-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TpEQW8NS+vtdTnliurfnVOm8xmFN/yTLjot7JffeDSDo1KPIh8q0K4VFx4UGI6RY Ep+/kC+oDeY/lbwXPnOPhQ== 0000912057-96-006419.txt : 19960416 0000912057-96-006419.hdr.sgml : 19960416 ACCESSION NUMBER: 0000912057-96-006419 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960415 EFFECTIVENESS DATE: 19960415 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VARIABLE ANNUITY ACCT C OF AETNA LIFE INSURANCE & ANNUITY CO CENTRAL INDEX KEY: 0000103007 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-75988 FILM NUMBER: 96546927 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-02513 FILM NUMBER: 96546928 BUSINESS ADDRESS: STREET 1: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 BUSINESS PHONE: 2032734808 MAIL ADDRESS: STREET 1: C/O AETNA LIFE & CASUALTY STREET 2: 151 FARMINGTON AVE CITY: HARTFORD STATE: CT ZIP: 06156 FORMER COMPANY: FORMER CONFORMED NAME: VARIABLE ANNUITY ACCOUNT C OF AETNA VARIABLE ANNUITY LIFE IN DATE OF NAME CHANGE: 19791108 485BPOS 1 485BPOS As filed with the Securities and Exchange Registration No. 33-75988* Commission April 15, 1996 Registration No. 811-2513 - ---------------------------- ------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-4 POST-EFFECTIVE AMENDMENT NO. 4 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND AMENDMENT TO REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Variable Annuity Account C of Aetna Life Insurance and Annuity Company (EXACT NAME OF REGISTRANT) Aetna Life Insurance and Annuity Company (NAME OF DEPOSITOR) 151 Farmington Avenue, RE4C, Hartford, Connecticut 06156 (ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) Depositor's Telephone Number, including Area Code: (860) 273-7834 Susan E. Bryant, Counsel Aetna Life Insurance and Annuity Company 151 Farmington Avenue, RE4C, Hartford, Connecticut 06156 (NAME AND ADDRESS OF AGENT FOR SERVICE) It is proposed that this filing will become effective (CHECK APPROPRIATE SPACE): immediately upon filing pursuant to paragraph (b) of Rule 485 --- X on May 1, 1996 pursuant to paragraph (b) of Rule 485 --- Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has registered an indefinite number of securities under the Securities Act of 1933. Registrant filed a Rule 24f-2 Notice for the fiscal year ended December 31, 1995 on February 29, 1996. *Pursuant to Rule 429(a) under the Securities Act of 1933, Registrant has included a combined prospectus under this Registration Statement which includes all the information which would currently be required in prospectuses relating to the securities covered by the following earlier Registration Statements: 33-75972; 33-76024; and 33-89858. VARIABLE ANNUITY ACCOUNT C CROSS REFERENCE SHEET
FORM N-4 ITEM NO. PART A (PROSPECTUS) LOCATION - -------- ------------------- -------- 1 Cover Page Cover Page 2 Definitions Definitions 3 Synopsis or Highlights Prospectus Summary; Fee Table 4 Condensed Financial Information Condensed Financial Information 5 General Description of Registrant, Depositor, and Portfolio Companies The Company; Variable Annuity Account C; The Funds 6 Deductions and Expenses Charges and Deductions; Distribution 7 General Description of Variable Annuity Contracts Purchase; Miscellaneous 8 Annuity Period Annuity Period 9 Death Benefit Death Benefit During Accumulation Period; Death Benefit Payable During the Annuity Period 10 Purchases and Contract Value Purchase; Contract Valuation 11 Redemptions Right to Cancel; Withdrawals 12 Taxes Tax Status 13 Legal Proceedings Miscellaneous - Legal Matters and Proceedings 14 Table of Contents of the Statement of Additional Information Contents of the Statement of Additional Information
FORM N-4 ITEM NO. PART B (STATEMENT OF ADDITIONAL INFORMATION) LOCATION - -------- -------------------------------------------- -------- 15 Cover Page Cover page 16 Table of Contents Table of Contents 17 General Information and History General Information and History 18 Services General Information and History; Independent Auditors 19 Purchase of Securities Being Offered Offering and Purchase of Contracts 20 Underwriters Offering and Purchase of Contracts 21 Calculation of Performance Data Performance Data; Average Annual Total Return Quotations 22 Annuity Payments Annuity Payments 23 Financial Statements Financial Statements
PART C (OTHER INFORMATION) Information required to be included in Part C is set forth under the appropriate item, so numbered, in Part C to this Registration Statement. PROSPECTUS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Prospectus describes individual deferred variable annuity contracts ("Contracts") issued by Aetna Life Insurance and Annuity Company (the "Company"). The Contracts are intended to qualify as Individual Retirement Annuities established under Section 408 of the Internal Revenue Code of 1986, as amended (the "Code"). (See "Purchase.") The Contracts provide that contributions may be allocated to one or more of the Credited Interest Options or to one or more of the Subaccounts of Variable Annuity Account C, a separate account of the Company. The Subaccounts invest directly in shares of the following Funds: - Aetna Variable Fund - Fidelity VIP Equity-Income - Aetna Income Shares Portfolio - Aetna Variable Encore Fund - Fidelity VIP Growth Portfolio - Aetna Investment Advisers Fund, - Fidelity VIP Overseas Portfolio Inc. - Janus Aspen Aggressive Growth - Aetna Ascent Variable Portfolio Portfolio - Aetna Crossroads Variable Portfolio - Janus Aspen Balanced Portfolio - Aetna Legacy Variable Portfolio - Janus Aspen Growth Portfolio - Alger American Growth Portfolio - Janus Aspen Short-Term Bond - Alger American Small Cap Portfolio Portfolio - Fidelity VIP II Contrafund - Janus Aspen Worldwide Growth Portfolio Portfolio - Scudder International Portfolio Class A Shares - TCI Growth (a Twentieth Century fund) The Credited Interest Options currently available under the Contract are the Guaranteed Interest Account, the Fixed Account and the Guaranteed Accumulation Account (available in New York only). Except as specifically mentioned, this Prospectus describes only investments through the Separate Account. A brief description of each of the Credited Interest Options is contained in Appendices to this Prospectus and additional information concerning the Guaranteed Accumulation Account is contained in a separate prospectus. The availability of the Funds and the Credited Interest Options is subject to applicable regulatory authorization. Not all Funds or Credited Interest Options may be available in all jurisdictions or under all Contracts. (See "Investment Options.") This Prospectus provides investors with the information that they should know about the Separate Account before investing in the Contract. Additional information about the Separate Account is contained in a Statement of Additional Information ("SAI") which is available at no charge. The SAI has been filed with the Securities and Exchange Commission and is incorporated herein by reference. The Table of Contents for the SAI is printed on page 14 of this Prospectus. An SAI may be obtained by indicating the request on the Application, or by calling the number listed under the "Inquiries" section of the Prospectus Summary. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUSES OF THE FUNDS AND THE GUARANTEED ACCUMULATION ACCOUNT. ALL PROSPECTUSES SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION ARE DATED MAY 1, 1996. TABLE OF CONTENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DEFINITIONS.......................................................................... DEFINITIONS - 1 PROSPECTUS SUMMARY................................................................... SUMMARY - 1 FEE TABLE............................................................................ FEE TABLE - 1 CONDENSED FINANCIAL INFORMATION...................................................... AUV HISTORY - 1 THE COMPANY.......................................................................... 1 VARIABLE ANNUITY ACCOUNT C........................................................... 1 INVESTMENT OPTIONS................................................................... 1 The Funds........................................................................ 1 Credited Interest Options........................................................ 3 PURCHASE............................................................................. 4 Contract Availability............................................................ 4 Contract Purchase................................................................ 4 Purchase Payments................................................................ 4 Right to Cancel.................................................................. 4 CHARGES AND DEDUCTIONS............................................................... 4 Daily Deductions from the Separate Account....................................... 4 Maintenance Fee.................................................................. 5 Deferred Sales Charge............................................................ 5 Fund Expenses.................................................................... 6 Premium and Other Taxes.......................................................... 6 CONTRACT VALUATION................................................................... 6 Contract Value................................................................... 6 Accumulation Units............................................................... 7 Net Investment Factor............................................................ 7 TRANSFERS............................................................................ 7 Dollar Cost Averaging Program.................................................... 7 WITHDRAWALS.......................................................................... 8 Reinvestment Privilege........................................................... 8 ADDITIONAL WITHDRAWAL OPTIONS........................................................ 8 DEATH BENEFIT DURING ACCUMULATION PERIOD............................................. 9 ANNUITY PERIOD....................................................................... 9 Annuity Period Elections......................................................... 9 Annuity Options.................................................................. 10 Annuity Payments................................................................. 10 Charges Deducted During the Annuity Period....................................... 11 Death Benefit Payable During the Annuity Period.................................. 11 TAX STATUS........................................................................... 11 Introduction..................................................................... 11 Taxation of the Company.......................................................... 12 Contracts Used with Certain Retirement Plans..................................... 12 Individual Retirement Annuities and Simplified Employee Pension Plans............ 12
MISCELLANEOUS........................................................................ 13 Distribution..................................................................... 13 Delay or Suspension of Payments.................................................. 13 Performance Reporting............................................................ 13 Voting Rights.................................................................... 13 Modification of the Contract..................................................... 14 Legal Matters and Proceedings.................................................... 14 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 14 APPENDIX I--GUARANTEED INTEREST ACCOUNT.............................................. 15 APPENDIX II--FIXED ACCOUNT........................................................... 16 APPENDIX III--GUARANTEED ACCUMULATION ACCOUNT........................................ 18 APPENDIX IV--FEDERAL INCOME TAX SUMMARY FOR IRAS..................................... 19
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. THE COMPANY DOES NOT AUTHORIZE ANY PERSON TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING CONTAINED IN THIS PROSPECTUS EXCEPT AS OTHERWISE CONTAINED HEREIN. DEFINITIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The following terms are defined as they are used in this Prospectus: ACCUMULATION PERIOD: The period during which Purchase Payment(s) credited to the Contract are invested to fund future annuity payments. ACCUMULATION UNIT: A measure of the value of each Subaccount before annuity payments begin. ANNUITANT: The person on whose life or life expectancy the annuity payments are based. ANNUITY: A series of payments for life, a definite period or a combination of the two. ANNUITY DATE: The date on which annuity payments begin. ANNUITY PERIOD: The period during which annuity payments are made. ANNUITY UNIT: A measure of the value of each Subaccount selected during the Annuity Period. BENEFICIARY(IES): The person or persons identified on the application who are to receive any death benefit proceeds payable under the Contract. CODE: Internal Revenue Code of 1986, as amended. COMPANY (WE, US): Aetna Life Insurance and Annuity Company. CONTRACT: The individual deferred, variable annuity contracts offered by this Prospectus. CONTRACT HOLDER (YOU): The person to whom the Contract is issued. CONTRACT VALUE: The dollar value of amounts held under the Contract as of any Valuation Date during the Accumulation Period. CONTRACT YEAR: The period of 12 months measured from the date the first Purchase Payment is applied to the Contract or from any anniversary of such date. CREDITED INTEREST OPTIONS: The fixed interest options available under the Contract. The Credited Interest Options currently consist of the Guaranteed Interest Account, the Fixed Account and the Guaranteed Accumulation Account, each of which is described in an Appendix to this Prospectus. Amounts allocated to the Credited Interest Options are included in the Contract Value. FUND(S): An open-end registered management investment company whose shares are purchased by the Separate Account to fund the benefits provided by the Contract. HOME OFFICE: The Company's principal executive offices located at 151 Farmington Avenue, Hartford, Connecticut 06156. PURCHASE PAYMENT(S): The gross payment(s) made to the Company under a Contract. SEPARATE ACCOUNT: Variable Annuity Account C, a separate account established by the Company for the purpose of funding variable annuity contracts issued by the Company. SUBACCOUNT(S): The portion of the assets of the Separate Account that is allocated to a particular Fund. Each Subaccount invests in the shares of only one corresponding Fund. VALUATION DATE: The date and time at which the value of the Subaccount is calculated. Currently, this calculation occurs at the close of business of the New York Stock Exchange on any normal business day, Monday through Friday, that the New York Stock Exchange is open. - -------------------------------------------------------------------------------- DEFINITIONS - 1 PROSPECTUS SUMMARY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACTS OFFERED The Contracts described in this Prospectus are individual deferred variable annuity contracts issued by Aetna Life Insurance and Annuity Company (the "Company"). There are two types of Contracts currently offered through this Prospectus for new sales: (1) 1994 Contracts that are not connected with an internal transfer (if you are a new customer), and (2) 1994 Internal Rollover Contracts (if you have an existing Contract or retirement account established with the Company or one of our affiliates) (collectively referred to as "1994 Contracts"). In New York, subject to regulatory approval, this Contract is available only to individuals who have retirement accounts established with the Company under the Company's Multiple Asset Portfolio contracts, as a 1994 Internal Rollover Contract. Additionally, this Prospectus also describes 1992 Contracts (Internal Rollover and those that are not connected with an internal transfer) that were discontinued for new sales during 1994 ("1992 Contracts"). The Contracts are intended to qualify as Individual Retirement Annuities under Section 408(b) of the Code. The Contracts will accept annual contributions to an Individual Retirement Annuity or a Simplified Employee Pension Plan (SEP). The Contracts can also accept transfers or rollovers from another Individual Retirement Annuity, an Individual Retirement Account under Section 408(a) of the Code, a tax-deferred annuity under Section 403(b) of the Code or a qualified pension or profit sharing plan under 401(a) of the Code. These Contracts may be purchased by completing the proper application form and submitting it to the Distributor. (See "Contract Purchase.") FREE LOOK PERIOD You may cancel the Contract no later than 10 days after you receive it (or as otherwise allowed by state law) by returning it to the Company with a written notice of cancellation. We will produce a refund not later than seven days after we receive the Contract and the written notice at our Home Office. Cancellations requested after a customer receives the Contract will consist of a refund of the Purchase Payment. (See "Purchase--Right to Cancel.") INVESTMENT OPTIONS The Company has established Variable Annuity Account C, a registered unit investment trust, for the purpose of funding the variable portion of the Contracts. The Separate Account is divided into Subaccounts which invest directly in shares of the Funds described herein, as you designate. The Contract allows investment in any or all of the Subaccounts, as well as in the Credited Interest Options described below. For a complete list of the Funds available under the Contracts, and a description of the investment objectives of each of the Funds and their investment advisers, see "Investment Options--The Funds" in this Prospectus, as well as the prospectuses for each of the Funds. The Contract also provides for investment in Credited Interest Options which allow you to earn fixed rates of interest that may vary periodically in the Company's discretion. The fixed options available under the Contract are the Guaranteed Interest Account, the Fixed Account and the Guaranteed Accumulation Account. (See the Appendices to this Prospectus.) CHARGES AND DEDUCTIONS Certain charges are associated with these Contracts. These charges include daily deductions from the Separate Account (the mortality and expense risk charges and an administrative expense charge), as well as any annual maintenance fee, transfer fees, and premium and other taxes. The Funds also incur certain fees and expenses which are deducted directly from the Funds. A deferred sales charge may apply upon a full or partial withdrawal of the Contract Value. (See the Fee Table and "Charges and Deductions.") - -------------------------------------------------------------------------------- SUMMARY - 1 TRANSFERS Prior to the Annuity Date, and subject to certain limitations, Contract Values may be transferred among the Subaccounts and the Credited Interest Options without charge. Transfers can be requested in writing or by telephone in accordance with the Company's transfer procedures. (See Appendices I, II and III for a full description of the restrictions applicable to transfers from the Credited Interest Options.) (See "Transfers.") WITHDRAWALS All or a part of the Contract Value may be withdrawn prior to the Annuity Date by properly completing a disbursement form and sending it to the Company. Certain charges may be assessed upon withdrawal. The withdrawal may also be subject to income tax and a federal tax penalty. (See "Withdrawals.") The Contract also offers certain Additional Withdrawal Options during the Accumulation Period to persons meeting certain criteria. Additional Withdrawal Options are not available in all states and may not be suitable in every situation. (See "Additional Withdrawal Options.") DEATH BENEFIT A death benefit is payable if you die before the Annuity Date. Death benefit proceeds will be paid to the Beneficiary in an amount equal to the Contract Value. Until the election of a method of payment, the Contract Value will remain invested under the Contract. The Beneficiary may elect to receive the proceeds in a lump sum or under any of the payment options available under the Contract. However, the Code requires that distributions begin within a certain time period. (See "Death Benefit During Accumulation Period.") After Annuity Payments have commenced, a death benefit may be payable to the Beneficiary depending upon the terms of the Contract and the Annuity Option selected. (See "Death Benefit Payable During the Annuity Period.") THE ANNUITY PERIOD On the Annuity Date, you may elect to begin receiving Annuity Payments. Annuity Payments can be made on either a fixed, variable or combination fixed and variable basis. If a variable payout is selected, the payments will vary with the investment performance of the Subaccount(s) selected. The Company reserves the right to limit the number of Subaccounts that may be available during the Annuity Period. (See "Annuity Period.") TAXES Contributions and earnings are not generally taxed until you or your beneficiary(ies) actually receive a distribution from the Contract. A 10% federal tax penalty may be imposed on certain withdrawals. (See "Tax Status.") INQUIRIES Questions, inquiries or requests for additional information can be directed to your agent or local representative, or you may contact the Company as follows: - Write to: Aetna Life Insurance and Annuity Company 151 Farmington Avenue Hartford, Connecticut 06156-1258 Attention: Customer Service - Call Customer Service: 1-800-531-4547 (for Contract Values, automated transfers or changes in allocation call: 1-800-262-3862)
- -------------------------------------------------------------------------------- SUMMARY - 2 FEE TABLE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Fee Table describes the various charges and expenses associated with the Contract during the Accumulation Period. For amounts deducted during the Annuity Period, see "Charges Deducted During the Annuity Period." No sales charge is paid upon purchase of the Contract. Some expenses may vary as explained under "Charges and Deductions." The charges and expenses shown below do not include premium taxes that may be applicable. For more information regarding expenses paid out of the assets of a particular Fund, see the Fund's prospectus. DIRECT CHARGES. These charges are deducted directly from the Contract Value. They include a Deferred Sales Charge, an Annual Maintenance Fee and an Allocation and Transfer Fee, each of which is described below: DEFERRED SALES CHARGE. The deferred sales charge is deducted as a percentage of the amount withdrawn and varies depending on the type of Contract you own and whether the Purchase Payments were transferred from an existing contract issued by us or one of our affiliates. - SCHEDULE A illustrates deferred sales charges for 1994 and 1992 Internal Rollover Contracts for internal transfers from contracts issued by the Company under pension or profit sharing retirement plans or tax-deferred annuity plans. (For 1992 Contracts, this schedule applies only if you have not been subject to a deferred sales charge under the prior contract.) It also applies to all internal transfers from contracts issued by Aetna Life Insurance Company. The deferred sales charge is based on the number of completed Contract Years since the date of initial payment to the new Contract. This Schedule also applies to all sales of the Contract in New York. - SCHEDULE B illustrates deferred sales charges for 1992 Internal Rollover Contracts for internal transfers from contracts issued by the Company where you have been, or still are, subject to a deferred sales charge. The deferred sales charge is based on the number of completed Contract Years since the initial payment to the predecessor Contract. - SCHEDULE C illustrates deferred sales charges for 1994 Internal Rollover Contracts for internal transfers from IRA or SEP Contracts issued by the Company where you have been, or still are, subject to a deferred sales charge. The Contract Holder enters the deferred sales charge schedule at the percentage point corresponding to the deferred sales charge applicable under the predecessor Contract at the time of the exchange, and continues from that point in the schedule. Schedule C also applies to all new purchases that are not connected with an internal transfer (i.e., external rollovers or Contracts established with at least a $1,000 annual Purchase Payment). Your Contract Schedule page shows the Deferred Sales Charge Schedule that applies to you. The total amount deducted for the deferred sales charge will not exceed 8.5% of the total Purchase Payments applied to the Contract. The Deferred Sales Charge is calculated as follows:
SCHEDULE A COMPLETED CONTRACT DEFERRED SALES YEARS CHARGE DEDUCTION - ------------------- ---------------- Less than 1 1% 1 or more 0%
- -------------------------------------------------------------------------------- FEE TABLE - 1
SCHEDULE B COMPLETED CONTRACT DEFERRED SALES YEARS CHARGE DEDUCTION - ---------------------------------------- ---------------- Less than 5 5% 5 or more but less than 6 4% 6 or more but less than 7 3% 7 or more but less than 8 2% 8 or more but less than 9 1% 9 or more 0% SCHEDULE C COMPLETED CONTRACT DEFERRED SALES YEARS CHARGE DEDUCTION - ---------------------------------------- ---------------- Less than 2 6% 2 or more but less than 3 5% 3 or more but less than 4 4% 4 or more but less than 5 3% 5 or more but less than 6 2% 6 or more but less than 7 1% 7 or more 0%
ANNUAL CONTRACT MAINTENANCE FEE. The maintenance fee will generally be..................... $ 25.00 deducted annually from each Contract. For 1994 Contracts, if the Contract Value is $10,000 or greater, and for 1992 Contracts, if the initial Purchase Payment is $10,000 or greater, the maintenance fee will be $0. ALLOCATION AND TRANSFER FEES. The Company currently allows an unlimited.................... $ 0.00 number of transfers or allocation changes without charge. However, we reserve the right to assess a fee of $10.00 for each transfer in excess of 12 made during each Contract Year. (See "Transfers and Allocation Changes.")
INDIRECT CHARGES. Each Subaccount pays these expenses out of its assets. The charges are reflected in the Subaccount's daily Accumulation Unit Value and are not charged directly to your Contract Value. They include: MORTALITY AND EXPENSE RISK CHARGE. This illustrates the maximum mortality.................. 1.25% and expense risk charge that can be deducted under the Contract. For the 1994 Contracts, the charge may be reduced to 1.15% under certain circumstances. (See "Charges and Deductions.") ADMINISTRATIVE EXPENSE CHARGE. We currently do not impose an administrative................ 0.00% expense charge. However, we reserve the right to deduct a daily charge from the Subaccounts, equivalent on an annual basis to not more than 0.25%. --------- TOTAL SEPARATE ACCOUNT EXPENSES 1.25% --------- ---------
- -------------------------------------------------------------------------------- FEE TABLE - 2 ANNUAL EXPENSES OF THE FUNDS The following table illustrates the advisory fees and other expenses applicable to the Funds. A Fund's "Other Expenses" include operating costs of the Fund. These expenses are reflected in the Fund's net asset value and are not deducted from your Contract Value. (Except as noted, the following figures are a percentage of average net assets and, except where otherwise indicated, are based on figures for the year ended December 31, 1995.)
INVESTMENT OTHER ADVISORY EXPENSES FEES(1) (AFTER TOTAL FUND (AFTER EXPENSE EXPENSE ANNUAL REIMBURSEMENT) REIMBURSEMENT) EXPENSES -------------- ----------- ----------- Aetna Variable Fund(2) 0.25% 0.06% 0.31% Aetna Income Shares(2) 0.25% 0.08% 0.33% Aetna Variable Encore Fund(2) 0.25% 0.10% 0.35% Aetna Investment Advisers Fund, Inc.(2) 0.25% 0.08% 0.33% Aetna Ascent Variable Portfolio(2) 0.50% 0.15% 0.65% Aetna Crossroads Variable Portfolio(2) 0.50% 0.15% 0.65% Aetna Legacy Variable Portfolio(2) 0.50% 0.15% 0.65% Alger American Growth Portfolio 0.75% 0.10% 0.85% Alger American Small Cap Portfolio 0.85% 0.07% 0.92% Fidelity VIP II Contrafund Portfolio(3) 0.61% 0.11% 0.72% Fidelity VIP Equity-Income Portfolio 0.51% 0.10% 0.61% Fidelity VIP Growth Portfolio 0.61% 0.09% 0.70% Fidelity VIP Overseas Portfolio 0.76% 0.15% 0.91% Janus Aspen Aggressive Growth Portfolio(4) 0.75% 0.11% 0.86% Janus Aspen Balanced Portfolio(4) 0.82% 0.55% 1.37% Janus Aspen Growth Portfolio(4) 0.65% 0.13% 0.78% Janus Aspen Short-Term Bond Portfolio(4) 0.00% 0.70% 0.70% Janus Aspen Worldwide Growth Portfolio(4) 0.68% 0.22% 0.90% Scudder International Portfolio Class A Shares 0.88% 0.20% 1.08% TCI Growth(5) 1.00% 0.00% 1.00%
- ------------------------ (1) Certain of the unaffiliated Fund advisers reimburse the Company for administrative costs incurred in connection with administering the Funds as variable funding options under the Contract. These reimbursements are paid out of the investment advisory fees and are not charged to investors. (2) As of May 1, 1996, the Company will provide administrative services to the Fund and will assume the Fund's ordinary recurring direct costs under an Administrative Services Agreement. The "Other Expenses" shown are not based on figures for the year ended December 31, 1995, but reflect the fee payable under this Agreement. (3) A portion of the brokerage commissions the Fund paid was used to reduce its expenses. Without this reduction, total operating expenses would have been 0.73% for the Contrafund Portfolio. (4) The information for each Portfolio is net of fee waivers or reductions from Janus Capital. Fee reductions for the Aggressive Growth, Balanced, Growth, and Worldwide Growth Portfolios reduce the management fee to the level of the corresponding Janus retail fund. Other waivers, if applicable, are first applied against the management fee and then against other expenses. Without such waivers or reductions, the Management Fee, Other Expenses and Total Fund Annual Expenses would have been 0.82%, 0.11%, and 0.93% for Aggressive Growth Portfolio; 1.00%, 0.55%, 1.55% for Balanced Portfolio; 0.85% 0.13% and 0.98% for Growth Portfolio; 0.65%, 0.72% and 1.37% for Short-Term Bond Portfolio; and 0.87%, 0.22% and 1.09% for Worldwide Growth Portfolio; respectively. Janus Capital may modify or terminate the waivers or reductions at any time upon 90 days' notice to the Portfolio's Board of Trustees. (5) The Portfolio's investment adviser pays all expenses of the Portfolio except brokerage commissions, taxes, interest, fees, expenses of the non-interested person directors (including counsel fees) and extraordinary expenses. These expenses have historically represented a very small percentage (less than 0.01%) of total net assets in a fiscal year. - -------------------------------------------------------------------------------- FEE TABLE - 3 HYPOTHETICAL ILLUSTRATION (EXAMPLE) THIS EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES AND/OR RETURN MAY BE MORE OR LESS THAN THOSE SHOWN BELOW. The following Examples illustrate the expenses that would have been paid assuming a $1,000 investment in the Contract and a 5% return on assets. For the purposes of these Examples, the maximum maintenance fee of $25.00 that can be deducted under the Contract has been converted to a percentage of assets equal to 0.107%.
EXAMPLE A EXAMPLE B ------------------------------------- ------------------------------------- IF YOU WITHDRAW YOUR ENTIRE CONTRACT IF YOU WITHDRAW YOUR ENTIRE CONTRACT VALUE AT THE END OF THE PERIODS VALUE AT THE END OF THE PERIODS SHOWN, YOU WOULD PAY THE FOLLOWING SHOWN, YOU WOULD PAY THE FOLLOWING EXPENSES, INCLUDING ANY APPLICABLE EXPENSES, INCLUDING ANY APPLICABLE DEFERRED SALES CHARGE ASSESSED UNDER DEFERRED SALES CHARGE ASSESSED UNDER SCHEDULE A: SCHEDULE B: 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- ------ ------- ------- -------- Aetna Variable Fund $27 $53 $ 91 $197 $69 $108 $138 $197 Aetna Income Shares $27 $53 $ 92 $199 $69 $108 $139 $199 Aetna Variable Encore Fund $28 $54 $ 93 $202 $69 $109 $140 $202 Aetna Investment Advisers Fund, Inc. $27 $53 $ 92 $199 $69 $108 $139 $199 Aetna Ascent Variable Portfolio $31 $63 $108 $233 $72 $118 $154 $233 Aetna Crossroads Variable Portfolio $31 $63 $108 $233 $72 $118 $154 $233 Aetna Legacy Variable Portfolio $31 $63 $108 $233 $72 $118 $154 $233 Alger American Growth Portfolio $33 $69 $118 $254 $74 $123 $164 $254 Alger American Small Cap Portfolio $33 $71 $122 $261 $74 $125 $168 $261 Fidelity VIP II Contrafund Portfolio $31 $65 $112 $241 $73 $120 $158 $241 Fidelity VIP Equity-Income Portfolio $30 $62 $106 $229 $71 $116 $153 $229 Fidelity VIP Growth Portfolio $31 $64 $111 $239 $72 $119 $157 $239 Fidelity VIP Overseas Portfolio $33 $71 $121 $260 $74 $125 $167 $260 Janus Aspen Aggressive Growth Portfolio $33 $69 $119 $255 $74 $124 $165 $255 Janus Aspen Balanced Portfolio $38 $85 $144 $306 $79 $138 $189 $306 Janus Aspen Growth Portfolio $32 $67 $115 $247 $73 $121 $161 $247 Janus Aspen Short-Term Bond Portfolio $31 $64 $111 $239 $72 $119 $157 $239 Janus Aspen Worldwide Growth Portfolio $33 $71 $121 $259 $74 $125 $167 $259 Scudder International Portfolio Class A Shares $35 $76 $130 $277 $76 $130 $175 $277 TCI Growth $34 $74 $126 $269 $75 $128 $171 $269
- -------------------------------------------------------------------------------- FEE TABLE - 4
EXAMPLE C EXAMPLE D ------------------------------------- ------------------------------------- IF YOU WITHDRAW YOUR ENTIRE CONTRACT VALUE AT THE END OF THE PERIODS IF YOU DO NOT WITHDRAW YOUR CONTRACT SHOWN, YOU WOULD PAY THE FOLLOWING VALUE, OR IF YOU ANNUITIZE DURING THE EXPENSES, INCLUDING ANY APPLICABLE PERIODS SHOWN, YOU WOULD PAY THE DEFERRED SALES CHARGE ASSESSED UNDER FOLLOWING EXPENSES (NO DEFERRED SALES SCHEDULE C: CHARGE IS REFLECTED):* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- ------ ------- ------- -------- Aetna Variable Fund $79 $ 97 $114 $197 $17 $53 $ 91 $197 Aetna Income Shares $79 $ 97 $115 $199 $17 $53 $ 92 $199 Aetna Variable Encore Fund $79 $ 98 $116 $202 $17 $54 $ 93 $202 Aetna Investment Advisers Fund, Inc. $79 $ 97 $115 $199 $17 $53 $ 92 $199 Aetna Ascent Variable Portfolio $82 $107 $131 $233 $20 $63 $108 $233 Aetna Crossroads Variable Portfolio $82 $107 $131 $233 $20 $63 $108 $233 Aetna Legacy Variable Portfolio $82 $107 $131 $233 $20 $63 $108 $233 Alger American Growth Portfolio $84 $112 $141 $254 $22 $69 $118 $254 Alger American Small Cap Portfolio $23 $ 71 $122 $261 $23 $71 $122 $261 Fidelity VIP II Contrafund Portfolio $83 $109 $135 $241 $21 $65 $112 $241 Fidelity VIP Equity-Income Portfolio $82 $105 $129 $229 $20 $62 $106 $229 Fidelity VIP Growth Portfolio $83 $108 $134 $239 $21 $64 $111 $239 Fidelity VIP Overseas Portfolio $85 $114 $144 $260 $23 $71 $121 $260 Janus Aspen Aggressive Growth Portfolio $84 $113 $142 $255 $22 $69 $119 $255 Janus Aspen Balanced Portfolio $89 $127 $167 $306 $28 $85 $144 $306 Janus Aspen Growth Portfolio $83 $110 $138 $247 $22 $67 $115 $247 Janus Aspen Short-Term Bond Portfolio $83 $108 $134 $239 $21 $64 $111 $239 Janus Aspen Worldwide Growth Portfolio $85 $114 $144 $259 $23 $71 $121 $259 Scudder International Portfolio Class A Shares $86 $119 $153 $277 $25 $76 $130 $277 TCI Growth $85 $117 $149 $269 $24 $74 $126 $269
- -------------------------- * This Example would not apply if a nonlifetime variable annuity option is selected and a lump sum settlement is requested within three years (for 1992 Contracts) or 5 years (for 1994 Contracts) after annuity payments start since the lump sum payment will be treated as a withdrawal during the Accumulation Period and will be subject to any deferred sales charge that would then apply. (See Example A, B or C, as applicable.) - -------------------------------------------------------------------------------- FEE TABLE - 5 CONDENSED FINANCIAL INFORMATION (FOR CONTRACTS ISSUED AFTER MARCH 1994 WITH TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES OF 1.25%)* (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR THE TWO YEARS ENDED DECEMBER 31, 1995 IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH FINANCIAL STATEMENTS HAVE BEEN AUDITED BY KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS. THE FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE INDEPENDENT AUDITORS' REPORT THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
1995 1994 --------------- --------------- AETNA VARIABLE FUND Value at beginning of period $10.778 $11.020 Value at end of period $14.077 $10.778 Increase (decrease) in value of accumulation unit(1) 30.61% (2.20)%(2) Number of accumulation units outstanding at end of period 2,370,234 602,838 AETNA INCOME SHARES Value at beginning of period $10.360 $10.905 Value at end of period $12.098 $10.360 Increase (decrease) in value of accumulation unit(1) 16.78% (5.00)%(2) Number of accumulation units outstanding at end of period 354,993 148,193 AETNA VARIABLE ENCORE FUND Value at beginning of period $10.528 $10.241 Value at end of period $11.026 $10.528 Increase (decrease) in value of accumulation unit(1) 4.73% 2.80) Number of accumulation units outstanding at end of period 544,383 334,746 AETNA INVESTMENT ADVISERS FUND, INC. Value at beginning of period $10.868 $11.057 Value at end of period $13.673 $10.868 Increase (decrease) in value of accumulation unit(1) 25.81% (1.71)%(2) Number of accumulation units outstanding at end of period 940,933 261,895 AETNA ASCENT VARIABLE PORTFOLIO Value at beginning of period $10.000 (5) Value at end of period $10.976 Increase (decrease) in value of accumulation unit(1) 9.76% Number of accumulation units outstanding at end of period 49,748 AETNA CROSSROADS VARIABLE PORTFOLIO Value at beginning of period $10.000 (5) Value at end of period $10.862 Increase (decrease) in value of accumulation unit(1) 8.62% Number of accumulation units outstanding at end of period 47,204 AETNA LEGACY VARIABLE PORTFOLIO Value at beginning of period $10.000 (6) Value at end of period $10.626 Increase (decrease) in value of accumulation unit(1) 6.26% Number of accumulation units outstanding at end of period 20,531 ALGER AMERICAN GROWTH PORTFOLIO Value at beginning of period $10.000 (5) Value at end of period $11.379 Increase (decrease) in value of accumulation unit(1) 13.79% Number of accumulation units outstanding at end of period 284,978 ALGER AMERICAN SMALL CAP PORTFOLIO Value at beginning of period $ 9.437 $ 9.959 Value at end of period $13.450 $ 9.437 Increase (decrease) in value of accumulation unit(1) 42.52% (5.24)%(2) Number of accumulation units outstanding at end of period 1,081,375 208,784 FIDELITY VIP II CONTRAFUND PORTFOLIO Value at beginning of period $10.000 (4) Value at end of period $11.681 Increase (decrease) in value of accumulation unit(1) 16.81% Number of accumulation units outstanding at end of period 174,259 FIDELITY EQUITY-INCOME PORTFOLIO Value at beginning of period $10.403 $10.000 Value at end of period $13.880 $10.403 Increase (decrease) in value of accumulation unit(1) 33.42% 4.03) Number of accumulation units outstanding at end of period 766,360 100,574
- -------------------------------------------------------------------------------- AUV HISTORY - 1 CONDENSED FINANCIAL INFORMATION (CONTINUED) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
1995 1994 --------------- --------------- FIDELITY GROWTH PORTFOLIO Value at beginning of period $10.472 $10.000 Value at end of period $14.000 $10.472 Increase (decrease) in value of accumulation unit(1) 33.69% 4.72) Number of accumulation units outstanding at end of period 612,992 121,070 FIDELITY OVERSEAS PORTFOLIO Value at beginning of period $ 9.474 $10.000 Value at end of period $10.262 $ 9.474 Increase (decrease) in value of accumulation unit(1) 8.32% (5.26)%(3) Number of accumulation units outstanding at end of period 166,303 54,387 JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $10.000 (4) Value at end of period $12.861 Increase (decrease) in value of accumulation unit(1) 28.61% Number of accumulation units outstanding at end of period 167,920 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $10.000 (5) Value at end of period $11.259 Increase (decrease) in value of accumulation unit(1) 12.59% Number of accumulation units outstanding at end of period 34,072 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $10.000 (5) Value at end of period $11.626 Increase (decrease) in value of accumulation unit(1) 16.26% Number of accumulation units outstanding at end of period 78,126 JANUS ASPEN SHORT-TERM BOND PORTFOLIO Value at beginning of period $10.000 (6) Value at end of period $10.285 Increase (decrease) in value of accumulation unit(1) 2.85% Number of accumulation units outstanding at end of period 1,405 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $10.000 (4) Value at end of period $12.216 Increase (decrease) in value of accumulation unit(1) 22.16% Number of accumulation units outstanding at end of period 65,384 SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES Value at beginning of period $12.687 $12.957 Value at end of period $13.923 $12.687 Increase (decrease) in value of accumulation unit(1) 9.74% (2.08)%(2) Number of accumulation units outstanding at end of period 432,183 187,169 TCI GROWTH Value at beginning of period $11.781 $12.069 Value at end of period $15.253 $11.781 Increase (decrease) in value of accumulation unit(1) 29.47% (2.39)%(2) Number of accumulation units outstanding at end of period 474,744 139,235
* This Table applies to all 1994 and 1992 Internal Rollover Contracts issued on or after March 23, 1994 and all Contracts not connected with an internal transfer (i.e., external rollovers or Contracts established with at least a $1,000 annual Purchase Payment) issued on or after March 29, 1994. (1) The above figures are calculated by subtracting the beginning Accumulation Unit value from the ending Accumulation Unit value during a calendar year, and dividing the result by the beginning Accumulation Unit value. These figures do not reflect the deferred sales charge or the fixed dollar annual maintenance fee, if any. Inclusion of these charges would reduce the investment results shown. (2) Reflects less than a full year of performance activity. Funds were first received in this option during April 1994. (3) Reflects less than a full year of performance activity. Funds were first received in this option during May 1994. (4) Reflects less than a full year of performance activity. Funds were first available in this option during May 1995. (5) Reflects less than a full year of performance activity. Funds were first available in this option during June 1995. (6) Reflects less than a full year of performance activity. Funds were first available in this option during July 1995. - -------------------------------------------------------------------------------- AUV HISTORY - 2 CONDENSED FINANCIAL INFORMATION (FOR CONTRACTS WITH TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES OF 1.15%) (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR THE TWO YEARS ENDED DECEMBER 31, 1995 IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH FINANCIAL STATEMENTS HAVE BEEN AUDITED BY KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS. THE FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE INDEPENDENT AUDITORS' REPORT THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
1995 1994 --------------- --------------- AETNA VARIABLE FUND Value at beginning of period $10.791 $10.875 Value at end of period $14.108 $10.791 Increase (decrease) in value of accumulation unit(1) 30.74% (0.77)%(3) Number of accumulation units outstanding at end of period 273,578 110,420 AETNA INCOME SHARES Value at beginning of period $10.373 $10.367 Value at end of period $12.125 $10.373 Increase (decrease) in value of accumulation unit(1) 16.89% 0.06 %(3) Number of accumulation units outstanding at end of period 50,261 16,110 AETNA VARIABLE ENCORE FUND Value at beginning of period $10.541 $10.484 Value at end of period $11.051 $10.541 Increase (decrease) in value of accumulation unit(1) 4.84% 0.54 %(4) Number of accumulation units outstanding at end of period 145,629 9,736 AETNA INVESTMENT ADVISERS FUND, INC. Value at beginning of period $10.880 $10.951 Value at end of period $13.703 $10.880 Increase (decrease) in value of accumulation unit(1) 25.95% (0.65)%(4) Number of accumulation units outstanding at end of period 138,271 49,333 AETNA ASCENT VARIABLE PORTFOLIO Value at beginning of period $10.000 (6) Value at end of period $10.982 Increase (decrease) in value of accumulation unit(1) 9.82% Number of accumulation units outstanding at end of period 15,055 AETNA CROSSROADS VARIABLE PORTFOLIO Value at beginning of period $10.000 (6) Value at end of period $10.868 Increase (decrease) in value of accumulation unit(1) 8.68% Number of accumulation units outstanding at end of period 2,394 AETNA LEGACY VARIABLE PORTFOLIO Value at beginning of period $10.000 (7) Value at end of period $10.631 Increase (decrease) in value of accumulation unit(1) 6.31% Number of accumulation units outstanding at end of period 17,106 ALGER AMERICAN GROWTH PORTFOLIO Value at beginning of period $10.000 (6) Value at end of period $11.385 Increase (decrease) in value of accumulation unit(1) 13.85% Number of accumulation units outstanding at end of period 12,859 ALGER AMERICAN SMALL CAP PORTFOLIO Value at beginning of period $ 9.450 $ 9.202 Value at end of period $13.481 $ 9.450 Increase (decrease) in value of accumulation unit(1) 42.66% 2.70 %(2) Number of accumulation units outstanding at end of period 54,684 22,052 FIDELITY VIP II CONTRAFUND PORTFOLIO Value at beginning of period $10.000 (5) Value at end of period $11.689 Increase (decrease) in value of accumulation unit(1) 16.89% Number of accumulation units outstanding at end of period 5,453 FIDELITY EQUITY-INCOME PORTFOLIO Value at beginning of period $10.409 $10.000 Value at end of period $13.902 $10.409 Increase (decrease) in value of accumulation unit(1) 33.55% 4.09 %(2) Number of accumulation units outstanding at end of period 118,679 43,852
- -------------------------------------------------------------------------------- AUV HISTORY - 3 CONDENSED FINANCIAL INFORMATION (CONTINUED) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
1995 1994 --------------- --------------- FIDELITY GROWTH PORTFOLIO Value at beginning of period $10.479 $10.000 Value at end of period $14.023 $10.479 Increase (decrease) in value of accumulation unit(1) 33.82% 4.79 %(4) Number of accumulation units outstanding at end of period 45,765 32,592 FIDELITY OVERSEAS PORTFOLIO Value at beginning of period $ 9.480 $10.000 Value at end of period $10.278 $ 9.480 Increase (decrease) in value of accumulation unit(1) 8.43% (5.20)%(4) Number of accumulation units outstanding at end of period 4,284 5,098 JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $10.000 (5) Value at end of period $12.869 Increase (decrease) in value of accumulation unit(1) 28.69% Number of accumulation units outstanding at end of period 22,050 JANUS ASPEN BALANCED PORTFOLIO Value at beginning of period $10.000 (6) Value at end of period $11.265 Increase (decrease) in value of accumulation unit(1) 12.65% Number of accumulation units outstanding at end of period 9,383 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $10.000 (6) Value at end of period $11.633 Increase (decrease) in value of accumulation unit(1) 16.33% Number of accumulation units outstanding at end of period 3,238 JANUS ASPEN SHORT-TERM BOND PORTFOLIO Value at beginning of period $10.000 (7) Value at end of period $10.290 Increase (decrease) in value of accumulation unit(1) 2.90% Number of accumulation units outstanding at end of period 0 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $10.000 (5) Value at end of period $12.223 Increase (decrease) in value of accumulation unit(1) 22.23% Number of accumulation units outstanding at end of period 2,617 SCUDDER INTERNATIONAL PORTFOLIO CLASS A SHARES Value at beginning of period $12.701 $13.433 Value at end of period $13.952 $12.701 Increase (decrease) in value of accumulation unit(1) 9.85% (5.45)%(2) Number of accumulation units outstanding at end of period 41,921 23,840 TCI GROWTH Value at beginning of period $11.794 $11.910 Value at end of period $15.285 $11.794 Increase (decrease) in value of accumulation unit(1) 29.60% (0.97)%(3) Number of accumulation units outstanding at end of period 13,307 4,486
(1) The above figures are calculated by subtracting the beginning Accumulation Unit value from the ending Accumulation Unit value during a calendar year, and dividing the result by the beginning Accumulation Unit value. These figures do not reflect the deferred sales charge or the fixed dollar annual maintenance fee, if any. Inclusion of these charges would reduce the investment results shown. (2) Reflects less than a full year of performance activity. Funds were first received in this option during September 1994. (3) Reflects less than a full year of performance activity. Funds were first received in this option during October 1994. (4) Reflects less than a full year of performance activity. Funds were first received in this option during November 1994. (5) Reflects less than a full year of performance activity. Funds were first available in this option during May 1995. (6) Reflects less than a full year of performance activity. Funds were first available in this option during June 1995. (7) Reflects less than a full year of performance activity. Funds were first available in this option during July 1995. - -------------------------------------------------------------------------------- AUV HISTORY - 4 CONDENSED FINANCIAL INFORMATION (1992 CONTRACTS ISSUED PRIOR TO MARCH 1994)* (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE YEARS IN THE TEN-YEAR PERIOD ENDED DECEMBER 31, 1995 (AS APPLICABLE), IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH FINANCIAL STATEMENTS HAVE BEEN AUDITED BY KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS. THE FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE INDEPENDENT AUDITORS' REPORT THEREON, ARE INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ AETNA VARIABLE FUND Value at beginning of period $105.558 $107.925 $102.383 $ 97.165 $77.845 Value at end of period $137.869 $105.558 $107.925 $102.383 $97.165 Increase (decrease) in value of accumulation unit(1) 30.61% (2.19)% 5.41% 5.37% 24.82% Number of accumulation units outstanding at end of period 6,364,000 13,966,072 21,148,863 24,201,565 20,948,226 AETNA INCOME SHARES Value at beginning of period $40.173 $42.283 $39.038 $36.789 $31.192 Value at end of period $46.913 $40.173 $42.283 $39.038 $36.789 Increase (decrease) in value of accumulation unit(1) 16.78% (4.99)% 8.31% 6.11% 17.94% Number of accumulation units outstanding at end of period 2,377,622 5,108,720 8,210,666 8,507,292 7,844,412 AETNA VARIABLE ENCORE FUND Value at beginning of period $36.271 $35.282 $34.619 $33.812 $32.138 Value at end of period $37.988 $36.271 $35.282 $34.619 $33.812 Increase (decrease) in value of accumulation unit(1) 4.73% 2.80% 1.92% 2.39% 5.21% Number of accumulation units outstanding at end of period 1,836,260 3,679,802 5,086,515 7,534,662 8,430,082 AETNA INVESTMENT ADVISERS FUND, INC. Value at beginning of period $14.270 $14.519 $13.379 $12.736 $10.896 Value at end of period $17.954 $14.270 $14.519 $13.379 $12.736 Increase (decrease) in value of accumulation unit(1) 25.82% (1.71)% 8.52% 5.05% 16.89% Number of accumulation units outstanding at end of period 9,193,181 21,990,186 30,784,750 34,802,433 22,898,099 TCI GROWTH Value at beginning of period $10.213 $10.463 $10.000(3) Value at end of period $13.224 $10.213 $10.463 Increase (decrease) in value of accumulation unit(1) 29.47% (2.39)% 4.63% Number of accumulation units outstanding at end of period 4,184,701 12,096,731 12,272,152 1990 1989 1988 1987 1986 ------------ ------------ ------------ ------------ ------------ AETNA VARIABLE FUND Value at beginning of period $76,311 $59.871 $52.885 $50.760 $43.205 Value at end of period $77.845 $76.311 $59.871 $52.885 $50.760 Increase (decrease) in value of accumulation unit(1) 2.01% 27.46% 13.21% 4.19% 17.49% Number of accumulation units outstanding at end of period 18,362,906 17,142,820 16,455,396 16,497,406 16,578,251 AETNA INCOME SHARES Value at beginning of period $28.943 $25.574 $24.061 $23.308 $20.703 Value at end of period $31.192 $28.943 $25.574 $24.061 $23.308 Increase (decrease) in value of accumulation unit(1) 7.77% 13.17% 6.29% 3.23% 12.58% Number of accumulation units outstanding at end of period 6,984,793 6,202,834 5,955,293 5,372,271 6,188,470 AETNA VARIABLE ENCORE FUND Value at beginning of period $30.012 $27.783 $26.171 $24.812 $23.504 Value at end of period $32.138 $30.012 $27.783 $26.171 $24.812 Increase (decrease) in value of accumulation unit(1) 7.08% 8.02% 6.16% 5.48% 5.57% Number of accumulation units outstanding at end of period 10,220,110 8,286,033 8,154,644 7,326,151 6,692,947 AETNA INVESTMENT ADVISERS FUND, INC. Value at beginning of period $10.437 $10.000(2) Value at end of period $10.896 $10.437 Increase (decrease) in value of accumulation unit(1) 4.40% 4.37% Number of accumulation units outstanding at end of period 17,078,985 9,535,986 TCI GROWTH Value at beginning of period Value at end of period Increase (decrease) in value of accumulation unit(1) Number of accumulation units outstanding at end of period
* This Table applies to 1992 Internal Rollover Contracts issued prior to March 23, 1994 and 1992 Contracts not connected with an internal transfer (i.e., external rollovers or Contracts established with at least a $1,000 annual Purchase Payment) issued prior to March 29, 1994. (1) The above figures are calculated by subtracting the beginning Accumulation Unit value from the ending Accumulation Unit value during a calendar year, and dividing the result by the beginning Accumulation Unit value. These figures do not reflect the deferred sales charge or the fixed dollar annual maintenance fee, if any. Inclusion of these charges would reduce the investment results shown. (2) The initial Accumulation Unit value was established at $10.000 on June 23, 1989, the date on which the Fund commenced operations. (3) The initial Accumulation Unit value was established at $10.000 on February 1, 1993, the date on which the Portfolio became available under the Contract. - -------------------------------------------------------------------------------- AUV HISTORY - 5 THE COMPANY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Aetna Life Insurance and Annuity Company (the "Company") is the issuer of the Contract, and as such, it is responsible for providing the insurance and annuity benefits under the Contract. The Company is a stock life insurance company organized under the insurance laws of the State of Connecticut in 1976. Through a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance Company (formerly Participating Annuity Life Insurance Company, an Arkansas life insurance company organized in 1954). The Company is engaged in the business of issuing life insurance policies and variable annuity contracts in all states of the United States. The Company's principal executive offices are located at 151 Farmington Avenue, Hartford, Connecticut 06156. The Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc., which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc. and an indirect wholly owned subsidiary of Aetna Life and Casualty Company. VARIABLE ANNUITY ACCOUNT C - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Company established Variable Annuity Account C (the "Separate Account") in 1976 as a segregated asset account for the purpose of funding its variable annuity contracts. The Separate Account is registered as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"), and meets the definition of "separate account" under the federal securities laws. The Separate Account is divided into "subaccounts" which do not invest directly in stocks, bonds or other investments. Instead, each Subaccount buys and sells shares of a corresponding Fund. Although the Company holds title to the assets of the Separate Account, such assets are not chargeable with liabilities of any other business conducted by the Company. Income, gains or losses of the Separate Account are credited to or charged against the assets of the Separate Account without regard to other income, gains or losses of the Company. All obligations arising under the Contracts are general corporate obligations of the Company. INVESTMENT OPTIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE FUNDS Purchase Payments may be allocated to one or more of the Subaccounts as designated on the application. In turn, the Subaccounts invest in the corresponding Funds at net asset value. The availability of Funds may be subject to regulatory authorization. In addition, the Company may add or withdraw Funds, as permitted by applicable law. Not all Funds may be available in all jurisdictions or under all Contracts. The investment results of the Funds described below are likely to differ significantly and there is no assurance that any of the Funds will achieve their respective investment objectives. Except where otherwise noted, all of the Funds are diversified, as defined in the 1940 Act. - -AETNA VARIABLE FUND seeks to maximize total return through investments in a diversified portfolio of common stocks and securities convertible into common stock.(1) - -AETNA INCOME SHARES seeks to maximize total return, consistent with reasonable risk, through investments in a diversified portfolio consisting primarily of debt securities.(1) - -AETNA VARIABLE ENCORE FUND 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 INVESTMENT ADVISERS FUND, INC. is a managed fund which seeks to maximize investment return consistent with reasonable safety of principal by - -------------------------------------------------------------------------------- 1 investing in one or more of the following asset classes: stocks, bonds and cash equivalents based on the Company's judgment of which of those sectors or mix thereof offers the best investment prospects.(1) - -AETNA GENERATION PORTFOLIOS, INC.--AETNA ASCENT VARIABLE PORTFOLIO seeks to provide capital appreciation by allocating its investments among equities and fixed income securities. The Portfolio is managed for investors who generally have an investment horizon exceeding 15 years, and who have a high level of risk tolerance.(1) - -AETNA GENERATION PORTFOLIOS, INC.--AETNA CROSSROADS VARIABLE PORTFOLIO seeks to provide total return (i.e., income and capital appreciation, both realized and unrealized) by allocating its investments among equities and fixed income securities. The Portfolio is managed for investors who generally have an investment horizon exceeding 10 years and who have a moderate level of risk tolerance.(1) - -AETNA GENERATION PORTFOLIOS, INC.--AETNA LEGACY VARIABLE PORTFOLIO seeks to provide total return consistent with preservation of capital by allocating its investments among equities and fixed income securities. The Portfolio is managed for investors who generally have an investment horizon exceeding five years and who have a low level of risk tolerance.(1) - -ALGER AMERICAN FUND--ALGER AMERICAN GROWTH PORTFOLIO seeks long-term capital appreciation by investing in a diversified, actively managed portfolio of equity securities. The Portfolio primarily invests in equity securities of companies which have a market capitalization of $1 billion or greater.(2) - -ALGER AMERICAN FUND--ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO seeks long-term capital appreciation. Except during temporary defensive periods, the Portfolio invests at least 65% of its total assets in equity securities of companies that, at the time of purchase of the securities, have total market capitalization within the range of companies included in the Russell 2000 Growth Index, updated quarterly. The Russell 2000 Growth Index is designed to track the performance of small capitalization companies. At March 31, 1996, the range of market capitalization of these companies was $20 million to $3.0 billion.(2) - -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND II--CONTRAFUND PORTFOLIO seeks maximum total return over the long term by investing mainly in equity securities of companies that are undervalued or out-of-favor.(3) - -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--EQUITY-INCOME PORTFOLIO seeks reasonable income by investing primarily in income-producing equity securities. In selecting investments, the Fund also considers the potential for capital appreciation.(3) - -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--GROWTH PORTFOLIO seeks capital appreciation by investing mainly in common stocks, although its investments are not restricted to any one type of security.(3) - -FIDELITY INVESTMENTS' VARIABLE INSURANCE PRODUCTS FUND--OVERSEAS PORTFOLIO seeks long-term growth by investing mainly in foreign securities (at least 65% of the Fund's total assets in securities of issuers from at least three countries outside of North America).(3) - -JANUS ASPEN SERIES--AGGRESSIVE GROWTH PORTFOLIO is a NONDIVERSIFIED portfolio that seeks long-term growth of capital in a manner consistent with the preservation of capital. The Portfolio pursues its investment objective by normally investing at least 50% of its equity assets in securities issued by medium-sized companies. Medium-sized companies are those whose market capitalizations fall within the range of companies in the S&P MidCap 400 Index, which as of December 29, 1995 included companies with capitalizations between approximately $118 million and $7.5 billion, but which is expected to change on a regular basis.(4) - -JANUS ASPEN SERIES--BALANCED PORTFOLIO seeks long-term capital growth, consistent with preservation of capital and balanced by current income. The Portfolio pursues its investment objective by investing 40%-60% of its assets in equity securities selected primarily for their growth potential and 40%-60% of its assets in fixed-income securities selected primarily for their income potential.(4) - -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 in common stocks of companies of any size.(4) - -------------------------------------------------------------------------------- 2 - -JANUS ASPEN SERIES--SHORT-TERM BOND PORTFOLIO seeks as high a level of current income as is consistent with preservation of capital by investing primarily in short-and intermediate-term fixed income securities.(4) - -JANUS ASPEN SERIES--WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of capital in a manner consistent with preservation of capital. The Portfolio pursues its investment objective primarily through investments in common stocks of foreign and domestic issuers.(4) - -SCUDDER VARIABLE LIFE INVESTMENT FUND-- INTERNATIONAL PORTFOLIO CLASS A SHARES seeks long-term growth of capital primarily through diversified holdings of marketable foreign equity investments.(5) - -TCI PORTFOLIOS, INC.--TCI GROWTH (A TWENTIETH CENTURY FUND) seeks capital growth. The Fund seeks to achieve its objective by investing in common stocks (including securities convertible into common stocks) and other securities that meet certain fundamental and technical standards of selection and, in the opinion of the Fund's investment manager, have better than average potential for appreciation.(6) Investment Advisers for each of the Funds: (1) Aetna Life Insurance and Annuity Company (2) Fred Alger Management, Inc. (3) Fidelity Management & Research Company (4) Janus Capital Corporation (5) Scudder, Stevens & Clark, Inc. (6) Investors Research Corporation RISKS ASSOCIATED WITH INVESTMENT IN THE FUNDS. Some of the Funds may use instruments known as derivatives as part of their investment strategies. The use of certain derivatives may involve high risk of volatility to a Fund, and the use of leverage in connection with such derivatives can also increase risk of losses. Some of the Funds may also invest in foreign or international securities which involve greater risks than U.S. investments. More comprehensive information, including a discussion of potential risks, is found in the respective Fund prospectuses which accompany this Prospectus. You should read the Fund prospectuses and consider carefully, and on a continuing basis, which Fund or combination of Funds is best suited to your long-term investment objectives. CONFLICTS OF INTEREST (MIXED AND SHARED FUNDING). Shares of the Funds are sold to each of the Subaccounts for funding the variable annuity contracts issued by the Company. Shares of the Funds may also be sold to other insurance companies for the same purpose. This is referred to as "shared funding." Shares of the Funds may also be used for funding variable life insurance contracts issued by the Company or by third parties. This is referred to as "mixed funding." Because the Funds available under the Contract are sold to fund variable annuity contracts and variable life insurance policies issued by us or by other companies, certain conflicts of interest could arise. If a conflict of interest were to occur, one of the separate accounts might withdraw its investment in a Fund, which might force that Fund to sell portfolio securities at disadvantageous prices, causing its per share value to decrease. Each Fund's Board of Directors or Trustees has agreed to monitor events in order to identify any material irreconcilable conflicts which might arise and to determine what action, if any, should be taken to address such conflict. CREDITED INTEREST OPTIONS Purchase Payments may be allocated to one or more of the Credited Interest Options available under the Contract as described below. - - The Guaranteed Interest Account is a part of the Company's general account and guarantees a minimum interest rate, as specified in the Contract. The Company may credit higher interest rates in its discretion. (See Appendix I.) - - The Fixed Account is also a part of the Company's general account. The Fixed Account guarantees a minimum interest rate, as specified in the Contract. The Company may credit higher interest rates from time to time. Transfers from the Fixed Account are limited. (See Appendix II.) - - The Guaranteed Accumulation Account (GAA) is a Credited Interest Option through which we guarantee stipulated rates of interest for stated periods of time. Amounts must remain in GAA for the full guaranteed term to received the quoted interest rates, or a market value adjustment (which may be positive or negative) will be applied. (See Appendix III.) - -------------------------------------------------------------------------------- 3 PURCHASE - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACT AVAILABILITY The Contracts described in this Prospectus are intended to be used as Individual Retirement Annuities. The Contracts will accept annual contributions to an IRA including contributions pursuant to the provisions of a Simplified Employee Pension Plan ("SEP"). The Contracts can also accept transfers and rollovers from other Individual Retirement Annuities/Individual Retirement Accounts, as well as tax deferred annuities and qualified pension/profit sharing plans under Section 401(a) of the Code. CONTRACT PURCHASE These Contracts may be purchased by completing the proper application form and submitting it to the Company. The Company must accept or reject the application within two business days of receipt. If the application is incomplete, the Company may hold any forms and accompanying Purchase Payments for five days. Purchase Payments may be held for longer periods only with the consent of the Contract Holder, pending acceptance of the application. PURCHASE PAYMENTS The initial Purchase Payment is credited at the Accumulation Unit Value for the Valuation Period in which the Purchase Payment and an application, in good order, are received at the Company's Home Office. Subsequent Purchase Payments (if any) are credited to the Contract at the Accumulation Unit value(s) determined on the next Valuation Date following our receipt of such Purchase Payment. The minimum initial rollover amount required to establish a Contract is $1,500. The Contract may accept additional rollovers and/or Purchase Payments as long as they meet the minimum amount established from time to time by us. Installment Purchase Payments must be at least $85 per month or $1,000 annually. (Monthly installments must be made via Automatic Bank Check Plan.) The Code imposes a maximum limit on annual Purchase Payments which may be excluded from your gross income. (See Appendix IV.) ALLOCATION OF PURCHASE PAYMENTS. Purchase Payments will initially be allocated to the Subaccounts or Credited Interest Options as specified by the Contract Holder on the application. Changes in such allocation may be made in writing or by telephone transfer. Allocations must be in whole percentages, and there may be limitations on the number of investment options that can be selected during the Accumulation Period. (See "Transfers.") RIGHT TO CANCEL You may cancel the Contract no later than 10 days after you receive it (or as otherwise allowed by state law) by returning it to the Company with a written notice of cancellation. We will produce a refund not later than seven days after we receive the Contract and the written notice at our Home Office. Cancellations requested after a customer receives the Contract will consist of a refund of the Purchase Payment. CHARGES AND DEDUCTIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DAILY DEDUCTIONS FROM THE SEPARATE ACCOUNT MORTALITY AND EXPENSE RISK CHARGE. The Company makes a daily deduction from each of the Subaccounts for the mortality and expense risk charge. The Charge is equal, on an annual basis, to 1.25% of the daily net assets of the Subaccounts and compensates the Company for the assumption of the mortality and expense risks under the Contract. Under the 1994 Contracts, the Company will reduce the charge to 1.15% provided one of the following conditions are met: (1) the Contract has remained in the Accumulation Period for 10 years following the initial Purchase Payment; or (2) if $250,000 or more is applied as the initial Purchase Payment; or (3) if the Contract's Value at the Contract Year anniversary is at least $250,000. The mortality risks are those assumed for our promise to make lifetime payments according to annuity rates specified in the Contract. The expense risk is the risk that the actual expenses for costs incurred under the Contract will exceed the maximum costs that can be charged under the Contract. - -------------------------------------------------------------------------------- 4 If the amount deducted for mortality and expense risks is not sufficient to cover the mortality costs and expense shortfalls, the loss is borne by the Company. If the deduction is more than sufficient, the excess may be used to recover distribution expenses relating to the Contracts and as a source of profit to the Company. The Company expects to make a profit from the mortality and expense risk charge. ADMINISTRATIVE EXPENSE CHARGE. The Company reserves the right to make a deduction from each of the Subaccounts for an administrative expense charge. The administrative expense charge compensates the Company for administrative expenses that exceed revenues from the maintenance fee described below. The charge is set at a level which does not exceed the average expected cost of the administrative services to be provided while the Contract is in force. The Company does not expect to make a profit from this charge. Under the Contract, the amount of the administrative expense charge may be an amount equal, on an annual basis, to a maximum of 0.25% of the daily net assets of the Subaccounts. There is currently no administrative expense charge during the Accumulation Period or Annuity Period. Once an Annuity option is elected, the charge will be established and will be effective during the entire Annuity Period. MAINTENANCE FEE During the Accumulation Period, the Company will deduct an annual maintenance fee from the Contract Value. The maintenance fee is to reimburse the Company for some of its administrative expenses relating to the establishment and maintenance of the Contracts. The maintenance fee under the Contract is $25. The maintenance fee is determined annually based on the Contract Value on the last day of the Contract Year. For 1994 Contracts, if the Contract Value is $10,000 or greater, and for 1992 Contracts, if the initial Purchase Payment is $10,000 or greater, the annual maintenance fee is zero. The maintenance fee will be deducted on a pro rata basis from each Subaccount in which you have an interest. DEFERRED SALES CHARGE Withdrawals of all or a portion of the Contract Value may be subject to a deferred sales charge. The deferred sales charge is a percentage of the amount withdrawn from the Subaccounts and the Credited Interest Options in which you have an interest. As set forth in the tables below, the length of the deferred sales charge schedule will vary depending on the type of Contract. SCHEDULE A applies to 1994 Internal Rollover Contracts established with amounts that were transferred or rolled over from an existing Contract issued by the Company where you have participated under a pension or profit sharing retirement plan or a tax-deferred annuity plan, and to 1992 Internal Rollover Contracts established with amounts transferred from such contracts only where you have not been subject to a deferred sales charge under the prior contract. It also applies to all Contracts established with amounts that were transferred from an existing contract issued by Aetna Life Insurance Company (one of our affiliates) and all sales of the Contract in New York. The deferred sales charge is based on the number of completed Contract Years since the date of initial payment to the new Contract.
