Prospectus - May 3, 1999
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[Begin sidebar]
The Funds
Aetna Ascent VP
Aetna Balanced VP, Inc.
Aetna Income Shares d/b/a Aetna Bond VP
Aetna Crossroads VP
Aetna Variable Fund d/b/a Aetna Growth and Income VP
Aetna Index Plus Bond VP
Aetna Index Plus Large Cap VP
Aetna Index Plus Mid Cap VP
Aetna Index Plus Small Cap VP
Aetna Legacy VP
Aetna Variable Encore Fund d/b/a Aetna Money Market VP
Aetna Value Opportunity VP
Calvert Social Balanced Portfolio
Fidelity Variable Insurance Products Fund (VIP) Equity-Income Portfolio
Fidelity Variable Insurance Products Fund (VIP) High Income Portfolio
Fidelity Variable Insurance Products Fund (VIP II) Asset Manager Portfolio
Fidelity Variable Insurance Products Fund (VIP II) Contrafund Portfolio
Fidelity Variable Insurance Products Fund (VIP II) Index 500 Portfolio
Janus Aspen Aggressive Growth Portfolio
Janus Aspen Growth Portfolio
Janus Aspen Worldwide Growth Portfolio
Lexington Emerging Markets Fund, Inc.
Lexington Natural Resources Trust*
MFS Total Return Series
Oppenheimer Global Securities Fund/VA
Oppenheimer Strategic Bond Fund/VA
Portfolio Partners MFS Emerging Equities Portfolio
Portfolio Partners MFS Research Growth Portfolio
Portfolio Partners MFS Value Equity Portfolio
Portfolio Partners Scudder International Growth Portfolio
Portfolio Partners T. Rowe Price Growth Equity Portfolio
[End sidebar]
The Contracts. The contracts described in this prospectus are group deferred
variable annuity contracts issued by Aetna Life Insurance and Annuity Company
(the Company). The contracts may be single purchase payment contracts, which
allow for lump sum payments, or installment purchase payment contracts, which
allow for installment payments. They are intended to be used as funding vehicles
for certain types of retirement plans, including those that qualify for
beneficial tax treatment and/or to provide current income reduction under
certain sections of the Internal Revenue Code of 1986, as amended (Tax Code).
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Why Reading this Prospectus is Important. Before you participate in the contract
through a retirement plan, you should read this prospectus. It provides facts
about the contract and its investment options. Plan sponsors (generally your
employer) should read this prospectus to help determine if the contract is
appropriate for their plan. Keep this document for future reference.
Table of Contents . . . page 3
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Contract Design. The contracts are designed to:
> Help you save for retirement while receiving beneficial tax treatment
> Offer a variety of investment options to help meet long-term financial goals
> Provide a benefit to a beneficiary in the event of death
> Provide future income payments over a lifetime or for a specified period
You may participate in this contract if you are an eligible employee of a school
board or public university in the State of New York and if you are a member of
the New York State United Teachers Trust (NYSUT) or the United University
Professions (UUP).
Investment Options. The contracts offer variable investment options and fixed
interest options. When we establish your account, you instruct us to direct
account dollars to any of the available options. Some investment options may be
unavailable through certain contracts and plans.
Variable Investment Options. These options are called subaccounts. Each
subaccount invests in one of the mutual funds (funds) listed on this page.
Earnings on amounts invested in a subaccount will vary depending on the
performance of its underlying fund. The subaccounts are within Variable Annuity
Account C (the separate account), a separate account of the Company. You do not
invest directly in or hold shares of the funds.
The funds in which the subaccounts invest have various risks. For information
about risks of investing in the funds see "Investment Options" in this
prospectus and each fund prospectus. Retain the fund prospectuses for future
reference.
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* Transfers or deposits are not allowed into the subaccount investing in this
fund, except from accounts established under the contract before May 1, 1998.
As soon as all those who have current allocations to the subaccount under the
contract have redirected their allocations to other investment options, we
will close the subaccount to all investments (except loan repayments that
we automatically deposit into the subaccount according to our loan
repayment procedures).
<PAGE>
Prospectus - May 3, 1999 (continued)
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Fixed Interest Options.
> Guaranteed Accumulation Account
> Fixed Account
Except as specifically mentioned, this prospectus describes only the variable
investment options. However, we describe the fixed interest options in the
appendices to this prospectus. There is also a separate prospectus for the
Guaranteed Accumulation Account.
Getting Additional Information. You may obtain the May 3, 1999, Statement of
Additional Information (SAI) by indicating your request on your enrollment
materials or calling the Opportunity Plus Processing Office at 1-800-677-4636.
You may also obtain an SAI for any of the funds by calling that number. This
prospectus, the SAI and other information about the separate account are posted
on the Securities and Exchange Commission (SEC) web site, http://www.sec.gov and
may also be obtained, free of charge, by contacting the SEC Public Reference
Room at 202-942-8090. The SAI table of contents is listed on page 35 of this
prospectus. The SAI is incorporated into this prospectus by reference.
Additional Disclosure Information. Neither the SEC, nor any state securities
commission, has approved or disapproved the securities offered through this
prospectus or passed on the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense. This prospectus is valid
only when accompanied by current prospectuses of the funds and the Guaranteed
Accumulation Account. We do not intend for this prospectus to be an offer to
sell or a solicitation of an offer to buy these securities in any state that
does not permit their sale. We have not authorized anyone to provide you with
information that is different than that contained in this prospectus.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<S> <C>
Contract Overview ............................... 4
Who's Who
The Contract and Your Retirement Plan
Contract Rights
Contract Facts
Contract Phases: Accumulation Phase, Income Phase
Questions: Contacting the Company (sidebar)
Sending Requests in Good Order (sidebar)
</TABLE>
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<TABLE>
<S> <C>
Fee Table .................................. 6
Condensed Financial Information ............ 10
Investment Options ......................... 10
Transfers .................................. 11
Contract Purchase or Participation ......... 12
Contract Ownership and Rights .............. 13
Right to Cancel ............................ 13
Fees ....................................... 14
Your Account Value ......................... 17
Withdrawals ................................ 19
Systematic Distribution Options ............ 21
Death Benefit .............................. 22
The Income Phase ........................... 23
Taxation ................................... 26
Other Topics ............................... 30
</TABLE>
The Company -- Variable Annuity Account C -- Performance Reporting -- Voting
Rights -- Contract Distribution -- Contract Modification -- Commission Payments
- -- Changes in Beneficiary Designations -- Opportunity Plus Processing Office --
Agreement with the Company -- Contract Modification -- Legal Matters and
Proceedings -- Payment Delay or Suspension -- Year 2000 Readiness
<TABLE>
<S> <C>
Contents of the Statement of Additional Information ......... 35
Appendix I -- Guaranteed Accumulation Account ............... 36
Appendix II -- Fixed Account ................................ 38
Appendix III -- Fund Descriptions ........................... 39
Appendix IV -- Condensed Financial Information .............. 42
</TABLE>
3
<PAGE>
[Begin sidebar]
Questions: Contacting the Company. To answer your questions, contact your local
representative or write or call the Company through:
Opportunity Plus
Processing Office
P.O. Box 12894
Albany, New York 12212-2894
1-800-OPP-INFO
(1-800-677-4636)
Sending Forms and Written Requests in Good Order.
If you are writing to change your beneficiary, request a withdrawal, or for any
other purpose, contact your local representative or the Company through the
Opportunity Plus Processing Office to learn what information is required in
order for the request to be in "good order." We can only act upon written
requests that are received in good order.
[End sidebar]
Contract Overview
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The following is a summary. Please read each section of this prospectus for
additional information.
Who's Who
You (the participant): The individual participating in a retirement plan, where
the plan uses the contracts as funding options.
Plan Sponsor: The sponsor of your retirement plan. Generally, your employer.
Contract Holder: The person or entity to whom we issue the contract. Generally,
the plan sponsor.
We (the Company): Aetna Life Insurance and Annuity Company. We issue the
contract.
The Contract and Your Retirement Plan
Retirement plan (plan): A plan sponsor has established a retirement plan for
you. The contracts are offered as funding options for that plan. We are not a
party to the plan, so the terms and the conditions of the contracts and the plan
may differ.
Plan Type. We refer to plans in this prospectus as 403(b) plans. For a
description, see "Taxation."
Contract Rights
You hold all rights under the contract and may make all elections for your
account.
Contract Facts
Free look/Right to Cancel: Contract holders and participants may cancel their
purchase no later than 10 days after they receive the contract (or other
document evidencing their interest.) See "Right To Cancel."
Death Benefit: A beneficiary may receive a benefit in the event of your death
prior to the income phase. Death benefits during the income phase depend on the
payment option selected. See "Death Benefit" and "The Income Phase."
Withdrawals: During the accumulation phase, you may, subject to the limits in
the contract, withdraw all or a part of your account value. Certain fees and
taxes may apply. See "Withdrawals" and "Taxation."
Systematic Distribution Options: You may elect to receive regular payments from
your account, while retaining the account in the accumulation phase. See
"Systematic Distribution Options."
Fees: Certain fees are deducted from your account value. See "Fee Table" and
"Fees."
Taxation: The Tax Code has certain rules that apply to amounts accumulated and
distributed under the contract. Tax penalties may apply if rules are not
followed. See "Taxation."
4
<PAGE>
Contract Phases
I. The Accumulation Phase. (accumulating retirement benefits)
[Begin flow chart information]
--------------
Payments to
Your Account
--------------
Step 1 [down arrow]
------------------------------------------
Aetna Life Insurance and Annuity Company
------------------------------------------
a) [down arrow] Step 2 b) [down arrow]
--------------- -----------------------------
Variable Annuity
Fixed Account C
Interest
Options Variable Investment Options
--------------- -----------------------------
The Subaccounts
-----------------------------
A B Etc.
-----------------------------
[down arrow] Step 2 b) [down arrow]
-----------------
Mutual Mutual
Fund A Fund B
-----------------
[End flow chart information]
STEP 1: You or the contract holder provide Aetna Life Insurance and Annuity
Company with your completed enrollment materials. The contract holder directs us
to set up an account for you.
STEP 2: You direct us to invest your account dollars in any of the:
(a) Fixed Interest Options
(b) Variable Investment Options. (The variable investment options are the
subaccounts of Variable Annuity Account C. Each one invests in a specific
mutual fund.)
STEP 2(b), continued: The subaccount(s) selected purchases shares of its
corresponding fund.
II. The Income Phase. The contract offers several payment options, if you wish
to elect one (see "The Income Phase.") In general, you may:
> Receive payments over a lifetime or for a specified period
> Receive payments monthly, quarterly, semi-annually or annually
> Select an option that provides a death benefit to beneficiaries
> Select fixed payments or payments that vary based on the performance of the
variable investment options you select.
5
<PAGE>
[Begin sidebar]
In This Section:
> Early Withdrawal Charge Schedule
> Fees Deducted from the Subaccounts
> Fund Fees
> Examples of Fee Deductions
Also see the "Fees" section for:
> Early Withdrawal Charge Schedules
> How, When and Why Fees are Deducted
> Premium and Other Taxes
See "The Income Phase" for:
> Fees During the Income Phase
[End sidebar]
Fee Table
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The tables and examples in this section show the fees your account may incur
while accumulating dollars under the contract (the Accumulation Phase). See "The
Income Phase" for fees that may apply after you begin receiving payments under
the contract. The fees shown below do not include premium taxes that may be
applicable.
Transaction Fees
Early Withdrawal Charge. As a percentage of the amount withdrawn.
Early Withdrawal Charge Schedule(1)
<TABLE>
<CAPTION>
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Installment Purchase Payment Contracts
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<S> <C>
Purchase Payment | Early Withdrawal
Periods Completed | Charge
Fewer than 5 | 5%
5 or more but fewer than 7 | 4%
7 or more but fewer than 9 | 3%
9 or more but fewer than 10 | 2%
10 or more | 0%
- --------------------------------------------------
</TABLE>
Fees Deducted From the Subaccounts
(Daily deductions equal to the given percentage on an annual basis)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge ......... 1.25%
Administrative Expense Charge ............. 0.00%(2)
----
Total Separate Account Expenses ........... 1.25%
====
</TABLE>
(1)For Single Purchase Payment Contracts, there is no withdrawal charge. For
Installment Purchase Payment Contracts, we waive the withdrawal charge for
dollars contributed to the funds or the Guaranteed Accumulation Account on
or after April 1, 1995. (See "Fees--Early Withdrawal Charge.")
(2)We do not currently impose an administrative expense charge. However, we
reserve the right to deduct a daily charge of not more than 0.25% on an
annual basis from the subaccounts.
6
<PAGE>
Fees Deducted by the Funds
Using this Information. The following table shows the investment advisory fees
and other expenses charged annually by each fund. Fund fees are one factor that
impacts the value of a fund share. To learn about additional factors, refer to
the fund prospectus.
How Fees are Deducted. Fund fees are not deducted from account values. Instead,
fees are deducted from the value of fund shares on a daily basis, which in turn
will affect the value of each subaccount on a daily basis. Except as noted
below, the following figures are a percentage of the average net assets of each
fund, and are based on figures for the year ended December 31, 1998.
