As we move forward in our mission to provide the tools to help you achieve your
dreams by becoming your retirement partner, it is an opportune time to reflect
upon our achievements in 1996.
Our Aetna funds had another outstanding year. Aeltus Investment Management,
Inc., our affiliate organization which manages these funds, was named one of the
World's Best Money Managers by Nelson's Publications, an organization that
compares investment performance data on over 1,700 investment managers from
around the world.
To broaden our customer service capabilities, we established a second Customer
Service site in Phoenix, Arizona. This endeavor demonstrates our strong
commitment to providing you with professional and dependable customer service at
all times.
The Aetna Retirement Services organization, through its subsidiary Aetna
Financial Services, Inc. is in the process of developing financial planning
capabilities to provide customers with the tools to achieve their retirement
dreams. Once this capaiblity is developed, Aetna Financial Services'
professional financial planners, in partnership with other Aetna Retirement
Services representatives, will be able to help customers define their financial
objectives, evaluate their options, and advise them on the steps they can take
to help turn their retirement dreams into tangible goals.
Once again, you will only be receiving the financial statements of the mutual
funds you were invested in as of December 31, 1996. If you have selected any of
the funds offered by the Calvert, Franklin, or Lexington fund families, you will
receive each of these reports in a separate mailing. This is the most cost
effective way for us to get this information to you without burdening you with
reports that may not be of relevance or interest to you.
Please contact us if you have any questions or comments. You are the reason
we're in business.
Thank you for your business and continued trust.
/s/ Dan Kearney
Daniel P. Kearney
President, Aetna Retirement Services, Inc.
<PAGE>
Aetna Variable Fund
Growth of $10,000
Average Annual Total Return for
the Year Ended December 31, 1996*
1 Year 5 Year 10 Year
24.46% 13.16% 14.22%
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Jan-87 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Fund 10000 10538 12081 15593 16109 20361 21726 23190 22956 30359 37785
S&P 500 Index 10000 10525 12273 16163 15660 20432 21988 24205 24524 33741 41484
</TABLE>
* "Total Return" is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not include any separate account charges imposed by ALIAC.
Aetna Variable Fund provided a return of 24.46%, net of fund expenses, for the
year ended December 31, 1996. In favorable comparison, the past year was another
amazing one for the U.S. stock market during which the S&P 500, an unmanaged
index, returned a whopping 22.95%. The Fund's outstanding performance level
placed it in the top 6% (21 out of 356) of all variable funds in the Growth and
Income universe tracked by Morningstar for 1996. Among the same universe of
funds, the Fund's ranking for 5 years is 92% (157 out of 170) and for 10 years
is 19% (17 out of 91). How does a fund like Aetna Variable Fund beat the S&P 500
during such a strong year? Looking first at what was not responsible, then
examining the ultimate strength, will help in understanding and celebrating the
Fund's success
The Fund's outperformance was not achieved by taking more risk than the S&P 500.
Using any of a number of risk models, the portfolio "beta," or relative
volatility (how much the fund's return can change in the short term), of the
Fund compared to the S&P 500 index would have measured between 0.85 and 0.95
during 1996, with the index measuring a slightly higher 1.0. Modest use of cash
equivalents, broad diversification into a number of sub-categories of equity
asset classes (also known as diversifying asset classes), and value-oriented
stock selection all contributed to keeping the Fund's risk profile below that of
the S&P 500.
Asset allocation also did not spur strong returns in 1996. Although our broad
diversification into stocks of mid-sized and small companies, international
stocks, and real estate stocks (equity REITs) helped to reduce the absolute
volatility in the portfolio, most asset class returns, as demonstrated by their
benchmark index return, lagged behind the S&P 500:
- --------------------------------------------------------------------------------
Asset Class Benchmark Index Benchmark Return
- --------------------------------------------------------------------------------
Large Cap Stocks S&P 500 22.95%
Mid Cap Stocks S&P Mid Cap 400 Index 19.20%
Small Cap Stocks Russell 2000 16.49%
International Stocks MSCI Europe, Australia & Far East 6.36%
Real Estate Stocks NAREIT 35.26%
Obviously, our diversification into equity REITs contributed to our excellent
returns during 1996, but even though we had great enthusiasm for this asset
class, the Fund could not invest more than about 4% in these securities because
of their limited (though growing) size and liquidity. Our tactical asset
allocation disciplines guided us to reduce or increase weightings in most asset
classes at appropriate points during the year, but frankly we would have been
better off just investing in S&P 500 stocks compared to our average asset mix
during the year.
1
<PAGE>
Aetna Variable Fund (continued)
Finally, the Fund did not beat the S&P 500 by making large style, sector, or
industry bets. We do not place extremely heavy influence on any specific style
such as a growth style or a value style. We do not make subjective forecasts of
interest rates, the economy, or even future company earnings. We keep our
portfolios relatively close to their benchmarks with regard to macroeconomic
factors, such as sensitivity to changes in interest rates or economic activity,
and with regard to sector and industry weightings. These risk-control
disciplines keep our relative performance focused upon stock selection, where we
believe that we can add the most value for our investors.
It was the outstanding performance of our stock selection disciplines which led
to our excellent performance. We made significant improvements in both our
investment research and in our portfolio implementation processes over the past
year, which we believe will provide a solid foundation for future investment
performance. Several key additions to our professional investment staff have
greatly enhanced our quantitative research and management capabilities. We have
amassed a notable historical database of company financials, analyst earnings
estimates, insider buying and selling, stock returns, and economic variables,
and have done cutting-edge research to uncover evidence of past market
inefficiencies which we exploit in our portfolios. State-of-the-art hardware,
software, and databases enable us to analyze and rebalance our portfolios nearly
every trading day using an extremely efficient computer-based process which
quickly processes an enormous amount of market, economic, and company
information. Carefully constructed portfolio risk-control and optimization
techniques enable us to focus the risk in our portfolios upon those
characteristics which we believe will be rewarded, and to neutralize all other
risks. Characteristics we favor--attractive valuation, positive earnings
momentum, and shareholder oriented management--were strongly valued by the
market over the past year, and we believe that they are likely to continue to
help guide us to stocks which offer the potential for superior returns.
Our asset allocation disciplines, which measure the extra expected return of
stocks over bonds, indicated that as of year end, prospective stock returns were
unusually low compared to bond yields. Consequently, given the returns of asset
classes in 1996, we have recently become more cautious towards domestic
equities, and equity REITs in particular. We believe the likelihood of profit
disappointment is increasing, as corporate profit growth is expected to continue
its slow-down in coming months. Although Federal Reserve monetary policy has
been neutral of late, Chairman Greenspan has implied that he is inclined to
dampen the market's excitement, and even slight evidence of inflationary
pressure may be cause to raise interest rates. The Fund has often been close to
fully invested in stocks during the year, but we have begun to increase cash
equivalents allocation, with a target allocation of roughly 5%.
Past performance is no assurance of future returns.
Investment Summary:
- --------------------------------------------------------------------------------
Top Ten Equity Holdings % of Portfolio
- --------------------------------------------------------------------------------
Intel Corp. 2.7%
AT&T Corp. 1.9%
Bristol-Meyers Squibb Co. 1.9%
Travelers Group, Inc. 1.7%
Microsoft Corp. 1.7%
BankAmerica Corp. 1.6%
Cisco Systems, Inc. 1.6%
Johnson & Johnson 1.6%
Mobil Corp. 1.5%
Walt Disney Co. (The) 1.4%
2
<PAGE>
Large Cap Portfolio Sector Breakdown:
- --------------------------------------------------------------------------------
Portfolio S&P 500
Sector Weight Weight Over/(Under)
- --------------------------------------------------------------------------------
Basic Materials 2.2% 6.3% (4.1)%
Producer Goods & Services 10.0% 12.6% (2.6)%
Technology 14.5% 11.8% 2.7 %
Consumer Goods 31.5% 32.7% (1.2)%
Services 2.4% 2.3% 0.1 %
Financial Services 14.2% 14.6% (0.4)%
Utilities 25.2% 19.7% 5.5 %
Asset Allocation:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Portfolio of Notional Value Notional Value Economic
Investments of Options * of Futures * Exposure *
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Large Cap Stocks 72.2% -- 3.8% 76.0%
Mid Cap Stocks 9.9% (6.0)% -- 3.9%
Small Cap Stocks 4.3% 1.4% -- 5.7%
International Stocks 5.7% -- 0.2% 5.9%
Real Estate Stocks 3.8% -- -- 3.8%
Special Situations ** 1.1% -- 0.8% 1.9%
Convertible Securities 1.4% -- -- 1.4%
Cash Equivalents 1.6% 4.6% (4.8)% 1.4%
----- ----- ----- -----
Total Investments 100.0% 0.0% 0.0% 100.0%
===== ===== ===== =====
</TABLE>
* "Notional value" refers to the economic value at risk, or the exposure to the
financial instruments underlying the options and futures positions. "Economic
exposure" reflects the Fund's exposure to both changes in value of the portfolio
of investments as well as the financial instruments underlying the options and
futures positions.
** Please note that a new type of equity investment was introduced to the Fund's
lineup during the past fiscal year. The "special situations" category was
created to take advantage of investment opportunities which are "special" in the
sense that they do not fit well into our normal valuation and modeling
framework. The largest category within this group is initial public offerings,
but other categories include spin-offs, newly created securities, and stocks of
companies which derive their value from something other than assets, earnings,
and dividends.
3
<PAGE>
Aetna Income Shares
Growth of $10,000
Average Annual Total Returns for
the Year Ended December 31, 1996*
1 Year 5 Year 10 Year
3.60% 6.77% 8.83%
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Jan-87 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Income Shares 10000 10451 11248 12887 14065 16799 18051 19798 19026 22497 23304
Lehman Aggregate Bond Index 10000 10276 11087 12698 13835 16049 17237 18917 18365 21757 22547
</TABLE>
* "Total Return" is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not include any separate account charges imposed by ALIAC.
Aetna Income Shares generated a return of 3.60%, net of fund expenses, for the
year ended December 31, 1996. The Fund's performance was comparable to the
Lehman Brothers Aggregate Bond Index (an unmanaged index) return of 3.63% over
the same period. Versus its competitive peer group for the past 1,5, and 10
years ended December 31, 1996, the Fund's returns ranked in the top 51% (151 out
of 295), 53% (86 out of 163), and 19% (18 out of 95) respectively, of
Morningstar's variable annuity corporate bond funds universe.
As interest rates rose over the year, the negative price action was sufficient
to bite into the coupon income of investment grade bonds. The longer dated
assets were hardest hit as 30-year U.S.Treasury yields rose by nearly 0.70% over
the period. U.S. Treasuries underperformed other sectors within the investment
grade universe as corporate bonds and mortgage-backed securities received some
benefit from the additional yield provided. As one would expect in a down market
environment, mortgage-backed securities outperformed all other sectors.
Inherently more defensive in nature, these securities typically provide for
monthly repayments of principal and interest. Within the Fund, premium GNMA
pass-throughs and non-agency mortgage-backed securities were among the top
performers due to their shorter durations.
In the corporate sector, credit quality played a role as lower rated bonds
generally fared better than higher quality counterparts. Improved balance
sheets, increased demand and favorable market technicals help to narrow yield
spread differentials between corporate bonds and U.S. Treasuries. The Fund's
holdings of foreign bonds, particularly those of Asian issuers such as Korea and
China outperformed the general corporate universe. We were disappointed with the
return performance on our media and cable holdings. These companies and the
industry as a whole have struggled this year with high capital expenditures and
increased competition.
In addition, Fund performance was increased through modest holdings of
high-yield bonds and emerging country debt. Both asset classes smartly
outperformed traditional investment grade bonds in 1996. Strong cash inflows,
improved fundamentals, and demand for higher yields provided support to these
alternative asset classes. Here again, returns varied according to specific
companies or industries within the high-yield market and between countries or
continents for the emerging markets. The Fund's high-yield holdings generated
mixed results while the emerging market holdings provided exceptional returns.
4
<PAGE>
As we look forward to 1997, we anticipate that the interest rate environment
will remain fairly stable over the next several months. Moderate economic growth
with little in terms of inflationary pressures could keep monetary policy on
hold. Given a relatively unchanged interest rate environment, securities that
provide additional yield over U.S. Treasuries could outperform the market. As
opportunities arise, we believe the Fund is well positioned with exposure to
mortgage securities and an overweighting of corporate bonds. We intend to
maintain a modest exposure to alternative asset classes to enhance potential
yield and diversify the Fund's portfolio holdings.
Past performance is no assurance of future returns.
Investment Summary:
<TABLE>
<CAPTION>
- -------------------------------------------------- ---------------------------------------------------------------------
Quality Ratings % of Portfolio Top Ten Long Term Holdings % of Portfolio
- -------------------------------------------------- ---------------------------------------------------------------------
<S> <C> <C> <C>
AAA 59.5% U.S. Treasury Bond, 10.375%, 11/15/12 3.8%
AA 7.6% U.S. Treasury Note, 6.875% 03/31/00 3.8%
A 11.0% FNMA, 30 Yr., 8.00%, 12/11/26 3.8%
BBB 6.1% U.S. Treasury Note, 6.875%, 08/31/99 3.0%
BB 3.8% U.S. Treasury Note, 6.875, 07/31/99 3.0%
B 2.2% U.S. Treasury Note, 6.25%, 05/31/00 3.0%
Other 9.8% U.S. Treasury Note, 5.75%, 08/15/03 2.9%
Average AA- Associates Corp., 7.95%, 02/15/10 2.4%
U.S. Treasury Note, 6.50%, 05/31/01 2.2%
Ford Motor Credit Corp., FRN, 5.75%, 02/22/99 2.2%
</TABLE>
5
<PAGE>
Aetna Variable Encore Fund
Growth of $10,000
Average Annual Total Returns for
the Year Ended December 31, 1996*
1 Year 5 Year 10 Year
5.37% 4.46% 6.08%
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Jan-87 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Variable Encore Fund 10000 10679 11483 12560 13622 14511 15042 15522 16154 17131 18051
IBC/Donoghue Public Money Market Funds 10000 10594 11320 12285 13214 13949 14415 14799 15346 16167 16947
</TABLE>
* "Total Return" is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not include any separate account charges imposed by ALIAC. The IBC/Donoghue
Public Money Market Funds is an unmanaged broad based index. An investment in
this Fund is neither insured nor guaranteed by the United States Government.
Aetna Variable Encore Fund generated a total return of 5.37%, net of fund
expenses, for the year ended December 31, 1996. Versus its peer group, the
Fund's performance ranked in the top 20% (52 out of 262), 16% (26 out of 165),
and 14% (16 out of 115) of Morningstar's variable money market funds universe
for the 1, 5, and 10 year periods, respectively. As of December 31, 1996 the
Fund reported a 7-day average yield of 5.23%, net of fund expenses, and
maintained an average portfolio maturity of 48 days.
The Fund's above average performances are a direct result of adjustments to
average portfolio maturity, positioning along the yield curve, and security
selection. A yield curve plots current money market security yields against
money market security maturities. Earlier in the year, an inverted yield curve,
one in which short-term rates are higher than long-term rates, provided the Fund
with an opportunity to "barbell" the portfolio holdings. In other words, the
Fund focused attention primarily on the front end of the yield curve where
higher yields are offered on shorter maturities, and some attention on longer
maturities. This strategy resulted in shorter average maturities but generated
higher yields. As the year progressed and the yield curve reshaped to a more
normal positive slope, the Fund's average maturity was lengthened as yields
increased on longer dated maturities.
An increased allocation to asset-backed securities also helped enhance yield.
These AAA-rated securities are usually collateralized by a pool of assets such
as credit card receivables, automobile loans, or other similar types of assets.
Investors are compensated with additional yield for the amortizing structures
and increased complexity of these securities. Incremental yield was added
through use of corporate and medium term notes over commercial paper.
Our near term strategy for early 1997 is to remain relatively neutral and keep
the current Fund strategy in place. Although the data at year-end point to
pockets of economic strength, we do not expect a strong resurgence of economic
growth as we enter the new year. With 1996 behind us, we believe that the
Federal Reserve will strive to leave monetary policy unchanged barring an
increase in inflation.
Past performance is no assurance of future returns.
Investment Summary:
- ---------------------------------- -----------------------------------------
Quality Breakdown % of Portfolio Maturity Distribution % of Portfolio
- ---------------------------------- -----------------------------------------
Tier 1 97.0% 1 - 30 days 45.1%
Tier 2 3.0% 31-60 days 19.7%
61-90 days 13.7%
91 days or more 21.5%
6
<PAGE>
Aetna Investment Advisers Fund, Inc.
Growth of $10,000
Average Annual Total Returns for
the Year Ended December 31, 1996*
1 Year 5 Year Inception+
15.17% 11.26% 11.29%
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Apr-89 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Investment Advisers Fund 10000 10730 11339 13429 14289 15699 15627 19882 22898
Lehman Aggregate Bond Index 10000 11325 12340 14314 15373 16872 16380 19405 20109
S&P 500 Index 10000 12297 11915 15545 16729 18416 18659 25671 31562
60% S&P 500/40% Lehman Aggregate 10000 11913 12129 15133 16281 17908 17849 23143 26607
</TABLE>
* `Total Return' is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not include any separate account charges imposed by ALIAC.
+ Date of Inception was April 3, 1989.
The Aetna Investment Advisers Fund generated a total return of 15.17% for the
year ended December 31, 1996, net of fund expenses, as compared with a return of
14.97% for the 60%/40% weighted S&P 500 Index and the Lehman Brothers Aggregate
Bond Index (both unmanaged indices). In addition to outpacing its benchmark, the
Fund's performance also compared favorably within Morningstar's Balanced Fund
universe, ranking in the top 28% (116 out of 416) and the top 30% (69 out of
233) for the one and five year time periods, respectively.
The first six months of 1996 was characterized by strength in the economy,
higher interest rates and strong equity markets. For most of this period, the
Fund maintained an allocation of stocks relative to bonds of 65/35, reducing it
slightly to a more neutral 60/40 split toward mid-year. During this time, stocks
of smaller companies outpaced stocks of larger companies, and the Fund's
aggressive equity posture and small company stock exposure contributed
positively to performance. Bond prices fell considerably over this period as
fears of an overheating economy led to higher interest rates. Due to the Fund's
shorter duration posture and exposure to diversifying asset classes, it was able
to outperform the Lehman Aggregate Bond Index.
We continued our defensive strategy into the second half of the year reducing
our exposure to small company stocks. Throughout the second half of 1996, we
maintained an allocation of 55% stocks and 45% bonds and cash. After a sharp and
short-lived sell-off in July, stocks continued to set a string of new records,
with large company stocks outperforming small company stocks. Overall, the S&P
500 returned 22.95% in 1996, with technology stocks leading the way--a sector in
which the Fund was overweighted--adding to performance.
The U.S. Treasury market continued the bumpy ride it began in early 1996, but
this time with a reversal of fortunate performance. U.S. Treasury yields fell
from their 1996 high of 7.20% in July and eventually troughed at 6.35% late in
the year as the economy showed signs of slowing. In all, 1996 was a mediocre
year for bonds as the Lehman Aggregate Bond Index returned 3.63%. The only
bright spot was in emerging markets and high yield bonds. The Fund's exposure to
these sub-categories of bonds (also known as diversifying asset classes)
produced strong positive returns for the year.
Looking to 1997, the likelihood of moderate economic growth, low global
inflation and a strong US dollar could continue to foster a favorable investment
environment. We believe corporate earnings growth, while slowing, is likely to
remain positive, with individual stock selection taking on increased importance.
We will continue to emphasize diversifying asset classes as interest rates are
expected to remain at moderate levels, and adjust allocation between stocks,
bonds, and cash as appropriate.
Past performance is no assurance of future returns.
7
<PAGE>
Aetna Investment Advisers Fund, Inc. (continued)
Investment Summary:
- --------------------------------------------------------------------------------
Top Ten Holdings % of Portfolio
- --------------------------------------------------------------------------------
U.S. Treasury Note, 5.75%, 10/31/00 6.3%
SunAmerica, Inc. 1.2%
U.S. Treasury Bond, 6.25%, 06/30/98 1.2%
Intel Corp. 1.1%
Pitney Bowes Credit Corp., 8.55%, 09/15/09 1.1%
United Technologies Corp. 1.0%
United Mexican States Government Bond, 11.375%, 09/15/16 1.0%
Cisco Systems, Inc. 1.0%
BCH Cayman Islands, Ltd. 1.0%
BMC Software, Inc. 1.0%
Large Cap Portfolio Sector Breakdown:
- --------------------------------------------------------------------------------
Portfolio S&P 500
Sector Weight Weight Over/(Under)
- --------------------------------------------------------------------------------
Basic Materials 2.5% 6.3% (3.8)%
Producer Goods & Services 22.6% 12.6% 10.0 %
Technology 11.4% 11.8% (0.4)%
Consumer Goods 34.1% 32.7% 1.4 %
Services 2.0% 2.3% (0.3)%
Financial Services 13.6% 14.6% (1.0)%
Utilities 13.8% 19.7% (5.9)%
8
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1996
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
COMMON STOCKS (97.4%)
United States (91.7%)
Aerospace and Defense (1.3%)
General Dynamics Corp. ..................... 23,200 $ 1,635,600
Gulfstream Aerospace Corp. + ............... 125,600 3,045,800
McDonnell Douglas Corp. .................... 971,000 62,143,999
United Technologies Corp. .................. 404,800 26,716,800
------------
93,542,199
------------
Agriculture (0.2%)
Pioneer Hi-Bred International, Inc. ........ 182,500 12,775,000
------------
Apparel (1.4%)
Fruit of the Loom, Inc. + .................. 735,000 27,838,125
Gap, Inc. .................................. 97,200 2,928,150
Jones Apparel Group, Inc. + ................ 40,300 1,506,213
Liz Claiborne, Inc. ........................ 1,033,700 39,926,662
Nike, Inc. Class B ......................... 391,400 23,386,150
------------
95,585,300
------------
Autos and Auto Equipment (1.6%)
Borg Warner Automotive, Inc. ............... 61,700 2,375,450
Chrysler Corp. ............................. 2,699,200 89,073,599
Dura Automotive Systems, Inc. + ............ 27,900 627,750
Kaydon Corp. ............................... 38,000 1,790,750
Smith (A.O.) Corp. ......................... 93,100 2,781,363
Snap-On, Inc. .............................. 378,200 13,473,375
SPX Corp. .................................. 85,300 3,305,375
------------
113,427,662
------------
Banks (7.4%)
Bank United Corp. .......................... 46,500 1,243,875
BankAmerica Corp. .......................... 1,147,000 114,413,249
Bankers Corp. .............................. 42,000 845,250
CCB Financial Corp. ........................ 14,500 989,625
Charter One Financial, Inc. ................ 428,400 17,992,800
City National Corp. ........................ 210,800 4,558,550
Comerica, Inc. ............................. 45,000 2,356,875
Commercial Federal Corp. ................... 57,200 2,745,600
Cullen/Frost Bankers, Inc. ................. 76,000 2,527,000
FFY Financial Corp. ........................ 21,500 544,219
First American Corp. (Tenn.) ............... 84,900 4,892,363
First Chicago Corp. ........................ 1,422,072 76,436,369
First Commonwealth Financial Corp. ......... 18,900 352,013
First Empire State Corp. ................... 3,900 1,123,200
First of America Bank Corp. ................ 61,700 3,709,713
First Union Corp. .......................... 1,120,100 82,887,399
Golden West Financial Corp. ................ 103,500 6,533,438
GreenPoint Financial Corp. ................. 260,300 12,299,175
H. F. Ahmanson & Co. ....................... 1,129,400 36,705,500
Investors Financial Services Corp. ......... 105,300 2,922,075
NationsBank Corp. .......................... 926,300 90,545,824
North Fork Bancorp, Inc. ................... 61,600 2,194,500
ONBANCorp, Inc. ............................ 11,900 331,713
Queens County Bancorp, Inc. ................ 66,666 3,158,302
Number
of Market
Shares Value
--------- ------------
Banks (continued)
Reliance Bancorp, Inc. ..................... 13,400 $ 261,300
Republic New York Corp. .................... 295,600 24,128,350
Security Capital Corp. ..................... 33,000 2,433,750
St. Francis Capital Corp. .................. 12,200 317,200
Star Banc Corp. ............................ 62,100 5,705,438
Trustmark Corp. ............................ 17,900 456,450
UnionBancal Corp. .......................... 78,100 4,139,300
Zion Bancorporation ........................ 36,500 3,796,000
------------
513,546,415
------------
Building Materials and Construction (0.9%)
American Buildings Co. + ................... 60,500 1,444,438
Armstrong World Industries, Inc. ........... 377,800 26,257,100
Arvin Industries, Inc. ..................... 43,100 1,066,725
Butler Manufacturing Co. ................... 9,300 376,650
Centex Corp. ............................... 143,800 5,410,475
Champion Enterprises, Inc. + ............... 403,404 7,866,378
Continental Homes Holding Corp. ............ 37,300 792,625
Elcor Corp. ................................ 36,800 786,600
Granite Construction, Inc. ................. 128,850 2,448,150
Jacobs Engineering Group, Inc. + ........... 32,800 774,900
Lennar Corp. ............................... 238,000 6,485,500
Masco Corp. ................................ 67,400 2,426,400
NCI Building Systems, Inc. + ............... 14,300 493,350
Skyline Corp. .............................. 32,400 801,900
Texas Industries, Inc. ..................... 39,900 2,019,938
Tredegar Industries, Inc. .................. 17,300 694,163
Vulcan Materials Co. ....................... 35,800 2,179,325
------------
62,324,617
------------
Chemicals (1.7%)
Arcadian Corp. ............................. 207,600 5,501,400
ARCO Chemical Co. .......................... 66,200 3,243,800
Chemed Corp. ............................... 19,300 704,450
Cytec Industries + ......................... 335,100 13,613,438
Dow Chemical Co. ........................... 903,900 70,843,162
Du Pont (E.I.) de Nemours .................. 65,200 6,153,250
Goodrich (B.F.) Co. ........................ 128,000 5,184,000
Monsanto Co. ............................... 245,600 9,547,700
OM Group, Inc. ............................. 42,300 1,142,100
PPG Industries, Inc. ....................... 57,700 3,238,413
------------
119,171,713
------------
Commercial Services (0.5%)
AccuStaff, Inc. + .......................... 44,000 929,500
APAC Teleservices, Inc. + .................. 16,600 637,025
Billing Information Concepts + ............. 39,400 1,132,750
Devry, Inc. + .............................. 171,200 4,023,200
Employee Solutions, Inc. + ................. 155,600 3,189,800
FactSet Research Systems, Inc. + ........... 43,700 917,700
GATX Corp. ................................. 95,000 4,607,500
Kindercare Learning Centers, Inc.+ ......... 59,500 1,115,625
May & Speh, Inc. + ......................... 32,200 394,450
Quintiles Transnational Corp. + ............ 1,300 86,125
See Notes to Portfolio of Investments. 9
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1996 (continued)
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
United States (continued)
Commercial Services (continued)
Robert Half International, Inc. + .......... 286,800 $ 9,858,750
US Filter Corp. + .......................... 106,100 3,368,675
Wackenhut Corp. Class B .................... 66,900 1,020,225
------------
31,281,325
------------
Computer Software (5.2%)
Access Health, Inc. + ...................... 54,900 2,456,775
Acxiom Corp. + ............................. 71,800 1,723,200
Analysts International Corp. ............... 17,400 491,550
BMC Software, Inc. + ....................... 985,600 40,779,199
Boole & Babbage, Inc. + .................... 36,150 903,750
Cadence Design Systems, Inc. + ............. 303,600 12,068,100
CCC Information Services Group + ........... 9,200 147,200
Cisco Systems, Inc. + ...................... 1,789,320 113,845,484
Computer Associates International,
Inc ...................................... 850,175 42,296,205
Computer Sciences Corp. + .................. 1 82
Compuware Corp. + .......................... 404,300 20,265,538
Document Sciences Corp. + .................. 9,300 91,838
Edify Corp. + .............................. 25,600 409,600
Engineering Animation, Inc. + .............. 37,200 902,100
Hyperion Software Corp. + .................. 100,100 2,127,125
Kronos, Inc. + ............................. 30,350 971,200
Memco Software Ltd. + ...................... 9,800 172,725
Microsoft Corp. + .......................... 1,399,200 115,608,899
Peerless Systems Corp. + ................... 1,000 17,000
Project Software & Development,
Inc. + ................................... 27,600 1,169,550
SPSS, Inc. + ............................... 16,800 468,300
Sungard Data Systems, Inc. + ............... 125,300 4,949,350
------------
361,864,770
------------
Computers and Office Equipment (4.8%)
3Com Corp. + ............................... 400,000 29,350,000
Ceridian Corp. + ........................... 347,200 14,061,600
Comdisco, Inc. ............................. 92,850 2,947,988
Compaq Computer Corp. + .................... 993,100 73,737,674
Comverse Technology, Inc. + ................ 94,451 3,571,428
Dell Computer Corp. + ...................... 1,677,900 89,138,437
EMC Corp. + ................................ 277,800 9,202,125
FORE Systems, Inc. + ....................... 168,600 5,542,725
Gateway 2000, Inc. + ....................... 171,600 9,191,325
Harris Corp. ............................... 107,300 7,363,463
HBO & Co. .................................. 65,700 3,900,938
Herman Miller, Inc. ........................ 116,100 6,574,163
Moore Corp. Ltd. ........................... 667,400 13,598,275
Standard Register Co. ...................... 31,700 1,030,250
Sun Microsystems, Inc. + ................... 2,268,500 58,272,093
Trident Microsystems, Inc. + ............... 35,300 595,688
Wallace Computer Services, Inc. ............ 58,200 2,007,900
Western Digital Corp. + .................... 107,200 6,097,000
------------
336,183,072
------------
Consumer Products (0.2%)
First Brands Corp. ......................... 139,200 3,949,800
Number
of Market
Shares Value
--------- ------------
Consumer Products (continued)
Premark International, Inc. ................ 297,300 $ 6,614,925
------------
10,564,725
------------
Diversified (2.7%)
Amway Asia Pacific Ltd. .................... 19,800 839,025
General Electric Co. ....................... 778,600 76,984,074
Harsco Corp. ............................... 95,700 6,555,450
Oakley, Inc. + ............................. 790,400 8,595,600
Plantronics, Inc. + ........................ 9,100 409,500
Raychem Corp. .............................. 117,200 9,390,650
Rohm & Haas Co. ............................ 72,700 5,934,138
Textron, Inc. .............................. 611,600 57,643,299
Varlen Corp. ............................... 26,400 542,850
VF Corp. ................................... 306,200 20,668,500
------------
187,563,086
------------
Electrical and Electronics (3.2%)
ADT Ltd. + ................................. 186,800 4,273,050
Cymer, Inc. + .............................. 5,530 266,131
Dynatech Corp. + ........................... 188,400 8,336,700
Esterline Technologies + ................... 68,400 1,786,950
Hadco Corp. + .............................. 112,400 5,507,600
Integrated Packaging Assembly
Corp. + .................................. 13,500 109,055
Intel Corp. ................................ 1,433,000 187,633,437
Logicon, Inc. .............................. 93,200 3,401,800
MTS Systems Corp. .......................... 22,600 452,000
Novellus Systems, Inc. + ................... 116,100 6,291,169
Symbol Technologies, Inc. + ................ 16,800 743,400
Technitrol, Inc. ........................... 17,700 679,238
Waters Corp. + ............................. 93,000 2,824,875
------------
222,305,405
------------
Electrical Equipment (0.6%)
Belden, Inc. ............................... 89,000 3,293,000
Berg Electronics Corp. + ................... 125,900 3,698,313
Burr-Brown Corp. + ......................... 35,150 913,900
C-Cube Microsystems, Inc. + ................ 35,000 1,292,813
Charter Power Systems, Inc. ................ 14,900 454,450
Dionex Corp. + ............................. 18,000 630,000
Methode Electronics, Inc. Class A .......... 52,500 1,063,125
Pittway Corp. Class A ...................... 1,000 53,500
SCI Systems, Inc. + ........................ 75,600 3,373,650
Tektronix, Inc. ............................ 472,300 24,205,375
------------
38,978,126
------------
Financial Services (3.4%)
ALBANK Financial Corp. ..................... 15,020 471,253
Alex Brown & Sons, Inc. .................... 74,200 5,379,500
Astoria Financial Corp. .................... 99,400 3,665,375
Bankers Trust New York Corp. ............... 155,000 13,368,750
Bear Stearns Co., Inc. ..................... 363,825 10,141,622
Beneficial Corp. ........................... 107,300 6,800,138
Chase Manhattan Corp. ...................... 115,768 10,332,294
ContiFinancial Corp. + ..................... 28,000 1,011,500
Deposit Guaranty Corp. ..................... 51,600 1,599,600
10 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
United States (continued)
Financial Services (continued)
Great Financial Corp. ...................... 41,000 $ 1,194,125
Liberty Financial Co. ...................... 4 156
Merrill Lynch & Co., Inc. .................. 247,400 20,163,100
Olympic Financial Ltd. + ................... 165,000 2,371,875
PHH Corp. .................................. 128,600 5,529,800
Salomon, Inc. .............................. 723,200 34,080,800
SunAmerica, Inc. ........................... 78,400 3,479,000
Travelers Group, Inc. ...................... 2,632,540 119,451,502
------------
239,040,390
------------
Foods and Beverages (4.1%)
Archer-Daniels-Midland Co. ................. 179,200 3,942,400
Cagle's, Inc. .............................. 21,200 304,750
Campbell Soup Co. .......................... 812,400 65,195,099
Coca-Cola Co. .............................. 839,600 44,183,949
General Mills, Inc. ........................ 253,500 16,065,563
Hershey Foods Corp. ........................ 565,000 24,718,750
Hudson Foods, Inc. Class A ................. 148,800 2,827,200
Interstate Bakeries Corp. .................. 75,000 3,684,375
Kroger Co. (The) + ......................... 1,292,100 60,082,649
Mondavi (Robert) Corp. Class A + ........... 56,500 2,062,250
Nash-Finch Co. ............................. 17,000 361,250
Ralcorp Holdings, Inc. + ................... 46,500 982,313
Ralston-Ralston Purina Group ............... 16,600 1,218,025
Sara Lee Corp. ............................. 1,289,300 48,026,424
Supervalu, Inc. ............................ 320,000 9,080,000
------------
282,734,997
------------
Health Services (1.6%)
Allegiance Corp. ........................... 70,020 1,934,303
Beverly Enterprises + ...................... 1,051,500 13,406,625
FPA Medical Management, Inc. + ............. 599,600 13,416,050
Genesis Health Ventures, Inc. + ............ 72,300 2,250,338
Genetics Institute, Inc. + ................. 26,900 2,279,775
Invacare Corp. ............................. 81,700 2,246,750
Lincare Holdings, Inc. + ................... 379,100 15,543,100
Manor Care, Inc. ........................... 240,900 6,504,300
Maxicare Health Plans, Inc. + .............. 141,200 3,141,700
MedPartners, Inc. + ........................ 37,200 781,200
Oxford Health Plans, Inc. + ................ 558,500 32,707,156
Sunrise Assisted Living, Inc. + ............ 14,000 390,250
Tenet Healthcare Corp. + ................... 577,300 12,628,438
Universal Health Services, Inc. + .......... 140,500 4,021,813
Wellpoint Health Networks, Inc. ............ 28,881 992,784
------------
112,244,582
------------
Home Furnishings and Appliances (0.0%)
Haverty Furniture Co., Inc. ................ 32,000 364,000
Kimball International, Inc. Class B ........ 11,500 475,813
Sunbeam Corp. .............................. 93,100 2,397,325
------------
3,237,138
------------
Number
of Market
Shares Value
--------- ------------
Hotels and Restaurants (0.9%)
HFS, Inc. + ................................ 46,300 $ 2,766,425
Interstate Hotels Co. + .................... 9,300 262,725
Marcus Corp. ............................... 13,200 280,500
Marriott International, Inc. ............... 879,900 48,614,474
Prime Hospitality Corp. + .................. 110,000 1,773,750
Promus Hotel Corp. + ....................... 101,800 3,015,825
RFS Hotel Investors, Inc. .................. 180,000 3,555,000
------------
60,268,699
------------
Insurance (2.2%)
Allied Group, Inc. ......................... 27,600 900,450
Allstate Corp. ............................. 223,101 12,911,970
AMBAC, Inc. ................................ 109,500 7,268,063
American Bankers Insurance Group ........... 77,900 3,982,638
Bankers Life Holding Corp. ................. 27,200 680,000
Capital American Financial Corp. ........... 14,700 534,713
Cigna Corp. ................................ 358,700 49,007,387
CMAC Investment Corp. ...................... 201,000 7,386,750
Conseco, Inc. .............................. 308,600 19,673,250
Fremont General Corp. ...................... 111,470 3,455,570
Highlands Insurance Co. + .................. 74,610 1,510,853
IPC Holdings Ltd. .......................... 159,300 3,564,338
ITT Hartford Group, Inc. ................... 265,700 17,934,750
Lawyers Title Corp. ........................ 18,200 357,175
MAIC Holdings, Inc. + ...................... 11,236 380,620
Markel Corp. + ............................. 5,000 450,000
Mutual Risk Management Ltd. ................ 105,466 3,902,242
Old Republic International Corp. ........... 275,728 7,375,724
Orion Capital Corp. ........................ 36,000 2,200,500
Pxre Corp. ................................. 15,900 393,525
Security-Connecticut Corp. ................. 19,100 670,888
Selective Insurance Group, Inc. ............ 32,000 1,216,000
Transatlantic Holdings, Inc. ............... 92,800 7,470,400
Vesta Insurance Group, Inc. ................ 93,000 2,917,875
------------
156,145,681
------------
Machinery and Equipment (2.0%)
Barnes Group, Inc. ......................... 23,600 1,416,000
Blount, Inc. Class A ....................... 45,700 1,753,738
Brunswick Corp. ............................ 72,900 1,749,600
Case Corp. ................................. 415,300 22,633,850
Caterpillar, Inc. .......................... 508,000 38,226,999
Cooper Cameron Corp. + ..................... 279,500 21,381,750
Global Industrial Technologies,
Inc. + ................................... 107,800 2,385,075
Harnischfeger Industries, Inc. ............. 724,800 34,881,000
JLG Industries, Inc. ....................... 120,000 1,920,000
Parker-Hannifin Corp. ...................... 231,400 8,966,750
Stanley Works .............................. 147,700 3,987,900
------------
139,302,662
------------
Media and Entertainment (2.1%)
Callaway Golf Co. .......................... 230,900 6,638,375
Carnival Corp. ............................. 39,136 1,291,488
11
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1996 (continued)
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
United States (continued)
Media and Entertainment (continued)
Clear Channel Communications, Inc. + ....... 54,600 $ 1,972,425
Fleetwood Enterprises, Inc. ................ 111,000 3,052,500
Harrah's Entertainment, Inc. + ............. 28,800 572,400
Heritage Media Corp. Class A + ............. 46,500 523,125
International Game Technology .............. 93,300 1,702,725
Jones Intercable, Inc. + ................... 11,600 120,350
King World Production, Inc. + .............. 461,700 17,025,188
Regal Cinemas, Inc. + ...................... 221,100 6,798,825
Renaissance Communications + ............... 50,000 1,787,500
Speedway Motorsports, Inc. + ............... 37,600 789,600
Walt Disney Co. (The) ...................... 1,452,200 101,109,424
Young Broadcasting Corp. + ................. 32,500 950,625
------------
144,334,550
------------
Medical Supplies (1.3%)
Bio-Rad Labs, Inc. Class A + ............... 58,400 1,752,000
Biomet, Inc. ............................... 342,700 5,183,338
Coherent, Inc. + ........................... 79,800 3,371,550
Collagen Corp. ............................. 26,000 474,500
Guidant Corp. .............................. 1,026,419 58,505,882
Hillenbrand Industries, Inc. ............... 37,500 1,359,375
Mallinckrodt, Inc. ......................... 272,500 12,024,063
Sola International, Inc. + ................. 54,700 2,078,600
Steris Corp. + ............................. 18,700 813,450
Sybron International Corp. + ............... 101,800 3,359,400
------------
88,922,158
------------
Metals and Mining (1.0%)
AK Steel Holding Corp. ..................... 46,400 1,838,600
Ashland Coal Inc. .......................... 13,300 369,075
Carpenter Technology Corp. ................. 73,200 2,680,950
Cleveland-Cliffs, Inc. ..................... 58,000 2,631,750
Commonwealth Aluminum Corp. ................ 70,000 1,076,250
MAF Bancorp, Inc. .......................... 12,900 448,275
Mueller Industries, Inc. + ................. 122,700 4,723,950
Newmont Mining Corp. ....................... 158,100 7,074,975
RMI Titanium Co. + ......................... 249,600 7,020,000
Timken Co. ................................. 835,500 38,328,562
Titanium Metals Corp. + .................... 76,000 2,498,500
Trinity Industries, Inc. ................... 95,200 3,570,000
------------
72,260,887
------------
Oil and Gas (9.6%)
Amoco Corp. ................................ 1,200,709 96,657,074
Atlantic Richfield Co. ..................... 632,300 83,779,749
Belco Oil & Gas Corp. + .................... 43,200 1,182,600
Camco International, Inc. .................. 112,900 5,207,513
Columbia Gas System, Inc. .................. 673,000 42,819,624
Exxon Corp. ................................ 440,700 43,188,599
Halliburton Co. ............................ 240,400 14,484,100
Kerr-Mcgee Corp. ........................... 906,700 65,282,399
Laclede Gas Co. ............................ 41,200 993,950
Mobil Corp. ................................ 861,500 105,318,374
Number
of Market
Shares Value
--------- ------------
Oil and Gas (continued)
National Fuel Gas Co. ...................... 22,200 $ 915,750
Occidental Petroleum Corp. ................. 248,500 5,808,688
Oneok, Inc. ................................ 70,000 2,100,000
Phillips Petroleum Co. ..................... 1,613,100 71,379,674
Tesoro Petroleum Corp. + ................... 79,100 1,107,400
Texaco, Inc. ............................... 874,500 85,810,312
The Williams Cos., Inc. .................... 78,450 2,941,875
Tidewater, Inc. ............................ 129,000 5,837,250
Tosco Corp. ................................ 131,900 10,436,588
Unocal Corp. ............................... 55,400 2,250,625
USX-Marathon Group ......................... 960,900 22,941,488
------------
670,443,632
------------
Paper and Containers (0.1%)
Mead Corp. ................................. 88,500 5,144,063
------------
Pharmaceuticals (7.2%)
Allergan, Inc. ............................. 303,600 10,815,750
American Home Products Corp. ............... 677,500 39,718,437
Amgen, Inc. + .............................. 87,200 4,741,500
Becton, Dickinson & Co. .................... 988,600 42,880,524
Biogen, Inc. + ............................. 248,800 9,641,000
Bristol-Myers Squibb Co. ................... 1,201,900 130,706,624
Dura Pharmaceuticals, Inc. + ............... 129,300 6,174,075
Eli Lilly & Co. ............................ 46,500 3,394,500
Immulogic Pharmaceutical Corp. + ........... 42,100 268,388
Johnson & Johnson .......................... 2,237,408 111,311,047
Jones Medical Industries, Inc. ............. 72,475 2,654,397
Merck & Co., Inc. .......................... 686,900 54,436,824
Rhone-Poulenc Rorer, Inc. .................. 15,100 1,179,688
Schering Plough ............................ 1,238,900 80,218,774
------------
498,141,528
------------
Printing and Publishing (2.2%)
Banta Corp. ................................ 233,400 5,339,025
Central Newspapers, Inc. Class A ........... 50,700 2,230,800
Devon Group, Inc. + ........................ 17,700 486,750
Gannett Co., Inc. .......................... 748,600 56,051,424
Lexmark International Group, Inc.+ ......... 46,900 1,295,613
Meredith Corp. ............................. 48,400 2,553,100
New York Times Co. ......................... 525,600 19,972,800
Pulitzer Publishing Co. .................... 54,666 2,535,136
Scholastic Corp. + ......................... 66,000 4,438,500
Times Mirror Co. ........................... 441,000 21,939,750
Tribune Co. ................................ 474,100 37,394,638
------------
154,237,536
------------
Real Estate Investment Trusts (3.8%)
Ambassador Apartments, Inc. ................ 59,100 1,396,238
American General Hospitality Corp. ......... 55,800 1,325,250
American Health Properties, Inc. ........... 59,000 1,408,625
AMLI Residential Properities Trust ......... 55,900 1,306,663
Apartment Investment & Management
Co ....................................... 165,500 4,675,375
Arden Realty Group, Inc. ................... 93,800 2,602,950
Associated Estates Realty Corp. ............ 133,100 3,161,125
12 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
United States (continued)
Real Estate Investment Trusts (continued)
Beacon Properties Corp. .................... 288,700 $ 10,573,638
Brandywine Realty Trust .................... 25,900 505,050
Bre Properties, Inc. Class A ............... 29,100 720,225
CALI Realty Corp. .......................... 175,000 5,403,125
Camden Property Trust ...................... 25,500 729,938
Capstone Capital Trust, Inc. ............... 51,500 1,152,313
Carr Realty Corp. .......................... 102,000 2,983,500
CBL & Associates Properties, Inc. .......... 124,800 3,229,200
Chelsea GCA Realty, Inc. ................... 131,500 4,553,188
Colonial Properties Trust .................. 159,800 4,853,925
Cousins Properties, Inc. ................... 43,200 1,215,000
Crescent Real Estate Equities, Inc. ........ 231,700 12,222,175
Crown America Realty Trust ................. 228,300 1,712,250
Developers Diversified Realty Corp. ........ 309,100 11,475,338
Duke Realty Investments, Inc. .............. 293,900 11,315,150
Equity Residential Properties Trust ........ 159,600 6,583,500
Essex Property Trust, Inc. ................. 108,100 3,175,438
Evans Withycombe Residential, Inc. ......... 90,500 1,900,500
Excel Realty Trust, Inc. ................... 139,300 3,534,738
First Industrial Realty Trust, Inc. ........ 173,400 5,267,025
General Growth Properties .................. 230,100 7,420,725
Healthcare Realty Trust, Inc. .............. 121,200 3,211,800
Highwood Properties, Inc. .................. 138,600 4,677,750
Home Properties of New York, Inc. .......... 6,300 141,750
Innkeepers USA Trust ....................... 135,900 1,885,613
JDN Realty Corp. ........................... 39,200 1,082,900
Kimco Realty Corp. ......................... 301,900 10,528,763
LTC Properties, Inc. ....................... 56,900 1,052,650
Macerich Co. (The) ......................... 83,100 2,170,988
Manufactured Home Communities, Inc. ........ 126,000 2,929,500
Merry Land & Investment Co., Inc. .......... 51,700 1,111,550
MGI Properties, Inc. ....................... 75,500 1,661,000
Mid-America Apartment Communities,
Inc ...................................... 100,500 2,901,938
National Golf Properties, Inc. ............. 141,100 4,462,288
National Health Investors, Inc. ............ 125,000 4,734,375
Oasis Residential, Inc. .................... 277,700 6,317,675
OMEGA Healthcare Investors, Inc. ........... 48,000 1,596,000
Patriot American Hospitality, Inc. ......... 41,500 1,789,688
Post Properties, Inc. ...................... 157,400 6,335,350
Prime Retail, Inc. ......................... 46,900 586,250
Public Storage, Inc. ....................... 471,300 14,610,300
Ramco-Gerhenson Properties ................. 22,675 382,641
Reckson Associates Realty Corp. ............ 138,900 5,868,525
Rouse Co. .................................. 51,000 1,619,250
Security Capital Industrial Trust .......... 200,525 4,286,222
Simon Debartolo Group, Inc. ................ 306,244 9,493,564
Smith (Charles E.) Residential
Realty Co. ............................... 40,100 1,172,925
South West Property Trust .................. 459,500 7,754,063
Spieker Properties, Inc. ................... 214,700 7,729,200
Storage USA, Inc. .......................... 28,400 1,068,550
Starwood Lodging Trust ..................... 173,700 9,575,213
Number
of Market
Shares Value
--------- ------------
Real Estate Investment Trusts (continued)
Summit Properties, Inc. .................... 81,800 $ 1,809,825
Tanger Factory Outlet Centers, Inc. ........ 94,100 2,552,463
Universal Health Realty Income
Trust .................................... 32,800 672,400
Vornado Realty Trust ....................... 168,400 8,841,000
Walden Residential Properties, Inc. ........ 206,000 5,124,250
Weeks Corp. ................................ 3,000 99,750
Weingarten Realty Investors ................ 101,000 4,103,125
------------
262,343,261
------------
Retail (5.9%)
American Stores Co. ........................ 1,610,800 65,841,449
Borders Group, Inc. + ...................... 75,800 2,719,325
Carson Pirie Scott & Co. + ................. 22,800 575,700
CVS Corp. .................................. 46,600 1,928,075
Dayton Hudson Corp. ........................ 2,021,100 79,328,174
Fabri-Centers of America Class A + ......... 27,300 440,213
Fabri-Centers of America Class B + ......... 8,300 127,613
Footstar, Inc. + ........................... 13,416 333,723
Hasbro, Inc. ............................... 18,600 723,075
Hibbett Sporting Goods, Inc. + ............. 7,600 110,200
May Department Stores Co. .................. 41,900 1,958,825
Mercantile Stores Co., Inc. ................ 324,700 16,032,063
Payless ShoeSource, Inc. + ................. 23,492 880,950
Price/Costco, Inc. + ....................... 750,500 18,856,313
Proffitt's, Inc. + ......................... 23,000 848,125
Revco D.S., Inc. + ......................... 427,000 15,799,000
Ross Stores, Inc. .......................... 504,500 25,225,000
Russ Berrie & Co., Inc. .................... 33,000 594,000
Safeway, Inc. + ............................ 307,100 13,128,525
Saks Holdings, Inc. + ...................... 23,300 629,100
Santa Isabel S.A ........................... 67,500 1,527,188
Sears, Roebuck & Co. ....................... 1,612,200 74,362,724
Shopko Stores, Inc. ........................ 383,700 5,755,500
Talbots, Inc. .............................. 46,500 1,331,063
The Finish Line, Inc. + .................... 23,300 492,213
TJX Companies, Inc. ........................ 796,800 37,748,400
United Auto Group, Inc. + .................. 9,300 239,475
Urban Shopping Centers, Inc. ............... 137,200 3,978,800
Vons Companies, Inc. + ..................... 133,000 7,963,375
Wet Seal, Inc. + ........................... 89,100 1,904,513
Williams-Sonoma, Inc. + .................... 37,200 1,353,150
Woolworth Corp. + .......................... 488,700 10,690,313
Zale Corp. + ............................... 955,300 18,270,113
------------
411,696,275
------------
Specialty Consumer Durables (0.1%)
Harley-Davidson, Inc. ...................... 134,900 6,340,300
------------
Telecommunications (1.3%)
360 Communications Co. + ................... 187,700 4,340,563
Ameritech Corp. ............................ 1,172,600 71,088,874
Aspect Telecommunications Corp. + .......... 47,845 3,038,158
Cascade Communications Corp. + ............. 158,400 8,731,800
DSP Communications, Inc. + ................. 14,400 279,000
LCC International, Inc. Class A + .......... 33,400 617,900
13
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1996 (continued)
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
United States (continued)
Telecommunications (continued)
Lightbridge, Inc. + ........................ 3,670 $ 31,424
Lucent Technologies, Inc. .................. 51,100 2,363,375
Teleport Communications Group, Inc. + ...... 27,900 850,950
U.S. Long Distance Corp. + ................. 39,300 314,400
------------
91,656,444
------------
Transportation (1.9%)
AMR Corp. + ................................ 956,300 84,273,937
Comair Holdings, Inc. ...................... 272,850 6,548,400
CSX Corp. .................................. 525,400 22,198,150
Eagle USA Airfreight, Inc. + ............... 18,200 477,750
Expeditors International of
Washington, Inc. ......................... 54,200 1,246,600
Harper Group, Inc. ......................... 45,000 1,068,750
UAL Corp. + ................................ 207,800 12,987,500
USAir Group, Inc. + ........................ 27,900 652,163
Werner Enterprises, Inc. ................... 42,000 761,250
------------
130,214,500
------------
Utilities - Electric (4.0%)
Boston Edison Co. .......................... 367,200 9,868,500
Calenergy, Inc. + .......................... 93,911 3,157,757
Central Hudson Gas & Electric Co. .......... 43,100 1,352,263
Commonwealth Energy System Co. ............. 48,700 1,144,450
Consolidated Edison Co. of
New York, Inc. ........................... 715,400 20,925,450
DQE, Inc. .................................. 78,050 2,263,450
Edison International ....................... 309,800 6,157,275
Enova Corp. ................................ 100,000 2,275,000
Entergy Corp. .............................. 2,343,700 65,037,674
Long Island Lighting Corp. ................. 118,800 2,628,450
MDU Resources Group, Inc. .................. 17,200 395,600
Ohio Edison Co. ............................ 421,000 9,577,750
Orange & Rockland Utilities, Inc. .......... 40,000 1,435,000
Pinnacle West Capital Corp. ................ 329,300 10,455,275
Public Service Co. of New Mexico ........... 180,000 3,532,500
Public Service Enterprise
Group, Inc. .............................. 210,600 5,738,850
Sierra Pacific Resources ................... 124,400 3,576,500
SIGCORP, Inc. .............................. 15,000 519,375
Texas Utilities Co. ........................ 1,703,800 69,429,849
Unicom Corp. ............................... 2,179,400 59,116,224
United Illuminating Co. .................... 36,000 1,129,500
------------
279,716,692
------------
Utilities - Oil and Gas (0.7%)
AGL Resources, Inc. ........................ 107,200 2,264,600
Brooklyn Union Gas Co. (The) ............... 82,700 2,491,338
Coastal Corp. (The) ........................ 617,400 30,175,425
Connecticut Energy Corp. ................... 14,700 312,375
New Jersey Resources Corp. ................. 43,000 1,257,750
Northwest Natural Gas Co. .................. 18,150 435,600
Pacific Enterprises ........................ 225,100 6,837,413
Valero Energy Corp. ........................ 88,000 2,519,000
------------
46,293,501
------------
Number
of Market
Shares Value
--------- ------------
Utilities - Telephone (4.6%)
Aerial Communications, Inc. + .............. 213,900 $ 1,737,938
AT&T Corp. ................................. 3,044,600 132,440,099
BellSouth Corp. ............................ 1,735,900 70,086,962
Century Telephone Enterprises .............. 156,000 4,816,500
Cincinnati Bell, Inc. ...................... 347,600 21,420,850
LCI International, Inc. + .................. 65,900 1,416,850
NYNEX Corp. ................................ 1,658,600 79,820,124
Southern New England
Telecommunications Corp. ................. 211,600 8,225,950
-------------
319,965,273
-------------
Total United States 6,373,798,164
-------------
Foreign Common Stocks (5.7%)
Argentina (0.1%)
Banco Frances del Rio de la Plata
SA (Banks) ............................... 141,450 3,889,875
Quilmes Industrial SA (Foods and
Beverages) ............................... 114,600 1,045,725
------------
Total Argentina 4,935,600
------------
Australia (0.1%)
Australian Gas Light Co. Ltd. (Oil
and Gas) ................................. 325,000 1,848,229
Goodman Fielder Ltd. (Foods and
Beverages) ............................... 2,580,000 3,196,714
Ita Group + (Foods and Beverages) ......... 1,250,000 1,360,160
Reinsurance Australia Corp. Ltd. ...........
