --------------------------------------------------------------------------------------------------------------
18.778786 12/31/96 15.566474 14.60% 05/31/95 05/31/95
- --------------------------------------------------------------------------------------------------------------
14.926614 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------
14.926614 12/31/96 13.837532 2.48% 09/30/93 09/30/93
- --------------------------------------------------------------------------------------------------------------
13.795425 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------
13.795425 12/31/96 14.394899 (8.96%) 12/31/92 11.064651 3.66% 08/31/92
- --------------------------------------------------------------------------------------------------------------
21.479751 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------
21.479751 12/31/96 17.21472 18.54% 12/31/92 12.406852 10.69% 05/31/89
- --------------------------------------------------------------------------------------------------------------
16.986196 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------
16.986196 12/31/96 15.781252 2.25% 12/31/92 9.516022 11.37% 07/31/89
- --------------------------------------------------------------------------------------------------------------
16.131314 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------
16.131314 12/31/96 12.73642 20.32% 10/31/94 10/31/94
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Inception Inception Inception Account Free One Year Three Year
as of AUV w/ DSC Date AUV w/ DSC Charge Out DSC DSC
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 10.285518 17.10% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
04/03/89 7.477658 11.00% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
6.207376 7.87% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
07/04/95 9.998626 14.64% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
5.395736 15.19% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/30/97 11.070343 13.05% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
10/31/96 10.442242 26.38% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
07/31/95 10.031445 10.86% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
7.594212 4.64% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/30/97 11.315963 14.63% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/30/97 10.977318 14.77% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/31/89 9.577661 10.39% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/31/94 9.960346 19.43% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/31/94 10.041578 18.35% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/31/94 9.768341 5.92% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/31/95 9.884851 21.33% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
06/30/94 8.336837 17.09% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
06/30/95 10.154564 16.23% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
10/31/94 16.135205 10.39% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
06/30/95 10.236486 18.51% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/31/95 10.076232 24.72% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 15.114153 (6.18%) 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
09/30/93 9.792947 9.10% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 14.067019 (6.83%) 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
08/31/92 10.073907 5.26% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 21.173272 (3.63%) 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
05/31/89 9.290766 10.12% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 16.776235 (3.81%) 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
07/31/89 8.944799 7.79% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 15.808803 (3.06%) 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
10/31/94 8.592851 20.04% 125 0 5.00% 5.00%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Five Year DSC Ten Year DSC Inception DSC
- -----------------------------------------------------------
<S> <C> <C>
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 1.00%
- -----------------------------------------------------------
4.00% 0.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 1.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 4.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 1.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 1.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
4.00% 0.00% 5.00%
- -----------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Maintenance
Fund Name Fee As of Date
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Bond VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Growth VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Legacy VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Money Market VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Small Company VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 0 12/31/97
- -------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 0 12/31/97
- -------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Three Year Three Year Three Year Five Year
As of AUV as of Date as of AUV w/out DSC as of Date as of AUV w/out DSC as of Date
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.860404 12/31/96 13.39505 18.41% 07/05/95
- ---------------------------------------------------------------------------------------------------------------------
18.810623 12/31/96 15.550804 20.96% 12/30/94 10.880661 20.02% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.237538 12/31/96 12.376698 6.96% 12/30/94 10.35969 8.51% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
14.797481 12/31/96 12.74414 16.11% 07/05/95