Fund Expense Table
<TABLE>
<CAPTION>
Total Fund Net Fund
Annual Annual
Expenses Expenses
Investment Without Total After
Advisory Other Waivers or Waivers and Waivers or
Fees(1) Expenses Reductions Reductions Reductions
------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Aetna Ascent VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75%
Aetna Balanced VP, Inc.(3) 0.50% 0.09% 0.59% -- 0.59%
Aetna Bond VP(3) 0.40% 0.10% 0.50% -- 0.50%
Aetna Crossroads VP(2)(3) 0.60% 0.15% 0.75% 0.00% 0.75%
Aetna Growth and Income VP(3) 0.50% 0.08% 0.58% -- 0.58%
Aetna Index Plus Bond VP(2)(3) 0.30% 0.26% 0.56% 0.11% 0.45%
Aetna Index Plus Large Cap VP(2)(3) 0.35% 0.10% 0.45% 0.00% 0.45%
Aetna Index Plus Mid Cap VP(2)(3) 0.40% 0.51% 0.91% 0.31% 0.60%
Aetna Index Plus Small Cap VP(2)(3) 0.40% 0.61% 1.01% 0.41% 0.60%
Aetna Legacy VP(2)(3) 0.60% 0.16% 0.76% 0.00% 0.76%
Aetna Money Market VP(3) 0.25% 0.09% 0.34% -- 0.34%
Aetna Value Opportunity VP(2)(3) 0.60% 0.14% 0.74% 0.00% 0.74%
Calvert Social Balanced Portfolio(4) 0.70% 0.18% 0.88% 0.02% 0.86%
Fidelity VIP Equity-Income Portfolio(5) 0.49% 0.09% 0.58% 0.01% 0.57%
Fidelity VIP High Income Portfolio(5) 0.58% 0.12% 0.70% 0.00% 0.70%
Fidelity VIP II Asset Manager Portfolio(5) 0.54% 0.10% 0.64% 0.01% 0.63%
Fidelity VIP II Contrafund Portfolio(5) 0.59% 0.11% 0.70% 0.04% 0.66%
Fidelity VIP II Index 500 Portfolio(5) 0.24% 0.11% 0.35% 0.07% 0.28%
Janus Aspen Aggressive Growth Portfolio(6) 0.72% 0.03% 0.75% 0.00% 0.75%
Janus Aspen Growth Portfolio(6) 0.72% 0.03% 0.75% 0.07% 0.68%
Janus Aspen Worldwide Growth Portfolio(6) 0.67% 0.07% 0.74% 0.02% 0.72%
Lexington Emerging Markets Fund, Inc.(7) 0.85% 1.23% 2.08% 0.00% 2.50%
Lexington Natural Resources Trust(7) 1.00% 0.29% 1.29% 0.00% 2.50%
MFS Total Return Series(8) 0.75% 0.16% 0.91% 0.00% 0.91%
Oppenheimer Global Securities Fund/VA(9) 0.68% 0.06% 0.74% -- 0.74%
Oppenheimer Strategic Bond Fund/VA(9) 0.74% 0.06% 0.80% -- 0.80%
Portfolio Partners MFS Emerging Equities
Portfolio(10) 0.68% 0.13% 0.81% 0.00% 0.83%
Portfolio Partners MFS Research Growth
Portfolio(10) 0.70% 0.15% 0.85% -- 0.85%
Portfolio Partners MFS Value Equity
Portfolio(10) 0.65% 0.25% 0.90% -- 0.90%
Portfolio Partners Scudder International
Growth Portfolio(10) 0.80% 0.20% 1.00% -- 1.00%
Portfolio Partners T. Rowe Price Growth
Equity Portfolio(10) 0.60% 0.15% 0.75% -- 0.75%
</TABLE>
7
<PAGE>
Footnotes to the "Fees Deducted by the Funds" Table
(1) Certain of the fund advisers reimburse the company for administrative costs
incurred in connection with administering the funds as variable funding
options under the contract. These reimbursements are generally paid out of
the management fees and are not charged to investors.
(2) The investment adviser is contractually obligated through December 31, 1999
to waive all or a portion of its investment advisory fee and/or its
administrative services fee and/or to reimburse a portion of other expenses
in order to ensure that the portfolio's Total Fund Annual Expenses do not
exceed the percentage reflected under Net Fund Annual Expenses After
Waivers or Reductions.
(3) Prior to May 1, 1998, the portfolio's investment adviser provided
administrative services to the portfolio and assumed the portfolio's
ordinary recurring direct costs under an administrative services agreement.
After that date, the portfolio's investment adviser provided administrative
services but no longer assumed all of the portfolio's ordinary recurring
direct costs under an 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, 1998, but reflect the fee payable under the
new administrative services agreement and estimates the portfolio's
ordinary recurring direct costs.
(4) The figures above are based on expenses for fiscal year 1998, and have been
restated to reflect the elimination of a performance adjustment. The
restatement includes the addition of 0.01% to the portfolio management fee.
Other Expenses reflect an indirect fee of 0.02% relating to an expense
offset arrangement with the portfolio's custodian. Amounts shown under
Total Waivers and Reductions reflect a voluntary reduction of fees paid
indirectly.
(5) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or the investment adviser
on behalf of 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. These credits are included under
Total Waivers and Reductions.
(6) All expenses are stated both with and without contractual waivers and fee
reductions by Janus Capital. Fee reductions for the Aggressive Growth,
Growth and Worldwide Growth Portfolios reduce the Management fee to the
level of the corresponding Janus retail fund. Other waivers, if applicable,
are first applied against the Management Fee and then against Other
Expenses. Janus Capital has agreed to continue the other waivers and fee
reduction until at least the next annual renewal of the advisory agreement.
(7) For 1998, the fund's investment adviser voluntarily agreed to limit the
total expenses of the fund (excluding interest, taxes, brokerage
commissions, and extraordinary expense, but including management fees and
operating expenses) to an annual rate of 2.50% of the fund's average daily
net assets. This voluntary agreement will remain in effect through December
31, 1999.
(8) Each series has an expense offset arrangement which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. Expenses do not take
into account these expense reductions, and are therefore higher than the
actual expenses of the series.
(9) Fee waiver/expense reimbursement obligations do not apply to these
portfolios.
(10) The investment adviser has agreed to reimburse the portfolios for expenses
and/or waive its fees, so that, through at least April 30, 2000, the
aggregate of each portfolio's expenses will not exceed the combined
investment advisory fees and other expenses shown under the Net Fund Annual
Expenses After Waivers or Reductions column above. For the Portfolio
Partners MFS Emerging Equities Portfolio, the Total Fund Annual Expenses
Without Waivers or Reductions for 1998 were less than the percentage
reflected under the Net Fund Annual Expenses After Waivers or Reductions
column. Nevertheless, the investment adviser will waive fees and/or
reimburse expenses if that portfolio's Total Fund Annual Expenses Without
Waivers or Reductions for 1999 exceed the percentage reflected under the
Net Fund Annual Expenses After Waivers or Reductions column.
8
<PAGE>
Hypothetical Examples
Account Fees Incurred Over Time. The following hypothetical examples show the
fees paid over time if $1,000 is invested in a subaccount, assuming a 5% annual
return on the investment. For the purpose of these examples, we deducted a
mortality and expense risk charge of 1.25% annually. The total fund expenses are
those shown in the column "Total Annual Expenses Without Waivers or Reductions"
in the Fund Expense Table.
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> These examples are purely hypothetical
> They should not be considered a
representation of past or future expenses
or expected returns
> Actual fees and/or returns may be more or
less than those shown in these examples
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<TABLE>
<CAPTION>
EXAMPLE A
---------
If you withdraw your entire account
value at the end of the periods shown,
you would pay the following fees,
including any applicable Early
Withdrawal Charge assessed:*
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Aetna Ascent VP $72 $117 $166 $233
Aetna Balanced VP, Inc. $70 $113 $158 $216
Aetna Bond VP $69 $110 $154 $206
Aetna Crossroads VP $72 $117 $166 $233
Aetna Growth and Income VP $70 $112 $157 $215
Aetna Index Plus Bond VP $70 $112 $157 $213
Aetna Index Plus Large Cap VP $69 $109 $151 $201
Aetna Index Plus Mid Cap VP $73 $122 $173 $249
Aetna Index Plus Small Cap VP $74 $125 $178 $260
Aetna Legacy VP $72 $118 $166 $234
Aetna Money Market VP $68 $105 $146 $189
Aetna Value Opportunity VP $72 $117 $165 $232
Calvert Social Balanced Portfolio $73 $121 $172 $246
Fidelity VIP Equity-Income Portfolio $70 $112 $157 $215
Fidelity VIP High Income Portfolio $71 $116 $163 $227
Fidelity VIP II Asset Manager Portfolio $71 $114 $160 $221
Fidelity VIP II Contrafund Portfolio $71 $116 $163 $227
Fidelity VIP II Index 500 Portfolio $68 $106 $146 $190
Janus Aspen Aggressive Growth Portfolio $72 $117 $166 $233
Janus Aspen Growth Portfolio $72 $117 $166 $233
Janus Aspen Worldwide Growth Portfolio $72 $117 $165 $232
Lexington Emerging Markets Fund, Inc. $84 $155 $228 $362
Lexington Natural Resources Trust $77 $133 $192 $288
MFS Total Return Series $73 $122 $173 $249
Oppenheimer Global Securities Fund/VA $72 $117 $165 $232
Oppenheimer Strategic Bond Fund/VA $72 $119 $168 $238
Portfolio Partners MFS Emerging Equities Portfolio $72 $119 $169 $239
Portfolio Partners MFS Research Growth Portfolio $73 $120 $171 $243
Portfolio Partners MFS Value Equity Portfolio $73 $122 $173 $248
Portfolio Partners Scudder International Growth
Portfolio $74 $125 $178 $258
Portfolio Partners T. Rowe Price Growth Equity
Portfolio $72 $117 $166 $233
<CAPTION>
EXAMPLE B
---------
If you leave your entire account
value invested or if you select an
income phase payment option at the
end of the periods shown, you would
pay the following fees (no Early
Withdrawal Charge is reflected):**
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Aetna Ascent VP $20 $ 63 $108 $233
Aetna Balanced VP, Inc. $19 $ 58 $100 $216
Aetna Bond VP $18 $ 55 $ 95 $206
Aetna Crossroads VP $20 $ 63 $108 $233
Aetna Growth and Income VP $19 $ 58 $ 99 $215
Aetna Index Plus Bond VP $18 $ 57 $ 98 $213
Aetna Index Plus Large Cap VP $17 $ 54 $ 92 $201
Aetna Index Plus Mid Cap VP $22 $ 68 $116 $249
Aetna Index Plus Small Cap VP $23 $ 71 $121 $260
Aetna Legacy VP $20 $ 63 $108 $234
Aetna Money Market VP $16 $ 50 $ 87 $189
Aetna Value Opportunity VP $20 $ 62 $107 $232
Calvert Social Balanced Portfolio $22 $ 67 $114 $246
Fidelity VIP Equity-Income Portfolio $19 $ 58 $ 99 $215
Fidelity VIP High Income Portfolio $20 $ 61 $105 $227
Fidelity VIP II Asset Manager Portfolio $19 $ 59 $102 $221
Fidelity VIP II Contrafund Portfolio $20 $ 61 $105 $227
Fidelity VIP II Index 500 Portfolio $16 $ 51 $ 87 $190
Janus Aspen Aggressive Growth Portfolio $20 $ 63 $108 $233
Janus Aspen Growth Portfolio $20 $ 63 $108 $233
Janus Aspen Worldwide Growth Portfolio $20 $ 62 $107 $232
Lexington Emerging Markets Fund, Inc. $34 $102 $174 $362
Lexington Natural Resources Trust $26 $ 79 $135 $288
MFS Total Return Series $22 $ 68 $116 $249
Oppenheimer Global Securities Fund $20 $ 62 $107 $232
Oppenheimer Strategic Bond Fund $21 $ 64 $110 $238
Portfolio Partners MFS Emerging Equities Portfolio $21 $ 65 $111 $239
Portfolio Partners MFS Research Growth Portfolio $21 $ 66 $113 $243
Portfolio Partners MFS Value Equity Portfolio $22 $ 67 $115 $248
Portfolio Partners Scudder International Growth
Portfolio $23 $ 70 $120 $258
Portfolio Partners T. Rowe Price Growth Equity
Portfolio $20 $ 63 $108 $233
</TABLE>
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* This example reflects deduction of an early withdrawal charge calculated
using the schedule applicable to Installment Purchase Payment Contracts.
Under that schedule, if only one $1,000 payment was made as described above,
fewer than 5 purchase payment periods would have been completed at the end
of years 1, 3 and 5, and the 5% charge would apply. At the end of the tenth
account year, the early withdrawal charge is waived regardless of the number
of purchase payment periods completed, and no early withdrawal charge would
apply.
** This example does not apply if during the income phase, a nonlifetime
payment option with variable payments is selected and a lump sum withdrawal
is requested within 3 years after payments start. In this case, the lump sum
payment is treated as a withdrawal during the accumulation phase and may be
subject to an early withdrawal charge as shown in Example A.
9
<PAGE>
Condensed Financial Information
- --------------------------------------------------------------------------------
Understanding Condensed Financial Information. In Appendix IV, we provide
condensed financial information about the Variable Annuity Account C (the
separate account) subaccounts available under the contracts. The tables show the
value of the subaccounts over the past 10 years. For subaccounts that were not
available 10 years ago, we give a history from the date of first availability.
Investment Options
- --------------------------------------------------------------------------------
The contract offers variable investment options and fixed interest options. When
we establish your account(s), you instruct us to direct account dollars to any
of the available options.