SCHEDULE A COMPLETED CONTRACT DEFERRED SALES YEARS CHARGE DEDUCTION ------------------- ---------------- Less than 1 1% 1 or more 0%
SCHEDULE B applies to 1992 Internal Rollover Contracts established with amounts that were transferred from an existing Contract issued by the Company where the Contract Holder has been, or still is, subject to a deferred sales charge. The beginning deferred sales charge is based on the number of completed Contract Years since the initial payment to the predecessor Contract.
SCHEDULE B COMPLETED CONTRACT DEFERRED SALES YEARS CHARGE DEDUCTION ---------------------------------------- ---------------- Less than 5 5% 5 or more but less than 6 4% 6 or more but less than 7 3% 7 or more but less than 8 2% 8 or more but less than 9 1% 9 or more 0%
SCHEDULE C applies to 1994 Internal Rollover Contracts established with amounts that were transferred from an IRA or SEP Contract issued by us where you have been, or still are, subject to a deferred sales charge. The Contract Holder enters the deferred sales charge - -------------------------------------------------------------------------------- 5 schedule at the percentage point corresponding to the deferred sales charge applicable under the predecessor contract at the time of the exchange, and continues from that point in the Schedule. Schedule C also applies to all new purchases that are not connected with an internal transfer (i.e., external rollovers or Contracts established with at least a $1,000 annual Purchase Payment).
SCHEDULE C COMPLETED CONTRACT DEFERRED SALES YEARS CHARGE DEDUCTION ---------------------------------------- ---------------- Less than 2 6% 2 or more but less than 3 5% 3 or more but less than 4 4% 4 or more but less than 5 3% 5 or more but less than 6 2% 6 or more but less than 7 1% 7 or more 0%
A deferred sales charge will not be deducted from any portion of the Contract Value if the withdrawal is: - - applied to provide Annuity benefits; - - paid due to your death; - - withdrawn due to the election of an Additional Withdrawal Option (see "Additional Withdrawal Options"); - - paid where the Contract Value is $2,500 or less and no amount has been withdrawn from that Contract, within the prior 12 months; - - paid in an amount of 10% or less of the current Contract Value. This applies only to the first partial withdrawal in each calendar year and does not apply to full withdrawals, except for Contracts issued in the states of Washington, Florida and New Jersey. The 10% amount will be calculated using the Contract Value on the date the request is received in good order at our Home Office. When an Additional Withdrawal Option is elected, this provision includes any amounts paid under that election. This provision is available only if you are at least age 59 1/2. The deduction for the deferred sales charge will not exceed 8.5% of the total Purchase Payments actually made to the Contract. The Company does not anticipate that the deferred sales charge will cover all sales and administrative expenses which it incurs in connection with the Contract. The difference will be covered by the general assets of the Company, which are attributable, in part, to mortality and expense risk charges under the Contract described above. FUND EXPENSES Each Fund incurs certain expenses which are paid out of its net assets. These expenses include, among other things, the investment advisory or "management" fee. The expenses of the Funds are set forth in the Fee Table in this Prospectus and described more fully in the accompanying Fund prospectuses. PREMIUM AND OTHER TAXES Several states and municipalities impose a premium tax on annuities. These taxes currently range from 0% to 4%. The Company reserves the right to deduct premium tax against Purchase Payments or Contract Values at any time, but no earlier than when we have a tax liability under state law. The Company's current practice is to deduct for premium taxes at the time of complete withdrawal or annuitization. In addition to the premium tax, the Company reserves the right to assess a charge for any state or federal taxes due against the Contract or the Separate Account assets. (See "Tax Status.") Any municipal premium tax assessed at a rate in excess of 1% will be deducted from the Purchase Payment(s) or from the amount applied to an Annuity Option based upon our determination of when such tax is due. We will absorb any municipal premium tax that is assessed at 1% or less. We reserve the right, however, to reflect this added expense in our annuity purchase rates for residents of such municipalities. CONTRACT VALUATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CONTRACT VALUE Until the Annuity Date, the Contract Value is the total dollar value of amounts held in your Account as of any Valuation Date. The Contract Value at any given time is based on the value of the units held in each Subaccount, plus the value of amounts held in any of the Credited Interest Options. - -------------------------------------------------------------------------------- 6 ACCUMULATION UNITS The value of your interest in a Subaccount is expressed as the number of "Accumulation Units" that you hold multiplied by an "Accumulation Unit Value" (or "AUV") for each unit. The AUV on any Valuation Date is determined by multiplying the value on the immediately preceding Valuation Date by the net investment factor of that Subaccount for the period between the immediately preceding Valuation Date and the current Valuation Date. (See "Net Investment Factor" below.) The Accumulation Unit Value will be affected by the investment performance, expenses and charges of the applicable Fund and is reduced each day by a percentage that accounts for the daily assessment of mortality and expense risk charges and the administrative charge (if any). Initial Purchase Payments will be credited to your Contract as described under "Purchase Payments." Each subsequent Purchase Payment (or amount transferred) will be credited to your Contract at the AUV computed on the next Valuation Date following our receipt of your payment or transfer request. The value of an Accumulation Unit may increase or decrease. NET INVESTMENT FACTOR The net investment factor is used to measure the investment performance of a Subaccount from one Valuation Date to the next. The net investment factor for a Subaccount for any valuation period is equal to the sum of 1.0000 plus the net investment rate. The net investment rate equals: (a) the net assets of the Fund held by the Subaccount on the current Valuation Date, minus (b) the net assets of the Fund held by the Subaccount on the preceding Valuation Date, plus or minus (c) taxes or provisions for taxes, if any, attributable to the operation of the Subaccount; (d) divided by the total value of the Subaccount's Accumulation and Annuity Units on the preceding Valuation Date; (e) minus a daily charge at the annual effective rate of 1.25% (or 1.15%, as applicable) for mortality and expense risks and up to 0.25% as an administrative expense charge (currently 0%). The net investment rate may be either positive or negative. TRANSFERS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- At any time prior to the Annuity Date, you can transfer amounts held under your Contract from one Subaccount to another. Transfers between the Credited Interest Options and the Subaccounts are subject to certain restrictions. (See Appendices I, II and III.) A request for transfer can be made either in writing or by telephone. The telephone transfer privilege is available automatically; no special election is necessary. All transfers must be in accordance with the terms of the Contract. The Company currently allows unlimited transfers of accumulated amounts to available investment options without charge. However, the Company reserves the right to impose an additional fee if more than 12 such changes are made in any calendar year. The total number of investment options that you may select during the Accumulation Period may be limited, as set forth on your application. Additionally, 1994 Contracts provide that no more than ten investment choices may be selected at any given time. Any transfer will be based on the Accumulation Unit Value next determined after the Company receives a valid transfer request at its Home Office. Transfers are currently not available during the Annuity Period; however, they may be available under some Annuity Options beginning later in 1996. (See "Annuity Period--Annuity Options.") DOLLAR COST AVERAGING PROGRAM For 1994 Contracts, you may establish automated transfers of Funds from one Subaccount to another Subaccount on a monthly basis through the Company's Dollar Cost Averaging Program. Dollar Cost Averaging is a system for investing a fixed amount of money at regular intervals over a period of time. Dollar Cost Averaging does not ensure a profit nor guarantee against loss in a declining market. You should consider your financial ability to continue purchases through periods of low price levels. Please refer to the "Inquiries" section of the prospectus summary which describes how you can obtain further information. - -------------------------------------------------------------------------------- 7 WITHDRAWALS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- All or a portion of the Contract Value may be withdrawn at any time during the Accumulation Period. To request a withdrawal, you must properly complete a disbursement form and send it to our Home Office. Payments for withdrawal requests will be made in accordance with SEC requirements, but normally not later than seven calendar days following our receipt of a disbursement form. Withdrawals may be requested in one of the following forms: - -FULL WITHDRAWAL OF THE CONTRACT: The amount paid for a full withdrawal will be the Contract Value allocated to the Subaccounts, the Guaranteed Interest Account, the Guaranteed Accumulation Account (plus or minus a market value adjustment) (see Appendix III), and the Fixed Account, minus any applicable deferred sales charge. - -PARTIAL WITHDRAWALS (Percentage): The amount paid will be the percentage of the Contract Value requested minus any applicable deferred sales charge. - -PARTIAL WITHDRAWAL (Specified Dollar Amount): The amount paid will be the dollar amount requested. However, the amount withdrawn from the Contract will equal the amount requested plus any applicable deferred sales charge. For any partial withdrawal, amounts will be withdrawn proportionately from each Subaccount or Credited Interest Option in which the Account is invested, unless you request otherwise in writing. All amounts paid will be based on the Contract Value as of the next Valuation Date after we receive a request for withdrawal at our Home Office, or on such later date as the disbursement form may specify. REINVESTMENT PRIVILEGE You may elect to reinvest all or a portion of the proceeds received from a full withdrawal of your Contract within 30 days after such withdrawal has been made. Accumulation Units will be credited to the Contract for the amount reinvested, as well as any applicable maintenance fee and any deferred sales charge imposed at the time of withdrawal. Any maintenance fee which falls due after the withdrawal and before the reinvestment will be deducted from the amounts reinvested. Reinvested amounts will be reallocated to the applicable investment options in the same proportion as they were allocated at the time of withdrawal. Accumulation Units will be credited to your Contract based on the Accumulation Unit Value next computed following our receipt of your request along with the amount to be reinvested. The reinvestment privilege may be used only once. For a discussion of amounts withdrawn from GIA and GAA and then reinvested see Appendices I and III, respectively. If you are contemplating reinvestment, you should seek competent advice regarding the tax consequences associated with such a transaction. ADDITIONAL WITHDRAWAL OPTIONS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Company offers certain withdrawal options under the Contract that are not considered Annuity Options ("Additional Withdrawal Options"). To exercise these options, your Contract Value must meet the minimum dollar amounts and age criteria applicable to that option. The Additional Withdrawal Options currently available under the Contract include the following: - -SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of partial withdrawals from your Contract based on a payment method you select. It is designed for those who want a periodic income while retaining investment flexibility for amounts accumulated under a Contract. The first distribution may not be made before you attain age 59 1/2. - -ECO--ESTATE CONSERVATION OPTION. ECO offers the same investment flexibility as SWO but is designed for those who want to receive only the minimum distribution that the Code requires each year. Under ECO, the Company calculates the minimum distribution amount required by law at age 70 1/2, and pays you that amount once a year. (See "Tax Status.") Other Additional Withdrawal Options may be added from time to time. Additional information relating to any of the Additional Withdrawal Options may be obtained from your local representative or from the Company at its Home Office. If you select one of the Additional Withdrawal Options, you will retain all of the rights and flexibility - -------------------------------------------------------------------------------- 8 permitted under the Contract during the Accumulation Period. Your Contract Value will continue to be subject to the charges and deductions described in this Prospectus. Once you elect an Additional Withdrawal Option, you may revoke it any time by submitting a written request to our Home Office. Once an option is revoked, it may not be elected again, nor may any other Additional Withdrawal Option be elected unless permitted by the Code. The Company reserves the right to discontinue the availability of one or all of these Additional Withdrawal Options at any time, and/or to change the terms of future elections. DEATH BENEFIT DURING ACCUMULATION PERIOD - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Contract provides that a death benefit is payable to the Beneficiary(ies) upon your death before the Annuity Date. The amount of the death benefit will be equal to the Contract Value. Death benefit proceeds may be paid to the Beneficiary: - - in a lump sum; - - in accordance with any of the Annuity Options available under the Contract; or - - under any Additional Withdrawal Options available under the Contract (if the Beneficiary is your spouse). The Beneficiary may instead elect one of the following two options; however, the Code limits how long the death benefit proceeds may be left in these options (see below): - - to leave the Contract Value invested in the Contract; or - - to leave the Contract Value on deposit in the Company's general account, and to receive monthly, quarterly, semi-annual or annual interest payments at the interest rate then being credited on such deposits. The balance on deposit can be withdrawn at any time or applied to an Annuity Option. When paying the Beneficiary, we will determine the Contract Value on the Valuation Date following the date on which we receive proof of death acceptable to the Company. Interest, if any, will be paid from the date of death at a rate no less than required by law. We will mail payment to the Beneficiary within seven days after we receive proof of death. The Code requires that distribution of death proceeds begin within a certain period of time. Generally, either payments must begin by December 31 of the year following the year of your death, or the entire value of your benefits must be distributed by December 31 of the fifth year following the year of your death. If your Beneficiary is your spouse, he or she is not required to begin distributions until the year you would have attained age 70 1/2. In no event may payments extend beyond the life expectancy of the Beneficiary or any period greater than the Beneficiary's life expectancy. If no elections are made, no distributions will be made. Failure to commence distributions within the above time periods can result in tax penalties. Regardless of the method of payment, death benefit proceeds will generally be taxed to the Beneficiary in the same manner as if you had received those payments. (See "Tax Status.") ANNUITY PERIOD - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ANNUITY PERIOD ELECTIONS The Code generally requires that minimum annual distributions of the Contract Value must begin by April 1st of the calendar year following the calendar year in which you attain age 70 1/2. In addition, distributions must be in a form and amount sufficient to satisfy the Code requirements. These requirements may be satisfied by the election of certain Annuity Options or Additional Withdrawal Options. (See "Tax Status.") At least 30 days prior to the Annuity Date, you must notify us in writing of the following: - - the date on which you would like to start receiving Annuity payments; - - the Annuity Option under which you want your payments to be calculated and paid; - - whether the payments are to be made monthly, quarterly, semi-annually or annually; and - - the investment option(s) used to provide Annuity payments (i.e., a fixed annuity using the general account or any of the Subaccounts available at the time of annuitization). As of the date of this Prospectus, - -------------------------------------------------------------------------------- 9 Aetna Variable Fund, Aetna Income Shares and Aetna Investment Advisers Fund, Inc. are the only Subaccounts available; however, additional Subaccounts may be available under some Annuity Options in the future. (See "Annuity Options" below.) Annuity Payments will not begin until you have selected an Annuity Option. Until a date and option are elected, the Contract will continue in the Accumulation Period. Once Annuity Payments begin, the Annuity Option may not be changed, nor may transfers currently be made among the investment option(s) selected. (See "Annuity Options" below for more information about transfers during the Annuity Period.) ANNUITY OPTIONS You may choose one of the following Annuity Options: LIFETIME ANNUITY OPTIONS: - -OPTION 1--Life Annuity.--An Annuity with payments ending on the Annuitant's death. - -OPTION 2--Life Annuity with Guaranteed Payments-- An Annuity with payments guaranteed for 5, 10, 15 or 20 years, or such other periods as the Company may offer at the time of annuitization. - -OPTION 3--Life Income based Upon the Lives of Two Payees--An Annuity will be paid during the lives of the Annuitant and a second Annuitant, with 100%, 66 2/3% or 50% of the payment to continue after the first death, or 100% of the payment to continue at the death of the second Annuitant and 50% of the payment to continue at the death of the Annuitant. - -OPTION 4--Life Income based Upon the Lives of Two Payees--An annuity with payments for a minimum of 120 months, with 100% of the payment to continue after the first death. If Option 1 or 3 is elected, it is possible that only one Annuity payment will be made if the Annuitant under Option 1, or the surviving Annuitant under Option 3, should die prior to the due date of the second Annuity payment. Once lifetime Annuity payments begin, the Annuitant cannot elect to receive a lump-sum settlement. NONLIFETIME ANNUITY OPTIONS: - -OPTION 1--Payments for a Specified Period--payments will continue for a specified period of time, as provided for under your Contract. An Annuity may be selected on a fixed or variable basis and payments may be made for the number of years specified in your Contract: 3-30 years for 1992 Contracts, 5-30 years for 1994 Contracts. If this option is elected on a variable basis, the Annuitant may request at any time during the payment period that the present value of all or any portion of the remaining variable payments be paid in one sum. However, any lump-sum elected before five years of payments for 1994 Contracts, or 3 years of payments for 1992 Contracts, have been completed will be treated as a withdrawal during the Accumulation Period and any applicable deferred sales charge will be assessed. (See "Charges and Deductions--Deferred Sales Charge.") The nonlifetime option is not available on a variable basis under a Contract which provides for immediate Annuity benefits. We may also offer additional Annuity Options under your Contract from time to time. The Company expects to offer additional Annuity Options and enhanced versions of the Annuity Options listed above at some time during 1996. These additional Annuity Options and enhanced versions of the existing options will have additional Subaccounts available and will allow transfers between Subaccounts during the Annuity Period. (Additional Subaccounts and transfer capability are expected during the second half of 1996.) Such additional or enhanced options will be made available by an endorsement to the Contract, which will include the guaranteed annuity payout rates and other terms applicable to such options. (Depending on which guaranteed payout rates apply to the existing options, guaranteed payout rates for the new and enhanced options will be the same or lower.) Please refer to the Contract, or call the number listed in the "Inquiries" section of the Prospectus Summary, to determine which options are available and the terms of such options. It is not expected that these additional or enhanced options will be made available to those who have already commenced receiving Annuity Payments. ANNUITY PAYMENTS DATE PAYOUTS START. When payments start, the age of the Annuitant plus the number of years for which payments are guaranteed must not exceed 95. Annuity payments may not extend beyond (a) the life of the Annuitant, (b) the joint lives of the Annuitant and Beneficiary, (c) a period certain greater than the Annuitant's life expectancy, or (d) a period greater than the joint life expectancies of the Annuitant and Beneficiary. - -------------------------------------------------------------------------------- 10 AMOUNT OF EACH ANNUITY PAYMENT. The amount of each payment depends on how you allocate your Contract Value between fixed and variable payouts. No election may be made that would result in a first Annuity payment of less than $50 or total yearly Annuity payments of less than $250 for 1994 Contracts, and a first Annuity payment of less than $20 or total yearly Annuity payments of less than $100 for 1992 Contracts. If your Contract Value on the Annuity Date is insufficient to elect an option for the minimum amount specified, a lump-sum payment must be elected. If Annuity payments are to be made on a variable basis, the first and subsequent payments will vary depending on the assumed net investment rate selected (3 1/2% or 5% per annum). Selection of a 5% rate causes a higher first payment, but Annuity payments will increase thereafter only to the extent that the net investment rate exceeds 5% on an annualized basis. Annuity payments would decline if the rate were below 5%. Use of the 3 1/2% assumed rate causes a lower first payment, but subsequent payments would increase more rapidly or decline more slowly as changes occur in the net investment rate. (See the Statement of Additional Information for further discussion on the impact of selecting an assumed net investment rate.) CHARGES DEDUCTED DURING THE ANNUITY PERIOD We make a daily deduction for mortality and expense risks from any amounts held on a variable basis. Therefore, electing the nonlifetime option on a variable basis will result in a deduction being made even though we assume no mortality risk. We may also deduct a daily administrative charge from amounts held under the variable options. (See "Charges and Deductions.") DEATH BENEFIT PAYABLE DURING THE ANNUITY PERIOD If an Annuitant dies after Annuity payments have begun, any death benefit payable will depend on the terms of the Contract and the Annuity Option selected. If Option 1 or Option 3 was elected, Annuity payments will cease on the death of the Annuitant under Option 1 or the death of the surviving Annuitant under Option 3. If Lifetime Option 2 or Option 4 was elected and the death of the Annuitant under Option 2, or the surviving Annuitant under Option 4, occurs prior to the end of the guaranteed minimum payment period, we will pay to the Beneficiary in a lump sum, unless otherwise requested, the present value of the guaranteed annuity payments remaining. If the nonlifetime option was elected, and the Annuitant dies before all payments are made, the value of any remaining payments will be paid in a lump-sum to the Beneficiary (unless otherwise requested), and no deferred sales charge will be imposed. If the Annuitant dies after Annuity payments have begun and if there is a death benefit payable under the Annuity Option elected, the remaining value must be distributed to the Beneficiary at least as rapidly as under the original method of distribution. Any lump-sum payment paid under the applicable lifetime or nonlifetime Annuity Options will be made within seven calendar days after proof of death acceptable to us, and a request for payment are received at our Home Office. The value of any death benefit proceeds will be determined as of the next Valuation Date after we receive acceptable proof of death and a request for payment. Under Options 2 and 4, such value will be reduced by any payments made after the date of death. TAX STATUS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INTRODUCTION The following provides a general discussion and is not intended as tax advice. This discussion reflects the Company's understanding of current federal income tax law. Such laws may change in the future, and it is possible that any change could be retroactive (i.e., effective prior to the date of the change). The Company makes no guarantee regarding the tax treatment of any Contract or transaction involving a Contract. The ultimate effect of federal income taxes on the amounts held under a Contract, on Annuity payments, and on the economic benefit to the Contract Holder, Annuitant or Beneficiary may depend upon the tax status of the individual concerned. Any person concerned about these tax implications should consult a competent tax adviser before initiating any transaction. - -------------------------------------------------------------------------------- 11 TAXATION OF THE COMPANY The Company is taxed as a life insurance company under the Code. Since the Separate Account is not an entity separate from the Company, it will not be taxed separately as a "regulated investment company" under the Code. Investment income and realized capital gains are automatically applied to increase reserves under the Contracts. Under existing federal income tax law, the Company believes that the Separate Account's investment income and realized net capital gains will not be taxed to the extent that such income and gains are applied to increase the reserves under the Contracts. The Company does not anticipate that it will incur any federal income tax liability attributable to the Separate Account and, therefore, the Company does not intend to make provisions for any such taxes. However, if changes in the federal tax laws or interpretation thereof result in the Company being taxed on income or gains attributable to the Separate Account, then the Company may impose a charge against the Separate Account (with respect to some or all Contracts) in order to set aside provisions to pay such taxes. CONTRACTS USED WITH CERTAIN RETIREMENT PLANS IN GENERAL. The Contract is designed for use with retirement plans qualified under Sections 408(b) or 408(k) of the Code. The tax rules applicable to participants and beneficiaries in retirement plans vary according to the type of plan and the terms and conditions of the plan. The Company makes no attempt to provide more than general information about use of the Contracts with the various types of retirement plans. Some retirement plans are subject to limitations on distribution and other requirements that are not incorporated in the Contracts. Purchasers are responsible for determining that contributions, distributions and other transactions with respect to the Contracts satisfy applicable laws, and should consult their legal counsel and tax advisor regarding the suitability of the Contract. INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSION PLANS Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an "Individual Retirement Annuity" or "Individual Retirement Account" (each hereinafter referred to as an "IRA"). Also, distributions from certain other types of qualified plans may be "rolled over" on a tax-deferred basis into an IRA. Employers may establish Simplified Employee Pension (SEP) Plans and make contributions to an IRA on behalf of their employees. The sale of a Contract for use with an IRA requires special disclosure mandated by the Internal Revenue Code, and purchasers of an IRA Contract will be provided with supplemental information as required by the Code. (See Appendix IV.) Such purchasers will have the right to revoke their purchase within seven days of the earlier of the establishment of the IRA or their purchase. A Contract issued as an IRA will be amended as necessary to conform to the requirements of the Code. Purchasers should seek competent advice as to the suitability of the Contract as an IRA. TAXATION OF DISTRIBUTIONS. All distributions will be taxed as ordinary income unless nondeductible contributions were made to the IRA or the distribution is "rolled over" to another retirement plan in accordance with the terms of the Code. If amounts are withdrawn before age 59 1/2, the payment is subject to a 10% penalty unless the payment is due to disability, is rolled over to another IRA or is part of a series of payments over your (or your Beneficiary's) life or life expectancy. Distributions are generally subject to withholding for the recipient's federal income tax liability at rates that vary according to the type of distribution and the recipient's tax status. Recipients generally are provided the opportunity to elect not have tax withheld from distributions. In general, payments received by your Beneficiaries after your death are taxed in the same manner as if you have received those payments, except that a limited death benefit exclusion may apply. The Code imposes a 10% penalty tax on the taxable portion of any distribution from an IRA unless made when (a) you have attained age 59 1/2, (b) you have become disabled as defined by the Code, (c) the distribution amount is rolled over in accordance with the terms of the Code, or (d) paid in a series of substantially equal periodic payments. The Code may impose other penalty taxes in other circumstances. This Contract has been approved by the IRS as a prototype IRA. The IRS approval, however, only pertains to whether the Contract meets the Code requirements for IRAs and is not a determination of the merits of the Contract. - -------------------------------------------------------------------------------- 12 MISCELLANEOUS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- DISTRIBUTION The Company will serve as the principal underwriter for the securities sold by this Prospectus. The Company is registered as a broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers, Inc. (NASD). As underwriter, the Company will contract with one or more registered broker-dealers ("Distributors"), including at least one affiliate of the Company, to offer and sell the Contracts. All persons offering and selling the Contracts must be registered representatives of the Distributors and must also be licensed as insurance agents to sell variable annuity contracts. These registered representatives may also provide services to Contract Holders in connection with their Contract. PAYMENT OF COMMISSIONS. Persons offering and selling the Contracts may receive commissions in connection with the sale of the Contracts. The maximum percentage amount that the Company will ever pay as commission with respect to any given Purchase Payment is with respect to those made during the first year of Purchase Payments under a Contract. The percentage amount will range from 2% to 4% of those Purchase Payments. The Company may also pay renewal commissions on Purchase Payments made after the first year and service fees. The average of all payments made by the Company is estimated to equal approximately 3% of the total Purchase Payments made over the life of an average Contract. The Company may also reimburse the Distributor for certain expenses. The name of the Distributor and the registered representative responsible for your Contract are set forth in your application. Commissions and sales related expenses are paid by the Company and are not deducted from Purchase Payments. (See "Charges and Deductions--Deferred Sales Charge.") DELAY OR SUSPENSION OF PAYMENTS The Company reserves the right to suspend or postpone the date of payment for any benefit or values (a) on any Valuation Date on which the New York Stock Exchange ("Exchange") is closed (other than customary weekend and holiday closings) or when trading on the Exchange is restricted; (b) when an emergency exists, as determined by the SEC, so that disposal of securities held in the Subaccounts is not reasonably practicable or is not reasonably practicable for the value of the Subaccount's assets; or (c) during such other periods as the SEC may by order permit for the protection of investors. The conditions under which restricted trading or an emergency exists shall be determined by the rules and regulations of the SEC. PERFORMANCE REPORTING From time to time, the Company may advertise different types of historical performance for the Subaccounts of the Separate Account. The Company may advertise the "standardized average annual total returns" of the Subaccounts, calculated in a manner prescribed by the SEC, as well as the "non-standardized returns." "Standardized average annual total returns" are computed according to a formula in which a hypothetical investment of $1,000 is applied to the Subaccount and then related to the ending redeemable values over the most recent one, five and ten-year periods (or since inception, if less than ten years). Standardized returns will reflect the reduction of all recurring charges during each period (e.g., mortality and expense risk charges, annual maintenance fees, administrative expense charge (if any) and any applicable deferred sales charge.) "Non-standardized returns" will be calculated in a similar manner, except that non-standardized figures will not reflect the deduction of any applicable deferred sales charge (which would decrease the level of performance shown if reflected in these calculations). The non-standardized figures may also include monthly, quarterly, year-to-date and three-year periods. The Company may also advertise certain ratings, rankings or other information related to the Company, the Subaccounts or the Funds. Further details regarding performance reporting and advertising are described in the Statement of Additional Information. VOTING RIGHTS In accordance with the Company's view of present applicable law, it will vote the shares of each of the Funds held by the Separate Account at regular and special meetings of Fund shareholders in accordance with instructions received from persons having a voting interest in the Separate Account. The Company will vote shares for which it has not received instructions in the same proportion as it votes shares for which it has received instructions. Each person having a voting interest in the Separate Account will receive periodic reports relating to the - -------------------------------------------------------------------------------- 13 Fund(s) in which he or she has an interest, as well as any proxy materials and a form on which to give voting instructions. Voting instructions will be solicited by written communication at least 14 days before such meeting. The number of votes for which each person may give direction will be determined as of the record date set by the Fund. The number of votes that you may cast during the Accumulation Period is equal to the portion of the Contract Value allocated to that Fund, divided by the net asset value of one share of that Fund. During the Annuity Period, the number of votes is equal to the valuation reserve applicable to the portion of the Contract attributable to that Fund, divided by the net asset value of one share of that Fund. In determining the number of votes, fractional votes will be recognized. MODIFICATION OF THE CONTRACT The Company may modify the Contract when it deems an amendment appropriate, by providing you written notice 30 days before the effective date of the change. The most likely reason for a change to the Contract would be to ensure compliance with applicable law. Certain changes will require the approval of appropriate state or federal regulatory authorities. LEGAL MATTERS AND PROCEEDINGS The Company knows of no material legal proceedings pending to which the Separate Account or the Company is a party or which would materially affect the Separate Account. The validity of the securities offered by this Prospectus has been passed upon by Susan E. Bryant, Esq., Counsel to the Company. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Statement of Additional Information contains more specific information on the Separate Account and the Contract, as well as the financial statements of the Separate Account and the Company. A list of the contents of the SAI is set forth below. General Information and History Variable Annuity Account C Offering and Purchase of Contracts Performance Data General Average Annual Total Return Quotations Annuity Payments Sales Material and Advertising Independent Auditors Financial Statements of the Separate Account Financial Statements of Aetna Life Insurance and Annuity Company - -------------------------------------------------------------------------------- 14 APPENDIX I GUARANTEED INTEREST ACCOUNT (AVAILABLE IN ALL STATES EXCEPT WASHINGTON, NEW YORK AND NEW JERSEY) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE GUARANTEED INTEREST ACCOUNT ("GIA") IS AN INVESTMENT OPTION AVAILABLE DURING THE ACCUMULATION PERIOD. AMOUNTS ALLOCATED TO SHORT-TERM CLASSIFICATIONS OF GIA ARE HELD IN THE COMPANY'S GENERAL ACCOUNT THAT SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. AMOUNTS ALLOCATED TO LONG-TERM CLASSIFICATIONS OF GIA ARE HELD IN A NONINSULATED, NONUNITIZED SEPARATE ACCOUNT. INTERESTS IN GIA HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON EXEMPTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THIS PROSPECTUS REGARDING GIA, MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE GUARANTEED INTEREST ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC. GIA is a Credited Interest Option under which we guarantee stipulated rates of interest for stated periods of time. Interest is credited daily at a rate that will provide the guaranteed effective yield by the end of the stated period of time. During a stated period of time, amounts may be applied to any or all available Guaranteed Terms within the Short-Term and Long-Term Classifications. The Short-Term Classification consists of all Guaranteed Terms of 3 years or less and the Long-Term Classification consists of all Guaranteed Terms of 10 years or less, but greater than 3 years. As long as amounts are not withdrawn before the end of a stated term, we will pay the guaranteed rate of interest. If amounts are withdrawn or transferred before the end of a stated period of time, we will pay a reduced rate of interest, but never less than the minimum stated in the Contract. As a Guaranteed Term matures, assets accumulating under GIA may be (a) transferred to a new Guaranteed Term, (b) transferred to the other available investment options, or (c) withdrawn. Amounts withdrawn may be subject to a deferred sales charge and/or tax liabilities. MORTALITY AND EXPENSE RISK CHARGES We make no deductions from the credited interest rate for mortality and expense risks; these risks are considered in determining the credited interest rate. TRANSFERS AMONG INVESTMENT OPTIONS Transfers are permitted from Guaranteed Terms of one Classification to available Guaranteed Terms of another Classification. We will apply a reduced rate of interest to amounts transferred prior to the end of a Guaranteed Term. Transfers of GIA values due to a maturity are not subject to a reduced rate of interest. By notifying us at our Home Office at least 30 days before Annuity payments begin, you may elect to have amounts that have been accumulating under GIA transferred to one or more of the Subaccounts currently available during the Annuity Period to provide variable Annuity payments. GIA cannot be used as an investment option during the Annuity Period. REINVESTMENT PRIVILEGE Any amounts reinvested in GIA will be applied to the current deposit period. Amounts are proportionately reinvested to the classifications in the same manner as they were allocated before the withdrawal. - -------------------------------------------------------------------------------- 15 APPENDIX II FIXED ACCOUNT (AVAILABLE IN ALL STATES EXCEPT NEW YORK) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE FOLLOWING SUMMARIZES MATERIAL INFORMATION CONCERNING THE FIXED ACCOUNT. AMOUNTS ALLOCATED TO THE FIXED ACCOUNT ARE HELD IN THE COMPANY'S GENERAL ACCOUNT THAT SUPPORTS GENERAL INSURANCE AND ANNUITY OBLIGATIONS. INTERESTS IN THE FIXED ACCOUNT HAVE NOT BEEN REGISTERED WITH THE SEC IN RELIANCE ON EXEMPTIONS UNDER THE SECURITIES ACT OF 1933, AS AMENDED. DISCLOSURE IN THE PROSPECTUS REGARDING THE FIXED ACCOUNT, MAY, HOWEVER, BE SUBJECT TO CERTAIN GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY AND COMPLETENESS OF SUCH STATEMENTS. DISCLOSURE IN THIS APPENDIX REGARDING THE FIXED ACCOUNT HAS NOT BEEN REVIEWED BY THE SEC. The Fixed Account guarantees the minimum interest rate specified in the Contract. These minimum interest rates cannot be changed by the Company; however, the Company may credit a higher interest rate from time to time. Amounts applied to the Fixed Account will earn the interest rate in effect when actually applied to the Fixed Account. Under the Fixed Account, the Company assumes the risk of investment gain or loss by guaranteeing Contract Values and promising a minimum interest rate and Annuity Payment. The Company's determination of interest rates reflects the investment income earned on invested assets and the amortization of any capital gains and/or losses realized on the sale of invested assets. The Fixed Account will reflect a compound interest rate credited by us. The interest rate quoted is an annual effective yield. Under certain emergency conditions, we may defer payment of a Fixed Account withdrawal value for a period of up to six months, or as provided by federal law. The Fixed Account withdrawal value may be paid in equal payments, with interest, over a period not to exceed 60 months when: (a) the amount held in the Fixed Account under this Contract exceeds $100,000 ($250,000 on 1992 Contracts) on the day prior to the current withdrawal; and (b) the sum of the current Fixed Account withdrawal and the total of all Fixed Account withdrawals from the Contract within the past 12 calendar months exceeds 20% of the amount in the Fixed Account on the day prior to the current withdrawal. Interest rates, as used above, will not be more than two percentage points below any rate determined prospectively by the Board of Directors for this class of Contract. In no event will the interest rate be less than the minimum stated in the Contract. MORTALITY AND EXPENSE RISK CHARGES We make no deductions from the credited interest rate for mortality and expense risks; these risks are considered in determining the credited rate. TRANSFERS AMONG INVESTMENT OPTIONS Transfers from the Fixed Account to any other available investment option(s) are allowed in each calendar year during the Accumulation Period. The amount which may be transferred may vary at our discretion; however, it will never be less than 10% of the amount held under the Fixed Account. Additionally, any remaining balance in the Fixed Account under the Contract may be transferred by you in its entirety to any other investment option(s) if: (a) the Current Value in the Fixed Account is $2,000 or less; or (b) the maximum percentage allowed was transferred from the Fixed Account in each of the four consecutive calendar years and no additional Net Purchase Payment(s) have been allocated to the Fixed Account during that same time period. - -------------------------------------------------------------------------------- 16 By notifying us at our Home Office at least 30 days before Annuity Payments begin, you may elect to have amounts which have been accumulating under the Fixed Account transferred to one or more of the Subaccounts available during the Annuity Period to provide variable Annuity Payments. - -------------------------------------------------------------------------------- 17 APPENDIX III GUARANTEED ACCUMULATION ACCOUNT (OFFERED IN NEW YORK ONLY) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE GUARANTEED ACCUMULATION ACCOUNT ("GAA") IS A CREDITED INTEREST OPTION AVAILABLE DURING THE ACCUMULATION PERIOD. AMOUNTS ALLOCATED TO LONG-TERM CLASSIFICATIONS OF GAA ARE HELD IN A NONINSULATED, NONUNITIZED SEPARATE ACCOUNT. AMOUNTS ALLOCATED TO SHORT-TERM CLASSIFICATIONS OF GAA ARE HELD IN THE COMPANY'S GENERAL ACCOUNT. THIS APPENDIX IS A SUMMARY OF GAA AND IS NOT INTENDED TO REPLACE THE GAA PROSPECTUS. YOU SHOULD READ THE ACCOMPANYING GAA PROSPECTUS CAREFULLY BEFORE INVESTING. GAA is a Credited Interest Option in which we guarantee stipulated rates of interest for stated periods of time on amounts directed to GAA. This option guarantees the minimum interest rate specified in the Contract. The interest rate stipulated is an annual effective yield; that is, it reflects a full year's interest. Interest is credited daily at a rate that will provide the guaranteed annual effective yield for one year. During a specified period of time (the "deposit period"), amounts may be applied to any or all available Guaranteed Terms within the Short-Term and Long-Term classifications. Short-Term GAA has Guaranteed Terms from one to three years, and Long-Term GAA has Guaranteed Terms greater than three years but no more than ten years. Withdrawals or transfers from a Guaranteed Term before the end of that Guaranteed Term may be subject to a market value adjustment ("MVA"). An MVA reflects the change in the value of the investments due to changes in interest rates since the date of deposit. When interest rates increase after the date of deposit, the value of the investment decreases and the MVA is negative. Conversely, when interest rates decrease after the date of deposit, the value of the investment increases, and the MVA is positive. It is possible that a negative MVA could result in you receiving an amount which is less than the amount paid into GAA. As a Guaranteed Term matures, assets accumulating under GAA may be (a) transferred to a new Guaranteed Term, (b) transferred to other available investment options, or (c) withdrawn. Amounts withdrawn may be subject to a deferred sales charge and/or federal tax penalties. MORTALITY AND EXPENSE RISK CHARGES We make no deductions from the credited interest rate for mortality and expense risks; these risks are considered in determining the credited interest rate. TRANSFERS AMONG INVESTMENT OPTIONS Transfers are permitted among Guaranteed Terms. However, amounts applied to GAA may not be transferred to another Guaranteed Term of GAA, or to any other Subaccount or Credited Interest Option available under the Contract, during the deposit period or the 90 days after the close of the deposit period. We will apply an MVA to transfers made before the end of a Guaranteed Term, unless such transfer is due to the maturity of the Guaranteed Term. By notifying us at least 30 days prior to the Annuity Date, you may elect a Variable Annuity and have amounts that have been accumulating under GAA transferred to one or more of the Subaccounts available during the Annuity Period. GAA cannot be used as an investment option during the Annuity Period. REINVESTMENT PRIVILEGE If amounts are withdrawn from GAA and reinvested, they will be applied to the current deposit period. Amounts are proportionately reinvested in the same manner as they were allocated before the withdrawal. Any negative MVA amount applied to a withdrawal is not included in the reinvestment. - -------------------------------------------------------------------------------- 18 APPENDIX IV FEDERAL INCOME TAX SUMMARY FOR IRAS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This notice summarizes the federal income tax rules that apply to individual retirement annuity (IRA) contracts. Please remember that this information is subject to change at any time, special rules apply to many of the items summarized here and Aetna Life Insurance and Annuity Company (ALIAC) is not allowed to give you tax advice. For more information about federal income taxes and how they affect your IRA we suggest that you call the IRS (at the IRS Tax Forms number in your phone book) and ask for Publication 590 each year. This free publication will give you current information about the federal income tax aspects of payments to and from your IRA. You can also call your local IRS district office for general information. For specific advice about your income and estate taxes you should contact a qualified tax specialist. REVOCATION Federal tax regulations allow you to revoke the Contract within 7 days from when you receive it and have your contributions returned to you. If you want to revoke your contract within this time period, you may call ALIAC at 1-800-531-4547 or write to Aetna Life Insurance and Annuity Company, 151 Farmington Avenue, Hartford, Connecticut 06156-1258, Attention: IRA Customer Service. STATUTORY REQUIREMENTS The Contract is an individual retirement annuity contract as described in section 408(b) of the Internal Revenue Code. The Contract can be used for tax deduction purposes as an IRA and to accept contributions made under a simplified employee pension (SEP) plan. The money in your IRA is always fully vested, the Contract may not be transferred to anyone, you may not borrow money from it and you have full flexibility in making contributions. The Contract has been approved by the Internal Revenue Service as a prototype IRA. However, IRS approval only means that the Contract meets the federal tax requirements for an IRA and is not a determination of the merits of the Contract. CONTRIBUTION AND FEDERAL INCOME TAX DEDUCTION LIMITS As long as you have compensation for the year and will not be 70 1/2 years old or later during any part of the year, you may contribute up to the lesser of $2,000 or your taxable compensation to this or any other IRA each year. (You can set up another IRA for your non-working spouse and contribute as much as $2,250 in total, but no more than $2,000 to either IRA.) Contributions must be in the form of money (check or money order). You can't contribute stock or other property to the Contract. Contributions for a year can be made up to the due date for filing your federal tax return for that year, not including extensions. If you contribute an amount between January 1 and April 15 of any year, you must tell ALIAC which year the contribution is for. If you do not say otherwise, ALIAC must report the contribution to the IRS on behalf of the year in which it is received. Generally, you may take a deduction for the contributions you make to your IRA. However, if you or your spouse is covered by an employer retirement plan, you ability to deduct IRA contributions will depend on your income and filing status. IRS Publication 590 includes worksheets to help you figure the amount of your deductible contributions. If you cannot deduct any part of your contribution, you can still make the contributions on a nondeductible basis. But you will have to keep separate records if you make any nondeductible IRA contributions. ALIAC does not keep such records on your behalf. If you contribute more than the allowable limit for the year or make any contribution for the year in which you reach age 70 1/2 or any later year, you are subject to a penalty tax of 6% on the over-contributions for the year contributed and each following year that the excess contributions remain in the IRA. To avoid the penalty tax, you must withdraw the excess contributions and their earnings by the due date of your tax return for that year (including extensions). You can also withdraw any deductible or nondeductible contributions and earnings by such date. - -------------------------------------------------------------------------------- 19 Special contribution and deduction rules apply if your IRA is used as part of a SEP. Since a SEP is an employer-sponsored retirement arrangement, the maximum deductible contribution is the lesser of $30,000 or 15% of your compensation for the year. TAX STATUS OF CONTRACT EARNINGS Unless you engage in a prohibited transaction, the earnings in your IRA are not taxable until you receive them. But if you use the IRA to secure a loan or engage in any other prohibited transaction, the value of the IRA will lose its tax privileges and become taxable income for that year. In that case, you will owe regular taxes plus penalties on the amount involved in the prohibited transaction. DISTRIBUTIONS FROM YOUR IRA You can withdraw funds from your IRA any time subject to the terms of the Contract. Unless you have any nondeductible contributions in your IRA and records to back them up, all payments are subject to regular income tax in the year received. If you withdraw funds before age 59 1/2, the payment is also subject to a 10% penalty tax unless the payment is due to your disability as defined in the Code, rolled-over to another IRA or is part of a series of payments over your (or you and your Beneficiary's) life or life expectancy. There is no "averaging" or other special tax treatment available for payments from your IRA. And if the total retirement-type payments made to you in a given year exceed certain levels set by the Internal Revenue Code, you may owe an excise tax as well. You must start receiving "minimum distributions" once you reach age 70 1/2. These payments must start no later than the April 1st of the year after you reach age 70 1/2. Special rules are used to calculate the minimum distribution but such payment is roughly equivalent to the amount determined by dividing your IRA account balance by factors for your estimated life expectancy as set forth by the Code. If you do not take the minimum distribution once you reach age 70 1/2, you are subject to an excise tax of 50% of the funds you should have received but did not. ROLLOVERS You can roll-over funds from another IRA to this IRA or from this IRA to another IRA and defer paying federal income taxes on such distributions. However, rollovers must be completed within 60 days of receipt of funds and funds rolled over may not be rolled again to another IRA for 12 months. SPECIAL FORMS TO FILE If you make any nondeductible contributions to the IRA, you will have to file IRS Form 8606 for such year and in the year in which you receive payments from the IRA (to calculate the amount of such previously taxed funds being withdrawn as part of the distribution). If any excess contributions are made, you engage in a prohibited transaction, have an "excess distribution" or do not receive any minimum required distributions, you must file IRS Form 5329 to pay the applicable excise and penalty taxes. ALIAC does not prepare or file these forms on your behalf. - -------------------------------------------------------------------------------- 20 PLEASE ATTACH TO YOUR APPLICATION - -------------------------------------------------------------------------------- I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C INDIVIDUAL VARIABLE ANNUITY CONTRACT PROSPECTUS DATED MAY 1, 1996 FOR INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSION PLANS, AS WELL AS ALL CURRENT PROSPECTUSES PERTAINING TO THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACTS. - ------- PLEASE SEND AN ACCOUNT C STATEMENT OF ADDITIONAL INFORMATION (FORM NO. 75988(S)-2) DATED MAY 1, 1996. - -------------------------------------------------------------------------------- CONTRACT HOLDER'S SIGNATURE - -------------------------------------------------------------------------------- DATE 75988-2 (5/96) - -------------------------------------------------------------------------------- VARIABLE ANNUITY ACCOUNT C OF AETNA LIFE INSURANCE AND ANNUITY COMPANY - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1996 Individual Variable Annuity Contracts for Individual Retirement Annuities under Section 408(b) and Simplified Employee Pension Plans under Section 408(k) This Statement of Additional Information is not a prospectus and should be read in conjunction with the current prospectus for Variable Annuity Account C (the "Separate Account") dated May 1, 1996. A free prospectus is available upon request from the local Aetna Life Insurance and Annuity Company office or by writing to or calling: Aetna Life Insurance and Annuity Company Customer Service 151 Farmington Avenue Hartford, Connecticut 06156 1-800-531-4547 Read the prospectus before you invest. Terms used in this Statement of Additional Information shall have the same meaning as in the prospectus. TABLE OF CONTENTS Page ---- General Information and History. . . . . . . . . . . . . . . . . . . . . . 2 Variable Annuity Account C . . . . . . . . . . . . . . . . . . . . . . . . 2 Offering and Purchase of Contracts . . . . . . . . . . . . . . . . . . . . 3 Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Average Annual Total Return Quotations . . . . . . . . . . . . . . . . . . 4 Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Sales Material and Advertising . . . . . . . . . . . . . . . . . . . . . . 8 Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Financial Statements of the Separate Account . . . . . . . . . . . . . . . S-1 Financial Statements of Aetna Life Insurance and Annuity Company . . . . . F-1 GENERAL INFORMATION AND HISTORY Aetna Life Insurance and Annuity Company (the "Company") is a stock life insurance company which was organized under the insurance laws of the State of Connecticut in 1976. Through a merger, it succeeded to the business of Aetna Variable Annuity Life Insurance Company (formerly Participating Annuity Life Insurance Company organized in 1954). As of December 31, 1995, the Company had assets of $27.1 billion (subject to $25.5 billion of customer and other liabilities, $1.6 billion of shareholder equity) which includes $11 billion in assets held in the Company's separate accounts. The Company had $22 billion in assets under management, including $8 billion in its mutual funds. As of December 31, 1994, it ranked among the top 2% of all U.S. life insurance companies by size. The Company is a wholly owned subsidiary of Aetna Retirement Holdings, Inc., which is in turn a wholly owned subsidiary of Aetna Retirement Services, Inc. and an indirect wholly owned subsidiary of Aetna Life and Casualty Company. The Company is engaged in the business of issuing life insurance policies and annuity contracts in all states of the United States. The Company's Home Office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. In addition to serving as the principal underwriter and the depositor for the Separate Account, the Company is also a registered investment adviser under the Investment Advisers Act of 1940, and a registered broker-dealer under the Securities Exchange Act of 1934. The Company provides investment advice to several of the registered management investment companies offered as variable investment options under the Contracts funded by the Separate Account (see "Variable Annuity Account C" below). Other than the mortality and expense risk charges and administrative expense charge described in the prospectus, all expenses incurred in the operations of the Separate Account are borne by the Company. See "Charges and Deductions" in the prospectus. The Company receives reimbursement for certain administrative costs from some unaffiliated sponsors of the Funds used as funding options under the Contract. These fees generally range up to 0.25%. The assets of Separate Account are held by the Company. The Separate Account has no custodian. However, the Funds in whose shares the assets of the Separate Account are invested each have custodians, as discussed in their respective prospectuses. VARIABLE ANNUITY ACCOUNT C Variable Annuity Account C (the "Separate Account") is a separate account established by the Company for the purpose of funding variable annuity contracts issued by the Company. The Separate Account is registered with the Securities and Exchange Commission as a unit investment trust under the Investment Company Act of 1940, as amended. The assets of each of the Subaccounts of the Separate Account will be invested exclusively in shares of the Funds described in the Prospectus. Purchase Payments made under the Contract may be allocated to one or more of the Subaccounts. The Company may make additions to or deletions from available investment options as permitted by law. The availability of the Funds is subject to applicable regulatory authorization. Not all Funds are available in all jurisdictions or under all Contracts. The Funds currently available under the Contract are as follows: 2 Aetna Variable Fund Fidelity VIP Growth Portfolio Aetna Income Shares Fidelity VIP Overseas Portfolio Aetna Variable Encore Fund Janus Aspen Aggressive Growth Portfolio Aetna Investment Advisers Fund, Inc. Janus Aspen Balanced Portfolio Aetna Ascent Variable Portfolio Janus Aspen Growth Portfolio Aetna Crossroads Variable Portfolio Janus Aspen Short-Term Bond Portfolio Aetna Legacy Variable Portfolio Janus Aspen Worldwide Growth Portfolio Alger American Growth Portfolio Scudder International Portfolio Class A Shares Alger American Small Cap Portfolio TCI Growth Fidelity VIP II Contrafund Portfolio Fidelity VIP Equity-Income Portfolio Complete descriptions of each of the Funds, including their investment objectives, policies, risks and fees and expenses, are contained in the prospectuses and statements of additional information for each of the Funds. OFFERING AND PURCHASE OF CONTRACTS The Company is both the depositor and the principal underwriter for the securities sold by the prospectus. The Company offers the Contracts through life insurance agents licensed to sell variable annuities who are registered representatives of the Company or of other registered broker-dealers who have sales agreements with the Company. The offering of the Contracts is continuous. A description of the manner in which Contracts are purchased may be found in the prospectus under the section titled "Purchase" and "Contract Valuation." PERFORMANCE DATA GENERAL From time to time, the Company may advertise different types of historical performance for the Subaccounts of the Separate Account available under the Contracts. The Company may advertise the "standardized average annual total returns," calculated in a manner prescribed by the Securities and Exchange Commission (the "standardized return"), as well as "non-standardized returns," both of which are described below. The standardized and non-standardized total return figures are computed according to a formula in which a hypothetical initial Purchase Payment of $1,000 is applied to the various Subaccounts under the Contract, and then related to the ending redeemable values over one, five and ten year periods (or fractional periods thereof). The standardized figures reflect the deduction of all recurring charges during each period (e.g., mortality and expense risk charges, maintenance fees, administrative expense charges, and deferred sales charges). For the standardized figures, Table One reflects the deferred sales charge schedules shown in Schedule A of the Prospectus, Table Two reflects the schedule shown in Schedule B of the Prospectus and Table Three reflects the schedule shown in Schedule C of the Prospectus. These charges will be deducted on a pro rata basis in the case of fractional periods. The maintenance fee is converted to a percentage of assets based on the average account size under the Contracts described in the Prospectus. 3 The non-standardized figures will be calculated in a similar manner, except that they will not reflect the deduction of any applicable deferred sales charge (which would decrease the level of performance shown if reflected in these calculations). The non-standardized figures may also include monthly, quarterly, year-to-date and three-year periods. If a Fund was in existence prior to the date it became available under the Contract, standardized and non-standardized total returns may include periods prior to such date. These figures are calculated by adjusting the actual returns of the Fund to reflect the charges that would have been assessed under the Contract had that Fund been available under the Contract during that period. Investment results of the Funds will fluctuate over time, and any presentation of the Subaccounts' total return quotations for any prior period should not be considered as a representation of how the Subaccounts will perform in any future period. Additionally, the Contract Value upon redemption may be more or less than your original cost. AVERAGE ANNUAL TOTAL RETURN QUOTATIONS - STANDARDIZED AND NON-STANDARDIZED The tables below reflect the average annual standardized and non-standardized total return quotation figures for the periods ended December 31, 1995 for the Subaccounts under the Contract. For those Subaccounts where results are not available for the full calendar period indicated, the percentage shown is an average annual return since inception (denoted with an *). TABLE ONE CORRESPONDING WITH DEFERRED SALES CHARGE SCHEDULE A
