PRESIDENT'S LETTER
Dear Valued Shareholder,
Thank you for investing in the Aetna variable funds. We are pleased to bring you
this annual report on the portfolios you have chosen to help you along the road
to your investment goals.
Let's recap the market during the report period, calendar year 1999. As we
approached the start of 1999, high market volatility in the U.S. plus
significant economic problems outside the U.S. created anxiety in the markets.
However, shortly into the year, fears began to abate and the financial market
environment improved. By mid-year, emerging markets began to rebound. European
performance offered hope for its best potential in a decade. An early-year
economic improvement in Japan had been initially viewed as a short-term
statistical anomaly. However, by summer, improving private-sector demand
suggested that Japan's recovery might last.
On June 30, the Federal Reserve raised short-term interest rates - the first of
three times during the year. This initially led to a sell-off in U.S. bond
markets and a flattening of equity-market returns. In fact, the U.S. market as a
whole produced negative returns for the third calendar quarter. Still, the U.S.
economy continued to show signs of steadiness and vigor.
By the close of the year, the U.S. stock market broke through to new all-time
highs. The Dow Jones Industrial Average, Standard & Poor's 500 Index and Russell
2000 Index were all up more than 20% for 1999. And the technology-laden NASDAQ
Composite soared 85.6% in 1999. Today, leading economic reports indicate that
the U.S. economy is growing robustly - and still without generating an
acceleration in inflation.
At the Aetna Variable Annuity Funds and its advisor, Aeltus Investment
Management, Inc., we strive to continuously improve our products and services.
Here are some highlights of our efforts since we last wrote to you:
o THREE NEW GET FUNDS - SERIES D, E AND G - were successfully launched
in 1999. These innovative total-return funds offer investors
participation in the equity markets while providing the downside
protection of guaranteeing the return of their initial investment.
GET H is open to investment until March 14, 2000.
o OUR Y2K TECHNOLOGY MANAGEMENT EFFORTS WERE HUGELY SUCCESSFUL. Over
New Year's weekend, we conducted a series of quality control checks
on all of our systems, the culmination of a more than two year
comprehensive preventative management project. We are pleased to
tell you that all of our business systems are operating without
incident and on schedule. Your account information is up-to-date and
our customer service and access technology are all functioning
normally.
As we start a new year - and a new millennium - you have our continued
commitment to bringing you our best in products and services. We wish you a
prosperous new year.
Sincerely,
/s/ J. Scott Fox
J. Scott Fox
President
i
<PAGE>
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
President's Letter......................................................i
CAPITAL APPRECIATION PORTFOLIOS:
Investment Review.......................................................1
Portfolios of Investments:
Aetna Growth VP.......................................................14
Aetna International VP................................................16
Aetna Small Company VP................................................19
Aetna Value Opportunity VP............................................21
Statements of Assets and Liabilities...................................22
Statements of Operations...............................................24
Statements of Changes in Net Assets....................................26
Notes to Financial Statements..........................................30
Additional Information.................................................35
Financial Highlights...................................................37
Independent Auditors' Report...........................................41
GROWTH & INCOME PORTFOLIOS:
Investment Review......................................................42
Portfolios of Investments:
Aetna Balanced VP.....................................................52
Aetna Growth and Income VP............................................60
Aetna Real Estate Securities VP.......................................69
Statements of Assets and Liabilities...................................70
Statements of Operations...............................................71
Statements of Changes in Net Assets....................................72
Notes to Financial Statements..........................................75
Additional Information.................................................81
Financial Highlights...................................................82
Independent Auditors' Report...........................................85
INCOME PORTFOLIOS:
Investment Review......................................................86
Portfolios of Investments:
Aetna Bond VP.........................................................94
Aetna High Yield VP...................................................96
Aetna Money Market VP.................................................98
Statements of Assets and Liabilities..................................100
Statements of Operations..............................................101
Statements of Changes in Net Assets...................................102
Notes to Financial Statements.........................................105
Additional Information................................................110
Financial Highlights..................................................111
Independent Auditors' Report..........................................114
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GET FUNDS:
Investment Review.....................................................115
Portfolios of Investments:
Series C.............................................................127
Series D.............................................................133
Series E.............................................................139
Series G.............................................................145
Series H.............................................................151
Statements of Assets and Liabilities..................................152
Statements of Operations..............................................154
Statements of Changes in Net Assets...................................156
Notes to Financial Statements.........................................161
Additional Information................................................165
Financial Highlights..................................................166
Independent Auditors' Report..........................................171
<PAGE>
Aetna Growth VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Growth VP 12/13/96 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Growth VP 10,000 10,146 9,846 11,780 14,139 13,510 15,701 16,607 14,939 18,580
S&P 500 Index 10,000 10,165 10,437 12,259 13,178 13,556 15,447 15,957 14,369 17,430
<CAPTION>
Growth VP 12/31/99
<S> <C> <C> <C> <C>
Aetna Growth VP 19,816 21,130 20,359 25,103
S&P 500 Index 18,298 19,588 18,363 21,096
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
Inception Date 1 Year Inception
------------------------------------------
12/13/96 34.97% 35.20%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA GROWTH VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Growth VP (Growth) generated a total return of 34.97%, net of fund
expenses, for the year ended December 31, 1999. The benchmark, Standard & Poor's
(S&P) 500 Index(a), returned 21.04% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
The equity markets began 1999 focused on the recovery of the Latin American and
Asian economies as well as the strengthening of major global economies. This
positive outlook translated into strong equity market performance, especially
for large-cap growth stocks, which experienced better-than-expected
earnings-per-share growth. (A company's capitalization is determined by
multiplying the number of shares outstanding by the current price per share.)
As we entered the second half of the year, continued domestic and international
economic strength, combined with rising commodity prices, gave rise to fears of
inflationary pressure. In response to those fears, the Federal Reserve Bank
enacted three interest-rate increases, thereby raising short-term interest rates
to 5.50%. The 30-year bond yield rose during the year from 5.09% to 6.48%.
Despite a less-favorable interest-rate environment and concerns about
Y2K-associated earnings disruptions, company earnings reports remained strong
and propelled the equity market to new highs.
See Definition of Terms. 1
<PAGE>
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE IN THE PAST TWELVE
MONTHS?
The Portfolio's investments in the technology sector were the primary driver of
performance during the year, contributing more than half of the excess return
over the benchmark. The Portfolio's holdings in healthcare and commercial
services also contributed to results. Significant contributions to performance
came from internet service provider America Online, as well as from the
telephone equipment manufacturers and data service providers such as Tellabs,
QUALCOMM and Nokia. Robust demand for internet services and wireless and digital
products drove earnings and growth rates higher during the year.
The Portfolio's investments in the biotechnology sector - specifically Amgen,
Biogen and Idec Pharmaceuticals - produced above-market returns as these
companies experienced strong earnings growth and positive product-pipeline news.
Investments in securities such as Young and Rubicam and Omnicom Group in
commercial services drove this sector's outperformance. Both of these
advertising companies benefited from industry consolidation, cost savings, and
increased advertising expenditures. Rising advertisement spending was driven by
an increase in classified advertising due to the tight labor market, the
millennium celebration, and more important, the internet.
WHAT IS YOUR OUTLOOK GOING FORWARD?
As the new millennium dawns, the equity market remains focused on many of the
same issues that plagued the second half of 1999. While the fear of earnings
disappointments from higher interest rates and Y2K disruptions did not
materialize, inflationary pressures do appear to be real. Rising inflation could
lead to a further increase in interest rates. Companies whose earnings are
sensitive to higher interest rates - such as financials, retailers and home
builders - may exhibit weak stock performance over the near term, while stocks
whose earnings are not as exposed to higher rates could continue to outperform.
DOMESTIC EQUITY PORTFOLIO BREAKDOWN:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
SECTOR INVESTMENTS S&P 500 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 2.0% 3.0% (1.0)%
Commercial Services 5.2% 1.2% 4.0%
Consumer Discretionary 12.1% 11.8% 0.3%
Consumer Non-Discretionary 1.8% 6.3% (4.5)%
Energy 4.3% 6.0% (1.7)%
Finance 10.1% 12.6% (2.5)%
Healthcare 10.8% 9.3% 1.5%
Manufacturing 9.9% 9.5% 0.4%
Technology 37.2% 30.8% 6.4%
Utilities 6.6% 9.5% (2.9)%
2 See Definition of Terms.
<PAGE>
- ----------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ----------------------------------------------
Microsoft Corp. 4.4%
General Electric Co. 4.2%
Citigroup, Inc. 4.0%
Young and Rubicam, Inc. 3.5%
Motorola, Inc. 3.1%
CBS Corp. 3.0%
Cisco Systems, Inc. 2.8%
QUALCOMM, Inc. 2.7%
Wal-Mart Stores, Inc. 2.7%
American International Group, Inc. 2.4%
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
See Definition of Terms. 3
<PAGE>
Aetna International VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
International VP 12/22/97 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna International VP 10,000 10,270 12,030 12,521 10,549 12,213 12,686 13,476 14,074 18,479
MSCI EAFE Index 10,000 10,190 11,698 11,830 10,156 12,263 12,442 12,767 13,336 15,610
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
Inception Date 1 Year Inception
------------------------------------------
12/22/97 51.33% 35.44%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA INTERNATIONAL VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna International VP (International) generated a 51.33% total return, net of
fund expenses, for the year ended December 31, 1999. The benchmark, Morgan
Stanley International-Europe, Australia and Far East (MSCI EAFE) Index(b),
returned 27.30% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
Economic factors around the world were strong during the last year. By year-end
1999, many economists were raising economic growth rates world-wide and citing
solid synchronized growth. The International Monetary Fund growth outlook for
2000 is now 3.5%, compared with 2.5% in 1998.
In October 1998, world stock markets began an amazing rebound from a Russian
crisis and the Asian currency crisis. In January 1999, world markets continued
their rebound. In over 100 countries, interest rates were slashed; of which the
resulting excess liquidity helped propel equity markets. Also in January, Brazil
devalued its currency, but investors anticipated the event. At the same time,
much of the excess leverage that existed in the Asian currencies had evaporated.
Asian economies (excluding Japan) experienced a "V" recovery (a rapid increase
following a sharp decline) as Korea led the way with 30% year-over-year
industrial product growth.
4 See Definition of Terms.
<PAGE>
With much fanfare, the European Euro arrived on the scene on January 1, 1999.
The Euro provides more possibilities of long-term benefits in promoting trading
of goods and services. The Euro is a long-term positive for European stocks, and
investors will reward companies that can adapt well to this changing regulatory
environment.
In 1999, investors began to believe the Japanese restructuring story. Japan
avoided a banking collapse, and government fiscal programs placed a floor on its
dwindling economy. Economic predictions for another year of strong negative
economic growth proved incorrect. Foreign investors reacted quickly on the news
of Sony's announced restructuring in March. Thus, Japan was the one of the
best-performing major markets in 1999.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
The Portfolio continued to be invested in growth-oriented names, and these
stocks provided positive performance. Communication stocks such as phone-maker
Nokia in Finland, cellular-operator Vodafone in the United Kingdom and
competitor Mannesman in Germany helped performance. In October, Mannesman
announced a takeover of UK cellular phone operator, Orange, igniting a
fourth-quarter technology rally across the world.
Performance in Japanese technology stocks - such as NTT, Sony and SoftBank -
spurred the Portfolio's performance in Japan. These stocks represent the leaders
of the new Japan, companies that can compete in the global marketplace. Though
the Portfolio's underweight position in Japan hindered investment performance
slightly, strong stock selection overcame it.
WHAT IS YOUR OUTLOOK GOING FORWARD?
The outlook for international investing is much more positive today than in
previous years:
In Japan, the economy has bottomed, taxes have been slashed, new fiscal programs
have permeated the economy, restructuring led by the banking sector is exciting
investors, and the growth in information technology easily exceeds Japan's
overall growth. In the next two years, over $480 billion dollars in government
bonds earning 6% will mature. These investors face investing in 1% government
bonds or investing in a rebounding stock market. In the 1990s, the Japanese bond
market earned returns far greater than its stock market. Do not be surprised if,
in the next decade, these roles are reversed.
In Europe, economic growth and low inflation paint a healthy picture for equity
investing. Mergers and acquisitions continue to increase at a torrid pace.
Europe actually leads the U.S. in certain technology areas, such as mobile
communications. On a price-to-earnings relative basis, Europe actually trades
more modestly than the United States.
The economies in Asia have rebounded tremendously but the continued expansion of
credit growth needs to resume in order to extend market growth. In Latin
America, investors are optimistic that a peaceful, open presidential election
will occur in Mexico. Latin American economies should grow by 4% next year. For
the first time in several years, most foreign stock markets offer encouragement
for investors by having a healthy mix of solid growth, restructuring and low
inflation.
International investments involve risks not present in U.S. securities,
including currency fluctuations, less public information and political and
economic uncertainty.
See Definition of Terms. 5
<PAGE>
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% OF EQUITY % OF OVER/(UNDER)
COUNTRY WEIGHTINGS INVESTMENTS MSCI EAFE WEIGHTING
- --------------------------------------------------------------------------------
Japan 22.6% 27.4% (4.8)%
United Kingdom 13.6% 19.2% (5.6)%
Netherlands 12.2% 5.2% 7.0%
France 8.5% 10.3% (1.8)%
Germany 7.7% 10.5% (2.8)%
Finland 6.2% 3.0% 3.2%
Denmark 3.7% 0.8% 2.9%
Switzerland 3.4% 5.7% (2.3)%
Spain 3.2% 2.7% 0.5 %
Sweden 3.2% 2.7% 0.5 %
Other 15.7% 12.5% 3.2%
- ------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ------------------------------------------
SoftBank Corp. 2.6%
Sony Corp. 2.4%
Telefonica de Espana 2.0%
British Telecom Plc 1.9%
Nokia Corp., ADR 1.8%
Siemens AG 1.8%
Vivendi SA 1.8%
BCE, Inc. 1.7%
Cable & Wireless Plc 1.6%
Mannesmann AG 1.5%
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
6 See Definition of Terms.
<PAGE>
Aetna Small Company VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Small Company VP 12/27/96 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Small Company VP 10,000 10,113 9,968 11,773 13,982 13,614 15,505 14,570 11,746 13,750
Russell 2000 Index 10,000 10,195 9,668 11,235 12,907 12,475 13,728 13,089 10,451 12,156
<CAPTION>
Small Company VP 12/31/99
<S> <C> <C> <C> <C>
Aetna Small Company VP 13,105 15,030 14,458 18,008
Russell 2000 Index 11,497 13,285 12,428 14,720
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
Inception Date 1 Year Inception
------------------------------------------
12/27/96 30.85% 21.56%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA SMALL COMPANY VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Small Company VP (Small Company) generated a 30.85% total return, net of
fund expenses, for the year ended December 31, 1999. The benchmark, Russell 2000
Index(c), returned 21.26% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
The economic or market condition that had the greatest effect on the Portfolio's
performance was the continued investor's preference to pay for leading edge
technology. We saw this in three industries. Most technology stocks,
particularly those related to the internet were strong. In healthcare,
biotechnology was strong, especially in the second half of the year. Investors
showed enthusiasm for these shares, as many biotech companies launched new
products. Finally, shares of telecommunication stocks rose throughout most of
the year, fueled by new technologies in this area.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
For the fourth quarter of 1999, the Portfolio received strong performance from
two areas, technology and healthcare (primarily biotech). Our overweight
positions in these two areas, as well as strong stock selection, greatly
enhanced returns. In the biotech area, four of our holdings (Human Genome
Sciences, Titan Pharmaceuticals, Nanogen and Medarex) advanced more than 100% in
the fourth quarter. On the technology side, three holdings (Cree Research,
Banyan Systems and Optibase LTD) also advanced more than 100% in the quarter. A
fourth holding, Interleaf, was up 98% in the quarter. Investments in the utility
See Definition of Terms. 7
<PAGE>
sector (mostly telecommunications) were also strong. For the most part, our
investments in the consumer discretionary and financial sectors saw
lower-than-market returns.
During the fourth quarter, we moved money into the healthcare and the commercial
services area. We funded these moves by reducing our exposure in the consumer
discretionary and finance sectors. Going forward, we remain overweighted in
healthcare and commercial services. We have underweighted finance, manufacturing
and consumer-discretionary sectors.
While the technology and healthcare sectors carried the Portfolio's performance
in the second half of the year, the Portfolio did receive strong performance
from the other areas particularly in the first half of the year. Our decision to
overweight energy and raw materials contributed to the strong first half
results. In addition, we took an aggressive position in retail stocks since we
felt they represented attractive values.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Looking forward, we are optimistic about investments in the small-cap area. (A
company's capitalization is determined by multiplying the number of shares
outstanding by the current price per share.) This group is finally responding to
the valuation gap versus the larger companies. In 1999, the Russell 2000 Index
outperformed the S&P 500 Index(a) for the first time in five years, topped off
by a very strong fourth quarter. We believe the small-cap arena should continue
to perform well. Investors are beginning to show an appetite for high-tech
industries (both technology and healthcare), and the markets are beginning to
reward "smaller" firms, many of which have a strong technology focus.
We continue to believe that our strategy of focusing on those companies with the
strongest business momentum and those selling at reasonable prices will produce
stronger-than-market returns.
The risks of investing in small company stocks may include low trading volumes,
a greater degree of change in earnings and greater short-term volatility.
DOMESTIC EQUITY PORTFOLIO BREAKDOWN:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
SECTOR INVESTMENTS RUSSELL 2000 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 2.0% 4.3% (2.3)%
Commercial Services 12.1% 8.0% 4.1%
Consumer Discretionary 11.9% 14.1% (2.2)%
Consumer Non-Discretionary 2.7% 2.0% 0.7%
Energy 4.1% 4.0% 0.1%
Finance 6.4% 12.4% (6.0)%
Healthcare 20.1% 9.8% 10.3%
Manufacturing 9.0% 10.1% (1.1)%
Technology 28.7% 30.5% (1.8)%
Utilities 3.0% 4.8% (1.8)%
8 See Definition of Terms.
<PAGE>
- ------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ------------------------------------------
Cree Research, Inc. 2.8%
Orbotech, Ltd 2.1%
Optimal Robotics Corp. 2.0%
Mercury Computer Systems, Inc. 2.0%
i-STAT Corp. 2.0%
Nanogen, Inc. 2.0%
Cell Genesys, Inc. 2.0%
K-Swiss, Inc. 1.9%
Indus International, Inc. 1.8%
Genelabs Technologies, Inc. 1.7%
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
See Definition of Terms. 9
<PAGE>
Aetna Value Opportunity VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Value Opportunity VP 12/13/96 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Value Opportunity VP 10,000 10,215 10,513 12,281 14,314 14,236 15,957 15,984 13,324 17,423
S&P 500 Index 10,000 10,165 10,437 12,259 13,178 13,556 15,447 15,957 14,369 17,430
<CAPTION>
Value Opportunity VP 12/31/99
<S> <C> <C> <C> <C>
Aetna Value Opportunity VP 17,591 19,250 17,993 20,834
S&P 500 Index 18,298 19,588 18,363 21,096
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
Inception Date 1 Year Inception
------------------------------------------
12/13/96 19.58% 27.21%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA VALUE OPPORTUNITY VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Value Opportunity VP (Value Opportunity) generated a 19.58% total return,
net of fund expenses, for the year ended December 31, 1999. The benchmark,
Standard & Poor's (S&P) 500 Index(a), returned 21.04% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
During the initial months of 1999, a strengthening world economy led to a strong
equity performance for large cap growth stocks which continued to report better
than expected earnings growth. In April, large cap value stocks experienced a
month long rally as their lower multiples and better than expected first quarter
earnings growth attracted bargain hunters. For that month, value investors
believed that the enormous valuation gap between value stocks and growth stocks
had started to close.
As we entered the second half of the year, continued domestic and international
economic strength, combined with rising commodity prices, gave rise to fears of
inflationary pressure. In response to those fears, the Federal Reserve Bank
effected three interest rate increases, thereby raising short-term interest
rates to 5.50%. The 30 year bond yields rose during the year from 5.09% to
6.48%. In that less favorable interest rate environment and with concerns about
Y2K associated earnings disruptions, growth stocks were propelled to new highs
as earnings reports remained strong. Value stocks trailed badly. Their perceived
growth was slower and fears arose that higher rates would adversely impact the
finance and interest rate sensitive stocks that compromise much of the value
stock universe.
10 See Definition of Terms.
<PAGE>
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
Key drivers of performance were stock selection in financial services and
manufacturing. A combination of good stock selection and sector-weighting
decisions in utilities and consumer non-discretionary sectors helped
performance. Underweight positions and stock selection in the outperforming
consumer discretionary and technology sectors detracted from results.
Within the finance sector, the decision to underweight bank stocks, which
underperformed the S&P 500 Index, and to overweight investment banking, which
outperformed, was a significant contributor to the quarter's favorable
performance. An excellent investment-banking environment accounted for the
better-than-market performance of Goldman Sachs and Citigroup. Sector results
were also aided by holdings in money manager T. Rowe Price.
The biggest factor in achieving positive results within the manufacturing sector
was the Portfolio's sizeable position and strong performance of Hughes
Electronics. Our holdings in Xerox and McDermott International dampened our
performance in the sector, although we were able to minimize the negative impact
of these disappointments by reacting quickly to weakening fundamentals of both
companies. Current prices of these two stocks are roughly half of the selling
prices realized by the Portfolio.
An underweight position in utilities, particularly relative to the
underperformance of several of the regional Bell operating companies, as well as
electric and gas utilities, added to performance in the quarter. Our holdings in
MCI Worldcom and Century Telephone achieved positive returns in the sector. The
fact that we had no exposure to the underperforming consumer non-discretionary
sector helped quarterly returns.
During the fourth quarter of 1998, the Asian crisis created some unusual
opportunities for us to buy technology stocks at particularly favorable
valuation levels. A year later, in the fourth quarter of 1999, the Portfolio
realized significant profits from our holdings in Sun Microsystems and Oracle.
As a result of these profit-taking activities, technology - the fourth quarter's
strongest-performing sector - was reduced to a less-than-market-weight position
in the Portfolio. The proceeds from sales of these stocks were re-deployed into
more-reasonably valued stocks, such as the drug company Warner Lambert and the
retailer Costco. Finally, a less-than-market exposure to the outperforming
consumer discretionary sector hampered results for the quarter.
WHAT IS YOUR OUTLOOK GOING FORWARD?
As the new millennium begins, the equity market remains focused on many of the
same issues that plagued the second half of 1999. While the fear of earnings
disappointments due to higher interest rates and Y2K disruptions did not
materialize, inflationary pressures could continue to concern the equity markets
in 2000. Rising inflation could lead to a further increase in interest rates.
Stocks such as financials, retailers and home builders - whose earnings are
sensitive to higher interest rates - may exhibit weak stock performance over the
near term. Companies whose earnings are not as vulnerable to increasing rates
could continue to outperform.
See Definition of Terms. 11
<PAGE>
DOMESTIC EQUITY PORTFOLIO BREAKDOWN:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
SECTOR INVESTMENTS S&P 500 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 5.1% 3.0% 2.1%
Commercial Services 2.2% 1.2% 1.0%
Consumer Discretionary 8.2% 11.8% (3.6)%
Consumer Non-Discretionary -- 6.3% (6.3)%
Energy 7.1% 6.0% 1.1%
Finance 22.2% 12.6% 9.6%
Healthcare 14.0% 9.3% 4.7%
Manufacturing 26.1% 9.5% 16.6%
Technology 7.7% 30.8% (23.1)%
Utilities 7.4% 9.5% (2.1)%
- ------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ------------------------------------------------
General Motors Corp. - Class H 4.5%
International Business Machines
Corp. 4.4%
Goldman Sachs Group, Inc. (The) 4.0%
Merck & Co., Inc. 3.9%
Citigroup, Inc. 3.9%
Chevron Corp. 3.8%
Ford Motor Co. 3.8%
CenturyTel, Inc. 3.3%
Freddie Mac Corp. 3.3%
MCI WorldCom, Inc. 3.3%
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
12 See Definition of Terms.
<PAGE>
- --------------------------------------------------------------------------------
DEFINITION OF TERMS
- --------------------------------------------------------------------------------
(a) The S&P 500 is the Standard & Poor's 500 Index. Performance is calculated
on a total return basis and dividends are reinvested, as reported by Frank
Russell Company.
(b) The MSCI EAFE Index (Morgan Stanley Capital International-Europe,
Australia and Far East) is a market value-weighted average of the
performance of more than 900 securities listed on the stock exchanges of
countries in Europe, Australia and the Far East. Performance is calculated
on a total return basis, as reported by Frank Russell Company.
(c) The Russell 2000 Index consists of the smallest 2,000 of the 3,000 largest
companies, based on market capitalization.
The unmanaged indices described above are not available for individual
investment.
13
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
GROWTH
================================================================================
NUMBER OF MARKET
SHARES VALUE
-------------- ---------------
COMMON STOCKS (93.0%)
BIOTECH AND MEDICAL PRODUCTS (5.3%)
Amgen, Inc. + ........................ 136,300 $ 8,186,519
Biogen, Inc. + ....................... 57,500 4,858,750
IDEC Pharmaceuticals Corp. + ......... 66,600 6,543,450
------------
19,588,719
------------
COMMERCIAL SERVICES (4.9%)
Omnicom Group, Inc. .................. 50,700 5,070,000
Young And Rubicam, Inc. + ............ 183,600 12,989,700
------------
18,059,700
------------
COMPUTERS (2.0%)
Apple Computer, Inc. + ............... 39,900 4,102,219
Sun Microsystems, Inc. + ............. 43,200 3,345,300
------------
7,447,519
------------
CONGLOMERATE AND AEROSPACE (5.6%)
General Electric Co. ................. 100,900 15,614,275
United Technologies Corp. ............ 77,600 5,044,000
------------
20,658,275
------------
CONSUMER FINANCE (1.8%)
Capital One Financial Corp. .......... 137,800 6,640,238
------------
CONSUMER SERVICES (1.6%)
Carnival Corp. ....................... 126,900 6,067,406
------------
DATA AND IMAGING SERVICES (13.6%)
America Online, Inc. + ............... 103,000 7,770,063
Cisco Systems, Inc. + ................ 97,700 10,466,112
EMC Corp. + .......................... 80,100 8,750,925
Microsoft Corp. + .................... 139,100 16,239,925
Oracle Corp. + ....................... 61,600 6,903,050
------------
50,130,075
------------
DISCRETIONARY RETAIL (6.6%)
Circuit City Stores, Inc. ............ 135,800 6,119,487
Costco Wholesale Corp. + ............. 18,300 1,669,875
Dayton Hudson Co. .................... 28,900 2,122,344
Home Depot, Inc. ..................... 67,800 4,648,538
Wal-Mart Stores, Inc. ................ 144,000 9,954,000
------------
24,514,244
------------
DIVERSIFIED FINANCIAL SERVICES (4.0%)
Citigroup Inc. ....................... 265,300 14,740,731
------------
DRUGS (4.8%)
Allergan, Inc. ....................... 102,600 5,104,350
Bristol-Myers Squibb Co. ............. 60,700 3,896,181
Johnson & Johnson .................... 34,900 3,250,063
Warner Lambert Co. ................... 66,200 5,424,262
------------
17,674,856
------------
ELECTRICAL MACHINERY AND INSTRUMENTS (1.9%)
JDS Uniphase Corporation + ........... 14,200 2,290,637
Waters Corp. + ....................... 91,000 4,823,000
------------
7,113,637
------------
ELECTRONIC MEDIA (3.0%)
CBS Corp. + .......................... 170,800 10,920,525
------------
FOOD AND BEVERAGE (1.7%)
Anheuser-Busch Co., Inc. ............. 88,400 6,265,350
------------
FOREST PRODUCTS AND BUILDING MATERIALS (1.8%)
Georgia-Pacific Corp. ................ 133,200 6,759,900
------------
GAS UTILITIES (1.7%)
Enron Corp. .......................... 140,700 6,243,563
------------
INSURANCE (2.4%)
American International Group, Inc. ... 83,001 8,974,483
------------
INVESTMENT SERVICES (1.2%)
Morgan Stanley Dean Witter & Co. ..... 30,700 4,382,425
------------
MAJOR TELECOMMUNICATIONS (6.1%)
MCI Worldcom, Inc. + ................. 140,850 7,473,853
Nextel Communications, Inc. + ........ 35,000 3,609,375
SBC Communications, Inc. ............. 146,922 7,162,448
Sprint PCS + ......................... 42,400 4,346,000
------------
22,591,676
------------
OIL (1.4%)
Apache Corp. ......................... 74,000 2,733,375
EOG Resources, Inc. .................. 142,800 2,507,925
------------
5,241,300
------------
OIL SERVICES (0.9%)
Halliburton Co. ...................... 82,500 3,320,625
------------
PRODUCER GOODS (1.7%)
Honeywell International Inc. ......... 109,200 6,299,475
------------
SEMICONDUCTORS AND ELECTRONICS (19.0%)
ADC Telecommunications, Inc. + ....... 107,000 7,764,187
Applied Materials, Inc. + ............ 31,800 4,028,662
Comverse Technology, Inc. + .......... 25,800 3,734,550
General Instrument Corp. + ........... 39,300 3,340,500
Intel Corp. .......................... 92,000 7,572,750
Lucent Technologies, Inc. ............ 62,085 4,644,734
Motorola, Inc. ....................... 78,300 11,529,675
Nokia Corp., ADR ..................... 27,100 5,149,000
Nortel Networks Corp. ................ 52,500 5,302,500
PMC Sierra Inc. + .................... 14,300 2,292,469
QUALCOMM Inc. + ...................... 57,600 10,144,800
Scientific-Atlanta, Inc. ............. 29,000 1,613,125
Texas Instruments, Inc. .............. 34,500 3,342,188
------------
70,459,140
------------
TOTAL COMMON STOCKS (COST $268,103,951) 344,093,862
------------
PRINCIPAL
AMOUNT
-------------
SHORT-TERM INVESTMENTS (7.0%)
Federal Home Loan Bank,1.50%,01/03/00 .. $ 4,834,000 4,834,000
Federal Home Loan Bank,5.20%,01/26/00 .. 20,000,000 19,933,555
U.S. Treasury Bill,4.86%,02/17/00 @ .... 1,100,000 1,093,318
------------
TOTAL SHORT-TERM INVESTMENTS (COST $25,860,873) 25,860,873
------------
TOTAL INVESTMENTS (COST $293,964,824)(A) 369,954,735
OTHER ASSETS LESS LIABILITIES (109,302)
------------
TOTAL NET ASSETS $369,845,433
============
14 See Notes to Portfolio of Investments.
<PAGE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$294,434,926. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains................................ $79,491,446
Unrealized losses............................... (3,971,637)
-----------
Net unrealized gain............................ $75,519,809
===========
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- ---------------------- --------- ------------- ------------ --------------
S&P 500 Index Futures 41 $15,213,050 Mar 00 $ 443,731
============= =============
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
Category percentages are based on net assets.
See Notes to Financial Statements. 15
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
INTERNATIONAL
================================================================================
NUMBER OF MARKET
SHARES VALUE
-------------- --------------
COMMON STOCKS (94.7%)
AUSTRALIA (1.0%)
Foster's Brewing Group Ltd. (Food and
Beverage)................................ 148,900 $ 427,505
-----------
BRAZIL (1.4%)
Telecomunicaciones Brasileiras SA, ADR
(Other Telecommunications) .............. 4,680 601,380
-----------
CANADA (2.4%)
BCE Inc. (Other Telecommunications) ...... 8,200 745,119
Canadian National Railway Co. ADR (Surface
Transport)............................... 7,000 184,187
Canadian National Railway Co. (Surface
Transport)............................... 3,600 95,282
-----------
TOTAL CANADA 1,024,588
-----------
DENMARK (3.5%)
Novo-Nordisk A/S (Drugs) ................. 4,600 609,502
Tele Danmark A/S (Other
Telecommunications)...................... 6,600 489,901
Vestas Wind Systems A/S (Producer Goods) + 2,400 425,083
-----------
TOTAL DENMARK 1,524,486
-----------
FINLAND (5.9%)
Comptel Oyj (Computer Software) + ........ 7,300 513,070
Nokia Corp., ADR (Telecommunications) .... 4,200 798,000
Perlos Oyj (Semiconductors and
Electronics) + .......................... 12,600 443,800
Tietoenator Oyj (Computer Software) ...... 8,500 530,347
UPM-Kymmene Corp. (Forest Products and
Building Materials) ..................... 7,100 285,803
-----------
TOTAL FINLAND 2,571,020
-----------
FRANCE (8.0%)
Altran Technologies SA (Conglomerate and
Aerospace)............................... 800 483,048
Axa (Insurance) .......................... 1,900 264,630
Banque Nationale de Paris (Banks and
Thrifts)................................. 5,200 479,345
France Telecom SA
(Other Telecommunications) .............. 2,600 343,548
Groupe Danone (Food and Beverage) ........ 2,050 482,746
Schneider Electric SA (Electrical
Machinery and Instruments) .............. 5,700 447,136
Total Fina SA (Oil Services) ............. 1,748 233,081
Vivendi (Conglomerate and Aerospace) ..... 8,469 764,067
-----------
TOTAL FRANCE 3,497,601
-----------
GERMANY (7.3%)
Buderus AG (Forest Products and Building
Materials)............................... 25,480 430,782
Deutsche Pfandbrief & Hypothekenbank AG
(Banks and Thrifts) ..................... 3,900 291,218
Fresenius Medical Care AG (Biotech and
Medical Products) ....................... 2,950 252,045
Infonet Services Corporation (Data and
Imaging Services) ....................... 23,800 624,750
Intershop Communications AG (Data and
Imaging Services) + ..................... 600 169,067
Mannesmann AG (Data and Imaging Services) 2,700 650,756
Siemens AG (Electrical Machinery and
Instruments)............................. 6,100 775,322
-----------
TOTAL GERMANY 3,193,940
-----------
HONG KONG (1.8%)
China Telecom Ltd., ADR (Other
Telecommunications) + ................... 2,400 308,550
Hutchison Whampoa Ltd.
(Consumer Services) + ................... 34,000 494,243
-----------
TOTAL HONG KONG 802,793
-----------
IRELAND (1.9%)
Allied Irish Banks (Banks and Thrifts) ... 26,207 298,547
CRH Plc (Forest Products
and Building Materials) ................. 16,531 356,010
Waterford Wedgewood
(Housing and Furnishings) ............... 175,600 178,482
-----------
TOTAL IRELAND 833,039
-----------
ITALY (2.2%)
Arnoldo Mondadori Editor (Print Media) ... 8,400 266,280
Banca Nazionale del Lavoro
(Banks and Thrifts) + ................... 66,300 220,847
Telecom Italia SpA (Other
Telecommunications)...................... 40,700 454,229
-----------
TOTAL ITALY 941,356
-----------
JAPAN (21.5%)
Banyu Pharmaceutical Co., Ltd. (Drugs) ... 20,000 310,298
Canon, Inc. (Semiconductors and
Electronics)............................. 11,000 437,157
East Japan Railway Co. (Surface Transport) 60 323,610
FamilyMart Co., Ltd. (Discretionary
Retail).................................. 7,100 472,592
Fuji Heavy Industries Ltd. (Automotive) .. 49,500 339,174
Fujitsu Limited (Computers) .............. 13,000 592,991
Matsushita Electric Industrial Co., Ltd.
(Electrical Machinery and Instruments) .. 14,000 387,823
Matsushita-Kotobuki Electronics
Industries, Ltd. (Electrical Machinery
and Instruments) ........................ 17,500 352,021
Murata Manufacturing Co., Ltd.
(Semiconductors and Electronics) ........ 2,000 469,851
Nippon Telegraph & Telephone (Major
Telecommunications)...................... 30 513,900
NTT Mobile Communication Network, Inc.
(Other Telecommunications) + ............ 9 346,222
Olympus Optical Co., Ltd. (Electrical
Machinery and Instruments) .............. 15,000 212,167
Promise Co., Ltd. (Consumer Finance) ..... 4,800 244,323
Seino Transportation Co. Ltd. (Surface
Transport)............................... 73,000 387,294
Sekisui Chemical Co., Ltd. (Specialty
Chemicals)............................... 50,000 221,711
Sharp Corp. (Semiconductors and
Electronics)............................. 13,000 332,762
Shin-Etsu Chemical Co., Ltd. (Specialty
Chemicals)............................... 8,000 344,558
SoftBank Corp. (Semiconductors and
Electronics)............................. 1,200 1,148,786
Sony Corp. (Housing and Furnishings) ..... 3,500 1,038,078
Terumo Corp. (Biotech and Medical
Products)................................ 8,600 229,816
16 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
-------------- --------------
JAPAN (CONTINUED)
The Tokio Marine & Fire Insurance Co.,
Ltd. (Insurance) ........................ 28,000 $ 327,526
Tokai Bank Ltd. (Banks and Thrifts) ...... 49,000 308,888
-----------
TOTAL JAPAN 9,341,548
-----------
MEXICO (1.8%)
Grupo Financiero Bancomer, SA de CV
(Investment Services) ................... 898,903 375,705
Telefonos de Mexico SA, ADR (Other
Telecommunications) + ................... 3,800 427,500
-----------
TOTAL MEXICO 803,205
-----------
NETHERLANDS (11.5%)
Akzo Nobel NV (Specialty Chemicals) ...... 6,000 300,697
Draka Holding N.V. (Semiconductors and
Electronics)............................. 4,100 203,413
Getronics NV (Computers) ................. 5,600 446,336
ING Groep NV (Diversified Financial
Services)................................ 9,398 566,893
Kloninklijke KPN NV (Major
Telecommunications)...................... 6,500 633,850
KPNQwest N.V. (Other Telecommunications) + 6,800 452,334
Philips Electronics NV (Electrical
Machinery and Instruments) .............. 4,500 611,358
STMicroelectronics (Semiconductors and
Electronics)............................. 2,100 322,918
United Pan-Europe Communications NV (Other
Telecommunications) + ................... 3,800 485,664
Vendex KBB N.V. (Discretionary Retail) ... 16,091 427,500
VNU-Verenigde Nederlandes
Uitgeversbedrijven Verenigd Bezit (Print
Media)................................... 10,900 572,374
-----------
TOTAL NETHERLANDS 5,023,337
-----------
NORWAY (1.6%)
Ocean Rig ASA (Oil Services) + ........... 34,833 169,652
Petroleum Geo-Services ASA (PGS) (Oil
Services) + ............................. 22,100 394,667
Tomra Systems ASA (Producer Goods) ....... 7,800 132,476
-----------
TOTAL NORWAY 696,795
-----------
SINGAPORE (0.8%)
Singapore Airlines Ltd. (Air Transport) .. 32,200 365,404
-----------
SPAIN (3.0%)
Telefonica Publicidad e Informacion, S.A.
(Consumer Services) + ................... 9,600 466,142
Telefonica de Espana (Major
Telecommunications) + ................... 34,121 851,574
-----------
TOTAL SPAIN 1,317,716
-----------
SWEDEN (3.0%)
Electrolux AB (Housing and Furnishings) .. 12,700 319,628
Ericsson Telephone, ADR
(Telecommunications Equipment) .......... 8,900 584,619
HiQ International AB (Data and Imaging
Services)................................ 4,500 288,428
Icon Medialab International AB (Data and
Imaging Services) + ..................... 3,200 111,396
-----------
TOTAL SWEDEN 1,304,071
-----------
SWITZERLAND (3.2%)
Adecco SA (Surface Transport) ............ 600 467,248
Roche Holdings AG (Drugs) ................ 27 320,480
Swiss Re (Insurance) ..................... 130 267,054
The Swatch Group AG (Consumer Specialties) 300 345,538
-----------
TOTAL SWITZERLAND 1,400,320
-----------
UNITED KINGDOM (12.9%)
Bank of Scotland (Banks and Thrifts) ..... 23,887 277,492
British Telecom Plc (Other
Telecommunications) 33,459 817,923
Cable & Wireless Plc
(Other Telecommunications) + ............ 42,300 716,930
Dixons Group Plc (Discretionary Retail) .. 18,138 436,360
Granada Group Plc (Electronic Media) + ... 30,201 306,193
Kingfisher Plc (Discretionary Retail) .... 39,652 440,132
Prudential Plc (Insurance) ............... 19,200 378,462
Shell Transport & Trading Co. (Oil) ...... 32,700 271,828
SmithKline Beecham Plc (Drugs) ........... 20,085 256,365
Stagecoach Holdings plc (Surface
Transport)............................... 23,700 61,076
United News & Media Plc (Print Media) .... 32,700 416,855
Viatel, Inc. (Other Telecommunications) + 8,800 471,900
Vodafone Group Plc (Other
Telecommunications)...................... 31,615 156,689
WPP Group Plc (Commercial Services) ...... 39,000 618,152
-----------
TOTAL UNITED KINGDOM 5,626,357
-----------
TOTAL COMMON STOCKS (COST $30,886,645) 41,296,461
-----------
PRINCIPAL
AMOUNT
------------
SHORT-TERM INVESTMENTS (3.3%)
Federal Home Loan Bank,Zero
Coupon, 01/03/00......................... $1,350,000 1,350,000
U.S. Treasury Bill,4.86%,02/17/00 @ ...... 100,000 99,376
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,449,393) 1,449,376
-----------
TOTAL INVESTMENTS (COST $32,336,038)(A) 42,745,837
OTHER ASSETS LESS LIABILITIES 802,606
-----------
TOTAL NET ASSETS $43,548,443
===========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$32,479,995. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains................................... $10,737,705
Unrealized losses.................................. (471,863)
-----------
Net unrealized gain............................... $10,265,842
===========
See Notes to Financial Statements. 17
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
INTERNATIONAL (CONTINUED)
================================================================================
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- ------------------ ------------- ----------- -------------- ---------------
Topix Index....... 2 $ 335,161 Mar 00 $ 17,424
=========== ===============
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
++ 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.
Category percentages are based on net assets.