(Insurance) .............................. 985,000 3,833,467
------------
Total Australia 10,238,570
------------
Austria (0.1%)
Austria Mikro Systeme
International AG (Electrical and
Electronics) ............................. 5,865 452,339
Oesterreichische
Elektrizitaetswirtschafts-AG
(Utilities - Electric) ................... 25,000 1,869,314
Strabag Oesterreich AG (Building
Materials and Construction) .............. 4,760 266,115
VA Technologie AG (Commercial
Services) ................................ 25,300 3,966,715
------------
Total Austria 6,554,483
------------
Belgium (0.1%)
Cimenteries CBR Cementbedrijven
(Building Materials and
Construction) ............................ 46,000 4,177,934
G.I.B. Holdings Ltd. (Retail) .............. 85,300 3,818,621
------------
Total Belgium 7,996,555
------------
Brazil (0.0%)
Companhia Energetica de Minas
Gerais (Utilities - Electric) ............ 12,000 408,817
Telecomunicacoes Brasileiras SA
(Utilities - Telephone) .................. 25,950 1,985,175
------------
Total Brazil ............................... 2,393,992
------------
Canada (0.2%)
Anderson Exploration Ltd. (Oil and
Gas) ..................................... 158,500 2,046,798
BCE, Inc. (Utilities - Telephone) .......... 48,432 2,307,386
14 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
Canada (continued)
Canadian National Railway
(Transportation) ......................... 120,000 $ 4,560,000
Dofasco, Inc. (Metals and Mining) .......... 13,411 253,416
Intertape Polymer Group, Inc. ..............
(Paper and Containers) ................... 96,600 2,216,513
Petro-Canada (Oil and Gas) ................. 183,100 2,584,889
Royal Bank of Canada (Banks) ............... 92,800 3,256,609
------------
Total Canada 17,225,611
------------
Chile (0.0%)
Empresa Nacional Electricidad SA
(Utilities - Electric) ..................... 40,000 620,000
------------
Denmark (0.2%)
Carli Gry International A/S +
(Apparel) ................................ 74,900 3,580,629
Falck A/S (Commercial Services) ............ 12,630 3,768,291
ISS International Service System
A/S (Diversified) ........................ 128,100 3,365,963
Tele Danmark A/S (Utilities -
Telephone) ............................... 69,800 3,845,628
------------
Total Denmark 14,560,511
------------
Finland (0.1%)
Huhtamaki Group (Diversified) .............. 78,700 3,654,104
Neste (Oil and Gas) ........................ 36,600 889,388
Oy Nokia Ab (Telecommunications) ........... 76,000 4,399,383
UPM-Kymmene Corp. + (Paper and
Containers) .............................. 55,500 1,162,017
------------
Total Finland 10,104,892
------------
France (0.3%)
Credit Local de France (Financial
Services) ................................ 28,800 2,503,993
Elf Aquitaine SA (Oil and Gas) ............. 33,600 3,052,526
Eridania Beghin-Say SA (Foods and
Beverages) ............................... 12,500 2,007,699
Lafarge SA (Building Materials and
Construction) ............................ 33,600 2,011,966
Pathe SA + (Media and
Entertainment) ........................... 13,030 3,132,972
Pernod Ricard (Foods and
Beverages) ............................... 19,500 1,076,511
Scor SA (Insurance) ........................ 50,600 1,776,297
Union des Assurances Federales
(Insurance) .............................. 29,400 3,619,341
Usinor Sacilor (Metals and Mining) ......... 6,900 100,207
------------
Total France 19,281,512
------------
Germany (0.4%)
BASF AG (Chemicals) ........................ 91,100 3,487,683
Commerzbank AG (Banks) ..................... 135,000 3,425,131
Deutsche Pfandbrief &
Hypothekenbank AG (Banks) ................ 69,200 3,116,249
GEA AG (Machinery and Equipment) ........... 6,700 2,069,419
Leifheit AG (Home Furnishings and
Appliances) .............................. 46,800 1,806,881
Moebel Walther AG (Home
Furnishings and Appliances) .............. 17,000 1,114,133
Schering AG (Pharmaceuticals) .............. 38,100 3,211,447
Number
of Market
Shares Value
--------- ------------
Germany (continued)
Schmalbach Lubeca AG (Paper and
Containers) .............................. 14,300 $ 3,507,474
VEBA AG (Utilities - Electric) ............. 62,050 3,563,294
Viag AG (Diversified) ...................... 2,800 1,094,666
Volkswagen AG (Autos and Auto
Equipment) ............................... 8,830 3,652,646
------------
Total Germany 30,049,023
------------
Hong Kong (0.3%)
China Light & Power Co. Ltd. ...............
(Utilities - Electric) ................... 309,000 1,374,222
Goldlion Holdings Ltd. (Retail) ............ 2,330,000 1,912,800
Great Eagle Holdings Ltd. (Real
Estate Investment Trusts) ................ 474,000 1,954,830
Guangnan Holdings (Commercial
Services) ................................ 3,788,000 3,256,653
Hong Kong Land Holdings Ltd. (Real
Estate Investment Trusts) ................ 853,291 2,372,149
HSBC Holdings Plc (Banks) .................. 128,482 2,749,035
Hysan Development Co. Ltd. (Real
Estate Investment Trusts) ................ 518,000 2,062,626
Ng Fung Hong Ltd. (Foods and
Beverages) ............................... 770,000 691,856
Regal Hotels International (Hotels
and Restaurants) ......................... 7,900,000 2,757,597
Tai Cheung Holdings Ltd. (Real
Estate Investment Trusts) ................ 105,000 99,095
Wheelock & Co. Ltd. (Real Estate
Investment Trusts) ....................... 468,000 1,334,118
------------
Total Hong Kong 20,564,981
------------
Indonesia (0.1%)
Asia Pulp & Paper Co. Ltd. +
(Paper and Containers) ................... 58,900 669,988
Bank Negara Indonesia + (Banks) ........... 239,000 126,455
P.T. Pasifik Satelit Nusantara ADR
+ (Telecommunications) .................. 31,300 375,600
PT Alumindo Perkasa (Metals and
Mining) .................................. 1,910,000 1,051,005
PT Bank Danamon Indonesia (Banks) .......... 1,038,000 977,587
PT Citra Marga Nusaphala Persada
(Commercial Services) .................... 1,651,000 1,292,846
PT Semen Gresik (Building
Materials and Construction) .............. 568,000 1,827,217
Steady Safe (Foreign-Registered
shares) (Transportation) ................. 680,000 870,688
------------
Total Indonesia 7,191,386
------------
Ireland (0.1%)
Adare Printing Group Plc (Printing
and Publishing) .......................... 197,935 1,909,543
Golden Vale Plc (Foods and
Beverages) ............................... 1,331,000 1,441,750
Irish Life Plc (Insurance) ................. 354,416 1,628,603
Waterford Wedgewood Plc (Home
Furnishings and Appliances) .............. 1,768,938 2,245,463
------------
Total Ireland 7,225,359
------------
15
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1996 (continued)
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
Italy (0.2%)
Credito Italiano (Banks) ................... 2,736,000 $ 2,997,814
Istituto Mobiliare Italiano S.p.A ..........
(Financial Services) ..................... 31,600 270,174
Pirelli S.p.A. (Autos and Auto
Equipment) ............................... 1,836,500 3,400,031
Stet Societa' Finanziaria
Telefonica S.p.A .........................
(Telecommunications) ..................... 1,110,000 3,741,368
------------
Total Italy 10,409,387
------------
Japan (0.9%)
AJL PEPS Trust (Consumer Products) ......... 76,800 1,257,600
Bank of Tokyo-Mitsubishi (Banks) ........... 214,000 3,963,987
Daibiru Corp. (Real Estate
Investment Trusts) ....................... 110,000 1,014,043
Daiichi Pharmaceutical ..................... 227,000 3,637,632
(Pharmaceuticals)
DDI Corp. (Utilities - Telephone) .......... 504 3,326,131
Exedy Corp. (Autos and Auto
Equipment) ............................... 159,400 1,977,565
Familymart (Retail) ........................ 30 1,197
Fuji Photo Film (Chemicals) ................ 106,000 3,488,584
Fujitsu Denso (Diversified) ................ 22,100 773,033
Furukawa Electric Co. (Electrical
Equipment) ............................... 475,000 2,246,704
Hitachi Koki (Electrical
Equipment) ............................... 317,000 2,264,091
Hitachi Ltd. (Electrical and
Electronics) ............................. 138,200 1,285,914
Ito-Yokado Co. Ltd. (Retail) ............... 70,000 3,039,545
Komatsu Ltd. (Machinery and
Equipment) ............................... 323,000 2,643,663
Konica Corp. (Chemicals) ................... 361,000 2,388,627
Matsushita Electric Industrial Co. .........
Ltd. (Electrical and
Electronics) ............................. 191,000 3,110,106
Mitsubishi Heavy Industries Ltd. ...........
(Aerospace and Defense) .................. 396,000 3,138,795
Mizuno Corp. (Consumer Products) ........... 207,000 1,565,831
NAMCO (Media and Entertainment) ............ 109,500 3,349,056
Nintendo Co. Ltd. (Electrical and
Electronics) ............................. 8,000 571,379
Nippon Densetsu Kogyo (Building
Materials and Construction) .............. 13,000 120,961
Nishimatsu Construction +
(Building Materials and
Construction) ............................ 45,000 391,574
NTT Data Communications Systems
Co. (Computer Software) .................. 100 2,920,651
Rohm Co. (Electrical and
Electronics) ............................. 23,000 1,505,988
Shin-Etsu Chemical Co. (Chemicals) ......... 1,200 21,814
Shinmaywa Industries Ltd. (Autos
and Auto Equipment) ...................... 181,000 1,330,171
Takara Standard (Building
Materials and Construction) .............. 307,000 2,552,382
TDK Corp. (Electrical and
Electronics) ............................. 25,000 1,626,174
Tsukishima Kikai (Machinery and
Equipment) ............................... 72,700 1,196,321
West Japan Railway
(Transportation) ......................... 928 2,998,191
------------
Total Japan 59,707,710
------------
Number
of Market
Shares Value
--------- ------------
Malaysia (0.2%)
AMMB Holdings Bhd (Financial
Services) ................................ 397,000 $ 3,332,560
Leader Universal Holdings Bhd
(Diversified) ............................ 481,500 1,010,471
Lion Land Bhd (Financial Services) ......... 1,651,000 1,706,236
MBF Capital Bhd (Financial
Services) ................................ 1,835,000 2,979,007
Oriental Holdings Bhd
(Diversified) ............................ 348,300 2,372,103
UMW Holdings Bhd (Diversified) ............. 101,000 471,905
------------
Total Malaysia 11,872,282
------------
Mexico (0.2%)
ALFA, SA de C.V. (Diversified) ............. 776,726 3,571,822
Gruma SA (Foods and Beverages) ............. 150,000 910,820
Panamerican Beverages, Inc. (Foods
and Beverages) ........................... 81,000 3,796,875
Transportacion Maritima Mexicana
SA de CV (Transportation) ................ 158,100 830,025
Tubos de Acero de Mexico SA +
(Metals and Mining) ...................... 152,000 2,413,000
------------
Total Mexico 11,522,542
------------
Netherlands (0.2%)
Fortis Amev N.V. (Financial
Services) ................................ 73,916 2,585,317
Getronics NV (Computers and Office
Equipment) ............................... 133,000 3,606,155
ING Groep N.V. (Banks) ..................... 107,588 3,868,781
Philips Electronics N.V
(Electrical and Electronics) ............. 88,500 3,581,469
------------
Total Netherlands 13,641,722
------------
New Zealand (0.0%)
Telecom Corp. of New Zealand Ltd.
(Telecommunications) ................... 175,000 892,707
------------
Norway (0.3%)
Den norske Bank ASA (Banks) ................ 996,850 3,809,193
Kvaerner ASA (Transportation) .............. 71,600 3,481,673
Merkantildata ASA (Computer
Software) ................................ 189,000 3,463,068
Saga Petroleum ASA (Oil and Gas) ........... 165,000 2,584,028
Schibsted ASA (Printing and
Publishing) .............................. 215,500 3,965,505
Tomra Systems ASA (Paper and
Containers) .............................. 150,000 2,337,371
------------
Total Norway 19,640,838
------------
Philippines (0.1%)
Ayala Land, Inc. (Real Estate
Investment Trusts) ....................... 2,060,000 2,349,809
DMCI Holdings, Inc. + (Building
Materials and Construction) .............. 1,980,000 1,298,669
------------
Total Philippines 3,648,478
------------
Singapore (0.2%)
City Developements Ltd. (Real
Estate Investment Trusts) ................ 358,000 3,224,720
Clipsal Industries Ltd.
(Electrical Equipment) ................... 675,000 2,457,000
16 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
Number
of Market
Shares Value
--------- ------------
Singapore (continued)
Development Bank of Singapore Ltd.
(Banks) .................................. 256,000 $ 3,458,918
NatSteel Ltd. (Metals and Mining) .......... 336,000 763,844
Wing Tai Holdings Ltd.
(Diversified) ............................ 1,413,000 4,040,551
------------
Total Singapore 13,945,033
------------
South Korea (0.0%)
Korea Electric Power Corp.
(Utilities - Electric) ..................... 108,300 2,220,150
------------
Spain (0.2%)
Cubiertas y Mzov SA (Building
Materials and Construction) .............. 43,700 3,359,599
Empresa Nacional de Electricidad
SA (Utilities - Electric) ................ 49,400 3,509,175
Repsol SA (Oil and Gas) .................... 100,300 3,840,045
Telefonica de Espana (Utilities -
Telephone) ............................... 90,000 2,086,104
------------
Total Spain 12,794,923
------------
Sweden (0.3%)
Enator AB + (Commercial Services) ......... 161,120 4,117,653
Frontec AB + (Computer Software) .......... 227,000 3,922,950
Mo och Domsjo AB (Paper and
Containers) .............................. 121,500 3,416,508
Skandinaviska Enskilda Banken
(Banks) .................................. 387,000 3,967,472
Volvo AB (Autos and Auto
Equipment) ............................... 170,200 3,751,465
------------
Total Sweden 19,176,048
------------
Switzerland (0.0%)
Baloise Holding Ltd. (Insurance) ........... 160 320,543
------------
Taiwan (0.0%)
China Steel Corp. ++ (Metals and
Mining) .................................... 128,000 2,568,000
------------
United Kingdom (0.8%)
Bank of Scotland (Banks) ................... 640,354 3,380,660
British Airways Plc
(Transportation) ......................... 291,200 3,017,392
British Telecommunications Plc
(Utilities - Telephone) .................. 442,700 2,988,702
Burton Group Plc (Retail) .................. 1,513,759 4,060,602
Commercial Union Plc (Insurance) ........... 285,600 3,340,588
Cowie Group Plc (Autos and Auto
Equipment) ............................... 483,000 3,335,161
D.F.S. Furniture Co. Plc + (Home
Furnishings and Appliances) .............. 256,290 2,646,885
Glaxo Wellcome Plc
(Pharmaceuticals) ........................ 185,600 3,011,012
Granada Group Plc (Diversified) ............ 214,839 3,167,339
Hillsdown Holdings Plc (Foods and
Beverages) ............................... 1,113,704 3,811,763
Inchcape Plc (Retail) ...................... 314,316 1,465,747
Ladbroke Group Plc (Media and
Entertainment) ........................... 817,696 3,232,437
National Power Plc (Utilities -
Electric) ................................ 72,050 2,440,694
Pearson Plc (Printing and
Publishing) .............................. 238,000 3,052,634
Pilkington Plc (Building Materials
and Construction) ........................ 796,800 2,133,977
Railtrack Group Plc
(Transportation) ......................... 385,000 2,553,046
Number
of Market
Shares Value
--------- ------------
United Kingdom (continued)
Shell Transport & Trading Co. (Oil
and Gas) ................................. 210,000 $ 3,635,058
Slough Estates Plc (Real Estate
Investment Trusts) ....................... 487,125 2,321,627
T & N Plc (Autos and Auto
Equipment) ............................... 460,000 1,365,789
-------------
Total United Kingdom 54,961,113
-------------
Total Foreign Common Stocks 396,263,951
-------------
Total Common Stocks (cost $5,172,979,766) 6,770,062,115
-------------
PREFERRED STOCKS (0.3%)
United States (0.3%)
Alexander & Alexander ++
(Financial Services) ..................... 49,000 2,560,250
AMC Entertainment (Media and
Entertainment) ........................... 15,850 427,950
Case Corp. ++ (Machinery and
Equipment) ............................... 14,200 1,909,900
Corning Delaware L.P. (Foods and
Beverages) ............................... 13,900 884,388
Cyprus Amax Minerals Co. (Metals
and Mining) .............................. 42,100 2,294,450
Freeport McMoRan, Inc. (Metals and
Mining) .................................. 23,000 646,875
International Paper Co. ++ (Paper
and Containers) .......................... 9,300 430,125
Sea Containers Ltd. (Diversified) .......... 36,000 1,638,000
Security Capital Pacific Trust
(Real Estate Investment Trusts) .......... 19,400 594,125
Tanger Factory Outlet Centers,
Inc. (Retail) ............................ 55,800 1,374,075
Union Planters Co. (Foods and
Beverages) ............................... 18,600 921,863
Valero Energy Corp. (Utilities -
Oil and Gas) ............................. 37,200 2,148,300
William Cos., Inc. (Commercial
Services) ................................ 27,900 2,476,125
------------
Total United States 18,306,426
------------
Foreign Preferred Stocks (0.0%)
Austria (0.0%)
Creditanstalt-Bankverein (Banks) ........... 24,100 1,111,671
------------
Germany (0.0%)
Gerry Weber International AG
(Apparel) .................................. 60,059 2,455,191
------------
Total Foreign Preferred Stocks 3,566,862
------------
Total Preferred Stocks (cost $ 19,823,223) 21,873,288
------------
Principal Market
Amount Value
------------ ------------
LONG-TERM BONDS AND NOTES (1.2%)
Corporate and Convertible Bonds (1.2%)
Agnico-Eagle Mines Ltd., 3.50%,
01/27/04 ................................. $ 2,900,000 $ 2,679,497
Alza Corp., 0.00%, 07/14/14 ................ 1,860,000 760,275
Alza Corp., 5.00%, 05/01/06 ................ 930,000 897,450
Apache Corp., 6.00%, 01/15/02 .............. 1,470,000 1,837,500
Automatic Data Processing, Inc.,
0.00%, 02/20/12 .......................... 3,800,000 2,201,347
Baker Hughes, Inc., 0.00%, 05/05/08 ........ 9,975,000 7,573,512
17
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1996 (continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
------------ ------------
Corporate and Convertible Bonds
(continued)
Battle Mountain Gold Co., 6.00%,
01/04/05 ................................. $ 500,000 $ 430,000
Bindley Western, 6.50%, 10/01/02 ........... 930,000 1,009,251
Boston Chicken, Inc., 0.00%,
06/01/15 ................................. 3,730,000 1,142,313
Career Horizons, Inc., 7.00%,
11/01/02 ................................. 930,000 1,826,288
Checkpoint Systems, Inc., 5.25%,
11/01/05 ................................. 1,162,000 1,652,945
Cityscape Financial Corp. ++ ,
6.00%, 05/01/06 .......................... 1,160,000 1,218,000
Comverse Technology Inc. ++ ,
5.75%, 10/01/06 .......................... 4,600,000 4,784,000
Consolidated Natural Gas Co.,
7.25%, 12/15/15 .......................... 950,000 1,017,688
Continental Airlines, Inc. ++ ,
6.75%, 04/15/06 .......................... 1,860,000 2,111,100
Continental Homes Holding Corp.,
6.875%, 11/01/02 ......................... 700,000 741,125
Costco Wholesale, Inc., 5.75%,
05/15/02 ................................. 2,225,000 2,168,082
Cross Timbers Oil Co., 5.25%,
11/01/03 ................................. 465,000 517,894
Fpa Medical Management, 4.50%,
12/15/01 ................................. 1,860,000 1,869,300
Fremont General Corp., 0.00%,
10/12/13 ................................. 930,000 556,838
Healthsouth Rehab Corp., 5.00%,
04/01/01 ................................. 465,000 934,650
Home Depot, Inc., 3.25%, 10/01/01 .......... 930,000 911,400
Integrated Health Services, 5.75%,
01/01/01 ................................. 930,000 918,375
Marriott International, Inc. ++ ,
0.00%, 03/25/11 .......................... 2,730,000 1,535,625
NAC Re Corp. ++ , 5.25%, 12/15/02 .......... 930,000 895,125
National Semiconductor Corp. ++ ,
6.50%, 10/01/02 .......................... 4,650,000 4,557,000
Office Depot, Inc., 0.00%, 12/11/07 ........ 1,100,000 668,250
Ogden Corp., 6.00%, 06/01/02 ............... 475,000 453,625
Pennzoil Co., 4.75%, 10/01/03 .............. 1,000,000 1,170,000
Pennzoil Co., 6.50%, 01/15/03 .............. 465,000 719,588
Phycor Inc., 4.50%, 02/15/03 ............... 1,395,000 1,379,306
Phymatrix Corp., 6.75%, 06/15/03 ........... 2,300,000 1,897,500
Pioneer Financial Services, 6.50%,
04/01/03 ................................. 1,395,000 1,867,556
Pogo Producing, 5.50%, 03/15/04 ............ 930,000 2,051,813
Potomac Electric Power, 7.00%,
01/15/18 ................................. 750,000 772,500
Prime Hospitality Corp., 7.00%,
04/15/02 ................................. 795,000 1,148,775
Proffitt's, Inc., 4.75%, 11/01/03 .......... 3,665,000 3,674,163
Richey Electronics, Inc. ++ ,
7.00%, 03/01/06 .......................... 1,859,000 1,861,324
Rotech Medical Corp. ++ , 5.25%,
06/01/03 ................................. 3,255,000 3,271,275
Sanmina Corp. ++ , 5.50%, 08/15/02 ........ 930,000 1,897,200
SCI Systems, Inc. ++ , 5.00%,
05/01/06 ................................. 695,000 816,625
Sholodge Inc., 7.50%, 05/01/04 ............. 2,562,000 2,292,990
Theratx Inc., 8.00%, 02/01/02 .............. 1,920,000 1,804,800
Thermo Instrument System ++ ,
4.50%, 10/15/03 .......................... 930,000 953,250
U.S. Filter Corp., 6.00%, 09/15/05 ........ 3,165,000 5,570,400
US Cellular Corp., 0.00%, 06/15/15 ........ 2,325,000 770,156
US Office Products Co. ++ , 5.50%,
02/01/01 ................................. 930,000 1,213,650
Veterinary Centers of America ++ ,
5.25%, 05/01/06 .......................... 465,000 313,871
------------
Total Long-Term Bonds and Notes
(cost $76,105,184) ....................... 83,315,197
------------
Number of Market
Contracts Value
------------ ------------
CALL OPTIONS PURCHASED (0.1%)
Russell 2000 Index, Strike $340,
March 97 ................................. 1,500 $ 4,575,000
Russell 2000 Index, Strike $355,
March 97 ................................. 1,213 2,410,838
------------
Total Call Options Purchased
(cost $6,170,939) ........................ 6,985,838
------------
PUT OPTIONS PURCHASED (0.1%)
S & P MidCap Index, Strike $240,
March 97 ................................. 10,380 4,476,375
S & P MidCap Index, Strike $250,
March 97 ................................. 6,048 4,158,000
------------
Total Put Options Purchased
(cost $9,655,684) ........................ 8,634,375
------------
Principal Market
Amount Value
------------ ------------
SHORT-TERM INVESTMENTS (1.6%)
A.H. Robins Co., Inc. ++ , Comm.
Paper, 6.50%, 01/02/97 ................... $ 18,685,000 $ 18,685,000
American Express Credit Corp.,
Comm. Paper, 5.50%, 01/02/97 ............. 31,391,000 31,391,000
Countrywide Home Loans, Comm.
Paper, 6.75%, 01/02/97 ................... 4,388,000 4,388,000
Dana Credit Corp., Comm. Paper,
6.95%, 01/03/97 .......................... 18,195,000 18,191,487
Occidental Petroleum, Comm. Paper,
6.20%, 01/06/97 .......................... 9,200,000 9,193,662
U.S. Treasury Bill +++ , Time
Deposit, 5.08%, 08/21/97 ................. 26,800,000 25,913,456
U.S. Treasury Bill +++ , Time
Deposit, 5.115%, 08/21/97 ................ 1,000,000 967,179
--------------
Total Short-Term Investments
(cost $108,742,737) ...................... 108,729,784
--------------
TOTAL INVESTMENTS
(cost $5,393,477,533)(a) ................. 6,999,600,597
Other assets less liabilities .............. (45,370,101)
--------------
Total Net Assets ........................... $6,954,230,496
==============
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amounted to
$5,403,059,920. Unrealized gains and losses, based on identified tax cost at
December 31, 1996, are as follows:
Unrealized gains .................. $1,652,529,593
Unrealized losses ................. (55,988,916)
--------------
Net unrealized gain ............. $1,596,540,677
--------------
+ Non-income producing security.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+++ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1996.
Category percentages are based on net assets.
18 See Notes to Financial Statements.
<PAGE>
Notes to Portfolio of Investments (continued)
Information concerning open futures contracts at December 31, 1996 is shown
below:
No. of Initial
Long Notional Expiration Unrealized
Contracts Value Date Gain/(Loss)
--------- ----- ---- -----------
All Ordinaries
Share Price .... 27 $ 1,251,060 March 97 $ 61,436
Index Future
TSE 35 Index ..... 19 2,137,791 March 97 71,528
Future
FTSE 100 Index ... 10 1,664,238 March 97 36,686
Future
Topix Index ...... 70 9,655,323 March 97 (488,843)
Future
S & P 500 Index
Future ......... 862 317,607,905 March 97 3,271,594
------------- ------------
$ 332,316,317 $ 2,952,401
============= ============
Information concerning written option contracts at December 31, 1996 is shown
below:
<TABLE>
<CAPTION>
Exercise Expiration Market
Call Options Contracts Price Date Value
- ------------ --------- ----- ---- -----
<S> <C> <C> <C> <C>
S & P Midcap Index ....................... 6,048 $ 240 March 97 $ (8,202,600)
S & P Midcap Index ....................... 10,380 250 March 97 (21,668,250)
Sunbeam Corporation ...................... 233 20 Jan 97 (135,431)
Put Options
- -----------
Russell 2000 Index ....................... 1,500 340 March 97 (1,087,500)
Russell 2000 Index ....................... 1,213 355 March 97 (1,379,788)
------------
Total Deferred Premiums on Written Options $(32,473,569)
============
</TABLE>
19
<PAGE>
Aetna Income Shares
Portfolio of Investments - December 31, 1996
- --------------------------------------------------------------------------------
Principal Market
Amount Value
-------- -----------
LONG-TERM BONDS AND NOTES (89.2%)
U.S. Government and Agency Obligations (41.9%)
Agency Mortgage-Backed Securities (15.3%)
Federal Home Loan Mortgage Corp.
20 6-B, 0.00%, 07/15/19 ........................ $ 34,553 $ 34,553
Federal National Mortgage
Association, 0.00%, 06/25/19 ................... 1,234,934 1,153,980
Federal National Mortgage
Association, 7.00%, 08/01/25 -
03/01/26 ....................................... 14,698,022 14,399,475
Federal National Mortgage
Association, 7.50%, 11/01/25 -
12/11/26 ....................................... 15,000,000 15,000,000
Federal National Mortgage
Association, 8.00%, 12/11/26 ................... 25,000,000 25,468,750
Government National Mortgage
Association, 7.00%, 04/15/26 ................... 10,064,744 9,860,309
Government National Mortgage
Association, 7.50%, 03/15/24 -
10/15/25 ....................................... 9,036,012 9,052,956
Government National Mortgage
Association, 10.00%, 10/15/09 -
01/15/21 ....................................... 10,576,234 11,610,668
Government National Mortgage
Association, 10.50%, 02/15/13 -
01/15/21 ....................................... 10,815,295 11,974,506
Government National Mortgage
Association, 11.00%, 02/15/10 .................. 38,166 42,197
------------
98,597,394
------------
U.S. Agencies (1.5%)
Small Business Administration
92-20K, 7.55%, 11/01/12 ........................ 9,114,016 9,296,296
------------
9,296,296
------------
U.S. Treasuries (25.1%)
U.S. Treasury Bond, 6.75%, 08/15/26 ............. 5,000,000 5,035,940
U.S. Treasury Bond, 10.375%,
11/15/12 ....................................... 20,000,000 25,768,759
U.S. Treasury Note, 5.75%, 08/15/03 ............. 20,000,000 19,406,250
U.S. Treasury Note, 6.25%, 05/31/00 ............. 20,000,000 20,087,450
U.S. Treasury Note, 6.375%, 05/15/99 ............. 9,500,000 9,586,099
U.S. Treasury Note, 6.50%, 05/31/01 ............. 15,000,000 15,173,445
U.S. Treasury Note, 6.875%, 07/31/99 ............. 20,000,000 20,412,450
U.S. Treasury Note, 6.875%, 08/31/99 ............. 20,000,000 20,418,760
U.S. Treasury Note, 6.875%, 03/31/00 ............. 25,000,000 25,570,313
------------
161,459,466
------------
Total U.S. Government and Agency
Obligations(cost $269,036,424) ................. 269,353,156
------------
Corporate Bonds (44.5%)
Financial Services (15.0%)
American General, 8.125%, 08/15/09 ............... 10,000,000 10,753,200
Associates Corp., 7.95%, 02/15/10 ................ 15,000,000 16,045,200
Capital One Bank, 8.625%, 01/15/97 ............... 5,000,000 5,002,800
Chase Manhattan Corp., 6.625%,
01/15/98 ....................................... 10,000,000 10,067,900
Dean Witter, Discover & Co., 6.00%,
03/01/98 ....................................... 6,000,000 6,001,920
Ford Motor Credit Corp., FRN,
5.75%, 02/22/99 ................................ 15,000,000 15,030,526
Ford Motor Credit Corp., FRN,
5.962%, 06/02/98 ............................... 7,000,000 7,035,666
General Electric Capital Corp.,
7.96%, 02/02/98 ................................ 10,000,000 10,243,500
General Electric Capital Corp.,
8.625%, 06/15/08 ............................... 10,000,000 11,330,100
Mellon Capital II, 7.995%, 01/15/27 ............. $ 5,000,000 $ 5,057,000
------------
96,567,812
------------
Principal Market
Amount Value
---------- -----------
Foreign and Supranationals (15.5%)
African Development Bank, 8.80%,
09/01/19 ....................................... 11,650,000 13,776,242
China International Trust, 9.00%,
10/15/06 ....................................... 10,000,000 11,053,400
Inter-American Development Bank,
12.25%, 12/15/08 ............................... 7,775,000 11,183,716
International Bank For
Reconstruction & Development,
9.25%, 07/15/17 ................................ 11,000,000 13,691,370
Korea Electric, 6.375%, 12/01/03 ................. 4,500,000 4,372,875
Korean Development Bank, 9.25%,
06/15/98 ....................................... 5,000,000 5,223,300
Republic of Argentina, 9.25%,
02/23/01 ....................................... 5,000,000 5,093,750
Republic of Argentina, FRB, 6.625%,
03/31/05 ....................................... 4,900,000 4,266,063
Rogers Cablesystem, 10.00%, 03/15/05 ............. 8,500,000 9,073,750
Swire Pacific Ltd. + , 8.50%,
09/29/04 ....................................... 5,500,000 5,893,030
Teleport Communications, 0.00%,
07/01/07 ....................................... 10,000,000 6,875,000
United Mexican States Government +
, 7.562%, 08/06/01 ............................. 9,000,000 9,066,094
------------
99,568,590
------------
Other Corporate Bonds (14.0%)
Alliance Entertainment, 11.25%,
07/15/05 ....................................... 5,000,000 3,675,000
Echostar Communications, 0.00%,
06/01/04 ....................................... 10,000,000 8,311,309
Georgia-Pacific Corp., 9.50%,
12/01/11 ....................................... 5,500,000 6,420,700
HSBC America + , 7.808%, 12/15/26 ................ 6,500,000 6,279,715
Lamar Advertising Co., 9.625%,
12/01/06 ....................................... 2,000,000 2,080,000
MFS Communications, Inc., 5.00%,
01/15/06 ....................................... 5,000,000 3,650,000
MGM Grand Hotel, 12.00%, 05/01/02 ................ 4,000,000 4,300,000
Paramount Communications, Inc.,
7.50%, 07/15/23 ................................ 11,500,000 9,826,060
Tele-Communcations, Inc., 9.80%,
02/01/12 ....................................... 5,000,000 5,411,000
Telewest Plc, 11.00%, 10/01/07 ................... 6,850,000 4,795,000
Tenet Healthcare Corp., 9.625%,
09/01/02 ....................................... 5,000,000 5,470,000
Time Warner, Inc., 7.95%, 02/01/00 ............... 7,000,000 7,238,343
Time Warner, Inc., 9.125%, 01/15/13 ............. 5,000,000 5,429,300
Trump Atlantic City, 11.25%,
05/01/06 ....................................... 5,000,000 4,975,000
TRW, Inc., 9.35%, 06/04/20 ....................... 10,500,000 12,603,675
------------
90,465,102
------------
Total Corporate Bonds (cost $279,539,667) ........ 286,601,504
------------
Non-Agency Mortgage-Backed Securities (1.5%)
Mortgage-Backed Securities (1.5%)
Chase Mortgage Finance, 6.75%,
11/25/09 ....................................... 7,544,972 7,537,899
Security Pacific National Bank,
8.50%, 03/01/17 ................................ 2,275,340 2,263,964
------------
9,801,863
------------
Total Non-Agency Mortgage-Backed
Securities (cost $9,658,946) ................... 9,801,863
------------
Asset-Backed Securities (1.3%)
First Chicago Master Trust 94I-A,
5.80%, 01/15/99 ................................ 8,250,000 8,263,778
------------
Total Asset-Backed Securities (cost $8,242,652)... 8,263,778
------------
Total Long-Term Bonds and Notes
(cost $566,477,689) ............................ 574,020,301
------------
20 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Principal Market
Amount Value
------------ ------------
SHORT-TERM INVESTMENTS (15.9%)
Bridgestone Firestone Master Trust,
Inc. + , Asset-Backed Securities,
6.40%, 01/06/97 ................................ $ 15,000,000 $ 15,000,000
Circuit City Credit Card + , Comm ................
Paper, 6.20%, 01/07/97 ......................... 12,000,000 12,000,000
Countrywide Home Loans, Comm .....................
Paper, 6.50%, 01/09/97 ......................... 15,000,000 14,981,042
Dakota Certificates-Standard Credit
Card Master Trust 1 +,
Asset-Backed Securities, 5.50%,
01/14/97 ....................................... 20,000,000 19,963,333
Lockheed Martin Corp. + , Comm ...................
Paper, 7.25%, 01/02/97 ......................... 30,666,000 30,666,000
Source One Mortgage Services Corp.,
Comm. Paper, 5.72%, 01/14/97 ................... 10,000,000 9,980,933
------------
Total Short-Term Investments
(cost $102,591,308)
102,591,308
------------
TOTAL INVESTMENTS
(cost $669,068,997)(a) ......................... 676,611,609
Other assets less liabilities .................... (32,882,180)
------------
Total Net Assets ................................. $643,729,429
============
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amount to
$669,718,833. Unrealized gains and losses based on identified tax cost at
December 31, 1996, are as follows:
Unrealized gains ..................................... $ 12,707,192
Unrealized losses .................................... (5,814,416)
------------
Net unrealized gain ................................ $ 6,892,776
============
+ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
Category percentages are based on net assets.
See Notes to Financial Statements. 21
<PAGE>
Aetna Variable Encore Fund
Portfolio of Investments - December 31, 1996
- --------------------------------------------------------------------------------
Principal Market
Amount Value
------------ ------------
Asset-Backed Securities (17.2%)
Capita Equipment Receivables Trust,
5.60%, 10/15/97 ........................... $8,727,063 $8,727,063
CARCO Auto Loan Master Trust
1993-2, 5.665%, 11/15/98 .................. 15,500,000 15,551,150
Case Equipment Loan Trust, 5.562,
09/15/97 ................................. 9,553,295 9,591,603
Dakota Certificates - Standard
Credit Card Master Trust 1 + ,
5.35%, 02/21/97............................ 3,500,000 3,473,993
Dakota Certificates - Standard
Credit Card Master Trust 1 + ,
5.40%, 03/14/97 ........................... 7,000,000 6,919,080
Dakota Certificates - Standard
Credit Card Master Trust 1 + ,
5.35%, 01/13/97 ........................... 8,300,000 8,286,432
Ford Credit Auto Lease, 5.451%,
11/15/97 .................................. 5,000,000 4,995,300
Nationsbank Auto Owner Trust,
5.776%, 08/15/97 .......................... 9,243,754 9,243,754
Norwest Auto Trust, 5.465%, 12/05/97 ........ 20,498,108 20,483,144
WFS Financial, Inc., 5.50%, 01/16/98 ........ 18,000,000 18,000,000
------------
Total Asset-Backed Securities 105,271,519
------------
Certificates of Deposit (4.3%)
Abbey National Europe, 5.52%,
02/26/97 .................................. 10,000,000 10,000,149
Deutsche Bank AG, New York Branch,
5.22%, 02/28/97 ........................... 9,000,000 9,000,000
Deutsche Bank AG, New York Branch,
5.32%, 03/06/97 ........................... 7,500,000 7,494,225
------------
Total Certificates of Deposit 26,494,374
------------
Commercial Paper - Domestic (22.0%)
Alamo Funding L.P. + , 5.55%,
01/21/97 .................................. 1,260,000 1,256,309
Baxter International, Inc. + ,
6.00%, 01/24/97 ........................... 5,000,000 4,981,667
Chrysler Financial Corp., 5.33%,
04/10/97 .................................. 3,000,000 2,953,740
Ciesco L.P. + , 5.32%, 02/12/97 ............. 2,300,000 2,286,065
Ciesco L.P. + , 6.75%, 01/06/97 ............. 1,000,000 999,250
Cooperative Association of Tractor
Dealers, Inc., 5.50%, 01/23/97 ............ 1,000,000 996,792
Cooperative Association of Tractor
Dealers, Inc., 5.60%, 01/23/97 ............ 2,100,000 2,093,140
Cooperative Association of Tractor
Dealers, Inc., 6.40%, 01/06/97 ............ 3,000,000 2,997,867
Corporate Asset Funding Co., Inc.,
5.32%, 02/26/97 ........................... 4,000,000 3,967,489
Countrywide Home Loans, 5.36%,
01/22/97 .................................. 3,086,000 3,076,811
Countrywide Home Loans, 6.50%,
01/09/97 .................................. 4,000,000 3,994,944
CSW Credit, Inc., 5.34%, 01/30/97 ........... 8,600,000 8,564,281
CSW Credit, Inc., 5.45%, 02/25/97 ........... 9,400,000 9,323,155
Dealers Capital Access Trust, Inc.,
5.40%, 02/24/97 ........................... 2,300,000 2,281,715
Dealers Capital Access Trust, Inc.,
5.43%, 02/14/97 ........................... 2,300,000 2,285,083
Dealers Capital Access Trust, Inc.,
5.45%, 02/14/97 ........................... 2,500,000 2,483,726
Dealers Capital Access Trust, Inc.,
5.45%, 02/25/97 ........................... 2,000,000 1,983,650
Dean Witter, Discover & Co., 5.38%,
01/29/97 .................................. 4,000,000 3,983,860
Finova Capital Corp., 5.55%,
02/10/97 .................................. 7,500,000 7,454,906
Principal Market
Amount Value
------------ ------------
Ford Motor Credit Co., 5.33%,
03/28/97 .................................. $8,000,000 $7,890,720
GE Capital Corp., 5.34%, 04/30/97 ........... 4,400,000 4,320,492
Government Development Bank of
Puerto Rico, 5.45%, 02/18/97 .............. 7,500,000 7,446,635
GTE Corp., 5.55%, 01/31/97 .................. 3,100,000 3,086,140
Hertz Corp., 5.33%, 03/31/97 ................ 8,000,000 7,886,960
Jefferson Smurfit Finance Corp.,
5.33%, 04/29/97 ........................... 2,700,000 2,651,157
Jefferson Smurfit Finance Corp.,
5.35%, 06/02/97 ........................... 5,000,000 4,882,900
Jefferson Smurfit Finance Corp.,
5.45%, 03/17/97 ........................... 2,200,000 2,173,468
Mid-Atlantic Fuel Co., 7.40%,
01/02/97 .................................. 3,681,000 3,681,000
Sears Roebuck Acceptance Corp.,
5.50%, 03/24/97 ........................... 6,500,000 6,413,940
Sheffield Receivables Corp. +,
5.35%, 01/21/97 ........................... 2,500,000 2,492,941
Sheffield Receivables Corp. +,
5.70%, 01/03/97 ........................... 3,000,000 2,999,525
Transamerica Finance Group, 5.34%,
03/26/97 .................................. 8,300,000 8,188,448
WMX Technologies, Inc. + , 5.43%,
01/24/97 .................................. 3,000,000 2,990,045
------------
Total Commercial Paper - Domestic 135,068,821
------------
Commercial Paper - Foreign (15.6%)
Abbey National North America,
5.30%, 03/10/97 ........................... 3,620,000 3,580,651
Central Hispano NA Capital Corp.,
5.33%, 04/28/97 ........................... 7,000,000 6,874,910
Central Hispano NA Capital Corp.,
5.44%, 02/27/97 ........................... 6,000,000 5,949,227
Central Hispano NA Capital Corp.,
5.44%, 02/28/97 ........................... 6,000,000 5,948,320
Daewoo International (America)
Corp., 5.60%, 02/14/97 .................... 10,000,000 9,933,111
Province of British Columbia,
5.40%, 02/11/97 ........................... 7,000,000 6,958,000
Skandinaviska Enskilda Banken
Funding, Inc., 5.35%, 02/05/97 ............ 14,000,000 13,929,261
Svenska Handelsbanken, Inc., 5.36%,
05/27/97 .................................. 12,000,000 11,740,933
Svenska Handelsbanken, Inc., 5.40%,
02/28/97 .................................. 6,000,000 5,948,700
Xerox Mexican S.A. de C.V., 5.43%,
03/24/97 .................................. 7,500,000 7,401,600
Xerox Mexican S.A. de C.V., 5.51%,
01/27/97 .................................. 7,697,000 7,667,548
Xerox Mexican S.A. de C.V., 5.55%,
01/22/97 .................................. 10,000,000 9,969,167
------------
Total Commercial Paper - Foreign 95,901,428
------------
Corporate Notes (19.4%)
Advanta National Bank, FRN, 5.762%,
09/18/97 .................................. 4,350,000 4,355,438
Bankers Trust New York Corp. + ,
5.69%, 12/12/97 ........................... 5,400,000 5,399,892
Bankers Trust New York Corp. + ,
5.69%, 12/22/97 ........................... 10,000,000 9,997,400
Capital One Bank, FRN, 6.10%,
02/03/97 .................................. 5,500,000 5,501,880
FNB Boston, 5.47%, 03/31/97 ................. 6,000,000 5,998,800
FNB Boston, 5.47%, 04/07/97 ................. 8,000,000 7,998,400
General Motors Acceptance Corp.,
7.625%, 02/15/97 .......................... 1,000,000 1,001,872
Golden West Financial, 10.25%,
05/15/97 .................................. 5,210,000 5,292,214
22 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
Principal Market
Amount Value
------------ ------------
Corporate Notes (continued)
Greyhound Financial Corp., 8.25%,
03/11/97 .................................. $6,000,000 $ 6,028,080
Household Bank FSB, FRN, 5.46%,
09/19/97 .................................. 21,460,000 21,458,927
Money Funding, Inc., 8.125%,
04/07/97 .................................. 4,000,000 4,020,000
PACCAR Financial Corp., 5.597%,
03/26/97 .................................. 15,000,000 15,000,000
PNC Bank NA, FRN, 5.462%, 07/02/97 .......... 27,000,000 26,986,500
------------
Total Corporate Notes 119,039,403
------------
Medium Term Notes (14.3%)
American Honda Finance Corp. + ,
5.612%, 05/01/97 .......................... 14,000,000 14,008,260
American Honda Finance Corp. + ,
5.667%, 04/15/97 .......................... 5,800,000 5,803,364
American Honda Finance Corp., FRN +
, 5.612%, 09/04/97 ........................ 8,400,000 8,400,000
Chrysler Financial Corp., 7.11%,
03/21/97 .................................. 3,000,000 3,009,300
Columbia/HCA Healthcare Corp., FRN
+ , 5.583%, 07/28/97 ...................... 4,200,000 4,200,000
Corporate Asset Funding Co., Inc.,
+, 5.556%, 12/02/97 ....................... 9,000,000 9,000,000
Discover Credit, 7.76%, 05/13/97 ............ 5,800,000 5,840,368
Discover Credit, 7.81%, 03/18/97 ............ 6,000,000 6,026,640
Finova Capital Corp., 5.595%,
04/15/97 .................................. 14,000,000 14,012,179
General Motors Acceptance Corp.,
5.805%, 04/13/98 .......................... 10,500,000 10,494,750
General Motors Acceptance Corp.,
7.75%, 01/17/97 ........................... 1,000,000 1,000,947
Greyhound Financial Corp, 7.95%,
05/19/97 .................................. 3,200,000 3,226,976
Sears Roebuck & Co., FRN, 5.717%,
05/12/97 .................................. 2,900,000 2,903,625
------------
Total Medium Term Notes 87,926,409
------------
U.S. Government Agency Obligations (6.5%)
Federal Home Loan Bank, 5.65%,
04/27/98 .................................. 20,000,000 20,054,000
Federal National Mortgage
Association, 5.84%, 02/18/97 .............. 10,000,000 10,001,069
Student Loan Marketing Association,
FRN, 5.70%, 01/21/97 ...................... 10,000,000 10,000,268
------------
Total U.S. Government Agency Obligations 40,055,337
------------
TOTAL INVESTMENTS (cost $609,672,569)(a) .... 609,757,291
Other assets less liabilities 3,748,047
============
Total Net Assets $613,505,338
============
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purpose is identical.
Unrealized gains and losses, based on identified tax cost at December 31, 1996,
are as follows:
Unrealized gains .................... $ 198,719
Unrealized losses ................... (113,997)
===========
Net unrealized gain ............... $ 84,722
===========
+ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
Category percentages are based on net assets.
See Notes to Financial Statements. 23
<PAGE>
Aetna Investment Advisers Fund, Inc.
