497 1 a2077896z497.txt 497 PROSPECTUS - MAY 1, 2002 -------------------------------------------------------------------------------- THE CONTRACTS. The contracts described in this prospectus are group deferred variable annuity contracts issued by ING Life Insurance and Annuity Company (the Company) (formerly known as Aetna Life Insurance and Annuity Company). They are intended to be used as funding vehicles for certain types of retirement plans, including those that qualify for beneficial tax treatment and/or to provide current income reduction under certain sections of the Internal Revenue Code of 1986, as amended (Tax Code). [SIDE NOTE] THE FUNDS ING VP Ascent Portfolio (Class R Shares)(1) ING VP Balanced Portfolio, Inc. (Class R Shares)(1) ING VP Bond Portfolio (Class R Shares)(1) ING VP Crossroads Portfolio (Class R Shares)(1) ING VP Growth and Income Portfolio (Class R Shares)(1) ING VP Index Plus LargeCap Portfolio (Class R Shares)(1) ING VP Index Plus MidCap Portfolio (Class R Shares)(1) ING VP Index Plus SmallCap Portfolio (Class R Shares)(1) ING VP Legacy Portfolio (Class R Shares)(1) ING VP Money Market Portfolio (Class R Shares)(1) ING VP Value Opportunity Portfolio (Class R Shares)(1) ING VP Emerging Markets Fund(1) ING VP Natural Resources Trust(1)(2) ING MFS Capital Opportunities Portfolio (Initial Class)(1) ING MFS Emerging Equities Portfolio (Initial Class)(1) ING MFS Research Portfolio (Initial Class)(1) ING Scudder International Growth Portfolio (Initial Class)(1) ING T. Rowe Price Growth Equity Portfolio (Initial Class)(1) Calvert Social Balanced Portfolio Fidelity-Registered Trademark- VIP Asset Manager(SM) Portfolio (Initial Class) Fidelity-Registered Trademark- VIP Contrafund-Registered Trademark- Portfolio (Initial Class) Fidelity-Registered Trademark- VIP Equity-Income Portfolio (Initial Class) Fidelity-Registered Trademark- VIP High Income Portfolio (Initial Class) Fidelity-Registered Trademark- VIP Index 500 Portfolio (Initial Class) Janus Aspen Aggressive Growth Portfolio (Institutional Shares) Janus Aspen Growth Portfolio (Institutional Shares) Janus Aspen Worldwide Growth Portfolio (Institutional Shares) MFS-Registered Trademark- Total Return Series (Initial Class) Oppenheimer Global Securities Fund/VA Oppenheimer Strategic Bond Fund/VA [END SIDE NOTE] WHY READING THIS PROSPECTUS IS IMPORTANT. Before you participate in the contract through a retirement plan, you should read this prospectus. It provides facts about the contract and its investment options. Plan sponsors (generally your employer) should read this prospectus to help determine if the contract is appropriate for their plan. Keep this document for future reference. TABLE OF CONTENTS . . . PAGE 3 You may participate in this contract if you are an eligible employee participating in the State University of New York (SUNY) defined contribution retirement plan or any predecessor SUNY plan under section 403(b) of the Tax Code. INVESTMENT OPTIONS. The contracts offer variable investment options and fixed interest options. When we establish your account, you instruct us to direct account dollars to any of the available options. Some investment options may be unavailable through certain contracts and plans. VARIABLE INVESTMENT OPTIONS. These options are called subaccounts. The subaccounts are within Variable Annuity Account C (the separate account). Each subaccount invests in one of the mutual funds (funds) listed on this page. Earnings on amounts invested in a subaccount will vary depending upon the performance of its underlying fund. You do not invest directly in or hold shares of the funds. RISKS ASSOCIATED WITH INVESTING IN THE FUNDS. Information about the risks of investing in the funds is located in the "Investment Options" section in this prospectus at page 11 and in each fund prospectus. Read this prospectus in conjunction with the fund prospectuses, and retain the prospectuses for future reference. GETTING ADDITIONAL INFORMATION You may obtain the May 1, 2002, Statement of Additional Information (SAI) by indicating your request on your enrollment materials or calling the Company at 1-800-677-4636. You may also obtain an SAI for any of the funds by calling that number. This prospectus, the SAI and other information about the separate account may be obtained by accessing the Securities and Exchange Commission's (SEC) web site, www.sec.gov. Copies of this information may also be obtained, after paying a duplicating fee, by contacting the SEC Public Reference Room. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-202-942-8090 or 1-800-SEC-0330, e-mailing publicinfo@sec.gov or by writing to SEC Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. 20549. The SAI table -------------------------------------------------- (1) Effective May 1, 2002 this fund has changed its name to the name listed above. See Appendix III--Fund Descriptions on page 42 for a complete list of former and current fund names. (2) Transfers or deposits are not allowed into the subaccount investing in this fund, except from accounts established under the contract before May 1, 1998. As soon as all those who have current allocations to the subaccount under the contract have redirected their allocations to other investment options, we will close the subaccount to all investments. PROSPECTUS - MAY 1, 2002 (CONTINUED) -------------------------------------------------------------------------------- of contents is listed on page 37 of this prospectus. The SAI is incorporated into this prospectus by reference. ADDITIONAL DISCLOSURE INFORMATION. Neither the SEC, nor any state securities commission, has approved or disapproved the securities offered through this prospectus or passed on the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. This prospectus is valid only when accompanied by current prospectuses of the funds and the Guaranteed Accumulation Account. We do not intend for this prospectus to be an offer to sell or a solicitation of an offer to buy these securities in any state that does not permit their sale. We have not authorized anyone to provide you with information that is different than that contained in this prospectus. FIXED INTEREST OPTIONS. -- Guaranteed Accumulation Account -- Fixed Plus Account Except as specifically mentioned, this prospectus describes only the variable investment options. However, we describe the fixed interest options in the appendices to this prospectus. There is also a separate prospectus for the Guaranteed Accumulation Account. TABLE OF CONTENTS CONTRACT OVERVIEW......................................... 4 Who's Who The Contract and Your Retirement Plan Contract Rights Contract Facts Questions: Contacting the Company (sidebar) Sending Forms and Written Requests in Good Order (sidebar) Contract Phases: Accumulation Phase, Income Phase FEE TABLE................................................... 7 CONDENSED FINANCIAL INFORMATION............................. 11 INVESTMENT OPTIONS.......................................... 11 TRANSFERS................................................... 13 CONTRACT PURCHASE OR PARTICIPATION.......................... 14 CONTRACT OWNERSHIP AND RIGHTS............................... 16 RIGHT TO CANCEL............................................. 16 FEES........................................................ 17 YOUR ACCOUNT VALUE.......................................... 19 WITHDRAWALS................................................. 21 SYSTEMATIC DISTRIBUTION OPTIONS............................. 22 DEATH BENEFIT............................................... 23 THE INCOME PHASE............................................ 24 TAXATION.................................................... 28 OTHER TOPICS................................................ 32 The Company - Variable Annuity Account C - Performance Reporting - Voting Rights - Contract Distribution - ContractModification - Legal Matters and Proceedings - Payment Delay or Suspension - Intent to Confirm Quarterly CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION......... 37 APPENDIX I - GUARANTEED ACCUMULATION ACCOUNT................ 38 APPENDIX II - FIXED PLUS ACCOUNT............................ 40 APPENDIX III - FUND DESCRIPTIONS............................ 42 APPENDIX IV - CONDENSED FINANCIAL INFORMATION............... 49
3 [SIDE NOTE] QUESTIONS: CONTACTING THE COMPANY. To answer your questions, contact your local representative or write or call the Company through: Service Center P.O. Box 12894 Albany, New York 12212-2894 (1-800-677-4636) SENDING FORMS AND WRITTEN REQUESTS IN GOOD ORDER. If you are writing to change your beneficiary, request a withdrawal, or for any other purpose, contact your local representative or the Company through the Service Center to learn what information is required in order for the request to be in "good order." Generally, a request is considered to be in "good order" when it is signed, dated and made with such clarity and completeness that we are not required to exercise any discretion in carrying it out. We can only act upon written requests that are received in good order. [END SIDE NOTE] CONTRACT OVERVIEW ---------------------------------------------- The following is a summary. Please read each section of this prospectus for additional information. WHO'S WHO ------------------------------------------------------------------- You (the participant): The individual participating in a retirement plan, where the plan uses the contracts as funding options. Plan Sponsor: The sponsor of your retirement plan. Generally, your employer. Contract Holder: The person or entity to whom we issue the contracts. The contract holder is the trustee of a multiple employer trust approved by the Company to apply for and own the contracts as authorized by SUNY. We, Us, Our (the Company): ING Life Insurance and Annuity Company. We issue the contract. THE CONTRACT AND YOUR RETIREMENT PLAN ------------------------------------------------------------------- RETIREMENT PLAN (PLAN). A plan sponsor has established a retirement plan for you. The contracts are offered as funding options for that plan. We are not a party to the plan, so the terms and the conditions of the contracts and the plan may differ. PLAN TYPE. We refer to plans in this prospectus as 403(b), 401(a) and 414(h) plans. For a description, see "Taxation." USE OF AN ANNUITY CONTRACT IN YOUR PLAN. Under the federal tax laws, earnings on amounts held in annuity contracts are generally not taxed until they are withdrawn. However, in the case of a qualified retirement account (such as a 403(b), 401(a) or 414(h) retirement plan), an annuity contract is not necessary to obtain this favorable tax treatment and does not provide any tax benefits beyond the deferral already available to the tax qualified account itself. However, annuities do provide other features and benefits (such as the guaranteed death benefit or the option of lifetime income phase options at established rates) which may be valuable to you. You should discuss your alternatives with your financial representative taking into account the additional fees and expenses you may incur in an annuity. See "Contract Purchase or Participation." CONTRACT RIGHTS ------------------------------------------------------------------- Under each contract, we establish an employee account and an employer account for you. You have a nonforfeitable right to the value of your employee account and employer account, as determined by the plan administrator in accordance with the terms of the plan. You may exercise certain rights under the contract as permitted by the plan. See "Contract Ownership and Rights." CONTRACT FACTS ------------------------------------------------------------------- FREE LOOK/RIGHT TO CANCEL. Participants may cancel their purchase no later than 10 days after they receive the document evidencing their participation in the contract. See "Right To Cancel." DEATH BENEFIT. A beneficiary may receive a benefit in the event of your death prior to the income phase. Death benefits during the income phase depend upon the payment option selected. See "Death Benefit" and "The Income Phase." WITHDRAWALS. During the accumulation phase, you may, subject to the limits in the contract and certification from the plan administrator that you are eligible, withdraw all or a part of your account value. Certain fees and taxes may apply. See "Withdrawals" and "Taxation." Amounts withdrawn from the Guaranteed Accumulation Account may be subject to market value adjustment. See Appendix I. 4 SYSTEMATIC DISTRIBUTION OPTIONS. Subject to the terms of the plan, you may elect to receive regular payments from your account, while retaining the account in the accumulation phase. See "Systematic Distribution Options." FEES. Certain fees are deducted from your account value. See "Fee Table" and "Fees." TAXATION. Taxes will generally be due when you receive a distribution. Tax penalties may apply in some circumstances. See "Taxation." 5 CONTRACT PHASES ------------------------------------------------------------------- I. THE ACCUMULATION PHASE. (accumulating retirement benefits under your contract) STEP 1: You or the contract holder provide ING Life Insurance and Annuity Company with your completed enrollment materials. The contract holder directs us to set up an employee account and employer account under each contract. STEP 2: You direct us to invest your account dollars in one or more of the following investment options: a) Fixed Interest Options: or b) Variable Investment Options. (The variable investment options are the subaccounts of Variable Annuity Account C. Each one invests in a specific mutual fund.) STEP 3: The subaccount(s) selected purchases shares of its corresponding fund. Payments to Your Account Step 1 ING Life Insurance and Annuity Company (a) Step 2 (b) Fixed Interest Options VARIABLE ANNUITY ACCOUNT C Variable Investment Options THE SUBACCOUNTS A B ETC. Step 3 Mutual Fund A Mutual Fund B
II. THE INCOME PHASE. (receiving income phase payments from your contract) If you wish to begin receiving payments from your contract, you may elect from the options available. The contract offers several income phase payment options. See "The Income Phase." In general, you may: -- Receive income phase payments over a lifetime or for a specified period; -- Receive income phase payments monthly, quarterly, semi-annually or annually; -- Select an income phase payment option that provides a death benefit to your beneficiary(ies); or -- Select fixed income phase payments or payments that vary based upon the performance of the variable investment options you select. 6 [SIDE NOTE] IN THIS SECTION: -- Fees Deducted from Investments in the Subaccounts -- Fees Deducted by the Funds -- Hypothetical Examples ALSO SEE THE "FEES" SECTION FOR: -- How, When and Why Fees are Deducted -- Premium and Other Taxes SEE "THE INCOME PHASE" FOR: -- Fees During the Income Phase [END SIDE NOTE] FEE TABLE ---------------------------------------------- The tables and examples in this section show the fees that may affect your account during the accumulation phase. See "The Income Phase" for fees that may apply after you begin receiving payments under the contract. The fees shown below do not include premium taxes that may be applicable. FEES DEDUCTED FROM THE ING VP MONEY MARKET PORTFOLIO SUBACCOUNT (Daily deductions equal to the given percentage of values invested in the subaccounts on an annual basis) MORTALITY AND EXPENSE RISK CHARGE............... 0.10% ADMINISTRATIVE EXPENSE CHARGE................... 0.25% -------- TOTAL SEPARATE ACCOUNT EXPENSES................. 0.35% ========
FEES DEDUCTED FROM ALL OTHER ING FUND/PORTFOLIO SUBACCOUNTS (Daily deductions equal to the given percentage of values invested in the subaccounts on an annual basis) MORTALITY AND EXPENSE RISK CHARGE............... 0.75% ADMINISTRATIVE EXPENSE CHARGE................... 0.25% -------- TOTAL SEPARATE ACCOUNT EXPENSES................. 1.00% ========
FEES DEDUCTED FROM NON-ING SUBACCOUNTS (Daily deductions equal to the given percentage of values invested in the subaccounts on an annual basis) MORTALITY AND EXPENSE RISK CHARGE............... 0.85% ADMINISTRATIVE EXPENSE CHARGE................... 0.25% -------- TOTAL SEPARATE ACCOUNT EXPENSES................. 1.10% ========
7 FEES DEDUCTED BY THE FUNDS USING THIS INFORMATION. The following table shows the investment advisory fees, 12b-1 fees (if applicable) and other expenses including service fees (if applicable) charged annually by each fund. See the "Fees" section of this prospectus, and the fund prospectus for additional information. HOW FEES ARE DEDUCTED. Fund fees are not deducted from account values. Instead, fees are deducted from the value of fund shares on a daily basis, which in turn will affect the value of each subaccount on a daily basis. Except as noted below, the following figures are a percentage of the average net assets of each fund, and are based on figures for the year ended December 31, 2001.
FUND EXPENSE TABLE(1) FEES AND TOTAL NET MANAGEMENT TOTAL FUND EXPENSES FUND (ADVISORY) 12B-1 OTHER ANNUAL WAIVED OR ANNUAL FUND NAME FEES FEE EXPENSES EXPENSES REIMBURSED EXPENSES --------- ---------- ------- -------- ---------- ---------- --------- ING VP Ascent Portfolio (Class R Shares)(2) 0.60% -- 0.14% 0.74% -- 0.74% ING VP Balanced Portfolio, Inc. (Class R Shares)(2) 0.50% -- 0.09% 0.59% -- 0.59% ING VP Bond Portfolio (Class R Shares)(2) 0.40% -- 0.10% 0.50% -- 0.50% ING VP Crossroads Portfolio (Class R Shares)(2) 0.60% -- 0.14% 0.74% 0.04% 0.70% ING VP Growth and Income Portfolio (Class R Shares)(2) 0.50% -- 0.09% 0.59% -- 0.59% ING VP Index Plus LargeCap Portfolio (Class R Shares)(2) 0.35% -- 0.10% 0.45% -- 0.45% ING VP Index Plus MidCap Portfolio (Class R Shares)(2) 0.40% -- 0.15% 0.55% -- 0.55% ING VP Index Plus SmallCap Portfolio (Class R Shares)(2) 0.40% -- 0.31% 0.71% 0.11% 0.60% ING VP Legacy Portfolio (Class R Shares)(2) 0.60% -- 0.16% 0.76% 0.11% 0.65% ING VP Money Market Portfolio (Class R Shares)(2) 0.25% -- 0.09% 0.34% -- 0.34% ING VP Value Opportunity Portfolio (Class R Shares)(2) 0.60% -- 0.11% 0.71% -- 0.71% ING VP Emerging Markets Fund(3) 0.85% -- 1.00% 1.85% -- 1.85% ING VP Natural Resources Trust(3) 1.00% -- 0.35% 1.35% -- 1.35% ING MFS Capital Opportunities Portfolio (Initial Class) 0.65% -- 0.25% 0.90% -- 0.90% ING MFS Emerging Equities Portfolio (Initial Class) 0.68% -- 0.13% 0.81% -- 0.81% ING MFS Research Portfolio (Initial Class) 0.70% -- 0.15% 0.85% -- 0.85% ING Scudder International Growth Portfolio (Initial Class) 0.80% -- 0.20% 1.00% -- 1.00% ING T. Rowe Price Growth Equity Portfolio (Initial Class) 0.60% -- 0.15% 0.75% -- 0.75% Calvert Social Balanced Portfolio(4) 0.70% -- 0.18% 0.88% -- 0.88% Fidelity-Registered Trademark- VIP Asset Manager-SM- Portfolio (Initial Class)(5) 0.53% -- 0.11% 0.64% -- 0.64% Fidelity-Registered Trademark- VIP Contrafund-Registered Trademark- Portfolio (Initial Class)(5) 0.58% -- 0.10% 0.68% -- 0.68% Fidelity-Registered Trademark- VIP Equity-Income Portfolio (Initial Class)(5) 0.48% -- 0.10% 0.58% -- 0.58% Fidelity-Registered Trademark- VIP High Income Portfolio (Initial Class)(5) 0.58% -- 0.13% 0.71% -- 0.71% Fidelity-Registered Trademark- VIP Index 500 Portfolio (Initial Class)(6) 0.24% -- 0.11% 0.35% -- 0.35% Janus Aspen Aggressive Growth Portfolio (Institutional Shares)(7) 0.65% -- 0.02% 0.67% -- 0.67% Janus Aspen Growth Portfolio (Institutional Shares)(7) 0.65% -- 0.01% 0.66% -- 0.66% Janus Aspen Worldwide Growth Portfolio (Institutional Shares)(7) 0.65% -- 0.04% 0.69% -- 0.69% MFS-Registered Trademark- Total Return Series (Initial Class)(8) 0.75% -- 0.14% 0.89% -- 0.89% Oppenheimer Global Securities Fund/VA 0.64% -- 0.06% 0.70% -- 0.70% Oppenheimer Strategic Bond Fund/VA(9) 0.74% -- 0.05% 0.79% -- 0.79%
8 FOOTNOTES TO "FUND EXPENSE TABLE" (1) The Company may receive compensation from each of the funds or the funds' affiliates based on an annual percentage of the average net assets held in that fund by the Company. The percentage paid may vary from one fund company to another. For certain funds, some of this compensation may be paid out of 12b-1 fees or service fees that are deducted from fund assets. Any such fees deducted from fund assets are disclosed in this Fund Expense Table and the fund prospectuses. The Company may also receive additional compensation from certain funds for administrative, recordkeeping or other services provided by the Company to the funds or the funds' affiliates. These additional payments are made by the funds or the funds' affiliates to the Company and do not increase, directly or indirectly, the fees and expenses shown above. See "Fees -- Fund Expenses" for additional information. (2) ING Investments, LLC, the investment adviser to each Portfolio, has entered into written expense limitation agreements with each Portfolio (except Balanced, Growth and Income, Bond and Money Market) under which it will limit expenses of the Portfolios, excluding interest, brokerage and extraordinary expenses, subject to possible reimbursement to ING Investments, LLC within three years. The amount of each Portfolio's expenses waived or reimbursed during the last fiscal year by the Portfolio's investment adviser is shown under the heading "Fees and Expenses Waived or Reimbursed" in the table above. For each Portfolio, the expense limits will continue through at least December 31, 2002. (3) ING Investments, LLC has entered into written expense limitation agreements with each Portfolio under which it will limit expenses of the Portfolio, excluding interest, taxes, brokerage and extraordinary expenses subject to possible reimbursement to ING Investments, LLC within three years. The amount of each Portfolio's expenses waived or reimbursed during the last fiscal year by ING Investments, LLC is shown under the heading "Fees and Expenses Waived or Reimbursed" in the table above. For the Emerging Markets Fund and Natural Resources Trust, the expense limits will continue through at least July 26, 2002. For the remaining ING VP portfolios, the expense limits will continue through at least October 31, 2002. (4) "Management (Advisory) Fees" include an administrative fee paid by the Fund to Calvert Administrative Services Company, an affiliate of Calvert. "Other Expenses" listed above reflect an indirect fee of 0.01% resulting from the Portfolio's offset arrangement with the custodian bank whereby the custodian's and transfer agent's fees may be paid indirectly by credits earned on the Portfolio's uninvested cash balances. These credits are used to reduce the Portfolio's expenses. A voluntary reduction of fees paid indirectly is not reflected in the above table. If this voluntary reduction was reflected, the amounts shown under "Other Expenses" and "Total Net Fund Annual Expenses" would be 0.17% and 0.87%, respectively. (5) Actual annual class operating expenses were lower because a portion of the brokerage commissions that the fund paid was used to reduce the fund's expenses. In addition, through arrangements with the fund's custodian, credits realized as a result of uninvested cash balances are used to reduce a portion of the fund's custodian expenses. These offsets may be discontinued at any time. (6) The fund's manager has voluntarily agreed to reimburse the class to the extent that total operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions and extraordinary expenses) exceed 0.28%. This arrangement can be discontinued by the fund's manager at any time. Including this reimbursement, the Management (Advisory) Fees, Other Expenses and Total Fund Annual Expenses in 2001 were 0.24%, 0.04% and 0.28%, respectively. (7) All expenses are shown without the effect of any expense offset arrangements. (8) The series has an expense offset arrangement which reduces the series' custodian fee based upon the amount of cash maintained by the series with its custodian and dividend disbursing agent. The series may enter into other such arrangements and directed brokerage arrangements, which would also have the effect of reducing the series' expenses. The Other Expenses shown above do not take into account these expense reductions, and are therefore higher than the actual expenses of the series. Had these fee reductions been taken into account, Total Net Fund Annual Expenses would be lower and would equal 0.88% for the series. (9) OppenheimerFunds, Inc., will reduce the management fee by 0.10% as long as the fund's trailing 12-month performance at the end of the quarter is in the fifth Lipper peer-group quintile; and by 0.05% as long as it is in the fourth quintile. The waiver is voluntary and may be terminated by the Manager at any time. 9 HYPOTHETICAL EXAMPLES ACCOUNT FEES INCURRED OVER TIME. The following hypothetical examples show the fees paid over time if $1,000 is invested in a subaccount, assuming a 5% annual return on the investment. For the purpose of these examples, we deducted a mortality and expense risk charge of 0.10% on an annual basis for the ING VP Money Market Portfolio subaccount, 0.75% on an annual basis for all other ING Fund/Portfolio subaccounts and 0.85% on an annual basis for all Non-ING subaccounts. We also deducted an administrative expense charge of 0.25% on an annual basis, from all subaccounts. The total fund expenses are those shown in the column "Total Net Fund Annual Expenses" in the Fund Expense Table, assuming that any applicable fee waivers or reimbursements would apply during all periods shown. -- These examples are purely hypothetical. -- They should not be considered a representation WHETHER OR NOT YOU WITHDRAW OR IF YOU SELECT AN INCOME PHASE of past or future expenses or expected returns. PAYMENT OPTION AT THE END OF THE PERIODS SHOWN, YOU WOULD -- Actual expenses and/or returns may be more or PAY THE FOLLOWING FEES: less than those shown in these examples.
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------ ------- ------- -------- ING VP Ascent Portfolio (Class R Shares) $18 $55 $ 94 $205 ING VP Balanced Portfolio, Inc. (Class R Shares) $16 $50 $ 87 $189 ING VP Bond Portfolio (Class R Shares) $15 $47 $ 82 $179 ING VP Crossroads Portfolio (Class R Shares) $17 $54 $ 92 $201 ING VP Growth and Income Portfolio (Class R Shares) $16 $50 $ 87 $189 ING VP Index Plus LargeCap Portfolio (Class R Shares) $15 $46 $ 79 $174 ING VP Index Plus MidCap Portfolio (Class R Shares) $16 $49 $ 84 $185 ING VP Index Plus SmallCap Portfolio (Class R Shares) $16 $50 $ 87 $190 ING VP Legacy Portfolio (Class R Shares) $17 $52 $ 90 $195 ING VP Money Market Portfolio (Class R Shares) $ 7 $22 $ 38 $ 86 ING VP Value Opportunity Portfolio (Class R Shares) $17 $54 $ 93 $202 ING VP Emerging Markets Fund $29 $88 $150 $318 ING VP Natural Resources Trust $24 $73 $126 $269 ING MFS Capital Opportunities Portfolio (Initial Class) $19 $60 $103 $222 ING MFS Emerging Equities Portfolio (Initial Class) $18 $57 $ 98 $213 ING MFS Research Portfolio (Initial Class) $19 $58 $100 $217 ING Scudder International Growth Portfolio (Initial Class) $20 $63 $108 $233 ING T. Rowe Price Growth Equity Portfolio (Initial Class) $18 $55 $ 95 $206 Calvert Social Balanced Portfolio $20 $62 $107 $231 Fidelity-Registered Trademark- VIP Asset Manager(SM) Portfolio (Initial Class) $18 $55 $ 94 $205 Fidelity-Registered Trademark- VIP Contrafund-Registered Trademark- Portfolio (Initial Class) $18 $56 $ 96 $209 Fidelity-Registered Trademark- VIP Equity-Income Portfolio (Initial Class) $17 $53 $ 91 $199 Fidelity-Registered Trademark- VIP High Income Portfolio (Initial Class) $18 $57 $ 98 $213 Fidelity-Registered Trademark- VIP Index 500 Portfolio (Initial Class) $15 $46 $ 79 $174 Janus Aspen Aggressive Growth Portfolio (Institutional Shares) $18 $56 $ 96 $208 Janus Aspen Growth Portfolio (Institutional Shares) $18 $55 $ 95 $207 Janus Aspen Worldwide Growth Portfolio (Institutional Shares) $18 $56 $ 97 $211 MFS-Registered Trademark- Total Return Series (Initial Class) $20 $62 $107 $232 Oppenheimer Global Securities Fund/VA $18 $57 $ 97 $212 Oppenheimer Strategic Bond Fund/VA $19 $59 $102 $221
10 CONDENSED FINANCIAL INFORMATION ---------------------------------------------- UNDERSTANDING CONDENSED FINANCIAL INFORMATION. In Appendix IV, we provide condensed financial information about the Variable Annuity Account C (the separate account) subaccounts available under the contracts. The tables show the value of the subaccounts over the past 10 years. For subaccounts that were not available 10 years ago, we give a history from the date of first availability. INVESTMENT OPTIONS ---------------------------------------------- The contract offers variable investment options and fixed interest options. When we establish your account(s), you instruct us to direct account dollars to any of the available options. VARIABLE INVESTMENT OPTIONS. These options are called subaccounts. The subaccounts are within Variable Annuity Account C (the separate account), a separate account of the Company. Each subaccount invests in a specific mutual fund. Earnings on amounts invested in a subaccount will vary depending upon the performance and fees of its underlying fund. You do not invest directly in or hold shares of the funds. -- FUND DESCRIPTIONS. We provide brief descriptions of the funds in Appendix III. Please refer to the fund prospectuses for additional information. Fund prospectuses may be obtained free of charge, from the Service Center at the address and phone number listed in "Contract Overview--Questions", by accessing the SEC's website, or by contacting the SEC Public Reference Room. FIXED INTEREST OPTIONS. For descriptions of the fixed interest options, see Appendix I and II and the Guaranteed Accumulation Account prospectus. SELECTING INVESTMENT OPTIONS - CHOOSE OPTIONS APPROPRIATE FOR YOU. Your ING representative can help you evaluate which investment options may be appropriate for your financial goals. - UNDERSTAND THE RISKS ASSOCIATED WITH THE OPTIONS YOU CHOOSE. Some subaccounts invest in funds that are considered riskier than others. Funds with additional risks are expected to have a value that rises and falls more rapidly and to a greater degree than other funds. For example, funds investing in foreign or international securities are subject to additional risks not associated with domestic investments, and their performance may vary accordingly. Also, funds using derivatives in their investment strategy may be subject to additional risks. - BE INFORMED. Read this prospectus, the fund prospectuses, the fixed interest option appendices and the Guaranteed Accumulation Account prospectus. LIMITS ON OPTION AVAILABILITY. Some funds and fixed interest options may not be available through certain contracts or plans. We may add, withdraw or substitute 11 funds, subject to the conditions in the contract and in compliance with regulatory requirements. In the case of a substitution, the new fund may have different fees and charges than the fund it replaced. LIMITS ON NUMBER OF OPTIONS SELECTED. No more than 18 investment options may be selected for your account at any one time during the accumulation phase. Each subaccount, the Fixed Plus Account and each classification of the Guaranteed Accumulation Account counts as one option. LIMITS IMPOSED BY THE UNDERLYING FUND. Orders for the purchase of fund shares may be subject to acceptance by the fund. We reserve the right to reject, without prior notice, any allocation of a purchase payment to a subaccount if the subaccount's investment in the corresponding fund is not accepted by the fund for any reason. ADDITIONAL RISKS OF INVESTING IN THE FUNDS. (MIXED AND SHARED FUNDING) "Shared funding" occurs when shares of a fund, which the subaccounts buy for variable annuity contracts, are also bought by other insurance companies for their variable annuity contracts. "Mixed funding" occurs when shares of a fund, which the subaccounts buy for variable annuity contracts, is bought for variable life insurance contracts issued by us or other insurance companies. -- Shared--bought by more than one company -- Mixed--bought for annuities and life insurance It is possible that a conflict of interest may arise due to mixed and/or shared funding, that could adversely impact the fund. For example, if a conflict of interest occurred and one of the subaccounts withdrew its investment in a fund, the fund may be forced to sell its securities at disadvantageous prices, causing its share values to decrease. Each fund's board of directors or trustees will monitor events to identify any conflicts which might arise and to determine what action, if any, should be taken to address such conflicts. 12 TRANSFERS ---------------------------------------------- TRANSFERS AMONG INVESTMENT OPTIONS. During the accumulation phase and during the income phase, you may transfer among variable investment options. You may make a request in writing, by telephone or, where applicable, electronically. Transfers must be made in accordance with the terms of the contract and your plan. Transfers from fixed interest options are restricted as outlined in Appendices I and II. VALUE OF TRANSFERRED DOLLARS. The value of amounts transferred into or out of subaccounts will be based on the subaccount unit values next determined after we receive your request in good order at our Service Center. You may make up to twelve transfers per calendar year among available variable investment options. TELEPHONE AND ELECTRONIC TRANSFERS: SECURITY MEASURES. To prevent fraudulent use of telephone and electronic transactions (including, but not limited to, internet transactions), we have established security procedures. These include recording calls on our toll-free telephone lines and requiring use of a personal identification number (PIN) to execute transactions. You are responsible for keeping your PIN and account information confidential. If we fail to follow reasonable security procedures, we may be liable for losses due to unauthorized or fraudulent telephone or other electronic transactions. We are not liable for losses resulting from following telephone or electronic instructions we believe to be genuine. If a loss occurs when we rely on such instructions, you will bear the loss. LIMITS ON FREQUENT TRANSFERS. The contracts are not designed to serve as vehicles for frequent trading in response to short-term fluctuations in the market. Such frequent trading can disrupt management of a fund and raise its expenses. This in turn can have an adverse effect on fund performance. Accordingly, organizations or individuals that use market-timing investment strategies and make frequent transfers should not purchase the contracts. We reserve the right to restrict, in our sole discretion and without prior notice, transfers initiated by a market-timing organization or individual or other party authorized to give transfer instructions on behalf of multiple contract holders or participants. Such restrictions could include: (1) not accepting transfer instructions from an agent acting on behalf of more than one contract holder or participant; and (2) not accepting preauthorized transfer forms from market timers or other entities acting on behalf of more than one contract holder or participant at a time. We further reserve the right to impose, without prior notice, restrictions on any transfers that we determine, in our sole discretion, will disadvantage or potentially hurt the rights or interests of other contract holders or participants. THE DOLLAR COST AVERAGING PROGRAM. The contracts allow you to participate in our Dollar Cost Averaging Program. There is no additional charge for this service. Dollar cost averaging is a system for investing that buys fixed dollar amounts of an investment at regular intervals, regardless of price. Our program transfers, at regular intervals, a fixed dollar amount from ING VP Money Market Portfolio to the Fixed Plus Account, GAA, or one or more subaccounts that you select. Amounts transferred to or from the Fixed Plus Account and subsequently withdrawn from the contract during the accumulation phase may be subject to the Fixed Plus Account transfer and partial surrender restrictions. (See Appendix II). Amounts transferred from the Guaranteed Accumulation Account before the end of a guaranteed term may be subject to a market value adjustment. (See Appendix I and the Guaranteed Accumulation Account 13 prospectus.) Dollar cost averaging is not permitted into the ING VP Natural Resources Trust subaccount. Dollar cost averaging neither ensures a profit nor guarantees against loss in a declining market. You should consider your financial ability to continue purchases through periods of low price levels. For additional information about this program, contact your local representative or call the Company at the number listed in "Contract Overview--Questions." This program is not available to participants in the Asset Rebalancing Program. THE ASSET REBALANCING PROGRAM. This program allows you to have your account value automatically reallocated to specified percentages on a scheduled basis. There is no additional charge for this service. If elected, account values invested in the subaccounts (excluding the ING GET Fund subaccount) will be rebalanced. Account values invested in the Guaranteed Accumulation Account and the Fixed Plus Account will not be rebalanced. To elect to participate in the Asset Rebalancing Program, contact the Service Center. This program is not available to participants in the Dollar Cost Averaging Program. CONTRACT PURCHASE OR PARTICIPATION ---------------------------------------------- CONTRACTS AVAILABLE FOR PURCHASE. The contracts available for purchase are group flexible premium deferred variable annuity contracts that the Company offers in connection with retirement plans under Code Section 403(b), 401(a) and 414(h). They are designed to fund the State University of New York (SUNY) defined contribution retirement plan (the SUNY Plan), and to accept transfers of amounts made to the predecessor program which is qualified under Section 403(b) of the Code. There are two group deferred variable annuity contracts: 1) The rollover contracts, for transferred assets from the predecessor Section 403(b) optional retirement program; and 2) The modal contracts for ongoing contributions and transferred assets made to the SUNY Plan, a plan qualified under sections 401(a) and 414(h) of the Code. USE OF AN ANNUITY CONTRACT IN YOUR PLAN. Under the federal tax laws, earnings on amounts held in annuity contracts are generally not taxed until they are withdrawn. However, in the case of a qualified retirement account (such as a 403(b), 401(a) or 414(h) retirement plan), an annuity contract is not necessary to obtain this favorable tax treatment and does not provide any tax benefits beyond the deferral already available to the tax qualified account itself. However, annuities do provide other features and benefits (such as the guaranteed death benefit or the option of lifetime income phase options at established rates) which may be valuable to you. You should discuss your alternatives with your financial representative, taking into account the additional fees and expenses you may incur in an annuity. PURCHASING THE CONTRACT. The contract holder submits the required forms and application to the Company. We approve the forms and issue a contract to the contract holder. PARTICIPATING IN THE CONTRACT. To participate in the contract, complete an enrollment form and submit it to the Service Center. (See "Contract Overview-- Questions.") If your enrollment is accepted, we establish an employee account and an employer account for each participant. 14 -- Under the rollover contract, we will allocate purchase payments attributable to transfers of after-tax employee contributions made to a predecessor 403(b) plan to the employee account, and purchase payments attributable to a transfer of employer contributions made under the same plan to the employer account. -- Under the modal contract, we will allocate funds attributable to Code section 414(h) contributions to an employee account, and ongoing payments under Code section 401(a) and transferred funds attributable to Code section 401(a) contributions from another investment provider to an employer account. ACCEPTANCE OR REJECTION OF APPLICATION OR ENROLLMENT FORMS. We must accept or reject an application or your enrollment forms within two business days of receipt. If the application or enrollment forms are incomplete, we may hold any forms and accompanying purchase payments for five days, unless you consent to our holding them longer. Under limited circumstances, we may also agree, for a particular plan, to hold purchase payments for longer periods with the permission of the contract holder. If we agree to this, we will deposit the payments in the ING VP Money Market Portfolio subaccount until the forms are completed (for a maximum of 105 days). If we reject the application or enrollment forms, we will return the forms and any payments. ALLOCATING PURCHASE PAYMENTS TO THE INVESTMENT OPTIONS. You direct us to allocate initial purchase payments among the investment options available under the plan. Generally you will specify this information on your enrollment materials. After your enrollment, changes to allocations for future purchase payments or transfer of existing balances among investment options may be requested in writing and, where available, by telephone or electronically. Allocations must be in whole percentages and there may be limitations on the number of investment options that can be selected at any one time. See "Investment Options" and "Transfers." FACTORS TO CONSIDER IN THE PURCHASE DECISION. The decision to purchase or participate in the contract should be discussed with your financial representative, making sure that you understand the investment options it provides, its other features, the risks and potential benefits you will face, and the fees and expenses you will incur. You should pay attention to the following issues, among others: 1. Long-Term Investment--This contract is a long-term investment, and is typically most useful as part of a personal retirement plan. Early withdrawals may be restricted by the Tax Code or your plan, or may expose you to tax penalties. The value of deferred taxation on earnings grows with the amount of time funds are left in the contract. You should not participate in this contract if you are looking for a short-term investment or expect to need to make withdrawals before you are 59 1/2. 2. Investment Risk--The value of investment options available under this contract may fluctuate with the markets and interest rates. You should not participate in this contract in order to invest in these options if you cannot risk getting back less money than you put in. 3. Features and Fees--The fees for this contract reflect costs associated with the features and benefits it provides. As you consider this contract, you should determine the value that these various benefits and features have for you, given your particular circumstances, and consider the charges for those features. 4. Exchanges--If this contract will be a replacement for another annuity contract or mutual fund option under the plan, you should compare the two options carefully, compare the costs associated with each, and identify additional benefits available under this contract. You should consider 15 whether these additional benefits justify any increased charges that might apply under this contract. Also, be sure to talk to your financial professional or tax adviser to make sure that the exchange will be handled so that it is tax-free. CONTRACT OWNERSHIP AND RIGHTS ---------------------------------------------- WHO OWNS THE CONTRACT? We issue the contract to a trustee of a multiple employer trust that has applied for and owns the contract as authorized by SUNY and the Company. WHO OWNS MONEY ACCUMULATED UNDER THE CONTRACT? You have a nonforfeitable value of your employee account and employer account, as determined by the plan administrator in accordance with the terms of the plan. WHAT RIGHTS DO I HAVE UNDER THE CONTRACT? You may select the investment options to be used for allocations to your employee account and employer account. You may elect an income phase payment if the plan administrator certifies that you are eligible for a distribution and that the form of annuity is permitted under the terms of the plan. RIGHT TO CANCEL ---------------------------------------------- WHEN AND HOW TO CANCEL. You may cancel your purchase within ten days after receiving the document evidencing your interest by returning it to the Service Center along with a written notice of cancellation. REFUNDS. We will produce a refund to you not later than seven days after we receive the document evidencing your interest and the written notice of cancellation at the Service Center. The refund will equal the dollars contributed to your accounts plus any earnings or less any losses attributable to the purchase payments allocated to the variable investment options. Any mortality and expense risk charges and administrative expense charges deducted during the period you held the contract will not be returned. No market value adjustment will be applied to any amounts you contributed to the Guaranteed Accumulation Account. 16 [SIDE NOTE] TYPES OF FEES There are two types of fees your account may incur: -- Fees Deducted from the Subaccounts - Mortality and Expense Risk Charge - Administrative Expense Charge -- Fees Deducted by the Funds - Investment Advisory Fees - Other Expenses - 12b-1 Fees -- Fund Expenses -- Premium and Other Taxes -- Charges for ING GET Fund [END SIDE NOTE] FEES ---------------------------------------------- The following repeats and adds to information provided in the "Fee Table" section. Please review both this section and the Fee Table for information on fees. FEES DEDUCTED FROM THE SUBACCOUNTS MORTALITY AND EXPENSE RISK CHARGE AMOUNT. The mortality and expense risk charge during the accumulation phase is the following percentage on an annual basis of your account value invested in the subaccounts. ING VP Money Market Portfolio............ 0.10% All Other ING Fund/Portfolio subaccounts............................ 0.75% Non-ING subaccounts...................... 0.85%
During the income phase, the mortality and expense risk charge is 1.25% on an annual basis of your account value invested in the subaccounts. WHEN/HOW. We deduct this fee daily from the subaccounts corresponding to the funds you select. We do not deduct this fee from any fixed interest option. We deduct this fee during the accumulation phase and the income phase. See also "The Income Phase--Charges Deducted." PURPOSE. The fee compensates us for the mortality and expense risks we assume under the contracts. -- The mortality risks are those risks associated with our promise to make lifetime payments based on annuity rates specified in the contracts and our funding of the death benefit and other payments we make to owners or beneficiaries of the accounts. -- The expense risk is the risk that the actual expenses we incur under the contracts will exceed the maximum costs that we can charge. If the amount we deduct for this fee is not enough to cover our mortality costs and expenses under the contracts, we will bear the loss. We may use any excess to recover distribution costs relating to the contract and as a source of profit. We expect to make a profit from this fee. ADMINISTRATIVE EXPENSE CHARGE AMOUNT. 0.25% on an annual basis from your account value invested in the funds. WHEN/HOW. We deduct this fee daily during the accumulation phase from your account value held in the subaccounts corresponding to the funds you select. We do not currently deduct this fee during the income phase, although we reserve the right to do so. If we are imposing this fee under the contract when you enter the income phase, the fee will apply to you during the entire income phase. PURPOSE. This fee helps defray our administrative expenses that cannot be covered by the mortality and expense risk charge described above. The fee is not intended to exceed the average expected cost of administering the contracts. We do not expect to make a profit from this fee. FUND EXPENSES AMOUNT. Each fund determines its own advisory fee, service fees or 12b-1 fees (if applicable) and other expenses. Service fees and 12b-1 fees are generally 17 deducted from fund assets in order to pay for the servicing or distribution of fund shares. If a fund has such fees, some or all of such fees may be remitted to the Company as compensation for distribution or shareholder services performed by the Company with respect to the use of the funds as investment options under the contracts. The Fund Expense Table in this prospectus identifies which funds have service fees or 12b-1 fees. In addition to any service fees or 12b-1 fees that the Company may receive from a fund or its affiliate, the Company also receives additional compensation from certain funds or their affiliates for administrative, recordkeeping or other services provided by the Company to the fund or the fund affiliates. Such additional payments do not increase, directly or indirectly, the fund's fees and expenses. As of December 31, 2001, the amount of such additional payments ranged up to 0.425% annually for affiliated funds, and 0.25% annually for unaffiliated funds, of the average net assets held in a fund by the Company. For a list of fund fees, see "Fee Table." The fees are described in more detail in each fund prospectus. WHEN/HOW. Fund fees are not deducted from your account. Fund advisory fees and expenses are reflected in the daily value of the fund shares, which will in turn affect the daily value of each subaccount. PURPOSE. These amounts help to pay the funds' investment adviser and operating expenses. PREMIUM AND OTHER TAXES Currently, there is no premium tax on annuities under New York regulations. If the state does impose a premium tax, it would be deducted from the amount applied to an income phase payment option. We reserve the right to deduct a charge for state premium tax at any time from the purchase payments(s) or from the account value at any time, but no earlier than when we have a tax liability under state law. In addition, the Company reserves the right to assess a charge for any federal taxes due against the separate account. See "Taxation." CHARGES FOR ING GET FUND Various series of ING GET Fund may be offered from time to time, and additional charges may apply if you elect to invest in one of these series. If a series is available, it will be described in a supplement to this prospectus at the time it is offered. The supplement will include fee table information about the option. 18 YOUR ACCOUNT VALUE ---------------------------------------------- During the accumulation phase, your account value at any given time equals: -- Account dollars directed to the fixed interest options, including interest earnings to date; less -- Deductions, if any, from the fixed interest options (e.g., withdrawals, fees); plus -- The current dollar value of amounts invested in the subaccounts. SUBACCOUNT ACCUMULATION UNITS. When a fund is selected as an investment option, your account dollars invest in "accumulation units" of the Variable Annuity Account C subaccount corresponding to that fund. The subaccount invests directly in the fund shares. The value of your interests in a subaccount is expressed as the number of accumulation units you hold multiplied by an "Accumulation Unit Value," as described below, for each unit. ACCUMULATION UNIT VALUE (AUV). The value of each accumulation unit in a subaccount is called the accumulation unit value or AUV. The value of accumulation units vary daily in relation to the underlying fund's investment performance. The value also reflects deductions for fund fees and expenses, the mortality and expense risk charge, and the administrative charge (if any). We discuss these deductions in more detail in "Fee Table" and "Fees." VALUATION. We determine the AUV every business day after the close of the New York Stock Exchange (normally at 4:00 p.m. Eastern Time). At that time, we calculate the current AUV by multiplying the AUV last calculated by the "net investment factor" of the subaccount. The net investment factor measures the investment performance of the subaccount from one valuation to the next. Current AUV = Prior AUV x Net Investment Factor NET INVESTMENT FACTOR. The net investment factor for a subaccount between two consecutive valuations, equals the sum of 1.0000 plus the net investment rate. NET INVESTMENT RATE. The net investment rate is computed according to a formula that is equivalent to the following: -- The net assets of the fund held by the subaccount as of the current valuation, minus; -- The net assets of the fund held by the subaccount at the preceding valuation, plus or minus; -- Taxes or provisions for taxes, if any, due to subaccount operations (with any federal income tax liability offset by foreign tax credits to the extent allowed); -- Divided by the total value of the subaccount units at the preceding valuation; -- Minus a daily deduction for the mortality and expense risk charge and the administrative expense charge and any other fees, such as guarantee charges for ING GET Fund, deducted from investments in the separate account. See "Fees." The net investment rate may be either positive or negative. 19 HYPOTHETICAL ILLUSTRATION. As a hypothetical illustration, assume that an investor contributes $5,000 to his account and directs us to invest $3,000 in Fund A and $2,000 in Fund B. After receiving the contribution and following the next close of business of the New York Stock Exchange (normally at 4:00 p.m. Eastern Time), the applicable AUV's are $10 for Subaccount A, and $25 for Subaccount B. Your account is credited with 300 accumulation units of Subaccount A and 80 accumulation units of Subaccount B. STEP 1: You make an initial contribution of $5000. STEP 2: A. You direct us to invest $3,000 in Fund A. The purchase payment purchases 300 accumulation units of Subaccount A ($3,000 divided by the current $10 AUV). B. You direct us to invest $2,000 in Fund B. The purchase payment purchases 80 accumulation units of Subaccount B ($2,000 divided by the current $25 AUV). STEP 3: The separate account then purchases shares of the applicable funds at the current market value (net asset value or NAV). $5,000 contribution STEP 1 ING Life Insurance and Annuity Company STEP 2 VARIABLE ANNUITY ACCOUNT C Subaccount A Subaccount B Etc. 300 accumulation units 80 accumulation units STEP 3 Fund A Fund B
The fund's subsequent investment performance, expenses and charges, and the daily charges deducted from the subaccount, will cause the AUV to move up or down on a daily basis. PURCHASE PAYMENTS TO YOUR ACCOUNT. If all or a portion of initial payments are directed to the subaccounts, they will purchase subaccount accumulation units at the AUV next computed after our acceptance of the applicable application or enrollment forms. Any subsequent purchase payments or transfers directed to the subaccounts that we receive by the close of business of the New York Stock Exchange (Exchange) (normally at 4:00 p.m. Eastern Time) will purchase subaccount accumulation units at the AUV computed after the close of the Exchange on that day. The value of subaccounts may vary day to day. 20 [SIDE NOTE] TAXES, FEES AND DEDUCTIONS Amounts withdrawn may be subject to one or more of the following: -- Market Value Adjustment (see Appendix I) -- Tax Penalty (see "Taxation") -- Tax Withholding (see "Taxation") To determine which may apply, refer to the appropriate sections of this prospectus, contact your ING representative or call the Service Center at the number listed in "Contract Overview--Questions." [END SIDE NOTE] WITHDRAWALS ---------------------------------------------- MAKING A WITHDRAWAL. Subject to limitations on withdrawals from the Fixed Plus Account, you may withdraw all or a portion of your account value at any time during the accumulation phase. Your plan administrator must certify that you are eligible, both as to the timing and form of distribution. STEPS FOR MAKING A WITHDRAWAL. You must: -- Select the withdrawal amount. 1) Full Withdrawal: You will receive, reduced by any required withholding tax, your account value allocated to the subaccounts, the Guaranteed Accumulation Account (plus or minus any applicable market value adjustment) plus the amount available for withdrawal from the Fixed Plus Account. 2) Partial Withdrawal (Percentage or Specified Dollar Amount): You will receive, reduced by any required withholding tax, the amount you specify, subject to the value available in your account. The amounts available from the Fixed Plus Account may be limited. For a description of limitations on withdrawals from the Fixed Plus Account, see Appendix II. -- Select Investment Options. If this is not specified, we will withdraw dollars in the same proportion as the values you hold in the various investment options from each investment option in which you have an account value. -- Properly complete a disbursement form and submit it to the Service Center. CALCULATION OF YOUR WITHDRAWAL. We determine your account value every normal business day after the close of the New York Stock Exchange (normally at 4:00 p.m. Eastern Time). We pay withdrawal amounts based on your account value either: (1) As of the next valuation after we receive a request for withdrawal in good order at the Service Center, or (2) On such later date as specified on the disbursement form. DELIVERY OF PAYMENT. Payments for withdrawal requests will be made in accordance with SEC requirements. Normally, the payment will be sent not later than seven calendar days following our receipt of the disbursement form in good order at the Service Center. REINVESTMENT PRIVILEGE. The contracts allow one-time use of a reinvestment privilege. Within 30 days after a full withdrawal, if allowed by law and the contract, you may elect to reinvest all or a portion of the proceeds. We must receive reinvested amounts within 60 days of the withdrawal. We will credit the account for the amount reinvested based upon the subaccount values next computed following our receipt of your request and the amount to be reinvested. We will reinvest in the same investment options and proportions in place at the time of withdrawal. If you withdraw amounts from a series of the ING GET Fund and then elect to reinvest them, we will reinvest them in a GET Fund series that is then accepting deposits, if one is available. If one is not available, we will reallocate your GET amounts among other investment options in which you invested, on a pro rata basis. Special rules apply to reinvestments of amounts withdrawn from the Guaranteed Accumulation Account (see Appendix I). Seek competent advice regarding the tax consequences associated with reinvestment. 21 [SIDE NOTE] FEATURES OF A SYSTEMATIC DISTRIBUTION OPTION A systematic distribution option allows you to receive regular payments from your account, without moving into the income phase. By maintaining your account in the accumulation phase, certain rights and flexibility are retained and any accumulation phase fees may apply. [END SIDE NOTE] SYSTEMATIC DISTRIBUTION OPTIONS ---------------------------------------------- AVAILABILITY OF SYSTEMATIC DISTRIBUTION OPTIONS. These options may be exercised at any time during the accumulation phase of the contract. To exercise one of these options the account value must meet any minimum dollar amount and age criteria applicable to that option. In addition, for the employer account and certain employee accounts, the contract holder must provide written certification that the distribution is in accordance with the terms of the plan. To determine what systematic distribution options are available, check with the Company at the Service Center. The systematic distribution options currently available under the contract include the following: -- SWO--SYSTEMATIC WITHDRAWAL OPTION. SWO is a series of automatic partial withdrawals from your account based on the payment method selected. It is designed for those who want a periodic income while retaining investment flexibility for amounts accumulated under the contract. You may not elect this option if you have an outstanding contract loan. -- LEO--LIFE EXPECTANCY OPTION. This option provides for annual payments for a number of years equal to your life expectancy or the expectancy of you and a designated beneficiary. It is designed to meet the substantially equal periodic payment exception to the 10% premature distribution penalty under Tax Code Section 72. (See "Taxation.") -- ECO--ESTATE CONSERVATION OPTION. ECO offers the same investment flexibility as SWO, but is designed for those who want to receive only the minimum distribution that the Tax Code requires each year. Under ECO, we calculate the minimum distribution amount required by law at the later of age 70 1/2 or retirement, and pay you that amount once a year. -- OTHER SYSTEMATIC DISTRIBUTION OPTIONS. We may add additional systematic distribution options from time to time. You may obtain additional information relating to any of the systematic distribution options from your local representative or from the Company at the Service Center. AVAILABILITY OF SYSTEMATIC DISTRIBUTION OPTIONS. The Company may discontinue the availability of one or all of the systematic distribution options at any time, and/or change the terms of future elections. TERMINATING A SYSTEMATIC DISTRIBUTION OPTION. Once a systematic distribution option is elected, you may revoke it at any time by submitting a written request to the Service Center. Any revocation will apply only to the amount not yet paid. Once an option is revoked for an account, it may not be elected again, nor may any other systematic distribution option be elected unless the Tax Code permits it. CHARGES AND TAXATION. When you elect a systematic distribution option, your account value remains in the accumulation phase and subject to the charges and deductions described in the "Fees" section. Taking a withdrawal through a systematic distribution option may have tax consequences. If you are concerned about tax implications consult a tax adviser before one of these options is elected. 22 [SIDE NOTE] DURING THE INCOME PHASE This section provides information about the accumulation phase. For death benefit information applicable to the income phase (see "The Income Phase.") [END SIDE NOTE] DEATH BENEFIT ---------------------------------------------- The contract provides a death benefit in the event of your death, which is payable to the beneficiary you name for your account. DURING THE ACCUMULATION PHASE PAYMENT PROCESS 1. Following your death, your beneficiary must provide the Company with proof of death acceptable to us and a payment request in good order. 2. The payment request should include selection of a benefit payment option. 3. Within seven days after we receive proof of death acceptable to us and payment request in good order at the Service Center, we will mail payment, unless otherwise requested. Until a payment option is selected, account dollars will remain invested as at the time of your death, and no distribution will be made. If you die during the accumulation phase of your account, the following payment options are available to your beneficiary, if allowed by the Tax Code: -- Lump-sum payment; -- Payment in accordance with any of the available income phase payment options. See "The Income Phase--Payment Options"; or -- If the beneficiary is your spouse, payment in accordance with an available systematic distribution option. See "Systematic Distribution Options." The beneficiary may also leave the account value invested in the contract, subject to Tax Code limits on the length of time amounts may remain invested. THE VALUE OF THE DEATH BENEFIT. The death benefit will be based on your account value as calculated on the next valuation following the date on which we receive proof of death in good order. Interest, if any, will be paid from the date of death at a rate no less than required by law. For amounts held in the Guaranteed Accumulation Account, any positive aggregate market value adjustment (the sum of all market value adjustments calculated due to a withdrawal) will be included in your account value. If a negative aggregate market value adjustment applies, it would be deducted only if the death benefit is withdrawn more than six months after your death. We describe the market value adjustment in Appendix I and in the Guaranteed Accumulation Account prospectus. The contracts provide a guaranteed death benefit if the beneficiary elects a lump-sum distribution or an income phase payment option within six months of your death. For those contracts, the guaranteed death benefit is the greater of: (a) Your account value on the day that notice of death and request for payment are received in good order at our Home Office, plus any positive aggregate market value adjustment that applies to amounts allocated to the GAA; or (b) The sum of payments (minus any applicable premium tax) made to your account, minus withdrawals or income phase payments made from your account. TAX CODE REQUIREMENTS. The Tax Code requires distribution of death benefit proceeds within a certain period of time. Failure to begin receiving death benefit payments within those time periods can result in tax penalties. Regardless of the method of payment, death benefit proceeds will generally be taxed to the beneficiary in the same manner as if you had received those payments. See "Taxation" for additional information. 23 [SIDE NOTE] We may have used the following terms in prior prospectuses: ANNUITY PHASE--Income Phase ANNUITY OPTION--Payment Option ANNUITY PAYMENT--Income Phase Payment ANNUITIZATION--Initiating Income Phase Payments [END SIDE NOTE] THE INCOME PHASE ---------------------------------------------- During the income phase you stop contributing dollars to your account and start receiving payments from your accumulated account value. INITIATING PAYMENTS. At least 30 days prior to the date you want to start receiving income phase payments, you must notify us in writing of the following: -- Payment start date; -- Income phase payment option (see the income phase payment options table in this section); -- Payment frequency (i.e., monthly, quarterly, semi-annually or annually); -- Choice of fixed, variable or a combination of both fixed and variable payments; and -- Selection of an assumed net investment rate (only if variable payments are elected). The account will continue in the accumulation phase until you properly initiate income phase payments. Once an income phase payment option is selected, it may not be changed; however, certain options allow you to withdraw a lump sum. WHAT AFFECTS PAYMENT AMOUNTS? Some of the factors that may affect the amount of your income phase payment include: your age, your account value, the income phase payment option selected, number of guaranteed payments (if any) selected, whether fixed, variable or a combination of both fixed and variable payments are selected, and, for variable payments, the assumed net investment rate selected. FIXED PAYMENTS. Amounts funding fixed income phase payments will be held in the Company's general account. The amount of fixed payment amounts do not vary over time. VARIABLE PAYMENTS. Amounts funding your variable income phase payments will be held in the subaccount(s) selected. The contracts may restrict the subaccounts available during the income phase. You may make up to twelve transfers per calendar year among available variable investment options. For variable income phase payments, an assumed net investment rate must be selected. PAYMENTS FROM FIXED PLUS ACCOUNT VALUES. If a nonlifetime income phase payment option is selected, for amounts held in the Fixed Plus Account during the accumulation phase, income phase payments may only be made on a fixed basis. ASSUMED NET INVESTMENT RATE. If you select variable income phase payments, you must also select an assumed net investment rate of either 5% or 3 1/2%. If you select a 5% rate, your first payment will be higher, but subsequent payments will increase only if the investment performance of the subaccounts selected is greater than 5% annually, after deduction of fees. Payment amounts will decline if the investment performance is less than 5%, after deduction of fees. If you select a 3 1/2% rate, your first income phase payment will be lower and subsequent payments will increase more rapidly or decline more slowly depending upon the investment performance of the subaccounts selected. For 24 more information about selecting an assumed net investment rate, request a copy of the Statement of Additional Information by calling the Company. See "Contract Overview--Questions." MINIMUM PAYMENT AMOUNTS. The income phase payment option selected must result in one or both of the following: -- A first income phase payment of at least $20; or -- Total yearly income phase payments of at least $100. If your account value is too low to meet these minimum payment amounts, you must elect a lump-sum payment. CHARGES DEDUCTED. When you select an income payment phase option (one of the options listed in the tables on the following page), a mortality and expense risk charge, consisting of a daily deduction of 1.25% on an annual basis, will be deducted from amounts held in the subaccounts. This charge compensates us for mortality and expense risks we assume under variable income phase payout options and is applicable to all variable income phase payout options, including variable nonlifetime options under which we do not assume mortality risk. Although we expect to make a profit from this fee, we do not always do so. We may also deduct a daily administrative charge of 0.25% annually from amounts held in the subaccounts. DEATH BENEFIT DURING THE INCOME PHASE. The death benefits that may be available to a beneficiary are outlined in the payment option table below. If a lump-sum payment is due as a death benefit, we will make payment within seven calendar days after we receive proof of death acceptable to us and the payment request in good order at our Home Office at the following address: Customer Service Settlements 5906 ING U.S. Financial Services P.O. Box 2883 Hartford, CT 06101-8785 TAXATION. To avoid certain tax penalties, you and any beneficiary must meet the distribution rules imposed by the Tax Code. See "Taxation." 25 INCOME PHASE PAYMENT OPTIONS The following tables list the income phase payment options and accompanying death benefits which may be available under the contracts. Some contracts restrict the options and the terms available. Check with your contract holder for details. We may offer additional income phase payment options under the contract from time to time. TERMS USED IN THE TABLES: ANNUITANT: The person(s) on whose life expectancy the income phase payments are calculated. BENEFICIARY: The person designated to receive the death benefit payable under the contract. --------------------------------------------------------------------------------------- LIFETIME INCOME PHASE PAYMENT OPTIONS --------------------------------------------------------------------------------------- LENGTH OF PAYMENTS: For as long as the annuitant lives. It is possible that only one payment will be made should the Life Income annuitant die prior to the second payment's due date. DEATH BENEFIT--NONE: All payments end upon the annuitant's death. --------------------------------------------------------------------------------------- LENGTH OF PAYMENTS: For as long as the annuitant lives, with payments guaranteed for a choice of 5-20 years or as otherwise specified in the contract. Life Income-- DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If the annuitant Guaranteed Payments dies before we have made all the guaranteed payments, we will pay the beneficiary a lump sum (unless otherwise requested) equal to the present value of the remaining guaranteed payments. --------------------------------------------------------------------------------------- LENGTH OF PAYMENTS: For as long as either annuitant lives. It is possible that only one payment will be made should both annuitants die before the second payment's due date. CONTINUING PAYMENTS: (A) This option allows a choice of 100%, 66 2/3% or 50% of Life Income--Two the payment to continue to the surviving annuitant after the Lives first death; or (B) 100% of the payment to continue to the annuitant on the second annuitant's death, and 50% of the payment to continue to the second annuitant on the annuitant's death. DEATH BENEFIT--NONE: Payments end after the deaths of both annuitants. --------------------------------------------------------------------------------------- LENGTH OF PAYMENTS: For as long as either annuitant lives, with payments guaranteed for a minimum of 60 months, or as otherwise specified in the contract. Life Income--Two CONTINUING PAYMENTS: 100% of the payment will continue to Lives--Guaranteed the surviving annuitant after the first death. Payments DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If both annuitants die before the guaranteed payments have all been paid, we will pay the beneficiary a lump sum (unless otherwise requested) equal to the present value of the remaining guaranteed payments. --------------------------------------------------------------------------------------- Life Income--Cash LENGTH OF PAYMENTS: For as long as the annuitant lives. Refund Option-- DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: Following the fixed payment only annuitant's death, we will pay a lump-sum payment equal to the amount originally applied to the payment option (less any premium tax) and less the total amount of fixed income payments paid. --------------------------------------------------------------------------------------- Life Income--Two LENGTH OF PAYMENTS: For as long as either annuitant lives. Lives--Cash CONTINUING PAYMENT: 100% of the payment to continue after Refund Option-- the first death. fixed payment only DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: When both annuitants die, we will pay a lump- sum payment equal to the amount applied to the income phase payment option (less any premium tax) and less the total amount of fixed income payments paid. ---------------------------------------------------------------------------------------