18 See Notes to Financial Statements.
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SMALL COMPANY
================================================================================
NUMBER OF MARKET
SHARES VALUE
-------------- ---------------
COMMON STOCKS (91.6%)
AIR TRANSPORT (1.2%)
America West Holdings Corp. + ........ 31,400 $ 651,550
Circle International Group, Inc. ..... 52,300 1,163,675
------------
1,815,225
------------
AUTOMOTIVE (0.8%)
Brilliance China Automotive Holdings
Limited.............................. 390,400 1,244,400
------------
BANKS AND THRIFTS (2.5%)
Astoria Financial Corp. .............. 34,800 1,059,225
Capital Crossing Bank + .............. 51,800 647,500
Citizens Banking Corp. ............... 52,500 1,174,688
East West Bancorp, Inc. .............. 77,300 884,119
------------
3,765,532
------------
BIOTECH AND MEDICAL PRODUCTS (13.8%)
BioSource International, Inc. + ...... 149,300 1,185,069
Cell Genesys, Inc. + ................. 227,900 2,919,969
COR Therapeutics, Inc. + ............. 16,300 438,062
Cubist Pharmaceuticals, Inc. + ....... 60,300 1,160,775
Datascope Corp. + .................... 35,600 1,424,000
Genelabs Technologies, Inc. + ........ 468,500 2,576,750
Human Genome Sciences, Inc. + ........ 12,700 1,938,337
i-STAT Corp. + ....................... 207,000 3,001,500
Medarex, Inc. + ...................... 38,100 1,419,225
Nanogen, Inc. + ...................... 136,000 2,975,000
Titan Pharmaceuticals, Inc. + ........ 80,000 1,520,000
------------
20,558,687
------------
COMMERCIAL SERVICES (6.2%)
HA-LO Industries, Inc. + ............. 82,900 621,750
Labor Ready, Inc. + .................. 182,900 2,217,662
Marketing Services Group, Inc. + ..... 115,000 1,926,250
Navigant International, Inc. + ....... 163,900 1,915,581
NOVA Corp. + ......................... 45,400 1,432,938
Webhire, Inc. + ...................... 67,100 1,132,313
------------
9,246,494
------------
COMPUTERS (4.2%)
Corsair Communications, Inc. + ....... 221,200 1,797,250
Orbotech Ltd. + ...................... 40,350 3,127,125
Splash Technology Holdings, Inc. + ... 155,800 1,372,987
------------
6,297,362
------------
CONGLOMERATE AND AEROSPACE (1.6%)
Applied Signal Technology, Inc. ...... 90,900 1,278,281
SBS Technologies Corp. + ............. 29,800 1,087,700
------------
2,365,981
------------
CONSUMER FINANCE (2.4%)
American Capital Strategies, Ltd. .... 74,700 1,699,425
First Sierra Financial, Inc. + ....... 65,200 1,116,550
Medallion Financial Corp. ............ 42,500 762,344
------------
3,578,319
------------
CONSUMER SERVICES (2.7%)
Bid.Com International Inc. ........... 349,300 1,462,694
Rainforest Cafe, Inc. + .............. 240,600 954,881
Veterinary Centers of America, Inc. + 126,300 1,626,112
------------
4,043,687
------------
CONSUMER SPECIALTIES (1.5%)
Coachmen Industries, Inc. ............ 58,200 880,275
Grand Toys International, Inc. + ..... 133,700 869,050
Toymax International, Inc. + ......... 98,900 463,594
------------
2,212,919
------------
DATA AND IMAGING SERVICES (11.9%)
Banyan Systems, Inc. + ............... 123,700 2,474,000
Brooktrout Technology, Inc. + ........ 82,400 1,529,550
Datalink Corporation + ............... 45,100 868,175
Datatec Systems, Inc. + .............. 175,800 988,875
FOCUS Enhancements, Inc. + ........... 156,600 1,291,950
Indus International, Inc. + .......... 220,400 2,686,125
Interleaf, Inc. + .................... 53,900 1,812,387
Mercury Computer Systems, Inc. + ..... 86,500 3,027,500
Optimal Robotics Corp. + ............. 81,700 3,043,325
------------
17,721,887
------------
DRUGS (0.4%)
Alliance Pharmaceutical Corp. + ...... 90,700 668,913
------------
ELECTRICAL MACHINERY AND INSTRUMENTS (1.1%)
Optibase Ltd. + ...................... 46,600 1,642,650
------------
ELECTRONIC MEDIA (1.8%)
Granite Broadcasting Corp. + ......... 107,000 1,083,375
Paxson Communications Corp. + ........ 128,700 1,536,356
------------
2,619,731
------------
FOOD AND BEVERAGE (2.4%)
Suiza Foods Corp. + .................. 46,300 1,834,637
Suprema Specialties, Inc. + .......... 81,600 642,600
Zapata Corp. + ....................... 254,900 1,178,913
------------
3,656,150
------------
FOOD AND DRUG RETAIL (0.4%)
Casey's General Stores, Inc. ......... 61,700 643,994
------------
FOREST PRODUCTS AND BUILDING MATERIALS (1.2%)
Potlatch Corp. ....................... 39,500 1,762,687
------------
HEALTH SERVICES (4.1%)
Apria Healthcare Group, Inc. + ....... 96,600 1,732,762
Covance, Inc. + ...................... 115,600 1,249,925
PAREXEL International Corp. + ........ 139,100 1,643,119
Sierra Health Services, Inc. + ....... 226,200 1,512,713
------------
6,138,519
------------
HOUSING AND FURNISHINGS (0.9%)
Webb (Del E) Corp. + ................. 54,100 1,349,119
------------
INDUSTRIAL SERVICES (4.0%)
DualStar Technologies Corporation + .. 181,500 1,383,937
Insituform Technologies, Inc. + ...... 19,500 550,875
Newpark Resources, Inc. + ............ 159,500 976,938
Spectrasite Holdings, Inc. + ......... 167,300 1,819,387
York Research Corp. + ................ 328,900 1,233,375
------------
5,964,512
------------
See Notes to Portfolio of Investments. 19
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SMALL COMPANY (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
INSURANCE (0.9%)
Horace Mann Educators Corp. .......... 71,500 $ 1,403,188
------------
OIL (2.0%)
Union Pacific Resources Group Inc. ... 94,500 1,204,875
Valero Energy Corp. .................. 58,300 1,158,713
Vintage Petroleum, Inc. + ............ 56,100 676,706
------------
3,040,294
------------
OIL SERVICES (3.0%)
Marine Drilling Companies, Inc. + .... 114,300 2,564,606
McDermott International, Inc., ADR ... 217,900 1,974,719
------------
4,539,325
------------
OTHER TELECOMMUNICATIONS (2.1%)
Arch Communications Group, Inc. + .... 301,100 1,985,378
Gilat Communications Ltd. + .......... 44,800 1,078,000
------------
3,063,378
------------
PRINT MEDIA (1.0%)
Reader's Digest Association, Inc.
(The)................................ 50,700 1,482,975
------------
PRODUCER GOODS (3.4%)
Actrade International, Ltd. + ........ 56,200 839,488
AVTEAM, Inc. + ....................... 136,300 732,613
Kafus Environmental Industries Ltd. + 216,200 1,932,287
Shaw Group, Inc. + ................... 61,700 1,561,781
------------
5,066,169
------------
REAL ESTATE INVESTMENT TRUSTS (0.6%)
Impac Mortgage Holdings, Inc. ........ 229,100 945,038
------------
SEMICONDUCTORS AND ELECTRONICS (9.8%)
8x8, Inc. + .......................... 246,900 1,265,362
Cree Research, Inc. + ................ 49,800 4,251,675
Dallas Semiconductor Corp. ........... 28,100 1,810,694
Dense-Pac Microsystems, Inc. + ....... 162,100 1,301,866
ECtel Ltd. + ......................... 54,500 994,625
ESS Technology, Inc. + ............... 63,000 1,397,812
MRV Communications, Inc. + ........... 32,400 2,037,150
SpectraLink Corp. + .................. 219,200 1,589,200
------------
14,648,384
------------
SPECIALTY CHEMICALS (0.6%)
Alcide Corp. + ....................... 75,100 957,525
------------
SURFACE TRANSPORT (0.6%)
Roadway Express, Inc. ................ 38,300 828,238
------------
TEXTILES AND APPAREL (2.5%)
K-Swiss Inc. ......................... 156,100 2,900,045
Vans, Inc. + ......................... 63,100 772,975
------------
3,673,020
------------
TOTAL COMMON STOCKS (COST $118,956,590) 136,944,302
------------
PRINCIPAL
AMOUNT
------------
SHORT-TERM INVESTMENTS (12.1%)
Federal Home Loan Bank,1.50%,01/03/00 $17,354,000 17,354,000
------------ ------------
PRINCIPAL MARKET
AMOUNT VALUE
------------ ------------
SHORT-TERM INVESTMENTS (CONTINUED)
U.S. Treasury Bill,4.86%,02/17/00 @ .. 700,000 695,748
------------
TOTAL SHORT-TERM INVESTMENTS (COST $18,049,748) 18,049,748
------------
TOTAL INVESTMENTS (COST $137,006,338)(A) 154,994,050
OTHER ASSETS LESS LIABILITIES (5,577,740)
------------
TOTAL NET ASSETS $149,416,310
============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$137,278,694. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains........................................... $27,559,121
Unrealized losses.......................................... (9,843,765)
-----------
Net unrealized gain....................................... $17,715,356
===========
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- --------------------- ----------- ------------- ------------ ---------------
Russell 2000 Index 44 $ 11,218,900 Mar 00 $ 835,368
Futures............. ============= ==============
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
Category percentages are based on net assets.
20 See Notes to Financial Statements.
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
VALUE OPPORTUNITY
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
COMMON STOCKS (89.3%)
AIR TRANSPORT (1.9%)
FDX Corp. + ........................... 40,000 $ 1,637,500
-----------
AUTOMOTIVE (5.5%)
Dana Corp. ............................ 50,000 1,496,875
Ford Motor Co. ........................ 60,000 3,206,250
-----------
4,703,125
-----------
BANKS AND THRIFTS (3.0%)
J.P. Morgan & Co. ..................... 20,000 2,532,500
-----------
CHEMICALS (2.1%)
Monsanto Co. .......................... 50,000 1,781,250
-----------
COMPUTERS (4.5%)
International Business Machines Corp. . 35,000 3,780,000
-----------
CONGLOMERATE AND AEROSPACE (12.2%)
Boeing Co. ............................ 50,000 2,078,125
General Dynamics Corp. ................ 35,000 1,846,250
General Motors Corp. - Class H + ...... 40,000 3,840,000
United Technologies Corp. ............. 40,000 2,600,000
-----------
10,364,375
-----------
CONSUMER FINANCE (3.3%)
Freddie Mac Corp....................... 60,000 2,823,750
-----------
DISCRETIONARY RETAIL (2.7%)
Costco Wholesale Corp. + .............. 25,000 2,281,250
-----------
DIVERSIFIED FINANCIAL SERVICES (3.9%)
Citigroup Inc. ........................ 60,000 3,333,750
-----------
DRUGS (12.5%)
Abbott Laboratories ................... 70,000 2,541,875
Merck & Co., Inc. ..................... 50,000 3,353,125
Pharmacia & Upjohn, Inc. .............. 50,000 2,250,000
Warner Lambert Co. .................... 30,000 2,458,125
-----------
10,603,125
-----------
ELECTRONIC MEDIA (2.4%)
Walt Disney Co. (The) + ............... 70,000 2,047,500
-----------
FOREST PRODUCTS AND BUILDING MATERIALS (2.4%)
Sealed Air Corp. + .................... 40,000 2,072,500
-----------
HOUSING AND FURNISHINGS (2.3%)
Centex Corp. .......................... 80,000 1,975,000
-----------
INSURANCE (2.8%)
AFLAC, Inc. ........................... 50,000 2,359,375
-----------
INVESTMENT SERVICES (6.8%)
Goldman Sachs Group, Inc. (The) ....... 36,000 3,390,750
T. Rowe Price & Associates ............ 65,000 2,400,937
-----------
5,791,687
-----------
MAJOR TELECOMMUNICATIONS (6.6%)
CenturyTel, Inc. ...................... 60,050 2,844,869
MCI Worldcom, Inc. + .................. 52,500 2,785,781
-----------
5,630,650
-----------
OIL (6.4%)
Chevron Corp. ......................... 37,500 3,248,437
Texaco, Inc. .......................... 40,000 2,172,500
-----------
5,420,937
-----------
PRODUCER GOODS (5.6%)
Ingersoll-Rand Co. .................... 50,000 2,753,125
Minnesota Mining and Manufacturing Co. 20,000 1,957,500
-----------
4,710,625
-----------
SEMICONDUCTORS AND ELECTRONICS (2.4%)
Intel Corp. ........................... 25,000 2,057,813
-----------
TOTAL COMMON STOCKS (COST $70,274,066) 75,906,712
-----------
PRINCIPAL
AMOUNT
------------
SHORT-TERM INVESTMENTS (7.8%)
Federal Home Loan Bank,1.50%,01/03/00 . $6,328,000 6,328,000
U.S. Treasury Bill,4.86%,02/17/00 @ ... 300,000 298,178
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $6,626,178) 6,626,178
-----------
TOTAL INVESTMENTS (COST $76,900,244)(A) 82,532,890
OTHER ASSETS LESS LIABILITIES 2,496,899
-----------
TOTAL NET ASSETS $85,029,789
===========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses at December 31, 1999, are as follows:
Unrealized gains......................................... $ 8,790,459
Unrealized losses........................................ (3,157,813)
-----------
Net unrealized gain..................................... $ 5,632,646
===========
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- ---------------------- ---------- ------------ ------------ ---------------
S&P 500 Index Futures 4 $ 1,484,200 Mar 00 $ 50,364
============ ===============
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
Category percentages are based on net assets.
See Notes to Financial Statements. 21
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
================================================================================
ASSETS:
Investments, at market value ..........................................
Cash ..................................................................
Foreign currency ......................................................
Receivable for:
Dividends and interest ...............................................
Investments sold .....................................................
Fund shares sold .....................................................
Variation margin .....................................................
Recoverable foreign taxes ............................................
Reimbursement from Investment Adviser ................................
Prepaid expenses ......................................................
Gross unrealized gain on forward foreign currency exchange contracts ..
Total assets .....................................................
LIABILITIES:
Payable for:
Investments purchased ................................................
Fund shares redeemed .................................................
Accrued investment advisory fees ......................................
Accrued administrative service fees ...................................
Accrued custody fees ..................................................
Other liabilities .....................................................
Gross unrealized loss on forward foreign currency exchange contracts ..
Total liabilities ................................................
NET ASSETS ......................................................
NET ASSETS REPRESENTED BY:
Paid-in capital .......................................................
Net unrealized gain on investments, open futures contracts and foreign
currency related transactions ........................................
Undistributed net investment income ...................................
Accumulated net realized gain on investments ..........................
NET ASSETS ......................................................
Cost of investments ...................................................
Cost of foreign currency ..............................................
CAPITAL SHARES:
Authorized ............................................................
Par Value .............................................................
Outstanding ...........................................................
Net asset value, offering and redemption price per share (net assets
divided by shares outstanding) .......................................
22 See Notes to Financial Statements.
<PAGE>
================================================================================
GROWTH INTERNATIONAL SMALL COMPANY VALUE OPPORTUNITY
------------ ------------- ------------- -----------------
$369,954,735 $ 42,745,837 $154,994,050 $ 82,532,890
71 507 30,570 9,729
-- 1,000,093 -- --
79,962 11,585 57,326 44,552
-- 1,859,481 68,198 5,130,199
78,799 4,841 -- --
34,850 33 211,200 3,400
-- 18,286 -- --
-- 8,573 -- --
2,348 253 1,125 772
-- 4,841 -- --
------------ ------------ ------------ ------------
370,150,765 45,654,330 155,362,469 87,721,542
------------ ------------ ------------ ------------
-- 1,820,715 4,414,362 2,612,338
52,742 158,330 1,404,566 17,172
183,820 30,818 94,670 46,290
22,977 2,719 9,467 5,786
19,160 48,182 15,335 6,368
26,633 4,884 7,759 3,799
-- 40,239 -- --
------------ ------------ ------------ ------------
305,332 2,105,887 5,946,159 2,691,753
------------ ------------ ------------ ------------
$369,845,433 $ 43,548,443 $149,416,310 $ 85,029,789
============ ============ ============ ============
$286,783,469 $ 31,365,532 $117,575,863 $ 65,686,143
76,433,642 10,397,643 18,823,080 5,683,010
143,385 34,998 210,247 133,832
6,484,937 1,750,270 12,807,120 13,526,804
------------ ------------ ------------ ------------
$369,845,433 $ 43,548,443 $149,416,310 $ 85,029,789
============ ============ ============ ============
$293,964,824 $ 32,336,038 $137,006,338 $ 76,900,244
$ -- $ 997,250 $ -- $ --
Two Billion Two Billion Two Billion Two Billion
$ 0.001 $ 0.001 $ 0.001 $ 0.001
21,354,411 2,735,133 9,047,224 5,177,737
$ 17.32 $ 15.92 $ 16.52 $ 16.42
See Notes to Financial Statements. 23
<PAGE>
CAPITAL APPRECTIATION PORTFOLIOS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
================================================================================
INVESTMENT INCOME:
Dividends .............................................................
Interest ..............................................................
Foreign taxes withheld on dividends ...................................
Total investment income ..........................................
INVESTMENT EXPENSES:
Investment advisory fees ..............................................
Administrative services fees ..........................................
Printing and postage fees .............................................
Custody fees ..........................................................
Transfer agent fees ...................................................
Audit fees ............................................................
Directors' fees .......................................................
Registration fees .....................................................
Miscellaneous expenses ................................................
Expenses before reimbursement and waiver from Investment Adviser ......
Expense reimbursement and waiver from Investment Adviser ..............
Net expenses .....................................................
Net investment income .................................................
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ..........................................................
Futures and forward foreign currency exchange contracts ..............
Foreign currency related transactions ................................
Net realized gain on investments .................................
Net change in unrealized gain or loss on:
Investments ..........................................................
Futures and forward foreign currency exchange contracts ..............
Foreign currency related transactions ................................
Net change in unrealized gain or loss on investments .............
Net realized and change in unrealized gain or loss on investments .....
Net increase in net assets resulting from operations ..................
24 See Notes to Financial Statements.
<PAGE>
================================================================================
GROWTH INTERNATIONAL SMALL COMPANY VALUE OPPORTUNITY
----------- ------------- ------------- -----------------
$ 1,115,608 $ 300,851 $ 638,310 $ 820,705
1,127,588 54,223 1,053,359 286,492
----------- ----------- ----------- -----------
2,243,196 355,074 1,691,669 1,107,197
(1,893) (26,623) -- (6,537)
----------- ----------- ----------- -----------
2,241,303 328,451 1,691,669 1,100,660
----------- ----------- ----------- -----------
1,477,828 216,793 834,103 465,367
184,729 19,129 83,410 58,171
9,139 3,015 4,967 6,928
23,837 144,945 19,882 8,407
2,578 2,382 2,578 2,578
20,420 24,493 20,262 20,197
6,102 641 3,044 2,224
29,622 2,675 7,432 3,427
5,829 543 3,211 1,946
----------- ----------- ----------- -----------
1,760,084 414,616 978,889 569,245
-- (120,367) -- --
----------- ----------- ----------- -----------
1,760,084 294,249 978,889 569,245
----------- ----------- ----------- -----------
481,219 34,202 712,780 531,415
----------- ----------- ----------- -----------
26,596,312 4,900,436 19,241,278 19,153,073
1,446,396 25,883 1,634,590 462,263
-- (63,700) -- --
----------- ----------- ----------- -----------
28,042,708 4,862,619 20,875,868 19,615,336
----------- ----------- ----------- -----------
54,032,461 8,283,497 12,166,478 (5,869,299)
45,708 41,875 183,092 (148,647)
-- 2,994 -- --
----------- ----------- ----------- -----------
54,078,169 8,328,366 12,349,570 (6,017,946)
----------- ----------- ----------- -----------
82,120,877 13,190,985 33,225,438 13,597,390
----------- ----------- ----------- -----------
$82,602,096 $13,225,187 $33,938,218 $14,128,805
=========== =========== =========== ===========
See Notes to Financial Statements. 25
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
GROWTH
-------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income ................. $ 481,219 $ 223,542
Net realized gain (loss) on investments 28,042,708 (6,218,742)
Net change in unrealized gain or loss
on investments........................ 54,078,169 22,073,422
------------ ------------
Net increase in net assets resulting
from operations....................... 82,602,096 16,078,222
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (337,834) (233,463)
From net realized gains on investments. (15,204,353) --
------------ ------------
Decrease in net assets from
distributions to shareholders......... (15,542,187) (233,463)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............. 212,364,548 133,494,697
Net asset value of shares issued upon
reinvestment of distributions........ 15,542,187 233,463
Payments for shares redeemed........... (67,484,450) (13,173,524)
------------ ------------
Net increase in net assets from fund
share transactions.................... 160,422,285 120,554,636
------------ ------------
Net change in net assets............. 227,482,194 136,399,395
NET ASSETS:
Beginning of period.................... 142,363,239 5,963,844
------------ ------------
End of period.......................... $369,845,433 $142,363,239
============ ============
End of period net assets includes
undistributed net investment income... $ 143,385 $ --
============ ============
SHARE TRANSACTIONS:
Number of shares sold.................. 14,288,419 11,095,048
Number of shares issued upon
reinvestment of distributions........ 981,818 17,449
Number of shares redeemed.............. (4,438,843) (1,195,162)
------------ ------------
Net increase.......................... 10,831,394 9,917,335
============ ============
26 See Notes to Financial Statements.
<PAGE>
================================================================================
INTERNATIONAL
-------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income ................. $ 34,202 $ 94,747
Net realized gain on investments....... 4,862,619 1,023,371
Net change in unrealized gain or loss
on investments........................ 8,328,366 1,651,337
------------ ------------
Net increase in net assets resulting
from operations....................... 13,225,187 2,769,455
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (353,954) (17,927)
From net realized gains on investments. (3,037,839) (813,619)
------------ ------------
Decrease in net assets from
distributions to shareholders......... (3,391,793) (831,546)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............. 34,117,191 11,492,897
Net asset value of shares issued upon
reinvestment of distributions........ 3,391,793 814,794
Payments for shares redeemed........... (20,036,271) (13,414,872)
------------ ------------
Net increase (decrease) in net assets
from fund share transactions.......... 17,472,713 (1,107,181)
------------ ------------
Net change in net assets............. 27,306,107 830,728
NET ASSETS:
Beginning of period.................... 16,242,336 15,411,608
------------ ------------
End of period.......................... $ 43,548,443 $ 16,242,336
============ ============
End of period net assets includes
undistributed net investment income... $ 34,998 $ 117,527
============ ============
SHARE TRANSACTIONS:
Number of shares sold.................. 2,598,430 971,299
Number of shares issued upon
reinvestment of distributions........ 235,495 70,485
Number of shares redeemed.............. (1,500,618) (1,139,958)
------------ ------------
Net increase (decrease)............... 1,333,307 (98,174)
============ ============
See Notes to Financial Statements. 27
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
SMALL COMPANY
-------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income ................. $ 712,780 $ 579,644
Net realized gain (loss) on investments 20,875,868 (6,877,466)
Net change in unrealized gain or loss
on investments........................ 12,349,570 5,570,006
------------ ------------
Net increase (decrease) in net assets
resulting from operations............. 33,938,218 (727,816)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (551,932) (544,565)
From net realized gains on investments. (1,144,832) (230,169)
------------ ------------
Decrease in net assets from
distributions to shareholders......... (1,696,764) (774,734)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............. 66,957,022 109,090,666
Net asset value of shares issued upon
reinvestment of distributions........ 1,696,764 774,734
Payments for shares redeemed........... (51,301,904) (26,641,691)
------------ ------------
Net increase in net assets from fund
share transactions.................... 17,351,882 83,223,709
------------ ------------
Net change in net assets............. 49,593,336 81,721,159
NET ASSETS:
Beginning of period.................... 99,822,974 18,101,815
------------ ------------
End of period.......................... $149,416,310 $ 99,822,974
============ ============
End of period net assets includes
undistributed net investment income... $ 210,247 $ 49,652
============ ============
SHARE TRANSACTIONS:
Number of shares sold.................. 4,954,441 8,539,090
Number of shares issued upon
reinvestment of distributions........ 111,511 60,652
Number of shares redeemed.............. (3,825,156) (2,210,865)
------------ ------------
Net increase.......................... 1,240,796 6,388,877
============ ============
28 See Notes to Financial Statements.
<PAGE>
================================================================================
VALUE OPPORTUNITY
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income ................. $ 531,415 $ 437,647
Net realized gain (loss) on investments 19,615,336 (2,499,205)
Net change in unrealized gain or loss
on investments........................ (6,017,946) 11,291,482
------------ ------------
Net increase in net assets resulting
from operations....................... 14,128,805 9,229,924
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (404,977) (387,014)
From net realized gains on investments. (3,577,088) (339,496)
------------ ------------
Decrease in net assets from
distributions to shareholders......... (3,982,065) (726,510)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............. 14,685,948 67,879,273
Net asset value of shares issued upon
reinvestment of distributions........ 3,982,065 726,510
Payments for shares redeemed........... (19,893,670) (10,147,268)
------------ ------------
Net increase (decrease) in net assets
from fund share transactions.......... (1,225,657) 58,458,515
------------ ------------
Net change in net assets............. 8,921,083 66,961,929
NET ASSETS:
Beginning of period.................... 76,108,706 9,146,777
------------ ------------
End of period.......................... $ 85,029,789 $ 76,108,706
============ ============
End of period net assets includes
undistributed net investment income... $ 133,832 $ 7,394
============ ============
SHARE TRANSACTIONS:
Number of shares sold.................. 958,103 5,269,016
Number of shares issued upon
reinvestment of distributions........ 245,379 53,123
Number of shares redeemed.............. (1,308,831) (806,672)
------------ ------------
Net increase (decrease)............... (105,349) 4,515,467
============ ============
See Notes to Financial Statements. 29
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
1. ORGANIZATION
Aetna Variable Portfolios, Inc. (Fund) is registered under the Investment
Company Act of 1940 (the Act) 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, each of which has
its own investment objective, policies and restrictions.
The Fund currently offers multiple portfolios. This report covers four
diversified portfolios: Aetna Growth VP, Aetna International VP, Aetna Small
Company VP and Aetna Value Opportunity VP (Portfolios).
The following is each Portfolio's investment objective:
AETNA GROWTH VP (Growth) seeks growth of capital through investment in a
diversified portfolio consisting primarily of common stocks and securities
convertible into common stocks believed to offer growth potential.
AETNA INTERNATIONAL VP (International) seeks long-term capital growth
primarily through investment in a diversified portfolio of common stocks
principally traded in countries outside of the U.S. International will not
target any given level of current income.
AETNA SMALL COMPANY VP (Small Company) seeks growth of capital primarily
through investment in a diversified portfolio of common stocks and securities
convertible into common stocks of companies with smaller market
capitalizations.
AETNA VALUE OPPORTUNITY VP (Value Opportunity) seeks growth of capital
primarily through investment in a diversified portfolio of common stocks and
securities convertible into common stock.
Shares of the Portfolios are offered to insurance company separate accounts that
fund both annuity and life insurance contracts and to certain tax-qualified
retirement plans. At December 31, 1999, separate accounts of Aetna Life
Insurance and Annuity Company (ALIAC) and its affiliates held 100.0%, 100.0%,
99.6% and 99.8% of Growth, International, Small Company and Value Opportunity's
shares outstanding, respectively.
Aeltus Investment Management, Inc. (Aeltus) serves as the investment adviser to
each Portfolio. Bradley, Foster & Sargent, Inc. (Bradley) served as the
sub-adviser to Value Opportunity only through December 31, 1999 at which point
the sub-advisory agreement was terminated. ALIAC serves as the principal
underwriter to each Portfolio. Aeltus and ALIAC are both indirect wholly-owned
subsidiaries of Aetna Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of each Portfolio has 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.
A. VALUATION OF INVESTMENTS
Exchange traded equity investments are stated at market values based upon prices
furnished by external pricing sources as reported on national securities
exchanges. Over-the-counter securities are stated at the last sale price, or if
there has been no sale that day, at the mean of the bid and asked prices. Fixed
income securities, with the exception of high yield securities,
30
<PAGE>
================================================================================
maturing in more than sixty days for which market quotations are readily
available are valued at the mean of the last bid and asked price. High yield
securities are priced at bid by external pricing sources or brokers making a
market in the security. Short-term investments maturing in sixty days or less
are valued at amortized cost, which when combined with accrued interest,
approximates market value. Securities and fixed income investments for which
market quotations are not considered to be readily available are valued using
methods approved by the Board of Directors (Board).
The accounting records of the Portfolios are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the prevailing rates of exchange
at the end of each day. 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. The Portfolios do not isolate
the portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
their market prices. Such fluctuations are included in net realized and
unrealized gain or loss on investments.
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 invest in
financial futures contracts as a hedge against existing portfolio securities, 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 fluctuations
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 the Portfolios 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 Portfolios, where authorized, may use
forward foreign currency exchange contracts to hedge against foreign currency
exchange rate risks on their non-U.S. dollar denominated securities. Contracts
are recorded at market value and marked-to-market daily.
The risks associated with financial 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 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 financial futures and forward foreign
currency exchange contracts are reflected in the accompanying financial
statements. The amounts at risk under such futures and forward foreign currency
exchange contracts may exceed the amounts reflected in the financial statements.
The notional amounts (economic exposure) of these contracts are disclosed in the
Portfolios of Investments and elsewhere 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 reported to shareholders
as 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 those which can only be sold
under Rule 144A of the Securities Act of 1933 (1933 Act) or are
31
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
securities offered pursuant to Section 4(2) of the 1933 Act, and are subject to
legal or contractual restrictions on resale and may not be publicly sold without
registration under the 1933 Act. 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. Each Portfolio may invest up to 15% of
its total assets in illiquid securities. The Portfolios will not pay the costs
of disposition of restricted securities other than ordinary brokerage fees, if
any.
D. FEDERAL INCOME TAXES
Each Portfolio intends to meet the requirements to be taxed as a regulated
investment company for the current year. As such, each Portfolio is relieved of
federal income taxes by distributing all of its net taxable investment income
and capital gains, if any, in compliance with the applicable provisions of the
Internal Revenue Code. Furthermore, by distributing substantially all of its net
taxable investment income and capital gains during the calendar year, each
Portfolio will avoid federal excise taxes in accordance with the applicable
provisions of the Internal Revenue Code. Thus, the financial statements contain
no provision for federal income taxes.
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 differing treatments for foreign currency transactions, certain
futures and options contracts, passive foreign investment company activity and
repurchases of certain securities sold at a loss. In addition, distributions of
realized gains from sales of securities held one year or less are taxable to
shareholders at ordinary income tax rates rather than preferred capital gain tax
rates in accordance with the applicable provisions of the Internal Revenue Code.
F. LINE OF CREDIT
Certain portfolios of Aetna Variable Portfolios, Inc. (including the
Portfolios), Aetna Generation Portfolios, Inc., Aetna Balanced VP, Inc., Aetna
Variable Fund, Aetna Income Shares, certain series of Aetna GET Fund and certain
series of Aetna Series Fund Inc., collectively Aetna Mutual Funds, have entered
into a revolving credit facility, of up to $300,000,000, with a syndicate of
banks led by Citibank, N.A. For its services as Agent, Citibank, N.A. received
an agent fee of $200,000. In addition, the revolving credit facility requires
the payment of an annual commitment fee of 0.09% based on the average daily
unused amount of the credit facility. Each of the Aetna Mutual Funds will pay
its pro rata share of both the agent fee and commitment fee. Generally,
borrowings under the facility accrue interest at the Federal Funds Rate plus a
specified margin. Repayments generally must be made within 30 days after the
date of a revolving credit advance. The revolving credit facility became
effective on November 30, 1999, and there was no outstanding balance as of
December 31, 1999.
G. 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 accreted or amortized, respectively, using an effective yield
method over the life of the 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.
32
<PAGE>
================================================================================
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES FEES
Each Portfolio pays Aeltus an investment advisory fee expressed as a percentage
of its average daily net assets. Below are the Portfolios' annual investment
advisory fees, as of December 31, 1999:
ADVISORY FEE
------------
Growth 0.60%
International 0.85%
Small Company 0.75%
Value Opportunity 0.60%
Aeltus entered into a subadvisory agreement with Bradley for Value Opportunity.
As sub-adviser, Bradley supervised the investment and reinvestment of cash and
equity securities. The subadvisory agreement provided that Aeltus pay Bradley a
subadvisory fee at an annual rate of 0.15% of Value Opportunity's average daily
net assets on the first $250 million and 0.10% of Value Opportunity's average
daily net assets above $250 million. For the year ended December 31, 1999,
Aeltus paid Bradley $113,534. This agreement terminated on December 31, 1999.
Aeltus entered into a consulting agreement with Bradley for Value Opportunity
and Aetna Value Opportunity Fund, a series of Aetna Series Fund, Inc., under
which Bradley agreed to provide assistance with shareholder communications,
contribute to marketing efforts and provide other non-investment advisory
services for the Value Opportunity funds. For the year ended December 31, 1999,
Aeltus paid Bradley $236,000. This agreement terminated on December 31, 1999.
Each Portfolio pays Aeltus an administrative services fee in exchange for
receiving certain administrative and shareholder services and to compensate
Aeltus for supervising the Portfolios' other service providers. Each Portfolio
pays Aeltus an administrative services fee at an annual rate based on its
average daily net assets. The rate for each Portfolio is 0.075% on the first $5
billion in assets and 0.050% on assets over $5 billion.
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Portfolio, in
exchange for fees payable by Aeltus, of up to 0.425% of the Portfolios' average
daily net assets. For the year ended December 31, 1999, Aeltus paid ALIAC
$1,494,165.
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated through December 31, 1999 to reimburse each
Portfolio for some or all of its operating expenses or to waive fees in order to
maintain a certain expense ratio. Reimbursement and waiver arrangements will
increase a Portfolio's yield and total return. Actual expenses for the year
ended December 31, 1999 were at or below contractual limits. Actual expense
ratios are included in the Financial Highlights.
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the year ended December 31, 1999 were:
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
Growth $472,826,802 $319,077,382
International 55,650,141 43,044,593
Small Company 262,322,704 234,843,693
Value Opportunity 89,412,606 89,941,820
33
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
6. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As of December 31, 1999, International had the following open forward foreign
currency exchange contracts that obligate the Portfolio to deliver currencies at
specified future dates. The net unrealized loss of $35,398 on these contracts,
is included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
INTERNATIONAL
EXCHANGE CONTRACTS IN EXCHANGE CONTRACTS UNREALIZED
DATE TYPE CURRENCY TO RECEIVE/DELIVER FOR AT VALUE GAIN (LOSS)
---- ---- -------- ------------------ --- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
5/18/00 Buy HKD 531,000 $ 68,088 $ 68,276 $ 188
5/18/00 Buy HKD 349,000 44,446 44,874 428
5/18/00 Buy HKD 580,000 73,981 74,576 595
2/17/00 Buy JPY 56,310,000 551,940 555,570 3,630
5/18/00 Sell HKD 531,000 67,690 68,276 (586)
5/18/00 Sell HKD 349,000 44,489 44,874 (385)
5/18/00 Sell HKD 580,000 73,936 74,576 (640)
1/27/00 Sell JPY 141,734,000 1,363,220 1,393,657 (30,437)
2/17/00 Sell JPY 14,959,000 145,871 147,590 (1,719)
2/17/00 Sell JPY 56,310,000 549,098 555,570 (6,472)
--------
$(35,398)
========
</TABLE>
34
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
ADDITIONAL INFORMATION
DECEMBER 31, 1999
================================================================================
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR (UNAUDITED)
In accordance with federal tax authorities, certain portions of the dividends
taxable as ordinary income qualify for the corporate dividends received
deduction. The following percentages reflect the portions of such dividends
paid:
Growth 5.80%
Small Company 5.62%
Value Opportunity 8.34%
In accordance with federal tax authorities, the Portfolios paid the following
amounts of dividends which qualify to be taxed at long-term capital gain rates:
AGGREGATE PER SHARE
---------- ---------
Growth $1,980,035 $0.1096
International 792,836 0.3265
Value Opportunity 1,987,271 0.4000
International intends to elect to pass through the credit for taxes paid in
foreign countries during its fiscal year ended December 31, 1999. In accordance
with current tax laws, the foreign income and foreign tax per share (for a share
outstanding on December 31, 1999) are as follows:
DIVIDEND FOREIGN TAX
COUNTRY PER SHARE PER SHARE
------- --------- -----------
Australia 0.0056 0.0004
Brazil 0.0018 0.0001
Canada 0.0034 0.0005
Switzerland 0.0044 0.0007
Denmark 0.0050 0.0007
United Kingdom 0.0310 0.0029
Mexico 0.0029 0.0001
Japan 0.0088 0.0013
Singapore 0.0008 0.0001
Norway 0.0013 0.0002
New Zealand 0.0007 0.0001
Sweden 0.0037 0.0004
Finland 0.0014 0.0002
France 0.0122 --
Germany 0.0093 0.0009
Ireland 0.0038 --
Italy 0.0012 0.0002
Netherlands 0.0093 0.0005
Spain 0.0010 0.0001
The pass through of the foreign tax credit affects only those shareholders of
International who were holders on the dividend record date of December 13, 1999.
Accordingly, shareholders received more detailed information along with their
Form 1099-DIV in January 2000.
35
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
ADDITIONAL INFORMATION (CONTINUED)
DECEMBER 31, 1999
================================================================================
YEAR 2000 (UNAUDITED)
The Portfolio's Year 2000 remediation efforts have been completed. Currently,
the Portfolio's have no information that indicates a mission-critical vendor or
service provider will be unable to sell goods or provide services to the
Portfolios or that any customer will be unable to purchase from the Portfolios
because of Year 2000 issues. As of today, the Portfolio's have not experienced
any significant disruptions to their financial reporting or operating activities
that were caused by failure of their computerized systems resulting from Year
2000 issues.
36
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
FINANCIAL HIGHLIGHTS
GROWTH
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 13, 1996
YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, DECEMBER 31, OPERATIONS)
1999 1998 1997 TO DECEMBER 31, 1996
----------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period .................... $ 13.53 $ 9.85 $ 10.15 $ 10.00
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................................. 0.03 0.03 0.04+ 0.01+
Net realized and change in unrealized gain or loss on
investments ............................................ 4.62 3.68 3.27 0.15
----------- ----------- ----------- -----------
Total from investment operations ..................... 4.65 3.71 3.31 0.16
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
From net investment income ............................. (0.02) (0.03) (0.03) (0.01)
From net realized gains on investments ................. (0.84) -- (3.58) --
----------- ----------- ----------- -----------
Total distributions .................................. (0.86) (0.03) (3.61) (0.01)
----------- ----------- ----------- -----------
Net asset value, end of period .......................... $ 17.32 $ 13.53 $ 9.85 $ 10.15
=========== =========== =========== ===========
Total return* ........................................... 34.97% 37.68% 33.01% 1.57%
Net assets, end of period (000's) ....................... $ 369,845 $ 142,363 $ 5,964 $ 5,175
Ratio of net expenses to average net assets ............. 0.71% 0.75% 0.75% 0.67%(1)
Ratio of net investment income to average net assets .... 0.20% 0.40% 0.29% 1.99%(1)
Portfolio turnover rate ................................. 138.03% 152.99% 207.41% 1.97%
</TABLE>
(1) Annualized.
* 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 period.
See Notes to Financial Statements. 37
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL
================================================================================
Selected data for a fund share outstanding throughout each period:
PERIOD FROM
DECEMBER 22, 1997
YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, OPERATIONS)
1999 1998 TO DECEMBER 31, 1997
------------ ------------ --------------------
Net asset value, beginning
of period ................ $ 11.59 $ 10.27 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .... (0.01) 0.07 --
Net realized and change in
unrealized gain or loss on
investments............... 5.78 1.87 0.27
------- ------- -------
Total from investment
operations............. 5.77 1.94 0.27
------- ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.15) (0.01) --
From net realized gains on
investments............... (1.29) (0.61) --
------- ------- -------
Total distributions .... (1.44) (0.62) --
------- ------- -------
Net asset value, end of
period.................... $ 15.92 $ 11.59 $ 10.27
======= ======= =======
Total return* ............. 51.33% 18.92% 2.74%
Net assets, end of period
(000's)................... $43,548 $16,242 $15,412
Ratio of net expenses to
average net assets ....... 1.15% 1.15% 1.15%(1)
Ratio of net investment
income to average net
assets.................... 0.13% 0.55% (0.98)%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets .... 1.62% 1.77% --
Portfolio turnover rate ... 168.88% 158.02% 0.71%
(1) Annualized.
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
38 See Notes to Financial Statements.
<PAGE>
SMALL COMPANY
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 27, 1996
YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, DECEMBER 31, OPERATIONS)
1999 1998 1997 TO DECEMBER 31, 1996
------------ ------------ ------------ --------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 12.79 $ 12.77 $ 10.11 $10.00
-------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.08 0.07 0.04+ 0.01+
Net realized and
change in unrealized
gain or loss on
investments............ 3.84 0.07 3.44 0.11
-------- ------- ------- ------
Total from
investment
operations.......... 3.92 0.14 3.48 0.12
-------- ------- ------- ------
LESS DISTRIBUTIONS:
From net investment
income................. (0.06) (0.08) (0.03) (0.01)
From net realized
gains on investments... (0.13) (0.04) (0.79) --
-------- ------- ------- ------
Total distributions.. (0.19) (0.12) (0.82) (0.01)
-------- ------- ------- ------
Net asset value, end
of period ............. $ 16.52 $ 12.79 $ 12.77 $10.11
======== ======= ======= ======
Total return* .......... 30.85% 1.10% 34.49% 1.23%
Net assets, end of
period (000's) ........ $149,416 $99,823 $18,102 $5,158
Ratio of net expenses
to average net assets.. 0.88% 0.89% 0.90% 0.55%(1)
Ratio of net
investment income to
average net assets .... 0.64% 0.93% 0.78% 5.96%(1)
Portfolio turnover
rate................... 256.09% 185.29% 180.25% --
</TABLE>
(1) Annualized.