Variable Investment Options. These options are called subaccounts. The
subaccounts are within Variable Annuity Account C (the separate account), a
separate account of the Company. Earnings on amounts invested in a subaccount
will vary depending on the performance and fees of its underlying fund. You do
not invest directly in or hold shares of the funds.
> Fund Descriptions. We provide brief descriptions of the funds in Appendix III.
Please refer to the fund prospectuses for additional information. Fund
prospectuses may be obtained, free of charge, from the Opportunity Plus
Processing Office at the address and phone number listed in "Contract
Overview" or by contacting SEC's website or the the SEC Public Reference Room.
Fixed Interest Options. For descriptions of the fixed interest options, see
Appendix I and II and the Guaranteed Accumulation Account prospectus.
- --------------------------------------------------------------------------------
Selecting Investment Options
o Choose options appropriate for you. Your Aetna representative can help you
evaluate which funds or fixed interest options may be appropriate for your
financial goals.
o Understand the risks associated with the options you choose. Some subaccounts
invest in funds that are considered riskier than others. Funds with additional
risks are expected to have a value that rises and falls more rapidly and to a
greater degree than other funds. For example, funds investing in foreign or
international securities are subject to additional risks not associated with
domestic investments, and their performance may vary accordingly. Also, funds
using derivatives in their investment strategy may be subject to additional
risks.
o Be informed. Read this prospectus, the fund prospectus, fixed interest option
appendices and the Guaranteed Accumulation Account prospectus.
- --------------------------------------------------------------------------------
Limits on Option Availability. Some funds and fixed interest options may not be
available through certain contracts or plans. We may add, withdraw or substitute
funds, subject to the conditions in the contract and regulatory requirements.
Limits on Number of Options Selected. No more than 18 investment options may be
selected for your account at any one time during the accumulation phase of your
account. If you have an outstanding loan, you may currently
10
<PAGE>
make a total of 18 cumulative selections over the life of your account. Each
subaccount, the Fixed Account and each classification of the Guaranteed
Accumulation Account selected counts toward these limits. If you have a loan on
the account, each option counts toward the limit, even after the full value is
transferred to other options.
Limits Imposed by the Underlying Fund. Orders for the purchase of fund shares
may be subject to acceptance by the fund. We reserve the right to reject,
without prior notice, any allocation of payments to a subaccount if the
subaccount's investment in the corresponding fund is not accepted by the fund
for any reason.
Additional Risks of Investing in the Funds. (Mixed and Shared Funding)
"Shared funding" occurs when shares of a fund, which the subaccounts buy for
variable annuity contracts, are also bought by other insurance companies for
their variable annuity contracts.
"Mixed funding" occurs when shares of a fund, which the subaccounts buy for
variable annuity contracts, is bought for variable life insurance contracts
issued by us or other insurance companies.
> Shared--bought by more than one company
> Mixed--bought for annuities and life insurance
It is possible that a conflict of interest may arise due to mixed and/or shared
funding, that could adversely impact the fund. For example, if a conflict of
interest occurred and one of the subaccounts withdrew its investment in a fund,
the fund may be forced to sell its securities at disadvantageous prices, causing
its share values to decrease. Each fund's board of directors or trustees will
monitor events to identify any conflicts which might arise and to determine what
action, if any, should be taken to address such conflicts.
Transfers
- --------------------------------------------------------------------------------
Transfers Among Investment Options. During the accumulation phase, you may
transfer among investment options. You may make a request in writing, by
telephone or, where applicable, electronically. Transfers must be made in
accordance with the terms of the contract and your plan. Transfers from fixed
interest options are restricted as outlined in Appendices I and II. You may not
make transfers once you enter the income phase.
Value of Transferred Dollars. The value of amounts transferred in or out of the
funds will be based on the subaccount unit values next determined after we
receive your request in good order at the Opportunity Plus Processing Office.
(See "Contract Overview -- Questions.")
Telephone Transfers: Security Measures. To prevent fraudulent use of telephone
transactions, we have established security procedures. These include recording
calls on our toll-free telephone lines and requiring use of a personal
identification number (PIN) to execute transactions. You are responsible for
keeping your PIN and account information confidential. If we fail to follow
reasonable security procedures, we may be liable for losses due to unauthorized
or fraudulent telephone transactions. We are not liable for losses resulting
from telephone instructions we believe to be genuine. If a loss occurs when we
rely on such instructions, you will bear the loss.
11
<PAGE>
Limits on Frequent Transfers. The contracts are not designed to serve as
vehicles for frequent trading in response to short-term fluctuations in the
market. Such frequent trading can disrupt management of a fund and raise its
expenses. This in turn can have an adverse effect on fund performance.
Accordingly, organizations or individuals that use market-timing investment
strategies and make frequent transfers should not purchase the contracts.
We reserve the right to restrict, in our sole discretion and without prior
notice, transfers initiated by a market-timing organization or individual or
other party authorized to give transfer instructions on behalf of multiple
contract holders or participants. Such restrictions could include: (1) not
accepting transfer instructions from an agent acting on behalf of more than one
contract holder or participant; and (2) not accepting preauthorized transfer
forms from market timers or other entities acting on behalf of more than one
contract holder or participant at a time.
We further reserve the right to impose, without prior notice, restrictions on
any transfers that we determine, in our sole discretion, will disadvantage or
potentially hurt the rights or interests of other contract holders or
participants.
Contract Purchase or Participation
- --------------------------------------------------------------------------------
Contracts Available for Purchase. The contracts available for purchase are
deferred annuity contracts that the Company offers in connection with retirement
plans under Code Section 403(b). The plans are established by school boards and
public universities in the state of New York, for participants who are members
and agency fee payers of the New York State United Teachers Trust (NYSUT) and
United University Professions (UUP).
There are two group deferred variable annuity contracts:
(1) Single purchase payments contracts issued for lump sum transfers to us of
amounts accumulated under a pre-existing plan; and
(2) Installment purchase payment contracts established to accept continuing
periodic payments.
We reserve the right to set a minimum purchase payment on single purchase
payment contracts. Lump sum transfers below this minimum will be applied to an
installment purchase payment contract.
Purchasing the Contract. The contract holder submits the required forms and
application to the Company. We approve the forms and issue a contract to the
contract holder.
Participating in the Contract. To participate in the contract, complete an
enrollment form and submit it to the Opportunity Plus Processing Office. (See
"Contract Overview -- Questions.") If your enrollment is accepted, we establish
an account for you under the contract(s). Your account includes amounts held
under both the installment purchase payment contract and the single purchase
payment contract.
Acceptance or Rejection of Applications or Enrollment Forms. We must accept or
reject an application or your enrollment materials within two business days of
receipt. If the forms are incomplete, we may hold any forms
12
<PAGE>
and accompanying payments for five days, unless you consent to our holding them
longer. Under limited circumstances, we may also agree, for a particular plan,
to hold payments for longer periods with the permission of the contract holder.
If we agree to this, we will deposit the payments in the Aetna Money Market VP
subaccount until the forms are completed (for a maximum of 105 days). If we
reject the application or enrollment forms, we will return the forms and any
payments.
Allocation of Payments. You direct us to allocate initial contributions to the
investment options available under the plan. Generally you will specify this
information on your enrollment materials. After your enrollment, changes to
allocations for future payments or transfer of existing balances among
investment options may be requested in writing and, where available, by
telephone or electronically.
Allocations must be in whole percentages and there may be limitations on the
number of investment options that can be selected at any one time. (See
"Investment Options" and "Transfers.")
Contract Ownership and Rights
- --------------------------------------------------------------------------------
Who owns the Contract? The contract holder. This is the person or entity to whom
we issue the contract, usually your employer.
Who Owns Money Accumulated under the Contract? We establish an account for you
under the contracts. You have all the rights to the value of your account.
What Rights Do I Have under The Contract? You hold all rights under the contract
and may make all elections for your account.
Right to Cancel
- --------------------------------------------------------------------------------
When and How to Cancel. You or the contract holder may cancel your purchase
within ten days after receiving the contract (or other document evidencing your
interest) by returning it to the Opportunity Plus Processing Office along with a
written notice of cancellation.
Refunds. We will produce a refund to you or the contract holder not later than
seven days after we receive the contract or other document evidencing your
interest and the written notice of cancellation at the Opportunity Plus
Processing Office. The refund will equal the dollars contributed to the contract
plus any earnings or less any losses attributable to those contributions
allocated to the variable investment options.
13
<PAGE>
[Begin sidebar]
Types of Fees
There are three types of fees your account may incur:
> Transaction Fees
o Early Withdrawal Charge
> Fees Deducted from the Subaccounts
o Mortality and Expense Risk Charge
o Administrative Expense Charge
> Fees Deducted by the Funds
o Investment Advisory Fees
o Other Expenses
Terms to Understand in the Schedules
> Account Year--a 12-month period measured from the date we establish your
account, or measured from any anniversary of that date.
> Purchase Payment Period (for installment purchase payment contracts)--the
period of time it takes to complete the number of installment payments
expected to be made to your account over a year. For example, if your payment
frequency is monthly, a payment period is completed after 12 payments are
made. If only 11 payments are made, the payment period is not completed until
the twelfth payment is made. At any given time, the number of payment periods
completed can not exceed the number of account years completed, regardless of
the number of payments made.
[End sidebar]
Fees
- --------------------------------------------------------------------------------
The following repeats and adds to information provided in the "Fee Table"
section. Please review both this section and the Fee Table for information on
fees.
Transaction Fees
Early Withdrawal Charge
Under installment purchase payment contracts, withdrawals of all or a portion of
your account value may be subject to a charge. There is no early withdrawal
charge for single purchase payment contracts.
Amount. The charge is a percentage of the amount withdrawn. The percentage will
be determined by the early withdrawal charge schedule that applies to your
account. The charge will never be more than 8.5% of total payments to your
account.
Purpose. This is a deferred sales charge. The charge reimburses us for some of
the sales and administrative expenses associated with the contract. Our
remaining sales and administrative expenses will be covered by our general
assets which are attributable in part to the mortality and expense risk charge
described in this section.
Early Withdrawal Charge Schedules:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Installment Purchase Payment Contracts
- --------------------------------------------------------------------
<S> <C>
Purchase Payment Periods Completed | Early Withdrawal Charge
Fewer than 5 | 5%
5 or more but fewer than 7 | 4%
7 or more but fewer than 9 | 3%
9 or more but fewer than 10 | 2%
10 or more | 0%
- -------------------------------------------------------------------
</TABLE>
Free Withdrawals. If you are between the ages of 591/2 and 701/2, you may
withdraw up to 10% of your account value during each calendar year without
being charged a withdrawal fee. The free withdrawal only applies to the first
partial withdrawal you make in each calendar year. The 10% amount will be based
on your account value calculated on the valuation date next following our
receipt of your request for withdrawal. Outstanding contract loans are excluded
from the account value when calculating the 10% free withdrawal amount.
The free withdrawal will not apply:
> To a full withdrawal of your account
> To partial withdrawals due to a default on a contract loan
> If ECO or SWO is elected
Waiver. The early withdrawal charge is waived for portions of a withdrawal where
one or more of the following apply:
> Used to provide payments to you during the income phase
> Paid because of your death before income phase payments begin
> Paid where your account value is $2,500 or less and no part of the account has
been taken as a withdrawal or a loan or used to provide income phase payments
within the prior 12 months
> Taken because of the election of a systematic distribution option (See
"Systematic Distribution Options")
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<PAGE>
> Taken when you are 59-1/2 or older, have an installment purchase payment
account and have completed at least nine purchase payment periods
> Withdrawn due to disability as specified in the Tax Code
> Taken on or after the tenth anniversary of the effective date of the account
> Due to a financial hardship as defined in the Tax Code
> Withdrawn due to your separation from service with your current employer,
while meeting the age and service requirements to receive benefits under the
New York State Teachers' or Employee's Retirement Systems (even if you are not
a member of either system)
> Withdrawn from the portion of the account value invested in the subaccounts
and/or GAA attributable to payments made on or after April 1, 1995. This
waiver does not apply to:
> Amounts deposited in the Fixed Account
> Amounts deposited in a subaccount or GAA but then transferred to the Fixed
Account; or
> Amounts that came from the Fixed Account but were then transferred to a
subaccount or GAA
> For any withdrawal, the account value of the payments made on or after April
1, 1995 will be withdrawn first, then the remaining value will be used to
satisfy the disbursement request.
Early Withdrawal Charge Schedule For GAA For Certain New York Contracts
The following schedule applies to withdrawals from GAA under installment
purchase payment master contracts issued after July 29, 1993 in the State of New
York. This schedule is based on the number of completed account years.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Installment Purchase Payment Contracts
- -----------------------------------------------------------------
<S> <C>
Account Years Completed Early Withdrawal Charge
Fewer than 3 | 5%
3 or more but fewer than 4 | 4%
4 or more but fewer than 5 | 3%
5 or more but fewer than 6 | 2%
6 or more but fewer than 7 | 1%
7 or more | 0%
- -----------------------------------------------------------------
</TABLE>
Fees Deducted from the Subaccounts
Mortality and Expense Risk Charge
Amount. 1.25% annually of your account value invested in the subaccounts.
When/How. This fee is deducted daily from the subaccounts. We do not deduct this
from any fixed interest option.
Purpose. The fee compensates us for the mortality and expense risks we assume
under the contracts.