Table continued -- 26 Income phase payment options continued --------------------------------------------------------------------------------------- NONLIFETIME INCOME PHASE PAYMENT OPTIONS --------------------------------------------------------------------------------------- LENGTH OF PAYMENTS: Payments generally may be fixed or variable and may be made for 3-30 years. However, for amounts held in the Fixed Plus Account during the accumulation phase, the payment must be on a fixed basis and must be for 6-30 years. In certain cases a lump-sum payment Nonlifetime-- may be requested at any time (see below). Guaranteed DEATH BENEFIT--PAYMENT TO THE BENEFICIARY: If the annuitant Payments dies before we make all the guaranteed payments, we will continue to pay the beneficiary the remaining payments. Unless prohibited by a prior election of the contract holder, the beneficiary may elect to receive a lump-sum payment equal to the present value of the remaining guaranteed payments. --------------------------------------------------------------------------------------- LUMP-SUM PAYMENT: If the "Nonlifetime--Guaranteed Payments" option is elected with variable payments, you may request at any time that all or a portion of the present value of the remaining payments be paid in one lump sum. Lump-sum payments will be sent within seven calendar days after we receive the request for payment in good order at the Service Center. CALCULATION OF LUMP-SUM PAYMENTS. If a lump-sum payment is available to a beneficiary or to you in the options above, the rate we use to calculate the present value of the remaining guaranteed payments is the same rate we use to calculate the income phase payments (i.e., the actual fixed rate used for fixed payments, or the 3 1/2% or 5% assumed net investment rate for variable payments). ---------------------------------------------------------------------------------------
27 [SIDE NOTE] IN THIS SECTION -- Introduction -- The Contract -- Withdrawals and other Distributions - Taxation of Distributions - 10% Penalty Tax -- Withholding for Federal Income Tax Liability -- Minimum Distribution Requirements -- Assignment or Transfer of Contracts -- Exclusion From Gross Income -- Rules Specific to Certain Plans -- Restrictions on Distributions -- Taxation of Gains Prior to Distribution -- Taxation of the Company When consulting a tax adviser, be certain that he or she has expertise in the Tax Code sections applicable to your tax concerns. [END SIDE NOTE] TAXATION ---------------------------------------------- INTRODUCTION This section discusses our understanding of current federal income tax laws affecting the contracts. You should keep the following in mind when reading it: -- Your tax position (or the tax position of the designated beneficiary, as applicable) determines federal taxation of amounts held or paid out under the contract; -- Tax laws change. It is possible that a change in the future could affect contracts issued in the past; -- This section addresses federal income tax rules and does not discuss federal estate and gift tax implications, state and local taxes or any other tax provisions; and -- We do not make any guarantee about the tax treatment of the contract or transaction involving the contract. We do not intend this information to be tax advice. For advice about the effect of federal income taxes or any other taxes on amounts held or paid out under the contract, consult a tax adviser. For more comprehensive information, contact the Internal Revenue Service. THE CONTRACT The contracts are designed to provide retirement benefits to participants under the SUNY Plan. Payments made under Tax Code sections 401(a), 414(h) and 403(b) are permitted under the contracts. SUNY and participants are responsible for determining that contributions, distributions and other transactions satisfy applicable laws. Legal counsel and a tax adviser should be consulted regarding the suitability of the contract. If the contract is purchased in conjunction with a retirement plan, the plan is not a part of the contract and we are not bound by the plan's terms or conditions. WITHDRAWALS AND OTHER DISTRIBUTIONS Certain tax rules apply to distributions from the contracts. A distribution is any amount taken from the contract including withdrawals, income phase payments, rollovers, exchanges and death benefit proceeds. The tax rules vary according to plan type and the terms and conditions of the plan. We report the taxable portion of all distributions to the IRS. TAXATION OF DISTRIBUTIONS All distributions from a 401(a) or a 403(b) plan are taxed as received unless: -- The distribution is rolled over to another plan eligible to receive rollovers or to a traditional individual retirement annuity/account (IRA) in accordance with the Tax Code; or -- You made after-tax contributions to the plan. In this case, depending upon the type of distribution, a portion of the distribution may be excluded from gross income according to the rules detailed in the Tax Code. In general, payments received by your designated beneficiaries after your death are taxed in the same manner as if you had received those payments. 28 10% PENALTY TAX Under certain circumstances, the Tax Code may impose a 10% penalty tax on the taxable portion of any distribution from a contract used with a 401(a) or 403(b) plan. The 10% penalty tax applies to the taxable portion of a distribution unless one or more of the following have occurred: (a) You have attained age 59 1/2; (b) You have become disabled, as defined in the Tax Code; (c) You have died; (d) You have separated from service with the plan sponsor at or after age 55; (e) The distribution is rolled over into another eligible plan or to an IRA in accordance with the Tax Code; (f) The distribution is made in substantially equal periodic payments (at least annually) over your life or life expectancy or the joint lives or joint life expectancies of you and your designated beneficiary and you have had a separation from service with the plan sponsor; or (g) The distribution is made due to an IRS levy upon your account. In addition, the penalty tax does not apply for the amount of a distribution equal to unreimbursed medical expenses incurred by you that qualify for deduction as specified in the Tax Code. WITHHOLDING FOR FEDERAL INCOME TAX LIABILITY Any taxable distributions under the contracts are generally subject to withholding. Federal income tax liability rates vary according to the type of distribution and the recipient's tax status. Generally, distributions from these plans are subject to a mandatory 20% federal income tax withholding. However, you or a designated beneficiary may elect not to have tax withheld from certain distributions. If you or your designated beneficiary is a non-resident alien, then any withholding is governed by Tax Code section 1441 based on the individual's citizenship, the country of domicile and treaty status. MINIMUM DISTRIBUTION REQUIREMENTS To avoid certain tax penalties, you and any designated beneficiary must meet the minimum distribution requirements imposed by the Tax Code. These rules may dictate one or more of the following: -- Start date for distributions; -- The time period in which all amounts in your account(s) must be distributed; or -- Distribution amounts. START DATE. Generally, you must begin receiving distributions by April 1 of the calendar year following the calendar year in which you attain age 70 1/2 or retire, whichever occurs later, unless under 403(b) plans, if the Company maintains separate records of amounts held as of December 31, 1986. In this case, distribution of these amounts generally must begin by the end of the calendar year in which you attain age 75 or retire, if later. However, if you take any distributions in excess of the minimum required amount, then special rules require that some or all of the December 31, 1986 balance be distributed earlier. TIME PERIOD. We must pay out distributions from the contracts over one of the following time periods: -- Over your life or the joint lives of you and your designated beneficiary; or 29 -- Over a period not greater than your life expectancy or the joint life expectancies of you and your designated beneficiary. 50% EXCISE TAX. If you fail to receive the minimum required distribution for any tax year, a 50% excise tax is imposed on the required amount that was not distributed. MINIMUM DISTRIBUTION OF DEATH BENEFIT PROCEEDS. Different distribution requirements apply if your death occurs: -- After you begin receiving minimum distributions under the contract; or -- Before you begin receiving such distributions. If your death occurs after you begin receiving minimum distributions under the contract, distributions must be made at least as rapidly as under the method in effect at the time of your death. Tax Code section 401(a)(9) provides specific rules for calculating the minimum required distributions at your death. If your death occurs before you begin receiving minimum distributions under the contract, your entire balance must be distributed by December 31 of the calendar year containing the fifth anniversary of the date of your death. For example: If you die September 1, 2002, your entire balance must be distributed to the designated beneficiary by December 31, 2007. However, if the distribution begins by December 31 of the calendar year following the calendar year of your death, then payments may be made in either of the following time-frames: -- Over the life of the designated beneficiary; or -- Over a period not extending beyond the life expectancy of the designated beneficiary. START DATES FOR SPOUSAL DESIGNATED BENEFICIARIES. If the designated beneficiary is your spouse, the distribution must begin on or before the later of the following: -- December 31 of the calendar year following the calendar year of your death; or -- December 31 of the calendar year in which you would have attained age 70 1/2. ASSIGNMENT OR TRANSFER OF CONTRACTS Adverse tax consequences to the plan and/or to you may result if your beneficial interest in the contract is assigned or transferred to persons other than: a plan participant as a means to provide benefit payments; an alternate payee under a qualified domestic relations order in accordance with Tax Code section 414(p); or to the Company as collateral for a loan. EXCLUSION FROM GROSS INCOME In order to be excludable from gross income for federal income tax purposes, total annual contributions made by you and your employer cannot exceed, generally, the lesser of 100% of your compensation or $40,000. Compensation means your compensation from the employer sponsoring the plan and, for years beginning after December 31, 1997, includes any elective deferrals under Tax Code section 402(g) and any amounts not includible in gross income under Tax Code sections 125 or 457. This limit applies to your contributions as well as to any contributions made by your employer on your behalf. An additional limit specifically limits your salary reduction contributions to a 403(b) plan to generally no more than $11,000 in 2002. This limit is scheduled to increase as follows: $12,000 in 2003; $13,000 in 2004; $14,000 in 2005; $15,000 in 2006. 30 After 2006, contribution limits will be subject to indexing. Your own limit may be higher or lower, depending upon certain conditions. Payments to your account(s) will be excluded from your federal gross income only if the plan meets certain nondiscrimination requirements. CATCH-UP CONTRIBUTIONS. Notwithstanding the contribution limit provided for above, for any plan year beginning on or after January 1, 2002, a participant in a 403(b) plan who is at least age 50 by the end of the plan year may contribute an additional amount not to exceed the lesser of: (a) $1,000 as adjusted under Code Section 414(v)(2)(B) and (C) or (b) the participant's compensation for the year reduced by any other elective deferrals of the participant for the year. An additional catch-up contribution may be available. For advice on using the catch-up contribution provisions, please consult with your tax advisor. Under Tax Code section 403(b), contributions made by public school systems or nonprofit healthcare organizations and other Tax Code section 501(c)(3) tax exempt organizations to purchase annuity contracts for their employees are generally excludable from the gross income of the employee. In order to be excludable from gross income, total annual contributions made by you and your employer to a 403(b) plan cannot exceed the limits set by the Tax Code. RULES SPECIFIC TO CERTAIN PLANS 401(A) PLANS. Tax Code section 401(a) permits certain employers to establish various types of retirement plans for employees, and permits self-employed individuals to establish various types of retirement plans for themselves and for their employees. These retirement plans may permit the purchase of the contracts to accumulate retirement savings under the plans. 414(H) PLANS. Under Tax Code section 414(h), where a governmental employer "picks up" plan contributions otherwise designated as employee contributions, the contributions are treated as employer contributions. The 414(h) contributions are excluded from the employee's taxable income and are not subject to federal income tax withholding. RESTRICTIONS ON DISTRIBUTIONS The SUNY Plan permitted only employee after-tax and employer contributions to the 403(b) plan. The Tax Code imposes no restrictions on distribution of employee after-tax contributions or employer contributions. TAXATION OF GAINS PRIOR TO DISTRIBUTION You will generally not pay taxes on any earnings from the annuity contract described in this prospectus until they are withdrawn. Tax-qualified retirement arrangements under Tax Code sections 401(a), 414(h) and 403(b) also generally defer payment of taxes on earnings until they are withdrawn. (See "Taxation of Distributions" earlier in this "Taxation" section for a discussion of how distributions under the various types of plans are taxed.) When an annuity contract is used to fund one of these tax-qualified retirement arrangements, you should know that the annuity contract does not provide any additional tax deferral of earnings beyond the tax deferral provided by the tax-qualified retirement arrangement. However, annuities do provide other features and benefits which may be valuable to you. You should discuss your alternatives with your financial representative. 31 Additionally, although earnings under the contract are generally not taxed until withdrawn, the IRS has stated in published rulings that a variable contract owner, including participants under Code section 403(b) plans, will be considered the owner of separate account assets if the contract owner possesses incidents of investment control over the assets. In these circumstances, income and gains from the separate account assets would be currently includible in the variable contract owner's gross income. The Treasury announced that it will issue guidance regarding the extent to which owners could direct their investments among subaccounts without being treated as owners of the underlying assets of the separate account. It is possible that the Treasury's position, when announced, may adversely affect the tax treatment of existing contracts. The Company therefore reserves the right to modify the contract as necessary to attempt to prevent the contract owner from being considered the federal tax owner of a pro rata share of the assets of the separate account. TAXATION OF THE COMPANY We are taxed as a life insurance company under the Tax Code. Variable Annuity Separate Account C is not a separate entity from us. Therefore, it is not taxed separately as a "regulated investment company", but is taxed as part of the Company. We automatically apply investment income and capital gains attributable to the separate account to increase reserves under the contracts. Because of this, under existing federal tax law we believe that any such income and gains will not be taxed to the extent that such income and gains are applied to increase reserves under the contracts. In addition, any foreign tax credits attributable to the separate account will be first used to reduce any income taxes imposed on the separate account before being used by the Company. In summary, we do not expect that we will incur any federal income tax liability attributable to the separate account and we do not intend to make any provision for such taxes. However, changes in federal tax laws and/or their interpretation may result in our being taxed on income or gains attributable to the separate account. In this case, we may impose a charge against the separate account (with respect to some or all of the contracts) to set aside provisions to pay such taxes. We may deduct this amount from the separate account, including from your account value invested in the subaccounts. OTHER TOPICS ---------------------------------------------- THE COMPANY ING Life Insurance and Annuity Company (the Company, we, us, our) issues the contracts described in this prospectus and is responsible for providing each contract's insurance and annuity benefits. We are a stock life insurance company organized under the insurance laws of the State of Connecticut in 1976 and an indirect wholly-owned subsidiary of ING Groep N.V., a global financial institution active in the fields of insurance, banking and asset management. Through a merger, our operations include the business of Aetna Variable Annuity Life Insurance Company (formerly known as Participating Annuity Life Insurance Company, an Arkansas life insurance company organized in 1954). Prior to May 1, 2002, the Company was known as Aetna Life Insurance and Annuity Company. 32 We are engaged in the business of issuing life insurance and annuities. Our principal executive offices are located at: 151 Farmington Avenue Hartford, Connecticut 06156 VARIABLE ANNUITY ACCOUNT C We established Variable Annuity Account C (the "separate account") under Connecticut Law in 1976 as a continuation of the separate account established in 1974 under Arkansas law of Aetna Variable Annuity Life Insurance Company. The separate account was established as a segregated asset account to fund variable annuity contracts. The separate account is registered as a unit investment trust under the Investment Company Act of 1940 (the "40 Act"). It also meets the definition of "separate account" under the federal securities laws. The separate account is divided into "subaccounts." These subaccounts invest directly in shares of a pre-assigned fund. Although we hold title to the assets of the separate account, such assets are not chargeable with the liabilities of any other business that we conduct. Income, gains or losses of the separate account are credited to or charged against the assets of the separate account without regard to other income, gains or losses of the Company. All obligations arising under the contracts are obligations of the Company. PERFORMANCE REPORTING We may advertise different types of historical performance for the subaccounts including: -- Standardized average annual total returns; and -- Non-standardized average annual total returns. We may also advertise certain ratings, rankings or other information related to the Company, the subaccounts or the funds. For further details regarding performance reporting and advertising request a Statement of Additional Information at the number listed in "Contract Overview--Questions." STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS. We calculate standardized average annual total returns according to a formula prescribed by the SEC. This shows the percentage return applicable to $1,000 invested in the subaccount over the most recent one, five and 10-year periods. If the investment option was not available for the full period, we give a history from the date money was first received in that option under the separate account. Standardized average annual total returns reflect the deduction of all recurring charges during each period (e.g., mortality and expense risk charges and administrative expense charges). NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS. We calculate non- standardized average annual total returns in a similar manner as that stated above, except that we may also include performance from the Fund's inception date, if that date is earlier than the one we use for standardized returns. VOTING RIGHTS Each of the subaccounts holds shares in a fund and each is entitled to vote at regular and special meetings of that fund. Under our current view of applicable law, we will vote the shares for each subaccount as instructed by persons having a voting interest in the subaccount. Under the contracts described in this prospectus, you have a fully vested interest in the value of your account. Therefore, under the plan you generally have the right to instruct the contract 33 holder how to direct us to vote shares attributable to your account. Currently, we obtain participant voting instructions directly from participants, subject to receipt of authorization from the contract holder to accept such instructions. We will vote shares for which instructions have not been received in the same proportion as those for which we received instructions. Each person who has a voting interest in the separate account will receive periodic reports relating to the funds in which he or she has an interest, as well as any proxy materials and a form on which to give voting instructions. Voting instructions will be solicited by a written communication at least 14 days before the meeting. The number of votes (including fractional votes) any person is entitled to direct will be determined as of the record date set by any fund in which that person invests through the subaccounts. -- During the accumulation phase, the number of votes is equal to the portion of the account value invested in the fund, divided by the net asset value of one share of that fund. -- During the income phase, the number of votes is equal to the portion of reserves set aside for the contract's share of the fund, divided by the net asset value of one share of that fund. CONTRACT DISTRIBUTION The Company's subsidiary, ING Financial Advisers, LLC (IFA) (prior to May 1, 2002, known as Aetna Investment Services, LLC), serves as the principal underwriter for the contracts. IFA, a Delaware limited liability company, is registered as a broker-dealer with the SEC. IFA is also a member of the National Association of Securities Dealers, Inc. (NASD) and the Securities Investor Protection Corporation. IFA's principal office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. The contracts are offered to the public by individuals who are registered representatives of IFA or other broker-dealers which have entered into a selling arrangement with IFA. We refer to IFA and the other broker-dealers selling the contracts as "distributors." All registered representatives selling the contracts must also be licensed as insurance agents for the Company. Broker-dealers which have or may enter into selling agreements with IFA include the following broker-dealers which are affiliated with the Company: Aeltus Capital, Inc. BancWest Investment Services, Inc. Baring Investment Services, Inc. Compulife Investor Services, Inc. Directed Services, Inc. Financial Network Investment Corporation Financial Northeastern Securities, Inc. Granite Investment Services, Inc. Guaranty Brokerage Services, Inc. IFG Network Securities, Inc. ING America Equities, Inc. ING Barings Corp. ING Direct Funds Limited ING DIRECT Securities, Inc. ING Funds Distributor, Inc. ING Furman Selz Financial Services LLC ING TT&S (U.S.) Securities, Inc. Locust Street Securities, Inc. Multi-Financial Securities Corporation PrimeVest Financial Services, Inc. 34 Systematized Benefits Administrators, Inc. United Variable Services, Inc. VESTAX Securities Corporation Washington Square Securities, Inc. COMMISSION PAYMENTS. Persons who offer and sell the contracts may be paid a commission. The maximum percentage amount that may be paid with respect to a given purchase payment is the first-year percentage which ranges from 1% to a maximum of 4% of the first year of payments to an account. Renewal commissions on payments made after the first year and asset-based service fees may also be paid. The average of all commissions and asset-based service fees paid is estimated to equal approximately 4% of the total payments made over the life of an average contract. Some sales personnel may receive various types of non-cash compensation as special sales incentives, including trips and educational and/or business seminars. The total compensation package for sales, supervisory and management personnel of affiliated or related broker-dealers may be positively impacted if the overall amount of investments in the contracts and other products issued or advised by the Company or its affiliates increases over time. We may pay wholesaling fees to certain distributors that may be calculated as a percentage of the commissions paid to distributors or of purchase payments received under the contracts. Sales management personnel may also receive compensation that may be calculated as a percentage of the commissions paid to distributors or of purchase payments received under the contracts. Distributors may also be reimbursed for certain expenses. The names of the distributor and the registered representative responsible for your account are stated in your enrollment materials. THIRD PARTY COMPENSATION ARRANGEMENTS. Occasionally: -- Commissions and fees may be paid to distributors affiliated or associated with the contract holder, you and/or other contract participants; and/or -- The Company may enter into agreements with entities associated with the contract holder, you and/or other participants. Through such agreements, we may pay the entities for certain services in connection with administering the contract. In both these circumstances there may be an understanding that the distributor or entities would endorse us as a provider of the contract. You will be notified if you are purchasing a contract that is subject to these arrangements. TRANSFER OF OWNERSHIP; ASSIGNMENT. No assignment of a contract will be binding on us unless made in writing and sent to us at the Service Center. We will use reasonable procedures to confirm that the assignment is authentic, including verification of signature. If we fail to follow our own procedures, we will be liable for any losses to you directly resulting from the failure. Otherwise, we are not responsible for the validity of any assignment. The rights of the contract holder and the interest of the annuitant and any beneficiary will be subject to the rights of any assignee of record. CONTRACT MODIFICATION We may change the contract as required by federal or state law. In addition, we may, upon 30 days' written notice to the contract holder, make other changes to group contracts that would apply only to individuals who become participants under that Contract after the effective date of such changes. If the group contract holder does not agree to a change, we reserve the right to refuse to establish new accounts under the contract. Certain changes will require the approval of appropriate state or federal regulatory authorities. 35 LEGAL MATTERS AND PROCEEDINGS We are aware of no material legal proceedings pending which involve the separate account as a party or which would materially affect the separate account. The validity of the securities offered by this prospectus has been passed upon by Counsel to the Company. In recent years, a number of companies have been named as defendants in class action lawsuits relating to life insurance sales practices. The Company is a defendant in one such lawsuit, a purported class action which was filed against the Company in the United States District Court for the Middle District of Florida on June 30, 2000, by Helen Reese, Richard Reese, Villere Bergeron, and Alan Eckert (the "Reese Complaint"). The Reese Complaint claims that the Company engaged in unlawful sales practices in marketing life insurance policies. The Company has moved to dismiss the Reese Complaint for failure to state a claim upon which relief can be granted. Certain discovery is under way. The Company intends to defend this action vigorously. The Company also is a party to other litigation and arbitration proceedings in the ordinary course of its business, none of which is expected to have a material adverse effect on the Company. PAYMENT DELAY OR SUSPENSION We reserve the right to suspend or postpone the date of any payment of benefits or values under the following circumstances: (a) on any valuation date when the New York Stock Exchange is closed (except customary weekend and holidays) when trading on the Exchange is restricted; (b) when an emergency exists as determined by the SEC so that disposal of the securities held in the subaccounts is not reasonably practicable or it is not reasonably practicable fairly to determine the value of the subaccount's assets; (c) during any other periods the SEC may by order permit for the protection of investors. The conditions under which restricted trading or an emergency exists shall be determined by the rules and regulations of the SEC. INTENT TO CONFIRM QUARTERLY We will provide confirmation of scheduled transactions quarterly rather than immediately to the participant. 36 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION ---------------------------------------------- The Statement of Additional Information contains more specific information on the separate account and the contract, as well as the financial statements of the separate account and the Company. A list of the contents of the SAI is set forth below: General Information and History Variable Annuity Account C Offering and Purchase of Contracts Performance Data General Average Annual Total Return Quotations Income Phase Payments Sales Material and Advertising Independent Auditors Financial Statements of the Separate Account Financial Statements of ING Life Insurance and Annuity Company and Subsidiaries You may request an SAI by calling the Service Center at the number listed in "Contract Overview--Questions." 37 APPENDIX I GUARANTEED ACCUMULATION ACCOUNT ------------------------------------------------------------------ The Guaranteed Accumulation Account (GAA) is a fixed interest option that may be available during the accumulation phase under the contracts. This appendix is only a summary of certain facts about GAA. Please read the GAA prospectus before investing in this option. GENERAL DISCLOSURE. Amounts that you invest in GAA will earn a guaranteed interest rate if amounts are left in GAA for the specified period of time. If you withdraw or transfer those amounts before the specified period of time has elapsed, we may apply a "market value adjustment," which may be positive or negative. When you decide to invest money in GAA, you will want to contact your representative or the Company to learn: -- The interest rate we will apply to the amounts that you invest in GAA. We change this rate periodically, so be certain you know what rate we guarantee on the day your account dollars are invested into GAA. -- The period of time your account dollars need to remain in GAA in order to earn that rate. You are required to leave your account dollars in GAA for a specified period of time (guaranteed term), in order to earn the guaranteed interest rate. DEPOSIT PERIODS. A deposit period is the time during which we offer a specific interest rate if you deposit dollars for a certain guaranteed term. For a particular interest rate and guaranteed term to apply to your account dollars, you must invest them during the deposit period during which that rate and term are offered. INTEREST RATES. We guarantee different interest rates, depending upon when account dollars are invested in GAA. The interest rate we guarantee is an annual effective yield; that means that the rate reflects a full year's interest. We credit interest daily at a rate that will provide the guaranteed annual effective yield over one year. The guaranteed interest rate will never be less than the rate stated in the contract. FEES AND OTHER DEDUCTIONS. If all or a portion of your account value in GAA is withdrawn, you may incur the following: -- Market Value Adjustment (MVA)--as described in this appendix and in the GAA prospectus; or -- Tax Penalties and/or Tax withholding--see "Taxation". We do not make deductions from amounts in GAA to cover mortality and expense risks. Rather, we consider these risks when determining the credited rate. MARKET VALUE ADJUSTMENT (MVA). If you withdraw or transfer your account value from GAA before the guaranteed term is completed, an MVA may apply. The MVA reflects the change in the value of the investment due to changes in interest rates since the date of deposit. The MVA may be positive or negative. -- If interest rates at the time of withdrawal have increased since the date of deposit, the value of the investment decreases and the MVA will be negative. This could result in your receiving less than the amount you paid into GAA. -- If interest rates at the time of withdrawal have decreased since the date of deposit, the value of the investment increases and the MVA will be positive. GUARANTEED TERMS. The guaranteed term is the period of time account dollars must be left in GAA in order to earn the guaranteed interest rate specified for that guaranteed term. We offer different guaranteed terms at different times. Check with your representative or the Company to learn the details about the guaranteed term(s) currently being offered. In general, we offer the following guaranteed terms: -- Short-term--three years or fewer; and -- Long-term--ten years or less, but greater than three years. 38 At the end of a guaranteed term, you may: -- Transfer dollars to a new guaranteed term; -- Transfer dollars to other available investment options; or -- Withdraw dollars. Deductions may apply to withdrawals. See "Fees and Other Deductions" in this section. TRANSFER OF ACCOUNT DOLLARS. Generally, account dollars invested in GAA may be transferred among guaranteed terms offered through GAA, and/or to other investment options offered through the contract. However, transfers may not be made during the deposit period in which your account dollars are invested in GAA or for 90 days after the close of that deposit period. We will apply an MVA to transfers made before the end of a guaranteed term. INCOME PHASE. GAA can not be used as an investment option during the income phase. However, you may notify us at least 30 days in advance to elect a variable payment option and to transfer your GAA account dollars to any of the subaccounts available during the income phase. REINVESTING AMOUNTS WITHDRAWN FROM GAA. If amounts are withdrawn from GAA and then reinvested in GAA, we will apply the reinvested amount to the current deposit period. This means that the guaranteed annual interest rate, and guaranteed terms available on the date of reinvestment will apply. Amounts will be reinvested proportionately in the same way as they were allocated before withdrawal. Your account value will not be credited for any negative MVA that was deducted at the time of withdrawal. 39 APPENDIX II FIXED PLUS ACCOUNT ------------------------------------------------------------------ The Fixed Plus Account is an investment option available under the contracts. Amounts allocated to the Fixed Plus Account are held in the Company's general account which supports insurance and annuity obligations. Additional information about this option may be found in the contract. GENERAL DISCLOSURE. Interests in the Fixed Plus Account have not been registered with the SEC in reliance on exemptions under the Securities Act of 1933, as amended. Disclosure in this prospectus about the Fixed Plus Account may be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of the statements. Disclosure in this Appendix regarding the Fixed Plus Account has not been reviewed by the SEC. INTEREST RATES. The Fixed Plus Account guarantees that amounts allocated to this option will earn the minimum interest rate specified in the contract. We may credit a higher interest rate from time to time, but the rate we credit will never fall below the guaranteed minimum specified in the contract. Among other factors, the safety of the interest rate guarantees depends upon the claims-paying ability of the Company. We credit amounts held in the Fixed Plus Account with a rate 0.25% higher than the then-declared rate beginning in the tenth year after your account was established. Amounts applied to the Fixed Plus Account will earn the interest rate in effect at the time money is applied. Amounts in the Fixed Plus Account will reflect a compound interest rate as credited by us. The rate we quote is an annual effective yield. We do not make deductions from amounts in the Fixed Plus Account to cover mortality and expense risks. We consider these risks in determining the credited rate. Our determination of credited interest rates reflects a number of factors, including mortality and expense risks, interest rate guarantees, the investment income earned on invested assets and the amortization of any capital gains and/or losses realized on the sale of invested assets. Under this option, we assume the risk of investment gain or loss by guaranteeing the amounts you allocate to this option and promising a minimum interest rate and income phase payment. PARTIAL WITHDRAWAL. Partial withdrawals are limited to 20% of the amount held in the Fixed Plus Account on the day we receive a request in good order at the Service Center. The 20% limit is reduced by any Fixed Plus withdrawals, transfers or income phase payments made in last 12 months. In calculating the 20% limit, we reserve the right to include payments made through a Systematic Distribution Option. FULL WITHDRAWAL. If the contract holder or you, if allowed by the plan, request a full withdrawal of your account value, we will pay any amounts held in the Fixed Plus Account, with interest, in five annual payments equal to: -- One-fifth of the Fixed Plus Account value on the day we receive the request, reduced by any Fixed Plus Account withdrawals, loans, transfers or income phase payments made during the past 12 months; -- One-fourth of the remaining Fixed Plus Account value 12 months later; -- One-third of the remaining Fixed Plus Account value 12 months later; -- One-half of the remaining Fixed Plus Account value 12 months later; and -- The balance of the Fixed Plus Account value 12 months later. A full withdrawal may be canceled at any time before the end of the five-payment period. Once we receive a request for full withdrawal, no further withdrawals or transfers will be permitted from Fixed Plus Account. We will waive the above full withdrawal five-payment period if full withdrawal is made due to any of the following: -- Your death before income phase payments have begun; -- Election of any income phase payment option with fixed payments or a lifetime payment option with variable payments; 40 -- Your account value in the Fixed Plus Account value is $3,500 or less and the amount withdrawn is to be transferred to another investment program under the SUNY Plan provided no withdrawals, transfers or income phase payments have been made from your account within the past 12 months; or -- When the account value is $4,000 or less and paid to you in a lump sum. ALTERNATIVE PAYMENT OF FIXED PLUS ACCOUNT VALUES. As an alternative to the payment of Fixed Plus Account values in five annual payments, the contract holder may instead elect an alternative method of payment. Under the alternative method of payment, within 60 days of the proposed withdrawal date, the contract holder must notify the Company that it intends to surrender the entire contract. Within 30 days after receiving that notice, the Company will tell the contract holder the specific period and interest rate that would apply to a complete surrender of the contract in level, annual payments for a period of up to ten years. Under that payment method, the Company may reduce the interest rate credited to the Fixed Plus Account up to 1.5% from the interest rate being credited upon the date of withdrawal, and the interest rate would remain constant throughout the payment period. When the contract holder receives the specific information from the Company about the alternative method of payment, the contract holder must irrevocably elect in writing to use either the alternative method of payment, or the payment of Fixed Plus Account values in five annual payments. TRANSFERS. Transfers are limited to 20% of the amount held in the Fixed Plus Account on the day a request in good order is received at our Service Center. The 20% limit is reduced by any Fixed Plus Account withdrawals, transfers or income phase payments made in the past 12 months. We reserve the right to include payments made through a Systematic Distribution Option in calculating the 20% limit. The 20% limit will be waived if your account value in Fixed Plus Account is $1,000 or less. INCOME PHASE. Amounts accumulating under the Fixed Plus Account can be transferred to the subaccounts to fund variable lifetime income phase payment options during the income phase. However, Fixed Plus Account values may not be used to fund nonlifetime income options with variable payments. 41 APPENDIX III FUND DESCRIPTIONS ------------------------------------------------------------------ LIST OF FUND NAME CHANGES --------------------------------------------------------------------------------
CURRENT FUND NAME FORMER FUND NAME ING Generation Portfolios, Inc.--ING VP Ascent Portfolio Aetna Generation Portfolios, Inc.--Aetna Ascent VP (Class R Shares) ING VP Balanced Portfolio, Inc. (Class R Shares) Aetna Balanced VP, Inc. ING VP Bond Portfolio (Class R Shares) Aetna Income Shares d/b/a Aetna Bond VP ING Generation Portfolios, Inc.--ING VP Crossroads Aetna Generation Portfolios, Inc.--Aetna Crossroads VP Portfolio (Class R Shares) ING Variable Funds--ING VP Growth and Income Portfolio Aetna Variable Fund d/b/a Aetna Growth and Income VP (Class R Shares) ING Variable Portfolios, Inc.--ING VP Index Plus LargeCap Aetna Variable Portfolios, Inc.--Aetna Index Plus Large Portfolio (Class R Shares) Cap VP ING Variable Portfolios, Inc.--ING VP Index Plus MidCap Aetna Variable Portfolios, Inc.--Aetna Index Plus Mid Cap Portfolio (Class R Shares) VP ING Variable Portfolios, Inc.--ING VP Index Plus SmallCap Aetna Variable Portfolios, Inc.--Aetna Index Plus Small Portfolio (Class R Shares) Cap VP ING Generation Portfolios, Inc.--ING VP Legacy Portfolio Aetna Generation Portfolios, Inc.--Aetna Legacy VP (Class R Shares) ING VP Money Market Portfolio (Class R Shares) Aetna Variable Encore Fund d/b/a Aetna Money Market VP ING Variable Portfolios, Inc.--ING VP Value Opportunity Aetna Variable Portfolios, Inc.--Aetna Value Opportunity Portfolio (Class R Shares) VP ING VP Emerging Markets Fund Pilgrim Emerging Markets Fund, Inc. ING VP Natural Resources Trust Pilgrim Natural Resources Trust ING Partners, Inc.--ING MFS Capital Opportunities Portfolio Partners, Inc. (PPI) MFS Capital Opportunities Portfolio (Initial Class) Portfolio (Initial Class) ING Partners, Inc.--ING MFS Emerging Equities Portfolio Portfolio Partners, Inc. (PPI) MFS Emerging Equities (Initial Class) Portfolio (Initial Class) ING Partners, Inc.--ING MFS Research Portfolio (Initial Portfolio Partners, Inc. (PPI) MFS Research Growth Class) Portfolio (Initial Class) ING Partners, Inc.--ING Scudder International Growth Portfolio Partners, Inc. (PPI) Scudder International Portfolio (Initial Class) Growth Portfolio (Initial Class) ING Partners, Inc.--ING T. Rowe Price Growth Equity Portfolio Partners, Inc. (PPI) T. Rowe Price Growth Portfolio (Initial Class) Equity Portfolio (Initial Class)
42 FUND DESCRIPTIONS -------------------------------------------------------------------------------- THE INVESTMENT RESULTS OF THE MUTUAL FUNDS (FUNDS) ARE LIKELY TO DIFFER SIGNIFICANTLY AND THERE IS NO ASSURANCE THAT ANY OF THE FUNDS WILL ACHIEVE THEIR RESPECTIVE INVESTMENT OBJECTIVES. SHARES OF THE FUNDS WILL RISE AND FALL IN VALUE AND YOU COULD LOSE MONEY BY INVESTING IN THE FUNDS. SHARES OF THE FUNDS ARE NOT BANK DEPOSITS AND ARE NOT GUARANTEED, ENDORSED OR INSURED BY ANY FINANCIAL INSTITUTION, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. EXCEPT AS NOTED, ALL FUNDS ARE DIVERSIFIED, AS DEFINED UNDER THE INVESTMENT COMPANY ACT OF 1940. PLEASE REFER TO THE FUND PROSPECTUSES FOR ADDITIONAL INFORMATION. FUND PROSPECTUSES MAY BE OBTAINED FREE OF CHARGE, FROM OUR HOME OFFICE AT THE ADDRESS AND TELEPHONE NUMBER LISTED IN "CONTRACT OVERVIEW--QUESTIONS", BY ACCESSING THE SEC'S WEB SITE OR BY CONTACTING THE SEC PUBLIC REFERENCE ROOM. CERTAIN FUNDS OFFERED UNDER THE CONTRACTS HAVE INVESTMENT OBJECTIVES AND POLICIES SIMILAR TO OTHER FUNDS MANAGED BY THE FUND'S INVESTMENT ADVISER. THE INVESTMENT RESULTS OF A FUND MAY BE HIGHER OR LOWER THAN THOSE OF OTHER FUNDS MANAGED BY THE SAME ADVISER. THERE IS NO ASSURANCE AND NO REPRESENTATION IS MADE THAT THE INVESTMENT RESULTS OF ANY FUND WILL BE COMPARABLE TO THOSE OF ANOTHER FUND MANAGED BY THE SAME INVESTMENT ADVISER.
INVESTMENT ADVISER/ FUND NAME SUBADVISER INVESTMENT OBJECTIVE ING GENERATION PORTFOLIOS, INC.-- ING Investments, LLC Seeks to provide capital appreciation. Managed for ING VP ASCENT PORTFOLIO (formerly Subadviser: Aeltus investors seeking capital appreciation who generally Aetna Generation Investment have an investment horizon exceeding 15 years and who Portfolios, Inc.--Aetna Ascent Management, Inc. have a high level of risk tolerance. Under normal VP) (Aeltus) market conditions, allocates assets among several (CLASS R SHARES) classes of equities, fixed-income securities (including up to 15% of total assets in high-yield instruments) and money market instruments. The benchmark portfolio is 80% equities and 20% fixed-income under neutral market conditions. ING VP BALANCED PORTFOLIO, INC. ING Investments, LLC Seeks to maximize investment return, consistent with (formerly Aetna Balanced Subadviser: Aeltus reasonable safety of principal, by investing in a VP, Inc.) Investment diversified portfolio of one or more of the following (CLASS R SHARES) Management, Inc. asset classes: stocks, bonds and cash equivalents, (Aeltus) based on the judgment of the Fund's management, of which of those sectors or mix thereof offers the best investment prospects. Typically, maintains approximately 60% of total assets in equities and approximately 40% of total assets in debt (including money market instruments). ING VP BOND PORTFOLIO (formerly ING Investments, LLC Seeks to maximize total return as is consistent with Aetna Income Shares d/b/a Aetna Subadviser: Aeltus reasonable risk, through investment in a diversified Bond VP) Investment portfolio consisting of debt securities. Under normal (CLASS R SHARES) Management, Inc. market conditions, invests at least 80% of net assets (Aeltus) in high-grade corporate bonds, mortgage-related and other asset-backed securities, and securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities. ING GENERATION PORTFOLIOS, INC.-- ING Investments, LLC Seeks to provide total return (i.e., income and capital ING VP CROSSROADS PORTFOLIO Subadviser: Aeltus appreciation, both realized and unrealized). Managed (formerly Aetna Generation Investment for investors seeking a balance between income and Portfolios, Inc.--Aetna Management, Inc. capital appreciation who generally have an investment Crossroads VP) (Aeltus) horizon exceeding ten years and who have a moderate (CLASS R SHARES) level of risk tolerance. Under normal market conditions, allocates assets among several classes of equities, fixed-income securities (including up to 15% of total assets in high-yield instruments) and money market instruments. The benchmark portfolio is 60% equities and 40% fixed-income under neutral market conditions.
43
INVESTMENT ADVISER/ FUND NAME SUBADVISER INVESTMENT OBJECTIVE ING VARIABLE FUNDS--ING VP GROWTH ING Investments, LLC Seeks to maximize total return through investments in a AND INCOME PORTFOLIO (formerly Subadviser: Aeltus diversified portfolio of common stocks and securities Aetna Variable Fund d/b/a Aetna Investment convertible into common stock. Under normal market Growth and Income VP) Management, Inc. conditions, invests at least 65% of total assets in (CLASS R SHARES) (Aeltus) common stocks that Aeltus (the Portfolio's subadviser) believes have significant potential for capital appreciation or income growth or both. ING VARIABLE PORTFOLIOS, INC.--ING ING Investments, LLC Seeks to outperform the total return performance of the VP INDEX PLUS LARGECAP PORTFOLIO Subadviser: Aeltus Standard & Poor's 500 Composite Index (S&P 500), while (formerly Aetna Variable Investment maintaining a market level of risk. Invests at least Portfolios, Inc.--Aetna Index Management, Inc. 80% of net assets in stocks included in the S&P 500. Plus Large Cap VP) (Aeltus) The S&P 500 is a stock market index comprised of common (CLASS R SHARES) stocks of 500 of the largest companies traded in the U.S. and selected by Standard & Poor's Corporation. ING VARIABLE PORTFOLIOS, INC.--ING ING Investments, LLC Seeks to outperform the total return performance of the VP INDEX PLUS MIDCAP PORTFOLIO Subadviser: Aeltus Standard & Poor's MidCap 400 Index (S&P 400), while (formerly Aetna Variable Investment maintaining a market level of risk. Invests at least Portfolios, Inc.--Aetna Index Management, Inc. 80% of net assets in stocks included in the S&P 400. Plus Mid Cap VP) (Aeltus) The S&P 400 is a stock market index comprised of common (CLASS R SHARES) stocks of 400 mid- capitalization companies traded in the U.S. and selected by Standard & Poor's Corporation. ING VARIABLE PORTFOLIOS, INC.--ING ING Investments, LLC Seeks to outperform the total return performance of the VP INDEX PLUS SMALLCAP PORTFOLIO Subadviser: Aeltus Standard and Poor's SmallCap 600 Index (S&P 600), while (formerly Aetna Variable Investment maintaining a market level of risk. Invests at least Portfolios, Inc.--Aetna Index Management, Inc. 80% of net assets in stocks included in the S&P 600. Plus Small Cap VP) (Aeltus) The S&P 600 is a stock market index comprised of common (CLASS R SHARES) stocks of 600 small-capitalization companies traded in the U.S. and selected by Standard & Poor's Corporation. ING GENERATION PORTFOLIOS, INC.-- ING Investments, LLC Seeks to provide total return consistent with ING VP LEGACY PORTFOLIO (formerly Subadviser: Aeltus preservation of capital. Managed for investors Aetna Generation Investment primarily seeking total return consistent with capital Portfolios, Inc.--Aetna Legacy Management, Inc. preservation who generally have an investment horizon VP) (Aeltus) exceeding five years and who have a low level of risk (CLASS R SHARES) tolerance. Under normal market conditions, allocates assets among several classes of equities, fixed-income securities (including up to 15% of total assets in high-yield instruments) and money market instruments. The benchmark portfolio is 40% equities and 60% fixed-income under neutral market conditions. ING VP MONEY MARKET PORTFOLIO ING Investments, LLC Seeks to provide high current return, consistent with (formerly Aetna Variable Encore Subadviser: Aeltus preservation of capital and liquidity, through Fund d/b/a Aetna Money Market VP) Investment investment in high-quality money market instruments. (CLASS R SHARES) Management, Inc. Invests in a diversified portfolio of high-quality (Aeltus) fixed income securities denominated in U.S. dollars, with short remaining maturities. ING VARIABLE PORTFOLIOS, INC.--ING ING Investments, LLC Seeks growth of capital primarily through investment in VP VALUE OPPORTUNITY PORTFOLIO Subadviser: Aeltus a diversified portfolio of common stocks and securities (formerly Aetna Variable Investment convertible into common stock. Under normal market Portfolios, Inc.--Aetna Value Management, Inc. conditions, invests at least 65% of total assets in Opportunity VP) (Aeltus) common stocks and securities convertible into common (CLASS R SHARES) stock.
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INVESTMENT ADVISER/ FUND NAME SUBADVISER INVESTMENT OBJECTIVE ING VP EMERGING MARKETS FUND ING Investments, LLC Seeks long-term growth of capital primarily through (formerly Pilgrim Emerging (ING Investments) investment in equity securities and equity equivalents Markets Fund, Inc.) (formerly ING Pilgrim of emerging market companies. Normally invests at least Investments, LLC) 80% of its assets in securities of issuers located in at least three countries which generally are considered to be emerging market countries by the international financial community. May invest up to 20% of its assets in securities of U.S. and other developed market issuers, including investment-grade debt securities of U.S. issuers. Under normal conditions, invests at least 75% of total assets in common and preferred stocks, warrants and convertible securities. May also lend portfolio securities, up to 33 1/3% of total assets. ING VP NATURAL RESOURCES TRUST ING Investments, LLC A NONDIVERSIFIED Portfolio that seeks long-term growth (formerly Pilgrim Natural (ING Investments) of capital primarily through investment in common Resources Trust) (formerly ING Pilgrim stocks of companies that own or develop natural Investments, LLC) resources and other basic commodities, or supply goods and services to such companies. Current income will not be a factor. Total return will consist primarily of capital appreciation. Normally invests at least 80% of assets in companies with substantial natural resource assets. May also lend portfolio securities, up to 33 1/3% of its total assets. ING PARTNERS, INC.--ING MFS CAPITAL ING Life Insurance and Seeks capital appreciation. Invests primarily (at least OPPORTUNITIES PORTFOLIO (formerly Annuity Company 65% of net assets) in common stocks and related Portfolio Partners, Inc. (PPI) (formerly Aetna Life securities, such as preferred stocks, convertible MFS Capital Opportunities Insurance and Annuity securities and depositary receipts. Portfolio) Company) (INITIAL CLASS) Subadviser: Massachusetts Financial Services Company ING PARTNERS, INC.--ING MFS ING Life Insurance and Seeks long-term growth of capital. Invests primarily EMERGING EQUITIES PORTFOLIO Annuity Company (at least 80% of net assets under normal circumstances) (formerly Portfolio (formerly Aetna Life in common stocks and related securities, such as Partners, Inc. (PPI) MFS Insurance and Annuity preferred stocks, convertible securities and depositary Emerging Equities Portfolio) Company) receipts, of emerging growth companies. (INITIAL CLASS) Subadviser: Massachusetts Financial Services Company ING PARTNERS, INC.--ING MFS ING Life Insurance and Seeks long-term growth of capital and future income. RESEARCH PORTFOLIO (formerly Annuity Company Invests primarily (at least 80% of total assets) in Portfolio Partners, Inc. (PPI) (formerly Aetna Life common stocks and related securities, such as preferred MFS Research Growth Portfolio) Insurance and Annuity stocks, convertible securities and depositary receipts. (INITIAL CLASS) Company) Subadviser: Massachusetts Financial Services Company
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INVESTMENT ADVISER/ FUND NAME SUBADVISER INVESTMENT OBJECTIVE ING PARTNERS, INC.--ING SCUDDER ING Life Insurance and Seeks long-term growth of capital. Invests primarily INTERNATIONAL GROWTH PORTFOLIO Annuity Company (at least 65% of total assets) in the equity securities (formerly Portfolio (formerly Aetna Life of foreign companies that the subadviser believes have Partners, Inc. (PPI) Scudder Insurance and Annuity high growth potential. Will normally invest in International Growth Portfolio) Company) securities of at least three different countries other (INITIAL CLASS) Subadviser: Deutsche than the U.S. and will invest in securities in both Investment Management developed and developing markets. Americas Inc. (Deutsche) ING PARTNERS, INC.--ING T. ROWE ING Life Insurance and Seeks long-term capital growth, and secondarily, PRICE GROWTH EQUITY PORTFOLIO Annuity Company increasing dividend income. Invests primarily (at least (formerly Portfolio (formerly Aetna Life 80% of net assets under normal circumstances) in common Partners, Inc. (PPI) T. Rowe Insurance and Annuity stocks. Concentrates its investments in growth Price Growth Equity Portfolio) Company) companies. Investments in foreign securities are (INITIAL CLASS) Subadviser: T. Rowe limited to 30% of total assets. Price Associates, Inc. CALVERT VARIABLE Calvert Asset Seeks to achieve a competitive total return through an SERIES, INC.--CALVERT SOCIAL Management actively managed NONDIVERSIFIED portfolio of stocks, BALANCED PORTFOLIO Company, Inc. bonds and money market instruments which offer income Subadviser: NCM and capital growth opportunity and which satisfy the Capital Management investment and social criteria for the Portfolio. Group, Inc. Typically invests about 60% of its assets in stocks and 40% in bonds or other fixed-income investments. Stock investments are primarily common stock in large-cap companies, while the fixed-income investments are primarily a wide variety of investment grade bonds. FIDELITY-REGISTERED TRADEMARK- Fidelity Management & Seeks to obtain high total return with reduced risk VARIABLE INSURANCE Research Company over the long term by allocating its assets among PRODUCTS--FIDELITY-REGISTERED Subadvisers: Fidelity stocks, bonds and short-term instruments. Assets are TRADEMARK- VIP ASSET MANAGER(SM) Management & Research allocated among stocks, bonds, and short-term and money PORTFOLIO (U.K.) Inc.; Fidelity market instruments, maintaining a neutral mix over time (INITIAL CLASS) Management & Research of 50% of assets in stocks, 40% of assets in bonds, and (Far East) Inc.; 10% of assets in short-term and money market Fidelity Investments instruments. Japan Limited; Fidelity Investments Money Management, Inc.; FMR Co., Inc. FIDELITY-REGISTERED TRADEMARK- Fidelity Management & Seeks long-term capital appreciation. Normally invests VARIABLE INSURANCE Research Company primarily in common stocks of companies whose value the PRODUCTS--FIDELITY-REGISTERED Subadvisers: Fidelity Portfolio's investment adviser believes is not fully TRADEMARK- VIP Management & Research recognized by the public. CONTRAFUND-REGISTERED TRADEMARK- (U.K.) Inc.; Fidelity PORTFOLIO Management & Research (INITIAL CLASS) (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc.
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INVESTMENT ADVISER/ FUND NAME SUBADVISER INVESTMENT OBJECTIVE FIDELITY-REGISTERED TRADEMARK- Fidelity Management & Seeks reasonable income. Also considers the potential VARIABLE INSURANCE Research Company for capital appreciation. Seeks to achieve a yield PRODUCTS--FIDELITY-REGISTERED Subadviser: FMR which exceeds the composite yield on the securities TRADEMARK- VIP EQUITY-INCOME Co., Inc. comprising the Standard & Poor's 500 Index. Normally PORTFOLIO invests at least 80% of total assets in (INITIAL CLASS) income-producing equity securities, which tends to lead to investments in large cap "value" stocks. FIDELITY-REGISTERED TRADEMARK- Fidelity Management & Seeks a high level of current income while also VARIABLE INSURANCE Research Company considering growth of capital. Normally invests PRODUCTS--FIDELITY-REGISTERED Subadvisers: Fidelity primarily in income- producing debt securities, TRADEMARK- VIP HIGH INCOME Management & Research preferred stocks and convertible securities, with an PORTFOLIO (U.K.) Inc.; Fidelity emphasis on lower-quality debt securities. (INITIAL CLASS) Management & Research (Far East) Inc.; Fidelity Investments Japan Limited; FMR Co., Inc. FIDELITY-REGISTERED Fidelity Management & Seeks investment results that correspond to the total TRADEMARK-VARIABLE INSURANCE Research Company return of common stocks publicly traded in the United PRODUCTS--FIDELITY-REGISTERED Subadviser: Deutsche States, as represented by the Standard & Poor's 500 TRADEMARK- VIP INDEX 500 Asset Index (S&P 500). Normally invests at least 80% of PORTFOLIO Management, Inc. assets in common stocks included in the S&P 500. (INITIAL CLASS) JANUS ASPEN SERIES--AGGRESSIVE Janus Capital A NONDIVERSIFIED Portfolio that seeks long-term growth GROWTH PORTFOLIO of capital. Invests primarily in common stocks selected (INSTITUTIONAL SHARES) for their growth potential and normally invests at least 50% of its equity assets in medium-sized companies. Medium-sized companies are those whose market capitalization falls within the range of companies in the Standard and Poor's (S&P) MidCap 400 Index. JANUS ASPEN SERIES--GROWTH Janus Capital Seeks long-term growth of capital in a manner PORTFOLIO consistent with the preservation of capital. Invests (INSTITUTIONAL SHARES) primarily in common stocks selected for their growth potential. Although it can invest in companies of any size, it generally invests in larger, more established companies. JANUS ASPEN SERIES--WORLDWIDE Janus Capital Seeks long-term growth of capital in a manner GROWTH PORTFOLIO consistent with the preservation of capital. Invests (INSTITUTIONAL SHARES) primarily in common stocks of companies of any size located throughout the world. Normally invests in issuers from at least five different countries, including the United States. May at times invest in fewer than five countries or even in a single country. MFS-REGISTERED TRADEMARK- VARIABLE MFS Investment Seeks mainly to provide above-average income (compared INSURANCE TRUST(SM)-- Management-Registered to a portfolio invested entirely in equity securities) MFS-REGISTERED TRADEMARK- TOTAL Trademark- (MFS) consistent with the prudent employment of capital, and RETURN SERIES secondarily to provide a reasonable opportunity for (INITIAL CLASS) growth of capital and income. Under normal market conditions, invests at least 40%, but not more than 75%, of net assets in common stocks and related securities (referred to as equity securities) such as preferred stock; bonds, warrants or rights convertible into stock; and depositary receipts for those securities. Invests at least 25% of net assets in non-convertible fixed income securities.
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INVESTMENT ADVISER/ FUND NAME SUBADVISER INVESTMENT OBJECTIVE OPPENHEIMER VARIABLE ACCOUNT OppenheimerFunds, Inc. Seeks long-term capital appreciation by investing a FUNDS--OPPENHEIMER GLOBAL substantial portion of assets in securities of foreign SECURITIES FUND/VA issuers, "growth-type" companies, cyclical industries and special situations that are considered to have appreciation possibilities. Invests mainly in common stocks and can also buy other equity securities, including preferred stocks and convertible securities in the U.S. and foreign countries. OPPENHEIMER VARIABLE ACCOUNT OppenheimerFunds, Inc. Seeks a high level of current income principally FUNDS--OPPENHEIMER STRATEGIC BOND derived from interest on debt securities. Invests FUND/VA mainly in debt securities of issuers in three market sectors: foreign governments and companies, U.S. Government securities, and lower-grade high-yield securities of U.S. and foreign companies.
48 APPENDIX IV CONDENSED FINANCIAL INFORMATION ------------------------------------------------------------------ (SELECTED DATA FOR ACCUMULATION UNITS OUTSTANDING THROUGHOUT EACH PERIOD) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR THE PERIOD ENDED DECEMBER 31, 2001 IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH HAVE BEEN AUDITED BY ERNST & YOUNG LLP, INDEPENDENT AUDITORS. THE CONDENSED FINANCIAL INFORMATION PRESENTED BELOW FOR EACH OF THE PERIODS IN THE NINE-YEAR PERIOD ENDED DECEMBER 31, 2000 (AS APPLICABLE), IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE SEPARATE ACCOUNT, WHICH HAVE BEEN AUDITED BY OTHER AUDITORS. THE FINANCIAL STATEMENTS AND THE INDEPENDENT AUDITORS' REPORT THEREON FOR THE YEAR ENDED DECEMBER 31, 2001 ARE INCLUDED IN THE STATEMENT OF ADDITIONAL INFORMATION.