Portfolio of Investments - December 31, 1996
- --------------------------------------------------------------------------------
Number Market
of Shares Value
--------- -----------
COMMON STOCKS (56.0%)
Aerospace and Defense (1.9%)
Boeing Co. ......................................... 113,700 $12,094,837
United Technologies Corp. .......................... 211,200 13,939,199
-----------
26,034,036
-----------
Apparel (2.4%)
Gap, Inc. .......................................... 224,400 6,760,050
Herbalife International, Inc. ...................... 11,600 378,450
Liz Claiborne, Inc. ................................ 141,700 5,473,163
Nike, Inc. Class B ................................. 181,300 10,832,675
St. John Knits, Inc. ............................... 10,800 469,800
Tommy Hilfiger Corp. + ............................. 181,600 8,716,800
Wolverine World Wide, Inc. ......................... 21,000 609,000
-----------
33,239,938
-----------
Autos and Auto Equipment (0.9%)
Chrysler Corp. ..................................... 260,300 8,589,900
Intermet Corp. ..................................... 68,000 1,096,500
Kaydon Corp. ....................................... 15,000 706,875
SPX Corp. .......................................... 16,500 639,375
Tower Automotive, Inc. + ........................... 15,800 493,750
Wynn's International, Inc. ......................... 5,100 161,288
-----------
11,687,688
-----------
Banks (2.0%)
Bancorp Hawaii, Inc. ............................... 16,000 672,000
Boatmen's Bancshares, Inc. ......................... 30,700 1,980,150
Cal Fed Bancorp, Inc. + ............................ 17,200 421,400
CCB Financial Corp. ................................ 14,300 975,975
City National Corp. ................................ 22,300 482,238
Community First Bankshares, Inc. ................... 31,000 852,500
Corus Bankshares, Inc. ............................. 8,200 264,450
Cullen/Frost Bankers, Inc. ......................... 27,900 927,675
HUBCO, Inc. ........................................ 39,140 958,930
Imperial Bancorp + ................................. 36,000 864,000
Liberty Bancorp, Inc. Oklahoma ..................... 10,200 507,450
Magna Group, Inc. .................................. 15,200 448,400
Mercantile Bankshares Corp. ........................ 24,800 793,600
ML Bancorp, Inc. ................................... 58,000 819,250
NationsBank Corp. .................................. 110,600 10,811,150
North Side Savings Bank Bronx NY ................... 17,600 959,200
Provident Bancorp .................................. 21,450 729,300
Provident Bankshares Corp. ......................... 17,850 696,150
Riggs National Corp. ............................... 47,000 810,750
Security Capital Corp. ............................. 12,200 899,750
Silicon Valley Bancshares + ........................ 10,600 341,850
Westamerica Bancorp ................................ 10,900 629,475
Zion Bancorporation ................................ 8,900 925,600
-----------
27,771,243
-----------
Building Materials and Construction (0.5%)
ABT Building Products Corp. + ...................... 13,300 332,500
Ameron, Inc. ....................................... 10,300 531,738
Apogee Enterprises, Inc. ........................... 11,500 457,125
Arvin Industries, Inc. ............................. 17,200 425,700
Number Market
of Shares Value
--------- -----------
Building Materials and Construction (continued)
Centex Corp. ....................................... 30,900 $ 1,162,613
Champion Enterprises, Inc. + ....................... 26,456 515,892
Continental Homes Holding Corp. .................... 37,100 788,375
NCI Building Systems, Inc. + ....................... 23,600 814,200
Oakwood Homes Corp. ................................ 26,400 603,900
Southdown, Inc. .................................... 11,400 354,825
Texas Industries, Inc. ............................. 13,000 658,125
Tredegar Industries, Inc. .......................... 7,500 300,938
-----------
6,945,931
-----------
Chemicals (1.0%)
Cytec Industries + ................................. 20,200 820,625
Dexter Corp. ....................................... 17,900 570,563
Fuller (H.B.) Co. .................................. 10,300 484,100
Monsanto Co. ....................................... 307,600 11,957,949
-----------
13,833,237
-----------
Commercial Services (1.1%)
Carriage Services, Inc. + .......................... 15,100 337,863
Culligan Water Technologies, Inc. ..................
+ ................................................ 7,200 291,600
Daisytek International Corp. + ..................... 19,000 779,000
Electro Rent Corp. + ............................... 26,000 646,750
Measurex Corp. ..................................... 30,300 727,200
Philip Environmental, Inc. + ....................... 22,800 330,600
Service Corp. International ........................ 334,400 9,363,200
Stewart Enterprises, Inc. .......................... 18,500 629,000
United Waste Systems, Inc. + ....................... 22,800 783,750
US Filter Corp. + .................................. 26,700 847,725
Wackenhut Corp. Class B ............................ 31,600 481,900
-----------
15,218,588
-----------
Computer Software (3.6%)
BMC Software, Inc. + ............................... 320,800 13,273,099
Brooktrout Technology, Inc. + ...................... 7,200 201,600
Cadence Design Systems, Inc + ...................... 276,700 10,998,825
Cisco Systems, Inc + ............................... 216,100 13,749,362
Computer Associates International,
Inc .............................................. 203,300 10,114,175
Rational Software Corp. + .......................... 15,600 617,175
Shiva Corp. + ...................................... 6,400 223,200
-----------
49,177,436
-----------
Computers and Office Equipment (3.0%)
Comdisco, Inc. ..................................... 27,900 885,825
Compaq Computer Corp. + ............................ 102,000 7,573,500
Comverse Technology, Inc. + ........................ 20,000 756,250
DH Technology, Inc. + .............................. 26,000 624,000
HBO & Co. .......................................... 170,400 10,117,500
Herman Miller, Inc. ................................ 18,000 1,019,250
Sun Microsystems, Inc. + ........................... 321,200 8,250,825
U.S. Robotics Corp. + .............................. 154,800 11,145,600
Wallace Computer Services, Inc. .................... 20,000 690,000
-----------
41,062,750
-----------
Consumer Products (0.8%)
Gillette Co. ....................................... 120,300 9,353,325
Helen of Troy Ltd. + ............................... 50,000 1,100,000
-----------
10,453,325
-----------
24 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
Number Market
of Shares Value
--------- -----------
Diversified (4.4%)
Allied Signal, Inc. ................................ 185,600 $12,435,199
Day Runner, Inc. + ................................. 19,700 384,150
Deere & Co. ........................................ 218,500 8,876,563
DT Industries, Inc. ................................ 24,200 847,000
Eastern Enterprises ................................ 20,000 707,500
General Electric Co. ............................... 111,200 10,994,900
Harsco Corp. ....................................... 11,300 774,050
Paragon Trade Brands, Inc. + ....................... 20,000 600,000
Raychem Corp. ...................................... 163,700 13,116,462
Robbins & Myers, Inc. .............................. 14,000 350,000
Tyco International Ltd. ............................ 215,000 11,368,124
-----------
60,453,948
-----------
Electrical and Electronics (1.6%)
BMC Industries, Inc. ............................... 17,500 551,250
Computer Products, Inc. + .......................... 43,800 854,100
CTS Corp. .......................................... 5,200 222,300
DuPont Photomasks, Inc. + .......................... 28,000 1,270,500
Hadco Corp. + ...................................... 21,000 1,029,000
Intel Corp. ........................................ 113,600 14,874,499
Logicon, Inc. ...................................... 24,000 876,000
Symbol Technologies, Inc. + ........................ 14,100 623,925
Technitrol, Inc. ................................... 24,000 921,000
Waters Corp. + ..................................... 27,000 820,125
-----------
22,042,699
-----------
Electrical Equipment (1.2%)
Berg Electronics Corp. + ........................... 24,000 705,000
Fluke Corp. ........................................ 18,000 803,250
Honeywell, Inc. .................................... 145,300 9,553,475
Jabil Circuit, Inc. + .............................. 34,700 1,388,000
LeCroy Corp. + ..................................... 9,600 360,000
Microchip Technology, Inc. + ....................... 10,800 549,450
Rexel, Inc. + ...................................... 26,300 417,513
Sanmina Corp. + .................................... 15,000 847,500
SCI Systems, Inc. + ................................ 14,200 633,675
Valmont Industries ................................. 20,000 825,000
-----------
16,082,863
-----------
Financial Services (6.2%)
Astoria Financial Corp. ............................ 27,600 1,017,750
Chase Manhattan Corp. .............................. 136,700 12,200,474
ContiFinancial Corp. + ............................. 27,000 975,375
Great Financial Corp. .............................. 27,200 792,200
Green Tree Financial Corp. ......................... 238,500 9,212,063
MBNA Corp. ......................................... 169,200 7,021,800
Money Store, Inc. (The) ............................ 375,200 10,364,900
Olympic Financial Ltd. + ........................... 13,800 198,375
Quick & Reilly Group, Inc. ......................... 17,100 510,863
Raymond James Financial, Inc. ...................... 26,000 783,250
RCSB Financial, Inc. ............................... 18,500 536,500
SunAmerica, Inc. ................................... 381,800 16,942,374
T. Rowe Price Associates ........................... 201,100 8,747,850
TCF Financial Corp. ................................ 8,800 382,800
Number Market
of Shares Value
--------- -----------
Financial Services (continued)
Travelers Group, Inc. .............................. 279,900 $12,700,462
Union Planters Corp. ............................... 22,265 868,335
WFS Financial, Inc. + .............................. 38,500 765,188
-----------
84,020,559
-----------
Foods and Beverages (2.2%)
Coca-Cola Co. ...................................... 180,100 9,477,763
Einstein/noah Bagel Corp. + ........................ 10,200 303,450
Hershey Foods Corp. ................................ 193,900 8,483,125
Interstate Bakeries Corp. .......................... 240,300 11,804,737
-----------
30,069,075
-----------
Health Services (0.8%)
ADAC Laboratories .................................. 17,000 405,875
HEALTHSOUTH Corp. + ................................ 249,500 9,636,938
Universal Health Services, Inc. + .................. 15,100 432,238
-----------
10,475,051
-----------
Home Furnishings and Appliances (0.2%)
Carlisle Cos., Inc. ................................ 14,500 877,250
Ethan Allen Interiors, Inc. ........................ 28,000 1,078,000
Furniture Brands International,
Inc. + ........................................... 23,100 323,400
Mohawk Industries, Inc. + .......................... 15,500 341,000
-----------
2,619,650
-----------
Hotels and Restaurants (1.2%)
Consolidated Products, Inc. + ...................... 23,800 464,100
Doubletree Corp. + ................................. 6,270 282,150
HFS, Inc. + ........................................ 98,000 5,855,500
Hilton Hotels Corp. ................................ 358,700 9,371,038
Quality Dining, Inc + .............................. 18,500 330,688
Signature Resorts, Inc. + .......................... 4,400 155,100
-----------
16,458,576
-----------
Insurance (1.5%)
American Bankers Insurance Group ................... 16,400 838,450
American International Group, Inc. ................. 98,100 10,619,325
Capital RE Corp. ................................... 18,700 871,888
CapMAC Holdings, Inc. .............................. 22,000 728,750
CMAC Investment Corp. .............................. 24,000 882,000
Delphi Financial Group, Inc + ...................... 14,600 430,700
Enhance Financial Services Group,
Inc .............................................. 24,200 883,300
Fremont General Corp. .............................. 28,300 877,300
Horace Mann Educators Corp. ........................ 23,200 936,700
Markel Corp. + ..................................... 8,000 720,000
Orion Capital Corp. ................................ 15,400 941,325
Protective Life Corp. .............................. 17,900 713,763
Selective Insurance Group, Inc. .................... 17,700 672,600
Vesta Insurance Group, Inc. ........................ 7,050 221,194
-----------
20,337,295
-----------
Machinery and Equipment (0.7%)
Case Corp. ......................................... 111,500 6,076,750
Cooper Cameron Corp. + ............................. 14,400 1,101,600
Global Industrial Technologies,
Inc. + ........................................... 21,100 466,838
Hughes Supply, Inc. ................................ 13,700 590,813
25
<PAGE>
Aetna Investment Advisers Fund, Inc.
Portfolio of Investments - December 31, 1996 (continued)
- --------------------------------------------------------------------------------
Number Market
of Shares Value
--------- -----------
Machinery and Equipment (continued)
JLG Industries, Inc. ............................... 42,600 $ 681,600
Watts Industries, Inc. ............................. 19,600 467,950
Zygo Corp. + ....................................... 4,300 223,600
-----------
9,609,151
-----------
Media and Entertainment (0.8%)
Fleetwood Enterprises, Inc. ........................ 19,400 533,500
K2, Inc. ........................................... 25,000 687,500
Omnicom Group, Inc. ................................ 196,600 8,994,450
-----------
10,215,450
-----------
Medical Supplies (0.2%)
Coherent, Inc. + ................................... 23,300 984,425
Hologic, Inc. + .................................... 22,000 544,500
MedImmune, Inc. + .................................. 40,000 680,000
OrNda HealthCorp. + ................................ 30,300 886,275
-----------
3,095,200
-----------
Metals and Mining (0.5%)
Brush Wellman, Inc. ................................ 21,200 347,150
Commercial Metals Co. .............................. 18,200 548,275
Gibraltar Steel Corp. + ............................ 8,800 231,000
Mueller Industries, Inc. + ......................... 19,400 746,900
Olympic Steel, Inc. + .............................. 31,700 804,388
Oregon Metallurgical Corp. + ....................... 21,800 703,050
Penn Engineering & Manufacturing
Corp ............................................. 38,500 789,250
Reliance Steel & Aluminum Co. ..................... 10,300 360,500
RMI Titanium Co. + ................................. 29,000 815,625
Shiloh Industries, Inc. + .......................... 53,000 861,250
Steel Dynamics, Inc. + ............................. 20,100 384,413
-----------
6,591,801
-----------
Oil and Gas (5.2%)
American Exploration Co. + ......................... 18,300 292,800
BJ Services Co. + .................................. 7,900 402,900
Camco International, Inc. .......................... 22,000 1,014,750
Cliffs Drilling Co. + .............................. 18,400 1,163,800
Energy Ventures, Inc. + ............................ 7,700 391,738
Falcon Drilling Co., Inc. + ........................ 10,600 416,050
Halliburton Co. .................................... 186,000 11,206,500
Helmerich & Payne, Inc. ............................ 19,800 1,032,075
Laclede Gas Co. .................................... 24,100 581,413
Louisiana Land and Exploration Co. ................. 116,300 6,236,588
Marine Drilling Co., Inc. + ........................ 26,300 517,781
Mobil Corp. ........................................ 53,700 6,564,825
Neuvo Energy Co. + ................................. 8,200 426,400
Reading & Bates Corp. + ............................ 30,600 810,900
Santa Fe Energy Resources, Inc. + .................. 56,700 786,713
Schlumberger Ltd. .................................. 120,100 11,994,987
Seacor Holdings + .................................. 11,400 718,200
Smith International, Inc. + ........................ 23,000 1,032,125
Stone Energy Corp. + ............................... 16,500 492,938
Swift Energy Co. + ................................. 33,600 1,003,800
Tesoro Petroleum Corp. + ........................... 60,900 852,600
Texaco, Inc. ....................................... 70,000 6,868,750
Number Market
of Shares Value
--------- -----------
Oil and Gas (continued)
Tidewater, Inc. .................................... 179,400 $ 8,117,850
Tuboscope Vetco International
Corp. + .......................................... 57,400 889,700
Unocal Corp. ....................................... 166,500 6,764,063
Vintage Petroleum, Inc. ............................ 19,500 672,750
-----------
71,252,996
-----------
Paper and Containers (0.1%)
Caraustar Industries, Inc. ......................... 21,100 701,575
Sealed Air Corp. + ................................. 14,000 582,750
-----------
1,284,325
-----------
Pharmaceuticals (4.5%)
American Home Products Corp. ....................... 139,800 8,195,775
Amgen, Inc. + ...................................... 208,300 11,326,312
IDEC Pharmaceuticals Corp. + ....................... 32,100 762,375
Johnson & Johnson .................................. 181,184 9,013,904
Jones Medical Industries, Inc. ..................... 6,400 234,400
Medeva Plc ......................................... 38,000 641,250
Merck & Co., Inc. .................................. 150,600 11,935,049
Pfizer, Inc. ....................................... 116,800 9,679,800
Schering Plough .................................... 156,400 10,126,900
-----------
61,915,765
-----------
Printing and Publishing (0.0%)
Meredith Corp. ..................................... 10,000 527,500
-----------
Real Estate Investment Trusts (0.4%)
Bay Apartment Communities, Inc. .................... 8,600 309,600
Bre Properties, Inc. Class A ....................... 13,000 321,750
CWM Mortgage Holdings, Inc. ........................ 36,000 774,000
Fairfield Communities, Inc. + ...................... 16,300 403,425
General Growth Properties .......................... 12,800 412,800
Patriot American Hospitality, Inc. ................. 23,000 991,875
Public Storage, Inc. ............................... 23,400 725,400
Starwood Lodging Trust ............................. 19,600 1,080,450
-----------
5,019,300
-----------
Retail (3.9%)
Borders Group, Inc. + .............................. 19,600 703,150
Buckle, Inc. (The) + ............................... 13,000 325,000
Carson Pirie Scott & Co. + ......................... 31,800 802,950
Central Garden and Pet Co. + ....................... 15,400 324,363
Claire's Stores, Inc. .............................. 35,450 460,850
Dayton Hudson Corp. ................................ 336,800 13,219,399
Eagle Hardware & Garden, Inc. + .................... 19,100 396,325
Family Dollar Stores, Inc. ......................... 28,600 582,725
Friedman's, Inc. Class A + ......................... 21,500 317,125
Gadzooks, Inc. + ................................... 11,000 200,750
Inacom Corp. + ..................................... 23,300 932,000
Insight Enterprises, Inc. + ........................ 17,100 478,800
Lazare Kaplan International, Inc. ..................
+ ................................................ 20,000 342,500
Marks Bros. Jewelers, Inc. + ....................... 11,600 134,850
Meyer (Fred), Inc. + ............................... 21,600 766,800
Pier 1 Imports, Inc. ............................... 37,300 657,413
Revco D.S., Inc. + ................................. 14,100 521,700
Ross Stores, Inc. .................................. 20,800 1,040,000
26 See Notes to Portfolio of Investments.
<PAGE>
- --------------------------------------------------------------------------------
Number Market
of Shares Value
--------- -----------
Retail (continued)
Russ Berrie & Co., Inc. ............................ 11,100 $ 199,800
Safeway, Inc. + .................................... 266,900 11,409,974
Sears, Roebuck & Co. ............................... 114,300 5,272,088
Tech Data Corp. + .................................. 12,500 342,188
TJX Companies, Inc. ................................ 268,400 12,715,449
Wet Seal, Inc. + ................................... 20,200 431,775
Zale Corp. + ....................................... 40,000 765,000
-----------
53,342,974
-----------
Telecommunications (1.1%)
Ameritech Corp. .................................... 126,500 7,669,063
Andrew Corp. + ..................................... 120,500 6,394,031
Boston Technology, Inc. + .......................... 18,000 517,500
Davox Corp. + ...................................... 7,000 288,750
PictureTel Corp. + ................................. 13,000 338,000
-----------
15,207,344
-----------
Transportation (0.9%)
Avondale Industries, Inc. + ........................ 44,100 948,150
Burlington Northern Santa Fe Corp. ................. 109,300 9,440,788
Comair Holdings, Inc. .............................. 34,900 837,600
Heartland Express, Inc. + .......................... 20,250 493,594
SkyWest, Inc. ...................................... 19,700 273,338
-----------
11,993,470
-----------
Utilities - Electric (0.8%)
Calenergy, Inc. + .................................. 26,000 874,250
Central Hudson Gas & Electric Co. .................. 28,500 894,188
Central Maine Power Co. ............................ 39,000 453,375
Central Vermont Public Service ..................... 19,200 230,400
Commonwealth Energy System Co. ..................... 30,000 705,000
Idaho Power Co. .................................... 24,000 747,000
IES Industries, Inc. ............................... 16,200 483,975
Interstate Power Co. ............................... 18,000 522,000
KU Energy Corp. .................................... 27,300 819,000
Public Service Co. of New Mexico ................... 20,500 402,313
Sierra Pacific Resources ........................... 30,600 879,750
TNP Enterprises, Inc. .............................. 31,800 870,525
United Illuminating Co. ............................ 22,900 718,488
Washington Gas Light Co. ........................... 22,400 506,800
Washington Water Power Co. ......................... 31,000 577,375
WPL Holdings, Inc. ................................. 24,100 677,813
WPS Resources Corp. ................................ 26,500 755,250
-----------
11,117,502
-----------
Utilities - Oil and Gas (0.3%)
Atmos Energy Corp. ................................. 30,000 716,250
Energen Corp. ...................................... 15,500 468,875
NUI Corp. .......................................... 33,600 760,200
People's Energy Corp. .............................. 22,600 765,575
Wicor, Inc. ........................................ 21,700 778,488
-----------
3,489,388
-----------
Utilities - Water (0.1%)
American Water Works Co., Inc. ..................... 39,000 804,370
-----------
Total Common Stocks (cost $599,822,042) ............ 763,450,424
-----------
Principal Market
Amount Value
--------- -----------
LONG-TERM BONDS AND NOTES (29.0%)
U.S. Government and Agency Obligations (11.7%)
Federal Home Loan Mortgage Corp. ...................
1604I, 6.00%, 11/15/08 ........................... $ 8,200,000 $ 7,795,904
U.S. Treasury Bond, 6.25%, 06/30/98 ................ 16,800,000 16,884,016
U.S. Treasury Bond, 6.375%,
03/31/01 ......................................... 12,000,000 12,082,511
U.S. Treasury Note, 5.75%, 10/31/00 ................ 87,300,000 86,181,511
U.S. Treasury Note, 7.50%, 01/31/97 ................ 36,600,000 36,662,818
-----------
Total U.S. Government and Agency
Obligations(cost $158,947,260)
159,606,760
-----------
Corporate Bonds (11.6%)
African Development Bank, 8.80%,
09/01/19 ....................................... 7,000,000 8,277,570
American General Finance, 8.45%,
10/15/09 ....................................... 7,000,000 7,812,490
BCH Cayman Islands Ltd., 7.70%,
07/15/06 ....................................... 13,100,000 13,492,999
Centennial Cellular Corp.,
10.125%, 05/15/05 .............................. 5,550,000 5,605,500
CMS Energy, 9.875%, 10/01/99 ..................... 6,000,000 6,270,000
Exide Corp., 10.00%, 04/15/05 .................... 7,595,000 7,898,800
HSBC America ++ , 7.808%, 12/15/26 .............. 12,250,000 11,834,847
Kaman Corp., 6.00%, 03/15/12 ..................... 6,275,000 5,459,250
MFS Communications, Inc.,
8.875%,01/15/06 ................................ 4,650,000 3,394,500
News America Holdings, 8.50%,
02/23/25 ....................................... 9,300,000 10,150,671
Pitney Bowes Credit Corp., 8.55%,
09/15/09 ....................................... 13,100,000 14,760,948
Pittston Co., 4.00%, 07/01/97 .................... 3,249,000 3,192,143
Riggs Capital Trust ++ , 8.625%,
12/31/26 ....................................... 3,700,000 3,700,000
Rogers Cantel, Inc., 9.375%,
06/01/08 ....................................... 6,100,000 6,420,250
Swire Pacific Ltd. ++ , 8.50%,
09/29/04 ....................................... 10,000,000 10,714,600
Tele-Communcations, Inc., 9.80%,
02/01/12 ....................................... 9,200,000 9,956,240
Trump Atlantic City, 11.25%,
05/01/06 ....................................... 5,000,000 4,975,000
United Mexican States Government,
11.375%, 09/15/16 .............................. 13,200,000 13,925,999
Viacom, Inc., 8.00%, 07/07/06 .................... 10,000,000 9,700,000
------------
Total Corporate Bonds
(cost $149,615,076) ............................ 157,541,807
------------
Foreign and Supranationals (3.1%)
App International Finance, 10.25%,
10/01/00 ....................................... 4,650,000 4,812,750
App International Finance, 11.75%,
10/01/05 ....................................... 2,800,000 3,024,000
Morocco Reconstruction &
Consolidation Agreement, FRN,
11.10%# 01/01/09 ............................... 9,500,000 7,861,250
Poland Discount Bond, 6.50%,
10/27/24 ....................................... 10,000,000 9,687,500
Poland Non-US Glb Reg'd, 4.00%,
10/27/14 ....................................... 10,000,000 8,462,500
Russia-Interest Notes-US, 12.48%#,
12/29/49 ....................................... 6,500,000 4,515,875
Transport De Gas Del Sur, 7.75%,
12/23/98 ....................................... 4,600,000 4,577,000
------------
Total Foreign and Supranationals
(cost $39,664,132) ............................. 42,940,875
------------
Non-Agency Mortgage-Backed Securities (2.6%)
American Southwest Financial
Securities Corp., 8.00%, 01/18/09 .............. 7,723,998 7,938,821
Chase Mortgage Finance, 6.75%,
11/25/09 ....................................... 3,456,240 3,453,000
DLJ Mortgage Acceptance Corp.,
8.10%, 06/18/04 ................................ 4,650,000 4,131,234
Kidder Peabody Acceptance Corp.,
6.50%, 11/25/25 ................................ 5,000,000 4,918,750
27
<PAGE>
Aetna Investment Advisers Fund, Inc.
Portfolio of Investments - December 31, 1996 (continued)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
--------- -----------
Non-Agency Mortgage-Backed Securities (continued)
Kidder Peabody Acceptance Corp.,
8.80%, 04/01/07 ........................... $ 5,000,000 $ 5,395,317
Merrill Lynch Mortgage Investors,
Inc., 7.86%, 06/15/21 ..................... 9,427,777 9,606,020
--------------
Total Non-Agency Mortgage-Backed
Securities (cost $33,392,420) ............. 35,443,142
--------------
Total Long-Term Bonds and Notes
(cost $381,618,888) ....................... 395,532,584
--------------
SHORT-TERM INVESTMENTS (15.2%)
Archer Daniels Midland, Comm
Paper, 6.25%, 01/06/97 .................... 21,750,000 21,734,896
Bridgestone Firestone Master
Trust, Inc.++ , Asset-Backed
Securities, 6.40%, 01/06/97 ................. 17,923,000 17,923,000
Circuit City Credit Card ++ ,
Comm. Paper, 6.20%, 01/07/97 .............. 17,500,000 17,500,000
Circuit City Credit Card++, Comm
Paper, 6.80%, 01/02/97 .................... 21,951,000 21,951,000
Cooperative Association of Tractor
Dealers, Comm. Paper, 6.40%,
01/06/97 .................................. 6,000,000 5,995,733
Countrywide Home Loans, Comm
Paper, 6.50%, 01/09/97 .................... 15,000,000 14,981,042
Countrywide Home Loans, Comm
Paper, 6.75%, 01/02/97 .................... 48,612,000 48,612,000
Dealers Capital Access Trust,
Inc., Comm. Paper, 7.00%,
01/02/97 .................................. 2,790,000 2,790,000
Ford Motor Credit Co., Comm
Paper, 5.55%, 01/03/97 .................... 40,790,000 40,783,712
Occidental Petroleum, Comm. Paper,
6.20%, 01/06/97 ........................... 10,000,000 9,993,111
U.S. Treasury Bill +++ , Time
Deposit, 5.08%, 08/21/97 .................. 4,900,000 4,737,907
--------------
Total Short-Term Investments
(cost $207,004,770) ....................... 207,002,401
TOTAL INVESTMENTS --------------
(cost $1,188,445,700)(a) .................. 1,365,985,409
Other assets less liabilities (1,943,737)
--------------
Total Net Assets $1,364,041,672
==============
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amount to
$1,189,484,891. Unrealized gains and losses, based on identified tax cost at
December 31, 1996, are as follows:
Unrealized gains .................................... $ 182,915,762
Unrealized losses ................................... (6,415,244)
-------------
Net unrealized gain ............................... $ 176,500,518
=============
+ Non-income producing security.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Directors.
+++ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1996.
# Effective interest rate.
Category percentages are based on net assets.
Information concerning open future contracts at December 31, 1996 is shown
below:
No. of Initial
Long Notional Expiration Unrealized
Contracts Value Date Gain/(Loss)
--------- ----- ---- -----------
S & P 500 Index
Future 65 $24,282,000 March 97 $ (85,750)
===========
28 See Notes to Financial Statements.
<PAGE>
Statements of Assets and Liabilities
December 31, 1996
================================================================================
<TABLE>
<CAPTION>
Aetna Aetna
Aetna Aetna Variable Investment
Variable Income Encore Advisers Fund,
Fund Shares Fund Inc.
------------ ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments, at market value .................................. $6,999,600,597 $676,611,609 $609,757,291 $1,365,985,409
Cash .......................................................... 570,345 350 -- 365,088
Cash denominated in foreign currencies ........................ 17,452,396 -- -- --
Receivable for:
Dividends and interest ...................................... 15,176,349 9,232,803 3,423,559 7,285,704
Investments sold ............................................ 44,357,935 -- -- 1,745,737
Fund shares sold ............................................ 4,862 706 755,002 2,862
Recoverable taxes ........................................... 30,776 -- -- --
Gross unrealized gain on forward foreign currency exchange
contracts ................................................... 3,413,755 -- -- --
-------------- ------------ ------------ --------------
Total assets ......................................... 7,080,607,015 685,845,468 613,935,852 1,375,384,800
-------------- ------------ ------------ --------------
Liabilities:
Payable for:
Dividends to shareholders.................................... 208,220 47,602 -- --
Investments purchased ....................................... 81,514,754 40,767,535 -- 4,491,725
Fund shares redeemed ........................................ 2,366,252 1,038,445 244,858 5,703,119
Variation margin ............................................ 6,314,572 -- -- 474,500
Gross unrealized loss on forward foreign currency exchange
contracts ................................................... 221,844 -- -- --
Deferred premiums on written options, at market value ......... 32,473,569 -- -- --
Accrued investment advisory fees .............................. 2,926,168 218,714 128,408 580,848
Accrued administrative and service fees ....................... 351,140 43,743 51,363 92,936
Other liabilities ............................................. -- -- 5,885 --
-------------- ------------ ------------ --------------
Total liabilities .................................... 126,376,519 42,116,039 430,514 11,343,128
-------------- ------------ ------------ --------------
NET ASSETS..................................................... $6,954,230,496 $643,729,429 $613,505,338 $1,364,041,672
============== ============ ============ ==============
Net assets represented by:
Paid-in capital ............................................... $5,049,843,917 $643,211,785 $589,073,309 $1,065,737,778
Net unrealized gain on investments ............................ 1,611,529,652 7,542,612 84,722 177,453,959
Undistributed (distributions in excess of) net investment
income ........................................................ (116,078) 2,453,457 24,410,184 12,606,830
Accumulated net realized gain (loss) on investments ........... 292,973,005 (9,478,425) (62,877) 108,243,105
-------------- ------------ ------------ --------------
NET ASSETS..................................................... $6,954,230,496 $643,729,429 $613,505,338 $1,364,041,672
============== ============ ============ ==============
Shares authorized ............................................. Unlimited Unlimited Unlimited Unlimited
Par value ..................................................... $ 1.00 $ 1.00 $ 1.00 $ 0.001
Shares outstanding ............................................ 214,694,270 50,995,995 46,499,453 90,226,629
Net asset value per share (net assets divided by shares
outstanding) $ 32.391 $ 12.623 $ 13.194 $ 15.118
Cost of investments ........................................... $5,393,477,533 $669,068,997 $609,672,569 $1,188,445,700
Cost of cash denominated in foreign currencies ................ $ 17,458,127 -- -- --
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
Statements of Operations
Year ended December 31, 1996
================================================================================
<TABLE>
<CAPTION>
Aetna Aetna
Aetna Aetna Variable Investment
Variable Income Encore Advisers Fund,
Fund Shares Fund Inc.
------------ ------------- ------------ ----------------
<S> <C> <C> <C> <C>
Investment Income:
Dividends ........................................................ $ 139,992,261 $ 27,167 $ -- $ 10,892,363
Interest ......................................................... 14,155,684 44,105,829 30,927,131 36,130,372
-------------- ------------- ------------ -------------
154,147,945 44,132,996 30,927,131 47,022,735
Foreign taxes withheld ........................................... (949,544) -- -- (59,413)
-------------- ------------- ------------ -------------
Total investment income ................................. 153,198,401 44,132,996 30,927,131 46,963,322
-------------- ------------- ------------ -------------
Expenses:
Investment advisory fee .......................................... 22,537,554 2,033,785 1,386,027 4,616,886
Administrative services fees ..................................... 3,258,759 430,403 447,624 851,380
Miscellaneous .................................................... 1,111,267 100,037 45,155 260,850
-------------- ------------- ------------ -------------
Total expenses .......................................... 26,907,580 2,564,225 1,878,806 5,729,116
-------------- ------------- ------------ -------------
Net investment income ............................................ 126,290,821 41,568,771 29,048,325 41,234,206
-------------- ------------- ------------ -------------
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on:
Sale of investments ............................................ 921,185,560 4,197,867 874 116,801,824
Written options ................................................ (5,254,213) -- -- (1,564,152)
Futures and forward foreign currency exchange contracts ........ 26,321,398 -- -- (309,945)
Foreign currency related transactions .......................... (122,246) -- -- --
-------------- ------------- ------------ -------------
Net realized gain on investments ........................ 942,130,499 4,197,867 874 114,927,727
-------------- ------------- ------------ -------------
Net change in unrealized gain or loss on:
Investments .................................................... 307,754,298 (23,388,378) (22,687) 26,634,225
Written Options ................................................ (673,615) -- -- --
Futures and forward foreign currency exchange contracts ........ 4,275,567 -- -- (85,750)
Foreign currency related transactions .......................... (14,837) -- -- --
-------------- ------------- ------------ -------------
Net change in unrealized gain or loss on investments .... 311,341,413 (23,388,378) (22,687) 26,548,475
-------------- ------------- ------------ -------------
Net realized and change in unrealized gain (loss) ................ 1,253,471,912 (19,190,511) (21,813) 141,476,202
-------------- ------------- ------------ -------------
Net increase in net assets resulting from operations ............. $1,379,762,733 $ 22,378,260 $29,026,512 $182,710,408
============== ============= ============ =============
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Aetna Variable Fund Aetna Income Shares
------------------------------ -------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Net investment income ............................................ $ 126,290,821 $ 121,449,354 $ 41,568,771 $ 42,658,844
Net realized gain ................................................ 942,130,499 618,484,874 4,197,867 5,548,431
Net change in unrealized gain (loss) ............................. 311,341,413 655,688,100 (23,388,378) 53,970,465
-------------- -------------- ------------ ------------
Net increase in net assets resulting from operations ........... 1,379,762,733 1,395,622,328 22,378,260 102,177,740
-------------- -------------- ------------ ------------
Distributions to Shareholders:
From net investment income ....................................... (142,295,877) (121,467,727) (41,091,489) (40,862,116)
From net realized gains .......................................... (587,939,494) (812,495,987) -- --
-------------- -------------- ------------ ------------
Decrease in net assets from distributions to shareholders ...... (730,235,371) (933,963,714) (41,091,489) (40,862,116)
-------------- -------------- ------------ ------------
Share Transactions:
Proceeds from shares sold ........................................ 157,493,741 293,617,310 20,171,265 70,377,292
Net asset value of shares issued upon reinvestment of
distributions .................................................. 730,007,966 933,736,815 41,016,709 40,782,267
Payments for shares redeemed ..................................... (244,305,179) (451,382,489) (65,705,805) (67,218,527)
-------------- -------------- ------------ ------------
Net increase (decrease) in net assets from share transactions .. 643,196,528 775,971,636 (4,517,831) 43,941,032
-------------- -------------- ------------ ------------
Change in net assets ............................................. 1,292,723,890 1,237,630,250 (23,231,060) 105,256,656
Net Assets:
Beginning of year ................................................ 5,661,506,606 4,423,876,356 666,960,489 561,703,833
-------------- -------------- ------------ ------------
End of year ...................................................... $6,954,230,496 $5,661,506,606 $643,729,429 $666,960,489
============== ============== ============ ============
End of year net assets includes undistributed (distributions in
excess of) net investment income ............................... $ (116,078) $ 13,766,310 $ 2,453,457 $ (116,781)
============== ============== ============ ============
Share Transactions:
Number of shares sold ............................................ 4,987,093 10,162,782 1,561,711 5,565,388
Number of shares issued upon reinvestment of distributions ....... 22,399,165 31,806,470 3,242,212 3,165,606
Number of shares redeemed ........................................ (7,542,873) (15,783,222) (5,105,607) (5,364,352)
-------------- -------------- ------------ ------------
Net increase (decrease) ........................................ 19,843,385 26,186,030 (301,684) 3,366,642
============== ============== ============ ============
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
===================================================================================================================================
Aetna Variable Encore Fund Aetna Investment Advisers
Fund, Inc
----------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
Operations:
Net investment income ........................................... $ 29,048,325 $ 29,137,815 $ 41,234,206 $ 42,225,550
Net realized gain (loss) ........................................ 874 (52,156) 114,927,727 88,067,506
Net change in unrealized gain (loss) ............................ (22,687) 472,281 26,548,475 125,951,337
------------ ------------- -------------- --------------
Net increase in net assets resulting from operations .......... 29,026,512 29,557,940 182,710,408 256,244,393
------------ ------------- -------------- --------------
Distributions to Shareholders:
From net investment income ...................................... (33,468,844) (385,007) (30,353,948) (52,754,265)
From net realized gains ......................................... -- -- (90,460,584) (25,336,005)
------------ ------------- -------------- --------------
Decrease in net assets from distributions to shareholders ..... (33,468,844) (385,007) (120,814,532) (78,090,270)
------------ ------------- -------------- --------------
Share Transactions:
Proceeds from shares sold ....................................... 314,151,025 245,248,012 55,639,226 74,184,396
Net asset value of shares issued upon reinvestment of
distributions ................................................. 33,468,844 385,007 120,814,532 78,090,270
Payments for shares redeemed .................................... (243,708,802) (243,808,588) (70,295,042) (92,449,914)
------------ ------------- -------------- --------------
Net increase in net assets from share transactions ............ 103,911,067 1,824,431 106,158,716 59,824,752
------------ ------------- -------------- --------------
Change in net assets ............................................ 99,468,735 30,997,364 168,054,592 237,978,875
Net Assets:
Beginning of year ............................................... 514,036,603 483,039,239 1,195,987,080 958,008,205
------------ ------------- -------------- --------------
End of year ..................................................... $613,505,338 $ 514,036,603 $1,364,041,672 $1,195,987,080
============ ============= ============== ==============
End of year net assets include undistributed net investment
income ........................................................ $ 24,410,184 $ 28,830,703 $ 12,606,830 $ 1,726,572
============ ============= ============== ==============
Share Transactions:
Number of shares sold ........................................... 23,539,460 19,041,695 3,743,359 5,556,544
Number of shares issued upon reinvestment of distributions ...... 2,593,663 28,953 8,699,680 5,582,169
Number of shares redeemed ....................................... (18,290,210) (18,919,850) (4,685,746) (7,030,152)
------------ ------------- -------------- --------------
Net increase .................................................. 7,842,913 150,798 7,757,293 4,108,561
============ ============= ============== ==============
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
Notes to Financial Statements
December 31, 1996
================================================================================
1. Summary of Significant Accounting Policies
Aetna Variable Fund (Variable Fund) is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company whose
shares are currently sold to Aetna Life Insurance and Annuity Company (the
Company), an Aetna Life Insurance Company Separate Account, and to other
shareholders of Variable Fund only through reinvestment of distributions. The
Company's shares are allocated to certain of its variable life/annuity accounts.
The Company's separate accounts and affiliates held 99.6% of Variable Fund's
shares outstanding at December 31, 1996. The investment objective of Variable
Fund is to maximize total return through investments in a diversified portfolio
of common stocks and securities convertible into common stock.
Aetna Income Shares (Income Shares) is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company whose
shares are currently sold to the Company for allocation to certain of its
variable life/annuity accounts and to other shareholders of Income Shares only
through reinvestment of distributions. The Company's separate accounts and
affiliates held 99.2% of Income Shares' outstanding shares at December 31, 1996.
The investment objective of Income Shares is to maximize total return,
consistent with reasonable risk, through investments in a diversified portfolio
consisting primarily of debt securities.
Aetna Variable Encore Fund (Encore Fund) is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company
organized by the Company to serve as an investment vehicle for certain of the
Company's variable life/annuity accounts. The Company's separate accounts held
all of Encore Fund's outstanding shares at December 31, 1996. The investment
objective of Encore Fund is to provide high current return, consistent with
preservation of capital and liquidity, through investment in high-quality money
market instruments.
Aetna Investment Advisers Fund, Inc. (Advisers Fund) is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company whose shares are currently sold to the Company for allocation to certain
of its variable life/annuity separate accounts. The Company's separate accounts
held all of Advisers Fund's shares outstanding at December 31, 1996. The
investment objective of Advisers Fund is to produce the maximum investment
return consistent with reasonable safety of principal.
Variable Fund, Income Shares, Encore Fund, and Advisers Fund are referred to
individually as a "Fund", and collectively as the "Funds".
The Company serves as the Investment Adviser and principal underwriter to each
Fund. It is an indirect wholly-owned subsidiary of Aetna Retirement Services,
Inc. which is in turn a wholly-owned subsidiary of Aetna Inc.
The accompanying financial statements of the Funds have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of each Fund.
A. Valuation of Investments
Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter securities,
at the mean of the bid and asked prices. Short-term investments maturing in more
than sixty days for which market quotations are readily available are valued at
current market value. Short-term investments maturing in less than sixty days
are valued at amortized cost which when combined with accrued interest
approximates market. Securities for which market quotations are not considered
to be readily available are valued in good faith using methods approved by the
Board of Trustees/Directors.
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign currency
are translated into U.S. dollars at the prevailing rates of exchange at the end
of the period. Purchases and sales of securities, income receipts, and expense
payments are translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions.
33
<PAGE>
Notes to Financial Statements
December 31, 1996 (continued)
================================================================================
1. Summary of Significant Accounting Policies (continued)
B. Option Contracts
The Funds may purchase put and call options and write put and covered call
options as a hedge against adverse movements in the value of portfolio holdings
or to increase market exposure.
Option contracts are valued daily. Unrealized gains or losses are recorded based
upon the last sales price on the principal exchange on which the option is
traded.
The Funds will realize a gain or loss upon the expiration or closing of the
option contract. When an option is exercised, the proceeds on sales of the
underlying security for a written call option, the purchase cost of the security
for a written put option, or the cost of the security for a purchased put or
call option is adjusted by the amount of premium received or paid.
The risk in writing a call option is that the Funds give up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Funds may incur a loss
if the market price of the security decreases and the option is exercised. The
risk in buying an option is that the Funds pay a premium whether or not the
option is exercised. Risks may also arise from an illiquid secondary market, or
from the inability of counterparties to meet the terms of the contract.
C. Futures and Foreign Currency Exchange Contracts
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Funds "sell" futures
contracts as a hedge against declines in the value of portfolio securities. The
Funds may enter into futures contracts to manage the risk of changes in interest
rates, equity prices, currency exchange rates or in anticipation of future
purchases and sales of portfolio securities.
Upon entering into a futures contract, each Fund is required to deposit with a
broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by each Fund equal to the daily fluctuations in the
market value of the contract. These amounts are recorded by each Fund as
unrealized gains or losses. When a contract is closed, each Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Generally,
futures contracts held by the Funds are closed prior to expiration.
A forward foreign currency exchange contract is an agreement to pay or receive
specific amounts of a currency at a future date in exchange for another currency
at an agreed upon exchange rate. The Funds may use forward foreign currency
exchange contracts to hedge certain foreign currency assets. Contracts are
recorded at market value and marked-to-market daily.
The risks associated with futures and forward foreign currency exchange
contracts may arise from an imperfect correlation between the change in market
value of the securities held by the Funds and the price of futures contracts.
Risks may also arise from an illiquid secondary market, or from the inability of
counterparties to meet the terms of the contract.
Realized and unrealized gains or losses on futures and foreign currency exchange
contracts are reflected in the accompanying financial statements. The amounts at
risk under such futures and foreign currency exchange contracts may exceed the
amounts reflected in the financial statements. The notional amounts of these
contracts are disclosed in the Portfolios of Investments and elswhere in the
Notes to Financial Statements. For federal income tax purposes, any futures and
forward foreign currency exchange contracts which remain open at the end of the
fiscal year are marked-to-market and the resultant net gain or loss is included
in federal taxable income.
34
<PAGE>
================================================================================
1. Summary of Significant Accounting Policies (continued)
D. Illiquid and Restricted Securities
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Portfolios to sell them promptly
at an acceptable price. Restricted securities are subject to legal or
contractual restrictions on resale and may not be publicly sold without
registration under the Securities Act of 1933. Each Portfolio may invest up to
15% of its total assets in illiquid securities. Illiquid and restricted
securities are valued using market quotations when readily available. In the
absence of market quotations, the securities are valued based upon their fair
value determined under procedures approved by the Board of Trustees/Directors.
The Portfolios will not pay the costs of disposition of restricted securities
other than ordinary brokerage fees, if any.
E. Delayed Delivery Transactions
The Funds may purchase or sell securities on a when-issued or forward commitment
basis. The price of the underlying securities and date when the securities will
be delivered and paid for are fixed at the time the transaction is negotiated.
The market value of the securities purchased or sold are identified in the
Funds' portfolio of investments. Losses may arise due to changes in the market
value of the securities or from the inability of counterparties to meet the
terms of the contract.
F. Federal Income Taxes
As qualified regulated investment companies, the Funds are relieved of federal
income and excise taxes by distributing their net taxable investment income and
capital gains, if any, in compliance with the applicable provisions of the
Internal Revenue Code.
G. Distributions
The Funds distribute all net investment income and net capital gains, if any, to
shareholders annually. Distributions from net investment income are based on
taxable net income. Distributions are recorded on the ex-dividend date. Income
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions and deferred losses on wash sales.
H. Other
Investment transactions are accounted for on the day following trade-date,
except same day settlements which are accounted for on the trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are amortized, using an effective yield method, over the life of the
respective security. Dividend income and stock splits are recorded on the
ex-dividend date. Realized gains and losses from investment transactions are
determined on an identified cost basis.
2. Investment Advisory and Administrative Services Fees
For the period January 1, 1996 through July 31, 1996, Variable Fund, Advisers
Fund and Income Shares paid the Company (its investment adviser) an investment
advisory fee at an annual rate of one-quarter of one percent (0.25%) of each
Fund's average daily net assets. On June 17, 1996, the shareholders of Variable
Fund, Advisers Fund and Income Shares approved a new Investment Advisory
Agreement, effective August 1, 1996, which provides for an increase in the
annual advisory fee to 0.50% of average daily net assets for Variable and
Advisers Funds and an increase in the annual advisory fee to 0.40% of average
daily net assets for Income Shares. For the year ended December 31, 1996, Encore
Fund paid the Company an investment advisory fee at an annual rate of 0.25% of
its average daily net assets.
35
<PAGE>
Notes to Financial Statements
December 31, 1996 (continued)
================================================================================
The Funds had entered into an administrative services agreement (the Agreement)
with the Company whereby the Company was reimbursed for a share of its overhead
related to managing the Funds. In addition, the Company had been paying, and the
Funds had been reimbursing the Company for, the Funds' ordinary, recurring
expenses such as legal fees, trustees'/directors' fees, custodial fees and
insurance premiums. Effective May 1, 1996, the Agreement was modified to enable
each Fund to fix the amount of its costs and expenses. Under the terms of the
new Agreement, the Company will receive a fixed fee in exchange for providing
the services described above, including reimbursement of its overhead related to
managing the Funds. The new Agreement provides for the Company to receive a
fixed fee at an annual rate of 0.06% of average daily net assets for Variable
Fund, 0.08% of average daily net assets for each of Advisers Fund and Income
Shares and 0.10% of average daily net assets for Encore Fund.
During June and July, the shareholders of each Fund voted to approve a
subadvisory agreement (the Subadvisory Agreement) among the Funds, the Company
and the Company's affiliate, Aeltus Investment Management, Inc. (Aeltus). Under
the terms of the Subadvisory Agreement, Aeltus will supervise the investment and
reinvestment of cash and securities and provide certain related administrative
services for each Fund in exchange for fees to be paid by the Company.
The fees vary by Fund, depending on the Fund's investment objective, and range
from 0.15% to 0.30% of a particular Fund's average daily net assets. For the
period ended December 31, 1996, the Company paid Aeltus $7,750,390, $651,877,
$366,655, $1,628,453 for Variable, Income Shares, Encore and Advisers Fund,
respectively, in accordance with the terms of the Subadvisory Agreement.