* 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 period.
See Notes to Financial Statements. 39
<PAGE>
CAPITAL APPRECIATION PORTFOLIOS
FINANCIAL HIGHLIGHTS (CONTINUED)
VALUE OPPORTUNITY
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 13, 1996
YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, DECEMBER 31, OPERATIONS)
1999 1998 1997 TO DECEMBER 31, 1996
------------ ------------ ------------ --------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 14.41 $ 11.92 $ 10.20 $10.00
------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.10 0.09 0.11+ 0.02+
Net realized and
change in unrealized
gain or loss on
investments............ 2.71 2.56 3.90 0.20
------- ------- ------- ------
Total from
investment
operations.......... 2.81 2.65 4.01 0.22
------- ------- ------- ------
LESS DISTRIBUTIONS:
From net investment
income................. (0.08) (0.08) (0.10) (0.02)
From net realized
gains on investments... (0.72) (0.08) (2.19) --
------- ------- ------- ------
Total distributions.. (0.80) (0.16) (2.29) (0.02)
------- ------- ------- ------
Net asset value, end
of period ............. $ 16.42 $ 14.41 $ 11.92 $10.20
======= ======= ======= ======
Total return* .......... 19.58% 22.39% 39.36% 2.15%
Net assets, end of
period (000's) ........ $85,030 $76,109 $ 9,147 $5,202
Ratio of net expenses
to average net assets.. 0.73% 0.74% 0.75% 0.67%(1)
Ratio of net
investment income to
average net assets .... 0.69% 0.93% 1.06% 2.73%(1)
Portfolio turnover
rate................... 124.80% 125.72% 187.84% --
</TABLE>
(1) Annualized.
* 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 period.
40 See Notes to Financial Statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Aetna Variable Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Growth VP, Aetna International VP, Aetna Small Company VP and Aetna Value
Opportunity VP, series of Aetna Variable Portfolios, Inc. (collectively the
Capital Appreciation Portfolios), including the portfolios of investments as of
December 31, 1999, and 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 or
periods in the four-year period then ended. These financial statements and
financial highlights are the responsibility of the Capital Appreciation
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, 1999, by correspondence with the custodians 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 the
Capital Appreciation Portfolios as of December 31, 1999, the results of their
operations for the year then ended, 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 or periods in the four-year period then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
February 4, 2000
41
<PAGE>
Aetna Balanced VP, Inc.
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Balanced Fund VP, Inc. Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Balanced Fund VP, Inc. 10,000 10,572 12,515 13,315 14,633 14,582 18,552
Lehman Brothers Aggregate Bond Index 10,000 10,896 12,639 13,575 14,898 14,463 17,135
S&P 500 Index 10,000 9,689 12,641 13,605 14,976 15,174 20,876
60% S&P 500/40% Lehman Brothers 10,000 10,181 12,703 13,667 15,032 14,983 19,427
<CAPTION>
Balanced Fund VP, Inc. Dec-96 Dec-97 Dec-98 Dec-99
<S> <C> <C> <C> <C>
Aetna Balanced Fund VP, Inc. 21,367 26,172 30,606 34,772
Lehman Brothers Aggregate Bond Index 17,757 19,471 21,161 20,986
S&P 500 Index 25,667 34,230 44,011 53,269
60% S&P 500/40% Lehman Brothers 22,335 27,650 33,631 37,664
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------
13.60% 18.98% 13.27%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA BALANCED VP, INC.
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Balanced VP, Inc. (Balanced) generated a 13.60% total return, net of fund
expenses, for the year ended December 31, 1999. For the same period the
benchmark, Standard & Poor's (S&P) 500 Index(a) returned 21.04%, while the
composite index, 60% S&P 500 Index/40% Lehman Brothers Aggregate Bond Index(b),
returned 12.00%.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
Over the past 12 months, the U.S. economy continued along its course of strong
growth and low inflation. Despite undergoing a 12% correction that started in
July and ended in mid-October, the S&P 500 Index had a tremendous rally in the
4th quarter of the year, managing to close at record highs. As Y2K fears began
to diminish, it was technology shares (particularly those associated with
telecommunications and the internet) that propelled the stock market higher.
Continued brisk Gross Domestic Product growth, combined with tight labor
markets, led the Federal Reserve (the "Fed") to raise the federal funds ("Fed
funds") rate in each of the last three calendar quarters of 1999. (The Fed funds
rate is the interest rate charged on overnight loans between banks.) Each
increase was 25 basis points (1/4 of one percent), effectively reversing the
three 25-basis-point easings (or decreases) in the latter half of 1998.
42 See Definition of Terms.
<PAGE>
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
Large and Mid Cap Stocks: Both the large and mid-cap equity portions of the
Portfolio performed extremely well in this environment, as the quantitative
model that we use favored technology shares due to their strong business
momentum. The fact that these stocks trade at extremely high valuations relative
to the market caused the value factors in our model to detract from performance.
Low-P/E stocks underperformed high-P/E stocks by 65% in 1999. P/E - or
price/earnings ratio - is calculated by dividing a stock's current selling price
by the company's earnings. (P/E gives an idea of what investors are willing to
pay for a company's earning potential.) This poor performance was typical of
virtually all value-oriented investment strategies. Value strategies seek
companies whose stocks appear undervalued in relation to their assets and
earnings; they typically have low P/Es. Growth strategies look for companies
that have a record of above-average earnings growth; they typically have high
P/Es.
Overall, our multi-factor model showed positive discrimination, with our
best-ranked stocks outperforming the worst-ranked stocks by approximately 35%.
This helped produce outstanding results for this strategy in the fourth quarter
as follows:
o An overweight position in technology - led by positions in Cisco,
Microsoft and QUALCOMM - helped the large cap portion of the
Portfolio in the fourth quarter. During the same quarter, poor stock
selection in oil stocks detracted from performance.
o An overweight position in technology - led by positions in VERITAS,
QLogic and Seibel - helped the mid cap portion of Portfolio in the
fourth quarter. However, poor stock selection in the manufacturing
sector detracted from performance.
Small Cap Stocks: Technology and healthcare sectors carried the performance in
the second half of 1999. However, other areas also provided strong performance
particularly in the first half of the year; these included energy, raw materials
and retail stocks - which we overweighted.
For the fourth quarter, it was technology and healthcare (primarily biotech)
once again providing strong performance. Strong stock selection plus overweight
positions in these two areas greatly enhanced returns. Investments in the
utility sector (mostly telecommunications) were also strong. However, our
investments in the consumer discretionary and financial sectors mostly saw
lower-than-market returns.
Fixed Income: Early in the year, an overweight position in high yield corporate
bonds positively affected performance. Toward mid-year, as market default
concerns increased, we reduced this exposure to lock-in some of the gains. Also
helping to boost performance was an overweight position in investment-grade
corporate bonds early in the year and during the third quarter as well as being
overweight in government-agency securities in the third quarter.
Duration was also a positive contributor to performance. (Duration measures a
bond's sensitivity to increases or decreases in interest rates. The longer the
duration, the more a bond - or a bond fund - will be affected by rate changes.)
During the first half as well as the last two months of 1999, we maintained a
short duration, which had a positive impact on performance.
On the negative side, the Portfolio underweighted mortgage-backed securities
throughout much of the year, a sector that performed well relative to U.S.
Treasury securities. Also, some credit events in investment-grade corporates in
the latter half of the year modestly reduced returns.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Large and Mid Cap Stocks: Going forward, we are concerned by the extreme price
appreciation in technology stocks in the fourth quarter of 1999. The recent
increase in interest rates does not provide a supportive environment for
high-P/E growth stocks; and, to the extent that the bear market in bonds
continues, we feel that those stocks will have a difficult time maintaining
their current valuations.
See Definition of Terms. 43
<PAGE>
Although we are keenly aware of these risks, we remain committed to our
disciplined investment process. We will continue to utilize our multi-factor
stock-selection model to evaluate each stock on its own merits, rather than
making choices based on macro-economic factors.
Small Cap Stocks: Looking forward, we are optimistic about investments in the
small-cap area. (A company's capitalization is determined by multiplying the
number of shares outstanding by the current price per share.) The group is
finally responding to the valuation gap versus the larger companies. In 1999,
the Russell 2000 Index(d) outperformed the S&P 500 Index for the first time in
five years, topped off by a very strong fourth quarter. We believe the small-cap
arena should continue to perform well. Investors are beginning to show an
appetite for high-tech industries (both technology and healthcare), and the
markets are beginning to reward "smaller" firms that have a strong technology
base. We continue to believe that our strategy of focusing on companies with the
strongest business momentum and those selling at reasonable prices will produce
stronger-than-market returns.
Fixed Income: We expect the Fed to continue raising the Fed funds rate, in an
effort to slow domestic economic activity and reverse certain imbalances in the
economy, such as the low savings rate. Market consensus appears to be a 6% Fed
funds rate by mid-year, which is close to our expectation of 6-6.25%.
We start out the year seeing yields closer to fair value. We will trade duration
tactically, in the expectation that a stock-market correction could eventually
lead to a weakening economy and lower interest rates. We could see higher rates
in the first quarter of 2000, but until this plays out, we expect to bias our
duration toward the long side based on our longer-term view.
We expect to continue our overweight position in asset-backed securities.
However, we continue to be defensive in most investment-grade sectors and
mortgage-backed securities, underweighting those sectors. We also expect to
continue being defensive in emerging markets and high yield, both of which could
be negatively affected by any stock market correction that might occur.
DOMESTIC EQUITY PORTFOLIO BREAKDOWN:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
SECTOR INVESTMENTS S&P 500 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 2.5% 3.0% (0.5)%
Commercial Services 3.5% 1.2% 2.3%
Consumer Discretionary 13.1% 11.8% 1.3%
Consumer Non-Discretionary 4.2% 6.3% (2.1)%
Energy 6.3% 6.0% 0.3%
Finance 12.4% 12.6% (0.2)%
Healthcare 8.5% 9.3% (0.8)%
Manufacturing 10.2% 9.5% 0.7%
Technology 31.0% 30.8% 0.2%
Utilities 8.3% 9.5% (1.2)%
44 See Definition of Terms.
<PAGE>
- --------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- --------------------------------------------------
Microsoft Corp. 3.2%
Cisco Systems, Inc. 2.2%
General Electric Co. 2.1%
Wal-Mart Stores, Inc. 1.7%
Exxon Corp. 1.1%
America Online, Inc. 1.0%
Lucent Technologies, Inc. 1.0%
Home Depot, Inc. 0.8%
MCI WorldCom, Inc. 0.8%
International Business Machines Corp. 0.8%
- --------------------------------------------------------------------------------
% OF NET
TOP FIVE INCOME HOLDINGS ASSETS
- --------------------------------------------------------------------------------
U.S. Treasury Note, 5.50%, 07/31/01 5.0%
U.S. Treasury Note, 6.00%, 08/15/04 2.4%
U.S. Treasury Note, 6.00%, 08/15/09 1.8%
U.S. Treasury Note, 5.25%, 02/15/29 1.8%
Government National Mortgage Association, 7.50%, 12/15/23 1.6%
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
See Definition of Terms. 45
<PAGE>
Aetna Growth and Income VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Growth and Income VP Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Growth and Income VP 10,000 10,331 13,059 13,934 14,874 14,731 19,481
S&P 500 Index 10,000 9,689 12,641 13,605 14,976 15,174 20,876
<CAPTION>
Growth and Income VP Dec-96 Dec-97 Dec-98 Dec-99
<S> <C> <C> <C> <C>
Aetna Growth and Income VP 24,247 31,494 36,057 42,334
S&P 500 Index 25,667 34,230 44,011 53,269
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------
17.42% 23.51% 15.52%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA GROWTH AND INCOME VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Growth and Income VP (Growth and Income) generated a 17.42% total return,
net of fund expenses, for the year ended December 31, 1999. The benchmark,
Standard & Poor's (S&P) 500 Index(a), returned 21.04% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
Over the past twelve months, the stock market produced impressive returns
largely due to the continued strength of growth stocks, particularly in the
technology sector. For example, the S&P 500 Growth Index(c) was up 28.2%
compared to 12.7% for the S&P 500 Value Index(d). (Growth stocks are those with
a record of above-average earnings growth. Value stocks are those that appear
undervalued in relation to the company's assets and earnings.)
Stocks advanced despite rising interest rates. For example, the benchmark
30-year Treasury bond yielded 5.10% on December 31, 1998, but a year later the
yield had climbed to 6.48%. Usually, stocks have difficulty during such an
adverse interest-rate environment.
What explains the astounding performance of equities? Certainly not attractive
valuation. According to our valuation disciplines and those of most other market
watchers (including Fed Chairman Alan Greenspan), the market has been overvalued
by historic norms for the entire period. Earnings growth during the period was
solid but not spectacular, so earnings alone do not provide the answer.
46 See Definition of Terms.
<PAGE>
Perhaps the flood of liquidity coming into U.S. stocks from both domestic and
foreign investors best explains the behavior of the market over the past twelve
months. Foreign markets tumbled during the summer of 1998, scaring many
investors into the "safe haven" of the U.S. In addition, U.S. investors
continued their enthusiasm for owning stock mutual funds, particularly index and
growth funds. This liquidity naturally flowed to the largest and most liquid
stocks.
In general, the rich got richer, as large-cap growth stocks - whose
price/earnings (P/E) ratios began the year well ahead of the average stock - saw
further multiple expansion based upon strong earnings growth and the outlook for
more of the same. (P/E ratio is calculated by dividing a stock's current selling
price by per share earnings. P/E gives an idea of what investors are willing to
pay for a company's earning potential.) As an investment discipline, value
proved very disappointing, as stocks which appeared relatively overvalued became
even more so. The most rewarding investment style was momentum, especially price
momentum - buying the stocks that have seen their prices appreciate most.
- -------------------------------------------------------------------------------
ASSET ALLOCATION: % OF NOTIONAL
INVESTMENT VALUE* ECONOMIC EXPOSURE*
ASSET CLASS 12/31/99 OF FUTURES 12/31/99 12/31/98
- -------------------------------------------------------------------------------
Large Cap Stocks 82.7% 1.5% 84.2% 78.4%
Mid Cap Stocks 2.2% -- 2.2% 2.7%
Small Cap Stocks 1.5% -- 1.5% 2.3%
International Stocks 5.7% -- 5.7% 4.2%
International Bonds 0.1% -- 0.1% 0.1%
Real Estate Stocks 1.5% -- 1.5% 4.4%
Convertible Securities 0.4% -- 0.4% 1.0%
Special Situations** 1.6% -- 1.6% 2.5%
Cash Equivalents 4.3% (1.5)% 2.8% 4.4%
-------------------------------------------------------
100.0% -- 100.0% 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 the value of the
portfolio of investments as well as the financial instruments underlying the
options and futures positions.
** 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 current assets, earnings and dividends.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
The Portfolio's underperformance during the past twelve months is mainly
attributed to our overweight position in consumer discretionary stocks such as
TJX, Centex Corp. and Safeway, which appeared to be quite inexpensive throughout
the year but which declined further in price. Despite strong non-apparel sales,
TJX apparel sales suffered as a result of the unusually warm weather experienced
by much of the country, causing the stock to decline considerably during the
last quarter of 1999.
Portfolio performance was also hurt by stock selection within the manufacturing
sector. For example, we were underweight in GE, which had a return of over 53%
for the year, and we were overweight in Loew's, which had a return of -37% for
the year. In addition, we were overweight in Tyco International Ltd., whose
stock fell during the fourth quarter as a result of allegations of improper
accounting practices following acquisitions.
On the positive side, the Portfolio was underweight in consumer
non-discretionary stocks (sometimes called consumer staples) during the past
year, primarily because most of these stocks appeared overvalued to us. For
example, we were underweight in Gillette, Coca-Cola and Unilever, all of which
experienced negative returns for the year. Unfortunately, this was not enough to
offset the negative results in the consumer discretionary and manufacturing
sectors.
See Definition of Terms. 47
<PAGE>
WHAT IS YOUR OUTLOOK GOING FORWARD?
We expect the S&P 500 Index to experience more normal returns of 8% to 10% going
forward. Further P/E expansion seems unlikely given its already lofty level and
earnings growth appears to be back to its normal 8% to 10% rate. Foreign markets
and economies are reviving, pulling incremental investment flow into foreign
markets. This activity has caused some weakness in the U.S. dollar, which, along
with very tight labor markets, could mean increases in inflation and interest
rates are ahead. In such an environment, our disciplined and conservative
strategy should perform relatively well.
DOMESTIC EQUITY PORTFOLIO BREAKDOWN:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
SECTOR INVESTMENTS S&P 500 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 2.5% 3.0% (0.5)%
Commercial Services 1.1% 1.2% (0.1)%
Consumer Discretionary 12.2% 11.8% 0.4%
Consumer Non-Discretionary 4.3% 6.3% (2.0)%
Energy 5.9% 6.0% (0.1)%
Finance 11.6% 12.6% (1.0)%
Healthcare 8.2% 9.3% (1.1)%
Manufacturing 8.2% 9.5% (1.3)%
Technology 36.7% 30.8% 5.9%
Utilities 9.3% 9.5% (0.2)%
- ----------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ----------------------------------------------
Microsoft Corp. 4.6%
General Electric Co. 3.4%
Cisco Systems, Inc. 2.7%
Wal-Mart Stores, Inc. 2.3%
Intel Corp. 1.7%
Citigroup Inc. 1.6%
Lucent Technologies, Inc. 1.4%
America Online, Inc. 1.3%
Exxon Corp. 1.3%
Procter & Gamble Co. 1.3%
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
48 See Definition of Terms.
<PAGE>
Aetna Real Estate Securities VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Real Estate VP 12/15/97 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna Real Estate VP 10,000 10,363 10,343 9,960 9,217 9,031 8,513 9,585 8,876 8,651
NAREIT Equity REIT Index 10,000 10,236 10,188 9,720 8,698 8,444 8,037 8,848 8,136 8,054
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
Inception Date 1 Year Inception
------------------------------------------
12/15/97 -4.22% -6.85%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA REAL ESTATE SECURITIES VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Real Estate Securities VP (Real Estate) generated a -4.22% total return,
net of fund expenses, for the year ended December 31, 1999. The benchmark,
NAREIT Equity REIT Index(e), returned -4.62% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
Equilibrium Real Estate Market Conditions: The period from 1992 to 1998 saw a
dramatic recovery in real estate operating fundamentals, with rents rising
rapidly and the supply of new space across all sectors being very constrained.
In the last 18 months, that dramatic recovery appears to have been shifting into
"neutral." While we do not see any dramatic overbuilding, the very positive rent
increases are being replaced by more modest ones, closer to the level of
inflation. REIT-earnings growth rates, which were bolstered by the recovery,
have settled into more normalized 6% to 8% levels. With the exit of the growth
investor, and without the much-awaited entry of the large value investors,
capital outflows have hampered the industry.
Equity Market Volatility and Narrowness: This has been a negative factor since
the middle of last year. REIT share prices remain depressed, trading at an
average 5-15% discount to underlying net asset value. This makes it difficult
for REITs to access capital through the issuance of more stock, since doing so
would be dilutive. Consequently, property acquisitions, which had been a
contributor to earnings growth during the 1992 to 1998 period, slowed to a
trickle in 1999. Indeed, REITs were net sellers of property during 1999, with
proceeds redeployed to repurchase stock, invest in higher-yielding developments
or make selective value-added acquisitions.
See Definition of Terms. 49
<PAGE>
Interest-Rate Increases: REITs generally fall into the category of interest
rate-sensitive stocks. In that REITs finance themselves with short-term and
long-term debt, interest-rate increases raise the cost of capital and can have a
negative earnings impact for REITs.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
The Portfolio maintained an overweight exposure to the multifamily sector, which
had a positive impact on performance over the last year. Healthcare REIT
exposure decreased from overweight to underweight, as concerns regarding
government reimbursements to nursing home operators began to be felt by owners
of healthcare real estate. Exposure to the office sector moved from an
underweight position to overweight, as the relative outlook for office REITs
strengthened; strong stock selection among office REITs contributed to
performance. Hotel exposure remained underweight throughout the period with
mixed influence on performance, as a slowing economic expansion continued to put
pressure on lodging operating fundamentals.
WHAT IS YOUR OUTLOOK GOING FORWARD?
We continue to believe that the fundamentals for real estate stocks remain
positive, with good internal growth prospects translating to high single-digit
expected earnings growth. With dividend yields over 9%, income investors should
find the sector attractive, unless bond-market yields continue to move up.
Underlying real estate markets remain healthy nationwide. Risk to REIT earnings
could stem from timing differences between asset dispositions and redeployment
in the form of acquisitions, or new development. We also believe that REIT
stock-buyback programs could increasingly impact the bottom line in 2000.
The Portfolio invests in real estate investment securities that involve certain
risks including management skills, changes in general or regional economy,
changes in property value and refinancing.
- ----------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ----------------------------------------------------
Equity Office Properties Trust 5.9%
Equity Residential Properties Trust 5.6%
Apartment Investment & Management Co. 4.5%
CBL & Associates Properties, Inc. 4.1%
PS Business Parks, Inc. 3.7%
Essex Property Trust, Inc. 3.3%
ProLogis Trust 3.2%
Kimco Realty Corp. 3.1%
Boston Properties, Inc. 3.1%
Simon Property Group, Inc. 2.7%
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
50 See Definition of Terms.
<PAGE>
- --------------------------------------------------------------------------------
DEFINITION OF TERMS
- --------------------------------------------------------------------------------
(a) The S&P 500 is the Standard & Poor's 500 Index. Performance is calculated
on a total return basis and dividends are reinvested, as reported by Frank
Russell Company.
(b) The Lehman Brothers Aggregate Bond Index is an unmanaged index and is
composed of securities from Lehman Brothers Government/Corporate Bond
Index, Mortgage-Backed Securities Index and the Asset-Backed Securities
Index.
(c) S&P 500 Growth Index is the Standard & Poor's 500 Growth Index. Companies
in each U.S. index are split into two groups based on price-to-book ratio
to create growth and value indices. The Growth index contains companies
with higher price-to-book ratios, while the Value index contains those
with lower ratios.
(d) S&P 500 Value Index is the Standard & Poor's 500 Value Index. Companies in
each U.S. index are split into two groups based on price-to-book ratio to
create growth and value indices. The Value index contains companies with
lower price-to-book ratios, while the Growth index contains those with
higher ratios.
(e) The NAREIT Equity REIT Index is a market weighted total return of all
tax-qualified REITs listed on the New York Stock Exchange, American Stock
Exchange and the NASDAQ National Market System as reported by Frank
Russell Company.
The unmanaged indices described above are not available for individual
investment.
51
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
BALANCED
================================================================================
NUMBER OF MARKET
SHARES MALUE
------------ --------------
COMMON STOCKS (61.2%)
AIR TRANSPORT (0.5%)
America West Holdings
Corp. + ................ 194,500 $ 4,035,875
AMR Corp. + ............. 12,400 830,800
Circle International
Group, Inc. ............ 97,500 2,169,375
Delta Air Lines, Inc. ... 11,600 577,825
FDX Corp. + ............. 28,640 1,172,450
Southwest Airlines Co. .. 47,137 763,030
--------------
9,549,355
--------------
ALUMINUM (0.2%)
Alcan Aluminum Ltd. ..... 16,700 687,831
Alcoa Inc. .............. 39,400 3,270,200
Reynolds Metals Co. ..... 7,600 582,350
--------------
4,540,381
--------------
AUTO PARTS AND HARDWARE (0.1%)
Black & Decker Corp. .... 4,900 256,025
Cooper Tire & Rubber Co. 8,200 127,613
Genuine Parts Co. ....... 18,700 463,994
Snap-On, Inc. ........... 8,500 225,781
--------------
1,073,413
--------------
AUTOMOTIVE (0.8%)
Dana Corp. .............. 20,882 625,155
Delphi Automotive Systems
Corp.................... 53,887 848,720
Eaton Corp. ............. 6,700 486,588
Ford Motor Co. .......... 93,900 5,017,781
General Motors Corp. + .. 79,800 5,800,462
Johnson Controls, Inc. .. 8,700 494,813
Monaco Coach Corp. + .... 56,475 1,443,642
TRW, Inc. ............... 12,500 649,219
--------------
15,366,380
--------------
BANKS AND THRIFTS (2.6%)
AmSouth Bancorporation .. 46,850 904,791
Astoria Financial Corp. . 78,800 2,398,475
Bank of America Corp. ... 71,306 3,578,670
Bank of New York Co.,
Inc..................... 63,700 2,548,000
BB&T Corp. .............. 27,600 755,550
Chase Manhattan Corp. ... 68,100 5,290,519
Citizens Banking Corp. .. 85,300 1,908,587
Comerica, Inc. .......... 13,250 618,609
East West Bancorp, Inc. . 168,200 1,923,787
Fifth Third Bancorp ..... 21,400 1,570,225
Firstar Corp. ........... 77,264 1,632,202
FirstFed Financial Corp.
+....................... 49,600 697,500
Fleet Boston Financial
Corp.................... 83,904 2,920,908
Flushing Financial Corp. 43,850 649,528
Golden State Bancorp,
Inc. + ................. 126,300 2,178,675
Golden West Financial
Corp.................... 16,500 552,750
Huntington Bancshares
Inc..................... 22,627 540,220
J.P. Morgan & Co. ....... 17,500 2,215,937
KeyCorp ................. 44,400 982,350
Mellon Financial Corp. .. 43,400 1,478,312
Northern Trust Corp. .... 22,400 1,187,200
PNC Bank Corp. .......... 24,800 1,103,600
Regions Financial Corp. . 18,200 457,275
SouthTrust Corp. ........ 12,800 484,000
State Street Corp. ...... 14,400 1,052,100
Summit Bancorp .......... 17,700 542,063
Suntrust Banks, Inc. .... 25,200 1,734,075
Synovus Financial Corp. . 21,500 427,313
U.S. Bancorp ............ 62,300 1,483,519
Union Planters Co. ...... 11,000 433,813
Wachovia Corp. .......... 17,600 1,196,800
Washington Mutual, Inc. . 50,478 1,312,428
Wells Fargo & Co. ....... 128,400 5,192,175
--------------
51,951,956
--------------
BIOTECH AND MEDICAL PRODUCTS (1.6%)
Amgen, Inc. + ........... 84,200 5,057,262
Biomet, Inc. ............ 11,500 460,000
Boston Scientific Corp. + 34,100 745,938
Cell Genesys, Inc. + .... 403,700 5,172,406
COR Therapeutics, Inc. + 27,100 728,313
Cubist Pharmaceuticals,
Inc. + ................. 97,800 1,882,650
Datascope Corp. + ....... 68,100 2,724,000
Genelabs Technologies,
Inc. + ................. 123,400 678,700
Guidant Corp. + ......... 24,200 1,137,400
Human Genome Sciences,
Inc. + ................. 41,400 6,318,675
Medarex, Inc. + ......... 67,200 2,503,200
Medtronic, Inc. + ....... 48,600 1,770,862
Pharmacyclics, Inc. + ... 32,500 1,340,625
Protein Design Labs,
Inc. + ................. 28,000 1,960,000
--------------
32,480,031
--------------
CHEMICALS (0.5%)
Dow Chemical Co. ........ 23,000 3,073,375
Du Pont (E.I.) de Nemours 82,900 5,461,037
Hercules, Inc. .......... 9,200 256,450
Monsanto Co. ............ 26,200 933,375
Rohm & Haas Co. ......... 8,136 331,034
Union Carbide Corp. ..... 4,500 300,375
--------------
10,355,646
--------------
COMMERCIAL SERVICES (0.9%)
Bell & Howell Co. + ..... 23,300 741,231
Deluxe Corp. ............ 8,600 235,963
HA-LO Industries, Inc. + 150,500 1,128,750
Interpublic Group of Co.,
Inc. (The) ............. 25,600 1,476,800
Labor Ready, Inc. + ..... 348,300 4,223,137
Marketing Services Group,
Inc. + ................. 217,100 3,636,425
NOVA Corp. + ............ 106,200 3,351,938
Omnicom Group, Inc. ..... 13,900 1,390,000
Paychex, Inc. ........... 21,300 852,000
RR Donnelley & Sons Co. . 14,400 357,300
--------------
17,393,544
--------------
52 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES MALUE
------------ --------------
COMPUTERS (2.6%)
Apple Computer, Inc. + .. 19,400 $ 1,994,562
Gateway, Inc. + ......... 25,800 1,859,212
Hewlett Packard Co. ..... 84,100 9,582,144
International Business
Machines Corp. ......... 148,800 16,070,400
Orbotech Ltd. + ......... 74,100 5,742,750
Sun Microsystems, Inc. + 191,600 14,837,025
Unisys Corp. + .......... 31,800 1,015,613
--------------
51,101,706
--------------
CONGLOMERATE AND AEROSPACE (2.8%)
Alliant Techsystems,
Inc. +.................. 21,100 1,314,794
Boeing Co. .............. 100,300 4,168,719
Crane Co. ............... 9,000 178,875
General Dynamics Corp. .. 13,200 696,300
General Electric Co. .... 270,500 41,859,875
Kroll O' Gara Co. (The) + 43,300 714,450
Lockheed Martin Corp. ... 15,200 332,500
Loews Corp. ............. 10,800 655,425
Raytheon Co. ............ 23,800 632,187
Textron, Inc. ........... 13,600 1,042,950
United Technologies Corp. 54,500 3,542,500
--------------
55,138,575
--------------
CONSUMER FINANCE (1.0%)
Associates First Capital
Corp.................... 57,138 1,567,724
Avis Rent A Car, Inc. + . 43,800 1,119,637
Capital One Financial
Corp.................... 14,700 708,356
Countrywide Credit
Industries, Inc. ....... 11,100 280,275
Doral Financial Corp. ... 73,700 907,431
Freddie Mac Corp. ....... 56,100 2,640,206
Federal National Mortgage
Association............. 78,300 4,888,856
First Sierra Financial,
Inc. + ................. 167,200 2,863,300
Household International,
Inc..................... 51,400 1,914,650
MBNA Corp. .............. 60,375 1,645,219
Rollins Truck Leasing
Corp.................... 58,600 699,538
Ryder System, Inc. ...... 6,600 161,288
SLM Holding Corp. ....... 15,000 633,750
--------------
20,030,230
--------------
CONSUMER PRODUCTS (1.0%)
Avon Products, Inc. ..... 10,000 330,000
Clorox Co. .............. 8,900 448,338
Colgate-Palmolive Co. ... 43,800 2,847,000
Gillette Co. ............ 44,000 1,812,250
International Flavors &
Fragrances, Inc. ....... 4,300 162,325
Kimberly-Clark Corp. .... 40,700 2,655,675
Procter & Gamble Co. .... 108,500 11,887,531
--------------
20,143,119
--------------
CONSUMER SERVICES (0.9%)
Brinker International,
Inc. + ................. 51,800 1,243,200
Buffets, Inc. + ......... 185,700 1,857,000
Carnival Corp. .......... 50,700 2,424,094
CEC Entertainment, Inc. + 44,700 1,268,362
Cendant Corp. + ......... 59,400 1,577,812
Darden Restaurants, Inc. 14,700 266,438
Egreetings Network,
Inc. +.................. 7,800 78,975
H&R Block, Inc. ......... 9,000 393,750
Hilton Hotels Corp. ..... 9,700 93,363
Marriott International,
Inc..................... 12,400 391,375
McDonald's Corp. ........ 107,400 4,329,562
Tricon Global
Restaurants, Inc. + .... 15,680 605,640
Veterinary Centers of
America, Inc. + ........ 271,400 3,494,275
--------------
18,023,846
--------------
CONSUMER SPECIALTIES (0.1%)
Brunswick Corp. ......... 10,200 226,950
Coachmen Industries, Inc. 145,300 2,197,662
Hasbro, Inc. ............ 19,950 380,297
--------------
2,804,909
--------------
DATA AND IMAGING SERVICES (9.7%)
3Com Corp. + ............ 29,000 1,363,000
Adobe Systems, Inc. ..... 15,400 1,035,650
America Online, Inc. + .. 274,400 20,700,050
American Management
Systems, Inc. + ........ 29,500 925,563
Automatic Data
Processing, Inc. ....... 49,800 2,682,975
BMC Software, Inc. + .... 16,800 1,342,950
Ceridian Corp. + ........ 14,600 314,813
Cisco Systems, Inc. + ... 402,300 43,096,387
Computer Associates
International, Inc. .... 44,300 3,098,231
Computer Sciences Corp. + 12,700 1,201,738
Compuware Corp. + ....... 28,400 1,057,900
Eastman Kodak Co. ....... 26,600 1,762,250
Electronic Data Systems
Corp.................... 52,900 3,540,994
EMC Corp. + ............. 109,800 11,995,650
Entrust Technologies,
Inc. + ................. 81,400 4,878,912
First Data Corp. ........ 49,400 2,436,037
Mercury Computer Systems,
Inc. + ................. 200,900 7,031,500
Microsoft Corp. + ....... 553,400 64,609,450
Network Appliance, Inc. + 15,800 1,312,388
Novell, Inc. + .......... 30,700 1,226,081
Oracle Corp. + .......... 118,000 13,223,375
Peregrine Systems, Inc. + 31,600 2,660,325
Pinnacle Systems, Inc. + 40,200 1,635,637
--------------
193,131,856
--------------
DISCRETIONARY RETAIL (4.2%)
AutoZone, Inc. + ........ 15,900 513,769
Bed Bath & Beyond, Inc. + 15,000 521,250
Best Buy Co., Inc. + .... 20,400 1,023,825
Circuit City Stores, Inc. 20,800 937,300
Costco Wholesale Corp. + 24,700 2,253,875
Dayton Hudson Co. ....... 50,000 3,671,875
Dollar General Corp. .... 23,000 523,250
Federated Department
Stores, Inc. + ......... 20,400 1,031,475
Gap, Inc. ............... 99,375 4,571,250
Home Depot, Inc. ........ 238,800 16,372,725
Insight Enterprises,
Inc. +.................. 49,575 2,013,984
See Notes to Portfolio of Investments. 53
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
BALANCED (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES MALUE
------------ --------------
DISCRETIONARY RETAIL (CONTINUED)
Kmart Corp. + ........... 51,000 $ 513,188
Kohl's Corp. + .......... 13,500 974,531
Limited, Inc. ........... 26,100 1,130,456
Lowe's Co., Inc. ........ 40,600 2,425,850
May Department Stores Co. 34,800 1,122,300
Nordstrom, Inc. ......... 15,800 413,763
Regis Corp. ............. 40,800 770,100
Sears, Roebuck & Co. .... 31,500 958,781
Staples, Inc. + ......... 48,600 1,008,450
Tandy Corp. ............. 23,900 1,175,581
TJX Companies, Inc. ..... 46,000 940,125
Tweeter Home
Entertainment Group + .. 80,600 2,861,300
Wal-Mart Stores, Inc. ... 477,500 33,007,188
Zale Corp. + ............ 37,600 1,818,900
--------------
82,555,091
--------------
DIVERSIFIED FINANCIAL SERVICES (1.1%)
American Express Co. .... 33,900 5,635,875
Citigroup Inc. .......... 278,350 15,465,822
Providian Financial Corp. 14,550 1,324,959
--------------
22,426,656
--------------
DRUGS (2.9%)
Allergan, Inc. .......... 15,400 766,150
Alliance Pharmaceutical
Corp. + ................ 150,200 1,107,725
American Home Products
Corp.................... 53,900 2,125,681
Baxter International,
Inc..................... 26,700 1,677,094
Bristol-Myers Squibb Co. 163,800 10,513,913
Columbia Laboratories,
Inc. + ................. 159,900 1,199,250
Johnson & Johnson ....... 114,700 10,681,437
Medicis Pharmaceutical
Corp. + ................ 69,700 2,966,606
Merck & Co., Inc. ....... 96,500 6,471,531
Pfizer, Inc. ............ 415,500 13,477,781
Pharmacia & Upjohn, Inc. 45,100 2,029,500
Schering Plough ......... 60,700 2,560,781
Warner Lambert Co. ...... 35,400 2,900,588
--------------
58,478,037
--------------
ELECTRIC UTILITIES (1.0%)
AES Corp. + ............. 14,500 1,083,875
Ameren Corp. ............ 10,600 347,150
American Electric Power
Co...................... 12,800 411,200
Carolina Power & Light
Co...................... 15,000 456,563
Central & South West
Corp. ++ ............... 18,500 370,000
Cleco Corp. ............. 21,800 698,962
Consolidated Edison, Inc. 24,300 838,350
Constellation Energy
Group................... 15,300 443,700
Dominion Resources, Inc. 19,400 761,450
DTE Energy Co. .......... 21,500 674,562
Duke Energy Corp. ....... 30,500 1,528,812
Edison International Inc. 30,200 790,862
Entergy Corp. ........... 20,000 515,000
FirstEnergy Corp. ....... 15,000 340,313
FPL Group, Inc. ......... 14,500 620,781
GPU, Inc. ............... 12,500 374,219
Independent Energy
Holdings + ............. 77,700 2,588,381
Peco Energy Co. ......... 25,600 889,600
PG&E Corp. .............. 31,700 649,850
PP&L Resources, Inc. .... 17,100 391,163
Public Service Enterprise
Group, Inc. ............ 23,100 804,169
Reliant Energy Inc. ..... 26,300 601,613
Southern Co. ............ 59,600 1,400,600
Texas Utilities Co. ..... 24,000 853,500
Unicom Corp. ............ 18,500 619,750
--------------
19,054,425
--------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.4%)
Lexmark International
Group, Inc. + .......... 14,600 1,321,300
Mettler-Toledo
International, Inc. + .. 43,000 1,642,062
PE Corp-PE Biosystems
Group................... 10,200 1,227,188
Pitney Bowes, Inc. ...... 23,400 1,130,513
Rockwell International
Corp.................... 16,200 775,575
Xerox Corp. ............. 54,800 1,243,275
--------------
7,339,913
--------------
ELECTRONIC MEDIA (1.3%)
CBS Corp. + ............. 58,100 3,714,769
Citadel Communications
Corp. + ................ 38,000 2,465,250
Clear Channel
Communications, Inc. + . 27,900 2,490,075
Comcast Corp. ........... 58,100 2,937,681
International Speedway
Corp.................... 30,300 1,526,363
Mediaone Group, Inc. + .. 50,100 3,848,306
Paxson Communications
Corp. + ................ 244,500 2,918,719
Time Warner, Inc. ....... 48,700 3,527,706
Viacom, Inc. + .......... 42,000 2,538,375
--------------
25,967,244
--------------
FOOD AND BEVERAGE (1.5%)
Anheuser-Busch Co., Inc. 49,900 3,536,662
Archer-Daniels-Midland
Co...................... 19,020 231,806
Beringer Wine Estates
Holdings, Inc. + ....... 35,500 1,415,562
Bestfoods ............... 21,400 1,124,838
Brown-Forman Corp. + .... 7,000 400,750
Campbell Soup Co. ....... 17,700 684,769
Coca-Cola Co. ........... 102,000 5,941,500
Coca-Cola Enterprises,
Inc..................... 35,100 706,388
Conagra, Inc. ........... 41,700 940,856
Coors (Adolph) Co. ...... 5,000 262,500
Fortune Brands, Inc. .... 16,800 555,450
General Mills, Inc. ..... 32,000 1,144,000
Kellogg Co. ............. 31,100 958,269
PepsiCo, Inc. ........... 112,800 3,976,200
Quaker Oats Co. ......... 14,800 971,250
Ralston-Ralston Purina
Group................... 26,400 735,900
Sara Lee Corp. .......... 73,300 1,617,181
Suiza Foods Corp. + ..... 94,000 3,724,750
54 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES MALUE
------------ --------------
FOOD AND BEVERAGE (CONTINUED)
Wrigley (Wm.) Jr. Co. + . 9,300 $ 771,319
--------------
29,699,950
--------------
FOOD AND DRUG RETAIL (0.4%)
Casey's General Stores,
Inc..................... 161,400 1,684,612
CVS Corp. ............... 35,800 1,429,763
Kroger Co. (The) + ...... 77,400 1,460,925
Safeway, Inc. + ......... 21,000 746,813
SUPERVALU, Inc. ......... 16,400 328,000
Sysco Corp. ............. 25,200 996,975
Walgreen Co. ............ 41,400 1,210,950
Winn-Dixie Stores, Inc. . 5,100 122,081
--------------
7,980,119
--------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.7%)
Armstrong World
Industries, Inc. ....... 4,200 140,175
Bemis Co., Inc. ......... 5,500 191,813
Centex Construction
Products, Inc. ......... 39,800 1,552,200
Champion International
Corp.................... 11,100 687,506
Fort James Corp. ........ 18,300 500,962
Georgia-Pacific Corp. ... 17,600 893,200
International Paper Co. . 44,400 2,505,825
Masco Corp. ............. 30,300 768,862
Mead Corp. .............. 10,200 443,063
Potlatch Corp. .......... 66,200 2,954,175
Westvaco Corp. .......... 10,600 345,825
Weyerhaeuser Co. ........ 24,900 1,788,131
Willamette Industries,
Inc..................... 12,900 599,044
--------------
13,370,781
--------------
GAS UTILITIES (0.4%)
Coastal Corp. (The) ..... 18,100 641,419
Columbia Energy Group ... 8,700 550,275
Consolidated Natural Gas
Co...................... 9,300 603,919
El Paso Energy Corp. .... 18,900 733,556
Enron Corp. ............. 47,800 2,121,125
NICOR, Inc. ............. 5,100 165,750
Sempra Energy ........... 20,400 354,450
Southwest Gas Corp. ..... 38,800 892,400
Williams Co., Inc. (The) 32,600 996,337
--------------
7,059,231
--------------
HEALTH SERVICES (0.6%)
Apria Healthcare Group,
Inc. + ................. 209,300 3,754,319
Cardinal Health, Inc. ... 16,300 780,363
Columbia/HCA Healthcare
Corp.................... 43,200 1,266,300
Covance, Inc. + ......... 248,200 2,683,662
IMPATH Inc. + ........... 71,200 1,811,150
IMS Health, Inc. ........ 33,400 908,062
United Healthcare Corp. . 17,000 903,125
--------------
12,106,981
--------------
HEAVY MACHINERY (0.2%)
Cummins Engine Co., Inc. 6,800 328,525
Deere & Co. ............. 19,300 837,137
Manitowoc Co., Inc. (The) 51,300 1,744,200
Navistar International
Corp. + ................ 12,500 592,188
PACCAR, Inc. ............ 12,600 558,338
--------------
4,060,388
--------------
HOUSING AND FURNISHINGS (0.4%)
Centex Corp. ............ 7,800 192,563
Kaufman & Broad Home
Corp.................... 46,900 1,134,394
Maytag Corp. ............ 10,400 499,200
MDC Holdings, Inc. ...... 49,000 768,687
Newell Rubbermaid Inc. .. 23,300 675,700
Ryland Group, Inc. ...... 42,400 977,850
Webb (Del E) Corp. + .... 111,900 2,790,506
Whirlpool Corp. ......... 7,400 481,463
--------------
7,520,363
--------------
INDUSTRIAL SERVICES (0.5%)
Catalytica, Inc. + ...... 198,600 2,693,512
Dycom Industries, Inc. + 26,000 1,145,625
Granite Construction,
Inc..................... 48,100 886,844
Insituform Technologies,
Inc. + ................. 65,900 1,861,675
Jacobs Engineering Group,
Inc. + ................. 26,800 871,000
Newpark Resources, Inc. + 361,600 2,214,800
USA Waste Management,
Inc..................... 25,500 438,281
York Research Corp. + ... 61,800 231,750
--------------
10,343,487
--------------
INSURANCE (1.9%)
AFLAC, Inc. ............. 27,400 1,292,937
Allstate Corp. (The) .... 32,700 784,800
American General Corp. .. 20,200 1,532,675
American International
Group, Inc. ............ 127,750 13,812,969
Aon Corp. ............... 25,200 1,008,000
CIGNA Corp. ............. 15,500 1,248,719
Cincinnati Financial
Corp.................... 16,800 523,950
Conseco, Inc. ........... 30,000 536,250
FBL Financial Group, Inc. 50,800 1,016,000
Gallagher (Arthur J.) &
Co...................... 34,500 2,233,875
Hartford Financial
Services Group, Inc. ... 22,200 1,051,725
Hooper Holmes, Inc. ..... 102,000 2,626,500
Horace Mann Educators
Corp.................... 136,000 2,669,000
Jefferson-Pilot Corp. ... 11,100 757,575
Lincoln National Corp. .. 20,600 824,000
Marsh & McLennan Co.,
Inc..................... 20,100 1,923,319
MBIA, Inc. .............. 11,100 586,219
MGIC Investment Corp. ... 9,700 583,819
Radian Group Inc. ....... 23,300 1,112,575
St. Paul Co., Inc. ...... 8,030 270,510
Torchmark Corp. ......... 13,200 383,625
Triad Guaranty, Inc. + .. 34,800 791,700
--------------
37,570,742
--------------
INVESTMENT SERVICES (1.0%)
Bear Stearns Co., Inc.