> The mortality risks are those risks associated with our promise to make
lifetime payments based on annuity rates specified in the contracts and our
funding of the death benefit and other payments we make to owners or
beneficiaries of the accounts
> The expense risk is the risk that the actual expenses we incur under the
contracts will exceed the maximum costs that we can charge
15
<PAGE>
If the amount we deduct for this fee is not enough to cover our mortality costs
and expenses under the contracts, we will bear the loss. We may use any excess
to recover distribution costs relating to the contract and as a source of
profit. We expect to make a profit from this fee.
Administrative Expense Charge
Maximum Amount. 0.25% We currently do not impose this fee. We reserve the right,
however, to charge up to 0.25% on an annual basis from your account value
invested in the funds.
When/How. If imposed, we will deduct this fee daily from your account value held
in the subaccounts corresponding to the funds you select. This fee may be
assessed during the accumulation phase and/or the income phase. If we are
imposing this fee under the contract when you enter the income phase, the fee
will apply to you during the entire income phase.
Purpose. This fee helps defray our administrative expenses that cannot be
covered by the mortality and expense risk charge described above. The fee is not
intended to exceed the average expected cost of administering the contracts. We
do not expect to make a profit from this fee.
Fund Expenses
Amount. Each fund determines its own advisory fee and expenses. For a list of
fund fees see "Fee Table." The fees are described in more detail in each fund
prospectus.
When/How. Fund fees are not deducted from your account. Fund advisory fees and
expenses are reflected in the daily value of the fund shares, which will in turn
affect the daily value of each subaccount.
Purpose. These amounts help to pay the funds' investment advisor and operating
expenses.
Premium and Other Taxes. Currently, there is no premium tax on annuities under
New York regulations. If the state does impose a premium tax, it would be
deducted from the amount applied to an income option. We reserve the right to
deduct a state premium tax at any time from the purchase payment(s) or from the
account value at any time, but no earlier than when we have a tax liability
under state law.
In addition, the Company reserves the right to assess a charge for any federal
taxes due against the separate account. (See "Taxation.")
16
<PAGE>
Your Account Value
- --------------------------------------------------------------------------------
During the accumulation phase, your account value at any given time equals:
> Account dollars directed to the fixed interest options, including interest
earnings to date
> Less any deductions from the fixed interest options (e.g. withdrawals, fees)
> Plus the current dollar value of amounts invested in the subaccounts.
Subaccount Accumulation Units. When a fund is selected as an investment option,
your account dollars invest in "accumulation units" of the Variable Annuity
Account C subaccount corresponding to that fund. The subaccount invests directly
in the fund shares. The value of your interests in a subaccount is expressed as
the number of accumulation units you hold multiplied by an "Accumulation Unit
Value," as described below, for each unit.
Accumulation Unit Value (AUV). The value of each accumulation unit in a
subaccount is called the accumulation unit value or AUV. The value of
accumulation units vary daily in relation to the underlying fund's investment
performance. The value also reflects deductions for fund fees and expenses, the
mortality and expense risk charge, and the administrative charge (if any). We
discuss these deductions in more detail in "Fee Table" and "Fees."
Valuation. We determine the AUV every business day after the close of the New
York Stock Exchange. At that time, we calculate the current AUV by multiplying
the AUV last calculated by the "net investment factor" of the subaccount. The
net investment factor measures the investment performance of the subaccount from
one valuation to the next.
Current AUV = Prior AUV x Net Investment Factor
Net Investment Factor. The net investment factor for a subaccount between two
consecutive valuations, equals the sum of 1.0000 plus the net investment rate.
Net Investment Rate. The net investment rate is computed according to a formula
that is equivalent to the following:
> The net assets of the fund held by the subaccount as of the current valuation,
minus;
> The net assets of the fund held by the subaccount at the preceding valuation,
plus or minus;
> Taxes or provisions for taxes, if any, due to subaccount operations (with any
federal income tax liability offset by foreign tax credits to the extent
allowed);
> Divided by the total value of the subaccount units at the preceding valuation;
> Less a daily deduction for the mortality and expense risk charge and the
administrative expense charge (if any). See "Fees."
The net investment rate may be either positive or negative.
17
<PAGE>
Hypothetical Illustration. As a hypothetical illustration, assume that an
investor contributes $5,000 to his account and directs us to invest $3,000 in
Fund A and $2,000 in Fund B. After receiving the contribution and following the
next close of business of the New York Stock Exchange, the applicable AUV's are
$10 for Subaccount A, and $25 for Subaccount B. The investor's account is
credited with 300 accumulation units of Subaccount A and 80 accumulation units
of Subaccount B.
[Begin flow chart information]
---------------------
$5,000 contribution
---------------------
Step 1 [down arrow]
------------------------------------------
Aetna Life Insurance and Annuity Company
------------------------------------------
Step 2 [down arrow]
------------------------------------------
Variable Annuity Account C
------------------------------------------
Subaccount A Subaccount B Etc.
300 80
accumulation accumulation
units units
------------------------------------------
[down arrow] Step 3 [down arrow]
------------- ------------
Fund A Fund B
------------- ------------
[End flow chart information]
Step 1: An Investor contributes $5000
Step 2:
A. He directs us to invest $3,000 in Fund A. His dollars purchase 300
accumulation units of Subaccount A ($3,000 divided by the current $10 AUV).
B. He directs us to invest $2,000 in Fund B. His dollars purchase 80
accumulation units of Subaccount B ($2,000 divided by the current $25 AUV).
Step 3: The separate account then purchases shares of the applicable funds at
the current market value (NAV).
The fund's subsequent investment performance, expenses and charges, and the
daily charges deducted from the subaccount, will cause the AUV to move up or
down on a daily basis.
Payments to Your Account. If all or a portion of initial payments are directed
to the subaccounts, they will purchase subaccount accumulation units at the AUV
next computed after our acceptance of the applicable application or enrollment
forms. Subsequent payments or transfers directed to the subaccounts that we
receive by the close of business of the New York Stock Exchange (Exchange) will
purchase subaccount accumulation units at the AUV computed after the close of
the Exchange on that day. The value of subaccounts may vary day to day.
18
<PAGE>
[Begin sidebar]
Taxes, Fees and Deductions
Amounts withdrawn may be subject to one or more of the following:
> Early Withdrawal Charge (see "Fees--Early Withdrawal Charge")
> Market Value Adjustment (see Appendix I)
> Tax Penalty (see "Taxation")
> Tax Withholding (see "Taxation")
To determine which may apply, refer to the appropriate sections of this
prospectus, contact your Aetna representative or call the Company at the number
listed in "Contract Overview--
Questions."
[End sidebar]
Withdrawals
- --------------------------------------------------------------------------------
Making a Withdrawal. Subject to the Tax Code withdrawal restrictions described
below, you may withdraw all or a portion of your account value at any time
during the accumulation phase.
Steps for Making A Withdrawal. You must:
> Select the Withdrawal Amount
1) Full Withdrawal: You will receive, reduced by any required withholding tax,
your account value allocated to the subaccounts, the Guaranteed
Accumulation Account (plus or minus any applicable market value adjustment)
and to the Fixed Account, minus any applicable early withdrawal charge.
2) Partial Withdrawal (Percentage or Specified Dollar Amount): You will
receive, reduced by any required withholding tax, the amount you specify,
subject to the value available in your account. However, the amount
actually withdrawn from your account will be adjusted by any applicable
early withdrawal charge, and any positive or negative market value
adjustment for amounts withdrawn from the Guaranteed Accumulation Account.
> Select Investment Options. If this is not specified, we will withdraw dollars
proportionally from each investment option in which you have an account value.
> Properly complete a disbursement form and submit it to the Opportunity Plus
Processing Office.
Calculation of Your Withdrawal. We determine your account value every normal
business day after the close of the New York Stock Exchange. We pay withdrawal
amounts based on your account value either: (1) As of the next valuation after
we receive a request for withdrawal in good order at the Opportunity Plus
Processing Office, or (2) On such later date as specified on the disbursement
form.
Delivery of Payment. Payments for withdrawal requests will be made in accordance
with SEC requirements. Normally, the payment will be sent not later than seven
calendar days following our receipt of the disbursement form in good order.
Withdrawal Restrictions from 403(b) Plans. Section 403(b) (11) of the Tax Code
generally prohibits withdrawal under 403(b) contracts prior to your death,
disability, attainment of age 59-1/2, separation from service or financial
hardship, of the following:
1) Salary reduction contributions made after December 31, 1988 and;
2) Earnings on those contributions and earnings on amounts held before 1989 and
credited after December 31, 1988.
19
<PAGE>
Reinvestment Privilege. The contracts allow one-time use of a reinvestment
privilege. Within 30 days after a full withdrawal, if allowed by law and the
contract, you may elect to reinvest all or a portion of the proceeds. We must
receive reinvested amounts within 60 days of the withdrawal. We will credit the
account for the amount reinvested based on the subaccount values next computed
following our receipt of your request and the amount to be reinvested. We will
credit the amount reinvested proportionally for early withdrawal charges imposed
at the time of withdrawal. We will reinvest in the same investment options and
proportions in place at the time of withdrawal. Special rules apply to
reinvestments of amounts withdrawn from the Guaranteed Accumulation Account (see
Appendix I). Seek competent advice regarding the tax consequences associated
with reinvestment.
20
<PAGE>
[Begin sidebar]
Features of a Systematic Distribution Option (SDO)
An SDO allows the contract holder to elect for you to receive regular payments
from your account, without moving into the income phase. By maintaining your
account in the accumulation phase, certain rights and flexibility are retained
and any accumulation phase fees may apply.
[End sidebar]
Systematic Distribution Options
- --------------------------------------------------------------------------------
Availability of Systematic Distribution Options (SDOs). To exercise one of these
options the account value must meet any minimum dollar amount and age criteria
applicable to that option. To determine what SDO's are available, check with the
contract holder or the Company at the Opportunity Plus Processing Office.
The SDOs currently available under the contract include the following:
> SWO--Systematic Withdrawal Option. SWO is a series of automatic partial
withdrawals from your account based on the payment method selected. It is
designed for those who want a periodic income while retaining investment
flexibility for amounts accumulated under the contract. You may not elect this
option if you have an outstanding contract loan.
> 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 Tax Code requires each year.
Under ECO, we calculate the minimum distribution amount required by law at
the later of age 70-1/2 or retirement and pay you that amount once a year.
> Other Systematic Distribution Options. We may add additional SDOs from time to
time. You may obtain additional information relating to any of the SDOs from
your local representative or from the Company at the Opportunity Plus
Processing Office.
Availability of Systematic Distribution Options. The Company may discontinue the
availability of one or all of the SDOs at any time, and/or change the terms of
future elections.
Terminating a Systematic Distribution Option. Once an SDO is elected, you may
revoke it at any time by submitting a written request to the Opportunity Plus
Processing Office. Any revocation will apply only to the amount not yet paid.
Once an option is revoked for an account, it may not be elected again, nor may
any other SDO be elected unless the Tax Code permits it.
Charges and Taxation. When you elect an SDO, your account value remains in the
accumulation phase and subject to the charges and deductions described in the
"Fees" section. Taking a withdrawal through an SDO may have tax consequences. If
you are concerned about tax implications consult a tax advisor before one of
these options is elected.
21
<PAGE>
[Begin sidebar]
During the Income Phase
This section provides information about the accumulation phase. For death
benefit information applicable to the income phase, see "Income Phase".
[End sidebar]
Death Benefit
- --------------------------------------------------------------------------------
The contract provides a death benefit in the event of your death, which is
payable to the beneficiary you name for your account.
During the Accumulation Phase
Payment Process
1. Following your death, your beneficiary must provide the Company with proof
of death acceptable to us and a payment request in good order
2. The payment request should include selection of a benefit payment option
3. Within seven days after we receive proof of death acceptable to us and
payment request in good order at the Opportunity Plus Processing Office, we
will mail payment, unless otherwise requested
Until a payment option is selected, account dollars will remain invested as at
the time of your death, and no distribution will be made.
If you die during the accumulation phase of your account, the following payment
options are available to your beneficiary, if allowed by the Tax Code:
> Lump sum payment
> Payment in accordance with any of the available income phase payment options
(see "The Income Phase--Payment Options")
> If the beneficiary is your spouse, payment in accordance with an available SDO
(See "Systematic Distribution Options")
The following options are also available; however, the Tax Code limits how long
the death benefit proceeds may be left in these options:
> Leaving your account value invested in the contract; or
> Under some contracts, leaving your account value on deposit in the Company's
general account, and receiving monthly, quarterly, semi-annual or annual
interest payments at the interest rate then being credited on such deposits.
The beneficiary may withdraw the balance on deposit at any time or request to
receive payment in accordance with any of the available income phase payment
options (See "The Income Phase--Payment Options.")
The Value of the Death Benefit. The death benefit will be based on your account
value as calculated on the next valuation following the date on which we receive
proof of death in good order. Interest, if any, will be paid from the date of
death at a rate no less than required by law. For amounts held in the Guaranteed
Accumulation Account (GAA), any positive aggregate market value adjustment (the
sum of all market value adjustments calculated due to a withdrawal) will be
included in your account value. If a negative aggregate market value adjustment
applies, it would be deducted only if the death benefit is withdrawn more than
six months after your death. We describe the market value adjustment in Appendix
I and in the GAA prospectus.
Tax Code Requirements. The Tax Code requires distribution of death benefit
proceeds within a certain period of time. Failure to begin receiving death
benefit payments within those 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 "Taxation" for additional information.)