3. Purchases and Sales of Investments
Purchases and sales of investment securities, excluding short-term investments,
for all Funds except Encore Fund, a money market fund, for the year ended
December 31, 1996 were:
Cost of Purchases Proceeds from Sales
----------------- -------------------
Variable Fund $5,332,645,688 $5,117,253,372
Income Shares 585,103,660 525,102,772
Advisers Fund 1,180,169,341 1,266,106,997
4. Capital Loss Carryforward
At December 31, 1996, for federal income tax purposes, Income Shares and Encore
Fund had the following capital loss carryforwards available to offset future
long-term capital gains of approximately:
Capital Loss Carryforward Year of Expiration
------------------------- ------------------
Income Shares $8,828,000 2002
Encore Fund 63,000 2003
5. Options
The following reflects the call and put option activity for the year ended
December 31, 1996:
Variable Fund
<TABLE>
<CAPTION>
Call Options Written
--------------------------------------------------------------
Number of Option Deferred Premium Realized
Contracts Received Gain (Loss)
------------ ------------ ------------
<S> <C> <C> <C>
Outstanding December 31, 1995 ........................... -- $ -- $ --
Written ................................................. 70,790 84,573,623 --
Closed .................................................. (51,862) (54,058,443) (9,892,119)
Expired ................................................. (1,711) (1,495,967) 1,495,967
Exercised ............................................... (556) (152,322) --
------- ------------ ------------
Outstanding December 31, 1996 ........................... 16,661 $ 28,866,891 $ (8,396,152)
======= ============ ============
</TABLE>
36
<PAGE>
================================================================================
5. Options (continued)
Variable Fund (continued)
<TABLE>
<CAPTION>
Put Options Written
------------------------------------------------------------
Number of Option Deferred Premium Realized
Contracts Received Gain (Loss)
--------- -------- -----------
<S> <C> <C> <C>
Outstanding December 31, 1995 ............................ -- $ -- $ --
Written .................................................. 6,618 6,743,979 --
Closed ................................................... (2,742) (2,562,686) 1,893,710
Expired .................................................. 6,618 (1,248,229) 1,248,229
Exercised ................................................ -- -- --
----------- ----------- -----------
Outstanding December 31, 1996 ............................ 2,713 $ 2,933,064 $ 3,141,939
=========== =========== ===========
</TABLE>
Investment Advisers Fund
<TABLE>
<CAPTION>
Call Options Written
--------------------------------------------------------------
Number of Option Deferred Premium Realized
Contracts Received Gain (Loss)
--------- -------- -----------
<S> <C> <C> <C>
Outstanding December 31, 1995 ........................... -- $ -- $ --
Written ................................................. 2,366 2,244,302 --
Closed .................................................. (2,366) (2,244,302) (1,564,152)
Expired ................................................. -- -- --
Exercised ............................................... -- -- --
----------- ----------- -----------
Outstanding December 31, 1996 ........................... -- $ -- $(1,564,152)
=========== =========== ===========
</TABLE>
6. Forward Foreign Currency Exchange Contracts
At December 31, 1996, Variable Fund had the following open forward foreign
currency exchange contracts that obligate the Fund to deliver currencies at
specified future dates. The net unrealized gain of $3,191,911 on these contracts
is included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
Exchange Currency to U.S. $ Value Currency to U.S. $ Value Unrealized
Date be Delivered December 31, 1996 be Received December 31, 1996 Gain (Loss)
---- ------------ ----------------- ----------- ----------------- -----------
Contracts to Buy
- ----------------
<S> <C> <C> <C> <C> <C>
2/10/97 311,187 $311,187 400,000 $299,139 $(12,048)
U.S. Dollar Swiss Franc
- ---------------------------------------------------------------------------------------------------------------------------
2/10/97 2,332,861 2,332,861 3,130,000 2,340,764 7,903
U.S. Dollar Swiss Franc
- ---------------------------------------------------------------------------------------------------------------------------
3/13/97 2,763,445 2,763,445 305,380,000 2,657,714 (105,731)
U.S. Dollar Japanese Yen
- ---------------------------------------------------------------------------------------------------------------------------
1/24/97 682,035 682,035 75,000,000 648,583 (33,452)
U.S. Dollar Japanese Yen
- ---------------------------------------------------------------------------------------------------------------------------
1/6/97 311,496 311,496 485,000 312,820 1,324
U.S. Dollar German Deutschemark
- ---------------------------------------------------------------------------------------------------------------------------
1/2/97 716,941 716,941 424,000 716,458 (483)
U.S. Dollar British Pounds
- ---------------------------------------------------------------------------------------------------------------------------
1/2/97 246,444 246,444 1,906,000 246,384 (60)
U.S. Dollar Hong Kong Dollars
- ---------------------------------------------------------------------------------------------------------------------------
1/2/97 223,619 223,619 5,870,000 225,006 1,387
U.S. Dollar Philipinnes Peso
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
Notes to Financial Statements
December 31, 1996 (continued)
================================================================================
6. Forward Foreign Currency Exchange Contracts (continued)
<TABLE>
<S> <C> <C> <C> <C> <C>
Contracts to Sell
- -----------------
2/10/97 3,123,000 2,335,530 2,624,370 2,624,370 288,840
Swiss Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
3/3/97 24,544,000 15,989,646 16,426,348 16,426,348 436,702
German Deutschemark U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
3/3/97 9,263,000 6,036,868 5,990,689 5,990,689 (46,179)
German Deutschemark U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
2/13/97 867,000 564,198 562,767 562,767 (1,431)
German Deutschemark U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
2/13/97 60,367,300 11,641,813 11,905,790 11,905,790 263,977
French Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
2/13/97 1,572,000 303,160 300,236 300,236 (2,924)
French Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
3/13/97 1,917,560,000 16,688,471 17,820,743 17,820,743 1,132,272
Japanese Yen U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
3/17/97 1,434,050,000 12,487,761 13,129,921 13,129,921 642,160
Japanese Yen U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
1/24/97 1,775,150,000 15,351,104 15,925,650 15,925,650 574,546
Japanese Yen U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
4/18/97 12,814,600 7,461,715 7,526,359 7,526,359 64,644
Dutch Guilder U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
4/18/97 3,414,000 1,987,912 1,973,479 1,973,479 (14,433)
Dutch Guilder U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
1/7/97 3,775,554,000 2,472,575 2,467,472 2,467,472 (5,103)
Italian Lira U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
$3,191,911
==========
</TABLE>
7. Certain Reclassifications
In accordance with Statement of Position 93-2, the Funds made the following
reclassifications to the Statement of Asset and Liabilities:
<TABLE>
<CAPTION>
Undistributed Net Investment Accumulated Net Realized Gain
Paid-in Capital Income (Loss) on Investments
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Variable Fund $(9,181,282) $2,122,668 $7,058,614
Income Shares (2,092,960) 2,092,956 4
</TABLE>
These reclassifications have no impact on the net asset value of the Funds and
are designed to present each Fund's capital accounts on a tax basis.
38
<PAGE>
================================================================================
Federal Tax Status of Dividends Declared During the Fiscal Year (Unaudited)
As of December 31, 1996, the following Funds declared long term capital gain
dividends per share as follows:
Variable Fund $2.6800 December 1996
Advisers Fund 0.5225 July 1996
All of the income dividends paid by each Fund were ordinary income for federal
income tax purposes. The percentage of income dividends that were qualifying
dividends for the corporate dividends received deduction were:
Variable Fund 65.33%
Income Shares 0.07%
Advisers Fund 15.59%
39
<PAGE>
Aetna Variable Fund
Financial Highlights
================================================================================
Selected data for a fund share outstanding throughout each year:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 + 1994 + 1993 + 1992 +
----- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year ........... $29.055 $26.229 $31.245 $31.602 $30.954
----------- ----------- ----------- ----------- -----------
Income from investment operations:
Net investment income ................................ 0.651 0.724 0.765 0.822 0.810
Net realized and unrealized gain (loss) .............. 6.446 7.620 (1.071) 1.287 1.229
----------- ----------- ----------- ----------- -----------
Total from investment operations ............... 7.097 8.344 (0.306) 2.109 2.039
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income ........................... (0.733) (0.723) (0.811) (0.814) (0.866)
From net realized gains on investments ............... (3.028) (4.795) (3.899) (1.652) (0.525)
----------- ----------- ----------- ----------- -----------
Total distributions ............................ (3.761) (5.518) (4.710) (2.466) (1.391)
----------- ----------- ----------- ----------- -----------
Net asset value per share, end of year ................. $32.391 $29.055 $26.229 $31.245 $31.602
=========== =========== =========== =========== ===========
Total return* .......................................... 24.46% 32.25% (0.96)% 6.74% 6.70%
Net assets, end of year (millions) ..................... $6,954 $5,662 $4,424 $4,988 $4,552
Ratio of total expenses to average net assets .......... 0.43% 0.29% 0.30% 0.29% 0.30%
Ratio of net investment income to average net assets ... 2.02% 2.42% 2.52% 2.57% 2.86%
Portfolio turnover rate ................................ 85.03% 96.63% 84.27% 25.22% 16.26%
Average commission rate paid per share ................. $0.0418 -- -- -- --
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares
outstanding throughout the year.
See Notes to Financial Statements.
40
<PAGE>
<TABLE>
<CAPTION>
Aetna Income Shares
Financial Highlights
====================================================================================================================================
Selected data for a fund share outstanding throughout each year:
Year Ended December 31,
1996 1995 + 1994 + 1993 + 1992 +
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year ....... $ 13.001 $ 11.719 $ 13.052 $ 12.759 $ 13.511
------------ ------------ ------------ ------------ ------------
Income from investment operations:
Net investment income ............................ 0.844 0.885 0.791 0.854 0.949
Net realized and unrealized gain (loss) .......... (0.387) 1.237 (1.294) 0.365 0.039
------------ ------------ ------------ ------------ ------------
Total from investment operations ........... 0.457 2.122 (0.503) 1.219 0.988
------------ ------------ ------------ ------------ ------------
Less distributions:
From net investment income ....................... (0.835) (0.840) (0.830) (0.852) (1.070)
From net realized gains on investments ........... -- -- -- (0.074) (0.670)
------------ ------------ ------------ ------------ ------------
Total distributions ........................ (0.835) (0.840) (0.830) (0.926) (1.740)
------------ ------------ ------------ ------------ ------------
Net asset value per share, end of year ............. $ 12.623 $ 13.001 $ 11.719 $ 13.052 $ 12.759
============ ============ ============ ============ ============
Total return* ...................................... 3.60% 18.24% (3.80)% 9.68% 7.45%
Net assets, end of year (000's) .................... $ 643,729 $ 666,960 $ 561,704 $ 641,429 $ 530,880
Ratio of total expenses to average net assets ...... 0.39% 0.32% 0.33% 0.31% 0.31%
Ratio of net investment income to average net assets 6.39% 6.97% 6.38% 6.47% 6.96%
Portfolio turnover rate ............................ 96.41% 113.72% 74.24% 56.37% 94.26%
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares
outstanding throughout the year.
See Notes to Financial Statements.
41
<PAGE>
<TABLE>
<CAPTION>
Aetna Variable Encore Fund
Financial Highlights
====================================================================================================================================
Selected data for a fund share outstanding throughout each year:
Year Ended December 31,
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year ....... $ 13.298 $ 12.544 $ 12.535 $ 12.557 $ 12.628
----------- ----------- ----------- ----------- ------------
Income from investment operations:
Net investment income ............................ 0.697 0.755 0.526 0.397 0.502
Net realized and unrealized gain (loss) .......... (0.001) 0.009 (0.022) 0.001 (0.042)
----------- ----------- ----------- ----------- ------------
Total from investment operations ........... 0.696 0.764 0.504 0.398 0.460
----------- ----------- ----------- ----------- ------------
Less distributions:
From net investment income ....................... (0.800) (0.010) (0.495) (0.420) (0.531)
----------- ----------- ----------- ----------- ------------
Total distributions ........................ (0.800) (0.010) (0.495) (0.420) (0.531)
----------- ----------- ----------- ----------- ------------
Net asset value per share, end of year ............. $ 13.194 $ 13.298 $ 12.544 $ 12.535 $ 12.557
=========== =========== =========== =========== ============
Total return* ...................................... 5.37% 6.05% 4.09% 3.19% 3.67%
Net assets, end of year (000's) .................... $ 613,505 $ 514,037 $ 483,039 $ 380,249 $ 461,991
Ratio of total expenses to average net assets ...... 0.34% 0.30% 0.32% 0.31% 0.37%
Ratio of net investment income to average net assets 5.24% 5.82% 4.16% 3.14% 3.96%
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
Per share data calculated using weighted average number of shares outstanding
throughout the year.
See Notes to Financial Statements.
42
<PAGE>
Aetna Investment Advisers Fund, Inc.
Financial Highlights
================================================================================
Selected data for a fund share outstanding throughout each year:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 + 1994 + 1993 + 1992 +
----- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value per share, beginning of year ....... $14.502 $12.226 $12.798 $12.066 $11.841
------- ------- ------- ------- -------
Income from investment operations:
Net investment income ............................ 0.469 0.539 0.480 0.441 0.450
Net realized and unrealized gain (loss) .......... 1.585 2.737 (0.532) 0.741 0.297
------- ------- ------- ------- -------
Total from investment operations ........... 2.054 3.276 (0.052) 1.182 0.747
------- ------- ------- ------- -------
Less distributions:
From net investment income ....................... (0.350) (0.670) (0.451) (0.440) (0.506)
From net realized gains on investments ........... (1.088) (0.330) (0.069) (0.010) (0.016)
------- ------- ------- ------- -------
Total distributions ........................ (1.438) (1.000) (0.520) (0.450) (0.522)
------- ------- ------- ------- -------
Net asset value per share, end of year ............. $15.118 $14.502 $12.226 $12.798 $12.066
======= ======= ======= ======= =======
Total return* ...................................... 15.17% 27.23% (0.35)% 9.90% 6.39%
Net assets, end of year (millions) ................. $1,364 $1,196 $958 $920 $730
Ratio of total expenses to average net assets ...... 0.45% 0.31% 0.32% 0.31% 0.32%
Ratio of net investment income to average net assets 3.21% 3.96% 3.83% 3.53% 4.05%
Portfolio turnover rate ............................ 107.80% 141.21% 112.05% 24.71% 15.51%
Average commission rate paid per share ............. $0.0576 -- -- -- --
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares
outstanding throughout the year.
See Notes to Financial Statements.
43
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Trustees/Directors
Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund
and Aetna Investment Advisers Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund and Aetna
Investment Advisers Fund, Inc. (the Funds), including the portfolios of
investments, as of December 31, 1996, the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Aetna
Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund and Aetna
Investment Advisers Fund, Inc. as of December 31, 1996, the results of their
operations for the year then ended, the changes in their net assets for each of
the years in the two-year period then ended and financial highlights for each of
the years in the five-year period then ended in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
44
<PAGE>
Special Meeting of Shareholders
(Unaudited)
================================================================================
During June and July, Special Shareholder Meetings were held for shareholders in
each Fund. Variable Fund's, Income Shares' and Advisers Fund's shareholders met
on June 17, 1996, while Encore Fund's shareholders met on July 19, 1996.
Shareholders of record on April 30, 1996 were entitled to vote at the meetings
held on behalf of Variable Fund, Income Shares and Advisers Fund. Shareholders
of record on May 31, 1996 were entitled to vote at the meeting held on behalf of
Encore Fund.
At each separately held meeting, shareholders voted to elect nine
Trustees/Directors, approve a subadvisory agreement among each of the Funds, the
Company, and Aeltus, and approve a new Investment Advisory Agreement between
each Fund and the Company. In addition, shareholders in each Fund, except
Advisers Fund, voted to amend the Fund's Declaration of Trust to modify the
Fund's liability and indemnification provisions. (Shareholders of Advisers Fund
were not asked to vote on this measure because it is organized as a corporation,
and as such, its Directors are subject to different legal liability
requirements). Following is a brief description and the results of each vote.
A. Election of Trustees/Directors
The following individuals were elected to serve as Trustees/Directors for each
of the Funds. Every individual named served as a Trustee/Director in each Fund
prior to this election. There are no other individuals currently serving as
Trustees/Directors to any Fund.
<TABLE>
<CAPTION>
Trustee/Director Votes Cast Votes Trustee/Director Votes Cast Votes
Fund For Withheld Fund For Withheld
- ---------------------------------------------------------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Morton Ehrlich Sidney Koch
- -------------- -----------
Variable Fund 161,372,922 5,644,517 Variable Fund 161,306,419 5,711,020
Income Shares 37,916,952 1,263,478 Income Shares 37,939,127 1,241,303
Encore Fund 25,324,833 1,020,609 Encore Fund 25,306,469 1,038,973
Advisers Fund 62,941,680 2,327,593 Advisers Fund 63,009,968 2,259,305
Maria T. Fighetti Shaun P. Mathews
- ----------------- ----------------
Variable Fund 160,954,146 6,063,293 Variable Fund 161,204,997 5,812,442
Income Shares 37,799,689 1,380,741 Income Shares 37,904,972 1,275,458
Encore Fund 25,302,225 1,043,217 Encore Fund 25,306,830 1,038,612
Advisers Fund 62,885,813 2,383,460 Advisers Fund 62,971,499 2,297,774
David L. Grove Corine T. Norgaard
- -------------- ------------------
Variable Fund 160,793,454 6,223,985 Variable Fund 160,946,263 6,071,176
Income Shares 37,623,553 1,556,877 Income Shares 37,705,587 1,474,843
Encore Fund 25,240,520 1,104,922 Encore Fund 25,279,538 1,065,904
Advisers Fund 62,856,296 2,412,977 Advisers Fund 62,840,547 2,428,726
Timothy A. Holt Richard G. Scheide
- --------------- ------------------
Variable Fund 161,309,064 5,708,375 Variable Fund 161,220,137 5,797,302
Income Shares 37,901,688 1,278,742 Income Shares 37,931,384 1,249,046
Encore Fund 25,308,142 1,037,300 Encore Fund 25,306,244 1,039,198
Advisers Fund 62,956,557 2,312,716 Advisers Fund 63,032,028 2,237,245
Daniel P. Kearney
- -----------------
Variable Fund 161,063,795 5,953,644
Income Shares 37,872,659 1,307,771
Encore Fund 25,291,156 1,054,286
Advisers Fund 62,627,319 2,641,954
</TABLE>
45
<PAGE>
Special Meeting of Shareholders (continued)
(Unaudited)
================================================================================
B. Approval of Subadvisory Agreement
The shareholders of each Fund voted to approve a Subadvisory Agreement with
Aeltus. (See Note 2 of Notes to Financials for a description of the services
provided and the compensation arrangement defined by the terms of the
agreement.)
Results of the vote were:
Votes Cast Votes Cast
Fund For Against Abstentions
- --------------------------------------------------------------------------------
Variable Fund 146,516,837 12,670,365 7,830,237
Income Shares 34,324,420 3,117,166 1,738,844
Encore Fund 23,472,094 1,259,184 1,614,164
Advisers Fund 57,046,100 4,903,072 3,320,101
C. Approval of New Investment Advisory Agreement
Shareholders in each Fund voted to approve a new Investment Advisory Agreement
(the Agreement) between each Fund and the Company. For all Funds, the Agreement
was updated in the following respects: the language was simplified where
possible; the liability provisions made it clear that the Company is liable to
the Fund for the Company's negligence, and it expanded the Company's ability to
use brokerage commissions to pay Fund expenses.
Additionally shareholders of Variable Fund, Advisers Fund and Income Shares
voted to increase the annual investment advisory fee from 0.25% of average daily
net assets to 0.50% of average daily net assets for Variable Fund and Advisers
Fund and to 0.40% of average daily net assets for Income Shares.
Results of the vote were:
Votes Cast Votes Cast
Fund For Against Abstentions
- --------------------------------------------------------------------------------
Variable Fund 135,248,579 23,840,887 7,927,973
Income Shares 32,469,944 4,960,684 1,749,802
Encore Fund 23,663,583 1,095,508 1,586,351
Advisers Fund 54,058,024 7,937,568 3,273,681
D. Amendment to Funds' Declaration of Trust
Shareholders of Variable Fund, Income Shares and Encore Fund voted to delete and
restate certain articles in each Fund's Declaration of Trust related to the
liability of Trustees to a Fund and the indemnification by a Fund of Trustees
and officers for liabilities incurred while acting as Trustees or officers of
the Fund. The primary purpose of the amendment is to allow a Fund to advance
costs to a Trustee if that Trustee is named in an action for which the Fund
would ultimately be obligated to indemnify the Trustee without the Trustee being
required to post collateral.
Results of the vote were:
Votes Cast Votes Cast
Fund For Against Abstentions
- --------------------------------------------------------------------------------
Variable Fund 145,455,619 12,351,797 9,210,023
Income Shares 34,236,869 2,960,541 1,983,020
Encore Fund 23,143,387 1,358,413 1,843,642
46
<PAGE>
Aetna Variable Index Plus Portfolio
The Aetna Variable Index Plus Portfolio generated a 9.64% return for the period
from September 16, 1996 to December 31, 1996, net of fund expenses,
outperforming the S&P 500 which produced a return of 8.92% for the same period.
The S&P 500 is an unmanaged index that tracks a broad base of 500 U.S. stocks,
and is generally considered the benchmark for large company stocks. The S&P 500
performance is calculated by giving more weight to the stocks of larger
companies, as they have a greater influence than other stocks on the direction
of the stock market.
The Index Plus Portfolio's basic approach is to own approximately 400 to 450 of
the stocks tracked by S&P 500 index, overweighting (relative to the weight of
the stock in the index) those stocks which are expected to outperform and
underweighting those expected to underperform. Through a quantitative computer
model that ranks each stock in the S&P 500 on a variety of characteristics
including price/earnings ratio, growth reliability, earnings momentum, analyst
estimate revision, price momentum and earnings surprise, the attractiveness of
each issue is determined. Stocks that rank well in the model are overweighted,
and stocks with indifferent ranks are held at a weight in the Portfolio
approximately equal to their weight in the S&P 500. Finally, stocks with poor
ranks are underweighted or not owned at all. We believe that a portfolio that
avoids the underperforming securities in the S&P 500 and identifies potential
strong performers could outperform the index.
The objective of the Portfolio is to outperform the S&P 500 while maintaining
portfolio characteristics that are substantially the same as the S&P 500. To
this end, sector weightings closely resemble those found in the S&P 500, and are
constrained to plus or minus 35% of the index sector weightings. To illustrate
this concept, the Portfolio's sector weightings relative to the S&P 500 are
included in the accompanying exhibit. Going forward, we will continue to pursue
incremental returns over the total return of the S&P 500 Index, and adhere to
our disciplined stock selection process.
Past performance is no assurance of future returns.
Investment Summary:
- --------------------------------------------------------------------------------
Top Ten Holdings % of Portfolio
- --------------------------------------------------------------------------------
General Electric Co. 4.3%
Intel Corp. 3.3%
Philip Morris Cos., Inc. 2.8%
Microsoft Corp. 2.4%
Merck & Co. 2.2%
Coca-Cola Co. 2.0%
Exxon Corp. 1.8%
Bristol-Meyers Squibb Co. 1.6%
Pfizer, Inc. 1.6%
Du Pont (E.I.) deNemours 1.6%
Large Cap Portfolio Sector
Breakdown:
- --------------------------------------------------------------------------------
Portfolio S&P 500
Sector Weight Weight Over/(Under)
- --------------------------------------------------------------------------------
Basic Materials 4.4% 6.3% (1.9)%
Producer Goods & Services 13.8% 12.6% 1.2 %
Technology 13.4% 11.8% 1.6 %
Consumer Goods 32.3% 32.7% (0.4)%
Services 1.6% 2.3% (0.7)%
Financial Services 16.3% 14.6% 1.7 %
Utilities 18.2% 19.7% (1.5)%
47
<PAGE>
Aetna Variable Index Plus Portfolio
Portfolio of Investments - December 31, 1996
================================================================================
Number
of Market
Shares Value
---------- ---------
COMMON STOCKS (97.3%)
Aerospace and Defense (1.8%)
Boeing Co. ............................................. 1,021 $ 108,608
General Dynamics Corp. ................................. 100 7,050
Lockheed Martin Corp. .................................. 546 49,959
McDonnell-Douglas Corp. ................................ 900 57,600
Newport News Shipbuilding, Inc. + ...................... 60 900
Northrop Grumman Corp. ................................. 100 8,275
Raytheon Co. ........................................... 500 24,063
United Technologies Corp. .............................. 1,400 92,399
-----------
348,854
-----------
Agriculture (0.1%)
Pioneer Hi-Bred International, Inc. .................... 200 14,000
-----------
Apparel (0.8%)
Alberto-Culver Co. ..................................... 100 4,800
Fruit of the Loom, Inc. + .............................. 300 11,363
Gap, Inc. .............................................. 1,200 36,150
Liz Claiborne, Inc. .................................... 200 7,725
Nike, Inc. Class B ..................................... 1,700 101,574
Russell Corp. .......................................... 100 2,975
-----------
164,587
-----------
Auto Parts and Accessories (0.3%)
Dana Corp. ............................................. 200 6,525
Echlin, Inc. ........................................... 100 3,163
Genuine Parts Co. ...................................... 200 8,900
Pep Boys ............................................... 100 3,075
The Goodyear Tire & Rubber Co. ......................... 500 25,688
TRW, Inc. .............................................. 200 9,900
-----------
57,251
-----------
Autos and Auto Equipment (2.2%)
Chrysler Corp. ......................................... 4,000 131,999
Ford Motor Co. ......................................... 3,800 121,124
General Motors Corp. ................................... 2,800 156,099
PACCAR, Inc. ........................................... 100 6,800
Snap-On, Inc. .......................................... 200 7,125
-----------
423,147
-----------
Banks (7.2%)
Banc One Corp. ......................................... 1,400 60,200
Bank of Boston Corp. ................................... 600 38,550
Bank of New York Co., Inc. ............................. 1,600 54,000
BankAmerica Corp. ...................................... 2,100 209,474
Barnett Banks, Inc. .................................... 1,100 45,238
Boatmen's Bancshares, Inc. ............................. 400 25,800
CITICORP ............................................... 1,500 154,499
Comerica, Inc. ......................................... 600 31,425
Corestates Financial Corp. ............................. 500 25,938
Fifth Third Bancorp .................................... 500 31,406
First Bank System, Inc. ................................ 800 54,600
First Chicago Corp. .................................... 1,300 69,875
First Union Corp. ...................................... 1,600 118,399
Fleet Financial Group, Inc. ............................ 800 39,900
Number
of Market
Shares Value
---------- ---------
Banks (continued)
Golden West Financial Corp. ............................ 200 $ 12,625
Great Western Financial Corp. .......................... 400 11,600
H. F. Ahmanson & Co. ................................... 200 6,500
KeyCorp ................................................ 1,000 50,500
Mellon Bank Corp. ...................................... 400 28,400
NationsBank Corp. ...................................... 1,200 117,299
Norwest Corp. .......................................... 2,100 91,349
Republic New York Corp. ................................ 200 16,325
Suntrust Banks, Inc. ................................... 1,000 49,250
Wachovia Corp. ......................................... 400 22,600
Wells Fargo & Co. ...................................... 100 26,975
-----------
1,392,727
-----------
Building Materials and Construction (0.3%)
Armstrong World Industries, Inc. ....................... 100 6,950
Centex Corp. ........................................... 100 3,763
Foster Wheeler Corp. ................................... 100 3,713
Martin Marietta Materials, Inc. ........................ 254 5,906
Masco Corp. ............................................ 300 10,800
Sherwin-Williams Co. ................................... 200 11,200
Weyerhaeuser Co. ....................................... 300 14,213
-----------
56,545
-----------
Chemicals (3.4%)
Air Products and Chemicals, Inc. ....................... 200 13,825
Dow Chemical Co. ....................................... 700 54,863
Du Pont (E.I.) de Nemours .............................. 3,300 311,437
Eastman Chemical Co. ................................... 100 5,525
Engelhard Corp. ........................................ 200 3,825
FMC Corp. + ............................................ 100 7,013
Goodrich (B.F.) Co. .................................... 100 4,050
Great Lakes Chemical Corp. ............................. 100 4,675
Hercules, Inc. ......................................... 200 8,650
Monsanto Co. ........................................... 3,600 139,949
Morton International, Inc. ............................. 400 16,300
Nalco Chemical Co. ..................................... 100 3,613
PPG Industries, Inc. ................................... 600 33,675
Praxair, Inc. .......................................... 500 23,063
Sigma-Aldrich Corp. .................................... 100 6,244
Union Carbide Corp. .................................... 300 12,263
W.R. Grace & Co. ....................................... 200 10,350
-----------
659,320
-----------
Commercial Services (0.9%)
ACNielsen Corp. + ...................................... 66 998
Automatic Data Processing, Inc. ........................ 900 38,588
CUC International, Inc. + .............................. 900 21,375
Dun & Bradstreet Corp. ................................. 200 4,750
Ecolab, Inc. ........................................... 100 3,763
First Data Corp. ....................................... 1,400 51,100
Service Corp. International ............................ 800 22,400
WMX Technologies, Inc. ................................. 1,300 42,413
-----------
185,387
-----------
48 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number
of Market
Shares Value
---------- ---------
Computer Software (5.0%)
Cisco Systems, Inc. + .................................. 4,100 $ 260,862
Computer Associates International, Inc. ................ 2,300 114,424
Computer Sciences Corp. + .............................. 200 16,425
Microsoft Corp. + ...................................... 5,800 479,224
Novell, Inc. + ......................................... 300 2,841
Oracle Corp. + ......................................... 2,100 87,675
-----------
961,451
-----------
Computers and Office Equipment (3.6%)
3Com Corp. + ........................................... 900 66,038
Alco Standard Corp. .................................... 200 10,325
Cabletron Systems, Inc. + .............................. 400 13,300
Ceridian Corp. + ....................................... 100 4,050
Compaq Computer Corp. + ................................ 1,700 126,224
Dell Computer Corp. + .................................. 1,000 53,125
Deluxe Corp. ........................................... 200 6,550
Digital Equipment Corp. + .............................. 300 10,913
EMC Corp. + ............................................ 400 13,250
Harris Corp. ........................................... 100 6,863
International Business Machines, Inc. .................. 1,700 256,699
Moore Corp. Ltd. ....................................... 200 4,075
Pitney Bowes, Inc. ..................................... 500 27,250
Sun Microsystems, Inc. + ............................... 2,400 61,650
Xerox Corp. ............................................ 700 36,838
-----------
697,150
-----------
Consumer Products (3.3%)
Avon Products, Inc. .................................... 600 34,275
Clorox Co. ............................................. 200 20,075
Colgate-Palmolive Co. .................................. 300 27,675
Eastman Kodak Co. ...................................... 1,100 88,275
Gillette Co. ........................................... 2,500 194,374
International Flavors & Fragrances, .................... 100 4,500
Inc
Mattel, Inc. ........................................... 800 22,200
Newell Co. ............................................. 300 9,450
Polaroid Corp. ......................................... 100 4,350
Procter & Gamble Co. (The) ............................. 2,100 225,749
Tupperware Corp. ....................................... 100 5,363
-----------
636,286
-----------
Diversified (6.9%)
Allied Signal, Inc. .................................... 1,500 100,499
American Brands, Inc. .................................. 300 14,888
Cognizant Corp. ........................................ 500 16,500
Cooper Industries, Inc. ................................ 200 8,425
Corning, Inc. .......................................... 300 13,875
Crane Co. .............................................. 150 4,350
Deere & Co. ............................................ 1,500 60,938
Dover Corp. ............................................ 400 20,100
Eaton Corp. ............................................ 100 6,975
General Electric Co. ................................... 8,500 840,437
ITT Industries, Inc. ................................... 200 4,900
Johnson Controls, Inc. ................................. 100 8,288
Minnesota Mining and Manufacturing Co. ................. 1,200 99,449
Number
of Market
Shares Value
---------- ---------
Diversified (continued)
Raychem Corp. .......................................... 200 $ 16,025
Rohm & Haas Co. ........................................ 300 24,488
Tenneco, Inc. .......................................... 300 13,538
Textron, Inc. .......................................... 200 18,850
TRINOVA Corp. .......................................... 100 3,638
Tyco International Ltd. ................................ 800 42,300
VF Corp. ............................................... 200 13,500
Westinghouse Electric Corp. ............................ 400 7,950
Whitman Corp. .......................................... 200 4,575
-----------
1,344,488
-----------
Electrical and Electronics (4.3%)
General Signal Corp. ................................... 100 4,275
Hewlett Packard Co. .................................... 2,500 125,624
Intel Corp. ............................................ 4,900 641,593
National Service Industries, Inc. ...................... 100 3,738
Perkin-Elmer Corp. ..................................... 100 5,888
Rockwell International Corp. ........................... 500 30,438
Seagate Technology, Inc. + ............................. 700 27,650
-----------
839,206
-----------
Electrical Equipment (0.8%)
AMP, Inc. .............................................. 300 11,513
Emerson Electric Co. ................................... 1,000 96,749
Grainger (W. W.), Inc. ................................. 100 8,025
Honeywell, Inc. ........................................ 500 32,875
-----------
149,162
-----------
Financial Services (5.4%)
American Express Co. ................................... 2,100 118,649
Bankers Trust New York Corp. ........................... 200 17,250
Beneficial Corp. ....................................... 100 6,338
Chase Manhattan Corp. .................................. 1,900 169,574
Dean Witter, Discover & Co. ............................ 400 26,500
Federal Home Loan Mortgage Corp. ....................... 500 55,063
Federal National Mortgage Association .................. 4,800 178,799
Green Tree Financial Corp. ............................. 700 27,038
Household International, Inc. .......................... 300 27,675
J.P. Morgan & Co. ...................................... 500 48,813
MBNA Corp. ............................................. 1,200 49,800
Merrill Lynch & Co., Inc. .............................. 600 48,900
Morgan Stanley Group, Inc. ............................. 400 22,850
National City Corp. .................................... 700 31,413
PNC Bank Corp. ......................................... 900 33,863
Providian Corp. ........................................ 400 20,550
Salomon, Inc. .......................................... 300 14,138
St. Paul Cos., Inc. .................................... 100 5,863
Transamerica Corp. ..................................... 100 7,900
Travelers Group, Inc. .................................. 2,666 120,969
US Bancorp ............................................. 500 22,469
-----------
1,054,414
-----------
Foods and Beverages (5.4%)
Anheuser-Busch Co., Inc. ............................... 1,300 52,000
Archer-Daniels-Midland Co. ............................. 1,500 33,000
49
<PAGE>
Aetna Variable Index Plus Portfolio
Portfolio of Investments - December 31, 1996 (continued)
================================================================================
Number
of Market
Shares Value
---------- ---------
Foods and Beverages (continued)
Campbell Soup Co. ...................................... 1,000 $ 80,250
Coca-Cola Co. .......................................... 7,400 389,424
Conagra, Inc. .......................................... 1,200 59,700
CPC International, Inc. ................................ 500 38,750
General Mills, Inc. .................................... 200 12,675
Heinz (H.J.) Co. ....................................... 1,100 39,325
Hershey Foods Corp. .................................... 800 35,000
Kellogg Co. ............................................ 200 13,125
Kroger Co. (The) + ..................................... 200 9,300
PepsiCo, Inc. .......................................... 2,800 81,900
Quaker Oats Co. ........................................ 100 3,813
Ralston-Ralston Purina Group ........................... 200 14,675
Sara Lee Corp. ......................................... 2,200 81,950
Sysco Corp. ............................................ 400 13,050
Unilever N.V ........................................... 400 70,100
Wrigley (Wm) Jr Co. .................................... 400 22,500
-----------
1,050,537
-----------
Health Services (0.5%)
Columbia/HCA Healthcare Corp. .......................... 2,200 89,650
Humana, Inc. + ......................................... 200 3,825
Manor Care, Inc. ....................................... 100 2,700
Tenet Healthcare Corp. + ............................... 400 8,750
United Healthcare Corp. ................................ 100 4,500
-----------
109,425
-----------
Hotels and Restaurants (1.2%)
Choice Hotels International, Inc. + .................... 100 1,763
HFS, Inc. + ............................................ 800 47,800
Hilton Hotels Corp. .................................... 1,300 33,963
ITT Corp. + ............................................ 200 8,675
Marriott International, Inc. ........................... 800 44,200
McDonald's Corp. ....................................... 2,100 95,024
Wendy's International .................................. 200 4,100
-----------
235,525
-----------
Household Appliances (0.1%)
Maytag Corp. ........................................... 300 5,925
Whirlpool Corp. ........................................ 100 4,663
-----------
10,588
-----------
Insurance (3.4%)
Allstate Corp. ......................................... 2,600 150,474
American General Corp. ................................. 400 16,350
American International Group, Inc. ..................... 2,000 216,499
Aon Corp. .............................................. 100 6,213
Chubb Corp. ............................................ 500 26,875
Cigna Corp. ............................................ 300 40,988
General Re Corp. ....................................... 300 47,325
ITT Hartford Group, Inc. ............................... 400 27,000
Jefferson-Pilot Corp. .................................. 200 11,325
Lincoln National Corp. ................................. 200 10,500
Loews Corp. ............................................ 400 37,700
Marsh & McLennan Cos., Inc. ............................ 200 20,800
MGIC Investment Corp. .................................. 300 22,800
Number
of Market
Shares Value
---------- ---------
Insurance (continued)
Safeco Corp. ........................................... 200 $ 7,888
Torchmark Corp. ........................................ 100 5,050
UNUM Corp. ............................................. 200 14,450
-----------
662,237
-----------
Machinery and Equipment (1.2%)
Baker Hughes, Inc. ..................................... 900 31,050
Black & Decker Corp. ................................... 200 6,025
Briggs & Stratton Corp. ................................ 100 4,400
Brunswick Corp. ........................................ 200 4,800
Case Corp. ............................................. 200 10,900
Caterpillar, Inc. ...................................... 1,100 82,775
Fluor Corp. ............................................ 300 18,825
Harnischfeger Industries, Inc. ......................... 200 9,625
Illinois Tool Works, Inc. .............................. 300 23,963
Ingersoll-Rand Co. ..................................... 400 17,800
Millipore Corp. ........................................ 100 4,138
Pall Corp. ............................................. 200 5,100
Parker-Hannifin Corp. .................................. 100 3,875
Stanley Works .......................................... 200 5,400
-----------
228,676
-----------
Media and Entertainment (0.5%)
Interpublic Group of Cos., Inc. ........................ 200 9,500
King World Production, Inc. + .......................... 100 3,688
Walt Disney Co. (The) .................................. 1,200 83,550
-----------
96,738
-----------
Medical Supplies (0.7%)
Alza Corp. + ........................................... 200 5,175
Bard (C.R.), Inc. ...................................... 100 2,800
Baxter International, Inc. ............................. 500 20,500
Biomet, Inc. ........................................... 200 3,025
Boston Scientific Corp. + .............................. 600 36,000
Mallinckrodt, Inc. ..................................... 100 4,413
Medtronic, Inc. ........................................ 700 47,600
St. Jude Medical, Inc. + ............................... 100 4,263
US Surgical Corp. ...................................... 200 7,875
-----------
131,651
-----------
Metals and Mining (0.4%)
Alcan Aluminum, Ltd. ................................... 200 6,725
Allegheny Teledyne, Inc. ............................... 300 6,900
Aluminum Co. of America ................................ 300 19,125
Barrick Gold Corp. ..................................... 200 5,750
Freeport-McMoRan Copper & Gold, Inc. ................... 200 5,975
Inco, Ltd. ............................................. 200 6,375
Newmont Mining Corp. ................................... 100 4,475
Nucor Corp. ............................................ 100 5,100
Phelps Dodge Corp. ..................................... 100 6,750
Reynolds Metals Co. .................................... 100 5,638
-----------
72,813
-----------
Oil and Gas (9.6%)
Amerada Hess Corp. ..................................... 200 11,575
Amoco Corp. ............................................ 1,100 88,550
50 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number
of Market
Shares Value
---------- ---------
Oil and Gas (continued)
Ashland, Inc. .......................................... 100 $ 4,388
Atlantic Richfield Co. ................................. 900 119,249
Burlington Resources, Inc. ............................. 700 35,263
Chevron Corp. .......................................... 3,000 194,999
Columbia Gas System, Inc. .............................. 200 12,725
Consolidated Natural Gas Co. ........................... 300 16,575
Dresser Industries, Inc. ............................... 300 9,300
El Paso Natural Gas Co. ................................ 27 1,364
Enron Corp. ............................................ 700 30,188
Exxon Corp. ............................................ 3,700 362,599
Halliburton Co. ........................................ 200 12,050
Helmerich & Payne, Inc. ................................ 100 5,213
Kerr-Mcgee Corp. ....................................... 300 21,600
Louisiana Land and Exploration Co. ..................... 100 5,363
Mobil Corp. ............................................ 1,000 122,249
NorAm Energy Corp. ..................................... 400 6,150
Occidental Petroleum Corp. ............................. 1,000 23,375
Oryx Energy Co. + ...................................... 300 7,425
PanEnergy Corp. ........................................ 400 18,000
Pennzoil Co. ........................................... 100 5,650
Phillips Petroleum Co. ................................. 1,500 66,375
Rowan Cos., Inc. + ..................................... 300 6,788
Royal Dutch Petroleum Co. .............................. 1,600 273,199
Schlumberger Ltd. ...................................... 1,500 149,812
Texaco, Inc. ........................................... 1,500 147,187
The Williams Cos., Inc. ................................ 300 11,250
Union Pacific Resources Group, Inc. .................... 454 13,280
Unocal Corp. ........................................... 1,300 52,813
USX-Marathon Group ..................................... 700 16,713
Western Atlas, Inc. + .................................. 100 7,088
-----------
1,858,355
-----------
Paper and Containers (0.9%)
Avery Dennison Corp. ................................... 600 21,225
Bemis Co., Inc. ........................................ 200 7,375
Champion International Corp. ........................... 100 4,325
Crown Cork & Seal Co., Inc. ............................ 300 16,313
Georgia-Pacific Corp. .................................. 100 7,200
International Paper Co. ................................ 400 16,150
Kimberly-Clark Corp. ................................... 900 85,725
Mead Corp. ............................................. 100 5,813
Temple-Inland, Inc. .................................... 100 5,413
Willamette Industries, Inc. ............................ 100 6,963
-----------
176,502
-----------
Pharmaceuticals (11.0%)
Abbott Laboratories .................................... 4,500 228,374
Allergan, Inc. ......................................... 100 3,563
American Home Products Corp. ........................... 2,200 128,974
Amgen, Inc. + .......................................... 1,600 87,000
Becton, Dickinson & Co. ................................ 400 17,350
Bristol-Myers Squibb Co. ............................... 2,900 315,374
Eli Lilly & Co. ........................................ 1,800 131,399
Pharmaceuticals (continued)
Johnson & Johnson ...................................... 5,600 $278,599
Merck & Co., Inc. ...................................... 5,500 435,874
Pfizer, Inc. ........................................... 3,800 314,924
Pharmacia & Upjohn, Inc. ............................... 700 27,738
Schering Plough ........................................ 1,600 103,599
Warner Lambert Co. ..................................... 800 60,000
-----------
2,132,768
-----------
Printing and Publishing (0.5%)
Dow Jones & Co., Inc. .................................. 200 6,775
Gannett Co., Inc. ...................................... 300 22,463
John H. Harland Co. .................................... 100 3,300
Knight-Ridder, Inc. .................................... 200 7,650
McGraw-Hill Cos., Inc. ................................. 200 9,225
Meredith Corp. ......................................... 100 5,275
New York Times Co. ..................................... 200 7,600
RR Donnelley & Sons Co. ................................ 100 3,138
Times Mirror Co. ....................................... 600 29,850
Tribune Co. ............................................ 100 7,888
-----------
103,164
-----------
Retail (3.6%)
Albertson's, Inc. ...................................... 500 17,813
American Stores Co. .................................... 700 28,613
Charming Shoppes, Inc. + ............................... 400 2,025
Circuit City Stores, Inc. .............................. 100 3,013
CVS Corp. .............................................. 200 8,275
Dayton Hudson Corp. .................................... 1,300 51,025
Dillard Department Stores, Inc. ........................ 200 6,175
Federated Department Stores, Inc. + .................... 700 23,888
Footstar, Inc. + ....................................... 28 697
Giant Food, Inc. ....................................... 100 3,450
Great Atlantic & Pacific Tea Co., Inc. ................. 100 3,188
Harcourt General, Inc. ................................. 100 4,613
Hasbro, Inc. ........................................... 200 7,775
Home Depot, Inc. ....................................... 1,900 95,237
J.C. Penney Co., Inc. .................................. 700 34,125
Kmart Corp. + .......................................... 1,600 16,600
Lowe's Companies, Inc. ................................. 500 17,750
May Department Stores Co. .............................. 400 18,700
Mercantile Stores Co., Inc. ............................ 100 4,938
Nordstrom, Inc. ........................................ 100 3,544
Price/Costco, Inc. + ................................... 300 7,538
Rite Aid Corp. ......................................... 200 7,950
Sears, Roebuck & Co. ................................... 1,600 73,800
The Limited, Inc. ...................................... 400 7,350
TJX Companies, Inc. .................................... 400 18,950
Toys "R" Us, Inc. + .................................... 800 24,000
Wal-Mart Stores, Inc. .................................. 6,400 146,399
Walgreen Co. ........................................... 800 32,000
Winn-Dixie Stores, Inc. ................................ 300 9,488
Woolworth Corp. + ...................................... 800 17,500
-----------
696,419
-----------
51
<PAGE>
Aetna Variable Index Plus Portfolio
Portfolio of Investments - December 31, 1996 (continued)
================================================================================
Number
of Market
Shares Value
---------- ---------
Telecommunications (1.7%)
AirTouch Communications, Inc. + ........................ 400 $ 10,100
Ameritech Corp. ........................................ 2,300 139,437
Andrew Corp. + ......................................... 400 21,225
Lucent Technologies, Inc. .............................. 1,918 88,708
Northern Telecom Ltd. .................................. 1,100 68,063
-----------
327,533
-----------
Tobacco (2.9%)
Philip Morris Cos., Inc. ............................... 4,900 551,862
UST, Inc. .............................................. 500 16,188
-----------
568,050
-----------
Transportation (1.1%)
AMR Corp. + ............................................ 200 17,625
Burlington Northern Santa Fe Corp. ..................... 300 25,913
Conrail, Inc. .......................................... 100 9,963
CSX Corp. .............................................. 700 29,575
Delta Air Lines, Inc. .................................. 200 14,175
Federal Express Corp. + ................................ 200 8,900
Laidlaw, Inc. Class B .................................. 400 4,600
Norfolk Southern Corp. ................................. 600 52,500
Ryder System, Inc. ..................................... 200 5,625
Southwest Airlines Co. ................................. 200 4,425
Union Pacific Corp. .................................... 500 30,063
USAir Group, Inc. + .................................... 200 4,675
-----------
208,039
-----------
Utilities - Electric (1.8%)
American Electric Power Co. ............................ 500 20,563
Baltimore Gas & Electric Co. ........................... 200 5,350
Carolina Power & Light Co. ............................. 300 10,950
Central & South West Corp. ............................. 300 7,688
CINergy Corp. .......................................... 300 10,013
Consolidated Edison Co. of ............................. 400 11,700
New York, Inc. .......................................
Dominion Resources, Inc. ............................... 300 11,550
DTE Energy Co. ......................................... 200 6,475
Duke Power Co. ......................................... 600 27,750
Edison International ................................... 1,100 21,863
Entergy Corp. .......................................... 600 16,650
FPL Group, Inc. ........................................ 500 23,000
GPU, Inc. .............................................. 400 13,450
Houston Industries, Inc. ............................... 400 9,050
Northern States Power Co. .............................. 100 4,588
Ohio Edison Co. ........................................ 300 6,825
Pacific Gas & Electric Co. ............................. 300 6,300
PacifiCorp ............................................. 700 14,350
Peco Energy Co. ........................................ 300 7,575
PP&L Resources, Inc. ................................... 300 6,900
Public Service Enterprise Group, Inc. .................. 400 10,900
Southern Co. ........................................... 2,000 45,250
Texas Utilities Co. .................................... 700 28,525
Unicom Corp. ........................................... 400 10,850
Union Electric Co. ..................................... 200 7,700
-----------
345,815
-----------
Number
of Market
Shares Value
---------- ---------
Utilities - Oil and Gas (0.3%)
Coastal Corp. (The) .................................... 300 $ 14,663
NICOR, Inc. ............................................ 100 3,575
Pacific Enterprises .................................... 200 6,075
People's Energy Corp. .................................. 100 3,388
Sonat, Inc. ............................................ 500 25,750
-----------
53,451
-----------
Utilities - Telephone (4.2%)
Alltel Corp. ........................................... 300 9,413
AT&T Corp. ............................................. 1,900 82,650
Bell Atlantic Corp. .................................... 1,300 84,175
BellSouth Corp. ........................................ 3,200 129,199
GTE Corp. .............................................. 2,900 131,949
MCI Communications Corp. ............................... 1,200 39,225
NYNEX Corp. ............................................ 1,200 57,750
Pacific Telesis Group .................................. 1,100 40,425
SBC Communications, Inc. ............................... 1,700 87,975
Sprint Corp. ........................................... 1,100 43,863
Tellabs, Inc. + ........................................ 1,100 41,388
U. S. West Communications Group ........................ 1,300 41,925
WorldCom, Inc. + ....................................... 1,300 33,881
-----------
823,818
-----------
Total Common Stocks (cost $17,786,473)
18,876,079
-----------
Principal Market
Amount Value
-------- ---------
SHORT-TERM INVESTMENTS (4.0%)
Federal Home Loan Mortgage Corp.,
Mortgage-Backed Securities, 5.40%,
01/02/97 ............................................. $679,000 $ 679,000
U.S. Treasury Bill, Time Deposit,
5.08%, 08/21/97 ...................................... 100,000 96,692
-----------
Total Short-Term Investments
(cost $775,740) 775,692
----------
TOTAL INVESTMENTS (cost 19,651,771
$18,562,213)(a)
Other assets less liabilities (241,314)
===========
Total Net Assets $19,410,457
===========
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amount to
$18,575,649. Unrealized gains and losses, based on identified tax cost at
December 31, 1996, are as follows:
Principal Market
Amount Value
-------- ---------
Unrealized gains ................................... $1,266,620
Unrealized losses .................................. (190,498)
==========
Net unrealized gain ............................. $1,076,122
==========
+ Non-income producing security.
Category percentages are based on net assets.
52 See Notes to Financial Statements.
<PAGE>
Aetna Variable Index Plus Portfolio
Statement of Assets and Liabilities - December 31, 1996
================================================================================
<TABLE>
<S> <C>
Assets:
Investments, at market value ........................................................................... $ 19,651,771
Cash ................................................................................................... 1,877
Receivable for:
Dividends and interest ............................................................................... 33,968
Fund shares sold ..................................................................................... 22,850
Miscellaneous ........................................................................................ 601
------------
Total assets .................................................................................. 19,711,067
------------
Liabilities:
Payable for:
Dividends to shareholders ............................................................................ 36,828
Investments purchased ................................................................................ 72,411
Fund shares redeemed ................................................................................. 183,002
Accrued investment advisory fees ....................................................................... 5,858
Accrued administrative service fees .................................................................... 2,511
------------
Total liabilities ............................................................................. 300,610
------------
NET ASSETS ............................................................................................. $ 19,410,457
============
Net assets represented by:
Paid-in capital ........................................................................................ $ 18,345,726
Net unrealized gain on investments ..................................................................... 1,089,558
Distributions in excess of net investment income ....................................................... (69)
Accumulated net realized loss on investments ........................................................... (24,758)
------------
NET ASSETS ............................................................................................. $ 19,410,457
============
Shares authorized ...................................................................................... Unlimited
Par value .............................................................................................. $ 0.001
Shares outstanding ..................................................................................... 1,779,788
Net asset value per share (net assets divided by shares outstanding) ................................... $ 10.906
Cost of investments .................................................................................... $ 18,562,213
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
Aetna Variable Index Plus Portfolio
Statement of Operations - Period from September 16, 1996 to December 31, 1996
================================================================================
<TABLE>
<S> <C>
Investment Income:
Dividends ............................................................................................. $ 85,353
Interest .............................................................................................. 20,634
-----------
105,987
Foreign taxes withheld ................................................................................ (71)
-----------
Total investment income ...................................................................... 105,916
-----------
Expenses:
Investment advisory fees .............................................................................. 15,479
Administrative services fees .......................................................................... 6,634
-----------
Total expenses ............................................................................... 22,113
-----------
Net investment income ................................................................................. 83,803
-----------
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on:
Sale of investments ................................................................................. 2,867
Futures ............................................................................................. (4,476)
-----------
Net realized loss on investments ............................................................. (1,609)
-----------
Net change in unrealized gain or loss on:
Investments ......................................................................................... 1,089,558
-----------
Net change in unrealized gain or loss on investments ......................................... 1,089,558
-----------
Net realized and change in unrealized gain ............................................................ 1,087,949
-----------
Net increase in net assets resulting from operations .................................................. $ 1,171,752
===========
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
<TABLE>
<CAPTION>
Aetna Variable Index Plus Portfolio
Statement of Changes in Net Assets
====================================================================================================================================
Period from
September 16,
1996 to
December 31, 1996
-----------------
<S> <C>
Operations:
Net investment income ...................................................................................... $ 83,803
Net realized loss on sale of investments ................................................................... (1,609)
Net change in unrealized gain .............................................................................. 1,089,558
------------
Net increase in net assets resulting from operations ..................................................... 1,171,752
------------
Distributions to Shareholders:
From net investment income ................................................................................. (83,638)
From net realized gains .................................................................................... (23,383)
------------
Decrease in net assets from distributions to shareholders ................................................ (107,021)
------------
Share Transactions:
Proceeds from shares sold .................................................................................. 23,374,816
Net asset value of shares issued upon reinvestment of distributions ........................................ 70,017
Payments for shares redeemed ............................................................................... (5,099,107)
------------
Net increase in net assets from share transactions ....................................................... 18,345,726
------------
Change in net assets ....................................................................................... 19,410,457
Net assets:
Beginning of period ........................................................................................ --
------------
End of period .............................................................................................. $ 19,410,457
============
End of period net assets include distributions in excess of net investment income .......................... $ (69)
============
Share Transactions
Number of shares sold ...................................................................................... 2,235,617
Number of shares issued upon reinvestment of distributions ................................................. 6,304
Number of shares redeemed .................................................................................. (462,133)
------------
Net increase ............................................................................................. 1,779,788
============
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
Aetna Variable Index Plus Portfolio
Notes to Financial Statements - December 31, 1996
================================================================================
1. Summary of Significant Accounting Policies
Aetna Variable Portfolios, Inc. (Fund) is registered under the Investment
Company Act of 1940 as an open-end management investment company. It was
incorporated under the laws of Maryland on June 4, 1996. The Articles of
Incorporation permit the Fund to offer separate portfolios (Portfolios) each of
which has its own investment objective, policies and restrictions.