(The)................... 4,079 174,377
Charles Schwab Corp. .... 101,600 3,898,900
Duff & Phelps Credit
Rating Co. ............. 18,800 1,672,025
See Notes to Portfolio of Investments. 55
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
BALANCED (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES MALUE
------------ --------------
INVESTMENT SERVICES (CONTINUED)
Franklin Resources, Inc. 8,800 $ 282,150
Lehman Brothers Holdings
Inc..................... 13,400 1,134,812
Merrill Lynch & Co., Inc. 35,100 2,930,850
Morgan Stanley Dean
Witter & Co. ........... 59,800 8,536,450
Paine Webber Group Inc. . 17,800 690,863
--------------
19,320,427
--------------
MAJOR TELECOMMUNICATIONS (3.7%)
ALLTEL Corp. ............ 30,300 2,505,431
AT&T Corp. .............. 253,800 12,880,350
Bell Atlantic Corp. ..... 128,100 7,886,156
BellSouth Corp. ......... 155,500 7,279,344
CenturyTel, Inc. ........ 15,600 739,050
GTE Corp. ............... 80,900 5,708,506
MCI Worldcom, Inc. + .... 304,650 16,165,491
Nextel Communications,
Inc. + ................. 37,000 3,815,625
SBC Communications, Inc. 141,296 6,888,180
Sprint Corp. ............ 62,000 4,173,375
Sprint PCS + ............ 46,100 4,725,250
U.S. WEST, Inc. ......... 20,875 1,503,000
--------------
74,269,758
--------------
MISCELLANEOUS METALS (0.0%)
Phelps Dodge Corp. ...... 6,500 436,313
--------------
OIL (2.8%)
Amerada Hess Corp. ...... 9,700 550,475
Apache Corp. ............ 12,200 450,638
Ashland Oil, Inc. ....... 12,300 405,131
Atlantic Richfield Co. .. 40,000 3,460,000
Burlington Resources,
Inc..................... 13,600 449,650
Chevron Corp. ........... 54,100 4,686,412
Conoco Inc. ............. 32,900 818,388
Exxon Mobil Corp. ....... 282,613 22,768,036
Kerr-McGee Corp. ........ 9,300 576,600
Occidental Petroleum
Corp.................... 26,800 579,550
Phillips Petroleum Co. .. 27,300 1,283,100
Royal Dutch Petroleum Co. 169,400 10,238,112
Texaco, Inc. ............ 41,000 2,226,813
Union Pacific Resources
Group Inc. ............. 193,100 2,462,025
Unocal Corp. ............ 20,100 674,606
USX-Marathon Group ...... 25,600 632,000
Valero Energy Corp. ..... 106,600 2,118,675
Vintage Petroleum, Inc. + 100,800 1,215,900
--------------
55,596,111
--------------
OIL SERVICES (0.9%)
Baker Hughes, Inc. ...... 13,600 286,450
BJ Services Co. + ....... 71,100 2,972,869
Halliburton Co. ......... 33,900 1,364,475
Marine Drilling
Companies, Inc. + ...... 282,900 6,347,569
McDermott International,
Inc., ADR .............. 368,600 3,340,437
Schlumberger, Ltd. ...... 45,100 2,536,875
Transocean Sedco Forex
Inc..................... 8,749 294,745
--------------
17,143,420
--------------
OTHER TELECOMMUNICATIONS (0.3%)
CapRock Communications
Corp. + ................ 68,500 2,221,969
Convergent
Communications, Inc. + . 15,000 238,125
Global Crossing Holdings
Ltd. + ................. 63,165 3,158,250
GRIC Communications, Inc.
+....................... 7,800 197,925
Tritel, Inc. + .......... 15,500 491,156
--------------
6,307,425
--------------
PRINT MEDIA (0.7%)
Dun & Bradstreet Corp. .. 7,200 212,400
Equifax, Inc. ........... 6,000 141,375
Factset Research Systems,
Inc. + ................. 16,800 1,337,700
Gannett Co., Inc. ....... 25,700 2,096,156
Knight-Ridder, Inc. ..... 9,100 541,450
McGraw-Hill Co., Inc. ... 17,800 1,096,925
Meredith Corp. .......... 64,500 2,688,844
New York Times Co. ...... 16,100 790,912
Reader's Digest
Association, Inc. (The) 77,800 2,275,650
Scholastic Corp. + ...... 14,500 901,719
Times Mirror Co. ........ 9,800 656,600
Tribune Co. ............. 20,800 1,145,300
--------------
13,885,031
--------------
PRODUCER GOODS (1.9%)
Allegheny Technologies
Incorporated............ 9,300 208,669
Avery Dennison Corp. .... 12,100 881,787
C&D Technologies, Inc. .. 40,300 1,712,750
Cooper Industries, Inc. . 11,300 456,944
Corning, Inc. ........... 28,200 3,636,037
Danaher Corp. ........... 14,800 714,100
Dover Corp. ............. 6,800 308,550
Ecolab, Inc. ............ 13,400 524,275
Emerson Electric Co. .... 37,800 2,168,775
FMC Corp. + ............. 3,900 223,519
Honeywell International
Inc..................... 72,188 4,164,316
Illinois Tool Works, Inc. 24,400 1,648,525
Ingersoll-Rand Co. ...... 20,950 1,153,559
ITT Industries, Inc. .... 12,100 404,594
Kafus Environmental
Industries Ltd. + ...... 46,200 412,913
Lincoln Electric
Holdings, Inc. ......... 36,100 744,563
Minnesota Mining and
Manufacturing Co. ...... 31,900 3,122,212
Mueller Industries, Inc.
+....................... 43,400 1,573,250
Pall Corp. .............. 10,100 217,781
Parker-Hannifin Corp. ... 9,200 472,075
PPG Industries, Inc. .... 14,300 894,644
Shaw Group, Inc. + ...... 119,700 3,029,906
Sherwin-Williams Co. .... 18,800 394,800
Spartech Corp. .......... 57,700 1,860,825
Thomas & Betts Corp. .... 5,500 175,313
Tyco International Ltd. . 178,240 6,929,080
--------------
38,033,762
--------------
SEMICONDUCTORS AND ELECTRONICS (6.7%)
Adaptec, Inc. + ......... 12,300 613,463
ADC Telecommunications,
Inc. + ................. 15,700 1,139,231
56 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES MALUE
------------ --------------
Analog Devices, Inc. + .. 18,700 $ 1,739,100
Applied Materials, Inc. + 43,600 5,523,575
Comverse Technology,
Inc. +.................. 8,800 1,273,800
Cree Research, Inc. + ... 79,200 6,761,700
Dallas Semiconductor
Corp.................... 63,300 4,078,894
ECtel Ltd. + ............ 95,500 1,742,875
ESS Technology, Inc. + .. 167,500 3,716,406
Flextronics International
Ltd. + ................. 68,200 3,137,200
General Instrument
Corp. +................. 14,600 1,241,000
Intel Corp. ............. 137,000 11,276,812
KLA Instruments Corp. + . 10,200 1,136,025
L-3 Communications
Holdings, Inc. + ....... 45,400 1,889,775
LSI Logic Corp. + ....... 16,700 1,127,250
Lucent Technologies, Inc. 257,720 19,280,677
Micron Technology, Inc. + 20,000 1,555,000
Motorola, Inc. .......... 70,000 10,307,500
MRV Communications,
Inc. +.................. 58,300 3,665,613
National Semiconductor
Corp. + ................ 16,900 723,531
Nortel Networks Corp. ... 145,700 14,715,700
Plexus Corp. + .......... 25,100 1,104,400
QUALCOMM Inc. + ......... 79,600 14,019,550
Scientific-Atlanta, Inc. 8,800 489,500
Solectron Corp. + ....... 30,800 2,929,850
Tellabs, Inc. + ......... 44,400 2,849,925
Teradyne, Inc. + ........ 18,300 1,207,800
Texas Instruments, Inc. . 97,200 9,416,250
Transwitch Corp. + ...... 49,400 3,584,588
Xilinx, Inc. + .......... 39,400 1,791,469
--------------
134,038,459
--------------
SPECIALTY CHEMICALS (0.0%)
Engelhard Corp. ......... 10,600 200,075
Grace (W.R.) & Co. + .... 7,200 99,900
Praxair, Inc. ........... 5,900 296,844
Sigma-Aldrich Corp. ..... 10,100 303,631
--------------
900,450
--------------
STEEL (0.0%)
Nucor Corp. ............. 9,100 498,794
--------------
SURFACE TRANSPORT (0.3%)
Burlington Northern Santa
Fe Corp. ............... 36,100 875,425
CSX Corp. ............... 18,000 564,750
Kansas City Southern
Industries, Inc. ....... 13,100 977,588
Roadway Express, Inc. ... 97,000 2,097,625
Union Pacific Corp. ..... 19,600 855,050
--------------
5,370,438
--------------
TEXTILES AND APPAREL (0.1%)
Liz Claiborne, Inc. ..... 12,100 455,263
Nike, Inc. .............. 14,600 723,612
VF Corp. ................ 13,000 390,000
--------------
1,568,875
--------------
TOTAL COMMON STOCKS (COST $906,533,725) 1,215,987,618
--------------
PREFERRED STOCKS (0.1%)
Seagram Co. Ltd. (Food
and Beverage) .......... 32,700 1,469,456
--------------
TOTAL PREFERRED STOCKS (COST $1,632,934) 1,469,456
--------------
NUMBER OF
CONTRACTS
--------------
CALL OPTIONS PURCHASED (0.0%)
Euro Currency Index,
Strike $1.035,
Feb. 00 ................ 6,160 57,652
--------------
TOTAL CALL OPTIONS PURCHASED (COST $94,975) 57,652
--------------
PRINCIPAL AMOUNT
----------------
LONG-TERM BONDS AND NOTES (33.4%)
CORPORATE BONDS (7.3%)
ABN AMRO Bank
NV,7.55%,06/28/06....... $ 1,660,000 1,653,958
Ahold Finance USA
Inc.,6.25%,05/01/09..... 2,270,000 2,034,238
Alliant Energy Resources
Corp.,7.38%,11/09/09.... 1,485,000 1,443,191
Atlantic Richfield
Co.,5.90%,04/15/09...... 2,000,000 1,814,780
Bank of America
Corp.,5.75%,03/01/04.... 1,235,000 1,170,459
BankBoston
N.A.,7.38%,09/15/06..... 3,000,000 2,973,720
Bombardier Capital
Inc.,7.30%,12/15/02..... 2,660,000 2,648,615
Capital Auto Receivables
Asset
Trust,6.30%,05/15/04.... 9,650,000 9,584,033
Capital Auto Receivables
Asset
Trust,6.45%,01/15/05.... 2,500,000 2,473,730
Chemical Master Credit
Card
Trust,7.09%,02/15/09.... 9,705,000 9,580,582
Chesapeake Energy
Corp.,9.63%,05/01/05.... 2,095,000 1,990,250
Cilcorp,
Inc.,8.70%,10/15/09..... 3,805,000 3,842,274
CIT Group Holdings,
Inc.,7.13%,10/15/04..... 3,230,000 3,202,448
Conoco
Inc.,5.90%,04/15/04..... 5,150,000 4,916,550
Cooper Tire & Rubber
Co.,7.75%,12/15/09...... 2,210,000 2,150,993
DaimlerChrysler NA
Holdings
Inc.,7.20%,09/01/09..... 2,679,000 2,630,258
Discover Card Master
Trust I,6.85%,07/17/07 . 3,000,000 2,947,031
Dow Chemical
Co.,7.38%,11/01/29...... 1,335,000 1,276,928
Eastman Kodak
Co.,6.50%,08/15/01...... 3,300,000 3,276,372
Edison International
Inc.,6.88%,09/15/04..... 2,590,000 2,536,102
El Paso Energy
Corp.,6.63%,07/15/01.... 2,525,000 2,499,450
ERAC USA Finance
Co.,6.95%,03/01/04 ++ .. 1,572,000 1,519,762
Ford Motor Credit
Corp.,7.38%,10/28/09.... 6,100,000 6,022,225
Fortune Brands,
Inc.,6.63%,07/15/28..... 2,900,000 2,451,382
GTE Corp.,6.70%,09/01/09 5,500,000 5,224,395
Kaman
Corp.,6.00%,03/15/12.... 701,000 630,900
Liberty Media Group
Corp.,7.88%,07/15/09.... 1,900,000 1,891,391
Lockheed Martin
Corp.,8.20%,12/01/09.... 3,110,000 3,094,450
MBNA Master Credit Card
Trust,6.40%,01/18/05.... 16,000,000 15,824,000
Metromedia Fiber
Network,10.00%,12/15/09. 310,000 316,975
See Notes to Portfolio of Investments. 57
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
BALANCED (CONTINUED)
================================================================================
PRINCIPAL MARKET
AMOUNT VALUE
-------------- --------------
CORPORATE BONDS (CONTINUED)
Norwest Financial,
Inc.,5.38%,09/30/03..... $ 3,000,000 $ 2,826,540
Nuevo Grupo Iusacell
SA,14.25%,12/01/06 2,800,000 2,912,000
Pepsi Bottling Holdings
Inc.,5.63%,02/17/09..... 3,250,000 2,863,803
Petroleum
Geo-Services,7.50%,03/31/07 2,080,000 2,033,429
Quebec Province
Co.,5.75%,02/15/09...... 5,500,000 4,882,240
Quebec Province
Co.,7.50%,09/15/29...... 2,870,000 2,782,092
Raytheon
Co.,6.75%,08/15/07...... 2,550,000 2,378,972
Telewest
Plc,11.00%,10/01/07..... 1,780,000 1,655,400
Texaco Capital,
Inc.,5.50%,01/15/09..... 3,300,000 2,894,463
Textron Financial
Corp.,7.13%,12/09/04.... 3,925,000 3,877,743
Tyco International Group
SA,6.38%,06/15/05....... 3,740,000 3,506,530
U.S. West Communications
Group,7.20%,11/01/04.... 2,815,000 2,793,212
United Technologies
Corp.,7.50%,09/15/29 5,000,000 4,894,235
USA Waste Management,
Inc.,6.88%,05/15/09..... 1,460,000 1,230,196
--------------
TOTAL CORPORATE BONDS (COST $148,650,728) 145,152,297
--------------
FOREIGN AND SUPRANATIONALS (0.4%)
African Development
Bank,8.80%,09/01/19..... 7,000,000 7,864,570
--------------
TOTAL FOREIGN AND SUPRANATIONALS
(COST $7,088,938) 7,864,570
--------------
FOREIGN OBLIGATIONS (2.5%)
Bundesobligation,Zero
Coupon,11/26/04......... 20,500,000 20,137,114
Republic of
Deutschland,Zero
Coupon,07/04/09......... 26,100,000 24,600,487
Treasury Inflation Index
of India,Zero
Coupon,01/15/09......... 4,545,000 4,503,812
--------------
TOTAL FOREIGN OBLIGATIONS (COST $51,033,446) 49,241,413
--------------
NON-AGENCY MORTGAGE-BACKED SECURITIES (0.2%)
DLJ Mortgage Acceptance
Corp.,8.10%,06/18/04.... 4,650,000 4,105,805
--------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(COST $4,650,000) 4,105,805
--------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (10.6%)
Federal National Mortgage
Association,6.50%,11/01/28-08/01/29 22,063,906 20,792,013
Federal National Mortgage
Association,6.63%,09/15/09 27,289,000 26,495,627
Federal National Mortgage
Association,7.00%,11/01/29 12,979,487 12,549,477
Federal National Mortgage
Association,7.00%,
01/25/30 #.............. 13,500,000 13,052,880
Federal National Mortgage
Association,8.50%,11/01/23-12/01/29 18,726,009 19,269,315
Federal National Mortgage
Association,9.50%,10/01/16 7,306,858 7,777,417
Government National
Mortgage
Association,6.00%,11/20/29-01/15/30 9,980,000 9,882,323
Government National
Mortgage
Association,6.38%,04/20/28 3,435,694 3,445,127
Government National
Mortgage
Association,6.50%,10/20/28 22,029,288 20,604,434
Government National
Mortgage
Association,6.50%,
01/26/30 #.............. 7,030,000 7,037,689
Government National
Mortgage
Association,7.00%,09/15/24-11/15/24 17,187,806 16,743,026
Government National
Mortgage
Association,7.50%,12/15/23 32,495,208 32,343,703
Government National
Mortgage
Association,8.00%,12/15/23-07/15/24 21,075,837 21,399,504
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES (COST $216,709,050) 211,392,535
--------------
U.S. GOVERNMENT OBLIGATIONS (12.4%)
U.S. Treasury
Note,5.25%,02/15/29..... 43,031,000 35,581,043
U.S. Treasury
Note,5.50%,07/31/01-08/31/01 107,308,000 106,146,301
U.S. Treasury
Note,6.00%,08/15/04 * .. 48,539,000 47,780,336
U.S. Treasury
Note,6.00%,08/15/09..... 37,015,000 35,858,281
U.S. Treasury
Note,5.88%,10/31/01-11/15/04 6,745,000 6,685,996
U.S. Treasury
Note,6.13%,08/15/29..... 10,000,000 9,532,800
U.S. Treasury
Note,8.13%,08/15/21..... 4,300,000 4,931,541
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $250,282,061) 246,516,298
--------------
TOTAL LONG-TERM BONDS AND NOTES
(COST $678,414,223) 664,272,918
--------------
SHORT-TERM INVESTMENTS (6.6%)
Central & South West
Corp.,6.30%,01/12/00.... 10,000,000 9,985,500
Cooperative Associates of
Tractor Dealers,
Inc.,5.26%,01/06/00..... 20,000,000 19,991,233
Dana Credit
Corp.,7.50%,01/13/00.... 20,000,000 19,958,333
Detroit Edison
Co.,6.72%,01/28/00 * ... 10,000,000 10,000,000
Enron
Corp.,8.07%,01/10/00.... 20,000,000 19,968,617
Federal Home Loan
Bank,1.50%,01/03/00..... 9,799,000 9,799,000
Lockheed Martin
Corp.,7.10%,01/18/00.... 15,000,000 14,955,625
Merrill Lynch & Co.,
Inc.,5.55%,01/24/00..... 10,565,000 10,530,796
U.S. Treasury
Bill,4.86%,02/17/00 @ .. 1,600,000 1,590,283
Wheels
Inc.,7.50%,01/04/00 /+/ 15,000,000 14,996,875
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $131,775,012) 131,776,262
--------------
TOTAL INVESTMENTS (COST $1,718,450,869)(A) 2,013,563,906
OTHER ASSETS LESS LIABILITIES (25,441,736)
--------------
TOTAL NET ASSETS $1,988,122,170
==============
58 See Notes to Portfolio of Investments.
<PAGE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$1,725,476,709. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains.................................. $340,386,921
Unrealized losses................................. (52,299,724)
------------
Net unrealized gain.............................. $288,087,197
============
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- --------------------- ----------- ------------- ------------ ---------------
Russell 2000 Index 93 $ 23,712,675 Mar 00 $ 1,659,856
Futures............. ============= ===============
+ Non-income producing security.
/+/ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Trustees.
++ 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.
# When-issued or delayed delivery security. The cost of the total
when-issued or delayed delivery securities is $20,119,111.
* Segregated securities for purchases of delayed delivery or when-issued
securities held at December 31, 1999.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
Acquisition date and cost concerning illiquid securities at December 31, 1999
is shown below:
ACQUISITION
DATE COST
---------------------- -----------------
Wheels Inc................... 12/28/99 $ 14,996,875
=================
The market value of the total illiquid securities above is $14,996,875 which
represents 0.75% of the total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 59
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
GROWTH AND INCOME
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
COMMON STOCKS (95.2%)
UNITED STATES (89.6%)
AIR TRANSPORT (0.3%)
America West Holdings Corp. + ..... 42,300 $ 877,725
Delta Air Lines, Inc. ............. 535,301 26,664,676
United Parcel Service, Inc. ....... 64,200 4,429,800
---------------
31,972,201
---------------
ALUMINUM (0.2%)
Alcoa Inc. ........................ 200,000 16,600,000
---------------
AUTO PARTS AND HARDWARE (0.3%)
Audiovox Corp. + .................. 55,600 1,681,900
Black & Decker Corp. .............. 548,200 28,643,450
Cooper Tire & Rubber Co. .......... 163,800 2,549,138
---------------
32,874,488
---------------
AUTOMOTIVE (1.2%)
Delphi Automotive Systems Corp. ... 1,318,671 20,769,068
Ford Motor Co. .................... 1,205,900 64,440,281
General Motors Corp. + ............ 176,400 12,822,075
Johnson Controls, Inc. ............ 297,700 16,931,688
Monaco Coach Corp. + .............. 16,900 432,006
TRW, Inc. ......................... 158,400 8,226,900
---------------
123,622,018
---------------
BANKS AND THRIFTS (3.8%)
AmSouth Bancorporation ............ 171,383 3,309,834
Astoria Financial Corp. ........... 238,700 7,265,431
Bank of America Corp. ............. 918,000 46,072,125
Bank of New York Co., Inc. ........ 28,000 1,120,000
Bank One Corp. .................... 262,000 8,400,375
Bank United Corp. ................. 10,700 291,575
Chase Manhattan Corp. ............. 855,100 66,430,581
Comerica, Inc. .................... 310,500 14,496,469
Dime Bancorp, Inc. ................ 237,800 3,596,725
Downey Financial Corp. ............ 25,900 522,856
Fifth Third Bancorp ............... 507,200 37,215,800
First Union Corp. ................. 290,400 9,528,750
FirstFed Financial Corp. + ........ 202,500 2,847,656
Fleet Boston Financial Corp. ...... 148,000 5,152,250
Golden State Bancorp, Inc. + ...... 156,800 2,704,800
Golden West Financial Corp. ....... 1,746,300 58,501,050
J.P. Morgan & Co. ................. 249,300 31,567,613
PNC Bank Corp. .................... 98,200 4,369,900
Republic New York Corp. ........... 248,800 17,913,600
SouthTrust Corp. .................. 219,000 8,280,938
UnionBanCal Corp. ................. 82,700 3,261,481
Wells Fargo & Co. ................. 1,128,100 45,617,544
---------------
378,467,353
---------------
BIOTECH AND MEDICAL PRODUCTS (1.1%)
Amgen, Inc. + ..................... 733,600 44,061,850
Bard (C.R.) Inc. .................. 141,100 7,478,300
Bio-Rad Labs, Inc. + .............. 54,600 1,276,275
Biogen, Inc. + .................... 55,600 4,698,200
Chiron Corp. + .................... 106,000 4,491,750
Datascope Corp. + ................. 99,800 3,992,000
Hanger Orthopedic Group, Inc. + ... 164,500 1,645,000
IDEC Pharmaceuticals Corp. + ...... 17,600 1,729,200
Invitrogen Corporation + .......... 32,800 1,968,000
Liposome Co., Inc. + .............. 34,600 422,228
Mallinckrodt Inc. ................. 216,400 6,884,225
MedImmune, Inc. + ................. 27,700 4,594,737
Medtronic, Inc. + ................. 321,400 11,711,012
Mentor Corp. ...................... 10,000 258,125
Millennium Pharmaceuticals, Inc. + 20,100 2,452,200
Ocular Sciences, Inc. + ........... 49,500 934,313
PolyMedica Corp. + ................ 36,500 844,063
ResMed Inc. + ..................... 69,900 2,918,325
Techne Corporation + .............. 57,701 3,177,138
Varian, Inc. + .................... 67,900 1,527,750
---------------
107,064,691
---------------
CHEMICALS (0.5%)
Dow Chemical Co. .................. 130,600 17,451,425
Du Pont (E.I.) de Nemours ......... 403,700 26,593,738
Monsanto Co. ...................... 7,000 249,375
---------------
44,294,538
---------------
COMMERCIAL SERVICES (0.1%)
Catalina Marketing Corp. + ........ 8,300 960,725
Concord EFS, Inc. + ............... 46,100 1,187,075
Deluxe Corp. ...................... 49,900 1,369,131
Dendrite International, Inc. + .... 39,450 1,336,369
Galileo International, Inc. ....... 50,400 1,508,850
Herman Miller, Inc. ............... 14,300 328,900
Interim Services, Inc. + .......... 30,900 764,775
Modis Professional Services + ..... 119,100 1,697,175
Navigant Consulting, Inc. + ....... 56,000 609,000
Valassis Communications, Inc. + ... 23,800 1,005,550
---------------
10,767,550
---------------
COMPUTERS (4.5%)
Apple Computer, Inc. + ............ 366,800 37,711,625
Compaq Computer Corp. ............. 416,000 11,258,000
Dell Computer Corp. + ............. 1,316,000 67,116,000
Gateway, Inc. + ................... 401,100 28,904,269
Harmonic Inc. + ................... 235,700 22,376,769
Hewlett Packard Co. ............... 501,700 57,162,444
International Business Machines
Corp.............................. 1,100,000 118,800,000
Micron Electronics, Inc. + ........ 39,700 441,663
NCR Corp. + ....................... 19,300 730,987
Sun Microsystems, Inc. + .......... 1,390,600 107,684,587
---------------
452,186,344
---------------
CONGLOMERATE AND AEROSPACE (4.7%)
Boeing Co. ........................ 816,200 33,923,312
60 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
UNITED STATES (CONTINUED)
CONGLOMERATE AND AEROSPACE (CONTINUED)
Cordant Technologies, Inc. ........ 47,300 $ 1,560,900
General Dynamics Corp. ............ 494,200 26,069,050
General Electric Co. .............. 2,208,300 341,734,425
Loews Corp. ....................... 308,600 18,728,163
Northrop Grumman Corp. ............ 20,500 1,108,281
Textron, Inc. ..................... 136,800 10,490,850
United Technologies Corp. ......... 510,700 33,195,500
---------------
466,810,481
---------------
CONSUMER FINANCE (0.9%)
Crescent Operating, Inc. + ........ 5,900 16,225
Freddie Mac Corp. ................. 500,000 23,531,250
Federal National Mortgage
Association....................... 1,022,700 63,854,831
---------------
87,402,306
---------------
CONSUMER PRODUCTS (1.8%)
Church & Dwight Co., Inc. ......... 192,100 5,126,668
Colgate-Palmolive Co. ............. 47,000 3,055,000
Gillette Co. ...................... 98,500 4,056,969
Kimberly-Clark Corp. .............. 705,100 46,007,775
Procter & Gamble Co. .............. 1,148,400 125,821,575
---------------
184,067,987
---------------
CONSUMER SERVICES (1.3%)
Apollo Group, Inc. + .............. 16,100 323,006
Applebee's International, Inc. .... 28,100 828,950
Brinker International, Inc. + ..... 93,800 2,251,200
Carnival Corp. .................... 515,000 24,623,437
Darden Restaurants, Inc. .......... 1,517,700 27,508,312
E-Stamp Corp. + ................... 72,800 1,619,800
Electronic Arts, Inc. + ........... 15,200 1,276,800
H&R Block, Inc. ................... 183,300 8,019,375
Hollywood Park, Inc. + ............ 139,300 3,125,544
Jack in the Box Inc. + ............ 89,900 1,859,806
Lakes Gaming, Inc. + .............. 246,850 1,959,372
Mandaley Resort Group + ........... 61,300 1,233,663
McDonald's Corp. .................. 543,500 21,909,844
MGM Grand, Inc. + ................. 85,400 4,296,687
National R.V. Holdings, Inc. + .... 165,450 3,184,913
Papa John's International, Inc. + . 37,400 974,738
Park Place Entertainment Corp. + .. 583,800 7,297,500
Sonic Corp. + ..................... 100,150 2,854,275
Sotheby's Holdings, Inc. .......... 91,600 2,748,000
Tricon Global Restaurants, Inc. + . 322,900 12,472,012
WMS Industries, Inc. + ............ 27,000 354,375
---------------
130,721,609
---------------
CONSUMER SPECIALTIES (0.0%)
JAKKS Pacific, Inc. + ............. 69,500 1,298,781
Russ Berrie & Co., Inc. ........... 70,200 1,842,750
Topps Co., Inc. + ................. 98,700 1,024,013
---------------
4,165,544
---------------
DATA AND IMAGING SERVICES (17.1%)
3Com Corp. + ...................... 133,000 6,251,000
America Online, Inc. + ............ 1,710,400 129,028,300
American Management Systems, Inc. + 26,200 822,025
Ancor Communications, Inc. + ...... 11,400 773,775
Automatic Data Processing, Inc. ... 25,000 1,346,875
BEA Systems, Inc. + ............... 400,000 27,975,000
BMC Software, Inc. + .............. 35,700 2,853,769
BroadVision, Inc. + ............... 174,200 29,624,887
Cisco Systems, Inc. + ............. 2,564,500 274,722,062
Citrix Systems, Inc. + ............ 21,200 2,607,600
Clarify, Inc. + ................... 15,100 1,902,600
Cognizant Technology Solutions
Corp. + .......................... 3,000 327,938
Computer Associates International,
Inc............................... 188,300 13,169,231
Compuware Corp. + ................. 390,800 14,557,300
Concord Communications, Inc. + .... 21,100 936,313
CSG Systems International, Inc. + . 330,900 13,194,638
DSP Group, Inc. + ................. 9,400 874,200
eBay Inc. + ....................... 8,800 1,101,650
Electronic Data Systems Corp. ..... 613,800 41,086,237
Electronics for Imaging, Inc. + ... 72,300 4,202,438
EMC Corp. + ....................... 773,200 84,472,100
Emulex Corp. + .................... 179,400 20,182,500
Extreme Networks, Inc. + .......... 32,000 2,672,000
F.Y.I. Incorporated + ............. 15,000 510,000
F5 Networks, Inc. + ............... 38,600 4,400,400
FileNet Corp. + ................... 34,400 877,200
First Data Corp. .................. 759,600 37,457,775
Go2Net, Inc. + .................... 210,800 18,339,600
Hyperion Solutions Corp. + ........ 14,700 639,450
In Focus Systems, Inc. + .......... 33,700 781,419
InfoSpace.com, Inc. + ............. 150,000 32,100,000
Intuit Inc. + ..................... 473,000 28,350,437
Legato Systems, Inc. + ............ 34,000 2,339,625
Macromedia, Inc. + ................ 6,700 489,938
Mercury Computer Systems, Inc. + .. 31,200 1,092,000
Mercury Interactive Corp. + ....... 220,600 23,811,012
Micromuse Inc. + .................. 100,000 17,000,000
Microsoft Corp. + ................. 3,961,700 462,528,475
Mindspring Enterprises, Inc. + .... 19,300 509,641
National Computer Systems, Inc. ... 5,400 203,175
Network Appliance, Inc. + ......... 363,400 30,184,912
Network Solutions, Inc. + ......... 159,300 34,657,706
Oracle Corp. + .................... 873,800 97,920,212
Portal Software, Inc. + ........... 175,200 18,023,700
QLogic Corp. + .................... 166,800 26,667,150
Rational Software Corp. + ......... 19,300 948,113
Razorfish Inc. + .................. 218,600 20,794,325
RealNetworks, Inc. + .............. 120,900 14,545,781
Remedy Corp. + .................... 24,500 1,160,688
Sapient Corp. + ................... 8,200 1,155,688
SEI Co. ........................... 7,400 880,716
SERENA Software, Inc. + ........... 17,900 553,781
See Notes to Portfolio of Investments. 61
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
GROWTH AND INCOME (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
UNITED STATES (CONTINUED)
DATA AND IMAGING SERVICES (CONTINUED)
Siebel Systems, Inc. + ............ 60,000 $ 5,040,000
Sterling Software, Inc. + ......... 114,400 3,603,600
Sybase, Inc. + .................... 463,300 7,876,100
Symantec Corp. + .................. 383,700 22,494,412
TSI International Software Ltd. + . 9,700 549,263
Unify Corp. + ..................... 29,000 793,875
USWeb Corporation + ............... 413,600 18,379,350
VeriSign, Inc. + .................. 160,000 30,550,000
VERITAS Software Corp. + .......... 185,700 26,578,312
Verity, Inc. + .................... 12,400 527,775
Whittman-Hart, Inc. + ............. 28,300 1,517,588
Xircom, Inc. + .................... 31,900 2,392,500
Yahoo! Inc. + ..................... 102,700 44,437,006
---------------
1,718,347,138
---------------
DISCRETIONARY RETAIL (5.3%)
Abercrombie & Fitch Co. + ......... 76,400 2,038,925
American Eagle Outfitters, Inc. + . 47,500 2,137,500
Cato Corp. (The) .................. 178,600 2,254,825
CDW Computer Centers, Inc. + ...... 29,200 2,295,850
Costco Wholesale Corp. + .......... 196,700 17,948,875
CSK Auto Corp. + .................. 120,000 2,100,000
Dayton Hudson Co. ................. 332,900 24,447,344
Dollar Tree Stores, Inc. + ........ 23,200 1,123,750
Federated Department Stores, Inc. + 549,500 27,784,094
Footstar, Inc. + .................. 51,600 1,573,800
Gap, Inc. ......................... 1,182,975 54,416,850
Home Depot, Inc. .................. 1,278,785 87,676,662
Insight Enterprises, Inc. + ....... 43,800 1,779,375
InterTAN, Inc. + .................. 60,400 1,577,950
Kohl's Corp. + .................... 120,600 8,705,812
Land's End, Inc. + ................ 25,700 893,075
Lowe's Co., Inc. .................. 775,900 46,360,025
Micro Warehouse, Inc. + ........... 19,500 360,750
Musicland Stores Corp. + .......... 526,600 4,443,188
Office Depot, Inc. + .............. 337,100 3,687,031
PC Connection, Inc. + ............ 18,600 641,700
The Limited, Inc. ................. 115,500 5,002,594
Wal-Mart Stores, Inc. ............. 3,300,900 228,174,712
---------------
527,424,687
---------------
DIVERSIFIED FINANCIAL SERVICES (2.2%)
American Express Co. .............. 189,200 31,454,500
Citigroup Inc. .................... 2,808,200 156,030,612
Providian Financial Corp. ......... 351,900 32,044,894
---------------
219,530,006
---------------
DRUGS (5.9%)
Abbott Laboratories ............... 531,000 19,281,938
American Home Products Corp. ...... 560,600 22,108,663
Andrx Corp. + ..................... 180,500 7,637,406
Bristol-Myers Squibb Co. .......... 1,652,000 106,037,750
Eli Lilly & Co. ................... 496,000 32,984,000
Johnson & Johnson ................. 959,800 89,381,375
Jones Medical Industries, Inc. .... 80,900 3,514,094
King Pharmaceuticals, Inc. + ...... 23,400 1,311,863
Medicis Pharmaceutical Corp. + .... 79,700 3,392,231
Merck & Co., Inc. ................. 1,740,100 116,695,456
Perrigo Co. + ..................... 184,600 1,476,800
Pfizer, Inc. ...................... 2,661,500 86,332,406
Schering Plough ................... 735,900 31,045,781
Warner Lambert Co. ................ 858,200 70,318,762
---------------
591,518,525
---------------
ELECTRIC UTILITIES (0.5%)
Allegheny Energy, Inc. ............ 7,300 196,644
Cleco Corp. ....................... 68,700 2,202,694
Conectiv, Inc. .................... 130,800 2,199,075
Edison International Inc. ......... 330,900 8,665,443
Entergy Corp. ..................... 322,500 8,304,375
Florida Progress Corp. ............ 100,000 4,231,250
Minnesota Power, Inc. ............. 100,800 1,707,300
OGE Energy Corp. .................. 119,100 2,262,900
Peco Energy Co. ................... 152,700 5,306,325
Potomac Electric Power Co. ........ 22,900 525,269
Public Service Enterprise Group,
Inc............................... 196,400 6,837,175
Puget Sound Energy, Inc. .......... 22,300 432,062
SIGCORP, Inc. ..................... 115,500 2,627,625
United Illuminating Co. ........... 13,600 698,700
---------------
46,196,837
---------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.2%)
Rockwell International Corp. ...... 123,300 5,902,988
Waters Corp. + .................... 195,700 10,372,100
Zomax Inc. + ...................... 8,600 389,150
---------------
16,664,238
---------------
ELECTRONIC MEDIA (1.8%)
CBS Corp. + ....................... 413,319 26,426,584
Citadel Communications Corp. + .... 27,500 1,784,063
Clear Channel Communications,
Inc. +............................ 378,200 33,754,350
Comcast Corp. ..................... 84,000 4,247,250
Entercom Communications Corp. + ... 91,800 6,058,800
Hispanic Broadcasting Corp. + ..... 8,300 765,416
Infinity Broadcasting Corp. + ..... 31,500 1,139,906
Mediaone Group, Inc. + ............ 630,900 48,461,006
Pixar, Inc. + ..................... 79,800 2,822,925
Time Warner, Inc. ................. 619,000 44,838,812
Univision Communications, Inc. + .. 40,000 4,087,500
Viacom, Inc. + .................... 9,500 574,156
Walt Disney Co. (The) + ........... 215,200 6,294,600
---------------
181,255,368
---------------
FOOD AND BEVERAGE (1.6%)
Anheuser-Busch Co., Inc. .......... 243,900 17,286,412
Canandiagua Brands, Inc. + ........ 43,100 2,198,100
Coca-Cola Co. ..................... 1,427,000 83,122,750
62 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
UNITED STATES (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
Corn Products International, Inc. . 57,300 $ 1,876,575
Earthgrains Co. (The) ............. 23,300 375,713
IBP, Inc. ......................... 237,000 4,266,000
Kellogg Co. ....................... 280,400 8,639,825
M&F Worldwide Corp. + ............. 222,500 1,126,406
NBTY, Inc. + ...................... 319,000 3,688,437
Pepsi Bottling Group, Inc. ........ 60,600 1,003,687
PepsiCo, Inc. ..................... 498,800 17,582,700
Quaker Oats Co. ................... 20,200 1,325,625
Sara Lee Corp. .................... 820,700 18,106,694
Suiza Foods Corp. + ............... 24,900 986,663
U.S. Foodservice + ................ 167,500 2,805,625
---------------
164,391,212
---------------
FOOD AND DRUG RETAIL (0.8%)
CVS Corp. ......................... 483,200 19,297,800
Longs Drug Stores, Inc. ........... 800,000 20,650,000
SUPERVALU, Inc. ................... 1,107,700 22,154,000
Sysco Corp. ....................... 441,500 17,466,844
---------------
79,568,644
---------------
FOREST PRODUCTS AND BUILDING MATERIALS (1.4%)
Ball Corp. ........................ 386,500 15,218,437
Boise Cascade Corp. ............... 335,000 13,567,500
Champion International Corp. ...... 312,200 19,336,887
Elcor Corp. ....................... 86,500 2,605,813
Georgia-Pacific Corp. ............. 713,000 36,184,750
Georgia-Pacific Corp. ............. 143,100 3,523,837
International Paper Co. ........... 300,000 16,931,250
Temple-Inland Inc. ................ 67,300 4,437,594
Texas Industries, Inc. ............ 23,800 1,012,988
USG Corp. ......................... 111,100 5,235,587
Weyerhaeuser Co. .................. 199,500 14,326,594
Willamette Industries, Inc. ....... 88,400 4,105,075
---------------
136,486,312
---------------
GAS UTILITIES (0.8%)
Coastal Corp. (The) ............... 696,100 24,668,044
Columbia Energy Group ............. 379,500 24,003,375
El Paso Energy Corp. .............. 90,200 3,500,887
National Fuel Gas Co. ............. 29,700 1,381,050
Northwest Natural Gas Co. ......... 31,900 699,806
People's Energy Corp. ............. 56,000 1,876,000
Questar Corp. ..................... 192,500 2,887,500
Sempra Energy ..................... 1,317,107 22,884,734
Southwest Gas Corp. ............... 23,300 535,900
Southwestern Energy Co. ........... 255,500 1,676,719
---------------
84,114,015
---------------
HEALTH SERVICES (0.4%)
Bindley Western Industries, Inc. .. 156,800 2,361,800
Lincare Holdings Inc. + ........... 39,000 1,352,812
MedQuist, Inc. + .................. 61,600 1,590,050
Orthodontic Centers of America,
Inc. + ........................... 60,200 718,638
Oxford Health Plans, Inc. + ....... 38,500 488,469
Patterson Dental Co. + ............ 20,200 861,025
Quest Diagnostics Incorporated + .. 15,200 464,550
Trigon Healthcare, Inc. + ......... 88,100 2,598,950
United Healthcare Corp. ........... 506,100 26,886,562
Universal Health Services, Inc. + . 15,100 543,600
---------------
37,866,456
---------------
HEAVY MACHINERY (0.1%)
JLG Industries, Inc. .............. 26,200 417,563
PACCAR, Inc. ...................... 216,500 9,593,656
---------------
10,011,219
---------------
HOUSING AND FURNISHINGS (0.4%)
Ethan Allen Interiors, Inc. ....... 12,300 394,369
Harman International Industries ... 7,700 432,163
Kaufman & Broad Home Corp. ........ 710,000 17,173,125
Pulte Corp. ....................... 1,021,800 22,990,500
Ryland Group, Inc. ................ 73,400 1,692,787
Salton, Inc. + .................... 16,300 545,031
---------------
43,227,975
---------------
INDUSTRIAL SERVICES (0.0%)
Reckson Service Industries, Inc. + 23,180 1,445,853
---------------
INSURANCE (2.0%)
AFLAC, Inc. ....................... 254,900 12,028,094
Allmerica Financial Corp. ......... 17,900 995,688
American International Group, Inc. 921,000 99,583,125
CIGNA Corp. ....................... 374,700 30,186,769
Lincoln National Corp. ............ 605,600 24,224,000
MGIC Investment Corp. ............. 450,300 27,102,431
Mony Group Inc. + ................. 58,600 1,710,387
PMI Group, Inc. (The) ............. 39,700 1,937,856
Radian Group Inc. ................. 38,900 1,857,475
---------------
199,625,825
---------------
INVESTMENT SERVICES (1.6%)
Charles Schwab Corp. .............. 124,000 4,758,500
Edwards (A.G.), Inc. .............. 17,100 548,269
Goldman Sachs Group, Inc. (The) ... 17,000 1,601,187
Investors Financial Services Corp. 68,400 3,146,400
Lehman Brothers Holdings Inc. ..... 422,400 35,772,000
Merrill Lynch & Co., Inc. ......... 338,000 28,223,000
Morgan Stanley Dean Witter & Co. .. 599,300 85,550,075
---------------
159,599,431
---------------
MAJOR TELECOMMUNICATIONS (6.7%)
ALLTEL Corp. ...................... 16,310 1,348,633
AT&T Corp. ........................ 2,292,200 116,329,150
Bell Atlantic Corp. ............... 1,431,800 88,145,187
BellSouth Corp. ................... 1,758,300 82,310,419
GTE Corp. ......................... 775,000 54,685,937
See Notes to Portfolio of Investments. 63
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
GROWTH AND INCOME (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
UNITED STATES (CONTINUED)
MAJOR TELECOMMUNICATIONS (CONTINUED)
MCI Worldcom, Inc. + .............. 2,327,100 $ 123,481,744
Nextel Communications, Inc. + ..... 44,000 4,537,500
SBC Communications, Inc. .......... 2,047,000 99,791,250
Sprint Corp. ...................... 341,000 22,953,563
Sprint PCS + ...................... 90,000 9,225,000
U.S. WEST, Inc. ................... 645,400 46,468,800
Western Wireless Corporation ...... 376,400 25,124,700
---------------
674,401,883
---------------
MISCELLANEOUS METALS (0.1%)
Freeport-McMoRan
Copper & Gold, Inc. + ............ 313,200 6,616,350
---------------
OIL (3.0%)
Apache Corp. ...................... 189,900 7,014,431
Atlantic Richfield Co. ............ 454,800 39,340,200
Chevron Corp. ..................... 443,400 38,409,525
Conoco Inc. ....................... 756,900 18,827,888
Exxon Mobil Corp. ................. 1,571,243 126,583,226
Kerr-McGee Corp. .................. 419,800 26,027,600
Pennzoil-Quaker State Co. + ....... 113,200 1,153,225
Phillips Petroleum Co. ............ 247,300 11,623,100
Tesoro Petroleum Corp. + .......... 271,700 3,141,531
Texaco, Inc. ...................... 67,000 3,638,938
Ultramar Diamond Shamrock Corp. ... 240,100 5,447,269
Union Pacific Resources Group Inc. 254,800 3,248,700
USX-Marathon Group ................ 677,100 16,715,906
---------------
301,171,539
---------------
OIL SERVICES (0.3%)
Atwood Oceanics, Inc. + ........... 6,500 251,063
BJ Services Co. + ................. 162,600 6,798,712
Pride International, Inc. + ....... 30,400 444,600
Schlumberger, Ltd. ................ 73,000 4,106,250
SEACOR SMIT Holdings + ............ 42,800 2,214,900
Seitel, Inc. + .................... 456,400 3,080,700
Tidewater, Inc. ................... 72,600 2,613,600
Tosco Corp. ....................... 242,600 6,595,688
Transocean Sedco Forex Inc. ....... 190,962 6,433,032
---------------
32,538,545
---------------
OTHER TELECOMMUNICATIONS (1.2%)
Broadwing Inc. .................... 57,500 2,120,312
Citizens Utilities Co. + .......... 91,861 1,303,278
Global Crossing Holdings Ltd. + ... 586,000 29,300,000
Level 3 Communications, Inc. ...... 271,900 22,261,813
Net2Phone, Inc. + ................. 14,000 643,125
Powertel, Inc. + .................. 181,200 18,187,950
Price Communications Corp. + ...... 313,500 8,719,219
Telephone & Data Systems, Inc. .... 205,600 25,905,600
United States Cellular Corp. + .... 128,900 13,010,843
---------------
121,452,140
---------------
PRINT MEDIA (1.0%)
Central Newspapers, Inc. .......... 58,800 2,315,250
Factset Research Systems, Inc. + .. 116,550 9,280,294
Gannett Co., Inc. ................. 213,800 17,438,062
Knight-Ridder, Inc. ............... 479,400 28,524,300
McClatchy Co. ..................... 154,300 6,673,475
Reader's Digest Association, Inc.