- ---------------------------------------------------------------------------------------------------------------------
22.193956 12/31/96 17.301856 28.28% 12/30/94 10.777032 27.23% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.173224 12/31/96 10.028765 31.35% 12/13/96
- ---------------------------------------------------------------------------------------------------------------------
14.443996 12/31/96 10.92378 32.23% 09/16/96
- ---------------------------------------------------------------------------------------------------------------------
13.549966 12/31/96 11.982379 13.08% 07/05/95
- ---------------------------------------------------------------------------------------------------------------------
11.950985 12/31/96 11.473149 4.17% 12/30/94 10.527493 4.32% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.654334 12/31/96 10.280372 32.82% 12/27/96
- ---------------------------------------------------------------------------------------------------------------------
13.261304 12/31/96 9.635612 37.63% 12/13/96
- ---------------------------------------------------------------------------------------------------------------------
22.602836 12/31/96 19.060303 18.59% 12/30/94 13.372059 19.12% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
19.81826 12/31/96 15.664424 26.52% 12/30/94 10.401914 23.97% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
19.33878 12/31/96 15.858254 21.95% 12/30/94 10.47063 22.69% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
12.639846 12/31/96 11.473085 10.17% 12/30/94 9.473449 10.09% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
17.156285 12/31/96 13.99368 22.60% 01/03/95
- ---------------------------------------------------------------------------------------------------------------------
15.254122 12/31/96 13.709721 11.27% 12/30/94 10.214043 14.30% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
15.576473 12/31/96 12.917487 20.58% 12/30/94 9.13453 19.47% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
23.227542 12/31/96 21.044724 10.37% 12/30/94 15.955256 13.34% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
16.485456 12/31/96 13.599378 21.22% 12/30/94 9.042221 22.16% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
18.778786 12/31/96 15.566474 20.64% 12/30/94 9.710361 24.59% 09/13/93
- ---------------------------------------------------------------------------------------------------------------------
22.539157 12/31/96 18.64219 20.90% 12/30/94 15.871555 12.40% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
23.310723 12/31/96 21.713579 7.36% 12/30/94 17.225856 10.61% 05/03/93
- ---------------------------------------------------------------------------------------------------------------------
14.926614 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
14.926614 12/31/96 13.837532 7.87% 12/30/94 9.435682 16.52% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
13.795425 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
13.795425 12/31/96 14.394899 (4.16%) 12/30/94 11.76586 5.45% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
21.479751 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
21.479751 12/31/96 17.21472 24.78% 12/30/94 12.277821 20.50% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
16.986196 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
16.986196 12/31/96 15.781252 7.64% 12/30/94 12.68681 10.22% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
16.131314 11/28/97 11/28/97 11/28/97
- ---------------------------------------------------------------------------------------------------------------------
16.131314 12/31/96 12.73642 26.66% 12/31/94 8.446955 24.07% 12/31/92
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Separate
Five Year Five Year Ten Year Ten Year Ten Year Inception Inception Inception Account
as of AUV w/out DSC as of Date as of AUV w/out DSC Date AUV w/out DSC Charge
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/05/95 07/05/95 9.998131 20.33% 125
- -----------------------------------------------------------------------------------------------------------------------
10.200069 13.02% 04/03/89 04/03/89 7.477658 11.13% 125
- -----------------------------------------------------------------------------------------------------------------------
10.077053 5.61% 12/31/87 6.207376 7.87% 125
- -----------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 9.998626 17.03% 125
- -----------------------------------------------------------------------------------------------------------------------
10.455961 16.24% 12/31/87 5.395736 15.19% 125
- -----------------------------------------------------------------------------------------------------------------------
12/13/96 12/13/96 9.890612 31.32% 125
- -----------------------------------------------------------------------------------------------------------------------
09/16/96 09/16/96 10 32.91% 125
- -----------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 9.874152 13.53% 125
- -----------------------------------------------------------------------------------------------------------------------
10.052882 3.52% 12/31/87 7.594212 4.64% 125
- -----------------------------------------------------------------------------------------------------------------------
12/27/96 12/27/96 10.167345 33.76% 125
- -----------------------------------------------------------------------------------------------------------------------
12/13/96 12/13/96 9.43896 38.16% 125
- -----------------------------------------------------------------------------------------------------------------------
13.118853 11.49% 12/31/87 7.942325 11.03% 125
- -----------------------------------------------------------------------------------------------------------------------