2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- ING VP ASCENT PORTFOLIO Value at beginning of period $17.601 $17.940 $15.886 $15.422 $13.291(1) Value at end of period $15.375 $17.601 $17.940 $15.886 $15.422 Number of accumulation units outstanding at end of period 3,336 7,811 33,852 21,430 380 ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $31.429 $32.002 $28.524 $24.700 $20.419 $17.954 Value at end of period $29.731 $31.429 $32.002 $28.524 $24.700 $20.419 Number of accumulation units outstanding at end of period 143,093 163,952 2,155,445 2,294,877 2,160,305 2,716,641 ING VP BOND PORTFOLIO Value at beginning of period $58.190 $53.738 $54.819 $51.330 $47.992 $46.913 Value at end of period $62.490 $58.190 $53.738 $54.819 $51.330 $47.992 Number of accumulation units outstanding at end of period 232,374 155,538 867,416 994,987 959,336 835,724 ING VP CROSSROADS PORTFOLIO Value at beginning of period $16.322 $16.458 $15.120 $14.456 $12.577(1) Value at end of period $14.991 $16.322 $16.458 $15.120 $14.456 Number of accumulation units outstanding at end of period 1,743 1,565 30,738 31,468 873 ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $250.600 $284.994 $245.765 $217.359 $169.448 $137.869 Value at end of period $201.933 $250.600 $284.994 $245.765 $217.359 $169.448 Number of accumulation units outstanding at end of period 25,678 30,796 1,555,542 1,747,097 1,826,355 2,071,139 ING VP INDEX PLUS LARGECAP PORTFOLIO Value at beginning of period $20.618 $23.044 $18.772 $14.444 $14.493(2) Value at end of period $17.588 $20.618 $23.044 $18.772 $14.444 Number of accumulation units outstanding at end of period 971,498 1,114,270 2,748,955 1,302,825 17,771 ING VP INDEX PLUS MIDCAP PORTFOLIO Value at beginning of period $15.357 $12.967 $11.338 $9.928(1) Value at end of period $14.965 $15.357 $12.967 $11.338 Number of accumulation units outstanding at end of period 511,904 572,329 73,984 35,201 ING VP INDEX PLUS SMALLCAP PORTFOLIO Value at beginning of period $10.866 $10.019 $9.157 $10.193(1) Value at end of period $10.989 $10.866 $10.019 $9.157 Number of accumulation units outstanding at end of period 263,320 54,967 118,433 81,388 ING VP LEGACY PORTFOLIO Value at beginning of period $14.862(1) $15.070 $14.248 $13.491 $12.296(3) Value at end of period $15.039 $15.597 $15.070 $14.248 $13.491 Number of accumulation units outstanding at end of period 626 0 46,462 95,526 2,279 ING VP MONEY MARKET PORTFOLIO Value at beginning of period $46.754 $44.501 $42.883 $41.174 $39.528 $37.988 Value at end of period $47.990 $46.754 $44.501 $42.883 $41.174 $39.528 Number of accumulation units outstanding at end of period 459,088 264,427 845,679 564,537 455,502 597,656 ING VP VALUE OPPORTUNITY PORTFOLIO Value at beginning of period $15.536 $14.274 $12.088 $11.472(1) Value at end of period $13.867 $15.536 $14.274 $12.088 Number of accumulation units outstanding at end of period 676,401 668,609 74,768 33,957 1995 1994 1993 1992 ---- ---- ---- ---- ING VP ASCENT PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP BALANCED PORTFOLIO, INC. Value at beginning of period $14.270 $14.519 $13.379 $12.736 Value at end of period $17.954 $14.270 $14.519 $13.379 Number of accumulation units outstanding at end of period 9,193,181 21,990,186 30,784,750 34,802,433 ING VP BOND PORTFOLIO Value at beginning of period $40.173 $42.283 $39.038 $36.789 Value at end of period $46.913 $40.173 $42.283 $39.038 Number of accumulation units outstanding at end of period 2,377,622 5,108,720 8,210,666 8,507,292 ING VP CROSSROADS PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP GROWTH AND INCOME PORTFOLIO Value at beginning of period $105.558 $107.925 $102.383 $97.165 Value at end of period $137.869 $105.558 $107.925 $102.383 Number of accumulation units outstanding at end of period 6,364,000 13,966,072 21,148,863 24,201,565 ING VP INDEX PLUS LARGECAP PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP INDEX PLUS MIDCAP PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP INDEX PLUS SMALLCAP PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP LEGACY PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING VP MONEY MARKET PORTFOLIO Value at beginning of period $36.271 $35.282 $34.619 $33.812 Value at end of period $37.988 $36.271 $35.282 $34.619 Number of accumulation units outstanding at end of period 1,836,260 3,679,802 5,086,515 7,534,662 ING VP VALUE OPPORTUNITY PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period
49 CONDENSED FINANCIAL INFORMATION (CONTINUED) ------------------------------------------------------------------
2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- CALVERT SOCIAL BALANCED PORTFOLIO Value at beginning of period $28.827 $30.131 $27.186 $23.675 $19.965 $17.951 Value at end of period $26.492 $28.827 $30.131 $27.186 $23.675 $19.965 Number of accumulation units outstanding at end of period 67,387 68,715 880,319 917,567 929,282 898,279 FIDELITY-REGISTERED TRADEMARK- VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $20.561 $19.201 $18.285 $16.587 $13.110 $11.617 Value at end of period $19.298 $20.561 $19.201 $18.285 $16.587 $13.110 Number of accumulation units outstanding at end of period 745,163 396,948 2,271,494 2,533,673 2,139,178 1,454,755 FIDELITY-REGISTERED TRADEMARK- VIP HIGH INCOME PORTFOLIO Value at beginning of period $7.379 $9.638 $9.023 $9.995(1) Value at end of period $6.432 $7.379 $9.638 $9.023 Number of accumulation units outstanding at end of period 182,905 172,513 194,440 178,601 FIDELITY-REGISTERED TRADEMARK- VIP ASSET MANAGER-SM- PORTFOLIO Value at beginning of period $17.405 $18.343 $16.719 $14.715 $12.349 $10.912 Value at end of period $16.484 $17.405 $18.343 $16.719 $14.715 $12.349 Number of accumulation units outstanding at end of period 103,286 121,872 1,511,789 1,596,943 1,576,603 1,384,927 FIDELITY-REGISTERED TRADEMARK- VIP CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO Value at beginning of period $25.097 $27.214 $22.177 $17.276 $14.092 $11.763 Value at end of period $21.749 $25.097 $27.214 $22.177 $17.276 $14.092 Number of accumulation units outstanding at end of period 477,544 447,797 3,780,287 3,333,320 2,706,862 1,522,169 FIDELITY-REGISTERED TRADEMARK- VIP INDEX 500 PORTFOLIO Value at beginning of period $25.213 $28.147 $23.650 $18.662 $14.240 $11.740 Value at end of period $21.885 $25.213 $28.147 $23.650 $18.662 $14.240 Number of accumulation units outstanding at end of period 516,580 530,641 4,354,723 3,947,187 3,093,080 1,490,937 JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $36.122 $53.644 $24.098 $18.174 $16.334 $15.323 Value at end of period $21.598 $36.122 $53.644 $24.098 $18.174 $16.334 Number of accumulation units outstanding at end of period 598,743 613,085 3,274,450 2,142,130 1,939,607 1,893,718 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $27.035 $32.036 $22.529 $16.816 $13.872 $11.859 Value at end of period $20.094 $27.035 $32.036 $22.529 $16.816 $13.872 Number of accumulation units outstanding at end of period 693,080 833,491 2,721,885 1,354,047 1,109,942 663,945 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $32.189 $38.648 $23.797 $18.690 $15.493 $12.158 Value at end of period $24.655 $32.189 $38.648 $23.797 $18.690 $15.493 Number of accumulation units outstanding at end of period 1,056,363 1,345,689 5,548,674 4,687,167 3,873,511 2,090,908 MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES Value at beginning of period $12.284 $10.720 $10.531 $10.182(1) Value at end of period $12.161 $12.284 $10.720 $10.531 Number of accumulation units outstanding at end of period 1,049,275 227,449 63,822 36,633 OPPENHEIMER GLOBAL SECURITIES FUND / VA Value at beginning of period $16.737 $16.126 $10.303 $10.077(2) Value at end of period $14.538 $16.737 $16.126 $10.303 Number of accumulation units outstanding at end of period 503,065 568,224 59,571 20,548 OPPENHEIMER STRATEGIC BOND FUND / VA Value at beginning of period $10.226 $10.089 $9.935 $10.055(1) Value at end of period $10.588 $10.226 $10.089 $9.935 Number of accumulation units outstanding at end of period 223,241 153,728 173,219 100,555 1995 1994 1993 1992 ---- ---- ---- ---- CALVERT SOCIAL BALANCED PORTFOLIO Value at beginning of period $13.990 $14.640 $13.726 $12.913 Value at end of period $17.951 $13.990 $14.640 $13.726 Number of accumulation units outstanding at end of period 856,361 743,464 705,415 503,006 FIDELITY-REGISTERED TRADEMARK- VIP EQUITY-INCOME PORTFOLIO Value at beginning of period $10.000(1) Value at end of period $11.617 Number of accumulation units outstanding at end of period 628,582 FIDELITY-REGISTERED TRADEMARK- VIP HIGH INCOME PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period FIDELITY-REGISTERED TRADEMARK- VIP ASSET MANAGER-SM- PORTFOLIO Value at beginning of period $9.447 $10.000(1) Value at end of period $10.912 $9.447 Number of accumulation units outstanding at end of period 1,316,916 1,254,504 FIDELITY-REGISTERED TRADEMARK- VIP CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO Value at beginning of period $10.000(1) Value at end of period $11.763 Number of accumulation units outstanding at end of period 525,476 FIDELITY-REGISTERED TRADEMARK- VIP INDEX 500 PORTFOLIO Value at beginning of period $10.000(1) Value at end of period $11.740 Number of accumulation units outstanding at end of period 290,547 JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO Value at beginning of period $12.169 $10.000(2) Value at end of period $15.323 $12.169 Number of accumulation units outstanding at end of period 1,280,953 393,553 JANUS ASPEN GROWTH PORTFOLIO Value at beginning of period $10.000(2) Value at end of period $11.859 Number of accumulation units outstanding at end of period 109,717 JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO Value at beginning of period $10.000(2) Value at end of period $12.158 Number of accumulation units outstanding at end of period 314,653 MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period OPPENHEIMER GLOBAL SECURITIES FUND / VA Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period OPPENHEIMER STRATEGIC BOND FUND / VA Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period
50 CONDENSED FINANCIAL INFORMATION (CONTINUED) ------------------------------------------------------------------
2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- ING VP EMERGING MARKETS FUND Value at beginning of period $7.244 $12.315 $5.470 $7.715 $8.832 $8.323 Value at end of period $6.408 $7.244 $12.315 $5.470 $7.715 $8.832 Number of accumulation units outstanding at end of period 230,209 220,651 940,817 745,856 750,330 548,618 ING VP NATURAL RESOURCES TRUST Value at beginning of period $15.061 $12.882 $11.433 $14.403 $13.611 $10.862 Value at end of period $12.503 $15.061 $12.882 $11.433 $14.403 $13.611 Number of accumulation units outstanding at end of period 78,861 138,949 437,491 534,962 650,486 587,248 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period $40.144 $43.112 $29.339 $23.440 $23.106(4) Value at end of period $29.829 $40.144 $43.112 $29.339 $23.440 Number of accumulation units outstanding at end of period 488,111 675,846 2,448,587 2,244,308 2,018,219 ING MFS EMERGING EQUITIES PORTFOLIO Value at beginning of period $20.194 $28.710 $19.268 $15.046 $15.236(4) Value at end of period $14.914 $20.194 $28.710 $19.268 $15.046 Number of accumulation units outstanding at end of period 441,170 535,101 3,024,975 3,101,880 2,707,904 ING MFS RESEARCH PORTFOLIO Value at beginning of period $18.363 $17.796 $14.528 $11.960 $12.195(4) Value at end of period $14.347 $18.363 $17.796 $14.528 $11.960 Number of accumulation units outstanding at end of period 145,207 199,271 194,296 1,379,653 232,418 ING SCUDDER INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period $25.876 $32.585 $20.829 $17.709 $17.490(4) Value at end of period $18.672 $25.876 $32.585 $20.829 $17.709 Number of accumulation units outstanding at end of period 140,556 188,647 2,807,485 2,962,631 3,237,710 ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO Value at beginning of period $24.962 $25.283 $20.929 $16.608 $16.276(4) Value at end of period $22.132 $24.962 $25.283 $20.929 $16.608 Number of accumulation units outstanding at end of period 340,010 492,530 1,549,310 1,564,888 1,317,058 1995 1994 1993 1992 ---- ---- ---- ---- ING VP EMERGING MARKETS FUND Value at beginning of period $8.772 $10.000(3) Value at end of period $8.323 $8.772 Number of accumulation units outstanding at end of period 371,156 144,750 ING VP NATURAL RESOURCES TRUST Value at beginning of period $9.412 $10.071 $9.193 $9.018 Value at end of period $10.862 $9.412 $10.071 $9.193 Number of accumulation units outstanding at end of period 530,562 533,016 341,771 198,338 ING MFS CAPITAL OPPORTUNITIES PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING MFS EMERGING EQUITIES PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING MFS RESEARCH PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING SCUDDER INTERNATIONAL GROWTH PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO Value at beginning of period Value at end of period Number of accumulation units outstanding at end of period
---------------------------------- FOOTNOTE FOR PERIOD ENDED DECEMBER 31, 2001: (1) Funds were first received in this option during December 2001. FOOTNOTES FOR PERIOD ENDED DECEMBER 31, 1998: (1) Funds were first received in this option during May 1998. (2) Funds were first received in this option during June 1998. FOOTNOTES FOR PERIOD ENDED DECEMBER 31, 1997: (1) Funds were first received in this option during February 1997. (2) Funds were first received in this option during December 1997. (3) Funds were first received in this option during May 1997. (4) Funds were first received in this option during November 1997. FOOTNOTES FOR PERIOD ENDED DECEMBER 31, 1995: (1) The initial accumulation unit value was established at $10.000 during May 1995, when the fund became available under the contract. (2) The initial accumulation unit value was established at $10.000 during July 1995, when the fund became available under the contract. FOOTNOTES FOR PERIOD ENDED DECEMBER 31, 1994: (1) The initial accumulation unit value was established at $10.000 during March 1994, when funds were first received under this option. (2) The initial accumulation unit value was established at $10.000 during June 1994, when funds were first received under this option. (3) Funds were first received in this option during October 1994. 51 FOR MASTER APPLICATIONS ONLY ------------------------------------------------------------------ I HEREBY ACKNOWLEDGE RECEIPT OF AN ACCOUNT C STATE UNIVERSITY OF NEW YORK SUNY GROUP DEFERRED VARIABLE ANNUITY PROSPECTUS DATED MAY 1, 2002 AS WELL AS ALL CURRENT PROSPECTUSES PERTAINING TO THE VARIABLE INVESTMENT OPTIONS AVAILABLE UNDER THE CONTRACTS. ____ PLEASE SEND AN ACCOUNT C STATEMENT OF ADDITIONAL INFORMATION (FORM NO. SAI.81216-02) DATED MAY 1, 2002. -------------------------------------------------------------------------------- CONTRACT HOLDER'S SIGNATURE -------------------------------------------------------------------------------- DATE PRO.81216-02 VARIABLE ANNUITY ACCOUNT C OF ING LIFE INSURANCE AND ANNUITY COMPANY STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 2002 Group Variable Annuity Contracts issued to The State University of New York (SUNY) Defined Contribution Retirement Plan 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, 2002 describing contracts issued in connection with the Defined Contribution Plan for the State University of New York. A free prospectus is available upon request from the local ING Life Insurance and Annuity Company office or by writing to or calling: Service Center PO Box 12894 Albany, New York 12212-2894 1-800-677-4636 Read the prospectus before you invest. Unless otherwise indicated, terms used in this Statement of Additional Information shall have the same meaning as in the prospectus. TABLE OF CONTENTS Page General Information and History 2 Variable Annuity Account C 2 Offering and Purchase of Contracts 3 Performance Data 4 General 4 Average Annual Total Return Quotations 4 Income Phase Payments 8 Sales Material and Advertising 9 Independent Auditors 9 Financial Statements of the Separate Account S-1 Financial Statements of ING Life Insurance and Annuity Company and Subsidiaries F-1 GENERAL INFORMATION AND HISTORY ING Life Insurance and Annuity Company (the "Company," we, us, our) is a stock life insurance company which was organized under the insurance laws of the State of Connecticut in 1976. Prior to May 1, 2002, the Company was known as Aetna Life Insurance and Annuity Company. 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, 2001, the Company and its subsidiary life company had $48 billion invested through their products, including $33 billion in their separate accounts (of which the Company, or its affiliate ING Investments, LLC manages or oversees the management of $21 billion). The Company is ranked based on assets among the top 1% of all life insurance companies rated by A.M. Best Company as of December 31, 2000. The Company is an indirect wholly-owned subsidiary of ING Groep, N.V., a global financial institution active in the fields of insurance, banking and asset management. The Company is engaged in the business of issuing life insurance policies and annuity contracts. Our Home Office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. In addition to serving as the depositor for the separate account, the Company is a registered investment adviser under the Investment Advisers Act of 1940. We provide 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). The Company has established the Service Center to provide administrative support to the contract holder and participants of the State University of New York Defined Contribution Retirement Plan (SUNY). This office will handle enrollments, billing, transfers, redemptions, and inquiries for all SUNY contract holders and participants. All forms and correspondence should be sent to the address listed on the cover of this Statement of Additional Information. Other than the mortality and expense risk charge and administrative expense charges described in the prospectus, all expenses incurred in the operations of the separate account are borne by the Company. However, the Company does receive compensation for certain administrative or distribution costs from the funds or affiliates of the funds used as funding options under the contract. (See "Fees" in the prospectus.) The assets of the separate account are held by the Company. The separate account has no custodian. However, the funds in whose shares the assets of the separate account are invested each have custodians, as discussed in their respective prospectuses. From this point forward, the term "contract(s)" refers only to those offered through the prospectus. VARIABLE ANNUITY ACCOUNT C Variable Annuity Account C is a separate account established by the Company for the purpose of funding variable annuity contracts issued by the Company. The separate account is registered with the Securities and Exchange Commission ("SEC") as a unit investment trust under the Investment Company Act of 1940, as amended. Payments to accounts under the contract may be allocated to one or more of the subaccounts. Each subaccount invests in the shares of only one of the funds listed below. We may make additions to, deletions from or substitutions of available investment options as permitted by law and subject to the conditions of the contract. The availability of the funds is subject to applicable regulatory authorization. 2 The funds currently available under the contract are as follows: ING VP ASCENT PORTFOLIO (CLASS R SHARES)(1) ING VP BALANCED PORTFOLIO, INC. (CLASS R SHARES)(1) ING VP BOND PORTFOLIO (CLASS R SHARES)(1) ING VP CROSSROADS PORTFOLIO (CLASS R SHARES)(1) ING VP GROWTH AND INCOME PORTFOLIO (CLASS R SHARES)(1) ING VP INDEX PLUS LARGECAP PORTFOLIO (CLASS R SHARES)(1) ING VP INDEX PLUS MIDCAP PORTFOLIO (CLASS R SHARES)(1) ING VP INDEX PLUS SMALLCAP PORTFOLIO (CLASS R SHARES)(1) ING VP LEGACY PORTFOLIO (CLASS R SHARES)(1) ING VP MONEY MARKET PORTFOLIO (CLASS R SHARES)(1) ING VP VALUE OPPORTUNITY PORTFOLIO (CLASS R SHARES)(1) ING VP EMERGING MARKETS FUND (1) ING VP NATURAL RESOURCES TRUST(1)(2) ING MFS CAPITAL OPPORTUNITIES PORTFOLIO (INITIAL CLASS)(1) ING MFS EMERGING EQUITIES PORTFOLIO (INITIAL CLASS)(1) ING MFS RESEARCH PORTFOLIO (INITIAL CLASS)(1) ING SCUDDER INTERNATIONAL GROWTH PORTFOLIO (INITIAL CLASS)(1) ING T. ROWE PRICE GROWTH EQUITY PORTFOLIO (INITIAL CLASS)(1) CALVERT SOCIAL BALANCED PORTFOLIO FIDELITY(R) VIP ASSET MANAGER-SM- PORTFOLIO (INITIAL CLASS) FIDELITY(R) VIP CONTRAFUND(R) PORTFOLIO (INITIAL CLASS) FIDELITY(R) VIP EQUITY-INCOME PORTFOLIO (INITIAL CLASS) FIDELITY(R) VIP HIGH INCOME PORTFOLIO (INITIAL CLASS) FIDELITY(R) VIP INDEX 500 PORTFOLIO (INITIAL CLASS) JANUS ASPEN AGGRESSIVE GROWTH PORTFOLIO (INSTITUTIONAL SHARES) JANUS ASPEN GROWTH PORTFOLIO (INSTITUTIONAL SHARES) JANUS ASPEN WORLDWIDE GROWTH PORTFOLIO (INSTITUTIONAL SHARES) MFS(R) TOTAL RETURN SERIES (INITIAL CLASS) OPPENHEIMER GLOBAL SECURITIES FUND/VA OPPENHEIMER STRATEGIC BOND FUND/VA (1) Effective May 1, 2002 this fund has changed its name to the name listed above. See Appendix III on page 42 in the prospectus for a complete list of former and current fund names. (2) Transfers or deposits are not allowed into the subaccount investing in this fund, except from accounts established under the contract before May 1, 1998. As soon as all those who have current allocations to the subaccount under the contract have redirected their allocations to other investment options, we will close the subaccount to all investments. Complete descriptions of each of the funds, including their investment objectives, policies, risks and fees and expenses, is contained in the prospectuses and statements of additional information for each of the funds. OFFERING AND PURCHASE OF CONTRACTS The Company is the depositor and the Company's subsidiary, ING Financial Advisers, LLC (IFA) serves as the principal underwriter for the contracts. IFA, a Delaware limited liability company, is registered as a broker-dealer with the SEC. IFA is also a member of the National Association of Securities Dealers, Inc. and the Securities Investor Protection Corporation. IFA's principal office is located at 151 Farmington Avenue, Hartford, Connecticut 06156. The contracts are distributed through life insurance agents licensed to sell variable annuities who are registered representatives of IFA or of other registered broker-dealers who have entered into sales arrangements with IFA. The offering of the contracts is continuous. A description of the manner in which contracts are purchased may be found in the prospectus under the sections entitled "Contract Ownership and Rights" and "Your Account Value." 3 PERFORMANCE DATA GENERAL From time to time, we may advertise different types of historical performance for the subaccounts of the separate account available under the contracts. We may advertise the "standardized average annual total returns," calculated in a manner prescribed by the Securities and Exchange Commission (the "standardized return"), as well as "non-standardized returns," calculated in an identical manner but including additional periods. The standardized total return figures are computed according to a formula in which a hypothetical initial payment of $1,000 is applied to the various subaccounts under the contract, and then related to the ending redeemable values over one, five and ten year periods (or fractional periods thereof). The redeemable value is then divided by the initial investment and this quotient is taken to the Nth root (N represents the number of years in the period) and 1 is subtracted from the result which is then expressed as a percentage, carried to at least the nearest hundredth of a percent. TR = ((ERV/P) TO THE POWER OF 1 DIVIDED BY N) - 1 Where: TR = The standardized returns net of subaccount recurring charges. ERV = The ending redeemable value of the hypothetical account at the end of the period. P = A hypothetical initial payment of $1,000. N = The number of years in the period. The standardized figures use the actual returns of the fund since the date contributions were first received in the fund under the separate account and then adjust them to reflect the deduction of all recurring charges under the contracts during each period (e.g., mortality and expense risk charges, and any applicable administrative expense charges). These charges will be deducted on a pro rata basis in the case of fractional periods. The total return figures shown below may differ from actual historical total return under your contract because for periods prior to 1994, the subaccount's investment performance was based on the performance of the underlying fund plus any cash held by the subaccount. The non-standardized figures are calculated in a similar manner, except that they may also include monthly, quarterly, year-to-date and three-year periods and may include returns calculated from the fund's inception date and/or the date the fund was added to the separate account. Investment results of the subaccounts will fluctuate over time, and any presentation of the subaccounts' total return quotations for any prior period should not be considered as a representation of how the subaccounts will perform in any future period. Additionally, the contract value and/or account 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 period ended December 31, 2001 for the subaccounts under the contract issued by the Company. These returns reflect investment advisory fees and all other expenses of the funds, as well as annual deductions from the Separate Account as follows: a 1.25% annual deduction from all subaccounts prior to December 11, 2001, and beginning December 11, 2001 a 1.00% annual deduction from the Separate Account for all ING Fund subaccounts, and a 1.10% annual deduction for all Non-ING subaccounts. As of May 1, 2002, the annual deduction for the ING VP Money Market Portfolio was reduced to 0.35%. If these charges had been in effect 4 during all periods shown, total return figures would be higher. For those subaccounts where results are not available for the full calendar period indicated, performance for such partial periods is shown in the column labeled "Since Inception." For standardized performance, the "Since Inception" column shows average annual return since the date contributions were first received in the fund under the separate account. For non-standardized performance, the "Since Inception" column shows average annual total return since the fund's inception date. For the ING MFS Capital Opportunities Portfolio (Initial Class), ING MFS Emerging Equities Portfolio (Initial Class), ING MFS Research Portfolio (Initial Class), ING Scudder International Growth Portfolio (Initial Class) and ING T. Rowe Price Growth Equity Portfolio (Initial Class) subaccounts, two sets of performance returns are shown for each subaccount: one showing performance based solely on the performance of the ING Partners, Inc. (IPI) portfolio from November 28, 1997, the date the portfolio commenced operations; and one quotation based on (a) performance through November 26, 1997 of the fund it replaced under many contracts and; (b) after November 26, 1997, based on the performance of the IPI portfolio. 5
DATE STANDARDIZED CONTRIBUTIONS ------------------------------------------- FIRST RECEIVED SINCE UNDER THE SUBACCOUNT 1 YEAR 5 YEAR 10 YEAR INCEPTION* SEPARATE ACCOUNT -------------------------------------------------------------------------------------------------------------------------------- ING VP Ascent Portfolio (Class R Shares) (12.64%) 3.37% 7.32% 07/05/1995 ING VP Balanced Portfolio, Inc. (Class R Shares)(1) (5.39%) 7.81% 8.85% ING VP Bond Portfolio (Class R Shares) (1) 7.40% 5.42% 5.44% ING VP Crossroads Portfolio (Class R Shares) (8.14%) 3.79% 6.82% 07/05/1995 ING VP Growth and Income Portfolio (Class R Shares) (1) (19.41%) 3.57% 7.59% ING VP Index Plus LargeCap Portfolio (Class R Shares) (14.69%) 10.00% 10.62% 10/31/1996 ING VP Index Plus MidCap Portfolio (Class R Shares) (2.54%) 10.10% 05/04/1998 ING VP Index Plus SmallCap Portfolio (Class R Shares) 1.14% 1.56% 05/04/1998 ING VP Legacy Portfolio (Class R Shares) (3.58%) 4.74% 6.77% 07/05/1995 ING VP Money Market Portfolio (Class R Shares) (1)(2) 2.66% 3.96% 3.56% ING VP Value Opportunity Portfolio (Class R Shares) (10.73%) 11.90% 05/30/1997 ING VP Emerging Markets Fund (11.53%) (6.21%) (5.82%) 10/31/1994 ING VP Natural Resources Trust(1) (16.97%) (1.68%) 3.32% ING MFS Capital Opportunities Portfolio (Initial Class) (25.69%) 6.44% 11/28/1997 Neuberger Berman AMT Growth/ING MFS Capital Opportunities(3) (25.69%) 9.69% 9.08% ING MFS Emerging Equities Portfolio (Initial Class) (26.13%) (0.52%) 11/28/1997 Alger American Small Cap/ING MFS Emerging Equities(3) (26.13%) 1.35% 5.13% 09/30/1993 ING MFS Research Portfolio (Initial Class) (21.86%) 1.80% 11/28/1997 American Century VP Capital Appreciation/ING MFS Research(3) (21.86%) 1.00% 4.45% 08/31/1992 ING Scudder International Growth Portfolio (Initial Class) (27.83%) 1.61% 11/28/1997 Scudder VLIF International/ING Scudder International Growth(3) (27.83%) 2.56% 6.06% ING T. Rowe Price Growth Equity Portfolio (Initial Class) (11.33%) 7.81% 11/28/1997 Alger American Growth/ING T. Rowe Price Growth Equity(3) (11.33%) 11.04% 13.65% 10/31/1994 Calvert Social Balanced Portfolio(1) (8.09%) 5.82% 7.44% Fidelity(R)VIP Asset Manager-SM- Portfolio (Initial Class) (5.28%) 5.95% 7.13% 03/31/1994 Fidelity(R)VIP Contrafund(R)Portfolio (Initial Class) (13.33%) 9.07% 12.60% 05/31/1995 Fidelity(R)VIP Equity-Income Portfolio (Initial Class) (6.14%) 8.04% 11.70% 05/31/1994 Fidelity(R)VIP High Income Portfolio (Initial Class) (12.83%) (11.41%) 05/12/1998 Fidelity(R)VIP Index 500 Portfolio (Initial Class) (13.19%) 9.00% 12.43% 05/31/1995 Janus Aspen Aggressive Growth Portfolio (Institutional Shares) (40.20%) 5.75% 10.91% 06/30/1994 Janus Aspen Growth Portfolio (Institutional Shares) (25.67%) 7.69% 10.59% 06/30/1995 Janus Aspen Worldwide Growth Portfolio (Institutional Shares) (23.40%) 9.74% 14.63% 05/31/1995 MFS(R)Total Return Series (Initial Class) (1.00%) 5.06% 05/26/1998 Oppenheimer Global Securities Fund/VA (13.13%) 9.69% 05/04/1998 Oppenheimer Strategic Bond Fund/VA 3.55% 1.43% 05/07/1998
Please refer to the discussion preceding the tables for an explanation of the charges included and methodology used in calculating the standardized and non-standardized figures. These figures represent historical performance and should not be considered a projection of future performance. * Reflects performance from the date contributions were first received in the fund under the separate account. (1) These funds have been available through the separate account for more than ten years. (2) The current yield for the subaccount for the seven-day period ended December 31, 2001 (on an annualized basis) was 0.94%. Current yield more closely reflects current earnings than does total return. The current yield reflects the deduction of all charges under the contract that are deducted from the total return quotations shown above. (3) The fund first listed was replaced with the applicable ING Portfolio after the close of business on November 26, 1997. The performance shown is based on the performance of the replaced fund until November 26, 1997, and the performance of the applicable ING Portfolio after that date. The replaced fund may not have been available under all contracts. The "Date Contributions First Received Under the Separate Account" refers to the applicable date for the replaced fund. If no date is shown, contributions were first received in the replaced fund under the separate account more than ten years ago. 6
NON-STANDARDIZED ------------------------------------------------------ FUND SINCE INCEPTION SUBACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION** DATE ------------------------------------------------------------------------------------------------------------------------------------ ING VP Ascent Portfolio (Class R Shares) (12.64%) (1.08%) 3.37% 7.32% 07/05/1995 ING VP Balanced Portfolio, Inc. (Class R Shares) (1) (5.39%) 1.39% 7.81% 8.85% ING VP Bond Portfolio (Class R Shares) (1) 7.40% 4.47% 5.42% 5.44% ING VP Crossroads Portfolio (Class R Shares) (8.14%) (0.28%) 3.79% 6.82% 07/05/1995 ING VP Growth and Income Portfolio (Class R Shares) (1) (19.41%) (6.34%) 3.57% 7.59% ING VP Index Plus LargeCap Portfolio (Class R Shares) (14.69%) (2.15%) 10.00% 11.27% 09/16/1996 ING VP Index Plus MidCap Portfolio (Class R Shares) (2.54%) 9.70% 13.63% 12/16/1997 ING VP Index Plus SmallCap Portfolio (Class R Shares) 1.14% 6.27% 5.03% 12/19/1997 ING VP Legacy Portfolio (Class R Shares) (3.58%) 1.82% 4.74% 6.77% 07/05/1995 ING VP Money Market Portfolio (Class R Shares) (1)(2) 2.66% 3.82% 3.96% 3.56% ING VP Value Opportunity Portfolio (Class R Shares) (10.73%) 4.69% 13.80% 14.12% 12/13/1996 ING VP Emerging Markets Fund (11.53%) 5.30% (6.21%) (3.99%) 03/30/1994 ING VP Natural Resources Trust(1) (16.97%) 3.03% (1.68%) 3.32% ING MFS Capital Opportunities Portfolio (Initial Class) (25.69%) 0.56% 6.41% 11/28/1997 Neuberger Berman AMT Growth/ING MFS Capital Opportunities(3) (25.69%) 0.56% 9.69% 9.08% ING MFS Emerging Equities Portfolio (Initial Class) (26.13%) (8.18%) (0.52%) 11/28/1997 Alger American Small Cap/ING MFS Emerging Equities(3) (26.13%) (8.18%) 1.35% 5.41% ING MFS Research Portfolio (Initial Class) (21.86%) (3.35%) 1.80% 11/28/1997 American Century VP Capital Appreciation/ING MFS Research(3) (21.86%) (3.35%) 1.00% 2.91% ING Scudder International Growth Portfolio (Initial Class) (27.83%) (3.57%) 1.67% 11/28/1997 Scudder VLIF International/ING Scudder International Growth(3) (27.83%) (3.57%) 2.56% 6.06% ING T. Rowe Price Growth Equity Portfolio (Initial Class) (11.33%) 1.88% 7.77% 11/28/1997 Alger American Growth/ING T. Rowe Price Growth Equity(3) (11.33%) 1.88% 11.04% 13.10% Calvert Social Balanced Portfolio(1) (8.09%) (0.86%) 5.82% 7.44% Fidelity(R)VIP Asset Manager-SM- Portfolio (Initial Class) (1) (5.28%) (0.47%) 5.95% 7.89% Fidelity(R)VIP Contrafund(R)Portfolio (Initial Class) (13.33%) (0.65%) 9.07% 14.33% 01/03/1995 Fidelity(R)VIP Equity-Income Portfolio (Initial Class) (1) (6.14%) 1.81% 8.04% 12.20% Fidelity(R)VIP High Income Portfolio (Initial Class) (1) (12.83%) (10.67%) (4.78%) 3.97% Fidelity(R)VIP Index 500 Portfolio (Initial Class) (13.19%) (2.55%) 9.00% 12.03% 08/27/1992 Janus Aspen Aggressive Growth Portfolio (Institutional Shares) (40.20%) (3.58%) 5.75% 11.12% 09/13/1993 Janus Aspen Growth Portfolio (Institutional Shares) (25.67%) (3.74%) 7.69% 10.44% 09/13/1993 Janus Aspen Worldwide Growth Portfolio (Institutional Shares) (23.40%) 1.19% 9.74% 14.32% 09/13/1993 MFS(R)Total Return Series (Initial Class) (1.00%) 4.92% 8.94% 11.79% 01/03/1995 Oppenheimer Global Securities Fund/VA(1) (13.13%) 12.17% 13.97% 12.49% Oppenheimer Strategic Bond Fund/VA 3.55% 2.15% 3.06% 4.30% 05/03/1993
Please refer to the discussion preceding the tables for an explanation of the charges included and methodology used in calculating the standardized and non-standardized figures. These figures represent historical performance and should not be considered a projection of future performance. ** Reflects performance from the fund's inception date. (1) These funds have been in operation for more than ten years. (2) The current yield for the subaccount for the seven-day period ended December 31, 2001 (on an annualized basis) was 0.94%. Current yield more closely reflects current earnings than does total return. The current yield reflects the deduction of all charges under the contract that are deducted from the total return quotations shown above. (3) The fund first listed was replaced with the applicable ING Portfolio after the close of business on November 26, 1997. The performance shown is based on the performance of the replaced fund until November 26, 1997, and the performance of the applicable ING Portfolio after that date. The replaced fund may not have been available under all contracts. The "Fund Inception Date" refers to the applicable date for the replaced fund. If no date is shown, the replaced fund has been in operation for more than ten years. 7 INCOME PHASE PAYMENTS When you begin receiving payments under the contract during the income phase (see "Income Phase" in the prospectus), the value of your account is determined using accumulation unit values as of the tenth valuation before the first payment is due. Such value (less any applicable premium tax charge) is applied to provide payments to you in accordance with the payment option and investment options elected. The Annuity option tables found in the Contract show, for each option, the amount of the first payment for each $1,000 of value applied. Thereafter, variable 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 payments will increase thereafter only to the extent that the net investment rate increases by more than 5% on an annual basis. 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 income phase 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 payment based on a particular investment option, and (b) is the then current Annuity Unit value for that investment option. As noted, Annuity Unit values fluctuate from one valuation to the next (see "Your Account Value" in the prospectus); such fluctuations reflect changes in the net investment factor for the appropriate subaccount(s) (with a ten valuation lag which gives the Company time to process 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 income phase. EXAMPLE: Assume that, at the date payments are to begin, there are 3,000 accumulation units credited under a particular contract or account and that the value of an accumulation unit for the tenth valuation prior to retirement was $13.650000. This produces a total value of $40,950. Assume also that no premium tax charge is payable and that the Annuity table in the contract provides, for the payment 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 upon the valuation 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 preceding the due date of the second monthly payment, multiplying this factor by .9999058* (to take into account 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 (assume such value to be $13.504376) to produce an Annuity Unit value of $13.523359 for the valuation occurring when 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. 8 *If an assumed net investment rate of 5% is elected, the appropriate factor to take into account such assumed rate would be .9998663. SALES MATERIAL AND ADVERTISING We may include hypothetical illustrations in our sales literature that explain the mathematical principles of dollar cost averaging, compounded interest, tax deferred accumulation, and the mechanics of variable annuity contracts. We may also discuss the difference between variable annuity contracts and other types of savings or investment products such as personal savings accounts and certificates of deposit. We may distribute sales literature that compares the percentage change in accumulation unit values for any of the subaccounts to established market indices such as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average or to the percentage change in values of other management investment companies that have investment objectives similar to the subaccount being compared. We may publish in advertisements and reports, the ratings and other information assigned to us by one or more independent rating organizations such as A.M. Best Company, Duff & Phelps, Standard & Poor's Corporation and Moody's Investors Service, Inc. The purpose of the ratings is to reflect our financial strength and/or claims-paying ability. We may also quote ranking services such as Morningstar's Variable Annuity/Life Performance Report and Lipper's Variable Insurance Products Performance Analysis Service (VIPPAS), which rank variable annuity or life subaccounts or their underlying funds by performance and/or investment objective. We may categorize the underlying funds in terms of the asset classes they represent and use such categories in marketing materials for the contracts. We may illustrate in advertisements the performance of the underlying funds, if accompanied by performance which also shows the performance of such funds reduced by applicable charges under the separate account. We may also show in advertisements the portfolio holdings of the underlying funds, updated at various intervals. From time to time, we will quote articles from newspapers and magazines or other publications or reports such as The Wall Street Journal, Money magazine, USA Today and The VARDS Report. We may provide in advertising, sales literature, periodic publications or other materials information on various topics of interest to current and prospective contract holders or participants. These topics may include the relationship between sectors of the economy and the economy as a whole and its effect on various securities markets, investment strategies and techniques (such as value investing, market timing, dollar cost averaging, asset allocation, constant ratio transfer and account rebalancing), the advantages and disadvantages of investing in tax-deferred and taxable investments, customer profiles and hypothetical purchase and investment scenarios, financial management and tax and retirement planning, and investment alternatives to certificates of deposit and other financial instruments, including comparison between the contracts and the characteristics of and market for such financial instruments. INDEPENDENT AUDITORS Ernst & Young LLP, 225 Asylum Street, Hartford, Connecticut 06103, are the independent auditors for the separate account and for the Company. The services provided to the separate account include primarily the audit of the separate account's financial statements and review of filings made with the SEC. Prior to May 3, 2001, KPMG LLP were the independent auditors for the separate account and for the Company. 9 FINANCIAL STATEMENTS VARIABLE ANNUITY ACCOUNT C INDEX
PAGE -------- Statement of Assets and Liabilities......................... S-2 Statement of Operations..................................... S-8 Statements of Changes in Net Assets......................... S-8 Condensed Financial Information............................. S-9 Notes to Financial Statements............................... S-42 Report of Independent Auditors.............................. S-61
S-1 VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES - December 31, 2001 ASSETS: Investments, at net asset value: (Note 1)
Net Shares Cost Assets ------ ---- ------ Aetna Ascent VP 5,255,708 $ 76,163,930 $ 67,010,283 Aetna Balanced VP, Inc. 63,527,168 941,395,632 768,043,464 Aetna Bond VP 31,629,056 411,092,484 409,596,277 Aetna Crossroads VP 4,633,460 62,509,495 57,037,891 Aetna GET Fund, Series D 29,598,965 297,508,659 288,293,920 Aetna GET Fund, Series E 11,999,667 120,781,409 118,196,723 Aetna GET Fund, Series G 3,405,259 34,322,636 33,746,120 Aetna GET Fund, Series H 2,570,498 26,011,100 25,807,795 Aetna GET Fund, Series I 125,859 1,271,493 1,252,292 Aetna GET Fund, Series J 38,632 390,384 380,525 Aetna GET Fund, Series K 227,934 2,301,390 2,274,781 Aetna GET Fund, Series L 132,321 1,332,026 1,304,688 Aetna GET Fund, Series Q 363,917 3,639,983 3,641,608 Aetna Growth and Income VP 173,976,346 5,426,258,664 3,399,497,793 Aetna Growth VP 12,527,440 182,697,142 120,764,519 Aetna Index Plus Large Cap VP 33,160,607 583,684,457 459,606,019 Aetna Index Plus Mid Cap VP 6,535,530 90,551,160 88,491,082 Aetna Index Plus Small Cap VP 2,487,919 28,270,439 28,859,864 Aetna International VP 1,389,613 10,503,134 10,977,941 Aetna Legacy VP 3,093,907 38,755,806 37,095,947 Aetna Money Market VP 28,106,423 372,750,420 374,568,678 Aetna Small Company VP 8,045,577 130,577,951 134,200,221 Aetna Technology VP 7,009,738 40,956,370 31,754,112 Aetna Value Opportunity VP 8,955,479 132,460,735 118,660,092 AIM V.I. Funds: Capital Appreciation Fund 875,993 29,357,433 19,026,559 Growth and Income Fund 2,192,023 63,888,717 44,278,866 Growth Fund 951,036 26,653,938 15,568,467 Value Fund 956,508 28,186,119 22,334,468 American Century Income and Growth Fund 23,013 642,973 628,951 Calvert Social Balanced Portfolio 33,166,811 65,972,466 58,340,420 Chapman DEM-Registered Trademark- Equity Fund 4,887 84,557 92,273 Fidelity-Registered Trademark- Investments Variable Insurance Products Funds: Asset Manager Portfolio -- Initial Class 1,487,902 24,287,386 21,589,463 Contrafund-Registered Trademark- Portfolio -- Initial Class 18,643,176 390,047,585 375,287,140 Equity-Income Portfolio -- Initial Class 10,431,395 243,068,260 237,314,227 Growth Portfolio -- Initial Class 11,554,630 479,838,036 388,351,107 High Income Portfolio -- Initial Class 420,323 2,744,118 2,694,271 Index 500 Portfolio -- Initial Class 738,808 111,739,318 96,096,738 Overseas Portfolio -- Initial Class 1,063,822 15,101,338 14,765,849 Franklin Value Securities Fund 11,912 116,804 129,725 Janus Aspen Series: Aggressive Growth Portfolio -- I Shares 25,905,823 1,101,530,359 569,410,000 Balanced Portfolio -- I Shares 14,995,572 354,396,600 338,450,060