--------------------------------------------------------------------------------------- FUND STANDARDIZED NON-STANDARDIZED INCEPTION DATE - ------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------- Aetna Variable Fund 29.16% 11.99% 12.18% 30.47% 10.31% 11.99% 12.18% 04/30/75 Aetna Income Shares 15.49% 8.39% 8.41% 16.65% 6.20% 8.39% 8.41% 06/01/78 Aetna Variable Encore Fund 3.58% 3.29% 4.81% 4.62% 3.03% 3.29% 4.81% 09/01/75 Aetna Investment Advisers Fund, Inc. 24.26% 10.39% 9.26% * 25.52% 10.18% 10.39% 9.26% * 06/23/89 Aetna Ascent Variable Portfolio 8.56% * n/a n/a 9.66% * n/a n/a n/a 07/03/95 Aetna Crossroads Variable Portfolio 7.43% * n/a n/a 8.52% * n/a n/a n/a 07/03/95 Aetna Legacy Variable Portfolio 5.09% * n/a n/a 6.15% * n/a n/a n/a 07/03/95 Alger American Growth Portfolio 33.19% 20.10% 17.85% * 34.54% 17.62% 20.10% 17.85% * 01/09/89 Alger American Small Cap Portfolio 40.94% 18.79% 20.82% * 42.37% 14.21% 18.79% 20.82% * 09/21/88 Fidelity VIP II Contrafund Portfolio 36.39% * n/a n/a 37.77% * n/a n/a n/a 01/03/95
4
--------------------------------------------------------------------------------------- FUND STANDARDIZED NON-STANDARDIZED INCEPTION DATE - ------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income Portfolio 31.95% 19.65% 11.79% * 33.28% 17.93% 19.65% 11.79% * 10/09/86 Fidelity VIP Growth Portfolio 32.21% 19.13% 13.27% * 33.55% 15.73% 19.13% 13.27% * 10/09/86 Fidelity VIP Overseas Portfolio 7.12% 6.56% 5.81% * 8.20% 13.55% 6.56% 5.81% * 01/28/87 Janus Aspen Aggressive Growth Portfolio 24.53% 25.83% * n/a 25.78% 25.83% * n/a n/a 09/13/93 Janus Aspen Balanced Portfolio 21.90% 12.34% * n/a 23.13% 12.34% * n/a n/a 09/13/93 Janus Aspen Growth Portfolio 27.13% 13.62% * n/a 28.41% 13.62% * n/a n/a 09/13/93 Janus Aspen Short-Term Bond Portfolio 6.99% 3.15% * n/a 8.07% 3.15% * n/a n/a 09/13/93 Janus Aspen Worldwide Growth Portfolio 24.41% 19.00% * n/a 25.66% 19.00% * n/a n/a 09/13/93 Scudder International Portfolio Class A Shares 8.52% 8.82% 7.85% * 9.62% 13.16% 8.82% 7.85% * 05/01/87 TCI Growth 28.04% 13.43% 11.36% * 29.34% 11.30% 13.43% 11.36% * 11/20/87
Please refer to the discussion preceding the Tables for an explanation of the charges included in the Standardized and Non-Standardized figures. These figures represent historical performance and should not be considered a projection of future performance. TABLE TWO CORRESPONDING WITH DEFERRED SALES CHARGE SCHEDULE B
--------------------------------------------------------------------------------------- FUND STANDARDIZED NON-STANDARDIZED INCEPTION DATE - ------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------- Aetna Variable Fund 23.95% 11.08% 12.18% 30.47% 10.31% 11.99% 12.18% 04/30/75 Aetna Income Shares 10.82% 7.51% 8.41% 16.65% 6.20% 8.39% 8.41% 06/01/78 Aetna Variable Encore Fund -0.61% 2.45% 4.81% 4.62% 3.03% 3.29% 4.81% 09/01/75 Aetna Investment Advisers Fund, Inc. 19.24% 9.49% 8.75% * 25.52% 10.18% 10.39% 9.26% * 06/23/89 Aetna Ascent Variable Portfolio 4.18% * n/a n/a 9.66% * n/a n/a n/a 07/03/95 Aetna Crossroads Variable Portfolio 3.09% * n/a n/a 8.52% * n/a n/a n/a 07/03/95 Aetna Legacy Variable Portfolio 0.84% * n/a n/a 6.15% * n/a n/a n/a 07/03/95 Alger American Growth Portfolio 27.81% 19.12% 17.33% * 34.54% 17.62% 20.10% 17.85% * 01/09/89
5
--------------------------------------------------------------------------------------- FUND STANDARDIZED NON-STANDARDIZED INCEPTION DATE - ------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------- Alger American Small Cap Portfolio 35.25% 17.82% 20.48% * 42.37% 14.21% 18.79% 20.82% * 09/21/88 Fidelity VIP II Contrafund Portfolio 30.88% * n/a n/a 37.77% * n/a n/a n/a 01/03/95 Fidelity VIP Equity-Income Portfolio 26.61% 18.68% 11.79% * 33.28% 17.93% 19.65% 11.79% * 10/09/86 Fidelity VIP Growth Portfolio 26.87% 18.16% 13.27% * 33.55% 15.73% 19.13% 13.27% * 10/09/86 Fidelity VIP Overseas Portfolio 2.79% 5.69% 5.69% * 8.20% 13.55% 6.56% 5.81% * 01/28/87 Janus Aspen Aggressive Growth Portfolio 9.50% 23.05% * n/a 25.78% 25.83% n/a n/a 09/13/93 Janus Aspen Balanced Portfolio 16.97% 9.86% * n/a 23.13% 12.34% * n/a n/a 09/13/93 Janus Aspen Growth Portfolio 21.99% 11.11% * n/a 28.41% 13.62% * n/a n/a 09/13/93 Janus Aspen Short-Term Bond Portfolio 2.66% 0.88% * n/a 8.07% 3.15% n/a n/a 09/13/93 Janus Aspen Worldwide Growth Portfolio 19.38% 16.38% * n/a 25.66% 19.00% n/a n/a 09/13/93 Scudder International Portfolio Class A Shares 4.14% 7.93% 7.73% * 9.62% 13.16% 8.82% 7.85% * 05/01/87 TCI Growth 22.87% 12.51% * 11.23% * 29.34% 11.30% 13.43% 11.36% * 11/20/87
Please refer to the discussion preceding the Tables for an explanation of the charges included in the Standardized and Non-Standardized figures. These figures represent historical performance and should not be considered a projection of future performance. TABLE THREE CORRESPONDING WITH DEFERRED SALES CHARGE SCHEDULE C
--------------------------------------------------------------------------------------- FUND STANDARDIZED NON-STANDARDIZED INCEPTION DATE - ------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------- Aetna Variable Fund 22.64% 11.54% 12.18% 30.47% 10.31% 11.99% 12.18% 04/30/75 Aetna Income Shares 9.65% 7.95% 8.41% 16.65% 6.20% 8.39% 8.41% 06/01/78 Aetna Variable Encore Fund -1.66% 2.87% 4.81% 4.62% 3.03% 3.29% 4.81% 09/01/75 Aetna Investment Advisers Fund, Inc. 17.99% 9.94% 9.09% * 25.52% 10.18% 10.39% 9.26% * 06/23/89 Aetna Ascent Variable Portfolio 3.08% n/a n/a 9.66% * n/a n/a n/a 07/03/95 Aetna Crossroads Variable Portfolio 2.01% * n/a n/a 8.52% * n/a n/a n/a 07/03/95 Aetna Legacy Variable Portfolio -0.22% * n/a n/a 6.15% * n/a n/a n/a 07/03/95 Alger American Growth Portfolio 26.46% 19.61% 17.68% * 34.54% 17.62% 20.10% 17.85% * 01/09/89
6
--------------------------------------------------------------------------------------- FUND STANDARDIZED NON-STANDARDIZED INCEPTION DATE - ------------------------------------------------------------------------------------------------------------------------------- SUBACCOUNT 1 Year 5 Years 10 Years 1 Year 3 Years 5 Years 10 Years - ------------------------------------------------------------------------------------------------------------------------------- Alger American Small Cap Portfolio 33.83% 18.31% 20.82% * 42.37% 14.21% 18.79% 20.82% * 09/21/88 Fidelity VIP II Contrafund Portfolio 29.50% * n/a n/a 37.77% * n/a n/a n/a 01/03/93 Fidelity VIP Equity-Income Portfolio 25.28% 19.17% 11.79% * 33.28% 17.93% 19.65% 11.79% * 10/09/86 Fidelity VIP Growth Portfolio 25.53% 18.65% 13.27% * 33.55% 15.73% 19.13% 13.27% * 10/09/86 Fidelity VIP Overseas Portfolio 1.71% 6.13% 5.81% * 8.20% 13.55% 6.56% 5.81% * 01/28/87 Janus Aspen Aggressive Growth Portfolio 18.24% 23.05% * n/a 25.78% 25.83% * n/a n/a 09/13/93 Janus Aspen Balanced Portfolio 15.74% 9.86% * n/a 23.13% 12.34% * n/a n/a 09/13/93 Janus Aspen Growth Portfolio 20.71% 11.11% * n/a 28.41% 13.62% * n/a n/a 09/13/93 Janus Aspen Short-Term Bond Portfolio 1.58% 0.88% * n/a 8.07% 3.15% * n/a n/a 09/13/93 Janus Aspen Worldwide Growth Portfolio 18.12% 16.38% * n/a 25.66% 19.00% * n/a n/a 09/13/93 Scudder International Portfolio Class A Shares 3.04% 8.38% 7.85% * 9.62% 13.16% 8.82% 7.85% * 05/01/87 TCI Growth 21.58% 12.97% 11.36% * 29.34% 11.30% 13.43% 11.36% * 11/20/87
Please refer to the discussion preceding the Tables for an explanation of the charges included in the Standardized and Non-Standardized figures. These figures represent historical performance and should not be considered a projection of future performance. ANNUITY PAYMENTS When Annuity payments are to begin, the value of the Contract is determined using Accumulation Unit values as of the tenth Valuation Date before the first Annuity payment is due. Such value (less any applicable premium tax) is applied to provide an Annuity in accordance with the Annuity and investment options elected. The Annuity option tables found in the Contract show, for each form of Annuity, the amount of the first Annuity payment for each $1,000 of value applied. Thereafter, variable Annuity payments fluctuate as the Annuity Unit value(s) fluctuates with the investment experience of the selected investment option(s). The first payment and subsequent payments also vary depending on the assumed net investment rate selected (3.5% or 5% per annum). Selection of a 5% rate causes a higher first payment, but Annuity payments will increase thereafter only to the extent that the net investment rate increases by more than 5% on an annual basis. Annuity payments would decline if the rate failed to increase by 5%. Use of the 3.5% assumed rate causes a lower first payment, but subsequent payments would increase more rapidly or decline more slowly as changes occur in the net investment rate. When the Annuity Period begins, the Annuitant is credited with a fixed number of Annuity Units (which does not change thereafter) in each of the designated investment options. This number is calculated by dividing (a) by (b), where (a) is the amount of the first Annuity payment based on a particular investment option, and (b) is the then current Annuity Unit value for that investment option. 7 As noted, Annuity Unit values fluctuate from one Valuation Date to the next; such fluctuations reflect changes in the net investment factor for the appropriate Subaccount(s) (with a ten Valuation Date lag which gives the Company time to process Annuity payments) and a mathematical adjustment which offsets the assumed net investment rate of 3.5% or 5% per annum. The operation of all these factors can be illustrated by the following hypothetical example. These procedures will be performed separately for the investment options selected during the Annuity Period. EXAMPLE: Assume that, at the date Annuity payments are to commence, there are 3,000 Accumulation Units credited under a particular Contract and that the value of an Accumulation Unit for the tenth Valuation Date prior to retirement was $13.650000. This produces a total value of $40,950. Assume also that no premium tax is payable and that the Annuity table in the Contract provides, for the option elected, a first monthly variable Annuity payment of $6.68 per $1000 of value applied; the Annuitant's first monthly payment would thus be 40.950 multiplied by $6.68, or $273.55. Assume then that the value of an Annuity Unit for the Valuation Date on which the first payment was due was $13.400000. When this value is divided into the first monthly payment, the number of Annuity Units is determined to be 20.414. The value of this number of Annuity Units will be paid in each subsequent month. If the net investment factor with respect to the appropriate Subaccount is 1.0015000 as of the tenth Valuation Date preceding the due date of the second monthly payment, multiplying this factor by .9999058* (to neutralize the assumed net investment rate of 3.5% per annum built into the number of Annuity Units determined above) produces a result of 1.0014057. This is then multiplied by the Annuity Unit value for the prior Valuation Date (assume such value to be $13.504376) to produce an Annuity Unit value of $13.523359 for the Valuation Date on which the second payment is due. The second monthly payment is then determined by multiplying the number of Annuity Units by the current Annuity Unit value, or 20.414 times $13.523359, which produces a payment of $276.07. *If an assumed net investment rate of 5% is elected, the appropriate factor to neutralize such assumed rate would be .9998663. SALES MATERIAL AND ADVERTISING The Company may include hypothetical illustrations in its sales literature that explain the mathematical principles of dollar cost averaging, compounded interest, tax deferred accumulation, and the mechanics of variable annuity contracts. The Company may also discuss the difference between variable annuity contracts and other types of savings or investment products, including, but not limited to, personal savings accounts and certificates of deposit. We may distribute sales literature that compares the percentage change in Accumulation Unit values for any of the Subaccounts to established market indices such as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average or to the percentage change in values of other management investment companies that have investment objectives similar to the Subaccount being compared. 8 We may publish in advertisements and reports, the ratings and other information assigned to us by one or more independent rating organizations such as A.M. Best Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors Services, Inc. The purpose of the ratings is to reflect our financial strength and/or claims-paying ability. We may also quote ranking services such as Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable Insurance Products Performance Analysis Service (VIPPAS), which rank variable annuity or life Subaccounts or their underlying funds by performance and/or investment objective. From time to time, we will quote articles from newspapers and magazines or other publications or reports, including, but not limited to The Wall Street Journal, Money magazine, USA Today and The VARDS Report. The Company may provide in advertising, sales literature, periodic publications or other materials information on various topics of interest to current and prospective Contract Holders. These topics may include the relationship between sectors of the economy and the economy as a whole and its effect on various securities markets, investment strategies and techniques (such as value investing, market timing, dollar cost averaging, asset allocation, constant ratio transfer and account rebalancing), the advantages and disadvantages of investing in tax-deferred and taxable investments, customer profiles and hypothetical purchase and investment scenarios, financial management and tax and retirement planning, and investment alternatives to certificates of deposit and other financial instruments, including comparison between the Contracts and the characteristics of and market for such financial instruments. INDEPENDENT AUDITORS KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103, are the independent auditors for the Separate Account and for the Company. The services provided to the Separate Account include primarily the examination of the Separate Account's financial statements and the review of filings made with the SEC. 9 FINANCIAL STATEMENTS VARIABLE ANNUITY ACCOUNT C INDEX Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . S-2 Statement of Assets and Liabilities. . . . . . . . . . . . . . . . . . . . S-3 Statement of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . S-8 Statements of Changes in Net Assets. . . . . . . . . . . . . . . . . . . . S-9 Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . S-10 Condensed Financial Information. . . . . . . . . . . . . . . . . . . . . . S-12 S-1 INDEPENDENT AUDITORS' REPORT The Board of Directors of Aetna Life Insurance and Annuity Company and Contract Owners of Variable Annuity Account C: We have audited the accompanying statement of assets and liabilities of Aetna Life Insurance and Annuity Company Variable Annuity Account C (the "Account") as of December 31, 1995, and the related statement of operations for the year then ended, statements of changes in net assets for each of the years in the two-year period then ended and condensed financial information for the year ended December 31, 1995. These financial statements and condensed financial information are the responsibility of the Account's management. Our responsibility is to express an opinion on these financial statements and condensed financial information based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and condensed financial information are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and condensed financial information referred to above present fairly, in all material respects, the financial position of the Aetna Life Insurance and Annuity Company Variable Annuity Account C as of December 31, 1995, the results of its operations for the year then ended, changes in its net assets for each of the years in the two-year period then ended and condensed financial information for the year ended December 31, 1995 in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Hartford, Connecticut February 16, 1996 S-2 VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES - December 31, 1995
ASSETS: Investments, at net asset value: (Note 1) Aetna Variable Fund; 135,944,293 shares at $29.06 per share (cost $3,682,373,523).................... $3,949,941,096 Aetna Income Shares; 29,688,857 shares at $13.00 per share (cost $382,776,733)....................... 386,007,595 Aetna Variable Encore Fund; 17,318,377 shares at $13.30 per share (cost $221,087,268) ............... 230,291,686 Aetna Investment Advisers Fund, Inc.; 49,855,715 shares at $14.50 per share (cost $600,395,092) ............................................................................... 723,017,695 Aetna GET Fund, Series B; 5,897,397 shares at $12.40 per share (cost $59,712,454).................... 73,136,258 Aetna Ascent Variable Portfolio; 454,714 shares at $10.80 per share (cost $4,803,331)................ 4,908,736 Aetna Crossroads Variable Portfolio; 341,591 shares at $10.74 per share (cost $3,599,790)............ 3,668,757 Aetna Legacy Variable Portfolio; 180,468 shares at $10.64 per share (cost $1,883,466)................ 1,919,680 Alger American Funds: Alger American Growth Portfolio; 1,234,082 shares at $31.16 per share (cost $38,739,937)....................................................................................... 38,454,000 Alger American Small Capitalization Portfolio; 6,121,453 shares at $39.41 per share (cost $203,207,523)................................................................................ 241,246,447 Calvert Responsibly Invested Balanced Portfolio; 16,846,014 shares at $1.70 per share (cost $26,512,853)................................................................................ 28,688,761 Fidelity Investments Variable Insurance Products Funds: Equity-Income Portfolio; 1,973,219 shares at $19.27 per share (cost $35,264,252)................... 38,023,939 Growth Portfolio; 949,237 shares at $29.20 per share (cost $27,212,340)............................ 27,717,728 Overseas Portfolio; 218,122 shares at $17.05 per share (cost $3,555,791)........................... 3,718,987 Fidelity Investments Variable Insurance Products Funds II - Asset Manager Portfolio; 910,080 shares at $15.79 per share (cost $12,839,173)..................... 14,370,158 Contrafund Portfolio; 2,202,984 shares at $13.78 per share (cost $30,071,951) ..................... 30,357,117 Index 500 Portfolio; 45,055 shares at $75.71 per share (cost $3,187,279) .......................... 3,411,144 Franklin Government Securities Trust; 1,651,095 shares at $13.35 per share (cost $21,210,874) .............................................................................. 22,042,115 Janus Aspen Series - Aggressive Growth Portfolio; 5,116,845 shares at $17.08 per share (cost $74,304,318)............... 87,395,716 Balanced Portfolio; 115,516 shares at $13.03 per share (cost $1,444,640)........................... 1,505,170 Flexible Income Portfolio; 347,266 shares at $11.11 per share (cost $3,690,542).................... 3,858,123 Growth Portfolio; 376,690 shares at $13.45 per share (cost $4,920,509)............................. 5,066,487 Short-Term Bond Portfolio; 54,258 shares at $10.03 per share (cost $544,564)....................... 544,210 Worldwide Growth Portfolio; 1,048,130 shares at $15.31 per share (cost $15,260,366)................ 16,046,863 Lexington Emerging Markets Fund, Inc.; 329,323 shares at $9.38 per share (cost $3,135,164) .......... 3,089,046 Lexington Natural Resources Trust; 1,257,565 shares at $11.30 per share (cost $12,932,744) .......... 14,210,484 Neuberger & Berman Advisers Management Trust - Growth Portfolio; 3,460,773 shares at $25.86 per share (cost $77,838,858)............................................................ 89,495,579 Scudder Variable Life Investment Fund - International Portfolio; 13,936,090 shares at $11.82 per share (cost $151,941,144).................................. ........................ 164,724,583 TCI Portfolios, Inc. - TCI Growth; 35,261,982 shares at $12.06 per share (cost $333,587,996) ........ 425,259,499 NET ASSETS ............................................................................................ 6,632,117,659 -------------- --------------
S-3 Net assets represented by:
Accumulation Unit Units Value Reserves for annuity contracts in accumulation and payment period: AETNA VARIABLE FUND: Qualified I ..................................................... 549,055.7 $180.879 $99,312,649 Qualified III ................................................... 6,364,000.3 137.869 877,395,210 Qualified IV .................................................... 269.0 83.646 22,498 Qualified V ..................................................... 121,691.2 14.113 1,717,411 Qualified VI .................................................... 188,964,022.4 14.077 2,660,123,261 Qualified VII ................................................... 9,779,134.6 13.247 129,544,460 Qualified VIII .................................................. 20,835.7 13.074 272,413 Qualified IX .................................................... 21,417.9 12.935 277,043 Qualified X (1.15)............................................... 273,578.4 14.108 3,859,670 Qualified X (1.25)............................................... 2,370,233.5 14.077 33,366,740 Reserves for annuity contracts in payment period (Note 1)........ 144,049,741 AETNA INCOME SHARES: Qualified I ..................................................... 72,902.0 47.405 3,455,895 Qualified III ................................................... 2,377,621.8 46.913 111,541,104 Qualified V ..................................................... 20,427.2 12.283 250,918 Qualified VI .................................................... 21,379,975.5 12.098 258,665,226 Qualified VII ................................................... 185,030.5 11.176 2,067,926 Qualified VIII .................................................. 1,090.6 11.143 12,153 Qualified IX .................................................... 3,580.8 11.203 40,116 Qualified X (1.15)............................................... 50,261.1 12.125 609,409 Qualified X (1.25)............................................... 354,993.3 12.098 4,294,879 Reserves for annuity contracts in payment period (Note 1) ....... 5,069,969 AETNA VARIABLE ENCORE FUND: Qualified I ..................................................... 150,480.4 38.485 5,791,253 Qualified III ................................................... 1,836,260.4 37.988 69,756,054 Qualified V ..................................................... 19,202.4 11.003 211,293 Qualified VI .................................................... 12,999,680.2 11.026 143,337,034 Qualified VII ................................................... 324,091.0 10.936 3,544,190 Qualified VIII .................................................. 656.2 10.620 6,969 Qualified IX .................................................... 3,050.3 10.857 33,118 Qualified X (1.15)............................................... 145,629.4 11.051 1,609,306 Qualified X (1.25)............................................... 544,382.5 11.026 6,002,469 AETNA INVESTMENT ADVISERS FUND, INC.: Qualified I ..................................................... 393,612.5 18.024 7,094,461 Qualified III ................................................... 9,193,181.4 17.954 165,052,015 Qualified V ..................................................... 19,038.2 13.693 260,683 Qualified VI .................................................... 38,152,394.6 13.673 521,663,491 Qualified VII ................................................... 335,791.4 13.135 4,410,596 Qualified VIII .................................................. 1,055.3 12.695 13,397 Qualified IX .................................................... 3,961.7 12.613 49,969 Qualified X (1.15)............................................... 138,270.8 13.703 1,894,705 Qualified X (1.25)............................................... 940,932.7 13.673 12,865,516 Reserves for annuity contracts in payment period (Note 1) ....... 9,712,862 AETNA GET FUND, SERIES B: Qualified III .................................................. 63,245.0 12.850 812,688 S-4 Accumulation Unit Units Value Qualified VI..................................................... 5,279,157.0 12.850 67,836,249 Qualified X (1.25)............................................... 349,212.6 12.850 4,487,321 AETNA ASCENT VARIABLE PORTFOLIO: Qualified III.................................................... 8.4 10.673 90 Qualified V...................................................... 202.1 10.666 2,156 Qualified VI..................................................... 393,052.6 10.673 4,195,040 Qualified VIII................................................... 7.7 10.673 82 Qualified X (1.15)............................................... 15,054.8 10.982 165,326 Qualified X (1.25)............................................... 49,748.1 10.976 546,042 AETNA CROSSROADS VARIABLE PORTFOLIO: Qualified V...................................................... 243.2 10.605 2,579 Qualified VI..................................................... 294,673.3 10.612 3,126,954 Qualified VIII................................................... 43.8 10.611 464 Qualified X (1.15)............................................... 2,393.5 10.868 26,012 Qualified X (1.25)............................................... 47,204.4 10.862 512,748 AETNA LEGACY VARIABLE PORTFOLIO: Qualified VI..................................................... 143,636.5 10.580 1,519,662 Qualified X (1.15)............................................... 17,106.0 10.631 181,853 Qualified X (1.25)............................................... 20,531.2 10.626 218,165 ALGER AMERICAN FUNDS: ALGER AMERICAN GROWTH PORTFOLIO: Qualified III ................................................... 530,262.6 11.715 6,211,911 Qualified V...................................................... 7,965.7 10.365 82,564 Qualified VI..................................................... 2,832,439.7 10.157 28,770,111 Qualified VIII................................................... 38.3 10.371 397 Qualified X (1.15)............................................... 12,858.7 11.385 146,392 Qualified X (1.25)............................................... 284,978.1 11.379 3,242,625 ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO: Qualified III ................................................... 1,714,187.0 13.558 23,241,019 Qualified V ..................................................... 31,527.5 13.463 424,453 Qualified VI .................................................... 15,036,764.7 13.450 202,245,073 Qualified VIII .................................................. 3,845.1 14.093 54,189 Qualified X (1.15)............................................... 54,683.5 13.481 737,179 Qualified X (1.25)............................................... 1,081,374.8 13.450 14,544,534 CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO: Qualified III ................................................... 856,360.5 17.951 15,372,772 Qualified V ..................................................... 14,656.3 13.870 203,278 Qualified VI .................................................... 966,097.9 13.527 13,068,322 Qualified VIII .................................................. 3,611.6 12.291 44,389 FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS: EQUITY-INCOME PORTFOLIO: Qualified III ................................................... 628,581.6 11.617 7,301,978 Qualified V ..................................................... 1,107.9 11.047 12,239 Qualified VI .................................................... 1,660,304.1 11.092 18,415,763 Qualified VIII .................................................. 638.7 11.054 7,060 Qualified X (1.15)............................................... 118,679.1 13.902 1,649,878 Qualified X (1.25)............................................... 766,359.8 13.880 10,637,021 GROWTH PORTFOLIO: Qualified III ................................................... 762.1 10.198 7,772 Qualified V ..................................................... 2,540.5 10.183 25,871 Qualified VI .................................................... 1,833,793.9 10.066 18,458,844 S-5 Accumulation Unit Units Value Qualified VIII .................................................. 158.7 10.190 1,617 Qualified X (1.15)............................................... 45,764.6 14.023 641,737 Qualified X (1.25)............................................... 612,991.7 14.000 8,581,887 OVERSEAS PORTFOLIO: Qualified III ................................................... 1,301.8 10.197 13,274 Qualified V ..................................................... 190.8 9.954 1,899 Qualified VI .................................................... 196,089.8 9.961 1,953,206 Qualified X (1.15)............................................... 4,284.4 10.278 44,037 Qualified X (1.25)............................................... 166,303.2 10.262 1,706,571 FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II: ASSET MANAGER PORTFOLIO: Qualified III.................................................... 1,316,915.5 10.912 14,370,158 CONTRAFUND PORTFOLIO: Qualified III ................................................... 525,476.0 11.763 6,181,326 Qualified V ..................................................... 6,415.4 10.461 67,111 Qualified VI .................................................... 2,116,732.0 10.397 22,007,519 Qualified VIII .................................................. 173.7 10.467 1,818 Qualified X (1.15)............................................... 5,452.8 10.689 63,737 Qualified X (1.25)............................................... 174,259.3 10.681 2,035,606 INDEX 500 PORTFOLIO: Qualified III ................................................... 290,546.8 11.740 3,411,144 FRANKLIN GOVERNMENT SECURITIES TRUST: Qualified III ................................................... 809,413.7 16.495 13,351,329 Qualified V ..................................................... 16,226.2 11.946 193,844 Qualified VI .................................................... 717,760.0 11.762 8,442,415 Qualified VIII .................................................. 4,916.9 11.090 54,527 JANUS ASPEN SERIES: AGGRESSIVE GROWTH PORTFOLIO: Qualified III ................................................... 1,280,952.5 15.323 19,627,517 Qualified V.. ................................................... 15,482.4 13.296 205,852 Qualified VI. ................................................... 4,887,059.8 13.322 65,105,449 Qualified VIII .................................................. 1,021.7 13.321 13,610 Qualified X (1.15)............................................... 22,049.9 12.869 283,760 Qualified X (1.25)............................................... 167,919.9 12.861 2,159,528 BALANCED PORTFOLIO: Qualified III ................................................... 161.4 10.853 1,751 Qualified V ..................................................... 160.2 10.843 1,737 Qualified VI .................................................... 93,303.8 10.850 1,012,385 Qualified X (1.15)............................................... 9,382.9 11.265 105,697 Qualified X (1.25)............................................... 34,071.6 11.259 383,600 FLEXIBLE INCOME PORTFOLIO: Qualified III ................................................... 3,344.5 12.124 40,550 Qualified V ..................................................... 745.1 12.054 8,981 Qualified VI .................................................... 315,361.3 12.077 3,808,592 GROWTH PORTFOLIO: Qualified III ................................................... 109,716.5 11.859 1,301,115 Qualified V. .................................................... 166.2 10.872 1,807 Qualified VI. ................................................... 259,195.5 10.870 2,817,612 Qualified X (1.15)............................................... 3,238.4 11.633 37,671 Qualified X (1.25)............................................... 78,126.0 11.626 908,282 S-6 Accumulation Unit Units Value SHORT-TERM BOND PORTFOLIO: Qualified III ................................................... 18,472.9 10.393 191,983 Qualified V ..................................................... 23.8 10.316 245 Qualified VI .................................................... 32,695.8 10.323 337,528 Qualified X (1.25)............................................... 1,405.3 10.285 14,454 WORLDWIDE GROWTH PORTFOLIO: Qualified III ................................................... 314,652.7 12.158 3,825,607 Qualified V ..................................................... 11,127.9 10.952 121,875 Qualified VI .................................................... 1,036,039.6 10.877 11,268,519 Qualified VIII .................................................. 13.7 10.846 149 Qualified X (1.15)............................................... 2,616.9 12.223 31,987 Qualified X (1.25)............................................... 65,384.2 12.216 798,726 LEXINGTON EMERGING MARKETS FUND: Qualified III ................................................... 371,155.8 8.323 3,089,046 LEXINGTON NATURAL RESOURCES TRUST: Qualified III ................................................... 530,562.2 10.862 5,763,092 Qualified V ..................................................... 8,347.9 12.095 100,969 Qualified VI .................................................... 711,891.9 11.720 8,346,423 NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST: GROWTH PORTFOLIO: Qualified III ................................................... 2,359,089.9 17.430 41,119,982 Qualified V ..................................................... 35,940.7 14.359 516,068 Qualified VI .................................................... 3,331,217.5 14.345 47,786,169 Qualified VIII .................................................. 5,947.6 12.334 73,360 SCUDDER VARIABLE LIFE INVESTMENT FUND: INTERNATIONAL PORTFOLIO: Qualified III ................................................... 3,823,292.2 14.515 55,495,694 Qualified V ..................................................... 38,067.4 13.799 525,305 Qualified VI .................................................... 7,323,208.0 13.923 101,958,550 Qualified VIII .................................................. 12,189.3 11.733 143,011 Qualified X (1.15)............................................... 41,921.0 13.952 584,886 Qualified X (1.25)............................................... 432,183.0 13.923 6,017,137 TCI PORTFOLIOS, INC.: TCI GROWTH: Qualified III *.................................................. 1,784,551.6 14.464 25,811,741 Qualified III .................................................. 4,184,701.2 13.224 55,336,455 Qualified V ..................................................... 24,825.6 15.176 376,753 Qualified VI .................................................... 21,986,645.3 15.253 335,360,124 Qualified VII ................................................... 63,035.5 12.840 809,380 Qualified VIII .................................................. 8,144.3 12.868 104,799 Qualified IX .................................................... 1,241.8 12.581 15,623 Qualified X (1.15)............................................... 13,306.7 15.285 203,397 Qualified X (1.25)............................................... 474,744.3 15.253 7,241,227 $6,632,117,659 -------------- --------------
*Applies only to participants of the Opportunity Plus program and Multiple Options Contracts. See Notes to Financial Statements. S-7 VARIABLE ANNUITY ACCOUNT C STATEMENT OF OPERATIONS - Year Ended December 31, 1995
INVESTMENT INCOME: Dividends: (Notes 1 and 3) Aetna Variable Fund............................................................ $648,150,765 Aetna Income Shares............................................................ 23,872,308 Aetna Variable Encore Fund .................................................... 172,751 Aetna Investment Advisers Fund, Inc............................................ 47,274,300 Aetna GET Fund, Series B ...................................................... 1,878,972 Aetna Ascent Variable Portfolio ............................................... 110,626 Aetna Crossroads Variable Portfolio ........................................... 61,834 Aetna Legacy Variable Portfolio ............................................... 33,640 Calvert Responsibly Invested Balanced Portfolio .............................. 2,556,825 Fidelity Investments Variable Insurance Products Fund - Equity Income Portfolio 423,626 Fidelity Investments Variable Insurance Products Fund - Growth Portfolio ...... 10,256 Fidelity Investments Variable Insurance Products Fund - Overseas Portfolio .... 5,145 Fidelity Investments Variable Insurance Products Fund II - Asset Manager Portfolio 259,914 Fidelity Investments Variable Insurance Products Fund II - Contrafund Portfolio 379,043 Franklin Government Securities Trust .......................................... 1,061,449 Janus Aspen Series - Aggressive Growth Portfolio............................... 982,586 Janus Aspen Series - Balanced Portfolio........................................ 11,553 Janus Aspen Series - Flexible Income Portfolio................................. 151,761 Janus Aspen Series - Growth Portfolio.......................................... 91,472 Janus Aspen Series - Short-Term Bond Portfolio................................. 11,707 Janus Aspen Series - Worldwide Growth Portfolio................................ 50,858 Lexington Emerging Markets Fund................................................ 29,990 Lexington Natural Resources Trust.............................................. 59,767 Neuberger & Berman Advisers Management Trust - Growth Portfolio ............... 1,779,523 Scudder Variable Life Investment Fund - International Portfolio............... 670,720 TCI Portfolios, Inc. - TCI Growth.............................................. 339,221 -------------- Total investment income ..................................................... 730,430,612 Valuation period deductions (Note 2)............................................. (71,090,542) -------------- Net investment income............................................................ 659,340,070 -------------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on sales of investments: (Notes 1 and 4) Proceeds from sales ........................................................... $570,154,582 Cost of investments sold ...................................................... 409,480,615 ------------ Net realized gain ........................................................... 160,673,967 Net unrealized gain on investments: Beginning of year ............................................................. 73,479,233 End of year ................................................................... 594,083,184 ------------ Net unrealized gain ......................................................... 520,603,951 -------------- Net realized and unrealized gain on investments ................................. 681,277,918 -------------- Net increase in net assets resulting from operations ............................ $1,340,617,988 -------------- --------------
See Notes to Financial Statements. S-8 VARIABLE ANNUITY ACCOUNT C STATEMENTS OF CHANGES IN NET ASSETS
Year Ended December 31, 1995 1994 ---- ---- FROM OPERATIONS: Net investment income .......................................... $ 659,340,070 $ 476,196,420 Net realized and unrealized gain (loss) on investments .......... 681,277,918 (581,812,453) Net increase (decrease) in net assets resulting from operations 1,340,617,988 (105,616,033) FROM UNIT TRANSACTIONS: Variable annuity contract purchase payments ..................... 771,594,245 711,565,372 Sales and administrative charges deducted by the Company ........ (98,694) (137,737) Net variable annuity contract purchase payments ............... 771,495,551 711,427,635 Transfers from the Company for mortality guarantee adjustments .. 3,678,430 1,880,350 Transfers to the Company's fixed account options ................ (44,377,350) (56,920,532) Transfers to other variable annuity accounts ........... 0 (23,284,415) Redemptions by contract holders ................................. (287,945,984) (269,542,942) Annuity payments ................................................ (14,807,537) (11,189,149) Other ........................................................... 1,144,770 1,452,959 Net increase in net assets from unit transactions ............. 429,187,880 353,823,906 Change in net assets ............................................ 1,769,805,868 248,207,873 NET ASSETS: Beginning of year ............................................... 4,862,311,791 4,614,103,918 End of year...................................................... $6,632,117,659 $4,862,311,791 -------------- -------------- -------------- --------------
See Notes to Financial Statements. S-9 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Variable Annuity Account C ("Account") is registered under the Investment Company Act of 1940 as a unit investment trust. The Account is sold exclusively for use with annuity contracts that are qualified under the Internal Revenue Code of 1986, as amended. The accompanying financial statements of the Account have been prepared in accordance with generally accepted accounting principles. a. VALUATION OF INVESTMENTS Investments in the following Funds are stated at the closing net asset value per share as determined by each Fund on December 31, 1995: Aetna Variable Fund Aetna Income Shares Aetna Variable Encore Fund Aetna Investment Advisers Fund, Inc. Aetna GET Fund, Series B Aetna Ascent Variable Portfolio Aetna Crossroads Variable Portfolio Aetna Legacy Variable Portfolio Alger American Fund: - Alger American Growth Portfolio - Alger American Small Capitalization Portfolio Calvert Responsibly Invested Balanced Portfolio Fidelity Investments Variable Insurance Products Fund: - Equity-Income Portfolio - Growth Portfolio - Overseas Portfolio Fidelity Investments Variable Insurance Products Fund II: - Asset Manager Portfolio - Contrafund Portfolio - Index 500 Portfolio Franklin Government Securities Trust Janus Aspen Series: - Aggressive Growth Portfolio - Balanced Portfolio - Flexible Income Portfolio - Growth Portfolio - Short-Term Bond Portfolio - Worldwide Growth Portfolio Lexington Emerging Markets Fund Lexington Natural Resources Trust Neuberger & Berman Advisers Management Trust: - Growth Portfolio Scudder Variable Life Investment Fund: - International Portfolio TCI Portfolios, Inc.: - TCI Growth b. OTHER Investment transactions are accounted for on a trade date basis and dividend income is recorded on the ex-dividend date. The cost of investments sold is determined by specific identification. c. FEDERAL INCOME TAXES The operations of Variable Annuity Account C form a part of, and are taxed with, the total operations of Aetna Life Insurance and Annuity Company ("Company") which is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended. d. ANNUITY RESERVES Annuity reserves are computed for currently payable contracts according to the Progressive Annuity, Individual Annuity Mortality, and Group Annuity Mortality tables using various assumed interest rates not to exceed seven percent. Mortality experience is monitored by the Company. S-10 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 1995 (continued) Charges to annuity reserves for mortality and expense risk experience are reimbursed to the Company if the reserves required are less than originally estimated. If additional reserves are required, the Company reimburses the Account. 2. VALUATION PERIOD DEDUCTIONS Deductions by the Account for mortality and expense risk charges are made in accordance with the terms of the contracts and are paid to the Company. 3. DIVIDEND INCOME On an annual basis the Funds distribute substantially all of their taxable income and realized capital gains to their shareholders. Distributions to the Account are automatically reinvested in shares of the Funds. The Account's proportionate share of each Fund's undistributed net investment income and accumulated net realized gain on investments is included in net unrealized gain in the Statement of Operations. 4. PURCHASES AND SALES OF INVESTMENTS The cost of purchases and proceeds from sales of investments other than short-term investments for the year ended December 31, 1995 aggregated $1,658,682,532 and $570,154,582, respectively. 5. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported therein. Although actual results could differ from these estimates, any such differences are expected to be immaterial to the net assets of the Account. S-11 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------- Increase Value at Value at in Value of Beginning End of Accumulation of Year Year Unit - ------------------------------------------------------------------------------------------------------------------------- AETNA VARIABLE FUND: Qualified I ............................................................. $138.406 $180.879 30.69% Qualified III ........................................................... 105.558 137.869 30.61% Qualified IV ............................................................ 63.884 83.646 30.93% Qualified V ............................................................. 10.823 14.113 30.40% Qualified VI ............................................................ 10.778 14.077 30.61% Qualified VII ........................................................... 10.136 13.247 30.69% Qualified VIII .......................................................... 10.011 13.074 30.60% Qualified IX ............................................................ 9.879 12.935 30.93% Qualified X (1.15) ...................................................... 10.791 14.108 30.74% Qualified X (1.25) ...................................................... 10.778 14.077 30.61% - ------------------------------------------------------------------------------------------------------------------------- AETNA INCOME SHARES: Qualified I ............................................................. $ 40.570 $ 47.405 16.85% Qualified III ........................................................... 40.173 46.913 16.78% Qualified V ............................................................. 10.536 12.283 16.59% Qualified VI ............................................................ 10.360 12.098 16.78% Qualified VII ........................................................... 9.565 11.176 16.85% Qualified VIII .......................................................... 9.543 11.143 16.77% Qualified IX ............................................................ 9.570 11.203 17.07% Qualified X (1.15) ...................................................... 10.373 12.125 16.89% Qualified X (1.25) ...................................................... 10.360 12.098 16.78% - ------------------------------------------------------------------------------------------------------------------------- AETNA VARIABLE ENCORE FUND: Qualified I ............................................................. $ 36.723 $ 38.485 4.80% Qualified III ........................................................... 36.271 37.988 4.73% Qualified V ............................................................. 10.523 11.003 4.57% Qualified VI ............................................................ 10.528 11.026 4.73% Qualified VII ........................................................... 10.435 10.936 4.80% Qualified VIII .......................................................... 10.141 10.620 4.73% Qualified IX ............................................................ 10.341 10.857 5.00% Qualified X (1.15) ...................................................... 10.541 11.051 4.84% Qualified X (1.25) ...................................................... 10.528 11.026 4.73% - ------------------------------------------------------------------------------------------------------------------------- AETNA INVESTMENT ADVISERS FUND, INC.: Qualified I ............................................................. $ 14.317 $ 18.024 25.89% Qualified III ........................................................... 14.270 17.954 25.82% Qualified V ............................................................. 10.900 13.693 25.62% Qualified VI ............................................................ 10.868 13.673 25.81% Qualified VII ........................................................... 10.434 13.135 25.89% Qualified VIII .......................................................... 10.091 12.695 25.81% Qualified IX ............................................................ 10.000 12.613 26.13% Qualified X (1.15) ...................................................... 10.880 13.703 25.95% Qualified X (1.25) ...................................................... 10.868 13.673 25.81% - -------------------------------------------------------------------------------------------------------------------------
S-12 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995 (continued)
- ------------------------------------------------------------------------------------------------------------------------- Increase Value at Value at in Value of Beginning End of Accumulation of Year Year Unit - ------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES B: Qualified III ........................................................... $ 10.160 $ 12.850 26.48% Qualified VI ............................................................ 10.160 12.850 26.48% Qualified X (1.25) ...................................................... 10.160 12.850 26.48% - ------------------------------------------------------------------------------------------------------------------------- AETNA ASCENT VARIABLE PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 10.673 6.73% (4) Qualified V ............................................................. 10.000 10.666 6.66% (5) Qualified VI ............................................................ 10.000 10.673 6.73% (5) Qualified VIII .......................................................... 10.000 10.673 6.73% (5) Qualified X (1.15) ...................................................... 10.000 10.982 9.82% (3) Qualified X (1.25) ...................................................... 10.000 10.976 9.76% (3) - ------------------------------------------------------------------------------------------------------------------------- AETNA CROSSROADS VARIABLE PORTFOLIO: Qualified V ............................................................. $ 10.000 $ 10.605 6.05% (5) Qualified VI ............................................................ 10.000 10.612 6.12% (5) Qualified VIII .......................................................... 10.000 10.611 6.11% (5) Qualified X (1.15) ...................................................... 10.000 10.868 8.68% (3) Qualified X (1.25) ...................................................... 10.000 10.862 8.62% (3) - ------------------------------------------------------------------------------------------------------------------------- AETNA LEGACY VARIABLE PORTFOLIO: Qualified VI ............................................................ $ 10.000 $ 10.580 5.80% (5) Qualified X (1.15) ...................................................... 10.000 10.631 6.31% (4) Qualified X (1.25) ...................................................... 10.000 10.626 6.26% (4) - ------------------------------------------------------------------------------------------------------------------------- ALGER AMERICAN FUNDS: ALGER AMERICAN GROWTH PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 11.715 17.15% (4) Qualified V ............................................................. 10.000 10.365 3.65% (5) Qualified VI ............................................................ 10.000 10.157 1.57% (5) Qualified VIII .......................................................... 10.000 10.371 3.71% (5) Qualified X (1.15) ...................................................... 10.000 11.385 13.85% (3) Qualified X (1.25) ...................................................... 10.000 11.379 13.79% (3) - ------------------------------------------------------------------------------------------------------------------------- ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO: Qualified III ........................................................... $ 9.513 $ 13.558 42.52% Qualified V ............................................................. 9.461 13.463 42.29% Qualified VI ............................................................ 9.437 13.450 42.52% Qualified VIII .......................................................... 9.889 14.093 42.51% Qualified X (1.15) ...................................................... 9.450 13.481 42.66% Qualified X (1.25) ...................................................... 9.437 13.450 42.52% - ------------------------------------------------------------------------------------------------------------------------- CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO: Qualified III ........................................................... $ 13.990 $ 17.951 28.31% Qualified V ............................................................. 10.839 13.870 27.96% Qualified VI ............................................................ 10.554 13.527 28.17% Qualified VIII .......................................................... 9.590 12.291 28.16% - -------------------------------------------------------------------------------------------------------------------------
S-13 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995 (continued)
- ------------------------------------------------------------------------------------------------------------------------- Increase (Decrease) Value at Value at in Value of Beginning End of Accumulation of Year Year Unit - ------------------------------------------------------------------------------------------------------------------------- FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS: EQUITY - INCOME PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 11.617 16.17% (2) Qualified V ............................................................. 10.000 11.047 10.47% (5) Qualified VI ............................................................ 10.000 11.092 10.92% (5) Qualified VIII .......................................................... 10.000 11.054 10.54% (5) Qualified X (1.15) ...................................................... 10.409 13.902 33.55% Qualified X (1.25) ...................................................... 10.403 13.880 33.42% - ------------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 10.198 1.98% (4) Qualified V ............................................................. 10.000 10.183 1.83% (5) Qualified VI ............................................................ 10.000 10.066 0.66% (5) Qualified VIII .......................................................... 10.000 10.190 1.90% (5) Qualified X (1.15) ...................................................... 10.479 14.023 33.82% Qualified X (1.25) ...................................................... 10.472 14.000 33.69% - ------------------------------------------------------------------------------------------------------------------------- OVERSEAS PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 10.197 1.97% (4) Qualified V ............................................................. 10.000 9.954 (0.46%) (5) Qualified VI ............................................................ 10.000 9.961 (0.39%) (5) Qualified X (1.15) ...................................................... 9.480 10.278 8.43% Qualified X (1.25) ...................................................... 9.474 10.262 8.32% - ------------------------------------------------------------------------------------------------------------------------- FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS II: ASSET MANAGER PORTFOLIO: Qualified III ........................................................... $ 9.447 $ 10.912 15.51% - ------------------------------------------------------------------------------------------------------------------------- CONTRAFUND PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 11.763 17.63% (2) Qualified V ............................................................. 10.000 10.461 4.61% (5) Qualified VI ............................................................ 10.000 10.397 3.97% (5) Qualified VIII .......................................................... 10.000 10.467 4.67% (5) Qualified X (1.15) ...................................................... 10.000 10.689 6.89% (2) Qualified X (1.25) ...................................................... 10.000 10.681 6.81% (2) - ------------------------------------------------------------------------------------------------------------------------- INDEX 500 PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 11.740 17.40% (2) - ------------------------------------------------------------------------------------------------------------------------- FRANKLIN GOVERNMENT SECURITIES TRUST: Qualified III ........................................................... $ 14.190 $ 16.495 16.24% Qualified V ............................................................. 10.294 11.946 16.06% Qualified VI ............................................................ 10.119 11.762 16.24% Qualified VIII .......................................................... 9.541 11.090 16.23% - ------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES: AGGRESSIVE GROWTH PORTFOLIO: Qualified III ........................................................... $ 12.169 $ 15.323 25.91% Qualified V ............................................................. 10.577 13.296 25.71% - -------------------------------------------------------------------------------------------------------------------------
S-14 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995 (continued)