22
<PAGE>
[Begin sidebar]
We may have used the following terms in prior prospectuses:
Annuity Phase--Income Phase
Annuity Option--Payment Option
Annuity Payment--Income Phase Payment
Annuitization--Initiating Income Phase Payments
[End sidebar]
The Income Phase
- --------------------------------------------------------------------------------
During the income phase you receive payments from your accumulated account
value.
Initiating Payments. At least 30 days prior to the date you want to start
receiving payments, you must notify us in writing of the following:
> Start date
> Payment option (see the payment options table in this section)
> Payment frequency (i.e., monthly, quarterly, semi-annually or annually)
> Choice of fixed or variable payments
> Selection of an assumed net investment rate (only if variable payments are
elected)
The account will continue in the accumulation phase until you properly initiate
payments. Once a payment option is selected, it may not be changed; however,
certain options allow you to withdraw a lump sum.
What Affects Payment Amounts? Some of the factors that may affect payment
amounts include: your age, your account value, the payment option selected,
number of guaranteed payments (if any) selected, and whether variable or fixed
payments are selected.
Fixed Payments. Amounts funding fixed payments will be held in the Company's
general account. Fixed payment amounts do not vary over time.
Variable Payments. Amounts funding your income payments will be held in the
subaccount(s) selected or a combination of subaccounts and the general account.
The contracts may restrict the subaccounts available during the income phase,
and you may not make transfers once you enter the income phase. For variable
payments, an assumed net investment rate must be selected.
Assumed Net Investment Rate. If you select a 5% rate, your first payment will be
higher, but subsequent payments will increase only if the investment performance
of the subaccounts selected, is greater than 5% annually, after deduction of
fees. Payment amounts will decline if the investment performance is less than
5%, after deduction of fees.
If you select a 3-1/2% rate, your first payment will be lower and subsequent
payments will increase more rapidly or decline more slowly depending on the
investment performance of the subaccounts selected. For more information about
selecting an assumed net investment rate, request a copy of the Statement of
Additional Information by calling the Opportunity Plus Processing Office. (See
"Contract Overview--Questions.")
Minimum Payment Amounts. The payment option selected must result in one or both
of the following:
> A first payment of at least $20
> Total yearly payments of at least $100
If your account value is too low to meet these minimum payment amounts, you
must elect a lump sum payment.
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<PAGE>
Charges Deducted. We make a daily deduction for mortality and expense risks from
amounts held in the subaccounts. Therefore, if you choose variable payments and
a nonlifetime payment option, we still make this deduction from the subaccounts
selected, even though we no longer assume any mortality risk for you. We may
also deduct a daily administrative charge from amounts held in the subaccounts.
(See "Fees.")
Death Benefit During the Income Phase. The death benefits that may be available
to a beneficiary are outlined in the payment option table below. If a lump sum
payment is due as a death benefit, we will make payment within seven calendar
days after we receive proof of death acceptable to us and the payment request in
good order at the Opportunity Plus Processing Office.
Taxation. To avoid certain tax penalties, you and any beneficiary must meet the
distribution rules imposed by the Tax Code. (See "Taxation.")
Payment Options
The following tables list the payment options and accompanying death benefits
which may be available under the contracts. Some contracts restrict the options
and the terms available. Check with your contract holder for details. We may
offer additional payment options under the contract from time to time.
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<PAGE>
Terms used in the Tables:
Annuitant: The person(s) on whose life expectancy the income phase payments are
calculated.
Beneficiary: The person designated to receive the death benefit payable under
the contract.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Lifetime Payment Options
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Length of Payments: For as long as the annuitant lives. It is possible that only one payment will be
Life Income made should the annuitant die prior to the second payment's due date.
Death Benefit--None: All payments end upon the annuitant's death.
- --------------------------------------------------------------------------------------------------------------------------------
Length of Payments: For as long as the annuitant lives, with payments guaranteed for a choice of
Life Income-- 5-20 years or as otherwise specified in the contract.
Guaranteed Death Benefit--Payment to the Beneficiary: If the annuitant dies before we have made all the
Payments guaranteed payments, we will pay the beneficiary a lump sum (unless otherwise requested) equal
to the present value of the remaining guaranteed payments.
- --------------------------------------------------------------------------------------------------------------------------------
Length of Payments: For as long as either annuitant lives. It is possible that only one payment will
be made should both annuitants die before the second payment's due date.
Continuing Payments:
Life Income-- (a) This option allows a choice of 100%, 662/3% or 50% of the payment to continue to the
Two Lives surviving annuitant after the first death; or
(b) 100% of the payment to continue to the annuitant on the second annuitant's death, and 50%
of the payment to continue to the second annuitant on the annuitant's death.
Death Benefit--None: Payments end after the deaths of both annuitants.
- --------------------------------------------------------------------------------------------------------------------------------
Length of Payments: For as long as either annuitant lives, with payments guaranteed for a
minimum of 120 months, or as otherwise specified in the contract.
Life Income-- Continuing Payments: 100% of the payment to continue to the surviving annuitant after the first
Two Lives-- death.
Guaranteed Death Benefit--Payment to the Beneficiary: If both annuitants die before the guaranteed
Payments payments have all been paid, we will pay the beneficiary a lump sum (unless otherwise requested)
equal to the present value of the remaining guaranteed payments.
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Nonlifetime Payment Options
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Length of Payments: Payments generally may be fixed or variable and may be made for 3-30 years.
In certain cases a lump sum payment may be requested at any time (see below).
Nonlifetime-- Death Benefit--Payment to the Beneficiary: If the annuitant dies before we make all the
Guaranteed guaranteed payments, we will pay the beneficiary a lump sum (unless otherwise requested) equal
Payments to the present value of the remaining guaranteed payments, and we will not impose any early
withdrawal charge.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Lump Sum Payment: If the Nonlifetime--Guaranteed Payments option is elected with
variable payments, you may request at any time that all or a portion of the
present value of the remaining payments be paid in one sum. A lump sum elected
before three years of payments have been completed will be treated as a
withdrawal during the accumulation phase and we will charge any applicable early
withdrawal charge. If the early withdrawal charge is based on completed purchase
payment periods, each year that passes after income payments begin will be
treated as a completed purchase payment period, even if no additional payments
are made. (See "Fees--Early Withdrawal Charge.") Lump sum payments will be sent
within seven calendar days after we receive the request for payment in good
order at the Opportunity Plus Processing Office.
Calculation of Lump Sum Payments. If a lump sum payment is available to a
beneficiary or to you in the options above, the rate we use to calculate the
present value of the remaining guaranteed payments is the same rate we use to
calculate the income payments (i.e., the actual fixed rate used for fixed
payments, or the 3-1/2% or 5% assumed net investment rate for variable
payments.)
- --------------------------------------------------------------------------------
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<PAGE>
[Begin sidebar]
In This Section
> Introduction
> The Contract
> Withdrawals and other Distributions
o Taxation of Distributions
o 10% Penalty Tax
o Withholding for Federal Income Tax Liability
> Minimum Distribution Requirements
> Assignment or Transfer of Contracts
> Exclusion from Gross Income
> Restrictions on Distributions
> Taxation of Gains Prior to Distribution
> Taxation of the Company
When consulting a tax adviser, be certain that he or she has expertise in the
Tax Code sections applicable to your tax concerns.
[End sidebar]
Taxation
- --------------------------------------------------------------------------------
Introduction
This section discusses our understanding of current federal income tax laws
affecting the contract. You should keep the following in mind when reading it:
> Your tax position (or the tax position of the beneficiary, as applicable)
determines federal taxation of amounts held or paid out under the contract.
> Tax laws change. It is possible that a change in the future could affect
contracts issued in the past.
> This section addresses federal income tax rules and does not discuss federal
estate and gift tax implications, state and local taxes or any other tax
provisions.
> We do not make any guarantee about the tax treatment of the contract or
transaction involving the contract.
- --------------------------------------------------------------------------------
We do not intend this information to be tax advice. For advice about the
effect of federal income taxes or any other taxes on amounts held or paid out
under the contract, consult a tax adviser. For more comprehensive information
contact the Internal Revenue Service.
- --------------------------------------------------------------------------------
The Contract
The Contract is designed for use with Tax Code section 403(b) plans. Contract
holders and participants are responsible for determining that contributions,
distributions and other transactions satisfy applicable laws. Legal counsel and
a tax adviser should be consulted regarding the suitability of the contract. If
the contract is purchased in conjunction with a retirement plan, the plan is not
a part of the contract and we are not bound by the plan's terms or conditions.
Withdrawals and Other Distributions
Certain tax rules apply to distributions from the contract. A distribution is
any amount taken from the contract including withdrawals, income payments,
rollovers, and death benefit proceeds.
We report the taxable portion of all distributions to the IRS.
Taxation of Distributions
All distributions from 403(b) plans are taxed as received unless:
> The distribution is rolled over to another plan of the same type or to a
traditional individual retirement annuity/account (IRA) in accordance with the
Tax Code; or
> You made after-tax contributions to the plan. In this case, depending on the
type of distribution, a portion of the amount may be excluded from gross
income according to the rules detailed in the Tax Code.
In general, payments received by your beneficiaries after your death are taxed
in the same manner as if you had received those payments.
26
<PAGE>
10% Penalty Tax
The Tax Code may impose a 10% penalty tax on the taxable portion of a
distribution from a 403(b) plan, unless one or more of the following have
occurred:
(a) You have attained age 59-1/2;
(b) You have become totally and permanently disabled,
(c) You have died,
(d) You have separated from service with the plan sponsor at or after age 55,
(e) The distribution is rolled over into another plan of the same type or to an
IRA in accordance with the Tax Code, or
(f) The distribution is made in substantially equal periodic payments (at least
annually) over your life or life expectancy or the joint lives or joint
life expectancies of you and your beneficiary. Also, you must have
separated from service with the plan sponsor; or
(g) The distribution is equal to unreimbursed medical expenses that qualify for
deduction as specified in the Tax Code.
Withholding for Federal Income Tax Liability
Any distributions under the contract are generally subject to withholding.
Federal income tax liability rates vary according to the type of distribution
and the recipient's tax status.
Generally, distributions from 403(b) plans are subject to a mandatory 20%
federal income tax withholding. However, you or a beneficiary may elect not to
have tax withheld from certain distributions. If you or your beneficiary is a
non-resident alien, then any withholding is governed by Tax Code section 1441
based on the individual's citizenship, the country of domicile and treaty
status.
Minimum Distribution Requirements
To avoid certain tax penalties, you and any beneficiary must meet the minimum
distribution requirements imposed by the Tax Code. These rules may dictate one
or more of the following:
> Start date for distributions
> The time period in which all amounts in your account(s) must be distributed
> Distribution amounts
Start Date. Generally, you must begin receiving distributions by April 1 of the
calendar year following the calendar year in which you attain age 701/2 or
retire, whichever occurs later, unless you had amounts under the contract as of
December 31, 1986. In this case, distribution of these amounts generally must
begin by the end of the calendar year in which you attain age 75 or retire, if
later. However, if you take any distributions in excess of the minimum required
amount, then special rules require that some or all of the December 31, 1986
balance be distributed earlier.
Time Period. We must pay out distributions from the contract over one of the
following time periods:
> Over your life or the joint lives of you and your beneficiary, or
> Over a period not greater than your life expectancy or the joint life
expectancies of you and your beneficiary.
27
<PAGE>
50% Excise Tax. If you fail to receive the minimum required distribution for any
tax year, a 50% excise tax is imposed on the required amount that was not
distributed.
Minimum Distribution of Death Benefit Proceeds. Different distribution
requirements apply if your death occurs:
> After you begin receiving minimum distributions under the contract, or
> Before you begin receiving such distributions.
If your death occurs after you begin receiving minimum distributions under the
contract, distributions must be made at least as rapidly as under the method in
effect at the time of your death. Tax Code section 401(a)(9) provides specific
rules for calculating the minimum required distributions at your death. The
rules differ, dependent upon:
> Whether your minimum required distribution was calculated each year based on
your single life expectancy or the joint life expectancies of you and your
beneficiary, and
> Whether life expectancy was recalculated.
The rules are complex and any beneficiary should consult with a tax adviser
before electing the method of calculation to satisfy the minimum distribution
requirements.
If your death occurs before you begin receiving minimum distributions under the
contract, your entire balance must be distributed by December 31 of the calendar
year containing the fifth anniversary of the date of your death. For example, if
you die on September 1, 1999, your entire balance must be distributed to the
beneficiary by December 31, 2004. However, if the distribution begins by
December 31 of the calendar year following the calendar year of your death, then
payments may be made in either of the following timeframes:
> Over the life of the beneficiary, or
> Over a period not extending beyond the life expectancy of the beneficiary.
Start Dates for Spousal Beneficiaries. If the beneficiary is your spouse, the
distribution must begin on or before the later of the following:
> December 31 of the calendar year following the calendar year of your death.
> December 31 of the calendar year in which you would have attained age 70-1/2.
Assignment or Transfer of Contracts
Adverse tax consequences to the plan and/or to you may result if your beneficial
interest in the contract is assigned or transferred to any person except to an
alternate payee under a qualified domestic relations order in accordance with
Tax Code section 414(p) or to the Company as collateral for a loan.