S-2 VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES - December 31, 2001 (continued):
Net Shares Cost Assets ------ ---- ------ Capital Appreciation Portfolio -- S Shares 25,781 $ 545,981 $ 530,322 Flexible Income Portfolio -- I Shares 4,866,544 56,838,167 56,743,899 Growth Portfolio -- I Shares 15,373,195 426,395,893 305,619,111 Worldwide Growth Portfolio -- I Shares 27,458,173 909,329,194 783,656,268 Janus Twenty Fund 12,915 642,222 496,725 Lord Abbett Funds: Growth and Income Portfolio 53,053 1,201,597 1,226,053 Mid-Cap Value Portfolio 17,155 257,998 265,038 MFS-Registered Trademark- Total Return Series 1,140,677 21,279,207 21,227,997 Oppenheimer Funds: Developing Markets Fund 16,784 218,990 222,893 Global Securities Fund/VA 3,808,514 96,231,723 86,986,470 Strategic Bond Fund/VA 2,124,804 9,891,651 9,816,595 PAX World Balanced Fund 115,981 2,418,556 2,309,174 Pilgrim Funds: Emerging Markets Fund 1,119,442 5,261,516 5,518,849 Natural Resources Trust Fund 1,028,305 13,623,422 12,750,984 Pilgrim Variable Funds: Growth Opportunities Portfolio -- Class R 1,738 9,527 9,527 International Value Portfolio -- Class R 149,031 1,512,553 1,529,054 Mid Cap Opportunities Portfolio -- Class R 4,863 29,633 29,521 Small Cap Opportunities Portfolio -- Class R 3,139 56,426 59,269 Pioneer Funds: Equity-Income VCT Portfolio 4,805 87,585 88,405 Fund VCT Portfolio 469 8,944 8,945 Mid-Cap Value VCT Portfolio 4,662 76,248 80,892 Portfolio Partners, Inc. (PPI): PPI MFS Capital Opportunities Portfolio -- I Class 7,964,827 316,304,508 216,006,116 PPI MFS Emerging Equities Portfolio -- I Class 7,494,156 373,169,708 305,236,978 PPI MFS Research Growth Portfolio -- I Class 21,266,928 219,343,753 172,262,113 PPI Scudder International Growth Portfolio -- I Class 14,513,049 144,260,565 145,565,880 PPI T. Rowe Price Growth Equity Portfolio -- I Class 4,937,177 241,450,739 223,752,864 Wachovia Special Values Fund 198,772 3,938,370 3,925,737 --------------- --------------- NET ASSETS $14,798,227,582 $11,141,346,898 =============== ===============
S-3 VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES - December 31, 2001 (continued): NET ASSETS REPRESENTED BY: Reserves for annuity contracts in accumulation and payment period: (Notes 1 and 6) Aetna Ascent VP Annuity contracts in accumulation............. $ 67,010,283 Aetna Balanced VP, Inc. Annuity contracts in accumulation............. 739,144,233 Annuity contracts in payment period........... 28,899,231 Aetna Bond VP Annuity contracts in accumulation............. 403,727,419 Annuity contracts in payment period........... 5,868,858 Aetna Crossroads VP Annuity contracts in accumulation............. 56,976,436 Annuity contracts in payment period........... 61,455 Aetna GET Fund, Series D Annuity contracts in accumulation............. 288,293,920 Aetna GET Fund, Series E Annuity contracts in accumulation............. 118,196,723 Aetna GET Fund, Series G Annuity contracts in accumulation............. 33,746,120 Aetna GET Fund, Series H Annuity contracts in accumulation............. 25,807,795 Aetna GET Fund, Series I Annuity contracts in accumulation............. 1,252,292 Aetna GET Fund, Series J Annuity contracts in accumulation............. 380,525 Aetna GET Fund, Series K Annuity contracts in accumulation............. 2,274,781 Aetna GET Fund, Series L Annuity contracts in accumulation............. 1,304,688 Aetna GET Fund, Series Q Annuity contracts in accumulation............. 3,641,608 Aetna Growth and Income VP Annuity contracts in accumulation............. 3,170,240,934 Annuity contracts in payment period........... 229,256,859 Aetna Growth VP Annuity contracts in accumulation............. 120,456,683 Annuity contracts in payment period........... 307,836 Aetna Index Plus Large Cap VP Annuity contracts in accumulation............. 457,492,812 Annuity contracts in payment period........... 2,113,207 Aetna Index Plus Mid Cap VP Annuity contracts in accumulation............. 88,491,082 Aetna Index Plus Small Cap VP Annuity contracts in accumulation............. 28,859,864 Aetna International VP Annuity contracts in accumulation............. 10,977,941 Aetna Legacy VP Annuity contracts in accumulation............. 36,927,158 Annuity contracts in payment period........... 168,789
S-4 VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES - December 31, 2001 (continued): Aetna Money Market VP Annuity contracts in accumulation............. $ 374,418,757 Annuity contracts in payment period........... 149,921 Aetna Small Company VP Annuity contracts in accumulation............. 134,140,868 Annuity contracts in payment period........... 59,353 Aetna Technology VP Annuity contracts in accumulation............. 31,754,112 Aetna Value Opportunity VP Annuity contracts in accumulation............. 118,660,092 AIM V.I. Funds: Capital Appreciation Fund Annuity contracts in accumulation............. 19,026,559 Growth and Income Fund Annuity contracts in accumulation............. 44,278,866 Growth Fund Annuity contracts in accumulation............. 15,568,467 Value Fund Annuity contracts in accumulation............. 22,334,468 American Century Income and Growth Fund Annuity contracts in accumulation............. 628,951 Calvert Social Balanced Portfolio Annuity contracts in accumulation............. 58,340,420 Chapman DEM-Registered Trademark- Equity Fund Annuity contracts in accumulation............. 92,273 Fidelity-Registered Trademark- Investments Variable Insurance Products Funds: Asset Manager Portfolio -- Initial Class Annuity contracts in accumulation............. 21,589,463 Contrafund-Registered Trademark- Portfolio -- Initial Class Annuity contracts in accumulation............. 375,287,140 Equity-Income Portfolio -- Initial Class Annuity contracts in accumulation............. 237,314,227 Growth Portfolio -- Initial Class Annuity contracts in accumulation............. 388,351,107 High Income Portfolio -- Initial Class Annuity contracts in accumulation............. 2,645,583 Annuity contracts in payment period........... 48,688 Index 500 Portfolio -- Initial Class Annuity contracts in accumulation............. 96,096,738 Overseas Portfolio -- Initial Class Annuity contracts in accumulation............. 14,765,849 Franklin Value Securities Fund Annuity contracts in accumulation............. 129,725 Janus Aspen Series: Aggressive Growth Portfolio -- I Shares Annuity contracts in accumulation............. 569,410,000 Balanced Portfolio -- I Shares Annuity contracts in accumulation............. 338,450,060 Capital Appreciation Portfolio -- S Shares Annuity contracts in accumulation............. 530,322
S-5 VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES - December 31, 2001 (continued): Flexible Income Portfolio -- I Shares Annuity contracts in accumulation............. $ 56,743,899 Growth Portfolio -- I Shares Annuity contracts in accumulation............. 304,891,580 Annuity contracts in payment period........... 727,531 Worldwide Growth Portfolio -- I Shares Annuity contracts in accumulation............. 782,779,890 Annuity contracts in payment period........... 876,378 Janus Twenty Fund Annuity contracts in accumulation............. 496,725 Lord Abbett Funds: Growth and Income Portfolio Annuity contracts in accumulation............. 1,226,053 Mid-Cap Value Portfolio Annuity contracts in accumulation............. 265,038 MFS-Registered Trademark- Total Return Series Annuity contracts in accumulation............. 21,227,997 Oppenheimer Funds: Developing Markets Fund Annuity contracts in accumulation............. 222,893 Global Securities Fund/VA Annuity contracts in accumulation............. 86,986,470 Strategic Bond Fund/VA Annuity contracts in accumulation............. 9,799,961 Annuity contracts in payment period........... 16,634 PAX World Balanced Fund Annuity contracts in accumulation............. 2,309,174 Pilgrim Funds: Emerging Markets Fund Annuity contracts in accumulation............. 5,518,849 Natural Resources Trust Fund Annuity contracts in accumulation............. 12,750,984 Pilgrim Variable Funds: Growth Opportunities Portfolio -- Class R Annuity contracts in accumulation............. 9,527 International Value Portfolio -- Class R Annuity contracts in accumulation............. 1,529,054 Mid Cap Opportunities Portfolio -- Class R Annuity contracts in accumulation............. 29,521 Small Cap Opportunities Portfolio -- Class R Annuity contracts in accumulation............. 59,269 Pioneer Funds: Equity-Income VCT Portfolio Annuity contracts in accumulation............. 88,405 Fund VCT Portfolio Annuity contracts in accumulation............. 8,945 Mid-Cap Value VCT Portfolio Annuity contracts in accumulation............. 80,892
S-6 VARIABLE ANNUITY ACCOUNT C STATEMENT OF ASSETS AND LIABILITIES - December 31, 2001 (continued): Portfolio Partners, Inc. (PPI): PPI MFS Capital Opportunities Portfolio -- I Class Annuity contracts in accumulation............. $ 215,627,607 Annuity contracts in payment period........... 378,509 PPI MFS Emerging Equities Portfolio -- I Class Annuity contracts in accumulation............. 305,126,330 Annuity contracts in payment period........... 110,648 PPI MFS Research Growth Portfolio -- I Class Annuity contracts in accumulation............. 172,262,113 PPI Scudder International Growth Portfolio -- I Class Annuity contracts in accumulation............. 145,560,773 Annuity contracts in payment period........... 5,107 PPI T. Rowe Price Growth Equity Portfolio -- I Class Annuity contracts in accumulation............. 223,625,073 Annuity contracts in payment period........... 127,791 Wachovia Special Values Fund Annuity contracts in accumulation............. 3,925,737 -------------- $11,141,346,898 ==============
See Notes to Financial Statements S-7 VARIABLE ANNUITY ACCOUNT C STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001 ----------------- INVESTMENT INCOME: Income: (Notes 1, 3 and 5) Dividends....................................... $ 464,350,375 Expenses: (Notes 2 and 5) Valuation period deductions..................... (132,666,634) --------------- Net investment income............................. $ 331,683,741 --------------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS: Net realized loss on sales of investments: (Notes 1, 4 and 5) Proceeds from sales............................. $ 3,331,253,418 Cost of investments sold........................ (3,763,191,632) --------------- Net realized loss on investments.............. (431,938,214) --------------- Net unrealized loss on investments: (Note 5) Beginning of year............................... (1,381,531,716) End of year..................................... (3,656,880,684) --------------- Net change in unrealized loss on investments................................. (2,275,348,968) --------------- Net realized and unrealized loss on investments... (2,707,287,182) --------------- Net decrease in net assets resulting from operations...................................... $(2,375,603,441) ===============
See Notes to Financial Statements -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 2001 2000 ---- ---- FROM OPERATIONS: Net investment income................... $ 331,683,741 $ 1,296,974,423 Net realized (loss) gain on investments........................... (431,938,214) 324,558,619 Net change in unrealized loss on investments........................... (2,275,348,968) (3,605,027,788) --------------- --------------- Net decrease in net assets resulting from operations....................... (2,375,603,441) (1,983,494,746) --------------- --------------- FROM UNIT TRANSACTIONS: Variable annuity contract purchase payments.............................. 1,150,499,362 1,255,425,118 Transfer (to) from the Company for mortality guarantee adjustments....... (691,770) 3,371,394 Transfer (to) from the Company's other variable annuity accounts............. (426,771,909) 254,674,124 Redemptions by contract holders......... (859,262,313) (1,257,770,002) Annuity Payments........................ (34,629,019) (47,041,158) Other................................... (1,478,438) 1,019,544 --------------- --------------- Net (decrease) increase in net assets from unit transactions (Note 6)..... (172,334,087) 209,679,020 --------------- --------------- Change in net assets.................... (2,547,937,528) (1,773,815,726) NET ASSETS: Beginning of year....................... 13,689,284,426 15,463,100,152 --------------- --------------- End of year............................. $11,141,346,898 $13,689,284,426 =============== ===============
See Notes to Financial Statements S-8 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA ASCENT VP: 0.00% to 1.75% 1.60% Qualified III $ 17.601 $ 15.374 (12.65%) 202.6 $ 3,115 Qualified V 17.449 15.218 (12.79%) 1,522.1 23,163 Qualified VI 17.601 15.374 (12.65%) 2,337,041.6 35,929,678 Qualified VIII 17.593 15.367 (12.65%) 8.6 132 Qualified X (1.15) 18.200 15.914 (12.56%) 8,988.9 143,049 Qualified X (1.25) 18.100 15.811 (12.65%) 366,302.8 5,791,614 Qualified XI 17.927 15.755 (12.12%) 76,262.0 1,201,508 Qualified XII (0.05) 16.762 15.691 (6.39%) (6) 6,000.4 94,152 Qualified XII (0.35) 10.744 9.471 (11.85%) 149,119.8 1,412,314 Qualified XII (0.40) 15.873 13.985 (11.89%) 2,197.3 30,729 Qualified XII (0.45) 10.716 9.436 (11.94%) 87,049.2 821,396 Qualified XII (0.55) 10.688 9.402 (12.03%) 3,470.0 32,625 Qualified XII (0.60) 10.376 9.385 (9.55%) (2) 788.6 7,401 Qualified XII (0.65) 10.660 9.368 (12.12%) 251,064.4 2,351,971 Qualified XII (0.70) 10.646 9.352 (12.15%) 28,974.2 270,967 Qualified XII (0.75) 10.633 9.335 (12.21%) 214,582.9 2,003,131 Qualified XII (0.80) 11.292 9.908 (12.26%) 239,231.2 2,370,303 Qualified XII (0.85) 15.761 13.823 (12.30%) 146,445.5 2,024,316 Qualified XII (0.90) 11.104 9.734 (12.34%) 2,015.3 19,617 Qualified XII (0.95) 15.688 13.745 (12.39%) 63,532.1 873,249 Qualified XII (1.00) 15.652 13.707 (12.43%) 489,143.9 6,704,696 Qualified XII (1.05) 15.616 13.668 (12.47%) 76,585.6 1,046,772 Qualified XII (1.10) 15.580 13.630 (12.52%) 44,705.8 609,340 Qualified XII (1.15) 15.544 13.591 (12.56%) 17,199.5 233,759 Qualified XII (1.20) 15.508 13.553 (12.61%) 39,012.2 528,733 Qualified XII (1.25) 15.472 13.515 (12.65%) 8,645.2 116,840 Qualified XII (1.30) 15.436 13.477 (12.69%) 7,856.6 105,883 Qualified XII (1.35) 15.400 13.439 (12.73%) 8.5 114 Qualified XII (1.40) 15.365 13.401 (12.78%) 5,178.6 69,399 Qualified XII (1.50) 15.294 13.326 (12.87%) 4,550.4 60,638 Qualified XV 17.815 15.609 (12.38%) 8,828.9 137,810 Qualified XVI 17.437 15.194 (12.86%) 36,844.7 559,818 Qualified XVII 17.821 15.622 (12.34%) 1,132.8 17,696 Qualified XVIII 18.328 16.066 (12.34%) 8,286.1 133,124 Qualified XXI 17.858 15.670 (12.25%) 9,375.6 146,916 Qualified XXII 17.888 15.709 (12.18%) 10,461.1 164,333 Qualified XXIV 15.662 13.734 (12.31%) 18,369.2 252,282 Qualified XXV 17.628 15.499 (12.08%) 9,106.5 141,141 Qualified XXVI 17.620 15.469 (12.21%) 626.3 9,688 Qualified XXVII 17.624 15.425 (12.48%) 33,425.3 515,585 Qualified XXVIII 17.601 15.375 (12.65%) 3,335.7 51,286 --------------------------------------------------------------------------------------------------------------------------------- AETNA BALANCED VP, INC.: 0.00% to 1.75% 5.73% Qualified I 31.647 29.954 (5.35%) 30,859.6 924,367 Qualified III 31.424 29.730 (5.39%) 35,755.7 1,063,018 Qualified V 23.779 22.457 (5.56%) 4,739.3 106,430 Qualified VI 23.936 22.642 (5.41%) 15,791,704.0 357,555,763 Qualified VII 23.063 21.829 (5.35%) 193,770.1 4,229,808 Qualified VIII 22.215 21.013 (5.41%) 4,681.1 98,364 Qualified IX 22.557 21.445 (4.93%) 1,928.9 41,365 Qualified X (1.15) 24.108 22.827 (5.31%) 96,618.9 2,205,519 Qualified X (1.25) 23.936 22.642 (5.41%) 4,053,041.6 91,768,969 Qualified XI 24.380 23.202 (4.83%) 684,729.6 15,887,097 Qualified XII (0.05) 23.584 23.108 (2.02%) (6) 121,395.5 2,805,207 Qualified XII (0.35) 11.974 11.430 (4.54%) 1,197,262.2 13,684,707 Qualified XII (0.40) 17.181 16.392 (4.59%) 9,835.3 161,220 Qualified XII (0.45) 11.943 11.389 (4.64%) 174,642.2 1,989,000 Qualified XII (0.55) 11.912 11.348 (4.73%) 179,399.6 2,035,827 Qualified XII (0.60) 12.058 11.327 (6.06%) (2) 618,049.1 7,000,642 Qualified XII (0.65) 11.881 11.307 (4.83%) 123,202.5 1,393,051 Qualified XII (0.70) 11.865 11.286 (4.88%) 224,541.6 2,534,177 Qualified XII (0.75) 11.850 11.266 (4.93%) 553,197.3 6,232,321
S-9 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA BALANCED VP, INC.: (continued): Qualified XII (0.80) $ 12.628 $ 11.999 (4.98%) 3,038,118.3 $ 36,454,382 Qualified XII (0.85) 17.060 16.203 (5.02%) 1,663,296.8 26,950,398 Qualified XII (0.90) 12.379 11.751 (5.07%) 18,354.1 215,679 Qualified XII (0.95) 16.981 16.112 (5.12%) 627,673.6 10,113,077 Qualified XII (1.00) 16.942 16.067 (5.16%) 3,179,028.9 51,077,458 Qualified XII (1.05) 16.903 16.021 (5.22%) 165,847.8 2,657,048 Qualified XII (1.10) 16.864 15.976 (5.27%) 60,130.4 960,644 Qualified XII (1.15) 16.825 15.931 (5.31%) 72,759.3 1,159,128 Qualified XII (1.20) 16.786 15.886 (5.36%) 63,930.6 1,015,602 Qualified XII (1.25) 16.747 15.842 (5.40%) 7,084.8 112,238 Qualified XII (1.30) 16.708 15.797 (5.45%) 3,720.5 58,772 Qualified XII (1.35) 16.670 15.752 (5.51%) 531.0 8,364 Qualified XII (1.40) 16.631 15.708 (5.55%) 11,109.1 174,501 Qualified XII (1.50) 16.554 15.620 (5.64%) 1,077.2 16,826 Qualified XV 24.228 22.987 (5.12%) 85,982.2 1,976,472 Qualified XVI 23.714 22.375 (5.65%) 304,552.9 6,814,371 Qualified XVII 24.150 22.902 (5.17%) 266,175.7 6,095,955 Qualified XVIII 24.150 22.902 (5.17%) 414,099.1 9,483,697 Qualified XIX 31.930 30.298 (5.11%) 22,072.9 668,766 Qualified XX 31.710 30.072 (5.17%) 84,038.1 2,527,193 Qualified XXI 24.286 23.078 (4.97%) 95,721.6 2,209,063 Qualified XXII 24.327 23.135 (4.90%) 91,052.4 2,106,497 Qualified XXIV 16.953 16.098 (5.04%) 338,782.1 5,453,715 Qualified XXV 23.973 22.825 (4.79%) 258,873.9 5,908,797 Qualified XXVI 23.962 22.781 (4.93%) 27,462.4 625,621 Qualified XXVII 31.470 29.827 (5.22%) 1,490,555.3 44,458,794 Qualified XXVIII 31.429 29.731 (5.40%) 143,093.2 4,254,303 Qualified XXIX 31.429 29.730 (5.41%) 10,380.9 308,623 Qualified XXX 31.429 29.650 (5.66%) 120,114.6 3,561,397 Annuity contracts in payment period 28,899,231 --------------------------------------------------------------------------------------------------------------------------------- AETNA BOND VP: 0.00% to 1.75% 6.40% Qualified I 58.977 63.372 7.45% 11,659.0 738,855 Qualified III 58.190 62.489 7.39% 11,856.0 740,869 Qualified V 15.115 16.205 7.21% 13,280.4 215,209 Qualified VI 15.007 16.115 7.38% 11,769,148.7 189,659,832 Qualified VII 13.904 14.941 7.46% 132,442.9 1,978,830 Qualified VIII 13.816 14.836 7.38% 9,231.3 136,956 Qualified IX 14.146 15.252 7.82% 2,039.1 31,101 Qualified X (1.15) 15.115 16.248 7.50% 82,489.2 1,340,284 Qualified X (1.25) 15.007 16.115 7.38% 1,882,061.4 30,329,419 Qualified XI 15.286 16.514 8.03% 525,416.9 8,676,734 Qualified XII (0.05) 15.886 16.447 3.53% (6) 22,510.2 370,226 Qualified XII (0.35) 11.377 12.329 8.37% 416,127.1 5,130,431 Qualified XII (0.40) 13.041 14.124 8.30% 1,646.4 23,254 Qualified XII (0.45) 11.348 12.284 8.25% 91,516.0 1,124,183 Qualified XII (0.55) 11.318 12.240 8.15% 48,530.9 594,018 Qualified XII (0.60) 11.539 12.218 5.88% (2) 128,150.2 1,565,739 Qualified XII (0.65) 11.289 12.196 8.03% 162,515.5 1,982,039 Qualified XII (0.70) 11.274 12.174 7.98% 140,186.1 1,706,626 Qualified XII (0.75) 11.259 12.152 7.93% 279,302.0 3,394,078 Qualified XII (0.80) 11.406 12.304 7.87% 1,192,571.4 14,673,398 Qualified XII (0.85) 12.949 13.961 7.82% 904,309.7 12,625,068 Qualified XII (0.90) 11.388 12.273 7.77% 8,759.9 107,510 Qualified XII (0.95) 12.889 13.883 7.71% 471,124.5 6,540,621 Qualified XII (1.00) 12.859 13.844 7.66% 2,285,455.5 31,639,846 Qualified XII (1.05) 12.829 13.805 7.61% 129,865.3 1,792,790 Qualified XII (1.10) 12.800 13.766 7.55% 68,465.6 942,498 Qualified XII (1.15) 12.770 13.727 7.49% 62,226.1 854,178 Qualified XII (1.20) 12.740 13.688 7.44% 50,803.6 695,399 Qualified XII (1.25) 12.711 13.650 7.39% 28,418.3 387,910 Qualified XII (1.30) 12.681 13.611 7.33% 4,920.7 66,976
S-10 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA BOND VP: (continued): Qualified XII (1.35) $ 12.652 $ 13.573 7.28% 480.2 $ 6,518 Qualified XII (1.40) 12.623 13.535 7.22% 10,134.0 137,164 Qualified XII (1.50) 12.564 13.459 7.12% 1,612.0 21,696 Qualified XV 15.190 16.361 7.71% 47,583.9 778,520 Qualified XVI 14.868 15.926 7.12% 176,719.8 2,814,440 Qualified XVII 15.087 16.226 7.55% 259,850.2 4,216,330 Qualified XVIII 15.087 16.226 7.55% 504,658.6 8,188,591 Qualified XIX 59.293 63.808 7.61% 8,586.4 547,880 Qualified XX 58.502 62.918 7.55% 15,083.7 949,035 Qualified XXI 15.227 16.426 7.87% 23,648.1 388,444 Qualified XXII 15.252 16.466 7.96% 69,345.0 1,141,835 Qualified XXIV 12.867 13.871 7.80% 158,918.9 2,204,364 Qualified XXV 15.030 16.246 8.09% 94,842.7 1,540,815 Qualified XXVI 15.023 16.214 7.93% 46,816.6 759,084 Qualified XXVII 58.266 62.692 7.60% 697,898.0 43,752,623 Qualified XXVIII 58.190 62.490 7.39% 232,374.0 14,521,050 Qualified XXIX 58.190 62.489 7.39% 1,960.2 122,489 Qualified XXX 58.180 62.321 7.12% 25,218.9 1,571,664 Annuity contracts in payment period 5,868,858 --------------------------------------------------------------------------------------------------------------------------------- AETNA CROSSROADS VP: 0.00% to 1.75% 2.54% Qualified III 16.322 14.991 (8.15%) 34.6 518 Qualified V 16.181 14.838 (8.30%) 806.1 11,961 Qualified VI 16.322 14.991 (8.15%) 1,945,392.2 29,163,374 Qualified X (1.15) 16.799 15.445 (8.06%) 18,902.1 291,943 Qualified X (1.25) 16.707 15.345 (8.15%) 266,564.1 4,090,426 Qualified XI 16.625 15.362 (7.60%) 71,563.7 1,099,362 Qualified XII (0.05) 16.042 15.300 (4.63%) (6) 5,741.8 87,849 Qualified XII (0.35) 10.777 9.988 (7.32%) 77,523.5 774,305 Qualified XII (0.40) 14.962 13.860 (7.37%) 572.7 7,938 Qualified XII (0.45) 10.749 9.952 (7.41%) 190,721.8 1,898,063 Qualified XII (0.55) 10.721 9.916 (7.51%) 2,933.3 29,087 Qualified XII (0.60) 10.501 9.898 (5.74%) (2) 887.1 8,781 Qualified XII (0.65) 10.693 9.880 (7.60%) 88,213.8 871,552 Qualified XII (0.70) 10.679 9.862 (7.65%) 56,178.5 554,032 Qualified XII (0.75) 10.665 9.845 (7.69%) 220,372.4 2,169,566 Qualified XII (0.80) 11.232 10.363 (7.74%) 158,589.2 1,643,460 Qualified XII (0.85) 14.857 13.700 (7.79%) 97,325.0 1,333,352 Qualified XII (0.90) 11.061 10.195 (7.83%) 2,379.9 24,263 Qualified XII (0.95) 14.788 13.623 (7.88%) 54,305.9 739,809 Qualified XII (1.00) 14.754 13.585 (7.92%) 195,525.0 2,656,207 Qualified XII (1.05) 14.719 13.547 (7.96%) 75,355.2 1,020,837 Qualified XII (1.10) 14.685 13.508 (8.01%) 57,924.4 782,443 Qualified XII (1.15) 14.651 13.470 (8.06%) 13,895.5 187,173 Qualified XII (1.20) 14.617 13.432 (8.11%) 352,350.4 4,732,771 Qualified XII (1.25) 14.584 13.395 (8.15%) 13,693.2 183,421 Qualified XII (1.30) 14.550 13.357 (8.20%) 5,656.9 75,559 Qualified XII (1.40) 14.483 13.282 (8.29%) 11,787.3 156,559 Qualified XII (1.50) 14.416 13.207 (8.39%) 842.4 11,126 Qualified XV 16.521 15.220 (7.87%) 8,971.7 136,550 Qualified XVI 16.170 14.814 (8.39%) 34,726.2 514,434 Qualified XVII 16.526 15.232 (7.83%) 28,421.9 432,923 Qualified XVIII 16.917 15.592 (7.83%) 10,453.4 162,990 Qualified XXI 16.561 15.279 (7.74%) 5,458.3 83,397 Qualified XXII 16.588 15.317 (7.66%) 11,974.0 183,405 Qualified XXIV 14.763 13.611 (7.80%) 7,213.9 98,188 Qualified XXV 16.347 15.113 (7.55%) 4,884.5 73,820 Qualified XXVI 16.340 15.083 (7.69%) 361.3 5,450 Qualified XXVII 16.343 15.040 (7.97%) 43,445.1 653,415 Qualified XXVIII 16.322 14.991 (8.15%) 1,742.8 26,127 Annuity contracts in payment period 61,455 ---------------------------------------------------------------------------------------------------------------------------------
S-11 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES D: 0.25% to 1.75% 1.46% Qualified III $ 10.188 $ 10.235 0.46% 5,679.9 $ 58,134 Qualified VI 10.188 10.235 0.46% 11,004,023.9 112,626,185 Qualified X (1.15) 10.188 10.235 0.46% 132,698.1 1,358,165 Qualified X (1.25) 10.188 10.235 0.46% 2,396,910.6 24,532,380 Qualified XI 10.292 10.403 1.08% 2,082,570.1 21,664,977 Qualified XII (0.30) 10.414 10.391 (0.22%) (6) 113,240.1 1,176,678 Qualified XII (0.60) 10.394 10.537 1.38% 109,223.6 1,150,889 Qualified XII (0.65) 10.376 10.515 1.34% 1,176.9 12,375 Qualified XII (0.70) 10.370 10.503 1.28% 36,796.9 386,478 Qualified XII (0.80) 10.347 10.469 1.18% 26,177.6 274,053 Qualified XII (0.85) 10.455 10.453 (0.02%) (2) 78,932.0 825,076 Qualified XII (0.90) 10.324 10.436 1.08% 21,619.4 225,620 Qualified XII (0.95) 10.313 10.419 1.03% 50,425.8 525,386 Qualified XII (1.00) 10.301 10.402 0.98% 169,250.0 1,760,539 Qualified XII (1.05) 10.290 10.385 0.92% 2,245,229.0 23,316,703 Qualified XII (1.10) 10.279 10.368 0.87% 157,582.8 1,633,818 Qualified XII (1.20) 10.256 10.335 0.77% 311,695.2 3,221,370 Qualified XII (1.25) 10.244 10.318 0.72% 4,834,394.4 49,881,281 Qualified XII (1.30) 10.233 10.302 0.67% 49,869.4 513,755 Qualified XII (1.35) 10.222 10.285 0.62% 12,912.6 132,806 Qualified XII (1.40) 10.210 10.268 0.57% 9,072.6 93,157 Qualified XII (1.50) 10.188 10.235 0.46% 5,628.6 57,609 Qualified XII (1.65) 10.171 10.186 0.15% (1) 692.5 7,054 Qualified XV 10.256 10.335 0.77% 76,150.5 787,015 Qualified XVI 10.131 10.153 0.22% 101,063.2 1,026,095 Qualified XVII 10.188 10.235 0.46% 89,461.7 915,640 Qualified XVIII 10.188 10.235 0.46% 477,459.9 4,886,802 Qualified XXI 10.282 10.377 0.92% 50,652.0 525,616 Qualified XXII 10.282 10.377 0.92% 397,209.4 4,121,842 Qualified XXIV 10.251 10.339 0.86% 63,863.9 660,289 Qualified XXV 10.203 10.318 1.13% 52,237.4 538,985 Qualified XXVI 10.199 10.298 0.97% 18,663.1 192,193 Qualified XXVII 10.201 10.269 0.67% 2,843,992.1 29,204,955 --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES E: 0.25% to 1.75% 0.79% Qualified V 10.114 10.026 (0.87%) 489.8 4,911 Qualified VI 10.139 10.068 (0.70%) 4,823,676.8 48,564,778 Qualified X (1.15) 10.109 10.013 (0.95%) 132,151.9 1,323,237 Qualified X (1.25) 10.107 10.010 (0.96%) 1,256,793.2 12,580,500 Qualified XI 10.221 10.210 (0.11%) 725,679.4 7,409,187 Qualified XII (0.30) 10.126 10.197 0.70% (6) 139,947.4 1,427,044 Qualified XII (0.70) 10.265 10.275 0.10% 9,878.6 101,503 Qualified XII (0.80) 10.249 10.249 0.00% 24,170.4 247,722 Qualified XII (0.85) 10.295 10.236 (0.57%) (2) 70,223.1 718,804 Qualified XII (0.95) 10.226 10.210 (0.16%) 102,170.2 1,043,158 Qualified XII (1.00) 10.218 10.197 (0.21%) 46,435.2 473,500 Qualified XII (1.05) 10.210 10.184 (0.25%) 961,600.7 9,792,942 Qualified XII (1.10) 10.202 10.171 (0.30%) 36,429.3 370,522 Qualified XII (1.20) 10.186 10.145 (0.40%) 127,627.8 1,294,784 Qualified XII (1.25) 10.178 10.132 (0.45%) 1,567,937.4 15,886,342 Qualified XII (1.30) 10.171 10.119 (0.51%) 15,370.2 155,531 Qualified XII (1.35) 10.163 10.106 (0.56%) 5,406.2 54,635 Qualified XII (1.40) 10.155 10.093 (0.61%) 1,902.5 19,202 Qualified XII (1.50) 10.139 10.068 (0.70%) 6,631.1 66,762 Qualified XII (1.65) 10.092 10.029 (0.62%) (1) 3,252.1 32,615 Qualified XV 10.186 10.145 (0.40%) 86,412.4 876,654 Qualified XVI 10.100 10.004 (0.95%) 21,398.0 214,066 Qualified XVII 10.139 10.068 (0.70%) 116,742.8 1,175,367 Qualified XVIII 10.107 10.010 (0.96%) 61,374.6 614,360 Qualified XXI 10.210 10.184 (0.25%) 16,970.1 172,823 Qualified XXII 10.210 10.184 (0.25%) 155,762.6 1,586,286 Qualified XXIV 10.185 10.152 (0.32%) 23,112.9 234,642
S-12 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES E: (continued): Qualified XXV $ 10.155 $ 10.149 (0.06%) 120,853.4 $ 1,226,541 Qualified XXVI 10.118 10.130 0.12% (2) 43,101.8 436,621 Qualified XXVII 10.153 10.100 (0.52%) 999,176.6 10,091,684 --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES G: 0.25% to 1.75% 0.39% Qualified VI 9.914 9.903 (0.11%) 1,295,879.0 12,833,090 Qualified X (1.25) 9.888 9.853 (0.35%) 442,314.4 4,358,124 Qualified XI 9.983 10.033 0.50% 84,837.2 851,172 Qualified XII (0.30) 9.941 10.020 0.79% (6) 6,579.1 65,923 Qualified XII (0.60) 10.031 10.111 0.80% 4,874.1 49,282 Qualified XII (0.80) 10.004 10.065 0.61% 1,379.6 13,886 Qualified XII (0.85) 10.013 10.053 0.40% (10) 5,422.2 54,509 Qualified XII (0.90) 9.991 10.041 0.50% 359.6 3,611 Qualified XII (0.95) 9.925 10.030 1.06% (7) 8,989.9 90,169 Qualified XII (1.00) 9.978 10.018 0.40% 22,600.3 226,410 Qualified XII (1.05) 9.972 10.007 0.35% 169,969.4 1,700,884 Qualified XII (1.10) 9.965 9.995 0.30% 51,610.0 515,842 Qualified XII (1.15) 9.946 9.984 0.38% (2) 1,860.4 18,574 Qualified XII (1.20) 9.952 9.972 0.20% 34,302.1 342,061 Qualified XII (1.25) 9.946 9.961 0.15% 536,929.7 5,348,357 Qualified XII (1.30) 9.939 9.949 0.10% 4,364.8 43,425 Qualified XII (1.35) 9.933 9.938 0.05% 3,769.3 37,459 Qualified XII (1.40) 9.926 9.926 0.00% 3,654.3 36,273 Qualified XII (1.45) 9.920 9.915 (0.05%) 30,622.5 303,622 Qualified XV 9.952 9.972 0.20% 30,156.2 300,718 Qualified XVI 9.881 9.846 (0.35%) 5,834.6 57,447 Qualified XVII 9.914 9.903 (0.11%) 29,548.4 292,618 Qualified XVIII 9.888 9.853 (0.35%) 68,752.5 677,418 Qualified XXI 9.972 10.007 0.35% 2,661.3 26,632 Qualified XXII 9.972 10.007 0.35% 18,134.7 181,474 Qualified XXIV 9.952 9.980 0.28% 6,204.6 61,922 Qualified XXV 9.929 9.984 0.55% 8,607.1 85,933 Qualified XXVI 9.913 9.964 0.51% (2) 8,750.2 87,187 Qualified XXVII 9.927 9.936 0.09% 511,483.3 5,082,098 --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES H: 0.25% to 1.75% 0.47% Qualified VI 10.069 9.985 (0.83%) 1,081,741.0 10,801,184 Qualified X (1.15) 10.051 9.943 (1.07%) 46,788.1 465,214 Qualified X (1.25) 10.049 9.941 (1.07%) 228,130.1 2,267,841 Qualified XI 10.127 10.104 (0.23%) 106,426.3 1,075,331 Qualified XII (0.30) 10.127 10.091 (0.36%) (6) 3,361.0 33,916 Qualified XII (0.60) 10.163 10.171 0.08% 331.5 3,372 Qualified XII (0.80) 10.142 10.129 (0.13%) 13,648.7 138,248 Qualified XII (0.85) 9.871 10.119 2.51% (4) 1,991.4 20,151 Qualified XII (0.90) 10.131 10.109 (0.22%) 1,483.1 14,993 Qualified XII (0.95) 10.126 10.098 (0.28%) 15,062.1 152,097 Qualified XII (1.00) 10.121 10.088 (0.33%) 14,009.1 141,324 Qualified XII (1.05) 10.116 10.078 (0.38%) 315,951.1 3,184,155 Qualified XII (1.10) 10.111 10.067 (0.44%) 23,491.4 236,488 Qualified XII (1.20) 10.100 10.047 (0.52%) 13,950.2 140,158 Qualified XII (1.25) 10.095 10.037 (0.57%) 277,780.7 2,788,085 Qualified XII (1.30) 10.090 10.026 (0.63%) 1,295.0 12,984 Qualified XII (1.35) 10.084 10.016 (0.67%) 9,055.2 90,697 Qualified XII (1.40) 10.079 10.006 (0.72%) 5,910.0 59,135 Qualified XII (1.45) 10.074 9.996 (0.77%) 1,273.3 12,728 Qualified XV 10.100 10.047 (0.52%) 15,669.0 157,426 Qualified XVI 10.043 9.934 (1.09%) 9,652.2 95,885 Qualified XVII 10.069 9.985 (0.83%) 34,877.5 348,252 Qualified XVIII 10.049 9.941 (1.07%) 58,342.7 579,985 Qualified XXI 10.116 10.078 (0.38%) 1,711.4 17,247 Qualified XXII 10.116 10.078 (0.38%) 24,037.4 242,249 Qualified XXV 10.084 10.066 (0.18%) 1,790.0 18,018 Qualified XXVI 10.080 10.047 (0.33%) 1,932.0 19,411 Qualified XXVII 10.082 10.018 (0.63%) 268,638.6 2,691,221 ---------------------------------------------------------------------------------------------------------------------------------
S-13 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES I: 1.75% 0.24% Qualified X (1.25) $ 9.863 $ 9.804 (0.60%) 112,434.8 $ 1,102,311 Qualified XVIII 9.863 9.804 (0.60%) 15,297.9 149,981 --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES J: 1.75% 0.16% Qualified X (1.25) 9.731 9.686 (0.46%) 32,661.5 316,359 Qualified XVIII 9.731 9.686 (0.46%) 6,624.6 64,166 --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES K: 1.30% to 1.75% 0.00% Qualified X (1.25) 10.041 9.788 (2.52%) 43,521.5 425,988 Qualified XXVII 10.046 9.836 (2.09%) 187,961.9 1,848,793 --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES L: 1.30% 4.60% Qualified XXVII 10.015 9.979 (0.36%) 130,743.4 1,304,688 --------------------------------------------------------------------------------------------------------------------------------- AETNA GET FUND, SERIES Q: 1.05% 0.00% Qualified XXVII 9.999 10.000 0.01% (12) 364,160.8 3,641,608 --------------------------------------------------------------------------------------------------------------------------------- AETNA GROWTH AND INCOME VP: 0.00% to 1.75% 0.60% Qualified I 329.769 265.883 (19.37%) 86,477.3 22,992,856 Qualified III 250.600 201.929 (19.42%) 10,923.7 2,205,820 Qualified V 25.448 20.473 (19.55%) 18,076.0 370,069 Qualified VI 25.588 20.618 (19.42%) 75,994,481.3 1,566,854,215 Qualified VII 24.151 19.472 (19.37%) 6,275,874.0 122,203,819 Qualified VIII 23.756 19.140 (19.43%) 53,917.0 1,031,972 Qualified IX 24.020 19.453 (19.01%) 12,412.5 241,461 Qualified X (1.15) 25.772 20.788 (19.34%) 331,651.2 6,894,366 Qualified X (1.25) 25.588 20.618 (19.42%) 13,049,579.3 269,056,225 Qualified XI 26.063 21.129 (18.93%) 4,010,571.4 84,739,364 Qualified XII (0.05) 23.506 21.043 (10.48%) (6) 462,701.7 9,736,631 Qualified XII (0.35) 10.545 8.575 (18.68%) 4,800,393.2 41,163,372 Qualified XII (0.40) 17.368 14.115 (18.73%) 53,877.3 760,478 Qualified XII (0.45) 10.518 8.544 (18.77%) 847,662.1 7,242,425 Qualified XII (0.55) 10.490 8.513 (18.85%) 928,095.3 7,900,875 Qualified XII (0.60) 10.163 8.497 (16.39%) (2) 1,639,325.8 13,929,351 Qualified XII (0.65) 10.463 8.482 (18.93%) 445,025.1 3,774,703 Qualified XII (0.70) 10.450 8.467 (18.98%) 962,323.7 8,147,995 Qualified XII (0.75) 10.436 8.451 (19.02%) 3,065,149.9 25,903,582 Qualified XII (0.80) 11.429 9.251 (19.06%) 11,126,932.7 102,935,254 Qualified XII (0.85) 17.246 13.953 (19.09%) 5,556,404.1 77,528,507 Qualified XII (0.90) 11.094 8.971 (19.14%) 90,959.9 816,001 Qualified XII (0.95) 17.166 13.874 (19.18%) 3,054,662.3 42,380,385 Qualified XII (1.00) 17.127 13.835 (19.22%) 13,342,020.8 184,586,858 Qualified XII (1.05) 17.087 13.796 (19.26%) 525,252.3 7,246,381 Qualified XII (1.10) 17.047 13.757 (19.30%) 294,161.5 4,046,780 Qualified XII (1.15) 17.008 13.718 (19.34%) 284,047.7 3,896,567 Qualified XII (1.20) 16.969 13.680 (19.38%) 209,140.8 2,861,046 Qualified XII (1.25) 16.929 13.641 (19.42%) 75,992.2 1,036,610 Qualified XII (1.30) 16.890 13.603 (19.46%) 10,253.0 139,472 Qualified XII (1.35) 16.851 13.565 (19.50%) 262.3 3,558 Qualified XII (1.40) 16.812 13.526 (19.55%) 43,851.3 593,133 Qualified XII (1.50) 16.734 13.450 (19.62%) 9,104.8 122,460 Qualified XV 25.900 20.933 (19.18%) 832,516.0 17,427,058 Qualified XVI 25.351 20.376 (19.62%) 1,096,214.3 22,336,463 Qualified XVII 25.817 20.855 (19.22%) 3,760,767.6 78,430,809 Qualified XVIII 25.817 20.855 (19.22%) 3,988,776.8 83,185,940 Qualified XIX 332.719 268.938 (19.17%) 47,243.1 12,705,454 Qualified XX 252.842 204.249 (19.22%) 102,140.7 20,862,132 Qualified XXI 25.963 21.015 (19.06%) 350,781.1 7,371,665 Qualified XXII 26.006 21.067 (18.99%) 1,117,594.4 23,544,362 Qualified XXIV 17.138 13.862 (19.12%) 1,142,703.5 15,840,156 Qualified XXV 25.628 20.786 (18.89%) 671,177.3 13,951,091 Qualified XXVI 25.617 20.745 (19.02%) 85,130.2 1,766,027
S-14 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA GROWTH AND INCOME VP: (continued): Qualified XXVII $250.928 $202.587 (19.26%) 1,137,553.0 $ 230,453,445 Qualified XXVIII 250.600 201.933 (19.42%) 25,678.1 5,185,262 Qualified XXIX 250.600 201.929 (19.42%) 2,840.6 573,604 Qualified XXX 250.558 201.386 (19.62%) 65,867.9 13,264,875 Annuity contracts in payment period 229,256,859 --------------------------------------------------------------------------------------------------------------------------------- AETNA GROWTH VP: 0.00% to 1.75% 11.29% Qualified III 15.760 11.351 (27.98%) 675.3 7,665 Qualified V 20.638 14.840 (28.09%) 3,890.9 57,741 Qualified VI 20.761 14.953 (27.98%) 3,666,867.6 54,830,671 Qualified VIII 20.755 14.948 (27.98%) 634.9 9,490 Qualified X (1.15) 20.839 15.024 (27.90%) 6,451.8 96,932 Qualified X (1.25) 20.761 14.953 (27.98%) 546,125.1 8,166,209 Qualified XI 21.069 15.266 (27.54%) 282,640.9 4,314,796 Qualified XII (0.05) 17.528 15.247 (13.01%) (6) 36,220.0 552,247 Qualified XII (0.35) 13.544 9.844 (27.32%) 175,057.4 1,723,265 Qualified XII (0.40) 21.242 15.431 (27.36%) 1,049.6 16,196 Qualified XII (0.45) 13.509 9.808 (27.40%) 352,265.5 3,455,020 Qualified XII (0.55) 13.474 9.773 (27.47%) 20,044.8 195,898 Qualified XII (0.60) 13.456 9.755 (27.50%) 4,506.0 43,956 Qualified XII (0.65) 13.439 9.738 (27.54%) 20,761.3 202,174 Qualified XII (0.70) 13.421 9.720 (27.58%) 164,211.1 1,596,132 Qualified XII (0.75) 13.404 9.703 (27.61%) 227,866.4 2,210,988 Qualified XII (0.80) 15.239 11.026 (27.65%) 1,211,713.4 13,360,352 Qualified XII (0.85) 21.073 15.239 (27.68%) 150,712.6 2,296,710 Qualified XII (0.90) 14.801 10.698 (27.72%) 19,301.6 206,488 Qualified XII (0.95) 20.994 15.167 (27.76%) 142,509.7 2,161,444 Qualified XII (1.00) 20.955 15.131 (27.79%) 946,969.4 14,328,594 Qualified XII (1.05) 20.916 15.095 (27.83%) 77,946.8 1,176,607 Qualified XII (1.10) 20.878 15.059 (27.87%) 18,104.9 272,642 Qualified XII (1.15) 20.839 15.024 (27.90%) 19,163.2 287,908 Qualified XII (1.20) 20.800 14.988 (27.94%) 13,386.2 200,632 Qualified XII (1.25) 20.761 14.953 (27.98%) 14,689.9 219,658 Qualified XII (1.30) 20.723 14.918 (28.01%) 4,066.9 60,670 Qualified XII (1.35) 20.684 14.882 (28.05%) 788.9 11,740 Qualified XII (1.40) 20.646 14.847 (28.09%) 8,807.6 130,766 Qualified XII (1.50) 20.569 14.777 (28.16%) 4,078.0 60,261 Qualified XV 20.994 15.167 (27.76%) 34,573.2 524,371 Qualified XVI 20.569 14.777 (28.16%) 65,576.0 969,017 Qualified XVII 20.761 14.953 (27.98%) 50,159.9 750,041 Qualified XVIII 21.022 15.194 (27.72%) 51,320.0 779,756 Qualified XXI 21.045 15.226 (27.65%) 37,527.1 571,387 Qualified XXII 21.045 15.239 (27.59%) 125,991.5 1,919,984 Qualified XXIV 20.969 15.161 (27.70%) 61,211.1 928,022 Qualified XXV 20.793 15.075 (27.50%) 63,366.1 955,244 Qualified XXVI 20.784 15.045 (27.61%) 13,347.8 200,818 Qualified XXVII 7.718 5.570 (27.83%) 108,472.4 604,191 Annuity contracts in payment period 307,836 --------------------------------------------------------------------------------------------------------------------------------- AETNA INDEX PLUS LARGE CAP VP: 0.00% to 1.75% 4.07% Qualified V 20.478 17.439 (14.84%) 1,498.6 26,134 Qualified VI 20.618 17.587 (14.70%) 11,127,272.0 195,695,332 Qualified VIII 20.612 17.580 (14.71%) 2,059.4 36,205 Qualified X (1.15) 20.707 17.681 (14.61%) 27,450.8 485,357 Qualified X (1.25) 20.618 17.587 (14.70%) 1,322,388.5 23,256,846 Qualified XI 20.959 17.986 (14.18%) 907,894.5 16,329,391 Qualified XII (0.05) 19.435 17.950 (7.64%) (6) 359,184.4 6,447,360 Qualified XII (0.35) 12.651 10.890 (13.92%) 437,895.4 4,768,681 Qualified XII (0.40) 21.131 18.180 (13.97%) 1,662.8 30,230 Qualified XII (0.45) 12.618 10.850 (14.01%) 677,370.4 7,349,469 Qualified XII (0.55) 12.585 10.811 (14.10%) 144,312.8 1,560,166 Qualified XII (0.60) 12.569 10.792 (14.14%) 72,835.6 786,042 Qualified XII (0.65) 12.553 10.772 (14.19%) 232,973.4 2,509,590
S-15 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA INDEX PLUS LARGE CAP VP: (continued): Qualified XII (0.70) $ 12.536 $ 10.753 (14.22%) 199,252.0 $ 2,142,557 Qualified XII (0.75) 12.520 10.733 (14.27%) 606,971.6 6,514,626 Qualified XII (0.80) 13.950 11.953 (14.32%) 2,847,404.2 34,035,022 Qualified XII (0.85) 20.975 17.964 (14.36%) 743,884.8 13,363,146 Qualified XII (0.90) 13.500 11.556 (14.40%) 39,494.0 456,393 Qualified XII (0.95) 20.885 17.869 (14.44%) 520,590.3 9,302,428 Qualified XII (1.00) 20.841 17.822 (14.49%) 2,957,522.3 52,708,963 Qualified XII (1.05) 20.796 17.775 (14.53%) 177,687.1 3,158,388 Qualified XII (1.10) 20.751 17.728 (14.57%) 112,980.0 2,002,909 Qualified XII (1.15) 20.707 17.681 (14.61%) 42,375.2 749,236 Qualified XII (1.20) 20.663 17.634 (14.66%) 31,870.5 562,004 Qualified XII (1.25) 20.618 17.587 (14.70%) 34,502.9 606,802 Qualified XII (1.30) 20.574 17.541 (14.74%) 12,542.8 220,014 Qualified XII (1.35) 20.530 17.494 (14.79%) 592.5 10,365 Qualified XII (1.40) 20.486 17.448 (14.83%) 41,187.6 718,642 Qualified XII (1.50) 20.399 17.356 (14.92%) 5,902.2 102,438 Qualified XIV 20.618 17.587 (14.70%) 883.9 15,545 Qualified XV 20.870 17.856 (14.44%) 52,914.0 944,832 Qualified XVI 20.427 17.381 (14.91%) 152,444.3 2,649,634 Qualified XVII 20.692 17.668 (14.61%) 70,818.2 1,251,216 Qualified XVIII 20.877 17.871 (14.40%) 85,028.4 1,519,542 Qualified XXI 20.920 17.926 (14.31%) 79,445.3 1,424,136 Qualified XXII 20.936 17.954 (14.24%) 175,012.7 3,142,178 Qualified XXIV 20.854 17.857 (14.37%) 88,176.0 1,574,558 Qualified XXV 20.650 17.730 (14.14%) 105,874.5 1,877,154 Qualified XXVI 20.641 17.696 (14.27%) 24,496.6 433,491 Qualified XXVII 20.645 17.645 (14.53%) 2,246,477.0 39,639,087 Qualified XXVIII 20.618 17.588 (14.70%) 971,497.8 17,086,703 Annuity contracts in payment period 2,113,207 --------------------------------------------------------------------------------------------------------------------------------- AETNA INDEX PLUS MID CAP VP: 0.00% to 1.75% 5.86% Qualified III 14.669 14.965 2.02% (7) 9.0 134 Qualified V 14.688 14.290 (2.71%) 1,289.3 18,424 Qualified VI 14.751 14.374 (2.56%) 2,436,649.8 35,024,404 Qualified VIII 14.748 14.370 (2.56%) 1,615.4 23,214 Qualified X (1.15) 14.791 14.427 (2.46%) 8,545.9 123,292 Qualified X (1.25) 14.751 14.374 (2.56%) 284,425.7 4,088,335 Qualified XI 14.923 14.630 (1.96%) 203,746.6 2,980,813 Qualified XII (0.05) 14.784 14.611 (1.17%) (6) 65,668.5 959,482 Qualified XII (0.35) 15.460 15.202 (1.67%) 76,014.1 1,155,566 Qualified XII (0.40) 15.046 14.787 (1.72%) 559.3 8,271 Qualified XII (0.45) 15.419 15.147 (1.76%) 57,830.7 875,962 Qualified XII (0.55) 15.379 15.092 (1.87%) 15,014.7 226,602 Qualified XII (0.60) 15.183 15.065 (0.78%) (2) 70,045.6 1,055,237 Qualified XII (0.65) 15.339 15.038 (1.96%) 12,404.4 186,538 Qualified XII (0.70) 15.319 15.011 (2.01%) 46,084.5 691,774 Qualified XII (0.75) 15.299 14.984 (2.06%) 73,912.7 1,107,508 Qualified XII (0.80) 14.930 14.615 (2.11%) 457,672.1 6,688,878 Qualified XII (0.85) 14.910 14.588 (2.16%) 145,443.4 2,121,728 Qualified XII (0.90) 14.890 14.561 (2.21%) 6,947.3 101,159 Qualified XII (0.95) 14.870 14.534 (2.26%) 156,767.2 2,278,455 Qualified XII (1.00) 14.851 14.508 (2.31%) 543,328.0 7,882,602 Qualified XII (1.05) 14.831 14.481 (2.36%) 69,170.8 1,001,662 Qualified XII (1.10) 14.811 14.454 (2.41%) 37,048.2 535,495 Qualified XII (1.15) 14.791 14.427 (2.46%) 5,029.2 72,556 Qualified XII (1.20) 14.771 14.401 (2.50%) 7,819.4 112,607 Qualified XII (1.25) 14.751 14.374 (2.56%) 9,458.9 135,962 Qualified XII (1.30) 14.731 14.348 (2.60%) 1,284.6 18,431 Qualified XII (1.35) 14.712 14.321 (2.66%) 1,324.1 18,963 Qualified XII (1.40) 14.692 14.295 (2.70%) 10,547.1 150,771 Qualified XII (1.50) 14.653 14.242 (2.80%) 918.1 13,076 Qualified XV 14.870 14.534 (2.26%) 20,748.7 301,561