The Fund offers four diversified Portfolios, one of which, Aetna Variable Index
Plus Portfolio (Portfolio), is described in this report.
The Portfolio seeks to outperform the total return performance of publicly
traded stocks represented by the S&P 500 Composite Stock Price Index, a stock
market index composed of 500 common stocks selected by Standard & Poor's
Corporation.
Shares of the Portfolio are owned by insurance companies as depositors of
separate accounts which are used to fund variable annuity contracts and variable
life insurance policies. Currently, all shares are held by separate accounts of
Aetna Life Insurance and Annuity Company (ALIAC) and its subsidiary, Aetna
Insurance Company of America.
ALIAC serves as the Investment Adviser and principal underwriter to the
Portfolio. It is an indirect wholly-owned subsidiary of Aetna Retirement
Services, Inc. which in turn is a wholly-owned subsidiary of Aetna Inc.
The accompanying financial statements of the Portfolio have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the
Portfolio.
A. Valuation of Investments
Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter securities,
at the mean of the bid and asked prices. Short-term investments maturing in more
than sixty days for which market quotations are readily available are valued at
current market value. Short-term investments maturing in less than sixty days
are valued at amortized cost which when combined with accrued interest
approximates market. Securities for which market quotations are not considered
to be readily available are valued in good faith using methods approved by the
Board of Directors.
B. Futures Contracts
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Portfolio "sells" futures
contracts as a hedge against declines in the value of portfolio securities. The
Portfolio may enter into futures contracts to manage the risk of changes in
interest rates, equity prices, currency exchange rates or in anticipation of
future purchases and sales of portfolio securities.
Upon entering into a futures contract, the Portfolio is required to deposit with
a broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by the Portfolio equal to the daily fluctuations in
the market value of the contract. These amounts are recorded by the Portfolio as
unrealized gains or losses. When a contract is closed, the Portfolio records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Generally,
futures contracts held by the Portfolio are closed prior to expiration.
The risks associated with futures contracts may arise from an imperfect
correlation between the change in market value of the securities held by the
Portfolio and the price of futures contracts. Risks may also arise from an
illiquid secondary market, or from the inability of counterparties to meet the
terms of the contract.
56
<PAGE>
================================================================================
B. Futures Contracts (continued)
Realized and unrealized gains or losses on futures contracts are reflected in
the accompanying financial statements. The amounts at risk under such futures
contracts may exceed the amounts reflected in the financial statements. The
notional amounts of these contracts are disclosed in the Portfolio of
Investments. For federal income tax purposes, any futures contracts which remain
open at the end of the fiscal year are marked-to-market and the resultant net
gain or loss is included in federal taxable income.
C. Federal Income Taxes
As a qualified regulated investment company, the Portfolio is relieved of
federal income and excise taxes by distributing its net taxable investment
income and capital gains, if any, in compliance with the applicable provisions
of the Internal Revenue Code.
D. Distributions
The Portfolio distributes all net investment income and net capital gains, if
any, to shareholders annually. Distributions from net investment income are
based on taxable net income. Distributions are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for deferred losses
on wash sales.
E. Other
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective security using a
yield-to-maturity method. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from investment transactions are determined on an
identified cost basis.
2. Investment Advisory and Administrative Services Fees
The Portfolio pays the Investment Adviser a monthly fee at an annual rate of
0.35% of its average daily net assets. Under an Administrative Services
Agreement (Agreement), ALIAC provides all administrative services necessary for
the Portfolio's operations and is responsible for the supervision of the
Portfolio's other service providers. ALIAC also assumes all ordinary, recurring
costs of the Portfolio, such as custodian fees, director's fees, transfer agent
costs and accounting expenses. For these services, ALIAC receives an annual fee,
payable monthly, at a rate of 0.15% of the Portfolio's average daily net assets.
Under a Subadvisory Agreement, the Fund and ALIAC have engaged Aeltus Investment
Management, Inc. (Aeltus) to act as subadviser to the Portfolio. Under the terms
of the Subadvisory Agreement, Aeltus will supervise the investment and
reinvestment of cash and securities and provide certain related administrative
services to the Portfolio in exchange for a fee (payable by ALIAC) of 0.25% of
the Portfolio's average daily net assets. For the period ended December 31,
1996, ALIAC paid Aeltus $11,056 in accordance with the terms of the Subadvisory
Agreement.
3. Purchases and Sales of Investment Securities
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the period from September 16, 1996 (commencement of
operations) to December 31, 1996 were $18,566,609 and $783,004, respectively.
4. Certain Reclassifications
In accordance with Statement of Position 93-2, the Portfolio has reclassified
$234 from undistributed net investment income to accumulated net realized loss
on investments. This reclassification has no impact on the net asset value of
the Portfolio and is designed to present the Portfolio's capital accounts on a
tax basis.
================================================================================
Federal Tax Status of Dividends Declared During the Fiscal Year (Unaudited)
All of the income dividends paid by the Portfolio were ordinary income for
federal income tax purposes. The percentage of income dividends that were
qualifying dividends for the corporate dividends received deduction was 79.76%.
57
<PAGE>
Aetna Variable Index Plus Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout the period:
Period from
September 16, 1996
to December 31,
1996
------------------
Net asset value per share, beginning of period ............. $ 10.000
------------
Income from investment operations:
Net investment income .................................... 0.047
Net realized and unrealized gain ......................... 0.919
------------
Total from investment operations ................... 0.966
------------
Less distributions:
From net investment income ............................... (0.047)
From net realized gains on investments ................... (0.013)
------------
Total distributions ................................ (0.060)
------------
Net asset value per share, end of period ................... $ 10.906
============
Total return* .............................................. 9.64%
Net assets, end of period (000's) .......................... $ 19,410
Ratio of total expenses to average net assets** ............ 0.50%
Ratio of net investment income to average net assets** ..... 1.89%
Portfolio turnover rate .................................... 5.18%
Average commission rate paid per share ..................... $ 0.0358
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
** Annualized.
See Notes to Financial Statements.
58
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Directors
Aetna Variable Portfolios, Inc.:
We have audited the accompanying statement of assets and liabilities of Aetna
Variable Index Plus Portfolio (the Fund), a series of Aetna Variable Portfolios,
Inc., including the portfolio of investments, as of December 31, 1996, the
related statement of operations, changes in net assets and financial highlights
for the period from September 16, 1996 (date of commencement of operations) to
December 31, 1996. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1996, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Aetna
Variable Index Plus Portfolio, as of December 31, 1996, the results of its
operations, changes in its net assets and financial highlights for the period
from September 16, 1996 to December 31, 1996 in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
59
<PAGE>
Aetna Generation Portfolios, Inc.
[THE FOLLOWING THREE TABLES WERE REPRESENTED BY LINE CHARTS
IN THE PRINTED MATERIAL]
Aetna Ascent Variable Portfolio
Growth of $10,000
Average Annual Total Returns for the
Year Ended December 31, 1996*
1 Year Inception+
23.58% 23.12%
<TABLE>
<CAPTION>
Jul-95 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Ascent Variable Portfolio 10000 10601 11045 11453 12049 12654 13650
S&P 500 10000 10795 11445 12059 12600 12989 14072
Russell 2000 10000 10988 11226 11799 12389 12431 13077
MSCI EAFE 10000 10425 10856 11177 11362 11357 11546
NAREIT 10000 10470 10903 11151 11646 12408 14747
SB Broad Inv. Grade Bond 10000 10190 10632 10447 10498 10694 11017
SB Non US World Bond 10000 9757 9959 9792 9832 10150 10376
91 Day T-Bill 10000 10138 10276 10406 10538 10677 10811
Ascent Index 10000 10531 10949 11256 11621 11921 12793
</TABLE>
Aetna Crossroads Variable Portfolio
Growth of $10,000
Average Annual Total Returns for the
Year Ended December 31, 1996*
1 Year Inception+
18.81% 19.08%
<TABLE>
<CAPTION>
Jul-95 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Crossroads Variable Portfolio 10000 10532 10930 11233 11739 12207 12985
S&P 500 10000 10795 11445 12059 12600 12989 14072
Russell 2000 10000 10988 11226 11799 12389 12431 13077
MSCI EAFE 10000 10425 10856 11177 11362 11357 11546
NAREIT 10000 10470 10903 11151 11646 12408 14747
SB Broad Inv. Grade Bond 10000 10190 10632 10447 10498 10694 11017
SB Non US World Bond 10000 9757 9959 9792 9832 10150 10376
91 Day T-Bill 10000 10138 10276 10406 10538 10677 10811
Crossroads Index 10000 10433 10836 11301 11318 11593 12302
</TABLE>
Aetna Legacy Variable Portfolio
Growth of $10,000
Average Annual Total Returns for the
Year Ended December 31, 1996*
1 Year Inception+
14.19% 15.24%
<TABLE>
<CAPTION>
Jul-95 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Legacy Variable Portfolio 10000 10451 10827 11036 11403 11773 12363
S&P 500 10000 10795 11445 12059 12600 12989 14072
Russell 2000 10000 10988 11226 11799 12389 12431 13077
MSCI EAFE 10000 10425 10856 11177 11362 11357 11546
NAREIT 10000 10470 10903 11151 11646 12408 14747
SB Broad Inv. Grade Bond 10000 10190 10632 10447 10498 10694 11017
SB Non US World Bond 10000 9757 9959 9792 9832 10150 10376
91 Day T-Bill 10000 10138 10276 10406 10538 10677 10811
Legacy Index 10000 10334 10723 10810 11021 11270 11827
</TABLE>
* "Total Return" is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. The Standard
& Poor's 500 Stock Index, Russell 2000 Small Cap Stock Index, Morgan Stanley
Capital International Europe, Australia and Far East Index, National Association
of Real Estate Investment Trust Equity REIT Index, Salomon Brothers Broad
Investment Grade Index, and Salomon Brothers Non-U.S. World Government Bond
Index are unmanaged broad based market indices used to benchmark performance of
each asset class.
+ Date of inception was July 5, 1995.
60
<PAGE>
Returns on the Aetna Generation Portfolios, Inc., net of fund expenses, were
quite favorable for the twelve month period ended December 31, 1996, as each
fund outperformed its relative benchmark index for the period.
- --------------------------------------------------------------------------------
Generation Portfolio Portfolio Return Composite Index Return
- --------------------------------------------------------------------------------
Aetna Ascent 23.58% 16.84%
Aetna Crossroads 18.81% 13.54%
Aetna Legacy 14.19% 10.31%
The above benchmark indices are comprised of the seven stock and bond indices
listed below in weights that correspond to the particular benchmark weights for
each fund. Returns for the same twelve month period were as follows for the
various asset classes in which the Generation Portfolios invest:
- --------------------------------------------------------------------------------
Asset Class Benchmark Index Return
- --------------------------------------------------------------------------------
Large Cap Stocks S&P 500 22.95%
Small Cap Stocks Russell 2000 16.49%
International Stocks MSCI Europe, Australia & Far East 6.36%
Real Estate Stocks NAREIT 35.26%
Domestic Bonds Salomon Broad 3.62%
International Bonds S.B. Non-U.S. WGBI 4.18%
Cash Equivalents U.S. 90 Day T-Bill 5.21%
Our asset allocation disciplines guided us to underweight bonds in favor of cash
throughout the year, and to overweight stocks during most the year. On balance,
although our asset allocation shifts helped us both control risk and enhance
return, it was our security selection disciplines which contributed the most to
our investment success.
We made significant improvements in both our investment research and in our
portfolio implementation processes over the past year. Together, we believe
these two efforts provide a solid foundation for future investment performance.
Several key additions to our professional investment staff have greatly enhanced
our quantitative research and management capabilities. We have amassed a
noteworthy historical database of company financials, analyst earnings
estimates, insider buying and selling, stock returns, and economic variables,
and have done cutting-edge research to uncover evidence of past market
inefficiencies which we exploit in our portfolios. State-of-the-art hardware,
software, and databases enable us to analyze and rebalance our portfolios nearly
every trading day using an extremely efficient computer-based process which
quickly processes an enormous amount of market, economic, and company
information. Carefully constructed portfolio risk-control and optimization
techniques enable us to focus the risk in our portfolios upon those
characteristics which, we believe, will be rewarded, and to neutralize all other
risks. Fortunately, the characteristics we favor--attractive valuation, positive
earnings momentum, and shareholder oriented management--were favored highly by
the market over the past year, and we believe that they are likely to continue
to help guide us to stocks which have the potential to provide superior returns.
Prospective stock returns were unusually low compared to bond yields, as
indicated by our asset allocation disciplines, which measure the extra expected
return of stocks over bonds. Accordingly, we have recently become more cautious
toward domestic equities, and real estate stocks, or REIT's, in particular, and
more positive toward fixed income securities. This conclusion should not be
surprising, given the 1996 returns of these asset classes. We believe that
growth in corporate profits is likely to continue to slow in the year ahead, and
the potential for profit disappointment is high. Although Fed policy has been
neutral of late, Chairman Greenspan has given indications that he is inclined to
dampen the market's enthusiasm, and may use even slight evidence of inflationary
pressure to raise interest rates. We have begun to trim our equity exposure,
with a target of being slightly underweighted in stocks overall.
Past performance is no assurance of future returns.
61
<PAGE>
Aetna Generation Portfolios, Inc. (continued)
<TABLE>
<CAPTION>
Asset Allocation:
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio of Notional Value Economic
Aetna Ascent Investments of Futures* Exposure* Benchmark Range
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large Cap Stocks 30% (7)% 23% 20% 0 - 60%
Small Cap Stocks 20% (1)% 19% 20% 0 - 40%
International Stocks 13% 3% 16% 20% 0 - 40%
Real Estate Stocks 16% -- 16% 20% 0 - 40%
U.S. Dollar Bonds -- 9% 9% 10% 0 - 30%
International Bonds -- -- --% 10% 0 - 20%
Cash Equivalents 21% (4)% 17% 0% 0 - 30%
---- ---- ---- ----
100% 0% 100% 100%
---- ---- ---- ----
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio of Notional Value Economic
Aetna Crossroads Investments of Futures* Exposure* Benchmark Range
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large Cap Stocks 24% (7)% 17% 15% 0 - 45%
Small Cap Stocks 16% (1)% 15% 15% 0 - 30%
International Stocks 12% 2% 14% 15% 0 - 30%
Real Estate Stocks 13% -- 13% 15% 0 - 30%
U.S. Dollar Bonds 2% 17% 19% 25% 0 - 70%
International Bonds -- -- -- 10% 0 - 20%
Cash Equivalents 33% (11)% 22% 5% 0 - 30%
---- ---- ---- ----
100% 0% 100% 100%
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio of Notional Value Economic
Aetna Legacy Investments of Futures* Exposure* Benchmark Range
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Large Cap Stocks 18% (7)% 11% 10% 0 - 30%
Small Cap Stocks 11% (1)% 10% 10% 0 - 20%
International Stocks 9% 1% 10% 10% 0 - 20%
Real Estate Stocks 9% -- 9% 10% 0 - 20%
U.S. Dollar Bonds 4% 25% 29% 40% 0 -100%
International Bonds -- -- -- 10% 0 - 20%
Cash Equivalents 49% (18)% 31% 10% 0 - 30%
---- ---- ---- ----
100% 0% 100% 100%
==== ==== ==== ====
</TABLE>
* "Notional Value" refers to the economic value at risk, or the exposure to the
financial instruments underlying the futures positions. "Economic Exposure"
reflects the Fund's exposure to both changes in value of the portfolio of
investments, as well as the financial instruments underlying the futures
positions.
62
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Ascent
================================================================================
Number
of Market
Shares Value
--------- -------
COMMON STOCKS (76.5%)
United States (64.0%)
Apparel (0.5%)
Designer Holdings Ltd. + ......................... 600 $ 9,675
Gap, Inc. ........................................ 200 6,025
Jones Apparel Group, Inc. + ...................... 100 3,738
Liz Claiborne, Inc. .............................. 3,700 142,913
Paul Harris Stores, Inc. + ....................... 2,600 46,150
----------
208,501
----------
Autos and Auto Equipment (0.6%)
Chrysler Corp. ................................... 6,900 227,700
Kaydon Corp. ..................................... 1,300 61,263
----------
288,963
----------
Banks (3.8%)
BankAmerica Corp. ................................ 1,900 189,525
BanPonce Corp. ................................... 4,200 141,750
Commercial Federal Corp. ......................... 3,500 168,000
Corus Bankshares, Inc. ........................... 1,600 51,600
First Chicago Corp. .............................. 700 37,625
First Citizens Bancshares, Inc. Class A........... 100 7,700
FirstBank Puerto Rico ............................ 2,200 57,200
H. F. Ahmanson & Co. ............................. 6,000 195,000
KeyCorp .......................................... 700 35,350
NationsBank Corp. ................................ 200 19,550
New York Bancorp, Inc. ........................... 4,600 178,250
North Fork Bancorp, Inc. ......................... 4,100 146,063
ONBANCorp, Inc. .................................. 2,100 77,963
Republic New York Corp. .......................... 2,200 179,575
USBANCORP, Inc. .................................. 3,200 135,600
UST Corp. ........................................ 4,200 86,625
----------
1,707,376
----------
Building Materials and Construction (1.1%)
Armstrong World Industries, Inc. ................. 1,800 125,100
Champion Enterprises, Inc. + ..................... 3,476 67,782
Coachmen Industries, Inc. ........................ 6,600 187,275
Texas Industries, Inc. ........................... 500 25,313
Tredegar Industries, Inc. ........................ 1,950 78,244
----------
483,714
----------
Chemicals (0.8%)
Arcadian Corp. ................................... 5,000 132,500
Cytec Industries + ............................... 1,700 69,063
Monsanto Co. ..................................... 700 27,213
Rexene Corp. ..................................... 9,200 125,350
----------
354,126
----------
Commercial Services (0.9%)
CMG Information Services, Inc. + ................. 12,900 216,075
Culligan Water Technologies, Inc. + .............. 4,000 162,000
The Registry, Inc. + ............................. 900 41,513
US Filter Corp. + ................................ 200 6,350
----------
425,938
----------
Number
of Market
Shares Value
--------- -------
Computer Software (2.7%)
Applix, Inc. + ................................. 2,800 $ 61,250
BMC Software, Inc. + ........................... 1,400 57,925
Boole & Babbage, Inc. + ........................ 450 11,250
Cadence Design Systems, Inc. + ................. 4,500 178,875
Cisco Systems, Inc. + .......................... 3,300 209,963
Computer Associates International, Inc.......... 2,075 103,231
Compuware Corp. + .............................. 3,000 150,375
McAfee Associates, Inc. + ...................... 3,150 138,600
Microsoft Corp. + .............................. 2,800 231,349
Viasoft, Inc. + ................................ 1,600 75,600
----------
1,218,418
----------
Computers and Office Equipment (2.6%)
Compaq Computer Corp. + ........................ 3,700 274,724
Dell Computer Corp. + .......................... 5,100 270,937
EMC Corp. + .................................... 700 23,188
FORE Systems, Inc. + ........................... 800 26,300
Gateway 2000, Inc. + ........................... 1,100 58,919
HBO & Co. ...................................... 200 11,875
Herman Miller, Inc. ............................ 300 16,988
Moore Corp. Ltd. ............................... 9,000 183,375
Radisys Corp. + ................................ 1,900 92,625
United Stationers, Inc. + ...................... 600 11,700
Western Digital Corp. + ........................ 3,400 193,375
----------
1,164,006
----------
Diversified (0.6%)
NACCO Industries, Inc. ......................... 1,000 53,500
Raychem Corp. .................................. 400 32,050
Ruddick Corp. .................................. 3,600 50,400
Textron, Inc. .................................. 1,400 131,950
----------
267,900
----------
Education (0.1%)
ITT Educational Services, Inc. + ............... 1,950 45,094
----------
Electrical and Electronics (1.2%)
Dynatech Corp. + ............................... 100 4,425
Intel Corp. .................................... 3,200 418,999
Siliconix, Inc. + .............................. 500 11,750
Standard Microsystems Corp. + .................. 4,200 39,900
Symbol Technologies, Inc. + .................... 1,300 57,525
----------
532,599
----------
Electrical Equipment (1.0%)
Belden, Inc. ................................... 800 29,600
Jabil Circuit, Inc. + .......................... 2,400 96,000
Tektronix, Inc. ................................ 3,200 164,000
Vitesse Semiconductor Corp. + .................. 4,100 186,550
----------
476,150
----------
Financial Services (1.8%)
Bear Stearns Co., Inc. ......................... 3,150 87,806
BHC Financial, Inc. ............................ 2,800 44,100
Deposit Guaranty Corp. ......................... 1,100 34,100
See Notes to Portfolio of Investments. 63
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Ascent (continued)
================================================================================
Number
of Market
Shares Value
--------- -------
United States (continued)
Financial Services (continued)
Donaldson, Lufkin & Jenrette, Inc. ............. 4,200 $ 151,200
Merrill Lynch & Co., Inc. ...................... 900 73,350
North American Mortgage Co. .................... 7,500 148,125
Olympic Financial Ltd. + ....................... 700 10,063
PHH Corp. ...................................... 1,800 77,400
SunAmerica, Inc. ............................... 200 8,875
Travelers Group, Inc. .......................... 4,266 193,570
----------
828,589
----------
Foods and Beverages (1.4%)
Campbell Soup Co. .............................. 2,200 176,550
Hershey Foods Corp. ............................ 1,600 70,000
Kroger Co. (The) + ............................. 4,100 190,650
Riser Foods, Inc. Class A ...................... 6,600 209,550
----------
646,750
----------
Health Services (4.0%)
Allegiance Corp. ............................... 40 1,105
Beverly Enterprises + .......................... 13,800 175,950
Curative Health Services, Inc. + ............... 1,600 44,300
FPA Medical Management, Inc. + ................. 9,600 214,800
Genetics Institute, Inc. + ..................... 100 8,475
Invacare Corp. ................................. 1,200 33,000
Lincare Holdings, Inc. + ....................... 1,500 61,500
MedPartners, Inc. + ............................ 300 6,300
Morrison Health Care, Inc. ..................... 12,200 179,950
NovaCare, Inc. + ............................... 20,000 220,000
Prime Medical Services, Inc. + ................. 11,800 128,325
Renal Treatment Centers, Inc. + ................ 4,400 112,200
RoTech Medical Corp. + ......................... 9,600 201,600
Tenet Healthcare Corp. + ....................... 8,500 185,938
Universal Health Services, Inc. + .............. 2,400 68,700
Vencor, Inc. + ................................. 5,000 158,125
----------
1,800,268
----------
Home Furnishings and Appliances (0.9%)
O' Sullivan Industries + ....................... 16,000 224,000
Rowe Furniture Corp. ........................... 13,900 111,200
Stanley Furniture Co., Inc. + .................. 4,500 89,438
----------
424,638
----------
Hotels and Restaurants (0.4%)
HFS, Inc. + .................................... 100 5,975
Marriott International, Inc. ................... 2,200 121,550
Promus Hotel Corp. + ........................... 1,200 35,550
Red Roof Inns, Inc. + .......................... 1,000 15,500
----------
178,575
----------
Insurance (0.6%)
Allstate Corp. ................................. 500 28,938
AMBAC, Inc. .................................... 200 13,275
American National Insurance Co. ................ 700 51,625
Cigna Corp. .................................... 700 95,638
First American Financial Corp. ................. 300 12,338
Number
of Market
Shares Value
--------- -------
Insurance (continued)
Fremont General Corp. ............................ 900 $ 27,900
Kansas City Life Insurance Co. ................... 300 19,050
Orion Capital Corp. .............................. 400 24,450
--------
273,214
--------
Machinery and Equipment (1.5%)
Ade Corp. + ...................................... 7,000 119,000
Case Corp. ....................................... 1,000 54,500
Commercial Intertech Corp. ....................... 2,200 29,975
Cooper Cameron Corp. + ........................... 2,700 206,550
Graco, Inc. ...................................... 1,300 31,850
Harnischfeger Industries, Inc. ................... 4,400 211,750
L.S. Starrett Co. Class A ........................ 900 25,538
Parker-Hannifin Corp. ............................ 100 3,875
--------
683,038
--------
Media and Entertainment (1.8%)
Callaway Golf Co. ................................ 2,600 74,750
Clear Channel Communications, Inc. + ............. 200 7,225
Coastcast Corp. + ................................ 5,200 75,400
Gray Communication System, Inc. .................. 1,100 20,763
Harrah's Entertainment, Inc. + ................... 700 13,913
International Game Technology .................... 200 3,650
King World Production, Inc. + .................... 4,600 169,625
Penske Motorsports, Inc. + ....................... 3,500 88,375
Regal Cinemas, Inc. + ............................ 600 18,450
Renaissance Communications + ..................... 1,300 46,475
Speedway Motorsports, Inc. + ..................... 100 2,100
Walt Disney Co. (The) ............................ 4,400 306,349
--------
827,075
--------
Medical Supplies (0.4%)
Guidant Corp. .................................... 2,100 119,700
Hillenbrand Industries, Inc. ..................... 100 3,625
Mallinckrodt, Inc. ............................... 1,200 52,950
--------
176,275
--------
Metals and Mining (1.5%)
AK Steel Holding Corp. ........................... 400 15,850
Cleveland-Cliffs, Inc. ........................... 600 27,225
Maverick Tube Corp. + ............................ 8,600 109,650
Reliance Steel & Aluminum Co. ................... 2,100 73,500
RMI Titanium Co. + ............................... 8,200 230,624
Timken Co. ....................................... 4,500 206,438
--------
663,287
--------
Oil and Gas (2.9%)
Amoco Corp. ...................................... 1,500 120,750
Atlantic Richfield Co. ........................... 1,600 212,000
Camco International, Inc. ........................ 200 9,225
Clayton Williams Energy, Inc. + .................. 13,200 229,350
Edisto Resources Corp. + ......................... 6,700 56,113
Exxon Corp. ...................................... 1,000 98,000
Fina, Inc. Class A ............................... 900 43,425
Mobil Corp. ...................................... 400 48,900
64 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number
of Market
Shares Value
--------- -------
United States (continued)
Oil and Gas (continued)
Newpark Resources, Inc. + ...................... 2,800 $ 104,300
Occidental Petroleum Corp. ..................... 500 11,688
Oneok, Inc. .................................... 3,900 117,000
Phillips Petroleum Co. ......................... 1,000 44,250
Tesoro Petroleum Corp. + ....................... 7,000 98,000
Texaco, Inc. ................................... 300 29,438
Tosco Corp. .................................... 100 7,913
USX-Marathon Group ............................. 2,500 59,688
----------
1,290,040
----------
Paper and Containers (0.0%)
Mead Corp. ..................................... 100 5,813
----------
Pharmaceuticals (2.2%)
Allergan, Inc. ................................. 1,600 57,000
American Home Products Corp. ................... 2,300 134,838
Biogen, Inc. + ................................. 4,800 186,000
Bristol-Myers Squibb Co. ....................... 2,900 315,374
Immune Response Corp. + ........................ 23,600 194,700
Jones Medical Industries, Inc. ................. 450 16,481
Medicis Pharmaceutical Corp. + ................. 200 8,800
Merck & Co., Inc. .............................. 700 55,475
Schering Plough ................................ 500 32,375
----------
1,001,043
----------
Printing and Publishing (1.8%)
Big Flower Press Holdings, Inc. + .............. 1,100 20,625
Central Newspapers, Inc. Class A ............... 4,900 215,600
Lexmark International Group, Inc. + ............ 200 5,525
McClatchy Newspapers, Inc. ..................... 4,700 164,500
New York Times Co. ............................. 300 11,400
Pulitzer Publishing Co. ........................ 2,300 106,663
Thomas Nelson, Inc. ............................ 11,200 166,600
Tribune Co. .................................... 1,300 102,538
----------
793,451
----------
Real Estate Investment Trusts (15.2%)
Ambassador Apartments, Inc. .................... 3,900 92,138
Arden Realty Group, Inc. ....................... 1,800 49,950
Beacon Properties Corp. ........................ 6,700 245,387
Brandywine Realty Trust ........................ 8,500 165,750
CALI Realty Corp. .............................. 13,900 429,162
Camden Property Trust .......................... 200 5,725
Capstone Capital Trust, Inc. ................... 14,900 333,387
Colonial Properties Trust ...................... 6,100 185,288
Cousins Properties, Inc. ....................... 3,600 101,250
Developers Diversified Realty Corp. ............ 1,600 59,400
Duke Realty Investments, Inc. .................. 5,200 200,200
Equity Residential Properties Trust ............ 4,200 173,250
Essex Property Trust, Inc. ..................... 8,100 237,937
Evans Withycombe Residential, Inc. ............. 5,800 121,800
Excel Realty Trust, Inc. ....................... 1,900 48,213
First Industrial Realty Trust, Inc. ............ 9,300 282,487
General Growth Properties ...................... 11,600 374,099
Number
of Market
Shares Value
--------- -------
Real Estate Investment Trusts (continued)
Innkeepers USA Trust ........................... 15,100 $ 209,513
JDN Realty Corp. ............................... 3,400 93,925
Kimco Realty Corp. ............................. 13,500 470,812
Manufactured Home Communities, Inc. ............ 18,500 430,124
Mid-America Apartment Communities, Inc.......... 10,400 300,299
National Golf Properties, Inc. ................. 1,700 53,763
Prime Retail, Inc. ............................. 10,400 130,000
Public Storage, Inc. ........................... 8,400 260,399
Ramco-Gerhenson Properties ..................... 5,300 89,438
Reckson Associates Realty Corp. ................ 3,400 143,650
Regency Realty Corp. ........................... 11,200 293,999
Starwood Lodging Trust ......................... 2,100 115,763
Summit Properties, Inc. ........................ 13,300 294,262
Tanger Factory Outlet Centers, Inc. ............ 16,400 444,849
Walden Residential Properties, Inc. ............ 17,300 430,337
----------
6,866,556
----------
Retail (5.8%)
99 Cents Only Stores + ......................... 1,600 26,200
American Stores Co. ............................ 3,600 147,150
Borders Group, Inc. + .......................... 200 7,175
Carson Pirie Scott & Co. + ..................... 3,900 98,475
Cash America International, Inc. ............... 19,900 169,150
Damark International, Inc. + ................... 8,200 77,900
Dayton Hudson Corp. ............................ 3,900 153,075
NBTY, Inc. + ................................... 9,500 180,500
Pacific Sunwear of California + ................ 7,550 194,413
Price/Costco, Inc. + ........................... 9,300 233,662
Ross Stores, Inc. .............................. 700 35,000
Safeway, Inc. + ................................ 1,400 59,850
Sears, Roebuck & Co. ........................... 5,100 235,237
Smith's Food & Drug Centers, Inc. .............. 6,300 195,300
TJX Companies, Inc. ............................ 200 9,475
Urban Shopping Centers, Inc. ................... 14,900 432,099
Wet Seal, Inc. + ............................... 10,100 215,888
Woolworth Corp. + .............................. 5,900 129,063
Zale Corp. + ................................... 2,300 43,988
----------
2,643,600
----------
Specialty Consumer Durables (0.0%)
Harley-Davidson, Inc. .......................... 300 14,100
----------
Telecommunications (0.4%)
360 Communications Co. + ....................... 1 23
Cascade Communications Corp. + ................. 200 11,025
CommNet Cellular, Inc. + ....................... 6,100 170,038
----------
181,086
----------
Transportation (0.8%)
AMR Corp. + .................................... 1,700 149,813
Comair Holdings, Inc. .......................... 1,800 43,200
Continental Airlines, Inc., Class B + .......... 3,200 90,400
UAL Corp. + .................................... 1,000 62,500
USAir Group, Inc. + ............................ 100 2,338
----------
348,251
----------
65
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Ascent (continued)
================================================================================
Number
of Market
Shares Value
--------- -------
United States (continued)
Utilities - Electric (2.9%)
Bangor Hydro-Electric Co. .......................... 1,700 $ 15,725
Boston Edison Co. .................................. 6,900 185,438
Commonwealth Energy System Co. ..................... 7,600 178,600
Entergy Corp. ...................................... 1,100 30,525
Long Island Lighting Corp. ......................... 5,600 123,900
Orange & Rockland Utilities, Inc. .................. 3,400 121,975
Texas Utilities Co. ................................ 4,300 175,225
TNP Enterprises, Inc. .............................. 9,500 260,062
Unicom Corp. ....................................... 7,400 200,725
----------
1,292,175
----------
Utilities - Oil and Gas (0.3%)
Energen Corp. ...................................... 2,200 66,550
Valero Energy Corp. ................................ 1,700 48,663
----------
115,213
----------
Utilities - Telephone (1.3%)
AT&T Corp. ......................................... 9,600 417,599
LCI International, Inc. + .......................... 200 4,300
NYNEX Corp. ........................................ 3,900 187,688
----------
609,587
----------
Utilities - Water (0.2%)
California Water Service Co. ....................... 1,700 71,400
----------
Total United States ................................ 28,906,809
----------
Foreign Common Stocks (12.5%)
Australia (0.5%)
Australian Gas Light Co. Ltd. (Oil and Gas) ........ 9,800 55,731
Goodman Fielder Ltd. (Foods and Beverages) ......... 40,000 49,561
Ita Group + (Foods and Beverages) ................. 50,000 54,406
Reinsurance Australia Corp. Ltd. (Insurance) ....... 17,000 66,161
----------
Total Australia .................................... 225,859
----------
Austria (0.1%)
Austria Mikro Systeme International
AG (Electrical and Electronics) .................. 140 10,798
VA Technologie AG (Commercial Services) ........... 350 54,876
----------
Total Austria ...................................... 65,674
----------
Belgium (0.4%)
Cimenteries CBR Cementbedrijven
(Building Materials and Construction) ............ 800 72,660
G.I.B. Holdings Ltd. (Retail) ...................... 1,900 85,057
----------
Total Belgium ...................................... 157,717
----------
Brazil (0.1%)
Telecomunicacoes Brasileiras SA
(Utilities - Telephone) ............................ 850 65,025
----------
Canada (0.4%)
BCE, Inc. (Utilities - Telephone) .................. 816 38,883
Canadian National Railway (Transportation) ......... 2,000 76,000
Number
of Market
Shares Value
--------- -------
Canada (continued)
Intertape Polymer Group, Inc. (Paper and Containers).. 1,400 $ 32,123
Petro-Canada (Oil and Gas) ........................... 1,400 19,764
Royal Bank of Canada (Banks) ......................... 700 24,565
--------
Total Canada ......................................... 191,335
--------
Chile (0.1%)
Empresa Nacional Electricidad SA (Utilities -Electric) 1,800 27,900
--------
Denmark (0.5%)
Carli Gry International A/S + (Apparel) ............. 1,300 62,147
Falck A/S (Commercial Services) ...................... 250 74,590
ISS International Service System A/S (Diversified).... 2,200 57,807
Tele Danmark A/S (Utilities - Telephone) ............. 900 49,585
--------
Total Denmark ........................................ 244,129
--------
Finland (0.5%)
Huhtamaki Group (Diversified) ........................ 1,900 88,219
Neste (Oil and Gas) .................................. 1,500 36,450
Oy Nokia Ab (Telecommunications) ..................... 1,500 86,830
--------
Total Finland ........................................ 211,499
--------
France (0.7%)
Credit Local de France (Financial Services) .......... 550 47,819
Elf Aquitaine SA (Oil and Gas) ....................... 750 68,137
Eridania Beghin-Say SA (Foods and Beverages) ......... 200 32,123
Pathe SA + (Media and Entertainment) ................ 200 48,089
Union des Assurances Federales (Insurance) ........... 500 61,553
Usinor Sacilor (Metals and Mining) ................... 4,100 59,543
--------
Total France ......................................... 317,264
--------
Germany (0.9%)
BASF AG (Chemicals) .................................. 1,200 45,941
Commerzbank AG (Banks) ............................... 2,500 63,428
Deutsche Pfandbrief & Hypothekenbank AG (Banks) ...... 1,400 63,046
Leifheit AG (Home Furnishings and Appliances)......... 1,100 42,469
Schering AG (Pharmaceuticals) ........................ 800 67,432
Schmalbach Lubeca AG (Paper and Containers) .......... 300 73,583
VEBA AG (Utilities - Electric) ....................... 1,050 60,297
--------
Total Germany ........................................ 416,196
--------
Hong Kong (0.6%)
China Light & Power Co. Ltd. (Utilities - Electric)... 6,000 26,684
Guangnan Holdings (Commercial Services) .............. 70,000 60,181
HSBC Holdings Plc (Banks) ............................ 3,067 65,622
Hysan Development Co. Ltd. (Real Estate
Investment Trusts) ................................ 15,000 59,729
Regal Hotels International (Hotels and Restaurants)... 140,000 48,869
--------
Total Hong Kong ...................................... 261,085
--------
66 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number
of Market
Shares Value
--------- -------
Indonesia (0.2%)
PT Citra Marga Nusaphala Persada (Commercial Services) 64,000 $ 50,116
PT Semen Gresik (Building Materials and Construction). 15,000 48,254
--------
Total Indonesia ...................................... 98,370
--------
Ireland (0.2%)
Golden Vale Plc (Foods and Beverages) ................ 28,000 30,330
Irish Life Plc (Insurance) ........................... 7,000 32,166
Waterford Wedgewood Plc (Home Furnishings
and Appliances) ................................... 33,091 42,005
--------
Total Ireland ........................................ 104,501
--------
Italy (0.4%)
Istituto Mobiliare Italiano S.p.A
(Financial Services) .............................. 6,100 52,154
Pirelli S.p.A. (Autos and Auto Equipment) ............ 25,000 46,284
Stet Societa' Finanziaria Telefonica S.p.A
(Telecommunications) .............................. 18,000 60,671
--------
Total Italy .......................................... 159,109
--------
Japan (2.2%)
AJL PEPS Trust (Consumer Products) ................... 1,400 22,925
Bank of Tokyo-Mitsubishi (Banks) ..................... 2,000 37,047
Daiichi Pharmaceutical (Pharmaceuticals) ............. 4,000 64,099
DDI Corp. (Utilities - Telephone) .................... 8 52,796
Fuji Photo Film (Chemicals) .......................... 2,000 65,822
Furukawa Electric Co. (Electrical Equipment).......... 7,000 33,109
Hitachi Koki (Electrical Equipment) .................. 5,000 35,711
Hitachi Ltd. (Electrical and Electronics) ............ 5,000 46,524
Ito-Yokado Co. Ltd. (Retail) ......................... 1,000 43,422
Konica Corp. (Chemicals) ............................. 7,000 46,317
Matsushita Electric Industrial Co. Ltd.
(Electrical and Electronics) ...................... 4,000 65,133
Mitsubishi Heavy Industries Ltd. (Aerospace
and Defense) ...................................... 8,000 63,410
Mizuno Corp. (Consumer Products) ..................... 4,000 30,258
NAMCO (Media and Entertainment) ...................... 3,000 91,755
Nintendo Co. Ltd. (Electrical and Electronics)........ 1,000 71,422
Nippon Densetsu Kogyo (Building Materials
and Construction) ................................. 4,000 37,219
Shinmaywa Industries Ltd. (Autos and Auto Equipment).. 4,000 29,396
Takara Standard (Building Materials and Construction). 7,000 58,198
Tsukishima Kikai (Machinery and Equipment) ........... 1,000 16,456
West Japan Railway (Transportation) .................. 20 64,616
--------
Total Japan .......................................... 975,635
--------
Malaysia (0.3%)
AMMB Holdings Bhd (Financial Services) ............... 4,000 33,577
Lion Land Bhd (Financial Services) ................... 50,000 51,673
Oriental Holdings Bhd (Diversified) .................. 5,600 38,139
--------
Total Malaysia ....................................... 123,389
--------
Number
of Market
Shares Value
--------- -------
Mexico (0.2%)
ALFA, SA de C.V. (Diversified) ....................... 7,260 $ 33,384
Panamerican Beverages, Inc. (Foods and Beverages)..... 1,000 46,875
Tubos de Acero de Mexico SA + (Metals and Mining).... 1,800 28,575
--------
Total Mexico ......................................... 108,834
--------
Netherlands (0.2%)
ING Groep N.V. (Banks) ............................... 1,874 67,370
Philips Electronics N.V. (Electrical and Electronics). 900 36,422
--------
Total Netherlands .................................... 103,792
--------
Norway (0.5%)
Den norske Bank ASA (Banks) .......................... 14,600 55,790
Kvaerner ASA (Transportation) ........................ 1,000 48,627
Merkantildata ASA (Computer Software) ................ 3,000 54,969
Schibsted ASA (Printing and Publishing) .............. 2,800 51,524
--------
Total Norway ......................................... 210,910
--------
Philippines (0.1%)
DMCI Holdings, Inc. + (Building Materials
and Construction) .................................... 35,000 22,956
--------
Singapore (0.4%)
City Developements Ltd. (Real Estate
Investment Trusts) ................................. 5,000 45,038
Clipsal Industries Ltd. (Electrical Equipment)........ 11,000 40,040
Development Bank of Singapore Ltd. (Banks) ........... 2,000 27,023
Wing Tai Holdings Ltd. (Diversified) ................. 26,000 74,348
--------
Total Singapore ...................................... 186,449
--------
South Korea (0.1%)
Korea Electric Power Corp. (Utilities - Electric)..... 2,000 41,000
--------
Spain (0.5%)
Cubiertas y Mzov SA (Building Materials and
Construction) ...................................... 1,200 92,254
Empresa Nacional de Electricidad SA (Utilities -
Electric) .......................................... 1,000 71,036
Repsol SA (Oil and Gas) .............................. 1,500 57,428
--------
Total Spain 220,718
--------
Sweden (0.6%)
Enator AB + (Commercial Services) ................... 2,400 61,335
Frontec AB + (Computer Software) .................... 3,000 51,845
Mo Och Domsjoe AB (Paper and Containers) ............. 1,000 28,119
Skandinaviska Enskilda Banken (Banks) ................ 8,000 82,015
Volvo AB (Autos and Auto Equipment) .................. 2,000 44,083
--------
Total Sweden.......................................... 267,397
--------
Switzerland (0.1%)
Baloise Holding Ltd. (Insurance) ..................... 20 40,068
--------
Taiwan (0.1%)
China Steel Corp. ++ (Metals and Mining) ............ 3,000 60,188
--------
67
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Ascent (continued)
================================================================================
Number
of Market
Shares Value
--------- -------
United Kingdom (1.6%)
Bank of Scotland (Banks) ......................... 12,568 $ 66,351
British Airways Plc (Transportation) ............. 3,200 33,158
British Telecommunications Plc (Utilities -
Telephone) .................................... 8,000 54,009
Burton Group Plc (Retail) ........................ 20,700 55,527
Commercial Union Plc (Insurance) ................. 5,000 58,484
Cowie Group Plc (Autos and Auto Equipment) ....... 10,000 69,051
Glaxo Wellcome Plc (Pharmaceuticals) ............. 3,800 61,648
Granada Group Plc (Diversified) .................. 3,814 56,229
Hillsdown Holdings Plc (Foods and Beverages)...... 17,920 61,333
Inchcape Plc (Retail) ............................ 7,097 33,095
Ladbroke Group Plc (Media and Entertainment)...... 17,411 68,827
Pilkington Plc (Building Materials and
Construction) ................................. 20,000 53,564
Shell Transport & Trading Co. (Oil and Gas) ...... 4,200 72,701
----------
Total United Kingdom 743,977
----------
Total Foreign Common Stocks
5,650,976
-----------
Total Common Stocks
(cost $29,869,599) 34,557,785
-----------
PREFERRED STOCKS (0.1%)
Germany (0.1%)
Gerry Weber International AG (Apparel) ............. 993 40,593
----------
Total Preferred Stocks (cost $42,978) 40,593
-----------
Principal Market
Amount Value
--------- ---------
SHORT-TERM INVESTMENTS (20.1%)
Alamo Funding Lp ++ , Comm. Paper, 6.00%,
01/09/97 .................................... $ 1,500,000 $ 1,498,250
Central Corporate Credit Union of Michigan,
Comm. Paper, 5.50%, 01/15/97 ................ 974,000 972,066
Ciesco L.P. ++ , Comm. Paper, 5.85%, ........... 1,500,000 1,498,050
01/10/97
Cooperative Association of Tractor Dealers,
Comm. Paper, 6.40%, 01/06/97 ................ 1,000,000 999,289
Hertz Corp., Comm. Paper, 5.79%, 01/08/97 ...... 1,000,000 999,035
Pactel Capital Resources ++ , Comm. Paper,
6.75%, 01/02/97 ............................. 1,635,000 1,635,000
Sheffield Receivables Corp. ++ , Comm ..........
Paper, 5.68%, 01/17/97 ...................... 1,000,000 997,633
U.S. Treasury Bill +++ , Time Deposit,
5.08%, 08/21/97 ............................. 475,000 459,287
-----------
Total Short-Term Investments
(cost $9,058,840) 9,058,610
-----------
TOTAL INVESTMENTS
(cost $38,971,417)(a) 43,656,988
Other assets less liabilities 1,498,465
-----------
Total Net Assets $45,155,453
===========
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amount to
$38,984,174. Unrealized gains and losses, based on identified tax cost at
December 31, 1996, are as follows:
Unrealized gains ...................................... $ 5,131,828
Unrealized losses ..................................... (459,014)
-----------
Net unrealized gain ................................ $ 4,672,814
===========
+ Non-income producing security.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+++ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1996.
Category percentages are based on net assets.