(The)............................. 21,600 631,800
Times Mirror Co. .................. 83,500 5,594,500
Tribune Co. ....................... 500,700 27,569,794
Washington Post Co. ............... 449 249,588
---------------
98,277,063
---------------
PRODUCER GOODS (1.3%)
American Power Conversion Corp. + . 43,300 1,142,038
Brady (W.H.) Co. .................. 3,300 111,994
CommScope, Inc. + ................. 451,900 18,217,219
Dover Corp. ....................... 183,200 8,312,700
Graco, Inc. ....................... 43,000 1,542,625
Honeywell International Inc. ...... 92,000 5,307,250
Imation Corp. + ................... 49,800 1,671,412
Lincoln Electric Holdings, Inc. ... 54,400 1,122,000
Minnesota Mining and
Manufacturing Co. ................ 216,300 21,170,362
Mueller Industries, Inc. + ........ 14,000 507,500
Pall Corp. ........................ 181,900 3,922,219
Parker-Hannifin Corp. ............. 161,100 8,266,444
RTI International Metals, Inc. + .. 146,300 1,097,250
Tecumseh Products Co. ............. 48,800 2,302,750
Transportation Technologies
Industries, Inc. + ............... 22,400 404,600
Tyco International Ltd. ........... 1,357,988 52,791,783
Zebra Technologies, Inc. + ........ 40,800 2,386,800
---------------
130,276,946
---------------
REAL ESTATE INVESTMENT TRUSTS (1.4%)
AMB Property Corp. ................ 30,400 606,100
Apartment Investment & Management
Co................................ 125,200 4,984,525
Archstone Communities Trust ....... 180,700 3,704,350
Arden Realty Group, Inc. .......... 116,000 2,327,250
Avalon Bay Communities, Inc. ...... 100,792 3,458,425
Beacon Capital + /+/ .............. 267,600 3,211,200
Bedford Property Investors, Inc. .. 12,200 208,163
Boston Properties, Inc. ........... 44,800 1,394,400
Boykin Lodging Co. ................ 68,400 748,125
Brandywine Realty Trust ........... 238,000 3,897,250
Cabot Industrial Trust ............ 6,300 115,763
Camden Property Trust ............. 25,999 711,723
Captec Net Lease Realty, Inc. ..... 110,900 831,750
Carramerica Realty Corp. .......... 110,200 2,327,975
CBL & Associates Properties, Inc. . 311,000 6,414,375
Colonial Properties Trust ......... 181,300 4,203,894
Commercial Net Lease Realty ....... 118,000 1,172,625
Cornerstone Properties, Inc. ...... 33,500 489,937
Crescent Real Estate Equities, Inc. 348,000 6,394,500
64 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
UNITED STATES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Criimi Mae, Inc. .................. 79,600 $ 114,425
Crown America Realty Trust ........ 90,600 498,300
Duke-Weeks Realty Corp. ........... 131,974 2,573,493
Equity Office Properties Trust .... 181,166 4,461,213
Equity One, Inc. .................. 42,000 438,375
Equity Residential Properties Trust 385,417 16,452,488
Essex Property Trust, Inc. ........ 14,400 489,600
FelCor Lodging Trust Inc. ......... 76,200 1,333,500
First Industrial Realty Trust, Inc. 37,100 1,017,931
Franchise Finance Corp. of America 124,200 2,973,037
General Growth Properties, Inc. ... 43,800 1,226,400
Glenborough Realty Trust, Inc. .... 115,000 1,538,125
Glimcher Realty Trust ............. 81,400 1,048,025
Golf Trust of America, Inc. ....... 65,700 1,112,794
Health Care Property Investors,
Inc............................... 64,584 1,541,943
Health Care REIT, Inc. ............ 153,300 2,318,662
Healthcare Realty Trust, Inc. ..... 53,873 841,766
Home Properties of New York, Inc. . 18,900 518,569
Hospitality Properties Trust ...... 107,700 2,053,031
HRPT Properties Trust ............. 246,600 2,219,400
Innkeepers USA Trust .............. 110,900 907,994
Kimco Realty Corp. ................ 152,900 5,179,487
Koger Equity, Inc. ................ 150,000 2,531,250
Lexington Corporate Properties
Trust............................. 22,200 203,963
Liberty Property Trust ............ 54,500 1,321,625
Manufactured Home Communities, Inc. 93,900 2,282,944
Meditrust Companies Corp. ......... 217,900 1,198,450
MeriStar Hospitality Corp. ........ 50,003 800,048
National Golf Properties, Inc. .... 12,100 238,975
Parkway Properties, Inc. .......... 5,600 161,350
Post Properties, Inc. ............. 141,200 5,400,900
Prentiss Properties Trust ......... 214,900 4,512,900
Prime Retail, Inc. ................ 70,600 397,125
Prison Realty Trust ............... 166,100 840,881
ProLogis Trust .................... 111,925 2,154,556
PS Business Parks, Inc. ........... 5,800 131,950
Public Storage, Inc. .............. 140,246 3,181,831
Reckson Associates Realty Corp. ... 135,300 2,773,650
Reckson Associates Realty
Corp.-Class B .................... 11,678 265,674
Regency Realty Corp. .............. 20,100 402,000
Senior Housing Properties Trust ... 40,340 501,729
Shurgard Storage Centers, Inc. .... 15,000 347,812
Simon Property Group, Inc. ........ 211,644 4,854,584
SL Green Realty Corp. ............. 76,100 1,655,175
Starwood Financial Inc. ........... 7,533 127,585
Starwood Hotels & Resort Worldwide,
Inc............................... 116,100 2,728,350
Sun Communities, Inc. ............. 10,900 350,844
Urban Shopping Centers, Inc. ...... 77,000 2,088,625
Vornado Realty Trust .............. 49,000 1,592,500
---------------
141,108,164
---------------
SEMICONDUCTORS AND ELECTRONICS (10.9%)
Adaptec, Inc. + ................... 399,400 19,920,075
ADC Telecommunications, Inc. + .... 252,200 18,300,262
Advanced Fibre Communications, Inc.
+................................. 130,700 5,840,656
Alpha Industries, Inc. + .......... 18,200 1,043,088
Altera Corp. + .................... 80,000 3,965,000
Amkor Technology, Inc. + .......... 527,800 14,910,350
ANADIGICS, Inc. + ................. 7,200 339,750
Analog Devices, Inc. + ............ 100,000 9,300,000
Applied Materials, Inc. + ......... 468,500 59,353,094
Applied Micro Circuits Corp. + .... 19,100 2,430,475
Aspect Communications Corporation + 22,800 892,050
Atmel Corp. + ..................... 64,000 1,892,000
BroadCom Corp. + .................. 11,200 3,050,600
C-Cube Microsystems, Inc. + ....... 30,000 1,867,500
Carrier Access Corp. + ............ 6,000 403,875
Comverse Technology, Inc. + ....... 117,300 16,979,175
CTS Corp. ......................... 305,800 23,049,675
Cybex Computer Products Corp. + ... 10,800 437,400
Cymer, Inc. + ..................... 70,000 3,220,000
Cypress Semiconductor Corp. + ..... 102,800 3,328,150
Dallas Semiconductor Corp. ........ 12,100 779,694
Integrated Device Technology, Inc.
+................................. 742,101 21,520,971
Intel Corp. ....................... 2,116,200 174,189,712
Inter-Tel, Inc. ................... 24,300 607,500
International Rectifier Corp. + ... 68,700 1,786,200
KEMET Corp. + ..................... 18,700 842,669
KLA Instruments Corp. + ........... 289,800 32,276,475
Lam Research Corporation + ........ 265,800 29,653,312
Lattice Semiconductor Corp. + ..... 413,800 19,500,325
Linear Technology Corp. ........... 17,000 1,216,563
Lucent Technologies, Inc. ......... 1,936,500 144,874,406
Maxim Integrated Products, Inc. + . 89,400 4,218,562
Micrel, Inc. + .................... 8,100 461,194
Microchip Technology, Inc. + ...... 17,400 1,190,813
Micron Technology, Inc. + ......... 483,800 37,615,450
Motorola, Inc. .................... 607,400 89,439,650
Novellus Systems, Inc. + .......... 20,200 2,475,131
Park Electrochemical Corp. ........ 40,000 1,062,500
PMC Sierra Inc. + ................. 14,600 2,340,563
Power Integrations, Inc. + ........ 20,800 997,100
Powerwave Technologies, Inc. + .... 4,300 251,013
QUALCOMM Inc. + ................... 548,400 96,586,950
RF Micro Devices, Inc. + .......... 19,500 1,334,531
Rudolph Technologies, Inc. + ...... 6,800 227,800
SanDisk Corporation + ............. 16,800 1,617,000
Sanmina Corp. + ................... 15,900 1,588,013
Sawtek, Inc. + .................... 268,900 17,898,656
Scientific-Atlanta, Inc. .......... 137,600 7,654,000
SDL, Inc. + ....................... 100,000 21,800,000
Semtech Corp. + ................... 101,900 5,311,537
See Notes to Portfolio of Investments. 65
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
GROWTH AND INCOME (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
UNITED STATES (CONTINUED)
SEMICONDUCTORS AND ELECTRONICS (CONTINUED)
Synopsys, Inc. + .................. 213,800 $ 14,271,150
Tellabs, Inc. + ................... 561,700 36,054,119
Teradyne, Inc. + .................. 46,900 3,095,400
Texas Instruments, Inc. ........... 600,000 58,125,000
Three-Five Systems, Inc. + ........ 20,667 847,333
TriQuint Semiconductor, Inc. + .... 229,200 25,498,500
Vishay Intertechnology, Inc. + .... 576,900 18,244,462
Vitesse Semiconductor Corp. + ..... 46,000 2,412,125
Xilinx, Inc. + .................... 455,800 20,724,656
---------------
1,091,114,210
---------------
SPECIALTY CHEMICALS (0.1%)
ChiRex Inc. + ..................... 10,700 156,488
Lubrizol Corp. (The) .............. 75,500 2,331,062
OM Group, Inc. .................... 25,700 885,044
Praxair, Inc. ..................... 172,800 8,694,000
---------------
12,066,594
---------------
STEEL (0.0%)
Cleveland-Cliffs, Inc. ............ 51,300 1,596,713
Quanex Corp. ...................... 32,500 828,750
---------------
2,425,463
---------------
SURFACE TRANSPORT (0.5%)
Burlington Northern Santa Fe Corp. 1,057,200 25,637,100
Union Pacific Corp. ............... 602,600 26,288,425
---------------
51,925,525
---------------
TEXTILES AND APPAREL (0.1%)
Jones Apparel Group, Inc. + ....... 34,200 927,675
K-Swiss Inc. ...................... 40,100 744,983
Nike, Inc. ........................ 200,000 9,912,500
Timberland Co. (The) + ............ 13,300 703,237
---------------
12,288,395
---------------
TOBACCO (0.2%)
Philip Morris Co., Inc. ........... 893,000 20,706,438
---------------
TOTAL UNITED STATES (COST $7,983,434,416) 8,984,660,106
---------------
FOREIGN COMMON STOCKS (5.6%)
AUSTRALIA (0.0%)
Foster's Brewing Group Ltd. (Food
and Beverage) .................... 768,300 2,205,858
---------------
CANADA (1.2%)
Alcan Aluminum Ltd. (Aluminum) .... 250,200 10,305,112
BCE Inc. (Other Telecommunications) 62,899 5,647,967
Canadian National Railway Co.
(Surface Transport) .............. 55,000 1,447,188
Nortel Networks Corp.
(Semiconductors and Electronics) . 694,100 70,104,100
Seagram Co. Ltd. (Food and
Beverage)......................... 639,000 28,715,062
Trizec Hahn Corp. (Real Estate
Investment Trusts) ............... 78,800 1,329,750
---------------
TOTAL CANADA 117,549,179
---------------
DENMARK (0.2%)
Carli Gry International A/S
(Textiles and Apparel) ........... 311,730 3,540,375
Novo-Nordisk A/S (Drugs) .......... 55,540 7,359,076
Tele Danmark A/S (Other
Telecommunications)............... 122,100 9,063,154
Vestas Wind Systems A/S (Producer
Goods) + ......................... 22,400 3,967,443
---------------
TOTAL DENMARK 23,930,048
---------------
FINLAND (0.2%)
Nokia Corp., ADR
(Telecommunications).............. 51,700 9,823,000
Pohjola Group Insurance Corp.
(Insurance)....................... 26,562 1,603,840
Tietoenator Oyj (Computer Software) 62,000 3,868,410
---------------
TOTAL FINLAND 15,295,250
---------------
FRANCE (0.2%)
Axa (Insurance) ................... 27,600 3,844,096
France Telecom SA (Other
Telecommunications)............... 13,400 1,770,593
Total Fina SA (Oil Services) ...... 21,399 2,853,372
Vivendi (Conglomerate and
Aerospace)........................ 83,772 7,557,849
---------------
TOTAL FRANCE 16,025,910
---------------
GERMANY (0.3%)
Buderus AG (Forest Products and
Building Materials) .............. 49,320 833,838
DePfa Deutsche Pfandbriefbank AG
(Banks and Thrifts) .............. 48,900 3,651,420
Fresenius Medical Care AG (Biotech
and Medical Products) ............ 56,550 4,831,582
Infonet Services Corporation (Data
and Imaging Services) ............ 182,700 4,795,875
Mannesmann AG (Data and Imaging
Services)......................... 34,950 8,423,678
Siemens AG (Electrical Machinery
and Instruments) ................. 74,840 9,512,314
---------------
TOTAL GERMANY 32,048,707
---------------
IRELAND (0.1%)
Allied Irish Banks (Banks and
Thrifts).......................... 492,875 5,614,774
CRH Plc (Forest Products and
Building Materials) .............. 327,787 7,059,185
---------------
TOTAL IRELAND 12,673,959
---------------
ITALY (0.0%)
Banca Nazionale del Lavoro (Banks
and Thrifts) + ................... 1,163,300 3,874,974
Telecom Italia SpA (Other
Telecommunications)............... 90,000 1,004,438
---------------
TOTAL ITALY 4,879,412
---------------
66 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
JAPAN (0.7%)
Banyu Pharmaceutical Co., Ltd.
(Drugs)........................... 174,000 $ 2,699,589
Canon, Inc. (Semiconductors and
Electronics)...................... 160,000 6,358,653
FamilyMart Co., Ltd. (Discretionary
Retail)........................... 115,400 7,681,284
Fuji Heavy Industries Ltd.
(Automotive)...................... 740,500 5,073,904
Fujitsu Limited (Computers) ....... 202,000 9,214,174
Matsushita-Kotobuki Electronics
Industries, Ltd. (Electrical
Machinery and Instruments) ....... 57,000 1,146,584
NTT Mobile Communication Network,
Inc. (Other Telecommunications) + 129 4,962,510
Seino Transportation Co. Ltd.
(Surface Transport) .............. 239,000 1,267,991
Sekisui Chemical Co., Ltd.
(Specialty Chemicals) ............ 482,000 2,137,294
Shin-Etsu Chemical Co., Ltd.
(Specialty Chemicals) ............ 107,000 4,608,457
SoftBank Corp. (Semiconductors and
Electronics)...................... 10,800 10,339,076
Sony Corp. (Housing and
Furnishings)...................... 27,400 8,126,664
Terumo Corp. (Biotech and Medical
Products)......................... 142,800 3,816,014
The Tokio Marine & Fire Insurance
Co., Ltd. (Insurance) ............ 79,000 924,090
---------------
TOTAL JAPAN 68,356,284
---------------
NETHERLANDS (1.6%)
Akzo Nobel NV (Specialty Chemicals) 138,701 6,951,143
Getronics NV (Computers) .......... 85,600 6,822,570
ING Groep NV (Diversified Financial
Services)......................... 113,899 6,870,458
Kloninklijke KPN NV (Major
Telecommunications)............... 62,800 6,123,962
Philips Electronics NV (Electrical
Machinery and Instruments) ....... 46,200 6,276,605
Royal Dutch Petroleum Co. (Oil) ... 1,879,200 113,574,150
STMicroelectronics (Semiconductors
and Electronics) ................. 63,162 9,712,438
Unilever NV (Food and Beverage) ... 19,000 1,034,313
United Pan-Europe Communications NV
(Other Telecommunications) + ..... 34,000 4,345,419
Vendex KBB N.V. (Discretionary
Retail)........................... 79,734 2,118,344
---------------
TOTAL NETHERLANDS 163,829,402
---------------
NORWAY (0.1%)
Christiania Bank Og Kredkasse
(Banks and Thrifts) .............. 386,100 1,904,583
Ocean Rig ASA (Oil Services) + .... 599,607 2,920,345
Petroleum Geo-Services ASA (PGS)
(Oil Services) + ................. 162,200 2,896,609
---------------
TOTAL NORWAY 7,721,537
---------------
SOUTH KOREA (0.0%)
Hanvit Bank (Investment Services) . 130,000 838,500
---------------
SPAIN (0.2%)
Telefonica Publicidad e
Informacion, S.A. (Consumer
Services) + ...................... 175,845 8,538,398
Telefonica de Espana (Major
Telecommunications) + ............ 408,002 10,182,702
---------------
TOTAL SPAIN 18,721,100
---------------
SWEDEN (0.1%)
Ericsson Telephone, ADR
(Telecommunications Equipment) ... 94,800 6,227,175
HiQ International AB (Data and
Imaging Services) ................ 39,000 2,499,706
Icon Medialab International AB
(Data and Imaging Services) + .... 16,850 586,569
---------------
TOTAL SWEDEN 9,313,450
---------------
SWITZERLAND (0.0%)
The Swatch Group AG (Consumer
Specialties)...................... 2,000 2,303,586
---------------
UNITED KINGDOM (0.7%)
Bank of Scotland (Banks and
Thrifts).......................... 274,476 3,188,556
British Telecom Plc (Other
Telecommunications)............... 375,202 9,172,016
Cable & Wireless Plc (Other
Telecommunications) + ............ 447,246 7,580,235
Dixons Group Plc (Discretionary
Retail)........................... 307,496 7,397,669
Granada Group Plc (Electronic
Media) + ......................... 729,793 7,399,019
Kingfisher Plc (Discretionary
Retail)........................... 413,706 4,592,078
Prudential Plc (Insurance) ........ 212,801 4,194,626
Shire Pharmaceuticals Group PLC
(Drugs) + ........................ 167,035 4,864,900
SmithKline Beecham Plc (Drugs) .... 475,915 6,074,593
Stagecoach Holdings Plc (Surface
Transport)........................ 532,900 1,373,305
United News & Media Plc (Print
Media)............................ 262,500 3,346,317
Vodafone Group Plc (Other
Telecommunications)............... 547,955 2,715,753
WPP Group Plc (Commercial Services) 601,785 9,538,303
---------------
TOTAL UNITED KINGDOM 71,437,370
---------------
TOTAL FOREIGN COMMON STOCKS (COST $462,375,658) 567,129,552
---------------
TOTAL COMMON STOCKS (COST $8,445,810,074) 9,551,789,658
---------------
PREFERRED STOCKS (0.2%)
UNITED STATES (0.2%)
AMFM Inc. (Electronic Media) ...... 18,600 3,999,000
Ingersoll-Rand Co. (Producer Goods)
+................................. 55,800 1,422,900
International Paper Co. (Forest
Products and Building
Materials) + ++................... 9,300 504,525
See Notes to Portfolio of Investments. 67
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
GROWTH AND INCOME (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
--------------- ---------------
UNITED STATES (CONTINUED)
Kaufman & Broad Home Corp. (Housing
and Furnishings) + ............... 255,800 $ 2,014,425
Lincoln National Corp.
(Insurance) + .................... 74,400 1,636,800
Merrill "DG" (Strypes)
(Discretionary Retail) + ......... 69,700 2,517,912
Merrill CBR (Investment
Services) + ...................... 27,900 1,468,238
Owens-Illinois, Inc. (Forest
Products and Building
Materials) + ..................... 18,600 581,250
Salomon, Inc. (Investment
Services) + ...................... 69,800 7,538,400
Tanger Factory Outlet Centers, Inc.
(Real Estate Investment Trusts) + 55,800 1,126,463
Union Planters Co. (Banks and
Thrifts) + ....................... 18,600 927,675
TOTAL UNITED STATES 23,737,588
---------------
TOTAL PREFERRED STOCKS (COST $19,720,312) 23,737,588
---------------
PRINCIPAL
AMOUNT
---------------
LONG-TERM BONDS AND NOTES (0.2%)
CORPORATE BONDS (0.2%)
Baker Hughes, Inc.,Zero
Coupon,05/05/08 $ 3,325,000 2,310,875
Brightpoint, Inc.,Zero
Coupon,03/11/18................... 3,255,000 1,082,288
Credence Systems Corp.,
5.25%,09/15/02 ++ ................ 3,700,000 5,013,500
Devon Energy Corp.,4.90%,08/15/08 . 532,000 514,045
Devon Energy Corp.,4.95%,08/15/08 . 727,000 708,825
Hewlett Packard Co.,Zero
Coupon,10/14/17 ++ ............... 3,670,000 2,491,012
Homebase, Inc.,5.25%,11/01/04 ..... 2,790,000 1,691,438
Roche Holdings AG,Zero
Coupon,05/06/12 ++ ............... 11,625,000 5,957,812
Tel-Save Holding,
Inc.,5.00%,12/15/04 ++ ........... 1,400,000 1,177,750
Vantive Corp. (The),4.75%,09/01/02
++................................ 930,000 809,100
Veterinary Centers of America,
Inc.,5.25%,05/01/06 ++ ........... 465,000 297,600
---------------
TOTAL CORPORATE BONDS 22,054,245
---------------
TOTAL LONG-TERM BONDS AND NOTES
(COST $21,411,498) 22,054,245
---------------
SHORT-TERM INVESTMENTS (4.2%)
Countrywide
HomeLoans,5.05%,01/07/00 25,000,000 24,985,972
Dana Credit Corp.,7.45%,01/20/00 .. 28,335,000 28,235,316
Dana Credit Corp.,7.50%,01/13/00 .. 28,225,000 28,166,198
Enron Corp.,8.07%,01/10/00 ........ 30,000,000 29,952,925
Eog Resources,7.30%,01/21/00 ...... 19,760,000 19,687,876
Federal Home Loan
Bank,1.50%,01/03/00 18,623,000 18,623,000
Ford Motor Credit
Co.,5.42%,01/20/00................ 29,288,000 29,213,039
Merrill Lynch & Co., Inc.,
5.55%,01/24/00 ................... 25,071,000 24,989,833
Orix Credit Alliance,6.70%,01/13/00 35,443,000 35,377,036
Orix Credit Alliance,7.45%,01/14/00 24,975,000 24,918,147
Renaissance Energy
Co.,6.70%,01/27/00................ 30,309,000 30,173,620
Renaissance Energy
Co.,8.50%,01/05/00................ 16,285,000 16,277,310
Textron Financial
Corp.,5.45%,01/05/00 ++........... 35,000,000 34,989,403
U.S. Treasury Bill,4.86%,02/17/00 @ 17,400,000 17,294,295
Wheels Inc.,6.70%,01/26/00 /+/ .... 30,000,000 29,871,583
Wheels Inc.,7.50%,01/04/00 /+/ .... 30,000,000 29,993,750
---------------
TOTAL SHORT-TERM INVESTMENTS (COST $422,749,303) 422,749,303
---------------
TOTAL INVESTMENTS (COST $8,909,691,187)(A) 10,020,330,794
OTHER ASSETS LESS LIABILITIES 9,159,563
---------------
TOTAL NET ASSETS $10,029,490,357
===============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$8,950,602,086. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains............................... $1,441,430,156
Unrealized losses.............................. (371,701,448)
--------------
Net unrealized gain........................... $1,069,728,708
==============
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- ----------------------- ---------- ------------ ----------- ---------------
S&P 500 Index Futures... 394 $146,193,700 Mar 00 $ 4,977,934
============ ===============
+ Non-income producing security.
/+/ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Trustees.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
Acquisition date and cost concerning illiquid securities at December 31, 1999
is shown below:
ACQUISITION
DATE COST
------------- ------------
Beacon Capital............... 3/17/98 $ 4,031,495
Wheels Inc................... 12/15/99 29,871,583
Wheels Inc................... 12/28/99 29,993,750
------------
$63,896,828
============
The market value of the total illiquid securities above is $63,076,533 which
represents 0.63% of the total net assets.
Category percentages are based on net assets.
68 See Notes to Financial Statements.
<PAGE>
GROWTH & INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
REAL ESTATE
================================================================================
NUMBER OF MARKET
SHARES VALUE
---------- ----------
COMMON STOCKS (89.1%)
REAL ESTATE INVESTMENT TRUSTS (89.1%)
Alexandria Real Estate Equities, Inc. .... 800 $ 25,450
Apartment Investment & Management Co. .... 5,600 222,950
Archstone Communities Trust .............. 2,600 53,300
Avalon Bay Communities, Inc. ............. 1,700 58,331
Beacon Capital + /+/ ..................... 6,800 81,600
Bedford Property Investors, Inc. ......... 2,600 44,363
Boston Properties, Inc. .................. 5,000 155,625
Brandywine Realty Trust .................. 3,800 62,225
Capital Automotive REIT, Inc. ............ 2,200 26,813
Captec Net Lease Realty, Inc. ............ 300 2,250
CBL & Associates Properties, Inc. ........ 9,900 204,187
Colonial Properties Trust ................ 3,000 69,562
Crescent Real Estate Equities, Inc. ...... 6,600 121,275
Criimi Mae, Inc. ......................... 8,600 12,363
Developers Diversified Realty Corp. ...... 4,900 63,087
Duke-Weeks Realty Corp. .................. 5,520 107,640
Equity Office Properties Trust ........... 11,900 293,037
Equity One, Inc. ......................... 900 9,394
Equity Residential Properties Trust ...... 6,596 281,567
Essex Property Trust, Inc. ............... 4,900 166,600
Federal Realty Inc. ...................... 5,500 103,469
First Industrial Realty Trust, Inc. ...... 1,100 30,181
General Growth Properties, Inc. .......... 4,100 114,800
Glenborough Realty Trust, Inc. ........... 3,000 40,125
Golf Trust of America, Inc. .............. 6,600 111,787
Great Lakes REIT, Inc. ................... 1,700 24,438
Health Care REIT, Inc. ................... 4,600 69,575
Home Properties of New York, Inc. ........ 2,900 79,569
Host Marriott Corp. ...................... 16,000 132,000
Kimco Realty Corp. ....................... 4,600 155,825
Koger Equity, Inc. ....................... 6,900 116,437
Liberty Property Trust ................... 5,200 126,100
Manufactured Home Communities, Inc. ...... 1,600 38,900
Pan Pacific Retail Properties, Inc. ...... 1,400 22,838
Parkway Properties, Inc. ................. 1,600 46,100
Pennsylvania Real Estate Investment Trust 1,300 18,931
Post Properties, Inc. .................... 2,900 110,925
Prentiss Properties Trust ................ 4,700 98,700
Prime Retail, Inc. ....................... 2,400 13,500
ProLogis Trust ........................... 8,300 159,775
PS Business Parks, Inc. .................. 8,200 186,550
Public Storage, Inc. ..................... 2,088 47,371
Reckson Associates Realty Corp. .......... 1,000 20,500
Reckson Associates Realty Corp. - Class B 450 10,238
Shurgard Storage Centers, Inc. ........... 500 11,594
Simon Property Group, Inc. ............... 5,800 133,037
SL Green Realty Corp. .................... 1,800 39,150
Starwood Financial Inc. .................. 2,415 40,904
Starwood Hotels & Resort Worldwide, Inc. . 1,800 42,300
Summit Properties Inc. ................... 3,000 53,625
Sun Communities, Inc. .................... 1,300 41,844
Trizec Hahn Corp. ........................ 1,300 21,938
Vornado Realty Trust ..................... 3,800 123,500
----------
4,448,145
----------
TOTAL COMMON STOCKS (COST $5,330,727) 4,448,145
----------
PREFERRED STOCKS (0.0%)
Criimi Mae, Inc. + ....................... 258 2,161
----------
TOTAL PREFERRED STOCKS (COST $21,622) 2,161
==========
PRINCIPAL
AMOUNT
----------
SHORT-TERM INVESTMENTS (22.7%)
Federal Home Loan Bank,1.5%,01/03/00 ..... $1,133,000 1,133,000
----------
TOTAL SHORT-TERM INVESTMENTS (COST $1,133,000) 1,133,000
----------
TOTAL INVESTMENTS (COST $6,485,349)(A) 5,583,306
OTHER ASSETS LESS LIABILITIES (589,626)
----------
TOTAL NET ASSETS $4,993,680
==========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$6,536,236. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains.............................. $ 37,068
Unrealized losses............................. (989,998)
----------
Net unrealized loss.......................... $ (952,930)
==========
+ Non-income producing security.
/+/ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Directors.
Acquisition date and cost concerning illiquid securities at December 31, 1999
is shown below:
ACQUISITION
DATE COST
------------- ----------
Beacon Capital................ 3/17/98 $ 102,445
==========
The market value of the total illiquid securities above is $81,600 which
represents 1.63% of the total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 69
<PAGE>
GROWTH & INCOME PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
BALANCED GROWTH AND INCOME REAL ESTATE
--------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investments, at market
value ....................... $ 2,013,563,906 $10,020,330,794 $ 5,583,306
Cash ......................... 50,513 770,721 9,208
Foreign currency ............. 129,357 9,275,504 --
Receivable for:
Dividends and interest ...... 11,607,821 8,545,498 44,223
Investments sold ............ -- 3,426,388 3,862
Fund shares sold ............ 71 450,543 --
Variation margin ............ 446,400 334,900 --
Recoverable foreign taxes ... -- 456,784 --
Prepaid expenses ............. 20,212 101,661 57
Gross unrealized gain on
forward foreign currency
exchange contracts .......... -- 109,067 --
--------------- --------------- ---------------
Total assets ............ 2,025,818,280 10,043,801,860 5,640,656
--------------- --------------- ---------------
LIABILITIES:
Payable for:
Investments purchased ....... 33,843,479 -- --
Fund shares redeemed ........ 2,730,844 8,470,413 637,712
Accrued investment
advisory fees ............... 884,968 4,366,968 3,255
Accrued administrative
service fees ................ 132,745 549,711 325
Accrued custody fees ......... 35,716 366,577 3,476
Other liabilities ............ 68,358 220,785 2,208
Gross unrealized loss on
forward foreign currency
exchange contracts .......... -- 337,049 --
--------------- --------------- ---------------
Total liabilities ....... 37,696,110 14,311,503 646,976
--------------- --------------- ---------------
NET ASSETS ............. $ 1,988,122,170 $10,029,490,357 $ 4,993,680
=============== =============== ===============
NET ASSETS REPRESENTED BY:
Paid-in capital .............. $ 1,638,674,984 $ 8,571,165,134 $ 6,384,092
Net unrealized gain (loss)
on investments, open
futures contracts and
foreign currency related
transactions ................ 296,742,706 1,115,356,141 (902,043)
Undistributed net
investment income ........... 13,745,731 222,113 4,544
Accumulated net realized
gain (loss) on
investments ................. 38,958,749 342,746,969 (492,913)
--------------- --------------- ---------------
NET ASSETS ............. $ 1,988,122,170 $10,029,490,357 $ 4,993,680
=============== =============== ===============
Cost of investments .......... $ 1,718,450,869 $ 8,909,691,187 $ 6,485,349
Cost of foreign currency ..... $ 129,302 $ 9,278,356 $ --
CAPITAL SHARES:
Authorized ................... Two Billion Unlimited Two Billion
Par Value .................... $ 0.001 $ 1.000 $ 0.001
Outstanding .................. 127,713,479 326,787,636 646,352
Net Asset Value, offering
and redemption price per
share (net assets divided
by shares outstanding) ...... $ 15.57 $ 30.69 $ 7.73
</TABLE>
70 See Notes to Financial Statements.
<PAGE>
GROWTH & INCOME PORTFOLIOS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
================================================================================
<TABLE>
<CAPTION>
BALANCED GROWTH AND INCOME REAL ESTATE
--------------- ----------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ................................. $ 12,673,815 $ 120,142,723 $ 294,879
Interest .................................. 52,546,077 23,225,506 13,740
--------------- --------------- ---------------
65,219,892 143,368,229 308,619
Foreign taxes withheld on
dividends ................................ (103,208) (935,175) (34)
--------------- --------------- ---------------
Total investment income .............. 65,116,684 142,433,054 308,585
--------------- --------------- ---------------
INVESTMENT EXPENSES:
Investment advisory fees .................. 9,564,010 48,426,000 38,557
Administrative services fees .............. 1,434,602 6,089,176 3,856
Printing and postage fees ................. 23,739 92,191 3,120
Custody fees .............................. 59,725 423,573 3,623
Transfer agent fees ....................... 2,562 11,814 2,579
Audit fees ................................ 40,522 62,117 24,467
Directors'/Trustees' fees ................. 54,898 285,014 162
Registration fees ......................... 45,784 185,609 248
Miscellaneous expenses .................... 73,130 393,349 159
--------------- --------------- ---------------
Expenses before reimbursement
and waiver from Investment
Adviser .................................. 11,298,972 55,968,843 76,771
Expense reimbursement and
waiver from Investment
Adviser .................................. -- -- (27,907)
--------------- --------------- ---------------
Net expenses ......................... 11,298,972 55,968,843 48,864
--------------- --------------- ---------------
Net investment income ..................... 53,817,712 86,464,211 259,721
--------------- --------------- ---------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments .............................. 116,536,599 1,788,532,956 (306,821)
Written options .......................... 103,270 (13,713,361) --
Futures and forward foreign
currency exchange contracts .............. 4,040,764 41,628,453 --
Foreign currency related
transactions ............................. (502,021) (3,681,921) --
--------------- --------------- ---------------
Net realized gain (loss)
on investments ....................... 120,178,612 1,812,766,127 (306,821)
--------------- --------------- ---------------
Net change in unrealized gain
or loss on:
Investments .............................. 68,822,456 (336,637,891) (153,082)
Written options .......................... -- 27,825,067 --
Futures and forward foreign
currency exchange contracts .............. 1,659,856 (23,917,228) --
Foreign currency related
transactions ............................. (30,187) (207,327) --
--------------- --------------- ---------------
Net change in unrealized
gain or loss on
investments .......................... 70,452,125 (332,937,379) (153,082)
--------------- --------------- ---------------
Net realized and change in
unrealized gain or loss on
investments .............................. 190,630,737 1,479,828,748 (459,903)
--------------- --------------- ---------------
Net increase (decrease) in net
assets resulting from
operations ............................... $ 244,448,449 $ 1,566,292,959 $ (200,182)
=============== =============== ===============
</TABLE>
See Notes to Financial Statements. 71
<PAGE>
GROWTH & INCOME PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
BALANCED
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income ................. $ 53,817,712 $ 53,056,913
Net realized gain on investments....... 120,178,612 129,611,198
Net change in unrealized gain or loss
on investments........................ 70,452,125 90,857,948
-------------- --------------
Net increase in net assets resulting
from operations....................... 244,448,449 273,526,059
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (48,223,837) (45,005,345)
From net realized gains................ (208,911,250) (255,329,194)
-------------- --------------
Decrease in net assets from
distributions to shareholders......... (257,135,087) (300,334,539)
-------------- --------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............. 157,690,824 63,609,192
Net asset value of shares issued upon
reinvestment of distributions........ 257,135,087 300,334,539
Payments for shares redeemed........... (266,372,604) (126,833,307)
-------------- --------------
Net increase in net assets from fund
share transactions.................... 148,453,307 237,110,424
-------------- --------------
Net change in net assets............. 135,766,669 210,301,944
NET ASSETS:
Beginning of period.................... 1,852,355,501 1,642,053,557
-------------- --------------
End of period.......................... $1,988,122,170 $1,852,355,501
============== ==============
End of period net assets includes
undistributed net investment income... $ 13,745,731 $ 8,051,568
============== ==============
SHARE TRANSACTIONS:
Number of shares sold.................. 9,998,070 3,888,368
Number of shares issued upon
reinvestment of distributions........ 16,986,297 19,665,398
Number of shares redeemed.............. (17,037,037) (8,207,096)
-------------- --------------
Net increase.......................... 9,947,330 15,346,670
============== ==============
72 See Notes to Financial Statements.
<PAGE>
================================================================================
GROWTH AND INCOME
-------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income .................. $ 86,464,211 $ 98,576,593
Net realized gain on investments ....... 1,812,766,127 1,720,373,368
Net change in unrealized gain or loss
on investments ........................ (332,937,379) (546,496,697)
---------------- ----------------
Net increase in net assets resulting
from operations ....................... 1,566,292,959 1,272,453,264
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............. (96,551,194) (106,400,592)
From net realized gains ................ (1,689,351,369) (1,621,614,754)
---------------- ----------------
Decrease in net assets from
distributions to shareholders ......... (1,785,902,563) (1,728,015,346)
---------------- ----------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold .............. 127,245,129 173,705,279
Net asset value of shares issued upon
reinvestment of distributions ........ 1,785,140,798 1,727,349,858
Payments for shares redeemed ........... (1,464,338,336) (832,700,179)
---------------- ----------------
Net increase in net assets from fund
share transactions .................... 448,047,591 1,068,354,958
---------------- ----------------
Net change in net assets ............. 228,437,987 612,792,876
NET ASSETS:
Beginning of period .................... 9,801,052,370 9,188,259,494
---------------- ----------------
End of period .......................... $ 10,029,490,357 $ 9,801,052,370
================ ================
End of period net assets includes
undistributed (distributions in
excess of) net investment income ...... $ 222,113 $ (942,800)
================ ================
SHARE TRANSACTIONS:
Number of shares sold .................. 3,851,960 4,918,286
Number of shares issued upon
reinvestment of distributions ........ 59,832,318 53,542,755
Number of shares redeemed .............. (44,428,115) (24,104,473)
---------------- ----------------
Net increase .......................... 19,256,163 34,356,568
================ ================
See Notes to Financial Statements. 73
<PAGE>
GROWTH & INCOME PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
REAL ESTATE
-------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income ................. $ 259,721 $ 285,774
Net realized loss on investments....... (306,821) (187,051)
Net change in unrealized gain or loss
on investments........................ (153,082) (903,215)
----------- -----------
Net decrease in net assets resulting
from operations....................... (200,182) (804,492)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (251,012) (282,137)
----------- -----------
Decrease in net assets from
distributions to shareholders......... (251,012) (282,137)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............. 9,414,409 3,471,174
Net asset value of shares issued upon
reinvestment of distributions........ 251,012 142,761
Payments for shares redeemed........... (9,720,165) (2,180,599)
----------- -----------
Net increase (decrease) in net assets
from fund share transactions.......... (54,744) 1,433,336
----------- -----------
Net change in net assets............. (505,938) 346,707
NET ASSETS:
Beginning of period.................... 5,499,618 5,152,911
----------- -----------
End of period.......................... $ 4,993,680 $ 5,499,618
=========== ===========
End of period net assets includes
undistributed net investment income... $ 4,544 $ 1,335
=========== ===========
SHARE TRANSACTIONS:
Number of shares sold.................. 1,111,219 371,334
Number of shares issued upon
reinvestment of distributions........ 34,350 16,996
Number of shares redeemed.............. (1,144,282) (243,265)
----------- -----------
Net increase.......................... 1,287 145,065
=========== ===========
74 See Notes to Financial Statements.
<PAGE>
GROWTH & INCOME PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
1. ORGANIZATION
The Statements contained herein refer to Aetna Balanced VP, Inc. (Balanced),
Aetna Variable Fund d/b/a Aetna Growth and Income VP (Growth and Income) and
Aetna Real Estate Securities VP (Real Estate), a portfolio of Aetna Variable
Portfolios, Inc. (AVPI) (individually, a Portfolio, and collectively, the
Portfolios).