S-16 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA INDEX PLUS MID CAP VP: (continued): Qualified XVI $ 14.653 $ 14.242 (2.80%) 42,162.1 $ 600,472 Qualified XVII 14.751 14.374 (2.56%) 7,620.3 109,534 Qualified XVIII 14.751 14.374 (2.56%) 15,433.5 221,841 Qualified XXI 14.906 14.592 (2.11%) 18,728.1 273,280 Qualified XXII 14.906 14.603 (2.03%) 38,319.9 559,585 Qualified XXIV 14.860 14.536 (2.18%) 37,986.4 552,170 Qualified XXV 14.774 14.491 (1.92%) 41,096.5 595,530 Qualified XXVI 14.768 14.463 (2.07%) 13,045.8 188,682 Qualified XXVII 15.377 15.014 (2.36%) 517,509.4 7,769,886 Qualified XXVIII 15.357 14.965 (2.55%) 511,903.8 7,660,640 --------------------------------------------------------------------------------------------------------------------------------- AETNA INDEX PLUS SMALL CAP VP: 0.00% to 1.75% 4.91% Qualified V 10.416 10.516 0.96% 758.0 7,971 Qualified VI 10.461 10.579 1.13% 1,157,605.9 12,246,313 Qualified VIII 9.941 10.576 6.39% (1) 1,138.0 12,035 Qualified X (1.15) 10.489 10.618 1.23% 16,834.1 178,744 Qualified X (1.25) 10.461 10.579 1.13% 134,001.8 1,417,605 Qualified XI 10.583 10.767 1.74% 108,657.5 1,169,915 Qualified XII (0.05) 10.431 10.753 3.09% (6) 23,304.9 250,598 Qualified XII (0.35) 11.144 11.372 2.05% 38,549.2 438,382 Qualified XII (0.40) 10.338 10.882 5.26% (1) 77.1 839 Qualified XII (0.45) 11.115 11.331 1.94% 11,408.5 129,270 Qualified XII (0.55) 10.898 11.290 3.60% (1) 3,235.0 36,523 Qualified XII (0.60) 11.130 11.270 1.26% (2) 3,181.3 35,853 Qualified XII (0.65) 11.057 11.249 1.74% 60,052.2 675,527 Qualified XII (0.70) 11.042 11.229 1.69% 20,120.5 225,933 Qualified XII (0.75) 11.028 11.209 1.64% 16,254.9 182,201 Qualified XII (0.80) 10.588 10.756 1.59% 110,246.3 1,185,809 Qualified XII (0.85) 10.574 10.736 1.53% 48,920.3 525,208 Qualified XII (0.90) 10.559 10.716 1.49% 1,349.9 14,465 Qualified XII (0.95) 10.545 10.696 1.43% 58,078.3 621,206 Qualified XII (1.00) 10.531 10.677 1.39% 180,346.2 1,925,556 Qualified XII (1.05) 10.517 10.657 1.33% 7,455.4 79,452 Qualified XII (1.10) 10.503 10.637 1.28% 8,426.1 89,628 Qualified XII (1.15) 10.489 10.618 1.23% 3,338.2 35,445 Qualified XII (1.20) 10.475 10.598 1.17% 3,370.9 35,725 Qualified XII (1.25) 10.461 10.579 1.13% 4,434.8 46,916 Qualified XII (1.30) 10.447 10.559 1.07% 171.5 1,811 Qualified XII (1.35) 10.433 10.540 1.03% 227.5 2,398 Qualified XII (1.40) 10.419 10.520 0.97% 7,759.9 81,634 Qualified XII (1.50) 10.391 10.481 0.87% 91.9 963 Qualified XV 10.545 10.696 1.43% 9,281.7 99,277 Qualified XVI 10.391 10.481 0.87% 18,942.8 198,539 Qualified XVII 10.461 10.579 1.13% 12,866.1 136,111 Qualified XVIII 10.461 10.579 1.13% 7,169.3 75,844 Qualified XXI 10.571 10.739 1.59% 5,890.8 63,261 Qualified XXII 10.571 10.747 1.66% 21,656.7 232,745 Qualified XXIV 10.538 10.698 1.52% 10,634.0 113,763 Qualified XXV 10.477 10.665 1.79% 9,997.8 106,627 Qualified XXVI 10.303 10.644 3.31% (1) 6,129.0 65,237 Qualified XXVII 10.881 11.025 1.32% 292,146.5 3,220,915 Qualified XXVIII 10.866 10.989 1.13% 263,319.7 2,893,620 --------------------------------------------------------------------------------------------------------------------------------- AETNA INTERNATIONAL VP: 0.00% to 1.75% 0.11% Qualified V 11.434 8.581 (24.95%) 11.5 99 Qualified VI 11.484 8.632 (24.83%) 715,656.3 6,177,545 Qualified VIII 11.481 8.630 (24.83%) 13.0 112 Qualified X (1.15) 11.514 8.664 (24.75%) 1,072.9 9,296 Qualified X (1.25) 11.484 8.632 (24.83%) 80,579.1 695,559 Qualified XI 11.617 8.786 (24.37%) 17,216.9 151,268 Qualified XII (0.05) 9.713 8.774 (9.67%) (6) 1,974.0 17,320 Qualified XII (0.35) 11.462 8.695 (24.14%) 17,234.2 149,851 Qualified XII (0.45) 11.433 8.663 (24.23%) 56,668.9 490,923
S-17 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA INTERNATIONAL VP: (continued): Qualified XII (0.55) $ 11.403 $ 8.632 (24.30%) 723.2 $ 6,243 Qualified XII (0.60) 9.095 8.616 (5.27%) (8) 905.3 7,800 Qualified XII (0.65) 11.373 8.601 (24.37%) 1,682.8 14,474 Qualified XII (0.70) 11.358 8.585 (24.41%) 40,837.0 350,586 Qualified XII (0.75) 11.344 8.570 (24.45%) 7,954.3 68,168 Qualified XII (0.80) 11.623 8.777 (24.49%) 64,928.2 569,875 Qualified XII (0.85) 11.608 8.760 (24.53%) 36,688.7 321,393 Qualified XII (0.90) 11.592 8.744 (24.57%) 2,215.6 19,373 Qualified XII (0.95) 11.576 8.728 (24.60%) 25,721.5 224,497 Qualified XII (1.00) 11.561 8.712 (24.64%) 104,110.0 907,006 Qualified XII (1.05) 11.545 8.696 (24.68%) 3,613.5 31,423 Qualified XII (1.10) 11.530 8.680 (24.72%) 5,097.8 44,249 Qualified XII (1.15) 11.514 8.664 (24.75%) 2,847.6 24,672 Qualified XII (1.20) 11.499 8.648 (24.79%) 1,171.4 10,130 Qualified XII (1.25) 11.484 8.632 (24.83%) 3,880.9 33,500 Qualified XII (1.30) 11.468 8.616 (24.87%) 91.5 788 Qualified XII (1.40) 11.437 8.584 (24.95%) 3,040.8 26,102 Qualified XII (1.50) 11.407 8.553 (25.02%) 587.9 5,028 Qualified XV 11.576 8.728 (24.60%) 1,565.0 13,659 Qualified XVI 11.407 8.553 (25.02%) 8,303.5 71,020 Qualified XVIII 11.484 8.632 (24.83%) 8,478.8 73,189 Qualified XXI 11.604 8.763 (24.48%) 2,750.9 24,106 Qualified XXII 11.604 8.770 (24.42%) 28,216.2 247,456 Qualified XXIV 11.568 8.729 (24.54%) 11,002.6 96,042 Qualified XXV 11.501 8.702 (24.34%) 6,894.0 59,992 Qualified XXVI 11.496 8.685 (24.45%) 289.8 2,517 Qualified XXVII 8.094 6.096 (24.68%) 5,360.9 32,680 --------------------------------------------------------------------------------------------------------------------------------- AETNA LEGACY VP: 0.00% to 1.75% 4.35% Qualified III 15.599 15.039 (3.59%) 621.2 9,342 Qualified V 15.465 14.885 (3.75%) 584.6 8,702 Qualified VI 15.599 15.039 (3.59%) 1,083,315.3 16,291,979 Qualified X (1.15) 15.753 15.202 (3.50%) 15,761.2 239,602 Qualified X (1.25) 15.667 15.104 (3.59%) 336,932.1 5,089,023 Qualified XI 15.889 15.411 (3.01%) 48,909.5 753,744 Qualified XII (0.05) 15.689 15.349 (2.17%) (6) 43,588.6 669,042 Qualified XII (0.35) 11.234 10.929 (2.71%) 38,156.5 417,012 Qualified XII (0.40) 14.600 14.196 (2.77%) 145.5 2,065 Qualified XII (0.45) 11.204 10.889 (2.81%) 67,498.1 734,987 Qualified XII (0.55) 11.175 10.850 (2.91%) 13,869.1 150,480 Qualified XII (0.60) 11.137 10.830 (2.76%) (2) 18.7 203 Qualified XII (0.65) 11.146 10.811 (3.01%) 68,036.3 735,540 Qualified XII (0.70) 11.132 10.791 (3.06%) 35,171.9 379,540 Qualified XII (0.75) 11.117 10.772 (3.10%) 66,844.2 720,046 Qualified XII (0.80) 11.514 11.151 (3.15%) 117,599.1 1,311,348 Qualified XII (0.85) 14.497 14.033 (3.20%) 71,453.5 1,002,707 Qualified XII (0.90) 11.412 11.040 (3.26%) 3,429.6 37,863 Qualified XII (0.95) 14.430 13.954 (3.30%) 32,433.4 452,575 Qualified XII (1.00) 14.397 13.914 (3.35%) 280,328.4 3,900,489 Qualified XII (1.05) 14.363 13.875 (3.40%) 42,207.4 585,628 Qualified XII (1.10) 14.330 13.836 (3.45%) 30,463.7 421,496 Qualified XII (1.15) 14.297 13.797 (3.50%) 10,286.2 141,919 Qualified XII (1.20) 14.264 13.758 (3.55%) 17,388.0 239,224 Qualified XII (1.25) 14.231 13.720 (3.59%) 8,424.7 115,587 Qualified XII (1.30) 14.198 13.681 (3.64%) 2,682.7 36,702 Qualified XII (1.35) 13.694 13.642 (0.38%) (4) 3.3 45 Qualified XII (1.40) 14.132 13.604 (3.74%) 2,548.0 34,663 Qualified XII (1.50) 14.067 13.527 (3.84%) 188.6 2,551 Qualified XV 15.789 15.268 (3.30%) 5,920.4 90,392 Qualified XVI 15.454 14.862 (3.83%) 19,581.0 291,013 Qualified XVII 15.795 15.281 (3.25%) 19,598.1 299,478 Qualified XVIII 15.864 15.348 (3.25%) 46,201.7 709,104
S-18 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA LEGACY VP: (continued): Qualified XXI $ 15.828 $ 15.328 (3.16%) 5,228.6 $ 80,144 Qualified XXII 15.855 15.367 (3.08%) 5,463.5 83,958 Qualified XXIV 14.406 13.942 (3.22%) 2,428.7 33,861 Qualified XXV 15.623 15.161 (2.96%) 4,304.9 65,267 Qualified XXVI 15.616 15.131 (3.11%) 527.1 7,976 Qualified XXVII 15.620 15.088 (3.41%) 51,195.7 772,440 Qualified XXVIII 14.862 15.039 1.19% (12) 626.4 9,421 Annuity contracts in payment period 168,789 --------------------------------------------------------------------------------------------------------------------------------- AETNA MONEY MARKET VP: 0.00% to 1.75% 5.45% Qualified I 47.509 48.793 2.70% 22,886.2 1,116,684 Qualified III 46.754 47.989 2.64% 4,461.3 214,095 Qualified V 13.435 13.767 2.47% 20,324.7 279,810 Qualified VI 13.571 13.929 2.64% 9,788,389.4 136,342,476 Qualified VII 13.500 13.865 2.70% 268,289.9 3,719,839 Qualified VIII 13.066 13.410 2.63% 11,518.0 154,457 Qualified IX 13.531 13.923 2.90% 2,006.5 27,937 Qualified X (1.15) 13.669 14.044 2.74% 190,821.4 2,679,896 Qualified X (1.25) 13.571 13.929 2.64% 2,629,444.0 36,625,525 Qualified XI 13.823 14.274 3.26% 453,275.7 6,470,058 Qualified XII (0.05) 14.025 14.216 1.36% (6) 59,698.3 848,671 Qualified XII (0.35) 11.443 11.852 3.57% 535,159.4 6,342,709 Qualified XII (0.40) 12.448 12.886 3.52% 2,530.5 32,608 Qualified XII (0.45) 11.413 11.809 3.47% 106,827.0 1,261,520 Qualified XII (0.55) 11.383 11.767 3.37% 38,644.1 454,725 Qualified XII (0.60) 11.396 11.745 3.06% (2) 37,494.3 440,370 Qualified XII (0.65) 11.354 11.724 3.26% 319,091.5 3,741,029 Qualified XII (0.70) 11.339 11.703 3.21% 291,538.0 3,411,869 Qualified XII (0.75) 11.324 11.682 3.16% 354,704.5 4,143,658 Qualified XII (0.80) 11.456 11.812 3.11% 1,739,521.5 20,547,228 Qualified XII (0.85) 12.360 12.737 3.05% 515,676.5 6,568,171 Qualified XII (0.90) 11.398 11.740 3.00% 14,164.7 166,293 Qualified XII (0.95) 12.303 12.666 2.95% 907,363.0 11,492,660 Qualified XII (1.00) 12.274 12.630 2.90% 2,364,040.2 29,857,828 Qualified XII (1.05) 12.246 12.594 2.84% 134,426.8 1,692,971 Qualified XII (1.10) 12.218 12.559 2.79% 121,076.6 1,520,601 Qualified XII (1.15) 12.189 12.524 2.75% 76,506.1 958,163 Qualified XII (1.20) 12.161 12.488 2.69% 51,519.2 643,372 Qualified XII (1.25) 12.133 12.453 2.64% 31,486.5 392,102 Qualified XII (1.30) 12.105 12.418 2.59% 17,087.6 212,194 Qualified XII (1.35) 12.077 12.383 2.53% 5,210.1 64,517 Qualified XII (1.40) 12.049 12.348 2.48% 28,987.0 357,931 Qualified XII (1.50) 11.993 12.279 2.38% 4,958.5 60,885 Qualified XV 13.736 14.142 2.96% 48,394.0 684,388 Qualified XVI 13.445 13.765 2.38% 171,506.9 2,360,793 Qualified XVII 13.571 13.929 2.64% 391,787.1 5,457,203 Qualified XVIII 13.571 13.929 2.64% 778,425.0 10,842,682 Qualified XIX 47.509 48.793 2.70% 12,744.6 621,845 Qualified XX 46.754 47.989 2.64% 68,117.3 3,268,880 Qualified XXI 13.769 14.197 3.11% 77,731.6 1,103,555 Qualified XXII 13.792 14.232 3.19% 135,175.9 1,923,823 Qualified XXIV 12.282 12.655 3.04% 143,580.1 1,817,006 Qualified XXV 13.592 14.042 3.31% 125,327.2 1,759,844 Qualified XXVI 13.586 14.015 3.16% 37,077.3 519,639 Qualified XXVII 47.123 48.828 3.62% 764,353.3 37,321,843 Qualified XXVIII 46.754 47.990 2.64% 459,087.8 22,031,624 Qualified XXIX 46.754 47.989 2.64% 2,218.5 106,462 Qualified XXX 46.746 47.860 2.38% 36,697.0 1,756,318 Annuity contracts in payment period 149,921 ---------------------------------------------------------------------------------------------------------------------------------
S-19 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA SMALL COMPANY VP: 0.00% to 1.75% 3.51% Qualified V $ 18.458 $ 18.926 2.54% 1,465.8 $ 27,741 Qualified VI 18.568 19.070 2.70% 2,827,320.3 53,916,999 Qualified VIII 18.563 19.063 2.69% 749.9 14,296 Qualified X (1.15) 18.638 19.160 2.80% 2,884.7 55,271 Qualified X (1.25) 18.568 19.070 2.70% 366,997.9 6,998,650 Qualified XI 18.843 19.469 3.32% 163,782.6 3,188,683 Qualified XII (0.05) 18.893 19.444 2.92% (6) 36,062.8 701,205 Qualified XII (0.35) 12.732 13.195 3.64% 69,886.0 922,146 Qualified XII (0.40) 18.998 19.678 3.58% 311.1 6,122 Qualified XII (0.45) 12.699 13.147 3.53% 210,230.7 2,763,903 Qualified XII (0.55) 12.666 13.100 3.43% 23,550.8 308,516 Qualified XII (0.60) 12.779 13.076 2.32% (2) 36,305.4 474,730 Qualified XII (0.65) 12.633 13.052 3.32% 14,063.3 183,554 Qualified XII (0.70) 12.616 13.029 3.27% 40,459.1 527,142 Qualified XII (0.75) 12.600 13.005 3.21% 216,921.8 2,821,068 Qualified XII (0.80) 13.419 13.844 3.17% 2,121,732.5 29,373,265 Qualified XII (0.85) 18.847 19.434 3.11% 131,464.6 2,554,883 Qualified XII (0.90) 13.048 13.447 3.06% 22,618.7 304,154 Qualified XII (0.95) 18.777 19.342 3.01% 133,977.4 2,591,390 Qualified XII (1.00) 18.742 19.296 2.96% 798,137.7 15,400,865 Qualified XII (1.05) 18.707 19.251 2.91% 28,139.5 541,713 Qualified XII (1.10) 18.673 19.205 2.85% 22,420.7 430,589 Qualified XII (1.15) 18.638 19.160 2.80% 13,689.4 262,288 Qualified XII (1.20) 18.603 19.115 2.75% 15,471.4 295,736 Qualified XII (1.25) 18.568 19.070 2.70% 15,435.1 294,348 Qualified XII (1.30) 18.534 19.024 2.64% 4,253.5 80,918 Qualified XII (1.35) 18.499 18.979 2.59% 371.9 7,058 Qualified XII (1.40) 18.465 18.935 2.55% 8,634.3 163,491 Qualified XII (1.50) 18.396 18.845 2.44% 2,243.4 42,276 Qualified XV 18.777 19.342 3.01% 17,879.2 345,819 Qualified XVI 18.396 18.845 2.44% 44,050.3 830,127 Qualified XVII 18.568 19.070 2.70% 10,911.8 208,088 Qualified XVIII 18.801 19.377 3.06% 11,229.6 217,596 Qualified XXI 18.822 19.418 3.17% 17,604.7 341,849 Qualified XXII 18.822 19.434 3.25% 65,181.2 1,266,731 Qualified XXIV 18.754 19.334 3.09% 79,781.6 1,542,498 Qualified XXV 18.597 19.224 3.37% 28,245.7 542,996 Qualified XXVI 18.589 19.187 3.22% 9,989.7 191,673 Qualified XXVII 9.145 9.410 2.90% 361,369.9 3,400,491 Annuity contracts in payment period 59,353 --------------------------------------------------------------------------------------------------------------------------------- AETNA TECHNOLOGY VP: 0.00% to 1.75% 0.00% Qualified V 5.824 4.424 (24.04%) 4,187.8 18,527 Qualified VI 5.831 4.436 (23.92%) 3,252,927.4 14,429,986 Qualified VIII 5.830 4.435 (23.93%) 1,374.3 6,095 Qualified X (1.15) 3.266 4.443 36.04% (9) 2,277.1 10,117 Qualified X (1.25) 5.831 4.436 (23.92%) 394,228.6 1,748,798 Qualified XI 5.854 4.481 (23.45%) 316,766.1 1,419,429 Qualified XII (0.05) 4.815 4.475 (7.06%) (6) 52,058.5 232,962 Qualified XII (0.35) 5.865 4.503 (23.22%) 86,256.3 388,412 Qualified XII (0.45) 3.259 4.495 37.93% (9) 855.4 3,845 Qualified XII (0.55) 5.857 4.487 (23.39%) 14,659.2 65,776 Qualified XII (0.60) 6.538 4.483 (31.43%) (2) 6,940.4 31,114 Qualified XII (0.70) 5.851 4.476 (23.50%) 33,874.4 151,622 Qualified XII (0.75) 5.849 4.472 (23.54%) 85,592.6 382,770 Qualified XII (0.80) 5.847 4.468 (23.58%) 882,962.4 3,945,076 Qualified XII (0.85) 5.845 4.464 (23.63%) 126,835.3 566,193 Qualified XII (0.90) 5.842 4.460 (23.66%) 15,740.4 70,202 Qualified XII (0.95) 5.840 4.456 (23.70%) 126,033.2 561,604 Qualified XII (1.00) 5.838 4.453 (23.72%) 881,479.7 3,925,229 Qualified XII (1.05) 5.836 4.449 (23.77%) 17,208.8 76,562 Qualified XII (1.10) 5.834 4.445 (23.81%) 19,649.9 87,344
S-20 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AETNA TECHNOLOGY VP: (continued): Qualified XII (1.15) $ 5.832 $ 4.441 (23.85%) 8,801.6 $ 39,088 Qualified XII (1.20) 5.830 4.437 (23.89%) 16,960.8 75,255 Qualified XII (1.25) 5.828 4.434 (23.92%) 10,886.6 48,271 Qualified XII (1.30) 5.826 4.430 (23.96%) 2,130.7 9,439 Qualified XII (1.35) 5.893 4.426 (24.89%) (2) 764.8 3,385 Qualified XII (1.40) 5.822 4.422 (24.05%) 9,124.2 40,347 Qualified XII (1.50) 5.818 4.414 (24.13%) 296.6 1,309 Qualified XV 5.842 4.458 (23.69%) 29,524.9 131,622 Qualified XVI 5.821 4.417 (24.12%) 31,262.4 138,086 Qualified XVII 5.841 4.454 (23.75%) 24,538.4 109,294 Qualified XVIII 5.841 4.454 (23.75%) 16,949.7 75,494 Qualified XXI 5.848 4.469 (23.58%) 37,134.9 165,956 Qualified XXII 5.848 4.473 (23.51%) 161,904.3 724,198 Qualified XXIV 5.842 4.461 (23.64%) 78,902.5 351,984 Qualified XXV 5.840 4.472 (23.42%) 44,851.5 200,576 Qualified XXVI 5.837 4.463 (23.54%) 6,338.6 28,289 Qualified XXVII 5.710 4.352 (23.78%) 342,338.2 1,489,856 --------------------------------------------------------------------------------------------------------------------------------- AETNA VALUE OPPORTUNITY VP: 0.00% to 1.75% 4.66% Qualified V 20.480 18.250 (10.89%) 1,569.4 28,641 Qualified VI 20.602 18.388 (10.75%) 2,189,268.1 40,256,262 Qualified VIII 20.596 18.382 (10.75%) 447.1 8,218 Qualified X (1.15) 20.679 18.476 (10.65%) 5,521.9 102,022 Qualified X (1.25) 20.602 18.388 (10.75%) 305,476.9 5,617,110 Qualified XI 20.907 18.774 (10.20%) 142,063.4 2,667,099 Qualified XII (0.05) 20.990 18.750 (10.67%) (6) 3,204.1 60,076 Qualified XII (0.35) 13.931 12.547 (9.93%) 101,406.7 1,272,350 Qualified XII (0.40) 21.079 18.975 (9.98%) 330.2 6,266 Qualified XII (0.45) 13.895 12.502 (10.03%) 29,097.7 363,779 Qualified XII (0.55) 13.858 12.457 (10.11%) 28,686.6 357,349 Qualified XII (0.60) 14.318 12.434 (13.16%) (2) 65,723.6 817,207 Qualified XII (0.65) 13.822 12.412 (10.20%) 93,824.8 1,164,553 Qualified XII (0.70) 13.804 12.389 (10.25%) 182,613.9 2,262,404 Qualified XII (0.75) 13.786 12.367 (10.29%) 254,222.9 3,143,975 Qualified XII (0.80) 15.163 13.595 (10.34%) 1,164,757.4 15,834,877 Qualified XII (0.85) 20.911 18.740 (10.38%) 100,115.0 1,876,155 Qualified XII (0.90) 14.834 13.287 (10.43%) 11,962.3 158,943 Qualified XII (0.95) 20.834 18.651 (10.48%) 131,375.0 2,450,275 Qualified XII (1.00) 20.795 18.607 (10.52%) 840,710.3 15,643,096 Qualified XII (1.05) 20.756 18.563 (10.57%) 31,764.9 589,651 Qualified XII (1.10) 20.718 18.519 (10.61%) 12,379.8 229,262 Qualified XII (1.15) 20.679 18.476 (10.65%) 9,254.3 170,982 Qualified XII (1.20) 20.641 18.432 (10.70%) 14,690.6 270,778 Qualified XII (1.25) 20.602 18.388 (10.75%) 7,402.4 136,115 Qualified XII (1.30) 20.564 18.345 (10.79%) 1,796.0 32,947 Qualified XII (1.35) 20.526 18.302 (10.84%) 165.4 3,027 Qualified XII (1.40) 20.488 18.258 (10.88%) 5,533.7 101,034 Qualified XII (1.50) 20.412 18.172 (10.97%) 906.3 16,469 Qualified XV 20.834 18.651 (10.48%) 9,959.9 185,762 Qualified XVI 20.412 18.172 (10.97%) 23,921.9 434,708 Qualified XVII 20.602 18.388 (10.75%) 18,333.3 337,112 Qualified XVIII 20.861 18.685 (10.43%) 19,225.8 359,234 Qualified XXI 20.884 18.725 (10.34%) 20,417.1 382,311 Qualified XXII 20.884 18.740 (10.27%) 40,212.6 753,584 Qualified XXIV 20.809 18.644 (10.40%) 49,202.7 917,336 Qualified XXV 20.634 18.538 (10.16%) 21,307.3 394,995 Qualified XXVI 20.625 18.502 (10.29%) 8,353.4 154,555 Qualified XXVII 15.556 13.911 (10.57%) 698,721.6 9,719,916 Qualified XXVIII 15.536 13.867 (10.74%) 676,401.3 9,379,657 ---------------------------------------------------------------------------------------------------------------------------------
S-21 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AIM V.I. FUNDS: CAPITAL APPRECIATION FUND: 0.00% to 1.75% 7.37% Qualified V $ 12.068 $ 9.128 (24.36%) 361.4 $ 3,299 Qualified VI 12.101 9.168 (24.24%) 1,022,140.5 9,370,984 Qualified VIII 12.099 9.166 (24.24%) 1,258.8 11,538 Qualified X (1.25) 12.101 9.168 (24.24%) 103,950.8 953,021 Qualified XI 12.205 9.303 (23.78%) 39,241.3 365,062 Qualified XII (0.05) 10.267 9.266 (9.75%) (6) 26,847.6 248,770 Qualified XII (0.35) 12.286 9.393 (23.55%) 23,528.7 221,005 Qualified XII (0.45) 7.662 9.368 22.27% (9) 2,190.8 20,523 Qualified XII (0.55) 12.245 9.342 (23.71%) 10,960.4 102,392 Qualified XII (0.60) 12.235 9.330 (23.74%) 5,426.3 50,627 Qualified XII (0.65) 12.224 9.317 (23.78%) 3,349.1 31,204 Qualified XII (0.70) 12.214 9.305 (23.82%) 22,118.2 205,810 Qualified XII (0.75) 12.204 9.292 (23.86%) 23,785.0 221,010 Qualified XII (0.80) 12.193 9.280 (23.89%) 141,985.2 1,317,623 Qualified XII (0.85) 12.183 9.267 (23.93%) 76,050.9 704,764 Qualified XII (0.90) 12.173 9.255 (23.97%) 4,934.0 45,664 Qualified XII (0.95) 12.162 9.242 (24.01%) 77,644.9 717,594 Qualified XII (1.00) 12.152 9.230 (24.05%) 191,701.8 1,769,408 Qualified XII (1.05) 12.142 9.217 (24.09%) 9,773.8 90,085 Qualified XII (1.10) 12.132 9.205 (24.13%) 9,957.2 91,656 Qualified XII (1.15) 12.121 9.192 (24.16%) 2,161.7 19,870 Qualified XII (1.20) 12.111 9.180 (24.20%) 6,231.4 57,204 Qualified XII (1.25) 12.101 9.168 (24.24%) 8,717.7 79,924 Qualified XII (1.30) 12.091 9.155 (24.28%) 1,796.9 16,451 Qualified XII (1.35) 12.081 9.143 (24.32%) 1,035.4 9,467 Qualified XII (1.40) 12.070 9.131 (24.35%) 10,569.5 96,510 Qualified XII (1.50) 12.050 9.106 (24.43%) 2,666.9 24,285 Qualified XV 12.130 9.218 (24.01%) 8,511.8 78,462 Qualified XVI 12.050 9.106 (24.43%) 24,465.8 222,786 Qualified XVII 12.106 9.172 (24.24%) 3,533.4 32,408 Qualified XVIII 12.106 9.172 (24.24%) 6,261.7 57,432 Qualified XXI 12.160 9.254 (23.90%) 8,301.8 76,825 Qualified XXII 12.160 9.262 (23.83%) 48,529.9 449,484 Qualified XXIV 12.160 9.248 (23.95%) 34,825.4 322,065 Qualified XXV 12.115 9.225 (23.85%) 16,204.2 149,484 Qualified XXVI 12.110 9.207 (23.97%) 2,546.3 23,444 Qualified XXVII 7.500 5.693 (24.09%) 134,976.1 768,419 --------------------------------------------------------------------------------------------------------------------------------- GROWTH AND INCOME FUND: 0.00% to 1.75% 0.05% Qualified V 9.860 7.501 (23.92%) 33.3 250 Qualified VI 9.887 7.534 (23.80%) 2,942,079.4 22,165,626 Qualified VIII 9.885 7.532 (23.80%) 716.4 5,396 Qualified X (1.15) 9.903 7.554 (23.72%) 19,314.0 145,898 Qualified X (1.25) 9.887 7.534 (23.80%) 251,216.4 1,892,664 Qualified XI 9.972 7.645 (23.34%) 51,947.9 397,142 Qualified XII (0.05) 8.677 7.615 (12.24%) (6) 20,638.2 157,160 Qualified XII (0.15) 8.315 7.760 (6.67%) (7) 49.2 382 Qualified XII (0.35) 10.038 7.719 (23.10%) 61,032.5 471,110 Qualified XII (0.45) 10.021 7.698 (23.18%) 11,083.4 85,320 Qualified XII (0.55) 10.004 7.677 (23.26%) 47,385.8 363,781 Qualified XII (0.60) 9.996 7.667 (23.30%) 38,496.5 295,153 Qualified XII (0.65) 9.987 7.657 (23.33%) 2,706.5 20,724 Qualified XII (0.70) 9.979 7.646 (23.38%) 37,707.2 288,309 Qualified XII (0.75) 9.970 7.636 (23.41%) 106,588.9 813,913 Qualified XII (0.80) 9.962 7.626 (23.45%) 517,888.5 3,949,418 Qualified XII (0.85) 9.954 7.615 (23.50%) 153,707.8 1,170,485 Qualified XII (0.90) 9.945 7.605 (23.53%) 8,876.4 67,505 Qualified XII (0.95) 9.937 7.595 (23.57%) 137,710.2 1,045,909 Qualified XII (1.00) 9.928 7.585 (23.60%) 860,278.6 6,525,213 Qualified XII (1.05) 9.920 7.574 (23.65%) 63,880.6 483,832 Qualified XII (1.10) 9.912 7.564 (23.69%) 30,661.4 231,923
S-22 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- GROWTH AND INCOME FUND: (continued): Qualified XII (1.15) $ 9.903 $ 7.554 (23.72%) 10,181.0 $ 76,907 Qualified XII (1.20) 9.895 7.544 (23.76%) 31,088.0 234,528 Qualified XII (1.25) 9.887 7.534 (23.80%) 19,323.6 145,584 Qualified XII (1.30) 9.878 7.523 (23.84%) 9,769.1 73,493 Qualified XII (1.35) 9.870 7.513 (23.88%) 1,186.7 8,916 Qualified XII (1.40) 9.862 7.503 (23.92%) 16,419.7 123,197 Qualified XII (1.50) 9.845 7.483 (23.99%) 3,567.0 26,692 Qualified XV 9.911 7.575 (23.57%) 8,420.6 63,786 Qualified XVI 9.845 7.483 (23.99%) 38,470.3 287,873 Qualified XVII 9.891 7.537 (23.80%) 12,096.1 91,168 Qualified XVIII 9.891 7.537 (23.80%) 8,995.9 67,802 Qualified XXI 9.935 7.605 (23.45%) 2,816.0 21,416 Qualified XXII 9.935 7.611 (23.39%) 15,602.4 118,750 Qualified XXIV 9.935 7.599 (23.51%) 28,282.9 214,922 Qualified XXV 9.898 7.581 (23.41%) 14,348.1 108,773 Qualified XXVI 9.894 7.566 (23.53%) 24,172.1 182,886 Qualified XXVII 7.842 5.988 (23.64%) 309,796.3 1,855,060 --------------------------------------------------------------------------------------------------------------------------------- GROWTH FUND: 0.00% to 1.75% 0.21% Qualified V 9.452 6.161 (34.82%) 392.6 2,419 Qualified VI 9.477 6.188 (34.71%) 1,216,675.2 7,528,786 Qualified X (1.15) 9.493 6.204 (34.65%) 1,134.8 7,040 Qualified X (1.25) 9.477 6.188 (34.71%) 139,899.3 865,697 Qualified XII (0.05) 7.058 6.273 (11.12%) (6) 8,770.6 55,018 Qualified XII (0.35) 9.622 6.340 (34.11%) 29,608.0 187,715 Qualified XII (0.45) 5.651 6.322 11.87% (9) 1,399.4 8,847 Qualified XII (0.55) 9.590 6.305 (34.25%) 13,383.2 84,381 Qualified XII (0.60) 9.160 6.297 (31.26%) (2) 4,758.1 29,962 Qualified XII (0.65) 9.574 6.288 (34.32%) 4,471.1 28,114 Qualified XII (0.70) 9.566 6.280 (34.35%) 19,066.7 119,739 Qualified XII (0.75) 9.558 6.272 (34.38%) 26,166.1 164,114 Qualified XII (0.80) 9.550 6.263 (34.42%) 289,852.9 1,815,349 Qualified XII (0.85) 9.542 6.255 (34.45%) 98,664.6 617,147 Qualified XII (0.90) 9.533 6.246 (34.48%) 31,877.4 199,106 Qualified XII (0.95) 9.525 6.238 (34.51%) 91,693.3 571,983 Qualified XII (1.00) 9.517 6.229 (34.55%) 244,743.6 1,524,508 Qualified XII (1.05) 9.509 6.221 (34.58%) 18,977.5 118,059 Qualified XII (1.10) 9.501 6.213 (34.61%) 10,507.3 65,282 Qualified XII (1.15) 9.493 6.204 (34.65%) 4,995.5 30,992 Qualified XII (1.20) 9.485 6.196 (34.68%) 12,714.8 78,781 Qualified XII (1.25) 9.477 6.188 (34.71%) 16,455.6 101,827 Qualified XII (1.30) 9.469 6.179 (34.74%) 2,225.3 13,750 Qualified XII (1.35) 9.461 6.171 (34.77%) 1,346.0 8,306 Qualified XII (1.40) 9.453 6.163 (34.80%) 10,441.0 64,348 Qualified XII (1.50) 9.437 6.146 (34.87%) 905.1 5,563 Qualified XV 9.529 6.240 (34.52%) 5,934.9 37,034 Qualified XVI 9.437 6.146 (34.87%) 29,225.7 179,621 Qualified XVII 9.481 6.190 (34.71%) 7,892.4 48,854 Qualified XVIII 9.481 6.190 (34.71%) 5,703.9 35,307 Qualified XXI 9.552 6.265 (34.41%) 4,499.1 28,187 Qualified XXII 9.552 6.270 (34.36%) 22,059.2 138,311 Qualified XXIV 9.524 6.242 (34.46%) 24,342.4 151,945 Qualified XXV 9.489 6.226 (34.39%) 11,787.8 73,391 Qualified XXVI 9.485 6.214 (34.49%) 10,043.0 62,407 Qualified XXVII 7.162 4.685 (34.59%) 110,261.9 516,577 --------------------------------------------------------------------------------------------------------------------------------- VALUE FUND: 0.00% to 1.75% 2.33% Qualified III 9.942 8.584 (13.66%) 53.0 455 Qualified V 9.673 8.339 (13.79%) 70.4 587 Qualified VI 9.699 8.375 (13.65%) 1,044,830.1 8,750,452 Qualified VIII 9.685 8.373 (13.55%) (5) 4.7 39 Qualified X (1.15) 9.715 8.397 (13.57%) 1,875.2 15,746 Qualified X (1.25) 9.699 8.375 (13.65%) 162,644.9 1,362,151
S-23 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- VALUE FUND: (continued): Qualified XII (0.05) $ 9.222 $ 8.461 (8.25%) (6) 16,434.0 $ 139,048 Qualified XII (0.35) 9.848 8.580 (12.88%) 15,826.6 135,792 Qualified XII (0.45) 9.831 8.557 (12.96%) 85,810.0 734,276 Qualified XII (0.55) 9.814 8.534 (13.04%) 4,707.3 40,172 Qualified XII (0.60) 9.806 8.523 (13.08%) 3,593.1 30,624 Qualified XII (0.65) 9.798 8.511 (13.14%) 3,470.2 29,535 Qualified XII (0.70) 9.790 8.500 (13.18%) 111,847.3 950,702 Qualified XII (0.75) 9.781 8.488 (13.22%) 36,169.5 307,007 Qualified XII (0.80) 9.773 8.477 (13.26%) 367,238.2 3,113,078 Qualified XII (0.85) 9.765 8.465 (13.31%) 53,598.3 453,710 Qualified XII (0.90) 9.757 8.454 (13.35%) 18,378.9 155,375 Qualified XII (0.95) 9.748 8.443 (13.39%) 64,852.4 547,549 Qualified XII (1.00) 9.740 8.431 (13.44%) 255,962.3 2,158,018 Qualified XII (1.05) 9.732 8.420 (13.48%) 19,125.5 161,037 Qualified XII (1.10) 9.724 8.408 (13.53%) 25,349.4 213,138 Qualified XII (1.15) 9.715 8.397 (13.57%) 7,327.9 61,532 Qualified XII (1.20) 9.707 8.386 (13.61%) 5,729.4 48,047 Qualified XII (1.25) 9.699 8.375 (13.65%) 23,858.5 199,815 Qualified XII (1.30) 9.691 8.363 (13.70%) 1,317.4 11,017 Qualified XII (1.35) 9.683 8.352 (13.75%) 5,422.8 45,291 Qualified XII (1.40) 9.675 8.341 (13.79%) 4,552.1 37,969 Qualified XII (1.50) 9.658 8.318 (13.87%) 1,183.0 9,840 Qualified XV 9.719 8.417 (13.40%) 7,626.6 64,193 Qualified XVI 9.658 8.318 (13.87%) 18,992.4 157,979 Qualified XVII 9.703 8.378 (13.66%) 22,232.5 186,264 Qualified XVIII 9.703 8.378 (13.66%) 5,600.4 46,920 Qualified XXI 9.742 8.450 (13.26%) 2,694.0 22,764 Qualified XXII 9.742 8.457 (13.19%) 26,866.7 227,212 Qualified XXIV 9.746 8.448 (13.32%) 51,883.3 438,310 Qualified XXV 9.711 8.427 (13.22%) 5,138.7 43,304 Qualified XXVI 9.707 8.411 (13.35%) 1,332.4 11,207 Qualified XXVII 8.315 7.194 (13.48%) 197,986.2 1,424,313 --------------------------------------------------------------------------------------------------------------------------------- AMERICAN CENTURY INCOME & GROWTH FUND: 0.00% to 1.75% 1.36% Qualified XII (1.10) 31.141 27.255 (12.48%) (1) 4,490.7 122,394 Qualified XXVII 9.317 8.823 (5.30%) (2) 57,413.2 506,557 --------------------------------------------------------------------------------------------------------------------------------- CALVERT SOCIAL BALANCED PORTFOLIO: 0.00% to 1.75% 5.40% Qualified III 28.827 26.491 (8.10%) 19,628.9 519,989 Qualified V 22.095 20.272 (8.25%) 1,947.4 39,477 Qualified VI 21.722 19.962 (8.10%) 947,780.1 18,919,586 Qualified VIII 19.729 18.129 (8.11%) 5,131.9 93,037 Qualified X (1.25) 11.133 10.231 (8.10%) 36,378.6 372,189 Qualified XI 22.125 20.456 (7.54%) 69,838.5 1,428,617 Qualified XII (0.05) 21.386 20.374 (4.73%) (6) 395.0 8,048 Qualified XII (0.35) 11.574 10.733 (7.27%) 147,280.5 1,580,762 Qualified XII (0.40) 16.152 14.971 (7.31%) 179.8 2,692 Qualified XII (0.45) 11.543 10.694 (7.36%) 65,634.7 701,898 Qualified XII (0.55) 11.513 10.655 (7.45%) 12,082.9 128,743 Qualified XII (0.60) 11.035 10.636 (3.62%) (7) 8,855.2 94,184 Qualified XII (0.65) 11.483 10.617 (7.54%) 4,909.6 52,125 Qualified XII (0.70) 11.468 10.598 (7.59%) 31,092.2 329,515 Qualified XII (0.75) 11.453 10.579 (7.63%) 74,558.2 788,751 Qualified XII (0.80) 12.041 11.116 (7.68%) 193,795.3 2,154,229 Qualified XII (0.85) 16.038 14.798 (7.73%) 209,908.6 3,106,227 Qualified XII (0.90) 11.918 10.991 (7.78%) 2,330.5 25,615 Qualified XII (0.95) 15.964 14.715 (7.82%) 74,268.1 1,092,855 Qualified XII (1.00) 15.927 14.673 (7.87%) 297,804.5 4,369,686 Qualified XII (1.05) 15.890 14.632 (7.92%) 25,366.1 371,157 Qualified XII (1.10) 15.853 14.591 (7.96%) 37,567.5 548,147 Qualified XII (1.15) 15.816 14.550 (8.00%) 9,675.2 140,774 Qualified XII (1.20) 15.780 14.509 (8.05%) 2,958.2 42,920 Qualified XII (1.25) 15.743 14.468 (8.10%) 3,685.8 53,326
S-24 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- CALVERT SOCIAL BALANCED PORTFOLIO: (continued): Qualified XII (1.30) $ 15.707 $ 14.427 (8.15%) 1,988.5 $ 28,688 Qualified XII (1.35) 15.670 14.386 (8.19%) 1,718.8 24,727 Qualified XII (1.40) 15.634 14.346 (8.24%) 4,470.9 64,140 Qualified XII (1.50) 15.562 14.265 (8.33%) 370.5 5,285 Qualified XV 21.987 20.267 (7.82%) 5,994.8 121,496 Qualified XVI 21.521 19.727 (8.34%) 28,749.1 567,133 Qualified XVII 21.722 19.962 (8.10%) 802.8 16,025 Qualified XVIII 11.133 10.231 (8.10%) 9,409.3 96,267 Qualified XXI 22.040 20.347 (7.68%) 3,726.2 75,818 Qualified XXII 22.077 20.397 (7.61%) 3,677.9 75,018 Qualified XXIV 15.937 14.702 (7.75%) 23,099.4 339,607 Qualified XXV 21.748 20.087 (7.64%) 5,566.7 111,818 Qualified XXVI 21.739 20.048 (7.78%) 270.3 5,418 Qualified XXVII 28.864 26.578 (7.92%) 679,479.5 18,059,207 Qualified XXVIII 28.827 26.492 (8.10%) 67,387.3 1,785,224 --------------------------------------------------------------------------------------------------------------------------------- CHAPMAN DEM-REGISTERED TRADEMARK- EQUITY FUND: 0.00% to 1.75% 0.00% Qualified XXVII 7.647 6.879 (10.04%) (2) 13,413.7 92,273 --------------------------------------------------------------------------------------------------------------------------------- FIDELITY-REGISTERED TRADEMARK- INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS: ASSET MANAGER PORTFOLIO -- INITIAL CLASS: 1.05% to 1.25% 5.70% Qualified XXVII 17.427 16.538 (5.10%) 1,202,497.5 19,886,903 Qualified XXVIII 17.405 16.484 (5.29%) 103,285.6 1,702,560 --------------------------------------------------------------------------------------------------------------------------------- CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO -- INITIAL CLASS: 0.00% to 1.75% 3.44% Qualified III 25.097 21.749 (13.34%) 2,117.4 46,052 Qualified V 22.141 19.156 (13.48%) 5,199.5 99,601 Qualified VI 22.182 19.223 (13.34%) 8,115,293.2 156,000,282 Qualified VIII 22.324 19.344 (13.35%) 5,541.9 107,202 Qualified X (1.15) 25.063 21.741 (13.25%) 5,754.2 125,102 Qualified X (1.25) 24.923 21.598 (13.34%) 742,484.4 16,036,178 Qualified XI 22.594 19.698 (12.82%) 227,960.8 4,490,371 Qualified XII (0.05) 20.390 19.619 (3.78%) (6) 32,888.2 645,234 Qualified XII (0.15) 11.840 11.652 (1.59%) (7) 32.7 381 Qualified XII (0.35) 13.229 11.569 (12.55%) 396,981.8 4,592,683 Qualified XII (0.40) 20.503 17.920 (12.60%) 2,183.4 39,126 Qualified XII (0.45) 13.195 11.527 (12.64%) 591,944.6 6,823,345 Qualified XII (0.55) 13.160 11.485 (12.73%) 108,307.3 1,243,909 Qualified XII (0.60) 12.621 11.465 (9.16%) (2) 266,408.6 3,054,375 Qualified XII (0.65) 13.126 11.444 (12.81%) 275,047.2 3,147,640 Qualified XII (0.70) 13.109 11.423 (12.86%) 168,312.6 1,922,635 Qualified XII (0.75) 13.092 11.403 (12.90%) 497,659.6 5,674,812 Qualified XII (0.80) 14.375 12.514 (12.95%) 1,442,523.6 18,051,740 Qualified XII (0.85) 20.359 17.714 (12.99%) 318,515.6 5,642,186 Qualified XII (0.90) 14.009 12.183 (13.03%) 17,291.1 210,657 Qualified XII (0.95) 20.265 17.614 (13.08%) 545,556.7 9,609,436 Qualified XII (1.00) 20.218 17.564 (13.13%) 2,242,467.1 39,386,693 Qualified XII (1.05) 20.171 17.515 (13.17%) 167,705.1 2,937,354 Qualified XII (1.10) 20.124 17.466 (13.21%) 87,802.3 1,533,555 Qualified XII (1.15) 20.078 17.416 (13.26%) 50,343.1 876,775 Qualified XII (1.20) 20.031 17.367 (13.30%) 35,772.8 621,267 Qualified XII (1.25) 19.985 17.319 (13.34%) 27,983.1 484,639 Qualified XII (1.30) 19.938 17.270 (13.38%) 6,241.2 107,785 Qualified XII (1.35) 19.892 17.221 (13.43%) 199.7 3,439 Qualified XII (1.40) 19.846 17.173 (13.47%) 24,303.8 417,369 Qualified XII (1.50) 19.755 17.076 (13.56%) 9,811.0 167,532 Qualified XV 22.453 19.516 (13.08%) 43,865.4 856,078 Qualified XVI 21.977 18.997 (13.56%) 156,910.4 2,980,827 Qualified XVII 22.182 19.223 (13.34%) 15,976.3 307,112 Qualified XVIII 24.923 21.598 (13.34%) 18,840.1 406,909 Qualified XXI 22.507 19.593 (12.95%) 56,333.1 1,103,735 Qualified XXII 22.544 19.641 (12.88%) 133,617.8 2,624,387 Qualified XXIV 20.231 17.599 (13.01%) 145,751.7 2,565,085
S-25 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO -- INITIAL CLASS: (continued): Qualified XXV $ 22.209 $ 19.343 (12.90%) 71,480.5 $ 1,382,647 Qualified XXVI 22.199 19.306 (13.03%) 11,888.4 229,518 Qualified XXVII 25.130 21.820 (13.17%) 3,132,235.5 68,345,379 Qualified XXVIII 25.097 21.749 (13.34%) 477,544.2 10,386,108 --------------------------------------------------------------------------------------------------------------------------------- EQUITY-INCOME PORTFOLIO -- INITIAL CLASS: 0.00% to 1.75% 5.91% Qualified III 20.561 19.298 (6.14%) 916.2 17,680 Qualified V 19.397 18.176 (6.29%) 2,244.3 40,793 Qualified VI 19.632 18.426 (6.14%) 5,040,744.0 92,880,749 Qualified VIII 19.557 18.354 (6.15%) 5,099.7 93,600 Qualified X (1.15) 24.729 23.233 (6.05%) 75,694.0 1,758,598 Qualified X (1.25) 24.567 23.057 (6.15%) 1,042,819.6 24,044,291 Qualified XI 19.996 18.882 (5.57%) 286,003.3 5,400,315 Qualified XII (0.05) 19.888 18.805 (5.45%) (6) 19,227.7 361,577 Qualified XII (0.35) 11.419 10.815 (5.29%) 276,277.5 2,987,941 Qualified XII (0.40) 17.374 16.447 (5.34%) 795.6 13,086 Qualified XII (0.45) 11.389 10.776 (5.38%) 325,193.9 3,504,290 Qualified XII (0.55) 11.360 10.737 (5.48%) 59,829.7 642,391 Qualified XII (0.60) 11.454 10.718 (6.43%) (2) 292,698.5 3,137,143 Qualified XII (0.65) 11.330 10.698 (5.58%) 126,486.8 1,353,156 Qualified XII (0.70) 11.315 10.679 (5.62%) 170,131.2 1,816,831 Qualified XII (0.75) 11.300 10.660 (5.66%) 262,003.8 2,792,960 Qualified XII (0.80) 12.310 11.606 (5.72%) 875,115.5 10,156,591 Qualified XII (0.85) 17.252 16.257 (5.77%) 409,548.3 6,658,027 Qualified XII (0.90) 12.083 11.381 (5.81%) 11,263.8 128,193 Qualified XII (0.95) 17.172 16.166 (5.86%) 409,962.2 6,627,449 Qualified XII (1.00) 17.132 16.120 (5.91%) 743,883.4 11,991,400 Qualified XII (1.05) 17.092 16.075 (5.95%) 109,945.7 1,767,377 Qualified XII (1.10) 17.053 16.029 (6.00%) 91,020.1 1,458,961 Qualified XII (1.15) 17.013 15.984 (6.05%) 24,882.1 397,716 Qualified XII (1.20) 16.974 15.939 (6.10%) 31,625.2 504,074 Qualified XII (1.25) 16.935 15.894 (6.15%) 25,563.1 406,300 Qualified XII (1.30) 16.896 15.850 (6.19%) 8,324.9 131,949 Qualified XII (1.35) 16.856 15.805 (6.24%) 1,669.0 26,378 Qualified XII (1.40) 16.817 15.760 (6.29%) 18,021.8 284,024 Qualified XII (1.50) 16.740 15.672 (6.38%) 4,805.1 75,306 Qualified XV 19.871 18.707 (5.86%) 24,294.6 454,480 Qualified XVI 19.450 18.209 (6.38%) 136,761.5 2,490,291 Qualified XVII 19.632 18.426 (6.14%) 10,111.4 186,312 Qualified XVIII 24.567 23.057 (6.15%) 18,453.7 425,488 Qualified XXI 19.919 18.780 (5.72%) 23,278.3 437,166 Qualified XXII 19.952 18.827 (5.64%) 54,503.1 1,026,129 Qualified XXIV 17.143 16.152 (5.78%) 96,374.9 1,556,648 Qualified XXV 19.655 18.541 (5.67%) 37,990.6 704,384 Qualified XXVI 19.647 18.505 (5.81%) 20,834.3 385,539 Qualified XXVII 20.588 19.360 (5.96%) 1,746,305.9 33,808,483 Qualified XXVIII 20.561 19.298 (6.14%) 745,163.3 14,380,161 --------------------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO -- INITIAL CLASS: 0.00% to 1.75% 7.04% Qualified I 21.644 17.611 (18.63%) 2,093.4 36,866 Qualified III 23.158 18.832 (18.68%) 289.0 5,443 Qualified V 22.940 18.625 (18.81%) 2,897.4 53,964 Qualified VI 22.858 18.588 (18.68%) 9,927,690.0 184,535,902 Qualified VIII 23.130 18.808 (18.69%) 9,044.9 170,117 Qualified X (1.15) 32.002 26.050 (18.60%) 59,993.6 1,562,832 Qualified X (1.25) 31.791 25.853 (18.68%) 1,454,621.6 37,606,333 Qualified XI 23.282 19.048 (18.19%) 715,648.5 13,631,673 Qualified XII (0.05) 20.968 18.971 (9.52%) (6) 43,076.6 817,206 Qualified XII (0.35) 14.798 12.143 (17.94%) 630,664.9 7,658,164 Qualified XII (0.40) 21.270 17.446 (17.98%) 1,710.2 29,837 Qualified XII (0.45) 14.760 12.100 (18.02%) 280,103.7 3,389,255 Qualified XII (0.55) 14.721 12.056 (18.10%) 133,394.6 1,608,205 Qualified XII (0.60) 14.702 12.034 (18.15%) 344,984.5 4,151,543
S-26 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO -- INITIAL CLASS: (continued): Qualified XII (0.65) $ 14.683 $ 12.012 (18.19%) 331,027.6 $ 3,976,304 Qualified XII (0.70) 14.664 11.991 (18.23%) 230,639.0 2,765,592 Qualified XII (0.75) 14.645 11.969 (18.27%) 581,233.1 6,956,779 Qualified XII (0.80) 16.023 13.089 (18.31%) 2,269,302.5 29,702,901 Qualified XII (0.85) 21.120 17.245 (18.35%) 792,593.8 13,668,280 Qualified XII (0.90) 15.596 12.727 (18.40%) 60,877.3 774,785 Qualified XII (0.95) 21.023 17.147 (18.44%) 756,415.6 12,970,258 Qualified XII (1.00) 20.974 17.099 (18.48%) 1,960,651.3 33,525,177 Qualified XII (1.05) 20.926 17.051 (18.52%) 223,900.4 3,817,726 Qualified XII (1.10) 20.877 17.003 (18.56%) 105,975.1 1,801,895 Qualified XII (1.15) 20.829 16.955 (18.60%) 54,245.0 919,724 Qualified XII (1.20) 20.781 16.907 (18.64%) 85,637.1 1,447,867 Qualified XII (1.25) 20.733 16.860 (18.68%) 47,069.6 793,594 Qualified XII (1.30) 20.684 16.812 (18.72%) 14,251.7 239,600 Qualified XII (1.35) 20.637 16.765 (18.76%) 2,316.2 38,831 Qualified XII (1.40) 20.589 16.718 (18.80%) 51,222.0 856,330 Qualified XII (1.50) 20.494 16.624 (18.88%) 4,426.5 73,586 Qualified XV 23.137 18.872 (18.43%) 73,610.9 1,389,184 Qualified XVI 22.646 18.369 (18.89%) 211,009.7 3,876,037 Qualified XVII 22.858 18.588 (18.68%) 47,724.1 887,096 Qualified XVIII 31.791 25.853 (18.68%) 67,987.7 1,757,685 Qualified XXI 23.193 18.946 (18.31%) 76,737.3 1,453,865 Qualified XXII 23.231 18.993 (18.24%) 96,334.6 1,829,683 Qualified XXIV 20.988 17.133 (18.37%) 199,670.9 3,420,961 Qualified XXV 22.885 18.704 (18.27%) 179,206.1 3,351,870 Qualified XXVI 22.876 18.668 (18.39%) 42,755.4 798,157 --------------------------------------------------------------------------------------------------------------------------------- HIGH INCOME PORTFOLIO -- INITIAL CLASS: 0.75% to 1.50% 12.33% Qualified XXVII 7.389 6.453 (12.67%) 227,667.6 1,469,139 Qualified XXVIII 7.379 6.432 (12.83%) 182,904.9 1,176,444 Annuity contracts in payment period 48,688 --------------------------------------------------------------------------------------------------------------------------------- INDEX 500 PORTFOLIO -- INITIAL CLASS: 1.05% to 1.25% 1.12% Qualified XXVII 25.246 21.956 (13.03%) 3,861,877.2 84,791,375 Qualified XXVIII 25.213 21.885 (13.20%) 516,580.4 11,305,363 --------------------------------------------------------------------------------------------------------------------------------- OVERSEAS PORTFOLIO -- INITIAL CLASS: 0.00% to 1.75% 13.21% Qualified V 15.241 11.846 (22.28%) 207.2 2,455 Qualified VI 15.374 11.968 (22.15%) 619,426.7 7,413,299 Qualified VIII 15.367 11.962 (22.16%) 357.0 4,270 Qualified X (1.15) 15.943 12.424 (22.07%) 8,056.9 100,099 Qualified X (1.25) 15.838 12.330 (22.15%) 137,441.8 1,694,658 Qualified XI 15.659 12.264 (21.68%) 23,597.9 289,405 Qualified XII (0.05) 13.786 12.215 (11.40%) (6) 1,811.2 22,124 Qualified XII (0.35) 10.828 8.506 (21.44%) 56,983.4 484,701 Qualified XII (0.40) 15.074 11.835 (21.49%) 251.2 2,973 Qualified XII (0.45) 10.799 8.475 (21.52%) 20,631.5 174,852 Qualified XII (0.55) 10.771 8.444 (21.60%) 8,801.3 74,318 Qualified XII (0.60) 10.096 8.429 (16.51%) (2) 10,449.5 88,079 Qualified XII (0.65) 10.743 8.414 (21.68%) 23,263.1 195,736 Qualified XII (0.70) 10.729 8.399 (21.72%) 19,219.4 161,424 Qualified XII (0.75) 10.715 8.384 (21.75%) 17,806.7 149,291 Qualified XII (0.80) 11.957 9.350 (21.80%) 51,087.8 477,671 Qualified XII (0.85) 14.968 11.699 (21.84%) 38,755.2 453,397 Qualified XII (0.90) 11.949 9.335 (21.88%) 5,300.6 49,481 Qualified XII (0.95) 14.898 11.633 (21.92%) 24,429.0 284,183 Qualified XII (1.00) 14.864 11.600 (21.96%) 80,175.9 930,041 Qualified XII (1.05) 14.830 11.568 (22.00%) 10,958.2 126,764 Qualified XII (1.10) 14.795 11.535 (22.03%) 11,538.1 133,092 Qualified XII (1.15) 14.761 11.502 (22.08%) 6,014.3 69,177 Qualified XII (1.20) 14.727 11.470 (22.12%) 2,348.8 26,941 Qualified XII (1.25) 14.693 11.438 (22.15%) 9,530.9 109,015 Qualified XII (1.30) 14.659 11.406 (22.19%) 1,871.1 21,342
S-27 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- OVERSEAS PORTFOLIO -- INITIAL CLASS: (continued): Qualified XII (1.35) $ 14.625 $ 11.373 (22.24%) 121.0 $ 1,376 Qualified XII (1.40) 14.591 11.341 (22.27%) 2,207.9 25,040 Qualified XII (1.50) 14.523 11.278 (22.34%) 36.8 415 Qualified XV 15.561 12.151 (21.91%) 4,798.1 58,302 Qualified XVI 15.231 11.827 (22.35%) 15,492.2 183,226 Qualified XVII 15.374 11.968 (22.15%) 1,363.7 16,321 Qualified XVIII 15.838 12.330 (22.15%) 1,213.1 14,958 Qualified XXI 15.599 12.198 (21.80%) 7,543.9 92,020 Qualified XXII 15.625 12.229 (21.73%) 17,638.3 215,699 Qualified XXIV 14.874 11.623 (21.86%) 25,655.9 298,198 Qualified XXV 15.392 12.043 (21.76%) 9,165.3 110,378 Qualified XXVI 15.386 12.020 (21.88%) 1,792.3 21,544 Qualified XXVII 8.471 6.608 (21.99%) 28,690.1 189,584 --------------------------------------------------------------------------------------------------------------------------------- FRANKLIN VALUE SECURITIES FUND: 0.00% to 1.75% 0.00% Qualified VI 8.108 10.293 26.95% (9) 9,278.7 95,506 Qualified X (1.25) 8.071 10.293 27.53% (9) 1,354.4 13,941 Qualified XII (0.95) 10.307 10.307 0.00% (12) 236.9 2,442 Qualified XII (1.50) 9.925 10.282 3.60% (8) 17.0 175 Qualified XVIII 8.325 10.293 23.64% (10) 1,715.8 17,661 --------------------------------------------------------------------------------------------------------------------------------- JANUS ASPEN SERIES: AGGRESSIVE GROWTH PORTFOLIO -- I SHARES: 0.00% to 1.75% 0.00% Qualified I 21.908 13.107 (40.17%) 2,338.3 30,648 Qualified III 36.122 21.598 (40.21%) 73,818.2 1,594,325 Qualified V 31.095 18.562 (40.31%) 5,814.7 107,932 Qualified VI 31.406 18.778 (40.21%) 13,156,545.6 247,053,614 Qualified VIII 31.390 18.767 (40.21%) 10,005.8 187,778 Qualified X (1.15) 30.490 18.249 (40.15%) 52,073.2 950,284 Qualified X (1.25) 30.318 18.127 (40.21%) 1,307,190.7 23,695,445 Qualified XI 31.989 19.243 (39.84%) 927,250.3 17,843,077 Qualified XII (0.05) 22.649 19.165 (15.38%) (6) 175,169.2 3,357,118 Qualified XII (0.15) 12.937 11.259 (12.97%) (7) 33.4 376 Qualified XII (0.35) 18.526 11.178 (39.66%) 990,670.0 11,073,709 Qualified XII (0.40) 21.535 12.987 (39.69%) 5,603.2 72,769 Qualified XII (0.45) 18.477 11.137 (39.73%) 407,157.8 4,534,516 Qualified XII (0.55) 18.429 11.097 (39.79%) 161,687.6 1,794,247 Qualified XII (0.60) 18.405 11.077 (39.82%) 446,282.1 4,943,467 Qualified XII (0.65) 18.381 11.057 (39.85%) 259,793.1 2,872,532 Qualified XII (0.70) 18.357 11.037 (39.88%) 329,052.2 3,631,749 Qualified XII (0.75) 18.333 11.017 (39.91%) 710,208.1 7,824,363 Qualified XII (0.80) 19.747 11.861 (39.94%) 3,594,800.5 42,637,929 Qualified XII (0.85) 21.383 12.837 (39.97%) 1,011,774.8 12,988,153 Qualified XII (0.90) 19.367 11.621 (40.00%) 49,490.4 575,128 Qualified XII (0.95) 21.284 12.765 (40.03%) 1,103,526.2 14,086,512 Qualified XII (1.00) 21.235 12.729 (40.06%) 3,633,556.8 46,251,544 Qualified XII (1.05) 21.186 12.693 (40.09%) 252,869.2 3,209,669 Qualified XII (1.10) 21.137 12.657 (40.12%) 170,758.9 2,161,295 Qualified XII (1.15) 21.088 12.621 (40.15%) 77,962.4 983,963 Qualified XII (1.20) 21.039 12.586 (40.18%) 103,448.0 1,301,996 Qualified XII (1.25) 20.990 12.550 (40.21%) 72,227.6 906,457 Qualified XII (1.30) 20.942 12.515 (40.24%) 18,926.5 236,865 Qualified XII (1.35) 20.893 12.479 (40.27%) 5,094.0 63,568 Qualified XII (1.40) 20.845 12.444 (40.30%) 61,717.5 768,012 Qualified XII (1.50) 20.748 12.374 (40.36%) 13,963.3 172,782 Qualified XV 31.789 19.065 (40.03%) 137,586.9 2,623,094 Qualified XVI 31.115 18.557 (40.36%) 235,033.5 4,361,517 Qualified XVII 31.406 18.778 (40.21%) 53,201.9 999,026 Qualified XVIII 30.318 18.127 (40.21%) 67,109.2 1,216,488 Qualified XXI 31.866 19.140 (39.94%) 158,484.4 3,033,391 Qualified XXII 31.919 19.187 (39.89%) 183,873.9 3,527,988 Qualified XXIV 21.249 12.754 (39.98%) 336,511.1 4,291,862 Qualified XXV 31.443 18.895 (39.91%) 276,563.4 5,225,665