- ------------------------------------------------------------------------------------------------------------------------- Increase (Decrease) Value at Value at in Value of Beginning End of Accumulation of Year Year Unit - ------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES: AGGRESSIVE GROWTH PORTFOLIO (continued): Qualified VI ............................................................ $ 10.581 $ 13.322 25.91% Qualified VIII .......................................................... 10.581 13.321 25.90% Qualified X (1.15) ...................................................... 10.000 12.869 28.69% (2) Qualified X (1.25) ...................................................... 10.000 12.861 28.61% (2) - ------------------------------------------------------------------------------------------------------------------------- BALANCED PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 10.853 8.53% (4) Qualified V ............................................................. 10.000 10.843 8.43% (5) Qualified VI ............................................................ 10.000 10.850 8.50% (5) Qualified X (1.15) ...................................................... 10.000 11.265 12.65% (3) Qualified X (1.25) ...................................................... 10.000 11.259 12.59% (3) - ------------------------------------------------------------------------------------------------------------------------- FLEXIBLE INCOME PORTFOLIO: Qualified III ........................................................... $ 9.911 $ 12.124 22.33% Qualified V ............................................................. 10.000 12.054 20.54% (1) Qualified VI ............................................................ 9.873 12.077 22.33% - ------------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 11.859 18.59% (4) Qualified V ............................................................. 10.000 10.872 8.72% (5) Qualified VI ............................................................ 10.000 10.870 8.70% (5) Qualified X (1.15) ...................................................... 10.000 11.633 16.33% (3) Qualified X (1.25) ...................................................... 10.000 11.626 16.26% (3) - ------------------------------------------------------------------------------------------------------------------------- SHORT TERM BOND PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 10.393 3.93% (4) Qualified V ............................................................. 10.000 10.316 3.16% (5) Qualified VI ............................................................ 10.000 10.323 3.23% (5) Qualified X (1.25) ...................................................... 10.000 10.285 2.85% (4) - ------------------------------------------------------------------------------------------------------------------------- WORLDWIDE GROWTH PORTFOLIO: Qualified III ........................................................... $ 10.000 $ 12.158 21.58% (4) Qualified V ............................................................. 10.000 10.952 9.52% (4) Qualified VI ............................................................ 10.000 10.877 8.77% (5) Qualified VIII .......................................................... 10.000 10.846 8.46% (5) Qualified X (1.15) ...................................................... 10.000 12.223 22.23% (2) Qualified X (1.25) ...................................................... 10.000 12.216 22.16% (2) - ------------------------------------------------------------------------------------------------------------------------- LEXINGTON EMERGING MARKETS FUND: Qualified III ........................................................... $ 8.772 $ 8.323 (5.12%) - ------------------------------------------------------------------------------------------------------------------------- LEXINGTON NATURAL RESOURCES TRUST: Qualified III ........................................................... $ 9.412 $ 10.862 15.41% Qualified V ............................................................. 10.496 12.095 15.24% Qualified VI ............................................................ 10.154 11.720 15.42% - -------------------------------------------------------------------------------------------------------------------------
S-15 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995 (continued)
- -------------------------------------------------------------------------------------------------------------------------- Increase Value at Value at in Value of Beginning End of Accumulation of Year Year Unit - -------------------------------------------------------------------------------------------------------------------------- NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST - GROWTH PORTFOLIO: Qualified III ........................................................... $ 13.398 $ 17.430 30.09% Qualified V ............................................................. 11.055 14.359 29.89% Qualified VI ............................................................ 11.026 14.345 30.10% Qualified VIII .......................................................... 9.482 12.334 30.09% - -------------------------------------------------------------------------------------------------------------------------- SCUDDER VARIABLE LIFE INVESTMENT FUND - INTERNATIONAL PORTFOLIO: Qualified III ........................................................... $ 13.227 $ 14.515 9.74% Qualified V ............................................................. 12.595 13.799 9.56% Qualified VI ............................................................ 12.687 13.923 9.74% Qualified VIII .......................................................... 10.692 11.733 9.73% Qualified X (1.15) ...................................................... 12.701 13.952 9.85% Qualified X (1.25) ...................................................... 12.687 13.923 9.74% - -------------------------------------------------------------------------------------------------------------------------- TCI PORTFOLIOS, INC.: TCI GROWTH: Qualified III* .......................................................... $ 11.172 $ 14.464 29.47% Qualified III ........................................................... 10.213 13.224 29.47% Qualified V ............................................................. 11.740 15.176 29.27% Qualified VI ............................................................ 11.781 15.253 29.47% Qualified VII ........................................................... 9.911 12.840 29.55% Qualified VIII .......................................................... 9.939 12.868 29.46% Qualified IX ............................................................ 9.693 12.581 29.80% Qualified X (1.15) ...................................................... 11.794 15.285 29.60% Qualified X (1.25) ...................................................... 11.781 15.253 29.47% - --------------------------------------------------------------------------------------------------------------------------
*Applies only to participants of the Opportunity Plus program and Multiple Options Contracts. QUALIFIED I Individual contracts issued prior to May 1, 1975 in connection with "Qualified Corporate Retirement Plans" established pursuant to Section 401 of the Internal Revenue Code ("Code"); "Tax-Deferred Annuity Plans" established by the public school systems and tax-exempt organizations pursuant to Section 403(b) of the Code, and certain Individual Retirement Annuity Plans established by or on behalf of individuals pursuant to section 408(b) of the Code; Individual contracts issued prior to November 1, 1975 in connection with "H.R. 10 Plans" established by persons entitled to the benefits of the Self-Employed Individuals Tax Retirement Act of 1962, as amended; allocated group contracts issued prior to May 1, 1975 in connection with Qualified Corporate Retirement Plans; and group contracts issued prior to October 1, 1978 in connection with Tax-Deferred Annuity Plans. QUALIFIED III Individual contracts issued in connection with Tax-Deferred Annuity Plans and Individual Retirement Annuity Plans since May 1, 1975, H.R. 10 Plans since November 1, 1975; group contracts issued since October 1, 1978 in connection with Tax-Deferred Annuity S-16 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION CHANGE IN VALUE OF ACCUMULATION UNIT - JANUARY 1, 1995 TO DECEMBER 31, 1995 (continued) - -------------------------------------------------------------------------------- QUALIFIED III (continued): Plans and group contracts issued since May 1, 1979 in connection with "Deferred Compensation Plans" adopted by state and local governments and H.R. 10 Plans. QUALIFIED IV Certain large group contracts (Jumbo) issued in connection with Tax-Deferred Annuity Plans and Deferred Compensation Plans issued since January 1, 1979. QUALIFIED V Group AetnaPlus contracts issued since August 28, 1992 in connection with "Optional Retirement Plans" established pursuant to Section 403(b) or 401(a) of the Internal Revenue Code. QUALIFIED VI Group AetnaPlus contracts issued in connection with Tax-Deferred Annuity Plans and Retirement Plus Plans since August 28, 1992. QUALIFIED VII Certain existing contracts that were converted to ACES, the new administrative system (Previously valued under Qualified I). QUALIFIED VIII "Group Aetna Plus" contracts issued in connection with Tax-Deferred Annuity Plans and "Deferred Compensation Plans" adopted by state and local governments since June 30, 1993. QUALIFIED IX Certain large group contracts (Jumbo) that were converted to ACES, the new administrative system (previously valued under Qualified VI). QUALIFIED X Individual Retirement Annuity and Simplified Employee Pension Plans issued or converted to ACES, the new administrative system. 1 - Reflects less than a full year of performance activity. The initial Accumulation Unit Value was established at $10.000 during March 1995 when the fund became available under the contract or the applicable daily asset charge was first utilized. 2 - Reflects less than a full year of performance activity. The initial Accumulation Unit Value was established at $10.000 during May 1995 when the fund became available under the contract or the applicable daily asset charge was first utilized. 3 - Reflects less than a full year of performance activity. The initial Accumulation Unit Value was established at $10.000 during June 1995 when the fund became available under the contract or the applicable daily asset charge was first utilized. 4 - Reflects less than a full year of performance activity. The initial Accumulation Unit Value was established at $10.000 during July 1995 when the fund became available under the contract or the applicable daily asset charge was first utilized. 5 - Reflects less than a full year of performance activity. The initial Accumulation Unit Value was established at $10.000 during August 1995 when the fund became available under the contract or the applicable daily asset charge was first utilized. S-17 CONSOLIDATED FINANCIAL STATEMENTS AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES Index
PAGE --- Independent Auditors' Report..................................... F-2 Consolidated Financial Statements: Consolidated Statements of Income for the Years Ended December 31, 1995, 1994 and 1993.............................. F-3 Consolidated Balance Sheets as of December 31, 1995 and 1994... F-4 Consolidated Statements of Changes in Shareholder's Equity for the Years Ended December 31, 1995, 1994 and 1993.............................. F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993.............................. F-6 Notes to Consolidated Financial Statements....................... F-7
F-1 INDEPENDENT AUDITORS' REPORT The Shareholder and Board of Directors Aetna Life Insurance and Annuity Company: We have audited the accompanying consolidated balance sheets of Aetna Life Insurance and Annuity Company and Subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, changes in shareholder's equity and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aetna Life Insurance and Annuity Company and Subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, in 1993 the Company changed its methods of accounting for certain investments in debt and equity securities. KPMG Peat Marwick LLP Hartford, Connecticut February 6, 1996 F-2 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Consolidated Statements of Income (millions)
YEARS ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 -------- -------- -------- Revenue: Premiums............................................. $ 130.8 $ 124.2 $ 82.1 Charges assessed against policyholders............... 318.9 279.0 251.5 Net investment income................................ 1,004.3 917.2 911.9 Net realized capital gains........................... 41.3 1.5 9.5 Other income......................................... 42.0 10.3 9.5 -------- -------- -------- Total revenue...................................... 1,537.3 1,332.2 1,264.5 -------- -------- -------- Benefits and expenses: Current and future benefits.......................... 915.3 854.1 818.4 Operating expenses................................... 318.7 235.2 207.2 Amortization of deferred policy acquisition costs.... 43.3 26.4 19.8 -------- -------- -------- Total benefits and expenses........................ 1,277.3 1,115.7 1,045.4 -------- -------- -------- Income before federal income taxes..................... 260.0 216.5 219.1 Federal income taxes................................. 84.1 71.2 76.2 -------- -------- -------- Net income............................................. $ 175.9 $ 145.3 $ 142.9 -------- -------- -------- -------- -------- --------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-3 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Consolidated Balance Sheets (millions)
DECEMBER 31, -------------------- 1995 1994 --------- --------- ASSETS - ------------------------------------------------------- Investments: Debt securities, available for sale: (amortized cost: $11,923.7 and $10,577.8)........... $12,720.8 $10,191.4 Equity securities, available for sale: Non-redeemable preferred stock (cost: $51.3 and $43.3)............................................ 57.6 47.2 Investment in affiliated mutual funds (cost: $173.4 and $187.1)....................................... 191.8 181.9 Common stock (cost: $6.9 at December 31, 1995)..... 8.2 -- Short-term investments............................... 15.1 98.0 Mortgage loans....................................... 21.2 9.9 Policy loans......................................... 338.6 248.7 Limited partnership.................................. -- 24.4 --------- --------- Total investments................................ 13,353.3 10,801.5 Cash and cash equivalents.............................. 568.8 623.3 Accrued investment income.............................. 175.5 142.2 Premiums due and other receivables..................... 37.3 75.8 Deferred policy acquisition costs...................... 1,341.3 1,164.3 Reinsurance loan to affiliate.......................... 655.5 690.3 Other assets........................................... 26.2 15.9 Separate Accounts assets............................... 10,987.0 7,420.8 --------- --------- Total assets..................................... $27,144.9 $20,934.1 --------- --------- --------- --------- LIABILITIES AND SHAREHOLDER'S EQUITY - ------------------------------------------------------- Liabilities: Future policy benefits............................... $ 3,594.6 $ 2,912.7 Unpaid claims and claim expenses..................... 27.2 23.8 Policyholders' funds left with the Company........... 10,500.1 8,949.3 --------- --------- Total insurance reserve liabilities.............. 14,121.9 11,885.8 Other liabilities.................................... 259.2 302.1 Federal income taxes: Current............................................ 24.2 3.4 Deferred........................................... 169.6 233.5 Separate Accounts liabilities........................ 10,987.0 7,420.8 --------- --------- Total liabilities................................ 25,561.9 19,845.6 --------- --------- --------- --------- Shareholder's equity: Common stock, par value $50 (100,000 shares authorized; 55,000 shares issued and outstanding)............... 2.8 2.8 Paid-in capital...................................... 407.6 407.6 Net unrealized capital gains (losses)................ 132.5 (189.0) Retained earnings.................................... 1,040.1 867.1 --------- --------- Total shareholder's equity....................... 1,583.0 1,088.5 --------- --------- Total liabilities and shareholder's equity..... $27,144.9 $20,934.1 --------- --------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-4 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Consolidated Statements of Changes in Shareholder's Equity (millions)
YEARS ENDED DECEMBER 31, -------------------------------- 1995 1994 1993 --------- --------- --------- Shareholder's equity, beginning of year................ $ 1,088.5 $ 1,246.7 $ 990.1 Net change in unrealized capital gains (losses)........ 321.5 (303.5) 113.7 Net income............................................. 175.9 145.3 142.9 Common stock dividends declared........................ (2.9) -- -- --------- --------- --------- Shareholder's equity, end of year...................... $ 1,583.0 $ 1,088.5 $ 1,246.7 --------- --------- --------- --------- --------- ---------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-5 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Consolidated Statements of Cash Flows (millions)
YEARS ENDED DECEMBER 31, ------------------------------------ 1995 1994 1993 ---------- ---------- ---------- Cash Flows from Operating Activities: Net income........................................... $ 175.9 $ 145.3 $ 142.9 Adjustments to reconcile net income to net cash provided by operating activities: Increase in accrued investment income.............. (33.3) (17.5) (11.1) Decrease (increase) in premiums due and other receivables....................................... 25.4 1.3 (5.6) Increase in policy loans........................... (89.9) (46.0) (36.4) Increase in deferred policy acquisition costs...... (177.0) (105.9) (60.5) Decrease in reinsurance loan to affiliate.......... 34.8 27.8 31.8 Net increase in universal life account balances.... 393.4 164.7 126.4 Increase in other insurance reserve liabilities.... 79.0 75.1 86.1 Net increase in other liabilities and other assets............................................ 15.0 53.9 7.0 Decrease in federal income taxes................... (6.5) (11.7) (3.7) Net accretion of discount on bonds................. (66.4) (77.9) (88.1) Net realized capital gains......................... (41.3) (1.5) (9.5) Other, net......................................... -- (1.0) 0.2 ---------- ---------- ---------- Net cash provided by operating activities........ 309.1 206.6 179.5 ---------- ---------- ---------- Cash Flows from Investing Activities: Proceeds from sales of: Debt securities available for sale................. 4,207.2 3,593.8 473.9 Equity securities.................................. 180.8 93.1 89.6 Mortgage loans..................................... 10.7 -- -- Limited partnership................................ 26.6 -- -- Investment maturities and collections of: Debt securities available for sale................. 583.9 1,289.2 2,133.3 Short-term investments............................. 106.1 30.4 19.7 Cost of investment purchases in: Debt securities.................................... (6,034.0) (5,621.4) (3,669.2) Equity securities.................................. (170.9) (162.5) (157.5) Short-term investments............................. (24.7) (106.1) (41.3) Mortgage loans..................................... (21.3) -- -- Limited partnership................................ -- (25.0) -- ---------- ---------- ---------- Net cash used for investing activities........... (1,135.6) (908.5) (1,151.5) ---------- ---------- ---------- Cash Flows from Financing Activities: Deposits and interest credited for investment contracts........................................... 1,884.5 1,737.8 2,117.8 Withdrawals of investment contracts.................. (1,109.6) (948.7) (1,000.3) Dividends paid to shareholder........................ (2.9) -- -- ---------- ---------- ---------- Net cash provided by financing activities........ 772.0 789.1 1,117.5 ---------- ---------- ---------- Net (decrease) increase in cash and cash equivalents... (54.5) 87.2 145.5 Cash and cash equivalents, beginning of year........... 623.3 536.1 390.6 ---------- ---------- ---------- Cash and cash equivalents, end of year................. $ 568.8 $ 623.3 $ 536.1 ---------- ---------- ---------- ---------- ---------- ---------- Supplemental cash flow information: Income taxes paid, net............................... $ 90.2 $ 82.6 $ 79.9 ---------- ---------- ---------- ---------- ---------- ----------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-6 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements December 31, 1995, 1994, and 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries (collectively, the "Company") is a provider of financial services and life insurance products in the United States. The Company has two business segments, financial services and life insurance. The financial services products include individual and group annuity contracts which offer a variety of funding and distribution options for personal and employer-sponsored retirement plans that qualify under Internal Revenue Code Sections 401, 403, 408 and 457, and individual and group non-qualified annuity contracts. These contracts may be immediate or deferred and are offered primarily to individuals, pension plans, small businesses and employer-sponsored groups in the health care, government, education (collectively "not-for-profit" organizations) and corporate markets. Financial services also include pension plan administrative services. The life insurance products include universal life, variable universal life, interest sensitive whole life and term insurance. These products are offered primarily to individuals, small businesses, employer sponsored groups and executives of Fortune 2000 companies. BASIS OF PRESENTATION The consolidated financial statements include Aetna Life Insurance and Annuity Company and its wholly owned subsidiaries, Aetna Insurance Company of America and Aetna Private Capital, Inc. Aetna Life Insurance and Annuity Company is a wholly owned subsidiary of Aetna Retirement Services, Inc. ("ARSI"). ARSI is a wholly owned subsidiary of Aetna Life and Casualty Company ("Aetna"). Two subsidiaries, Systematized Benefits Administrators, Inc. ("SBA"), and Aetna Investment Services, Inc. ("AISI"), which were previously reported in the consolidated financial statements were distributed in the form of dividends to ARSI in December of 1995. The impact to the Company's financial statements of distributing these dividends was immaterial. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles. Intercompany transactions have been eliminated. Certain reclassifications have been made to 1994 and 1993 financial information to conform to the 1995 presentation. ACCOUNTING CHANGES Accounting for Certain Investments in Debt and Equity Securities On December 31, 1993, the Company adopted Financial Accounting Standard ("FAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities, which requires the classification of debt securities into three categories: "held to maturity", which are carried at amortized cost; "available for sale", which are carried at fair value with changes in fair value recognized as a component of shareholder's equity; and "trading", which are carried at fair value with immediate recognition in income of changes in fair value. Initial adoption of this standard resulted in a net increase of $106.8 million, net of taxes of $57.5 million, to net unrealized gains in shareholder's equity. These amounts exclude gains and losses allocable to experience-rated (including universal life) contractholders. Adoption of FAS No. 115 did not have a material effect on deferred policy acquisition costs. F-7 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates. CASH AND CASH EQUIVALENT Cash and cash equivalents include cash on hand, money market instruments and other debt issues with a maturity of ninety days or less when purchased. INVESTMENTS Debt Securities At December 31, 1995 and 1994, all of the Company's debt securities are classified as available for sale and carried at fair value. These securities are written down (as realized losses) for other than temporary decline in value. Unrealized gains and losses related to these securities, after deducting amounts allocable to experience-rated contractholders and related taxes, are reflected in shareholder's equity. Fair values for debt securities are based on quoted market prices or dealer quotations. Where quoted market prices or dealer quotations are not available, fair values are measured utilizing quoted market prices for similar securities or by using discounted cash flow methods. Cost for mortgage-backed securities is adjusted for unamortized premiums and discounts, which are amortized using the interest method over the estimated remaining term of the securities, adjusted for anticipated prepayments. Purchases and sales of debt securities are recorded on the trade date. Equity Securities Equity securities are classified as available for sale and carried at fair value based on quoted market prices or dealer quotations. Equity securities are written down (as realized losses) for other than temporary declines in value. Unrealized gains and losses related to such securities are reflected in shareholder's equity. Purchases and sales are recorded on the trade date. The investment in affiliated mutual funds represents an investment in the Aetna Series Fund, Inc., a retail mutual fund which has been seeded by the Company, and is carried at fair value. Mortgage Loans and Policy Loans Mortgage loans and policy loans are carried at unpaid principal balances net of valuation reserves, which approximates fair value, and are generally secured. Purchases and sales of mortgage loans are recorded on the closing date. F-8 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Limited Partnership The Company's limited partnership investment was carried at the amount invested plus the Company's share of undistributed operating results and unrealized gains (losses), which approximates fair value. The Company disposed of the limited partnership during 1995. Short-Term Investments Short-term investments, consisting primarily of money market instruments and other debt issues purchased with an original maturity of over ninety days and less than one year, are considered available for sale and are carried at fair value, which approximates amortized cost. DEFERRED POLICY ACQUISITION COSTS Certain costs of acquiring insurance business have been deferred. These costs, all of which vary with and are primarily related to the production of new business, consist principally of commissions, certain expenses of underwriting and issuing contracts and certain agency expenses. For fixed ordinary life contracts, such costs are amortized over expected premium-paying periods. For universal life and certain annuity contracts, such costs are amortized in proportion to estimated gross profits and adjusted to reflect actual gross profits. These costs are amortized over twenty years for annuity pension contracts, and over the contract period for universal life contracts. Deferred policy acquisition costs are written off to the extent that it is determined that future policy premiums and investment income or gross profits would not be adequate to cover related losses and expenses. INSURANCE RESERVE LIABILITIES The Company's liabilities include reserves related to fixed ordinary life, fixed universal life and fixed annuity contracts. Reserves for future policy benefits for fixed ordinary life contracts are computed on the basis of assumed investment yield, assumed mortality, withdrawals and expenses, including a margin for adverse deviation, which generally vary by plan, year of issue and policy duration. Reserve interest rates range from 2.25% to 10.00%. Assumed investment yield is based on the Company's experience. Mortality and withdrawal rate assumptions are based on relevant Aetna experience and are periodically reviewed against both industry standards and experience. Reserves for fixed universal life (included in Future Policy Benefits) and fixed deferred annuity contracts (included in Policyholders' Funds Left With the Company) are equal to the fund value. The fund value is equal to cumulative deposits less charges plus credited interest thereon, without reduction for possible future penalties assessed on premature withdrawal. For guaranteed interest options, the interest credited ranged from 4.00% to 6.38% in 1995 and 4.00% to 5.85% in 1994. For all other fixed options, the interest credited ranged from 5.00% to 7.00% in 1995 and 5.00% to 7.50% in 1994. Reserves for fixed annuity contracts in the annuity period and for future amounts due under settlement options are computed actuarially using the 1971 Individual Annuity Mortality Table, the 1983 Individual Annuity Mortality Table, the F-9 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 1983 Group Annuity Mortality Table and, in some cases, mortality improvement according to scales G and H, at assumed interest rates ranging from 3.5% to 9.5%. Reserves relating to contracts with life contingencies are included in Future Policy Benefits. For other contracts, the reserves are reflected in Policyholders' Funds Left With the Company. Unpaid claims for all lines of insurance include benefits for reported losses and estimates of benefits for losses incurred but not reported. PREMIUMS, CHARGES ASSESSED AGAINST POLICYHOLDERS, BENEFITS AND EXPENSES Premiums are recorded as revenue when due for fixed ordinary life contracts. Charges assessed against policyholders' funds for cost of insurance, surrender charges, actuarial margin and other fees are recorded as revenue for universal life and certain annuity contracts. Policy benefits and expenses are recorded in relation to the associated premiums or gross profit so as to result in recognition of profits over the expected lives of the contracts. SEPARATE ACCOUNTS Assets held under variable universal life, variable life and variable annuity contracts are segregated in Separate Accounts and are invested, as designated by the contractholder or participant under a contract, in shares of Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers Fund, Inc., Aetna GET Fund, or The Aetna Series Fund Inc., which are managed by the Company or other selected mutual funds not managed by the Company. Separate Accounts assets and liabilities are carried at fair value except for those relating to a guaranteed interest option which is offered through a Separate Account. The assets of the Separate Account supporting the guaranteed interest option are carried at an amortized cost of $322.2 million for 1995 (fair value $343.9 million) and $149.7 million for 1994 (fair value $146.3 million), since the Company bears the investment risk where the contract is held to maturity. Reserves relating to the guaranteed interest option are maintained at fund value and reflect interest credited at rates ranging from 4.5% to 8.38% in both 1995 and 1994. Separate Accounts assets and liabilities are shown as separate captions in the Consolidated Balance Sheets. Deposits, investment income and net realized and unrealized capital gains (losses) of the Separate Accounts are not reflected in the Consolidated Statements of Income (with the exception of realized capital gains (losses) on the sale of assets supporting the guaranteed interest option). The Consolidated Statements of Cash Flows do not reflect investment activity of the Separate Accounts. FEDERAL INCOME TAXES The Company is included in the consolidated federal income tax return of Aetna. The Company is taxed at regular corporate rates after adjusting income reported for financial statement purposes for certain items. Deferred income tax benefits result from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities. F-10 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 2. INVESTMENTS Investments in debt securities available for sale as of December 31, 1995 were as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE --------- ---------- ---------- --------- (MILLIONS) U.S. Treasury securities and obligations of U.S. government agencies and corporations... $ 539.5 $ 47.5 $ -- $ 587.0 Obligations of states and political subdivisions................................ 41.4 12.4 -- 53.8 U.S. Corporate securities: Financial.................................. 2,764.4 110.3 2.1 2,872.6 Utilities.................................. 454.4 27.8 1.0 481.2 Other...................................... 2,177.7 159.5 1.2 2,336.0 --------- ---------- ----- --------- Total U.S. Corporate securities............ 5,396.5 297.6 4.3 5,689.8 Foreign securities: Government................................. 316.4 26.1 2.0 340.5 Financial.................................. 534.2 45.4 3.5 576.1 Utilities.................................. 236.3 32.9 -- 269.2 Other...................................... 215.7 15.1 -- 230.8 --------- ---------- ----- --------- Total Foreign securities................... 1,302.6 119.5 5.5 1,416.6 Residential mortgage-backed securities: Residential pass-throughs.................. 556.7 99.2 1.8 654.1 Residential CMOs........................... 2,383.9 167.6 2.2 2,549.3 --------- ---------- ----- --------- Total Residential mortgage-backed securities................................ 2,940.6 266.8 4.0 3,203.4 Commercial/Multifamily mortgage-backed securities.................................. 741.9 32.3 0.2 774.0 --------- ---------- ----- --------- Total Mortgage-backed securities........... 3,682.5 299.1 4.2 3,977.4 Other asset-backed securities................ 961.2 35.5 0.5 996.2 --------- ---------- ----- --------- Total debt securities available for sale..... $11,923.7 $811.6 $14.5 $12,720.8 --------- ---------- ----- --------- --------- ---------- ----- ---------
F-11 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 2. INVESTMENTS (CONTINUED) Investments in debt securities available for sale as of December 31, 1994 were as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE --------- ---------- ---------- --------- (MILLIONS) U.S. Treasury securities and obligations of U.S. government agencies and corporations... $ 1,396.1 $ 2.0 $ 84.2 $ 1,313.9 Obligations of states and political subdivisions................................ 37.9 1.2 -- 39.1 U.S. Corporate securities: Financial.................................. 2,216.9 3.8 109.4 2,111.3 Utilities.................................. 100.1 -- 7.9 92.2 Other...................................... 1,344.3 6.0 67.9 1,282.4 --------- ---------- ---------- --------- Total U.S. Corporate securities............ 3,661.3 9.8 185.2 3,485.9 Foreign securities: Government................................. 434.4 1.2 33.9 401.7 Financial.................................. 368.2 1.1 23.0 346.3 Utilities.................................. 204.4 2.5 9.5 197.4 Other...................................... 46.3 0.8 1.5 45.6 --------- ---------- ---------- --------- Total Foreign securities................... 1,053.3 5.6 67.9 991.0 Residential mortgage-backed securities: Residential pass-throughs.................. 627.1 81.5 5.0 703.6 Residential CMOs........................... 2,671.0 32.9 139.4 2,564.5 --------- ---------- ---------- --------- Total Residential mortgage-backed securities.................................. 3,298.1 114.4 144.4 3,268.1 Commercial/Multifamily mortgage-backed securities.................................. 435.0 0.2 21.3 413.9 --------- ---------- ---------- --------- Total Mortgage-backed securities............. 3,733.1 114.6 165.7 3,682.0 Other asset-backed securities................ 696.1 0.2 16.8 679.5 --------- ---------- ---------- --------- Total debt securities available for sale..... $10,577.8 $133.4 $519.8 $10,191.4 --------- ---------- ---------- --------- --------- ---------- ---------- ---------
At December 31, 1995 and 1994, net unrealized appreciation (depreciation) of $797.1 million and $(386.4) million, respectively, on available for sale debt securities included $619.1 million and $(308.6) million, respectively, related to experience-rated contractholders, which were not included in shareholder's equity. F-12 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 2. INVESTMENTS (CONTINUED) The amortized cost and fair value of debt securities for the year ended December 31, 1995 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called, or prepaid.
AMORTIZED FAIR COST VALUE --------- --------- (MILLIONS) Due to mature: One year or less..................................... $ 348.8 $ 351.1 After one year through five years.................... 2,100.2 2,159.5 After five years through ten years................... 2,516.0 2,663.4 After ten years...................................... 2,315.0 2,573.2 Mortgage-backed securities........................... 3,682.5 3,977.4 Other asset-backed securities........................ 961.2 996.2 --------- --------- Total................................................ $11,923.7 $12,720.8 --------- --------- --------- ---------
The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Cash collateral, which is in excess of the market value of the loaned securities, is deposited by the borrower with a lending agent, and retained and invested by the lending agent to generate additional income for the Company. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value fluctuates. At December 31, 1995, the Company had loaned securities (which are reflected as invested assets on the Consolidated Balance Sheets) with a market value of approximately $264.5 million. At December 31, 1995 and 1994, debt securities carried at $7.4 million and $7.0 million, respectively, were on deposit as required by regulatory authorities. The valuation reserve for mortgage loans was $3.1 million at December 31, 1994. There was no valuation reserve for mortgage loans at December 31, 1995. The carrying value of non-income producing investments was $0.1 million and $0.2 million at December 31, 1995 and 1994, respectively. F-13 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 2. INVESTMENTS (CONTINUED) Investments in a single issuer, other than obligations of the U.S. government, with a carrying value in excess of 10% of the Company's shareholder's equity at December 31, 1995 are as follows:
AMORTIZED DEBT SECURITIES COST FAIR VALUE ---------- ---------- (MILLIONS) General Electric Corporation........................... $ 314.9 $ 329.3 General Motors Corporation............................. 273.9 284.5 Associates Corporation of North America................ 230.2 239.1 Society National Bank.................................. 203.5 222.3 Ciesco, L.P............................................ 194.9 194.9 Countrywide Funding.................................... 171.2 172.7 Baxter International................................... 168.9 168.9 Time Warner............................................ 158.6 166.1 Ford Motor Company..................................... 156.7 162.6
The portfolio of debt securities at December 31, 1995 and 1994 included $662.5 million and $318.3 million, respectively, (5% and 3%, respectively, of the debt securities) of investments that are considered "below investment grade". "Below investment grade" securities are defined to be securities that carry a rating below BBB-/Baa3, by Standard & Poors/ Moody's Investor Services, respectively. The increase in below investment grade securities is the result of a change in investment strategy, which has reduced the Company's holdings in residential mortgage-back securities and increased the Company's holdings in corporate securities. Residential mortgage-back securities are subject to higher prepayment risk and lower credit risk, while corporate securities earning a comparable yield are subject to higher credit risk and lower prepayment risk. We expect the percentage of below investment grade securities will increase in 1996, but we expect that the overall average quality of the portfolio of debt securities will remain at AA-. Of these below investment grade assets, $14.5 million and $31.8 million, at December 31, 1995 and 1994, respectively, were investments that were purchased at investment grade, but whose ratings have since been downgraded. Included in residential mortgage-back securities are collateralized mortgage obligations ("CMOs") with carrying values of $2.5 billion and $2.6 billion at December 31, 1995 and 1994, respectively. The principal risks inherent in holding CMOs are prepayment and extension risks related to dramatic decreases and increases in interest rates whereby the CMOs would be subject to repayments of principal earlier or later than originally anticipated. At December 31, 1995 and 1994, approximately 79% and 85%, respectively, of the Company's CMO holdings consisted of sequential and planned amortization class debt securities which are subject to less prepayment and extension risk than other CMO instruments. At December 31, 1995 and 1994, approximately 81% and 82%, respectively, of the Company's CMO holdings were collateralized by residential mortgage loans, on which the timely payment of principal and interest was backed by specified government agencies (e.g., GNMA, FNMA, FHLMC). If due to declining interest rates, principal was to be repaid earlier than originally anticipated, the Company could be affected by a decrease in investment income due to the reinvestment of these funds at a lower interest rate. Such prepayments may result in a duration mismatch between assets and liabilities which could be corrected as cash from prepayments could be reinvested at an appropriate duration to adjust the mismatch. F-14 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 2. INVESTMENTS (CONTINUED) Conversely, if due to increasing interest rates, principal was to be repaid slower than originally anticipated, the Company could be affected by a decrease in cash flow which reduces the ability to reinvest expected principal repayments at higher interest rates. Such slower payments may result in a duration mismatch between assets and liabilities which could be corrected as available cash flow could be reinvested at an appropriate duration to adjust the mismatch. At December 31, 1995 and 1994, approximately 3% and 4%, respectively, of the Company's CMO holdings consisted of interest-only strips ("IOs") or principal-only strips ("POs"). IOs receive payments of interest and POs receive payments of principal on the underlying pool of mortgages. The risk inherent in holding POs is extension risk related to dramatic increases in interest rates whereby the future payments due on POs could be repaid much slower than originally anticipated. The extension risks inherent in holding POs was mitigated somewhat by offsetting positions in IOs. During dramatic increases in interest rates, IOs would generate more future payments than originally anticipated. The risk inherent in holding IOs is prepayment risk related to dramatic decreases in interest rates whereby future IO cash flows could be much less than originally anticipated and in some cases could be less than the original cost of the IO. The risks inherent in IOs are mitigated somewhat by holding offsetting positions in POs. During dramatic decreases in interest rates POs would generate future cash flows much quicker than originally anticipated. Investments in available for sale equity securities were as follows:
GROSS GROSS UNREALIZED UNREALIZED COST GAINS LOSSES FAIR VALUE ------ ---------- ---------- ---------- (MILLIONS) 1995 Equity Securities................ $231.6 $ 27.2 $ 1.2 $ 257.6 ------ ----- --- ---------- 1994 Equity Securities................ $230.5 $ 6.5 $ 7.9 $ 229.1 ------ ----- --- ----------
3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS Realized capital gains or losses are the difference between proceeds received from investments sold or prepaid, and amortized cost. Net realized capital gains as reflected in the Consolidated Statements of Income are after deductions for net realized capital gains (losses) allocated to experience-rated contracts of $61.1 million, $(29.1) million and $(54.8) million for the years ended December 31, 1995, 1994, and 1993, respectively. Net realized capital gains (losses) allocated to experience-rated contracts are deferred and subsequently reflected in credited rates on an amortized basis. Net unamortized gains (losses), reflected as a component of Policyholders' Funds Left With the Company, were $7.3 million and $(50.7) million at the end of December 31, 1995 and 1994, respectively. Changes to the mortgage loan valuation reserve and writedowns on debt securities are included in net realized capital gains (losses) and amounted to $3.1 million, $1.1 million and $(98.5) million, of which $2.2 million, $0.8 million and $(91.5) million were allocable to experience-rated contractholders, for the years ended December 31, 1995, 1994 and 1993, respectively. The 1993 losses were primarily related to writedowns of interest-only mortgage-backed securities to their fair value. F-15 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED) Net realized capital gains (losses) on investments, net of amounts allocated to experience-rated contracts, were as follows:
1995 1994 1993 ----- ----- ------ (MILLIONS) Debt securities........................................ $32.8 $ 1.0 $ 9.6 Equity securities...................................... 8.3 0.2 0.1 Mortgage loans......................................... 0.2 0.3 (0.2) ----- ----- ------ Pretax realized capital gains.......................... $41.3 $ 1.5 $ 9.5 ----- ----- ------ After-tax realized capital gains....................... $25.8 $ 1.0 $ 6.2 ----- ----- ------
Gross gains of $44.6 million, $26.6 million and $33.3 million and gross losses of $11.8 million, $25.6 million and $23.7 million were realized from the sales of investments in debt securities in 1995, 1994 and 1993, respectively. Changes in unrealized capital gains (losses), excluding changes in unrealized capital gains (losses) related to experience-rated contracts, for the years ended December 31, were as follows:
1995 1994 1993 ------ -------- ------ (MILLIONS) Debt securities........................................ $255.9 $ (242.1) $164.3 Equity securities...................................... 27.3 (13.3) 10.6 Limited partnership.................................... 1.8 (1.8) -- ------ -------- ------ 285.0 (257.2) 174.9 Deferred federal income taxes (See Note 6)............. (36.5) 46.3 61.2 ------ -------- ------ Net change in unrealized capital gains (losses)........ $321.5 $ (303.5) $113.7 ------ -------- ------ ------ -------- ------
Net unrealized capital gains (losses) allocable to experience-rated contracts of $515.0 million and $104.1 million at December 31, 1995 and $(260.9) million and $(47.7) million at December 31, 1994 are reflected on the Consolidated Balance Sheet in Policyholders' Funds Left With the Company and Future Policy Benefits, respectively, and are not included in shareholder's equity. F-16 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 3. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (CONTINUED) Shareholder's equity included the following unrealized capital gains (losses), which are net of amounts allocable to experience-rated contractholders, at December 31:
1995 1994 1993 ------ ------- ------- (MILLIONS) Debt securities Gross unrealized capital gains....................... $179.3 $ 27.4 $ 164.3 Gross unrealized capital losses...................... (1.3) (105.2) -- ------ ------- ------- 178.0 (77.8) 164.3 Equity securities Gross unrealized capital gains....................... 27.2 6.5 12.0 Gross unrealized capital losses...................... (1.2) (7.9) (0.1) ------ ------- ------- 26.0 (1.4) 11.9 Limited Partnership Gross unrealized capital gains....................... -- -- -- Gross unrealized capital losses...................... -- (1.8) -- ------ ------- ------- Deferred federal income taxes (See Note 6)............. 71.5 108.0 61.7 ------ ------- ------- Net unrealized capital gains (losses).................. $132.5 $(189.0) $ 114.5 ------ ------- ------- ------ ------- -------
4. NET INVESTMENT INCOME Sources of net investment income were as follows:
1995 1994 1993 -------- ------ ------ (MILLIONS) Debt securities........................................ $ 891.5 $823.9 $828.0 Preferred stock........................................ 4.2 3.9 2.3 Investment in affiliated mutual funds.................. 14.9 5.2 2.9 Mortgage loans......................................... 1.4 1.4 1.5 Policy loans........................................... 13.7 11.5 10.8 Reinsurance loan to affiliate.......................... 46.5 51.5 53.3 Cash equivalents....................................... 38.9 29.5 16.8 Other.................................................. 8.4 6.7 7.7 -------- ------ ------ Gross investment income................................ 1,019.5 933.6 923.3 Less investment expenses............................... (15.2) (16.4) (11.4) -------- ------ ------ Net investment income.................................. $1,004.3 $917.2 $911.9 -------- ------ ------ -------- ------ ------
Net investment income includes amounts allocable to experience-rated contractholders of $744.2 million, $677.1 million and $661.3 million for the years ended December 31, 1995, 1994 and 1993, respectively. Interest credited to contractholders is included in Current and Future Benefits. F-17 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 5. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY The Company distributed $2.9 million in the form of dividends of two of its subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995. The amount of dividends that may be paid to the shareholder in 1996 without prior approval by the Insurance Commissioner of the State of Connecticut is $70.0 million. The Insurance Department of the State of Connecticut (the "Department") recognizes as net income and shareholder's equity those amounts determined in conformity with statutory accounting practices prescribed or permitted by the Department, which differ in certain respects from generally accepted accounting principles. Statutory net income was $70.0 million, $64.9 million and $77.6 million for the years ended December 31, 1995, 1994 and 1993, respectively. Statutory shareholder's equity was $670.7 million and $615.0 million as of December 31, 1995 and 1994, respectively. At December 31, 1995 and December 31, 1994, the Company does not utilize any statutory accounting practices which are not prescribed by insurance regulators that, individually or in the aggregate, materially affect statutory shareholder's equity. 6. FEDERAL INCOME TAXES The Company is included in the consolidated federal income tax return of Aetna. Aetna allocates to each member an amount approximating the tax it would have incurred were it not a member of the consolidated group, and credits the member for the use of its tax saving attributes in the consolidated return. In August 1993, the Omnibus Budget Reconciliation Act of 1993 (OBRA) was enacted which resulted in an increase in the federal corporate tax rate from 34% to 35% retroactive to January 1, 1993. The enactment of OBRA resulted in an increase in the deferred tax liability of $3.4 million at date of enactment, which is included in the 1993 deferred tax expense. Components of income tax expense (benefits) were as follows:
1995 1994 1993 ----- ----- ------- (MILLIONS) Current taxes (benefits): Income from operations............................... $82.9 $78.7 $ 87.1 Net realized capital gains........................... 28.5 (33.2) 18.1 ----- ----- ------- 111.4 45.5 105.2 ----- ----- ------- Deferred taxes (benefits): Income from operations............................... (14.4) (8.0) (14.2) Net realized capital gains........................... (12.9) 33.7 (14.8) ----- ----- ------- (27.3) 25.7 (29.0) ----- ----- ------- Total................................................ $84.1 $71.2 $ 76.2 ----- ----- ------- ----- ----- -------
F-18 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 6. FEDERAL INCOME TAXES (CONTINUED) Income tax expense was different from the amount computed by applying the federal income tax rate to income before federal income taxes for the following reasons:
1995 1994 1993 ------ ------ ------ (MILLIONS) Income before federal income taxes..................... $260.0 $216.5 $219.1 Tax rate............................................... 35% 35% 35% ------ ------ ------ Application of the tax rate............................ 91.0 75.8 76.7 ------ ------ ------ Tax effect of: Excludable dividends................................. (9.3) (8.6) (8.7) Tax reserve adjustments.............................. 3.9 2.9 4.7 Reinsurance transaction.............................. (0.5) 1.9 (0.2) Tax rate change on deferred liabilities.............. -- -- 3.7 Other, net........................................... (1.0) (0.8) -- ------ ------ ------ Income tax expense................................... $ 84.1 $ 71.2 $ 76.2 ------ ------ ------ ------ ------ ------
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 are presented below:
1995 1994 ------ ------ (MILLIONS) Deferred tax assets: Insurance reserves................................... $290.4 $211.5 Net unrealized capital losses........................ -- 136.3 Unrealized gains allocable to experience-rated contracts........................................... 216.7 -- Investment losses not currently deductible........... 7.3 15.5 Postretirement benefits other than pensions.......... 7.7 8.4 Other................................................ 32.0 28.3 ------ ------ Total gross assets..................................... 554.1 400.0 Less valuation allowance............................... -- 136.3 ------ ------ Deferred tax assets, net of valuation.................. 554.1 263.7 Deferred tax liabilities: Deferred policy acquisition costs.................... 433.0 385.2 Unrealized losses allocable to experience-rated contracts........................................... -- 108.0 Market discount...................................... 4.4 3.6 Net unrealized capital gains......................... 288.2 -- Other................................................ (1.9) 0.4 ------ ------ Total gross liabilities................................ 723.7 497.2 ------ ------ Net deferred tax liability............................. $169.6 $233.5 ------ ------ ------ ------
F-19 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 6. FEDERAL INCOME TAXES (CONTINUED) Net unrealized capital gains and losses are presented in shareholder's equity net of deferred taxes. At December 31, 1994, $81.0 million of net unrealized capital losses were reflected in shareholder's equity without deferred tax benefits. As of December 31, 1995, no valuation allowance was required for unrealized capital gains and losses. The reversal of the valuation allowance had no impact on net income in 1995. The "Policyholders' Surplus Account," which arose under prior tax law, is generally that portion of a life insurance company's statutory income that has not been subject to taxation. As of December 31, 1983, no further additions could be made to the Policyholders' Surplus Account for tax return purposes under the Deficit Reduction Act of 1984. The balance in such account was approximately $17.2 million at December 31, 1995. This amount would be taxed only under certain conditions. No income taxes have been provided on this amount since management believes the conditions under which such taxes would become payable are remote. The Internal Revenue Service ("Service") has completed examinations of the consolidated federal income tax returns of Aetna through 1986. Discussions are being held with the Service with respect to proposed adjustments. However, management believes there are adequate defenses against, or sufficient reserves to provide for, such challenges. The Service has commenced its examinations for the years 1987 through 1990. 7. BENEFIT PLANS Employee Pension Plans--The Company, in conjunction with Aetna, has non-contributory defined benefit pension plans covering substantially all employees. The plans provide pension benefits based on years of service and average annual compensation (measured over sixty consecutive months of highest earnings in a 120 month period). Contributions are determined using the Projected Unit Credit Method and, for qualified plans subject to ERISA requirements, are limited to the amounts that are currently deductible for tax reporting purposes. The accumulated benefit obligation and plan assets are recorded by Aetna. The accumulated plan assets exceed accumulated plan benefits. There has been no funding to the plan for the years 1993 through 1995, and therefore, no expense has been recorded by the Company. Agent Pension Plans--The Company, in conjunction with Aetna, has a non-qualified pension plan covering certain agents. The plan provides pension benefits based on annual commission earnings. The accumulated plan assets exceed accumulated plan benefits. There has been no funding to the plan for the years 1993 through 1995, and therefore, no expense has been recorded by the Company. Employee Postretirement Benefits--In addition to providing pension benefits, Aetna also provides certain postretirement health care and life insurance benefits, subject to certain caps, for retired employees. Medical and dental benefits are offered to all full-time employees retiring at age 50 with at least 15 years of service or at age 65 with at least 10 years of service. Retirees are required to contribute to the plans based on their years of service with Aetna. The cost to the Company associated with the Aetna postretirement plans for 1995, 1994 and 1993 were $1.4 million, $1.0 million and $0.8 million, respectively. Agent Postretirement Benefits--The Company, in conjunction with Aetna, also provides certain postemployment health care and life insurance benefits for certain agents. F-20 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 7. BENEFIT PLANS (CONTINUED) The cost to the Company associated to the agents' postretirement plans for 1995, 1994 and 1993 were $0.8 million, $0.7 million and $0.6 million, respectively. Incentive Savings Plan--Substantially all employees are eligible to participate in a savings plan under which designated contributions, which may be invested in common stock of Aetna or certain other investments, are matched, up to 5% of compensation, by Aetna. Pretax charges to operations for the incentive savings plan were $4.9 million, $3.3 million and $3.1 million in 1995, 1994 and 1993, respectively. Stock Plans--Aetna has a stock incentive plan that provides for stock options and deferred contingent common stock or cash awards to certain key employees. Aetna also has a stock option plan under which executive and middle management employees of Aetna may be granted options to purchase common stock of Aetna at the market price on the date of grant or, in connection with certain business combinations, may be granted options to purchase common stock on different terms. The cost to the Company associated with the Aetna stock plans for 1995, 1994 and 1993, was $6.3 million, $1.7 million and $0.4 million, respectively. 8. RELATED PARTY TRANSACTIONS The Company is compensated by the Separate Accounts for bearing mortality and expense risks pertaining to variable life and annuity contracts. Under the insurance contracts, the Separate Accounts pay the Company a daily fee which, on an annual basis, ranges, depending on the product, from .25% to 1.80% of their average daily net assets. The Company also receives fees from the variable life and annuity mutual funds and The Aetna Series Fund for serving as investment adviser. Under the advisory agreements, the Funds pay the Company a daily fee which, on an annual basis, ranges, depending on the fund, from .25% to 1.00% of their average daily net assets. The advisory agreements also call for the variable funds to pay their own administrative expenses and for The Aetna Series Fund to pay certain administrative expenses. The Company also receives fees (expressed as a percentage of the average daily net assets) from The Aetna Series Fund for providing administration, shareholder services and promoting sales. The amount of compensation and fees received from the Separate Accounts and Funds, included in Charges Assessed Against Policyholders, amounted to $128.1 million, $104.6 million and $93.6 million in 1995, 1994 and 1993, respectively. The Company may waive advisory fees at its discretion. The Company may, from time to time, make reimbursements to a Fund for some or all of its operating expenses. Reimbursement arrangements may be terminated at any time without notice. Since 1981, all domestic individual non-participating life insurance of Aetna and its subsidiaries has been issued by the Company. Effective December 31, 1988, the Company entered into a reinsurance agreement with Aetna Life Insurance Company ("Aetna Life") in which substantially all of the non-participating individual life and annuity business written by Aetna Life prior to 1981 was assumed by the Company. A $108.0 million commission, paid by the Company to Aetna Life in 1988, was capitalized as deferred policy acquisition costs. The Company maintained insurance reserves of $655.5 million and $690.3 million as of December 31, 1995 and 1994, respectively, relating to the business assumed. In consideration for the assumption of this business, a loan was established relating to the assets held by Aetna Life which support the insurance reserves. The loan is being reduced in accordance with the decrease in the reserves. The fair value of this loan was $663.5 million and $630.3 million as of December 31, 1995 and 1994, respectively, and is based upon the fair value of the underlying assets. Premiums of $28.0 million, $32.8 million and $33.3 million and current and future benefits of $43.0 million, $43.8 million and $55.4 million were assumed in 1995, 1994 and 1993, respectively. F-21 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 8. RELATED PARTY TRANSACTIONS (CONTINUED) Investment income of $46.5 million, $51.5 million and $53.3 million was generated from the reinsurance loan to affiliate in 1995, 1994 and 1993, respectively. Net income of approximately $18.4 million, $25.1 million and $13.6 million resulted from this agreement in 1995, 1994 and 1993, respectively. On December 16, 1988, the Company assumed $25.0 million of premium revenue from Aetna Life for the purchase and administration of a life contingent single premium variable payout annuity contract. In addition, the Company also is responsible for administering fixed annuity payments that are made to annuitants receiving variable payments. Reserves of $28.0 million and $24.2 million were maintained for this contract as of December 31, 1995 and 1994, respectively. Effective February 1, 1992, the Company increased its retention limit per individual life to $2.0 million and entered into a reinsurance agreement with Aetna Life to reinsure amounts in excess of this limit, up to a maximum of $8.0 million on any new individual life business, on a yearly renewable term basis. Premium amounts related to this agreement were $3.2 million, $1.3 million and $0.6 million for 1995, 1994 and 1993, respectively. The Company received no capital contributions in 1995, 1994 or 1993. The Company distributed $2.9 million in the form of dividends of two of its subsidiaries, SBA and AISI, to Aetna Retirement Services, Inc. in 1995. Premiums due and other receivables include $5.7 million and $27.6 million due from affiliates in 1995 and 1994, respectively. Other liabilities include $12.4 million and $27.9 million due to affiliates for 1995 and 1994, respectively. Substantially all of the administrative and support functions of the Company are provided by Aetna and its affiliates. The financial statements reflect allocated charges for these services based upon measures appropriate for the type and nature of service provided. 9. REINSURANCE The Company utilizes indemnity reinsurance agreements to reduce its exposure to large losses in all aspects of its insurance business. Such reinsurance permits recovery of a portion of losses from reinsurers, although it does not discharge the primary liability of the Company as direct insurer of the risks reinsured. The Company evaluates the financial strength of potential reinsurers and continually monitors the financial condition of reinsurers. Only those reinsurance recoverables deemed probable of recovery are reflected as assets on the Company's Consolidated Balance Sheets. F-22 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 9. REINSURANCE (CONTINUED) The following table includes premium amounts ceded/assumed to/from affiliated companies as discussed in Note 8 above.