Balanced was incorporated under the laws of Maryland on December 14, 1988.
Growth and Income was organized under the laws of Massachusetts on January 25,
1984. AVPI was incorporated under the laws of Maryland on June 4, 1996. The
Articles of Incorporation of AVPI permit it to offer separate portfolios, each
of which has its own investment objective, policies and restrictions. AVPI
currently offers multiple separate portfolios, including Real Estate. The
Portfolios are each registered under the Investment Company Act of 1940 (the
Act) as open-end management investment companies.
The following is each Portfolio's investment objective:
BALANCED seeks to maximize investment return, consistent with reasonable
safety of principal, by investing in a diversified portfolio of one or more
of the following asset classes: stocks, bonds and cash equivalents, based on
the judgement of the Fund's investment adviser, Aeltus Investment Management,
Inc. (Aeltus), of which of those sectors or mix thereof offers the best
investment prospects.
GROWTH AND INCOME seeks to maximize total return through investments in a
diversified portfolio of common stocks and securities convertible into common
stock. It is anticipated that capital appreciation and investment income will
both be major factors in achieving total return.
REAL ESTATE seeks maximum total return primarily through investment in a
diversified portfolio of equity securities of real estate companies, the
majority of which are real estate investment trusts (REITs).
Shares of the Portfolios are offered to insurance company separate accounts that
fund both annuity and life insurance contracts and to certain tax-qualified
retirement plans. At December 31, 1999, separate accounts of Aetna Life
Insurance and Annuity Company (ALIAC) and its affiliates held 98.6%, 97.9% and
100.0% of Balanced, Growth and Income and Real Estate's shares outstanding,
respectively.
Aeltus Investment Management, Inc. (Aeltus) serves as the investment adviser to
the Portfolios. ALIAC serves as the principal underwriter to each Portfolio.
Aeltus and ALIAC are both indirect wholly-owned subsidiaries of Aetna Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of each 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.
A. VALUATION OF INVESTMENTS
Exchange traded equity investments are stated at market values based upon prices
furnished by external pricing sources as reported on national securities
exchanges. Over-the-counter securities are stated at the last sale price, or if
there has been no sale that day, at the mean of the bid and asked prices. Fixed
income securities, with the exception of high yield securities, maturing in more
than sixty days for which market quotations are readily available are valued at
the mean of the last bid and asked price. High yield securities are priced at
bid by external pricing sources or brokers making a market in the security.
75
<PAGE>
GROWTH & INCOME PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
Short-term investments maturing in sixty days or less are valued at amortized
cost, which when combined with accrued interest, approximates market value.
Securities and fixed income investments for which market quotations are not
considered to be readily available are valued using methods approved by the
Board of Directors/Trustees (Board).
The accounting records of the Portfolios are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the prevailing rates of exchange
at the end of each day. 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. The Portfolios do not isolate
the portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
their market prices. Such fluctuations are included in net realized and
unrealized gain or loss on investments.
B. OPTIONS CONTRACTS
The Portfolios may purchase and write (sell) call options and put options and
write (sell) 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 and unrealized gains or losses are recorded
based upon the last sales price on the principal exchange on which the options
are traded. The Portfolios 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. Realized and unrealized gains or losses on option contracts are reflected
in the accompanying financial statements.
The risk in writing a call option is that the Portfolios 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 Portfolios 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 Portfolios 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 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 invest in
financial futures contracts as a hedge against existing portfolio securities, 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 fluctuations
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 the Portfolios 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 Portfolios, where authorized, may use
forward foreign currency exchange contracts to hedge against foreign currency
exchange rate risks on their non-U.S. dollar denominated securities. Contracts
are recorded at market value and marked-to-market daily.
76
<PAGE>
================================================================================
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 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 financial futures and forward foreign
currency exchange contracts are reflected in the accompanying financial
statements. The amounts at risk under such futures and forward foreign currency
exchange contracts may exceed the amounts reflected in the financial statements.
The notional amounts (economic exposure) of these contracts are disclosed in the
Portfolios of Investments and elsewhere 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 reported to shareholders
as federal taxable income.
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 those which can only be sold
under Rule 144A of the Securities Act of 1933 (1933 Act) or are securities
offered pursuant to Section 4(2) of the 1933 Act, and are subject to legal or
contractual restrictions on resale and may not be publicly sold without
registration under the 1933 Act. 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. The Portfolios will not pay the costs of
disposition of restricted securities other than ordinary brokerage fees, if any.
E. DELAYED DELIVERY TRANSACTIONS
The Portfolios 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 such securities are identified in the
Portfolios 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. In connection with such purchases, the Funds are required to hold
liquid assets as collateral with their custodian sufficient to cover the
purchase price.
F. FEDERAL INCOME TAXES
Each Portfolio intends to meet the requirements to be taxed as a regulated
investment company for the current year. As such, each Portfolio is relieved of
federal income taxes by distributing all of its net taxable investment income
and capital gains, if any, in compliance with the applicable provisions of the
Internal Revenue Code. Furthermore, by distributing substantially all of its net
taxable investment income and capital gains during the calendar year, each
Portfolio will avoid federal excise taxes in accordance with the applicable
provisions of the Internal Revenue Code. Thus, the financial statements contain
no provision for federal income taxes.
G. DISTRIBUTIONS
Distributions from net investment income are based on taxable net income. Income
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These distributions from net investment income are based on taxable net income.
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, certain futures and options contracts, certain investments in
foreign equity securities and repurchases of certain securities sold at a loss.
In addition, distributions of realized gains from sales of securities held one
year or less are taxable to shareholders at ordinary income tax rates rather
than preferred capital gain tax rates in accordance with the applicable
provisions of the Internal Revenue Code.
77
<PAGE>
GROWTH & INCOME PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
H. LINE OF CREDIT
Balanced, Growth and Income, certain portfolios of Aetna Variable Portfolios,
Inc., Aetna Generation Portfolios, Inc., Aetna Income Shares, certain series of
Aetna GET Fund and certain series of Aetna Series Fund Inc., collectively Aetna
Mutual Funds, have entered into a revolving credit facility, of up to
$300,000,000, with a syndicate of banks led by Citibank, N.A. For its services
as Agent, Citibank, N.A. received an agent fee of $200,000. In addition, the
revolving credit facility requires the payment of an annual commitment fee of
0.09% based on the average daily unused amount of the credit facility. Each of
the Aetna Mutual Funds will pay its pro rata share of both the agent fee and
commitment fee. Generally, borrowings under the facility accrue interest at the
Federal Funds Rate plus a specified margin. Repayments generally must be made
within 30 days after the date of a revolving credit advance. The revolving
credit facility became effective on November 30, 1999, and there was no
outstanding balance as of December 31, 1999.
I. 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 accreted or amortized, respectively, using an effective yield
method over the life of the 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.
3. INVESTMENT ADVISORY AND ADMINISTRATIVE FEES
Each Portfolio pays Aeltus an investment advisory fee expressed as a percentage
of its average daily net assets. Below are the Portfolios' annual investment
advisory fees as of December 31, 1999:
ADVISORY FEE
------------
Balanced 0.50%
Growth and Income 0.50%
Real Estate 0.75%
Each Portfolio pays Aeltus an administrative services fee in exchange for
receiving certain administrative and shareholder services and to compensate
Aeltus for supervising the Portfolios' other service providers. Each Portfolio
pays Aeltus an administrative services fee at an annual rate based on its
average daily net assets. The rate for each Portfolio is 0.075% on the first $5
billion in assets and 0.050% on assets over $5 billion.
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Portfolio, in
exchange for fees payable by Aeltus, of up to 0.375% of the Portfolios' average
daily net assets. For the year ended December 31, 1999, Aeltus paid ALIAC
$29,016,568.
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated through December 31, 1999 to reimburse Real
Estate for some or all of its operating expenses or to waive fees in order to
maintain a certain expense ratio. Reimbursement and waiver arrangements will
increase Real Estate's yield and total return. Actual expenses for the year
ended December 31, 1999 were at or below contractual limits. Actual expense
ratios are included in the Financial Highlights.
78
<PAGE>
================================================================================
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the year ended December 31, 1999 were:
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
Balanced $ 2,457,037,214 $ 2,557,612,882
Growth and Income 12,458,305,632 13,798,810,830
Real Estate 1,688,745 2,069,017
6. OPTIONS
For the year ended December 31, 1999, the following reflects the written call
activity:
CALL OPTIONS WRITTEN
----------------------------------------------
` NUMBER OF PREMIUM REALIZED
Balanced CONTRACTS RECEIVED GAIN (LOSS)
----------------------------------------------
Outstanding December 31, 1998 -- $ -- $ --
Written 114,746 214,256 --
Closed (108,096) (159,185) 48,199
Exercised (6,650) (55,071) 55,071
---------------------------------------------
Outstanding December 31, 1999 -- $ -- $ 103,270
=============================================
CALL OPTIONS WRITTEN
----------------------------------------------
` NUMBER OF PREMIUM REALIZED
Growth and Income CONTRACTS RECEIVED GAIN (LOSS)
----------------------------------------------
Outstanding December 31, 1998 15,136 $ 35,346,583 $ --
Written 15,981 33,349,858 --
Closed (30,517) (68,353,252) (13,713,361)
Exercised (600) (343,189) --
----------------------------------------------
Outstanding December 31, 1999 -- $ -- $(13,713,361)
==============================================
79
<PAGE>
GROWTH & INCOME PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
7. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
At December 31, 1999, Growth and Income had open forward foreign currency
exchange contracts that obligate the Portfolio to deliver currencies at
specified future dates. The net unrealized loss of $227,982 on these contracts
are included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
GROWTH AND INCOME
- -----------------
EXCHANGE CONTRACTS IN EXCHANGE CONTRACTS UNREALIZED
DATE TYPE CURRENCY TO RECEIVE/DELIVER FOR AT VALUE GAIN (LOSS)
---- ---- -------- ------------------ --- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
5/18/00 Buy HKD 15,970,000 $ 2,038,238 $ 2,053,416 $ 15,178
5/18/00 Buy HKD 4,340,000 553,585 558,036 4,451
5/18/00 Buy HKD 4,114,800 527,626 529,079 1,453
2/17/00 Buy JPY 1,147,830,000 11,250,809 11,307,044 56,235
1/4/00 Sell EURO 6,828,000 6,895,597 6,863,847 31,750
5/18/00 Sell HKD 24,424,800 3,113,581 3,140,531 (26,950)
1/27/00 Sell JPY 1,121,400,000 10,785,803 11,013,526 (227,723)
2/17/00 Sell JPY 828,237,200 8,076,423 8,158,799 (82,376)
---------
$(227,982)
=========
</TABLE>
8. CAPITAL LOSS CARRYFORWARD
In accordance with applicable provisions of the Internal Revenue Code, the
following capital loss carryforwards have been incurred as of December 31, 1999:
CAPITAL LOSS
CARRYFORWARD EXPIRATION DATE
------------ ---------------
Real Estate $ 80,901 2006
275,183 2007
These capital loss carryforwards may be used to offset future capital gains
until their respective expiration dates. It is the policy of each of the
Portfolios to reduce future distributions of realized gains to shareholders to
the extent of unexpired capital loss carryforwards.
80
<PAGE>
GROWTH & INCOME PORTFOLIOS
ADDITIONAL INFORMATION
DECEMBER 31, 1999
================================================================================
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR (UNAUDITED)
In accordance with federal tax authorities, certain portions of the dividends
taxable as ordinary income qualify for the corporate dividends received
deduction. The following percentages reflect the portions of such dividends
paid:
Balanced 13.78%
Growth and Income 9.87%
In accordance with federal tax authorities, the Portfolios paid the following
amounts of dividends which qualify to be taxed at long-term capital gain rates:
AGGREGATE PER SHARE
--------- ---------
Balanced $163,724,608 $ 1.3791
Growth and Income 559,450,793 1.9853
YEAR 2000 (UNAUDITED)
The Portfolio's Year 2000 remediation efforts have been completed. Currently,
the Portfolio's has no information that indicates a mission-critical vendor or
service provider will be unable to sell goods or provide services to the
Portfolios or that any significant customer will be unable to purchase from the
Portfolios because of Year 2000 issues. As of today, the Portfolio's has not
experienced any significant disruptions to our financial reporting or operating
activities that were caused by failure of our computerized systems resulting
from Year 2000 issues.
81
<PAGE>
GROWTH & INCOME PORTFOLIOS
FINANCIAL HIGHLIGHTS
BALANCED
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ..... $ 15.73 $ 16.03 $ 15.12 $ 14.50 $ 12.23
--------- --------- --------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ... 0.44 0.46 0.50+ 0.47+ 0.54+
Net realized and
change in unrealized
gain or loss on
investments ............. 1.56 2.11 2.73 1.59 2.73
--------- --------- --------- --------- ---------
Total from
investment
operations ........... 2.00 2.57 3.23 2.06 3.27
--------- --------- --------- --------- ---------
LESS DISTRIBUTIONS:
From net investment
income .................. (0.40) (0.39) (1.10) (0.35) (0.67)
From net realized
gains on investments .... (1.76) (2.48) (1.22) (1.09) (0.33)
--------- --------- --------- --------- ---------
Total distributions ... (2.16) (2.87) (2.32) (1.44) (1.00)
--------- --------- --------- --------- ---------
Net asset value, end
of period ............... $ 15.57 $ 15.73 $ 16.03 $ 15.12 $ 14.50
========= ========= ========= ========= =========
Total return* ............ 13.60% 16.93% 22.49% 15.17% 27.23%
Net assets, end of
period (millions) ....... $ 1,988 $ 1,852 $ 1,642 $ 1,364 $ 1,196
Ratio of net expenses
to average net assets ... 0.59% 0.59% 0.58% 0.45% 0.31%
Ratio of net
investment income to
average net assets ...... 2.81% 3.01% 3.01% 3.21% 3.96%
Portfolio turnover
rate .................... 135.71% 85.83% 112.03% 107.80% 141.21%
</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 period.
82 See Notes to Financial Statements.
<PAGE>
GROWTH AND INCOME
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ..... $ 31.87 $ 33.63 $ 32.39 $ 29.05 $ 26.23
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ... 0.31 0.38 0.54+ 0.65+ 0.72+
Net realized and
change in unrealized
gain or loss on
investments ............. 4.86 4.47 8.94 6.45 7.62
---------- ---------- ---------- ---------- ----------
Total from
investment
operations ........... 5.17 4.85 9.48 7.10 8.34
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From net investment
income .................. (0.34) (0.40) (0.58) (0.73) (0.72)
From net realized
gains on investments .... (6.01) (6.21) (7.66) (3.03) (4.80)
---------- ---------- ---------- ---------- ----------
Total distributions ... (6.35) (6.61) (8.24) (3.76) (5.52)
---------- ---------- ---------- ---------- ----------
Net asset value, end
of period ............... $ 30.69 $ 31.87 $ 33.63 $ 32.39 $ 29.05
========== ========== ========== ========== ==========
Total return* ............ 17.42% 14.49% 29.89% 24.46% 32.25%
Net assets, end of
period (millions) ....... $ 10,029 $ 9,801 $ 9,188 $ 6,954 $ 5,662
Ratio of net expenses
to average net assets ... 0.58% 0.57% 0.56% 0.43% 0.29%
Ratio of net
investment income to
average net assets ...... 0.89% 1.03% 1.46% 2.02% 2.42%
Portfolio turnover
rate .................... 133.44% 145.64% 107.01% 85.03% 96.63%
</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 period.
See Notes to Financial Statements. 83
<PAGE>
GROWTH & INCOME PORTFOLIOS
FINANCIAL HIGHLIGHTS (CONTINUED)
REAL ESTATE
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 15, 1997
YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, OPERATIONS)
1999 1998 TO DECEMBER 31, 1997
------------ ------------ --------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ......................... $ 8.53 $ 10.31 $ 10.00
--------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............. 0.52 0.45 0.05+
Net realized and change in
unrealized gain or loss on
investments ....................... (0.90) (1.78) 0.31
--------- --------- ---------
Total from investment
operations ..................... (0.38) (1.33) 0.36
--------- --------- ---------
LESS DISTRIBUTIONS:
From net investment income ........ (0.42) (0.45) (0.05)
--------- --------- ---------
Total distributions ............. (0.42) (0.45) (0.05)
--------- --------- ---------
Net asset value, end of
period ............................ $ 7.73 $ 8.53 $ 10.31
========= ========= =========
Total return* ...................... (4.22)% (12.85)% 3.59%
Net assets, end of period
(000's) ........................... $ 4,994 $ 5,500 $ 5,153
Ratio of net expenses to
average net assets ................ 0.95% 0.95% 0.95%(1)
Ratio of net investment
income to average net
assets ............................ 5.05% 5.24% 9.99%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets ............. 1.49% 1.32% --
Portfolio turnover rate ............ 34.77% 55.79% --
</TABLE>
(1) Annualized.
* 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 period.
84 See Notes to Financial Statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees/Directors and Shareholders of Aetna Balanced VP, Inc.,
Aetna Growth and Income VP, and Aetna Variable Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Balanced VP, Inc., Aetna Growth and Income VP and Aetna Real Estate Securities
VP, series of Aetna Variable Portfolios, Inc. (collectively the Growth and
Income Portfolios), including the portfolios of investments as of December 31,
1999, and 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 for Aetna Balanced VP, Inc. and Aetna Growth and Income VP,
and for the two-year period then ended and the period from December 15, 1997
(commencement of operations) to December 31, 1997 for Aetna Real Estate
Securities VP. These financial statements and financial highlights are the
responsibility of the Growth and Income 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, 1999, 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
Balanced VP, Inc., Aetna Growth and Income VP and Aetna Real Estate Securities
VP as of December 31, 1999, results of their operations for the year then ended,
changes in their net assets for each of the years in the two-year period then
ended and the financial highlights for each of the years or periods specified in
the first paragraph above, in conformity with generally accepted accounting
principles.
/s/ KMPG LLP
Hartford, Connecticut
February 4, 2000
85
<PAGE>
Aetna Bond VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Bond VP Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Bond VP 10,000 10,911 13,031 14,002 15,357 14,774 17,468
Lehman Brothers Aggregate Bond Index 10,000 10,896 12,639 13,575 14,898 14,463 17,135
<CAPTION>
Bond VP Dec-96 Dec-97 Dec-98 Dec-99
<S> <C> <C> <C> <C>
Aetna Bond VP 18,097 19,599 21,195 21,038
Lehman Brothers Aggregate Bond Index 17,757 19,471 21,089 20,986
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------
-0.74% 7.32% 7.72%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA BOND VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Bond VP (Bond) generated a -0.74% total return, net of fund expenses, for
the year ended December 31, 1999. The benchmark, Lehman Brothers Aggregate Bond
Index(a), returned -0.82% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
The Federal Reserve (the "Fed") entered the picture early in the year. Continued
brisk Gross Domestic Product growth, combined with tight labor markets, led the
Fed to raise rates. The Fed funds rate was increased 25 basis points (1/4 of one
percent) during each of the last three calendar quarters of 1999, effectively
reversing the three 25-basis-point easings (or decreases) in the latter half of
1998. (The "Fed funds" or federal funds rate is the interest rate charged on
overnight loans between banks.)
For the year, Fed action and uncertainty surrounding future actions drove yields
on U.S. Treasury securities ("Treasuries") higher and the yield curve flatter.
Starting with the short end (short-maturities) of the curve, the 2-year Treasury
yield increased 170 basis points; the 10-year, 179 basis points; and the
long-term 30-year was the best performer on a yield basis, rising only 139 basis
points.
Inflation indicators caused sporadic concern: the second quarter Employment Cost
Index showed a 1.1% increase, the largest since 1991; October's PPI (Producer
Price Index) rose 1.1%, its strongest number in nine years; and the National
Association of Purchasing Managers Price Paid Index showed a meaningful increase
toward the latter half of the year. However, these con-
86 See Definition of Terms.
<PAGE>
cerns were muted as the year ended. December's results had modest increases of
0.2% in the PPI, 0.1% in the CPI (Consumer Price Index) and 0.1% in average
hourly earnings.
Spread sectors (all non-Treasury issues) outperformed Treasuries handily for the
year. For 1999, emerging markets led the way with excess returns over
similar-duration Treasuries of 2,248 basis points. High yield issues showed
excess returns of 479 basis points, much of it early in the year, and held much
of its gains - despite concerns of increasing default rates which hit the market
in the third quarter.
Investment-grade corporate securities outperformed Treasuries of the equivalent
duration by 174 basis points, driven mainly by declines in swap spreads. As swap
spreads declined, mainly in the latter half of the year, investors stepped in
and increased allocations to corporates, further decreasing the yield spread
between corporate bonds and Treasuries.
In securitized markets, collateralized mortgage-backed securities,
mortgage-backed securities, and asset-backed securities showed excess returns of
312, 113 and 136 basis points, respectively, also driven by declining swap
spreads and improving market technicals.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
Early in the year, an overweight position in credit products (any security with
a credit risk, or risk of nonpayment), specifically high yield corporate bonds,
positively impacted performance. Toward mid-year, as market default concerns
increased, we reduced this exposure to lock-in some of the gains. An overweight
position in investment-grade corporate bonds early in the year and during the
third quarter, as well as an overweight position in government-agency securities
in the third quarter, also led to outperformance.
Duration was also a positive contributor to performance. Duration measures a
bond's sensitivity to increases or decreases in interest rates. The longer the
duration, the more a bond - or a bond fund - will be affected by rate changes.)
The short duration posture during the first half of the year, as well as the
last two months of 1999, had a meaningful positive impact on performance.
On the negative side, the Portfolio was underweight in mortgage-backed
securities throughout much of the year, a sector that performed well relative to
Treasuries. Also, some credit events (such as negative earnings news, or any
news detrimental to the company) in investment-grade corporates in the latter
half of the year modestly reduced the Portfolio's returns.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Economic momentum remains strong, with the wealth effect from rising stock
markets feeding domestic consumption. (As investors have seen their assets
increase in value, they feel more wealthy. Hence the "wealth effect," which
stimulates consumption.) We expect stock markets to moderate in 2000, and any
stock market correction should reverse the wealth effect and slow the economy.
This will begin to unwind the imbalances we have seen in terms of low savings
rates in the U.S. and a high and expanding current account deficit. (The U.S.
"current account" is the record of all transactions with foreign nations that
involve the exchange of merchandise, goods, services, or unilateral gifts.) The
extent to which these imbalances unwind will determine the length and depth of
any slowdown.
We expect the Fed to continue raising the Fed funds rate in order to slow
domestic activity and unwind some of the aforementioned imbalances. Market
consensus appears to be a 6% Fed funds rate by mid-year, and that is close to
our expectation of 6-6.25%.
Following a two-month period during which we maintained a short-duration stance,
we start out the year seeing yields closer to fair value, given that the
market's view of Fed tightening has come more in line with our expectation. We
will take short term changes in duration of the Portfolio with an expectation
that a correction in the stock market could eventually lead to a weakening
economy and lower rates. We could see higher rates in the first quarter of 2000,
but until this plays out, we expect to bias our duration toward the long side
based on our longer-term view.
See Definition of Terms. 87
<PAGE>
We continue to be defensive, underweighting most investment-grade sectors. In
investment-grade corporates, we expect to maintain our underweight position,
favoring a defensive posture by holding higher-quality and shorter-duration
corporates,
In securitized sectors, we expect to underweight mortgage-backed securities,
given the strong performance they have exhibited in recent months. Within the
sector, we will take a defensive posture, favoring securities that are less
sensitive to increases in Treasury volatility. We expect to continue our
overweight position in asset-backed securities, given their short duration and
high quality.
We expect to continue to be defensive in emerging markets, given that strong
performance in this sector over the past year has reduced spreads significantly.
A stock market correction, should it occur, would be negative for emerging
markets. We also expect to be defensive in high yield, where we expect
performance to be correlated to the level of economic activity and the stock
market. Should spreads move back up to where we feel that slower economic growth
is built into valuations, we would look to increase exposure.
- -----------------------------------------
QUALITY RATINGS
- -----------------------------------------
AAA 74.1%
AA 1.1%
A 10.4%
BBB 3.2%
BB 0.7%
B 0.7%
N/R/+/ 9.8%
- -----------------------------------------
WEIGHTED AVERAGE LIFE TO MATURITY
- -----------------------------------------
0 - 1 years 6.2%
1 - 5 years 36.5%
5 - 10 years 45.9%
10 - 20 years 1.2%
20 + years 10.2%
/+/The Not Rated (N/R) indication is used by securities rating services (such as
Standard & Poor's or Moody's) and mercantile agencies (such as Dun & Bradstreet)
to show that a security or a company has not been rated. It has neither negative
nor positive implications.
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
88 See Definition of Terms.
<PAGE>
Aetna High Yield VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
High Yield VP 12/10/97 12/31/97 12/31/98 12/31/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna High Yield VP 10,000 10,150 10,813 10,873 9,982 10,122 10,637 10,578 10,422 10,837
Merrill Lynch High Yield
Aggregate Index 10,000 10,058 10,337 10,511 10,135 10,425 10,538 10,609 10,476 10,589
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
Inception Date 1 Year Inception
------------------------------------------
12/10/97 7.05% 3.98%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA HIGH YIELD VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna High Yield VP (High Yield) generated a 7.05% total return, net of fund
expenses, for the year ended December 31, 1999. The benchmark, Merrill Lynch
High Yield Aggregate Index(b), returned 1.57% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
The high yield market, despite rising interest rates and increasing default
rates, produced the highest return of the domestic fixed-income asset classes in
1999. It returned approximately 450-500 basis points (4.5 to 5 percentage
points) more than U.S. Treasury securities in the 7 to 10-year maturity range.
The high yield market rebounded sharply in the first and second quarter of the
year from the severe widening of the gap between yields on high-yield issues and
on comparable-maturity Treasuries which resulted from the fall-out of the 1998
Asian crisis. However, it gave back some of the improvement during the third
quarter of 1999 - as an increased supply of new high yield issues, combined with
increased volatility in the Treasury and equity markets and increasing default
rates, resulted in high cash withdrawals from high yield mutual funds. In the
fourth quarter, performance did revert to that of the earlier part of the year,
as supply and demand factors improved.
See Definition of Terms. 89
<PAGE>
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
Positive growth factors as well as positive event risk (the likelihood of a
merger or acquisition of a lower-rated issuing company by a higher-rated
company) in the defensive telecommunications/media sector - where the Portfolio
is overweighted versus its benchmark index - contributed significantly to the
Portfolio's outperformance for the year.
Short-duration, high step-up coupon securities in this sector contributed
significantly to outperformance during the last quarter. Adding some cyclical
exposure in the paper/forest products and energy sectors benefited the
Portfolio's performance for the year, as these cyclical industries outperformed
the market. This was offset to a degree by some exposure to the chemical sector,
which underperformed the Portfolio's benchmark index during most of the year,
before beginning to outperform during the fourth quarter.
Also detracting from the Portfolio's performance was the underperformance of
United Artists, in the poorly performing theatre sector, as well as the
voluntary bankruptcy of Optel in the telecom sector.
WHAT IS YOUR OUTLOOK GOING FORWARD?
We expect default rates among high yield issuers to moderate somewhat from the
high 1999 levels. Still, they may remain above historic averages, due to the
continuing struggles of many over-leveraged companies in the commodity, energy
and health care sectors.
We favor overweighting the technology, media and telecommunications sectors
where we expect continued strong growth, consolidation and positive event risk
to support the sectors. We expect to underweight the cyclical sectors, where the
commodity rebound is fully reflected in the prices of bonds, and the
still-problematic healthcare sector.
High yielding fixed income securities are subject to greater market fluctuations
and risk of loss of income and principal than investments in lower yielding
fixed income securities.
- -----------------------------------------
QUALITY RATINGS
- -----------------------------------------
BBB 2.4%
BB 7.0%
B 72.5%
CCC 9.8%
N/R/+/ 8.1%
Defaulted Security 0.2%
- -----------------------------------------
MATURITY DISTRIBUTION
- -----------------------------------------
0 - 1 years 8.3%
1 - 5 years 5.0%
5 - 10 years 81.8%
10 - 20 years 4.9%
/+/The Not Rated (N/R) indication is used by securities rating services (such as
Standard & Poor's or Moody's) and mercantile agencies (such as Dun & Bradstreet)
to show that a security or a company has not been rated. It has neither negative
nor positive implications.
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
90 See Definition of Terms.
<PAGE>
Aetna Money Market VP
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
Money Market VP Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C> <C>
Aetna Money Market VP 10,000 10,844 11,552 11,976 12,358 12,864 13,642
IBC's Money Fund Average/All Taxable 10,000 10,756 11,354 11,733 12,047 12,491 13,159
<CAPTION>
Money Market VP Dec-96 Dec-97 Dec-98 Dec-99
<S> <C> <C> <C> <C>
Aetna Money Market VP 14,374 15,161 15,988 16,800
IBC's Money Fund Average/All Taxable 13,795 14,481 15,196 16,424
</TABLE>
------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------
5.08% 5.49% 5.33%
------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA MONEY MARKET VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Money Market VP (Money Market) generated a 5.08% total return, net of fund
expenses, for the year ended December 31, 1999. The benchmark, IBC's Money Funds
Report Average/All Taxable Index(c), returned 4.54% for the same period. As of
December 31, 1999, the Fund reported a 7-day yield of 5.80% with an average
weighted maturity of 52 days.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
The beginning of the year was characterized by steady monetary policy, which
kept short-term interest rates moving in a narrow range. Eventually, fears of
rising inflation and higher bond yields caused rates to increase. Increased
supply of short term debt, as issuers began addressing Y2K concerns, caused
yields between credit instruments and U.S. Treasury securities to widen. In the
latter half of 1999, the Federal Reserve's (the "Fed") three increases of the
federal funds rate caused short-term rates to rise dramatically. (The Fed funds
rate is the interest rate charged on overnight loans between banks.)
Fears of heavy corporate supply and illiquidity due to Y2K concerns led many
issuers to bring their deals to the market early. The volume of new issues of
asset-backed securities ("ABS") hit a record high in the third quarter of 1999
and issuance of commercial paper saw the largest increase ever in October. These
dramatic increases in supply caused spreads to widen.
See Definition of Terms. 91
<PAGE>
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
The Portfolio shortened its weighted average maturity prior to each tightening
(rate increase) by the Fed, enabling it to capture higher rates more quickly.
As spreads widened in the third quarter, we increased the Portfolio's ABS
weightings. We also increased allocations to the floating-rate (variable
interest rate) sector, taking advantage of corporate spread widening and
positioning the Portfolio for future tightenings by the Fed.
WHAT IS YOUR OUTLOOK GOING FORWARD?
With Y2K fears abating as the new year rolled over smoothly, market participants
have turned their attention to the unrelenting indications of strength in the
U.S. economy and the accompanying risks of higher inflation. Investors are now
focused on how much Fed tightening will be necessary to slow the economy and
relieve the inflationary pressures brought on by the economy's strong growth. We
expect the Fed to continue raising the Fed funds rate, in order to slow domestic
activity. We further expect stock markets to moderate in 2000, due to higher
interest rates. This correction in the stock market could eventually lead to a
weakening economy and lower rates.
For the first few months of 2000, we plan on maintaining a relatively short
weighted average maturity, so that the Portfolio can take advantage of further
tightenings by the Fed. We expect to increase our weighted average maturity as
the economy weakens and money market rates decline. Finally, we will concentrate
on purchasing securities in those sectors that provide the greatest relative
value.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. The fund is a money market
fund which does not seek to maintain a stable $1.00 net asset value. While the
fund's management objective includes the preservation of capital, it is possible
to lose money by investing in the fund.
- -----------------------------------------
QUALITY RATINGS*
- -----------------------------------------
Tier 1 99.1%
Tier 2 0.9%
- -----------------------------------------
MATURITY DISTRIBUTION
- -----------------------------------------
1 - 30 days 53.0
31 - 60 days 13.9
61 - 90 days 6.7
91 - 120 days 3.0
121 - 180 days 2.3
181 - 397 days 21.1
*Tier 1 securities are, or are comparable to, securities which are rated in the
highest short-term rating category by at least two nationally recognized
statistical rating organizations (NRSROs) or by the only NRSRO that has rated
the security. Tier 2 securities are securities that have received the requisite
rating in one of the two highest categories, but are not Tier 1.
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
92 See Definition of Terms.
<PAGE>
- --------------------------------------------------------------------------------
DEFINITION OF TERMS
- --------------------------------------------------------------------------------
(a) The Lehman Brothers Aggregate Bond Index is an unmanaged index and is
composed of securities from Lehman Brothers Government/Corporate Bond
Index, Mortgage-Backed Securities Index and the Asset-Backed Securities
Index.
(b) The Merrill Lynch High Yield Aggregate Index is an unmanaged index of
secured and subordinated debt securities rated by Standard & Poor's or by
Moody's Investors Service as less than investment grade (i.e. BBB or Baa)
but not in default.
(c) The IBC's Money Fund Average/All Taxable Index is an average of the
returns of more than 250 money market mutual funds surveyed each month by
IBC/Donaghue, Inc.
The unmanaged indices described above are not available for individual
investment.
93
<PAGE>
INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
BOND
================================================================================
NUMBER OF MARKET
CONTRACTS VALUE
------------ ------------
CALL OPTIONS PURCHASED (0.0%)
Euro Currency Index, Strike
$1.035,
Feb. 00 ................... $ 66,075
------------
TOTAL CALL OPTIONS PURCHASED (COST $108,851) 66,075
------------
PRINCIPAL AMOUNT
-------------------
LONG-TERM BONDS AND NOTES (95.7%)
CORPORATE BONDS (21.4%)
ASSET-BACKED SECURITIES
(6.1%)
ARG Funding
Corp.,5.88%,05/20/03....... $ 10,000,000 9,776,600
Capital Auto Receivables
Asset Trust,6.30%,05/15/04 11,500,000 11,421,387
Discover Card Master Trust
I, 6.85%,07/17/07 ......... 5,000,000 4,911,719
First Security Auto Grantor
Trust,6.10%,04/15/03....... 2,490,353 2,484,674
MBNA Master Credit Card
Trust,6.40%,01/18/05....... 12,500,000 12,362,500
West Penn Funding
Co.,6.63%,12/26/05......... 2,700,000 2,666,250
------------
43,623,130
------------
ELECTRIC AND TELEPHONE BONDS
(2.5%)
Alliant Energy Resources
Corp.,7.38%,11/09/09....... 1,675,000 1,627,842
Cilcorp, Inc.,8.70%,10/15/09
*.......................... 4,450,000 4,493,592
El Paso Energy
Corp.,6.63%,07/15/01....... 2,850,000 2,821,161
GTE North,
Inc.,5.65%,11/15/08........ 7,000,000 6,195,000
Metromedia Fiber
Network,10.00%,12/15/09 350,000 357,875
Texas Utilities
Co.,8.25%,04/01/04......... 2,700,000 2,780,136
------------
18,275,606
------------
FINANCIAL BONDS (2.4%)
Bank of America
Corp.,5.75%,03/01/04....... 1,400,000 1,326,836
BankBoston
N.A.,7.38%,09/15/06........ 2,650,000 2,626,786
Bombardier Capital
Inc.,7.30%,12/15/02........ 2,765,000 2,753,166
CIT Group Holdings,
Inc.,7.13%,10/15/04........ 3,610,000 3,579,206
Household Finance Corp.