S-28 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- AGGRESSIVE GROWTH PORTFOLIO -- I SHARES: (continued): Qualified XXVI $ 31.430 $ 18.859 (40.00%) 75,023.1 $ 1,414,860 Qualified XXVII 36.169 21.668 (40.09%) 3,316,994.3 71,872,632 Qualified XXVIII 36.122 21.598 (40.21%) 598,743.2 12,931,655 --------------------------------------------------------------------------------------------------------------------------------- BALANCED PORTFOLIO -- I SHARES: 0.00% to 1.75% 2.71% Qualified III 24.071 22.652 (5.90%) 674.5 15,279 Qualified V 23.857 22.415 (6.04%) 1,116.4 25,024 Qualified VI 24.064 22.646 (5.89%) 7,232,078.8 163,777,656 Qualified VIII 24.054 22.634 (5.90%) 4,349.7 98,451 Qualified X (1.15) 25.109 23.652 (5.80%) 73,228.0 1,731,989 Qualified X (1.25) 24.969 23.498 (5.89%) 1,038,256.0 24,396,940 Qualified XI 24.511 23.206 (5.32%) 450,547.4 10,455,403 Qualified XII (0.05) 23.624 23.112 (2.17%) (6) 86,430.4 1,997,580 Qualified XII (0.35) 14.550 13.817 (5.04%) 398,904.8 5,511,667 Qualified XII (0.40) 21.980 20.862 (5.09%) 1,945.9 40,595 Qualified XII (0.45) 14.512 13.767 (5.13%) 710,875.0 9,786,616 Qualified XII (0.55) 14.474 13.717 (5.23%) 154,190.0 2,115,024 Qualified XII (0.60) 14.455 13.692 (5.28%) 289,818.9 3,968,201 Qualified XII (0.65) 14.436 13.668 (5.32%) 278,332.0 3,804,242 Qualified XII (0.70) 14.418 13.643 (5.38%) 160,844.1 2,194,396 Qualified XII (0.75) 14.399 13.618 (5.42%) 498,519.5 6,788,838 Qualified XII (0.80) 15.540 14.690 (5.47%) 1,370,457.7 20,132,023 Qualified XII (0.85) 21.825 20.621 (5.52%) 238,039.2 4,908,606 Qualified XII (0.90) 15.203 14.357 (5.56%) 36,137.4 518,825 Qualified XII (0.95) 21.724 20.505 (5.61%) 453,463.4 9,298,267 Qualified XII (1.00) 21.674 20.447 (5.66%) 1,820,729.5 37,228,457 Qualified XII (1.05) 21.623 20.390 (5.70%) 160,978.8 3,282,358 Qualified XII (1.10) 21.573 20.332 (5.75%) 73,038.5 1,485,018 Qualified XII (1.15) 21.523 20.275 (5.80%) 69,825.5 1,415,712 Qualified XII (1.20) 21.474 20.218 (5.85%) 44,269.9 895,049 Qualified XII (1.25) 21.424 20.161 (5.90%) 29,572.1 596,203 Qualified XII (1.30) 21.374 20.104 (5.94%) 14,744.2 296,418 Qualified XII (1.35) 21.325 20.048 (5.99%) 1,251.1 25,083 Qualified XII (1.40) 21.276 19.991 (6.04%) 46,952.6 938,629 Qualified XII (1.50) 21.177 19.879 (6.13%) 3,645.6 72,471 Qualified XV 24.358 22.991 (5.61%) 47,389.8 1,089,538 Qualified XVI 23.841 22.379 (6.13%) 154,836.8 3,465,092 Qualified XVII 24.064 22.646 (5.89%) 27,092.5 613,536 Qualified XVIII 24.969 23.498 (5.89%) 76,043.9 1,786,879 Qualified XXI 24.417 23.082 (5.47%) 35,056.4 809,172 Qualified XXII 24.457 23.138 (5.39%) 66,355.9 1,535,343 Qualified XXIV 21.688 20.487 (5.54%) 120,125.2 2,461,004 Qualified XXV 24.093 22.787 (5.42%) 147,460.5 3,360,183 Qualified XXVI 24.083 22.743 (5.56%) 22,726.3 516,864 Qualified XXVII 9.491 8.949 (5.71%) 559,998.8 5,011,429 --------------------------------------------------------------------------------------------------------------------------------- CAPITAL APPRECIATION PORTFOLIO -- S SHARES: 0.00% to 1.75% 1.25% Qualified XXVII 8.800 7.388 (16.05%) (2) 71,781.5 530,322 --------------------------------------------------------------------------------------------------------------------------------- FLEXIBLE INCOME PORTFOLIO -- I SHARES: 0.00% to 1.75% 6.11% Qualified III 16.372 17.419 6.40% 6,497.9 113,187 Qualified V 16.147 17.152 6.22% 1,470.3 25,219 Qualified VI 16.308 17.351 6.40% 1,460,674.5 25,344,164 Qualified VIII 16.300 17.341 6.39% 201.0 3,485 Qualified X (1.25) 10.971 11.672 6.39% 162,058.9 1,891,551 Qualified XI 16.611 17.780 7.04% 81,053.5 1,441,131 Qualified XII (0.05) 17.060 17.708 3.80% (6) 12,175.5 215,603 Qualified XII (0.35) 11.206 12.031 7.36% 103,464.0 1,244,775 Qualified XII (0.40) 13.980 15.001 7.30% 652.4 9,787 Qualified XII (0.45) 11.177 11.987 7.25% 126,824.7 1,520,248 Qualified XII (0.55) 11.148 11.944 7.14% 32,870.0 392,599 Qualified XII (0.60) 11.340 11.922 5.13% (2) 55,975.4 667,339 Qualified XII (0.65) 11.119 11.901 7.03% 119,542.2 1,422,672
S-29 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- FLEXIBLE INCOME PORTFOLIO -- I SHARES: (continued): Qualified XII (0.70) $ 11.104 $ 11.879 6.98% 125,912.2 $ 1,495,711 Qualified XII (0.75) 11.090 11.858 6.93% 47,112.2 558,656 Qualified XII (0.80) 11.308 12.085 6.87% 362,170.7 4,376,833 Qualified XII (0.85) 13.881 14.828 6.82% 105,379.2 1,562,563 Qualified XII (0.90) 11.280 12.044 6.77% 4,325.7 52,099 Qualified XII (0.95) 13.817 14.745 6.72% 111,627.1 1,645,942 Qualified XII (1.00) 13.785 14.703 6.66% 622,608.5 9,154,213 Qualified XII (1.05) 13.753 14.662 6.61% 30,937.1 453,600 Qualified XII (1.10) 13.722 14.621 6.55% 39,214.6 573,357 Qualified XII (1.15) 13.690 14.579 6.49% 10,047.1 146,476 Qualified XII (1.20) 13.658 14.538 6.44% 14,538.2 211,356 Qualified XII (1.25) 13.626 14.497 6.39% 10,487.5 152,037 Qualified XII (1.30) 13.595 14.457 6.34% 773.0 11,175 Qualified XII (1.35) 13.563 14.416 6.29% 1,067.8 15,394 Qualified XII (1.40) 13.532 14.375 6.23% 13,733.4 197,418 Qualified XII (1.50) 13.469 14.294 6.13% 820.4 11,727 Qualified XV 16.507 17.615 6.71% 7,227.8 127,317 Qualified XVI 16.157 17.147 6.13% 25,089.8 430,215 Qualified XVII 16.308 17.351 6.40% 1,231.1 21,360 Qualified XVIII 11.175 11.672 4.45% (2) 7,152.4 83,483 Qualified XXI 16.547 17.685 6.88% 10,388.6 183,722 Qualified XXII 16.575 17.728 6.96% 9,818.8 174,068 Qualified XXIV 13.794 14.732 6.80% 26,491.3 390,270 Qualified XXV 16.328 17.459 6.93% 16,604.6 289,899 Qualified XXVI 16.321 17.425 6.76% 7,646.9 133,248 --------------------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO -- I SHARES: 0.00% to 1.75% 0.25% Qualified I 21.330 15.863 (25.63%) 48.4 767 Qualified III 27.035 20.094 (25.67%) 1,948.6 39,155 Qualified V 24.589 18.246 (25.80%) 1,851.0 33,773 Qualified VI 24.782 18.419 (25.68%) 6,230,644.3 114,762,237 Qualified VIII 24.792 18.425 (25.68%) 2,885.5 53,166 Qualified X (1.15) 26.652 19.829 (25.60%) 44,919.9 890,716 Qualified X (1.25) 26.504 19.699 (25.68%) 827,886.5 16,308,537 Qualified XI 25.242 18.875 (25.22%) 467,541.0 8,824,837 Qualified XII (0.05) 22.306 18.799 (15.72%) (6) 44,598.6 838,410 Qualified XII (0.35) 14.289 10.717 (25.00%) 404,888.4 4,339,189 Qualified XII (0.40) 21.734 16.292 (25.04%) 1,809.7 29,483 Qualified XII (0.45) 14.251 10.678 (25.07%) 560,456.5 5,984,555 Qualified XII (0.55) 14.214 10.639 (25.15%) 88,296.5 939,386 Qualified XII (0.60) 15.428 10.620 (31.16%) (1) 260,337.9 2,764,788 Qualified XII (0.65) 14.177 10.601 (25.22%) 51,355.8 544,423 Qualified XII (0.70) 14.159 10.582 (25.26%) 327,185.9 3,462,281 Qualified XII (0.75) 14.140 10.563 (25.30%) 382,926.3 4,044,850 Qualified XII (0.80) 15.543 11.604 (25.34%) 1,806,994.7 20,968,366 Qualified XII (0.85) 21.581 16.104 (25.38%) 635,214.3 10,229,491 Qualified XII (0.90) 15.062 11.234 (25.41%) 22,306.1 250,587 Qualified XII (0.95) 21.481 16.014 (25.45%) 421,489.2 6,749,728 Qualified XII (1.00) 21.431 15.969 (25.49%) 1,110,536.4 17,734,156 Qualified XII (1.05) 21.382 15.924 (25.53%) 116,083.2 1,848,509 Qualified XII (1.10) 21.332 15.879 (25.56%) 72,514.0 1,151,450 Qualified XII (1.15) 21.283 15.834 (25.60%) 32,481.6 514,314 Qualified XII (1.20) 21.234 15.789 (25.64%) 49,169.7 776,341 Qualified XII (1.25) 21.184 15.745 (25.68%) 39,970.2 629,331 Qualified XII (1.30) 21.135 15.701 (25.71%) 10,656.9 167,324 Qualified XII (1.35) 21.086 15.656 (25.75%) 1,405.2 22,000 Qualified XII (1.40) 21.038 15.612 (25.79%) 24,527.3 382,920 Qualified XII (1.50) 20.940 15.524 (25.86%) 6,364.6 98,804 Qualified XV 25.084 18.700 (25.45%) 50,761.7 949,243 Qualified XVI 24.552 18.202 (25.86%) 129,065.2 2,349,244 Qualified XVII 24.782 18.419 (25.68%) 37,110.8 683,544 Qualified XVIII 26.504 19.699 (25.68%) 38,107.3 750,675
S-30 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- GROWTH PORTFOLIO -- I SHARES: (continued): Qualified XXI $ 25.145 $ 18.774 (25.34%) 58,649.5 $ 1,101,086 Qualified XXII 25.187 18.820 (25.28%) 96,674.2 1,819,408 Qualified XXIV 21.445 16.000 (25.39%) 105,687.1 1,690,993 Qualified XXV 24.812 18.534 (25.30%) 124,839.1 2,313,767 Qualified XXVI 24.801 18.498 (25.41%) 22,400.2 414,359 Qualified XXVII 27.071 20.159 (25.53%) 2,654,330.2 53,508,643 Qualified XXVIII 27.035 20.094 (25.67%) 693,079.7 13,926,744 Annuity contracts in payment period 727,531 --------------------------------------------------------------------------------------------------------------------------------- WORLDWIDE GROWTH PORTFOLIO -- I SHARES: 0.00% to 1.75% 0.45% Qualified I 24.185 18.535 (23.36%) 2,110.6 39,120 Qualified III 32.189 24.654 (23.41%) 2,206.4 54,397 Qualified V 28.765 21.997 (23.53%) 4,269.0 93,906 Qualified VI 28.796 22.056 (23.41%) 14,623,767.5 322,541,817 Qualified VIII 28.703 21.983 (23.41%) 10,551.0 231,942 Qualified X (1.15) 32.523 24.936 (23.33%) 30,177.7 752,512 Qualified X (1.25) 32.342 24.771 (23.41%) 1,480,954.3 36,684,718 Qualified XI 29.330 22.601 (22.94%) 1,008,881.3 22,801,726 Qualified XII (0.05) 25.296 22.510 (11.01%) (6) 176,426.0 3,971,349 Qualified XII (0.15) 11.575 10.980 (5.14%) (7) 35.1 385 Qualified XII (0.35) 14.104 10.901 (22.71%) 1,191,347.0 12,986,874 Qualified XII (0.40) 24.188 18.686 (22.75%) 5,871.6 109,717 Qualified XII (0.45) 14.068 10.862 (22.79%) 1,074,941.9 11,676,019 Qualified XII (0.55) 14.031 10.823 (22.86%) 190,558.7 2,062,417 Qualified XII (0.60) 14.013 10.803 (22.91%) 697,543.5 7,535,562 Qualified XII (0.65) 13.994 10.784 (22.94%) 272,886.1 2,942,804 Qualified XII (0.70) 13.976 10.764 (22.98%) 454,510.2 4,892,348 Qualified XII (0.75) 13.958 10.745 (23.02%) 1,176,543.2 12,641,957 Qualified XII (0.80) 16.390 12.611 (23.06%) 4,694,956.2 59,208,093 Qualified XII (0.85) 24.018 18.471 (23.10%) 972,146.9 17,956,526 Qualified XII (0.90) 15.998 12.297 (23.13%) 51,113.2 628,539 Qualified XII (0.95) 23.907 18.367 (23.17%) 992,482.0 18,228,916 Qualified XII (1.00) 23.852 18.315 (23.21%) 3,691,115.2 67,602,774 Qualified XII (1.05) 23.796 18.263 (23.25%) 331,090.3 6,046,702 Qualified XII (1.10) 23.741 18.212 (23.29%) 151,240.6 2,754,393 Qualified XII (1.15) 23.686 18.161 (23.33%) 89,662.1 1,628,353 Qualified XII (1.20) 23.632 18.109 (23.37%) 79,146.4 1,433,262 Qualified XII (1.25) 23.577 18.058 (23.41%) 51,270.7 925,846 Qualified XII (1.30) 23.522 18.008 (23.44%) 12,768.1 229,928 Qualified XII (1.35) 23.468 17.957 (23.48%) 3,170.9 56,940 Qualified XII (1.40) 23.414 17.906 (23.52%) 49,760.8 891,017 Qualified XII (1.50) 23.305 17.806 (23.60%) 12,160.7 216,534 Qualified XV 29.147 22.392 (23.18%) 119,182.2 2,668,727 Qualified XVI 28.529 21.796 (23.60%) 248,276.3 5,411,431 Qualified XVII 28.796 22.056 (23.41%) 63,484.3 1,400,210 Qualified XVIII 32.342 24.771 (23.41%) 72,903.7 1,805,898 Qualified XXI 29.217 22.480 (23.06%) 115,698.8 2,600,910 Qualified XXII 29.266 22.536 (23.00%) 205,808.3 4,638,095 Qualified XXIV 23.867 18.351 (23.11%) 254,989.5 4,679,312 Qualified XXV 28.830 22.193 (23.02%) 175,568.0 3,896,381 Qualified XXVI 28.818 22.151 (23.13%) 60,851.2 1,347,915 Qualified XXVII 32.231 24.735 (23.26%) 4,384,838.9 108,458,991 Qualified XXVIII 32.189 24.655 (23.41%) 1,056,362.9 26,044,627 Annuity contracts in payment period 876,378 --------------------------------------------------------------------------------------------------------------------------------- JANUS TWENTY FUND: 0.00% to 1.75% 1.72% Qualified XII (0.95) 7.345 5.150 (29.88%) 63,184.5 325,400 Qualified XII (1.10) 7.820 5.140 (34.27%) (1) 33,331.7 171,325 --------------------------------------------------------------------------------------------------------------------------------- LORD ABBETT FUNDS: GROWTH AND INCOME PORTFOLIO: 0.00% to 1.75% 4.84% Qualified VI 8.622 9.703 12.54% (9) 119,941.5 1,163,792 Qualified X (1.25) 9.621 9.703 0.85% (12) 3,183.3 30,888
S-31 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- GROWTH AND INCOME PORTFOLIO: (continued): Qualified XII (0.95) $ 9.716 $ 9.716 0.00% (12) 3,165.0 $ 30,751 Qualified XII (1.25) 9.427 9.703 2.93% (11) 4.2 41 Qualified XII (1.40) 8.366 9.696 15.90% (9) 59.9 581 --------------------------------------------------------------------------------------------------------------------------------- MID-CAP VALUE PORTFOLIO: 0.00% to 1.75% 0.63% Qualified VI 8.112 9.341 15.15% (9) 6,563.1 61,306 Qualified X (1.25) 8.988 9.341 3.93% (7) 11,046.6 103,186 Qualified XII (0.95) 9.354 9.354 0.00% (12) 10,694.4 100,035 Qualified XII (1.00) 8.963 9.352 4.34% (11) 54.6 511 --------------------------------------------------------------------------------------------------------------------------------- MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES: 1.05% to 1.25% 3.77% Qualified XXVII 12.300 12.200 (0.81%) 694,079.4 8,467,769 Qualified XXVIII 12.284 12.161 (1.00%) 1,049,274.6 12,760,228 --------------------------------------------------------------------------------------------------------------------------------- OPPENHEIMER FUNDS: DEVELOPING MARKETS FUND: 0.00% to 1.75% 2.90% Qualified VI 13.820 13.823 0.02% (8) 11.3 156 Qualified XXVII 10.467 9.145 (12.63%) (2) 24,356.2 222,737 --------------------------------------------------------------------------------------------------------------------------------- GLOBAL SECURITIES FUND/VA: 0.00% to 1.75% 10.25% Qualified III 16.737 14.538 (13.14%) 66.9 973 Qualified V 16.205 14.054 (13.27%) 910.0 12,789 Qualified VI 16.275 14.137 (13.14%) 1,933,782.3 27,337,880 Qualified VIII 16.272 14.133 (13.15%) 866.6 12,248 Qualified X (1.15) 16.319 14.189 (13.05%) 15,614.6 221,555 Qualified X (1.25) 16.275 14.137 (13.14%) 210,817.9 2,980,332 Qualified XI 16.464 14.388 (12.61%) 143,471.9 2,064,274 Qualified XII (0.05) 15.011 14.370 (4.27%) (6) 42,420.8 609,587 Qualified XII (0.35) 16.624 14.572 (12.34%) 83,344.8 1,214,500 Qualified XII (0.40) 16.600 14.543 (12.39%) 585.8 8,520 Qualified XII (0.45) 16.581 14.519 (12.44%) 17,738.7 257,548 Qualified XII (0.55) 16.538 14.467 (12.52%) 11,434.0 165,415 Qualified XII (0.60) 16.648 14.441 (13.26%) (2) 71,246.7 1,028,873 Qualified XII (0.65) 16.495 14.414 (12.62%) 7,458.6 107,508 Qualified XII (0.70) 16.473 14.388 (12.66%) 41,409.6 595,802 Qualified XII (0.75) 16.452 14.362 (12.70%) 176,662.0 2,537,220 Qualified XII (0.80) 16.473 14.374 (12.74%) 690,023.7 9,918,401 Qualified XII (0.85) 16.451 14.347 (12.79%) 107,763.6 1,546,084 Qualified XII (0.90) 16.429 14.321 (12.83%) 6,138.0 87,902 Qualified XII (0.95) 16.407 14.294 (12.88%) 145,711.8 2,082,804 Qualified XII (1.00) 16.385 14.268 (12.92%) 784,685.1 11,195,887 Qualified XII (1.05) 16.363 14.242 (12.96%) 28,236.9 402,150 Qualified XII (1.10) 16.341 14.215 (13.01%) 19,087.7 271,331 Qualified XII (1.15) 16.319 14.189 (13.05%) 8,600.5 122,032 Qualified XII (1.20) 16.297 14.163 (13.09%) 7,918.8 112,154 Qualified XII (1.25) 16.275 14.137 (13.14%) 11,458.2 161,985 Qualified XII (1.30) 16.253 14.111 (13.18%) 1,534.6 21,655 Qualified XII (1.35) 16.231 14.085 (13.22%) 1,170.3 16,483 Qualified XII (1.40) 16.210 14.059 (13.27%) 8,512.1 119,672 Qualified XII (1.50) 16.166 14.007 (13.36%) 611.0 8,558 Qualified XV 16.407 14.294 (12.88%) 8,813.0 125,973 Qualified XVI 16.166 14.007 (13.36%) 38,712.4 542,245 Qualified XVII 16.275 14.137 (13.14%) 9,583.2 135,477 Qualified XVIII 16.275 14.137 (13.14%) 10,883.3 153,857 Qualified XXI 16.446 14.351 (12.74%) 15,527.9 222,841 Qualified XXII 16.446 14.362 (12.67%) 21,852.5 313,845 Qualified XXIV 16.395 14.296 (12.80%) 62,869.6 898,784 Qualified XXV 16.294 14.225 (12.70%) 25,717.8 365,836 Qualified XXVI 16.288 14.198 (12.83%) 7,948.0 112,845 Qualified XXVII 16.759 14.586 (12.97%) 793,849.2 11,579,084 Qualified XXVIII 16.737 14.538 (13.14%) 503,065.1 7,313,561 ---------------------------------------------------------------------------------------------------------------------------------
S-32 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- STRATEGIC BOND FUND/VA: 0.00% to 1.75% 6.28% Qualified V $ 10.142 $ 10.483 3.36% 72.9 $ 764 Qualified VI 10.185 10.545 3.53% 250,139.9 2,637,725 Qualified VIII 10.183 10.542 3.53% 983.2 10,365 Qualified X (1.25) 10.185 10.545 3.53% 63,325.5 667,767 Qualified XI 10.304 10.733 4.16% 11,080.0 118,922 Qualified XII (0.05) 10.393 10.719 3.14% (6) 1,097.9 11,768 Qualified XII (0.35) 10.437 10.905 4.48% 11,212.8 122,276 Qualified XII (0.45) 10.410 10.865 4.37% 18,216.6 197,923 Qualified XII (0.55) 10.793 10.826 0.31% (3) 729.4 7,896 Qualified XII (0.60) 10.611 10.806 1.84% (3) 1,419.9 15,343 Qualified XII (0.65) 10.356 10.787 4.16% 4,591.5 49,529 Qualified XII (0.70) 10.342 10.767 4.11% 4,338.2 46,709 Qualified XII (0.75) 10.329 10.748 4.06% 15,582.7 167,483 Qualified XII (0.80) 10.309 10.722 4.01% 26,225.3 281,188 Qualified XII (0.85) 10.295 10.702 3.95% 12,570.8 134,533 Qualified XII (0.90) 10.281 10.683 3.91% 99.2 1,060 Qualified XII (0.95) 10.268 10.663 3.85% 23,416.8 249,693 Qualified XII (1.00) 10.254 10.643 3.79% 40,851.9 434,787 Qualified XII (1.05) 10.240 10.624 3.75% 5,843.1 62,077 Qualified XII (1.10) 10.226 10.604 3.70% 4,182.8 44,354 Qualified XII (1.15) 10.213 10.584 3.63% 1,152.7 12,200 Qualified XII (1.20) 10.199 10.565 3.59% 1,928.5 20,375 Qualified XII (1.25) 10.185 10.545 3.53% 2,707.1 28,546 Qualified XII (1.30) 10.172 10.526 3.48% 133.3 1,403 Qualified XII (1.35) 10.562 10.507 (0.52%) (3) 31.9 335 Qualified XII (1.40) 10.144 10.487 3.38% 2,047.8 21,475 Qualified XII (1.50) 10.117 10.449 3.28% 200.7 2,097 Qualified XV 10.268 10.663 3.85% 4,691.8 50,029 Qualified XVI 10.117 10.449 3.28% 2,600.0 27,167 Qualified XVII 10.549 10.545 (0.04%) (3) 272.3 2,871 Qualified XVIII 10.185 10.545 3.53% 10,401.7 109,686 Qualified XXI 10.292 10.705 4.01% 2,751.2 29,452 Qualified XXII 10.292 10.713 4.09% 7,366.7 78,919 Qualified XXIV 10.260 10.664 3.94% 9,974.4 106,367 Qualified XXV 10.197 10.611 4.06% 1,762.2 18,699 Qualified XXVI 10.193 10.591 3.90% 635.9 6,735 Qualified XXVII 10.240 10.623 3.74% 156,054.7 1,657,769 Qualified XXVIII 10.226 10.588 3.54% 223,240.8 2,363,674 Annuity contracts in payment period 16,634 --------------------------------------------------------------------------------------------------------------------------------- PAX WORLD BALANCED FUND: 0.00% to 1.75% 4.11% Qualified XXVII 9.850 9.102 (7.59%) (2) 253,699.6 2,309,174 --------------------------------------------------------------------------------------------------------------------------------- PILGRIM FUNDS: EMERGING MARKETS FUND, INC.: 1.00% to 1.25% 20.84% Qualified XXVII 7.254 6.429 (11.37%) 628,973.1 4,043,668 Qualified XXVIII 7.244 6.408 (11.54%) 230,209.3 1,475,181 --------------------------------------------------------------------------------------------------------------------------------- NATURAL RESOURCES TRUST FUND: 0.00% to 1.75% 0.00% Qualified III 15.061 12.503 (16.98%) 3,386.0 42,335 Qualified V 16.636 13.789 (17.11%) 3,109.8 42,881 Qualified VI 16.250 13.490 (16.98%) 332,943.8 4,491,412 Qualified VIII 14.083 11.690 (16.99%) 1,114.5 13,028 Qualified XI 16.552 13.824 (16.48%) 20,341.4 281,199 Qualified XII (0.05) 14.677 13.768 (6.19%) (6) 401.9 5,533 Qualified XII (0.35) 10.347 8.668 (16.23%) 25,030.0 216,960 Qualified XII (0.40) 12.897 10.799 (16.27%) 236.2 2,551 Qualified XII (0.45) 10.320 8.637 (16.31%) 11,986.8 103,530 Qualified XII (0.55) 10.293 8.605 (16.40%) 2,562.7 22,052 Qualified XII (0.60) 8.529 8.590 0.72% (7) 8,577.6 73,682 Qualified XII (0.65) 10.266 8.574 (16.48%) 1,127.7 9,669 Qualified XII (0.70) 10.253 8.559 (16.52%) 10,939.2 93,629 Qualified XII (0.75) 10.240 8.544 (16.56%) 17,619.5 150,541
S-33 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- NATURAL RESOURCES TRUST FUND: (continued): Qualified XII (0.80) $ 11.184 $ 9.327 (16.60%) 96,811.1 $ 902,957 Qualified XII (0.85) 12.806 10.674 (16.65%) 24,509.6 261,616 Qualified XII (0.90) 11.304 9.295 (17.77%) (2) 522.8 4,859 Qualified XII (0.95) 12.747 10.614 (16.73%) 23,358.3 247,925 Qualified XII (1.00) 12.717 10.584 (16.77%) 87,224.6 923,185 Qualified XII (1.05) 12.688 10.554 (16.82%) 4,112.7 43,405 Qualified XII (1.10) 12.659 10.525 (16.86%) 2,203.3 23,190 Qualified XII (1.15) 12.629 10.495 (16.90%) 3,014.6 31,638 Qualified XII (1.20) 12.600 10.465 (16.94%) 4,776.6 49,987 Qualified XII (1.25) 11.497 10.436 (9.23%) (1) 39.8 415 Qualified XII (1.40) 11.955 10.348 (13.44%) (4) 81.9 848 Qualified XV 16.448 13.696 (16.73%) 9,110.3 124,774 Qualified XVI 16.099 13.331 (17.19%) 4,742.9 63,227 Qualified XVII 16.250 13.490 (16.98%) 718.2 9,689 Qualified XXI 16.488 13.750 (16.61%) 4,701.1 64,640 Qualified XXII 16.515 13.784 (16.54%) 2,935.8 40,467 Qualified XXIV 12.726 10.605 (16.67%) 6,887.9 73,046 Qualified XXV 16.269 13.574 (16.57%) 4,187.4 56,840 Qualified XXVI 16.262 13.548 (16.69%) 1,208.0 16,366 Qualified XXVII 15.080 12.543 (16.82%) 261,254.5 3,276,915 Qualified XXVIII 15.061 12.503 (16.98%) 78,860.5 985,993 --------------------------------------------------------------------------------------------------------------------------------- PILGRIM VARIABLE FUNDS: GROWTH OPPORTUNITIES PORTFOLIO -- CLASS R: 0.00% to 1.75% 0.00% Qualified XII (0.95) 8.916 8.916 0.00% (12) 1,068.5 9,527 --------------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL VALUE PORTFOLIO -- CLASS R: 0.00% to 1.75% 2.41% Qualified V 9.511 9.535 0.25% (12) 452.9 4,318 Qualified VI 8.697 9.542 9.72% (9) 359.0 3,426 Qualified X (1.25) 9.844 9.542 (3.07%) (7) 23,433.6 223,603 Qualified XII (0.75) 9.564 9.564 0.00% (12) 41.6 398 Qualified XII (0.95) 9.555 9.555 0.00% (12) 3,902.9 37,292 Qualified XII (1.00) 8.701 9.553 9.79% (9) 131,897.5 1,260,017 --------------------------------------------------------------------------------------------------------------------------------- MID CAP OPPORTUNITIES PORTFOLIO -- CLASS R: 0.00% to 1.75% 0.00% Qualified VI 8.835 9.446 6.92% (11) 34.5 326 Qualified X (1.25) 10.042 9.446 (5.94%) (8) 2,082.7 19,673 Qualified XII (0.95) 9.458 9.458 0.00% (12) 1,006.8 9,522 --------------------------------------------------------------------------------------------------------------------------------- SMALL CAP OPPORTUNITIES PORTFOLIO -- CLASS R: 0.00% to 1.75% 0.00% Qualified VI 7.835 8.945 14.17% (10) 2,339.4 20,926 Qualified X (1.25) 10.123 8.945 (11.64%) (8) 2,593.4 23,198 Qualified XII (0.95) 8.958 8.958 0.00% (12) 1,639.3 14,685 Qualified XII (1.00) 8.622 8.956 3.87% (11) 51.4 460 --------------------------------------------------------------------------------------------------------------------------------- PIONEER FUNDS: EQUITY-INCOME VCT PORTFOLIO: 0.00% to 1.75% 0.50% Qualified VI 9.279 9.610 3.57% (10) 2,341.8 22,505 Qualified X (1.25) 9.810 9.610 (2.04%) (7) 3,382.0 32,501 Qualified XII (0.95) 9.623 9.623 0.00% (12) 3,339.5 32,136 Qualified XII (1.00) 9.407 9.621 2.27% (11) 68.9 663 Qualified XII (1.40) 9.055 9.603 6.05% (9) 62.5 600 --------------------------------------------------------------------------------------------------------------------------------- FUND VCT PORTFOLIO: 0.00% to 1.75% 0.00% Qualified XII (0.95) 9.433 9.433 0.00% (12) 945.0 8,914 Qualified XII (1.40) 8.475 9.414 11.08% (9) 3.3 31 --------------------------------------------------------------------------------------------------------------------------------- MID-CAP VALUE VCT PORTFOLIO: 0.00% to 1.75% 0.00% Qualified VI 8.496 9.961 17.24% (9) 3,545.1 35,313 Qualified X (1.25) 9.785 9.961 1.80% (8) 3,865.0 38,499 Qualified XII (0.95) 9.974 9.974 0.00% (12) 439.3 4,382 Qualified XII (1.50) 9.832 9.949 1.19% (8) 271.2 2,698 ---------------------------------------------------------------------------------------------------------------------------------
S-34 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO PARTNERS, INC. (PPI): PPI MFS CAPITAL OPPORTUNITIES PORTFOLIO -- I CLASS: 0.00% to 1.75% 18.63% Qualified III $ 40.144 $ 29.828 (25.70%) 52,755.8 $ 1,573,599 Qualified V 32.806 24.337 (25.82%) 7,887.5 191,957 Qualified VI 33.037 24.548 (25.70%) 2,564,561.1 62,954,846 Qualified VIII 28.396 21.098 (25.70%) 10,210.1 215,413 Qualified X (1.15) 14.398 10.709 (25.62%) 5,862.7 62,784 Qualified X (1.25) 14.359 10.670 (25.69%) 367,526.5 3,921,508 Qualified XI 33.651 25.156 (25.24%) 275,367.0 6,927,131 Qualified XII (0.05) 28.829 25.054 (13.09%) (6) 20,611.2 516,392 Qualified XII (0.35) 14.877 11.155 (25.02%) 179,325.1 2,000,372 Qualified XII (0.40) 21.815 16.349 (25.06%) 920.9 15,056 Qualified XII (0.45) 14.838 11.114 (25.10%) 131,701.4 1,463,729 Qualified XII (0.55) 14.799 11.074 (25.17%) 80,209.6 888,241 Qualified XII (0.60) 14.780 11.054 (25.21%) 82,016.6 906,612 Qualified XII (0.65) 14.761 11.034 (25.25%) 22,069.5 243,515 Qualified XII (0.70) 14.741 11.014 (25.28%) 149,886.7 1,650,852 Qualified XII (0.75) 14.722 10.995 (25.32%) 183,731.2 2,020,125 Qualified XII (0.80) 16.643 12.423 (25.36%) 821,647.3 10,207,325 Qualified XII (0.85) 21.662 16.161 (25.39%) 452,342.2 7,310,302 Qualified XII (0.90) 16.057 11.973 (25.43%) 7,723.9 92,478 Qualified XII (0.95) 21.561 16.070 (25.47%) 248,057.0 3,986,276 Qualified XII (1.00) 21.512 16.024 (25.51%) 1,201,444.7 19,251,950 Qualified XII (1.05) 21.462 15.979 (25.55%) 55,243.1 882,729 Qualified XII (1.10) 21.412 15.934 (25.58%) 32,215.5 513,321 Qualified XII (1.15) 21.363 15.889 (25.62%) 28,373.3 450,824 Qualified XII (1.20) 21.313 15.845 (25.66%) 23,150.0 366,812 Qualified XII (1.25) 21.264 15.800 (25.70%) 9,841.0 155,488 Qualified XII (1.30) 21.214 15.755 (25.73%) 3,331.1 52,482 Qualified XII (1.35) 21.165 15.711 (25.77%) 597.0 9,380 Qualified XII (1.40) 21.116 15.667 (25.81%) 10,076.1 157,863 Qualified XII (1.50) 21.019 15.579 (25.88%) 1,301.9 20,283 Qualified XV 33.440 24.923 (25.47%) 26,053.8 649,338 Qualified XVI 32.731 24.260 (25.88%) 44,604.4 1,082,103 Qualified XVII 33.037 24.548 (25.70%) 4,221.6 103,632 Qualified XVIII 14.359 10.670 (25.69%) 11,004.8 117,421 Qualified XXI 33.521 25.021 (25.36%) 17,946.4 449,038 Qualified XXII 33.577 25.083 (25.30%) 38,024.6 953,771 Qualified XXIV 21.526 16.056 (25.41%) 50,045.7 803,533 Qualified XXV 33.077 24.702 (25.32%) 29,739.7 734,629 Qualified XXVI 33.063 24.654 (25.43%) 5,482.6 135,168 Qualified XXVII 40.196 29.926 (25.55%) 2,239,840.2 67,029,457 Qualified XXVIII 40.144 29.829 (25.69%) 488,111.3 14,559,872 Annuity contracts in payment period 378,509 --------------------------------------------------------------------------------------------------------------------------------- PPI MFS EMERGING EQUITIES PORTFOLIO -- I CLASS: 0.00% to 1.75% 6.20% Qualified III 20.194 14.914 (26.15%) 101,412.9 1,512,472 Qualified V 19.892 14.668 (26.26%) 8,247.3 120,971 Qualified VI 20.033 14.795 (26.15%) 8,308,496.0 122,924,198 Qualified VIII 20.982 15.495 (26.15%) 13,219.2 204,831 Qualified X (1.15) 20.179 14.919 (26.07%) 32,389.6 483,220 Qualified X (1.25) 20.033 14.795 (26.15%) 1,153,476.5 17,065,685 Qualified XI 20.405 15.162 (25.69%) 674,542.9 10,227,419 Qualified XII (0.05) 16.984 15.101 (11.09%) (6) 107,223.7 1,619,185 Qualified XII (0.35) 11.747 8.755 (25.47%) 736,762.3 6,450,354 Qualified XII (0.40) 13.619 10.145 (25.51%) 5,751.6 58,350 Qualified XII (0.45) 11.716 8.723 (25.55%) 329,339.6 2,872,829 Qualified XII (0.55) 11.686 8.692 (25.62%) 91,405.5 794,497 Qualified XII (0.60) 12.821 8.676 (32.33%) (2) 354,089.9 3,072,084 Qualified XII (0.65) 11.655 8.660 (25.70%) 110,098.4 953,452 Qualified XII (0.70) 11.640 8.645 (25.73%) 189,892.0 1,641,616 Qualified XII (0.75) 11.625 8.629 (25.77%) 646,310.7 5,577,015 Qualified XII (0.80) 12.527 9.294 (25.81%) 2,738,168.1 25,448,534
S-35 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- PPI MFS EMERGING EQUITIES PORTFOLIO -- I CLASS: (continued): Qualified XII (0.85) $ 13.523 $ 10.028 (25.84%) 914,949.3 $ 9,175,112 Qualified XII (0.90) 12.097 8.966 (25.88%) 17,146.8 153,738 Qualified XII (0.95) 13.460 9.971 (25.92%) 610,352.3 6,085,823 Qualified XII (1.00) 13.429 9.943 (25.96%) 2,960,169.7 29,432,967 Qualified XII (1.05) 13.398 9.915 (26.00%) 204,337.0 2,026,001 Qualified XII (1.10) 13.367 9.887 (26.03%) 68,030.8 672,621 Qualified XII (1.15) 13.336 9.859 (26.07%) 83,543.1 823,651 Qualified XII (1.20) 13.305 9.832 (26.10%) 80,837.3 794,792 Qualified XII (1.25) 13.274 9.804 (26.14%) 39,073.1 383,073 Qualified XII (1.30) 13.244 9.776 (26.19%) 2,994.1 29,270 Qualified XII (1.35) 13.213 9.749 (26.22%) 295.8 2,884 Qualified XII (1.40) 13.182 9.721 (26.26%) 20,142.2 195,802 Qualified XII (1.50) 13.121 9.666 (26.33%) 7,301.2 70,573 Qualified XV 20.277 15.021 (25.92%) 79,162.8 1,189,105 Qualified XVI 19.847 14.621 (26.33%) 137,851.4 2,015,525 Qualified XVII 20.033 14.795 (26.15%) 12,607.5 186,528 Qualified XVIII 20.033 14.795 (26.15%) 22,241.0 329,056 Qualified XXI 20.326 15.080 (25.81%) 102,235.1 1,541,706 Qualified XXII 20.360 15.118 (25.75%) 217,215.0 3,283,857 Qualified XXIV 13.438 9.963 (25.86%) 201,762.3 2,010,158 Qualified XXV 20.057 14.888 (25.77%) 88,671.0 1,320,134 Qualified XXVI 20.048 14.859 (25.88%) 16,554.1 245,978 Qualified XXVII 20.220 14.963 (26.00%) 2,375,970.8 35,551,651 Qualified XXVIII 20.194 14.914 (26.15%) 441,170.2 6,579,613 Annuity contracts in payment period 110,648 --------------------------------------------------------------------------------------------------------------------------------- PPI MFS RESEARCH GROWTH PORTFOLIO -- I CLASS: 0.00% to 1.75% 20.46% Qualified I 12.713 9.939 (21.82%) 603.1 5,994 Qualified III 16.788 13.116 (21.87%) 75,613.4 991,746 Qualified V 19.113 14.909 (22.00%) 11,605.5 173,026 Qualified VI 19.365 15.129 (21.87%) 5,680,341.1 85,937,880 Qualified VII 16.350 12.782 (21.82%) 118,387.3 1,513,226 Qualified VIII 16.330 12.757 (21.88%) 13,920.7 177,587 Qualified IX 16.173 12.668 (21.67%) 2,854.7 36,163 Qualified X (1.15) 19.503 15.252 (21.80%) 10,200.2 155,574 Qualified X (1.25) 19.365 15.129 (21.87%) 744,283.5 11,260,265 Qualified XI 19.724 15.504 (21.40%) 327,780.4 5,081,908 Qualified XII (0.05) 17.104 15.441 (9.72%) (6) 36,071.4 556,979 Qualified XII (0.35) 12.452 9.817 (21.16%) 407,660.1 4,001,999 Qualified XII (0.40) 12.506 9.855 (21.20%) 6,844.9 67,456 Qualified XII (0.45) 12.420 9.782 (21.24%) 108,893.4 1,065,195 Qualified XII (0.55) 12.387 9.746 (21.32%) 46,783.0 455,947 Qualified XII (0.60) 12.638 9.729 (23.02%) (2) 123,118.3 1,197,818 Qualified XII (0.65) 12.355 9.711 (21.40%) 100,081.8 971,894 Qualified XII (0.70) 12.339 9.694 (21.44%) 89,231.8 865,013 Qualified XII (0.75) 12.323 9.676 (21.48%) 179,677.2 1,738,557 Qualified XII (0.80) 13.621 10.690 (21.52%) 562,829.4 6,016,646 Qualified XII (0.85) 12.418 9.741 (21.56%) 665,570.5 6,483,322 Qualified XII (0.90) 13.236 10.378 (21.59%) 7,345.7 76,234 Qualified XII (0.95) 12.361 9.686 (21.64%) 352,288.1 3,412,263 Qualified XII (1.00) 12.332 9.659 (21.68%) 1,231,653.4 11,896,540 Qualified XII (1.05) 12.304 9.632 (21.72%) 53,074.1 511,210 Qualified XII (1.10) 12.275 9.605 (21.75%) 42,534.1 408,540 Qualified XII (1.15) 12.247 9.578 (21.79%) 58,402.4 559,378 Qualified XII (1.20) 12.218 9.551 (21.83%) 39,153.4 373,954 Qualified XII (1.25) 12.190 9.524 (21.87%) 8,680.2 82,670 Qualified XII (1.30) 12.162 9.497 (21.91%) 642.1 6,098 Qualified XII (1.35) 12.133 9.470 (21.95%) 248.0 2,349 Qualified XII (1.40) 12.105 9.443 (21.99%) 6,501.7 61,396 Qualified XII (1.50) 12.049 9.390 (22.07%) 1,483.0 13,925 Qualified XV 19.601 15.360 (21.64%) 61,574.8 945,789 Qualified XVI 19.185 14.951 (22.07%) 120,475.1 1,801,223
S-36 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- PPI MFS RESEARCH GROWTH PORTFOLIO -- I CLASS: (continued): Qualified XVII $ 19.365 $ 15.129 (21.87%) 99,038.1 $ 1,498,347 Qualified XVIII 19.365 15.129 (21.87%) 31,674.0 479,196 Qualified XIX 12.713 9.939 (21.82%) 8,062.0 80,128 Qualified XX 16.788 13.116 (21.87%) 9,964.0 130,688 Qualified XXI 19.648 15.420 (21.52%) 39,548.4 609,837 Qualified XXII 19.681 15.459 (21.45%) 105,949.1 1,637,867 Qualified XXIV 12.340 9.678 (21.57%) 135,543.6 1,311,791 Qualified XXV 19.388 15.224 (21.48%) 34,516.4 525,478 Qualified XXVI 19.380 15.194 (21.60%) 19,140.6 290,823 Qualified XXVII 18.387 14.393 (21.72%) 955,109.7 13,746,894 Qualified XXVIII 18.363 14.347 (21.87%) 145,206.8 2,083,282 Qualified XXIX 16.788 13.116 (21.87%) 3,274.9 42,953 Qualified XXX 16.785 13.081 (22.07%) 70,259.5 919,065 --------------------------------------------------------------------------------------------------------------------------------- PPI SCUDDER INTERNATIONAL GROWTH PORTFOLIO -- I CLASS: 0.00% to 1.75% 23.69% Qualified III 25.876 18.672 (27.84%) 33,686.6 628,997 Qualified V 24.404 17.581 (27.96%) 3,982.3 70,012 Qualified VI 24.820 17.910 (27.84%) 2,680,990.8 48,016,546 Qualified VIII 20.907 15.085 (27.85%) 21,702.2 327,377 Qualified X (1.15) 24.997 18.055 (27.77%) 32,985.2 595,547 Qualified X (1.25) 24.820 17.910 (27.84%) 357,693.1 6,406,284 Qualified XI 25.281 18.353 (27.40%) 225,578.3 4,140,038 Qualified XII (0.05) 20.571 18.279 (11.14%) (6) 38,078.2 696,031 Qualified XII (0.35) 12.401 9.030 (27.18%) 398,476.2 3,598,240 Qualified XII (0.40) 17.187 12.508 (27.22%) 2,307.0 28,856 Qualified XII (0.45) 12.369 8.997 (27.26%) 62,048.2 558,248 Qualified XII (0.55) 12.337 8.965 (27.33%) 51,349.1 460,345 Qualified XII (0.60) 11.980 8.949 (25.30%) (2) 119,265.8 1,067,310 Qualified XII (0.65) 12.305 8.933 (27.40%) 25,877.1 231,160 Qualified XII (0.70) 12.289 8.916 (27.45%) 77,879.2 694,371 Qualified XII (0.75) 12.273 8.900 (27.48%) 207,064.7 1,842,876 Qualified XII (0.80) 13.840 10.032 (27.51%) 724,610.2 7,269,290 Qualified XII (0.85) 17.066 12.364 (27.55%) 455,677.0 5,633,991 Qualified XII (0.90) 13.797 9.991 (27.59%) 7,079.7 70,733 Qualified XII (0.95) 16.987 12.294 (27.63%) 244,684.4 3,008,150 Qualified XII (1.00) 16.948 12.260 (27.66%) 997,076.6 12,224,159 Qualified XII (1.05) 16.908 12.225 (27.70%) 60,064.8 734,292 Qualified XII (1.10) 16.869 12.191 (27.73%) 25,606.8 312,172 Qualified XII (1.15) 16.830 12.156 (27.77%) 21,211.1 257,842 Qualified XII (1.20) 16.791 12.122 (27.81%) 13,727.7 166,407 Qualified XII (1.25) 16.752 12.088 (27.84%) 7,772.3 93,952 Qualified XII (1.30) 16.714 12.054 (27.88%) 502.7 6,059 Qualified XII (1.35) 15.807 12.020 (23.96%) (2) 224.4 2,697 Qualified XII (1.40) 16.636 11.986 (27.95%) 4,500.9 53,948 Qualified XII (1.50) 16.559 11.919 (28.02%) 2,879.8 34,324 Qualified XV 25.123 18.183 (27.62%) 34,445.4 626,320 Qualified XVI 24.590 17.699 (28.02%) 45,751.9 809,763 Qualified XVII 24.820 17.910 (27.84%) 1,569.2 28,104 Qualified XVIII 24.820 17.910 (27.84%) 7,244.1 129,742 Qualified XXI 25.184 18.254 (27.52%) 30,202.5 551,317 Qualified XXII 25.225 18.299 (27.46%) 48,206.7 882,134 Qualified XXIV 16.959 12.284 (27.57%) 37,911.7 465,707 Qualified XXV 24.850 18.021 (27.48%) 16,421.0 295,922 Qualified XXVI 24.839 17.987 (27.59%) 1,652.3 29,720 Qualified XXVII 25.910 18.733 (27.70%) 2,129,254.4 39,887,323 Qualified XXVIII 25.876 18.672 (27.84%) 140,556.3 2,624,467 Annuity contracts in payment period 5,107 --------------------------------------------------------------------------------------------------------------------------------- PPI T. ROWE PRICE GROWTH EQUITY PORTFOLIO -- I CLASS: 0.00% to 1.75% 15.67% Qualified III 24.962 22.131 (11.34%) 383.0 8,476 Qualified V 21.910 19.394 (11.48%) 2,094.9 40,628 Qualified VI 21.643 19.189 (11.34%) 5,148,256.9 98,789,901 Qualified VIII 22.091 19.585 (11.34%) 4,592.7 89,949
S-37 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued):
--------------------------------------------------------------------------------------------------------------------------------- Value Per Unit Units -------- Outstanding Net Assets Beginning End of Total Expense Investment at End at End of Year Year Return Ratio Income Ratio of Year of Year --------------------------------------------------------------------------------------------------------------------------------- PPI T. ROWE PRICE GROWTH EQUITY PORTFOLIO -- I CLASS: (continued): Qualified X (1.15) $ 24.380 $ 21.637 (11.25%) 24,854.0 $ 537,767 Qualified X (1.25) 24.245 21.496 (11.34%) 612,057.3 13,156,783 Qualified XI 22.045 19.664 (10.80%) 367,199.3 7,220,607 Qualified XII (0.05) 20.313 19.585 (3.58%) (6) 25,698.1 503,298 Qualified XII (0.35) 13.434 12.019 (10.53%) 277,718.3 3,337,896 Qualified XII (0.40) 20.457 18.293 (10.58%) 1,730.1 31,648 Qualified XII (0.45) 13.399 11.976 (10.62%) 184,736.4 2,212,403 Qualified XII (0.55) 13.364 11.933 (10.71%) 29,886.2 356,632 Qualified XII (0.60) 13.566 11.911 (12.20%) (2) 151,125.9 1,800,061 Qualified XII (0.65) 13.329 11.890 (10.80%) 16,816.2 199,945 Qualified XII (0.70) 13.312 11.868 (10.85%) 130,866.4 1,553,123 Qualified XII (0.75) 13.295 11.847 (10.89%) 337,910.0 4,003,220 Qualified XII (0.80) 14.625 13.026 (10.93%) 927,451.0 12,080,977 Qualified XII (0.85) 20.313 18.082 (10.98%) 204,547.8 3,698,633 Qualified XII (0.90) 14.163 12.601 (11.03%) 13,888.0 175,003 Qualified XII (0.95) 20.219 17.980 (11.07%) 353,929.3 6,363,648 Qualified XII (1.00) 20.172 17.930 (11.11%) 853,647.9 15,305,907 Qualified XII (1.05) 20.125 17.879 (11.16%) 103,378.6 1,848,306 Qualified XII (1.10) 20.079 17.829 (11.21%) 44,138.0 786,936 Qualified XII (1.15) 20.032 17.779 (11.25%) 25,440.0 452,298 Qualified XII (1.20) 19.986 17.729 (11.29%) 24,564.1 435,497 Qualified XII (1.25) 19.939 17.679 (11.33%) 7,849.1 138,765 Qualified XII (1.30) 19.893 17.629 (11.38%) 559.4 9,862 Qualified XII (1.35) 19.847 17.579 (11.43%) 346.9 6,099 Qualified XII (1.40) 19.801 17.530 (11.47%) 11,446.7 200,660 Qualified XII (1.50) 19.710 17.431 (11.56%) 516.5 9,003 Qualified XV 21.907 19.482 (11.07%) 23,775.0 463,185 Qualified XVI 21.443 18.964 (11.56%) 91,526.9 1,735,717 Qualified XVII 21.643 19.189 (11.34%) 17,503.3 335,871 Qualified XVIII 24.245 21.496 (11.34%) 19,133.3 411,290 Qualified XXI 21.960 19.559 (10.93%) 39,246.9 767,631 Qualified XXII 21.997 19.607 (10.87%) 55,315.8 1,084,577 Qualified XXIV 20.185 17.965 (11.00%) 95,737.6 1,719,926 Qualified XXV 21.669 19.309 (10.89%) 54,993.7 1,061,873 Qualified XXVI 21.660 19.272 (11.02%) 26,493.6 510,584 Qualified XXVII 24.994 22.204 (11.16%) 1,470,698.1 32,655,380 Qualified XXVIII 24.962 22.132 (11.34%) 340,010.3 7,525,108 Annuity contracts in payment period 127,791 --------------------------------------------------------------------------------------------------------------------------------- WACHOVIA SPECIAL VALUES FUND: 0.00% to 1.75% 11.57% Qualified XII (0.95) 10.967 12.556 14.49% (1) 15,173.0 190,512 Qualified XXVII 11.026 12.433 12.76% (2) 300,428.3 3,735,225 --------------------------------------------------------------------------------------------------------------------------------- TOTAL $11,141,346,898 =================================================================================================================================
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 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.
S-38 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued): QUALIFIED V Certain 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 Certain group AetnaPlus contracts issued in connection with Tax-Deferred Annuity Plans, Retirement Plus Plans and Deferred Compensation Plans since August 28, 1992. QUALIFIED VII Certain existing contracts that were converted to ACES, an administrative system (previously valued under Qualified I). QUALIFIED VIII Group AetnaPlus 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, an administrative system (previously valued under Qualified VI). QUALIFIED X Individual Retirement Annuity and Simplified Employee Pension Plans issued or converted to ACES, an administrative system. QUALIFIED XI Certain large group contracts issued in connection with Deferred Compensation Plans adopted by state and local governments since January 1996. QUALIFIED XII Group Retirement Plus and Voluntary TDA contracts issued since 1996 in connection with plans established pursuant to Section 403(b) or 401(a) of the Internal Revenue Code, shown separately by applicable daily charge; and contracts issued since October 1, 1996 in connection with Optional Retirement Plans established pursuant to Section 403(b) or 403(a) of the Internal Revenue Code. QUALIFIED XIII Certain existing contracts issued in connection with Deferred Compensation Plans issued through product exchange on May 25, 1996 (previously valued under Qualified VI). QUALIFIED XIV Certain existing contracts issued in connection with Deferred Compensation Plans issued through product exchange on November 1, 1996 (previously valued under Qualified III). QUALIFIED XV Certain existing contracts issued in connection with Deferred Compensation Plans issued through product exchange on December 16, 1996 (previously valued under Qualified VI), and new contracts issued after that date in connection with certain Deferred Compensation Plans. QUALIFIED XVI Group AetnaPlus contracts assessing an administrative expense charge effective April 7, 1997 issued in connection with Tax-Deferred Annuity Plans, Retirement Plus Plans and Deferred Compensation Plans. QUALIFIED XVII Group AetnaPlus contracts containing contractual limits on fees issued in connection with Tax-Deferred Annuity Plans and Deferred Compensation Plans, which resulted in reduced daily charges for certain funding options effective May 29, 1997. QUALIFIED XVIII Individual Retirement Annuity and Simplified Employee Pension Plan contracts containing contractual limits on fees, which resulted in reduced daily charges for certain funding options effective May 29, 1997. QUALIFIED XIX Group Corporate 401 contracts containing contractual limits on fees, which resulted in reduced daily charges for certain funding options effective May 29, 1997. QUALIFIED XX Group HR 10 contracts containing contractual limits on fees, which resulted in reduced daily charges for certain funding options effective May 29, 1997. QUALIFIED XXI Certain existing contracts issued in connection with Deferred Compensation Plans having contract modifications effective May 20, 1999. QUALIFIED XXII Certain existing contracts issued in connection with Deferred Compensation Plans having contract modifications effective May 20, 1999. QUALIFIED XXIV Group contract issued in connection with Optional Retirement Plans having contract modifications effective July 2000 to lower mortality and expense fee. QUALIFIED XXV Group contract issued in connection with Aetna Government Custom Choice plans having contract modifications effective October 2000 to lower mortality and expense fee. QUALIFIED XXVI Group contract issued in connection with Aetna Government Custom Choice plans having contract modifications effective October 2000 to lower mortality and expense fee. QUALIFIED XXVII Group contract issued in connection with Tax Deferred Annuity Plans having contract modifications effective February 2000 to lower mortality and expense fee. QUALIFIED XXVIII Group contract issued in connection with Optional Retirement Plans having contract modifications effective February 2000 to lower mortality and expense fee. QUALIFIED XXIX 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 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.
S-39 VARIABLE ANNUITY ACCOUNT C CONDENSED FINANCIAL INFORMATION - Year Ended December 31, 2001 (continued): QUALIFIED XXX 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 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.
NOTES TO CONDENSED FINANCIAL INFORMATION: (1) - Reflects less than a full year of performance activity. Funds were first received in this option during January 2001. (2) - Reflects less than a full year of performance activity. Funds were first received in this option during February 2001. (3) - Reflects less than a full year of performance activity. Funds were first received in this option during March 2001. (4) - Reflects less than a full year of performance activity. Funds were first received in this option during April 2001. (5) - Reflects less than a full year of performance activity. Funds were first received in this option during May 2001. (6) - Reflects less than a full year of performance activity. Funds were first received in this option during June 2001. (7) - Reflects less than a full year of performance activity. Funds were first received in this option during July 2001. (8) - Reflects less than a full year of performance activity. Funds were first received in this option during August 2001. (9) - Reflects less than a full year of performance activity. Funds were first received in this option during September 2001. (10) - Reflects less than a full year of performance activity. Funds were first received in this option during October 2001. (11) - Reflects less than a full year of performance activity. Funds were first received in this option during November 2001. (12) - Reflects less than a full year of performance activity. Funds were first received in this option during December 2001.