CEDED TO ASSUMED DIRECT OTHER FROM OTHER AMOUNT COMPANIES COMPANIES --------- ------------- ------------- (MILLIONS) 1995 Premiums: Life Insurance.................................................................. $ 28.8 $ 8.6 $ 28.0 Accident and Health Insurance................................................... 7.5 7.5 -- Annuities....................................................................... 82.1 -- 0.5 --------- ----- ----- Total earned premiums........................................................... $ 118.4 $ 16.1 $ 28.5 --------- ----- ----- --------- ----- ----- 1994 Premiums: Life Insurance.................................................................. $ 27.3 $ 6.0 $ 32.8 Accident and Health Insurance................................................... 9.3 9.3 -- Annuities....................................................................... 69.9 -- 0.2 --------- ----- ----- Total earned premiums........................................................... $ 106.5 $ 15.3 $ 33.0 --------- ----- ----- --------- ----- ----- 1993 Premiums: Life Insurance.................................................................. $ 22.4 $ 5.6 $ 33.3 Accident and Health Insurance................................................... 12.9 12.9 -- Annuities....................................................................... 31.3 -- 0.7 --------- ----- ----- Total earned premiums........................................................... $ 66.6 $ 18.5 $ 34.0 --------- ----- ----- --------- ----- ----- NET AMOUNT --------- 1995 Premiums: Life Insurance.................................................................. $ 48.2 Accident and Health Insurance................................................... -- Annuities....................................................................... 82.6 --------- Total earned premiums........................................................... $ 130.8 --------- --------- 1994 Premiums: Life Insurance.................................................................. $ 54.1 Accident and Health Insurance................................................... -- Annuities....................................................................... 70.1 --------- Total earned premiums........................................................... $ 124.2 --------- --------- 1993 Premiums: Life Insurance.................................................................. $ 50.1 Accident and Health Insurance................................................... -- Annuities....................................................................... 32.0 --------- Total earned premiums........................................................... $ 82.1 --------- ---------
F-23 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 10. FINANCIAL INSTRUMENTS ESTIMATED FAIR VALUE The carrying values and estimated fair values of the Company's financial instruments at December 31, 1995 and 1994 were as follows:
1995 1994 -------------------- -------------------- CARRYING FAIR CARRYING FAIR VALUE VALUE VALUE VALUE --------- --------- --------- --------- (MILLIONS) Assets: Cash and cash equivalents................................. $ 568.8 $ 568.8 $ 623.3 $ 623.3 Short-term investments.................................... 15.1 15.1 98.0 98.0 Debt securities........................................... 12,720.8 12,720.8 10,191.4 10,191.4 Equity securities......................................... 257.6 257.6 229.1 229.1 Limited partnership....................................... -- -- 24.4 24.4 Mortgage loans............................................ 21.2 21.9 9.9 9.9 Liabilities: Investment contract liabilities: With a fixed maturity................................... 989.1 1,001.2 826.7 833.5 Without a fixed maturity................................ 9,511.0 9,298.4 8,122.6 7,918.2
Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument, such as estimates of timing and amount of expected future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument. In evaluating the Company's management of interest rate and liquidity risk, the fair values of all assets and liabilities should be taken into consideration, not only those above. The following valuation methods and assumptions were used by the Company in estimating the fair value of the above financial instruments: SHORT-TERM INSTRUMENTS: Fair values are based on quoted market prices or dealer quotations. Where quoted market prices are not available, the carrying amounts reported in the Consolidated Balance Sheets approximates fair value. Short-term instruments have a maturity date of one year or less and include cash and cash equivalents, and short-term investments. DEBT AND EQUITY SECURITIES: Fair values are based on quoted market prices or dealer quotations. Where quoted market prices or dealer quotations are not available, fair value is estimated by using quoted market prices for similar securities or discounted cash flow methods. F-24 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 10. FINANCIAL INSTRUMENTS (CONTINUED) MORTGAGE LOANS: Fair value is estimated by discounting expected mortgage loan cash flows at market rates which reflect the rates at which similar loans would be made to similar borrowers. The rates reflect management's assessment of the credit quality and the remaining duration of the loans. The fair value estimate of mortgage loans of lower quality, including problem and restructured loans, is based on the estimated fair value of the underlying collateral. INVESTMENT CONTRACT LIABILITIES (INCLUDED IN POLICYHOLDERS' FUNDS LEFT WITH THE COMPANY): WITH A FIXED MATURITY: Fair value is estimated by discounting cash flows at interest rates currently being offered by, or available to, the Company for similar contracts. WITHOUT A FIXED MATURITY: Fair value is estimated as the amount payable to the contractholder upon demand. However, the Company has the right under such contracts to delay payment of withdrawals which may ultimately result in paying an amount different than that determined to be payable on demand. OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS (INCLUDING DERIVATIVE FINANCIAL INSTRUMENTS) During 1995, the Company received $0.4 million for writing call options on underlying securities. As of December 31, 1995 there were no option contracts outstanding. At December 31, 1995, the Company had a forward swap agreement with a notional amount of $100.0 million and a fair value of $0.1 million. The Company did not have transactions in derivative instruments in 1994. The Company also holds investments in certain debt and equity securities with derivative characteristics (i.e., including the fact that their market value is at least partially determined by, among other things, levels of or changes in interest rates, prepayment rates, equity markets or credit ratings/spreads). The amortized cost and fair value of these securities, included in the $13.4 billion investment portfolio, as of December 31, 1995 was as follows:
AMORTIZED FAIR (MILLIONS) COST VALUE ----------- ----------- Collateralized mortgage obligations..................................................................... $ 2,383.9 $ 2,549.3 Principal-only strips (included above).................................................................. 38.7 50.0 Interest-only strips (included above)................................................................... 10.7 20.7 Structured Notes (1).................................................................................... 95.0 100.3
(1) Represents non-leveraged instruments whose fair values and credit risk are based on underlying securities, including fixed income securities and interest rate swap agreements. 11. COMMITMENTS AND CONTINGENT LIABILITIES COMMITMENTS Through the normal course of investment operations, the Company commits to either purchase or sell securities or money market instruments at a specified future date and at a specified price or yield. The inability of counterparties to honor these commitments may result in either higher or lower replacement cost. Also, there is likely to be a change in F-25 AETNA LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (A wholly owned subsidiary of Aetna Retirement Services, Inc.) Notes to Consolidated Financial Statements (continued) December 31, 1995, 1994, and 1993 11. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED) the value of the securities underlying the commitments. At December 31, 1995, the Company had commitments to purchase investments of $31.4 million. The fair value of the investments at December 31, 1995 approximated $31.5 million. There were no outstanding forward commitments at December 31, 1994. LITIGATION There were no material legal proceedings pending against the Company as of December 31, 1995 or December 31, 1994 which were beyond the ordinary course of business. The Company is involved in lawsuits arising, for the most part, in the ordinary course of its business operations as an insurer. 12. SEGMENT INFORMATION The Company's operations are reported through two major business segments: Life Insurance and Financial Services. Summarized financial information for the Company's principal operations was as follows:
(MILLIONS) 1995 1994 1993 ----------- ----------- ----------- Revenue: Financial services..................................................................... $ 1,129.4 $ 946.1 $ 892.8 Life insurance......................................................................... 407.9 386.1 371.7 ----------- ----------- ----------- Total revenue.......................................................................... $ 1,537.3 $ 1,332.2 $ 1,264.5 ----------- ----------- ----------- Income before federal income taxes: Financial services..................................................................... $ 158.0 $ 119.7 $ 121.1 Life insurance......................................................................... 102.0 96.8 98.0 ----------- ----------- ----------- Total income before federal income taxes............................................... $ 260.0 $ 216.5 $ 219.1 ----------- ----------- ----------- Net income: Financial services..................................................................... $ 113.8 $ 85.5 $ 86.8 Life insurance......................................................................... 62.1 59.8 56.1 ----------- ----------- ----------- Net income............................................................................... $ 175.9 $ 145.3 $ 142.9 ----------- ----------- ----------- Assets under management, at fair value: Financial services..................................................................... $ 23,224.3 $ 17,785.2 $ 16,600.5 Life insurance......................................................................... 2,698.1 2,171.7 2,175.5 ----------- ----------- ----------- Total assets under management.......................................................... $ 25,922.4 $ 19,956.9 $ 18,776.0 ----------- ----------- ----------- ----------- ----------- -----------
F-26 VARIABLE ANNUITY ACCOUNT C PART C - OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements: (1) Included in Part A: Condensed Financial Information (2) Included in Part B: Financial Statements of Variable Annuity Account C: - Independent Auditors' Report - Statement of Assets and Liabilities as of December 31, 1995 - Statement of Operations for the year ended December 31, 1995 - Statements of Changes in Net Assets for the years ended December 31, 1995 and 1994 - Notes to Financial Statements Financial Statements of the Depositor: - Independent Auditors' Report - Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993 - Consolidated Balance Sheets as of December 31, 1995 and 1994 - Consolidated Statements of Changes in Shareholder's Equity for the years ended December 31, 1995, 1994 and 1993 - Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 - Notes to Consolidated Financial Statements (b) Exhibits (1) Resolution of the Board of Directors of Aetna Life Insurance and Annuity Company establishing Variable Annuity Account C(1) (2) Not applicable (3.1) Form of Broker-Dealer Agreement(1) (3.2) Alternative Form of Wholesaling Agreement and related Selling Agreement(1) (4.1) Form of Variable Annuity Contracts (IRA-CDA-IC) and (IP-CDA-IB) (5.1) Form of Variable Annuity Contract Application (304.00.1A)(2) (5.2) Form of Variable Annuity Contract Application (703.00.1A)(3) (6) Certification of Incorporation and By-Laws of Depositor(4) (7) Not applicable (8.1) Fund Participation Agreement (Amended and Restated) between Aetna Life Insurance and Annuity Company, Alger American Fund and Fred Alger Management, Inc. dated March 31, 1995(1) (8.2) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Fidelity Distributors Corporation (Variable Insurance Products Fund) dated February 1, 1994 and amended March 1, 1996(1) (8.3) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Fidelity Distributors Corporation (Variable Insurance Products Fund II) dated February 1, 1994 and amended March 1, 1996(1) (8.4) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Janus Aspen Series dated April 19, 1994 and amended March 1, 1996(1) (8.5) Fund Participation Agreement between Aetna Life Insurance and Annuity Company and Scudder Variable Life Investment Fund dated April 27, 1992 and amended February 19, 1993 and August 13, 1993(1) (8.6) Fund Participation Agreement between Aetna Life Insurance and Annuity Company, Investors Research Corporation and TCI Portfolios, Inc. dated July 29, 1992 and amended December 22, 1992 and June 1, 1994(1) (9) Opinion of Counsel(5) (10.1) Consent of Independent Auditors (10.2) Consent of Counsel (11) Not applicable (12) Not applicable (13) Computation of Performance Data(6) (14) Not applicable (15.1) Powers of Attorney(7) (15.2) Authorization for Signatures(1) (27) Financial Data Schedule 1. Incorporated by reference to Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 33-75986), as filed electronically on April 12, 1996. 2. Incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement on Form N-4 (File No. 33-75988), as filed on February 27, 1995. 3. Incorporated by reference to Post-Effective Amendment No. 2 to Registration Statement on Form N-4 (File No. 33-75972), as filed on April 28, 1995. 4. Incorporated by reference to Post-Effective Amendment No. 58 to Registration Statement on Form N-4 (File No. 2-52449), as filed on February 28, 1994. 5. Incorporated by reference to Registrant's 24f-2 Notice for fiscal year ended December 31, 1995, as filed electronically on February 29, 1996. 6. Incorporated by reference to Post-Effective Amendment No. 4 to Registration Statement on Form N-4 (File No. 33-75964), as filed on April 28, 1995. 7. Incorporated by reference to Post-Effective Amendment No. 3 to Registration Statement on Form N-4 (File No. 33-75974), as filed electronically on April 9, 1996. ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR Name and Principal Business Address* Positions and Offices with Depositor - ------------------ ------------------------------------ Daniel P. Kearney Director and President Timothy A. Holt Director, Senior Vice President and Chief Financial Officer Christopher J. Burns Director and Senior Vice President Laura R. Estes Director and Senior Vice President Gail P. Johnson Director and Vice President John Y. Kim Director and Senior Vice President Shaun P. Mathews Director and Vice President Glen Salow Director and Vice President Creed R. Terry Director and Vice President Eugene M. Trovato Vice President and Treasurer, Corporate Controller Zoe Baird Senior Vice President and General Counsel Diane Horn Vice President and Chief Compliance Officer Susan E. Schechter Corporate Secretary and Counsel * The principal business address of all directors and officers listed is 151 Farmington Avenue, Hartford, Connecticut 06156. ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT Incorporated herein by references to Item 26 of Post-Effective Amendment No. 5 to Registration Statement on Form N-4 (File No. 33-75986), as filed electronically on April 12, 1996. ITEM 27. NUMBER OF CONTRACT OWNERS As of February 29, 1996, there were 527,607 individuals holding interests in variable annuity contracts funded through Variable Annuity Account C. ITEM 28. INDEMNIFICATION Reference is hereby made to Section 33-320a of the Connecticut General Statutes ("C.G.S.") regarding indemnification of directors and officers of Connecticut corporations. The statute provides in general that Connecticut corporations shall indemnify their officers, directors, employees, agents, and certain other defined individuals against judgments, fines, penalties, amounts paid in settlement and reasonable expenses actually incurred in connection with proceedings against the corporation. The corporation's obligation to provide such indemnification does not apply unless (1) the individual is successful on the merits in the defense of any such proceeding; or (2) a determination is made (by a majority of the board of directors not a party to the proceeding by written consent; by independent legal counsel selected by a majority of the directors not involved in the proceeding; or by a majority of the shareholders not involved in the proceeding) that the individual acted in good faith and in the best interests of the corporation; or (3) the court, upon application by the individual, determines in view of all the circumstances that such person is reasonably entitled to be indemnified. C.G.S. Section 33-320a provides an exclusive remedy: a Connecticut corporation cannot indemnify a director or officer to an extent either greater or less than that authorized by the statute, e.g., pursuant to its certificate of incorporation, bylaws, or any separate contractual arrangement. However, the statute does specifically authorize a corporation to procure indemnification insurance to provide greater indemnification rights. The premiums for such insurance may be shared with the insured individuals on an agreed basis. Consistent with the statute, Aetna Life and Casualty Company has procured insurance from Lloyd's of London and several major United States excess insurers for its directors and officers and the directors and officers of its subsidiaries, including the Depositor, which supplements the indemnification rights provided by C.G.S. Section 33-320a to the extent such coverage does not violate public policy. ITEM 29. PRINCIPAL UNDERWRITER (a) In addition to serving as the principal underwriter for the Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also acts as the principal underwriter for Variable Life Account B and Variable Annuity Accounts B and G (separate accounts of ALIAC registered as unit investment trusts), and Variable Annuity Account I (a separate account of Aetna Insurance Company of America registered as a unit investment trust). Additionally, ALIAC is the investment adviser for Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers Fund, Inc., Aetna GET Fund, Aetna Series Fund, Inc. and Aetna Generation Portfolios, Inc. ALIAC is also the depositor of Variable Life Account B and Variable Annuity Accounts B and G. (b) See Item 25 regarding the Depositor. (c) Compensation as of December 31, 1995:
(1) (2) (3) (4) (5) Name of Net Underwriting Compensation on Principal Discounts and Redemption or Brokerage Underwriter Commissions Annuitization Commissions Compensation* ----------- ---------------- --------------- ----------- ------------- Aetna Life $1,830,629 $74,341,006 Insurance and Annuity Company
* Compensation shown in column 5 includes deductions for mortality and expense risk guarantees and contract charges assessed to cover costs incurred in the sales and administration of the contracts issued under Variable Annuity Account C. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS All records concerning contract owners of Variable Annuity Account C are located at the home office of the Depositor as follows: Aetna Life Insurance and Annuity Company 151 Farmington Avenue Hartford, Connecticut 06156 ITEM 31. MANAGEMENT SERVICES Not applicable ITEM 32. UNDERTAKINGS Registrant hereby undertakes: (a) to file a post-effective amendment to this registration statement on Form N-4 as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen months old for as long as payments under the variable annuity contracts may be accepted; (b) to include as part of any application to purchase a contract offered by a prospectus which is part of this registration statement on Form N-4, a space that an applicant can check to request a Statement of Additional Information; and (c) to deliver any Statement of Additional Information and any financial statements required to be made available under this Form N-4 promptly upon written or oral request. (d) Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES As required by the Securities Act of 1933, as amended, and the Investment Company Act of 1940, the Registrant, Variable Annuity Account C of Aetna Life Insurance and Annuity Company, certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment No. 4 to its Registration Statement on Form N-4 (File No. 33-75988) and has caused this Post-Effective Amendment No. 4 to its Registration Statement on Form N-4 (File No. 33-75988) to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hartford, State of Connecticut, on the 12th day of April, 1996. VARIABLE ANNUITY ACCOUNT C OF AETNA LIFE INSURANCE AND ANNUITY COMPANY (REGISTRANT) By: AETNA LIFE INSURANCE AND ANNUITY COMPANY (DEPOSITOR) By: Daniel P. Kearney* ---------------------------------- Daniel P. Kearney President As required by the Securities Act of 1933, as amended, this Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 (File No. 33-75988) has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date - --------- ----- ---- Daniel P. Kearney* Director and President ) - --------------------- (principal executive officer) ) Daniel P. Kearney ) ) Timothy A. Holt* Director, Senior Vice President and ) April - --------------------- Chief Financial Officer ) 12, 1996 Timothy A. Holt ) ) Christopher J. Burns* Director ) - --------------------- ) Christopher J. Burns ) Laura R. Estes* Director ) - --------------------- ) Laura R. Estes ) ) Gail P. Johnson* Director ) - --------------------- ) Gail P. Johnson ) ) John Y. Kim* Director ) - --------------------- ) John Y. Kim ) ) Shaun P. Mathews* Director ) - --------------------- ) Shaun P. Mathews ) ) Glen Salow* Director ) - --------------------- ) Glen Salow ) ) Creed R. Terry* Director ) - --------------------- ) Creed R. Terry ) ) Eugene M. Trovato* Vice President and Treasurer, ) - --------------------- Corporate Controller ) Eugene M. Trovato ) By: /s/ Julie E. Rockmore ------------------------------- Julie E. Rockmore *Attorney-in-Fact VARIABLE ANNUITY ACCOUNT C EXHIBIT INDEX Exhibit No. Exhibit Page - ----------- ------- ---- 99-B.1 Resolution of the Board of Directors of Aetna Life * Insurance and Annuity Company establishing Variable Annuity Account C 99-B.3.1 Form of Broker-Dealer Agreement * 99-B.3.2 Alternative Form of Wholesaling Agreement and related * Selling Agreement 99-B.4.1 Form of Variable Annuity Contracts (IRA-CDA-IC) and (IP-CDA-IB) ____ 99-B.5.1 Form of Variable Annuity Contract Application (304.00.1A) * 99-B.5.2 Form of Variable Annuity Contract Application (703.00.1A) * 99-B.6 Certification of Incorporation and By-Laws of * Depositor 99-B.8.1 Fund Participation Agreement (Amended and Restated) * between Aetna Life Insurance and Annuity Company, Alger American Fund and Fred Alger Management, Inc. as dated March 31, 1995 99-B.8.2 Fund Participation Agreement between Aetna Life * Insurance and Annuity Company and Fidelity Distributors Corporation (Variable Insurance Products Fund) dated February 1, 1994 and amended March 1, 1996 99-B.8.3 Fund Participation Agreement between Aetna Life * Insurance and Annuity Company and Fidelity Distributors Corporation (Variable Insurance Products Fund II) dated February 1, 1994 and amended March 1, 1996 99-B.8.4 Fund Participation Agreement between Aetna Life * Insurance and Annuity Company and Janus Aspen Series dated April 19, 1994 and amended March 1, 1996 *Incorporated by reference Exhibit No. Exhibit Page - ----------- ------- ---- 99-B.8.5 Fund Participation Agreement between Aetna Life * Insurance and Annuity Company and Scudder Variable Life Investment Fund dated April 27, 1992 and amended February 19, 1993 and August 13, 1993 99-B.8.6 Fund Participation Agreement between Aetna Life * Insurance and Annuity Company, Investors Research Corporation and TCI Portfolios, Inc. dated July 29, 1992 and amended December 22, 1992 and June 1, 1994 99-B.9 Opinion of Counsel * 99-B.10.1 Consent of Independent Auditors ____ 99-B.10.2 Consent of Counsel ____ 99-B.13 Computation of Performance Data * 27 Financial Data Schedule ____ *Incorporated by reference EX-4.1 2 EXHIBIT 4.1 [LOGO] ------------------------------------------------------------------------ AETNA LIFE INSURANCE AND ANNUITY COMPANY HOME OFFICE: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 531-4547 Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the benefits stated in this Contract. SPECIFICATIONS - -------------------------------------------------------------------------------- Plan - -------------------------------------------------------------------------------- Type of Plan INDIVIDUAL RETIREMENT ANNUITY (IRA) - -------------------------------------------------------------------------------- Annuitant MARY SMITH - -------------------------------------------------------------------------------- Contract Holder MARY SMITH - -------------------------------------------------------------------------------- Contract No. SPECIMEN - -------------------------------------------------------------------------------- Effective Date MAY 1, 1994 - -------------------------------------------------------------------------------- This Contract is Delivered in YOUR STATE and is Subject to the Laws of that Jurisdiction THE VARIABLE FEATURES OF THE CONTRACT ARE DESCRIBED IN PARTS III AND IV. RIGHT TO CANCEL - -------------------------------------------------------------------------------- The Contract Holder may cancel this Contract within 10 days of receiving it, by sending a written notice to Aetna at the above address or to the agent from whom it was purchased. Aetna will return all payments made for this Contract within 7 days after it receives the notice of cancellation and this Contract. This page, the following pages, and the application make up the entire Contract. Signed at the Home Office on the Effective Date. Gary G. Benanav Lucille M. Nickerson President Secretary Individual Variable, Fixed, or Combination Annuity Contract Nonparticipating ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. IRA-CDA-IC SPECIFICATIONS (CONTINUED) - -------------------------------------------------------------------------------- GUARANTEED There are guaranteed interest rates for amounts INTEREST RATE held in the Fixed Account (See 3.02) and the Guaranteed Interest Account. (See 3.03(d).) - -------------------------------------------------------------------------------- MAINTENANCE FEE This Contract may be subject to an annual Maintenance Fee. (See Contract Schedule and 3.04.) - -------------------------------------------------------------------------------- SURRENDER FEE There will be a charge deducted for early surrender. (See Contract Schedule and 3.14.) - -------------------------------------------------------------------------------- DEDUCTIONS FROM There will be deductions for mortality and expense THE SEPARATE and administrative fees. (See Contract Schedule ACCOUNT and 3.06.) - -------------------------------------------------------------------------------- DEDUCTION FROM Purchase Payment(s) are subject to a deduction for PURCHASE premium taxes, if any. (See 3.01.) PAYMENT(S) This Contract is a legal contract and constitutes the entire legal relationship between Aetna and the Contract Holder. READ THIS CONTRACT CAREFULLY. This contract sets forth, in detail, all of the rights and obligations of both you and Aetna. IT IS, THEREFORE, IMPORTANT THAT YOU READ THIS CONTRACT CAREFULLY. IRA-CDA-IC CONTRACT SCHEDULE INDIVIDUAL RETIREMENT ANNUITY (IRA) AND SIMPLIFIED EMPLOYEE PENSION PLAN - ------------------------------------------------------------------------------- MAINTENANCE FEE: The annual Maintenance Fee is $25. If the Contract's Current Value is $10,000 or greater on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender within the first Contract Year, the Surrender Fee will be 1% (one percent) of the Current Value. For all subsequent years, the Surrender Fee will be 0% (zero percent). No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months; (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. CHARGES TO SEPARATE A daily charge is deducted from any portion of the ACCOUNT: Current Value allocated to the Separate Account. The deduction is the daily equivalent of the annual percentage that will not exceed 1.50% Current Separate Account charges are 1.25% for the Annuity mortality risk, the expense risk and the administrative charge. Charges are subject to change annually, except for amounts which have been used to purchase an Annuity. The daily charge does not include investment advisory fees and other expenses charged by a Fund investment manager. These fees are disclosed in the applicable Fund Prospectus. Aetna will notify the Contract Holder of any change on Separate Account charges. IRA-CDA-IC CHARGES TO SEPARATE Aetna will reduce the Separate Account charge by: ACCOUNT: (CONT'D): (a)0.10% if ten years have elapsed since the initial Purchase Payment has been made to this Contract and an Annuity Option has not been elected; or (b)0.10% if the Current Value in the Contract is greater than $250,000 on the day of the initial Purchase Payment or on each subsequent anniversary. TABLE OF MINIMUM The values in the below Table only apply to VALUES -- FIXED ACCOUNT: annual Purchase Payments of exactly $1,000 credited to the Fixed Account. Values would be different for othe Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the 3% Guaranteed Interest Rate at the beginning of each Contract Year. The Maintenance Fee and applicable first year Surrender Fee are deducted. TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
END MINIMUM MINIMUM END MINIMUM MINIMUM OF YEAR CURRENT VALUE SURRENDER VALUE OF YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------ 1 $1,005 $ 995 16 $ 20,480 $ 20,480 2 2,040 2,040 17 22,124 22,124 3 3,106 3,106 18 23,818 23,818 4 4,205 4,205 19 25,563 25,563 5 5,336 5,336 20 27,360 27,360 6 6,501 6,501 25 37,186 37,186 7 7,701 7,701 8 8,937 8,937 30 48,577 48,577 9 10,235 10,235 10 11,572 11,572 35 61,782 61,782 11 12,949 12,949 40 77,091 77,091 12 14,368 14,368 13 15,829 15,829 45 94,838 94,838 14 17,333 17,333 15 18,883 18,883 50 115,411 115,411
IRA-CDA-IC CONTRACT SCHEDULE INDIVIDUAL RETIREMENT ANNUITY (IRA) AND SIMPLIFIED EMPLOYEE PENSION PLAN - -------------------------------------------------------------------------------- MAINTENANCE FEE: The annual Maintenance Fee is $25. If the Contract's Current Value is $10,000 or greater on the date the Maintenance Fee is to be deducted, the Maintenance Fee is $0. SURRENDER FEE: For each surrender, the Surrender Fee will be determined according to the number of completed Contract Years between the date the first Net Purchase Payment is applied to the Contract and the date of the surrender. The Surrender Fee Schedule under this Contract will commence at the percentage point in the Schedule below that corresponds with the percentage most recently applicable under the Aetna predecessor contract: COMPLETED CONTRACT YEARS SURRENDER FEE Less than 2 years6% 2 or more but less than 3 5% 3 or more but less than 4 4% 4 or more but less than 5 3% 5 or more but less than 6 2% 6 or more but less than 7 1% 7 or more years 0% No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months; (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. CHARGES TO SEPARATE A daily charge is deducted from any portion ACCOUNT: of the Current Value allocated to the Separate Account. The deduction is the daily equivalent of the annual percentage that will not exceed 1.50% Current Separate Account charges are 1.25% for the Annuity mortality risk, the expense risk IRA-CDA-IC CHARGES TO SEPARATE and the administrative charge. Charges are ACCOUNT (CONT'D) subject to change annually, except for amounts which have been used to purchase an Annuity. The daily charge does not include investment advisory fees and other expenses charged by a Fund investment manager. These fees are disclosed in the applicable Fund Prospectus. Aetna will notify the Contract Holder of any change on Separate Account charges. Aetna will reduce the Separate Account charge by: (a) 0.10% if ten years have elapsed since the initial Purchase Payment has been made to this Contract and an Annuity Option has not been elected; or (b) 0.10% if the Current Value in the Contract is greater than $250,000 on the day of the initial Purchase Payment or on each subsequent anniversary. TABLE OF MINIMUM The values in the below Table only apply to VALUES -- FIXED ACCOUNT: annual Purchase Paymentsof exactly $1,000 credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the 3% Guaranteed Interest Rate at the beginning of each Contract Year. The Maintenance Fee and applicable Surrender Fee are deducted. TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
END MINIMUM MINIMUM END MINIMUM MINIMUM OF YEAR CURRENT VALUE SURRENDER VALUE OF YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------ 1 $1,005 $ 995 16 $ 20,480 $ 20,480 2 2,040 2,040 17 22,124 22,124 3 3,106 3,106 18 23,818 23,818 4 4,205 4,205 19 25,563 25,563 5 5,336 5,336 20 27,360 27,360 6 6,501 6,501 25 37,186 37,186 7 7,701 7,701 8 8,937 8,937 30 48,577 48,577 9 10,235 10,235 10 11,572 11,572 35 61,782 61,782 11 12,949 12,949 40 77,091 77,091 12 14,368 14,368 13 15,829 15,829 45 94,838 94,838 14 17,333 17,333 15 18,883 18,883 50 115,411 115,411
IRA-CDA-IC TABLE OF CONTENTS I. GENERAL DEFINITIONS - -------------------------------------------------------------------------------- PAGE 1.01 Annuitant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.02 Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.03 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.04 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.05 Contract Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.06 Contract Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.07 Fixed Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.08 Fixed Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.09 Fund(s). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.10 General Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.11 Good Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.12 Guaranteed Interest Account (GIA). . . . . . . . . . . . . . . . . . . 4 1.13 Matured Term Value . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.14 Maturity Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.15 Nonunitized Separate Account . . . . . . . . . . . . . . . . . . . . . 4 1.16 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.17 Purchase Payment(s). . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.18 Separate Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.19 Valuation Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.20 Variable Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 II. GENERAL PROVISIONS - -------------------------------------------------------------------------------- 2.01 Change of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.02 Change of Fund(s). . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.03 Nonparticipating Contract. . . . . . . . . . . . . . . . . . . . . . . 6 2.04 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.05 State Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.06 Control of Contract. . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.07 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . 7 2.08 Misstatements and Adjustments. . . . . . . . . . . . . . . . . . . . . 7 2.09 Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.10 Grace Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.11 Nonwaiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2 III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS - -------------------------------------------------------------------------------- PAGE 3.01 Net Purchase Payment(s). . . . . . . . . . . . . . . . . . . . . . . . 7 3.02 Guaranteed Interest Rate -- Fixed Account. . . . . . . . . . . . . . . 7 3.03 Guaranteed Interest Account (GIA). . . . . . . . . . . . . . . . . . . 8 3.04 Maintenance Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . .10 3.05 Fund(s) Record Units -- Separate Account . . . . . . . . . . . . . . .11 3.06 Net Return Factor(s) -- Separate Account . . . . . . . . . . . . . . .11 3.07 Fund(s) Record Unit Value -- Separate Account. . . . . . . . . . . . .11 3.08 Current Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 3.09 Transfer of Current Value from the Funds or GIA. . . . . . . . . . . .12 3.10 Transfer of Current Value from the Fixed Account . . . . . . . . . . .12 3.11 Systematic Allocation. . . . . . . . . . . . . . . . . . . . . . . . .13 3.12 Notice to the Contract Holder. . . . . . . . . . . . . . . . . . . . .13 3.13 Sum Payable at Death (Before Annuity Payments Start) . . . . . . . . .13 3.14 Surrender Value. . . . . . . . . . . . . . . . . . . . . . . . . . . .14 3.15 Payment of Surrender Value . . . . . . . . . . . . . . . . . . . . . .14 3.16 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 3.17 Required Distribution to Contract Holder . . . . . . . . . . . . . . .15 3.18 Distribution Options . . . . . . . . . . . . . . . . . . . . . . . . .17 IV. ANNUITY PROVISIONS - -------------------------------------------------------------------------------- 4.01 Choices to be Made . . . . . . . . . . . . . . . . . . . . . . . . . .21 4.02 Annuity Payments to Annuitant. . . . . . . . . . . . . . . . . . . . .21 4.03 Annuity Payments to Annuitant's Beneficiary. . . . . . . . . . . . . .22 4.04 Terms of Annuity Options . . . . . . . . . . . . . . . . . . . . . . .22 4.05 Death of Annuitant/Beneficiary . . . . . . . . . . . . . . . . . . . .23 4.06 Fund(s) Annuity Units -- Separate Account. . . . . . . . . . . . . . .23 4.07 Fund(s) Annuity Unit Value -- Separate Account . . . . . . . . . . . .24 4.08 Annuity Options. . . . . . . . . . . . . . . . . . . . . . . . . . . .24 IRA-CDA-IC 3 I. GENERAL DEFINITIONS - -------------------------------------------------------------------------------- 1.01 ANNUITANT: The person who receives a series of payments for life or a definite period under this Contract. This term may also apply to the Contract Holder's Beneficiary who elected an Annuity Option after the Contract Holder's death before payments begin. The Annuitant cannot be changed. 1.02 ANNUITY: Payment of an income: (a) For the life of one or two persons; (b) For a stated period; or (c) For some combination of (a) and (b). 1.03 BENEFICIARY: The individual or estate entitled to receive any payment upon the death of the Contract Holder or Annuitant. 1.04 CODE: The Internal Revenue Code of 1986, as it may be amended from time to time. 1.05 CONTRACT HOLDER: The person to whom this Contract is issued. 1.06 CONTRACT YEAR: The period of 12 months measured from the date the first Net Purchase Payment is applied to the Contract or from any anniversary of such date. 1.07 FIXED ACCOUNT: An accumulation option with a guaranteed minimum interest rate. Aetna may credit a higher rate which is not guaranteed. 1.08 FIXED ANNUITY: An Annuity with payments which do not vary in amount. 1.09 FUND(S): The open-end registered management investment companies (mutual funds) made available by Aetna under this Contract. 1.10 GENERAL ACCOUNT: The account holding the assets of Aetna, other than those assets held in a Separate Account or the Nonunitized Separate Account. 1.11 GOOD ORDER: A Contract Holder instruction to Aetna is in Good Order when given with such clarity and completeness that Aetna is not required to exercise any discretion, utilizing such forms as Aetna may require. 1.12 GUARANTEED INTEREST An accumulation option which guarantees a ACCOUNT (GIA): stipulated rate of interest for a specified period of time. 1.13 MATURED TERM VALUE: The amount payable on a GIA Term's Maturity Date. 1.14 MATURITY DATE: The last day of a GIA Term. 1.15 NONUNITIZED SEPARATE An account set up by Aetna under Title 38a, ACCOUNT: Section 38a-433 of the Connecticut General Statutes which is used to hold assets for GIA Terms greater than three years. The Contract Holder does not participate in the investment gain or loss from the assets held in this account. IRA-CDA-IC 4 1.16 PLAN: The Simplified Employee Pension Plan named on the Contract cover, if applicable. The Plan is not a part of the Contract. Aetna is not bound by the terms of the Plan. 1.17 PURCHASE PAYMENT(S): Payment(s) made to Aetna. Purchase Payment(s) must be in cash and the total of such contributions cannot exceed $2,000 for an individual for any taxable year. Aetna will maintain an asset account for crediting IRA contributions as described in Code Section 408(b). Exceptions to the dollar maximum are: (a) Rollover contribution as permitted by Code Sections 402(c), 403(a)(4), 403(b)(8), or 408(d)(3) allocated to a Rollover asset account; and (b) An employer contribution made according to the terms of a Simplified Employee Pension Plan as described in Code Section 408(k) allocated to a Plan asset account. Contributions that exceed limitations may either be refunded to the Contract Holder or applied to the following calendar year's contribution, as permitted by the Code. Aetna assumes no responsibility for tax consequences that may result from excess contributions that are not refunded to the Contract Holder. 1.18 SEPARATE ACCOUNT: An account which buys and holds shares of the Fund(s). Income, gains or losses, realized or unrealized are credited or charged to this account without regard to other income, gains or losses of Aetna. Aetna owns the assets held in a separate account and is not a trustee as to such amounts. These accounts generally are not guaranteed and are held at market value. The assets of such accounts, to the extent of reserves and other contract liabilities of the Account, shall not be charged with other Aetna liabilities. 1.19 VALUATION PERIOD: The period of time for which a Fund determines its (PERIOD) net asset value, usually from 4:15 p.m. Eastern time each day the New York Stock Exchange is open until 4:15 p.m. the next such day, or such other day that one or more of the Funds determines its net asset value. 1.20 VARIABLE ANNUITY: An Annuity with payments that vary with the net investment results of one or more Funds under the Separate Account. II. GENERAL PROVISIONS - -------------------------------------------------------------------------------- 2.01 CHANGE OF CONTRACT: Except as provided below, only an authorized officer of Aetna may change the terms of this Contract. Aetna will notify the Contract Holder in writing at least 30 days before the effective date of any change. Any change will not affect the amount or terms of any Annuity which begins before the change. The following provisions of this Contract will not be changed: IRA-CDA-IC 5 2.01 CHANGE OF CONTRACT: (a) Net Purchase Payment(s) (CONT'D) (b) Guaranteed Interest Account (GIA) Interest Rate (c) Guaranteed Interest Rate -- Fixed Account (d) Net Return Factor(s) -- Separate Account (e) Current Value (f) Surrender Value (g) Fund(s) Annuity Unit Value -- Separate Account (h) Annuity Options (i) Fixed Annuity minimum interest rate (j) Maximum transfer, maintenance, or surrender fees. This Contract may also be changed as required by federal or state law. 2.02 CHANGE OF FUND(S): Aetna, or the Separate Account may: (a) Change the Fund(s) which may be invested in by the Separate Account; and (b) Replace the shares of any Fund(s) held in the Separate Account with shares of any other Fund(s). Changes must be: (a) Approved by a majority vote of persons having an interest in the Separate Account and the Fund(s); (b) Deemed necessary by Aetna under the Investment Company Act of 1940; or (c) Deemed necessary by Aetna to accomplish the purpose of the Separate Account. Aetna will notify the Contract Holder of any change. 2.03 NONPARTICIPATING: The Contract Holder, Annuitant, or Beneficiaries CONTRACT: will not have a right to share in the earnings of Aetna. 2.04 PAYMENTS: Aetna will make Annuity payments as and when due. Aetna will make other payments within 7 days of receipt at its Home Office of a written claim for payment which is in Good Order, except as provided in Section 3.15. 2.05 STATE LAWS: This Contract complies with the laws of the state in which it is delivered. Any cash, death or Annuity payments are equal to or greater than the minimum required by such laws. Annuity tables for legal reserve valuation shall be as required by state law. Such tables may be different from Annuity tables used to determine Annuity payments. 2.06 CONTROL OF CONTRACT: The Contract is established for the exclusive benefit of the individual Contract Holder or his or her Beneficiaries. All nonforfeitable rights in this Contract rest with the Contract Holder, who is entitled to all amounts held under this Contract. The Contract Holder may make any choices allowed by this Contract. IRA-CDA-IC 6 2.06 CONTROL OF CONTRACT: Choices made under this Contract must be in (CONT'D): writing. Until receipt of such choices at its Home Office, Aetna may rely on any previous choices made. This Contract is nontransferable and nonassignable, except to Aetna, or pursuant to a valid court order provided Aetna is notified and served with respect to such order pursuant to applicable law. 2.07 DESIGNATION OF The Contract Holder shall name the Beneficiary. BENEFICIARY: The Beneficiary may be changed at any time. Until receipt of a written request to change the Beneficiary, Aetna may rely upon the last named Beneficiary. 2.08 MISSTATEMENTS AND If Aetna finds the age of any payee to be ADJUSTMENTS: misstated, the correct facts will be used to adjust payments. Aetna reserves the right to correct any informational or administrative errors. 2.09 INCONTESTABILITY: Aetna cannot cancel this Contract because of any error of fact on the application. 2.10 GRACE PERIOD: This Contract will remain in effect even if Purchase Payments are not continued. 2.11 NONWAIVER: Aetna may, in its sole discretion, elect not to exercise a right or reservation specified in this Contract. Such election shall not constitute a waiver of the right to exercise such right or reservation at any subsequent time. III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS - -------------------------------------------------------------------------------- 3.01 NET PURCHASE This actual Purchase Payment(s) less any premium PAYMENT(S): tax. Generally, Aetna will deduct the premium tax when Annuity benefits are purchased (see 4.01). If Aetna determines that a premium tax is due when Purchase Payment(s) are received, or at any other time, it will deduct the tax at that time. The Net Purchase Payment(s) may be credited among no more than 10 of the following: (a) The Fixed Account; (b) The GIA; and (c) The Fund(s) in which the Separate Account invests. Aetna must be told the percentage of the Net Purchase Payment(s) to be applied to each investment above. Allocations to more than 10 such investment options are not permitted under this Contract. The investment allocation may be changed up to 12 times during any calendar year. More than 12 such changes in any calendar year, if permitted by Aetna, may be subject to an additional fee of up to $10 for each subsequent occurrence. 3.02 GUARANTEED INTEREST On any Net Purchase Payment(s) and transfers made RATE -- FIXED to the Fixed Account, Aetna will add interest ACCOUNT: daily at an annual rate no less than 3%. Aetna may add interest daily at any higher rate Aetna will periodically advise the Contract Holder of the rate being currently credited to the Fixed Account. IRA-CDA-IC 7 3.03 GUARANTEED INTEREST The Guaranteed Interest Account (GIA) provides a ACCOUNT guaranteed effective annual yield for Net Purchase Payments and transfers held in the GIA for stipulated periods of time (see (a) and (b) below). (a) Deposit Period - A calendar month, a calendar quarter, or any other period of time specified by Aetna during which Net Purchase Payment(s) and transfers are accepted into the GIA for one or more Guaranteed Terms. (b) Guaranteed Term (Term) -- The period of time for which Annual Effective Yields are earned on Net Purchase Payment(s) and on transfers made into a Deposit Period of the GIA. Terms are offered at Aetna's discretion for various lengths of time ranging up to and including ten years. (c) Guaranteed Term Classifications -- The grouping of Terms according to their time to maturity. The following are the Classifications: (1) Short Term: Terms of at least one month up to and including 3 years; or (2) Long Term: Terms of greater than 3 years and up to and including 10 years. During a Deposit Period, Aetna may make available one or more Terms within a Classification. The Contract Holder has the option to allocate Net Purchase Payment(s) and transfers into any or all of the available Deposit Period Terms. If no specific direction is given, Net Purchase Payment(s) and transfers will go into available Terms on a pro rata basis within the Classification(s) previously chosen by the Contract Holder. (d) Guaranteed Effective Yields (Yields) -- The effective annual yield(s) are guaranteed by Aetna for Net Purchase Payment(s) and transfers accepted into a Deposit Period for available Terms in the GIA. Yield(s) will gradually increase to the end of a Term and will never be less than 3%. The ending Term Guaranteed Effective Yield is the rate which Aetna will declare prior to each Deposit Period. Aetna will also calculate the interim Yield(s). Aetna will add interest daily for each applicable quarter. (e) Withdrawals -- Transfers may be requested at any time from the GIA prior to the end of a Term, subject to Contract transfer terms and conditions (see 3.09). Full or partial surrenders may be requested at any time from the GIA prior to the end of a Term. The amount withdrawn before the Maturity Date of a Term will receive a Yield which is reduced from the ending Guaranteed Term Effective Yield. The reduced Yield will never be less than 3%. IRA-CDA-IC 8 3.03 GUARANTEED INTEREST Full and partial surrenders are satisfied by ACCOUNT (GIA) withdrawing amounts from each of the Funds, (CONT'D) the Fixed Account, the GIA Short Term Classification and the GIA Long Term Classification on a pro rata basis. However, the Contract Holder may specify a particular order in which investment options will be liquidated in order to satisfy a partial surrender request. For purposes of withdrawals, Terms within the GIA Short Term and Long Term Classifications are considered as two separate investment options. Amounts will be removed within a GIA Classification starting with the Term still in effect with the oldest Deposit Period. Amounts withdrawn from the GIA under the Sum Payable at Death Provision (see 3.13) prior to the end of a Term will earn the Yield stated for the Net Purchase Payment(s) and transfers remaining in the Classification of the GIA to the end of the Term. (f) Maturity Date/Reinvestment -- The Contract Holder will be mailed a notice at least 18 calendar days before a Term's Maturity Date. This notice will contain the current Deposit Period's Yield(s), Term(s) and a projected Matured Term Value. The Matured Term Value may be surrendered or transferred on the Term's Maturity Date. If no specific direction is given by the Contract Holder prior to the Maturity Date, each Matured Term Value will be reinvested in a Term of the same duration. In the event that a Term of the same duration is unavailable, each Matured Term Value will automatically be reinvested in the next shortest Term available in the same Classification during the then current Deposit Period. If however, only one Term is available within the Classification, then the Matured Term Value will automatically be reinvested in that Term. If there are no Terms available in the Long Term Classification previously chosen, the Matured Term Value will be allocated to the Term within the Short Term Classification with the longest period. Within two business days after the Maturity Date, the Contract Holder will be mailed a confirmation statement. This statement will state the Terms and Yields which will apply to the reinvested Matured Term Value. During the calendar month following the Term's Maturity Date, the Contract Holder may notify Aetna's Home Office to transfer or surrender all or part of the Matured Term Value plus any interest accrued thereon from the GIA. This provision only applies to the first such request received from the Contract Holder during this period for any Matured Term Value. All or part of the Matured Term Value plus any interest accrued thereon may be transferred upon such request: (1) To any other Terms of the GIA available in the Current Deposit Period; (2) To the Fixed Account; or (3) To any other allowable Fund(s). IRA-CDA-IC 9 3.03 GUARANTEED INTEREST If no such notification is given, the Matured ACCOUNT (GIA) Term Value will remain subject to the terms and (CONT'D) conditions of the new Term. All surrender and transfer requests will be processed as of the date they are received in good order at Aetna's Home Office. (g) Net Purchase Payments to the GIA -- All amounts in the GIA under the Short Term Classification are normally maintained in the General Account. At its option, Aetna may hold Short Term Classifications of a given class in a Nonunitized Separate Account. Amounts in the GIA under the Long Term Classification are normally maintained in a Nonunitized Separate Account. There are no discrete units for this Nonunitized Separate Account. The Contract Holder does not participant in the gain or loss from the assets held in the Nonunitized Separate Account. Such gain or loss is borne entirely by Aetna. At its option, Aetna may hold Long Term Classifications of a given class in its General Account. For Terms under both the Short Term and Long Term Classifications, Aetna guarantees stipulated Yields to be credited to the GIA. All assets of Aetna including amounts maintained in the GIA are available to meet the guarantees under the GIA. (h) Changes -- Aetna may change this Section 3.03, including eliminating the GIA entirely, with 30 days advance written notice to the Contract Holder. Any such change shall become effective for Purchase Payments, transfers or reinvestments applied to any new Term. (i) Table of Representative Yields -- A table of representative Yields illustrated on a quarterly basis for Net Purchase Payment(s) accepted in the GIA during a Deposit Period and held to the end of a specified quarter will be provided upon request. The GIA cannot be used for an Annuity Option (see 4.08) under this contract. 