8.418697 18.68% 12/31/87 4.779521 15.28% 125
- -----------------------------------------------------------------------------------------------------------------------
8.99393 16.55% 12/31/87 4.483462 15.74% 125
- -----------------------------------------------------------------------------------------------------------------------
6.95037 12.71% 12/31/87 5.711978 8.27% 125
- -----------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 8.468594 26.61% 125
- -----------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 7.558066 17.75% 125
- -----------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.587103 14.86% 125
- -----------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 16.249978 8.67% 125
- -----------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.640119 16.22% 125
- -----------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.159933 21.40% 125
- -----------------------------------------------------------------------------------------------------------------------
10.133836 17.34% 11/12/90 11/12/90 10.794623 10.87% 125
- -----------------------------------------------------------------------------------------------------------------------
05/03/93 05/03/93 17.531834 6.30% 125
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 15.115188 (1.25%) 125
- -----------------------------------------------------------------------------------------------------------------------
8.930629 10.82% 09/21/88 09/21/88 3.34042 17.51% 125
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 14.067983 (1.94%) 125
- -----------------------------------------------------------------------------------------------------------------------
11.064651 4.51% 12/31/87 6.771537 7.38% 125
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 21.203485 1.30% 125
- -----------------------------------------------------------------------------------------------------------------------
12.406852 11.60% 12/31/87 6.202719 13.23% 125
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 16.741198 1.46% 125
- -----------------------------------------------------------------------------------------------------------------------
9.516022 12.29% 12/31/87 6.312275 10.41% 125
- -----------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 15.828404 1.91% 125
- -----------------------------------------------------------------------------------------------------------------------
6.969632 18.27% 01/09/89 01/09/89 3.590313 18.22% 125
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
- --------------------
Free Out
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
Page 4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Bond VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Growth VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 20 12/31/97
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
One Year One Year One Year Five Year Five Year Five Year Ten Year
As of AUV as of Date as of AUV w/ DSC as of Date as of AUV w/ DSC as of Date
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.860404 12/31/96 13.39505 12.43% 07/31/95 07/31/95
- -----------------------------------------------------------------------------------------------------------------
18.810623 12/31/96 15.550804 14.85% 12/31/92 10.200069 11.81% 04/03/89
- -----------------------------------------------------------------------------------------------------------------
13.237538 12/31/96 12.376698 1.55% 12/31/92 10.077053 4.47% 12/31/87
- -----------------------------------------------------------------------------------------------------------------
14.797481 12/31/96 12.74414 10.25% 07/04/95 07/04/95
- -----------------------------------------------------------------------------------------------------------------
22.193956 12/31/96 17.301856 21.80% 12/31/92 10.455961 15.00% 12/31/87
- -----------------------------------------------------------------------------------------------------------------
13.173224 05/30/97 05/30/97 05/30/97
- -----------------------------------------------------------------------------------------------------------------
14.443996 12/31/96 10.92378 25.55% 10/31/96 10/31/96
- -----------------------------------------------------------------------------------------------------------------
13.549966 12/31/96 11.982379 7.37% 07/31/95 07/31/95
- -----------------------------------------------------------------------------------------------------------------
11.950985 12/31/96 11.473149 (1.10%) 12/31/92 10.052882 2.40% 12/31/87
- -----------------------------------------------------------------------------------------------------------------
13.654334 05/30/97 05/30/97 05/30/97
- -----------------------------------------------------------------------------------------------------------------
13.261304 05/30/97 05/30/97 05/30/97
- -----------------------------------------------------------------------------------------------------------------
22.602836 12/31/96 19.060303 12.60% 12/31/92 13.118853 10.30% 05/31/89
- -----------------------------------------------------------------------------------------------------------------
19.81826 12/31/96 15.664424 20.13% 05/31/94 05/31/94
- -----------------------------------------------------------------------------------------------------------------
19.33878 12/31/96 15.858254 15.79% 05/31/94 05/31/94
- -----------------------------------------------------------------------------------------------------------------
12.639846 12/31/96 11.473085 4.60% 05/31/94 05/31/94
- -----------------------------------------------------------------------------------------------------------------
17.156285 12/31/96 13.99368 16.41% 05/31/95 05/31/95