See Notes to Financial Statements S-40 (This Page Left Blank Intentionally) S-41 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Variable Annuity Account C (the "Account") is a separate account established by Aetna Life Insurance and Annuity Company (the "Company") and is registered under the Investment Company Act of 1940 as amended, as a unit investment trust. The Account is sold exclusively for use with variable annuity contracts that are qualified under the Internal Revenue Code of 1986, as amended. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported therein. Actual results could differ from these estimates. 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, 2001: Aetna Ascent VP Franklin Value Securities Fund Aetna Balanced VP, Inc. Janus Aspen Series: Aetna Bond VP - Aggressive Growth Portfolio -- I Shares Aetna Crossroads VP - Balanced Portfolio -- I Shares Aetna GET Fund, Series D - Capital Appreciation Portfolio -- S Shares Aetna GET Fund, Series E - Flexible Income Portfolio -- I Shares Aetna GET Fund, Series G - Growth Portfolio -- I Shares Aetna GET Fund, Series H - Worldwide Growth Portfolio -- I Shares Aetna GET Fund, Series I Janus Twenty Fund Aetna GET Fund, Series J Lord Abbett Funds: Aetna GET Fund, Series K - Growth and Income Portfolio Aetna GET Fund, Series L - Mid-Cap Value Portfolio Aetna GET Fund, Series Q MFS-Registered Trademark- Total Return Series Aetna Growth and Income VP Oppenheimer Funds: Aetna Growth VP - Developing Markets Fund Aetna Index Plus Bond VP - Global Securities Fund Aetna Index Plus Large Cap VP - Strategic Bond Fund Aetna Index Plus Mid Cap VP Pax World Balanced Fund Aetna Index Plus Small Cap VP Pilgrim Funds: Aetna International VP - Emerging Markets Fund Aetna Legacy VP - Natural Resources Trust Fund Aetna Money Market VP Pilgrim Variable Funds: Aetna Small Company VP - Growth Opportunities Portfolio -- Class R Aetna Technology VP - International Value Portfolio -- Class R Aetna Value Opportunity VP - Mid Cap Opportunities Portfolio -- Class R AIM V.I. Funds: - Small Cap Opportunities Portfolio -- Class R - Capital Appreciation Fund Pioneer Funds: - Growth and Income Fund - Equity-Income VCT Portfolio - Growth Fund - Fund VCT Portfolio - Value Fund - Mid-Cap Value VCT Portfolio Calvert Social Balanced Portfolio Portfolio Partners, Inc. (PPI): Chapman DEM-Registered Trademark- Equity - PPI MFS Capital Opportunities Portfolio -- I Class Fund - PPI MFS Emerging Equities Portfolio -- I Class Fidelity-Registered Trademark- - PPI MFS Research Growth Portfolio -- I Class Investments Variable Insurance Products - PPI Scudder International Growth Portfolio -- I Class Funds: - PPI T. Rowe Price Growth Equity Portfolio -- I Class - Asset Manager Portfolio -- Initial Wachovia Special Values Fund Class - Contrafund-Registered Trademark- Portfolio -- Initial Class - Equity-Income Portfolio -- Initial Class - Growth Portfolio -- Initial Class - High Income Portfolio -- Initial Class - Index 500 Portfolio -- Initial Class - Overseas Portfolio -- Initial Class
S-42 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): b. OTHER Investment transactions are accounted for on a trade date basis and dividend income is recorded on the ex-dividend date. The cost of investments sold is determined by specific identification. c. FEDERAL INCOME TAXES The operations of the Account form a part of, and are taxed with, the total operations of the Company which is taxed as a life insurance company under the Internal Revenue Code of 1986, as amended. d. ANNUITY RESERVES Annuity reserves held in the Account are computed for currently payable contracts according to the Progressive Annuity, a49, 1971 Individual Annuity Mortality, 1971 Group Annuity Mortality, 83a, and 1983 Group Annuity Mortality tables using various assumed interest rates not to exceed seven percent. Mortality experience is monitored by the Company. Charges to annuity reserves for mortality experience are reimbursed to the Company if the reserves required are less than originally estimated. If additional reserves are required, the Company reimburses the Account. 2. VALUATION PERIOD DEDUCTIONS Deductions by the Account for mortality and expense risk charges are made in accordance with the terms of the contracts and are paid to the Company. 3. DIVIDEND INCOME On an annual basis, the Funds distribute substantially all of their taxable income and realized capital gains to their shareholders. Distributions to the Account are automatically reinvested in shares of the Funds. The Account's proportionate share of each Fund's undistributed net investment income (distributions in excess of net investment income) and accumulated net realized gain (loss) on investments is included in net unrealized gain (loss) in the 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, 2001 aggregated $3,490,603,072 and $3,331,253,418, respectively. S-43 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 5. SUPPLEMENTAL INFORMATION TO STATEMENT OF OPERATIONS Valuation Proceeds Cost of YEAR ENDED DECEMBER 31, Period from Investments 2001 Dividends Deductions Sales Sold AETNA ASCENT VP Annuity contracts in accumulation $ 1,154,661 $ (769,240) $ 5,676,614 $ (5,975,402) AETNA BALANCED VP, INC. Annuity contracts in accumulation 47,111,549 (9,056,666) 80,301,514 (93,997,468) AETNA BOND VP Annuity contracts in accumulation 22,752,368 (3,985,993) 37,890,365 (36,793,783) AETNA CROSSROADS VP Annuity contracts in accumulation 1,515,768 (650,061) 5,614,028 (5,931,680) AETNA GET FUND, SERIES C Annuity contracts in accumulation 7,610,032 (1,474,157) 117,167,336 (175,468,125) AETNA GET FUND, SERIES D Annuity contracts in accumulation 4,506,601 (4,104,666) 52,874,052 (54,864,923) AETNA GET FUND, SERIES E Annuity contracts in accumulation 984,703 (1,700,635) 16,111,808 (16,498,393) AETNA GET FUND, SERIES G Annuity contracts in accumulation 141,127 (507,028) 5,072,065 (5,182,909) AETNA GET FUND, SERIES H Annuity contracts in accumulation 128,690 (377,071) 3,720,840 (3,761,606) AETNA GET FUND, SERIES I Annuity contracts in accumulation 3,175 (22,583) 125,829 (128,896) AETNA GET FUND, SERIES J Annuity contracts in accumulation 687 (6,931) 82,583 (85,549) AETNA GET FUND, SERIES K Annuity contracts in accumulation 103 (36,706) 561,715 (571,874) AETNA GET FUND, SERIES L Annuity contracts in accumulation 30,395 (15,545) 269,903 (266,083) AETNA GET FUND, SERIES Q Annuity contracts in accumulation 0 (1,014) 62,851 (62,850) AETNA GROWTH AND INCOME VP Annuity contracts in accumulation 24,442,703 (43,449,288) 532,074,722 (829,138,963) AETNA GROWTH VP Annuity contracts in accumulation 16,483,152 (1,441,453) 15,612,423 (18,190,464) AETNA INDEX PLUS LARGE CAP VP Annuity contracts in accumulation 19,293,823 (4,941,421) 48,269,850 (47,998,296) AETNA INDEX PLUS MID CAP VP Annuity contracts in accumulation 4,216,905 (723,055) 25,007,221 (26,008,332) AETNA INDEX PLUS SMALL CAP VP Annuity contracts in accumulation 1,024,779 (219,751) 21,110,252 (21,316,974) AETNA INTERNATIONAL VP Annuity contracts in accumulation 13,095 (127,850) 24,243,846 (32,503,633) ---------------------------------------------------------------------------------------
S-44 Net Net Net Unrealized Net Increase Realized Gain (Loss) Change in (Decrease) Gain (Loss) -------------------------------- Unrealized in Net Assets YEAR ENDED DECEMBER 31, on Beginning of End Gain (Loss) Resulting from 2001 Investments Year of Year on Investments Operations AETNA ASCENT VP Annuity contracts in accumulation $ (298,788) $ 589,182 $ (9,153,647) $ (9,742,829) $ (9,656,196) AETNA BALANCED VP, INC. Annuity contracts in accumulation (13,695,954) (102,036,752) (173,352,168) (71,315,416) (46,956,487) AETNA BOND VP Annuity contracts in accumulation 1,096,582 (6,411,730) (1,496,207) 4,915,523 24,778,480 AETNA CROSSROADS VP Annuity contracts in accumulation (317,652) 116,983 (5,471,604) (5,588,587) (5,040,532) AETNA GET FUND, SERIES C Annuity contracts in accumulation (58,300,789) (30,255,816) 0 30,255,816 (21,909,098) AETNA GET FUND, SERIES D Annuity contracts in accumulation (1,990,871) (12,783,390) (9,214,739) 3,568,651 1,979,715 AETNA GET FUND, SERIES E Annuity contracts in accumulation (386,585) (2,883,267) (2,584,686) 298,581 (803,936) AETNA GET FUND, SERIES G Annuity contracts in accumulation (110,844) (1,034,596) (576,516) 458,080 (18,665) AETNA GET FUND, SERIES H Annuity contracts in accumulation (40,766) (267,248) (203,305) 63,943 (225,204) AETNA GET FUND, SERIES I Annuity contracts in accumulation (3,067) (32,894) (19,201) 13,693 (8,782) AETNA GET FUND, SERIES J Annuity contracts in accumulation (2,966) (16,577) (9,859) 6,718 (2,492) AETNA GET FUND, SERIES K Annuity contracts in accumulation (10,159) (8,299) (26,609) (18,310) (65,072) AETNA GET FUND, SERIES L Annuity contracts in accumulation 3,820 16 (27,338) (27,354) (8,684) AETNA GET FUND, SERIES Q Annuity contracts in accumulation 1 0 1,625 1,625 612 AETNA GROWTH AND INCOME VP Annuity contracts in accumulation (297,064,241) (1,455,124,346) (2,026,760,871) (571,636,525) (887,707,351) AETNA GROWTH VP Annuity contracts in accumulation (2,578,041) (1,523,352) (61,932,623) (60,409,271) (47,945,613) AETNA INDEX PLUS LARGE CAP VP Annuity contracts in accumulation 271,554 (35,413,466) (124,078,438) (88,664,972) (74,041,016) AETNA INDEX PLUS MID CAP VP Annuity contracts in accumulation (1,001,111) 1,324,838 (2,060,078) (3,384,916) (892,177) AETNA INDEX PLUS SMALL CAP VP Annuity contracts in accumulation (206,722) 769,578 589,425 (180,153) 418,153 AETNA INTERNATIONAL VP Annuity contracts in accumulation (8,259,787) (4,665,266) 474,807 5,140,073 (3,234,469) ------------------------------------------------------------------------------------------------------------
S-45 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 5. SUPPLEMENTAL INFORMATION TO STATEMENT OF OPERATIONS (continued): Valuation Proceeds Cost of YEAR ENDED DECEMBER 31, Period from Investments 2001 Dividends Deductions Sales Sold AETNA LEGACY VP Annuity contracts in accumulation $ 1,659,281 $ (417,437) $ 6,481,676 $ (6,705,501) AETNA MONEY MARKET VP Annuity contracts in accumulation 18,993,467 (3,706,495) 947,455,413 (950,955,698) AETNA SMALL COMPANY VP Annuity contracts in accumulation 4,189,523 (1,171,113) 66,296,076 (78,181,059) AETNA TECHNOLOGY VP Annuity contracts in accumulation 0 (292,747) 10,278,841 (21,230,242) AETNA VALUE OPPORTUNITY VP Annuity contracts in accumulation 4,231,683 (966,919) 10,972,471 (10,013,023) AIM V.I. FUNDS: CAPITAL APPRECIATION FUND Annuity contracts in accumulation 1,510,401 (207,717) 2,964,662 (4,491,112) GROWTH AND INCOME FUND Annuity contracts in accumulation 21,709 (505,757) 5,048,798 (6,777,588) GROWTH FUND Annuity contracts in accumulation 37,127 (176,215) 3,261,877 (5,201,434) VALUE FUND Annuity contracts in accumulation 474,714 (217,440) 3,532,672 (4,335,282) AMERICAN CENTURY INCOME & GROWTH FUND Annuity contracts in accumulation 4,278 (4,130) 239,461 (258,015) CALVERT SOCIAL BALANCED PORTFOLIO Annuity contracts in accumulation 3,284,609 (642,466) 5,199,701 (4,694,786) CHAPMAN DEM-REGISTERED TRADEMARK- EQUITY FUND Annuity contracts in accumulation 0 (641) 746,638 (770,870) FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS: ASSET MANAGER PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 1,291,798 (236,486) 3,080,303 (3,279,143) CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 13,696,673 (4,101,768) 23,332,252 (17,195,993) EQUITY-INCOME PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 12,802,442 (2,405,885) 11,539,661 (10,661,772) GROWTH PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 29,459,889 (4,333,499) 20,864,722 (18,110,038) HIGH INCOME PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 317,043 (30,572) 3,922,491 (5,101,482) INDEX 500 PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 1,128,054 (1,045,323) 23,760,455 (22,733,988) OVERSEAS PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 2,177,228 (178,800) 19,615,521 (27,730,870) ---------------------------------------------------------------------------------------
S-46 Net Net Net Unrealized Net Increase Realized Gain (Loss) Change in (Decrease) Gain (Loss) -------------------------------- Unrealized in Net Assets YEAR ENDED DECEMBER 31, on Beginning of End Gain (Loss) Resulting from 2001 Investments Year of Year on Investments Operations AETNA LEGACY VP Annuity contracts in accumulation $ (223,825) $ 718,785 $ (1,659,859) $ (2,378,644) $ (1,360,625) AETNA MONEY MARKET VP Annuity contracts in accumulation (3,500,285) 3,641,073 1,818,258 (1,822,815) 9,963,872 AETNA SMALL COMPANY VP Annuity contracts in accumulation (11,884,983) (9,322,798) 3,622,270 12,945,068 4,078,495 AETNA TECHNOLOGY VP Annuity contracts in accumulation (10,951,401) (12,476,702) (9,202,258) 3,274,444 (7,969,704) AETNA VALUE OPPORTUNITY VP Annuity contracts in accumulation 959,448 872,156 (13,800,643) (14,672,799) (10,448,587) AIM V.I. FUNDS: CAPITAL APPRECIATION FUND Annuity contracts in accumulation (1,526,450) (5,078,366) (10,330,874) (5,252,508) (5,476,274) GROWTH AND INCOME FUND Annuity contracts in accumulation (1,728,790) (8,823,291) (19,609,851) (10,786,560) (12,999,398) GROWTH FUND Annuity contracts in accumulation (1,939,557) (5,935,047) (11,085,471) (5,150,424) (7,229,069) VALUE FUND Annuity contracts in accumulation (802,610) (3,374,932) (5,851,651) (2,476,719) (3,022,055) AMERICAN CENTURY INCOME & GROWTH FUND Annuity contracts in accumulation (18,554) 0 (14,022) (14,022) (32,428) CALVERT SOCIAL BALANCED PORTFOLIO Annuity contracts in accumulation 504,915 570,470 (7,632,046) (8,202,516) (5,055,458) CHAPMAN DEM-REGISTERED TRADEMARK- EQUITY FUND Annuity contracts in accumulation (24,232) 0 7,716 7,716 (17,157) FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS: ASSET MANAGER PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation (198,840) (618,980) (2,697,923) (2,078,943) (1,222,471) CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 6,136,259 57,161,025 (14,760,445) (71,921,470) (56,190,306) EQUITY-INCOME PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 877,889 18,912,394 (5,754,033) (24,666,427) (13,391,981) GROWTH PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 2,754,684 22,218,848 (91,486,929) (113,705,777) (85,824,703) HIGH INCOME PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation (1,178,991) (540,697) (49,847) 490,850 (401,670) INDEX 500 PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 1,026,467 (491,226) (15,642,580) (15,151,354) (14,042,156) OVERSEAS PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation (8,115,349) (2,501,290) (335,489) 2,165,801 (3,951,120) ------------------------------------------------------------------------------------------------------------
S-47 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 5. SUPPLEMENTAL INFORMATION TO STATEMENT OF OPERATIONS (continued): Valuation Proceeds Cost of YEAR ENDED DECEMBER 31, Period from Investments 2001 Dividends Deductions Sales Sold FRANKLIN VALUE SECURITIES FUND Annuity contracts in accumulation $ 0 $ (208) $ 907 $ (726) JANUS ASPEN SERIES: AGGRESSIVE GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 0 (7,331,111) 98,308,301 (69,555,876) BALANCED PORTFOLIO -- I SHARES Annuity contracts in accumulation 8,609,431 (3,386,310) 9,851,626 (6,669,129) CAPITAL APPRECIATION PORTFOLIO -- S SHARES Annuity contracts in accumulation 3,314 (1,770) 258,365 (290,082) FLEXIBLE INCOME PORTFOLIO -- I SHARES Annuity contracts in accumulation 2,862,143 (489,235) 11,463,661 (11,783,258) GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 911,665 (3,736,721) 38,805,761 (28,454,911) WORLDWIDE GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 4,180,411 (9,496,428) 125,535,379 (82,794,791) JANUS TWENTY FUND Annuity contracts in accumulation 4,266 (4,062) 79,762 (110,958) LORD ABBETT FUNDS: GROWTH AND INCOME PORTFOLIO Annuity contracts in accumulation 29,669 (1,767) 167 (149) MID-CAP VALUE PORTFOLIO Annuity contracts in accumulation 836 (642) 22,801 (22,777) MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES Annuity contracts in accumulation 492,327 (136,985) 1,112,766 (1,046,316) OPPENHEIMER FUNDS: DEVELOPING MARKETS FUND Annuity contracts in accumulation 3,231 (1,005) 3,136,389 (3,129,395) GLOBAL SECURITIES FUND Annuity contracts in accumulation 7,036,577 (675,646) 18,545,517 (25,244,629) STRATEGIC BOND FUND Annuity contracts in accumulation 496,895 (92,383) 4,368,717 (4,549,775) PAX WORLD BALANCED FUND Annuity contracts in accumulation 47,463 (15,201) 581,039 (609,665) ---------------------------------------------------------------------------------------
S-48 Net Net Net Unrealized Net Increase Realized Gain (Loss) Change in (Decrease) Gain (Loss) -------------------------------- Unrealized in Net Assets YEAR ENDED DECEMBER 31, on Beginning of End Gain (Loss) Resulting from 2001 Investments Year of Year on Investments Operations FRANKLIN VALUE SECURITIES FUND Annuity contracts in accumulation $ 181 $ 0 $ 12,921 $ 12,921 $ 12,894 JANUS ASPEN SERIES: AGGRESSIVE GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 28,752,425 (127,682,633) (532,120,359) (404,437,726) (383,016,412) BALANCED PORTFOLIO -- I SHARES Annuity contracts in accumulation 3,182,497 10,698,793 (15,946,540) (26,645,333) (18,239,715) CAPITAL APPRECIATION PORTFOLIO -- S SHARES Annuity contracts in accumulation (31,717) 0 (15,659) (15,659) (45,832) FLEXIBLE INCOME PORTFOLIO -- I SHARES Annuity contracts in accumulation (319,597) (805,827) (94,268) 711,559 2,764,870 GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 10,350,850 (6,192,556) (120,776,782) (114,584,226) (107,058,432) WORLDWIDE GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 42,740,588 162,036,410 (125,672,926) (287,709,336) (250,284,765) JANUS TWENTY FUND Annuity contracts in accumulation (31,196) (36) (145,497) (145,461) (176,453) LORD ABBETT FUNDS: GROWTH AND INCOME PORTFOLIO Annuity contracts in accumulation 18 0 24,456 24,456 52,376 MID-CAP VALUE PORTFOLIO Annuity contracts in accumulation 24 0 7,040 7,040 7,258 MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES Annuity contracts in accumulation 66,450 229,562 (51,210) (280,772) 141,020 OPPENHEIMER FUNDS: DEVELOPING MARKETS FUND Annuity contracts in accumulation 6,994 0 3,903 3,903 13,123 GLOBAL SECURITIES FUND Annuity contracts in accumulation (6,699,112) (2,527,749) (9,245,253) (6,717,504) (7,055,685) STRATEGIC BOND FUND Annuity contracts in accumulation (181,058) (86,964) (75,056) 11,908 235,362 PAX WORLD BALANCED FUND Annuity contracts in accumulation (28,626) 0 (109,382) (109,382) (105,746) ------------------------------------------------------------------------------------------------------------
S-49 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 5. SUPPLEMENTAL INFORMATION TO STATEMENT OF OPERATIONS (continued): Valuation Proceeds Cost of YEAR ENDED DECEMBER 31, Period from Investments 2001 Dividends Deductions Sales Sold PILGRIM FUNDS: EMERGING MARKETS FUND (1) Annuity contracts in accumulation $ 1,238,222 $ (58,442) $ 20,603,841 $ (23,091,245) NATURAL RESOURCES TRUST FUND (2) Annuity contracts in accumulation 0 (165,895) 8,563,951 (8,183,441) PILGRIM VARIABLE FUNDS: GROWTH OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation 0 1 0 0 INTERNATIONAL VALUE PORTFOLIO -- CLASS R Annuity contracts in accumulation 18,424 (1,131) 74 (78) MID CAP OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation 0 (96) 9,757 (9,944) SMALL CAP OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation 1 (67) 733 (766) PIONEER FUNDS: EQUITY-INCOME VCT PORTFOLIO Annuity contracts in accumulation 222 (77) 48 (50) FUND VCT PORTFOLIO Annuity contracts in accumulation 0 1 0 0 MID-CAP VALUE VCT PORTFOLIO Annuity contracts in accumulation 0 (212) 21,459 (22,196) PORTFOLIO PARTNERS, INC. (PPI): PPI MFS CAPITAL OPPORTUNITIES PORTFOLIO -- I CLASS Annuity contracts in accumulation 47,269,790 (2,680,054) 25,865,721 (24,246,572) PPI MFS EMERGING EQUITIES PORTFOLIO -- I CLASS Annuity contracts in accumulation 22,645,296 (3,648,234) 33,552,038 (32,445,501) PPI MFS RESEARCH GROWTH PORTFOLIO -- I CLASS Annuity contracts in accumulation 41,622,453 (2,157,189) 20,710,153 (21,107,275) PPI SCUDDER INTERNATIONAL GROWTH PORTFOLIO -- I CLASS Annuity contracts in accumulation 43,250,742 (1,891,611) 732,508,626 (832,130,919) PPI T. ROWE PRICE GROWTH EQUITY PORTFOLIO -- I CLASS Annuity contracts in accumulation 36,705,570 (2,427,861) 15,920,750 (13,560,301) WACHOVIA SPECIAL VALUES FUND Annuity contracts in accumulation 227,192 (13,769) 981,601 (956,808) TOTAL VARIABLE ANNUITY ACCOUNT C $464,350,375 $(132,666,634) $3,331,253,418 $(3,763,191,632)
(1) - Effective May 1, 2001, Lexington Emerging Market Fund's name changed to Pilgrim Emerging Market Fund. (2) - Effective May 1, 2000, Lexington Natural Resources Trust's name changed to Pilgrim Natural Resources Trust Fund. S-50 Net Net Net Unrealized Net Increase Realized Gain (Loss) Change in (Decrease) Gain (Loss) -------------------------------- Unrealized in Net Assets YEAR ENDED DECEMBER 31, on Beginning of End Gain (Loss) Resulting from 2001 Investments Year of Year on Investments Operations PILGRIM FUNDS: EMERGING MARKETS FUND (1) Annuity contracts in accumulation $ (2,487,404) $ (436,042) $ 257,333 $ 693,375 $ (614,249) NATURAL RESOURCES TRUST FUND (2) Annuity contracts in accumulation 380,510 2,402,322 (872,438) (3,274,760) (3,060,145) PILGRIM VARIABLE FUNDS: GROWTH OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation 0 0 0 0 1 INTERNATIONAL VALUE PORTFOLIO -- CLASS R Annuity contracts in accumulation (4) 0 16,501 16,501 33,790 MID CAP OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation (187) 0 (112) (112) (395) SMALL CAP OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation (33) 0 2,843 2,843 2,744 PIONEER FUNDS: EQUITY-INCOME VCT PORTFOLIO Annuity contracts in accumulation (2) 0 820 820 963 FUND VCT PORTFOLIO Annuity contracts in accumulation 0 0 1 1 2 MID-CAP VALUE VCT PORTFOLIO Annuity contracts in accumulation (737) 0 4,644 4,644 3,695 PORTFOLIO PARTNERS, INC. (PPI): PPI MFS CAPITAL OPPORTUNITIES PORTFOLIO -- I CLASS Annuity contracts in accumulation 1,619,149 23,536,746 (100,298,392) (123,835,138) (77,626,253) PPI MFS EMERGING EQUITIES PORTFOLIO -- I CLASS Annuity contracts in accumulation 1,106,537 62,642,562 (67,932,730) (130,575,292) (110,471,693) PPI MFS RESEARCH GROWTH PORTFOLIO -- I CLASS Annuity contracts in accumulation (397,122) 42,588,288 (47,081,640) (89,669,928) (50,601,786) PPI SCUDDER INTERNATIONAL GROWTH PORTFOLIO -- I CLASS Annuity contracts in accumulation (99,622,293) (186,763) 1,305,315 1,492,078 (56,771,084) PPI T. ROWE PRICE GROWTH EQUITY PORTFOLIO -- I CLASS Annuity contracts in accumulation 2,360,449 46,977,151 (17,697,875) (64,675,026) (28,036,868) WACHOVIA SPECIAL VALUES FUND Annuity contracts in accumulation 24,793 0 (12,633) (12,633) 225,583 TOTAL VARIABLE ANNUITY ACCOUNT C $(431,938,214) $(1,381,531,716) $(3,656,880,684) $(2,275,348,968) $(2,375,603,441)
(1) - Effective May 1, 2001, Lexington Emerging Market Fund's name changed to Pilgrim Emerging Market Fund. (2) - Effective May 1, 2000, Lexington Natural Resources Trust's name changed to Pilgrim Natural Resources Trust Fund. S-51 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 2001 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year AETNA ASCENT VP Annuity contracts in accumulation $ 385,421 $ (298,788) $ (9,742,829) $ (390,814) $ 77,057,293 $ 67,010,283 AETNA BALANCED VP, INC. Annuity contracts in accumulation 38,054,883 (13,695,954) (71,315,416) (60,435,593) 842,266,266 739,144,233 Annuity contracts in payment period 33,169,278 28,899,231 AETNA BOND VP Annuity contracts in accumulation 18,766,375 1,096,582 4,915,523 82,899,136 296,126,266 403,727,419 Annuity contracts in payment period 5,792,395 5,868,858 AETNA CROSSROADS VP Annuity contracts in accumulation 865,707 (317,652) (5,588,587) (451,200) 62,461,577 56,976,436 Annuity contracts in payment period 68,046 61,455 AETNA GET FUND, SERIES C Annuity contracts in accumulation 6,135,875 (58,300,789) 30,255,816 (114,286,208) 136,195,306 0 AETNA GET FUND, SERIES D Annuity contracts in accumulation 401,935 (1,990,871) 3,568,651 (44,764,380) 331,078,585 288,293,920 AETNA GET FUND, SERIES E Annuity contracts in accumulation (715,932) (386,585) 298,581 (12,673,983) 131,674,642 118,196,723 AETNA GET FUND, SERIES G Annuity contracts in accumulation (365,901) (110,844) 458,080 (4,238,830) 38,003,615 33,746,120 AETNA GET FUND, SERIES H Annuity contracts in accumulation (248,381) (40,766) 63,943 (3,142,654) 29,175,653 25,807,795 AETNA GET FUND, SERIES I Annuity contracts in accumulation (19,408) (3,067) 13,693 (103,246) 1,364,320 1,252,292 AETNA GET FUND, SERIES J Annuity contracts in accumulation (6,244) (2,966) 6,718 (73,709) 456,726 380,525 AETNA GET FUND, SERIES K Annuity contracts in accumulation (36,603) (10,159) (18,310) (522,901) 2,862,754 2,274,781 AETNA GET FUND, SERIES L Annuity contracts in accumulation 14,850 3,820 (27,354) 1,297,385 15,987 1,304,688 AETNA GET FUND, SERIES Q Annuity contracts in accumulation (1,014) 1 1,625 3,640,996 0 3,641,608 AETNA GROWTH AND INCOME VP Annuity contracts in accumulation (19,006,585) (297,064,241) (571,636,525) (452,343,167) 4,428,082,443 3,170,240,934 Annuity contracts in payment period 311,465,868 229,256,859 AETNA GROWTH VP Annuity contracts in accumulation 15,041,699 (2,578,041) (60,409,271) (2,449,367) 171,026,842 120,456,683 Annuity contracts in payment period 132,657 307,836
S-52 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS (continued):
YEAR ENDED DECEMBER 31, 2001 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year AETNA INDEX PLUS LARGE CAP VP Annuity contracts in accumulation $ 14,352,402 $ 271,554 $ (88,664,972) $ 44,708,922 $ 487,054,341 $ 457,492,812 Annuity contracts in payment period 1,883,772 2,113,207 AETNA INDEX PLUS MID CAP VP Annuity contracts in accumulation 3,493,850 (1,001,111) (3,384,916) 33,987,861 55,395,398 88,491,082 AETNA INDEX PLUS SMALL CAP VP Annuity contracts in accumulation 805,028 (206,722) (180,153) 15,599,090 12,842,621 28,859,864 AETNA INTERNATIONAL VP Annuity contracts in accumulation (114,755) (8,259,787) 5,140,073 1,263,249 12,949,161 10,977,941 AETNA LEGACY VP Annuity contracts in accumulation 1,241,844 (223,825) (2,378,644) (667,463) 38,925,638 36,927,158 Annuity contracts in payment period 198,397 168,789 AETNA MONEY MARKET VP Annuity contracts in accumulation 15,286,972 (3,500,285) (1,822,815) 41,891,036 322,624,048 374,418,757 Annuity contracts in payment period 89,722 149,921 AETNA SMALL COMPANY VP Annuity contracts in accumulation 3,018,410 (11,884,983) 12,945,068 25,409,328 104,675,715 134,140,868 Annuity contracts in payment period 36,683 59,353 AETNA TECHNOLOGY VP Annuity contracts in accumulation (292,747) (10,951,401) 3,274,444 14,868,712 24,855,104 31,754,112 AETNA VALUE OPPORTUNITY VP Annuity contracts in accumulation 3,264,764 959,448 (14,672,799) 66,042,632 63,066,047 118,660,092 AIM V.I. FUNDS: CAPITAL APPRECIATION FUND Annuity contracts in accumulation 1,302,684 (1,526,450) (5,252,508) 2,528,530 21,974,303 19,026,559 GROWTH AND INCOME FUND Annuity contracts in accumulation (484,048) (1,728,790) (10,786,560) 8,297,132 48,981,132 44,278,866 GROWTH FUND Annuity contracts in accumulation (139,088) (1,939,557) (5,150,424) 3,356,314 19,441,222 15,568,467 VALUE FUND Annuity contracts in accumulation 257,274 (802,610) (2,476,719) 6,869,339 18,487,184 22,334,468 AMERICAN CENTURY INCOME & GROWTH FUND Annuity contracts in accumulation 148 (18,554) (14,022) 661,379 0 628,951 CALVERT SOCIAL BALANCED PORTFOLIO Annuity contracts in accumulation 2,642,143 504,915 (8,202,516) 133,413 63,262,465 58,340,420 CHAPMAN DEM-REGISTERED TRADEMARK- EQUITY FUND Annuity contracts in accumulation (641) (24,232) 7,716 109,430 0 92,273
S-53 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS (continued):
YEAR ENDED DECEMBER 31, 2001 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS: ASSET MANAGER PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation $ 286,471 $ (1,178,991) $ 490,850 $ (1,739,120) $ 23,730,253 $ 21,589,463 CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 82,731 1,026,467 (15,151,354) (31,572,214) 420,901,510 375,287,140 EQUITY-INCOME PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 1,055,312 (198,840) (2,078,943) 42,633,922 195,902,776 237,314,227 GROWTH PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 9,594,905 6,136,259 (71,921,470) (4,330,388) 448,871,801 388,351,107 HIGH INCOME PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 10,396,557 877,889 (24,666,427) 13,636,484 2,449,768 2,645,583 Annuity contracts in payment period 0 48,688 INDEX 500 PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 1,998,428 (8,115,349) 2,165,801 (4,602,017) 104,649,875 96,096,738 OVERSEAS PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 25,126,390 2,754,684 (113,705,777) 82,399,033 18,191,519 14,765,849 FRANKLIN VALUE SECURITIES FUND Annuity contracts in accumulation (208) 181 12,921 116,831 0 129,725 JANUS ASPEN SERIES: AGGRESSIVE GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation (7,331,111) 28,752,425 (404,437,726) 2,233,168 950,193,244 569,410,000 BALANCED PORTFOLIO -- I SHARES Annuity contracts in accumulation 5,223,121 3,182,497 (26,645,333) 60,635,832 296,053,943 338,450,060 CAPITAL APPRECIATION PORTFOLIO -- S SHARES Annuity contracts in accumulation 1,544 (31,717) (15,659) 576,154 0 530,322 FLEXIBLE INCOME PORTFOLIO -- I SHARES Annuity contracts in accumulation 2,372,908 (319,597) 711,559 17,081,029 36,898,000 56,743,899 GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation (2,825,056) 10,350,850 (114,584,226) (8,011) 411,767,617 304,891,580 Annuity contracts in payment period 917,937 727,531 WORLDWIDE GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation (5,316,017) 42,740,588 (287,709,336) (49,778,681) 1,082,624,571 782,779,890 Annuity contracts in payment period 1,095,143 876,378 JANUS TWENTY FUND Annuity contracts in payment period 204 (31,196) (145,461) 672,633 545 496,725 LORD ABBETT FUNDS: GROWTH AND INCOME PORTFOLIO Annuity contracts in accumulation 27,902 18 24,456 1,173,677 0 1,226,053 MID-CAP VALUE PORTFOLIO Annuity contracts in accumulation 194 24 7,040 257,780 0 265,038
S-54 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS (continued):
YEAR ENDED DECEMBER 31, 2001 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES Annuity contracts in accumulation $ 355,342 $ 66,450 $ (280,772) $ 16,227,259 $ 4,859,718 $ 21,227,997 OPPENHEIMER FUNDS: DEVELOPING MARKETS FUND Annuity contracts in accumulation 2,226 6,994 3,903 209,770 0 222,893 GLOBAL SECURITIES FUND Annuity contracts in accumulation 6,360,931 (6,699,112) (6,717,504) 43,783,614 50,258,541 86,986,470 STRATEGIC BOND FUND Annuity contracts in accumulation 404,512 (181,058) 11,908 3,571,548 5,987,840 9,799,961 Annuity contracts in payment period 21,845 16,634 PAX WORLD BALANCED FUND Annuity contracts in accumulation 32,262 (28,626) (109,382) 2,414,920 0 2,309,174 PILGRIM FUNDS: EMERGING MARKETS FUND (1) Annuity contracts in accumulation 1,179,780 (2,487,404) 693,375 (233,951) 6,367,049 5,518,849 NATURAL RESOURCES TRUST FUND (2) Annuity contracts in accumulation (165,895) 380,510 (3,274,760) (885,020) 16,696,149 12,750,984 PILGRIM VARIABLE FUNDS: GROWTH OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation 1 0 0 9,526 0 9,527 INTERNATIONAL VALUE PORTFOLIO -- CLASS R Annuity contracts in accumulation 17,293 (4) 16,501 1,495,264 0 1,529,054 MID CAP OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation (96) (187) (112) 29,916 0 29,521 SMALL CAP OPPORTUNITIES PORTFOLIO -- CLASS R Annuity contracts in accumulation (66) (33) 2,843 56,525 0 59,269 PIONEER FUNDS: EQUITY-INCOME VCT PORTFOLIO Annuity contracts in accumulation 145 (2) 820 87,442 0 88,405 FUND VCT PORTFOLIO Annuity contracts in accumulation 1 0 1 8,943 0 8,945 MID-CAP VALUE VCT PORTFOLIO Annuity contracts in accumulation (212) (737) 4,644 77,197 0 80,892 PORTFOLIO PARTNERS, INC. (PPI): PPI MFS CAPITAL OPPORTUNITIES PORTFOLIO -- I CLASS Annuity contracts in accumulation 44,589,736 1,619,149 (123,835,138) 2,133,043 291,099,078 215,627,607 Annuity contracts in payment period 400,248 378,509 PPI MFS EMERGING EQUITIES PORTFOLIO -- I CLASS Annuity contracts in accumulation 18,997,062 1,106,537 (130,575,292) (9,479,180) 425,020,833 305,126,330 Annuity contracts in payment period 167,018 110,648
S-55 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS (continued):
YEAR ENDED DECEMBER 31, 2001 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year PPI MFS RESEARCH GROWTH PORTFOLIO -- I CLASS Annuity contracts in accumulation $ 39,465,264 $ (397,122) $ (89,669,928) $ (11,665,527) $ 234,529,426 $ 172,262,113 PPI SCUDDER INTERNATIONAL GROWTH PORTFOLIO -- I CLASS Annuity contracts in accumulation 41,359,131 (99,622,293) 1,492,078 (17,206,284) 219,533,810 145,560,773 Annuity contracts in payment period 9,438 5,107 PPI T. ROWE PRICE GROWTH EQUITY PORTFOLIO -- I CLASS Annuity contracts in accumulation 34,277,709 2,360,449 (64,675,026) 6,924,273 244,707,197 223,625,073 Annuity contracts in payment period 158,262 127,791 WACHOVIA SPECIAL VALUES FUND Annuity contracts in accumulation 213,423 24,793 (12,633) 3,700,154 0 3,925,737 TOTAL VARIABLE ANNUITY ACCOUNT C $331,683,741 $(431,938,214) $(2,275,348,968) $ (172,334,087) $13,689,284,426 $11,141,346,898
(1) - Effective May 1, 2001, Lexington Emerging Market Fund's name changed to Pilgrim Emerging Market Fund. (2) - Effective May 1, 2000, Lexington Natural Resources Trust's name changed to Pilgrim Natural Resources Trust. S-56 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS (continued):
YEAR ENDED DECEMBER 31, 2000 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year AETNA ASCENT VP Annuity contracts in accumulation $ 36,550 $ 2,023,951 $ (3,440,951) $ (3,443,191) $ 81,880,934 $ 77,057,293 AETNA BALANCED VP, INC. Annuity contracts in accumulation 112,901,501 19,727,105 (147,081,096) (103,452,150) 958,810,376 842,266,266 Annuity contracts in payment period 34,529,808 33,169,278 AETNA BOND VP Annuity contracts in accumulation 13,216,666 (2,959,272) 13,343,145 (39,454,311) 312,007,882 296,126,266 Annuity contracts in payment period 5,764,551 5,792,395 AETNA CROSSROADS VP Annuity contracts in accumulation 441,285 97,305 (1,013,800) (4,468,657) 67,400,270 62,461,577 Annuity contracts in payment period 73,220 68,046 AETNA GET FUND, SERIES C Annuity contracts in accumulation 30,449,060 3,720,138 (49,493,522) (18,887,555) 170,407,185 136,195,306 AETNA GET FUND, SERIES D Annuity contracts in accumulation 14,440,368 3,089,297 (38,474,173) (119,418,211) 471,441,304 331,078,585 AETNA GET FUND, SERIES E Annuity contracts in accumulation 3,827,276 1,026,846 (13,265,067) (17,735,793) 157,821,380 131,674,642 AETNA GET FUND, SERIES G Annuity contracts in accumulation 379,657 71,399 (2,340,015) (5,775,781) 45,668,355 38,003,615 AETNA GET FUND, SERIES H Annuity contracts in accumulation 196,795 162,638 (269,484) 27,303,119 1,782,585 29,175,653 AETNA GET FUND, SERIES I Annuity contracts in accumulation 1,454 2,133 (32,894) 1,393,627 0 1,364,320 AETNA GET FUND, SERIES J Annuity contracts in accumulation 615 (45) (16,577) 472,733 0 456,726 AETNA GET FUND, SERIES K Annuity contracts in accumulation (979) 197 (8,299) 2,871,835 0 2,862,754 AETNA GET FUND, SERIES L Annuity contracts in accumulation (1) 0 16 15,972 0 15,987 AETNA GROWTH AND INCOME VP Annuity contracts in accumulation 536,765,360 (28,305,954) (1,173,968,207) (721,658,072) 5,753,192,035 4,428,082,443 Annuity contracts in payment period 373,523,149 311,465,868 AETNA GROWTH VP Annuity contracts in accumulation 1,093,671 3,731,651 (32,927,743) 53,759,126 145,431,206 171,026,842 Annuity contracts in payment period 71,588 132,657 AETNA HIGH YIELD VP Annuity contracts in accumulation (12,839) (193,642) 112,582 (2,083,594) 2,177,493 0 AETNA INDEX PLUS BOND VP Annuity contracts in accumulation (6,435) (14,618) 64,241 (1,042,892) 999,704 0
S-57 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS (continued):
YEAR ENDED DECEMBER 31, 2000 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year AETNA INDEX PLUS LARGE CAP VP Annuity contracts in accumulation $ 53,741,102 $ 21,047,809 $ (129,501,789) $ 68,658,775 $ 473,757,587 $ 487,054,341 Annuity contracts in payment period 1,234,629 1,883,772 AETNA INDEX PLUS MID CAP VP Annuity contracts in accumulation (27,987) 1,154,995 1,177,084 43,880,546 9,210,760 55,395,398 AETNA INDEX PLUS SMALL CAP VP Annuity contracts in accumulation (110,447) 829,971 97,541 3,748,048 8,277,508 12,842,621 AETNA INTERNATIONAL VP Annuity contracts in accumulation 2,173,465 192,117 (5,937,734) 8,806,604 7,714,709 12,949,161 AETNA LEGACY VP Annuity contracts in accumulation 334,677 292,708 802,261 (5,203,105) 42,650,270 38,925,638 Annuity contracts in payment period 247,224 198,397 AETNA MONEY MARKET VP Annuity contracts in accumulation 10,773,853 5,251,674 (413,714) (18,346,548) 325,367,721 322,624,048 Annuity contracts in payment period 80,784 89,722 AETNA REAL ESTATE SECURITIES VP Annuity contracts in accumulation (13,914) 383,451 72,859 (2,426,021) 1,983,625 0 AETNA SMALL COMPANY VP Annuity contracts in accumulation 4,688,047 16,494,744 (22,423,480) 43,023,013 62,919,038 104,675,715 Annuity contracts in payment period 11,036 36,683 AETNA TECHNOLOGY VP Annuity contracts in accumulation (123,166) (659,018) (12,476,702) 38,113,990 0 24,855,104 AETNA VALUE OPPORTUNITY VP Annuity contracts in accumulation 5,239,593 2,663,927 (4,901,655) 25,424,473 34,639,709 63,066,047 AIM V.I. FUNDS: CAPITAL APPRECIATION FUND Annuity contracts in accumulation 466,170 257,799 (5,245,120) 24,665,165 1,830,289 21,974,303 GROWTH AND INCOME FUND Annuity contracts in accumulation 1,144,879 389,979 (10,043,307) 47,737,578 9,752,003 48,981,132 GROWTH FUND Annuity contracts in accumulation 476,725 139,092 (6,432,977) 20,557,669 4,700,713 19,441,222 VALUE FUND Annuity contracts in accumulation 660,349 140,169 (4,209,966) 13,358,563 8,538,069 18,487,184 CALVERT SOCIAL BALANCED PORTFOLIO Annuity contracts in accumulation 2,267,247 2,854,362 (7,230,865) (2,720,584) 68,092,305 63,262,465 FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUNDS: ASSET MANAGER PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 2,601,494 701,785 (4,594,430) (2,709,341) 27,730,745 23,730,253 CONTRAFUND-REGISTERED TRADEMARK- PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 54,595,412 20,839,462 (110,406,630) (19,480,139) 475,353,405 420,901,510
S-58 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS (continued):
YEAR ENDED DECEMBER 31, 2000 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year EQUITY-INCOME PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation $ 13,851,094 $ 8,757,904 $ (11,069,516) $ (29,578,468) $ 213,941,762 $ 195,902,776 GROWTH PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 44,257,732 7,564,259 (113,706,819) 70,421,374 440,335,255 448,871,801 HIGH INCOME PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 114,589 (207,629) (583,683) 1,252,502 1,873,989 2,449,768 INDEX 500 PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 400,034 23,361,718 (35,626,722) (6,058,333) 122,573,178 104,649,875 OVERSEAS PORTFOLIO -- INITIAL CLASS Annuity contracts in accumulation 2,009,833 1,209,084 (7,577,795) 516,832 22,033,565 18,191,519 JANUS ASPEN SERIES: AGGRESSIVE GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 133,808,454 99,811,011 (717,624,386) 340,768,328 1,093,429,837 950,193,244 BALANCED PORTFOLIO -- I SHARES Annuity contracts in accumulation 28,232,215 4,925,773 (43,133,769) 70,619,050 235,410,674 296,053,943 FLEXIBLE INCOME PORTFOLIO -- I SHARES Annuity contracts in accumulation 1,568,435 (708,999) 876,966 2,253,321 32,908,277 36,898,000 GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 32,241,669 15,128,609 (126,023,034) 127,925,797 362,723,120 411,767,617 Annuity contracts in payment period 689,393 917,937 WORLDWIDE GROWTH PORTFOLIO -- I SHARES Annuity contracts in accumulation 91,464,664 61,024,670 (375,020,881) 169,190,829 1,136,307,574 1,082,624,571 Annuity contracts in payment period 752,858 1,095,143 JANUS TWENTY FUND Annuity contracts in payment period (1) (489) (36) 1,071 0 545 LEXINGTON FUNDS: EMERGING MARKETS FUND Annuity contracts in accumulation (138,792) (1,374,436) (3,710,968) 5,130 11,586,115 6,367,049 NATURAL RESOURCES TRUST FUND Annuity contracts in accumulation (115,114) (2,002,246) 4,524,862 (2,219,822) 16,508,469 16,696,149 MFS-REGISTERED TRADEMARK- TOTAL RETURN SERIES Annuity contracts in accumulation 26,933 20,170 230,740 3,897,679 684,196 4,859,718 OPPENHEIMER FUNDS: GLOBAL SECURITIES FUND Annuity contracts in accumulation 1,974,588 971,295 (3,945,771) 45,386,552 5,871,877 50,258,541 STRATEGIC BOND FUND Annuity contracts in accumulation 266,497 (125,516) (84,378) 2,461,306 3,464,259 5,987,840 Annuity contracts in payment period 27,517 21,845
S-59 VARIABLE ANNUITY ACCOUNT C NOTES TO FINANCIAL STATEMENTS - December 31, 2001 (continued): 6. SUPPLEMENTAL INFORMATION TO STATEMENT OF CHANGES IN NET ASSETS (continued):
YEAR ENDED DECEMBER 31, 2000 Net Net Change in Net Realized Unrealized Increase (Decrease) Net Assets Net Gain (Loss) Gain (Loss) in Net Assets ---------- Investment on on from Unit Beginning End Income (Loss) Investments Investments Transactions of Year of Year PORTFOLIO PARTNERS, INC. (PPI): PPI MFS CAPITAL OPPORTUNITIES PORTFOLIO -- I CLASS (1) Annuity contracts in accumulation $ 38,147,438 $ 5,749,841 $ (69,598,329) $ 90,392,695 $ 226,770,707 $ 291,099,078 Annuity contracts in payment period 36,974 400,248 PPI MFS EMERGING EQUITIES PORTFOLIO -- I CLASS Annuity contracts in accumulation (37,932) 23,737,586 (203,087,500) 6,822,966 597,714,231 425,020,833 Annuity contracts in payment period 38,500 167,018 PPI MFS RESEARCH GROWTH PORTFOLIO -- I CLASS Annuity contracts in accumulation 16,081,131 9,461,691 (39,062,464) (7,714,809) 255,763,877 234,529,426 PPI SCUDDER INTERNATIONAL GROWTH PORTFOLIO -- I CLASS Annuity contracts in accumulation 21,842,299 (15,668,306) (60,686,735) (17,427,634) 291,483,624 219,533,810 Annuity contracts in payment period 0 9,438 PPI T. ROWE PRICE GROWTH EQUITY PORTFOLIO -- I CLASS Annuity contracts in accumulation 18,361,154 7,768,474 (29,637,102) 5,277,763 243,032,240 244,707,197 Annuity contracts in payment period 62,930 158,262 TOTAL VARIABLE ANNUITY ACCOUNT C $1,296,974,423 $324,558,619 $(3,605,027,788) $ 209,679,020 $15,463,100,152 $13,689,284,426
(1) - Effective May 1, 2000, PPI MFS Value Equity Portfolio's name changed to PPI MFS Capital Opportunities Portfolio. S-60 REPORT OF INDEPENDENT AUDITORS To the Contractowners of Aetna Life Insurance and Annuity Company Variable Annuity Account C and the Board of Directors and Shareholder of Aetna Life Insurance and Annuity Company: We have audited the accompanying statement of assets and liabilities of the sixty-eight funds of Aetna Life Insurance and Annuity Company Variable Annuity Account C (the "Account"), referred to in Note 1, as of December 31, 2001, and the related statement of operations, changes in net assets and condensed financial information for the year then ended. 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 audit. The statement of changes in net assets for the year ended December 31, 2000, was audited by other auditors whose report dated February 2, 2001, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States. 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 audit provides 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 sixty-eight funds of Aetna Life Insurance and Annuity Company Variable Annuity Account C, referred to in Note 1, as of December 31, 2001, and the results of their operations, changes in their net assets and condensed financial information for the year then ended, in conformity with accounting principles generally accepted in the United States. [ERNST & YOUNG LLP SIGNATURE] Hartford, Connecticut February 8, 2002 S-61 ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (FORMERLY KNOWN AS AETNA LIFE INSURANCE AND ANNUITY COMPANY, A WHOLLY-OWNED SUBSIDIARY OF AETNA RETIREMENT HOLDINGS, INC.) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Report of Independent Auditors.................... F-2 Consolidated Financial Statements: Consolidated Statements of Income for the Year-ended December 31, 2001, One Month Ended December 31, 2000, the Eleven Months Ended November 30, 2000 and for the Year-ended December 31, 1999............... F-4 Consolidated Balance Sheets as of December 31, 2001 and 2000................. F-5 Consolidated Statements of Changes in Shareholder's Equity for the Year-ended December 31, 2001, One Month Ended December 31, 2000, the Eleven Months Ended November 30, 2000 and for the Year-ended December 31, 1999.......................... F-6 Consolidated Statements of Cash Flows for the Year-ended December 31, 2001, One Month Ended December 31, 2000, the Eleven Months Ended November 30, 2000 and for the Year-ended December 31, 1999............... F-7 Notes to Consolidated Financial Statements.... F-8
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors ING Life Insurance and Annuity Company We have audited the accompanying consolidated balance sheet of ING Life Insurance and Annuity Company and Subsidiaries (formerly Aetna Life Insurance and Annuity Company and Subsidiaries and hereafter referred to as the Company) as of December 31, 2001, and the related consolidated statements of income, changes in shareholder's equity, and cash flows for the then year ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of ING Life Insurance and Annuity Company and Subsidiaries at December 31, 2001, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. As discussed in Note 1, the Company adopted Financial Accounting Standards (FAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, and FAS No. 140, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES. /s/ Ernst & Young LLP Hartford, Connecticut January 31, 2002 F-2 REPORT OF INDEPENDENT AUDITORS The Shareholder and Board of Directors ING Life Insurance and Annuity Company: We have audited the accompanying consolidated balance sheet of ING Life Insurance and Annuity Company and Subsidiaries, formerly known as Aetna Life Insurance and Annuity Company and Subsidiaries, as of December 31, 2000, and the related consolidated statements of income, changes in shareholder's equity and cash flows for the period from December 1, 2000 to December 31, 2000 ("Successor Company"), and for the period from January 1, 2000 to November 30, 2000 and the year ended December 31, 1999 ("Preacquisition Company"). These consolidated financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 Successor Company's consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aetna Life Insurance and Annuity Company and Subsidiaries at December 31, 2000, and the results of their operations and their cash flows for the period from December 1, 2000 to December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Further, in our opinion, the Preacquisition Company's consolidated financial statements referred to above present fairly, in all material respects, the results of their operations and their cash flows for the period from January 1, 2000 to November 30, 2000, and the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 1 to the consolidated financial statements, effective November 30, 2000, ING America Insurance Holdings Inc. acquired all of the outstanding stock of Aetna Inc., Aetna Life Insurance and Annuity Company's indirect parent and sole shareholder in a business combination accounted for as a purchase. As a result of the acquisition, the consolidated financial information for the periods after the acquisition is presented on a different cost basis than that for the periods before the acquisition and, therefore, is not comparable. /s/ KPMG LLP Hartford, Connecticut March 27, 2001 F-3 ITEM 1. FINANCIAL STATEMENTS ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (Formerly known as Aetna Life Insurance and Annuity Company, a wholly-owned subsidiary of Aetna Retirement Holdings, Inc.) CONSOLIDATED STATEMENTS OF INCOME (millions)
Preacquisition ---------------------------- One month Eleven months Year-ended ended ended Year-ended December 31, December 31, November 30, December 31, 2001 2000 2000 1999 ------------- ------------- ------------- ------------- Revenue: Premiums $ 114.2 $ 16.5 $ 137.7 $ 107.5 Charges assessed against policyholders 381.3 36.4 424.6 388.3 Net investment income 888.4 78.6 833.8 886.3 Net realized capital (losses) gains (21.0) 1.8 (37.2) (21.5) Other income 172.1 13.4 148.7 129.7 -------- ------ -------- -------- Total revenue 1,535.0 146.7 1,507.6 1,490.3 Benefits and expenses: Current and future benefits 729.6 68.9 726.7 746.2 Operating expenses: Salaries and related benefits 181.0 29.9 187.5 153.0 Restructing charge 29.2 -- -- -- Other 234.0 19.2 227.1 213.7 Amortization of deferred policy acquisition costs and value of business acquired 112.0 10.2 116.7 104.9 Amortization of goodwill 61.9 -- -- -- -------- ------ -------- -------- Total benefits and expenses 1,347.7 128.2 1,258.0 1,217.8 Income from continuing operations before income taxes 187.3 18.5 249.6 272.5 Income taxes 87.4 5.9 78.1 90.6 -------- ------ -------- -------- Income from continuing operations 99.9 12.6 171.5 181.9 Discontinued operations, net of tax: Income from operations -- -- 5.7 5.7 -------- ------ -------- -------- Net income $ 99.9 $ 12.6 $ 177.2 $ 187.6 ======== ====== ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-4 ITEM 1. FINANCIAL STATEMENTS (continued) ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (Formerly known as Aetna Life Insurance and Annuity Company, a wholly-owned subsidiary of Aetna Retirement Holdings, Inc.) CONSOLIDATED BALANCE SHEETS (millions, except share data)
December 31, December 31, 2001 2000 --------------- --------------- ASSETS Investments: Debt securities available for sale, at fair value (amortized cost: $13,249.2 and $11,120.0) $13,539.9 $11,244.7 Equity securities, at fair value: Nonredeemable preferred stock (cost: $27.0 and $109.0) 24.6 100.7 Investment in affiliated mutual funds (cost: $22.9 and $9.6) 25.0 12.7 Common stock (cost: $2.3 and $2.2) 0.7 3.5 Short-term investments 31.7 109.4 Mortgage loans 241.3 4.6 Policy loans 329.0 339.3 Other investments 18.2 13.4 Securities pledged to creditors (amortized cost: $466.9 and $126.8) 467.2 129.0 --------- --------- Total investments 14,677.6 11,957.3 Cash and cash equivalents 82.0 796.3 Short-term investments under securities loan agreement 488.8 131.8 Accrued investment income 160.9 147.2 Premiums due and other receivables 21.5 82.9 Reciprocal loan with affiliate 191.1 -- Reinsurance recoverable 2,990.7 3,005.8 Current income taxes -- 40.6 Deferred policy acquisition costs 121.3 12.3 Value of business acquired 1,601.8 1,780.9 Goodwill 2,412.1 2,297.4 Other assets 194.3 154.7 Separate Accounts assets 32,663.1 36,745.8 --------- --------- Total assets $55,605.2 $57,153.0 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Future policy benefits $ 3,996.8 $ 3,977.7 Unpaid claims and claim expenses 28.8 29.6 Policyholders' funds left with the Company 12,135.8 11,125.6 --------- --------- Total insurance reserve liabilities 16,161.4 15,132.9 Payables under securities loan agreement 488.8 131.8 Current income taxes 59.2 -- Deferred income taxes 153.7 248.0 Other liabilities 1,624.7 549.9 Separate Accounts liabilities 32,663.1 36,745.8 --------- --------- Total liabilities 51,150.9 52,808.4 --------- --------- 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 4,292.4 4,303.8 Accumulated other comprehensive gain 46.6 25.4 Retained earnings 112.5 12.6 --------- --------- Total shareholder's equity 4,454.3 4,344.6 --------- --------- Total liabilities and shareholder's equity $55,605.2 $57,153.0 ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-5 ITEM 1. FINANCIAL STATEMENTS (continued) ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (Formerly known as Aetna Life Insurance and Annuity Company, a wholly-owned subsidiary of Aetna Retirement Holdings, Inc.) CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (millions)
Preacquisition ---------------------------- One month Eleven month Year-ended ended ended Year-ended December 31, December 31, November 30, December 31, 2001 2000 2000 1999 ------------- ------------- ------------- ------------- Shareholder's equity, beginning of period $4,344.6 $4,313.4 $1,385.7 $1,394.5 Comprehensive income: Net income 99.9 12.6 177.2 187.6 Other comprehensive income (loss), net of tax: Unrealized gains (losses) on securities ($32.5, $28.7, $79.4 and ($230.2) pretax) (1) 21.2 18.6 51.6 (149.6) -------- -------- -------- -------- Total comprehensive income 121.1 31.2 228.8 38.0 -------- -------- -------- -------- Capital contributions: Cash -- -- 73.5 -- Assets -- -- 56.0 -- -------- -------- -------- -------- Total capital contributions -- -- 129.5 -- -------- -------- -------- -------- Return of capital (11.3) -- -- -- Other changes (0.1) -- 0.8 2.9 Common stock dividends -- -- (10.1) (49.7) Adjustment for purchase accounting -- -- 2,578.7 -- -------- -------- -------- -------- Shareholder's equity, end of period $4,454.3 $4,344.6 $4,313.4 $1,385.7 ======== ======== ======== ========
(1) Net of reclassification adjustments. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-6 ITEM 1. FINANCIAL STATEMENTS (continued) ING LIFE INSURANCE AND ANNUITY COMPANY AND SUBSIDIARIES (Formerly known as Aetna Life Insurance and Annuity Company, a wholly-owned subsidiary of Aetna Retirement Holdings, Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (millions)
Preacquisition ------------------------------ One month Eleven months Year-ended ended ended Year-ended December 31, December 31, November 30, December 31, 2001 2000 2000 1999 --------------- --------------- ------------- --------------- Cash Flows from Operating Activities: Net income $ 99.9 $ 12.6 $ 177.2 $ 187.6 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Net accretion of discount on investments (1.2) (2.7) (32.6) (26.5) Amortization of deferred gain on sale -- -- (5.7) (5.7) Net realized capital losses (gains) 21.0 (1.8) 37.2 21.5 Changes in assets and liabilities: (Increase) decrease in accrued investment income (13.7) 6.6 (3.1) 0.9 (Increase) decrease in premiums due and other receivables (95.6) 31.1 (23.7) 23.3 Decrease (increase) in policy loans 10.3 0.1 (25.4) (21.8) Increase in deferred policy acquisition costs (121.3) (12.2) (136.6) (153.3) Decrease in value of business acquired 13.9 -- -- -- Goodwill amortization 61.8 -- -- -- Net increase (decrease) in universal life account balances 17.6 (3.8) 23.8 55.7 (Decrease) increase in other insurance reserve liabilities (136.3) (5.3) 85.6 (28.6) (Decrease) increase in other liabilities and other assets (67.9) 103.9 (75.2) (42.5) Increase (decrease) in income taxes 89.5 (14.3) 23.1 (259.8) --------- ------- --------- --------- Net cash (used for) provided by operating activities (122.0) 114.2 44.6 (249.2) --------- ------- --------- --------- Cash Flows from Investing Activities: Proceeds from sales of: Debt securities available for sale 14,216.7 233.0 10,083.2 5,890.1 Equity securities 4.4 1.5 118.4 111.2 Mortgage loans 5.2 0.1 2.1 6.1 Investment maturities and collections of: Debt securities available for sale 1,121.8 53.7 573.1 1,216.5 Short-term investments 7,087.3 0.4 59.9 80.6 Cost of investment purchases in: Debt securities available for sale (16,489.8) (230.7) (10,505.5) (7,099.7) Equity securities (50.0) (27.8) (17.6) (13.0) Mortgages debt securities (242.0) -- -- -- Short-term investments (6,991.1) (10.0) (113.1) (106.0) (Increase) decrease in property and equipment 7.4 1.9 5.4 (5.7) Other, net (4.7) 0.3 (4.0) 3.7 --------- ------- --------- --------- Net cash (used for) provided by investing activities (1,334.8) 22.4 201.9 83.8 --------- ------- --------- --------- Cash Flows from Financing Activities: Deposits and interest credited for investment contracts 1,941.5 164.2 1,529.7 2,040.2 Withdrawals of investment contracts (1,082.7) (156.3) (1,832.6) (1,680.8) Capital contribution from HOLDCO -- -- 73.5 -- Return of capital (11.3) -- -- -- Dividends paid to Shareholder -- -- (10.1) (255.7) Other, net (105.0) (73.6) 22.0 126.7 --------- ------- --------- --------- Net cash provided by (used for) financing activities 742.5 (65.7) (217.5) 230.4 --------- ------- --------- --------- Net (decrease) increase in cash and cash equivalents (714.3) 70.9 29.0 65.0 Effect of exchange rate changes on cash and cash equivalents -- -- 2.0 -- Cash and cash equivalents, beginning of period 796.3 725.4 694.4 629.4 --------- ------- --------- --------- Cash and cash equivalents, end of period $ 82.0 $ 796.3 $ 725.4 $ 694.4 ========= ======= ========= ========= Supplemental cash flow information: Income taxes (received) paid, net $ (12.3) $ 20.3 $ 39.9 $ 316.9 ========= ======= ========= =========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. F-7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ING Life Insurance and Annuity Company ("ILIAC"), formerly known as Aetna Life Insurance and Annuity Company ("ALIAC") and its wholly owned subsidiaries (collectively, the "Company") are providers of financial products and services and investment management services in the United States. The Company has three business segments: Worksite Products, Individual Products and Investment Management Services. On October 1, 1998, the Company sold its individual life insurance business to Lincoln National Corporation ("Lincoln") and accordingly, it is now classified as Discontinued Operations (refer to Note 3). On December 13, 2000, ING America Insurance Holdings, Inc. ("ING AIH"), an indirect wholly owned subsidiary of ING, acquired Aetna Inc., comprised of the Aetna Financial Services business, of which the Company is a part, and the Aetna International business, for approximately $7.7 billion. The purchase price was comprised of approximately $5.0 billion in cash and the assumption of $2.7 billion of outstanding debt and other net liabilities. In connection with the acquisition, Aetna Inc. was renamed Lion Connecticut Holdings Inc. ("Lion"). At the time of the sale, Lion entered into certain transition services agreements with a former related party, Aetna U.S. Healthcare, which was renamed Aetna Inc. ("former Aetna"). For accounting purposes, the acquisition was recorded as of November 30, 2000 using the purchase method. The effects of this transaction, including the recognition of goodwill, were pushed down and reflected on the financial statements of certain ARSI (a subsidiary of Lion) subsidiaries, including the Company. The Balance Sheet changes related to accounting for this purchase were entirely non-cash in nature and accordingly have been excluded from the pre-acquisition Consolidated Statement of Cash Flow for the eleven months ended November 30, 2000. The purchase price was allocated to assets and liabilities based on their respective fair values. This revaluation resulted in a net increase to assets, excluding the effects of goodwill, of $592.0 million and a net increase to liabilities of $310.6 million. Additionally, the Company established goodwill of $2.3 billion. Goodwill was being amortized over a period of 40 years. The allocation of the purchase price to assets and liabilities has been subjected to further refinement throughout 2001 as additional information has become available to more precisely estimate the fair values of the Company's respective assets and liabilities at the purchase date. The refinements to the Company's purchase price allocations are as follows: The Company completed a full review relative to the assumptions and profit streams utilized in the development of value of business acquired ("VOBA") and determined that certain refinements were necessary. Such refinements resulted in a reduction of VOBA; The Company completed the review of the fixed assets that existed at or prior to the acquisition and determined that an additional write down was necessary; The Company completed the review of severance actions related to individuals who were employed before or at the acquisition date and determined that an additional severance accrual was necessary; F-8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The Company completed its valuation of certain benefit plan liabilities and, as a result, reduced those benefit plan liabilities; The Company adjusted its reserve for policyholders' funds left with the company in order to conform its accounting policies with those of ING; The Company, after giving further consideration to certain exposures in the general market place, determined that a reduction of its investment portfolio carrying value was warranted; The Company determined that the establishment of a liability for certain noncancellable operating leases that existed prior to or at the acquisition date but are no longer providing a benefit to the Company's operations, was warranted; and The Company determined that the contractual lease payment of one of its operating leases was more than the current market rate, and established a corresponding unfavorable lease liability. The net impact of the refinements in purchase price allocations, as described above, resulted in a net decrease to assets, excluding the effects of goodwill, of $236.4 million, a net decrease to liabilities of $59.8 million and a net increase to the Company's goodwill of $176.6 million. Unaudited proforma consolidated income from continuing operations and net income of the Company for the period from January 1, 2000 to November 30, 2000 and for the year-ended December 31, 1999, assuming that the acquisition of the Company occurred at the beginning of each period, would have been approximately $118.1 million and $123.5 million, respectively. The pro forma adjustments, which do not affect revenues, reflect primarily goodwill amortization, amortization of the favorable lease asset and the elimination of amortization of the deferred gain on sale associated with the life business. The Worksite Products segment includes annuity contracts that offer a variety of funding and payout options for employer-sponsored retirement plans qualified under Internal Revenue Code Sections 401, 403, 408, and 457, nonqualified annuity contracts, and mutual funds. Annuity contracts may be deferred or immediate ("payout annuities"). These products also include programs offered to qualified plans and nonqualified deferred compensation plans that package administrative and recordkeeping services along with a menu of investment options, including mutual funds (both ILIAC and nonaffiliated mutual funds), variable and fixed investment options. Worksite products also include investment advisory services and pension plan administrative services. The Individual Products segment includes both deferred and immediate annuity contracts, which may be qualified or nonqualified, that are sold to individuals. These contracts also offer a choice of fixed or variable investment options, including both ILIAC and nonaffiliated mutual funds. Investment Management Services provides: investment advisory services to affiliated and unaffiliated institutional and retail clients on a fee-for-service basis; underwriting services to the ING Series Fund, Inc. (formerly known as the Aetna Series Fund, Inc.), and the ING Variable F-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Portfolios, Inc. (formerly known as the Aetna Variable Portfolios, Inc.); distribution services for other company products; and trustee, administrative, and other fiduciary services to retirement plans requiring or otherwise utilizing a trustee or custodian. Discontinued Operations include universal life, variable universal life, traditional whole life and term insurance. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include ILIAC and its wholly-owned subsidiaries, ING Insurance Company of America ("IICA"), Aetna Investment Adviser Holding Company, Inc. ("IA Holdco") and Aetna Investment Services, LLC ("AIS"). ILIAC is a wholly-owned subsidiary of Aetna Retirement Holdings, Inc. ("HOLDCO"), which is a wholly- owned subsidiary of Aetna Retirement Services, Inc. ("ARSI"). ARSI is ultimately owned by ING Groep N.V. (ING). HOLDCO contributed AIS to the Company on June 30, 2000 and contributed IA Holdco to the Company on July 1, 1999 (refer to Note 2). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The contributions of AIS and IA Holdco to the Company were accounted for in a manner similar to that of a pooling-of-interests and, accordingly, the Company's historical consolidated financial statements have been restated to include the accounts and results of operations of both companies. Certain reclassifications have been made to 2000 and 1999 financial information to conform to the 2001 presentation. NEW ACCOUNTING STANDARD ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the Financial Accounting Standards Board ("FASB") issued Financial Accounting Standard ("FAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended and interpreted by FAS No. 137, Accounting for Derivative Instruments and Hedging Activites -- Deferral of the Effective Date of FASB Statement No. 133, FAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities -- an Amendment of FASB No. 133, and certain FAS No. 133 implementation issues. This standard, as amended, requires companies to record all derivatives on the balance sheet as either assets or liabilities and measure those instruments at fair value. The manner in which companies are to record gains or losses resulting from changes in the fair values of those derivatives depends on the use of the derivative and whether it qualifies for hedge accounting. FAS 133 was effective for the Company's financial statements beginning January 1, 2001. Adoption of FAS No. 133 did not have a material effect on the Company's financial position or results of operations given the Company's limited derivative and embedded derivative holdings. (Refer to Note 5). F-10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The Company utilizes options, interest rate floors and warrants in order to manage interest rate and price risk (collectively, market risk). These financial exposures are monitored and managed by the Company as an integral part of the its overall risk management program. (Refer to Note 5). Derivatives are recognized on the balance sheet at their fair value. The Company chose not to designate its derivative instruments as part of hedge transactions. Therefore, changes in the fair value of the Company's derivative instruments are recorded immediately in the consolidated statements of income as part of realized capital gains and losses. Warrants are carried at fair value and are recorded as either derivative instruments or FAS No. 115 available for sale securities. Warrants that are considered derivatives are carried at fair value if they are readily convertible to cash. The values of these warrants can fluctuate given that the companies which underlie the warrants are non-public companies. At December 31, 2001, the estimated value of these warrants was immaterial. These warrants will be revalued each quarter and the change in the value of the warrants will be included in the consolidated statements of income. The Company, at times, may own warrants on common stock which are not readily convertible to cash as they contain certain conditions which preclude their convertibility and therefore, will not be included in assets or liabilities as derivatives. If conditions are satisfied and the underlying stocks become marketable, the warrants would be reclassified as derivatives and recorded at fair value as an adjustment through current period results of operations. The Company occasionally purchases a financial instrument that contains a derivative that is "embedded" in the instrument. In addition, the Company's insurance products are reviewed to determine whether they contain an embedded derivative. The Company assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the financial instrument or insurance product (i.e., the host contract) and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that the embedded derivative possesses economic characteristics that are clearly and closely related to the economic characteristics of the host contract and that a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract and carried at fair value. However, in cases where the host contract is measured at fair value, with changes in fair value reported in current period earnings or the Company is unable to reliably identify and measure the embedded derivative for separation from its host contracts, the entire contract is carried on the balance sheet at fair value and is not designated as a hedging instrument (refer to Note 5). FUTURE ACCOUNTING STANDARD ACCOUNTING FOR GOODWILL AND INTANGIBLE ASSETS In July 2001, the FASB issued FAS No. 142, Accounting for Goodwill and Intangible Assets. Under the new standard, goodwill and intangible assets deemed to have indefinite lives will no F-11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) longer be amortized but will be subject to annual impairment tests in accordance with the new standard. Other intangible assets will continue to be amortized over their useful lives. The Company will apply the new rules on the accounting for goodwill and other intangible assets beginning in the first quarter of 2002. Application of the nonamortization provisions of the new standard is expected to result in an increase in net income; however, the Company is still assessing the impact of the new standard. During 2002, the Company will perform the required impairment tests of goodwill as of January 1, 2002 and has not yet determined what the effect of these tests will be on the earnings and financial position of the Company. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from reported results using those estimates. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, money market instruments and other debt issues with a maturity of 90 days or less when purchased. INVESTMENTS All of the Company's fixed maturity and equity securities are currently designated as available-for-sale. Available-for-sale securities are reported at fair value. Securities determined to have a decline in value that is other than temporary are written down to estimated fair value which becomes the securities' new cost basis by a charge to realized losses in the accompanying consolidated statements of operations. Premiums and discounts are amortized/ accrued utilizing the scientific interest method which results in a constant yield over the securities' expected lives. Amortization/accrual of premiums and discounts on mortgage-related securities incorporates a prepayment assumption to estimate the securities expected lives. Included in available-for-sale securities are investments that support experience-rated products. Experience-rated products are products where the customer, not the Company, assumes investment (including realized capital gains and losses on the sale of invested assets) and other risks, subject to, among other things, principal and interest guarantees. Realized gains and losses on the sale of, as well as unrealized capital gains and losses on, investments supporting these products are reflected in policyholders' funds left with the Company. Realized capital gains and losses on all other investments are reflected on all other investments are reflected in the Company's results of operations. Unrealized capital gains and losses on all other investments are reflected in shareholder's equity, net of related income taxes. F-12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Purchases and sales of debt and equity securities (excluding private placements) are recorded on the trade date. Purchases and sales of private placements and mortgage loans are recorded on the closing date. Fair values for fixed maturity securities are obtained from independent pricing services or broker/ dealer quotations. Fair values for privately placed bonds are determined using a matrix-based model. The matrix-based model considers the level of risk-free interest rates, current corporate spreads, the credit quality of the issuer and cash flow characteristics of the security. The fair values for equity securities are based on quoted market prices. For equity securities not actively traded, estimated fair values are based upon values of issues of comparable yield and quality or conversion value where applicable. The Company engages in securities lending whereby certain securities from its portfolio are loaned to other institutions for short periods of time. Initial collateral, primarily cash, is required at a rate of 102% of the market value of the loaned domestic securities. The collateral is deposited by the borrower with a lending agent, and retained and invested by the lending agent according to the Company's guidelines to generate additional income. The market value of the loaned securities is monitored on a daily basis with additional collateral obtained or refunded as the market value of the loaned securities fluctuates. In September 2000, the FASB issued FAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. In accordance with this new standard, general account securities on loan are reflected on the Consolidated Balance Sheet as "Securities pledged to creditors", which includes the following:
Gross Gross December 31, 2001 Amortized Unrealized Unrealized Fair (Millions) Cost Gains Losses Value ------------------------------------------------------------------------------------------ Total securities pledged to creditors $466.9 $1.1 $0.8 $467.2 ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------ Gross Gross December 31, 2000 Amortized Unrealized Unrealized Fair (Millions) Cost Gains Losses Value ------------------------------------------------------------------------------------------ Debt securities $124.5 $5.3 $3.1 $126.7 Short-term investments 2.3 -- -- 2.3 ------------------------------------------------------------------------------------------ Total securities pledged to creditors $126.8 $5.3 $3.1 $129.0 ------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------
Total securities pledged to creditors at December 31, 2001 consisted entirely of debt securities. Dollar rolls and reverse repurchase agreement transactions are accounted for as collateral borrowings, where the amount borrowed is equal to the sales price of the underlying securities. These transactions are reported in "Other Liabilities." F-13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The investment in affiliated mutual funds represents an investment in funds managed by Aeltus Investment Management, Inc. ("Aeltus"), an indirect wholly owned subsidiary of HOLDCO. Funds managed by ILIAC and subadvised by outside investment advisers, and funds managed by ING Pilgrim Investments, LLC, and is carried at fair value. Mortgage loans on real estate are reported at amortized cost less a valuation allowance. If the value of any mortgage loan is determined to be impaired (i.e., when it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement), the carrying value of the mortgage loan is reduced to the present value of expected cash flows from the loan, discounted at the loan's effective interest rate, or to the loan's observable market price, or the fair value of the underlying collateral. The carrying value of the impaired loans is reduced by establishing a valuation allowance which is adjusted at each reporting date for significant changes in the calculated value of the loan. Changes in this valuation allowance are charged or credited to income. Policy loans are carried at unpaid principal balances, net of impairment reserves. Short-term investments, consisting primarily of money market instruments and other debt issues purchased with an original maturity of 91 days to one year, are considered available for sale and are carried at fair value, which approximates amortized cost. The Company's use of derivatives is limited to hedging purposes. The Company enters into interest rate and currency contracts, including swaps, caps, and floors to reduce and manage risks associated with changes in value, yield, price, cash flow or exchange rates of assets or liabilities held or intended to be held. Changes in the fair value of open derivative contracts are recorded in net realized capital gains and losses (Refer to Note 5). On occasion, the Company sells call options written on underlying securities which are carried at fair value. Changes in fair value of these options are recorded in net realized capital gains or losses. GOODWILL Goodwill, which represents the excess of cost over the fair value of net assets acquired, was amortized on a straight-line basis over 40 years. Refer to "Future Accounting Standard" within Note 1 for related information regarding the accounting for goodwill. DEFERRED POLICY ACQUISITION COSTS Certain costs of acquiring certain insurance business are deferred. These costs, all of which vary with and are primarily related to the production of new and renewal business, consist principally of commissions, certain expenses of underwriting and issuing contracts, and certain agency expenses. For certain annuity and pension contracts, such costs are amortized in proportion to estimated gross profits and adjusted to reflect actual gross profits over the life of the contracts (up to 30 years for annuity and pension contracts). F-14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Periodically, modifications may be made to deferred annuity contract features, such as shortening the surrender charge period, waiving the surrender charge, or changing the mortality and expense fees. Unamortized deferred policy acquisition costs associated with these modified contracts are not written off, but rather, continue to be associated with the original block of business to which these costs were previously recorded. Such costs are amortized based on revised estimates of expected gross profits based upon the contract after the modification. Deferred policy acquisition costs are written off to the extent that it is determined that future policy premiums and investment income or gross profits are not adequate to cover related expenses. VALUE OF BUSINESS ACQUIRED VOBA is an asset and represents the present value of estimated net cash flows embedded in the Company's contracts acquired by ING. VOBA is amortized in proportion to estimated gross profits and adjusted to reflect actual gross profits over the contracts (up to 30 years for annuity contracts and pension contracts). VOBA is written off to the extent that it is determined that gross profits are not adequate to recover the asset. Activity for the year-ended December 31, 2001 within VOBA was as follows:
(Millions) -------------------------------------------------------- Balance at December 31, 2000 $ 1,780.9 Adjustment of allocation of purchase price (165.3) Additions 90.0 Interest accrued at 7% 110.0 Amortization (213.8) -------------------------------------------------------- Balance at December 31,2001 $ 1,601.8 -------------------------------------------------------- --------------------------------------------------------
The estimated amount of VOBA to be amortized, net of interest, over the next five years is $81.1 million, $95.5 million, $103.3 million, $96.6 million and $89.5 million for the years 2002, 2003, 2004, 2005 and 2006, respectively. Actual amortization incurred during these years may vary as assumptions are modified to incorporate actual results. INSURANCE RESERVE LIABILITIES Future policy benefits include reserves for universal life, immediate annuities with life contingent payouts and traditional life insurance contracts. Reserves for universal life products are equal to cumulative deposits less withdrawals and charges plus credited interest thereon. Reserves for traditional life insurance contracts represent the present value of future benefits to be paid to or on behalf of policyholders and related expenses less the present value of future net premiums. Reserves for immediate annuities with life contingent payout contracts are computed on the basis of assumed investment yield, mortality, and expenses, including a margin for adverse deviations. Such assumptions generally vary by plan, year of issue and policy duration. Reserve interest rates F-15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) range from 2.0% to 9.5% for all years presented. Investment yield is based on the Company's experience. Mortality and withdrawal rate assumptions are based on relevant Company experience and are periodically reviewed against both industry standards and experience. Because the sale of the domestic individual life insurance business was substantially in the form of an indemnity reinsurance agreement, the Company reported an addition to its reinsurance recoverable approximating the Company's total individual life reserves at the sale date. Policyholders' funds left with the Company include reserves for deferred annuity investment contracts and immediate annuities without life contingent payouts. Reserves on such contracts are equal to cumulative deposits less charges and withdrawals plus credited interest thereon (rates range from 2.0% to 14.0% for all years presented) net of adjustments for investment experience that the Company is entitled to reflect in future credited interest. These reserves also include unrealized gains/losses related to FAS No. 115 for experience-rated contracts. Reserves on contracts subject to experience rating reflect the rights of contractholders, plan participants and the Company. Unpaid claims for all lines of insurance include benefits for reported losses and estimates of benefits for losses incurred but not reported. REVENUE RECOGNITION For certain annuity contracts, charges assessed against policyholders' funds for the cost of insurance, surrender charges, actuarial margin and other fees are recorded as revenue in charges assessed against policyholders. Other amounts received for these contracts are reflected as deposits and are not recorded as revenue. Related policy benefits are recorded in relation to the associated premiums or gross profit so that profits are recognized over the expected lives of the contracts. When annuity payments with life contingencies begin under contracts that were initially investment contracts, the accumulated balance in the account is treated as a single premium for the purchase of an annuity and reflected as an offsetting amount in both premiums and current and future benefits in the Consolidated Statements of Income. SEPARATE ACCOUNTS Separate Accounts assets and liabilities generally represent funds maintained to meet specific investment objectives of contractholders who bear the investment risk, subject, in some cases, to minimum guaranteed rates. Investment income and investment gains and losses generally accrue directly to such contractholders. The assets of each account are legally segregated and are not subject to claims that arise out of any other business of the Company. Separate Accounts assets supporting variable options under universal life and annuity contracts are invested, as designated by the contractholder or participant under a contract (who bears the investment risk subject, in limited cases, to minimum guaranteed rates) in shares of mutual funds F-16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) which are managed by the Company, or other selected mutual funds not managed by the Company. Separate Accounts assets are carried at fair value. At December 31, 2001 and 2000, unrealized gains of $10.8 million and of $9.5 million, respectively, after taxes, on assets supporting a guaranteed interest option are reflected in shareholder's equity. Separate Accounts liabilities are carried at fair value, except for those relating to the guaranteed interest option. Reserves relating to the guaranteed interest option are maintained at fund value and reflect interest credited at rates ranging from 3.0% to 14.0% in 2001 and 3.8% to 14.0% in 2000. Separate Accounts assets and liabilities are shown as separate captions in the Consolidated Balance Sheets. Deposits, investment income and net realized and unrealized capital gains and losses of the Separate Accounts are not reflected in the Consolidated Financial Statements (with the exception of realized and unrealized capital gains and losses on the assets supporting the guaranteed interest option). The Consolidated Statements of Cash Flows do not reflect investment activity of the Separate Accounts. 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 recoverable balances deemed probable of recovery are reflected as assets on the Company's Consolidated Balance Sheets. Of the reinsurance recoverable on the Consolidated Balance Sheets, $3.0 billion at both December 31, 2001 and 2000 is related to the reinsurance recoverable from Lincoln arising from the sale of the Company's domestic life insurance business (refer to Note 3). INCOME TAXES The Company files a consolidated federal income tax return with its subsidiary IICA. The Company is taxed at regular corporate rates after adjusting income reported for financial statement purposes for certain items. Deferred income tax expenses/benefits result from changes during the year in cumulative temporary differences between the tax basis and book basis of assets and liabilities. F-17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. RECENT DEVELOPMENTS CONTRIBUTIONS OF AIS AND IA HOLDCO FROM HOLDCO On June 30, 2000, HOLDCO contributed AIS to the Company. AIS is registered with the Securities and Exchange Commission as a broker/dealer and is a member of the National Association of Securities Dealers, Inc. It is also registered with the appropriate state securities authorities as a broker/dealer and is a Registered Investment Advisor. The principal operation of AIS is acting as underwriter for ILIAC's manufactured products, as well as the sale of fixed and variable annuities and mutual funds through its registered representatives. On July 1, 1999, HOLDCO contributed IA Holdco to the Company. The primary operating subsidiary of IA Holdco is Aeltus which has two wholly-owned operating subsidiaries: Aeltus Capital, Inc. ("ACI"), a broker dealer, and Aeltus Trust Company ("ATC"), a limited purpose banking entity. Aeltus is a registered investment advisor under the Investment Advisers Act of 1940 and provides investment advisory services to institutional and retail clients on a fee-for-service basis. In addition, Aeltus, through its ACI subsidiary, serves as underwriter to the ING Series Fund, Inc. (formerly known as the Aetna Series Fund, Inc.), and the ING Variable Portfolios, Inc. (formerly known as the Aetna Variable Portfolios, Inc.),and provides distribution services for other Company products. Aeltus' ATC subsidiary provides trustee, administrative, and other fiduciary services to retirement plans requiring or otherwise utilizing a trustee or custodian (refer to Note 16). 3. DISCONTINUED OPERATIONS--INDIVIDUAL LIFE INSURANCE On October 1, 1998, the Company sold its domestic individual life insurance business to Lincoln for $1 billion in cash. The transaction was generally in the form of an indemnity reinsurance arrangement, under which Lincoln contractually assumed from the Company certain policyholder liabilities and obligations, although the Company remains directly obligated to policyholders. Assets related to and supporting the life policies were transferred to Lincoln and the Company recorded a reinsurance recoverable from Lincoln. The transaction resulted in an after-tax gain on the sale of approximately $117 million, of which $57.7 million was deferred and was being recognized over approximately 15 years. The remaining portion of the gain was recognized immediately in net income and was largely attributed to access to the agency sales force and brokerage distribution channel. Approximately $5.7 million (after tax) of amortization related to the deferred gain was recognized in both 2000 and 1999. During the fourth quarter of 1999, the Company refined certain accrual and tax estimates which had been established in connection with the recording of the deferred gain. As a result, the deferred gain was increased by $12.9 million (after tax) to $65.4 million at December 31, 1999. In conjunction with the accounting for the 2000 acquisition of the Aetna Financial Services business, of which the Company is a part, the deferred gain, which was previously part of other liabilities, was written off (Refer to Note 1). The operating results of the domestic individual life insurance business are presented as Discontinued Operations. Premiums ceded and reinsurance recoveries made for domestic individual life insurance in 2001 totaled $334.9 million and $363.7 million, in 2000 totaled F-18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. DISCONTINUED OPERATIONS--INDIVIDUAL LIFE INSURANCE (continued) $419.1 million and $416.1 million, and in 1999 totaled $476.5 million and $513.4 million, respectively. 4. INVESTMENTS Debt securities available for sale as of December 31 were as follows:
Gross Gross Amortized Unrealized Unrealized Fair 2001 (Millions) Cost Gains Losses Value ------------------------------------------------------------------------------ U.S. government and government agencies and authorities $ 391.0 $ 11.0 $ 4.2 $ 397.8 States, municipalities and political subdivisions 173.7 7.7 -- 181.4 U.S. corporate securities: Public utilities 268.5 6.5 7.9 267.1 Other corporate securities 6,138.8 203.0 62.6 6,279.2 ------------------------------------------------------------------------------ Total U.S. corporate securities 6,407.3 209.5 70.5 6,546.3 ------------------------------------------------------------------------------ Foreign securities: Government 153.2 5.2 0.9 157.5 ------------------------------------------------------------------------------ Total foreign securities 153.2 5.2 0.9 157.5 ------------------------------------------------------------------------------ Mortgage-backed securities 4,513.3 90.1 15.9 4,587.5 Other asset-backed securities 2,077.6 67.1 8.1 2,136.6 ------------------------------------------------------------------------------ Total debt securities, including debt securities pledged to creditors 13,716.1 390.6 99.6 14,007.1 Less: Debt securities pledged to creditors 466.9 1.1 0.8 467.2 ------------------------------------------------------------------------------ Debt securities $13,249.2 $389.5 $98.8 $13,539.9 ------------------------------------------------------------------------------ ------------------------------------------------------------------------------
F-19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. INVESTMENTS (continued)
Gross Gross Amortized Unrealized Unrealized Fair 2000 (Millions) Cost Gains Losses Value ----------------------------------------------------------------------------- U.S. government and government agencies and authorities $ 920.8 $ 34.3 $ 2.1 $ 953.0 States, municipalities and political subdivisions 0.3 -- -- 0.3 U.S. corporate securities: Public utilities 282.2 13.8 6.2 289.8 Other corporate securities 4,643.5 86.1 128.3 4,601.3 ----------------------------------------------------------------------------- Total U.S. corporate securities 4,925.7 99.9 134.5 4,891.1 ----------------------------------------------------------------------------- Foreign securities: Government, including political subdivisions 384.7 23.9 4.3 404.3 Utilities 122.9 18.6 -- 141.5 Other 31.2 -- 9.3 21.9 ----------------------------------------------------------------------------- Total foreign securities 538.8 42.5 13.6 567.7 ----------------------------------------------------------------------------- Mortgage-backed securities 4,105.2 125.8 35.4 4,195.6 Other asset-backed securities 753.7 13.4 3.4 763.7 ----------------------------------------------------------------------------- Total debt securities, including debt securities pledged to creditors 11,244.5 315.9 189.0 11,371.4 Less: Debt securities pledged to creditors 124.5 5.3 3.1 126.7 ----------------------------------------------------------------------------- Debt securities $11,120.0 $310.6 $185.9 $11,244.7 ----------------------------------------------------------------------------- -----------------------------------------------------------------------------
At December 31, 2001 and 2000, net unrealized appreciation of $291.0 million and $126.9 million, respectively, on available-for-sale debt securities including debt securities pledged to creditors included $233.0 million and $92.9 million, respectively, related to experience-rated contracts, which were not reflected in shareholder's equity but in policyholders' funds left with the Company. F-20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. INVESTMENTS (continued) The amortized cost and fair value of total debt securities for the year-ended December 31, 2001 are shown below by contractual maturity. Actual maturities may differ from contractual maturities because securities may be restructured, called, or prepaid.