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<PAGE>
Exclusions from Gross Income
Under Tax Code section 403(b), contributions made by public school systems or
nonprofit healthcare organizations and other Tax Code section 501(c)(3) tax
exempt organizations to purchase annuity contracts for their employees are
generally excludable from the gross income of the employee.
In order to be excludable from gross income, total annual contributions made by
you and your employer to a 403(b) plan cannot exceed the lesser of the following
limits set by the Tax Code:
> The first limit, under Tax Code section 415, is generally the lesser of 25% of
your compensation or $30,000. Compensation means your compensation from the
employer sponsoring the plan and, for years beginning after December 31, 1997,
includes any elective deferrals under Tax Code section 402(g) and any amounts
not includible in gross income under Tax Code sections 125 or 457.
> The second limit, which is the exclusion allowance under Tax Code section
403(b), is usually calculated according to a formula that takes into account
your length of employment, any pretax contributions you and your employer have
already made under the plan, and any pretax contributions to certain other
retirement plans.
These two limits apply to your contributions as well as to any contributions
made by your employer on your behalf.
> An additional limit specifically limits your salary reduction contributions to
generally no more than $10,000 annually (subject to indexing). Your own limit
may be higher or lower, depending on certain conditions.
Payments to your account(s) will be excluded from your gross income only if the
plan meets certain nondiscrimination requirements.
Restrictions on Distributions
Tax Code section 403(b)(11) restricts the distribution under 403(b) contracts
of:
(1) salary reduction contributions made after December 31, 1988;
(2) earnings on those contributions; and
(3) earnings during such period on amounts held as of December 31, 1988.
Distribution of those amounts may only occur upon your death, attainment of age
59-1/2, separation from service, disability, or financial hardship. Income
attributable to salary reduction contributions and credited on or after January
1, 1989 may not be distributed in the case of hardship.
Taxation of Gains Prior to Distribution
Generally no amounts accumulated under the 403(b) contract will be taxable prior
to the time of actual distribution.
However, the IRS has stated in published rulings that a variable contract owner,
including participants under Tax Code section 403(b) plans, will be considered
the owner of separate account assets if the owner possesses incidents of
investment control over the assets. In these circumstances, income and gains
from the separate account assets would be currently includible in the variable
contract owner's gross income.
29
<PAGE>
The Treasury announced that it will issue guidance regarding the extent to which
owners could direct their investments among subaccounts without being treated as
owners of the underlying assets of the separate account. It is possible that the
Treasury's position, when announced, may adversely affect the tax treatment of
existing contracts. The Company therefore reserves the right to modify the
contract as necessary to attempt to prevent the owner from being considered the
federal tax owner of a pro rata share of the assets of the separate account.
Taxation of the Company
We are taxed as a life insurance company under the Tax Code. Variable Annuity
Separate Account C is not a separate entity from us. Therefore, it is not taxed
separately as a "regulated investment company", but is taxed as part of the
Company.
We automatically apply investment income and capital gains attributable to the
separate account to increase reserves under the contracts. Because of this,
under existing federal tax law we believe that any such income and gains will
not be taxed to the extent that such income and gains are applied to increase
reserves under the contracts. In addition, any foreign tax credits attributable
to the separate account will be first used to reduce any income taxes imposed on
the separate account before being used by the Company.
In summary, we do not expect that we will incur any federal income tax liability
attributable to the separate account and we do not intend to make any provision
for such taxes. However, changes in federal tax laws and/or their interpretation
may result in our being taxed on income or gains attributable to the separate
account. In this case, we may impose a charge against the separate account (with
respect to some or all of the contracts) to set aside provisions to pay such
taxes. We may deduct this amount from the separate account, including from your
account value invested in the subaccounts.
Other Topics
- --------------------------------------------------------------------------------
The Company
Aetna Life Insurance and Annuity Company (the Company, we) issues the contracts
described in this prospectus and is responsible for providing each contract's
insurance and annuity benefits.
We are a stock life insurance company organized under the insurance laws of the
State of Connecticut in 1976 and an indirect wholly owned subsidiary of Aetna
Inc. Through a merger, our operations include the business of Aetna Variable
Annuity Life Insurance Company (formerly known as Participating Annuity Life
Insurance Company, an Arkansas life insurance company organized in 1954).
We are engaged in the business of issuing life insurance and annuities. Our
principal executive offices are located at:
151 Farmington Avenue
Hartford Connecticut 06156
30
<PAGE>
Variable Annuity Account C
We established Variable Annuity Account C (the separate account) in 1976 as a
segregated asset account to fund our variable annuity contracts. The separate
account is registered as a unit investment trust under the Investment Company
Act of 1940 (the "40 Act"). It also meets the definition of "separate account"
under the federal securities laws.
The separate account is divided into "subaccounts." These subaccounts invest
directly in shares of a pre-assigned fund.
Although we hold title to the assets of the separate account, such assets are
not chargeable with the liabilities of any other business that we conduct.
Income, gains or losses of the separate account are credited to or charged
against the assets of the separate account without regard to other income, gains
or losses of the Company. All obligations arising under the contracts are
obligations of the Company.
Performance Reporting
We may advertise different types of historical performance for the subaccounts
including:
> standardized average annual total returns
> non-standardized average annual total returns
We may also advertise certain ratings, rankings or other information related to
the Company, the subaccounts or the funds. For further details regarding
performance reporting and advertising request a Statement of Additional
Information at the number listed in "Contract Overview--Questions."
Standardized Average Annual Total Returns. We calculate standardized average
annual total returns according to a formula prescribed by the SEC. This shows
the percentage return applicable to $1,000 invested in the subaccount over the
most recent one, five and 10-year periods. If the investment option was not
available for the full period, we give a history from the date money was first
received in that option under the separate account. We include all recurring
charges during each period (e.g., mortality and expense risk charges,
administrative expense charges (if any) and any applicable early withdrawal
charges).
Non-Standardized Average Annual Total Returns. We calculate non-standardized
average annual total returns in a similar manner as that stated above, except we
do not include the deduction of any applicable early withdrawal charge. If we
reflected these charges in the calculation, they would decrease the level of
performance reflected by the calculation. Non-standardized returns may also
include performance from the Fund's inception date, if that date is earlier than
the one we use for standardized returns.
Voting Rights
Each of the subaccounts holds shares in a fund and each is entitled to vote at
regular and special meetings of that fund. Under our current view of applicable
law, we will vote the shares for each subaccount as instructed by persons having
a voting interest in the separate account. Under the contracts described in this
prospectus, you have a fully vested interest in the value of your account.
Therefore, under the plan you generally have the right to instruct the contract
holder how to direct us to vote shares attributable to your
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<PAGE>
account. Currently, for group contracts used with section 403(b) plans, we
obtain participant voting instructions directly from participants, subject to
receipt of authorization from the contract holder to accept such instructions.
We will vote shares for which instructions have not been received in the same
proportion as those for which we received instructions. Each person who has a
voting interest in the separate account will receive periodic reports relating
to the funds 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 a written communication at least 14 days before the meeting.
The number of votes (including fractional votes) any person is entitled to
direct will be determined as of the record date set by any fund in which that
person invests through the subaccounts.
> During the accumulation phase the number of votes is equal to the portion of
the account value invested in the fund, divided by the net asset value of one
share of that fund.
> During the income phase, the number of votes is equal to the portion of
reserves set aside for the contract's share of the fund, divided by the net
asset value of one share of that fund.
Contract 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 SEC and
is a member of the National Association of Securities Dealers, Inc.
As principal underwriter, the Company will enter into arrangements with one or
more registered broker-dealers, including at least one affiliate of the Company,
to offer and sell the contracts described in this prospectus. We call these
entities "distributors."
We and one or more of our affiliates may also sell the contracts directly. All
individuals offering and selling the contracts must be registered
representatives of a broker-dealer and must be licensed as insurance agents to
sell variable annuity contracts.
Commission Payments. We may pay commissions to persons who offer and sell the
contracts. The maximum percentage amount we ever pay with respect to a given
purchase payment is the first-year percentage which ranges from 1% to 4% of the
first year of payments to an account. We may also pay renewal commissions on
payments made after the first year and asset-based service fees. The average of
all commissions and asset-based service fees paid is estimated to equal
approximately 2.5% of the total payments made over the life of an average
contract. Some sales personnel may receive various types of non-cash
compensation as special sales incentives, including trips and educational and/or
business seminars. However, any such compensation will be paid in accordance
with NASD rules.
We may reimburse the distributor for certain expenses. The name of the
distributor and the registered representative responsible for your account are
stated in your enrollment materials. Commissions and sales related expenses are
paid by us and are not deducted from payments to your account.
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Changes in Beneficiary Designations
The designated Beneficiary may be changed at any time. Such change will not
become effective until written notice of the change is received by the Company.
Opportunity Plus Processing Office
We established the Opportunity Plus Processing Office to provide administrative
support to you and other participants of the Opportunity Plus Program. This
office handles enrollment, billing, transfers, redemptions and inquiries. Send
forms and correspondence to:
Aetna Life Insurance and Annuity Company
Opportunity Plus Processing Office
P.O. Box 12894
Albany, New York 12212-2894
Telephone Number: 1-800-677-4636
Agreement with the Company
NYSUT Benefit Trust is a non-profit trust organized and existing under the laws
of the State of New York. This Trust operates for the benefit of its members and
agency fee payers of New York State United Teachers.
The Company (our, we) and NYSUT Benefit Trust agree to the following:
> Sponsorship of the Opportunity Plus program by NYSUT Benefit Trust
> Our provision, to all members and agency fee payers of educational programs
focused on financial planning for retirement
> Our employment of trained personnel to conduct these programs exclusively for
members
Additionally:
> We reimburse NYSUT Benefit Trust for direct out-of-pocket expenses up to a
maximum of $40,000 per year incurred in the promotion of the Opportunity Plus
program
> We will pay NYSUT Benefit Trust $46,000 per month through 1999. It utilizes
these amounts to enhance benefits to the membership
> We compensate United University Professions $48,000 per year for the use of
on-site campus facilities, endorsement of the Opportunity Plus program and for
the use of United University Professions payroll slots
Contract Modification
We may change the contract as required by federal or state law. In addition, we
may, upon 30 days' written notice to the contract holder, make other changes to
group contracts that would apply only to individuals who become participants
under that Contract after the effective date of such changes. If the group
contract holder does not agree to a change, we reserve the right to refuse to
establish new accounts under the contract. Certain changes will require the
approval of appropriate state or federal regulatory authorities.
33
<PAGE>
Legal Matters and Proceedings
We are aware of no material legal proceedings pending which involve the separate
account or the Company as 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.
Payment Delay or Suspension
We reserve the right to suspend or postpone the date of any payment of benefits
or values under the following circumstances: (a) on any valuation date when the
New York Stock Exchange is closed (except customary weekend and holidays) when
trading on the Exchange is restricted; b) when an emergency exists as determined
by the SEC so that disposal of the securities held in the subaccounts is not
reasonably practicable or it is not reasonably practicable fairly to determine
the value of the subaccount's assets; (c) during any other periods 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.
Year 2000 Readiness
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
mission-critical information technology (IT) systems and embedded systems Year
2000 ready. The plan for IT systems covers five stages including (i) assessment,
(ii) remediation, (iii) testing, (iv) implementation and (v) Year 2000 approval.
At year end 1997, Aetna, including the Company, had substantially completed the
assessment stage. The remediation of mission- critical IT systems was completed
year end 1998. Testing of all mission-critical IT systems is underway with Year
2000 approval 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, has initiated 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. Aetna
and the Company have assessed and are prioritizing responses in an attempt to
mitigate risks with respect to the failure of these parties to be Year 2000
ready. There can be no assurance that failure of third parties to complete
adequate preparations in a timely manner, and any resulting systems
interruptions or other consequences, would not have an adverse effect, directly
or indirectly, on the separate account, including, without limitation, its
operation or the valuation of its assets and units.
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Contents of the Statement of Additional Information
- --------------------------------------------------------------------------------
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
Income Phase Payments
Sales Material and Advertising
Independent Auditors
Financial Statements of the Separate Account
Financial Statements of Aetna Life Insurance and Annuity Company
You may request an SAI by calling the Opportunity Plus Processing Office at the
number listed in "Contract Overview -- Questions."
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Appendix I
Guaranteed Accumulation Account
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The Guaranteed Accumulation Account (GAA) is a fixed interest option that may be
available during the accumulation phase under the contracts. This appendix is
only a summary of certain facts about GAA. Please read the GAA prospectus before
investing in this option.
In General. Amounts that you invest in GAA will earn a guaranteed interest rate
if amounts are left in GAA for the specified period of time. If you withdraw or
transfer those amounts before the specified period of time has elapsed, we may
apply a "market value adjustment," which may be positive or negative.
When you decide to invest money in GAA, you will want to contact your
representative or the Company to learn:
> The interest rate we will apply to the amounts that you invest in GAA. We
change this rate periodically, so be certain you know what rate we guarantee
on the day your account dollars are invested into GAA.
> The period of time your account dollars need to remain in GAA in order to earn
that rate. You are required to leave your account dollars in GAA for a
specified period of time (guaranteed term), in order to earn the guaranteed
interest rate.
Deposit Periods. A deposit period is the time during which we offer a specific
interest rate if you deposit dollars for a certain guaranteed term. For a
particular interest rate and guaranteed term to apply to your account dollars,
you must invest them during the deposit period during which that rate and term
are offered.