- -----------------------------------------------------------------------------------------------------------------
15.254122 12/31/96 13.709721 5.64% 06/30/94 06/30/94
- -----------------------------------------------------------------------------------------------------------------
15.576473 12/31/96 12.917487 14.50% 06/30/95 06/30/95
- -----------------------------------------------------------------------------------------------------------------
23.227542 12/31/96 21.044724 4.79% 10/31/94 10/31/94
- -----------------------------------------------------------------------------------------------------------------
16.485456 12/31/96 13.599378 15.10% 06/30/95 06/30/95
- -----------------------------------------------------------------------------------------------------------------
18.778786 12/31/96 15.566474 14.54% 05/31/95 05/31/95
- -----------------------------------------------------------------------------------------------------------------
14.926614 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------
14.926614 12/31/96 13.837532 2.42% 09/30/93 09/30/93
- -----------------------------------------------------------------------------------------------------------------
13.795425 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------
13.795425 12/31/96 14.394899 (9.02%) 12/31/92 11.064651 3.38% 08/31/92
- -----------------------------------------------------------------------------------------------------------------
21.479751 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------
21.479751 12/31/96 17.21472 18.48% 12/31/92 12.406852 10.40% 05/31/89
- -----------------------------------------------------------------------------------------------------------------
16.986196 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------
16.986196 12/31/96 15.781252 2.19% 12/31/92 9.516022 11.08% 07/31/89
- -----------------------------------------------------------------------------------------------------------------
16.131314 11/28/97 11/28/97 11/28/97
- -----------------------------------------------------------------------------------------------------------------
16.131314 12/31/96 12.73642 20.26% 10/31/94 10/31/94
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Separate
Ten Year Ten Year Inception Inception Inception Account One Year Three Year
as of AUV w/ DSC Date AUV w/ DSC Charge Free Out DSC DSC
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/95 10.285518 17.04% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
04/03/89 7.477658 10.42% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
6.207376 7.81% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
07/04/95 9.998626 14.58% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
5.395736 15.13% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/30/97 11.070343 12.99% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
10/31/96 10.442242 26.32% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
07/31/95 10.031445 10.80% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
7.594212 4.58% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/30/97 11.315963 14.57% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/30/97 10.977318 14.71% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/31/89 9.577661 9.80% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/31/94 9.960346 19.37% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/31/94 10.041578 18.29% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/31/94 9.768341 5.86% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/31/95 9.884851 21.27% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
06/30/94 8.336837 17.03% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
06/30/95 10.154564 16.17% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
10/31/94 16.135205 10.33% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
06/30/95 10.236486 18.45% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/31/95 10.076232 24.66% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
11/28/97 15.114153 (6.24%) 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
09/30/93 9.792947 9.04% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
11/28/97 14.067019 (6.89%) 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
08/31/92 10.073907 5.00% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
11/28/97 21.173272 (3.69%) 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
05/31/89 9.290766 9.54% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
11/28/97 16.776235 (3.87%) 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
07/31/89 8.944799 7.20% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
11/28/97 15.808803 (3.12%) 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
10/31/94 8.592851 19.98% 125 0 5.00% 5.00%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Five Year DSC Ten Year DSC Inception DSC
- ------------------------------------------------------------------
<S> <C> <C>
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
5.00% 0.00% 5.00%
- ------------------------------------------------------------------
</TABLE>
Page 4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Fund Name Maintenance Fee As of Date