Information concerning open futures contracts at December 31, 1996 is shown
below:
Initial
No. of Notional Expiration Unrealized
Contracts Value Date Gain/(Loss)
----------- ------------ ------------ -------------
Long Contracts
Dutch Government
Bonds Future ..... 1 $ 154,278 March 97 $ (665)
FT-SE 100 Index
Future ........... 1 167,586 March 97 2,802
10 Yr Swiss Bond
Future ........... 2 173,767 March 97 1,355
TSE Index Future .... 3 337,624 March 97 8,843
Topix Index Future .. 4 552,159 March 97 (28,086)
2 Year US Treasury
Note Future ...... 6 1,246,875 March 97 (6,094)
10 Year US Treasury
Note Future ...... 25 2,764,031 March 97 (35,906)
Short Contracts
Russell 2000 Index
Future ........... 2 (363,000) March 97 250
S & P 500 Index
Future ........... 4 (1,472,000) March 97 (17,000)
S & P Mid-Cap 400
Index Future ..... 13 (1,635,400) March 97 (32,500)
------------- ------------
$ 1,925,920 $ (107,001)
============= ============
68 See Notes to Financial Statements.
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Crossroads
================================================================================
Number
of Market
Shares Value
--------- ----------
COMMON STOCKS (63.2%)
United States (51.2%)
Apparel (0.4%)
Gap, Inc. ........................................ 100 $ 3,013
Jones Apparel Group, Inc. + ...................... 100 3,738
Liz Claiborne, Inc. .............................. 2,800 108,150
Paul Harris Stores, Inc. + ....................... 1,700 30,175
----------
145,076
----------
Autos and Auto Equipment (0.7%)
Chrysler Corp. ................................... 5,100 168,299
Excel Industries, Inc. ........................... 3,100 51,538
Kaydon Corp. ..................................... 700 32,988
----------
252,825
----------
Banks (3.1%)
Andover Bancorp, Inc. ............................ 1,100 28,188
BankAmerica Corp. ................................ 1,500 149,625
Corus Bankshares, Inc. ........................... 1,000 32,250
First Chicago Corp. .............................. 843 45,311
First Union Corp. ................................ 1,500 111,000
FirstBank Puerto Rico ............................ 3,500 91,000
H. F. Ahmanson & Co. ............................. 3,800 123,500
NationsBank Corp. ................................ 200 19,550
New York Bancorp, Inc. ........................... 3,200 124,000
North Fork Bancorp, Inc. ......................... 3,100 110,438
ONBANCorp, Inc. .................................. 4,300 159,637
Republic New York Corp. .......................... 1,500 122,438
USBANCORP, Inc. .................................. 1,700 72,038
----------
1,188,975
----------
Building Materials and Construction (1.1%)
Armstrong World Industries, Inc. ................. 1,400 97,300
Champion Enterprises, Inc. + ..................... 3,128 60,996
Coachmen Industries, Inc. ........................ 5,000 141,875
Lone Star Industries, Inc. ....................... 1,800 66,375
Tredegar Industries, Inc. ........................ 1,350 54,169
----------
420,715
----------
Chemicals (0.7%)
Arcadian Corp. ................................... 3,800 100,700
Cytec Industries + ............................... 1,000 40,625
Monsanto Co. ..................................... 400 15,550
Rexene Corp. ..................................... 5,300 72,213
Sybron Chemicals, Inc. + ......................... 1,200 19,200
----------
248,288
----------
Commercial Services (0.7%)
CMG Information Services, Inc. + ................. 8,800 147,400
Culligan Water Technologies, Inc. + .............. 1,800 72,900
Employee Solutions, Inc. + ....................... 1,100 22,550
The Registry, Inc. + ............................. 100 4,613
US Filter Corp. + ................................ 100 3,175
----------
250,638
----------
Number
of Market
Shares Value
--------- ----------
Computer Software (2.3%)
BMC Software, Inc. + ............................. 1,200 $ 49,650
Boole & Babbage, Inc. + .......................... 225 5,625
Cadence Design Systems, Inc. + ................... 4,050 160,987
Cisco Systems, Inc. + ............................ 2,500 159,063
Computer Associates International,
Inc ............................................ 1,575 78,356
Compuware Corp. + ................................ 2,200 110,275
Hyperion Software Corp. + ........................ 2,800 59,500
Kronos, Inc. + ................................... 150 4,800
McAfee Associates, Inc. + ........................ 2,550 112,200
Microsoft Corp. + ................................ 1,400 115,675
--------
856,131
--------
Computers and Office Equipment (1.9%)
Compaq Computer Corp. + .......................... 2,500 185,624
Dell Computer Corp. + ............................ 4,500 239,062
EMC Corp. + ...................................... 500 16,563
Gateway 2000, Inc. + ............................. 900 48,206
HBO & Co. ........................................ 100 5,938
Herman Miller, Inc. .............................. 200 11,325
Moore Corp. Ltd. ................................. 5,600 114,100
Radisys Corp. + .................................. 1,600 78,000
United Stationers, Inc. + ........................ 200 3,900
Western Digital Corp. + .......................... 600 34,125
--------
736,843
--------
Diversified (1.2%)
Harsco Corp. ..................................... 600 41,100
NACCO Industries, Inc. ........................... 1,500 80,250
Oakley, Inc. + ................................... 600 6,525
Paragon Trade Brands, Inc. + ..................... 4,500 135,000
Raychem Corp. .................................... 400 32,050
Ruddick Corp. .................................... 2,800 39,200
Textron, Inc. .................................... 1,100 103,675
VF Corp. ......................................... 100 6,750
--------
444,550
--------
Education (0.1%)
ITT Educational Services, Inc. + ................. 1,800 41,625
--------
Electrical and Electronics (1.3%)
Intel Corp. ...................................... 3,300 432,093
Siliconix, Inc. + ................................ 300 7,050
Standard Microsystems Corp. + .................... 6,200 58,900
Symbol Technologies, Inc. + ...................... 100 4,425
--------
502,468
--------
Electrical Equipment (0.3%)
Belden, Inc. ..................................... 600 22,200
SCI Systems, Inc. + .............................. 200 8,925
Tektronix, Inc. .................................. 1,700 87,125
--------
118,250
--------
Financial Services (1.4%)
Bear Stearns Co., Inc. ........................... 2,625 73,172
BHC Financial, Inc. .............................. 2,700 42,525
See Notes to Portfolio of Investments. 69
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Crossroads (continued)
================================================================================
Number
of Market
Shares Value
--------- ----------
United States (continued)
Financial Services (continued)
Lehman Brothers Holdings, Inc. ................. 3,300 $ 103,538
Olympic Financial Ltd. + ....................... 300 4,313
Peoples Heritage Financial Group ............... 3,400 95,200
PHH Corp. ...................................... 600 25,800
SunAmerica, Inc. ............................... 100 4,438
Travelers Group, Inc. .......................... 3,600 163,349
----------
512,335
----------
Foods and Beverages (0.7%)
Hershey Foods Corp. ............................ 600 26,250
Kroger Co. (The) + ............................. 2,700 125,550
Riser Foods, Inc. Class A ...................... 4,100 130,175
----------
281,975
----------
Health Services (2.9%)
Allegiance Corp. ............................... 20 553
Beverly Enterprises + .......................... 9,200 117,300
Curative Health Services, Inc. + ............... 2,000 55,375
FPA Medical Management, Inc. + ................. 6,300 140,963
Genetics Institute, Inc. + ..................... 100 8,475
Health Images, Inc. ............................ 4,700 78,138
Invacare Corp. ................................. 1,200 33,000
Lincare Holdings, Inc. + ....................... 1,300 53,300
Morrison Health Care, Inc. ..................... 3,300 48,675
NovaCare, Inc. + ............................... 12,300 135,300
Renal Treatment Centers, Inc. + ................ 3,000 76,500
RoTech Medical Corp. + ......................... 7,400 155,400
Tenet Healthcare Corp. + ....................... 700 15,313
Universal Health Services, Inc. + .............. 2,000 57,250
Vencor, Inc. + ................................. 3,500 110,688
----------
1,086,230
----------
Home Furnishings and Appliances (0.5%)
Congoleum Corp. + .............................. 1,400 19,425
O' Sullivan Industries + ....................... 10,700 149,800
Stanley Furniture Co., Inc. + .................. 600 11,925
----------
181,150
----------
Hotels and Restaurants (0.3%)
HFS, Inc. + .................................... 100 5,975
Marriott International, Inc. ................... 300 16,575
Promus Hotel Corp. + ........................... 900 26,663
Red Roof Inns, Inc. + .......................... 3,100 48,050
----------
97,263
----------
Insurance (0.5%)
Allstate Corp. ................................. 400 23,150
AMBAC, Inc. .................................... 400 26,550
Cigna Corp. .................................... 500 68,313
Fremont General Corp. .......................... 600 18,600
Kansas City Life Insurance Co. ................. 300 19,050
Orion Capital Corp. ............................ 400 24,450
Presidential Life Corp. ........................ 400 4,825
----------
184,938
----------
Number
of Market
Shares Value
--------- ----------
Machinery and Equipment (1.3%)
Case Corp. ................................... 800 $ 43,600
Caterpillar, Inc. ............................ 100 7,525
Cooper Cameron Corp. + ....................... 1,900 145,350
Graco, Inc. .................................. 4,000 98,000
Harnischfeger Industries, Inc. ............... 3,000 144,375
The Manitowoc Co., Inc. ...................... 1,000 40,500
----------
479,350
----------
Media and Entertainment (1.6%)
Callaway Golf Co. ............................ 2,200 63,250
Coastcast Corp. + ............................ 4,100 59,450
International Family Entertainment, Inc. + ... 4,000 62,000
International Game Technology ................ 100 1,825
King World Production, Inc. + ................ 700 25,813
Penske Motorsports, Inc. + ................... 2,900 73,225
Regal Cinemas, Inc. + ........................ 600 18,450
Renaissance Communications + ................. 2,400 85,800
Walt Disney Co. (The) ........................ 3,200 222,799
----------
612,612
----------
Medical Supplies (0.4%)
Biomet, Inc. ................................. 400 6,050
Guidant Corp. ................................ 1,700 96,900
Hillenbrand Industries, Inc. ................. 100 3,625
Mallinckrodt, Inc. ........................... 1,000 44,125
----------
150,700
----------
Metals and Mining (1.0%)
Cleveland-Cliffs, Inc. ....................... 600 27,225
Reliance Steel & Aluminum Co. ............... 2,000 70,000
RMI Titanium Co. + ........................... 5,400 151,875
Timken Co. ................................... 2,900 133,038
----------
382,138
----------
Oil and Gas (2.7%)
Amoco Corp. .................................. 1,200 96,600
Atlantic Richfield Co. ....................... 1,100 145,750
Camco International, Inc. .................... 200 9,225
Clayton Williams Energy, Inc. + .............. 8,700 151,163
Columbia Gas System, Inc. .................... 1,100 69,988
Edisto Resources Corp. + ..................... 7,200 60,300
Exxon Corp. .................................. 800 78,400
Fina, Inc. Class A ........................... 600 28,950
Mobil Corp. .................................. 400 48,900
National Fuel Gas Co. ........................ 100 4,125
Newpark Resources, Inc. + .................... 1,900 70,775
Occidental Petroleum Corp. ................... 500 11,688
Oneok, Inc. .................................. 700 21,000
Phillips Petroleum Co. ....................... 2,300 101,775
Tesoro Petroleum Corp. + ..................... 4,300 60,200
Texaco, Inc. ................................. 200 19,625
USX-Marathon Group ........................... 1,700 40,588
----------
1,019,052
----------
70 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number
of Market
Shares Value
--------- ----------
United States (continued)
Pharmaceuticals (2.0%)
Allergan, Inc. ................................... 3,100 $ 110,438
American Home Products Corp. ..................... 400 23,450
Biogen, Inc. + ................................... 3,000 116,250
Bristol-Myers Squibb Co. ......................... 1,800 195,749
Immune Response Corp. + .......................... 15,500 127,875
Jones Medical Industries, Inc. ................... 450 16,481
Medicis Pharmaceutical Corp. + ................... 1,300 57,200
Merck & Co., Inc. ................................ 400 31,700
Rhone-Poulenc Rorer, Inc. ........................ 800 62,500
Schering Plough .................................. 500 32,375
----------
774,018
----------
Printing and Publishing (1.0%)
Central Newspapers, Inc. Class A ................. 2,100 92,400
Lexmark International Group, Inc. + .............. 200 5,525
McClatchy Newspapers, Inc. ....................... 2,000 70,000
Pulitzer Publishing Co. .......................... 1,300 60,288
Thomas Nelson, Inc. .............................. 6,000 89,250
Tribune Co. ...................................... 600 47,325
----------
364,788
----------
Real Estate Investment Trusts (12.4%)
Arden Realty Group, Inc. ......................... 1,400 38,850
Beacon Properties Corp. .......................... 5,800 212,424
Brandywine Realty Trust .......................... 6,000 117,000
CALI Realty Corp. ................................ 9,100 280,962
Camden Property Trust ............................ 200 5,725
Capstone Capital Trust, Inc. ..................... 9,700 217,037
Colonial Properties Trust ........................ 5,500 167,062
Cousins Properties, Inc. ......................... 3,500 98,438
Crescent Real Estate Equities, Inc. .............. 1,800 94,950
Developers Diversified Realty Corp. .............. 1,700 63,113
Duke Realty Investments, Inc. .................... 4,500 173,249
Equity Residential Properties Trust .............. 4,200 173,249
Essex Property Trust, Inc. ....................... 6,700 196,812
Evans Withycombe Residential, Inc. ............... 5,800 121,800
Excel Realty Trust, Inc. ......................... 1,500 38,063
First Industrial Realty Trust, Inc. .............. 5,800 176,174
General Growth Properties ........................ 7,500 241,874
Innkeepers USA Trust ............................. 12,100 167,887
JDN Realty Corp. ................................. 900 24,863
Kimco Realty Corp. ............................... 8,800 306,899
Manufactured Home Communities, Inc. .............. 7,900 183,674
Mid-America Apartment Communities, Inc ........... 7,800 225,224
Oasis Residential, Inc. .......................... 2,800 63,700
Prime Retail, Inc. ............................... 8,000 100,000
Public Storage, Inc. ............................. 7,300 226,299
Ramco-Gerhenson Properties ....................... 3,400 57,375
Reckson Associates Realty Corp. .................. 1,700 71,825
Regency Realty Corp. ............................. 8,700 228,374
Smith (Charles E.) Residential Realty Co. ........ 1,500 43,875
Tanger Factory Outlet Centers, Inc. .............. 10,700 290,237
Number
of Market
Shares Value
--------- ----------
Real Estate Investment Trusts (continued)
Walden Residential Properties, Inc. .............. 11,300 $ 281,087
----------
4,688,101
----------
Retail (4.6%)
American Stores Co. .............................. 3,100 126,713
Borders Group, Inc. + ............................ 100 3,588
Carson Pirie Scott & Co. + ....................... 3,100 78,275
Cash America International, Inc. ................. 10,900 92,650
Damark International, Inc. + ..................... 5,000 47,500
Dayton Hudson Corp. .............................. 3,000 117,750
Pacific Sunwear of California + .................. 5,150 132,613
Price/Costco, Inc. + ............................. 6,100 153,263
Ross Stores, Inc. ................................ 600 30,000
Safeway, Inc. + .................................. 1,400 59,850
Sears, Roebuck & Co. ............................. 3,200 147,600
Smith's Food & Drug Centers, Inc. ................ 3,900 120,900
TJX Companies, Inc. .............................. 900 42,638
U.S. Office Products Co. + ....................... 3,500 119,438
Urban Shopping Centers, Inc. ..................... 8,700 252,299
Wet Seal, Inc. + ................................. 7,100 151,763
Woolworth Corp. + ................................ 1,300 28,438
Zale Corp. + ..................................... 2,100 40,163
----------
1,745,441
----------
Specialty Consumer Durables (0.0%)
Harley-Davidson, Inc. .............................. 300 14,100
-------
Telecommunications (0.5%)
360 Communications Co. + ........................... 133 3,076
Cascade Communications Corp. + ..................... 1,500 82,688
CommNet Cellular, Inc. + ........................... 3,900 108,713
-------
194,477
-------
Transportation (0.6%)
AMR Corp. + ........................................ 1,200 105,750
Atlantic Coast Airlines, Inc. + .................... 2,500 30,625
Comair Holdings, Inc. .............................. 1,650 39,600
Continental Airlines, Inc., Class B + .............. 400 11,300
UAL Corp. + ........................................ 500 31,250
-------
218,525
-------
Utilities - Electric (2.0%)
Bangor Hydro-Electric Co. .......................... 6,100 56,425
Boston Edison Co. .................................. 4,500 120,938
Entergy Corp. ...................................... 900 24,975
Long Island Lighting Corp. ......................... 4,200 92,925
Orange & Rockland Utilities, Inc. .................. 2,400 86,100
Texas Utilities Co. ................................ 2,900 118,175
TNP Enterprises, Inc. .............................. 4,700 128,663
Unicom Corp. ....................................... 5,200 141,050
-------
769,251
-------
Utilities - Oil and Gas (0.3%)
Energen Corp. ...................................... 2,000 60,500
Valero Energy Corp. ................................ 1,500 42,938
-------
103,438
-------
71
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Crossroads (continued)
================================================================================
Number
of Market
Shares Value
--------- ----------
United States (continued)
Utilities - Telephone (0.7%)
AT&T Corp. ................................... 600 $ 26,100
LCI International, Inc. + .................... 100 2,150
NYNEX Corp. .................................. 2,800 134,750
Southern New England
Telecommunications Corp. ................... 2,200 85,525
----------
248,525
----------
Total United States .......................... 19,314,791
----------
Foreign Common Stocks (12.0%)
Australia (0.5%)
Australian Gas Light Co. Ltd. (Oil and Gas) .. 7,800 44,358
Goodman Fielder Ltd. (Foods and Beverages) ... 30,000 37,171
Ita Group + (Foods and Beverages) ........... 40,000 43,525
Reinsurance Australia Corp. Ltd. (Insurance).. 15,000 58,378
----------
Total Australia .............................. 183,432
----------
Austria (0.1%)
Austria Mikro Systeme International
AG (Electrical and Electronics) ............ 90 6,941
VA Technologie AG (Commercial Services) ...... 250 39,197
----------
Total Austria ................................ 46,138
----------
Belgium (0.3%)
Cimenteries CBR Cementbedrijven
(Building Materials and Construction) ...... 650 59,036
G.I.B. Holdings Ltd. (Retail) ................ 1,000 44,767
----------
Total Belgium ................................ 103,803
----------
Brazil (0.1%)
Telecomunicacoes Brasileiras SA
(Utilities - Telephone) ...................... 700 53,550
----------
Canada (0.4%)
BCE, Inc. (Utilities - Telephone) ............ 714 34,023
Canadian National Railway (Transportation) ... 1,000 38,000
Intertape Polymer Group, Inc. (Paper
and Containers) ............................ 1,200 27,534
Petro-Canada (Oil and Gas) ................... 1,300 18,353
Royal Bank of Canada (Banks) ................. 600 21,056
----------
Total Canada ................................. 138,966
----------
Chile (0.0%)
Empresa Nacional Electricidad SA
(Utilities - Electric) ....................... 600 9,300
----------
Denmark (0.5%)
Carli Gry International A/S + (Apparel) ...... 1,000 47,805
Falck A/S (Commercial Services) .............. 200 59,672
ISS International Service System A/S
(Diversified) .............................. 1,200 31,531
Tele Danmark A/S (Utilities - Telephone) ..... 750 41,321
----------
Total Denmark ................................ 180,329
----------
Number
of Market
Shares Value
--------- ----------
Finland (0.5%)
Huhtamaki Group (Diversified) ...................... 1,700 $78,932
Neste (Oil and Gas) ................................ 1,500 36,450
Oy Nokia Ab (Telecommunications) ................... 1,300 75,253
-------
Total Finland ...................................... 190,635
-------
France (0.6%)
Credit Local de France (Financial Services) ........ 300 26,083
Elf Aquitaine SA (Oil and Gas) ..................... 550 49,967
Eridania Beghin-Say SA (Foods and Beverages) ....... 150 24,092
Pathe SA + (Media and Entertainment) .............. 200 48,089
Union des Assurances Federales (Insurance) ......... 450 55,398
Usinor Sacilor (Metals and Mining) ................. 1,700 24,689
-------
Total France ....................................... 228,318
-------
Germany (0.9%)
BASF AG (Chemicals) ................................ 1,200 45,941
Commerzbank AG (Banks) ............................. 1,500 38,057
Deutsche Pfandbrief & Hypothekenbank AG (Banks) .... 1,100 49,536
Leifheit AG (Home Furnishings and Appliances)....... 900 34,748
Schering AG (Pharmaceuticals) ...................... 800 67,432
Schmalbach Lubeca AG (Paper and Containers)......... 250 61,319
VEBA AG (Utilities - Electric) ..................... 650 37,327
-------
Total Germany ...................................... 334,360
-------
Hong Kong (0.5%)
China Light & Power Co. Ltd. (Utilities - Electric). 5,000 22,237
Guangnan Holdings (Commercial Services) ............ 60,000 51,584
HSBC Holdings Plc (Banks) .......................... 1,780 38,085
Hysan Development Co. Ltd. (Real
Estate Investment Trusts) ........................ 10,000 39,819
Regal Hotels International (Hotels and Restaurants). 78,000 27,227
-------
Total Hong Kong .................................... 178,952
-------
Indonesia (0.2%)
PT Citra Marga Nusaphala Persada
(Commercial Services) ............................ 55,000 43,069
PT Semen Gresik (Building Materials
and Construction) ................................ 12,000 38,603
-------
Total Indonesia .................................... 81,672
-------
Ireland (0.2%)
Golden Vale Plc (Foods and Beverages) .............. 20,000 21,664
Irish Life Plc (Insurance) ......................... 7,000 32,166
Waterford Wedgewood Plc (Home
Furnishings and Appliances) ...................... 27,067 34,358
-------
Total Ireland ...................................... 88,188
-------
Italy (0.4%)
Istituto Mobiliare Italiano S.p.A
(Financial Services) ........................... 4,700 40,184
72 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number
of Market
Shares Value
--------- ----------
Italy (continued)
Pirelli S.p.A. (Autos and Auto Equipment) .......... 20,000 $37,027
Stet Societa' Finanziaria Telefonica
S.p.A. (Telecommunications) ...................... 18,000 60,671
-------
Total Italy ........................................ 137,882
-------
Japan (2.2%)
AJL PEPS Trust (Consumer Products) ................. 1,400 22,925
Bank of Tokyo-Mitsubishi (Banks) ................... 2,000 37,047
Daiichi Pharmaceutical (Pharmaceuticals) ........... 4,000 64,099
DDI Corp. (Utilities - Telephone) .................. 5 32,997
Fuji Photo Film (Chemicals) ........................ 1,000 32,911
Furukawa Electric Co. (Electrical Equipment) ....... 6,000 28,379
Hitachi Koki (Electrical Equipment) ................ 4,000 28,569
Hitachi Ltd. (Electrical and Electronics) .......... 4,000 37,219
Ito-Yokado Co. Ltd. (Retail) ....................... 1,000 43,422
Komatsu Ltd. (Machinery and Equipment) ............. 4,000 32,739
Konica Corp. (Chemicals) ........................... 6,000 39,700
Matsushita Electric Industrial Co. .................
Ltd. (Electrical and Electronics) ................ 3,000 48,850
Mitsubishi Heavy Industries Ltd. ...................
(Aerospace and Defense) .......................... 7,000 55,484
Mizuno Corp. (Consumer Products) ................... 2,000 15,129
NAMCO (Media and Entertainment) .................... 2,000 61,170
Nintendo Co. Ltd. (Electrical and Electronics)...... 1,000 71,422
Nippon Densetsu Kogyo (Building
Materials and Construction) ...................... 3,000 27,914
Shinmaywa Industries Ltd. (Autos and
Auto Equipment) .................................. 2,000 14,698
Takara Standard (Building Materials
and Construction) ................................ 6,000 49,884
Tsukishima Kikai (Machinery and Equipment) ......... 1,000 16,456
West Japan Railway (Transportation) ................
16 51,693
-------
Total Japan ........................................ 812,707
-------
Malaysia (0.3%)
AMMB Holdings Bhd (Financial
Services) ........................................ 4,000 33,577
Lion Land Bhd (Financial Services) ................. 38,000 39,271
Oriental Holdings Bhd (Diversified) ................ 4,200 28,604
-------
Total Malaysia ..................................... 101,452
-------
Mexico (0.3%)
ALFA, SA de C.V. (Diversified) ..................... 5,877 27,026
Panamerican Beverages, Inc. (Foods
and Beverages) ................................... 900 42,188
Tubos de Acero de Mexico SA +
(Metals and Mining) .............................. 1,700 26,988
-------
Total Mexico ....................................... 96,202
-------
Netherlands (0.1%)
ING Groep N.V. (Banks) ............................. 915 32,885
Philips Electronics N.V. (Electrical
and Electronics) ................................. 600 24,281
-------
Total Netherlands .................................. 57,166
-------
Number
of Market
Shares Value
--------- ----------
Norway (0.5%)
Den norske Bank ASA (Banks) ........................ 13,000 $49,676
Kvaerner ASA (Transportation) ...................... 800 38,901
Merkantildata ASA (Computer Software) .............. 3,000 54,969
Schibsted ASA (Printing and Publishing)............. 2,300 42,323
-------
Total Norway ....................................... 185,869
-------
Philippines (0.1%)
DMCI Holdings, Inc. + (Building
Materials and Construction) ........................ 35,000 22,956
-------
Singapore (0.4%)
City Developements Ltd. (Real Estate
Investment Trusts) ............................... 4,000 36,030
Clipsal Industries Ltd. (Electrical Equipment) ..... 8,000 29,120
Development Bank of Singapore Ltd. (Banks) ......... 2,000 27,023
Wing Tai Holdings Ltd. (Diversified) ............... 22,000 62,910
-------
Total Singapore .................................... 155,083
-------
South Korea (0.0%)
Korea Electric Power Corp. (Utilities - Electric)... 1,000 20,500
-------
Spain (0.5%)
Cubiertas y Mzov SA (Building Materials and
Construction) ...................... ............. 1,000 76,879
Empresa Nacional de Electricidad SA
(Utilities - Electric) ........................... 800 56,829
Repsol SA (Oil and Gas) ............................ 1,300 49,771
-------
Total Spain ........................................ 183,479
-------
Sweden (0.6%)
Enator AB + (Commercial Services) .................. 2,040 52,135
Frontec AB + (Computer Software) ................... 3,000 51,845
Mo Och Domsjoe AB (Paper and Containers) ........... 1,000 28,119
Skandinaviska Enskilda Banken (Banks) .............. 6,000 61,511
Volvo AB (Autos and Auto Equipment) ................ 1,800 39,675
-------
Total Sweden ....................................... 233,285
-------
Switzerland (0.0%)
Baloise Holding Ltd. (Insurance) ................... 10 20,034
-------
Taiwan (0.2%)
China Steel Corp. ++ (Metals and Mining)........... 3,000 60,188
-------
United Kingdom (1.6%)
Bank of Scotland (Banks) ........................... 10,056 53,089
British Airways Plc (Transportation) ............... 3,200 33,158
British Telecommunications Plc
(Utilities - Telephone) .......................... 6,000 40,506
Burton Group Plc (Retail) .......................... 9,300 24,947
Commercial Union Plc (Insurance) ................... 5,000 58,484
Cowie Group Plc (Autos and Auto Equipment) ......... 9,500 65,598
Glaxo Wellcome Plc (Pharmaceuticals) ............... 3,200 51,914
Granada Group Plc (Diversified) .................... 3,412 50,303
Hillsdown Holdings Plc (Foods and Beverages) ....... 12,928 44,247
Inchcape Plc (Retail) .............................. 6,286 29,313
73
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Crossroads (continued)
================================================================================
Number
of Market
Shares Value
--------- ----------
United Kingdom (continued)
Ladbroke Group Plc (Media and Entertainment) . 15,348 $ 60,672
Pilkington Plc (Building Materials
and Construction) .......................... 15,000 40,173
Shell Transport & Trading Co. (Oil and Gas)... 3,600 62,315
-----------
Total United Kingdom ......................... 614,719
-----------
Total Foreign Common Stocks .................. 4,519,165
-----------
Total Common Stocks (cost $20,477,600)........ 23,833,956
-----------
PREFERRED STOCKS (0.1%)
Germany (0.1%)
Gerry Weber International AG (Apparel) ....... 993 40,593
-----------
Total Preferred Stocks (cost $43,009) ........ 40,593
-----------
Principal Market
Amount Value
----------- -----------
LONG-TERM BONDS AND NOTES (1.9%)
U.S. Government Obligations (1.9%)
U.S. Treasury Note, 6.50%, 05/15/05 ............ $ 700,000 $ 704,922
-----------
Total Long-Term Bonds and Notes (cost $729,805) $ 704,922
-----------
SHORT-TERM INVESTMENTS (33.1%)
Alamo Funding Lp ++ , Comm. Paper,
6.00%, 01/09/97 .............................. 1,500,000 1,498,250
Budget Funding Corp., Comm. Paper,
5.40%, 01/07/97 .............................. 900,000 899,325
Central Corporate Credit Union of Michigan,
Comm. Paper, 5.50%, 01/15/97 ................. 1,026,000 1,023,962
Ciesco L.P. ++, Comm. Paper, 5.85%, 01/10/97.... 1,500,000 1,498,050
Cooperative Association of Tractor Dealers,
Comm. Paper, 6.40%, 01/06/97 ................. 1,000,000 999,289
Countrywide Home Loans, Comm. Paper, 6.20%,
01/02/97 ..................................... 1,000,000 999,139
Dakota Certificates-Standard Credit Card Master
Trust 1 ++, Asset-Backed Securities, 5.65%,
01/15/97 ..................................... 1,000,000 997,960
Hertz Corp., Comm. Paper, 5.79%, 01/08/97 ...... 1,500,000 1,498,553
Lockheed Martin Corp. ++, Comm Paper, 7.15%,
01/02/97 ..................................... 1,151,000 1,151,000
Pactel Capital Resources ++, Comm Paper, 6.75%,
01/02/97 ..................................... 1,500,000 1,500,000
U.S. Treasury Bill +++, Time Deposit, 5.08%,
08/21/97 ..................................... 430,000 415,776
-----------
Total Short-Term Investments (cost $12,481,511). 12,481,304
-----------
TOTAL INVESTMENTS (cost $33,731,925)(a) ........ 37,060,775
Other assets less liabilities .................. 629,602
-----------
Total Net Assets ............................... $37,690,377
===========
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amount to
$33,747,167. Unrealized gains and losses, based on identified tax cost at
December 31, 1996, are as follows:
Unrealized gains ..................... $3,633,803
Unrealized losses .................... (320,195)
----------
Net unrealized gain ................ $3,313,608
==========
+ Non-income producing security.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+++ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1996.
Category percentages are based on net assets.
Information concerning open futures contracts at December 31, 1996 is shown
below:
Initial
No. of Notional Expiration Unrealized
Contracts Value Date Gain/(Loss)
--------- ---------- ---------- -----------
Long Contracts
Dutch Government
Bond Future ........ 1 $ 154,278 March 97 $ (665)
TSE Index Future ..... 1 112,541 March 97 2,948
Topix Index .......... 3 414,075 March 97 (21,022)
Future
10 Yr Swiss Bond
Future ............. 2 173,767 March 97 1,355
2 Year US
Treasury Note ...... 10 2,078,125 March 97 (10,156)
Future
10 Year US
Treasury Note ...... 40 4,421,250 March 97 (56,250)
Future
Short Contracts
Russell 2000
Index Future ....... 1 (181,500) March 97 125
S & P 500 Index
Future ............. 4 (1,472,00) March 97 (17,000)
S & P Mid-Cap
Index Future ....... 8 (1,006,40) March 97 (20,000)
---------- -----------
$4,694,136 $ (120,665)
========== ===========
74 See Notes to Financial Statements.
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Legacy
================================================================================
Number
of Market
Shares Value
-------- ----------
COMMON STOCKS (46.2%)
United States (37.0%)
Apparel (0.5%)
Fruit of the Loom, Inc. + .................... 1,600 $ 60,600
Gap, Inc. .................................... 400 12,050
Liz Claiborne, Inc. .......................... 1,600 61,800
Paul Harris Stores, Inc. + ................... 800 14,200
--------
148,650
--------
Autos and Auto Equipment (0.7%)
Chrysler Corp. ..................................... 2,800 92,400
Excel Industries, Inc. ............................. 4,600 76,475
Kaydon Corp. ....................................... 600 28,275
-------
197,150
-------
Banks (2.3%)
BankAmerica Corp. .................................. 1,000 99,749
Corus Bankshares, Inc. ............................. 800 25,800
First Chicago Corp. ................................ 1,300 69,875
H. F. Ahmanson & Co. ............................... 2,400 78,000
NationsBank Corp. .................................. 200 19,550
New York Bancorp, Inc. ............................. 1,800 69,750
North Fork Bancorp, Inc. ........................... 1,800 64,125
ONBANCorp, Inc. .................................... 600 22,275
Republic New York Corp. ............................ 500 40,813
USBANCORP, Inc. .................................... 1,500 63,563
UST Corp. .......................................... 3,900 80,438
-------
633,938
-------
Building Materials and Construction (0.8%)
Armstrong World Industries, Inc. ................... 800 55,600
Champion Enterprises, Inc. + ....................... 2,432 47,424
Coachmen Industries, Inc. .......................... 200 5,675
Lone Star Industries, Inc. ......................... 1,500 55,313
Tredegar Industries, Inc. .......................... 1,200 48,150
-------
212,162
-------
Chemicals (0.5%)
Arcadian Corp. ..................................... 2,200 58,300
Cytec Industries + ................................. 900 36,563
Monsanto Co. ....................................... 200 7,775
Rexene Corp. ....................................... 3,100 42,238
Sybron Chemicals, Inc. + ........................... 600 9,600
-------
154,476
-------
Commercial Services (0.3%)
CMG Information Services, Inc. + ................... 4,800 80,400
The Registry, Inc. + ............................... 100 4,613
US Filter Corp. + .................................. 100 3,175
-------
88,188
-------
Computer Software (1.8%)
3DO Co. + .......................................... 4,000 19,250
BMC Software, Inc. + ............................... 600 24,825
Boole & Babbage, Inc. + ............................ 225 5,625
Number
of Market
Shares Value
-------- ----------
Computer Software (continued)
Cadence Design Systems, Inc. + ................... 3,300 $131,174
Cisco Systems, Inc. + ............................ 1,700 108,162
Computer Associates International, Inc ........... 675 33,581
Compuware Corp. + ................................ 1,300 65,163
Hyperion Software Corp. + ........................ 900 19,125
Kronos, Inc. + ................................... 150 4,800
Microsoft Corp. + ................................ 800 66,100
SPSS, Inc. + ..................................... 900 25,088
--------
502,893
--------
Computers and Office Equipment (1.5%)
Compaq Computer Corp. + .......................... 1,300 96,525
Dell Computer Corp. + ............................ 2,100 111,562
EMC Corp. + ...................................... 200 6,625
Gateway 2000, Inc. + ............................. 600 32,138
Herman Miller, Inc. .............................. 100 5,663
Moore Corp. Ltd. ................................. 3,700 75,388
Radisys Corp. + .................................. 300 14,625
Western Digital Corp. + .......................... 1,300 73,938
--------
416,464
--------
Diversified (0.4%)
Harsco Corp. ..................................... 400 27,400
Oakley, Inc. + ................................... 400 4,350
Raychem Corp. .................................... 400 32,050
Textron, Inc. .................................... 600 56,550
--------
120,350
--------
Education (0.1%)
ITT Educational Services, Inc. + ................. 1,050 24,281
--------
Electrical and Electronics (1.1%)
Dynatech Corp. + ................................. 1,700 75,225
Intel Corp. ...................................... 1,300 170,218
Siliconix, Inc. + ................................ 300 7,050
Standard Microsystems Corp. + .................... 6,000 57,000
Symbol Technologies, Inc. + ...................... 100 4,425
--------
313,918
--------
Electrical Equipment (0.1%)
Belden, Inc. ..................................... 600 22,200
--------
Financial Services (1.3%)
Bankers Trust New York Corp. ..................... 300 25,875
Bear Stearns Co., Inc. ........................... 1,890 52,684
BHC Financial, Inc. .............................. 2,200 34,650
Consumer Portfolio Services, Inc. + .............. 4,400 49,500
Lehman Brothers Holdings, Inc. ................... 2,500 78,438
North American Mortgage Co. ...................... 200 3,950
Olympic Financial Ltd. + ......................... 100 1,438
Peoples Heritage Financial Group ................. 500 14,000
Travelers Group, Inc. ............................ 2,133 96,784
--------
357,319
--------
See Notes to Portfolio of Investments. 75
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Legacy (continued)
================================================================================
Number
of Market
Shares Value
-------- ----------
United States (continued)
Foods and Beverages (0.8%)
Archer-Daniels-Midland Co. ....................... 2,900 $ 63,800
Hershey Foods Corp. .............................. 600 26,250
Kroger Co. (The) + ............................... 1,300 60,450
Riser Foods, Inc. Class A ........................ 2,300 73,025
--------
223,525
--------
Health Services (1.4%)
Allegiance Corp. ................................. 20 553
Beverly Enterprises + ............................ 5,500 70,125
Curative Health Services, Inc. + ................. 300 8,306
FPA Medical Management, Inc. + ................... 3,600 80,550
Invacare Corp. ................................... 1,000 27,500
NovaCare, Inc. + ................................. 6,600 72,600
RoTech Medical Corp. + ........................... 4,000 84,000
Tenet Healthcare Corp. + ......................... 1,500 32,813
Universal Health Services, Inc. + ................ 200 5,725
--------
382,172
--------
Home Furnishings and Appliances (0.4%)
Congoleum Corp. + ................................ 900 12,488
O' Sullivan Industries + ......................... 5,800 81,200
Pillowtex Corp. .................................. 800 14,400
--------
108,088
--------
Hotels and Restaurants (0.2%)
Marriott International, Inc. ..................... 300 16,575
Promus Hotel Corp. + ............................. 500 14,813
Red Roof Inns, Inc. + ............................ 1,500 23,250
--------
54,638
--------
Insurance (0.7%)
Allstate Corp. ................................... 200 11,575
AMBAC, Inc. ...................................... 300 19,913
American Bankers Insurance Group ................. 100 5,113
Cigna Corp. ...................................... 200 27,325
Fremont General Corp. ............................ 600 18,600
Kansas City Life Insurance Co. ................... 300 19,050
Orion Capital Corp. .............................. 300 18,338
Presidential Life Corp. .......................... 600 7,238
United Wisconsin Services, Inc. .................. 2,500 65,625
--------
192,777
--------
Machinery and Equipment (0.7%)
Case Corp. ....................................... 700 38,150
Caterpillar, Inc. ................................ 100 7,525
Cooper Cameron Corp. + ........................... 600 45,900
Graco, Inc. ...................................... 700 17,150
Harnischfeger Industries, Inc. ................... 1,700 81,813
L.S. Starrett Co. Class A ........................ 500 14,188
Parker-Hannifin Corp. ............................ 100 3,875
--------
208,601
--------
Number
of Market
Shares Value
-------- ----------
Media and Entertainment (1.5%)
Callaway Golf Co. ................................ 1,800 $ 51,750
Coastcast Corp. + ................................ 2,500 36,250
Infinity Broadcasting ............................ 1,900 64,574
International Family Entertainment, Inc. +........ 200 3,100
International Game Technology .................... 100 1,825
King World Production, Inc. + .................... 1,500 55,313
Penske Motorsports, Inc. + ....................... 1,100 27,775
Regal Cinemas, Inc. + ............................ 1,950 59,963
Walt Disney Co. (The) ............................ 1,800 125,324
--------
425,874
--------
Medical Supplies (0.3%)
Biomet, Inc. ..................................... 200 3,025
Guidant Corp. .................................... 1,300 74,100
--------
77,125
--------
Metals and Mining (0.8%)
Reliance Steel & Aluminum Co. ................... 1,700 59,500
RMI Titanium Co. + ............................... 2,900 81,563
Timken Co. ....................................... 1,600 73,400
--------
214,463
--------
Oil and Gas (2.1%)
Amoco Corp. ...................................... 800 64,400
Atlantic Richfield Co. ........................... 600 79,500
Camco International, Inc. ........................ 200 9,225
Clayton Williams Energy, Inc. + .................. 4,800 83,400
Edisto Resources Corp. + ......................... 5,300 44,388
Exxon Corp. ...................................... 500 49,000
Fina, Inc. Class A ............................... 400 19,300
Mobil Corp. ...................................... 300 36,675
Occidental Petroleum Corp. ....................... 200 4,675
Phillips Petroleum Co. ........................... 1,300 57,525
Tesoro Petroleum Corp. + ......................... 6,400 89,600
Texaco, Inc. ..................................... 200 19,625
Tosco Corp. ...................................... 50 3,956
USX-Marathon Group ............................... 900 21,488
--------
582,757
--------
Pharmaceuticals (1.5%)
Allergan, Inc. ................................... 700 24,938
American Home Products Corp. ..................... 400 23,450
Biogen, Inc. + ................................... 1,400 54,250
Bristol-Myers Squibb Co. ......................... 1,100 119,624
Immune Response Corp. + .......................... 8,400 69,300
Jones Medical Industries, Inc. ................... 450 16,481
Medicis Pharmaceutical Corp. + ................... 300 13,200
Merck & Co., Inc. ................................ 300 23,775
Rhone-Poulenc Rorer, Inc. ........................ 700 54,688
Schering Plough .................................. 400 25,900
--------
425,606
--------
76 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number
of Market
Shares Value
-------- ----------
United States (continued)
Printing and Publishing (0.7%)
Big Flower Press Holdings, Inc. + ............ 500 $ 9,375
Central Newspapers, Inc. Class A ............. 1,700 74,800
McClatchy Newspapers, Inc. ................... 1,900 66,500
Tribune Co. .................................. 400 31,550
----------
182,225
----------
Real Estate Investment Trusts (8.6%)
Ambassador Apartments, Inc. .................. 1,700 40,163
Arden Realty Group, Inc. ..................... 800 22,200
Beacon Properties Corp. ...................... 3,400 124,524
Brandywine Realty Trust ...................... 2,500 48,750
CALI Realty Corp. ............................ 4,400 135,849
Camden Property Trust ........................ 100 2,863
Capstone Capital Trust, Inc. ................. 4,600 102,924
Colonial Properties Trust .................... 3,200 97,199
Cousins Properties, Inc. ..................... 2,000 56,250
Developers Diversified Realty Corp. .......... 1,000 37,125
Duke Realty Investments, Inc. ................ 2,600 100,099
Equity Residential Properties Trust .......... 2,300 94,875
Essex Property Trust, Inc. ................... 3,800 111,624
Evans Withycombe Residential, Inc. ........... 2,200 46,200
Excel Realty Trust, Inc. ..................... 300 7,613
First Industrial Realty Trust, Inc. .......... 2,650 80,494
General Growth Properties .................... 3,600 116,099
Innkeepers USA Trust ......................... 7,400 102,674
JDN Realty Corp. ............................. 2,000 55,250
Kimco Realty Corp. ........................... 4,200 146,474
Manufactured Home Communities, Inc. .......... 1,200 27,900
Mid-America Apartment Communities, Inc........ 3,700 106,837
Oasis Residential, Inc. ...................... 1,600 36,400
Prime Retail, Inc. ........................... 4,300 53,750
Public Storage, Inc. ......................... 4,200 130,199
Ramco-Gerhenson Properties ................... 1,000 16,875
Reckson Associates Realty Corp. .............. 800 33,800
Regency Realty Corp. ......................... 6,700 175,874
Tanger Factory Outlet Centers, Inc. .......... 5,100 138,337
Walden Residential Properties, Inc. .......... 5,400 134,324
----------
2,383,545
----------
Retail (3.0%)
American Stores Co. .......................... 600 24,525
Ames Department Stores, Inc. + ............... 2,800 12,075
Carson Pirie Scott & Co. + ................... 100 2,525
Cash America International, Inc. ............. 1,200 10,200
Damark International, Inc. + ................. 2,900 27,550
Dayton Hudson Corp. .......................... 1,500 58,875
Genesco, Inc. + .............................. 1,600 14,800
Pacific Sunwear of California + .............. 3,100 79,825
Price/Costco, Inc. + ......................... 3,400 85,425
Ross Stores, Inc. ............................ 500 25,000
Safeway, Inc. + .............................. 1,200 51,300
Sears, Roebuck & Co. ......................... 1,700 78,413
Number
of Market
Shares Value
-------- ----------
Retail (continued)
Smith's Food & Drug Centers, Inc. .......... 2,200 $ 68,200
The Finish Line, Inc. + .................... 3,000 63,375
TJX Companies, Inc. ........................ 100 4,738
Trans World Entertainment + ................ 800 5,713
Urban Shopping Centers, Inc. ............... 3,000 87,000
Wet Seal, Inc. + ........................... 2,700 57,713
Woolworth Corp. + .......................... 1,600 35,000
Zale Corp. + ............................... 1,700 32,513
-----------
824,765
-----------
Specialty Consumer Durables (0.0%)
Harley-Davidson, Inc. ...................... 100 4,700
-----------
Telecommunications (0.3%)
360 Communications Co. + ................... 200 4,625
Cascade Communications Corp. + ............. 100 5,513
CommNet Cellular, Inc. + ................... 2,200 61,325
-----------
71,463
-----------
Transportation (0.4%)
AMR Corp. + ................................ 900 79,313
Comair Holdings, Inc. ...................... 1,350 32,400
UAL Corp. + ................................ 100 6,250
-----------
117,963
-----------
Utilities - Electric (1.2%)
Bangor Hydro-Electric Co. .................. 1,500 13,875
Boston Edison Co. .......................... 1,600 43,000
Commonwealth Energy System Co. ............. 1,300 30,550
Entergy Corp. .............................. 600 16,650
Pinnacle West Capital Corp. ................ 300 9,525
Texas Utilities Co. ........................ 1,500 61,125
TNP Enterprises, Inc. ...................... 2,600 71,175
Unicom Corp. ............................... 2,900 78,663
-----------
324,563
-----------
Utilities - Oil and Gas (0.3%)
Energen Corp. .............................. 1,700 51,425
NUI Corp. .................................. 1,500 33,938
-----------
85,363
-----------
Utilities - Telephone (0.7%)
AT&T Corp. ................................. 2,600 113,099
LCI International, Inc. + .................. 100 2,150
NYNEX Corp. ................................ 1,600 77,000
-----------
192,249
-----------
Total United States ........................ 10,274,451
-----------
Foreign Common Stocks (9.2%)
Australia (0.5%)
Australian Gas Light Co. Ltd. (Oil and Gas). 5,600 31,846
Goodman Fielder Ltd. (Foods and Beverages).. 20,000 24,781
Ita Group + (Foods and Beverages) ......... 30,000 32,644
Reinsurance Australia Corp. Ltd. (Insurance) 14,000 54,486
-----------
Total Australia ............................ 143,757
-----------
77
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Legacy (continued)
================================================================================
Number
of Market
Shares Value
-------- ----------
Austria (0.1%)
Austria Mikro Systeme International
AG (Electrical and Electronics) ................ 60 $ 4,628
VA Technologie AG (Commercial Services)........... 100 15,679
--------
Total Austria .................................... 20,307
--------
Belgium (0.4%)
Cimenteries CBR Cementbedrijven
(Building Materials and Construction)........... 950 86,283
G.I.B. Holdings Ltd. (Retail) .................... 300 13,430
--------
Total Belgium .................................... 99,713
--------
Brazil (0.1%)
Telecomunicacoes Brasileiras SA
(Utilities - Telephone)........................... 400 30,600
--------
Canada (0.3%)
BCE, Inc. (Utilities - Telephone) ................ 408 19,442
Canadian National Railway (Transportation)........ 500 19,000
Intertape Polymer Group, Inc. (Paper
and Containers) ................................ 1,000 22,945
Petro-Canada (Oil and Gas) ....................... 400 5,647
Royal Bank of Canada (Banks) ..................... 600 21,056
--------
Total Canada ..................................... 88,090
--------
Chile (0.0%)
Empresa Nacional Electricidad SA
(Utilities - Electric) ........................... 500 7,750
--------
Denmark (0.3%)
Carli Gry International A/S + (Apparel)........... 500 23,903
Falck A/S (Commercial Services) .................. 100 29,836
ISS International Service System A/S
(Diversified) .................................. 500 13,138
Tele Danmark A/S (Utilities - Telephone).......... 350 19,283
--------
Total Denmark .................................... 86,160
--------
Finland (0.2%)
Huhtamaki Group (Diversified) .................... 500 23,215
Oy Nokia Ab (Telecommunications) ................. 500 28,943
--------
Total Finland .................................... 52,158
--------
France (0.6%)
Credit Local de France (Financial Services)....... 300 26,083
Elf Aquitaine SA (Oil and Gas) ................... 300 27,255
Eridania Beghin-Say SA (Foods and Beverages)...... 100 16,062
Pathe SA + (Media and Entertainment) ............ 150 36,066
Union des Assurances Federales (Insurance)........ 300 36,932
Usinor Sacilor (Metals and Mining) ............... 1,000 14,523
--------
Total France ..................................... 156,921
--------
Germany (0.6%)
BASF AG (Chemicals) .............................. 1,200 45,941
Commerzbank AG (Banks) ........................... 1,500 38,057
Number
of Market
Shares Value
-------- ----------
Germany (continued)
Deutsche Pfandbrief & Hypothekenbank AG (Banks) .... 500 $22,516
Leifheit AG (Home Furnishings and Appliances)....... 400 15,443
Schering AG (Pharmaceuticals) ...................... 200 16,858
VEBA AG (Utilities - Electric) ..................... 600 34,456
-------
Total Germany ...................................... 173,271
-------
Hong Kong (0.3%)
China Light & Power Co. Ltd. (Utilities - Electric). 4,000 17,789
HSBC Holdings Plc (Banks) .......................... 1,582 33,849
Regal Hotels International (Hotels and Restaurants). 74,000 25,831
-------
Total Hong Kong .................................... 77,469
-------
Indonesia (0.1%)
PT Semen Gresik (Building Materials
and Construction) ................................ 10,000 32,169
-------
Ireland (0.1%)
Golden Vale Plc (Foods and Beverages) .............. 16,000 17,331
Waterford Wedgewood Plc (Home
Furnishings and Appliances) ...................... 12,047 15,292
-------
Total Ireland ...................................... 32,623
-------
Italy (0.2%)
Istituto Mobiliare Italiano S.p.A
(Financial Services) ............................. 2,300 19,665
Pirelli S.p.A. (Autos and Auto Equipment)........... 15,000 27,770
Stet Societa' Finanziaria Telefonica
S.p.A. (Telecommunications) ...................... 6,000 20,224
-------
Total Italy ....................................... 67,659
-------
Japan (2.0%)
AJL PEPS Trust (Consumer Products) ................. 1,000 16,375
Bank of Tokyo-Mitsubishi (Banks) ................... 1,000 18,523
Daibiru Corp. (Real Estate Investment Trusts)....... 1,000 9,219
Daiichi Pharmaceutical (Pharmaceuticals)............ 3,000 48,074
DDI Corp. (Utilities - Telephone) .................. 4 26,398
Furukawa Electric Co. (Electrical Equipment)........ 5,000 23,650
Hitachi Koki (Electrical Equipment) ................ 3,000 21,427
Hitachi Ltd. (Electrical and Electronics)........... 4,000 37,219
Komatsu Ltd. (Machinery and Equipment).............. 3,000 24,554
Konica Corp. (Chemicals) ........................... 4,000 26,467
Matsushita Electric Industrial Co.
Ltd. (Electrical and Electronics) ................ 2,000 32,567
Mitsubishi Heavy Industries Ltd.
(Aerospace and Defense) .......................... 3,000 23,779
Mizuno Corp. (Consumer Products) ................... 2,000 15,129
NAMCO (Media and Entertainment) .................... 2,000 61,170
Nintendo Co. Ltd. (Electrical and Electronics)...... 1,000 71,422
Nippon Densetsu Kogyo (Building
Materials and Construction) ...................... 2,000 18,609
Shinmaywa Industries Ltd. (Autos and
Auto Equipment) .................................. 2,000 14,698
78 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number
of Market
Shares Value
-------- ----------
Japan (continued)
Takara Standard (Building Materials
and Construction) ................................ 2,000 $16,628
Tsukishima Kikai (Machinery and Equipment).......... 1,000 16,456
West Japan Railway (Transportation) ................ 10 32,308
-------
Total Japan ........................................ 554,672
-------
Malaysia (0.1%)
Lion Land Bhd (Financial Services) ................. 14,000 14,468
Oriental Holdings Bhd (Diversified) ................ 2,800 19,069
-------
Total Malaysia ..................................... 33,537
-------
Mexico (0.2%)
ALFA, SA de C.V. (Diversified) ..................... 4,494 20,666
Panamerican Beverages, Inc. (Foods and Beverages)... 700 32,813
-------
Total Mexico ....................................... 53,479
-------
Netherlands (0.1%)
ING Groep N.V. (Banks) ............................. 255 9,170
Philips Electronics N.V. (Electrical
and Electronics) ................................. 500 20,234
-------
Total Netherlands .................................. 29,404
-------
Norway (0.3%)
Den norske Bank ASA (Banks) ........................ 5,000 19,106
Kvaerner ASA (Transportation) ...................... 600 29,176
Schibsted ASA (Printing and Publishing)............. 2,100 38,643
-------
Total Norway ...................................... 86,925
-------
Singapore (0.4%)
City Developements Ltd. (Real Estate
Investment Trusts) ............................... 3,000 27,023
Clipsal Industries Ltd. (Electrical Equipment)...... 6,000 21,840
Development Bank of Singapore Ltd. (Banks).......... 2,000 27,023
Wing Tai Holdings Ltd. (Diversified) ............... 15,000 42,893
-------
Total Singapore .................................... 118,779
-------
South Korea (0.1%)
Korea Electric Power Corp. (Utilities - Electric) .. 800 16,400
-------
Spain (0.3%)
Cubiertas y Mzov SA (Building
Materials and Construction) ...................... 450 34,595
Repsol SA (Oil and Gas) ............................ 1,100 42,114
-------
Total Spain ........................................ 76,709
-------
Sweden (0.6%)
Enator AB + (Commercial Services) ................. 1,200 30,668
Frontec AB + (Computer Software) .................. 2,000 34,563
Mo Och Domsjoe AB (Paper and Containers)............ 1,000 28,119
Skandinaviska Enskilda Banken (Banks) .............. 4,000 41,007
Volvo AB (Autos and Auto Equipment) ................ 1,600 35,266
-------
Total Sweden ...................................... 169,623
-------
Number
of Market
Shares Value
-------- ----------
Switzerland (0.1%)
Baloise Holding Ltd. (Insurance) ............... 10 $ 20,034
----------
United Kingdom (1.2%)
Bank of Scotland (Banks) ....................... 7,182 37,916
Burton Group Plc (Retail) ...................... 7,000 18,777
Commercial Union Plc (Insurance) ............... 5,000 58,484
Cowie Group Plc (Autos and Auto Equipment) ..... 6,000 41,431
Granada Group Plc (Diversified) ................ 1,809 26,670
Hillsdown Holdings Plc (Foods and Beverages) ... 6,536 22,370
Inchcape Plc (Retail) .......................... 3,622 16,890
Ladbroke Group Plc (Media and Entertainment) ... 15,309 60,518
Shell Transport & Trading Co. (Oil and Gas) .... 2,800 48,467
----------
Total United Kingdom ........................... 331,523
----------
Total Foreign Common Stocks .................... 2,559,732
----------
Total Common Stocks (cost $11,013,970) ......... 12,834,183
----------
PREFERRED STOCKS (0.1%)
Germany (0.1%)
Gerry Weber International AG (Apparel) ........ 567 23,179
----------
Total Preferred Stocks (cost $25,277) .......... 23,179
----------
Principal Market
Amount Value
---------- ----------
LONG-TERM BONDS AND NOTES (4.4%)
U.S. Government Obligations (4.4%)
U.S. Treasury Note, 6.50%, 05/15/05 .......... $1,200,000 $1,208,438
----------
Total Long-Term Bonds and Notes
(cost $1,251,096) .......................... 1,208,438
----------
SHORT-TERM INVESTMENTS (48.2%)
Alamo Funding Lp ++, Comm. Paper,
6.00%, 01/09/97 ............................ 1,100,000 1,098,717
Budget Funding Corp., Comm. Paper,
5.40%, 01/07/97 ............................ 900,000 899,325
Central Corporate Credit Union of
Michigan, Comm. Paper, 5.50%, 01/15/97 ..... 1,000,000 998,014
Ciesco L.P. ++, Comm. Paper, 5.85%,
01/10/97 ................................... 1,100,000 1,098,570
Cooperative Association of Tractor
Dealers, Comm. Paper, 6.40%, 01/06/97 ...... 1,000,000 999,289
Corporate Asset Funding ++, Comm Paper,
5.48%, 01/03/97 ............................ 1,000,000 999,848
Countrywide Home Loans, Comm. Paper,
6.20%, 01/07/97 ............................ 1,100,000 1,099,053
Dakota Certificates-Standard Credit Card
Master Trust 1 ++, Asset-Backed Securities,
5.65%, 01/15/97 ............................ 1,000,000 997,960
Dealers Capital Access Trust, Inc.,
Comm. Paper, 7.00%, 01/02/97 ............... 522,000 522,000
Hertz Corp., Comm. Paper, 5.79%, 01/08/97 .... 1,100,000 1,098,939
79
<PAGE>
Aetna Generation Portfolios, Inc.