Interest Rates. We guarantee different interest rates, depending on when account
dollars are invested in GAA. The interest rate we guarantee is an annual
effective yield; that means that the rate reflects a full year's interest. We
credit interest daily at a rate that will provide the guaranteed annual
effective yield over one year. The guaranteed interest rate will never be less
than the rate stated in the contract.
Fees and Other Deductions. If all or a portion of your account value in GAA is
withdrawn, you may incur the following:
> Market Value Adjustment (MVA)--as described in this appendix and in the GAA
prospectus
> Tax Penalties and/or Tax withholding--see "Taxation"
> Early Withdrawal Charge--see "Fees"
We do not make deductions from amounts in GAA to cover mortality and expense
risks. Rather, we consider these risks when determining the credited rate.
Market Value Adjustment (MVA).
If you withdraw or transfer your account value from GAA before the guaranteed
term is completed, an MVA may apply. The MVA reflects the change in the value of
the investment due to changes in interest rates since the date of deposit. The
MVA may be positive or negative.
> If interest rates at the time of withdrawal have increased since the date of
deposit, the value of the investment decreases and the MVA will be negative.
This could result in your receiving less than the amount you paid into GAA.
> If interest rates at the time of withdrawal have decreased since the date of
deposit, the value of the investment increases and the MVA will be positive.
Guaranteed Terms. The guaranteed term is the period of time account dollars must
be left in GAA in order to earn the guaranteed interest rate specified for that
guaranteed term. We offer different guaranteed terms at different times. Check
with your representative or the Company to learn the details about the
guaranteed term(s) currently being offered.
36
<PAGE>
In general we offer the following guaranteed terms:
> Short-term--three years or fewer
> Long-term--ten years or less, but greater than three years
At the end of a guaranteed term, you may:
> Transfer dollars to a new guaranteed term
> Transfer dollars to other available investment options
> Withdraw dollars
Deductions may apply to withdrawals. See "Fees and Other Deductions" in this
section.
Transfer of Account Dollars. Generally, account dollars invested in GAA may be
transferred among guaranteed terms offered through GAA, and/or to other
investment options offered through the contract. However, transfers may not be
made during the deposit period in which your account dollars are invested in GAA
or for 90 days after the close of that deposit period. We will apply an MVA to
transfers made before the end of a guaranteed term.
Income Phase. GAA can not be used as an investment option during the income
phase. However, you may notify us at least 30 days in advance to elect a
variable payment option and to transfer your GAA account dollars to any of the
subaccounts available during the income phase.
Borrowing Against Amounts held in GAA. You cannot take a loan from your account
value in GAA. However, we include your account value in GAA when determining the
amount of your account value we will distribute as a loan.
Reinvesting Amounts Withdrawn from GAA. If amounts are withdrawn from GAA and
then reinvested in GAA, we will apply the reinvested amount to the current
deposit period. This means that the guaranteed annual interest rate, and
guaranteed terms available on the date of reinvestment, will apply. Amounts will
be reinvested proportionately in the same way as they were allocated before
withdrawal.
Your account value will not be credited for any negative MVA that was deducted
at the time of withdrawal.
37
<PAGE>
Appendix II
Fixed Account
- --------------------------------------------------------------------------------
The Fixed Account is an investment option available during the accumulation
phase under the contracts. Amounts allocated to the Fixed Account are held in
the Company's general account which supports insurance and annuity obligations.
The Fixed Account is only available under installment purchase payment
contracts.
- --------------------------------------------------------------------------------
Additional information about this option may be found in the contract.
- --------------------------------------------------------------------------------
General Disclosure. Interests in the Fixed Account have not been registered with
the SEC in reliance on exemptions under the Securities Act of 1933, as amended.
Disclosure in this prospectus about the Fixed Account may be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of the statements. Disclosure in this Appendix
regarding the Fixed Account has not been reviewed by the SEC.
Interest Rates. The Fixed Account guarantees that amounts allocated to this
option will earn the minimum interest rate specified in the contract. We may
credit a higher interest rate from time to time, but the rate we credit will
never fall below the guaranteed minimum specified in the contract. Amounts
applied to the Fixed Account will earn the interest rate in effect at the time
money is applied. Amounts in the Fixed Account will reflect a compound interest
rate as credited by us. The rate we quote is an annual effective yield.
Our determination of interest rates reflects the investment income earned on
invested assets and the amortization of any capital gains and/or losses realized
on the sale of invested assets. Under this option, we assume the risk of
investment gain or loss by guaranteeing the amounts you allocate to this option
and promising a minimum interest rate and income phase payment.
Charges. We do not make deductions from amounts in the Fixed Account to cover
mortality and expense risks. We consider these risks when determining the
credited rate. If you make a withdrawal from amounts in the Fixed Account, an
early withdrawal charge may apply. (See "Fees--Early Withdrawal Charge.")
Transfers. During the accumulation phase, you may transfer account dollars from
the Fixed Account to any other available investment option. There is no limit on
the number of transfers that you can make out of the Fixed Account in a calendar
year. However, we only allow you to transfer amounts which equal your account
value in the Fixed Account multiplied by the current maximum percentage of the
transfer allowed (the "window") minus any previous transfers you made from this
option during the calendar year. We will waive the transfer limit when your
account value in the Fixed Account is $1,000 or less.
Income Phase. By notifying the Opportunity Plus Processing at least 30 days
before income payments begin, you may elect to have amounts transferred to one
or more of the subaccounts available during the income phase to provide variable
payments.
Contract Loans. Contract loans may be made from account values held in Fixed
Account.
38
<PAGE>
Appendix III
Fund Descriptions
- --------------------------------------------------------------------------------
The contract holder may designate some or all of the mutual funds described
below as variable funding options under a contract.
Availability of funds may vary. See "Investment Options" for availability and
other information.
The investment results of the mutual funds (funds) are likely to differ
significantly and there is no assurance that any of the funds will achieve their
respective investment objectives. Shares of the funds will rise and fall in
value and you could lose money by investing in the funds. Shares of the funds
are not bank deposits and are not guaranteed, endorsed or insured by any
financial institution, the Federal Deposit Insurance Corporation or any other
government agency. Except as noted, all funds are diversified, as defined under
the Investment Company Act of 1940.
> Aetna Balanced VP, Inc. seeks to maximize investment return, consistent with
reasonable safety of principal by investing in a diversified portfolio of one
or more of the following asset classes: stocks, bonds, and cash equivalents,
based on the investment adviser's judgment of which of those sectors or mix
thereof offers the best investment prospects.(1)
> 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. It is anticipated that
capital appreciation and investment income will both be major factors in
achieving total return.(1)
> 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. It is anticipated that capital
appreciation and investment income will both be major factors in achieving
total return.(1)
> 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)
> Aetna Generation Portfolios, Inc.--Aetna Ascent VP seeks to provide capital
appreciation. The Portfolio is designed for investors who generally have an
investment horizon exceeding 15 years and who have a high level of risk
tolerance.(1)
> Aetna Generation Portfolios, Inc.--Aetna Crossroads VP seeks to provide total
return (i.e., income and capital appreciation, both realized and unrealized).
The Portfolio is designed for investors who generally have an investment
horizon exceeding 10 years and who have a moderate level of risk tolerance.(1)
> Aetna Generation Portfolios, Inc.--Aetna Legacy VP seeks to provide total
return consistent with preservation of capital. The Portfolio is designed for
investors who generally have an investment horizon exceeding five years and
who have a low level of risk tolerance.(1)
> Aetna Variable Portfolios, Inc.--Aetna Index Plus Bond VP seeks maximum total
return, consistent with preservation of capital, primarily through investment
in a diversified portfolio of fixed-income securities, which will be chosen to
substantially replicate the characteristics of the Lehman Brothers Aggregate
Bond Index (LBAB), an unmanaged index comprised of approximately 6,900
securities.(1)
> Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Cap VP seeks to
outperform the total return performance of the Standard & Poor's 500 Composite
Index (S&P 500), while maintaining a market level of risk.(1)
> Aetna Variable Portfolios, Inc.--Aetna Index Plus Mid Cap VP seeks to
outperform the total return performance of the Standard & Poor's MidCap 400
Index (S&P 400), while maintaining a market level of risk.(1)
> Aetna Variable Portfolios, Inc.--Aetna Index Plus Small Cap VP seeks to
outperform the total return performance of the Standard & Poor's SmallCap 600
Index (S&P 600), while maintaining a market level of risk.(1)
> Aetna Variable Portfolios, Inc.--Aetna Value Opportunity VP seeks growth of
capital primarily through investment in a diversified portfolio of common
stocks and securities convertible into common stocks.(1)(a)
39
<PAGE>
> Calvert Social Balanced Portfolio is a nondiversified portfolio that seeks to
achieve a competitive total return through an actively managed, nondiversified
portfolio of stocks, bonds, and money market instruments which offer income
and capital growth opportunity and which satisfy the investment and social
criteria established for the Portfolio.(2)
> Fidelity Variable Insurance Products Fund--Equity-Income Portfolio seeks
reasonable income. The fund will also consider the potential for capital
appreciation. The fund seeks a yield which exceeds the composite yield on the
securities comprising the S&P 500.(3)
> Fidelity Variable Insurance Products Fund--High Income Portfolio seeks a high
level of current income while also considering growth of capital.(3)
> Fidelity Variable Insurance Products Fund II--Asset Manager Portfolio seeks
high total return with reduced risk over the long term by allocating its
assets among stocks, bonds and short-term instruments.(3)
> Fidelity Variable Insurance Products Fund II--Contrafund Portfolio seeks long
term capital appreciation by investing primarily in common stocks of companies
whose value the investment adviser believes is not fully recognized by the
public.(3)
> Fidelity Variable Insurance Products Fund II--Index 500 Portfolio seeks
investment results that correspond to the total return of common stocks
publicly traded in the United States, as represented by the S&P 500.(3a)
> Janus Aspen Series--Aggressive Growth Portfolio is a nondiversified portfolio
that seeks long-term growth of capital. The Portfolio pursues its investment
objective by investing primarily in common stocks selected for their growth
potential, and normally invests at least 50% of its equity assets in
medium-sized companies. Medium-sized companies are those whose market
capitalizations at the time of investment fall within the range of companies
in the S&P MidCap 400 Index. Market capitalization is a commonly used measure
of the size and value of a company. The market capitalizations within the
Index will vary, but as of December 31, 1998, they ranged from approximately
$142 million to $73 billion.(4)
> 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 selected for
their growth potential. Although the Portfolio can invest in companies of any
size, it generally invests in larger, more established issuers.(4)
> Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital. The Portfolio
pursues its investment objective by investing primarily in common stocks of
companies of any size throughout the world. The Portfolio normally invests in
issuers from at least five different countries, including the United States.
The Portfolio may at times invest in fewer than five countries or even a
single country.(4)
> Lexington Emerging Markets Fund, Inc. seeks long-term growth of capital
primarily through investment in equity securities of companies domiciled in,
or doing business in emerging countries and emerging markets. Investments in
emerging markets involve risks not present in domestic markets. See the Fund's
prospectus for information on risks inherent in this investment.(5)
> Lexington Natural Resources Trust is a nondiversified portfolio that seeks
long-term growth of capital through investment primarily in common stocks of
companies which own or develop natural resources and other basic commodities
or supply goods and services to such companies.
Transfers or deposits are not allowed into the subaccount investing in
this fund, except from accounts established under the contract before May
1, 1998. As soon as all those who have current allocations to the subaccount
under the will close the subaccount to all investments (except loan
repayments that we automatically deposit into the subaccount according to
our loan repayment procedures).(5)(a)
> MFS Total Return Series primarily seeks to provide above average income
(compared to a portfolio invested entirely in equity securities) consistent
with the prudent employment of capital. Its secondary objective is to take
advantage of opportunities for growth of capital and income. The series is a
"balanced fund." Under normal market conditions, the series invests (i) at
least 40%, but not more than 75%, of its net assets in equity securities; and
(ii) at least 25% of its net assets in non-convertible fixed income
securities.(6)
40
<PAGE>
> Oppenheimer Global Securities Fund/VA 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.(7)
> Oppenheimer Strategic Bond Fund/VA 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.(7)
> Portfolio Partners, Inc.--MFS Emerging Equities Portfolio seeks to provide
long-term growth of capital.(8)(a)
> Portfolio Partners, Inc.--MFS Research Growth Portfolio seeks long-term growth
of capital and future income.(8)(a)
> Portfolio Partners, Inc.--MFS Value Equity Portfolio seeks capital
appreciation.(8)(a)
> Portfolio Partners, Inc.--Scudder International Growth Portfolio seeks
long-term growth of capital.(8)(b)
> Portfolio Partners, Inc.--T. Rowe Price Growth Equity Portfolio seeks
long-term capital growth and, secondarily, increasing dividend income.(8)(c)
Investment Advisers for each of the Funds:
(1) Aeltus Investment Management, Inc. (adviser)
(a) Bradley, Foster & Sargent, Inc. (subadviser)
(2) Calvert Asset Management Company, Inc.
(3) Fidelity Management & Research Company (adviser)
(a) Bankers Trust Company (subadviser)
(4) Janus Capital Corporation
(5) Lexington Management Corporation (adviser)
(a) Market Systems Research Advisors, Inc. (subadviser)
(6) Massachusetts Financial Services Company ("MFS")
(7) OppenheimerFunds, Inc.