,6.00%,05/01/04............ 3,300,000 3,109,458
Textron Financial
Corp.,7.13%,12/09/04....... 4,080,000 4,030,877
------------
17,426,329
------------
FOREIGN BONDS (3.2%)
ABN AMRO Bank
NV,7.55%,06/28/06.......... 1,760,000 1,753,594
Ahold Finance USA
Inc.,6.25%,05/01/09........ 2,590,000 2,321,003
Edison International
Inc.,6.88%,09/15/04........ 2,980,000 2,917,986
Petroleum
Geo-Services,7.50%,03/31/07 2,270,000 2,219,175
Quebec Province
Co.,7.00%,01/30/07......... 5,000,000 4,890,500
Quebec Province
Co.,7.50%,09/15/29......... 3,320,000 3,218,308
Telewest Plc,11.00%,10/01/07 2,075,000 1,929,750
Tyco International Group
SA,6.38%,06/15/05 3,750,000 3,515,906
------------
22,766,222
------------
OTHER PUBLIC CORPORATE BONDS
(7.2%)
Chesapeake Energy
Corp.,9.63%,05/01/05....... 2,325,000 2,208,750
Conoco Inc.,5.90%,04/15/04 . 3,420,000 3,264,971
Cooper Tire & Rubber
Co.,7.75%,12/15/09......... 2,350,000 2,287,255
DaimlerChrysler NA Holdings
Inc.,7.20%,09/01/09........ 3,059,000 3,003,345
Dow Chemical
Co.,7.38%,11/01/29......... 1,510,000 1,444,315
Eastman Kodak
Co.,6.50%,08/15/01......... 3,760,000 3,733,078
Ford Motor Credit
Corp.,7.38%,10/28/09....... 6,820,000 6,733,045
Fortune Brands,
Inc.,6.63%,07/15/28........ 3,140,000 2,654,255
Liberty Media Group
Corp.,7.88%,07/15/09....... 1,910,000 1,901,346
Lockheed Martin
Corp.,8.20%,12/01/09....... 3,390,000 3,373,050
Pepsi Bottling Holdings
Inc.,5.63%,02/17/09........ 3,500,000 3,084,095
Raytheon Co.,6.75%,08/15/07 5,365,000 5,005,169
Texaco Capital,
Inc.,5.50%,01/15/09........ 3,780,000 3,315,476
U.S. West Communications
Group,7.20%,11/01/04....... 3,180,000 3,155,387
United Technologies
Corp.,7.50%,09/15/29....... 5,000,000 4,894,235
USA Waste Management,
Inc.,6.88%,05/15/09........ 1,585,000 1,335,521
------------
51,393,293
------------
TOTAL CORPORATE BONDS (COST $156,633,535) 153,484,580
------------
FOREIGN AND SUPRANATIONALS (1.5%)
Inter-American Development
Bank,12.25%,12/15/08....... 7,775,000 10,387,322
------------
TOTAL FOREIGN AND SUPRANATIONALS (COST $10,140,439) 10,387,322
------------
FOREIGN OBLIGATIONS (7.5%)
CONVERTIBLE BONDS (0.6%)
Treasury Inflation Index of
India,3.88%,01/15/09....... 4,280,000 4,241,213
------------
FOREIGN CURRENCY SECURITIES
(6.9%)
Bundesobligation,4.25%,11/26/04 22,000,000 21,610,561
Republic of
Deutschland,4.50%,07/04/09. 29,600,000 27,899,404
------------
49,509,965
------------
TOTAL FOREIGN OBLIGATIONS (COST $55,766,806) 53,751,178
------------
NON-AGENCY MORTGAGE-BACKED SECURITIES (0.1%)
Security Pacific National
Bank,8.50%,04/25/17 /+/ ... 860,490 860,490
------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES
(COST $858,284) 860,490
------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (32.5%)
AGENCY MORTGAGE-BACKED SECURITIES (32.5%)
Federal National Mortgage
Association,6.00%,07/01/29. 7,331,900 6,706,342
Federal National Mortgage
Association,6.50%,11/12/28-08/01/29 47,726,485 44,966,969
Federal National Mortgage
Association,6.63%,09/15/09. 25,685,000 24,907,615
Federal National Mortgage
Association,7.00%,08/01/25-03/01/26 8,209,066 7,969,234
Federal National Mortgage
Association,7.00%,01/25/30
#.......................... 7,500,000 7,251,600
Federal National Mortgage
Association,7.50%,11/01/28. 14,598,044 14,461,261
94 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
PRINCIPAL MARKET
AMOUNT VALUE
------------ ------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (CONTINUED)
Federal National Mortgage
Association,8.50%,11/01/23-12/01/29 $ 14,023,143 $ 14,427,728
Federal National Mortgage
Association,10.00%,02/25/19 3,717,058 3,915,718
Federal National Mortgage
Corp.,5.75%,04/15/03....... 13,000,000 12,621,752
Government National Mortgage
Association,6.00%,10/20/29. 2,243,900 2,218,787
Government National Mortgage
Association,6.00%,
01/15/30 # ................ 8,400,000 8,321,145
Government National Mortgage
Association,6.38%,04/20/28. 3,666,137 3,676,203
Government National Mortgage
Association,6.50%,
01/26/30 # ................ 7,500,000 7,508,203
Government National Mortgage
Association,7.00%,04/15/26-07/15/28 41,626,040 40,213,130
Government National Mortgage
Association,8.00%,
01/15/30 # ................ 23,000,000 23,230,000
Government National Mortgage
Association,10.50%,02/15/13-01/15/21 3,776,682 4,125,797
Government National Mortgage
Association,11.00%,02/15/10 20,392 21,952
Small Business
Administration
92-20K,7.55%,11/01/12...... 6,505,859 6,554,268
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $236,149,361) 233,097,704
------------
U.S. GOVERNMENT OBLIGATIONS (32.7%)
U.S. TREASURIES (32.7%)
U.S. Treasury
Note,5.25%,02/15/29 * ..... 52,866,000 43,713,309
U.S. Treasury
Note,5.50%,08/31/01-08/15/28 21,028,000 20,683,791
U.S. Treasury
Note,5.88%,10/31/01 * ..... 81,170,000 80,662,688
U.S. Treasury
Note,5.88%,11/30/01-11/15/04 7,370,000 7,318,232
U.S. Treasury
Note,6.00%,08/15/04 * ..... 30,078,000 29,607,881
U.S. Treasury
Note,6.00%,08/15/09........ 39,085,000 37,863,594
U.S. Treasury
Note,6.13%,08/15/29........ 12,000,000 11,439,360
U.S. Treasury
Note,8.13%,08/15/21........ 2,820,000 3,234,173
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST
$237,654,852) 234,523,028
------------
TOTAL LONG-TERM BONDS AND NOTES (COST $697,203,277) 686,104,302
------------
SHORT-TERM INVESTMENTS (10.0%)
Central & South West Corp.,
6.30%,01/12/00 ++ ......... 10,000,000 9,985,500
Conagra Inc.,6.32%,06/12/00 10,000,000 9,994,700
Detroit Edison
Co.,6.72%,01/28/00 * ...... 18,000,000 18,000,000
Federal Home Loan
Bank,1.50%,01/03/00........ 309,000 309,000
Lockheed Martin
Corp.,7.10%,01/18/00....... 10,000,000 9,970,417
Textron Financial
Corp.,5.56%,05/15/00 ++ ... 8,500,000 8,499,830
TRW Inc.,6.45%,01/10/00 ++ . 14,600,000 14,581,689
U.S. Treasury
Bill,4.86%,02/17/00 @ ..... 300,000 298,179
U.S. Treasury
Bill,4.90%,02/17/00 @ ..... 235,000 233,561
------------
TOTAL SHORT-TERM INVESTMENTS (COST $71,867,986) 71,872,876
------------
TOTAL INVESTMENTS (COST $769,180,114)(A) 758,043,253
OTHER ASSETS LESS LIABILITIES (40,571,494)
------------
TOTAL NET ASSETS $717,471,759
============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$770,904,960. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains............................... $ 463,165
Unrealized losses.............................. (13,324,872)
------------
Net unrealized loss........................... $(12,861,707)
============
* Segregated securities for purchases of delayed delivery or when-issued
securities held at December 31, 1999.
/+/ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Trustees.
# When-issued or delayed delivery 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, 1999.
Acquisition date and cost concerning illiquid securities at December 31, 1999
is shown below:
ACQUISITION
DATE COST
--------------- ---------------
Security Pacific.............. 3/20/97 $ 858,285
===============
The market value of the total illiquid securities above is $860,490 which
represents 0.12% of the total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 95
<PAGE>
INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
HIGH YIELD
================================================================================
NUMBER OF MARKET
SHARES VALUE
---------- ----------
STOCK WARRANTS (1.5%)
American Banknote Corp. Warrants ......... 175 $ 18
Intersil Corp. Warrants .................. 1,000 15,000
KMC Telcom Holdings, Inc. Warrants ....... 300 6,000
Ono Finance Plc Warrants ................. 1,000 10,000
R&B Falcon Corp. Warrants ................ 375 112,500
----------
TOTAL STOCK WARRANTS (COST $129,791) 143,518
----------
PREFERRED STOCKS (4.5%)
Adelphia Business Solutions + ............ 52 51,868
Cluett American Corp. ++ ................. 98 4,594
Cumulus Media, Inc. + .................... 52 57,780
Global Crossing Holdings Ltd. ............ 1,200 120,000
Rural Cellular Corp. ..................... 174 177,480
----------
TOTAL PREFERRED STOCKS (COST $396,678) 411,722
----------
PRINCIPAL
AMOUNT
----------
LONG-TERM BONDS AND NOTES (89.6%)
CORPORATE BONDS (88.3%)
Adelphia Communications,8.13%,07/15/03 ... 100,000 96,000
Allegiance Telecom, Inc.,Zero
Coupon,02/15/08.......................... 300,000 220,500
Allied Waste Industries,
Inc.,10.00%,08/01/09..................... 150,000 133,875
Ameristar Casino,10.50%,08/01/04 ......... 100,000 102,000
Anteon Corp.,12.00%,05/15/09 ............. 125,000 116,250
ASAT Finance Llc,12.50%,11/01/06 ......... 100,000 108,500
ATC Group Services,12.00%,01/15/08 /+/ ... 200,000 20,000
Bresnan Communications Corp.,Zero
Coupon,02/01/09.......................... 125,000 86,250
Charter Communications Holding LLC,Zero
Coupon,04/01/11.......................... 200,000 117,500
Clearnet Communications,Zero
Coupon,12/15/05.......................... 50,000 49,000
Coast Hotels & Casinos
Corp.,9.50%,04/01/09..................... 100,000 96,000
Comcast Cable Corp.,Zero Coupon,11/15/07 . 250,000 235,625
Condor Systems Inc.,11.88%,05/01/09 ++ ... 150,000 112,500
Dimac Corp.,12.50%,10/01/08 /+/ .......... 150,000 55,500
ESAT Telecom Group Plc,11.88%,12/01/08 ... 200,000 224,000
Exodus Communications,
Inc.,10.75%,12/15/09..................... 350,000 356,125
Fairchild Semiconductor
Inc.,10.38%,10/01/07..................... 200,000 204,000
Galaxy Telecom LP,12.38%,10/01/05 ........ 250,000 263,750
Garden State Newspapers
Corp.,8.63%,07/01/11..................... 150,000 137,250
Georgia Gulf Corp.,10.38%,11/01/07 ....... 100,000 104,375
Globenet Communications Group
Ltd.,13.00%,07/15/07..................... 200,000 204,000
Hollywood Casino Corp.,11.25%,05/01/07 ... 125,000 129,375
Hollywood Casino
Shreveport,13.00%,08/01/06 ++ ........... 100,000 107,000
Hollywood Park, Inc.,9.25%,02/15/07 ...... 100,000 99,000
Hyperion Telecom Corp.,12.25%,09/01/04 ... 100,000 107,000
Intersil Corp.,13.25%,08/15/09 ++ ........ 100,000 109,000
ITC Deltacom, Inc.,9.75%,11/15/08 ........ 150,000 153,375
Jupiters Ltd.,8.50%,03/01/06 ............. 125,000 121,250
KMC Telcom Holdings, Inc.,Zero
Coupon,02/15/08.......................... 300,000 159,000
Lyondell Chemical Co.,9.63%,05/01/07 ..... 125,000 127,813
McLeodUSA, Inc.,9.50%,11/01/08 ........... 100,000 100,250
Metromedia International Group,
Inc.,10.00%,11/15/08..................... 200,000 204,500
Metronet Communications Corp.,Zero
Coupon,11/01/07.......................... 250,000 211,412
Microcell Telecommunications,Zero
Coupon,06/01/06.......................... 200,000 177,500
Netia Holdings II B.V.,13.13%,06/15/09 ... 100,000 100,500
Nextlink Communications,
Inc.,10.75%,11/15/08..................... 150,000 154,500
NTL Communications Corp.,11.50%,10/01/08 . 200,000 216,000
NTL Communications Corp.,12.38%,10/01/08 . 125,000 87,500
Ono Finance PLC,13.00%,05/01/09 .......... 100,000 104,000
Penhall Acquisition Corp.,12.00%,08/01/06 125,000 126,250
Price Communications Wireless
Inc.,11.75%,07/15/07..................... 150,000 165,750
Primus Telecommunications
Group,11.25%,01/15/09.................... 50,000 48,250
PSINET, Inc.,11.50%,11/01/08 ............. 175,000 182,875
R&B Falcon Corp.,9.50%,12/15/08 .......... 50,000 50,125
Radio Unica Corp.Zero Coupon,08/01/06 .... 300,000 195,750
Repap New Brunswick,11.50%,06/01/04 ...... 150,000 155,250
Rhythms NetConnections Inc.,Zero
Coupon,05/15/08.......................... 200,000 108,000
Rhythms NetConnections
Inc.,12.75%,04/15/09..................... 50,000 48,375
Telecommunication Techniques Co.,
9.75%,05/15/08 .......................... 100,000 91,000
Telewest Plc,Zero Coupon,04/15/09 ++ ..... 100,000 63,500
Telewest Plc,11.00%,10/01/07 ............. 100,000 93,000
Teligent, Inc.,Zero Coupon,03/01/08 ...... 225,000 132,188
Tenneco, Inc.,11.63%,10/15/09 ++ ......... 150,000 152,250
United Artists Theatre
Corp.,9.75%,04/15/08..................... 200,000 30,000
Venetian Casino/LV Sands
Corp.,10.00%,11/15/05.................... 125,000 80,000
Verio Inc. 10 5/8,10.63%,11/15/09 ........ 200,000 205,500
Verio, Inc.,11.25%,12/01/08 .............. 150,000 158,250
Voicestream Wire Co.,Zero Coupon,11/15/09 200,000 120,500
Waterford Gaming Llc,9.50%,03/15/10 ++ ... 196,000 193,060
Williams Communications
Inc.,10.88%,10/01/09..................... 150,000 156,937
Winstar Communications,
Inc.,10.00%,03/15/08..................... 75,000 72,750
----------
8,141,535
----------
FOREIGN OBLIGATIONS (1.3%)
Jazztel Plc,Zero Coupon,12/15/09 ......... 50,000 50,569
NTL Inc.,Zero Coupon,04/15/09 ............ 70,000 64,749
----------
115,318
----------
TOTAL LONG-TERM BONDS AND NOTES (COST $8,641,529) 8,256,853
----------
96 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
SHORT-TERM INVESTMENTS (3.6%)
Federal Home Loan Bank,1.50%,01/03/00 .... $ 331,000 $ 331,000
----------
TOTAL SHORT-TERM INVESTMENTS (COST $331,000) 331,000
----------
TOTAL INVESTMENTS (COST $9,498,998)(A) 9,143,093
OTHER ASSETS LESS LIABILITIES 72,699
----------
TOTAL NET ASSETS $9,215,792
==========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$9,538,840. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains............................... $ 287,210
Unrealized losses.............................. (682,957)
---------
Net unrealized loss........................... $(395,747)
=========
+ 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.
/+/ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Directors.
Acquisition date and cost concerning illiquid securities at December 31, 1999
is shown below:
ACQUISITION
DATE COST
---------------------- ---------------
ATC Group Services............. 1/29/98 $ 200,000
Dimac Corp..................... 10/22/98 146,120
---------------
$ 346,120
===============
The market value of the total illiquid securities above is $75,500 which
represents 0.82% of the total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 97
<PAGE>
INCOME PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
MONEY MARKET
================================================================================
PRINCIPAL
AMOUNT VALUE
------------ --------------
ASSET-BACKED SECURITIES (32.8%)
ABFS Equipment Contract Trust
1999-A,
5.39%,07/15/00 .................... $ 3,902,809 $ 3,896,720
CarMax Auto Owner Trust,
6.20%,11/15/00 .................... 19,429,726 19,423,655
Case Equipment Receivables Trust
1998-B,
5.67%,09/15/00 .................... 5,034,903 5,031,854
Caterpillar Financial Asset
Trust,5.37%,07/25/00............... 15,074,185 15,049,454
Charter Equipment Lease 1999-1
LLC,5.78%,08/25/00................. 7,487,307 7,475,608
Cooperative Associates of Tractor
Dealers, Inc.,5.57%,01/06/00 ...... 10,000,000 9,995,358
Cooperative Associates of Tractor
Dealers, Inc.,5.87%,01/06/00 ...... 4,148,000 4,145,971
Copelco Capital Funding LLC 1999-1,
5.02%,03/15/00 .................... 2,064,635 2,062,699
Corporate Asset Funding Co.
Inc.,6.20%,01/18/00 ++ ............ 12,240,000 12,240,000
Dakota Certificates - Standard
Credit Card Master
Trust,6.90%,01/05/00 ++ ........... 12,000,000 11,995,400
Dealers Capital Acceptance Trust,
Inc.,5.50%,01/06/00................ 14,310,000 14,303,441
Dealers Capital Acceptance Trust,
Inc.,6.04%,01/27/00................ 6,700,000 6,673,021
Distribution Finance Services RV
Trust 1999-3,5.32%,08/15/00 ....... 895,919 895,919
DVI Receivables VII
LLC,5.38%,07/13/00................. 11,965,843 11,950,886
DVI Receivables X LLC,6.17%,11/13/00 7,253,539 7,251,363
Eureka Securitization, Inc.,
6.55%,02/22/00 ++ ................. 45,000,000 45,000,000
Green Tree Financial Corp. 1999-4,
5.25%,07/01/00 .................... 3,488,833 3,485,903
Ikon Receivables LLC,5.11%,06/15/00 9,191,568 9,186,973
Ikon Receivables LLC 1999-2,
6.14%,10/15/00 .................... 27,259,669 27,250,128
Jefferson Smurfit Finance
Co.,5.50%,01/03/00-01/07/00........ 9,000,000 8,996,792
Long Lane Master Trust III,
4.95%,04/28/00 ++ ................. 15,500,000 15,216,195
New Holland Equipment Business Trust
1999-A,6.15%,11/15/00 ++ .......... 12,754,040 12,749,307
Newcourt Equipment Trust Securities
1999-1,5.97%,08/20/00.............. 8,421,120 8,422,436
Nissan Auto Receivables Grantor
1999-A,
5.62%,09/15/00 .................... 23,198,549 23,172,269
Onyx Acceptance Owner
Trust,5.65%,09/15/00............... 6,545,358 6,539,989
Onyx Acceptance Owner
Trust,6.18%,11/15/00............... 17,240,799 17,236,084
Orix Credit Alliance Receivables
Trust 1999-A,6.13%,12/15/00 ....... 8,926,520 8,923,731
Racers Series 1999,6.60%,07/17/00 ++ 31,000,000 30,989,150
Ryder Vehicle Lease Trust 1999-A,
6.15%,10/16/00 .................... 10,000,000 9,997,852
Syndicated Loan Funding
Trust,5.55%,06/15/00............... 20,000,000 19,997,000
--------------
TOTAL ASSET-BACKED SECURITIES 379,555,158
--------------
COMMERCIAL PAPER - DOMESTIC (22.4%)
Baxter International,
Inc.,5.03%,01/26/00 ++ 4,500,000 4,485,539
Baxter International,
Inc.,5.05%,01/25/00 ++ 10,000,000 9,969,139
Cooper Industries,6.25%,02/10/00 ++ 20,000,000 19,868,056
Corning, Inc.,5.90%,01/25/00 ....... 12,000,000 11,956,733
Countrywide Home Loans,
Inc.,4.80%,01/04/00................ 15,000,000 14,998,000
Countrywide Home Loans,
Inc.,5.55%,01/04/00................ 3,473,000 3,472,465
Detroit Edison Co.,6.70%,01/26/00 .. 10,000,000 9,957,194
Eaton Corp.,5.83%,03/13/00 ++ ...... 7,000,000 6,921,670
Finova Capital Corp.,6.64%,03/20/00 30,000,000 29,968,500
General Electric Capital
Corp.,5.97%,02/03/00............... 5,000,000 4,974,296
General Electric Capital
Corp.,6.00%,01/25/00............... 10,000,000 9,963,333
GTE Corp.,6.16%,02/29/00 ++ ........ 18,000,000 17,824,440
Lehman Brothers Holdings
Inc.,6.09%,04/11/00................ 5,000,000 4,921,900
MCI Worldcom Inc.,7.10%,01/21/00 ++ 14,000,000 13,950,300
Peco Energy Co.,7.05%,01/14/00 ..... 12,000,000 11,974,150
PHH Corp.,5.60%,01/14/00 ........... 5,000,000 4,991,444
Republic Industries Funding
Co.,7.00%,01/07/00................. 5,000,000 4,996,111
Torchmark Corp.,5.80%,01/13/00 ..... 5,000,000 4,991,944
Wheels Inc.,6.30%,03/30/00 /+/ ..... 15,000,000 14,789,700
Wheels Inc.,6.50%,01/12/00 /+/ ..... 20,000,000 19,960,278
Wheels Inc.,6.70%,01/26/00 /+/ ..... 10,000,000 9,957,194
Wheels Inc.,7.10%,01/24/00 /+/ ..... 10,000,000 9,958,583
Zions Bancorporation,5.79%,04/13/00
++................................. 5,000,000 4,918,200
Zions Bancorporation,5.90%,01/31/00
++................................. 10,000,000 9,954,112
--------------
TOTAL COMMERCIAL PAPER - DOMESTIC 259,723,281
--------------
COMMERCIAL PAPER - FOREIGN (0.4%)
UBS Finance(Delaware)
Inc.,4.00%,01/03/00................ 4,402,000 4,402,000
--------------
TOTAL COMMERCIAL PAPER - FOREIGN 4,402,000
--------------
CORPORATE NOTES (16.3%)
Associates Corp. N.A.,6.45%,09/15/00
++................................. 9,000,000 9,017,640
Associates Corp. N.A.,6.41%,06/29/00
++................................. 14,000,000 13,992,720
Bank One Corp.,6.32%,01/16/01 ++ ... 15,000,000 15,018,750
Cox Communications Inc.,
6.67%,08/15/00 ++ ................. 10,200,000 10,194,390
Detroit Edison Co.,6.72%,01/28/00 .. 5,000,000 5,000,000
Finova Capital Corp.,6.38%,10/15/00 7,775,000 7,762,374
First Chicago Nbd,6.30%,02/10/00 ... 7,000,000 7,001,233
98 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
PRINCIPAL
AMOUNT VALUE
------------ --------------
CORPORATE NOTES (CONTINUED)
Fleet Boston Corp.,5.18%,01/29/01 .. $ 20,000,000 $ 20,000,000
General Motors Acceptance
Corp.,7.00%,03/01/00............... 3,500,000 3,510,013
International Lease Finance
Corp.,6.38%,01/18/00............... 5,945,000 5,947,632
Lehman Brothers Holdings
Inc.,9.88%,10/15/00................ 2,500,000 2,552,975
Textron Financial
Corp.,6.19%,05/15/00 ++ ........... 43,000,000 42,999,140
Washington Mutual,
Inc.,6.38%,07/01/00................ 10,000,000 9,987,500
Zions Bancorporation,6.44%,10/27/00
++................................. 36,000,000 36,000,360
--------------
TOTAL CORPORATE NOTES 188,984,727
--------------
MEDIUM-TERM NOTES - DOMESTIC (26.2%)
CIT Group Holdings,
Inc.,5.69%,02/24/00................ 23,100,000 23,098,060
CIT Group Holdings,
Inc.,6.15%,01/14/00................ 10,000,000 9,999,770
Countrywide Home Loans,
Inc.,6.16%,02/11/00................ 15,085,000 15,083,138
Countrywide Home Loans,
Inc.,6.31%,08/08/00................ 5,000,000 5,001,200
Countrywide Home Loans,
Inc.,6.33%,07/27/00................ 15,500,000 15,489,305
Eaton Corp.,6.13%,04/17/00 ++ ...... 27,000,000 27,000,540
Finova Capital Corp.,8.00%,02/01/00 5,000,000 5,008,782
General Motors Acceptance
Corp.,5.33%,10/20/00............... 15,500,000 15,367,630
General Motors Acceptance
Corp.,6.07%,02/24/00............... 14,824,000 14,821,918
Heller Financial,
Inc.,5.90%,08/07/00................ 32,000,000 31,976,000
Lehman Brothers Holdings
Inc.,6.88%,01/14/00................ 20,000,000 20,000,123
Lehman Brothers Holdings
Inc.,6.15%,03/15/00................ 16,000,000 15,982,560
PHH Corp.,5.61%,02/22/00 ........... 9,000,000 9,000,000
PHH Corp.,6.61%,03/23/00 ........... 25,000,000 25,000,500
PHH Corp.,6.66%,05/04/00 ........... 10,000,000 10,001,600
Popular Inc.,6.75%,04/26/00 ........ 6,900,000 6,900,000
Popular Inc.,6.81%,05/17/00 ........ 4,000,000 3,998,880
Prudential Funding
Corp.,6.25%,07/28/00 ++............ 29,500,000 29,497,640
Sears Roebuck Acceptance
Corp.,6.50%,10/04/00............... 5,100,000 5,087,250
Wells Fargo &
Co.,5.31%,03/31/00-04/30/00........ 14,850,000 14,825,229
--------------
TOTAL MEDIUM-TERM NOTES - DOMESTIC 303,140,125
--------------
MEDIUM-TERM NOTES - FOREIGN (1.5%)
Republic of Argentina,Zero
Coupon,10/16/00.................... 18,500,000 17,445,500
--------------
TOTAL MEDIUM-TERM NOTES - FOREIGN 17,445,500
--------------
TOTAL INVESTMENTS (COST $1,153,806,658)(A) 1,153,250,791
OTHER ASSETS LESS LIABILITIES 4,567,325
--------------
TOTAL NET ASSETS $1,157,818,116
==============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses at December 31, 1999, are as follows:
Unrealized gains............................. $ 38,567
Unrealized losses............................ (594,434)
---------
Net unrealized loss......................... $(555,867)
=========
++ 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.
/+/ Restricted security. This security has been determined to be illiquid
under guidelines established by the Board of Trustees.
Acquisition date and cost concerning illiquid securities at December 31, 1999
is shown below:
ACQUISITION
DATE COST
--------------------- --------------
Wheels Inc.,6.30%,03/30/00.... 12/28/99 14,771,625
Wheels Inc.,6.50%,01/12/00 ... 12/29/99 14,975,625
Wheels Inc.,6.50%,01/20/00 ... 12/14/99 4,984,653
Wheels Inc.,6.70%,01/26/00.... 12/15/99 9,957,194
Wheels Inc.,7.10%,01/24/00.... 12/28/99 9,958,583
--------------
$ 54,647,680
==============
The value of the total illiquid securities above is $54,665,755 which represents
4.72% of the total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 99
<PAGE>
INCOME PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
================================================================================
BOND HIGH YIELD MONEY MARKET
------------- ------------- -----------------
ASSETS:
Investments, at market value . $758,043,253 $ 9,143,093 $1,153,250,791
Cash ......................... 775 901 1,245
Foreign currency ............. 147,760 -- --
Receivable for:
Dividends and interest ...... 9,773,901 167,238 7,026,620
Investments sold ............ -- 3,411 --
Fund shares sold ............ 36,387 -- 2,612,030
Prepaid expenses ............. 8,300 102 10,832
------------ ------------ --------------
Total assets ............ 768,010,376 9,314,745 1,162,901,518
------------ ------------ --------------
LIABILITIES:
Payable for:
Investments purchased ....... 49,520,271 -- --
Fund shares redeemed ........ 680,853 86,183 4,700,100
Accrued investment advisory
fees......................... 261,301 5,621 253,941
Accrued administrative service
fees......................... 48,994 648 76,182
Accrued custody fees ......... 11,599 4,301 15,175
Other liabilities ............ 15,599 2,200 38,004
------------ ------------ --------------
Total liabilities ....... 50,538,617 98,953 5,083,402
------------ ------------ --------------
NET ASSETS ............. $717,471,759 $ 9,215,792 $1,157,818,116
============ ============ ==============
NET ASSETS REPRESENTED BY:
Paid-in capital .............. $750,063,774 $ 10,442,520 $1,107,419,358
Net unrealized loss on
investments.................. (11,171,227) (355,905) (555,867)
Undistributed (distributions
in excess of) net investment
income....................... 934,251 (16,271) 51,017,502
Accumulated net realized loss
on investments .............. (22,355,039) (854,552) (62,877)
------------ ------------ --------------
NET ASSETS ............. $717,471,759 $ 9,215,792 $1,157,818,116
============ ============ ==============
Cost of investments .......... $769,180,114 $ 9,498,998 $1,153,806,658
Cost of foreign currency ..... $ 147,701 $ -- $ --
CAPITAL SHARES:
Authorized ................... Unlimited Two Billion Unlimited
Par value .................... $ 1.000 $ 0.001 $ 1.000
Outstanding .................. 58,963,749 1,047,069 86,307,359
Net asset value, offering and
redemption price per share
(net assets divided by shares
outstanding)................. $ 12.17 $ 8.80 $ 13.42
100 See Notes to Financial Statements.
<PAGE>
INCOME PORTFOLIOS
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
BOND HIGH YIELD MONEY MARKET
------------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends .................................. $ 313,250 $ 21,460 $ --
Interest ................................... 47,472,360 975,588 54,574,087
------------ ------------ ------------
Total investment income ............... 47,785,610 997,048 54,574,087
------------ ------------ ------------
INVESTMENT EXPENSES:
Investment advisory fees ................... 3,050,254 61,843 2,534,715
Administrative services fees ............... 571,923 7,136 760,415
Printing and postage fees .................. 7,131 3,387 14,355
Custody fees ............................... 17,360 5,682 25,047
Transfer agent fees ........................ 11,894 2,795 3,414
Audit fees ................................. 37,585 25,610 31,295
Directors'/Trustees' fees .................. 22,608 254 26,630
Registration fees .......................... 7,395 220 52,393
Miscellaneous expenses ..................... 29,356 296 19,216
------------ ------------ ------------
Expenses before reimbursement and
waiver from Investment Adviser ............ 3,755,506 107,223 3,467,480
Expense reimbursement and waiver
from Investment Adviser ................... -- (31,073) --
------------ ------------ ------------
Net expenses .......................... 3,755,506 76,150 3,467,480
------------ ------------ ------------
Net investment income ...................... 44,030,104 920,898 51,106,607
------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ............................... (22,472,800) (299,084) --
Written options ........................... 117,761 -- --
Futures and forward foreign
currency exchange contracts ............... 1,022,114 (484) --
Foreign currency related
transactions .............................. (549,483) (254) --
------------ ------------ ------------
Net realized loss on
investments ........................... (21,882,408) (299,822) --
------------ ------------ ------------
Net change in unrealized gain or
loss on:
Investments ............................... (28,210,512) 23,530 (561,278)
Foreign currency related
transactions .............................. (34,366) -- --
------------ ------------ ------------
Net change in unrealized gain
or loss on investments ................ (28,244,878) 23,530 (561,278)
------------ ------------ ------------
Net realized and change in
unrealized gain or loss on
investments ............................... (50,127,286) (276,292) (561,278)
------------ ------------ ------------
Net increase (decrease) in net
assets resulting from operations .......... $ (6,097,182) $ 644,606 $ 50,545,329
============ ============ ============
</TABLE>
See Notes to Financial Statements. 101
<PAGE>
INCOME PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BOND
--------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ......................... $ 44,030,104 $ 42,765,946
Net realized gain (loss) on investments ....... (21,882,408) 12,113,406
Net change in unrealized gain or loss
on investments ............................... (28,244,878) 2,511,151
------------- -------------
Net increase (decrease) in net assets
resulting from operations .................... (6,097,182) 57,390,503
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income .................... (43,575,772) (43,159,245)
From net realized gains ....................... (2,565,754) (3,718,891)
------------- -------------
Decrease in net assets from
distributions to shareholders ................ (46,141,526) (46,878,136)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold ..................... 68,496,518 129,876,548
Net asset value of shares issued upon
reinvestment of distributions ............... 46,085,761 46,816,347
Payments for shares redeemed .................. (139,432,045) (77,605,522)
------------- -------------
Net increase (decrease) in net assets
from fund share transactions ................. (24,849,766) 99,087,373
------------- -------------
Net change in net assets .................... (77,088,474) 109,599,740
NET ASSETS:
Beginning of period ........................... 794,560,233 684,960,493
------------- -------------
End of period ................................. $ 717,471,759 $ 794,560,233
============= =============
End of period net assets includes
undistributed net investment income .......... $ 934,251 $ 12,386
============= =============
SHARE TRANSACTIONS:
Number of shares sold ......................... 5,318,775 9,811,337
Number of shares issued upon
reinvestment of distributions ............... 3,717,155 3,589,303
Number of shares redeemed ..................... (10,895,265) (5,880,354)
------------- -------------
Net increase (decrease) ...................... (1,859,335) 7,520,286
============= =============
</TABLE>
102 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
HIGH YIELD
-------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ...................... $ 920,898 $ 964,822
Net realized loss on investments ........... (299,822) (555,468)
Net change in unrealized gain or loss
on investments ............................ 23,530 (456,966)
------------ ------------
Net increase (decrease) in net assets
resulting from operations ................. 644,606 (47,612)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................. (934,712) (916,480)
From net realized gains .................... -- (70,942)
------------ ------------
Decrease in net assets from
distributions to shareholders ............. (934,712) (987,422)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold .................. 8,863,530 3,590,850
Net asset value of shares issued upon
reinvestment of distributions ............ 368,520 199,555
Payments for shares redeemed ............... (8,492,912) (4,087,023)
------------ ------------
Net increase (decrease) in net assets
from fund share transactions .............. 739,138 (296,618)
------------ ------------
Net change in net assets ................. 449,032 (1,331,652)
NET ASSETS:
Beginning of period ........................ 8,766,760 10,098,412
------------ ------------
End of period .............................. $ 9,215,792 $ 8,766,760
============ ============
End of period net assets includes
distributions in excess of net
investment income ......................... $ (16,271) $ (1,719)
============ ============
SHARE TRANSACTIONS:
Number of shares sold ...................... 946,641 349,877
Number of shares issued upon
reinvestment of distributions ............ 41,854 22,065
Number of shares redeemed .................. (910,934) (402,434)
------------ ------------
Net increase (decrease) ................... 77,561 (30,492)
============ ============
</TABLE>
See Notes to Financial Statements. 103
<PAGE>
INCOME PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
MONEY MARKET
-------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income ................. $ 51,106,607 $ 40,781,149
Net change in unrealized gain or loss
on investments........................ (561,278) (20,848)
--------------- -------------
Net increase in net assets resulting
from operations....................... 50,545,329 40,760,301
--------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (40,869,907) (34,446,801)
--------------- -------------
Decrease in net assets from
distributions to shareholders......... (40,869,907) (34,446,801)
--------------- -------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............. 1,659,181,476 929,993,353
Net asset value of shares issued upon
reinvestment of distributions........ 40,869,907 34,446,801
Payments for shares redeemed........... (1,427,077,356) (784,340,735)
--------------- -------------
Net increase in net assets from fund
share transactions.................... 272,974,027 180,099,419
--------------- -------------
Net change in net assets............. 282,649,449 186,412,919
NET ASSETS:
Beginning of period.................... 875,168,667 688,755,748
--------------- -------------
End of period.......................... $ 1,157,818,116 $ 875,168,667
=============== =============
End of period net assets includes
undistributed net investment income... $ 51,017,502 $ 40,780,802
=============== =============
SHARE TRANSACTIONS:
Number of shares sold.................. 126,541,295 70,927,540
Number of shares issued upon
reinvestment of distributions........ 3,191,341 2,701,802
Number of shares redeemed.............. (108,797,935) (59,793,888)
--------------- -------------
Net increase.......................... 20,934,701 13,835,454
=============== =============
104 See Notes to Financial Statements.
<PAGE>
INCOME PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
1. ORGANIZATION
The Statements contained herein refer to Aetna Income Shares d/b/a Aetna Bond VP
(Bond), Aetna High Yield VP (High Yield), a portfolio of Aetna Variable
Portfolios, Inc. (AVPI) and Aetna Variable Encore Fund d/b/a Aetna Money Market
VP (Money Market) (individually, a Portfolio, and collectively, the Portfolios).
Bond and Money Market were organized under the laws of Massachusetts on January
25, 1984. AVPI was incorporated under the laws of Maryland on June 4, 1996. The
Articles of Incorporation of AVPI permit it to offer separate portfolios, each
of which has its own investment objective, policies and restrictions. AVPI
currently offers multiple separate portfolios, including High Yield. Bond, Money
Market and AVPI are each registered under the Investment Company Act of 1940
(the Act) as open-end management investment companies.
The following is each Portfolio's investment objective:
BOND seeks to maximize total return, consistent with reasonable risk, through
investments in a diversified portfolio consisting primarily of debt
securities. It is anticipated that capital appreciation and investment income
will both be major factors in achieving total return.
HIGH YIELD seeks high current income and growth of capital primarily through
investment in a diversified portfolio of fixed-income securities rated lower
than BBB- by Standard and Poor's or lower than Baa3 by Moody's Investors
Service, Inc.
MONEY MARKET seeks to provide high current return, consistent with
preservation of capital and liquidity, through investment in high-quality
money market instruments.
Shares of the Portfolios are offered to insurance company separate accounts that
fund both annuity and life insurance contracts and to certain tax-qualified
retirement plans. At December 31, 1999, separate accounts of Aetna Life
Insurance and Annuity Company (ALIAC) and its affiliates held 96.7%, 100.0% and
96.7% of Bond, High Yield and Money Market's shares outstanding, respectively.
Aeltus Investment Management, Inc. (Aeltus) serves as the investment adviser to
the Portfolios. ALIAC serves as the principal underwriter to each Portfolio.
Aeltus and ALIAC are both indirect wholly owned subsidiaries of Aetna Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of each 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.
A. VALUATION OF INVESTMENTS
Exchange traded equity investments are stated at market values based upon prices
furnished by external pricing sources as reported on national securities
exchanges or, for over-the-counter securities, at the mean of the bid and asked
prices. Fixed income securities, with the exception of high yield securities,
maturing in more than sixty days for which market quotations are readily
available are valued at the mean of the last bid and asked price. High yield
securities are priced at bid by external pricing sources or brokers making a
market in the security. Short-term investments maturing sixty days or less are
valued at amortized cost, which when combined with accrued interest,
approximates market value. Securities and fixed income
105
<PAGE>
INCOME PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
investments for which market quotations are not considered to be readily
available are valued using methods approved by the Board of Directors/Trustees
(Board).
The accounting records of the Portfolios are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at the prevailing rates of exchange
at the end of each day. 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. The Portfolios do not isolate
the portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
their market prices. Such fluctuations are included in net realized and
unrealized gain or loss on investments.
B. OPTIONS CONTRACTS
The Portfolios (except Money Market) may purchase and write (sell) call options
and put options and write (sell) 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 and unrealized gains or losses are recorded
based upon the last sales price on the principal exchange on which the options
are traded. The Portfolios 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. Realized and unrealized gains or losses on option contracts are reflected
in the accompanying financial statements.
The risk in writing a call option is that the Portfolios 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 Portfolios 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 Portfolios 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 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 (except for
Money Market) invest in financial futures contracts as a hedge against their
existing portfolio securities, 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 fluctuations
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 the Portfolios 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 Portfolios (except for Money Market) may
use forward foreign currency exchange contracts to hedge against foreign
currency exchange rate risks on its non-U.S. dollar denominated securities.
Contracts are recorded at market value and marked-to-market daily.
106
<PAGE>
================================================================================
The risks associated with financial 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 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 financial futures and forward foreign
currency exchange contracts are reflected in the accompanying financial
statements. The amounts at risk under such futures and forward foreign currency
exchange contracts may exceed the amounts reflected in the financial statements.
The notional amounts (economic exposure) of these contracts are disclosed in the
Portfolios of Investments and elsewhere 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 reported to shareholders
as federal taxable income.
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 those which can only be sold
under Rule 144A of the Securities Act of 1933 (1933 Act) or are securities
offered pursuant to Section 4(2) of the 1933 Act, and are subject to legal or
contractual restrictions on resale and may not be publicly sold without
registration under the 1933 Act. Each Portfolio may invest up to 15% of its
total assets in illiquid securities (except Money Market which may invest up to
10%). 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. The Portfolios will not pay the costs of disposition of restricted
securities other than ordinary brokerage fees, if any.
E. DELAYED DELIVERY TRANSACTIONS
The Portfolios 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 such securities are identified in the
Portfolios 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. In connection with such purchases, the Portfolios are required to
hold liquid assets as collateral with their custodian sufficient to cover the
purchase price.
F. DOLLAR ROLL TRANSACTIONS
Each of the Portfolios may engage in dollar roll transactions with respect to
mortgage-backed securities issued by Government National Mortgage Association,
Federal National Mortgage Association and Federal Home Loan Mortgage Corp. In a
dollar roll transaction, a Portfolio sells a mortgage-backed security to a
financial institution, such as a bank or broker/dealer, and simultaneously
agrees to repurchase a substantially similar (i.e., same type, coupon, and
maturity) security from the institution at a later date at an agreed upon price.
The mortgage-backed securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories.
G. FEDERAL INCOME TAXES
Each Portfolio intends to meet the requirements to be taxed as a regulated
investment company for the current year. As such, each Portfolio is relieved of
federal income taxes by distributing all of its net taxable investment income
and capital gains, if any, in compliance with the applicable provisions of the
Internal Revenue Code. Furthermore, by distributing substantially all of its net
taxable investment income and capital gains during the calendar year, each
Portfolio will avoid federal excise taxes in accordance with the applicable
provisions of the Internal Revenue Code. Thus, the financial statements contain
no provision for federal income taxes.
107
<PAGE>
INCOME PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
H. 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 differing treatments for foreign currency transactions, certain
losses incurred after October 31, 1999, interest income on bonds in default and
repurchases of certain securities sold at a loss. In addition, distributions of
realized gains from sales of securities held one year or less are taxable to
shareholders at ordinary income tax rates rather than preferred capital gain tax
rates in accordance with the applicable provisions of the Internal Revenue Code.