3.04 MAINTENANCE FEE: The annual Maintenance Fee, if any (see Contract Schedule), will be deducted from the Current Value on the "due date" which is the last day of each Contract Year. If Aetna maintains more than one asset account under the Contract, only one annual Maintenance Fee will be deducted on the due date from the asset account first established, unless otherwise instructed by the Contract Holder. The annual Maintenance Fee may be paid to Aetna separately by the Contract Holder. If this option is requested in writing, a notice will be mailed to the Contract Holder on or before the due date. If the Fee is not received by Aetna by the 30th calendar day following the due date, it will be deducted from the Current Value. Unless the Contract Holder requests a reinstatement of the annual notice, Maintenance Fees will continue to be deducted for all subsequent Contract Years, where applicable. IRA-CDA-IC 10 3.05 FUND(S) RECORD UNITS --The portion of the Net Purchase Payment(s) applied SEPARATE ACCOUNT: to a Separate Account will determine the number of Fund(s) Record Units. This number is equal to the Net Purchase Payment(s) applied to the Fund divided by the Fund(s) Record Unit Value (see 3.07) for the Valuation Period in which the Purchase Payment is received in Good Order. 3.06 NET RETURN FACTOR(S) --The Net Return Factor(s) are used to compute all SEPARATE ACCOUNT: Separate Account Record Units for any Fund(s). The Net Return Factor for each Fund is equal to 1.0000000 plus the Net Return Rate. The Net Return Rate is equal to: (a) The value of the shares of the Fund held by the Separate Account at the end of the Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by (d) The total value of the Fund's Record Units and such Fund's Annuity Units of the Separate Account (see 3.07 and 4.07) at the start of the Valuation Period; minus (e) A daily Separate Account charge at an annual rate as shown on the Contract Schedule for Annuity mortality and expense risks, which may include profit; and a daily administrative charge. A Net Return Rate may be more or less than 0. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding. 3.07 FUND RECORD UNIT A Fund(s) Record Unit Value is computed by VALUE -- SEPARATE multiplying the Net Return Factors for the current ACCOUNT Valuation Period by the Fund(s) Record Unit Value for the previous Period. The dollar value of a Fund(s) Record Unit, Separate Account assets, and Variable Annuity payments may go up or down due to investment gain or loss. 3.08 CURRENT VALUE: The Current Value of this Contract is equal to: (a) Any amounts in the Fixed Account, including Fixed Account interest added by Aetna; plus (b) Any amounts in the GIA, including GIA interest added by Aetna, plus (c) The value of all Separate Account Record Units. Current Value does not include amounts used to purchase an Annuity. IRA-CDA-IC 11 3.09 TRANSFER OF CURRENT Before an Annuity option is elected, all or any VALUE FROM THE FUNDS portion of the Current Value held in a Fund or the OR GIA GIA may be transferred: (a) To any other allowable Fund; (b) To the Fixed Account; or (c) To Terms of the GIA available in the current Deposit Period. Amounts in a specific GIA Term cannot be transferred to the Deposit Period of another Term within the same classification except at the Term's Maturity (see 3.03(f)). Transfers from the GIA are subject to the Withdrawal provision for amounts withdrawn before the Maturity Date of a Term. (See 3.03(e)). Twelve transfers of Current Value (excluding transfers from the GIA at the end of a Guaranteed Term) can be made during a calendar year period. More than 12 such transfers in any calendar year, if permitted by Aetna, may be subject to an additional fee of up to $10 for each subsequent occurrence. 3.10 TRANSFER OF CURRENT 10% of the Current Value held in the Fixed Account VALUE FROM THE FIXED as of January 1 of a calendar year may be ACCOUNT transferred to any of the Fund(s), or to the GIA Term(s) available during the current Deposit Period. Such transfer will be: (a) Without charge; (b) Allowed once per calendar year; and (c) Not allowed under an Annuity Option. Aetna may, on a temporary basis, allow any larger percent to be transferred. Any remaining balance in the Fixed Account under the Contract may be transferred by the Contract Holder in its entirety to any of the other Fund(s), or to the GIA Term(s) available during the current Deposit Period if: (a) The Current Value in the Fixed Account under the Contract is $2,000 or less; or (b) The maximum percentage allowed was transferred from the Fixed Account in each of the four consecutive prior calendar years and no additional Net Purchase Payment(s) to the Contract have been allocated to the Fixed Account during the same four consecutive prior calendar year periods. The Current Value of the Fixed Account, as used above, is the value when the request is received at Aetna's Home Office in Good Order. IRA-CDA-IC 12 3.11 SYSTEMATIC ALLOCATION: A Systematic Allocation involves placing a lump sum in one Fund (mutual fund) and having it reallocated to another Fund in substantially equal monthly installments. The purpose of a Systematic Allocation is to permit shares of the second Fund to be purchased using the "dollar-cost-averaging" method. The amount applied to a Systematic Allocation must be no less than $100 per month over a period of at least 12 months. Systematic Allocations for periods longer than 24 months must be consented to by Aetna. Systematic Allocations may not be made from, or to, the Fixed Account or the GIA. Aetna reserves the right to limit the Funds that can be used to pay out or receive Systematic Allocations. Transfers made by reason of a Systematic Allocation will not reduce the number of investment transfers that can be made pursuant to Section 3.09. The Contract Holder may revoke a Systematic Allocation at any time. 3.12 NOTICE TO THE Before an Annuity Option is elected, Aetna will CONTRACT HOLDER notify the Contract Holder each year of: (a) The value of any amounts held in: (1) The Fixed Account; (2) The GIA; and (2) The Fund(s) for the Separate Account. (b) The number of any Fund(s) Record Units; and (c) The Fund(s) Record Unit Value. Such number or values will be as of a specific date no more than 60 days before the date of the notice. Aetna, as issuer of this Simplified Employee Pension or Individual Retirement Annuity Contract, will make any reports required by federal law. 3.13 SUM PAYABLE AT DEATH Aetna will pay the Current Value to the (BEFORE ANNUITY Beneficiary when: PAYMENTS START): (a) The Contract Holder dies before Annuity payments start; and (b) The notice of death is received in Good Order by Aetna. The sum payable will be the Current Value on the date when the notice is received in Good Order at Aetna's Home Office. The amount paid from the Fixed Account will not be less than the Net Purchase Payment(s) allocated to the Fixed Account plus interest (less an prior transfers, (see 3.10), surrenders, Maintenance Fees, or amounts used to purchase Annuity Options). The Beneficiary may choose to apply any sum under an Annuity Option (see 4.08), subject to any other terms and conditions of this Contract, or to receive a lump sum payment. Prior to any election, or until amounts must otherwise be distributed, the Beneficiary assumes all nonforfeitable rights under this Contract. IRA-CDA-IC 13 3.13 SUM PAYABLE AT DEATH If the Beneficiary is the Contract Holder's (BEFORE ANNUITY PAY- surviving spouse, the first Annuity payment or the MENTS START (CONT'D): lump sum payment may be deferred to a date not later than December 31 of the year in which the Contract Holder would have attained age 70 1/2 or such later date as may be allowed under federal law or regulations. The spouse may choose to treat this Contract as his or her own. If the Beneficiary is not the Contract Holder's surviving spouse, all of the Current Value must either be applied to an Annuity Option by December 31st of the year following the year of the Contract Holder's death or be paid to the Beneficiary by December 31st of the year containing the fifth anniversary of the Contract Holder's date of death. In no event may payments to any Beneficiary under an Annuity Option extend beyond the life of the Beneficiary or any period certain greater than the Beneficiary's life expectancy. If no Beneficiary exists, the payment will be made to the estate of the Contract Holder. 3.14 SURRENDER VALUE: Aetna will reduce the amount payable upon surrender of any portion of the Current Value by a Surrender Fee. The Surrender Fee will be in accordance with the Surrender Fee table in the Contract Schedule. The Fee on a total surrender of the Contract will not exceed 8.5% of the actual Purchase Payment(s) made to the Contract. Aetna is required by law to report any surrender to the Internal Revenue Service. Amounts are reported as fully taxable to the Contract Holder. Determination of cost basis from nondeductible IRA contributions as permitted by the Code shall be the responsibility of the Contract Holder. If a lump sum payment is elected in lieu of an Annuity Option, it must be paid no later than the April 1 of the calendar year following the year in which the Contract Holder turns age 70 1/2 or such later date as may be allowed under federal law or regulations. The Contract Holder or Beneficiary must notify Aetna in writing when a lump sum payment or Annuity payments are to commence. If the Contract Holder does not request commencement of benefits as described above, Aetna will not be responsible for compliance with the Code Section 401(a)(9) minimum distribution requirements and for any adverse tax consequences that may result. 3.15 PAYMENT OF SURRENDER Under certain emergency conditions, Aetna may VALUE defer payment from the General Account: (a) For a period of up to 6 months (unless not allowed by state law); or (b) As provided by federal law. IRA-CDA-IC 14 3.15 PAYMENT OF SURRENDER Aetna may pay any Fixed Account surrender in equal payments, with interest, over a period not to exceed 60 months when the amount held in the Fixed Account under this Contract exceeds $100,000 on the day prior to the current surrender request. This will apply only if the amounts surrendered within the past 12 months, added to the amount of the current surrender, exceed 20% of such Fixed Account amount. Interest, as used above, will not be more than two percentage points below any rate determined prospectively by Aetna for this class of Contract. In no event will the interest rate be less than 3%. 3.16 REINSTATEMENT: All or a portion of the proceeds of a full surrender of this Contract may be reinvested within 30 days after the surrender if allowed by law. Any Surrender Fee charged at the time of surrender on the amount being reinvested will be included in the reinstatement. Amounts will be reinstated among the Fixed Account, the Separate Account Fund(s) and the GIA in the same proportion as they were at the time of surrender. The number of Record Units reinstated will be based on the Record Unit Value(s) next computed after receipt at Aetna's Home Office of the reinstatement request and the amount to be reinvested. Amounts will be reinstated to the GIA current Deposit Period, as applicable. Any Maintenance Fee which falls due after the surrender and before the reinstatement will be deducted from the amount reinstated. Reinstatement of an Account is permitted only once. 3.17 REQUIRED DISTRIBUTION (a) General Requirement: Notwithstanding any TO CONTRACT HOLDER: provision of this Contract to the contrary, the distribution of the Contract Holder's Current Value shall be made in accordance with the minimum distribution requirements of Section 408(a)(6) or Section 408(b)(3) of the Code and the regulations thereunder, including the incidental death benefit provisions of Section 1.401(a)(9)-2 of the proposed regulations, all of which are herein incorporated by reference. (b) Minimum Payments to Contract Holder: The Contract Holder's entire Current Value in the Contract must be distributed, or begin to be distributed, by the Contract Holder's required beginning date, which is the April 1 following the calendar year in which the Contract Holder turns age 70 1/2. For each succeeding year, a distribution must be made on or before December 31. By the required beginning date, the Contract Holder may elect to have the balance under the Contract distributed in one of the following forms according to the terms of the Contract. (1) a lump sum payment; (2) equal or substantially equal payments over the life of the Contract Holder; IRA-CDA-IC 15 3.17 REQUIRED DISTRIBUTION (3) equal or substantially equal payments TO CONTRACT HOLDER over the lives of the Contract Holder (CONT'D): and his or her designated Beneficiary; (4) equal or substantially equal payments over a specified period that may not be longer than the Contract Holder's life expectancy; (5) equal or substantially equal payments over a specified period that may not be longer than the joint life and last survivor expectancy of the Contract Holder and his or her designated Beneficiary. (c) Minimum Death Benefits: If the Contract Holder dies before his or her entire Current Value is distributed, the entire remaining balance will be distributed as follows: (1) If the Contract Holder dies on or after the date distributions have begun under paragraph (b) above, the entire remaining balance must be distributed at least as rapidly as provided under Paragraph (b). (2) If the Contract Holder dies before distributions have begun under paragraph (b) above, the entire remaining balance must be distributed as elected by the Contract Holder or, if the Contract Holder has not so elected, as elected by the Beneficiary or Beneficiaries, as follows: (i) by December 31st of the year containing the fifth anniversary of the Contract Holder's death; or (ii) in equal or substantially equal payments over the life or life expectancy of the designated Beneficiary or Beneficiaries starting by December 31st of the year following the year of the Contract Holder's death. If, however, the Beneficiary is the Contract Holder's surviving spouse, then this distribution is not required to begin before December 31st of the year in which the Contract Holder would have turned 70 1/2. (d) Life Expectancies: Unless an Annuity Option has been elected by the Contract Holder prior to the commencement of distributions in accordance with paragraph (b) above (or, if applicable), by the surviving spouse where the Contract Holder dies before distributions have commenced), or unless a Systematic Withdrawal Option has been elected by the Contract Holder (see 3.18(b)), life expectancies of the Contract Holder or spouse Beneficiary shall be recalculated annually for purposes of distributions under paragraphs (b) and (c) above. An election not to recalculate shall be irrevocable and shall apply to all subsequent years. The life expectancy of a non-spouse Beneficiary shall not be recalculated. IRA-CDA-IC 16 3.17 REQUIRED DISTRIBUTION Life expectancy is computed by use of the TO CONTRACT HOLDER expected return multiplies in Tables V and VI (CONT'D): of Section 1.72-9 of the Income Tax Regulations. (e) Multiple IRAs: An individual may satisfy the minimum distribution requirements under Section 408(a)(6) and 408(b)(3) of the Code by receiving a distribution from one IRA that is equal to the amount required to satisfy the minimum distribution requirements for two or more IRAs. For this purpose, the Contract Holder of two or more IRAs may use the "alternative method" described in Notice 88- 38, 1988-1 C.B. 524, to satisfy the minimum distribution requirements described above. 3.14 DISTRIBUTION OPTIONS: The following distribution options may be elected by the Contract Holder. (a) ESTATE CONSERVATION OPTION (ECO): A Distribution Option under which a portion of the Contract's Current Value will automatically be surrendered and distributed each year. An ECO payment will be calculated on the full Contract Current Value and will be withdrawn pro rata from each investment option and asset account used for distribution. Except as stated in sub- paragraph (5) below, all rights, provisions and charges described in the Contract continue to apply to the remaining Current Value in the Contract. (1) Amount of Distribution: Each year that ECO is in effect, Aetna will calculate and distribute an amount equal to the minimum distribution required under the Code. The annual distribution will be determined by dividing the Current Value as of December 31 of the year prior to the payment year, by a life expectancy factor. As elected by the Contract Holder, the factor is either the single life or joint life expectancy based on tables in Code Section 401(a)(9) or related regulations. Life expectancy factors will be recalculated each year. If the joint life expectancy is elected and the spouse is not the Beneficiary, the Beneficiary's life expectancy will not be recalculated. These calculations may be changed as necessary to comply with the Code minimum distribution rules. The joint life expectancy will be based on the joint life of the Contract Holder and his or her Beneficiary. If joint life expectancy is elected and the Contract Holder or Beneficiary dies, payments will be based on the survivor's life expectancy. If the Beneficiary is not the Contract Holder's spouse and the non-spousal Beneficiary dies first, the joint life expectancy continues. If a single life expectancy is elected and the Contract Holder dies, or if a joint life expectancy is elected and the survivor dies, the sum payable at death (see 3.13) will be paid in a lump sum. IRA-CDA-IC 17 3.18 DISTRIBUTION OPTIONS Aetna assumes no responsibility for tax (CONT'D): consequences resulting from failure to receive required minimum distributions on additional Purchase Payments made after each year's annual distribution. (2) Minimum Current Value: At its discretion, Aetna may require a minimum initial Current Value for election of this option. If after election of this option, the Current Value is insufficient to make a scheduled ECO payment, Aetna will distribute the entire Contract balance. (3) Date of Distribution: The Contract Holder shall specify an annual distribution date. The distribution date may be the 15th of any month or such other date Aetna may designate or allow. Distributions may not start earlier than the year the Contract Holder attains age 70 1/2, or such later time when distributions must commence as specified under the Code, whichever is appropriate. Subsequent distributions will be made on the anniversary of that date. Aetna will allow a later annual distribution date to be designated; however, Aetna will not be responsible for compliance with the Code minimum distribution requirements of any prior time periods. In addition, Aetna will not be responsible for compliance with the Code requirements for any Contracts for which this election is not made. (4) Elections and Revocation: ECO may be elected by the Contract Holder by submitting a completed and signed election form to Aetna's Home Office. Once elected, this option may be revoked by the Contract Holder by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. ECO may be elected only once. (5) Reservation of Rights: Aetna reserves the right to change the terms of ECO for future elections and discontinue the availability of this option after proper notification. Aetna also reserves the right to allow payments to be made more frequently than annually. (b) SYSTEMATIC WITHDRAWAL OPTION (SWO): A Distribution Option under which a portion of the Contract's Current Value will automatically be surrendered and distributed each year. A SWO payment will be calculated on the full Contract Current Value and will be withdrawn pro rata from each investment option and asset account used for distribution. Except as stated in sub- paragraph (5) below, all rights, provisions and charges described in the Contract continue to apply to the remaining Current Value in the Contract. IRA-CDA-IC 18 3.18 DISTRIBUTION OPTIONS (1) Amount of Distribution: The Contract (CONT'D): Holder may elect one of the three payment methods described below. These calculations may be changed as necessary to comply with the Code minimum distribution rules. - Specified Amount: Payments of a designated dollar amount which must be no greater than 10% of the initial Current Value and shall remain constant. Beginning with the year the Contract Holder attains age 70 1/2 or such time distributions must commence under the Code. Aetna will calculate the minimum required distribution by dividing the Current Value as of December 31 of the year prior to the payment year by a life expectancy factor, and distribute this amount if it is greater than the elected Specified Payment; or - Specified Period: Payments which are made over a period of time which must be at least 10 years. The maximum specified period will be limited by the life expectancy factor. The amount paid each year is calculated by dividing the Current Value as of December 31 of the year prior to the payment year by the number of payment years remaining; or - Specified Percentage: Payments of a designated percentage of the Current Value. The percentage specified cannot be greater than 10% of the initial Current Value. By written request this percentage may be changed; however, Aetna reserves the right to limit the number of changes. The amount paid each year is calculated by multiplying the Current Value as of December 31 of the year prior to the payment year by the chosen percentage. Payments will be made until the year the Contract Holder attains age 70 1/2, or such later time when distributions must commence as specified under the Code. As elected by the Contract Holder, if Specified Payment or Specified Period is elected, the factor is either the single life or joint life expectancy based on tables in Code Section 401(a)(9) or related regulations. With each subsequent year, the life expectancy will be the life expectancy factor for the initial distribution year reduced by one. The joint life expectancy will be based on the joint life of the Contract Holder and his or her Beneficiary. If joint life expectancy is elected and the Contract Holder or Beneficiary dies on or after the required beginning date for minimum distributions to the Contract Holder the joint life expectancy factor will continue to be reduced by one for each distribution year. Payments will continue, unless IRA-CDA-IC 19 3.18 DISTRIBUTION OPTIONS the survivor elects an alternate payment (CONT'D): method. Any method elected must provide payments to be made at least as rapidly as those made prior to the Contract Holder's death. If the Contract Holder dies before the required beginning date for minimum distributions, SWO payments will cease and the Current Value will be paid (see 3.13). If joint life expectancy is elected and the Beneficiary dies before the required beginning date for minimum distributions to the Contract Holder, payments to the Contract Holder will continue under the elected payment method. Aetna assumes no responsibility for tax consequences resulting from failure to receive required minimum distributions on additional Purchase Payments made after December 31 of the prior year. (2) Minimum Current Value: At its discretion, Aetna may require a minimum initial Current Value for election of this option. If after election of this option the Current Value is insufficient to make a scheduled SWO payment, Aetna will distribute the entire Contract balance. (3) Date of Distribution: The Contract Holder shall specify the initial distribution date, but not before the Contract Holder attains age 59 1/2 and not later than the required beginning date for distributions under the Code. SWO payments will be made monthly, quarterly, semi-annually, or annually on the 15th of any month, or such other date Aetna may designate or allow. If payments are made more frequently than annually, the annual amount payable each year is divided by the number of payments due per year. At its discretion, Aetna may require a minimum initial payment amount. Aetna will not be responsible for compliance with the Code minimum distribution requirements for any prior time periods or for any Contracts for which election is not made. (4) Election and Revocation: SWO may be elected by the Contract Holder by submitting a completed and signed election form to Aetna's Home Office. Once elected, this option may be revoked by the Contract Holder by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. SWO may be elected only once. IRA-CDA-IC 20 3.18 DISTRIBUTION OPTIONS (5) Reservation of Rights: Aetna reserves (CONT'D): the right to change the terms of SWO for future elections and discontinue the availability of this option after proper notification. (c) OTHER DISTRIBUTION OPTIONS: Other distribution options may be made available by Aetna to the class of business to which this Contract belongs in accordance with Aetna's administrative practice. IV. ANNUITY PROVISIONS - -------------------------------------------------------------------------------- 4.01 CHOICES TO BE MADE: The Contract Holder may tell Aetna to apply any portion of the Current Value (minus any premium tax) for an Annuity under Option 2, 3, or 4 (see 4.08). This election must be made in a form acceptable to Aetna within the 90 day period ending on the date payments are to begin. A Contract Holder may revoke an election at any time prior to the date the payments start. In lieu of the election of an Annuity, the Contract Holder may tell Aetna to make a lump sum payment. When an Annuity Option is chosen, Aetna must also be told if payments are to be made other than monthly and whether to pay: (a) A Fixed Annuity using the General Account; (b) A Variable Annuity using any of the Fund(s) made available by Aetna for Annuity purposes; or (c) A combination of (a) and (b). If a Fixed Annuity is chosen, Aetna will add interest daily at an annual rate no less than 3%. Aetna may add interest daily at any higher rate. If a Variable Annuity is chosen, an Assumed Annual Net Return Rate of 5% may be elected. If not elected, Aetna will use an Assumed Annual Net Return Rate of 3.5%. 4.02 ANNUITY PAYMENTS TO In no event may any payments to the Annuitant ANNUITANT: under any Annuity Option extend beyond: (a) The life of the Annuitant; (b) The lives of the Annuitant and the Beneficiary; (c) Any certain period greater than the Annuitant's life expectancy as determined according to regulations under Code Section 401(a)(9); or IRA-CDA-IC 21 4.02 ANNUITY PAYMENTS TO (d) Any certain period greater than the life ANNUITANT (CONT'D): expectancy of the Annuitant and the Beneficiary as determined according to regulations under Code Section 401(a)(9). 4.03 ANNUITY PAYMENTS TO In no event may payments to the Beneficiary ANNUITANT'S BENEFICIARY:under any Annuity Option extend beyond: (a) The life of the Beneficiary; or (b) Any certain period greater than the Beneficiary's life expectancy as determined by regulations under Code Section 401(a)(9). 4.04 TERMS OF ANNUITY (a) When payments start, the age of the OPTIONS: Annuitant plus the number of years, if any, for which payments are guaranteed must not exceed 95. (b) An Annuity option may not be elected if the first payment would be less than $50 or if the total payments in a year would be less than $250 (less if required by state law). Aetna reserves the right to increase the minimum first Annuity payment amount and the annual minimum Annuity payment amount based upon increases reflected in the Consumer Price Index-Urban, (CPI-U) since July 1, 1993. (c) If a Fixed Annuity under Option 2, 3 or 4 is chosen and a larger payment would result from applying the Surrender Value to a current Aetna single premium immediate Annuity, Aetna will make the larger payment. (d) For purposes of calculating the guaranteed first payment of a Variable Annuity or the payments for a Fixed Annuity, the Annuitant's and second Annuitant's adjusted age will be used. The Annuitant's and second Annuitant's adjusted age is his or her age as of the birthday closest to the Annuity commencement date reduced by one year for Annuity commencement dates occurring during the period of time from July 1, 1993 through December 31, 1999. The Annuitant's and second Annuitant's age will be reduced by two years for Annuity commencement dates occurring during the period of time from January 1, 2000 through December 31, 2009. The Annuitant's and second Annuitant's age will be reduced by one additional year for Annuity commencement dates occurring in each succeeding decade. The Annuity purchase rates for Options 3 and 4 are based on mortality from 1983 Table a. (e) Assumed Annual Net Return Rate is the interest rate used to determine the amount of the first Annuity payment under a Variable Annuity. The Separate Account must earn this rate plus enough to cover the mortality and expense risk charges and, if applicable, any administrative charges if future Variable Annuity Payments are to remain level. IRA-CDA-IC 22 4.04 TERMS OF ANNUITY (f) Once elected, Annuity payments cannot be OPTIONS (CONT'D): commuted to a lump sum except for Variable Annuity payments under Option 2 (see 4.08). The life expectancy of the Annuitant or the Annuitant and second Annuitant shall be irrevocable upon the election of an Annuity Option. 4.05 DEATH OF ANNUITANT/ (a) When the Annuitant dies under Options 2 or 3, BENEFICIARY: or both the Annuitant and second Annuitant die under Option 4(d), the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary, or upon election by the Beneficiary, any remaining payments will continue to the Beneficiary. If Option 4 has been elected and the Annuitant dies, the remaining payments will continue to the second Annuitant as successor payee. The second Annuitant does not have the right to change the Beneficiary upon the Contract Holder's death. (b) If there is no Beneficiary under Option 2, 3 or 4, the present value of any remaining payments will be paid in one sum to the estate of the Annuitant. (c) If the Beneficiary designated under Option 1 dies, the amount held plus accrued interest will be paid in one sum to a successor Beneficiary, if any, named by the designated Beneficiary. If there is no successor Beneficiary, the lump sum will be paid to the designated Beneficiary's estate. (d) If the Beneficiary dies while receiving Annuity payments, the present value of any remaining guaranteed payments will be paid in one sum to the successor Beneficiary, or upon election by the successor Beneficiary, any remaining payments will continue to the successor Beneficiary. If no successor Beneficiary has been designated, the present value of any remaining guaranteed payments will be paid in one sum to the Beneficiary's estate. (e) The present value will be determined as of the Valuation Period in which proof of death acceptable to Aetna and a request for payment is received at Aetna's Home Office. The interest rate used to determine the first payment will be used to calculate the present value. 4.06 FUND(S) ANNUITY UNITS --The number of each Fund's Annuity Units is based SEPARATE ACCOUNT: on the amount of the first Variable Annuity payment which is equal to: (a) The portion of the Current Value applied to pay a Variable Annuity (minus any premium tax); divided by (b) 1,000; multiplied by (c) The payment rate for the Option chosen. IRA-CDA-IC 23 4.06 FUND(S) ANNUITY Such amount, or portion, of the variable payment UNITS -- will be divided by the appropriate Fund Annuity SEPARATE ACCOUNT Unit Value (see 4.07) on the tenth Valuation (CONT'D): Period before the due date of the first payment to determine the number of each Fund Annuity Units. The number of each Fund Annuity Units remains fixed. Each future payment is equal to the sum of the products of each Fund Annuity Unit Value multiplied by the appropriate number of Units. The Fund Annuity Unit Value on the tenth Valuation Period prior to the due date of the payment is used. 4.07 FUND(S) ANNUITY UNIT For any Valuation Period, a Fund Annuity Unit VALUE -- SEPARATE Value is equal to: ACCOUNT: (a) The Value for the previous Period; multiplied by (b) The Net Return Factor(s) (see 3.06 below) for the Period; multiplied by (c) A factor to reflect the Assumed Annual Net Return Rate. The factor for 3.5% per year is .9999058; for 5% per year it is .9998663. The dollar value of a Fund's Annuity Unit Values and payments may go up or down due to investment gain or loss. If the portion of a Variable Annuity payment for any Fund is not to decrease, the Annuity return factor under the Separate Account for that Fund must be: - 4.75% on an annual basis plus an annual return of up to 0.25% needed to offset the administrative charge set at the time Annuity payments commence if an Assumed Annual Net Return Rate of 3.5% is chosen; or - 6.25% on an annual basis plus an annual return of up to 0.25% needed to offset the administrative charge set at the time Annuity payments commence if an Assumed Annual Net Return Rate of 5% is chosen. Payments shall not be changed due to changes in the mortality or expense results or administrative charges. 4.08 ANNUITY OPTIONS: Option 1 -- Payment of Interest on Sum Left with Aetna -- This Option may be used only by the Beneficiary when the Annuitant dies before Aetna has started paying an Annuity. A portion or all of the sum paid upon death may be held under this Option and will be held in the General Account of Aetna at interest (see 4.01). The Beneficiary may later tell Aetna to: (a) Pay a portion or all of the sum held by Aetna; or (b) Apply a portion or all of the sum held by Aetna to any Annuity Option below. If a nonspouse Beneficiary elects that some or all of the full sum paid upon death is to be held under this Option, the Beneficiary must tell Aetna to pay the full sum held under this Option by December 31st of the year containing the fifth anniversary of the Contract Holder's death. IRA-CDA-IC 24 4.08 ANNUITY OPTIONS Option 2 -- Payments for a Stated Period of Time (CONT'D): -- An Annuity will be paid for the number of years chosen. The number of years must be at least 5 and not more than 30. If payments for this Option are made under a Variable Annuity, the present value of any remaining payments may be withdrawn at any time. If a withdrawal is requested within 5 years after the start of payments, it will be treated as a surrender (see 3.14). Option 3 -- Life Income -- An Annuity will be paid for the life of the Annuitant. If also chosen, Aetna will guarantee payments for 60, 120, 180, or 240 months. Option 4 -- Life Income for Two Payees -- An Annuity will be paid during the lives of the Annuitant and a second Annuitant. Payments will continue until both Annuitants have died. When this Option is chosen, a choice must be made of: (a) 100% of the payment to continue to the survivor; (b) 66 2/3% of the payment to continue to the survivor; (c) 50% of the payment to continue to the survivor; (d) Payments for a minimum of 120 months with 100% of the payment to continue to the survivor; or (e) 100% of the payment to continue to the survivor if the survivor is the Annuitant and 50% of the payment to continue to the survivor if the survivor is the second Annuitant. Other Options -- Aetna may make other options available as allowed by the laws of the state in which this Contract is delivered. IRA-CDA-IC 25 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT - -------------------------------------------------------------------------------- 5 3.00% 17.91 53.59 106.78 211.99 6 3.00% 15.14 45.30 90.27 179.22 7 3.00% 13.16 39.39 78.49 155.83 8 3.00% 11.68 34.96 69.66 138.31 9 3.00% 10.53 31.52 62.81 124.69 10 3.00% 9.61 28.77 57.33 113.82 11 3.00% 8.86 26.52 52.85 104.93 12 3.00% 8.24 24.65 49.13 97.54 13 3.00% 7.71 23.08 45.98 91.29 14 3.00% 7.26 21.73 43.29 85.95 15 3.00% 6.87 20.56 40.96 81.33 16 3.00% 6.53 19.54 38.93 77.29 17 3.00% 6.23 18.64 37.14 73.74 18 3.00% 5.96 17.84 35.56 70.59 19 3.00% 5.73 17.13 34.14 67.78 20 3.00% 5.51 16.50 32.87 65.26 21 3.00% 5.32 15.92 31.72 62.98 22 3.00% 5.15 15.40 30.68 60.92 23 3.00% 4.99 14.92 29.74 59.04 24 3.00% 4.84 14.49 28.88 57.33 25 3.00% 4.71 14.09 28.08 55.76 26 3.00% 4.59 13.73 27.36 54.31 27 3.00% 4.47 13.39 26.68 52.97 28 3.00% 4.37 13.08 26.06 51.74 29 3.00% 4.27 12.79 25.49 50.60 30 3.00% 4.18 12.52 24.95 49.53
IRA-CDA-IC 26 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
ADJUSTED AGE OF ANNUITANT NONE 60 120 180 240 - ----------------------------------------------------------------------- 50 $4.05 $4.05 $4.03 $3.99 $3.93 51 4.12 4.11 4.09 4.05 3.99 52 4.19 4.19 4.16 4.11 4.04 53 4.27 4.26 4.23 4.18 4.10 54 4.35 4.34 4.31 4.25 4.16 55 4.44 4.42 4.39 4.32 4.22 56 4.53 4.51 4.47 4.40 4.29 57 4.62 4.61 4.56 4.48 4.35 58 4.72 4.71 4.65 4.56 4.42 59 4.83 4.81 4.75 4.64 4.49 60 4.95 4.93 4.86 4.73 4.55 61 5.07 5.05 4.97 4.83 4.62 62 5.20 5.17 5.08 4.92 4.69 63 5.34 5.31 5.20 5.02 4.76 64 5.49 5.45 5.33 5.12 4.83 65 5.65 5.61 5.47 5.22 4.89 66 5.82 5.77 5.61 5.33 4.96 67 6.01 5.94 5.75 5.44 5.02 68 6.20 6.13 5.91 5.54 5.08 69 6.41 6.33 6.07 5.65 5.14 70 6.64 6.54 6.23 5.76 5.19 71 6.88 6.76 6.41 5.86 5.24 72 7.14 7.00 6.59 5.97 5.28 73 7.43 7.26 6.77 6.06 5.32 74 7.73 7.53 6.96 6.16 5.35 75 8.06 7.82 7.14 6.25 5.38
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 27 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
ADJUSTED AGES - --------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $3.69 $4.05 $4.27 $3.69 $4.03 55 55 3.88 4.25 4.47 3.87 4.14 55 60 3.99 4.44 4.71 3.98 4.42 60 55 3.99 4.44 4.71 3.98 4.42 60 60 4.24 4.71 4.99 4.23 4.57 60 65 4.38 4.97 5.32 4.38 4.93 65 60 4.38 4.97 5.32 4.38 4.93 65 65 4.72 5.33 5.70 4.71 5.14 65 70 4.93 5.68 6.15 4.91 5.66 70 65 4.93 5.68 6.15 4.91 5.66 70 70 5.40 6.21 6.70 5.36 5.96 70 75 5.69 6.68 7.32 5.62 6.67 75 70 5.69 6.68 7.32 5.62 6.67 75 75 6.37 7.45 8.15 6.23 7.12 75 80 6.78 8.11 8.99 6.54 8.13
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 28 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ----------------------------------------------------------------- GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT - ----------------------------------------------------------------- 5 3.50% 18.12 54.19 107.92 213.99 6 3.50% 15.35 45.92 91.44 181.32 7 3.50% 13.38 40.01 79.69 158.01 8 3.50% 11.90 35.59 70.88 140.56 9 3.50% 10.75 32.16 64.05 127.00 10 3.50% 9.83 29.42 58.59 116.18 11 3.50% 9.09 27.18 54.13 107.34 12 3.50% 8.46 25.32 50.42 99.98 13 3.50% 7.94 23.75 47.29 93.78 14 3.50% 7.49 22.40 44.62 88.47 15 3.50% 7.10 21.24 42.31 83.89 16 3.50% 6.76 20.23 40.29 79.89 17 3.50% 6.47 19.34 38.51 76.37 18 3.50% 6.20 18.55 36.94 73.25 19 3.50% 5.97 17.85 35.54 70.47 20 3.50% 5.75 17.22 34.28 67.98 21 3.50% 5.56 16.65 33.15 65.74 22 3.50% 5.39 16.13 32.13 63.70 23 3.50% 5.24 15.66 31.19 61.85 24 3.50% 5.09 15.24 30.34 60.17 25 3.50% 4.96 14.85 29.56 58.62 26 3.50% 4.84 14.49 28.95 57.20 27 3.50% 4.73 14.15 28.19 55.90 28 3.50% 4.63 13.85 27.58 54.69 29 3.50% 4.53 13.57 27.02 53.57 30 3.50% 4.45 13.30 26.49 52.53 - -----------------------------------------------------------------
IRA-CDA-IC 29 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ----------------------------------------------------------------- GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT - ----------------------------------------------------------------- 5 5.00% 18.74 56.00 111.33 219.98 6 5.00% 15.99 47.77 94.96 187.64 7 5.00% 14.02 41.90 83.30 164.59 8 5.00% 12.56 37.52 74.58 147.35 9 5.00% 11.42 34.11 67.81 133.99 10 5.00% 10.51 31.40 62.42 123.34 11 5.00% 9.77 29.19 58.03 114.66 12 5.00% 9.16 27.36 54.38 107.45 13 5.00% 8.64 25.81 51.31 101.39 14 5.00% 8.20 24.50 48.69 96.21 15 5.00% 7.82 23.36 46.44 91.75 16 5.00% 7.49 22.37 44.47 87.88 17 5.00% 7.20 21.51 42.75 84.48 18 5.00% 6.94 20.74 41.23 81.47 19 5.00% 6.71 20.06 39.88 78.80 20 5.00% 6.51 19.46 38.68 76.42 21 5.00% 6.33 18.91 37.59 74.28 22 5.00% 6.17 18.42 36.62 72.35 23 5.00% 6.02 17.98 35.73 70.61 24 5.00% 5.88 17.57 34.93 69.02 25 5.00% 5.76 17.20 34.20 67.57 26 5.00% 5.65 16.87 33.53 66.25 27 5.00% 5.54 16.56 32.92 65.04 28 5.00% 5.45 16.28 32.35 63.93 29 5.00% 5.36 16.01 31.83 62.90 30 5.00% 5.28 15.77 31.35 61.95 - -----------------------------------------------------------------
IRA-CDA-IC 30 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
- ------------------------------------------------------------------ ADJUSTED AGE OF NONE 60 120 180 240 ANNUITANT - ------------------------------------------------------------------ 50 $4.34 $4.34 $4.31 $4.27 $4.22 51 4.41 4.40 4.38 4.33 4.27 52 4.48 4.47 4.45 4.40 4.32 53 4.56 4.55 4.52 4.46 4.38 54 4.64 4.63 4.59 4.53 4.44 55 4.72 4.71 4.67 4.60 4.50 56 4.81 4.80 4.75 4.67 4.56 57 4.91 4.89 4.84 4.75 4.62 58 5.01 4.99 4.93 4.83 4.69 59 5.12 5.10 5.03 4.92 4.75 60 5.23 5.21 5.13 5.00 4.82 61 5.36 5.33 5.24 5.09 4.88 62 5.49 5.45 5.35 5.19 4.95 63 5.63 5.59 5.47 5.28 5.02 64 5.78 5.73 5.60 5.38 5.08 65 5.94 5.89 5.73 5.48 5.15 66 6.11 6.05 5.87 5.58 5.21 67 6.29 6.22 6.02 5.69 5.27 68 6.49 6.41 6.17 5.79 5.33 69 6.70 6.60 6.33 5.90 5.38 70 6.92 6.81 6.49 6.00 5.43 71 7.17 7.04 6.66 6.10 5.48 72 7.43 7.27 6.84 6.20 5.52 73 7.71 7.53 7.02 6.30 5.55 74 8.02 7.80 7.20 6.39 5.59 75 8.35 8.08 7.38 6.48 5.62 - ------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 31 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
- ------------------------------------------------------------------ ADJUSTED AGE OF NONE 60 120 180 240 ANNUITANT - ------------------------------------------------------------------ 50 $5.26 $5.25 $5.22 $5.17 $5.11 51 5.33 5.32 5.28 5.23 5.15 52 5.40 5.38 5.34 5.29 5.20 53 5.47 5.45 5.41 5.35 5.26 54 5.54 5.53 5.48 5.41 5.31 55 5.63 5.61 5.56 5.47 5.36 56 5.71 5.69 5.63 5.54 5.42 57 5.80 5.78 5.72 5.61 5.47 58 5.90 5.88 5.81 5.69 5.53 59 6.01 5.98 5.90 5.77 5.59 60 6.12 6.09 6.00 5.85 5.65 61 6.24 6.21 6.10 5.93 5.71 62 6.37 6.33 6.21 6.02 5.77 63 6.51 6.46 6.33 6.11 5.83 64 6.66 6.60 6.45 6.20 5.89 65 6.82 6.75 6.57 6.30 5.95 66 6.99 6.91 6.71 6.39 6.01 67 7.17 7.08 6.85 6.49 6.06 68 7.36 7.27 6.99 6.59 6.12 69 7.57 7.46 7.15 6.69 6.17 70 7.80 7.67 7.30 6.78 6.21 71 8.05 7.89 7.47 6.88 6.25 72 8.31 8.13 7.64 6.97 6.29 73 8.59 8.38 7.81 7.06 6.33 74 8.90 8.64 7.99 7.15 6.36 75 9.23 8.93 8.16 7.23 6.38 - ------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 32 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- -------------------------------------------------------------------------------- ADJUSTED AGES - ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $3.97 $4.35 $4.56 $3.97 $4.31 55 55 4.16 4.54 4.76 4.15 4.42 55 60 4.27 4.73 5.00 4.26 4.48 60 55 4.27 4.73 5.00 4.26 4.70 60 60 4.51 4.99 5.27 4.50 4.84 60 65 4.66 5.25 5.61 4.65 4.93 65 60 4.66 5.25 5.61 4.65 5.22 65 65 4.99 5.61 5.99 4.98 5.42 65 70 5.19 5.97 6.44 5.17 5.54 70 65 5.19 5.97 6.44 5.17 5.93 70 70 5.67 6.49 6.99 5.62 6.23 70 75 5.95 6.96 7.61 5.87 6.40 75 70 5.95 6.96 7.61 5.87 6.95 75 75 6.64 7.73 8.43 6.48 7.40 75 80 7.04 8.39 9.29 6.79 7.64 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 33 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- -------------------------------------------------------------------------------- ADJUSTED AGES - ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $4.88 $5.26 $5.48 $4.88 $5.23 55 55 5.04 5.44 5.66 5.04 5.32 55 60 5.15 5.63 5.91 5.14 5.38 60 55 5.15 5.63 5.91 5.14 5.59 60 60 5.37 5.87 6.16 5.37 5.72 60 65 5.52 6.14 6.51 5.51 5.80 65 60 5.52 6.14 6.51 5.51 6.10 65 65 5.83 6.49 6.87 5.82 6.29 65 70 6.04 6.84 7.34 6.00 6.41 70 65 6.04 6.84 7.34 6.00 6.81 70 70 6.49 7.35 7.87 6.44 7.08 70 75 6.77 7.84 8.51 6.68 7.25 75 70 6.77 7.84 8.51 6.68 7.81 75 75 7.45 8.60 9.33 7.27 8.25 75 80 7.86 9.28 10.20 7.57 8.49 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 34 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- -------------------------------------------------------------------------------- ADJUSTED AGES - ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $3.97 $4.35 $4.56 $3.97 $4.42 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.34 4.76 5.00 4.34 4.64 60 55 4.27 4.73 5.00 4.26 4.83 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.76 5.29 5.60 4.75 5.13 65 60 4.66 5.25 5.61 4.65 5.39 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.34 6.03 6.46 5.31 5.81 70 65 5.19 5.97 6.44 5.17 6.14 70 70 5.67 6.49 6.99 5.62 6.47 70 75 6.16 7.10 7.68 6.07 6.77 75 70 5.95 6.96 7.61 5.87 7.20 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.33 8.62 9.45 7.02 8.13 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 35 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- -------------------------------------------------------------------------------- ADJUSTED AGES - ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $4.03 $4.36 $4.55 $4.03 $4.41 55 55 4.16 4.54 4.76 4.15 4.54 55 60 4.27 4.73 5.00 4.26 4.83 60 55 4.34 4.76 5.00 4.34 4.64 60 60 4.51 4.99 5.27 4.50 4.98 60 65 4.66 5.25 5.61 4.65 5.39 65 60 4.76 5.29 5.60 4.75 5.13 65 65 4.99 5.61 5.99 4.98 5.60 65 70 5.19 5.97 6.44 5.17 6.14 70 65 5.34 6.03 6.46 5.31 5.81 70 70 5.67 6.49 6.99 5.62 6.47 70 75 5.95 6.96 7.61 5.87 7.20 75 70 6.16 7.10 7.68 6.07 6.77 75 75 6.64 7.73 8.43 6.48 7.68 75 80 7.04 8.39 9.29 6.79 8.70 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 36 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- -------------------------------------------------------------------------------- ADJUSTED AGES - ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $4.88 $5.26 $5.48 $4.88 $5.34 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.21 5.65 5.89 5.21 5.53 60 55 5.15 5.63 5.91 5.14 5.73 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.61 6.16 6.49 5.60 6.01 65 60 5.52 6.14 6.51 5.51 6.28 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.17 6.90 7.33 6.13 6.67 70 65 6.04 6.84 7.34 6.00 7.03 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.97 7.96 8.56 6.87 7.62 75 70 6.77 7.84 8.51 6.68 8.08 75 75 7.45 8.60 9.33 7.27 8.55 75 80 8.14 9.49 10.35 7.80 8.98 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 37 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- -------------------------------------------------------------------------------- ADJUSTED AGES - ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $4.93 $5.27 $5.46 $4.93 $5.19 55 55 5.04 5.44 5.66 5.04 5.43 55 60 5.15 5.63 5.91 5.14 5.73 60 55 5.21 5.65 5.89 5.21 5.53 60 60 5.37 5.87 6.16 5.37 5.86 60 65 5.52 6.14 6.51 5.51 6.28 65 60 5.61 6.16 6.49 5.60 6.01 65 65 5.83 6.49 6.87 5.82 6.47 65 70 6.04 6.84 7.34 6.00 7.03 70 65 6.17 6.90 7.33 6.13 6.67 70 70 6.49 7.35 7.87 6.44 7.33 70 75 6.77 7.84 8.51 6.68 8.08 75 70 6.97 7.96 8.56 6.87 7.62 75 75 7.45 8.60 9.33 7.27 8.55 75 80 7.86 9.28 10.20 7.57 9.59 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 38 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0%
- ----------------------------------------------------------------- GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT - ----------------------------------------------------------------- 5 5.00% 18.74 56.00 111.33 219.98 6 5.00% 15.99 47.77 94.96 187.64 7 5.00% 14.02 41.90 83.30 164.59 8 5.00% 12.56 37.52 74.58 147.35 9 5.00% 11.42 34.11 67.81 133.99 10 5.00% 10.51 31.40 62.42 123.34 11 5.00% 9.77 29.19 58.03 114.66 12 5.00% 9.16 27.36 54.38 107.45 13 5.00% 8.64 25.81 51.31 101.39 14 5.00% 8.20 24.50 48.69 96.21 15 5.00% 7.82 23.36 46.44 91.75 16 5.00% 7.49 22.37 44.47 87.88 17 5.00% 7.20 21.51 42.75 84.48 18 5.00% 6.94 20.74 41.23 81.47 19 5.00% 6.71 20.06 39.88 78.80 20 5.00% 6.51 19.46 38.68 76.42 21 5.00% 6.33 18.91 37.59 74.28 22 5.00% 6.17 18.42 36.62 72.35 23 5.00% 6.02 17.98 35.73 70.61 24 5.00% 5.88 17.57 34.93 69.02 25 5.00% 5.76 17.20 34.20 67.57 26 5.00% 5.65 16.87 33.53 66.25 27 5.00% 5.54 16.56 32.92 65.04 28 5.00% 5.45 16.28 32.35 63.93 29 5.00% 5.36 16.01 31.83 62.90 30 5.00% 5.28 15.77 31.35 61.95 - -----------------------------------------------------------------
IRA-CDA-IC 39 OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- ----------------------------------------------------------------- GUARANTEED MONTHLY QUARTERLY SEMI-ANNUAL ANNUAL YEARS RATE PAYMENT PAYMENT PAYMENT PAYMENT - ----------------------------------------------------------------- 5 3.50% 18.12 54.19 107.92 213.99 6 3.50% 15.35 45.92 91.44 181.32 7 3.50% 13.38 40.01 79.69 158.01 8 3.50% 11.90 35.59 70.88 140.56 9 3.50% 10.75 32.16 64.05 127.00 10 3.50% 9.83 29.42 58.59 116.18 11 3.50% 9.09 27.18 54.13 107.34 12 3.50% 8.46 25.32 50.42 99.98 13 3.50% 7.94 23.75 47.29 93.78 14 3.50% 7.49 22.40 44.62 88.47 15 3.50% 7.10 21.24 42.318 3.89 16 3.50% 6.76 20.23 40.29 79.89 17 3.50% 6.47 19.34 38.51 76.37 18 3.50% 6.20 18.55 36.94 73.25 19 3.50% 5.97 17.85 35.54 70.47 20 3.50% 5.75 17.22 34.28 67.98 21 3.50% 5.56 16.65 33.15 65.74 22 3.50% 5.39 16.13 32.13 63.70 23 3.50% 5.24 15.66 31.19 61.85 24 3.50% 5.09 15.24 30.34 60.17 25 3.50% 4.96 14.85 29.56 58.62 26 3.50% 4.84 14.49 28.95 57.20 27 3.50% 4.73 14.15 28.19 55.90 28 3.50% 4.63 13.85 27.58 54.69 29 3.50% 4.53 13.57 27.02 53.57 30 3.50% 4.45 13.30 26.49 52.53 - -----------------------------------------------------------------
IRA-CDA-IC 40 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
- -------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ---------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE - -------------------------------------------------------------------------------- 50 $5.48 $5.12 $5.46 $5.11 $5.41 $5.09 $5.34 $5.06 $5.24 $5.01 51 5.55 5.17 5.53 5.17 5.48 5.14 5.40 5.11 5.29 5.05 52 5.63 5.23 5.61 5.23 5.55 5.20 5.46 5.16 5.34 5.10 53 5.71 5.30 5.69 5.29 5.62 5.26 5.53 5.22 5.40 5.15 54 5.80 5.37 5.77 5.36 5.70 5.33 5.60 5.27 5.45 5.20 55 5.89 5.44 5.86 5.43 5.79 5.39 5.67 5.34 5.51 5.25 56 5.99 5.52 5.96 5.51 5.87 5.47 5.74 5.40 5.56 5.31 57 6.10 5.60 6.06 5.59 5.97 5.54 5.82 5.47 5.62 5.37 58 6.21 5.69 6.17 5.67 6.06 5.62 5.90 5.54 5.68 5.42 59 6.33 5.79 6.29 5.77 6.17 5.71 5.98 5.61 5.74 5.48 60 6.46 5.89 6.41 5.87 6.28 5.80 6.06 5.69 5.79 5.55 61 6.60 6.00 6.55 6.07 6.39 5.90 6.15 5.77 5.85 5.61 62 6.75 6.11 6.69 6.08 6.51 6.00 6.24 5.86 5.91 5.67 63 6.91 6.23 6.84 6.20 6.64 6.10 6.33 5.95 5.96 5.73 64 7.09 6.37 7.00 6.33 6.77 6.22 6.42 6.04 6.02 5.80 65 7.27 6.51 7.18 6.46 6.91 6.34 6.52 6.13 6.07 5.86 66 7.47 6.66 7.36 6.61 7.05 6.46 6.61 6.23 6.12 5.92 67 7.68 6.82 7.55 6.76 7.20 6.60 6.70 6.33 6.16 5.99 68 7.91 7.00 7.76 6.93 7.35 6.74 6.80 6.43 6.21 6.04 69 8.15 7.19 7.98 7.11 7.51 6.89 6.89 6.54 6.25 6.10 70 8.41 7.39 8.21 7.30 7.67 7.04 6.97 6.64 6.28 6.15 71 8.69 7.62 8.45 7.51 7.83 7.21 7.06 6.74 6.32 6.20 72 8.99 7.86 8.70 7.73 8.00 7.38 7.14 6.85 6.35 6.25 73 9.31 8.12 8.97 7.97 8.16 7.55 7.21 6.95 6.37 6.29 74 9.65 8.41 9.26 8.23 8.33 7.73 7.29 7.04 6.39 6.33 75 10.02 8.72 9.55 8.50 8.50 7.92 7.35 7.14 6.41 6.36 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 41 OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
- -------------------------------------------------------------------------------- ADJUSTED NONE 60 120 180 240 AGE OF ---------------------------------------------------------------------- ANNUITANT MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE MALE FEMALE - -------------------------------------------------------------------------------- 50 $4.56 $4.20 $4.55 $4.19 $4.51 $4.18 $4.45 $4.15 $4.36 $4.11 51 4.64 4.26 4.62 4.25 4.58 4.24 4.51 4.21 4.42 4.16 52 4.72 4.32 4.70 4.32 4.66 4.30 4.58 4.26 4.48 4.21 53 4.80 4.39 4.79 4.38 4.74 4.36 4.65 4.32 4.53 4.27 54 4.89 4.46 4.87 4.46 4.82 4.43 4.73 4.39 4.59 4.32 55 4.99 4.54 4.97 4.53 4.91 4.50 4.80 4.46 4.65 4.38 56 5.09 4.62 5.07 4.61 5.00 4.58 4.88 4.53 4.72 4.44 57 5.20 4.71 5.17 4.70 5.10 4.66 4.96 4.60 4.78 4.50 58 5.32 4.80 5.29 4.79 5.20 4.75 5.05 4.68 4.84 4.57 59 5.44 4.90 5.41 4.88 5.31 4.84 5.14 4.76 4.91 4.63 60 5.57 5.00 5.53 4.99 5.42 4.93 5.23 4.84 4.97 4.70 61 5.71 5.11 5.67 5.09 5.54 5.03 5.32 4.93 5.03 4.77 62 5.86 5.23 5.81 5.21 5.66 5.14 5.42 5.02 5.09 4.84 63 6.02 5.36 5.97 5.33 5.79 5.25 5.51 5.11 5.16 4.91 64 6.20 5.49 6.13 5.46 5.93 5.37 5.61 5.21 5.21 4.98 65 6.38 5.64 6.31 5.60 6.07 5.49 5.71 5.31 5.27 5.05 66 6.58 5.79 6.49 5.75 6.22 5.63 5.81 5.41 5.32 5.12 67 6.79 5.95 6.69 5.91 6.38 5.76 5.91 5.52 5.38 5.18 68 7.02 6.13 6.89 6.08 6.53 5.91 6.01 5.63 5.42 5.25 69 7.26 6.32 7.11 6.26 6.70 6.06 6.11 5.74 5.47 5.31 70 7.52 6.53 7.35 6.45 6.86 6.23 6.20 5.85 5.51 5.37 71 7.80 6.75 7.59 6.66 7.03 6.39 6.29 5.96 5.54 5.42 72 8.09 6.99 7.85 6.89 7.21 6.57 6.38 6.07 5.57 5.47 73 8.41 7.26 8.12 7.13 7.38 6.75 6.46 6.17 5.60 5.51 74 8.75 7.54 8.41 7.39 7.55 6.94 6.53 6.28 5.63 5.55 75 9.12 7.85 8.71 7.66 7.73 7.13 6.61 6.38 5.65 5.59 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 42 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS FEMALE AND SECOND ANNUITANT IS MALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- -------------------------------------------------------------------------------- ADJUSTED AGES - ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $3.75 $4.07 $4.26 $3.75 $3.98 55 55 3.88 4.25 4.47 3.87 4.06 55 60 3.99 4.44 4.71 3.98 4.12 60 55 4.06 4.47 4.71 4.06 4.37 60 60 4.24 4.71 4.99 4.23 4.47 60 65 4.38 4.97 5.32 4.38 4.54 65 60 4.49 5.01 5.32 4.48 4.89 65 65 4.72 5.33 5.70 4.71 5.02 65 70 4.93 5.68 6.15 4.91 5.14 70 65 5.07 5.75 6.17 5.05 5.60 70 70 5.40 6.21 6.70 5.36 5.79 70 75 5.69 6.68 7.32 5.62 5.96 75 70 5.89 6.83 7.40 5.81 6.63 75 75 6.37 7.45 8.15 6.23 6.92 75 80 6.78 8.11 8.99 6.54 7.15 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Female and the Second Annuitant is Male. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 43 OPTION 4 LIFE INCOME FOR TWO PAYEES AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES (ANNUITANT IS MALE AND SECOND ANNUITANT IS FEMALE) Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.0%