Portfolio of Investments - December 31, 1996
Aetna Legacy (continued)
================================================================================
Principal Market
Amount Value
---------- ----------
SHORT-TERM INVESTMENTS (continued)
Lockheed Martin Corp. ++, Comm Paper, 7.15%,
01/02/97 ................................... $ 1,000,000 $ 1,000,000
Oklahoma Gas & Electric Co., Comm Paper,
6.20%, 01/06/97 ............................ 1,100,000 1,099,242
Pactel Capital Resources ++, Comm Paper,
6.50%, 01/02/97 ............................ 1,100,000 1,100,000
U.S. Treasury Bill +++, Time Deposit, 5.08%,
08/21/97 ................................... 275,000 265,903
U.S. Treasury Bill +++, Time Deposit, 5.10%,
08/21/97 ................................... 100,000 96,728
-----------
Total Short-Term Investments
(cost $13,373,721) ......................... 13,373,588
-----------
TOTAL INVESTMENTS
(cost $25,664,064)(a) ...................... 27,439,388
Other assets less liabilities ................ 314,418
-----------
Total Net Assets ............................. $27,753,806
===========
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amount to
$25,664,597. Unrealized gains and losses, based on identified tax cost at
December 31, 1996, are as follows:
Unrealized gains ............................. $2,006,232
Unrealized losses ............................ (231,441)
----------
Net unrealized gain ........................ $1,774,791
==========
+ Non-income producing security.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+++ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1996.
Category percentages are based on net assets.
Information concerning open futures contracts at December 31, 1996 is shown
below:
Initial
No. of Notional Expiration Unrealized
Contracts Value Date Gain/(Loss)
--------- ---------- ---------- -----------
Long Contracts
Dutch Government
Bond Future .... 1 $ 162,956 March 97 $ (665)
10 Year Swiss
Bond Future .... 1 86,884 March 97 678
10 Year US
Treasury Note 42 4,625,813 March 97 (42,563)
Future .........
2 Year US
Treasury Note 11 2,285,938 March 97 (11,172)
Future .........
Short Contracts
Russell 2000
Index Future ... 2 (363,000) March 97 250
S & P 500 Index
Future ......... 3 (1,104,00) March 97 (12,750)
S & P Mid-Cap
Index Future ... 6 (754,800) March 97 (15,000)
---------- ----------
$4,939,791 $ (81,222)
========== ==========
80 See Notes to Financial Statements.
<PAGE>
Aetna Generation Portfiolios, Inc.
Statements of Assets and Liabilities
December 31, 1996
================================================================================
<TABLE>
<CAPTION>
Aetna Aetna Aetna
Ascent Crossroads Legacy
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Investments, at market value ........................................... $43,656,988 $37,060,775 $27,439,388
Cash ................................................................... 3,248 2,926 1,703
Cash denominated in foreign currencies ................................. 599,491 479,520 285,540
Receivable for:
Dividends and interest ............................................. 76,068 57,618 34,218
Investments sold ................................................... 349,997 49,882 13,156
Fund shares sold ................................................... 671,269 245,412 72,410
Variation margin ................................................... 15,245 202 --
Recoverable taxes .................................................. 1,174 877 535
Miscellaneous ...................................................... 820 771 1,133
Gross unrealized gain on forward foreign currency exchange
contracts ............................................................ 57,332 43,489 30,435
----------- ----------- -----------
Total assets .................................................. 45,431,632 37,941,472 27,878,518
----------- ----------- -----------
Liabilities:
Payable for:
Investments purchased .............................................. 246,920 226,498 72,723
Fund shares redeemed ............................................... -- 3 26,337
Variation margin ................................................... -- -- 7,716
Gross unrealized loss on forward foreign currency exchange
contracts ............................................................ 2,931 2,278 1,541
Accrued investment advisory fees ....................................... 21,062 17,853 13,116
Accrued administrative service fees .................................... 5,266 4,463 3,279
----------- ----------- -----------
Total liabilities ............................................. 276,179 251,095 124,712
----------- ----------- -----------
NET ASSETS ............................................................. $45,155,453 $37,690,377 $27,753,806
=========== =========== ===========
Net assets represented by:
Paid-in capital ........................................................ $39,951,363 $33,989,852 $25,759,287
Unrealized gain ........................................................ 4,636,231 3,250,875 1,722,945
Undistributed net investment income .................................... 213,667 171,098 10,864
Accumulated net realized gain .......................................... 354,192 278,552 260,710
----------- ----------- -----------
NET ASSETS ............................................................. $45,155,453 $37,690,377 $27,753,806
=========== =========== ===========
Capital Shares, $.001 par value:
Shares authorized (millions) ......................................... 2,000 2,000 2,000
Outstanding .......................................................... 3,578,309 3,146,469 2,466,029
Net Asset Value per share (net assets divided by shares
outstanding) ....................................................... $ 12.619 $ 11.979 $ 11.255
Cost of Investments .................................................... $38,971,417 $33,731,925 $25,664,064
Cost of cash denominated in foreign currencies ......................... $ 596,130 $ 478,052 $ 285,496
</TABLE>
See Notes to Financial Statements.
81
<PAGE>
Aetna Generation Portfolios, Inc.
Statements of Operations
Year ended December 31, 1996
================================================================================
<TABLE>
<CAPTION>
Aetna Aetna Aetna
Ascent Crossroads Legacy
----------- ----------- -----------
<S> <C> <C> <C>
Investment Income:
Dividends ................................................................. $ 632,454 $ 463,929 $ 306,329
Interest .................................................................. 209,898 434,616 518,828
----------- ----------- -----------
842,352 898,545 825,157
Foreign taxes withheld .................................................... (12,619) (9,097) (5,669)
----------- ----------- -----------
Total investment income ............................................. 829,733 889,448 819,488
----------- ----------- -----------
Investment Expenses:
Investment advisory fees .................................................. 136,513 129,138 105,706
Administrative services fees .............................................. 34,751 26,567 21,226
Miscellaneous ............................................................. 35,683 30,427 27,105
----------- ----------- -----------
Total investment expenses ........................................... 206,947 186,132 154,037
----------- ----------- -----------
Net investment income ..................................................... 622,786 703,316 665,451
----------- ----------- -----------
Realized and Unrealized Gain (Loss):
Realized gain (loss) on:
Sale of investments ..................................................... 1,424,061 1,159,590 936,895
Futures and forward currency contracts .................................. 292,787 293,790 228,068
Foreign currency transactions ........................................... (87,231) (5,566) (6,332)
----------- ----------- -----------
Net realized gain on investments ................................. 1,629,617 1,447,814 1,158,631
----------- ----------- -----------
Net change in unrealized gain or loss on:
Investments ............................................................. 3,485,551 2,324,867 928,103
Futures and forward currency contracts .................................. (88,206) (113,394) (83,061)
Foreign currency transactions ........................................... 80,687 1,732 (173)
----------- ----------- -----------
Net change in unrealized gain or loss on investments ............. 3,478,032 2,213,205 844,869
----------- ----------- -----------
Net realized and change in unrealized gain ................................ 5,107,649 3,661,019 2,003,500
----------- ----------- -----------
Increase in net assets resulting from operations ......................... $ 5,730,435 $ 4,364,335 $ 2,668,951
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
82
<PAGE>
Aetna Generation Portfolios, Inc.
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Aetna Ascent
--------------------------------
Period from
July 5, 1995
Year Ended to
December 31, December 31,
1996 1995
------------ ------------
From Operations:
<S> <C> <C>
Net investment income ...................................................................... $ 622,786 $ 199,959
Net realized gain on investments ........................................................... 1,629,617 439,918
Net change in unrealized gain or loss on investments ....................................... 3,478,032 1,158,199
------------ ------------
Increase in net assets resulting from operations ......................................... 5,730,435 1,798,076
------------ ------------
Distributions to Shareholders:
From net investment income ................................................................. (646,312) (427,870)
From net realized gains .................................................................... (1,314,791) --
------------ ------------
Decrease in net assets from distributions to shareholders ................................ (1,961,103) (427,870)
------------ ------------
From Fund Share Transactions:
Proceeds from shares sold .................................................................. 33,848,909 24,150,259
Net asset value of shares issued to shareholders
upon reinvestment of distributions ....................................................... 1,961,103 427,870
Cost of shares redeemed .................................................................... (13,273,777) (7,098,449)
------------ ------------
Increase in net assets from fund share transactions ...................................... 22,536,235 17,479,680
------------ ------------
Change in net assets ....................................................................... 26,305,567 18,849,886
Net Assets:
Beginning of period ........................................................................ 18,849,886 --
------------ ------------
End of period .............................................................................. $ 45,155,453 $ 18,849,886
============ ============
End of period net assets includes undistributed (distributions in excess of) net
investment income ........................................................................ $ 213,667 $ (5,803)
============ ============
Share Transactions:
Number of shares sold ...................................................................... 2,852,183 2,378,369
Number of shares issued upon reinvestment of distributions ................................. 159,062 39,636
Number of shares redeemed .................................................................. (1,179,070) (671,871)
------------ ------------
Net increase ............................................................................. 1,832,175 1,746,134
============ ============
</TABLE>
See Notes to Financial Statements.
83
<PAGE>
Aetna Generation Portfolios, Inc.
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Aetna Crossroads
----------------------------------
Period from
July 5, 1995
Year Ended to
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
From Operations:
Net investment income .................................................................. $ 703,316 $ 225,738
Net realized gain on investments ....................................................... 1,447,814 340,018
Net change in unrealized gain or loss on investments ................................... 2,213,205 1,037,670
------------ ------------
Increase in net assets resulting from operations ..................................... 4,364,335 1,603,426
------------ ------------
Distributions to Shareholders:
From net investment income ............................................................. (790,607) (327,474)
From net realized gains ................................................................ (1,203,828) --
------------ ------------
Decrease in net assets from distributions to shareholders ............................ (1,994,435) (327,474)
------------ ------------
From Fund Share Transactions:
Proceeds from shares sold .............................................................. 30,565,631 23,185,016
Net asset value of shares issued to shareholders
upon reinvestment of distributions ................................................... 1,994,435 327,474
Cost of shares redeemed ................................................................ (16,053,016) (5,975,015)
------------ ------------
Increase in net assets from fund share transactions .................................. 16,507,050 17,537,475
------------ ------------
Change in net assets ................................................................... 18,876,950 18,813,427
Net Assets:
Beginning of period .................................................................... 18,813,427 --
------------ ------------
End of period .......................................................................... $ 37,690,377 $ 18,813,427
============ ============
End of period net assets includes undistributed net investment income .................. $ 171,098 $ 7,137
============ ============
Share Transactions:
Number of shares sold .................................................................. 2,665,935 2,288,051
Number of shares issued upon reinvestment of distributions ............................. 169,462 30,491
Number of shares redeemed .............................................................. (1,440,613) (566,857)
------------ ------------
Net increase ........................................................................... 1,394,784 1,751,685
============ ============
</TABLE>
See Notes to Financial Statements.
84
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Aetna Legacy
----------------------------------
Period from
July 5, 1995
Year Ended to
December 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
From Operations:
Net investment income .................................................................. $ 665,451 $ 251,816
Net realized gain on investments ....................................................... 1,158,631 280,645
Net change in unrealized gain or loss on investments ................................... 844,869 878,076
------------ ------------
Increase in net assets resulting from operations ..................................... 2,668,951 1,410,537
------------ ------------
Distributions to Shareholders:
From net investment income ............................................................. (730,661) (321,791)
From net realized gains ................................................................ (1,061,503) --
------------ ------------
Decrease in net assets from distributions to shareholders ............................ (1,792,164) (321,791)
------------ ------------
From Fund Share Transactions:
Proceeds from shares sold .............................................................. 25,960,960 21,576,530
Net asset value of shares issued to shareholders
upon reinvestment of distributions ................................................... 1,792,164 321,791
Cost of shares redeemed ................................................................ (19,129,539) (4,733,633)
------------ ------------
Increase in net assets from fund share transactions .................................. 8,623,585 17,164,688
------------ ------------
Change in net assets ................................................................... 9,500,372 18,253,434
Net assets:
Beginning of period .................................................................... 18,253,434 --
------------ ------------
End of period .......................................................................... $ 27,753,806 $ 18,253,434
============ ============
End of period net assets includes undistributed net investment income .................. $ 10,864 $ 13,801
============ ============
Share Transactions
Number of shares sold .................................................................. 2,350,084 2,138,745
Number of shares issued upon reinvestment of distributions ............................. 160,746 30,251
Number of shares redeemed .............................................................. (1,760,792) (453,005)
------------ ------------
Net increase ........................................................................... 750,038 1,715,991
============ ============
</TABLE>
See Notes to Financial Statements.
85
<PAGE>
Aetna Generation Portfolios, Inc.
Notes to Financial Statements
December 31, 1996
================================================================================
1. Summary of Significant Accounting Policies
Aetna Generation Portfolios, Inc. (the Company) was incorporated in 1994 as a
Maryland Corporation. The Company is an open-end management investment company
and is authorized to issue multiple series of shares, each representing a
diversified portfolio of investments (Portfolio) with different investment
objectives, policies and restrictions. Currently, the Company offers shares of
the Aetna Ascent Variable Portfolio (Aetna Ascent); Aetna Crossroads Variable
Portfolio (Aetna Crossroads); and Aetna Legacy Variable Portfolio (Aetna
Legacy). The Company commenced investment operations on July 5, 1995. The
Portfolios are asset allocation funds that seek to maximize long-term investment
returns at varying levels of risk.
Shares of each Portfolio are owned by insurance companies as depositors of
separate accounts which are used to fund variable annuity contracts and variable
life insurance policies. It is currently expected that all shares will be held
by separate accounts of Aetna Life Insurance and Annuity Company (ALIAC) and its
subsidiary, Aetna Insurance Company of America.
ALIAC serves as the Investment Adviser and principal underwriter to each
Portfolio. It is an indirect wholly-owned subsidiary of Aetna Retirement
Services, Inc. which is in turn a wholly-owned subsidiary of Aetna Inc.
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect amounts reported therein. Although actual results could differ from these
estimates, any such differences are expected to be immaterial to the net assets
of the Portfolios.
A. Valuation of Investments
Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter securities,
at the mean of the bid and asked prices. Short-term investments maturing in more
than sixty days for which market quotations are readily available are valued at
current market value. Short-term investments maturing in less than sixty days
are valued at amortized cost which when combined with accrued interest
approximates market. Securities for which market quotations are not considered
to be readily available are valued in good faith using methods approved by the
Board of Directors.
The accounting records of the Portfolios are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars at the prevailing rates of exchange at
the end of the period. Purchases and sales of securities, income receipts, and
expense payments are translated into U.S. dollars at the prevailing exchange
rate on the respective dates of the transactions.
B. Futures and Forward Foreign Currency Exchange Contracts
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Portfolios may enter into
futures contracts to manage the risk of changes in interest rates, equity
prices, currency exchange rates or in anticipation of future purchases and sales
of portfolio securities. Upon entering into a futures contract, the Portfolios
are required to deposit with a broker an amount (initial margin) equal to a
percentage of the purchase price indicated by the futures contract. Subsequent
deposits (variation margin) are received or paid each day by the Portfolios
equal to the daily fluctuation in the market value of the contract. These
amounts are recorded by the Portfolios as unrealized gains or losses. When a
contract is closed, the Portfolios record a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Generally, futures contracts held by each
Portfolio are closed prior to expiration.
86
<PAGE>
================================================================================
B. Futures and Forward Foreign Currency Exchange Contracts (continued)
A forward foreign currency exchange contract is an agreement to pay or receive
specific amounts of a currency at a future date in exchange for another currency
at an agreed upon exchange rate. The Portfolios may use forward foreign currency
exchange contracts to hedge certain foreign currency assets. Contracts are
recorded at market value and marked-to-market daily.
The risks associated with futures and foreign currency exchange contracts may
arise from an imperfect correlation between the change in market value of the
securities held by the Portfolios and the price of the contracts. Risks may also
arise from an illiquid secondary market, or from the inability of counterparties
to meet the terms of the contracts.
Realized and unrealized gains or losses on futures and foreign currency exchange
contracts are reflected in the accompanying financial statements. For federal
income tax purposes, any futures contracts and forward foreign currency exchange
contracts which remain open at year end are marked-to-market and the resultant
net gain or loss is included in federal taxable income.
C. Illiquid and Restricted Securities
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Portfolios to sell them promptly
at an acceptable price. Restricted securities are subject to legal or
contractual restrictions on resale and may not be publicly sold without
registration under the Securities Act of 1933. Each Portfolio may invest up to
15% of its total assets in illiquid securities. Illiquid and restricted
securities are valued using market quotations when readily available. In the
absence of market quotations, the securities are valued based upon their fair
value determined under procedures approved by the Board of Directors. The
Portfolios will not pay the costs of disposition of restricted securities other
than ordinary brokerage fees, if any.
D. Federal Income Taxes
As a qualified regulated investment company, each Portfolio is relieved of
federal income and excise taxes by distributing its net taxable investment
income and capital gains, if any, in compliance with the applicable provisions
of the Internal Revenue Code.
E. Distributions
The Company distributes all net investment income and net capital gains, if any,
to shareholders annually. Distributions from net investment income are based on
taxable net income. Distributions are recorded on the ex-dividend date. Income
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatment for foreign currency
related transactions and deferred losses on wash sales.
F. Other
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective security using a
yield-to-maturity method. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from investment transactions are determined on an
identified cost basis.
2. Investment Advisory and Administrative Services Fees
For the the period January 1, 1996 through July 31, 1996, ALIAC received an
investment advisory fee at an annual rate of 0.50% of the average daily net
assets of each Portfolio. On June 17, 1996, the shareholders of each Portfolio
voted to approve a new Investment Advisory Agreement, effective August 1, 1996,
which provides for an increase in the annual advisory fee to 0.60% of average
daily net assets for each Portfolio.
87
<PAGE>
Aetna Generation Portfolios, Inc.
Notes to Financial Statements
December 31, 1996 (continued)
================================================================================
2. Investment Advisory and Administrative Services Fees (continued)
Prior to May 1, 1996, the Portfolios had entered into an administrative services
agreement (the Agreement) with ALIAC whereby ALIAC was reimbursed for a share of
its overhead related to managing the Portfolios. In addition, ALIAC had been
paying, and the Portfolios had been reimbursing ALIAC for, the Portfolios'
ordinary, recurring expenses such as legal fees, directors' fees, custodial fees
and insurance premiums. Effective May 1, 1996, the Agreement was modified to
enable each Portfolio to fix the amount of its costs and expenses. Under the
terms of the new Agreement, ALIAC will receive a fixed fee in exchange for
providing the services described above including reimbursement of its overhead
related to managing the Portfolios. The new Agreement provides for ALIAC to
receive a fixed fee at an annual rate of 0.15% of average daily net assets for
each Portfolio.
On June 17, 1996, the shareholders of each Portfolio voted to approve a
subadvisory agreement (the Subadvisory Agreement) among the Portfolios, ALIAC
and ALIAC's affiliate, Aeltus Investment Management, Inc. (Aeltus). Under the
terms of the Subadvisory Agreement, Aeltus will supervise the investment and
reinvestment of cash and securities and provide certain related administrative
services for each Portfolio in exchange for fees of up to 0.35% of each
Portfolio's average daily net assets. For the year ended December 31, 1996,
ALIAC paid Aeltus $46,685, $42,853, and $31,592 for Ascent, Crossroads and
Legacy, respectively, in accordance with the terms of the Subadvisory Agreement.
3. Purchases and Sales of Investment Securities
Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the year ended December 31, 1996 were:
Cost of Purchases Proceeds from Sales
----------------- -------------------
Aetna Ascent $35,145,847 $23,073,736
Aetna Crossroads 23,338,030 17,263,904
Aetna Legacy 12,429,744 12,698,618
4. Forward Foreign Currency Exchange Contracts
At December 31, 1996, Aetna Ascent, Aetna Crossroads, and Aetna Legacy had the
following open forward foreign currency exchange contracts that obligate the
Portfolios to deliver currencies at specified future dates. The net unrealized
gains of $54,401, $41,211, and $28,894, respectively, on these contracts is
included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
Aetna Ascent:
Exchange Currency to U.S. $ Value Currency to U.S. $ Value Unrealized
Date be Delivered December 31, 1996 be Received December 31, 1996 Gain (Loss)
---- ------------ ----------------- ----------- ----------------- -----------
Contracts to Buy
- ----------------
<S> <C> <C> <C> <C> <C>
2/10/97 29,813 $29,813 40,000 $29,914 $101
U.S. Dollar Swiss Franc
- ---------------------------------------------------------------------------------------------------------------------------
1/24/97 101,789 101,789 11,450,000 99,017 (2,772)
U.S. Dollar Japanese Yen
- ---------------------------------------------------------------------------------------------------------------------------
Contracts to Sell
- -----------------
2/10/97 68,000 50,854 57,143 57,143 6,289
Swiss Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
3/3/97 459,000 299,024 306,839 306,839 7,815
German Deutschemark U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
3/3/97 20,000 13,029 12,936 12,936 (93)
German Deutschemark U.S. Dollar
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
88
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Aetna Ascent (continued):
Exchange Currency to U.S. $ Value Currency to U.S. $ Value Unrealized
Date be Delivered December 31, 1996 be Received December 31, 1996 Gain (Loss)
---- ------------ ----------------- ----------- ----------------- -----------
Contracts to Sell (continued)
- -----------------------------
<S> <C> <C> <C> <C> <C>
2/13/97 1,050,000 $202,492 207,436 $207,436 $4,944
French Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
1/24/97 41,310,000 357,239 370,626 370,626 13,387
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/13/97 26,480,000 230,455 244,012 244,012 13,557
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/17/97 22,850,000 198,978 209,210 209,210 10,232
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
4/18/97 210,000 122,279 123,286 123,286 1,007
Dutch Guilder U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
1/7/97 48,811,000 31,966 31,900 31,900 (66)
Italian Lira U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
$54,401
=========
</TABLE>
<TABLE>
<CAPTION>
Aetna Crossroads:
Contracts to Buy
- ----------------
<S> <C> <C> <C> <C> <C>
2/10/97 22,359 22,359 30,000 22,435 76
U.S. Dollar Swiss Franc
- -----------------------------------------------------------------------------------------------------------------------------
1/24/97 80,098 80,098 9,010,000 77,916 (2,182)
U.S. Dollar Japanese Yen
- -----------------------------------------------------------------------------------------------------------------------------
Contracts to Sell
- -----------------
2/10/97 40,000 29,914 33,614 33,614 3,700
Swiss Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/3/97 385,000 250,815 256,971 256,971 6,156
German Deutschemark U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/3/97 10,000 6,514 6,468 6,468 (46)
German Deutschemark U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
2/13/97 822,000 158,522 161,986 161,986 3,464
French Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/13/97 25,970,000 226,016 238,700 238,700 12,684
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/17/97 13,920,000 121,216 127,449 127,449 6,233
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
1/24/97 33,950,000 293,592 304,049 304,049 10,457
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
4/18/97 150,000 87,342 88,061 88,061 719
Dutch Guilders U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
1/7/97 37,103,000 24,298 24,248 24,248 (50)
Italian Lira U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
$41,211
=========
</TABLE>
89
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Aetna Legacy:
Exchange Currency to U.S. $ Value Currency to U.S. $ Value Unrealized
Date be Delivered December 31, 1996 be Received December 31, 1996 Gain (Loss)
---- ------------ ----------------- ----------- ----------------- -----------
Contracts to Buy
- ----------------
<S> <C> <C> <C> <C> <C>
2/10/97 14,906 $14,906 20,000 $14,957 $51
U.S. Dollar Swiss Francs
- -----------------------------------------------------------------------------------------------------------------------------
1/24/97 51,207 51,207 5,760,000 49,811 (1,396)
U.S. Dollar Japanese Yen
- -----------------------------------------------------------------------------------------------------------------------------
Contracts to Sell
- -----------------
2/10/97 35,000 26,175 29,412 29,412 3,237
Swiss Francs U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/3/97 188,000 122,476 126,478 126,478 4,002
German Deutschemark U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/3/97 20,000 13,029 12,936 12,936 (93)
German Deutschemark U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
2/13/97 547,600 105,604 107,825 107,825 2,221
French Francs U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/13/97 1,111,000 96,690 102,883 102,883 6,193
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
1/24/97 28,530,000 246,721 255,563 255,563 8,842
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
3/17/97 12,400,000 107,979 113,532 113,532 5,553
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
4/18/97 70,000 40,759 41,095 41,095 336
Dutch Guilders U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
1/7/97 38,022,000 24,900 24,848 24,848 (52)
Italian Lira U.S. Dollar
- -----------------------------------------------------------------------------------------------------------------------------
$28,894
===========
</TABLE>
5. Certain Reclassifications
In accordance with Statement of Position 93-2, the Portfolios had the following
reclassifications to the Statement of Assets and Liabilities:
<TABLE>
<CAPTION>
Undistributed Net Investment Accumulated Net Realized Gain
Paid-in Capital Income on Investments
--------------------------- --------------------------------- -------------------------------
<S> <C> <C> <C>
Aetna Ascent $(64,552) $242,996 $(178,444)
Aetna Crossroads (54,673) 251,252 (196,579)
Aetna Legacy (28,986) 62,273 (33,287)
</TABLE>
Theses reclassifications have no impact on the net asset value of the Portfolios
and are designed to present each Portfolio's capital accounts on a tax basis.
90
<PAGE>
================================================================================
Federal Tax Status of Dividends Declared During the Fiscal Year (Unaudited)
As of December 31, 1996, the Portfolios declared long term capital gain
dividends per share as follows:
July 1996 December 1996
--------- -------------
Aetna Ascent $0.0275 $0.0370
Aetna Crossroads 0.0400 0.0725
Aetna Legacy 0.0400 0.0200
All of the income dividends paid by each Portfolio were ordinary income for
federal income tax purposes. The percentage of dividends that were qualifying
dividends for the corporate dividends received deduction were:
Aetna Ascent 30.57%
Aetna Crossroads 23.17%
Aetna Legacy 17.99%
91
<PAGE>
Aetna Generation Portfolios, Inc.
Financial Highlights
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
Aetna Ascent
-------------------------------------
Year Ended Period from
December 31, July 5, 1995 to
1996 December 31, 1995+
------------ ------------------
<S> <C> <C>
Net asset value, beginning of period .......................................... $ 10.795 $ 10.000
------------ ------------
Income from investment operations:
Net investment income ....................................................... 0.225 0.116
Net realized and change in unrealized gain .................................. 2.286 0.929
------------ ------------
Total from investment operations ...................................... $ 2.511 $ 1.045
------------ ------------
Less distributions:
From net investment income .................................................. (0.230) (0.250)
From net realized gains on investments ...................................... (0.457) --
------------ ------------
Total distributions ................................................... (0.687) (0.250)
------------ ------------
Net asset value, end of period ................................................ $ 12.619 $ 10.795
============ ============
Total return* ................................................................. 23.58% 10.45%
Net assets, end of period (000's) ............................................. $ 45,155 $ 18,850
Ratio of total expenses to average net assets** ............................... 0.84% 1.59%
Ratio of net investment income to average net assets** ........................ 2.53% 2.26%
Portfolio turnover rate ....................................................... 109.77% 39.77%
Average commission rate paid per share ........................................ $ 0.0296 --
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
** Annualized for periods of less than one year.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements
92
<PAGE>
- -------------------------------------------------------------------------------
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
Aetna Crossroads
-------------------------------------
Year Ended Period from
December 31, July 5, 1995 to
1996 December 31, 1995+
------------ ------------------
<S> <C> <C>
Net asset value, beginning of period .......................................... $ 10.740 $ 10.000
------------ ------------
Income from investment operations:
Net investment income ....................................................... 0.270 0.131
Net realized and change in unrealized gain .................................. 1.722 0.799
------------ ------------
Total from investment operations ...................................... $ 1.992 $ 0.930
------------ ------------
Less distributions:
From net investment income .................................................. (0.300) (0.190)
From net realized gains on investments ...................................... (0.453) --
------------ ------------
Total distributions ................................................... (0.753) (0.190)
------------ ------------
Net asset value, end of period ................................................ $ 11.979 $ 10.740
============ ============
Total return* ................................................................. 18.81% 9.30%
Net assets, end of period (000's) ............................................. $ 37,690 $ 18,813
Ratio of total expenses to average net assets** ............................... 0.80% 1.60%
Ratio of net investment income to average net assets** ........................ 3.01% 2.56%
Portfolio turnover rate ....................................................... 105.66% 49.38%
Average commission rate paid per share ........................................ $ 0.0284 --
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
** Annualized for periods of less than one year.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements
93
<PAGE>
Aetna Generation Portfolios, Inc.
Financial Highlights
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
Aetna Legacy
----------------------------------------
Year Ended Period from
December 31, July 5, 1995 to
1996 December 31, 1995+
------------ -------------------
<S> <C> <C>
Net asset value, beginning of period .......................................... $ 10.637 $ 10.000
------------ ------------
Income from investment operations:
Net investment income ....................................................... 0.334 0.148
Net realized and change in unrealized gain .................................. 1.150 0.679
------------ ------------
Total from investment operations ...................................... $ 1.484 $ 0.827
------------ ------------
Less distributions:
From net investment income .................................................. (0.363) (0.190)
From net realized gains on investments ...................................... (0.503) --
------------ ------------
Total distributions ................................................... (0.866) (0.190)
------------ ------------
Net asset value, end of period ................................................ $ 11.255 $ 10.637
============ ============
Total return* ................................................................. 14.19% 8.27%
Net assets, end of period (000's) ............................................. $ 27,754 $ 18,253
Ratio of total expenses to average net assets** ............................... 0.80% 1.62%
Ratio of net investment income to average net assets** ........................ 3.45% 2.91%
Portfolio turnover rate ....................................................... 111.11% 62.43%
Average commission rate paid per share ........................................ $ 0.0274 --
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
** Annualized for periods of less than one year.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements
94
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Directors
Aetna Generation Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Ascent Variable Portfolio, Aetna Crossroads Variable Portfolio and Aetna Legacy
Variable Portfolio, series of Aetna Generation Portfolios, Inc. (the
Portfolios), including the portfolios of investments, as of December 31, 1996,
and the related statements of operations for the year then ended, statements of
changes in net assets and financial highlights for the year ended December 31,
1996 and the period from July 5, 1995 (commencement of operations) to December
31, 1995. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Aetna
Ascent Variable Portfolio, Aetna Crossroads Variable Portfolio and Aetna Legacy
Variable Portfolio as of December 31, 1996, the results of their operations for
the year then ended, changes in their net assets and financial highlights for
the year ended December 31, 1996, and the period from July 5, 1995 to December
31, 1995 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
95
<PAGE>
Aetna Generation Portfolios, Inc.
Special Meeting of Shareholders
(Unaudited)
================================================================================
A Special Shareholder Meeting was held for shareholders in each Portfolio on
June 17, 1996. Shareholders of record on April 30, 1996 were entitled to vote at
the meeting. Shareholders voted to elect nine Directors, approve a subadvisory
agreement among each of the Portfolios, ALIAC and Aeltus, and approve a new
Investment Advisory Agreement between each Portfolio and ALIAC.
A. Election of Directors
The following individuals were elected to serve as Directors for each of the
Portfolios. Every individual named served as a Director in each Portfolio prior
to this election. There are no other individuals currently serving as Directors
to any Portfolio.
<TABLE>
<CAPTION>
Director Votes Cast Votes Director Votes Cast Votes
Portfolio For Withheld Portfolio For Withheld
- ------------------------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Morton Ehrlich Sidney Koch
- -------------- -----------
Aetna Ascent 1,415,097 38,376 Aetna Ascent 1,414,103 39,370
Aetna Crossroads 1,280,993 11,444 Aetna Crossroads 1,280,947 11,490
Aetna Legacy 934,860 9,938 Aetna Legacy 930,929 13,869
Maria T. Fighetti Shaun P. Mathews
- ----------------- ----------------
Aetna Ascent 1,415,097 38,376 Aetna Ascent 1,415,097 38,376
Aetna Crossroads 1,280,993 11,444 Aetna Crossroads 1,280,993 11,444
Aetna Legacy 934,860 9,938 Aetna Legacy 934,860 9,938
David L. Grove Corine T. Norgaard
- -------------- ------------------
Aetna Ascent 1,400,740 52,733 Aetna Ascent 1,403,031 50,442
Aetna Crossroads 1,280,993 11,444 Aetna Crossroads 1,280,993 11,444
Aetna Legacy 929,843 14,955 Aetna Legacy 934,860 9,938
Timothy A. Holt Richard G. Scheide
- --------------- ------------------
Aetna Ascent 1,415,097 38,376 Aetna Ascent 1,414,146 39,327
Aetna Crossroads 1,280,993 11,444 Aetna Crossroads 1,280,993 11,444
Aetna Legacy 934,860 9,938 Aetna Legacy 930,929 13,869
Daniel P. Kearney
- -----------------
Aetna Ascent 1,289,584 163,889
Aetna Crossroads 1,236,955 55,482
Aetna Legacy 933,643 11,155
</TABLE>
B. Approval of Subadvisory Agreement
The shareholders of each Portfolio voted to approve a Subadvisory Agreement
among each of the Portfolios, ALIAC and Aeltus. (See Note 2 for a description of
the services provided and the compensation arrangement defined by the terms of
the agreement.)
Results of the vote were:
Votes Cast Votes Cast
Portfolio For Against Abstentions
- --------------------------------------------------------------------------------
Aetna Ascent 1,182,670 201,056 69,747
Aetna Crossroads 1,207,887 29,802 54,748
Aetna Legacy 903,621 28,782 12,395
96
<PAGE>
================================================================================
C. Approval of New Investment Advisory Agreement
Shareholders in each Portfolio voted to approve a new Investment Advisory
Agreement (the "Agreement") between each Portfolio and ALIAC. The Agreement was
updated in the following respects: the language was simplified where possible;
the liability provisions made it clear that ALIAC is liable to the Portfolio for
ALIAC's negligence, and it expanded ALIAC's ability to use brokerage commissions
to pay Portfolio expenses.
Additionally, shareholders of each Portfolio voted to increase the annual
investment advisory fee from 0.50% of average daily net assets to 0.60% of
average daily net assets.
Results of the vote were:
Votes Cast Votes Cast
Portfolio For Against Abstentions
- --------------------------------------------------------------------------------
Aetna Ascent 1,293,052 90,893 69,528
Aetna Crossroads 1,198,934 37,539 55,964
Aetna Legacy 911,365 26,410 7,023
97
<PAGE>
Aetna GET Fund, Series B
Growth of $10,000
Average Annual Total Returns for the
Year Ended December 31, 1996*
1 Year Inception+
23.52% 21.10%
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Jul-94 Dec-96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna GET Fund, Series B 10000 10229 10186 10748 11664 12506 13078 13868 14443 14824 16148
Lehman Aggregate Bond Index 10000 10061 10099 10608 11254 11475 11964 11752 11819 12038 12399
S&P 500 Index 10000 10489 10487 11508 12607 13610 14429 15204 15885 16376 17742
60% S&P 500/40% Lehman Aggregate 10000 10318 10335 11146 12055 12723 13401 13732 14132 14505 15406
</TABLE>
* "Total Return" is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not include any separate account charges imposed by ALIAC.
+ The Fund commenced investment operations on July 1, 1994.
For the year ended December 31, 1996, the Aetna GET Fund, Series B (GET B)
achieved a return of 23.52% (net of fund expenses) versus the S&P 500 return of
22.95% and the Lehman Brothers Aggregate Bond Index return of 3.63% for the same
period. Both indices are unmanaged.
With continued stock market advances, GET B has enhanced its ability to meet its
obligation to shareholders, which resulted in an increased allocation to stocks
and securities convertible into stocks. Because GET B is designed to provide
equity market participation with downside protection against investment risk if
held until maturity, the asset mix is determined by the Fund's cumulative
returns of its stock and bond components since inception. The greater the
accumulated gains, the more the fund will participate in equities. Primarily due
to the strong equity markets since the Fund's launch in 1994, the Fund's equity
allocation has climbed steadily to its current level.
The outstanding performance of our stock selection disciplines led to the Fund's
excellent performance results during the period. We made significant
improvements in both our investment research and in our portfolio implementation
processes over the past year, which, we believe, provide a solid foundation for
future investment performance. We have enhanced our quantitative research and
management capabilities with key professional investment staff additions, and
amassed a notable historical database of company financials, analyst earnings
estimates, insider buying and selling, stock returns, and economic variables.
These improvements enable us to perform cutting-edge research to uncover
evidence of past market inefficiencies which we exploit in our portfolios.
State-of-the-art hardware, software, and databases allow us to analyze and
rebalance our portfolios nearly every trading day using an extremely efficient
computer-based process. Risk control and optimization techniques help us focus
the risk in our portfolios upon those characteristics which we believe will be
rewarded, and to neutralize all other risks. Fortunately, the characteristics we
favor in stock selection including attractive valuation, positive earnings
momentum, and shareholder oriented management, were well rewarded by the market
over the past year, and we believe that they are likely to continue to help
guide us to stocks which offer the potential for superior returns.
Past performance is no assurance of future returns.
98
<PAGE>
Investment Summary:
- --------------------------------------------------------------------------------
Top Ten Equity Holdings % of Portfolio
- --------------------------------------------------------------------------------
Intel Corp. 3.2%
Dell Computer Corp. 2.6%
AT&T Corp. 2.5%
BankAmerica Corp. 2.2%
Travelers Group, Inc. 2.2%
Bristol-Meyers Squibb Co. 2.1%
Cisco Systems, Inc. 2.1%
Chrysler Corp. 2.1%
Microsoft Corp. 2.0%
TJX Companies, Inc. 1.9%
Large Cap Portfolio Sector Breakdown:
- --------------------------------------------------------------------------------
Portfolio S&P 500
Sector Weight Weight Over/(Under)
- --------------------------------------------------------------------------------
Basic Materials 0.2% 6.3% (6.1)%
Producer Goods & Services 10.0% 12.6% (2.6)%
Technology 14.3% 11.8% 2.5 %
Consumer Goods 34.3% 32.7% 1.6 %
Services 3.0% 2.3% 0.7 %
Financial Services 15.9% 14.6% 1.3 %
Utilities 22.3% 19.7% 2.6 %
Asset Allocation:
- --------------------------------------------------------------------------------
Portfolio of Notional Value Economic
Investments of Futures * Exposure *
- --------------------------------------------------------------------------------
Large Cap Stocks 88.0% 5.3 % 93.3%
Mid Cap Stocks 1.5% -- 1.5%
Convertible Securities 2.5% -- 2.5%
Cash Equivalents 8.0% (5.3)% 2.7%
----- --- -----
Total Investments 100.0% 0.0% 100.0%
===== === =====
* "Notional value" refers to the economic value at risk, or the exposure to
the financial instruments underlying the options and futures positions.
"Economic exposure" reflects the Fund's exposure to both changes in value
of the portfolio of investments as well as the financial instruments
underlying the options and futures positions.
99
<PAGE>
Aetna GET Fund, Series C
The Aetna GET Fund, Series C (GET C), provided a return of 1.52%, net of fund
expenses, for the period from December 17, 1996 (commencement of the Guaranteed
Period) to December 31, 1996.
Through a portfolio strategy that allocates assets between equity and fixed
income securities in response to market fluctuations, GET C provides stock
market participation with reduced investment risk. This strategy is complemented
by a guarantee that market value of an investor's assets will not be less than
their market value on the first day of the Fund's 5-year Guaranteed Period if
the assets are held to the Fund's maturity on December 16, 2001. As of the
beginning of the Guaranteed Period, this Fund no longer accepts new deposits.
The decision of how much to invest in common stocks and securities convertible
into common stocks or investment grade bonds, the "asset mix allocation," is a
function of the cumulative returns of its stock and bond components since the
Fund's inception. During periods when the stock market is rising, the percentage
of GET C assets in stocks increases. Conversely, in a declining stock market,
the percentage of assets in stocks decreases; in fact, nearly all of GET C's
assets may be invested in bonds or cash equivalents. While GET C might not be
positioned to reap significant benefits from sudden stock market gains, the
fixed income securities would provide a cushion against potential loss during
stock market declines. Our stock selection strategy is one much like that used
in the Aetna Variable Index Plus Portfolio: a proprietary model that uses
quantitative criteria to identify those securities tracked by the S&P 500 that
have the greatest and the least growth potential. The fixed income portion of
the Fund focuses primarily on short-to-intermediate-term debt securities such as
highly rated corporate bonds, government securities, and commercial paper.
As of December 31, 1996, the GET C asset mix allocation was 54% stocks and 46%
fixed income securities. Going forward, we will continue to adjust allocations
according to the general market environment.
Past performance is no assurance of future returns.
Investment Summary:
- --------------------------------------------------------------------------------
Top Ten Equity Holdings % of Portfolio
- --------------------------------------------------------------------------------
General Electric Co. 2.6%
Intel Corp. 1.7%
Microsoft Corp. 1.3%
Merck & Co. 1.2%
Coca-Cola Co. 1.1%
Philip Morris Cos., Inc. 1.1%
Exxon Corp. 1.1%
Bristol-Meyers Squibb Co. .9%
Pfizer, Inc. .8%
Royal Dutch Petroleum Co. .8%
Large Cap Portfolio Sector Breakdown:
- --------------------------------------------------------------------------------
Portfolio S&P 500
Sector Weight Weight Over/(Under)
- --------------------------------------------------------------------------------
Basic Materials 4.3% 6.3% (2.0)%
Producer Goods & Services 14.6% 12.6% 2.0 %
Technology 12.9% 11.8% 1.1 %
Consumer Goods 30.9% 32.7% (1.8)%
Services 1.9% 2.3% (0.4)%
Financial Services 17.5% 14.6% 2.9 %
Utilities 17.9% 19.7% (1.8)%
100
<PAGE>
Aetna GET Fund, Series B
Portfolio of Investments - December 31, 1996
================================================================================
Number of Market
Shares Value
--------- --------
COMMON STOCKS (91.0%)
Aerospace and Defense (0.3%)
McDonnell Douglas Corp. ............................... 4,100 $ 262,400
----------
Apparel (1.9%)
Fruit of the Loom, Inc. + ............................. 3,400 128,775
Gap, Inc. ............................................. 900 27,113
Liz Claiborne, Inc. ................................... 16,900 652,763
Nike, Inc. Class B .................................... 13,500 806,625
----------
1,615,276
----------
Autos and Auto Equipment (2.1%)
Chrysler Corp. ........................................ 52,800 1,742,400
----------
Banks (7.7%)
BankAmerica Corp. ..................................... 18,800 1,875,300
CITICORP .............................................. 1 103
First Chicago Corp. ................................... 20,091 1,079,891
First Union Corp. ..................................... 16,800 1,243,200
H. F. Ahmanson & Co. .................................. 24,500 796,250
NationsBank Corp. ..................................... 14,200 1,388,050
----------
6,382,794
----------
Building Materials and Construction (1.5%)
Armstrong World Industries, Inc. ...................... 16,300 1,132,850
Centex Corp. .......................................... 3,900 146,738
----------
1,279,588
----------
Chemicals (0.2%)
Monsanto Co. .......................................... 3,700 143,838
----------
Commercial Services (0.4%)
Safety-Kleen Corp. .................................... 18,400 301,300
----------
Computer Software (5.7%)
Cisco Systems, Inc. + ................................. 28,000 1,781,500
Computer Associates International, .................... 26,025 1,294,744
Inc
Microsoft Corp. + ..................................... 20,000 1,652,500
----------
4,728,744
----------
Computers and Office Equipment (4.3%)
Compaq Computer Corp. + ............................... 11,100 824,175
Dell Computer Corp. + ................................. 41,700 2,215,302
EMC Corp. + ........................................... 4,100 135,813
Moore Corp. Ltd. ...................................... 20,200 411,575
----------
3,586,865
----------
Diversified (4.3%)
Eastern Enterprises ................................... 10,000 353,750
General Electric Co. .................................. 12,800 1,265,600
NACCO Industries, Inc. ................................ 15,200 813,200
Textron, Inc. ......................................... 3,500 329,875
VF Corp. .............................................. 12,000 810,000
----------
3,572,425
----------
Electrical and Electronics (3.3%)
Intel Corp. ........................................... 20,800 2,723,500
----------
Electrical Equipment (1.3%)
Tektronix, Inc. ....................................... 21,000 1,076,250
----------
Number of Market
Shares Value
--------- --------
Financial Services (3.2%)
Bankers Trust New York Corp. .......................... 9,800 $ 845,250
Travelers Group, Inc. ................................. 40,400 1,833,150
----------
2,678,400
----------
Foods and Beverages (4.3%)
Archer-Daniels-Midland Co. ............................ 16,500 363,000
Campbell Soup Co. ..................................... 14,900 1,195,725
Coca-Cola Co. ......................................... 16,700 878,838
Hershey Foods Corp. ................................... 7,000 306,250
Kroger Co. (The) + .................................... 17,800 827,700
----------
3,571,513
----------
Health Services (1.9%)
Beverly Enterprises + ................................. 67,700 863,175
Tenet Healthcare Corp. + .............................. 32,000 700,000
----------
1,563,175
----------
Hotels and Restaurants (1.8%)
HFS, Inc. + ........................................... 6,900 412,275
Marriott International, Inc. .......................... 20,200 1,116,050
----------
1,528,325
----------
Insurance (3.3%)
Allstate Corp. ........................................ 3,300 190,988
Cigna Corp. ........................................... 6,500 888,063
ITT Hartford Group, Inc. .............................. 10,900 735,750
Torchmark Corp. ....................................... 8,300 419,150
USLIFE Corp. .......................................... 16,100 535,325
----------
2,769,276
----------
Machinery and Equipment (1.1%)
Harnischfeger Industries, Inc. ........................ 17,400 837,375
Parker-Hannifin Corp. ................................. 1,200 46,500
Stanley Works ......................................... 200 5,400
----------
889,275
----------
Media and Entertainment (2.1%)
King World Production, Inc. + ......................... 13,900 512,563
Walt Disney Co. (The) ................................. 17,800 1,239,325
----------
1,751,888
----------
Medical Supplies (2.1%)
Biomet, Inc. .......................................... 5,900 89,238
Guidant Corp. ......................................... 15,001 855,057
Mallinckrodt, Inc. .................................... 17,600 776,600
----------
1,720,895
----------
Metals and Mining (1.2%)
Timken Co. ............................................ 22,000 1,009,250
----------
Oil and Gas (10.0%)
Amoco Corp. ........................................... 13,619 1,096,330
Atlantic Richfield Co. ................................ 9,700 1,285,250
Exxon Corp. ........................................... 4,250 416,500
Kerr-Mcgee Corp. ...................................... 12,700 914,400
Mobil Corp. ........................................... 11,200 1,369,200
Occidental Petroleum Corp. ............................ 22,800 532,950
Phillips Petroleum Co. ................................ 26,500 1,172,625
Texaco, Inc. .......................................... 4,500 441,563
See Notes to Portfolio of Investments. 101
<PAGE>
Aetna GET Fund, Series B
Portfolio of Investments - December 31, 1996 (continued)
================================================================================
Number of Market
Shares Value
--------- --------
Oil and Gas (continued)
The Williams Cos., Inc. ............................... 1,050 $ 39,375
USX-Marathon Group .................................... 42,100 1,005,138
----------
8,273,331
----------
Pharmaceuticals (6.3%)
Allergan, Inc. ........................................ 20,100 716,063
Becton, Dickinson & Co. ............................... 21,600 936,900
Bristol-Myers Squibb Co. .............................. 16,600 1,805,250
Johnson & Johnson ..................................... 2,900 144,275
Merck & Co., Inc. ..................................... 6,500 515,125
Schering Plough ....................................... 17,800 1,152,550
----------
5,270,163
----------
Printing and Publishing (1.1%)
Gannett Co., Inc. ..................................... 1,000 74,875
New York Times Co. .................................... 21,400 813,200
----------
888,075
----------
Retail (8.2%)
American Stores Co. ................................... 21,500 878,813
Dayton Hudson Corp. ................................... 32,700 1,283,475
Jostens, Inc. ......................................... 16,300 344,338
Price/Costco, Inc. + .................................. 33,700 846,713
Sears, Roebuck & Co. .................................. 23,500 1,083,938
TJX Companies, Inc. ................................... 34,500 1,634,438
Woolworth Corp. + ..................................... 32,600 713,125
----------
6,784,840
----------
Telecommunications (0.0%)
360 Communications Co. + .............................. 2 46
----------
Transportation (1.8%)
AMR Corp. + ........................................... 15,400 1,357,125
CSX Corp. ............................................. 3,000 126,750
USAir Group, Inc. + ................................... 400 9,350
----------
1,493,225
----------
Utilities - Electric (4.5%)
Consolidated Edison Co. of ............................ 22,100 646,425
New York, Inc. ......................................