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aetna Ascent VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Balanced VP, Inc. 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Bond VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Crossroads VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Growth and Income VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Growth VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Index Plus Large Cap VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Legacy VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Money Market VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Small Company VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Aetna Value Opportunity VP 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Calvert Social Balanced Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Janus Aspen Aggressive Growth Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Janus Aspen Balanced Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Janus Aspen Flexible Income Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Janus Aspen Growth Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Janus Aspen Worldwide Growth Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Global Securities Fund 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Emerging Equities Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Alger American Small Cap/PPI-MFS Emerging Equities 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Research Growth Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
American Century VP Capital Appreciation/PPI -MFS Research Growth 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Portfolio Partners MFS Value Equity Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Growth/PPI-MFS Value Equity 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Portfolio Partners Scudder International Growth Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Scudder International Portfolio Class A/PPI-Scudder International Growth 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Portfolio Partners T. Rowe Price Growth Equity Portfolio 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
Alger American Growth/PPI-T. Rowe Price Growth Equity 20 12/31/97
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
One Year One Year One Year Three Year Three Year Three Year Five Year
As of AUV as of Date as of AUV w/out DSC as of Date as of AUV w/out DSC as of Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15.860404 12/31/96 13.39505 18.35% 07/05/95
- --------------------------------------------------------------------------------------------------------------------
18.810623 12/31/96 15.550804 20.90% 12/30/94 10.880661 19.96% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
13.237538 12/31/96 12.376698 6.90% 12/30/94 10.35969 8.45% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
14.797481 12/31/96 12.74414 16.05% 07/05/95
- --------------------------------------------------------------------------------------------------------------------
22.193956 12/31/96 17.301856 28.22% 12/30/94 10.777032 27.17% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
13.173224 12/31/96 10.028765 31.29% 12/13/96
- --------------------------------------------------------------------------------------------------------------------
14.443996 12/31/96 10.92378 32.17% 09/16/96
- --------------------------------------------------------------------------------------------------------------------
13.549966 12/31/96 11.982379 13.02% 07/05/95
- --------------------------------------------------------------------------------------------------------------------
11.950985 12/31/96 11.473149 4.11% 12/30/94 10.527493 4.26% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
13.654334 12/31/96 10.280372 32.76% 12/27/96
- --------------------------------------------------------------------------------------------------------------------
13.261304 12/31/96 9.635612 37.57% 12/13/96
- --------------------------------------------------------------------------------------------------------------------
22.602836 12/31/96 19.060303 18.53% 12/30/94 13.372059 19.06% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
19.81826 12/31/96 15.664424 26.46% 12/30/94 10.401914 23.91% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
19.33878 12/31/96 15.858254 21.89% 12/30/94 10.47063 22.63% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
12.639846 12/31/96 11.473085 10.11% 12/30/94 9.473449 10.03% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
17.156285 12/31/96 13.99368 22.54% 01/03/95
- --------------------------------------------------------------------------------------------------------------------
15.254122 12/31/96 13.709721 11.21% 12/30/94 10.214043 14.24% 09/13/93
- --------------------------------------------------------------------------------------------------------------------
15.576473 12/31/96 12.917487 20.52% 12/30/94 9.13453 19.41% 09/13/93
- --------------------------------------------------------------------------------------------------------------------
23.227542 12/31/96 21.044724 10.31% 12/30/94 15.955256 13.28% 09/13/93
- --------------------------------------------------------------------------------------------------------------------
16.485456 12/31/96 13.599378 21.16% 12/30/94 9.042221 22.10% 09/13/93
- --------------------------------------------------------------------------------------------------------------------
18.778786 12/31/96 15.566474 20.58% 12/30/94 9.710361 24.53% 09/13/93
- --------------------------------------------------------------------------------------------------------------------
22.539157 12/31/96 18.64219 20.84% 12/30/94 15.871555 12.34% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
23.310723 12/31/96 21.713579 7.30% 12/30/94 17.225856 10.55% 05/03/93
- --------------------------------------------------------------------------------------------------------------------
14.926614 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------
14.926614 12/31/96 13.837532 7.81% 12/30/94 9.435682 16.46% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
13.795425 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------