- -------------------------------------------------------------------------------- ADJUSTED AGES - ---------------------- SECOND ANNUITANT ANNUITANT OPTION 4a OPTION 4b OPTION 4c OPTION 4d OPTION 4e - -------------------------------------------------------------------------------- 55 50 $3.69 $4.05 $4.27 $3.69 $4.13 55 55 3.88 4.25 4.47 3.87 4.25 55 60 3.06 4.47 4.71 4.06 4.36 60 55 3.99 4.44 4.71 3.98 4.55 60 60 4.24 4.71 4.99 4.23 4.70 60 65 4.49 5.01 5.32 4.48 4.85 65 60 4.38 4.97 5.32 4.38 5.10 65 65 4.72 5.33 5.70 4.71 5.32 65 70 5.07 5.75 6.17 5.05 5.54 70 65 4.93 5.68 6.15 4.91 5.86 70 70 5.40 6.21 6.70 5.36 6.18 70 75 5.89 6.82 7.40 5.81 6.49 75 70 5.69 6.68 7.32 5.62 6.92 75 75 6.37 7.45 8.15 6.23 7.40 75 80 7.07 8.34 9.16 6.78 7.85 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates assume the Annuitant is Male and the Second Annuitant is Female. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IRA-CDA-IC 44 Aetna Life Insurance and Annuity Company ENDORSEMENT This Contract is hereby endorsed as follows: The Contract section entitled GENERAL DEFINITIONS is amended to include the following terms: AETNA GET FUND (GET FUND): An open-end registered management investment company organized as a series fund. Each series of GET Fund constitutes a separate Fund under this Contract. ALLOCATION PERIOD: The period of time, usually from one to three months, during which amounts may be allocated to a series of GET Fund, whether by Transfer or by Net Purchase Payment(s). Each series of GET Fund will have a specific Allocation Period. At its discretion, Aetna may allow additional amounts to be allocated to a series of GET Fund during the Guarantee Period. The Guarantee established at the close of the Allocation Period will apply to these amounts. At its discretion, Aetna may specify a minimum amount per Transfer and per Net Purchase Payment amount for each series prior to the beginning of the Allocation Period for that series. Aetna will specify a minimum amount of assets that a series of the GET Fund must contain at the close of the Allocation Period; and reserves the right to terminate a series if it does not meet this minimum standard. If Aetna elects to terminate the GET Fund and not to start the Guarantee Period, Aetna will mail each Contract Holder with amount(s) in the series a notice that the series is being canceled. The cancellation notice will be mailed no later than 15 calendar days after the Allocation Period ends. The Contract Holder will have 45 calendar days from the end of the Allocation Period to Transfer the Current Value of the canceled series of GET Fund to another accumulation option(s). If no Transfer is made prior to the end of the 45 calendar day period, the Current Value in the canceled series of GET Fund will be transferred to Aetna Variable Encore Fund, a money market fund during the next Valuation Period. Aetna will also specify the maximum amount of assets that will be accepted into a series of the GET Fund; and reserves the right to not allow additional allocation to a series if it exceeds this maximum standard. If Aetna elects not to allow additional allocation to the series of GET Fund, Aetna will stop accepting Net Purchase Payments and Transfers into the series 10 calendar days after such election. The Allocation Period will continue until the date the Guarantee Period begins. GET FUND MATURITY DATE: The date at which the Guaranteed Period for a series will end and the GET Fund Record Units for that series will be liquidated. Another accumulation option must then be elected. If no such election is made by the GET Fund Maturity Date, the portion of the Current Value based on that GET Fund series will be transferred to the Allocation Period for another series of GET Fund. If no GET Fund Series is available, 50% of the Current Value from that GET Fund series will be transferred to Aetna Variable Fund, a growth and income fund. The remaining 50% of the Current Value will be transferred to Aetna Income Shares, a bond fund. The Transfers will be made during the next Valuation Period. Such Transfers will not be counted as one of the free Transfers. The GET Fund Maturity Date will be specified before the Allocation Period for that series begins. GUARANTEE: Aetna guarantees that on a series' GET Fund Maturity Date, the value of each Get Fund Record Unit then outstanding in that series will not be less than the value of the Record Unit on the last day of the Allocation Period. Aetna will transfer any amount necessary from its general account to the Separate Account in order to bring that Record Unit Value to the guaranteed level. This Guarantee does not apply to GET Fund Record Unit Values withdrawn or transferred before the GET Fund Maturity Date. EIGET-IC(R) GUARANTEED PERIOD: The length of time to which the Guarantee applies for a series, ending on the GET Fund Maturity Date. This period will be specified before the Allocation Period for a series begins. The Contract section entitled FUND(S) is amended to add the following sentence: Unless specifically indicated otherwise in this Contract, all references to Fund(s) in this Contract shall include each series of GET Fund. The Contract section entitled NET RETURN FACTOR(S) - SEPARATE ACCOUNT is hereby endorsed to add the following as subsection (f): Minus a daily fee at an annual rate of 0.25% during the Guaranteed Period for Aetna's guarantee of GET Fund Record Unit Values. This fee will be determined prior to the start of any series of GET Fund's Allocation Period. The Contract section entitled TRANSFER OF CURRENT VALUE FROM THE FUNDS is amended to include the following paragraph at the end of this provision: Withdrawals or Transfers from a GET Fund series before the Maturity Date will be at the then applicable GET Fund Record Unit Value, which may be more or less than the Record Unit Value guaranteed at the GET Fund Maturity Date. This Contract section entitled REINSTATEMENT is amended to include the following paragraph at the end of this provision: Amounts attributable to GET will be reinstated to the Allocation Period of a GET series, if available. If a GET series Allocation Period is unavailable, amounts will be reallocated among other Fund(s), the Fixed Account and the GI Account, (if applicable), on a pro rata basis. The Contract section entitled CHOICES TO BE MADE is amended to include the following paragraph at the end of this provision: Contract values based on any GET Fund series must be transferred to another accumulation option prior to election of an Annuity Option. Endorsed and made part of this Contract on the effective date of the Contract. /s/ Daniel P. Kearney President Aetna Life Insurance and Annuity Company EIGET-IC(R) - -------------------------------------------------------------------------------- [LOGO] AETNA LIFE INSURANCE AND ANNUITY COMPANY HOME OFFICE: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 531-4547 Individual Variable, Fixed, or Combination Contract Nonparticipating - -------------------------------------------------------------------------------- ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. IRA-CDA-IC [LOGO] AETNA LIFE INSURANCE AND ANNUITY COMPANY HOME OFFICE: 151 Farmington Avenue Hartford, Connecticut 06156 (800) 525-4225 Aetna Life Insurance and Annuity Company, herein called Aetna, agrees to pay the benefits stated in this Contract. SPECIFICATIONS - -------------------------------------------------------------------------------- Plan - -------------------------------------------------------------------------------- Type of Plan INDIVIDUAL RETIREMENT ANNUITY (IRA) 5.02 - -------------------------------------------------------------------------------- Annuitant MARY SMITH - -------------------------------------------------------------------------------- Contract Holder MARY SMITH - -------------------------------------------------------------------------------- Contract No. SPECIMEN - -------------------------------------------------------------------------------- Effective Date NOVEMBER 1, 1992 - -------------------------------------------------------------------------------- This Contract is Delivered in YOUR STATE and is Subject to the Laws of that Jurisdiction THE VARIABLE FEATURES OF THIS GROUP CONTRACT ARE DESCRIBED IN PARTS III AND IV. RIGHT TO CANCEL - -------------------------------------------------------------------------------- The Contract Holder may cancel this Contract within 10 days of receiving it by returning this Contract along with a written notice to Aetna at the above address or to the agent from whom it was purchased. Within 7 days after it receives the notice of cancellation and this Contract at its Home Office, Aetna will return the entire consideration paid plus any increase or minus any decrease in the current value of any funds allocated to the Separate Account. This page, the following pages, and the application make up the entire Contract. Signed at the Home Office on the Effective Date. /S/ Laura R. Estes /S/ George N. Gingold Laura R. Estes George N. Gingold Senior Vice President, ALIAC Pensions Secretary Individual Variable, Fixed, or Combination Annuity Contract Nonparticipating ALL PAYMENTS AND VALUES PROVIDED BY THE GROUP CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. IP-CDA-IB SPECIFICATIONS - -------------------------------------------------------------------------------- GUARANTEED There is a guaranteed interest rate for Purchase Payment(s) INTEREST RATE Fixed Account (See 3.02) and the GI Account. (See 3.03 (d)) - -------------------------------------------------------------------------------- SURRENDER FEE There will be a charge deducted for early surrender. (See Part V.) - -------------------------------------------------------------------------------- DEDUCTIONS FROM There will be deductions for mortality and expense risks and THE SEPARATE administrative fees. (See 3.06.) ACCOUNT - -------------------------------------------------------------------------------- DEDUCTIONS FROM Purchase Payment(s) are subject to a deduction for premium PURCHASE taxes, if any. (See 3.01.) PAYMENT(s) This Contract is a legal contract and constitutes the entire legal relationship between Aetna and the Contract Holder. READ THIS CONTRACT CAREFULLY. This Contract sets forth, in detail, all of the rights and obligations of both you and Aetna. IT IS THEREFORE IMPORTANT THAT YOU READ THIS CONTRACT CAREFULLY. IP-CDA-IB 2 I. GENERAL DEFINITIONS - -------------------------------------------------------------------------- PAGE 1.01 Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.02 Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.03 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.04 Contract Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.05 Contract Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.06 Fixed Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.07 Fixed Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.08 Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.09 General Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.10 Good Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.11 Guaranteed Interest Account (GI Account). . . . . . . . . . . . . . . . 5 1.12 Matured Term Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.13 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.14 Nonunitized Separate Account. . . . . . . . . . . . . . . . . . . . . . 5 1.15 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.16 Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.17 Purchase Payment(s) . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.18 Separate Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.19 Valuation Period (Period) . . . . . . . . . . . . . . . . . . . . . . . 6 1.20 Variable Annuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 II. GENERAL PROVISIONS - -------------------------------------------------------------------------------- 2.01 Change of Contract. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.02 Change of Fund(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.03 Nonparticipating Contract . . . . . . . . . . . . . . . . . . . . . . . 7 2.04 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.05 State Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.06 Control of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.07 Designation of Beneficiary. . . . . . . . . . . . . . . . . . . . . . . 7 2.08 Misstatements and Adjustments . . . . . . . . . . . . . . . . . . . . . 7 2.09 Incontestability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.10 Grace Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 IP-CDA-IB 3 III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS - -------------------------------------------------------------------------- PAGE 3.01 Net Purchase Payment(s) . . . . . . . . . . . . . . . . . . . . . . . . 7 3.02 Guaranteed Interest Rate -- Fixed Account . . . . . . . . . . . . . . . 8 3.03 Guaranteed Interest Account (GI Account). . . . . . . . . . . . . . . . 8 3.04 Maintenance Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.05 Fund Record Units -- Separate Account . . . . . . . . . . . . . . . . . 10 3.06 Net Return Factor(s) -- Separate Account. . . . . . . . . . . . . . . . 10 3.07 Fund Record Unit Value -- Separate Account. . . . . . . . . . . . . . . 11 3.08 Current Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.09 Transfer of Current Value from the Funds or GI Account. . . . . . . . . 11 3.10 Transfer of Current Value from the Fixed Account. . . . . . . . . . . . 12 3.11 Notice to the Contract Holder . . . . . . . . . . . . . . . . . . . . . 12 3.12 Sum Payable at Death (Before Annuity Payments Start). . . . . . . . . . 13 3.13 Surrender Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.14 Payment of Surrender Value. . . . . . . . . . . . . . . . . . . . . . . 13 3.15 Distribution Options (Estate Conservation Option (ECO) Systematic Withdrawal Option (SWO). . . . . . . . . . . . . . . . . . . 13 3.16 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 IV. ANNUITY PROVISIONS - -------------------------------------------------------------------------------- 4.01 Choices to be Made. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4.02 Annuity Payments to Annuitant . . . . . . . . . . . . . . . . . . . . . 14 4.03 Annuity Payments to Annuitant's Beneficiary . . . . . . . . . . . . . . 14 4.04 Terms of Annuity Options. . . . . . . . . . . . . . . . . . . . . . . . 15 4.05 Death of Annuitant/Beneficiary. . . . . . . . . . . . . . . . . . . . . 15 4.06 Fund(s) Annuity Units -- Separate Account . . . . . . . . . . . . . . . 16 4.07 Fund(s) Annuity Unit Value -- Separate Account. . . . . . . . . . . . . 16 4.08 Annuity Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 V. SPECIAL PROVISIONS - -------------------------------------------------------------------------------- 5.01 Pension or Profit Sharing Plan; Qualified Individual Deferred Annuity . 26 5.02 Individual Retirement Annuity (IRA); Simplified Employee Pension Plan . 33 VI. FEE SCHEDULE - -------------------------------------------------------------------------------- 6.01 Maintenance Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.02 Surrender Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 6.03 Table of Minimum Values -- Fixed Account. . . . . . . . . . . . . . . . 41 IP-CDA-IB 4 I. GENERAL DEFINITIONS - -------------------------------------------------------------------------------- 1.01 ANNUITANT: A person who receives a series of payments for life or a definite period under this Contract. This term may also apply to the Contract Holder's or Participant's beneficiary who elected an Annuity Option after the Contract Holder/Participant's death before payments begin. The Annuitant cannot be changed. 1.02 ANNUITY: Payment of an income: (a) For the life of one or two persons; (b) For a stated period; or (c) For some combination of (a) and (b). 1.03 CODE: The Internal Revenue Code of 1986, as it may be amended from time to time. 1.04 CONTRACT HOLDER: The entity to which, or person to whom this Contract is issued. 1.05 CONTRACT YEAR: The period of 12 months measured from the date the first Net Purchase Payment is applied to the Contract or from any anniversary of such date. 1.06 FIXED ACCOUNT: An accumulation option with a guaranteed minimum interest rate. Aetna may credit a higher rate which is not guaranteed. 1.07 FIXED ANNUITY: An Annuity with payments which do not vary in amount. 1.08 FUND(S): The open-end registered management investment companies (mutual funds) made available by Aetna under this Contract. 1.09 GENERAL ACCOUNT: The Account holding the assets of Aetna, other than those assets held in the Separate Account or the Nonunitized Separate Account. 1.10 GOOD ORDER: A Contract Holder instruction to Aetna is in Good Order when given with such clarity and completeness that Aetna is not required to exercise any discretion, utilizing such forms as Aetna may require. 1.11 GUARANTEED INTEREST An accumulation option which guarantees a ACCOUNT (GI ACCOUNT): stipulated rate of interest for a specified period of time. 1.12 MATURED TERM VALUE: The amount payable on a GI Account Term's Maturity Date. 1.13 MATURITY DATE: The last day of a GI Account Term. 1.14 NONUNITIZED SEPARATE An Account set up by Aetna under Title 38a, ACCOUNT Section 38a-433, of the Connecticut General Statutes which is used to hold assets for GI Account Terms greater than three years. The Contract Holder does not participate in the investment gain or loss from the assets held in this Account. 1.15 PARTICIPANT: A person who participates in the Plan named on the cover of this Contract, if applicable. IP-CDA-IB 5 1.16 PLAN: The Plan named on the Contract cover. The Plan is not a part of the Contract. Aetna is not bound by the terms of the Plan. 1.17 PURCHASE PAYMENT(S): Payments made to Aetna. 1.18 SEPARATE ACCOUNT: An account which buys and holds shares of the Fund(s). Income, gains or losses, realized or unrealized are credited or charged to this account without regard to other income, gains or losses of Aetna. Aetna owns the assets held in a separate account and is not a trustee as to such amounts. These accounts generally are not guaranteed and are held at market value. The assets of such accounts, to the extent of reserves and other contract liabilities of the account, shall not be charged with other Aetna liabilities. 1.19 VALUATION PERIOD: The period as of 4:00 p.m. Eastern time on each (PERIOD) day the New York Stock Exchange is open for business to 4:00 p.m. Eastern time of the next such business day. 1.20 VARIABLE ANNUITY: An Annuity with payments that vary with the net investment results of a Separate Account. II. GENERAL PROVISIONS - -------------------------------------------------------------------------------- 2.01 CHANGE OF CONTRACT: Except as provided below, only an authorized officer of Aetna may change the terms of the Contract. Aetna will notify the Contract Holder in writing at least 30 days before the effective date of any change. Any change will not affect the amount or terms of any Annuity which begins before the change. The following provisions of this Contract will not be changed: (a) Net Purchase Payment(s) (b) Guaranteed Interest Account (GI Account) Interest Rate, if available. (c) Guaranteed Interest Rate -- Fixed Account (d) Net Return Factor(s) -- Separate Account (e) Current Value (f) Surrender Value (g) Fund(s) Annuity Unit Value -- Separate Account. (h) Annuity Options (I) Fixed Annuity minimum interest rate (j) Maximum transfer, maintenance, or surrender fees. This Contract may also be changed as required by federal or state law. 2.02 CHANGE OF FUND(S): Aetna, or the Separate Account may: (a) Change the Fund(s) which may be invested in by the Separate Account; and (b) Replace the shares of any Fund(s) held in the Separate Account with shares of any other Fund(s). IP-CDA-IB 6 2.02 CHANGE OF FUND(S) Changes must be: (CONT'D): (a) Approved by a majority vote of persons having an interest in the Separate Account and the Fund(s); (b) Deemed necessary by Aetna under the Investment Company Act of 1940; or (c) Deemed necessary by Aetna to accomplish the purpose of the Separate Account. Aetna will notify the Contract Holder of any change. 2.03 NONPARTICIPATING The Contract Holder, Annuitant, or beneficiaries CONTRACT: will not have a right to share in the earnings of Aetna. 2.04 PAYMENTS: Aetna will make Annuity payments as and when due. Aetna will make other payments within 7 days of receipt at its Home Office of a written claim for payment which is in Good Order, except as provided in 3.14. 2.05 STATE LAWS: This Contract complies with the laws of the state in which it is delivered. Any cash, death or Annuity payments are equal to or greater than the minimum required by such laws. Annuity tables for legal reserve valuation shall be as required by state law. Such tables may be different from Annuity tables used to determine Annuity payments. 2.06 CONTROL OF CONTRACT: See Part V. 2.07 DESIGNATION OF See Part V. BENEFICIARY 2.08 MISSTATEMENTS AND If Aetna finds the age of any payee to be ADJUSTMENTS misstated, the correct facts will be used to adjust payments. Aetna reserves the right to correct any informational or administrative errors. 2.09 INCONTESTABILITY: Aetna cannot cancel this Contract because of any error of fact on the application. 2.10 GRACE PERIOD: This Contract will remain in effect even if Purchase Payments are not continued. III. PURCHASE PAYMENT, CURRENT VALUE, AND SURRENDER PROVISIONS - -------------------------------------------------------------------------------- 3.01 NET PURCHASE The actual Purchase Payment less any premium tax. PAYMENT(S): Generally, Aetna will deduct the premium tax when Annuity benefits are purchased (see Part IV). If Aetna determines that a premium tax is due when Purchase Payment(s) are received, or at any other time, it will deduct the tax at that time. The Net Purchase Payment(s) may be credited to: (a) The Fixed Account; (b) The Fund(s) in which the Separate Account invests; and (c) The GI Account, if available. IP-CDA-IB 7 3.01 NET PURCHASE Aetna must be told the percentage of the Net PAYMENT(S) Purchase Payment(s) to be applied to each (CONT'D) investment above. During any calendar year, Aetna may be told to change the investment mix twelve times. Should Aetna allow additional changes, each may be subject to a fee of up to $10. 3.02 GUARANTEED INTEREST On any Purchase Payment(s) made to the Fixed RATE -- FIXED ACCOUNT: Account, Aetna will add interest daily at an annual rate no less than 4%. Aetna may add interest daily at any higher rate determined by its Board of Directors. 3.03 GUARANTEED INTEREST The GI Account provides a guaranteed effective ACCOUNT (GI ACCOUNT): annual yield for (GI ACCOUNT): Net Purchase Payments and transfers held in the GI Account for stipulated periods of time (see (a) and (b) below). (a) Deposit Period -- A calendar month, a calendar quarter, or any other period of time specified by Aetna during which Net Purchase Payment(s) and transfers are accepted into the GI Account for one or more Guaranteed Terms. (b) Guaranteed Term (Term) -- The period of time for which Annual Effective Yields are earned on Net Purchase Payment(s) and on transfers made into the Deposit Period of the GI Account. Terms are offered at Aetna's discretion for various lengths of time ranging up to and including ten years. (c) Guaranteed Term Classifications -- The grouping of Terms according to their time to maturity. The following are the Classifications: (1) Short-Term: Terms of up to and including 3 years; or (2) Long-Term: Terms of greater than 3 years and up to and including 10 years. During a Deposit Period, Aetna may make available one or more Terms within a Classification. The Contract Holder has the option to allocate Net Purchase Payment(s) and transfers into any or all of the available Deposit Period Terms. If no specific direction is given, Net Purchase Payment(s) and transfers will go into available Terms on a pro rata basis within the Classification(s) previously chosen by the Contract Holder. (d) Guaranteed Effective Yields (Yields) -- The effective annual yield(s) are guaranteed by Aetna for Net Purchase Payment(s) and transfers accepted into a Deposit Period for available Terms in the GI Account. Yield(s) will gradually increase to the end of a Term and will never be less than 4%. The ending Term Guaranteed Effective Yield is the rate which Aetna will declare prior to each Deposit Period. Aetna will also calculate the interim Yield(s). Aetna will add interest daily for each applicable quarter. IP-CDA-IB 8 3.03 GUARANTEED INTEREST (e) Withdrawals from GI Account -- Transfers may ACCOUNT (GI ACCOUNT) be requested at any time from the GI account (CONT'D) prior to the end of a Term, subject to Contract specifications (see 3.09). Full or partial surrenders may be requested at any time from the GI Account prior to the end of a Term. The amount withdrawn before the Maturity date of a Term will receive a Yield which is reduced from the ending Guaranteed Term Effective Yield. The reduced Yield will never be less than 4%. Full and partial surrenders are satisfied by withdrawing amounts from each of the Funds, the Fixed Account, the GI Account Short-Term Classification and the GI Account Long-Term Classification) on a pro rata basis. However, the Contract Holder may specify a particular order in which investment options will be liquidated in order to satisfy a partial surrender request. For purposes of withdrawals, Terms within the GI Account Short-Term and Long-Term Classifications are considered as two separate investment options. Amounts will be removed within a GI Account Classification starting with the Term still in effect with the oldest Deposit Period. Net Purchase Payment(s) withdrawn from the GI Account under the Sum Payable at Death provision prior to the end of a Term will earn the Yield stated for the Net Purchase Payment(s) remaining in the Classification of the GI Account to the end of the Term. (f) Maturity Date/Reinvestment -- The Contract Holder will be mailed a notice at least 18 calendar days before a Term's Maturity Date. This notice will contain the current Deposit Period's Yield, Term(s) and a projected Matured Term Value. The Matured Term Value may be surrendered or transferred on the Term's Maturity Date. If no specific direction is given by the Contract Holder prior to the Maturity Date, each Matured Term Value will be reinvested in a Term of the same duration. In the event that a Term of the same duration is unavailable, each Matured Term Value will automatically be reinvested in the next shortest Term available in the same Classification during the then current Deposit Period. If however, only one Term is available within the Classification, then the Matured Term Value will automatically be reinvested in that Term. Within two business days after the Maturity Date, the Contract Holder will be mailed a confirmation statement. This statement will state the Terms and Yields which will apply to the reinvested Matured Term Value. During the calendar month following the Term's Maturity Date, the Contract Holder may notify Aetna's Home Office to transfer or surrender all or part of the Matured Term Value plus any interest accrued thereon from the GI Account. This provision only applies to the first such request received from the Contract Holder during this period for any Matured Term IP-CDA-IB 9 3.03 GUARANTEED INTEREST Value. All or part of the Matured Term Value ACCOUNT (GI ACCOUNT) plus any interest accrued thereon may be (CONT'D) transferred upon such request: (1) To any other Terms of the GI Account available in the current Deposit Period; (2) To the Fixed Account; or (3) To any other allowable Fund(s). If no such notification is given, the Matured Term Value will remain subject to the terms and conditions of the new Term. All surrender and transfer requests will be processed as of the date they are received in Good Order at Aetna's Home Office. (g) Deposits to the GI Account -- All amounts in the GI Account under the Short-Term Classification are made to the General Account. All amounts in the GI Account under the Long- Term Classification are made to a Nonunitized Separate Account. There are no discrete units for this Nonunitized Separate Account. The Contract Holder does not participate in the gain or loss from the assets held in the Nonunitized Separate Account. Such gain or loss is borne entirely by Aetna. These assets may be chargeable with liabilities arising out of any other business of Aetna. For Terms under both the Short-Term and Long- Term Classifications, Aetna guarantees stipulated Yields to be credited to the GI Account. All assets of Aetna including amounts made to the GI Account are available to meet the guarantees under the GI Account. (h) Table of Representative Yields -- A table of representative Yields illustrated on a quarterly basis for Net Purchase Payment(s) accepted in the GI Account during a Deposit Period and held to the end of a specified quarter will be provided upon request. The GI Account is available only under a Contract subject to the Special Provisions of section 5.02. The GI Account cannot be used as a pay-out option under the ANNUITY PROVISIONS of the Contract. 3.04 MAINTENANCE FEE: See Part V. 3.05 FUND RECORD UNITS -- The portion of the Net Purchase Payment(s) applied SEPARATE ACCOUNT: to the Separate Account will determine the number of each Fund's Record Units. This number is equal to the Net Purchase Payment applied to the Fund divided by the Fund Record Unit Value (see 3.07) for the Valuation Period in which the Purchase Payment is received in good order. 3.06 NET RETURN The Net Return Factors are used to compute all FACTOR(S) -- Separate Account Values and payments for any Fund. SEPARATE ACCOUNT: The Net Return Factor for each Fund is equal to 1.0000000 plus the Net Return Rate. IP-CDA-IB 10 3.06 NET RETURN The Net Return Rate is equal to: FACTOR(S) -- SEPARATE ACCOUNT (CONT'D): (a) The value of the shares of the Fund held by the Separate Account at the end of a Valuation Period; minus (b) The value of the shares of the Fund held by the Separate Account at the start of the Valuation Period; plus or minus (c) Taxes (or reserves for taxes) on the Separate Account (if any); divided by (d) The total value of the Fund Record Units and Fund Annuity Units of the Separate Account (see 3.07 and 4.07) at the start of the Valuation Period; minus (e) A daily actuarial charge at an annual effective rate of 1.25% for Annuity mortality and expense risks and profit and a daily administrative charge which will not exceed 0.25% on an annual effective basis. A Net Return Rate may be more or less than 0. The value of a share of the Fund is equal to the net assets of the Fund divided by the number of shares outstanding. The administrative charge may be changed annually except for amounts which have been used to purchase an Annuity. This charge will not exceed 0.25%. 3.07 FUND RECORD UNIT Each Fund's Record Unit Value is computed by VALUE -- SEPARATE multiplying the Net Return Factor for the current ACCOUNT (CONT'D) Valuation Period by the Fund's Record Unit Value for the previous Period. The dollar value of a Fund's Record Unit, Separate Account assets, and Variable Annuity payments may go up or down due to investment gain or loss. 3.08 CURRENT VALUE: The Current Value of this Contract is equal to: (a) Any amounts in the Fixed Account, including Fixed Account interest added by Aetna; plus (b) Any amounts in the GI Account, including GI Account interest added by Aetna; plus (c) The sum of any Separate Account Record Unit Value(s); less (d) Any Maintenance Fee(s) due. Current Value does not include amounts used to purchase an Annuity. 3.09 TRANSFER OF CURRENT Before an Annuity Option is elected, all or any VALUE FROM THE FUNDS portion of the Current Value may be transferred OR GI ACCOUNT: from any Fund or the GI Account, if available, to: (a) Any other Fund; (b) The Fixed Account; or IP-CDA-IB 11 3.09 TRANSFER OF CURRENT (c) The GI Account's current Deposit Period. VALUE FROM THE FUNDS OR GI ACCOUNT Amounts in a specific GI Account Term cannot be (CONT'D): transferred to the Deposit Period of another Term within the same Classification except at the Term's Maturity. Transfers from the GI Account are subject to the Withdrawal provision for amounts withdrawn before the Maturity Date of a Term. (See 3.03 (e).) Twelve transfers of Current Value (excluding transfers from the GI Account at the end of a Guaranteed Term) can be made during a calendar year period. Should Aetna allow additional transfers, each may be subject to a fee of up to $10. 3.10 TRANSFER OF CURRENT 10% of the Current Value held in the Fixed Account VALUE FROM THE FIXED may be transferred to any Fund(s) or the GI ACCOUNT: Account's current Deposit Period, if available. Such transfer will be: (a) Without charge; and (b) Allowed once per calendar year; and (c) Not allowed under an Annuity Option. Aetna may, on a temporary basis, allow any larger percent to be transferred. Any remaining balance in the Fixed Account under the Contract may be transferred by the Contract Holder in its entirety to any of the Fund(s) and/or if available to the GI Account's current Deposit Period, (as applicable), if: (a) The Current Value of the Fixed Account under the Contract is $2,000 or less; or (b) The maximum percentage allowed was transferred from the Fixed Account in each of the four consecutive prior calendar years and no additional Net Purchase Payment(s) to the Contract have been allocated to the Fixed Account during the same four consecutive calendar year periods. The Current Value of the Fixed Account, as used above, is the value when the request is received at Aetna's Home Office in Good Order. 3.11 NOTICE TO THE Before an Annuity Option is elected, Aetna will CONTRACT GOLDER notify the Contract Holder each year of: (a) The value of any amounts held in: (1) The Fixed Account; (2) The GI Account; if available; (3) The Fund(s) for the Separate Account; (b) The number of any Fund(s) Record Units; and (c) The Fund(s) Record Unit Value(s). IP-CDA-IB 12 3.11 NOTICE TO THE Such number or values will be as of a date no more CONTRACT HOLDER than 60 days before the date of the notice. (CONT'D): 3.12 SUM PAYABLE AT DEATH See Part V. (BEFORE ANNUITY PAYMENTS START): 3.13 SURRENDER VALUE: See Part V: 3.14 PAYMENT OF SURRENDER Under certain emergency conditions, Aetna may VALUE defer payment: (a) For a period of up to 6 months (unless not allowed by state law); and (b) As provided by federal law. Aetna may pay any Fixed Account surrender value with interest in equal payments over a period not to exceed 60 months when the amount held in the Fixed Account under this Contract exceeds $250,000 on the day prior to the current surrender request. This will apply only if the sum of the amounts surrendered within the past 12 months and the amount of the current surrender exceeds 20% of such Fixed Account amount. Interest, as used above, will not be more than two percentage points below any rate determined prospectively by the Board of Directors for this class of Contract. In no event will the interest rate be less than 4%. 3.15 DISTRIBUTION OPTIONS See Part V. (ESTATE CONSERVATION OPTION (ECO)/ SYSTEMATIC WITHDRAWAL OPTION (SWO)): 3.16 REINSTATEMENT: All or a portion of the proceeds of a full surrender of this Contract may be reinvested within 30 days after the surrender if allowed by law. Any Maintenance Fee and Surrender Fee charged at the time of surrender on the amount being reinvested will be included in the reinvestment. Amounts will be reinstated among the Fixed Account, the Separate Account Fund(s) and the GI Account (as applicable) in the same proportion as they were at the time of surrender. The number of Record Units reinstated will be based on the Record Unit Value(s) next computed after receipt at Aetna's Home Office of the reinstatement request and the amount to be reinvested. Amounts will be reinstated to the GI Account's current Deposit Period, as applicable. Any Maintenance Fee which falls due after the surrender and before the reinstatement will be deducted from the amount reinstated. Reinstatement is permitted only once. IP-CDA-IB 13 IV. ANNUITY PROVISIONS - -------------------------------------------------------------------------------- 4.01 CHOICES TO BE MADE: The Contract Holder may tell Aetna to pay any portion of the Current Value (minus any premium tax) as a premium for an Annuity under Option 2, 3, or 4 (see 4.08). This election must be made in a form acceptable to Aetna within the 90 period ending on the date payments are to begin. A Contract Holder may revoke an election at any time prior to the date the payments start. However the spouse of a married Contract Holder/Participant, under a Contract subject to the Special Provisions of section 5.01, must consent to the first election and any new choice other than Option 4(e) (see 4.08). When an Annuity Option is chosen, Aetna must also be told if payments are to be made other than monthly and to pay: (a) A Fixed Annuity using the General Account; (b) A Variable Annuity using any of the Fund(s) made available by Aetna for Annuity purposes; or (c) A combination of (a) and (b). If a Fixed Annuity is chosen, Aetna will add interest daily at an annual rate no less than 3.5%. Aetna may add interest daily at any higher rate. If a Variable Annuity is chosen, an Assumed Annual Net Return Rate of 5% may be chosen. If not chosen, Aetna will use an Assumed Annual Net Return Rate of 3.5%. 4.02 ANNUITY PAYMENTS TO In no event may any payments to the Annuitant ANNUITANT: under any Annuity Option extend beyond: (a) The life of the Annuitant; (b) The lives of the Annuitant and the beneficiary; (c) A period certain greater than the Annuitant's life expectancy according to regulations under Code Section 401(a)(9), determined as of the date payments are to begin; or (d) A period certain greater than the life expectancies of the Annuitant and the beneficiary according to regulations under Code Section 401(a)(9), determined as of the date payments are to begin. 4.03 ANNUITY PAYMENTS TO In no event may payments to the Beneficiary under ANNUITANT'S BENEFICIARY:an Annuity Option extend beyond: (a) The life of the Beneficiary; or (b) A period certain greater than the beneficiary's life expectancy as determined by regulations under Code Section 401(a)(9). The present value of any remaining payments due after the death of both Annuitants under a joint and survivor Annuity IP-CDA-IB 14 (U) 4.03 ANNUITY PAYMENTS TO Option, (see 4.08), will be made to the ANNUITANT'S BENEFICIARY beneficiary designated by the Contract Holder or (CONT'D): to the Contract Holder's estate. The second Annuitant does not have the right to change the beneficiary upon the Contract Holder's death. 4.04 TERMS OF ANNUITY (a) When payments start, the age of the Annuitant OPTIONS: plus the number of years for which payments are guaranteed must not exceed 95. (b) The present value of the expected payments to the Annuitant when payments start shell be determined according to the Tables under IRS regulations to comply with the minimum distribution incidental death benefit rule. This restriction does not apply if Option 4 is chosen and the second Annuitant is the spouse of the Annuitant. (c) No choice of any Annuity Option may be made if the first payment would be less than $20 or if the total payments in a year would be less than $100. (d) If a Fixed Annuity under option 2, 3 or 4 is chosen and a larger payment would result from applying the surrender value to a current Aetna single premium immediate Annuity, Aetna will make the larger payment. (e) The Annuitant's age will be reduced by two years for Annuity commencement dates occurring during the 1990's, reduced by two years for Annuity commencement dates occurring during the decade 2000-2009, and so on. The Annuitant's adjusted age is determined based on the age as of the birthday closest to the date of the first Annuity payment. The Annuity rates for Options 3 and 4 are based on mortality from 1983 Table a. (f) Assumed Annual Net Return Rate is the interest rate used to determine the amount of the first Annuity payment under a Variable Annuity. The Separate Account must earn this rate plus enough to cover the mortality and expense risk charges, and, if applicable, any administrative charge if future Variable Annuity Payments are to remain level. 4.05 DEATH OF When an Annuitant dies under option 2 or 3, or ANNUITANT/BENEFICIARY: both the Annuitant and survivor die under Option 4(d), the present value of any remaining guaranteed payments will be paid in one sum to the beneficiary, or upon election by the beneficiary, any remaining payments will continue to the beneficiary. If there is no beneficiary under Option 2 and 3, the present value of any remaining payments will be paid in one sum to the estate of the Annuitant. If there is no beneficiary under Option 4(d), the present value of any remaining payments will be paid in one lump sum to the last survivor's estate. If the Annuitant dies under Option 1, the amount held plus accrued interest will be paid in one sum to the beneficiary. If there is no beneficiary, the lump sum will be paid to the Annuitant's estate. IP-CDA-IB 15 (U) 4.05 DEATH OF If the Beneficiary dies while receiving annuity ANNUITANT/BENEFICIARY payments elected by the Annuitant, the present CONT'D): value of any remaining payments will be paid in one sum to the successor beneficiary's estate unless otherwise elected. The interest rate used to determine the first payment will be used to calculate the present value. 4.06 FUND(S) ANNUITY UNITS --The number of Fund(s) Annuity Units is based on SEPARATE ACCOUNT: the amount of the first Variable Annuity payment which is equal to: (a) The portion of the Current Value (minus any premium tax) applied to pay a Variable Annuity; divided by (b) 1,000; multiplied by (c) The payment rate for the Option chosen. Such amount, or portion, of the Variable Payment will be divided by the appropriate Fund(s) Annuity Unit Value (see 4.07) on the tenth Valuation Period before the due date of the first payment to determine the number of each Fund(s) Annuity Units. The number of each Fund(s) Annuity Units remains fixed. Each future payment is equal to the sum of the products of each Fund(s) Annuity Unit Value multiplied by the appropriate number of Units. The Fund(s) Annuity Unit Value on the tenth Valuation Period prior to the due date of the payment is used. 4.07 FUND(S) ANNUITY UNIT For any Valuation Period, a Fund(s) Annuity Unit VALUE -- SEPARATE Value is equal to: ACCOUNT: (a) The Value for the previous Period; multiplied by (b) The Net Return Factor(s) (see 3.06) for the Period; multiplied by (c) A factor to reflect the Assumed Annual Net Return Rate. The factor for 3.5% per year is .9999058; for 5% per year it is .9998663. The dollar value of a Fund(s) Annuity Unit Values and payments may go up or down due to investment gain or loss. If Variable Annuity payments are not to decrease, Aetna must earn a gross return on the assets of the Separate Account of: - 4.75% on an annual basis plus an annual return of up to 0.25% needed to offset the administrative charge set at the time Annuity payments commence if an Assumed Annual Net Return Rate of 3.5% is chosen; or - 6.25% on an annual basis plus an annual return of up to 0.25% needed to offset the administrative charge set at the time Annuity payments commence if an Assumed Annual Net Return Rate of 5% is chosen. Payments shall not be changed due to changes in the mortality or expense results or administrative charges. 4.08 ANNUITY OPTIONS: Option 1 -- Payment of Interest on Sum Left with Aetna -- This Option may be used only by the beneficiary when the Annuity dies before Aetna has started paying an Annuity. A portion or all of the IP-CDA-IB 16 (U) 4.08 ANNUITY OPTIONS sum paid upon death may be held under this Option (CONT'D): and will be held in the General Account of Aetna at interest (see 4.01). The beneficiary may later tell Aetna to: (a) Pay a portion or all of the sum held by Aetna; or (b) Apply a portion or all of the sum held by Aetna to any Annuity Option below. If this Contract is subject to Code Section 401(a)(9), and the beneficiary elects that the full sum paid upon death is to be held under this Option, the beneficiary, if a spouse, must elect (a) or (b) above within 5 years after the death of the Annuitant. If the beneficiary is not a spouse, the beneficiary must tell Aetna to pay the full sum within 5 years after the death of the Annuitant. Option 2 -- Payments for a Stated Period of Time -- An Annuity will be paid for the number of years chosen. The number of years must be at least 3 and not more than 30. If payments for this Option are made under a Variable Annuity, the present value of any remaining payments may be withdrawn at any time. If a withdrawal is requested within 3 years after the start of payments, it will be treated as a surrender (see Part V). Option 3 -- Life Income -- An Annuity will be paid for the life of the Annuitant. If also chosen, Aetna will guarantee payments for 60, 120, 180, or 240 months. Option 4 -- Life Income for Two Payees -- An Annuity will be paid during the lives of the Annuitant and a second Annuitant. At the death of either, payments will continue to the survivor. When this Option is chosen, a choice must be made of: (a) 100% of the payment to continue to the survivor; (b) 66 2/3% of the payment to continue to the survivor; (c) 50% of the payment to continue to the survivor; (d) Payments for a minimum of 120 months, with 100% of the payment to continue to the survivor; or (e) 100% of the payment to continue to the survivor if the survivor is the Annuitant and 50% of the payment to continue to the survivor if the survivor is the second Annuitant. Other Options -- Aetna may make other options available as allowed by the laws of the state in which this Contract is delivered. IP-CDA-IB 17 (U) OPTION 2 PAYMENTS FOR A STATED PERIOD OF TIME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and Rates for a Variable Annuity with Assumed Net Return Rate of 3.5%
- -------------------------------------------------------------------------------- YEARS AMOUNT OF YEARS AMOUNT OF YEARS AMOUNT OF OF PAYMENTS PAYMENTS OF PAYMENTS PAYMENTS OF PAYMENTS PAYMENTS - -------------------------------------------------------------------------------- 3 $29.19 13 $7.94 22 $5.39 4 22.27 14 7.49 23 5.24 5 18.12 15 7.10 24 5.09 6 15.35 16 6.76 25 4.96 7 13.38 17 6.47 26 4.84 8 11.90 18 6.20 27 4.73 9 10.75 19 5.97 28 4.63 10 9.83 20 5.75 29 4.53 11 9.09 21 5.56 30 4.45 12 8.46 - --------------------------------------------------------------------------------
Rates for a Variable Annuity with Assumed Net Return Rate of 5%
- -------------------------------------------------------------------------------- YEARS AMOUNT OF YEARS AMOUNT OF YEARS AMOUNT OF OF PAYMENTS PAYMENTS OF PAYMENTS PAYMENTS OF PAYMENTS PAYMENTS - -------------------------------------------------------------------------------- 3 $29.80 13 $8.64 22 $6.17 4 22.89 14 8.20 23 6.02 5 18.74 15 7.82 24 5.88 6 15.99 16 7.49 25 5.76 7 14.02 17 7.20 26 5.65 8 12.56 18 6.94 27 5.54 9 11.42 19 6.71 28 5.45 10 10.51 20 6.51 29 5.36 11 9.77 21 6.33 30 5.28 12 9.16 - --------------------------------------------------------------------------------
IP-CDA-IB 18 (U) OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5%; and Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
- -------------------------------------------------------------------------------- AGE OF ANNUITANT NONE 60 120 180 240 - -------------------------------------------------------------------------------- 50 $4.34 $4.34 $4.31 $4.27 $4.22 51 4.41 4.40 4.38 4.33 4.27 52 4.48 4.47 4.45 4.40 4.32 53 4.56 4.55 4.52 4.46 4.38 54 4.64 4.63 4.59 4.53 4.44 55 4.72 4.71 4.67 4.60 4.50 56 4.81 4.80 4.75 4.67 4.56 57 4.91 4.89 4.84 4.75 4.62 58 5.01 4.99 4.93 4.83 4.69 59 5.12 5.10 5.03 4.92 4.75 60 5.23 5.21 5.13 5.00 4.82 61 5.36 5.33 5.24 5.09 4.88 62 5.49 5.45 5.35 5.19 4.95 63 5.63 5.59 5.47 5.28 5.02 64 5.78 5.73 5.60 5.38 5.08 65 5.94 5.89 5.73 5.48 5.15 66 6.11 6.05 5.87 5.58 5.21 67 6.29 6.22 6.02 5.69 5.27 68 6.49 6.41 6.17 5.79 5.33 69 6.70 6.60 6.33 5.90 5.38 70 6.92 6.81 6.49 6.00 5.43 71 7.17 7.04 6.66 6.10 5.48 72 7.43 7.27 6.84 6.20 5.52 73 7.71 7.53 7.02 6.30 5.55 74 8.02 7.80 7.20 6.39 5.59 75 8.35 8.08 7.38 6.48 5.62 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IP-CDA-IB 19 (U) OPTION 3 LIFE INCOME AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Variable Annuity with Assumed Net Return Rate of 5.0% PAYMENTS GUARANTEED FOR A STATED PERIOD OF MONTHS
- -------------------------------------------------------------------------------- AGE OF ANNUITANT NONE 60 120 180 240 - -------------------------------------------------------------------------------- 50 $5.26 $5.25 $5.22 $5.17 $5.11 51 5.33 5.32 5.28 5.23 5.15 52 5.40 5.38 5.34 5.29 5.20 53 5.47 5.45 5.41 5.35 5.26 54 5.54 5.53 5.48 5.41 5.31 55 5.63 5.61 5.56 5.47 5.36 56 5.71 5.69 5.63 5.54 5.42 57 5.80 5.78 5.72 5.61 5.47 58 5.90 5.88 5.81 5.69 5.53 59 6.01 5.98 5.90 5.77 5.59 60 6.12 6.09 6.00 5.85 5.65 61 6.24 6.21 6.10 5.93 5.71 62 6.37 6.33 6.21 6.02 5.77 63 6.51 6.46 6.33 6.11 5.83 64 6.66 6.60 6.45 6.20 5.89 65 6.82 6.75 6.57 6.30 5.95 66 6.99 6.91 6.71 6.39 6.01 67 7.17 7.08 6.85 6.49 6.06 68 7.36 7.27 6.99 6.59 6.12 69 7.57 7.46 7.15 6.69 6.17 70 7.80 7.67 7.30 6.78 6.21 71 8.05 7.89 7.47 6.88 6.25 72 8.31 8.13 7.64 6.97 6.29 73 8.59 8.38 7.81 7.06 6.33 74 8.90 8.64 7.99 7.15 6.36 75 9.23 8.93 8.16 7.23 6.38 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IP-CDA-IB 20 (U) OPTION 4 LIFE INCOME FOR TWO PAYEES JOINT AND LAST SURVIVOR ANNUITY 100% TO THE SURVIVOR - NO MINIMUM PERIOD AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5% and Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 - -------------------------------------------------------------------------------- 45 $3.69 $3.80 $3.81 $3.84 $3.87 $3.90 $3.91 $3.92 $3.92 50 3.75 3.89 3.97 4.04 4.09 4.13 4.15 4.17 4.18 55 3.81 3.97 4.16 4.27 4.35 4.42 4.47 4.50 4.51 60 3.84 4.04 4.27 4.51 4.66 4.78 4.86 4.92 4.95 65 3.87 4.09 4.35 4.66 4.99 5.19 5.35 5.46 5.53 70 3.90 4.13 4.42 4.78 5.19 5.67 5.95 6.17 6.31 75 3.91 4.15 4.47 4.86 5.35 5.95 6.64 7.04 7.34 80 3.92 4.17 4.50 4.92 5.46 6.17 7.04 8.04 8.63 85 3.92 4.18 4.51 4.95 5.53 6.31 7.34 8.63 10.05 - --------------------------------------------------------------------------------
Rates for a Variable Annuity with Assumed Net Return Rate of 5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 - -------------------------------------------------------------------------------- 45 $4.63 $4.68 $4.73 $4.77 $4.80 $4.82 $4.84 $4.85 $4.86 50 4.68 4.80 4.88 4.95 5.00 5.04 5.06 5.08 5.10 55 4.73 4.88 5.04 5.15 5.24 5.30 5.35 5.39 5.41 60 4.77 4.95 5.15 5.37 5.52 5.63 5.72 5.79 5.83 65 4.80 5.00 5.24 5.52 5.83 6.04 6.20 6.31 6.39 70 4.82 5.04 5.30 5.63 6.04 6.49 6.77 6.99 7.15 75 4.84 5.06 5.35 5.72 6.20 6.77 7.45 7.86 8.16 80 4.85 5.08 5.39 5.79 6.31 6.99 7.86 8.84 9.43 85 4.86 5.10 5.41 5.83 6.39 7.15 8.16 9.43 10.86 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IP-CDA-IB 21 (U) OPTION 4 LIFE INCOME FOR TWO PAYEES JOINT AND LAST SURVIVOR ANNUITY 66 2/3% TO THE SURVIVOR - NO MINIMUM PERIOD AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5%; and Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 45 $3.94 $4.05 $4.18 $4.32 $4.48 $4.66 $4.84 $5.02 $5.19 50 4.05 4.20 4.35 4.51 4.69 4.89 5.09 5.30 5.49 55 4.18 4.35 4.54 4.73 4.95 5.18 5.42 5.65 5.87 60 4.32 4.51 4.73 4.99 5.25 5.53 5.82 6.11 6.37 65 4.48 4.69 4.95 5.25 5.61 5.97 6.33 6.69 7.02 70 4.66 4.89 5.18 5.53 5.97 6.49 6.96 7.43 7.88 75 4.84 5.09 5.42 5.82 6.33 6.96 7.73 8.39 9.02 80 5.02 5.30 5.65 6.11 6.69 7.43 8.39 9.54 10.46 85 5.19 5.49 5.87 6.37 7.02 7.88 9.02 10.46 12.15 - --------------------------------------------------------------------------------
Rates for a Variable Annuity Net Return Rate of 5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 45 $4.87 $4.99 $5.12 $5.27 $5.44 $5.64 $5.86 $6.09 $6.30 50 4.99 5.12 5.26 5.43 5.63 5.85 6.09 6.33 6.57 55 5.12 5.26 5.44 5.63 5.85 6.11 6.38 6.65 6.92 60 5.27 5.43 5.63 5.87 6.14 6.44 6.75 7.07 7.38 65 5.44 5.63 5.85 6.14 6.49 6.84 7.23 7.62 8.00 70 5.64 5.85 6.11 6.44 6.84 7.35 7.84 8.34 8.83 75 5.86 6.09 6.38 6.75 7.23 7.84 8.60 9.28 9.93 80 6.09 6.33 6.65 7.07 7.62 8.34 9.28 10.42 11.35 85 6.30 6.57 6.92 7.38 8.00 8.83 9.93 11.35 13.04 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IP-CDA-IB 22 (U) OPTION 4 LIFE INCOME FOR TWO PAYEES JOINT AND LAST SURVIVOR ANNUITY 50% TO THE SURVIVOR - NO MINIMUM PERIOD AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5%; and Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 45 $4.07 $4.22 $4.40 $4.61 $4.87 $5.17 $5.49 $5.84 $6.18 50 4.22 4.37 4.56 4.79 5.06 5.39 5.75 6.13 6.51 55 4.40 4.56 4.76 5.00 5.31 5.66 6.06 6.49 6.91 60 4.61 4.79 5.00 5.27 5.61 6.01 6.46 6.95 7.43 65 4.87 5.06 5.31 5.61 5.99 6.46 6.96 7.54 8.11 70 5.17 5.39 5.66 6.01 6.44 6.99 7.61 8.29 9.00 75 5.49 5.75 6.06 6.46 6.96 7.61 8.43 9.29 10.17 80 5.84 6.13 6.49 6.95 7.54 8.29 9.29 10.54 11.71 85 6.18 6.51 6.91 7.43 8.11 9.00 10.17 11.71 13.57 - --------------------------------------------------------------------------------
Rates for a Variable Annuity Net Return Rate of 5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 45 $5.01 $5.15 $5.33 $5.56 $5.83 $6.17 $6.55 $6.98 $7.40 50 5.15 5.29 5.48 5.71 6.01 6.36 6.78 7.23 7.68 55 5.33 5.48 5.66 5.91 6.23 6.61 7.05 7.54 8.05 60 5.56 5.71 5.91 6.16 6.51 6.93 7.42 7.96 8.53 65 5.83 6.01 6.23 6.51 6.87 7.34 7.89 8.51 9.16 70 6.17 6.36 6.61 6.93 7.34 7.87 8.51 9.23 10.00 75 6.55 6.78 7.05 7.42 7.89 8.51 9.33 10.20 11.14 80 6.98 7.23 7.54 7.96 8.51 9.23 10.20 11.44 12.64 85 7.40 7.68 8.05 8.53 9.16 10.00 11.14 12.64 14.51 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IP-CDA-IB 23 (U) OPTION 4 LIFE INCOME FOR TWO PAYEES JOINT AND LAST SURVIVOR ANNUITY 100% TO THE SURVIVOR - 120 MONTHS MINIMUM PERIOD AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5%; and Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 45 $3.69 $3.75 $3.80 $3.84 $3.87 $3.89 $3.91 $3.91 $3.92 50 3.75 3.89 3.97 4.04 4.09 4.13 4.15 4.16 4.17 55 3.80 3.97 4.15 4.26 4.35 4.41 4.46 4.48 4.49 60 3.84 4.04 4.26 4.50 4.65 4.76 4.84 4.89 4.91 65 3.87 4.09 4.35 4.65 4.98 5.17 5.31 5.41 5.46 70 3.89 4.13 4.41 4.76 5.17 5.62 5.87 6.05 6.15 75 3.91 4.15 4.46 4.84 5.31 5.87 6.48 6.79 6.98 80 3.91 4.16 4.48 4.89 5.41 6.05 6.79 7.50 7.83 85 3.92 4.17 4.49 4.91 5.46 6.15 6.98 7.83 8.50 - --------------------------------------------------------------------------------
Rates for a Variable Annuity with Assumed Net Return Rate of 5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 45 $4.63 $4.68 $4.73 $4.77 $4.80 $4.82 $4.84 $4.85 $4.85 50 4.68 4.80 4.88 4.94 4.99 5.03 5.06 5.07 5.08 55 4.73 4.88 5.04 5.14 5.23 5.29 5.34 5.37 5.38 60 4.77 4.94 5.14 5.37 5.51 5.62 5.70 5.75 5.78 65 4.80 4.99 5.23 5.51 5.82 6.00 6.15 6.24 6.30 70 4.82 5.03 5.29 5.62 6.00 6.44 6.68 6.86 6.96 75 4.84 5.06 5.34 5.70 6.15 6.68 7.27 7.57 7.76 80 4.85 5.07 5.37 5.75 6.24 6.86 7.57 8.26 8.58 85 4.85 5.08 5.38 5.78 6.30 6.96 7.76 8.58 9.23 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IP-CDA-IB 24 (U) OPTION 4 LIFE INCOME FOR TWO PAYEES JOINT AND 1/2 CONTINGENT LIFE INCOME ANNUITY NO MINIMUM PERIOD AMOUNT OF FIRST MONTHLY PAYMENT FOR EACH $1,000 AFTER DEDUCTION OF ANY CHARGE FOR PREMIUM TAXES Rates for a Fixed Annuity with Guaranteed Interest Rate of 3.5%; and Rates for a Variable Annuity with Assumed Net Return Rate of 3.5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 45 $3.86 $3.89 $3.93 $3.94 $3.96 $3.97 $3.98 $3.98 $3.98 50 4.02 4.10 4.15 4.18 4.21 4.23 4.24 4.25 4.26 55 4.22 4.31 4.42 4.48 4.53 4.57 4.59 4.61 4.61 60 4.43 4.56 4.70 4.84 4.93 4.99 5.04 5.07 5.09 65 4.69 4.84 5.02 5.22 5.42 5.54 5.63 5.69 5.73 70 4.99 5.17 5.39 5.65 5.93 6.23 6.40 6.52 6.60 75 5.33 5.54 5.82 6.14 6.52 6.95 7.40 7.64 7.81 80 5.70 5.96 6.29 6.69 7.17 7.75 8.41 9.08 9.45 85 6.07 6.38 6.75 7.24 7.84 8.59 9.49 10.51 11.50 - --------------------------------------------------------------------------------
Rates for a Variable Annuity Net Return Rate of 5% AGE OF SECOND ANNUITANT
- -------------------------------------------------------------------------------- AGE OF ANNUITANT 45 50 55 60 65 70 75 80 85 45 $4.80 $4.83 $4.86 $4.88 $4.89 $4.90 $4.91 $4.92 $4.92 50 4.95 5.02 5.06 5.10 5.13 5.15 5.16 5.17 5.18 55 5.14 5.23 5.32 5.38 5.43 5.46 5.49 5.51 5.52 60 5.36 5.47 5.59 5.72 5.80 5.86 5.91 5.95 5.97 65 5.63 5.77 5.93 6.10 6.29 6.41 6.50 6.56 6.60 70 5.96 6.12 6.31 6.54 6.81 7.08 7.25 7.37 7.46 75 6.35 6.54 6.77 7.06 7.42 7.81 8.25 8.49 8.66 80 6.79 7.01 7.30 7.66 8.11 8.65 9.28 9.93 10.29 85 7.26 7.53 7.86 8.29 8.85 9.55 10.41 11.39 12.37 - --------------------------------------------------------------------------------