Entergy Corp. ......................................... 34,800 965,700
Ohio Edison Co. ....................................... 13,900 316,225
Public Service Enterprise Group, Inc. ................. 300 8,175
Texas Utilities Co. ................................... 24,900 1,014,675
Unicom Corp. .......................................... 29,100 789,338
----------
3,740,538
----------
Utilities - Oil and Gas (1.1%)
Coastal Corp. (The) ................................... 3,700 180,838
Pacific Enterprises ................................... 23,900 725,963
----------
906,801
----------
Utilities - Telephone (4.0%)
AT&T Corp. ............................................ 47,600 2,070,600
NYNEX Corp. ........................................... 26,000 1,251,250
----------
3,321,850
----------
Total Common Stocks (cost$61,812,480) 75,576,246
----------
Principal Market
Amount Value
--------- --------
LONG-TERM BONDS AND NOTES (2.5%)
U.S. Government and Agency Obligations (2.5%)
U.S. Treasury Strips PO, Zero Coupon,
5.95%#, 05/15/99 .................................. $2,400,000 $ 2,088,239
------------
Total Long-Term Bonds and Notes
(cost $2,053,856)
2,088,239
------------
SHORT-TERM INVESTMENTS (8.2%)
A.H. Robins Co., Inc. ++ , Comm
Paper, 6.50%, 01/02/97 ............................ 1,244,000 1,244,000
Circuit City Credit Card ++ , Comm
Paper, 6.20%, 01/07/97 ............................ 4,000,000 4,000,000
Countrywide Home Loans, Comm. Paper,
6.75%, 01/02/97 ................................... 1,300,000 1,300,000
U.S. Treasury Bill +++ , Time
Deposit, 5.08%, 08/21/97 .......................... 160,000 154,707
U.S. Treasury Bill +++ , Time
Deposit, 5.115%, 08/21/97 ......................... 100,000 96,728
------------
Total Short-Term Investments
(cost $6,795,513)
6,795,435
------------
TOTAL INVESTMENTS
(cost $70,661,848)(a) ............................. 84,459,920
Other assets less liabilities
................................................... (1,443,553)
------------
Total Net Assets
$ 83,016,367
============
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amount to
$70,704,388. Unrealized gains and losses, based on identified tax cost at
December 31, 1996, are as follows:
Unrealized gains ..................................... $ 14,077,606
Unrealized losses .................................... (322,074)
------------
Net unrealized gain ................................ $ 13,755,532
============
+ Non-income producing security.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+++ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1996.
# Effective interest rate.
Category percentages are based on net assets.
Information concerning open futures contracts at December 31, 1996 is shown
below:
No. of Initial
Long Notional Expiration Unrealized
Contracts Value Date Gain/(Loss)
--------- ---------- ---------- -----------
S & P 500 Index
Future 12 $4,464,900 March 97 $ 2,099
===========
102 See Notes to Financial Statements.
<PAGE>
Aetna GET Fund, Series C
Portfolio of Investments - December 31, 1996
================================================================================
Number of Market
Shares Value
---------- ----------
COMMON STOCKS (55.7%)
Aerospace and Defense (1.1%)
Boeing Co. ................................. 6,500 $ 691,438
General Dynamics Corp. ..................... 1,200 84,600
Lockheed Martin Corp. ...................... 4,000 366,000
McDonnell-Douglas Corp. .................... 6,000 384,000
Northrop Grumman Corp. ..................... 800 66,200
Raytheon Co. ............................... 3,300 158,813
United Technologies Corp. .................. 8,900 587,400
----------
2,338,451
----------
Agriculture (0.1%)
Pioneer Hi-Bred International, Inc. ........ 1,500 105,000
----------
Apparel (0.5%)
Alberto-Culver Co. ......................... 500 24,000
Fruit of the Loom, Inc. + .................. 2,300 87,113
Gap, Inc. .................................. 5,900 177,738
Liz Claiborne, Inc. ........................ 1,800 69,525
Nike, Inc. Class B ......................... 10,100 603,475
Reebok International Ltd. .................. 700 29,400
Russell Corp. .............................. 700 20,825
----------
1,012,076
----------
Auto Parts and Accessories (0.2%)
Cooper Tire & Rubber Co. ................... 900 17,775
Dana Corp. ................................. 1,900 61,988
Echlin, Inc. ............................... 600 18,975
Genuine Parts Co. .......................... 2,200 97,900
Pep Boys ................................... 1,200 36,900
The Goodyear Tire & Rubber Co. ............. 2,900 148,988
TRW, Inc. .................................. 2,400 118,800
----------
501,326
----------
Autos and Auto Equipment (1.2%)
Chrysler Corp. ............................. 22,900 755,700
Ford Motor Co. ............................. 24,900 793,688
General Motors Corp. ....................... 15,900 886,425
PACCAR, Inc. ............................... 600 40,800
Snap-On, Inc. .............................. 1,100 39,188
----------
2,515,801
----------
Banks (4.3%)
Banc One Corp. ............................. 9,100 391,300
Bank of Boston Corp. ....................... 3,800 244,150
Bank of New York Co., Inc. ................. 10,800 364,500
BankAmerica Corp. .......................... 12,500 1,246,875
Barnett Banks, Inc. ........................ 6,400 263,200
Boatmen's Bancshares, Inc. ................. 2,900 187,050
CITICORP ................................... 9,900 1,019,700
Comerica, Inc. ............................. 3,800 199,025
Corestates Financial Corp. ................. 4,600 238,625
Fifth Third Bancorp ........................ 3,600 226,125
First Bank System, Inc. .................... 3,800 259,350
First Chicago Corp. ........................ 7,800 419,250
First Union Corp. .......................... 7,600 562,400
Number of Market
Shares Value
---------- ----------
Banks (continued)
Fleet Financial Group, Inc. ................ 5,000 $ 249,375
Golden West Financial Corp. ................ 1,100 69,438
Great Western Financial Corp. .............. 3,300 95,700
H. F. Ahmanson & Co. ....................... 2,600 84,500
KeyCorp .................................... 6,400 323,200
Mellon Bank Corp. .......................... 2,500 177,500
NationsBank Corp. .......................... 8,100 791,775
Norwest Corp. .............................. 12,800 556,800
Republic New York Corp. .................... 1,000 81,625
Suntrust Banks, Inc. ....................... 7,600 374,300
Wachovia Corp. ............................. 3,500 197,750
Wells Fargo & Co. .......................... 1,100 296,725
----------
8,920,238
----------
Building Materials and Construction (0.2%)
Armstrong World Industries, Inc. ........... 800 55,600
Centex Corp. ............................... 500 18,813
Foster Wheeler Corp. ....................... 600 22,275
Masco Corp. ................................ 2,700 97,200
Owens Corning .............................. 900 38,363
Sherwin-Williams Co. ....................... 1,600 89,600
Weyerhaeuser Co. ........................... 1,500 71,063
----------
392,914
----------
Chemicals (1.8%)
Air Products and Chemicals, Inc. ........... 1,900 131,338
Dow Chemical Co. ........................... 4,600 360,525
Du Pont (E.I.) de Nemours .................. 15,600 1,472,250
Eastman Chemical Co. ....................... 600 33,150
Engelhard Corp. ............................ 1,500 28,688
FMC Corp. + ................................ 600 42,075
Goodrich (B.F.) Co. ........................ 1,000 40,500
Great Lakes Chemical Corp. ................. 500 23,375
Hercules, Inc. ............................. 1,100 47,575
Monsanto Co. ............................... 20,400 793,050
Morton International, Inc. ................. 2,700 110,025
Nalco Chemical Co. ......................... 1,100 39,738
PPG Industries, Inc. ....................... 4,000 224,500
Praxair, Inc. .............................. 3,800 175,275
Sigma-Aldrich Corp. ........................ 900 56,194
Union Carbide Corp. ........................ 1,900 77,663
W.R. Grace & Co. ........................... 1,700 87,975
----------
3,743,896
----------
Commercial Services (0.6%)
Automatic Data Processing, Inc. ............ 5,400 231,525
Browning-Ferris Industries, Inc. ........... 1,500 39,375
CUC International, Inc. + .................. 7,700 182,875
Dun & Bradstreet Corp. ..................... 1,700 40,375
Ecolab, Inc. ............................... 1,200 45,150
First Data Corp. ........................... 9,000 328,500
Safety-Kleen Corp. ......................... 1,000 16,375
Service Corp. International ................ 4,400 123,200
WMX Technologies, Inc. ..................... 9,400 306,675
----------
1,314,050
----------
See Notes to Portfolio of Investments. 103
<PAGE>
Aetna GET Fund, Series C
Portfolio of Investments - December 31, 1996 (continued)
================================================================================
Number of Market
Shares Value
---------- ----------
Computer Software (2.7%)
Cisco Systems, Inc. + ...................... 23,300 $1,482,463
Computer Associates International, Inc...... 12,900 641,775
Computer Sciences Corp. + .................. 1,300 106,763
Microsoft Corp. + .......................... 33,200 2,743,150
Novell, Inc. + ............................. 2,600 24,619
Oracle Corp. + ............................. 13,800 576,150
----------
5,574,920
----------
Computers and Office Equipment (2.1%)
3Com Corp. + ............................... 5,100 374,213
Alco Standard Corp. ........................ 1,000 51,625
Cabletron Systems, Inc. + .................. 2,500 83,125
Ceridian Corp. + ........................... 1,300 52,650
Compaq Computer Corp. + .................... 9,500 705,375
Dell Computer Corp. + ...................... 5,700 302,813
Deluxe Corp. ............................... 1,400 45,850
EMC Corp. + ................................ 4,900 162,313
Harris Corp. ............................... 700 48,038
International Business Machines, Inc........ 11,000 1,661,000
Moore Corp. Ltd. ........................... 1,900 38,713
Pitney Bowes, Inc. ......................... 3,200 174,400
Sun Microsystems, Inc. + ................... 12,400 318,525
Tandem Computers, Inc. + ................... 2,200 30,250
Unisys Corp. + ............................. 2,400 16,200
Xerox Corp. ................................ 5,300 278,913
----------
4,344,003
----------
Consumer Products (1.8%)
American Greetings Corp. Class A ........... 1,200 34,050
Avon Products, Inc. ........................ 2,500 142,813
Clorox Co. ................................. 1,300 130,488
Colgate-Palmolive Co. ...................... 2,800 258,300
Eastman Kodak Co. .......................... 7,100 569,775
Gillette Co. ............................... 11,400 886,350
International Flavors & Fragrances, Inc..... 800 36,000
Mattel, Inc. ............................... 5,800 160,950
Newell Co. ................................. 2,200 69,300
Polaroid Corp. ............................. 500 21,750
Procter & Gamble Co. (The) ................. 12,700 1,365,250
Tupperware Corp. ........................... 1,100 58,988
----------
3,734,014
----------
Diversified (4.1%)
Allied Signal, Inc. ........................ 6,900 462,300
American Brands, Inc. ...................... 2,400 119,100
Cognizant Corp. ............................ 3,200 105,600
Cooper Industries, Inc. .................... 2,000 84,250
Corning, Inc. .............................. 1,700 78,625
Crane Co. .................................. 800 23,200
Deere & Co. ................................ 5,500 223,438
Dover Corp. ................................ 2,100 105,525
Eaton Corp. ................................ 1,100 76,725
General Electric Co. ....................... 56,300 5,566,616
ITT Industries, Inc. ....................... 2,200 53,900
Number of Market
Shares Value
---------- ----------
Diversified (continued)
Johnson Controls, Inc. ..................... 800 $ 66,300
Minnesota Mining and Manufacturing Co....... 7,900 654,713
Raychem Corp. .............................. 1,400 112,175
Rohm & Haas Co. ............................ 2,200 179,575
Tenneco, Inc. .............................. 1,300 58,663
Textron, Inc. .............................. 1,600 150,800
TRINOVA Corp. .............................. 500 18,188
Tyco International Ltd. .................... 5,300 280,238
VF Corp. ................................... 1,200 81,000
Westinghouse Electric Corp. ................ 3,300 65,588
Whitman Corp. .............................. 2,000 45,750
----------
8,612,269
----------
Electrical and Electronics (2.4%)
General Signal Corp. ....................... 900 38,475
Hewlett Packard Co. ........................ 16,500 829,125
Intel Corp. ................................ 28,000 3,666,250
National Service Industries, Inc. .......... 800 29,900
Perkin-Elmer Corp. ......................... 800 47,100
Rockwell International Corp. ............... 3,400 206,975
Seagate Technology, Inc. + ................. 4,100 161,950
----------
4,979,775
----------
Electrical Equipment (0.5%)
AMP, Inc. .................................. 1,600 61,400
Emerson Electric Co. ....................... 6,200 599,850
Grainger (W. W.), Inc. ..................... 900 72,225
Honeywell, Inc. ............................ 3,500 230,125
Tektronix, Inc. ............................ 300 15,375
Thomas & Betts Corp. ....................... 700 31,063
----------
1,010,038
----------
Financial Services (3.5%)
American Express Co. ....................... 11,800 666,700
Bankers Trust New York Corp. ............... 1,500 129,375
Beneficial Corp. ........................... 1,000 63,375
Chase Manhattan Corp. ...................... 12,100 1,079,925
Dean Witter, Discover & Co. ................ 3,600 238,500
Federal Home Loan Mortgage Corp. ........... 2,500 275,313
Federal National Mortgage Association....... 29,900 1,113,775
Green Tree Financial Corp. ................. 4,800 185,400
Household International, Inc. .............. 2,700 249,075
J.P. Morgan & Co. .......................... 3,200 312,400
MBNA Corp. ................................. 6,700 278,050
Merrill Lynch & Co., Inc. .................. 3,500 285,250
Morgan Stanley Group, Inc. ................. 2,900 165,663
National City Corp. ........................ 6,100 273,738
PNC Bank Corp. ............................. 7,200 270,900
Providian Corp. ............................ 1,700 87,338
Salomon, Inc. .............................. 2,000 94,250
St. Paul Cos., Inc. ........................ 1,200 70,350
Transamerica Corp. ......................... 1,200 94,800
Travelers Group, Inc. ...................... 25,500 1,157,063
US Bancorp ................................. 2,900 130,319
----------
7,221,559
----------
104 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number of Market
Shares Value
---------- ----------
Foods and Beverages (3.1%)
Anheuser-Busch Co., Inc. ................... 9,500 $ 380,000
Archer-Daniels-Midland Co. ................. 9,100 200,200
Brown-Forman Corp. Class B ................. 1,200 54,900
Campbell Soup Co. .......................... 5,200 417,300
Coca-Cola Co. .............................. 46,200 2,431,275
Conagra, Inc. .............................. 6,900 343,275
CPC International, Inc. .................... 2,700 209,250
General Mills, Inc. ........................ 1,600 101,400
Heinz (H.J.) Co. ........................... 6,900 246,675
Hershey Foods Corp. ........................ 4,300 188,125
Kellogg Co. ................................ 1,600 105,000
Kroger Co. (The) + ......................... 2,400 111,600
PepsiCo, Inc. .............................. 13,500 394,875
Quaker Oats Co. ............................ 1,400 53,375
Ralston-Ralston Purina Group ............... 2,000 146,750
Sara Lee Corp. ............................. 13,500 502,875
Supervalu, Inc. ............................ 900 25,538
Sysco Corp. ................................ 3,000 97,875
Unilever N.V ............................... 2,500 438,125
Wrigley (Wm) Jr Co. ........................ 1,600 90,000
----------
6,538,413
----------
Health Services (0.3%)
Columbia/HCA Healthcare Corp. .............. 14,300 582,725
Tenet Healthcare Corp. + ................... 2,800 61,250
----------
643,975
----------
Hotels and Restaurants (0.7%)
HFS, Inc. + ................................ 4,900 292,775
Hilton Hotels Corp. ........................ 6,700 175,038
ITT Corp. + ................................ 1,200 52,050
Marriott International, Inc. ............... 4,200 232,050
McDonald's Corp. ........................... 13,500 610,875
Wendy's International ...................... 1,800 36,900
----------
1,399,688
----------
Household Appliances (0.0%)
Maytag Corp. ............................... 1,700 33,575
Whirlpool Corp. ............................ 600 27,975
----------
61,550
----------
Insurance (2.1%)
Allstate Corp. ............................. 15,200 879,700
American General Corp. ..................... 3,600 147,150
American International Group, Inc. ......... 13,000 1,407,250
Aon Corp. .................................. 1,100 68,338
Chubb Corp. ................................ 3,300 177,375
Cigna Corp. ................................ 1,700 232,263
General Re Corp. ........................... 1,500 236,625
ITT Hartford Group, Inc. ................... 2,500 168,750
Jefferson-Pilot Corp. ...................... 1,300 73,613
Lincoln National Corp. ..................... 1,700 89,250
Loews Corp. ................................ 2,100 197,925
Marsh & McLennan Cos., Inc. ................ 1,500 156,000
MBIA, Inc. ................................. 800 81,000
MGIC Investment Corp. ...................... 1,800 136,800
Number of Market
Shares Value
---------- ----------
Insurance (continued)
Safeco Corp. ............................... 2,300 $ 90,706
Torchmark Corp. ............................ 1,300 65,650
UNUM Corp. ................................. 1,200 86,700
USF&G Corp. ................................ 2,200 45,925
USLIFE Corp. ............................... 600 19,950
----------
4,360,970
----------
Machinery and Equipment (0.7%)
Baker Hughes, Inc. ......................... 4,300 148,350
Black & Decker Corp. ....................... 1,300 39,163
Brunswick Corp. ............................ 1,800 43,200
Case Corp. ................................. 1,400 76,300
Caterpillar, Inc. .......................... 5,800 436,450
Fluor Corp. ................................ 1,600 100,400
Harnischfeger Industries, Inc. ............. 1,400 67,375
Illinois Tool Works, Inc. .................. 2,600 207,675
Ingersoll-Rand Co. ......................... 2,600 115,700
Millipore Corp. ............................ 400 16,550
Pall Corp. ................................. 1,600 40,800
Parker-Hannifin Corp. ...................... 1,000 38,750
Stanley Works .............................. 1,600 43,200
----------
1,373,913
----------
Media and Entertainment (0.3%)
Fleetwood Enterprises, Inc. ................ 700 19,250
Interpublic Group of Cos., Inc. ............ 2,000 95,000
King World Production, Inc. + .............. 600 22,125
Walt Disney Co. (The) ...................... 7,900 550,038
----------
686,413
----------
Medical Supplies (0.4%)
Alza Corp. + ............................... 1,800 46,575
Bard (C.R.), Inc. .......................... 600 16,800
Baxter International, Inc. ................. 2,800 114,800
Biomet, Inc. ............................... 1,900 28,738
Boston Scientific Corp. + .................. 3,400 204,000
Guidant Corp. .............................. 1,400 79,800
Mallinckrodt, Inc. ......................... 1,400 61,775
Medtronic, Inc. ............................ 4,000 272,000
St. Jude Medical, Inc. + ................... 800 34,100
US Surgical Corp. .......................... 1,500 59,063
----------
917,651
----------
Metals and Mining (0.3%)
Alcan Aluminum, Ltd. ....................... 1,700 57,163
Allegheny Teledyne, Inc. ................... 2,400 55,200
Aluminum Co. of America .................... 1,800 114,750
Freeport-McMoRan Copper & Gold, Inc. ....... 2,000 59,750
Inco, Ltd. ................................. 1,000 31,875
Newmont Mining Corp. ....................... 1,700 76,075
Nucor Corp. ................................ 700 35,700
Phelps Dodge Corp. ......................... 500 33,750
Reynolds Metals Co. ........................ 500 28,188
Timken Co. ................................. 800 36,700
USX-US Steel Group, Inc. ................... 900 28,238
----------
557,389
----------
105
<PAGE>
Aetna GET Fund, Series C
Portfolio of Investments - December 31, 1996 (continued)
================================================================================
Number of Market
Shares Value
---------- ----------
Oil and Gas (5.3%)
Amerada Hess Corp. ......................... 1,700 $ 98,388
Amoco Corp. ................................ 6,900 555,450
Ashland, Inc. .............................. 700 30,713
Atlantic Richfield Co. ..................... 4,500 596,250
Burlington Resources, Inc. ................. 4,300 216,613
Chevron Corp. .............................. 13,700 890,500
Columbia Gas System, Inc. .................. 1,000 63,625
Consolidated Natural Gas Co. ............... 1,800 99,450
Dresser Industries, Inc. ................... 3,300 102,300
Enron Corp. ................................ 4,700 202,688
ENSERCH Corp. .............................. 700 16,100
Exxon Corp. ................................ 23,500 2,303,000
Halliburton Co. ............................ 2,100 126,525
Helmerich & Payne, Inc. .................... 700 36,488
Kerr-Mcgee Corp. ........................... 1,200 86,400
Louisiana Land and Exploration Co. ......... 1,000 53,625
Mobil Corp. ................................ 6,200 757,950
NorAm Energy Corp. ......................... 3,400 52,275
Occidental Petroleum Corp. ................. 6,000 140,250
Oryx Energy Co. + .......................... 3,100 76,725
PanEnergy Corp. ............................ 3,700 166,500
Pennzoil Co. ............................... 900 50,850
Phillips Petroleum Co. ..................... 7,300 323,025
Rowan Cos., Inc. + ......................... 2,600 58,825
Royal Dutch Petroleum Co. .................. 9,900 1,690,425
Santa Fe Energy Resources, Inc. + .......... 2,200 30,525
Schlumberger Ltd. .......................... 8,300 828,963
Texaco, Inc. ............................... 6,400 628,000
The Williams Cos., Inc. .................... 2,550 95,625
Union Pacific Resources Group, Inc. ........ 4,600 134,550
Unocal Corp. ............................... 7,500 304,688
USX-Marathon Group ......................... 5,300 126,538
Western Atlas, Inc. + ...................... 1,000 70,875
----------
11,014,704
----------
Paper and Containers (0.5%)
Avery Dennison Corp. ....................... 3,200 113,200
Bemis Co., Inc. ............................ 1,600 59,000
Crown Cork & Seal Co., Inc. ................ 2,400 130,500
Georgia-Pacific Corp. ...................... 700 50,400
International Paper Co. .................... 2,200 88,825
James River Corp. of Virginia .............. 1,400 46,375
Kimberly-Clark Corp. ....................... 5,900 561,975
Mead Corp. ................................. 500 29,063
Temple-Inland, Inc. ........................ 400 21,650
Westvaco Corp. ............................. 1,000 28,750
Willamette Industries, Inc. ................ 400 27,850
----------
1,157,588
----------
Pharmaceuticals (6.0%)
Abbott Laboratories ........................ 21,700 1,101,275
Allergan, Inc. ............................. 900 32,063
American Home Products Corp. ............... 13,400 785,575
Amgen, Inc. + .............................. 9,000 489,375
Becton, Dickinson & Co. .................... 2,400 104,100
Number of Market
Shares Value
---------- ----------
Pharmaceuticals (continued)
Bristol-Myers Squibb Co. ................... 17,100 $1,859,625
Eli Lilly & Co. ............................ 11,600 846,800
Johnson & Johnson .......................... 28,100 1,397,975
Merck & Co., Inc. .......................... 33,800 2,678,650
Pfizer, Inc. ............................... 21,800 1,806,675
Pharmacia & Upjohn, Inc. ................... 5,200 206,050
Schering Plough ............................ 12,600 815,850
Warner Lambert Co. ......................... 5,700 427,500
----------
12,551,513
----------
Printing and Publishing (0.4%)
Dow Jones & Co., Inc. ...................... 700 23,713
Gannett Co., Inc. .......................... 3,000 224,625
John H. Harland Co. ........................ 600 19,800
Knight-Ridder, Inc. ........................ 2,400 91,800
McGraw-Hill Cos., Inc. ..................... 1,700 78,413
Meredith Corp. ............................. 700 36,925
New York Times Co. ......................... 1,800 68,400
RR Donnelley & Sons Co. .................... 1,100 34,513
Times Mirror Co. ........................... 2,600 129,350
Tribune Co. ................................ 1,100 86,763
----------
794,302
----------
Retail (1.9%)
Albertson's, Inc. .......................... 2,600 92,625
American Stores Co. ........................ 3,600 147,150
Circuit City Stores, Inc. .................. 700 21,088
CVS Corp. .................................. 2,000 82,750
Dayton Hudson Corp. ........................ 6,600 259,050
Dillard Department Stores, Inc. ............ 1,600 49,400
Federated Department Stores, Inc. + ........ 3,900 133,088
Giant Food, Inc. ........................... 1,100 37,950
Great Atlantic & Pacific Tea Co., Inc....... 900 28,688
Harcourt General, Inc. ..................... 1,300 59,963
Hasbro, Inc. ............................... 1,600 62,200
Home Depot, Inc. ........................... 10,300 516,288
J.C. Penney Co., Inc. ...................... 3,200 156,000
Kmart Corp. + .............................. 9,100 94,413
Longs Drug Stores, Inc. .................... 400 19,650
Lowe's Companies, Inc. ..................... 4,800 170,400
May Department Stores Co. .................. 2,600 121,550
Mercantile Stores Co., Inc. ................ 500 24,688
Nordstrom, Inc. ............................ 1,100 38,981
Price/Costco, Inc. + ....................... 4,100 103,013
Rite Aid Corp. ............................. 1,600 63,600
Sears, Roebuck & Co. ....................... 9,800 452,025
The Limited, Inc. .......................... 3,800 69,825
TJX Companies, Inc. ........................ 2,700 127,913
Toys "R" Us, Inc. + ........................ 5,200 156,000
Wal-Mart Stores, Inc. ...................... 24,500 560,438
Walgreen Co. ............................... 6,900 276,000
Winn-Dixie Stores, Inc. .................... 2,100 66,413
Woolworth Corp. + .......................... 4,000 87,500
----------
4,078,649
----------
106 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
Number of Market
Shares Value
---------- ----------
Telecommunications (0.9%)
AirTouch Communications, Inc. + ............ 3,700 $ 93,425
Ameritech Corp. ............................ 10,300 624,438
Andrew Corp. + ............................. 1,800 95,513
Lucent Technologies, Inc. .................. 13,400 619,750
Northern Telecom Ltd. ...................... 7,200 445,500
----------
1,878,626
----------
Tobacco (1.2%)
Philip Morris Cos., Inc. ................... 20,900 2,353,863
UST, Inc. .................................. 3,500 113,313
----------
2,467,176
----------
Transportation (0.7%)
AMR Corp. + ................................ 1,700 149,813
Burlington Northern Santa Fe Corp. ......... 2,500 215,938
Conrail, Inc. .............................. 1,700 169,363
CSX Corp. .................................. 4,500 190,125
Delta Air Lines, Inc. ...................... 1,400 99,225
Federal Express Corp. + .................... 1,200 53,400
Laidlaw, Inc. Class B ...................... 5,500 63,250
Norfolk Southern Corp. ..................... 2,700 236,250
Ryder System, Inc. ......................... 1,500 42,188
Southwest Airlines Co. ..................... 1,100 24,338
Union Pacific Corp. ........................ 2,900 174,363
USAir Group, Inc. + ........................ 2,000 46,750
----------
1,465,003
----------
Utilities - Electric (1.2%)
American Electric Power Co. ................ 3,100 127,488
Baltimore Gas & Electric Co. ............... 2,100 56,175
Carolina Power & Light Co. ................. 2,700 98,550
Central & South West Corp. ................. 2,900 74,313
CINergy Corp. .............................. 2,600 86,775
Consolidated Edison Co. of New York, Inc.... 2,400 70,200
Dominion Resources, Inc. ................... 2,500 96,250
DTE Energy Co. ............................. 2,000 64,750
Duke Power Co. ............................. 3,400 157,250
Edison International ....................... 9,200 182,850
Entergy Corp. .............................. 4,200 116,550
FPL Group, Inc. ............................ 3,200 147,200
GPU, Inc. .................................. 2,200 73,975
Houston Industries, Inc. ................... 3,400 76,925
Northern States Power Co. .................. 1,000 45,875
Ohio Edison Co. ............................ 2,700 61,425
Pacific Gas & Electric Co. ................. 4,200 88,200
PacifiCorp ................................. 5,500 112,750
Peco Energy Co. ............................ 3,100 78,275
PP&L Resources, Inc. ....................... 2,200 50,600
Public Service Enterprise Group, Inc........ 3,400 92,650
Southern Co. ............................... 11,300 255,663
Texas Utilities Co. ........................ 4,700 191,525
Unicom Corp. ............................... 2,200 59,675
Union Electric Co. ......................... 1,000 38,500
----------
2,504,389
----------
Number of Market
Shares Value
---------- ----------
Utilities - Oil and Gas (0.2%)
Coastal Corp. (The) ........................ 2,000 $ 97,750
NICOR, Inc. ................................ 900 32,175
Pacific Enterprises ........................ 1,500 45,563
People's Energy Corp. ...................... 600 20,325
Sonat, Inc. ................................ 2,600 133,900
----------
329,713
----------
Utilities - Telephone (2.4%)
Alltel Corp. ............................... 3,500 109,813
AT&T Corp. ................................. 12,000 522,000
Bell Atlantic Corp. ........................ 8,100 524,475
BellSouth Corp. ............................ 19,300 779,238
GTE Corp. .................................. 18,700 850,850
MCI Communications Corp. ................... 7,700 251,694
NYNEX Corp. ................................ 8,100 389,813
Pacific Telesis Group ...................... 4,400 161,700
SBC Communications, Inc. ................... 11,300 584,775
Sprint Corp. ............................... 6,000 239,250
Tellabs, Inc. + ............................ 5,600 210,700
U. S. West Communications Group ............ 6,600 212,850
WorldCom, Inc. + ........................... 9,600 250,200
----------
5,087,358
----------
Total Common Stocks (cost $113,521,577) .... 116,189,313
-----------
Principal Market
Amount Value
-------- -----------
LONG-TERM BONDS AND NOTES (35.9%)
U.S. Government Obligations (35.9%)
U.S. Treasury Strip, 6.20%#, 11/15/01 ..... $ 66,970,000 $ 49,681,376
U.S. Treasury Strip, 6.21%#, 02/15/02 ..... 34,510,000 25,236,207
------------
Total Long-Term Bonds and Notes
(cost $75,017,940) ....................... 74,917,583
------------
SHORT-TERM INVESTMENTS (12.5%)
Bridgestone Firestone Master Trust,
Inc. ++ , Asset-Backed Securities,
6.40%, 01/06/97 .......................... 5,000,000 5,000,000
Circuit City Credit Card ++ , Comm
Paper, 6.20%, 01/07/97 ................... 10,200,000 10,200,000
Dealers Capital Access Trust, Inc.,
Comm. Paper, 7.00%, 01/02/97 ............. 10,161,000 10,161,000
U.S. Treasury Bill +++ , Time
Deposit, 5.115%, 08/21/97 ................ 750,000 725,360
------------
Total Short-Term Investments
(cost $26,086,360) ....................... 26,086,360
------------
TOTAL INVESTMENTS
(cost $214,625,877)(a) ................... 217,193,256
Other assets less liabilities .............. (8,751,524)
-------------
Total Net Assets ........................... $208,441,732
============
107
<PAGE>
Aetna GET Fund, Series C
Portfolio of Investments - December 31, 1996 (continued)
================================================================================
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at December 31, 1996,
are as follows:
Unrealized gains ..................................... $ 3,105,958
Unrealized losses .................................... (538,579)
===========
Net unrealized gain .................................. $ 2,567,379
===========
+ Non-income producing security.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
+++ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1996.
# Effective interest rate.
Category percentages are based on net assets.
Information concerning open future contracts at December 31, 1996 is shown
below:
No. of Initial
Long Notional Expiration Unrealized
Contracts Value Date Gain/(Loss)
--------- ----------- ---------- -----------
S & P 500 Index
Future 30 $10,921,250 March 97 $ 246,250
===========
108 See Notes to Financial Statements.
<PAGE>
Aetna GET Fund
Statement of Assets and Liabilities -- December 31, 1996
================================================================================
Series B Series C
-------- --------
Assets:
Investments, at market value ..................... $84,459,920 $217,193,256
Cash ............................................. 9,056 1,815
Receivable for:
Dividends and interest ......................... 154,334 86,539
Investments sold ............................... 19,013 --
Miscellaneous .................................. 1,161 --
----------- ------------
Total assets ................................. 84,643,484 217,281,610
----------- ------------
Liabilities:
Payable for:
Dividends to shareholders ...................... -- 500
Investments purchased .......................... 1,424,648 8,209,233
Fund shares redeemed ........................... 49,731 317,609
Variation margin ............................... 87,600 219,000
Accrued investment advisory fees ................. 54,282 70,430
Accrued administrative service fees .............. 10,856 23,106
----------- ------------
Total liabilities ............................ 1,627,117 8,839,878
----------- ------------
NET ASSETS ....................................... $83,016,367 $208,441,732
=========== ============
Net assets represented by:
Paid-in capital .................................. $53,161,127 $205,293,548
Net unrealized gain on investments ............... 13,800,171 2,813,629
Undistributed net investment income .............. 315,700 285,668
Accumulated net realized gain on investments ..... 15,739,369 43,887
----------- ------------
NET ASSETS ....................................... $83,016,367 $208,441,732
=========== ============
Shares authorized ................................ Unlimited Unlimited
Par value ........................................ $ 0.001 $ 0.001
Shares outstanding ............................... 5,838,084 20,376,028
Net asset value per share (net assets divided by
shares outstanding) ............................ $ 14.220 $ 10.230
Cost of investments .............................. $70,661,848 $214,625,877
See Notes to Financial Statements.
109
<PAGE>
Aetna GET Fund
Statements of Operations
================================================================================
<TABLE>
<CAPTION>
Series B Series C
------------ ------------
Period from
Year ended September 16,
December 31, 1996 to
1996 December 31, 1996
------------ -----------------
<S> <C> <C>
Investment Income:
Dividends ........................................................................... $ 1,900,100 $ 81,659
Interest ............................................................................ 686,596 1,369,609
------------ ------------
2,586,696 1,451,268
Foreign taxes withheld .............................................................. (15,246) --
------------ ------------
Total investment income .................................................... 2,571,450 1,451,268
------------ ------------
Expenses:
Investment advisory fees ............................................................ 687,514 105,418
Administrative services fees ........................................................ 90,736 44,099
------------ ------------
Total expenses ............................................................. 778,250 149,517
------------ ------------
Net investment income ............................................................... 1,793,200 1,301,751
------------ ------------
Net Realized and Unrealized Gain:
Net realized gain on:
Sale of investments ............................................................... 15,167,755 43,887
Futures ........................................................................... 501,167 --
------------ ------------
Net realized gain on investments ........................................... 15,668,922 43,887
------------ ------------
Net change in unrealized gain or loss on:
Investments ....................................................................... 1,649,453 2,567,379
Futures ........................................................................... 154,146 246,250
------------ ------------
Net change in unrealized gain or loss on investments ....................... 1,803,599 2,813,629
------------ ------------
Net realized and change in unrealized gain .......................................... 17,472,521 2,857,516
------------ ------------
Net increase in net assets resulting from operations ................................ $ 19,265,721 $ 4,159,267
============ ============
</TABLE>
See Notes to Financial Statements.
110
<PAGE>
Aetna GET Fund
Statements of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Series B Series C
--------------------------------------- ---------------------
Period from
Year Ended Year Ended September 16, 1996 to
December 31, 1996 December 31, 1995 December 31, 1996
----------------- ----------------- ---------------------
<S> <C> <C> <C>
Operations:
Net investment income ..................................... $ 1,793,200 $ 2,238,511 $ 1,301,751
Net realized gain ......................................... 15,668,922 5,733,595 43,887
Net change in unrealized gain ............................. 1,803,599 12,335,976 2,813,629
----------- ----------- ------------
Net increase in net assets resulting from operations .... 19,265,721 20,308,082 4,159,267
----------- ----------- ------------
Distributions to Shareholders:
From net investment income ................................ (1,477,500) (2,274,766) (1,016,083)
From net realized gains ................................... (4,993,546) -- --
----------- ----------- ------------
Decrease in net assets from distributions to
shareholders ........................................... (6,471,046) (2,274,766) (1,016,083)
----------- ----------- ------------
Share Transactions:
Proceeds from shares sold ................................. 553,874 503,629 204,744,426
Net asset value of shares issued upon reinvestment of
distributions ........................................... 6,471,046 2,274,766 1,016,083
Payments for shares redeemed .............................. (25,372,861) (6,386,680) (461,961)
----------- ----------- ------------
Net increase (decrease) in net assets from share
transactions ........................................... (18,347,941) (3,608,285) 205,298,548
----------- ----------- ------------
Change in net assets ...................................... (5,553,266) 14,425,031 208,441,732
Net assets:
Beginning of period ....................................... 88,569,633 74,144,602 --
----------- ----------- ------------
End of period ............................................. $83,016,367 $88,569,633 $208,441,732
=========== =========== ============
End of period net assets includes undistributed
(distributions in excess of) net investment income ...... $ 315,700 $ (19,095) $ 285,668
=========== =========== ============
Share Transactions:
Number of shares sold ..................................... 41,466 44,217 20,323,071
Number of shares issued upon reinvestment of distributions 522,466 190,069 97,913
Number of shares redeemed ................................. (1,867,727) (566,518) (44,956)
----------- ----------- ------------
Net increase (decrease) ................................... (1,303,795) (332,232) 20,376,028
=========== =========== ============
</TABLE>
See Notes to Financial Statements.
111
<PAGE>
Aetna GET Fund
Notes to Financial Statements - December 31, 1996
================================================================================
1. Summary of Significant Accounting Policies
Aetna GET Fund (Fund) is registered under the Investment Company Act of 1940 as
an open-end management investment company. It was organized under the laws of
Massachusetts as a business trust on March 9, 1987. The Declaration of Trust
permits the Fund to offer separate series (Series) each of which has its own
investment objective, policies and restrictions.
Currently there are two diversified Series of the Fund, Aetna GET Fund, Series B
(Series B) and Aetna GET Fund, Series C (Series C). Both Series seek to achieve
maximum total return by participating in favorable equity market performance
without compromising a minimum targeted rate of return during a specified five
year period (Guaranteed Period). The minimum targeted return for each Series
during its Guaranteed Period is 2.5% per year before asset based contract
charges and each Series cost of operations.
Series B accumulated deposits from March 15, 1994 to June 30, 1994. The
Guaranteed Period for Series B is from July 1, 1994 to June 30, 1999, its
maturity date.
Series C accumulated deposits from September 16, 1996 to December 16, 1996. The
Guaranteed Period for Series C is from December 17, 1996 to December 16, 2001,
its maturity date.
Shares of each Series are owned by insurance companies as depositors of separate
accounts which are used to fund variable annuity contracts and variable life
insurance policies. Currently, all shares are held by separate accounts of Aetna
Life Insurance and Annuity Company (ALIAC) and its subsidiary, Aetna Insurance
Company of America.
ALIAC serves as the Investment Adviser and principal underwriter to each Series.
It is an indirect wholly-owned subsidiary of Aetna Retirement Services, Inc.
which is in turn a wholly-owned subsidiary of Aetna Inc.
The accompanying financial statements of the Series have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Series.
A. Valuation of Investments
Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter securities,
at the mean of the bid and asked prices. Short-term investments maturing in more
than sixty days for which market quotations are readily available are valued at
current market value. Short-term investments maturing in less than sixty days
are valued at amortized cost which when combined with accrued interest
approximates market. Securities for which market quotations are not considered
to be readily available are valued in good faith using methods approved by the
Board of Trustees.
B. Futures Contracts
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. Each Series uses futures
contracts as a hedge against declines in the value of portfolio securities. Each
Series may enter into futures contracts to manage the risk of changes in
interest rates, equity prices, currency exchange rates or in anticipation of
future purchases and sales of portfolio securities.
Upon entering into a futures contract, a Series is required to deposit with a
broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by a Series equal to the daily fluctuations in the
market value of the contract. These amounts are recorded by a Series as
unrealized gains or losses. When a contract is closed, a Series records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Generally,
futures contracts held by a Series are closed prior to expiration.
112
<PAGE>
================================================================================
1. Summary of Significant Accounting Policies (continued)
The risks associated with futures contracts may arise from an imperfect
correlation between the change in market value of the securities held by the
Fund and the price of futures contracts. The amounts at risk under such futures
contracts may exceed the amounts reflected in the financial statements. The
notional amounts of these contracts are disclosed in the Portfolio of
Investments. Risks may also arise from an illiquid secondary market, or from the
inability of counterparties to meet the terms of the contract. For federal
income tax purposes, any futures contracts which remain open at the end of the
fiscal period are marked-to-market and the resultant net gain or loss is
included in federal taxable income.
C. Illiquid and Restricted Securities
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Portfolios to sell them promptly
at an acceptable price. Restricted securities are subject to legal or
contractual restrictions on resale and may not be publicly sold without
registration under the Securities Act of 1933. Each Portfolio may invest up to
15% of its total assets in illiquid securities. Illiquid and restricted
securities are valued using market quotations when readily available. In the
absence of market quotations, the securities are valued based upon their fair
value determined under procedures approved by the Board of Directors. The
Portfolios will not pay the costs of disposition of restricted securities other
than ordinary brokerage fees, if any.
D. Federal Income Taxes
As a qualified regulated investment company, each Series is relieved of federal
income taxes by distributing its net taxable investment income and capital
gains, if any, in compliance with the applicable provisions of the Internal
Revenue Code.
E. Distributions
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to losses deferred due to wash sales.
F. Other
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are amortized over the life of the respective security using a
yield-to-maturity method. Dividend income and stock splits as well as
distributions to the shareholders are recorded on the ex-dividend date. Realized
gains and losses from investment transactions are determined on an identified
cost basis.
2. Investment Advisory Fee and Other Expenses
Each Series pays ALIAC, its investment adviser, an investment advisory fee
expressed as a percentage of the average daily net assets of each Series.
Investment advisory fees for Series B are at an annual rate of 0.75% of its
average daily net assets. Investment advisory fees for Series C are at an annual
rate of 0.60% of its average daily net assets (0.25% during the accumulation
period, September 16, 1996 to December 16, 1996).
Prior to May 1, 1996, the Fund had entered into an administrative services
agreement (the Agreement) with ALIAC whereby ALIAC was reimbursed for a share of
its overhead related to managing each Series. In addition, ALIAC had been
paying, and each Series had been reimbursing ALIAC for, their ordinary,
recurring expenses such as legal fees, trustees' fees, custodial fees and
insurance premiums. Effective May 1, 1996, the Agreement was modified to enable
each Series to fix the amount of its costs and expenses. Under the terms of the
new Agreement, ALIAC will receive a fixed fee in exchange for providing the
services described above including reimbursement of its overhead related to
managing each Series. The new Agreement provides for ALIAC to receive a fixed
fee at an annual rate of 0.15% of average daily net assets of each Series.
113
<PAGE>
Aetna GET Fund
Notes to Financial Statements - December 31, 1996 (continued)
================================================================================
2. Investment Advisory Fee and Other Expenses (continued)
On July 19, 1996, the shareholders of Series B voted to approve a subadvisory
agreement (the Subadvisory Agreement) among the Fund, ALIAC and ALIAC's
affiliate, Aeltus Investment Management, Inc. (Aeltus), which became effective
August 1, 1996. Aeltus has been the subadviser for Series C since its inception.
Under the terms of the Subadvisory Agreement, Aeltus will supervise the
investment and reinvestment of cash and securities and provide certain related
administrative services to each Series in exchange for a fee (payable by ALIAC)
of up to 0.35% of Series B's and up to 0.375% of Series C's average daily net
assets. For the period ended December 31, 1996, ALIAC paid Aeltus $133,105 and
$74,758 for Series B and Series C, respectively, in accordance with the terms of
the subadvisory agreement.
3. Purchases and Sales of Investment Securities
Purchases and sales of investment securities, excluding short-term investments,
for the year or period ended December 31, 1996 were:
Cost of Purchases Proceeds from Sales
----------------- -------------------
Series B $105,105,336 $123,128,388
Series C 200,357,793 12,002,996
4. Certain Reclassifications
In accordance with Statement of Position 93-2, Series B has reclassified $19,095
from accumulated net realized gain (loss) on investments to accumulated
undistributed net investment income. This reclassification has no impact on the
net asset value of Series B and is designed to present Series B's capital
accounts on a tax basis.
================================================================================
Federal Tax Status of Dividends Declared During the Fiscal Year (Unaudited)
On July 31, 1996, Series B declared long term capital gain dividends of $0.255
per share.
All of the income dividends paid by each Series were ordinary income for federal
income tax purposes. The percentage of income dividends that were qualifying
dividends for the corporate dividends received deduction were:
Series B 34.27%
Series C 5.65%
114
<PAGE>
Aetna GET Fund, Series B
Financial Highlights
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
Six-month
Year Ended Period Ended
December 31, December 31,
1996 1995 + 1994 +
------------ ------------ ------------
<S> <C> <C> <C>
Net asset value per share, beginning of period ..................... $ 12.401 $ 9.920 $ 10.092
------------ ------------ ------------
Income from investment operations:
Net investment income ............................................ 0.283 0.309 0.250
Net realized and unrealized gain ................................. 2.489 2.492 (0.064)
------------ ------------ ------------
Total from investment operations ........................... 2.772 2.801 0.186
------------ ------------ ------------
Less distributions:
From net investment income ....................................... (0.230) (0.320) (0.317)
From net realized gains on investments ........................... (0.723) -- (0.041)
------------ ------------ ------------
Total distributions ........................................ (0.953) (0.320) (0.358)
------------ ------------ ------------
Net asset value per share, end of period ........................... $ 14.220 $ 12.401 $ 9.920
============ ============ ============
Total return* ...................................................... 23.52% 28.38% 1.83%
Net assets, end of period (000's) .................................. $ 83,016 $ 88,570 $ 74,145
Ratio of total expenses to average net assets** .................... 0.85% 1.03% 0.53%
Ratio of net investment income to average net assets** ............. 1.96% 2.74% 4.52%
Portfolio turnover rate ............................................ 122.27% 90.25% 36.12%
Average commission rate paid per share ............................. $ 0.0538 -- --
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
** Annualized for periods of less than one year.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements.
115
<PAGE>
Aetna GET Fund, Series C
Financial Highlights
================================================================================
Selected data for a fund share outstanding throughout the period:
<TABLE>
<CAPTION>
Period from
December 17, 1996
to December 31,
1996
-------------
<S> <C>
Net asset value per share, beginning of period .................................................... $ 10.125
-------------
Income from investment operations:
Net investment income ........................................................................... 0.009
Net realized and unrealized gain ................................................................ 0.146
-------------
Total from investment operations .......................................................... 0.155
-------------
Less distributions:
From net investment income ...................................................................... (0.050)
-------------
Total distributions ....................................................................... (0.050)
-------------
Net asset value per share, end of period .......................................................... $ 10.230
=============
Total return* ..................................................................................... 1.52%
Net assets, end of period (000's) ................................................................. $ 208,442
Ratio of total expenses to average net assets** ................................................... 0.75%
Ratio of net investment income to average net assets** ............................................ 3.04%
Portfolio turnover rate ........................................................................... 6.25%
Average commission rate paid per share ............................................................ $ 0.0342
</TABLE>
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
** Annualized.
See Notes to Financial Statements.
116
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Trustees
Aetna GET Fund:
We have audited the accompanying statements of assets and liabilities of Aetna
GET Fund, Series B and Series C (the Funds), including the portfolios of
investments, as of December 31, 1996, and the related statements of operations
for the year then ended for Series B and the period from September 16, 1996
(commencement of operations) to December 31, 1996 for Series C, statements of
changes in net assets for the two-year period ended December 31, 1996 for Series
B and the period from December 16, 1996 to December 31, 1996 for Series C and
financial highlights for each of the years in the two-year period ended December
31, 1996 and the six month period ended December 31, 1994 for Series B and the
period from December 16, 1996 to December 31, 1996 for Series C. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Aetna
GET Fund, Series B and Series C as of December 31, 1996, the results of their
operations, changes in their net assets and financial highlights for each of the
years or periods specified in the first paragraph above in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 14, 1997
117
<PAGE>
Aetna GET Fund, Series B
Special Meeting of Shareholders (Unaudited)
================================================================================
A Special Shareholder Meeting was held for shareholders of the Fund on July 19,
1996. Shareholders of record on May 31, 1996 were entitled to vote at the
meeting.
The Shareholders of the Fund voted to elect nine Trustees, approve a subadvisory
agreement among the Fund, ALIAC, and Aeltus, and approve a new Investment
Advisory Agreement between the Fund and ALIAC. In addition, shareholders of the
Fund voted to amend the Fund's Declaration of Trust to modify the Fund's
liability and indemnification provisions.
A. Election of Trustees
The following individuals were elected to serve as Trustees of the Fund. Every
individual named served as a Trustee of the Fund prior to this election. There
are no other individuals currently serving as a Trustee of the Fund.
Votes Cast Votes
Trustee For Withheld
-------------------------------------------------------------
Morton Ehrlich 6,753,630 114,235
Maria T. Fighetti 6,753,481 114,384
David L. Grove 6,734,545 133,320
Timothy A. Holt 6,752,298 115,567
Daniel P. Kearney 6,751,897 115,968
Sidney Koch 6,753,630 114,235
Shaun P. Mathews 6,752,298 115,567
Corine T. Norgaard 6,753,630 114,235
Richard G. Scheide 6,753,630 114,235
B. Approval of Subadvisory Agreement
The shareholders of the Fund voted to approve a Subadvisory Agreement with
Aeltus. (See Note 2 of Notes to Financial Statements for a description of the
services provided and the compensation arrangement defined by the terms of the
agreement.)
Results of the vote were:
Votes Cast Votes Cast
For Against Abstentions
--------------------------------------------------------
6,463,900 255,020 148,945
C. Approval of New Investment Advisory Agreement
Shareholders of the Fund voted to approve a new Investment Advisory Agreement
(the "Agreement") between the Fund and ALIAC. The Agreement was updated in the
following respects: the language was simplified where possible; the liability
provisions made it clear that ALIAC is liable to the Fund for ALIAC's
negligence, and it expanded ALIAC's ability to use brokerage commissions to pay
Fund expenses.
Results of the vote were:
Votes Cast Votes Cast
For Against Abstentions
--------------------- ----------------- ----------------
6,346,902 228,526 292,437
118
<PAGE>
================================================================================
D. Amendment to Funds' Declaration of Trust
Shareholders of the Fund voted to delete and restate certain articles in the
Fund's Declaration of Trust related to the liability of Trustees to the Fund and
the indemnification by the Fund of Trustees and officers for liabilities
incurred while acting as Trustees or officers of the Fund. The primary purpose
of the amendment is to allow the Fund to advance costs to a Trustee if that
Trustee is named in an action for which the Fund would ultimately be obligated
to indemnify the Trustee without the Trustee being required to post collateral.
Results of the vote were:
Votes Cast Votes Cast
For Against Abstentions
--------------------- ----------------- ----------------
6,298,152 283,608 286,105
119