13.795425 12/31/96 14.394899 (4.22%) 12/30/94 11.76586 5.39% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
21.479751 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------
21.479751 12/31/96 17.21472 24.72% 12/30/94 12.277821 20.44% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
16.986196 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------
16.986196 12/31/96 15.781252 7.58% 12/30/94 12.68681 10.16% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
16.131314 11/28/97 11/28/97 11/28/97
- --------------------------------------------------------------------------------------------------------------------
16.131314 12/31/96 12.73642 26.60% 12/31/94 8.446955 24.01% 12/31/92
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Separate
Five Year Five Year Ten Year Ten Year Ten Year Inception Inception Inception Account
as of AUV w/out DSC as of Date as of AUV w/out DSC Date AUV w/out DSC Charge
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/05/95 07/05/95 9.998131 20.27% 125
- ---------------------------------------------------------------------------------------------------------------------
10.200069 12.96% 04/03/89 04/03/89 7.477658 11.07% 125
- ---------------------------------------------------------------------------------------------------------------------
10.077053 5.55% 12/31/87 6.207376 7.81% 125
- ---------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 9.998626 16.97% 125
- ---------------------------------------------------------------------------------------------------------------------
10.455961 16.18% 12/31/87 5.395736 15.13% 125
- ---------------------------------------------------------------------------------------------------------------------
12/13/96 12/13/96 9.890612 31.26% 125
- ---------------------------------------------------------------------------------------------------------------------
09/16/96 09/16/96 10 32.85% 125
- ---------------------------------------------------------------------------------------------------------------------
07/05/95 07/05/95 9.874152 13.47% 125
- ---------------------------------------------------------------------------------------------------------------------
10.052882 3.46% 12/31/87 7.594212 4.58% 125
- ---------------------------------------------------------------------------------------------------------------------
12/27/96 12/27/96 10.167345 33.70% 125
- ---------------------------------------------------------------------------------------------------------------------
12/13/96 12/13/96 9.43896 38.10% 125
- ---------------------------------------------------------------------------------------------------------------------
13.118853 11.43% 12/31/87 7.942325 10.97% 125
- ---------------------------------------------------------------------------------------------------------------------
8.418697 18.62% 12/31/87 4.779521 15.22% 125
- ---------------------------------------------------------------------------------------------------------------------
8.99393 16.49% 12/31/87 4.483462 15.68% 125
- ---------------------------------------------------------------------------------------------------------------------
6.95037 12.65% 12/31/87 5.711978 8.21% 125
- ---------------------------------------------------------------------------------------------------------------------
01/03/95 01/03/95 8.468594 26.55% 125
- ---------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 7.558066 17.69% 125
- ---------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.587103 14.80% 125
- ---------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 16.249978 8.61% 125
- ---------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.640119 16.16% 125
- ---------------------------------------------------------------------------------------------------------------------
09/13/93 09/13/93 8.159933 21.34% 125
- ---------------------------------------------------------------------------------------------------------------------
10.133836 17.28% 11/12/90 11/12/90 10.794623 10.81% 125
- ---------------------------------------------------------------------------------------------------------------------
05/03/93 05/03/93 17.531834 6.24% 125
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 15.115188 (1.31%) 125
- ---------------------------------------------------------------------------------------------------------------------
8.930629 10.76% 09/21/88 09/21/88 3.34042 17.45% 125
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 14.067983 (2.00%) 125
- ---------------------------------------------------------------------------------------------------------------------
11.064651 4.45% 12/31/87 6.771537 7.32% 125
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 21.203485 1.24% 125
- ---------------------------------------------------------------------------------------------------------------------
12.406852 11.54% 12/31/87 6.202719 13.17% 125
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 16.741198 1.40% 125
- ---------------------------------------------------------------------------------------------------------------------
9.516022 12.23% 12/31/87 6.312275 10.35% 125
- ---------------------------------------------------------------------------------------------------------------------
11/28/97 11/28/97 15.828404 1.85% 125
- ---------------------------------------------------------------------------------------------------------------------
6.969632 18.21% 01/09/89 01/09/89 3.590313 18.16% 125
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3
<PAGE>
- --------------------
Free Out
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
0
- --------------------
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0
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Page 4