(8) Aetna Life Insurance and Annuity Company (adviser);
(a) Massachusetts Financial Services Company (subadviser)
(b) Scudder Kemper Investments, Inc. (subadviser)
(c) T. Rowe Price Associates, Inc. (subadviser)
41
<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, 1998 (as applicable), is derived from the
financial statements of the separate account, which have been audited by KPMG
LLP, independent auditors. The financial statements and the independent
auditors' report thereon for the year ended December 31, 1998 are included in
the Statement of Additional Information.
<TABLE>
<CAPTION>
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
AETNA ASCENT VP
Value at beginning of
period $15.422 $13.291(1)
Value at end of period $15.886 $15.422
Number of accumulation
units outstanding at
end of period 21,430 380
AETNA BALANCED
VP, INC
Value at beginning of
period $24.700 $20.419 $17.954 $14.270
Value at end of period $28.524 $24.700 $20.419 $17.954
Number of accumulation
units outstanding at
end of period 2,294,877 2,160,305 2,716,641 9,193,181
AETNA BOND VP
Value at beginning of
period $51.330 $47.992 $46.913 $40.173
Value at end of period $54.819 $51.330 $47.992 $46.913
Number of accumulation
units outstanding at
end of period 994,987 959,336 835,724 2,377,622
AETNA
CROSSROADS VP
Value at beginning of
period $14.456 $12.577(1)
Value at end of period $15.120 $14.456
Number of accumulation
units outstanding at
end of period 31,468 873
AETNA GROWTH
AND INCOME VP
Value at beginning of
period $217.359 $169.448 $137.869 $105.558
Value at end of period $245.765 $217.359 $169.448 $137.869
Number of accumulation
units outstanding at
end of period 1,747,097 1,826,355 2,071,139 6,364,000
AETNA INDEX PLUS
BOND VP
Value at beginning of
period $10.128(3)
Value at end of period $10.578
Number of accumulation
units outstanding at
end of period 134,777
AETNA INDEX PLUS
LARGE CAP VP
Value at beginning of
period $14.444 $14.493(13)
Value at end of period $18.772 $14.444
Number of accumulation
units outstanding at
end of period 1,302,825 17,771
AETNA INDEX PLUS
MID CAP VP
Value at beginning of
period $9.928(3)
Value at end of period $11.338
Number of accumulation
units outstanding at
end of period 35,201
<CAPTION>
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AETNA ASCENT VP
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
AETNA BALANCED
VP, INC
Value at beginning of
period $14.519 $13.379 $12.736 $10.896 $10.437 $10.000(2)
Value at end of period $14.270 $14.519 $13.379 $12.736 $10.896 $10.437
Number of accumulation
units outstanding at
end of period 21,990,186 30,784,750 34,802,433 22,898,099 17,078,985 9,535,986
AETNA BOND VP
Value at beginning of
period $42.283 $39.038 $36.789 $31.192 $28.943 $25.574
Value at end of period $40.173 $42.283 $39.038 $36.789 $31.192 $28.943
Number of accumulation
units outstanding at
end of period 5,108,720 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
Number of accumulation
units outstanding at
end of period
AETNA GROWTH
AND INCOME VP
Value at beginning of
period $107.925 $102.383 $97.165 $77.845 $76.311 $59.871
Value at end of period $105.558 $107.925 $102.383 $97.165 $77.845 $76.311
Number of accumulation
units outstanding at
end of period 13,966,072 21,148,863 24,201,565 20,948,226 18,362,906 17,142,820
AETNA INDEX PLUS
BOND VP
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
AETNA INDEX PLUS
LARGE CAP VP
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
AETNA INDEX PLUS
MID CAP VP
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
</TABLE>
42
<PAGE>
Condensed Financial Information (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
AETNA INDEX PLUS
SMALL CAP VP
Value at beginning of
period $10.193(3)
Value at end of period $9.157
Number of accumulation
units outstanding at
end of period 81,388
AETNA LEGACY VP
Value at beginning of
period $13.491 $12.296(4)
Value at end of period $14.248 $13.491
Number of accumulation
units outstanding at
end of period 95,526 2,279
AETNA MONEY
MARKET VP
Value at beginning of
period $41.174 $39.528 $37.988 $36.271
Value at end of period $42.883 $41.174 $39.528 $37.988
Number of accumulation
units outstanding at
end of period 564,537 455,502 597,656 1,836,260
AETNA VALUE
OPPORTUNITY VP
Value at beginning of
period $11.472(3)
Value at end of period $12.088
Number of accumulation
units outstanding at
end of period 33,957
CALVERT SOCIAL
BALANCED
PORTFOLIO
Value at beginning of
period $23.675 $19.965 $17.951 $13.990
Value at end of period $27.186 $23.675 $19.965 $17.951
Number of accumulation
units outstanding at
end of period 917,567 929,282 898,279 856,361
FIDELITY VIP EQUITY-
INCOME PORTFOLIO
Value at beginning of
period $16.587 $13.110 $11.617 $10.000(6)
Value at end of period $18.285 $16.587 $13.110 $11.617
Number of accumulation
units outstanding at
end of period 2,533,673 2,139,178 1,454,755 628,582
FIDELITY VIP II ASSET
MANAGER PORTFOLIO
Value at beginning of
period $14.715 $12.349 $10.912 $9.447
Value at end of period $16.719 $14.715 $12.349 $10.912
Number of accumulation
units outstanding at
end of period 1,596,943 1,576,603 1,384,927 1,316,916
FIDELITY VIP II
CONTRAFUND
PORTFOLIO
Value at beginning of
period $17.276 $14.092 $11.763 $10.000(6)
Value at end of period $22.177 $17.276 $14.092 $11.763
Number of accumulation
units outstanding at
end of period 3,333,320 2,706,862 1,522,169 525,476
FIDELITY VIP II
INDEX 500
PORTFOLIO
Value at beginning of
period $18.662 $14.240 $11.740 $10.000(6)
Value at end of period $23.650 $18.662 $14.240 $11.740
Number of accumulation
units outstanding at
end of period 3,947,187 3,093,080 1,490,937 290,547
<CAPTION>
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AETNA INDEX PLUS
SMALL CAP VP
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
AETNA LEGACY VP
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
AETNA MONEY
MARKET VP
Value at beginning of
period $35.282 $34.619 $33.812 $32.138 $30.012 $27.783
Value at end of period $36.271 $35.282 $34.619 $33.812 $32.138 $30.012
Number of accumulation
units outstanding at
end of period 3,679,802 5,086,515 7,534,662 8,430,082 10,220,110 8,286,033
AETNA VALUE
OPPORTUNITY VP
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
CALVERT SOCIAL
BALANCED
PORTFOLIO
Value at beginning of
period $14.640 $13.726 $12.913 $11.233 $10.568 $10.000(5)
Value at end of period $13.990 $14.640 $13.726 $12.913 $11.233 $10.568
Number of accumulation
units outstanding at
end of period 743,464 705,415 503,006 355,851 148,576 20,710
FIDELITY VIP EQUITY-
INCOME PORTFOLIO
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
FIDELITY VIP II ASSET
MANAGER PORTFOLIO
Value at beginning of
period $10.000(7)
Value at end of period $9.447
Number of accumulation
units outstanding at
end of period 1,254,504
FIDELITY VIP II
CONTRAFUND
PORTFOLIO
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
FIDELITY VIP II
INDEX 500
PORTFOLIO
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
</TABLE>
43
<PAGE>
Condensed Financial Information (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
JANUS ASPEN
AGGRESSIVE
GROWTH PORTFOLIO
Value at beginning of
period $18.174 $16.334 $15.323 $12.169
Value at end of period $24.098 $18.174 $16.334 $15.323
Number of accumulation
units outstanding at
end of period 2,142,130 1,939,607 1,893,718 1,280,953
JANUS ASPEN
GROWTH PORTFOLIO
Value at beginning of
period $16.816 $13.872 $11.859 $10.000(9)
Value at end of period $22.529 $16.816 $13.872 $11.859
Number of accumulation
units outstanding at
end of period 1,354,047 1,109,942 663,945 109,717
JANUS ASPEN
WORLDWIDE
GROWTH PORTFOLIO
Value at beginning of
period $18.690 $15.493 $12.158 $10.000(9)
Value at end of period $23.797 $18.690 $15.493 $12.158
Number of accumulation
units outstanding at
end of period 4,687,167 3,873,511 2,090,908 314,653
LEXINGTON EMERGING
MARKETS FUND, INC.
Value at beginning of
period $7.715 $8.832 $8.323 $8.772
Value at end of period $5.470 $7.715 $8.832 $8.323
Number of accumulation
units outstanding at
end of period 745,856 750,330 548,618 371,156
LEXINGTON NATURAL
RESOURCES TRUST
Value at beginning of
period $14.403 $13.611 $10.862 $9.412
Value at end of period $11.433 $14.403 $13.611 $10.862
Number of accumulation
units outstanding at
end of period 534,962 650,486 587,248 530,562
MFS TOTAL RETURN
SERIES
Value at beginning of
period $10.182(3)
Value at end of period $10.531
Number of accumulation
units outstanding at
end of period 36,633
OPPENHEIMER GLOBAL
SECURITIES FUND/VA
Value at beginning of
period $10.077(11)
Value at end of period $10.303
Number of accumulation
units outstanding at
end of period 20,548
OPPENHEIMER STRATEGIC
BOND FUND/VA
Value at beginning of
period $10.055(3)
Value at end of period $9.935
Number of accumulation
units outstanding at
end of period 100,555
<CAPTION>
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
JANUS ASPEN
AGGRESSIVE
GROWTH PORTFOLIO
Value at beginning of
period $10.000(8)
Value at end of period $12.169
Number of accumulation
units outstanding at
end of period 393,553
JANUS ASPEN
GROWTH PORTFOLIO
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
JANUS ASPEN
WORLDWIDE
GROWTH PORTFOLIO
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
LEXINGTON EMERGING
MARKETS FUND, INC.
Value at beginning of
period $10.000(10)
Value at end of period $8.772
Number of accumulation
units outstanding at
end of period 144,750
LEXINGTON NATURAL
RESOURCES TRUST
Value at beginning of
period $10.071 $9.193 $9.018 $9.608 $11.441 $10.000(5)
Value at end of period $9.412 $10.071 $9.193 $9.018 $9.608 $11.441
Number of accumulation
units outstanding at
end of period 533,016 341,771 198,338 144,139 75,052 11,481
MFS TOTAL RETURN
SERIES
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
OPPENHEIMER GLOBAL
SECURITIES FUND/VA
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
OPPENHEIMER STRATEGIC
BOND FUND/VA
Value at beginning of
period
Value at end of period
Number of accumulation
units outstanding at
end of period
</TABLE>
44
<PAGE>
Condensed Financial Information (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO
PARTNERS MFS
EMERGING EQUITIES
PORTFOLIO
Value at beginning of
period $15.046 $15.236(12)
Value at end of period $19,268 $15.046
Number of accumulation
units outstanding at
end of period 3,101,880 2,707,904
PORTFOLIO
PARTNERS MFS
RESEARCH GROWTH
PORTFOLIO
Value at beginning of
period $11.960 $12.195(12)
Value at end of period $14.528 $11.960
Number of accumulation
units outstanding at
end of period 1,379,653 232,418
PORTFOLIO
PARTNERS MFS
VALUE EQUITY
PORTFOLIO
Value at beginning of
period $23.440 $23.106(12)
Value at end of period $29.339 $23.440
Number of accumulation
units outstanding at
end of period 2,244,308 2,018,219
PORTFOLIO PARTNERS
SCUDDER
INTERNATIONAL
GROWTH PORTFOLIO
Value at beginning of
period $17.709 $17.490(12)
Value at end of period $20.829 $17.709
Number of accumulation
units outstanding at
end of period 2,962,631 3,237,710
PORTFOLIO PARTNERS
T ROWE PRICE
GROWTH PORTFOLIO
Value at beginning of
period $16.608 $16.276(12)
Value at end of period $20.929 $16.608
Number of accumulation
units outstanding at
end of period 1,564,888 1,317,058
</TABLE>
- -----------------
(1) Funds were first received in this option during February 1997.
(2) The initial accumulation unit value was established at $10.000 on June 23,
1989, the date on which the fund commenced operations.
(3) Funds were first received in this option during May 1998.
(4) Funds were first received in this option during May 1997.
(5) The initial accumulation unit value was established at $10.000 on May 31,
1989, the date on which the fund became available under the contract.
(6) The initial accumulation unit value was established at $10.000 during May
1995, when the fund became available under the contract.
(7) The initial accumulation unit value was established at $10.000 during March
1994, when funds were first received under this option.
(8) The initial accumulation unit value was established at $10.000 during June
1994, when funds were first received in this option.
(9) The initial accumulation unit value was established at $10.000 during July
1995, when the fund became available under the contract.
(10) Funds were first received in this option during October 1994.
(11) Funds were first received in this option during June 1998.
(12) Funds were first received in this option during November 1997.
(13) Funds were first received in this option during December 1997.
45
<PAGE>
For Master Applications Only
- --------------------------------------------------------------------------------
I hereby acknowledge receipt of an Account C Opportunity Plus group deferred
variable annuity prospectus dated May 3, 1999 as well as all current
prospectuses pertaining to the variable investment options available under the
Contracts.
___ Please send an Account C Statement of Additional Information (Form No.
SAI.75962-99) dated May 3, 1999.
- --------------------------------------------------------------------------------
CONTRACT HOLDER'S SIGNATURE
- --------------------------------------------------------------------------------
DATE
PROS.75962-99
46