Amortized Fair (Millions) Cost Value -------------------------------------------------------------- Due to mature: One year or less $ 160.0 $ 162.1 After one year through five years 2,333.1 2,387.5 After five years through ten years 2,374.7 2,398.8 After ten years 2,257.4 2,334.6 Mortgage-backed securities 4,513.3 4,587.5 Other asset-backed securities 2,077.6 2,136.6 Less: Debt securities pledged to creditors 466.9 467.2 -------------------------------------------------------------- Debt securities $13,249.2 $13,539.9 -------------------------------------------------------------- --------------------------------------------------------------
At December 31, 2001 and 2000, debt securities with carrying values of $9.0 million and $8.6 million, respectively, were on deposit as required by regulatory authorities. The Company did not have any investments in a single issuer, other than obligations of the U.S. government, with a carrying value in excess of 10% of the Company's shareholder's equity at December 31, 2001. Included in the Company's total debt securities were residential collateralized mortgage obligations ("CMOs") supporting the following:
2001 2000 ------------------- ------------------- Amortized Fair Amortized Fair (Millions) Cost Value Cost Value ------------------------------------------------------------------------ Total residential CMOs (1) $1,830.5 $1,891.7 $1,606.6 $1,660.7 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Percentage of total: Supporting experience rated products 84.2% 80.6% Supporting remaining products 15.8% 19.4% ------------------------------------------------------------------------ 100.0% 100.0% ------------------------------------------------------------------------ ------------------------------------------------------------------------
(1) At December 31, 2001 and 2000, approximately 80% and 84%, respectively, of the Company's residential CMO holdings were backed by government agencies such as GNMA, FNMA, and FHLMC. There are various categories of CMOs which are subject to different degrees of risk from changes in interest rates and, for CMOs that are not agency-backed, defaults. The principal risks inherent in holding CMOs are prepayment and extension risks related to dramatic decreases and increases in interest rates resulting in the repayment of principal from the underlying mortgages either earlier or later than originally anticipated. At December 31, 2001 and 2000, approximately 3% and 2%, respectively, of the Company's CMO holdings were invested in types of CMOs F-21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 4. INVESTMENTS (continued) which are subject to more prepayment and extension risk than traditional CMOs (such as interest-only or principal-only strips). Investments in equity securities as of December 31 were as follows:
(Millions) 2001 2000 ------------------------------------------------------- Amortized Cost $52.2 $120.8 Gross unrealized gains 4.5 6.0 Gross unrealized losses 6.4 9.9 ------------------------------------------------------- Fair value $50.3 $116.9 ------------------------------------------------------- -------------------------------------------------------
Beginning in April 2001, the Company entered into dollar roll and reverse repurchase agreement transactions to increase its return on investments and improve liquidity. These transactions involve a sale of securities by the Company and an agreement to repurchase substantially the same securities as those sold, typically within one month. The dollar rolls and reverse repurchase agreements are accounted for as short-term collateralized financings and are reported within "Other Liabilities" on the Consolidated Balance Sheets. The repurchase obligation totaled $1.0 billion at December 31, 2001. Such borrowings averaged approximately $882.1 million from April through December 2001 and were collateralized by investment securities with fair values approximately equal to loan value. The primary risk associated with short-term collateralized borrowings is that the counterparty will be unable to perform under the terms of the contract. The Company's exposure is limited to the excess of the net replacement cost of the securities over the value of the short-term investments, an amount that was not material at December 31, 2001. The Company believes the counterparties to the dollar roll and reverse repurchase agreements are financially responsible and that the counterparty risk is immaterial. 5. FINANCIAL INSTRUMENTS ESTIMATED FAIR VALUE The carrying values and estimated fair values of certain of the Company's financial instruments at December 31, 2001 and 2000 were as follows:
2001 2000 -------------------- ------------------- Carrying Fair Carrying Fair (Millions) Value Value Value Value ------------------------------------------------------------------------- Assets: Mortgage loans $ 241.3 $ 247.7 $ 4.6 $ 4.5 Liabilities: Investment contract liabilities: With a fixed maturity 1,021.7 846.5 1,041.0 982.3 Without a fixed maturity 11,114.1 10,624.3 10,084.6 9,549.9 -------------------------------------------------------------------------
F-22 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. FINANCIAL INSTRUMENTS (continued) Fair value estimates are made at a specific point in time, based on available market information and judgments about various financial instruments, such as estimates of timing and amounts of future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instruments. In evaluating the Company's management of interest rate, price and liquidity risks, the fair values of all assets and liabilities should be taken into consideration, not only those presented above. The following valuation methods and assumptions were used by the Company in estimating the fair value of the above financial instruments: MORTGAGE LOANS: The fair values for commercial mortgages are estimated using a discounted cash flow approach. Commercial loans in good standing are discounted using interest rates determined by U.S. Treasury yields on each December 31 and spreads required on new loans with similar characteristics. The amortizing features of all loans are incorporated into the valuation. Where data on option features was available, option values were determined using a binomial valuation method and were incorporated into the mortgage valuation. 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. DERIVATIVE FINANCIAL INSTRUMENTS INTEREST RATE FLOORS Interest rate floors are used to manage the interest rate risk in the Company's bond portfolio. Interest rate floors are purchased contracts that provide the Company with an annuity in a declining interest rate environment. The Company had no open interest rate floors at December 31, 2001 or 2000. FOREIGN EXCHANGE SWAPS Foreign exchange swaps are used to reduce the risk of a change in the value, yield or cash flow with respect to invested assets. Foreign exchange swaps represent contracts that require the exchange of foreign currency cash flows for US dollar cash flows at regular interim periods, typically quarterly or semi-annually. The notional amount, carrying value and estimated fair value F-23 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. FINANCIAL INSTRUMENTS (continued) of the Company's open foreign exchange rate swaps as of December 31, 2001 were $25.0 million, $0.7 and $0.7 million, respectively. WARRANTS Included in common stocks are warrants which are instruments giving the Company the right, but not the obligation to buy a security at a given price during a specified period. The carrying values and estimated fair values of the Company's warrants to purchase equity securities at December 31, 2001 and 2000 were both $0.3 million. OPTIONS The Company earned $1.1 million of investment income for writing call options on underlying securities for the year-ended December 31, 2000. For the year-ended December 31, 2001 the Company earned no investment income for writing call options on underlying securities. At December 31, 2001 and 2000, there were no option contracts outstanding. EMBEDDED DERIVATIVES The Company also had investments in certain debt instruments that contain embedded derivatives, including those whose market value is at least partially determined by, among other things, levels of or changes in domestic and/or foreign interest rates (short- or long-term), exchange rates, prepayment rates, equity markets or credit ratings/spreads. The estimated fair value of the embedded derivatives within such securities as of December 31, 2001 was ($15.5) million. F-24 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 6. NET INVESTMENT INCOME Sources of net investment income were as follows:
Preacquisition ------------------------------ One month Eleven months Year-ended ended ended Year-ended December 31, December 31, November 30, December 31, (Millions) 2001 2000 2000 1999 ------------------------------------------------------------------------------------------------ Debt securities $887.2 $70.3 $768.9 $823.3 Nonredeemable preferred stock 1.5 1.8 9.5 17.1 Investment in affiliated mutual funds 7.2 0.5 2.1 2.4 Mortgage loans 5.9 0.1 0.5 1.1 Policy loans 8.9 0.7 7.9 7.7 Cash equivalents 18.2 4.4 50.3 39.0 Other 15.9 2.6 13.1 15.3 ------------------------------------------------------------------------------------------------ Gross investment income 944.8 80.4 852.3 905.9 Less: investment expenses (56.4) (1.8) (18.5) (19.6) ------------------------------------------------------------------------------------------------ Net investment income $888.4 $78.6 $833.8 $886.3 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------
Net investment income includes amounts allocable to experience-rated contractholders of $704.2 million for the year-ended December 31, 2001 and $55.9 million and $622.2 million for the one month and eleven month periods ended December 31, 2000 and November 30, 2000, respectively, and $659.6 million for the year-ended December 31, 1999. Interest credited to contractholders is included in current and future benefits. 7. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY The Company paid $10.1 million and $255.7 million in cash dividends to HOLDCO in 2000 and 1999, respectively. Of the $255.7 million paid in 1999, $206.0 million was accrued for in 1998. For the year-ended December 31, 2001, the Company did not pay any cash dividends to HOLDCO. The Company did not receive any capital contributions in 2001 and 1999. In 2000, the Company received capital contributions of $73.5 million in cash and $56.0 million in assets from HOLDCO. In conjunction with the sale of Aetna, Inc. to ING AIH, the Company was restricted from paying any dividends to the its parent in 2001 without prior approval by the Insurance Commissioner of the State of Connecticut. This restriction continues for a two year period from the date of the sale. The Insurance Department of the State of Connecticut (the "Department") recognizes as net income and capital and surplus those amounts determined in conformity with statutory F-25 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 7. DIVIDEND RESTRICTIONS AND SHAREHOLDER'S EQUITY (continued) accounting practices prescribed or permitted by the Department, which differ in certain respects from generally accepted accounting principles. Statutory net (loss) income was $(92.3) million, $100.6 million and $133.9 million for the years-ended December 31, 2001, 2000, and 1999, respectively. Statutory capital and surplus was $826.2 million and $931.1 million as of December 31, 2001 and 2000, respectively. As of December 31, 2001, the Company does not utilize any statutory accounting practices, which are not prescribed by state regulatory authorities that, individually or in the aggregate, materially affect statutory capital and surplus. For 2001, the Company was required to implement statutory accounting changes ("Codification") ratified by the National Association of Insurance Commissioners and state insurance departments. The cumulative effect of Codification to the Company's statutory surplus as of December 31, 2001 was a decrease of $12.5 million. 8. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS Realized capital gains or losses are the difference between the carrying value and sale proceeds of specific investments sold. Net realized capital (losses) gains on investments were as follows:
Preacquisition ------------------------------ One month Eleven months Year-ended ended ended Year-ended December 31, December 31, November 30, December 31, (Millions) 2001 2000 2000 1999 ------------------------------------------------------------------------------------------------ Debt securities $(20.6) $1.2 $(36.3) $(23.6) Equity securities (0.4) 0.6 (0.9) 2.1 ------------------------------------------------------------------------------------------------ Pretax realized capital (losses) gains $(21.0) $1.8 $(37.2) $(21.5) ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------ After-tax realized capital (losses) gains $(13.7) $1.3 $(24.3) $(14.0) ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------
Net realized capital gains (losses) of $117.0 million, $(16.8) million and $(36.7) million for 2001, 2000, and 1999, respectively, allocable to experience-rated contracts, were deducted from net realized capital gains and an offsetting amount was reflected in Policyholders' funds left with the Company. Net unamortized gains allocable to experienced-rated contractholders were $172.7 million and $45.1 million at December 31, 2001 and 2000, respectively. F-26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (continued) Proceeds from the sale of total debt securities and the related gross gains and losses were as follows:
Preacquisition ------------------------------ One month Eleven months Year-ended ended ended Year-ended December 31, December 31, November 30, December 31, (Millions) 2001 2000 2000 1999 ------------------------------------------------------------------------------------------------ Proceeds on sales $14,216.7 $233.0 $10,083.2 $5,890.1 Gross gains 57.0 1.2 2.5 10.5 Gross losses 77.6 -- 38.8 34.1 ------------------------------------------------------------------------------------------------
Changes in shareholder's equity related to changes in accumulated other comprehensive income (unrealized capital gains and losses on securities including securities pledged to creditors and excluding those related to experience-rated contractholders) were as follows:
(Millions) 2001 2000 1999 ----------------------------------------------------------- Debt securities $24.0 $ 92.1 $(199.2) Equity securities 2.0 (5.5) (3.4) Other 6.5 21.5 (27.6) ----------------------------------------------------------- Subtotal 32.5 108.1 (230.2) Increase (decrease) in deferred income taxes (Refer to Note 10) 11.3 37.9 (80.6) ----------------------------------------------------------- Net changes in accumulated other comprehensive income (loss) $21.2 $ 70.2 $(149.6) ----------------------------------------------------------- -----------------------------------------------------------
Net unrealized capital gains allocable to experience-rated contracts of $233.0 million and $92.9 million at December 31, 2001 and 2000, respectively, are reflected on the Consolidated Balance Sheets in Policyholders' funds left with the Company and are not included in shareholder's equity. Shareholder's equity included the following accumulated other comprehensive income (loss), which is net of amounts allocable to experience-rated contractholders, at December 31:
(Millions) 2001 2000 1999 --------------------------------------------------------- Net unrealized capital gains (losses): Debt securities $58.0 $34.0 $(58.1) Equity securities (1.9) (3.9) 1.6 Other 15.6 9.1 (12.4) --------------------------------------------------------- 71.7 39.2 (68.9) Deferred income taxes (Refer to Note 10) 25.1 13.8 (24.1) --------------------------------------------------------- Net accumulated other comprehensive income (loss) $46.6 $25.4 $(44.8) --------------------------------------------------------- ---------------------------------------------------------
F-27 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 8. CAPITAL GAINS AND LOSSES ON INVESTMENT OPERATIONS (continued) Changes in accumulated other comprehensive income related to changes in unrealized gains (losses) on securities, including securities pledged to creditors (excluding those related to experience-rated contractholders) were as follows:
(Millions) 2001 2000 1999 ----------------------------------------------------------- Unrealized holding gains (losses) arising during the year (1) $ 8.3 $70.0 $(146.3) Less: reclassification adjustment for (losses) gains and other items included in net income (2) (12.9) (0.1) 3.3 ----------------------------------------------------------- Net unrealized gains (losses) on securities $ 21.2 $70.1 $(149.6) ----------------------------------------------------------- -----------------------------------------------------------
(1) Pretax unrealized holding gains (losses) arising during the year were $12.7 million, $108.0 million and $(225.2) million for 2001, 2000, and 1999, respectively. (2) Pretax reclassification adjustments for (losses) gains and other items included in net income were $(19.8) million, $(0.1) million and $5.0 million for 2001, 2000, and 1999, respectively. 9. SEVERANCE AND FACILITIES CHARGES In December 2001, ING announced its intentions to further integrate and streamline the U.S.-based operations of ING Americas, of which the Company is a part, in order to build a more customer-focused organization. In connection with these actions, the Company recorded a charge of $29.2 million pretax. The severance portion of this charge ($28.4 million pretax) is based on a plan to eliminate 580 positions (primarily operations, information technology and other administrative/staff support personnel). Severance actions are expected to be substantially complete by March 31, 2003. The facilities portion ($.8 million pretax) of the charge represents the amount to be incurred by the Company to terminate a contractual obligation. In December 2000, the Company, in accounting for its acquisition by ING, established a severance liability related to actions taken or expected to be taken with respect to the integration of the Company's and ING's businesses. Subsequent to the date of the acquisition, the Company completed a full review of severance actions related to individuals who were employed before or at the acquisition date and determined that certain refinements in the allocation of the purchase price to the severance liability were necessary. Activity for the year-ended December 31, 2001 within this severance liability and positions eliminated related to such actions were as follows:
(Millions) Severance Liability Positions ------------------------------------------------------------------------ Balance at December 31, 2000 $10.7 175 Actions taken (8.4) (101) Allocation of purchase price: Additions 5.2 58 Attrition (3.3) (101) Refinements 1.0 -- ------------------------------------------------------------------------ Balance at December 31, 2001 $ 5.2 31 ------------------------------------------------------------------------ ------------------------------------------------------------------------
F-28 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 9. SEVERANCE AND FACILITIES CHARGES (continued) Severance actions related to the liability established in December 2000 are expected to be substantially complete by March 31, 2002. 10. INCOME TAXES The Company files a consolidated federal income tax return with IICA. The Company has a tax allocation agreement with IICA whereby the Company charges its subsidiary for taxes it would have incurred were it not a member of the consolidated group and credits the member for losses at the statutory tax rate. Income taxes from continuing operations consist of the following:
Preacquisition ------------------------------ One month Eleven months Year-ended ended ended Year-ended December 31, December 31, November 30, December 31, (Millions) 2001 2000 2000 1999 ------------------------------------------------------------------------------------------------ Current taxes (benefits): Federal $ 3.2 $ 9.4 $ 5.3 $ 64.3 State 2.2 0.2 2.6 2.5 Net realized capital gains (losses) 16.1 0.3 (11.5) (20.1) ------------------------------------------------------------------------------------------------ Total current taxes (benefits) 21.5 9.9 (3.6) 46.7 ------------------------------------------------------------------------------------------------ Deferred taxes (benefits): Federal 89.3 (4.3) 83.2 31.3 Net realized capital (losses) gains (23.4) 0.3 (1.5) 12.6 ------------------------------------------------------------------------------------------------ Total deferred taxes (benefits) 65.9 (4.0) 81.7 43.9 ------------------------------------------------------------------------------------------------ Total $ 87.4 $ 5.9 $ 78.1 $ 90.6 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------
F-29 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. INCOME TAXES (continued) Income taxes were different from the amount computed by applying the federal income tax rate to income from continuing operations before income taxes for the following reasons:
Preacquisition ------------------------------ One month Eleven months Year-ended ended ended Year-ended December 31, December 31, November 30, December 31, (Millions) 2001 2000 2000 1999 ------------------------------------------------------------------------------------------------ Income from continuing operations before income taxes $187.3 $18.5 $249.6 $272.5 Tax rate 35% 35% 35% 35% ------------------------------------------------------------------------------------------------ Application of the tax rate 65.6 6.4 87.4 95.4 Tax effect of: State income tax, net of federal benefit 1.4 0.1 1.7 1.6 Excludable dividends (1.8) (0.9) (12.6) (6.1) Goodwill amortization 21.6 -- -- -- Other, net 0.6 0.3 1.6 (0.3) ------------------------------------------------------------------------------------------------ Income taxes $ 87.4 $ 5.9 $ 78.1 $ 90.6 ------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------
F-30 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 10. INCOME TAXES (continued) The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 are presented below:
(Millions) 2001 2000 ---------------------------------------------------------- Deferred tax assets: Deferred policy acquisition costs $ 11.7 $ 44.8 Insurance reserves 286.9 306.3 Unrealized gains allocable to experience rated contracts 81.5 32.5 Investment losses 36.7 9.0 Postretirement benefits other than pensions 6.1 5.8 Deferred compensation 72.2 65.6 Other 29.1 21.1 ---------------------------------------------------------- Total gross assets 524.2 485.1 ---------------------------------------------------------- Deferred tax liabilities: Value of business acquired 558.5 623.3 Market discount 4.6 4.9 Net unrealized capital gains 106.6 46.3 Depreciation 5.1 4.4 Sale of individual life insurance business -- 15.1 Excludable dividends -- 5.0 Other 3.1 34.1 ---------------------------------------------------------- Total gross liabilities 677.9 733.1 ---------------------------------------------------------- Net deferred tax liability $(153.7) $(248.0) ---------------------------------------------------------- ----------------------------------------------------------
Net unrealized capital gains and losses are presented in shareholder's equity net of deferred taxes. As of December 31, 2001 and 2000, no valuation allowance was required for unrealized capital gains and losses. The "Policyholders' Surplus Account," which arose under prior tax law, is generally that portion of a life insurance company's statutory income that has not been subject to taxation. As of December 31, 1983, no further additions could be made to the Policyholders' Surplus Account for tax return purposes under the Deficit Reduction Act of 1984. The balance in such account was approximately $17.2 million at December 31, 2001. This amount would be taxed only under certain conditions. No income taxes have been provided on this amount since management believes under current tax law the conditions under which such taxes would become payable are remote. The Internal Revenue Service (the "Service") has completed examinations of the federal income tax returns of the Company through 1997. Discussions are being held with the Service with respect to proposed adjustments. Management believes there are adequate defenses against, or sufficient reserves to provide for, any such adjustments. The Service has commenced its examinations for the years 1998 through 2000. F-31 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 11. BENEFIT PLANS Prior to December 31, 2001, ILIAC, in conjunction with ING, had a qualified defined benefit pension plan covering substantially all employees ("Transition Pension Plan"). The Transition Pension Plan provided pension benefits based on a cash balance formula, which credited employees annually with an amount equal to a percentage of eligible pay based on age and years of service as well as an interest credit based on individual account balances. Contributions were determined using the Projected Unit Credit Method and were limited to the amounts that are tax-deductible. The accumulated benefit obligation and plan assets were recorded by ILIAC. As of the measurement date (i.e., January 1, 2001), fair value of plan assets exceeded projected benefit obligations. As of December 31, 2001, the Transition Pension Plan merged into the ING Americas Retirement Plan ("ING Pension Plan"), which is sponsored by ING North America Insurance Corporation ("ING North America"), an affiliate of ILIAC. The ING Pension Plan covers substantially all U.S. employees. Accordingly, the Company transferred $17.4 million of net assets ($11.3 million after tax) related to the movement of the Transition Pension Plan to ING North America. The Company reported this transfer of net assets as a $11.3 million reduction in paid in capital. The new plan's benefits are based on years of service and the employee's average annual compensation during the last five years of employment. Contributions are determined using the Projected Unit Credit Method and are limited to the amounts that are tax-deductible. Prior to December 31, 2001, ILIAC, in conjunction with ING, had a non-qualified defined benefit pension plan covering certain eligible employees. The plan provided pension benefits based on a cash balance formula, which credited employees annually with an amount equal to a percentage of eligible pay based on age and years of service as well as an interest credit based on individual account balances. As of December 31, 2001, ILIAC, in conjunction with ING, established a non-qualified defined benefit pension plan providing benefits to certain eligible employees based on years of service and the employee's average annual compensation during the last five years of employment. Contributions are determined using the Projected Unit Credit Method. The unfunded accumulated benefit obligation is recorded by ILIAC. In addition to providing pension benefits, ILIAC, in conjunction with ING, provides certain health care and life insurance benefits for retired employees. Retirees are generally required to contribute to the plans based on their years of service with the Company. The costs to the Company associated with the former Aetna postretirement plans for 2001, 2000, and 1999 were $0.6 million, $1.2 million and $2.1 million, respectively. ILIAC, in conjunction with ING, also has a non-qualified pension plan covering certain agents. The plan provides pension benefits based on annual commission earnings. As of the measurement date (i.e. January 1, 2001), the unfunded projected benefit obligation is recorded by the Company. The costs to the Company associated with the agents non-qualified pension plan for 2001, 2000, and 1999 were $6.6 million, $3.5 million and $3.3 million, respectively. The Company, in conjunction with ING, also provides certain postretirement health care and life insurance benefits for certain agents. The costs to the Company associated with the agents' F-32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 11. BENEFIT PLANS (continued) postretirement plans for 2001, 2000, and 1999 were $0.5 million, $1.4 million and $2.1 million, respectively. ILIAC, in conjunction with ING, also has a Savings Plan. Substantially all employees are eligible to participate in the savings plan under which designated contributions, which may be invested in a variety of financial instruments, are matched up to 5% of compensation by ING. Pretax charges to operations for the former Aetna incentive savings plan were $11.0 million, $9.0 million and $7.7 million in 2001, 2000, and 1999, respectively. ILIAC, in conjunction with former Aetna, had a stock incentive plan that provided for stock options, deferred contingent common stock or equivalent cash awards or restricted stock to employees. Certain executive, middle management and non-management employees were granted options to purchase common stock of former Aetna at or above the market price on the date of grant. Options generally became 100% vested three years after the grant was made, with one-third of the options vesting each year. The former Aetna did not recognize compensation expense for stock options granted at or above the market price on the date of grant under its stock incentive plans. In addition, executives were, from time to time, granted incentive units which were rights to receive common stock or an equivalent value in cash. The sale of the Company to ING AIH by former Aetna caused all outstanding stock options to vest immediately. The costs to the Company associated with the former Aetna stock plans for 2001, 2000, and 1999, were $1.8 million, $2.7 million and $0.4 million, respectively. Effective January 1, 1998, Aeltus established an additional deferred incentive compensation plan, designed to attract, retain and incent key members of Aeltus. The plan had a five year vesting period. Payments under the plan were conditioned upon continued employment and were based upon an imputed share price of Aeltus at the end of the vesting period. The plan value was determined annually and the cost of the plan was expensed ratably over the vesting period. A change in control at Aeltus, as defined in the plan, would cause immediate full vesting of all outstanding shares. The purchase of Aetna Inc. by ING in 2000 met this definition. As a result, all outstanding shares became fully vested based on Aeltus's imputed value at the date of the sale and were subsequently paid out in early 2001. The appropriate annual share of the cost of the plan, including the additional cost in 2000 associated with this full vesting, has been reflected in salaries and related benefits in the Consolidated Statements of Income for each of the years-ended December 31, 1999 and 2000, respectively. In 2001, a new deferred compensation plan was developed with attributes similar to those in the previous plans. The costs reflected in the Consolidated Financial Statements associated with Aeltus' new deferred incentive compensation plan for 2001 was $4.1 million. The costs for its former deferred incentive compensation plan for 2000 and 1999 were, $42.2 million and $4.7 million, respectively. F-33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. RELATED PARTY TRANSACTIONS INVESTMENT ADVISORY AND OTHER FEES ILIAC and Aeltus serve as investment advisors and administrators to the Company's mutual funds and variable funds (collectively, the Funds). Company mutual funds pay Aeltus or ILIAC, as investment advisor or administrator, a daily fee which, on an annual basis, ranged, depending on the fund, from 0.33% to 1.15% of their average daily net assets. All of the funds managed by ILIAC and certain of the funds managed by Aeltus are subadvised by investment advisors, in which case, Aeltus or ILIAC pays a subadvisory fee to the investment advisors. The Company is also compensated by the Separate Accounts (variable funds) for bearing mortality and expense risks pertaining to variable life and annuity contracts. Under the insurance and annuity contracts, the Separate Accounts pay the Company a daily fee, which, on an annual basis is, depending on the product, up to 3.40% of their average daily net assets. The amount of compensation and fees received from the Company mutual funds and Separate Accounts, included in charges assessed against policyholders and other income, amounted to $421.7 million, $506.3 million and $424.2 million in 2001, 2000, and 1999, respectively. RECIPROCAL LOAN AGREEMENT ILIAC maintains a reciprocal loan agreement with ING AIH, a Delaware corporation and affiliate, to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Under this agreement, which became effective in June 2001 and expires in April, 2011, ILIAC and ING AIH can borrow up to 3% of ILIAC's statutory admitted assets as of the preceding December 31 from one another. Interest on any ILIAC borrowings is charged at the rate of ING AIH's cost of funds for the interest period plus 0.15%. Interest on any ING AIH borrowings is charged at a rate based on the prevailing interest rate of U.S. commercial paper available for purchase with a similar duration. Under this agreement, ILIAC incurred interest expense of $0.1 million and earned interest income of $3.3 million for the year-ended December 31, 2001. At December 31, 2001, ILIAC had $191.1 million of receivables and no outstanding borrowings from ING AIH under this agreement. CAPITAL TRANSACTIONS In 2000, the Company received capital contributions in the form of cash and assets of $73.5 million, and $56.0 million, respectively from HOLDCO. The Company received no capital contributions in 1999 or 2001. Refer to Note 7 for dividends paid to HOLDCO. Refer to Note 11 for a discussion related to a return of capital to ING AIH. OTHER Premiums due and other receivables include $1.0 million and $4.7 million due from affiliates in 2001 and 2000, respectively. Other liabilities include $0.6 million and $4.1 million due to affiliates for 2001 and 2000, respectively. F-34 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 12. RELATED PARTY TRANSACTIONS (continued) Former Aetna transferred to the Company $0.4 million and $0.8 million for the years 2000 and 1999, respectively, based on former Aetna's decision not to settle state tax liabilities as permitted under the tax sharing arrangement, which is reported in other changes in retained earnings. There was no transfer of funds from former Aetna to the Company to settle state tax liabilities for the year 2001. Certain administrative and support functions of the Company are provided by former Aetna and its affiliates for a specified transition period. At the end of the transition period, these functions will be provided by ING affiliates. The financial statements reflect allocated charges for these services based upon measures appropriate for the type and nature of the service provided. 13. REINSURANCE On October 1, 1998, the Company sold its domestic individual life insurance business to Lincoln for $1 billion in cash. The transaction is generally in the form of an indemnity reinsurance arrangement, under which Lincoln contractually assumed from the Company certain policyholder liabilities and obligations, although the Company remains directly obligated to policyholders (Refer to Note 3). Effective January 1, 1998, 90% of the mortality risk on substantially all individual universal life product business written from June 1, 1991 through October 31, 1997 was reinsured externally. Beginning November 1, 1997, 90% of new business written on these products was reinsured externally. Effective October 1, 1998 this agreement was assigned from the third party reinsurer to Lincoln. Effective December 31, 1988, the Company entered into a modified coinsurance reinsurance agreement ("MODCO") with Aetna Life Insurance Company ("Aetna Life"), (formerly an affiliate of the Company), in which substantially all of the nonparticipating individual life and annuity business written by Aetna Life prior to 1981 was assumed by the Company. Effective January 1, 1997, this agreement was amended to transition (based on underlying investment rollover in Aetna Life) from a modified coinsurance arrangement to a coinsurance agreement. As a result of this change, reserves were ceded to the Company from Aetna Life as investment rollover occurred. Effective October 1, 1998, this agreement was fully transitioned to a coinsurance arrangement and this business along with the Company's direct individual life insurance business, with the exception of certain supplemental contracts with reserves of $70.5 million and $74.9 million as of December 31, 2001 and 2000, respectively, was sold to Lincoln (refer to Note 3). On December 16, 1988, the Company assumed $25.0 million of premium revenue from Aetna Life, (formerly an affiliate of the Company) for the purchase and administration of a life contingent single premium variable payout annuity contract. In addition, the Company is also responsible for administering fixed annuity payments that are made to annuitants receiving variable payments. Reserves of $24.1 million and $29.2 million were maintained for this contract as of December 31, 2001 and 2000, respectively. F-35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 13. REINSURANCE (continued) The following table includes premium amounts ceded/assumed.
Ceded to Assumed Direct Other from Other Net (Millions) Amount Companies Companies Amount ----------------------------------------------------------------------- 2001 ------------------------------ Premiums: Discontinued Operations $301.2 $315.0 $13.8 -- Accident and Health Insurance 4.5 4.5 -- -- Annuities 112.3 (1.3) 0.6 $114.2 ----------------------------------------------------------------------- Total earned premiums $418.0 $318.2 $14.4 $114.2 ----------------------------------------------------------------------- ----------------------------------------------------------------------- 2000 ------------------------------ Premiums: Discontinued Operations $366.6 $382.4 $15.8 -- Accident and Health Insurance 15.2 15.2 -- -- Annuities 160.4 7.1 0.9 $154.2 ----------------------------------------------------------------------- Total earned premiums $542.2 $404.7 $16.7 $154.2 ----------------------------------------------------------------------- ----------------------------------------------------------------------- 1999 ------------------------------ Premiums: Discontinued Operations $460.1 $478.0 $17.9 -- Accident and Health Insurance 33.4 33.4 -- -- Annuities 111.5 4.9 0.9 $107.5 ----------------------------------------------------------------------- Total earned premiums $605.0 $516.3 $18.8 $107.5 ----------------------------------------------------------------------- -----------------------------------------------------------------------
The Company had $35.9 billion, $38.9 billion and $43.4 billion of life insurance in force at December 31, 2001, 2000 and 1999, respectively. Substantially all life insurance in force at December 31, 2001, 2000 and 1999 was ceded to Lincoln. F-36 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. SEGMENT INFORMATION Summarized financial information for the Company's principal operations was as follows:
Investment Year-ended December 31, Worksite Individual Management 2001 (Millions) Products (1) Products (1) Services (1) Other (1) Total ----------------------------------------------------------------------------------------- Revenues from external customers $ 432.1 $ 151.1 $119.6 $ (35.2) $ 667.6 Net investment income 788.9 99.0 1.7 (1.2) 888.4 ----------------------------------------------------------------------------------------- Total revenue excluding net realized capital gains (losses) $ 1,221.0 $ 250.1 $121.3 $ (36.4) $ 1,556.0 ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- Amortization of deferred policy acquisition costs and value of business acquired $ 59.7 $ 41.4 -- $ 10.9 $ 112.0 ----------------------------------------------------------------------------------------- Income taxes (benefits) $ 70.1 $ 16.6 $ 15.7 $ (15.0) $ 87.4 ----------------------------------------------------------------------------------------- Operating earnings (2) $ 150.4 $ 24.3 $ 27.4 $ (88.5) $ 113.6 Net realized capital gains (losses), net of tax (20.2) 6.4 0.1 -- (13.7) ----------------------------------------------------------------------------------------- Income (loss) from continuing operations 130.2 30.7 27.5 (88.5) 99.9 ----------------------------------------------------------------------------------------- Net income (loss) $ 130.2 $ 30.7 $ 27.5 $ (88.5) $ 99.9 ----------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------- Segment assets (3) $41,695.7 $8,432.0 $ 82.1 $2,983.3 $53,193.1 ----------------------------------------------------------------------------------------- Expenditures for long-lived assets (4) -- -- -- $ 6.3 $ 6.3 ----------------------------------------------------------------------------------------- Balance of long-lived assets -- -- -- $ 33.1 $ 33.1 -----------------------------------------------------------------------------------------
(1) Worksite Products include deferred annuity contracts that fund defined contribution and deferred compensation plans; immediate annuity contracts; mutual funds; distribution services for annuities and mutual funds; programs offered to defined contribution plans and deferred compensation plans that package administrative and recordkeeping services along with a menu of investment options; wrapper agreements containing certain benefit response guarantees that are entered into with retirement plans, whose assets are not invested with the Company; investment advisory services and pension plan administrative services. Individual Products include deferred and immediate annuity contracts, both qualified and nonqualified, that are sold to individuals and provide variable or fixed investment options or a combination of both. Investment Management Services include: investment advisory services to affiliated and unaffiliated institutional and retail clients; underwriting; distribution for Company mutual funds and a former affiliate's separate accounts; and trustee, administrative and other services to retirement plans (Refer to Notes 1 and 2). Other includes consolidating adjustments, amortization of goodwill, ING corporate expense, restructuring charges, and taxes not allocated back to the segments. (2) Operating earnings is comprised of net income (loss) excluding net realized capital gains and losses. While operating earnings is the measure of profit or loss used by the Company's management when assessing performance or making operating decisions, it does not replace operating income or net income as a measure of profitability. (3) Segment assets exclude goodwill. (4) Expenditures of long-lived assets represent additions to property and equipment not allocable to business. F-37 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. SEGMENT INFORMATION (continued)
Investment Year-ended December 31, Worksite Individual Management Discontinued 2000 (Millions) Products (1) Products (1) Services (1) Operations (1) Other (1) Total ------------------------------------------------------------------------------------------------------------- Revenues from external customers $ 576.7 $ 115.4 $138.2 -- $(53.0) $ 777.3 Net investment income 793.6 112.2 2.8 -- 3.8 912.4 ------------------------------------------------------------------------------------------------------------- Total revenue excluding net realized capital gains (losses) $ 1,370.3 $ 227.6 $141.0 -- $(49.2) $ 1,689.7 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Amortization of deferred policy acquisition costs and value of business acquired $ 68.3 $ 47.3 $ -- -- $ 11.3 $ 126.9 ------------------------------------------------------------------------------------------------------------- Income taxes (benefits) $ 74.6 $ 16.6 $ 9.0 -- $(16.2) $ 84.0 ------------------------------------------------------------------------------------------------------------- Operating earnings (2) $ 159.4 $ 33.0 $ 9.7 -- $ 5.0 $ 207.1 Net realized capital (losses) gains, net of tax (20.8) (2.3) 0.1 -- -- (23.0) ------------------------------------------------------------------------------------------------------------- Income from continuing operations 138.6 30.7 9.8 -- 5.0 184.1 Discontinued operations, net of tax: Amortization of deferred gain on sale (3) -- -- -- $ 5.7 -- 5.7 ------------------------------------------------------------------------------------------------------------- Net income $ 138.6 $ 30.7 $ 9.8 $ 5.7 $ 5.0 $ 189.8 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Segment assets (4) $42,955.7 $8,864.6 $ 44.1 $2,991.2 -- $54,855.6 ------------------------------------------------------------------------------------------------------------- Expenditures for long- lived assets (5) -- -- -- -- $ 3.4 $ 3.4 ------------------------------------------------------------------------------------------------------------- Balance of long-lived assets -- -- -- -- $ 54.3 $ 54.3 -------------------------------------------------------------------------------------------------------------
(1) Worksite Products include deferred annuity contracts that fund defined contribution and deferred compensation plans; immediate annuity contracts; mutual funds; distribution services for annuities and mutual funds; programs offered to defined contribution plans and deferred compensation plans that package administrative and recordkeeping services along with a menu of investment options; wrapper agreements containing certain benefit response guarantees that are entered into with retirement plans, whose assets are not invested with the Company; investment advisory services and pension plan administrative services. Individual Products include deferred and immediate annuity contracts, both qualified and nonqualified, that are sold to individuals and provide variable or fixed investment options or a combination of both. Investment Management Services include the following services: investment advisory to affiliated and unaffiliated institutional and retail clients, underwriting, distribution for Company's mutual funds and affiliate's separate accounts; and trustee, administrative and other services to retirement plans (Refer to Notes 1 and 2). Discontinued operations include life insurance products (Refer to Note 3). Other includes consolidating adjustments, Year 2000 costs and taxes not allocated back to the segment. (2) Operating earnings is comprised of net income (loss) excluding net realized capital gains and losses. While operating earnings is the measure of profit or loss used by the Company's management when assessing performance or making operating decisions, it does not replace operating income or net income as a measure of profitability. (3) Taxes on the amortization of deferred gain on sale were $3.3 million. (4) Segment assets exclude goodwill. (5) Expenditures of long-lived assets represent additions to property and equipment not allocable to business segments. F-38 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 14. SEGMENT INFORMATION (continued)
Investment Year-ended December 31, Worksite Individual Management Discontinued 1999 (Millions) Products (1) Products (1) Services (1) Operations (1) Other (1) Total ------------------------------------------------------------------------------------------------------------- Revenues from external customers $ 469.8 $ 81.3 $118.3 -- $(43.9) $ 625.5 Net investment income 784.6 96.9 1.5 -- 3.3 886.3 ------------------------------------------------------------------------------------------------------------- Total revenue excluding net realized capital gains $ 1,254.5 $ 178.1 $119.8 -- $(40.6) $ 1,511.8 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Amortization of deferred policy acquisition costs and value of business acquired $ 63.0 $ 30.4 -- -- $ 11.5 $ 104.9 ------------------------------------------------------------------------------------------------------------- Income taxes (benefits) $ 82.0 $ 11.2 $ 16.5 -- $(19.1) $ 90.6 ------------------------------------------------------------------------------------------------------------- Operating earnings (2) $ 164.9 $ 22.2 28.1 -- $ (1.8) $ 213.4 Other Item (3) -- -- -- -- (17.5) (17.5) Net realized capital gains, net of tax (12.7) (1.3) -- -- -- (14.0) ------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations 152.2 20.9 28.1 -- (25.0) 181.9 Discontinued operations, net of tax: Amortization of deferred gain on sale (4) -- -- -- $ 5.7 -- 5.7 ------------------------------------------------------------------------------------------------------------- Net income (loss) $ 152.2 $ 20.9 $ 28.1 $ 5.7 $(25.0) $ 187.6 ------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------- Segment assets $44,484.9 $8,877.2 $ 36.6 $2,989.0 -- $56,387.7 ------------------------------------------------------------------------------------------------------------- Expenditures for long- lived assets (5) -- -- -- -- $ 3.9 $ 3.9 ------------------------------------------------------------------------------------------------------------- Balance of long-lived assets -- -- -- -- $ 12.2 $ 12.2 -------------------------------------------------------------------------------------------------------------
(1) Worksite Products include deferred annuity contracts that fund defined contribution and deferred compensation plans; immediate annuity contracts; mutual funds; distribution services for annuities and mutual funds; programs offered to defined contribution plans and deferred compensation plans that package administrative and recordkeeping services along with a menu of investment options; wrapper agreements containing certain benefit response guarantees that are entered into with retirement plans, whose assets are not invested with the Company; investment advisory services and pension plan administrative services. Individual Products include deferred and immediate annuity contracts, both qualified and nonqualified, that are sold to individuals and provide variable or fixed investment options or a combination of both. Investment Management Services include the following services: investment advisory to affiliated and unaffiliated institutional and retail clients, underwriting, distribution for Company's mutual funds and affiliate's separate accounts; and trustee, administrative and other services to retirement plans (Refer to Notes 1 and 2). Discontinued operations include life insurance products (Refer to Note 3). Other includes consolidating adjustments, Year 2000 costs, and taxes not allocated back to the segment. (2) Operating earnings is comprised of net income (loss) excluding net realized capital gains and losses and Year 2000 costs. While operating earnings is the measure of profit or loss used by the Company's management when assessing performance or making operating decisions, it does not replace operating income or net income as a measure of profitability. (3) Represents after-tax Year 2000 costs. (4) Taxes on the amortization of deferred gain on sale were $3.2 million. (5) Expenditures of long-lived assets represent additions to property and equipment not allocable to business segments. F-39 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 15. COMMITMENTS AND CONTINGENT LIABILITIES LEASES In conjunction with the acquisition by ING, the Company entered into or assumed from a former affiliate operating leases for office space. For the year-ended December 31, 2001, rent expense for these leases was $17.6 million. The future net minimum payments under noncancelable leases for 2002 through 2006 are estimated to be $24.8 million, $20.6 million, $17.6 million, $16.2 million and $14.4 million, respectively, and $15.6 million, thereafter. COMMITMENTS Through the normal course of investment operations, the Company commits to either purchase or sell securities or money market instruments at a specified future date and at a specified price or yield. The inability of counterparties to honor these commitments may result in either higher or lower replacement cost. Also, there is likely to be a change in the value of the securities underlying the commitments. At December 31, 2001, the Company had off-balance sheet commitments to purchase investments of $4.8 million with an estimated fair value of $4.8 million. At December 31, 2000 and 1999, there were no off-balance sheet commitments. LITIGATION In recent years, life insurance companies have been named as defendants in class action lawsuits relating to life insurance sales practices. The Company is currently a defendant in one such lawsuit. A purported class action complaint was filed in the United States District Court for the Middle District of Florida on June 30, 2000, by Helen Reese, Richard Reese, Villere Bergeron and Allan Eckert against ALIAC (the "Reese Complaint"). The Reese Complaint seeks compensatory and punitive damages and injunctive relief from ALIAC. The Reese Complaint claims that ALIAC engaged in unlawful sales practices in marketing life insurance policies. ALIAC has moved to dismiss the Reese Complaint for failure to state a claim upon which relief can be granted. Certain discovery is underway. The Company intends to defend the action vigorously. The Company is also involved in other lawsuits arising, for the most part, in the ordinary course of its business operations. While the outcome of these other lawsuits cannot be determined at this time, after consideration of the defenses available to the Company, applicable insurance coverage and any related reserves established, these other lawsuits are not expected to result in liability for amounts material to the financial condition of the Company, although it may adversely affect results of operations in future periods. 16. SUBSEQUENT EVENT Effective February 28, 2002, the Company distributed 100% of the stock of IA Holdco to HOLDCO. The transaction was accounted for as a dividend. Refer to Note 2 for further information about IA Holdco. F-40 QUARTERLY DATA (UNAUDITED)
2001 (Millions) First Second Third Fourth -------------------------------------------------------------- Total revenue $395.5 $411.9 $387.2 $340.4 -------------------------------------------------------------- Income (loss) from continuing operations before income taxes $ 64.3 $95.0 $ 68.9 $(40.9) Income taxes (benefit) 28.2 39.1 27.1 (7.0) -------------------------------------------------------------- Income (loss) from continuing operations $ 36.1 $55.9 $ 41.8 $(33.9) -------------------------------------------------------------- Net income (loss) $ 36.1 $55.9 $ 41.8 $(33.9) -------------------------------------------------------------- -------------------------------------------------------------- 2000 (Millions) First Second Third Fourth (1) ------------------------------------------------------------------ Total revenue $408.3 $409.3 $426.4 $410.3 ------------------------------------------------------------------ Income from continuing operations before income taxes $ 76.5 $85.0 $ 77.4 $ 29.2 Income taxes 25.1 28.1 22.7 8.1 ------------------------------------------------------------------ Income from continuing operations $ 51.4 $56.9 $ 54.7 $ 21.1 Income from discontinued operations 1.6 1.6 1.5 1.0 ------------------------------------------------------------------ Net income $ 53.0 $58.5 $ 56.2 $ 22.1 ------------------------------------------------------------------ ------------------------------------------------------------------
(1) Fourth quarter data reflects an aggregation of the pre-acquisition period of the two months ended November 30, 2000 and the post acquisition period of one month ended December 31, 2000. F-41 FORM NO. SAI.81216-02 ILIAC ED. MAY 2002