Rates are based on mortality from 1983 Table a. The rates do not differ by sex. Rates for ages not shown will be provided on request and will be computed on a basis consistent with the rates in the above tables. IP-CDA-IB 25 (U) The Special Provisions section which applies to this Contract is shown on the Contract cover under Type of Plan. The other section under Special Provisions does not apply. 5.01 PENSION OR PROFIT (a) Control of Contract: All rights in this SHARING PLAN; Contract rest with the Contract Holder, who QUALIFIED is entitled to all amounts held under this INDIVIDUAL DEFERRED Contract. The Contract Holder or authorized ANNUITY: designee of the Contract holder (as allowed by law), may make any choices allowed by this Contract. Choices made under this Contract must be in writing. Until receipt of such choices at its Home Office, Aetna may rely on any previous choices made. This Contract is not subject to the claims of any creditors except to the extent permitted by law. Any payment(s) made under this Contract to the Participant, or to the Contract Holder for a Qualified Individual Deferred Annuity, must be in compliance with the provisions of the Retirement Equity Act of 1984 (Act). Under a Qualified Individual Deferred Annuity Aetna will be responsible for ensuring the payment option is elected in compliance with the Act. The Participant may be the Contract Holder under a Pension or Profit Sharing Plan established solely for one individual. Under a Qualified Individual Deferred Annuity the Contract Holder may be a Participant who is separated from service under the Plan. The trustees of the Plan qualified under Code Section 401(a), are the applicant on behalf of the Contract Holder. This Contract is nontransferable and nonassignable except to Aetna, or pursuant to a "qualified domestic relations order" as set forth under the Act. (b) Designation of Beneficiary: The Contract Holder shall name the beneficiary on behalf of a Participant. However, if the Participant is married, on the date of death Aetna shall disregard the named beneficiary and shall treat the current spouse as sole beneficiary, if: (1) The Participant had not reached age 35; or (2) The Participant had reached age 35, and the appropriate preretirement survivor benefit waiver and spousal consent form(s) has not been submitted to Aetna. Any existing or future beneficiary designations not in conformance with this provision are null and void. (c) Maintenance Fee: The maintenance Fee, if any, (see 6.01) will be deducted from the Current Value on each Contract Year anniversary. Upon surrender of the entire Contract, the IP-CDA-IB 26 5.01 PENSION OR PROFIT annual Maintenance fee will be deducted. If SHARING PLAN; the surrender ofthe Contract occurs less than QUALIFIED DEFERRED 90 calendar days after the last Contract Year ANNUITY anniversary, Aetna will waive the Maintenance (CONT'D): Fee. (d) Estate Conservation Option (ECO) Distribution Option: ECO is a distribution option under which a portion of the Contract's Current Value will automatically be surrendered and distributed each year. An ECO payment will be calculated on the full Contract Value and will commence no earlier than the year the Participant attains age 70 1/2. All rights, provisions and charges described in the Contract continue to apply to the remaining Current Value in the Contract. (1) Amount of Distribution: Each year that ECO is in effect, Aetna will calculate and distribute an amount equal to the minimum required distribution under the Code. The annual distribution will be determined by dividing the Current Value, as of December 31 of the year prior to the payment year, by a life expectancy factor. As elected by the Contract Holder on behalf of the Participant, the factor is either the single life or joint life expectancy based on tables in Section 401(a)(9) of the Code or related regulations. If joint life expectancy is elected and the Participant or spouse dies, payments will be calculated based on the survivor's life expectancy. These calculations may be changed as necessary to comply with the Code minimum distribution rules. The joint life expectancy factor can only be elected based on the joint life expectancy of the Participant and his or her spouse. The spouse must be named as the beneficiary of any death benefits under the Contract while ECO is in effect. Also, Aetna assumes no responsibility for tax consequences resulting from failure to receive required minimum distributions on additional deposits made after each year's determination date, as described above. (2) Minimum Initial Current Value: At its discretion, Aetna may require a Minimum Initial Current Value for election of this option. If after election of this option, the Current Value is insufficient to make a scheduled ECO payment, Aetna will distribute the entire Contract balance. (3) Date of Distribution: Distribution will be made annually on the 15th of any month or such other date Aetna may designate or allow. The Contract Holder on behalf of the Participant, shall specify an initial distribution month, in a year that is not earlier than the calendar year in which the Participant attains age 70 1/2. IP-CDA-IB 27 5.01 PENSION OR PROFIT (4) Elections and Revocation: ECO may be SHARING PLAN; elected by the Contract Holder on behalf QUALIFIED INDIVIDUAL of the Participant, by submitting a DEFERRED ANNUITY completed and signed election form to (CONT'D) Aetna's Home Office. The Participant also must submit the appropriate joint and survivor annuity waiver and spousal consent form(s) to Aetna at its Home Office. Once elected, this option may be revoked by the Contract Holder by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. ECO may be elected only once. (5) Reservation of Rights: Aetna reserves the right to change the terms of ECO for future elections and discontinue the availability of this option after proper notification. Aetna also reserves the right to allow payments to be made more frequently than annually. (e) Systematic Withdrawal Option (SWO): A distribution option under which a portion of the Contract's Current Value will automatically be surrendered and distributed each year. A SWO payment will be calculated on the full Contract Current Value and will commence no earlier than the year the Participant attains age 70 1/2. All rights, provisions and charges described in the Contract continue to apply to the remaining Current Value in the Contract. (1) Amount of Distribution: The Contract Holder may elect one of the two payment methods described below on behalf of a Participant. - Specified Amount: Payments of a designated dollar amount which must be no greater than 10% of the initial Current Value. This amount will remain constant unless a higher amount is required under the Code minimum distribution rules. Each year that the Specified Amount is in effect, Aetna will calculate the minimum required distribution under the Code and distribute this amount if it is larger than the amount elected by the Participant. The life expectancy factor for this purpose will be the Participant's life expectancy at the time of the election of this option, and with each subsequent calendar year the factor will be reduced by one. The minimum required distribution will be determined by dividing the Current Value as of December 31 of the year prior to the payment year, by a life expectancy factor. - Specified Period: Payments which are made over a period of time. The Period must be at least 10 years, unless otherwise required by the Code minimum distribution rules. The maximum specified period will be limited by the Code minimum distribution rules. IP-CDA-IB 28 5.01 PENSION OR PROFIT SHARING The annual amount paid each year is PLAN; QUALIFIED INDIVIDUAL calculated by dividing the Current DEFERRED ANNUITY Value as of December 31 of the (CONT'D): prior year, by the number of payment years remaining. However, if the Code minimum distribution rules require payment of a greater amount, such higher amount will be paid. The life expectancy factor is either the single life or joint life expectancy, as elected by the Contract Holder on behalf of a Participant, based on tables in Section 401(a)(9) of the Code or related regulations. If the joint life expectancy is elected, upon either the Participant's or the spouse's death the minimum required distribution for the Specified Amount payment method will continue to be calculated in the same manner as described under Specified Amount. Payments upon the Participant's death will continue in the manner described above, unless the spouse elects an alternate payment mode. Any mode elected must provide payments to be made at least as rapidly as those made prior to the Participant's death. These calculations may be changed as necessary to comply with the Code minimum distribution rules. The joint life expectancy factor can only be elected based on the joint life expectancy of the Participant and his or her spouse. The spouse must be named as the beneficiary of any death benefits under the Contract while SWO is in effect. Aetna assumes no responsibility for tax consequences resulting from failure to receive required minimum distributions on additional deposits made after December 31 of the prior year. (2) Minimum Initial Current Value: At its discretion, Aetna may require a Minimum Initial Current Value for election of this option. If after election of this option the Current Value is insufficient to make a scheduled SWO payment, Aetna will distribute the entire Contract balance. (3) Date of Distribution: Distribution will be made annually on the 15th of any month or such other date Aetna may designate or allow. The Contract Holder on behalf of the Participant, shall specify an initial distribution month, not earlier than the calendar year in which the Participant attains age 70 1/2. (4) Election and Revocation: SWO may be elected by the Contract Holder on behalf of the Participant by submitting a completed and signed election form to Aetna's Home Office. The Participant must also submit the appropriate joint and survivor annuity waiver and spousal consent form(s) to Aetna' at its Home Office. IP-CDA-IB 29 5.01 PENSION OR PROFIT SHARING Once elected, this option may be revoked PLAN; QUALIFIED INDIVIDUAL by the Contract Holder by submitting a DEFERRED ANNUITY written request to Aetna at its Home (CONT'D): Office. Any revocation will apply only to amounts not yet paid. SWO may be elected only once. (5) Reservation of Rights: Aetna reserves the right to change the terms of SWO for future elections and discontinue the availability of this option after proper notification. Aetna also reserves the right to allow payments to be made more frequently than annually. (f) Sum Payable at Death (Before Annuity Payments Start): Aetna will pay the Current Value to the beneficiary when: (1) The Participant dies before Annuity payments start; and (2) The notice of death is received in Good Order by Aetna. The sum payable will be the Current Value on the date when the notice is received in Good Order at Aetna's Home Office. The amount paid from the Fixed Account will not be less than the Net Purchase Payment(s) allocated to the Fixed Account plus interest (less any prior transfers (see 3.10), surrenders, Maintenance Fees or amounts used to purchase Annuity Options). The beneficiary may choose to apply any sum under an Annuity Option (see Part IV), subject to any other terms and conditions of this Contract, or to receive a lump sum. If the beneficiary is the surviving spouse, the first Annuity payment or the lump sum payment may be deferred to a date not later than when the Participant would have attained age 70 1/2 or such later date as may be allowed under federal law or regulations. If the beneficiary is not the surviving spouse, all of the Current Value must either be applied to an Annuity Option within one year of the Participant's death or be paid to the beneficiary within 5 years of the Participant's death (see Part IV). In no event may payments to any beneficiary under an Annuity option extend beyond the life of the beneficiary or any period certain greater than the beneficiary's life expectancy. If no beneficiary exists, the payment will be made to the Participant's estate. (g) Surrender Value: After deduction of the Maintenance Fee, if any, Aetna will reduce the amount payable upon surrender of any portion of the Current Value by a Surrender Fee. The Surrender Fee will be in accordance with the Surrender Fee table in 6.02. Aetna is required by law to report any surrender to the Internal Revenue Service. Amounts are reported as fully taxable to the Participant, unless notified in writing by the Contract Holder of the cost basis from after tax contributions allowed by the Plan. IP-CDA-IB 30 5.01 PENSION OR PROFIT SHARING If the Participant is married, his or her PLAN; QUALIFIED INDIVIDUAL spouse must consent in writing to any DEFERRED ANNUITY request for a partial surrender. This (CONT'D): consent must be given the 90-day period before the partial surrender is to be made. A full surrender will be paid to a married Participant only as an Option 4(e) Life Income for Two Payees (see 4.08) unless the Participant's spouse consents in writing to one of the other Annuity Options or a lump sum payment. This consent must be given within the 90-day period ending on the date payment is to be made. At Aetna's discretion, a full surrender may be allowed without spousal consent if the Current Value is $3,500 or less. If a lump sum payment is elected in lieu of an Annuity Option, it must be paid no later than the April 1 of the calendar year following the year in which the Participant turns age 70 1/2 or such later date as may be allowed under federal law or regulations. The Contract Holder/Participant or beneficiary must notify Aetna in writing when a lump sum payment or Annuity payments are to commence. If the Contract Holder on behalf of the Participant does not request commencement of benefits as described above, Aetna will not be responsible for compliance with the Code Section 401 (a)(9) minimum distribution requirements and for any adverse tax consequences that may result. (h) Limitation on Contributions: The Purchase Payment(s) made to the Contract in any year for a Pension or Profit Sharing Plan cannot exceed the annual additions limitation of Code Section 415. In no event may the Purchase Payment(s) attributable to elective deferrals as defined in Code Section 401(k) exceed the annual limit in effect under Section 402(g) of the Code. Exception to the dollar maximum is a Rollover contribution as permitted by Code Section 402(a)(5) or 408(d)(3). Aetna will not be responsible for compliance with the above contribution limits. Aetna shall rely on the Contract Holder's fiduciary responsibility under the Employee Retirement Income Security Act of 1974 (ERISA) to ensure the proper administration of the Plan. (i) Minimum Distribution Requirements (1) General Requirement: Notwithstanding any provision of this Contract to the contrary, if this Contract is for a Qualified Individual Deferred Annuity, the distribution of the Contract Holder's Current Value shall be made in accordance with the minimum distribution requirements of section 401 (a)(9) of the Code and the regulations thereunder, including the incidental death benefit IP-CDA-IB 31 5.01 PENSION OR PROFIT SHARING provisions of section 1.401 (a)(9)-2 of PLAN; QUALIFIED INDIVIDUAL the proposed regulations, all of which DEFERRED ANNUITY are herein incorporated by reference. (CONT'D): (2) Minimum Payments to Contract Holder: The Contract Holder's entire Current Value in the Contract must be distributed, or begin to be distributed, by the Contract Holder's required beginning date, which is the April 1 following the calendar year in which the Contract Holder turns age 70 1/2. For each succeeding year, a distribution must be made on or before December 31. By the required beginning date, the Contract Holder may elect to have the balance under the Contract distributed in one of the following forms according to the terms of the Contract: (a) a lump sum payment; (b) equal or substantially equal payments over the life of the Contract Holder; (c) equal or substantially equal payments over the lives of the Contract Holder and his or her designated beneficiary; (d) equal or substantially equal payments over a specified period that may not be longer than the Contract Holder's life expectancy; (e) equal or substantially equal payments over a specified period that may not be longer than the joint life and last survivor expectancy of the Contract Holder and his or her designated beneficiary. (3) Minimum Death Benefits: If the Contract Holder dies before his or her entire Current Value is distributed, the entire remaining balance will be distributed as follows: (a) If the Contract Holder dies on or after the date distributions have begun under paragraph 2 above, the entire remaining balance must be distributed at least as rapidly as provided under paragraph 2. (b) If the Contract Holder dies before distributions have begun under paragraph 2 above, the entire remaining balance must be distributed as elected by the Contract Holder or, if the Contract Holder has not so elected, as elected by the beneficiary or beneficiaries, as follows: (i) by December 31st of the year containing the fifth anniversary of the Contract Holder's death; or IP-CDA-IB 32 5.01 PENSION OR PROFIT SHARING (ii) in equal or substantially PLAN; QUALIFIED INDIVIDUAL equal payments over the life DEFERRED ANNUITY or life expectancy of the (CONT'D): designated beneficiary or beneficiaries starting by December 31st of the year following the year of the Contract Holder's death. If, however, the beneficiary is the Contract Holder's surviving spouse, then this distribution is not required to begin before December 31st of the year in which the Contract Holder would have turned 70 1/2. (4) Life Expectancies: Unless an Annuity Option has been elected by the Contract Holder prior to the commencement of distributions in accordance with paragraph 2 above (or, if applicable, by the surviving spouse where the Contract Holder dies before distributions have commenced), or unless a Systematic Withdrawal Option has been elected by the Contract Holder, life expectancies of the Contract Holder or spouse beneficiary shall be recalculated annually for purposes of distributions under paragraphs 2 and 3 above. An election not to recalculate shall be irrevocable and shall apply to all subsequent years. The life expectancy of a non-spouse beneficiary shall not be recalculated. (j) THE FOLLOWING SECTION 5.02 OF THE SPECIAL PROVISIONS DOES NOT APPLY TO THIS CONTRACT. 5.02 INDIVIDUAL RETIREMENT (a) The preceding Section 5.01 of the Special ANNUITY (IRA): Provisions does not apply to this Contract. SIMPLIFIED EMPLOYEE PENSION PLAN: (b) Control of Contract: All nonforfeitable rights in this Contract rest with the Contract Holder, who is entitled to all amounts held under this Contract. The Contract Holder may make any choices allowed by this Contract. Choices made under this Contract must be in writing. Until receipt of such choices at its Home Office, Aetna may rely on any previous choices made. This Contract is nontransferable and nonassignable, except to Aetna, or pursuant to valid court order, provided Aetna is notified and served with respect to such order pursuant to applicable law. (c) Designation of Beneficiary: The Contract Holder shall name the beneficiary. The beneficiary may be changed at any time. Until receipt of a written request to change the beneficiary, Aetna may rely upon the last named beneficiary. (d) Maintenance Fee: The Maintenance Fee, if any, (see 6.01) will be deducted from the Current Value on each Contract Year anniversary. Upon surrender of the entire Contract, the annual Maintenance Fee will be deducted. If the surrender of the Contract occurs less than 90 calendar days after the last Contract Year anniversary, Aetna will waive the Maintenance Fee. IP-CDA-IB 33 5.02 INDIVIDUAL RETIREMENT (e) Estate Conservation Option (ECO) Distribution ANNUITY (IRA); Option: ECO is a distribution option under SIMPLIFIED EMPLOYEE which a portion of the Contract's Current PENSION PLAN Value will automatically be surrendered and (CONT'D): distributed each year. An ECO payment will be calculated on the Full Contract Value and will commence no earlier than the year the Participant attains age 70 1/2. All rights, provisions and charges described in the Contract continue to apply to the remaining Current Value in the Contract. (1) Amount of Distribution: Each year that ECO is in effect, Aetna will calculate and distribute an amount equal to the minimum required distribution under the Code. The annual distribution will be determined by dividing the Current Value, as of December 31 of the year prior to the payment year, by a life expectancy factor. As elected by the Contract Holder, the factor is either the single life or joint life expectancy based on tables in Section 401(a)(9) of the Code or related regulations. If joint life expectancy is elected, the payments upon death will be calculated based on the survivor's life expectancy. If there is no survivor, the Current Value will be paid in a lump sum to the survivor's estate. These calculations may be changed as necessary to comply with the Code minimum distribution rules. The joint life expectancy factor can only be elected based on the joint life expectancy of the Contract Holder and his or her spouse. The spouse must be named as the beneficiary of any death benefits while ECO is in effect. Also, Aetna assumes no responsibility for tax consequences resulting from failure to receive required minimum distributions on additional deposits made after each year's determination date, as described above. (2) Minimum Initial Current Value: At its discretion, Aetna may require a Minimum Initial Current Value for election of this option. If after election of this option, the Current Value is insufficient to make a scheduled ECO payment, Aetna will distribute the entire Contract balance. (3) Date of Distribution: Distribution will be made annually on the 15th of any month or such other date Aetna may designate or allow. The Contract Holder shall specify an initial distribution month, in a year that is not earlier than the calendar year in which the Contract Holder attains age 70 1/2. (4) Elections and Revocation: ECO may be elected by the Contract Holder by submitting a completed and signed election form to Aetna's Home Office. IP-CDA-IB 34 5.02 INDIVIDUAL RETIREMENT Once elected, this option may be revoked ANNUITY (IRA); by the Contract Holder by submitting a SIMPLIFIED EMPLOYEE written request to Aetna at its Home PENSION PLAN Office. Any revocation will apply only (CONT'D): to amounts not yet paid. ECO may be elected only once. (5) Reservation of Rights: Aetna reserves the right to change the terms of ECO for future elections and discontinue the availability of this option after proper notification. Aetna also reserves the right to allow payments to be made more frequently than annually. (f) Systematic Withdrawal Option (SWO): A distribution option under which a portion of the Contract's Current Value will automatically be surrendered and distributed each year. A SWO payment will be calculated on the Full Contract Current Value and will commence no earlier than the year the Contract Holder attains age 70 1/2. All rights, provisions and charges described in the Contract continue to apply to the remaining Current Value in the Contract. (1) Amount of Distribution: The Contract Holder may elect one of the two payment methods described below. - Specified Amount: Payments of a designated dollar amount which must be no greater than 10% of the initial Current Value. This amount will remain constant unless a higher amount is required under the Code minimum distribution rules. Each year that the Specified Amount is in effect, Aetna will calculate the minimum required distribution under the Code and distribute this amount if it is larger than the amount elected by the Contract Holder. The life expectancy factor for this purpose will be the Contract Holder's life expectancy for the initial distribution year and with each subsequent calendar year, the factor will be reduced by one. The minimum required distribution will be determined by dividing the Current Value as of December 31 of the year prior to the payment year, by a life expectancy factor. Specified Period: Payments which are made over a period of time. The Period must be at least 10 years unless otherwise required by the Code minimum distribution rules. The maximum specified period will be limited by the Code minimum distribution rules. The annual amount paid each year is calculated by dividing the Current Value as of December 31 of the prior year, by the number of payment years remaining. However, if the Code minimum distribution rules require payment of a greater amount, such higher amount will be paid. IP-CDA-IB 35 5.02 INDIVIDUAL RETIREMENT The life expectancy factor is ANNUITY (IRA); either the single life or joint SIMPLIFIED EMPLOYEE life expectancy, as elected by the PENSION PLAN Contract Holder based on tables in (CONT'D): the Code or related regulations. If the joint life expectancy is elected, upon either the Contract Holder's or the spouse's death, the minimum required distribution for the Specified Amount payment method will continue to be calculated in the same manner as described under Specified Amount. These calculations may be changed as necessary to comply with the Code minimum distribution rules. The joint life expectancy factor can only be elected based on the joint life expectancy of the Contract Holder and his or her spouse. The spouse must be named as the beneficiary of any death benefits under the Contract while SWO is in effect. Upon death, payments will continue in the manner described above under Specified Amount and Specified Period, unless otherwise elected by the beneficiary. Any mode elected by the beneficiary, must provide payments to be made at least as rapidly as those made prior to the Contract Holder's death. Aetna assumes no responsibility for tax consequences resulting from failure to receive required minimum distributions on additional deposits made after December 31 of the prior year. (2) Minimum Initial Current Value: At its discretion, Aetna may require a Minimum Initial Current Value for election of this option. If after election of this option the Current Value is insufficient to make a scheduled SWO payment, Aetna will distribute the entire Contract balance. (3) Date of Distribution: Distribution will be made annually on the 15th of any month or such other date Aetna may designate or allow. The Contract Holder shall specify an initial distribution month, not earlier than the calendar year in which the Contract Holder attains age 70 1/2. (4) Election and Revocation: SWO may be elected by the Contract Holder by submitting a completed and signed election form to Aetna's Home Office. Once elected, this option may be revoked by the Contract Holder by submitting a written request to Aetna at its Home Office. Any revocation will apply only to amounts not yet paid. SWO may be elected only once. IP-CDA-IB 36 5.02 INDIVIDUAL RETIREMENT (5) Reservation of Rights: Aetna reserves ANNUITY (IRA); the right to change the terms of SWO for SIMPLIFIED EMPLOYEE future elections and discontinue the PENSION PLAN availability of this option after proper (CONT'D): notification. Aetna also reserves the right to allow payments to be made more frequently than annually. (g) Sum Payable at Death (Before Annuity Payments Start): Aetna will pay the Current Value to the beneficiary when: (1) The Contract Holder dies before Annuity payments start; and (2) The notice of death is received in Good Order by Aetna. The sum payable will be the Current Value on the date when the notice is received in Good Order at Aetna's Home Office. The amount paid from the Fixed Account will not be less than the Net Purchase Payment(s) allocated to the Fixed Account plus interest (less any prior transfers (see 3.10), surrenders, Maintenance Fees, or amounts used to purchase Annuity Options). The beneficiary may choose to apply any sum under an Annuity Option (see Part IV), subject to any other terms and conditions of this Contract, or to receive a lump sum. If the beneficiary is the surviving spouse, the first Annuity payment or the lump sum payment may be deferred to a date not later than December 31 of the year in which the Contract Holder would have attained age 70 1/2 or such later date as may be allowed under federal law or regulations. Alternatively, the spouse may choose to treat this Contract as his or her own. If the beneficiary is not the surviving spouse, all of the Current Value must either be applied to an Annuity Option within one calendar year of the Contract Holder's death or be paid to the beneficiary within 5 calendar years of the Contract Holder's death (see Part IV). In no event may payments to any beneficiary under an Annuity Option extend beyond the life of the beneficiary or any period certain greater than the beneficiary's life expectancy. If no beneficiary exists, the payment will be made to the estate of the Contract Holder. (h) Surrender Value: After deduction of the Maintenance Fee, if any, Aetna will reduce the amount payable upon surrender of any portion of the Current Value by a Surrender Fee. The Surrender Fee will be in accordance with the Surrender Fee table in 6.02. The Fee on a total surrender of the Contract will not exceed 8.5% of the actual Purchase Payment(s) made to the Contract. Aetna is required by law to report any surrender to the Internal Revenue Service. Amounts are reported as fully taxable to the Contract Holder. Determination of cost basis from IP-CDA-IB 37 5.02 INDIVIDUAL RETIREMENT nondeductible contributions as permitted by ANNUITY (IRA); the Code shall be the responsibility of the PENSION PLAN Contract Holder. (CONT'D): If a lump sum payment is elected in lieu of an Annuity Option, it must be paid no later than the April 1 of the calendar year following the year in which the Contract Holder turns age 70 1/2 or such later date as may be allowed under federal law or regulations. The Contract Holder or beneficiary must notify Aetna in writing when a lump sum payment or Annuity payments are to commence. If the Contract Holder does not request commencement of benefits as described above, Aetna will not be responsible for compliance with the Code Section 401 (a)(9) minimum distribution requirements and for any adverse tax consequences that may result. (i) Limitation on Contributions: The Purchase Payment(s) must be in cash and the total of such contributions cannot exceed $2,000 for any individual for any taxable year. Exceptions to the dollar maximum are: (1) Rollover contribution as permitted by Code Sections 402(a)(5), 402(a)(7), 403(a)(4); and (2) An employer contribution made according to the terms of a Simplified Employee Pension Plan as described in Code Section 408(k). Contributions that exceed limitations may either be refunded to the Contract Holder or applied to the following calendar year's contribution, as permitted by the Code. Aetna assumes no responsibility for tax consequences that may result from excess contributions that are not refunded to the Contract Holder. (j) Reports: Aetna, as issuer of this Simplified Employee Pension or Individual Retirement Annuity Contract, will make any reports required by federal law. (k) Minimum Distribution Requirements (1) General Requirement: Notwithstanding any provision of this Contract to the contrary, the distribution of the Contract Holder's Current Value shall be made in accordance with the minimum distribution requirements of section 408 (a)(6) or section 408 (b)(3) of the Code and the regulations thereunder, including the incidental death benefit provisions of section 1.401 (a)(9)-2 of the proposed regulations, all of which are herein incorporated by reference. (2) Minimum Payments to Contract Holder: The Contract Holder's entire Current Value in the Contract must be distributed, or begin to be distributed, by the Contract Holder's required beginning date, which is the April 1 IP-CDA-IB 38 5.02 INDIVIDUAL RETIREMENT following the calendar year in which the ANNUITY (IRA); Contract Holder turns age 70 1/2. For SIMPLIFIED EMPLOYEE each succeeding year, a distribution PENSION PLAN must be made on or before December 31. (CONT'D): By the required beginning date, the Contract Holder may elect to have the balance under the Contract distributed in one of the following forms according to the terms of the Contract: (a) a lump sum payment; (b) equal or substantially equal payments over the life of the Contract Holder; (c) equal or substantially equal payments over the lives of the Contract Holder and his or her designated beneficiary; (d) equal or substantially equal payments over a specified period that may not be longer than the Contract Holder's life expectancy; (e) equal or substantially equal payments over a specified period that may not be longer than the joint life and last survivor expectancy of the Contract Holder and his or her designated beneficiary. (3) Minimum Death Benefits: If the Contract Holder dies before his or her entire Current Value is distributed, the entire remaining balance will be distributed as follows: (a) If the Contract Holder dies on or after the date distributions have begun under paragraph 2 above, the entire remaining balance must be distributed at least as rapidly as provided under paragraph 2. (b) If the Contract Holder dies before distributions have begun under paragraph 2 above, the entire remaining balance must be distributed as elected by the Contract Holder or, if the Contract Holder has not so elected, as elected by the beneficiary or beneficiaries, as follows: (i) by December 31st of the year containing the fifth anniversary of the Contract Holder's death; or (ii) in equal or substantially equal payments over the life or life expectancy of the designated beneficiary or beneficiaries starting by December 31st of the year following the year of the Contract Holder's death. If, however, the beneficiary is the Contract Holder's surviving spouse, then this distribution is not required to begin before December 31st of the year in which the Contract Holder would have turned 70 1/2. IP-CDA-IB 39 5.02 INDIVIDUAL RETIREMENT (4) Life Expectancies: Unless an Annuity ANNUITY (IRA); Option has been elected by the Contract SIMPLIFIED EMPLOYEE Holder prior to the commencement of PENSION PLAN distributions in accordance with (CONT'D): paragraph 2 above (or, if applicable, by the surviving spouse where the Contract Holder dies before distributions have commenced), or unless a Systematic Withdrawal Option has been elected by the Contract Holder, life expectancies of the Contract Holder or spouse beneficiary shall be recalculated annually for purposes of distributions under paragraphs 2 and 3 above. An election not to recalculate shall be irrevocable and shall apply to all subsequent years. The life expectancy of a non-spouse beneficiary shall not be recalculated. (5) Multiple IRAs: An individual may satisfy the minimum distribution requirements under sections 408 (a)(6) and 408 (b)(3) of the Code by receiving a distribution from one IRA that is equal to the amount required to satisfy the minimum distribution requirements for two or more IRAs. For this purpose, the Contract Holder of two or more IRAs may use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum distribution requirements described above. IP-CDA-IB 40 VI. FEE SCHEDULE PENSION OR PROFIT SHARING PLAN - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $30. 6.02 SURRENDER FEE: For each surrender, the Surrender Fee will be determined according to the number of completed Contract Years between the date the first Net Purchase Payment(s) is applied to the Contract and the date of surrender. The Surrender Fee will be determined as follows: COMPLETED CONTRACT YEARS SURRENDER FEE Less than 5 years 5% 5 or more but less than 7 4% 7 or more but less than 9 3% 9 or more but less than 10 2% 10 or more years 0% No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) Due to an election of a Distribution Option; or (d) As a transfer to another Pension/Profit Sharing or Individual Retirement Annuity Contract offered by Aetna Life Insurance and Annuity Company. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED Annual Purchase Payments of exactly $1,000 ACCOUNT: credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of each Contract Year. The Maintenance Fee and applicable Surrender Fee are deducted. IMPDP-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,010 $ 960 16 $ 22,043 $ 22,043 2 2,060 1,957 17 23,934 23,934 3 3,153 2,995 18 25,902 25,902 4 4,289 4,074 19 27,948 27,948 5 5,470 5,252 20 30,076 30,076 6 6,699 6,431 25 42,062 42,062 7 7,977 7,738 8 9,306 9,027 30 56,646 56,646 9 10,689 10,475 10 12,126 12,126 35 74,389 74,389 11 13,621 13,621 40 95,976 95,976 12 15,176 15,176 13 16,793 16,793 45 122,240 122,240 14 18,475 18,475 15 20,224 20,224 50 154,194 154,194 - -------------------------------------------------------------------------------------------------------------
IMPDP-IB 42 VI. FEE SCHEDULE PENSION OR PROFIT SHARING PLAN - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $30. 6.02 SURRENDER FEE: For each surrender, the Surrender Fee will be determined according to the number of completed Contract Years between the date the first Net Purchase Payment(s) is applied to the Contract and the date of surrender. The Fee on a total surrender of the Contract will not exceed 8.5% of the actual Purchase Payment(s) made to the Contract. The Surrender Fee will be determined as follows: COMPLETED CONTRACT YEARS SURRENDER FEE Less than 5 years 5% 5 or more but less than 7 4% 7 or more but less than 9 3% 9 or more but less than 10 2% 10 or more years 0% No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. (d) Due to an election of a Distribution Option; or (e) As a transfer to another Pension/Profit Sharing or Individual Retirement Annuity Contract offered by Aetna Life Insurance and Annuity Company. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED Annual Purchase Payments of exactly $1,000 ACCOUNT: credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of each Contract Year. The Maintenance Fee and applicable Surrender Fee are deducted. IMPDP-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,010 $ 960 16 $ 22,043 $ 22,043 2 2,060 1,957 17 23,934 23,934 3 3,153 2,995 18 25,902 25,902 4 4,289 4,074 19 27,948 27,948 5 5,470 5,252 20 30,076 30,076 6 6,699 6,431 25 42,062 42,062 7 7,977 7,738 8 9,306 9,027 30 56,646 56,646 9 10,689 10,475 10 12,126 12,126 35 74,389 74,389 11 13,621 13,621 40 95,976 95,976 12 15,176 15,176 13 16,793 16,793 45 122,240 122,240 14 18,475 18,475 15 20,224 20,224 50 154,194 154,194 - -------------------------------------------------------------------------------------------------------------
IMPDP-IB 42 VI. FEE SCHEDULE QUALIFIED INDIVIDUAL DEFERRED ANNUITY - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $0 if the initial Purchase Payment is $10,000 or greater. The Maintenance Fee will be $25 if the initial Purchase Payment is less than $10,000. 6.02 SURRENDER FEE: For each surrender, within the first Contract Year the Surrender Fee will be 1% (one percent) of the Current Value. For all subsequent years, the Surrender Fee will be 0% (zero percent). No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED one Purchase Payment of exactly $1,500 credited ACCOUNT: to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,500 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of the first Contract Year. The Maintenance Fee and applicable first year Surrender Fee are deducted. ISQIDA-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,500 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,535 $ 1,520 16 $ 2,264 $ 2,264 2 1,571 1,571 17 2,329 2,329 3 1,609 1,609 18 2,398 2,398 4 1,649 1,649 19 2,468 2,468 5 1,690 1,690 20 2,542 2,542 6 1,732 1,732 25 2,958 2,958 7 1,776 1,776 8 1,822 1,822 30 3,463 3,463 9 1,870 1,870 10 1,920 1,920 35 4,078 4,078 11 1,972 1,972 40 4,826 4,826 12 2,026 2,026 13 2,082 2,082 45 5,736 5,736 14 2,140 2,140 15 2,201 2,201 50 6,843 6,843 - -------------------------------------------------------------------------------------------------------------
ISQIDA-IB 42 VI. FEE SCHEDULE PENSION OR PROFIT SHARING PLAN AND QUALIFIED INDIVIDUAL DEFERRED ANNUITY - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $0 if the initial Purchase Payment is $10,000 or greater. The Maintenance Fee will be $25 if the initial Purchase Payment is less than $10,000. 6.02 SURRENDER FEE: For each surrender, the Surrender Fee will be determined according to the number of completed Contract Years between the date the first Net Purchase Payment(s) is applied to the Contract or if applicable to any Aetna Predecessor Contract, and the date of surrender. The Surrender Fee will be determined as follows: COMPLETED CONTRACT YEARS SURRENDER FEE Less than 5 years 5% 5 or more but less than 6 4% 6 or more but less than 7 3% 7 or more but less than 8 2% 8 or more but less than 9 1% 9 or more years 0% No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED one Purchase Payment of exactly $1,500 credited ACCOUNT: to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,500 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of the first Contract Year. The Maintenance Fee and applicable Surrender Fee are deducted. ISPDQIDA-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,500 OF NET PURCHASE PAYMENT ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,535 $ 1,458 16 $ 2,264 $ 2,264 2 1,571 1,493 17 2,329 2,329 3 1,609 1,529 18 2,398 2,398 4 1,649 1,566 19 2,468 2,468 5 1,690 1,622 20 2,542 2,542 6 1,732 1,680 25 2,958 2,958 7 1,776 1,741 8 1,822 1,804 30 3,463 3,463 9 1,870 1,870 10 1,920 1,920 35 4,078 4,078 11 1,972 1,972 40 4,826 4,826 12 2,026 2,026 13 2,082 2,082 45 5,736 5,736 14 2,140 2,140 15 2,201 2,201 50 6,843 6,843 - -------------------------------------------------------------------------------------------------------------
ISPDQIDA-IB 42 VI. FEE SCHEDULE INDIVIDUAL RETIREMENT ANNUITY (IRA) AND SIMPLIFIED EMPLOYEE PENSION PLAN - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $20. 6.02 SURRENDER FEE: For each surrender, the Surrender Fee will be determined according to the number of completed Contract Years between the date the first Net Purchase Payment(s) is applied to the Contract and the date of surrender. The Surrender Fee will be determined as follows: COMPLETED CONTRACT YEARS SURRENDER FEE Less than 5 years 5% 5 or more but less than 7 4% 7 or more but less than 9 3% 9 or more but less than 10 2% 10 or more years 0% No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED Annual Purchase Payments of exactly $1,000 ACCOUNT: credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of each Contract Year. The Maintenance Fee and applicable Surrender Fee are deducted. IMPDSEP-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,020 $ 969 16 $ 22,261 $ 22,261 2 2,081 1,977 17 24,171 24,171 3 3,184 3,025 18 26,158 26,158 4 4,331 4,115 19 28,224 28,224 5 5,524 5,304 20 30,373 30,373 6 6,765 6,495 25 42,478 42,478 7 8,056 7,815 8 9,398 9,117 30 57,206 57,206 9 10,794 10,579 10 12,246 12,246 35 75,124 75,124 11 13,756 13,756 40 96,925 96,925 12 15,326 15,326 13 16,959 16,959 45 123,448 123,448 14 18,658 18,658 15 20,424 20,424 50 155,719 155,719 - -------------------------------------------------------------------------------------------------------------
IMPDSEP-IB 42 VI. FEE SCHEDULE INDIVIDUAL RETIREMENT ANNUITY (IRA) AND SIMPLIFIED EMPLOYEE PENSION PLAN - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $0 if the initial Purchase Payment is $10,000 or greater. The Maintenance Fee will be $25 if the initial Purchase Payment is less than $10,000. 6.02 SURRENDER FEE: For each surrender, the Surrender Fee will be determined according to the number of completed Contract Years between the date the first Net Purchase Payment(s) is applied to the Contract and the date of surrender. The Surrender Fee will be determined as follows: COMPLETED CONTRACT YEARS SURRENDER FEE Less than 2 years 6% 2 or more but less than 3 5% 3 or more but less than 4 4% 4 or more but less than 5 3% 5 or more but less than 6 2% 6 or more but less than 7 1% 7 or more years 0% No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED Annual Purchase Payments of exactly $1,000 ACCOUNT: credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of each Contract Year. The Maintenance Fee and applicable Surrender Fee are deducted. IMSIRA-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,015 $ 954 16 $ 22,152 $ 22,152 2 2,071 1,967 17 24,053 24,053 3 3,168 3,042 18 26,030 26,030 4 4,310 4,181 19 28,086 28,086 5 5,498 5,388 20 30,225 30,225 6 6,732 6,665 25 42,271 42,271 7 8,017 8,017 8 9,352 9,352 30 56,926 56,926 9 10,742 10,742 10 12,186 12,186 35 74,757 74,757 11 13,689 13,689 40 96,451 96,451 12 15,251 15,251 13 16,876 16,876 45 122,845 122,845 14 18,566 18,566 15 20,324 20,324 50 154,957 154,957 - -------------------------------------------------------------------------------------------------------------
IMSIRA-IB 42 VI. FEE SCHEDULE INDIVIDUAL RETIREMENT ANNUITY (IRA) - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $0. 6.02 SURRENDER FEE: For each surrender, the Surrender Fee will be determined according to the number of completed Contract Years between the date the first Net Purchase Payment(s) is applied to the Contract and the date of surrender. The Surrender Fee will be determined as follows: COMPLETED CONTRACT YEARS SURRENDER FEE Less than 2 years 6% 2 or more but less than 3 5% 3 or more but less than 4 4% 4 or more but less than 5 3% 5 or more but less than 6 2% 6 or more but less than 7 1% 7 or more years 0% No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED Annual Purchase Payments of exactly $1,000 ACCOUNT: credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of each Contract Year. The applicable Surrender Fee is deducted. IMSEIRA-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,040 $ 978 16 $ 22,698 $ 22,698 2 2,122 2,016 17 24,645 24,645 3 3,246 3,117 18 26,671 26,671 4 4,416 4,284 19 28,778 28,778 5 5,633 5,520 20 30,969 30,969 6 6,898 6,829 25 43,312 43,312 7 8,214 8,214 8 9,583 9,583 30 58,328 58,328 9 11,006 11,006 10 12,486 12,486 35 76,598 76,598 11 14,026 14,026 40 98,827 98,827 12 15,627 15,627 13 17,292 17,292 45 125,871 125,871 14 19,024 19,024 15 20,825 20,825 50 158,774 158,774 - -------------------------------------------------------------------------------------------------------------
IMSEIRA-IB 42 VI. FEE SCHEDULE INDIVIDUAL RETIREMENT ANNUITY (IRA) - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $0 if the initial Purchase Payment is $10,000 or greater. The Maintenance Fee will be $25 if the initial Purchase Payment is less than $10,000. 6.02 SURRENDER FEE: For each surrender, within the first Contract Year the Surrender Fee will be 1% (one percent) of the Current Value. For all subsequent years, the Surrender Fee will be 0% (zero percent). No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months; (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED Annual Purchase Payments of exactly $1,000 ACCOUNT: credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of each Contract Year. The Maintenance Fee and applicable Surrender Fee are deducted. IROIRA-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,015 $ 1,005 16 $ 22,152 $ 22,152 2 2,071 2,071 17 24,053 24,053 3 3,168 3,168 18 26,030 26,030 4 4,310 4,310 19 28,086 28,086 5 5,498 5,498 20 30,225 30,225 6 6,732 6,732 25 42,271 42,271 7 8,017 8,017 8 9,352 9,352 30 56,926 56,926 9 10,742 10,742 10 12,186 12,186 35 74,757 74,757 11 13,689 13,689 40 96,451 96,451 12 15,251 15,251 13 16,876 16,876 45 122,845 122,845 14 18,566 18,566 15 20,324 20,324 50 154,957 154,957 - -------------------------------------------------------------------------------------------------------------
IROIRA-IB 42 VI. FEE SCHEDULE INDIVIDUAL RETIREMENT ANNUITY (IRA) - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $0. 6.02 SURRENDER FEE: For each surrender, within the first Contract Year the Surrender Fee will be 1% (one percent) of the Current Value. For all subsequent years, the Surrender Fee will be 0% (zero percent). No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months; (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED Annual Purchase Payments of exactly $1,000 ACCOUNT: credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of each Contract Year. The applicable first year Surrender Fee is deducted. IROEIRA-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,040 $ 1,030 16 $ 22,698 $ 22,698 2 2,122 2,122 17 24,645 24,645 3 3,246 3,246 18 26,671 26,671 4 4,416 4,416 19 28,778 28,778 5 5,633 5,633 20 30,969 30,969 6 6,898 6,898 25 43,312 43,312 7 8,214 8,214 8 9,583 9,583 30 58,328 58,328 9 11,006 11,006 10 12,486 12,486 35 76,598 76,598 11 14,026 14,026 40 98,827 98,827 12 15,627 15,627 13 17,292 17,292 45 125,871 125,871 14 19,024 19,024 15 20,825 20,825 50 158,774 158,774 - -------------------------------------------------------------------------------------------------------------
IROEIRA-IB 42 VI. FEE SCHEDULE INDIVIDUAL RETIREMENT ANNUITY (IRA) AND SIMPLIFIED EMPLOYEE PENSION PLAN - -------------------------------------------------------------------------------- 6.01 MAINTENANCE FEE: The Maintenance Fee will be $0 if the initial Purchase Payment is $10,000 or greater. The Maintenance Fee will be $25 if the initial Purchase Payment is less than $10,000. 6.02 SURRENDER FEE: For each surrender, the Surrender Fee will be determined according to the number of completed Contract Years between the date the first Net Purchase Payment(s) is applied to any predecessor Contract and the date of surrender. The Surrender Fee will be determined as follows: COMPLETED CONTRACT YEARS SURRENDER FEE Less than 5 years 5% 5 or more but less than 6 4% 6 or more but less than 7 3% 7 or more but less than 8 2% 8 or more but less than 9 1% 9 or more years 0% No Surrender Fee is deducted from any portion of the Current Value which is paid: (a) At the death of the Annuitant before Annuity payments start; (b) As a premium for an Annuity under this Contract; (c) For a full surrender where the Current Value is equal to $2,500 or less and no surrenders have been taken from the Contract within the prior 12 months. (d) Due to an election of a Distribution Option; or (e) In an amount equal to or less than 10% of the Current Value, as part of the first partial surrender request in a calendar year to a Contract Holder who is at least age 59 1/2. The Current Value is calculated as of the date the partial surrender request is received in Good Order at Aetna's Home Office. When a Distribution Option is elected, this provision includes any amounts paid under that election. This provision does not apply to full surrender requests. 6.03 TABLE OF MINIMUM The values in the following Table only apply to VALUES -- FIXED Annual Purchase Payments of exactly $1,000 ACCOUNT: credited to the Fixed Account. Values would be different for other Purchase Payment amounts, if partial surrenders are made, or if Aetna adds interest at a rate greater than the Guaranteed Interest Rate -- Fixed Account (see 3.02). The Surrender Value assumes that a Purchase Payment of exactly $1,000 is credited to the Fixed Account at the Guaranteed Interest Rate at the beginning of each Contract Year. The Maintenance Fee and applicable Surrender Fee are deducted. IROPIRA-IB 41 TABLE OF MINIMUM FIXED ACCOUNT VALUES PER $1,000 OF NET PURCHASE PAYMENTS ALLOCATED TO THE FIXED ACCOUNT
- ------------------------------------------------------------------------------------------------------------- END OF MINIMUM MINIMUM END OF MINIMUM MINIMUM YEAR CURRENT VALUE SURRENDER VALUE YEAR CURRENT VALUE SURRENDER VALUE - ------------------------------------------------------------------------------------------------------------- 1 $ 1,015 $ 954 16 $ 22,152 $ 22,152 2 2,071 1,967 17 24,053 24,053 3 3,168 3,010 18 26,030 26,030 4 4,310 4,095 19 28,086 28,086 5 5,498 5,278 20 30,225 30,225 6 6,732 6,530 25 42,271 42,271 7 8,017 7,856 8 9,352 9,259 30 56,926 56,926 9 10,742 10,742 10 12,186 12,186 35 74,757 74,757 11 13,689 13,689 40 96,451 96,451 12 15,251 15,251 13 16,876 16,876 45 122,845 122,845 14 18,566 18,566 15 20,324 20,324 50 154,957 154,957 - -------------------------------------------------------------------------------------------------------------
IROPIRA-IB 42 [LOGO] AETNA LIFE INSURANCE AND ANNUITY COMPANY HOME OFFICE: 151 Farmington Avenue Hartford, Connecticut 06158 (800)531-4547 Individual Variable, Fixed or Combination Contract Nonparticipating ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT. IP-CDA-IB EX-10.1 3 EXHIBIT 10.1 CONSENT OF INDEPENDENT AUDITORS The Board of Directors of Aetna Life Insurance and Annuity Company and Contract Owners of Aetna Variable Annuity Account C: We consent to the use of our reports dated February 6, 1996 and February 16, 1996 included herein and to the references to our Firm under the captions "Condensed Financial Information" in the Prospectus and "Independent Auditors" in the Statement of Additional Information. Our report dated February 6, 1996 refers to a change in 1993 in the Company's method of accounting for certain investments in debt and equity securities. KPMG Peat Marwick LLP Hartford, Connecticut April 12, 1996 EX-10.2 4 EX-10.2 Exhibit 10.2 Susan E. Bryant Counsel Law & Regulatory Affairs, RE4C 151 Farmington Avenue Hartford, CT 06156 (860) 273-7834 Fax: (860) 273-8340 April 12, 1996 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Attention: Filing Desk Re: Variable Annuity Account C of Aetna Life Insurance and Annuity Company Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 File Nos. 33-75988 and 811-2513 ------------------------------- Gentlemen: As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I hereby consent to the use of my opinion dated February 28, 1996 (incorporated herein by reference to the 24f-2 Notice for the fiscal year ended December 31, 1995 filed on behalf of Variable Annuity Account C of Aetna Life Insurance and Annuity Company on February 29, 1996) as an exhibit to this Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 (File No. 33-75988) and to my being named under the caption "Legal Matters" therein. Very truly yours, /s/ Susan E. Bryant Susan E. Bryant Counsel Aetna Life Insurance and Annuity Company EX-27 5 FINANCIAL DATA SCHEDULE
6 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 6,038,034,475 6,632,117,659 0 0 0 6,632,117,659 0 0 0 6,632,117,659 0 0 0 0 0 0 0 0 0 6,632,117,659 730,430,612 0 0 (71,090,542) 659,340,070 160,673,967 520,603,951 1,340,617,988 0 0 0 0 0 0 0 1,769,805,868 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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