I. LINE OF CREDIT
Bond, certain portfolios of Aetna Variable Portfolios, Inc., (including High
Yield), Aetna Generation Portfolios, Inc., Aetna Balanced VP, Inc., Aetna
Variable Fund, certain series of Aetna GET Fund and certain series of Aetna
Series Fund Inc., collectively Aetna Mutual Funds, have entered into a revolving
credit facility, of up to $300,000,000, with a syndicate of banks led by
Citibank, N.A. For its services as Agent, Citibank, N.A. received an agent fee
of $200,000. In addition, the revolving credit facility requires the payment of
an annual commitment fee of 0.09% based on the average daily unused amount of
the credit facility. Each of the Aetna Mutual Funds will pay its pro rata share
of both the agent fee and commitment fee. Generally, borrowings under the
facility accrue interest at the Federal Funds Rate plus a specified margin.
Repayments generally must be made within 30 days after the date of a revolving
credit advance. The revolving credit facility became effective on November 30,
1999, and there was no outstanding balance as of December 31, 1999.
J. 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 accreted or amortized, respectively, using an effective yield
method over the life of the 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.
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICE FEES
Each Portfolio pays Aeltus an investment advisory fee expressed as a percentage
of its average daily net assets. Below are the Portfolios' annual investment
advisory fees, as of December 31, 1999:
ADVISORY FEE
------------
Bond 0.40%
High Yield 0.65%
Money Market 0.25%
Each Portfolio pays Aeltus an administrative services fee in exchange for
receiving certain administrative and shareholder services and to compensate
Aeltus for supervising the Portfolios' other service providers. Each Portfolio
pays Aeltus an administrative services fee at an annual rate based on its
average daily net assets. The rate for each Portfolio is 0.075% on the first $5
billion in assets and 0.050% on assets over $5 billion.
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Portfolio, in
exchange for fees payable by Aeltus, of up to 0.325% of the Portfolios' average
daily net assets. For the year ended December 31, 1999, Aeltus paid ALIAC
$2,822,751.
108
<PAGE>
================================================================================
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated through December 31, 1999 to reimburse High
Yield for some or all of its operating expenses or to waive fees in order to
maintain a certain expense ratio. Reimbursement and waiver arrangements will
increase High Yield's yield and total return. Actual expenses for the year ended
December 31, 1999 were at or below contractual limits. Actual expense ratios are
included in the Financial Highlights.
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the year ended December 31, 1999 were:
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
Bond $1,452,370,184 $1,609,364,569
High Yield 11,718,118 11,838,779
6. OPTIONS
All Portfolios (except Money Market) may have options. For the year ended
December 31, 1999, the following reflects the written call activity:
<TABLE>
<CAPTION>
CALL OPTIONS WRITTEN
---------------------------------------------------------
NUMBER OF PREMIUM REALIZED
BOND CONTRACTS RECEIVED GAIN(LOSS)
---------------------------------------------------------
<S> <C> <C> <C>
Outstanding December 31, 1998 -- $ -- $ --
Written 131,430 244,954 --
Closed (123,880) (182,430) 55,237
Expired (7,550) (62,524) 62,524
---------------------------------------------------------
Outstanding December 31, 1999 -- $ -- $117,761
=========================================================
</TABLE>
7. CAPITAL LOSS CARRYFORWARD
In accordance with applicable provisions of the Internal Revenue Code, the
following capital loss carryforwards have been incurred as of December 31, 1999:
CAPITAL LOSS YEAR OF
CARRYFORWARD EXPIRATION
------------ ----------
Bond $14,513,549 2007
--------------------------------------------------------------
High Yield 218,483 2006
554,783 2007
--------------------------------------------------------------
Money Market 62,877 2003
These capital loss carryforwards may be used to offset future capital gains
until their respective expiration dates. It is the policy of each of the
Portfolios to reduce future distributions of realized gains to shareholders to
the extent of unexpired capital loss carryforwards.
109
<PAGE>
INCOME PORTFOLIOS
ADDITIONAL INFORMATION
DECEMBER 31, 1999
================================================================================
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR (UNAUDITED)
In accordance with federal income tax authorities, 2.25% of the High Yield
Portfolio's dividends qualify for the corporate dividends received deduction.
YEAR 2000 (UNAUDITED)
The Portfolio's Year 2000 remediation efforts have been completed. Currently,
the Portfolio's have no information that indicates a mission-critical vendor or
service provider will be unable to sell goods or provide services to the
Portfolios or that any customer will be unable to purchase from the Portfolios
because of Year 2000 issues. As of today, the Portfolio's have not experienced
any significant disruptions to their financial reporting or operating activities
that were caused by failure of their computerized systems resulting from Year
2000 issues.
110
<PAGE>
INCOME PORTFOLIOS
FINANCIAL HIGHLIGHTS
BOND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period .... $ 13.06 $ 12.85 $ 12.62 $ 13.00 $ 11.72
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .. 0.76 0.75 0.80+ 0.85+ 0.88+
Net realized and
change in unrealized
gain or loss on
investments ............ (0.86) 0.28 0.23 (0.39) 1.24
---------- ---------- ---------- ---------- ----------
Total from
investment
operations .......... (0.10) 1.03 1.03 0.46 2.12
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From net investment
income ................. (0.75) (0.76) (0.80) (0.84) (0.84)
From net realized
gains on investments ... (0.04) (0.06) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions .. (0.79) (0.82) (0.80) (0.84) (0.84)
---------- ---------- ---------- ---------- ----------
Net asset value, end
of period .............. $ 12.17 $ 13.06 $ 12.85 $ 12.62 $ 13.00
========== ========== ========== ========== ==========
Total return* ........... (0.74)% 8.14% 8.30% 3.60% 18.24%
Net assets, end of
period (000's) ......... $ 717,472 $ 794,560 $ 684,960 $ 643,729 $ 666,960
Ratio of net expenses
to average net assets .. 0.49% 0.49% 0.48% 0.39% 0.32%
Ratio of net
investment income to
average net assets ..... 5.77% 5.82% 6.31% 6.39% 6.97%
Portfolio turnover
rate ................... 201.00% 88.98% 134.92% 96.41% 113.72%
</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 period.
See Notes to Financial Statements. 111
<PAGE>
INCOME PORTFOLIOS
FINANCIAL HIGHLIGHTS (CONTINUED)
HIGH YIELD
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 10, 1997
YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, OPERATIONS)
1999 1998 TO DECEMBER 31, 1997
------------ ------------ --------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ........................ $ 9.04 $ 10.10 $ 10.00
--------- --------- ---------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ............ 0.86 1.07 0.05+
Net realized and change in
unrealized gain or loss on
investments ...................... (0.22) (1.09) 0.10
--------- --------- ---------
Total from investment
operations .................... 0.64 (0.02) 0.15
--------- --------- ---------
LESS DISTRIBUTIONS:
From net investment income ....... (0.88) (1.02) (0.05)
From net realized gains on
investments ...................... -- (0.02) --
--------- --------- ---------
Total distributions ............ (0.88) (1.04) (0.05)
--------- --------- ---------
Net asset value, end of
period ........................... $ 8.80 $ 9.04 $ 10.10
========= ========= =========
Total return* ..................... 7.05% (0.27)% 1.48%
Net assets, end of period
(000's) .......................... $ 9,216 $ 8,767 $ 10,098
Ratio of net expenses to
average net assets ............... 0.80% 0.80% 0.80%(1)
Ratio of net investment
income to average net
assets ........................... 9.68% 9.14% 7.81%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets ............ 1.13% 0.97% --
Portfolio turnover rate ........... 131.04% 178.39% 69.39%
</TABLE>
(1) Annualized.
* 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 period.
112 See Notes to Financial Statements.
<PAGE>
MONEY MARKET
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ..... $ 13.39 $ 13.36 $ 13.19 $ 13.29 $ 12.54
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ... 0.59 0.63 0.67+ 0.70+ 0.75+
Net realized and
change in unrealized
gain or loss on
investments ............. 0.06 0.07 0.03 -- 0.01
----------- ----------- ----------- ----------- -----------
Total from
investment
operations ........... 0.65 0.70 0.70 0.70 0.76
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
From net investment
income .................. (0.62) (0.67) (0.53) (0.80) (0.01)
----------- ----------- ----------- ----------- -----------
Total distributions ... (0.62) (0.67) (0.53) (0.80) (0.01)
----------- ----------- ----------- ----------- -----------
Net asset value, end
of period ............... $ 13.42 $ 13.39 $ 13.36 $ 13.19 $ 13.29
=========== =========== =========== =========== ===========
Total return* ............ 5.08% 5.46% 5.47% 5.37% 6.05%
Net assets, end of
period (000's) .......... $ 1,157,818 $ 875,169 $ 688,756 $ 613,505 $ 514,037
Ratio of net expenses
to average
net assets .............. 0.34% 0.34% 0.35% 0.34% 0.30%
Ratio of net
investment income to
average net assets ...... 5.04% 5.28% 5.34% 5.24% 5.82%
</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 period.
See Notes to Financial Statements. 113
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees/Directors and Shareholders of Aetna Bond VP, Aetna Money
Market VP and Aetna Variable Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Bond VP, Aetna Money Market VP and Aetna High Yield VP, series of Aetna Variable
Portfolios, Inc. (collectively the Income Portfolios), including the portfolios
of investments as of December 31, 1999, and 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 for Aetna Bond VP and Aetna Money
Market VP and for the two-year period then ended and the period from December
10, 1997 (commencement date) to December 31, 1997 for Aetna High Yield VP. These
financial statements and financial highlights are the responsibility of the
Income 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, 1999, 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 the
Income Portfolios as of December 31, 1999, the results of their operations for
the year then ended, 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 or
periods specified in the first paragraph above, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
February 4, 2000
114
<PAGE>
Aetna GET Fund, Series C
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
GET Fund, Series C 12/17/96 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Aetna GET Fund, Series C 10,000 10,153 10,251 11,620 12,442 12,715 14,432 15,002 13,496 16,248
S&P 500 Index 10,000 10,174 10,446 12,270 13,189 13,568 15,461 15,971 14,382 17,445
<CAPTION>
GET Fund, Series C 12/31/99
<S> <C> <C> <C> <C>
Aetna GET Fund, Series C 17,114 18,230 17,227 20,076
S&P 500 Index 18,314 19,605 18,380 21,115
</TABLE>
Aetna GET Fund, Series D
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
GET Fund, Series D 1/19/99 12/31/99
<S> <C> <C> <C> <C> <C>
Aetna GET Fund, Series D 10,000 10,060 10,298 9,971 10,802
S&P 500 Index 10,000 10,303 11,029 10,340 11,879
</TABLE>
Aetna GET Fund, Series E
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
GET Fund, Series E 9/15/99 12/31/99
<S> <C> <C>
Aetna GET Fund, Series E 10,000 10,714
S&P 500 Index 10,000 11,185
</TABLE>
See Definition of Terms. 115
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
- --------------------------------------------------------------------------------------------------
GET C GET D GET E
- --------------------------------------------------------------------------------------------------
Inception Date 1 Year Inception Inception Date Inception Inception Date Inception
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12/17/96 23.56% 25.77% 01/19/99 8.01% 09/15/99 7.14%
- --------------------------------------------------------------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA GET FUNDS, SERIES C, D AND E
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
The performance listed below for the Aetna GET Fund, Series C, D and E (GET C,
GET D and GET E) and their respective benchmarks is for the year ended December
31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
PORTFOLIO BENCHMARK INDEX
AETNA GET FUND RETURN BENCHMARK INDEX RETURN
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GET C 23.56% S&P 500 Index (b) 21.04%
GET D 8.01% S&P 500 Index (from 1/19/99 - 12/31/99) 18.79%
GET E 7.14% S&P 500 Index (from 9/15/99 - 12/31/99) 11.85%
</TABLE>
Currently closed to new deposits, GET C, GET D and GET E invest primarily in
common stocks and bonds in varying proportions in response to market
fluctuations. This strategy is complemented by a guarantee that the market value
of an investor's assets will generally not be less than their market value on
the first day of GET C, GET D and GET E's 5-year Guarantee Period if the assets
are held to GET C, GET D and GET E's maturity date of December 16, 2001, January
15, 2004 and September 14, 2004, respectively.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIOS?
Equity:
After suffering a 12% correction that started in July and ended in mid-October,
the S&P 500 had a tremendous rally in the 4th quarter to close at record highs.
As fears of Y2K litigation risk and a Y2K-caused slowdown in orders began to
diminish, the market was propelled higher by technology shares (particularly
those associated with telecommunication and the internet). However, the frenzied
buying of these sectors masked a deteriorating backdrop in the overall
environment for equities. These developments will receive more attention in the
new year as the Y2K issue fades away:
o In November, the Federal Reserve (the "Fed") raised the federal funds rate
for the third time in 1999, driving interest rates substantially higher.
(The federal funds rate is the interest rate charged on overnight loans
between banks.)
o Riots and protests against the World Trade Organization during their
meeting in Seattle suggest growing opposition to global free trade.
o Domestic economic data showed persistent strength coupled with nascent
signs of inflationary pressure.
The large cap equity portion of the Portfolios performed extremely well in this
environment, as the quantitative model that we use in this strategy favored
technology shares due to their strong business momentum. These stocks trade at
extremely high valuations relative to the market, which meant that the value
factors in our model detracted from performance.
Low-P/E stocks underperformed high-P/E stocks by 65% in 1999. (P/E - or
price/earnings ratio - is arrived at by dividing a stock's current selling price
by earnings per share. P/E gives an idea of what investors are willing to pay
for a company's earning potential.) This poor performance was typical of
virtually all value-oriented investment strategies. (Value investors seek
companies whose stocks appear undervalued in relation to their assets and
earnings; they typically have low P/Es. Growth investors search for companies
that have a record of above-average earnings growth; they typically have high
P/Es.)
116 See Definition of Terms.
<PAGE>
Overall, our multi-factor model showed positive discrimination, with our
best-ranked stocks outperforming the worst-ranked stocks by approximately 35%.
This helped boost results in the fourth quarter.
Fixed Income:
For the year, Fed action and uncertainty surrounding future actions drove yields
on U.S. Treasury securities ("Treasuries") higher and the yield curve flatter.
Starting with the short end (short-maturities) of the curve, the 2-year Treasury
yield increased 170 basis points; the 10-year, 179 basis points; and the
long-term 30-year was the best performer on a yield basis, rising only 139 basis
points.
Inflation indicators caused sporadic concern: the second quarter Employment Cost
Index showed a 1.1% increase, the largest since 1991; October's PPI (Producer
Price Index) rose 1.1%, its strongest number in nine years; and the National
Association of Purchasing Managers price paid index showed a meaningful increase
toward the latter half of the year. However, these concerns were muted as the
year ended, with December's results showing modest increases of 0.2% in the PPI,
0.1% in the CPI (Consumer Price Index), and 0.1% in average hourly earnings.
Spread sectors (all non-Treasury issues) outperformed Treasuries handily for the
year. For 1999, emerging markets led the way with excess returns over
similar-duration Treasuries of 2,248 basis points. High yield issues showed
excess returns of 479 basis points, much of it early in the year, and held much
of its gains - despite concerns of increasing default rates which hit the market
in the third quarter.
Investment-grade corporate securities outperformed Treasuries of the equivalent
duration by 174 basis points, driven mainly by declines in swap spreads. As swap
spreads declined, mainly in the latter half of the year, investors stepped in
and increased allocations to corporates, further decreasing the yield spread
between corporate bonds and Treasuries.
In securitized markets, collateralized mortgage-backed securities,
mortgage-backed securities, and asset-backed securities showed excess returns of
312, 113 and 136 basis points, respectively, also driven by declining swap
spreads and improving market technicals.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIOS' PERFORMANCE OVER THE PAST TWELVE
MONTHS?
Equity:
An overweight position in technology helped the Portfolio in the fourth quarter,
led by positions in Cisco, Microsoft and QUALCOMM. During the same quarter, poor
selection in oil stocks detracted from performance.
Fixed Income:
Early in the year, an overweight position in credit products (any security with
a credit risk, or risk of nonpayment), specifically high yield corporate bonds,
positively impacted performance. Toward mid-year, as market default concerns
increased, we reduced this exposure to lock-in some of the gains. An overweight
position in investment-grade corporate bonds early in the year and during the
third quarter, as well as an overweight in government-agency securities in the
third quarter, also led to outperformance.
Duration was also a positive contributor to performance. ("Duration" measures a
bond's sensitivity to increases or decreases in interest rates. The longer the
duration, the more a bond - or a bond fund - will be affected by rate changes.)
The short duration posture during the first half of the year, as well as the
last two months of 1999, had a meaningful positive impact on performance.
On the negative side, the Portfolios were underweight in mortgage-backed
securities throughout much of the year, a sector that performed well relative to
Treasuries. Also, some credit events (such as negative earnings news, or any
news detrimental to the company) in investment-grade corporates in the latter
half of the year modestly reduced returns.
See Definition of Terms. 117
<PAGE>
WHAT IS YOUR OUTLOOK GOING FORWARD?
Equity:
Going forward, we are concerned by the extreme price appreciation in technology
shares in the fourth quarter of 1999. The recent back-up in interest rates does
not provide a supportive environment for high-multiple growth stocks; and, to
the extent that the bear market in bonds continues, we feel that these issues
will have a difficult time maintaining their current valuations.
Although we are keenly aware of these risks, we remain committed to the
disciplined process that has worked so well for us over the past eight years, a
process that is not based on macro-economic forecasting. We will continue to
utilize our multi-factor model to evaluate each stock on its own merit. Adverse
macro-economic factors will be reflected in our stock selection when and if they
manifest themselves in the business momentum of each individual company.
Fixed Income:
Economic momentum remains strong, with the wealth effect from rising stock
markets feeding domestic consumption. (As investors have seen their assets
increase in value, they feel more wealthy. Hence the "wealth effect," which
stimulates consumption.) We expect stock markets to moderate in 2000, and any
stock market correction should reverse the wealth effect and slow the economy.
This will begin to unwind the imbalances we have seen in terms of low savings
rates in the U.S. and a high and expanding current account deficit. (The U.S.
"current account" is the record of all transactions with foreign nations that
involve the exchange of merchandise, goods, services, or unilateral gifts.) The
extent to which these imbalances unwind will determine the length and depth of
any slowdown. We expect the Fed to continue raising the Fed funds rate, to slow
domestic activity and unwind some of the aforementioned imbalances. Market
consensus appears to be a 6% Fed funds rate by mid-year, and that is close to
our expectation of 6-6.25%.
Following a two-month period during which we maintained a short-duration stance,
we start out the year seeing yields closer to fair value, given that the
market's view of Fed tightening has come more in line with our expectation. We
will take short term changes in duration of each Portfolio with an expectation
that a correction in the stock market could eventually lead to a weakening
economy and lower rates. We could see higher rates in the first quarter of 2000,
but until this plays out, we expect to bias our duration toward the long side
based on our longer-term view.
We continue to be defensive, underweighting most investment-grade sectors. In
investment-grade corporates, we expect to maintain our underweight position,
favoring a defensive posture by holding higher-quality and shorter-duration
corporates. In securitized sectors, we expect to underweight mortgage-backed
securities, given the strong performance they have exhibited in recent months.
Within the sector, we will take a defensive posture, favoring securities that
are less sensitive to increases in Treasury volatility. We expect to continue
our overweight position in asset-backed securities, given their short duration
and high quality.
We expect to continue to be defensive in emerging markets, given that strong
performance in this sector over the past year has reduced spreads significantly.
A stock market correction, should it occur, would be negative for emerging
markets. We also expect to be defensive in high yield, where we expect
performance to be correlated to the level of economic activity and the stock
market. Should spreads move back up to where we feel that slower economic growth
is built into valuations, we would look to increase exposure.
118 See Definition of Terms.
<PAGE>
GET C:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
DOMESTIC EQUITY PORTFOLIO SECTOR BREAKDOWN: INVESTMENTS S&P 500 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 3.0% 3.0% --
Commercial Services 1.4% 1.2% 0.2%
Consumer Discretionary 12.9% 11.8% 1.1%
Consumer Non-Discretionary 4.7% 6.3% (1.6)%
Energy 6.1% 6.0% 0.1%
Finance 12.2% 12.6% (0.4)%
Healthcare 6.8% 9.3% (2.5)%
Manufacturing 10.3% 9.5% 0.8%
Technology 33.2% 30.8% 2.4%
Utilities 9.4% 9.5% (0.1)%
- --------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- --------------------------------------------------
Microsoft Corp. 6.3%
Cisco Systems, Inc. 4.3%
General Electric Co. 4.1%
Wal-Mart Stores, Inc. 3.2%
Exxon Corp. 2.2%
America Online, Inc. 2.0%
Lucent Technologies, Inc. 1.9%
Home Depot, Inc. 1.6%
MCI WorldCom, Inc. 1.6%
International Business Machines Corp. 1.6%
- ------------------------------------------------------
ECONOMIC ECONOMIC
EXPOSURE* EXPOSURE*
ASSET CLASS ALLOCATION: 12/31/99 12/31/98
- ------------------------------------------------------
Large Cap Stocks 91.5% 91.0%
Mid Cap Stocks 1.5% 1.9%
International Stocks 3.0% 1.9%
Fixed Income 3.1% 2.7%
Cash Equivalents 0.9% 2.5%
----------------------
100.0% 100.0%
======================
See Definition of Terms. 119
<PAGE>
GET D:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
DOMESTIC EQUITY PORTFOLIO SECTOR BREAKDOWN: INVESTMENTS S&P 500 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 3.2% 3.0% 0.2%
Commercial Services 1.1% 1.2% (0.1)%
Consumer Discretionary 11.6% 11.8% (0.2)%
Consumer Non-Discretionary 5.0% 6.3% (1.3)%
Energy 7.3% 6.0% 1.3%
Finance 13.8% 12.6% 1.2%
Healthcare 6.6% 9.3% (2.7)%
Manufacturing 10.0% 9.5% 0.5%
Technology 32.2% 30.8% 1.4%
Utilities 9.2% 9.5% (0.3)%
- --------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- --------------------------------------------------
Microsoft Corp. 3.4%
General Electric Co. 2.8%
Cisco Systems, Inc. 2.7%
Exxon Corp. 2.0%
Wal-Mart Stores, Inc. 1.7%
America Online, Inc. 1.4%
Citigroup, Inc. 1.4%
Lucent Technologies, Inc. 1.3%
Home Depot, Inc. 1.2%
International Business Machines, Inc. 1.1%
- --------------------------------------------------------------------------------
% OF NOTIONAL ECONOMIC
INVESTMENT VALUE* EXPOSURE*
ASSET CLASS ALLOCATION: 12/31/99 OF FUTURES 12/31/99
- --------------------------------------------------------------------------------
Large Cap Stocks 63.4% 0.4% 63.8%
Mid Cap Stocks 1.1% -- 1.1%
International Stocks 2.2% -- 2.2%
Fixed Income 32.8% -- 32.8%
Cash Equivalents 0.5% (0.4)% 0.1%
------------------------------------------------
100.0% -- 100.0%
================================================
120 See Definition of Terms.
<PAGE>
GET E:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
DOMESTIC EQUITY PORTFOLIO SECTOR BREAKDOWN: INVESTMENTS S&P 500 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 3.0% 3.0% --
Commercial Services 1.2% 1.2% --
Consumer Discretionary 11.9% 11.8% 0.1%
Consumer Non-Discretionary 4.8% 6.3% (1.5)%
Energy 6.7% 6.0% 0.7%
Finance 13.2% 12.6% 0.6%
Healthcare 7.2% 9.3% (2.1)%
Manufacturing 9.7% 9.5% 0.2%
Technology 33.2% 30.8% 2.4%
Utilities 9.1% 9.5% (0.4)%
- --------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- --------------------------------------------------
Microsoft Corp. 4.5%
Cisco Systems, Inc. 3.0%
General Electric Co. 3.0%
Wal-Mart Stores, Inc. 2.3%
Exxon Mobil Corp. 2.1%
America Online, Inc. 1.5%
Citigroup Inc. 1.4%
Lucent Technologies, Inc. 1.4%
Home Depot, Inc. 1.2%
International Business Machines, Inc. 1.1%
- --------------------------------------------------------------------------------
% OF NOTIONAL ECONOMIC
INVESTMENT VALUE* EXPOSURE*
ASSET CLASS ALLOCATION: 12/31/99 OF FUTURES 12/31/99
- --------------------------------------------------------------------------------
Large Cap Stocks 68.5% 0.6% 69.1%
Mid Cap Stocks 1.1% -- 1.1%
International Stocks 2.2% -- 2.2%
Fixed Income 27.3% -- 27.3%
Cash Equivalents 0.9% (0.6)% 0.3%
------------------------------------------------
100.0% -- 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 Series' exposure to both changes in the value of the
portfolio of investments as well as the financial instruments underlying the
options and futures positions.
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Series are subject to change.
See Definition of Terms. 121
<PAGE>
Aetna GET Fund, Series G
Growth of $10,000
[The following was depicted as a line graph in the printed material.]
<TABLE>
<CAPTION>
GET Fund, Series G 12/15/99 12/31/99
<S> <C> <C>
Aetna GET Fund, Series G 10,000 10,286
S&P 500 Index 10,000 10,400
</TABLE>
-------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1999*
-------------------------------------------
Inception Date Inception
-------------------------------------------
12/15/99 2.86%
-------------------------------------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Performance does not take into account any separate account
charges imposed by Aetna. Past performance is no guarantee of future results.
Investment return and principal of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
AETNA GET FUND, SERIES G
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna GET Fund, Series G (GET G) generated a return of 2.86%, net of fund
expenses, for the period from December 15, 1999 through December 31, 1999. The
benchmark, the Standard & Poor's (S&P) 500 Index(a), returned 4.00% for the same
period.
Currently closed to new deposits, GET G invests primarily in common stocks and
bonds in varying proportions in response to market fluctuations. This strategy
is complemented by a guarantee that the market value of an investor's assets
will generally not be less than their market value on the first day of GET G's
5-year Guaranteed Period if the assets are held to GET G's maturity on December
14, 2004.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Equity:
Going forward, we are concerned by the extreme price appreciation in technology
shares in the fourth quarter of 1999. The recent back-up in interest rates does
not provide a supportive environment for high-multiple growth stocks; and, to
the extent that the bear market in bonds continues, we feel that these issues
will have a difficult time maintaining their current valuations.
122 See Definition of Terms.
<PAGE>
Although we are keenly aware of these risks, we remain committed to the
disciplined process that has worked so well for us over the past eight years, a
process that is not based on macro-economic forecasting. We will continue to
utilize our multi-factor model to evaluate each stock on its own merit. Adverse
macro-economic factors will be reflected in our stock selection when and if they
manifest themselves in the business momentum of each individual company.
Fixed Income:
Economic momentum remains strong, with the wealth effect from rising stock
markets feeding domestic consumption. (As investors have seen their assets
increase in value, they feel more wealthy. Hence the "wealth effect," which
stimulates consumption.) We expect stock markets to moderate in 2000, and any
stock market correction should reverse the wealth effect and slow the economy.
This will begin to unwind the imbalances we have seen in terms of low savings
rates in the U.S. and a high and expanding current account deficit. (The U.S.
"current account" is the record of all transactions with foreign nations that
involve the exchange of merchandise, goods, services, or unilateral gifts.) The
extent to which these imbalances unwind will determine the length and depth of
any slowdown. We expect the Fed to continue raising the Fed funds rate, to slow
domestic activity and unwind some of the aforementioned imbalances. Market
consensus appears to be a 6% Fed funds rate by mid-year, and that is close to
our expectation of 6-6.25%.
Following a two-month period during which we maintained a short-duration stance,
we start out the year seeing yields closer to fair value, given that the
market's view of Fed tightening has come more in line with our expectation. We
will take short term changes in duration of the Portfolio with an expectation
that a correction in the stock market could eventually lead to a weakening
economy and lower rates. We could see higher rates in the first quarter of 2000,
but until this plays out, we expect to bias our duration toward the long side
based on our longer-term view.
We continue to be defensive, underweighting most investment-grade sectors. In
investment-grade corporates we expect to maintain our underweight position,
favoring a defensive posture by holding higher-quality and shorter-duration
corporates. In securitized sectors, we expect to underweight mortgage-backed
securities, given the strong performance they have exhibited in recent months.
Within the sector, we will take a defensive posture, favoring securities that
are less sensitive to increases in Treasury volatility. We expect to continue
our overweight position in asset-backed securities, given their short duration
and high quality.
We expect to continue to be defensive in emerging markets, given that strong
performance in this sector over the past year has reduced spreads significantly.
A stock market correction, should it occur, would be negative for emerging
markets. We also expect to be defensive in high yield, where we expect
performance to be correlated to the level of economic activity and the stock
market. Should spreads move back up to where we feel that slower economic growth
is built into valuations, we would look to increase exposure.
DOMESTIC EQUITY PORTFOLIO BREAKDOWN:
- --------------------------------------------------------------------------------
% OF EQUITY % OF OVER/(UNDER)
SECTOR INVESTMENTS S&P 500 WEIGHTING
- --------------------------------------------------------------------------------
Basic Materials 2.9% 3.0% (0.1)%
Commercial Services 1.1% 1.2% (0.1)%
Consumer Discretionary 12.1% 11.8% 0.3%
Consumer Non-Discretionary 4.9% 6.3% (1.4)%
Energy 7.1% 6.0% 1.1%
Finance 13.2% 12.6% 0.6%
Healthcare 6.8% 9.3% (2.5)%
Manufacturing 10.2% 9.5% 0.7%
Technology 32.7% 30.8% 1.9%
Utilities 9.0% 9.5% (0.5)%
See Definition of Terms. 123
<PAGE>
- ---------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ---------------------------------------------------
Microsoft Corp. 3.6%
General Electric Co. 3.0%
Cisco Systems, Inc. 2.7%
Exxon Mobil Corp. 2.1%
Wal-Mart Stores, Inc. 1.8%
America Online, Inc. 1.5%
Citigroup Inc. 1.4%
Lucent Technologies, Inc. 1.4%
Home Depot, Inc. 1.2%
International Business Machines Corp. 1.1%
- --------------------------------------------------------------------------------
% OF NOTIONAL ECONOMIC
INVESTMENT VALUE* EXPOSURE*
ASSET CLASS ALLOCATION: 12/31/99 OF FUTURES 12/31/99
- --------------------------------------------------------------------------------
Large Cap Stocks 64.8% 2.0% 66.8%
Mid Cap Stocks 1.1% -- 1.1%
International Stocks 2.2% -- 2.2%
Fixed Income 29.2% -- 29.2%
Cash Equivalents 2.7% (2.0)% 0.7%
------------------------------------------------
100.0% -- 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 Series' exposure to both changes in the value of the
portfolio of investments as well as the financial instruments underlying the
options and futures positions.
The opinions expressed reflect those of the portfolio manager only through
December 31, 1999. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Series are subject to change.
124 See Definition of Terms.
<PAGE>
AETNA GET FUND, SERIES H
ACCUMULATION PERIOD
Aetna GET Fund, Series H (GET H) will be offered from December 15, 1999 through
March 14, 2000 as a funding option under certain variable annuity contracts
issued by Aetna Life Insurance and Annuity Company. GET H assets will be
invested entirely in short term instruments prior to March 15, 2000. After that
date, GET H will allocate its investments between equities and fixed income
securities in proportions that are intended to help GET H attain its investment
objective.
See Definition of Terms. 125
<PAGE>
- --------------------------------------------------------------------------------
DEFINITION OF TERMS
- --------------------------------------------------------------------------------
(a) The S&P 500 is the Standard & Poor's 500 Index. Performance is calculated
on a total return basis and dividends are reinvested, as reported by Frank
Russell Company.
The unmanaged index described above is not available for individual investment.
126
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES C
================================================================================
NUMBER OF MARKET
SHARES VALUE
----------- ------------
COMMON STOCKS (96.0%)
AIR TRANSPORT (0.3%)
AMR Corp. + ............................. 2,400 $ 160,800
Delta Air Lines, Inc. ................... 2,800 139,475
FDX Corp. + ............................. 5,960 243,987
Southwest Airlines Co. .................. 10,500 169,969
------------
714,231
------------
ALUMINUM (0.4%)
Alcan Aluminum Ltd. ..................... 3,300 135,919
Alcoa Inc. .............................. 7,600 630,800
Reynolds Metals Co. ..................... 900 68,962
------------
835,681
------------
AUTO PARTS AND HARDWARE (0.2%)
Black & Decker Corp. .................... 1,700 88,825
Briggs & Stratton Corp. ................. 300 16,087
Cooper Tire & Rubber Co. ................ 900 14,006
Genuine Parts Co. ....................... 4,450 110,416
Snap-On, Inc. ........................... 2,300 61,094
Stanley Works (The) ..................... 1,400 42,175
------------
332,603
------------
AUTOMOTIVE (1.3%)
Dana Corp. .............................. 4,657 139,419
Delphi Automotive Systems Corp. ......... 11,742 184,936
Eaton Corp. ............................. 700 50,838
Ford Motor Co. .......................... 18,800 1,004,625
General Motors Corp. + .................. 13,700 995,819
Johnson Controls, Inc. .................. 2,400 136,500
TRW, Inc. ............................... 2,000 103,875
------------
2,616,012
------------
BANKS AND THRIFTS (3.8%)
AmSouth Bancorporation .................. 9,000 173,813
Bank of America Corp. ................... 14,200 712,662
Bank of New York Co., Inc. .............. 11,000 440,000
BB&T Corp. .............................. 5,100 139,613
Chase Manhattan Corp. ................... 13,600 1,056,550
Comerica, Inc. .......................... 2,300 107,381
Fifth Third Bancorp ..................... 4,125 302,672
Firstar Corp. ........................... 21,027 444,195
Fleet Boston Financial Corp. ............ 14,687 511,291
Golden West Financial Corp. ............. 2,700 90,450
Huntington Bancshares Inc. .............. 5,423 129,474
J.P. Morgan & Co. ....................... 2,800 354,550
KeyCorp ................................. 3,600 79,650
Mellon Financial Corp. .................. 7,700 262,281
Northern Trust Corp. .................... 4,600 243,800
PNC Bank Corp. .......................... 5,800 258,100
SouthTrust Corp. ........................ 2,700 102,094
State Street Corp. ...................... 2,400 175,350
Summit Bancorp .......................... 4,100 125,563
Suntrust Banks, Inc. .................... 4,600 316,538
Synovus Financial Corp. ................. 4,200 83,475
U.S. Bancorp ............................ 12,500 297,656
Wachovia Corp. .......................... 3,000 204,000
Washington Mutual, Inc. ................. 8,721 226,746
Wells Fargo & Co. ....................... 24,700 998,806
------------
7,836,710
------------
BIOTECH AND MEDICAL PRODUCTS (1.0%)
Alza Corp. + ............................ 1,500 51,938
Amgen, Inc. + ........................... 16,200 973,012
Bard (C.R.) Inc. ........................ 800 42,400
Bausch & Lomb, Inc. ..................... 1,800 123,188
Biomet, Inc. ............................ 2,000 80,000
Boston Scientific Corp. + ............... 9,900 216,562
Guidant Corp. + ......................... 4,800 225,600
Mallinckrodt Inc. ....................... 1,100 34,994
Medtronic, Inc. + ....................... 9,400 342,512
------------
2,090,206
------------
CHEMICALS (1.0%)
Dow Chemical Co. ........................ 4,600 614,675
Du Pont (E.I.) de Nemours ............... 15,400 1,014,475
Hercules, Inc. .......................... 1,600 44,600
Monsanto Co. ............................ 5,200 185,250
Rohm & Haas Co. ......................... 4,405 179,228
Union Carbide Corp. ..................... 1,300 86,775
------------
2,125,003
------------
COMMERCIAL SERVICES (0.5%)
Deluxe Corp. ............................ 1,500 41,156
Interpublic Group of Co., Inc. (The) .... 6,200 357,662
Omnicom Group, Inc. ..................... 3,700 370,000
Paychex, Inc. ........................... 4,950 198,000
RR Donnelley & Sons Co. ................. 2,200 54,588
------------
1,021,406
------------
COMPUTERS (4.4%)
Apple Computer, Inc. + .................. 2,400 246,750
Cabletron Systems, Inc. + .............. 1,300 33,800
Gateway, Inc. + ......................... 5,400 389,137
Hewlett Packard Co. ..................... 16,800 1,914,150
International Business Machines Corp. ... 29,700 3,207,600
Silicon Graphics, Inc. + ................ 2,700 26,494
Sun Microsystems, Inc. + ................ 39,000 3,020,062
Unisys Corp. + .......................... 4,200 134,138
------------
8,972,131
------------
CONGLOMERATE AND AEROSPACE (5.1%)
Boeing Co. .............................. 20,000 831,250
Crane Co. ............................... 1,200 23,850
General Dynamics Corp. .................. 2,700 142,425
General Electric Co. .................... 54,100 8,371,975
Goodrich (B.F.) Co. ..................... 1,000 27,500
Loews Corp. ............................. 1,600 97,100
National Service Industries, Inc. ....... 800 23,600
Northrop Grumman Corp. .................. 500 27,031
Perkin-Elmer Inc. + ..................... 700 29,181
See Notes to Portfolio of Investments. 127
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES C (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
----------- ------------
CONGLOMERATE AND AEROSPACE (CONTINUED)
Raytheon Co. ............................ 3,900 $ 103,594
Textron, Inc. ........................... 2,600 199,388
United Technologies Corp. ............... 7,900 513,500
------------
10,390,394
------------
CONSUMER FINANCE (1.4%)
Associates First Capital Corp. .......... 12,098 331,939
Capital One Financial Corp. ............. 3,300 159,019
Countrywide Credit Industries, Inc. ..... 3,000 75,750
Freddie Mac Corp. ....................... 10,800 508,275
Federal National Mortgage Association ... 16,000 999,000
Household International, Inc. ........... 7,700 286,825
MBNA Corp. .............................. 12,075 329,043
Ryder System, Inc. ...................... 1,600 39,100
SLM Holding Corp. ....................... 2,400 101,400
------------
2,830,351
------------
CONSUMER PRODUCTS (2.0%)
Alberto-Culver Co. ...................... 1,000 25,813
Avon Products, Inc. ..................... 4,300 141,900
Clorox Co. .............................. 3,600 181,350
Colgate-Palmolive Co. ................... 8,700 565,500
Gillette Co. ............................ 8,800 362,450
International Flavors & Fragrances, Inc. 1,000 37,750
Kimberly-Clark Corp. .................... 8,300 541,575
Procter & Gamble Co. .................... 21,000 2,300,812
------------
4,157,150
------------
CONSUMER SERVICES (1.0%)
Carnival Corp. .......................... 9,800 468,562
Cendant Corp. + ......................... 14,100 374,531
Darden Restaurants, Inc. ................ 3,000 54,375
H&R Block, Inc. ......................... 2,500 109,375
Harrah's Entertainment, Inc. + .......... 1,200 31,725
Hilton Hotels Corp. ..................... 2,500 24,063
Marriott International, Inc. ............ 3,900 123,094
McDonald's Corp. ........................ 20,300 818,344
Tricon Global Restaurants, Inc. + ....... 2,470 95,404
Wendy's International, Inc. ............. 2,400 49,500
------------
2,148,973
------------
CONSUMER SPECIALTIES (0.1%)
Brunswick Corp. ......................... 1,500 33,375
Hasbro, Inc. ............................ 3,750 71,485
Jostens, Inc. ........................... 500 12,156
------------
117,016
------------
DATA AND IMAGING SERVICES (17.4%)
3Com Corp. + ............................ 5,900 277,300
Adobe Systems, Inc. ..................... 1,400 94,150
America Online, Inc. + .................. 55,300 4,171,694
Autodesk, Inc. .......................... 900 30,375
Automatic Data Processing, Inc. ......... 10,500 565,687
BMC Software, Inc. + .................... 3,600 287,775
Ceridian Corp. + ........................ 4,200 90,563
Cisco Systems, Inc. + ................... 81,600 8,741,400
Computer Associates International, Inc. . 8,450 590,972
Computer Sciences Corp. + ............... 2,600 246,025
Compuware Corp. + ....................... 6,000 223,500
Eastman Kodak Co. ....................... 5,400 357,750
Electronic Data Systems Corp. ........... 8,300 555,581
EMC Corp. + ............................. 22,100 2,414,425
First Data Corp. ........................ 8,400 414,225
Microsoft Corp. + ....................... 110,700 12,924,225
Network Appliance, Inc. + ............... 2,200 182,737
Novell, Inc. + .......................... 10,000 399,375
Oracle Corp. + .......................... 23,500 2,633,469
Parametric Technology Co. + ............. 4,000 108,250
Polaroid Corp. .......................... 300 5,644
Seagate Technology, Inc. + .............. 3,300 153,656
------------
35,468,778
------------
DISCRETIONARY RETAIL (7.5%)
AutoZone, Inc. + ........................ 1,300 42,006
Bed Bath & Beyond, Inc. + ............... 2,700 93,825
Best Buy Co., Inc. + .................... 4,200 210,788
Circuit City Stores, Inc. ............... 6,000 270,375
Consolidated Stores Corp. + ............. 1,700 27,625
Costco Wholesale Corp. + ................ 5,300 483,625
Dayton Hudson Co. ....................... 10,600 778,438
Dillards, Inc. .......................... 3,500 70,656
Dollar General Corp. .................... 4,000 91,000
Federated Department Stores, Inc. + ..... 5,300 267,981
Gap, Inc. ............................... 21,200 975,200
Home Depot, Inc. ........................ 47,700 3,270,431
Kmart Corp. + ........................... 11,900 119,744
Kohl's Corp. + .......................... 3,500 252,656
Lowe's Co., Inc. ........................ 8,800 525,800
May Department Stores Co. ............... 7,500 241,875
Nordstrom, Inc. ......................... 2,300 60,231
Office Depot, Inc. + .................... 6,000 65,625
Sears, Roebuck & Co. .................... 2,900 88,269
Staples, Inc. + ......................... 7,650 158,738
Tandy Corp. ............................. 4,800 236,100
The Limited, Inc. ....................... 3,700 160,256
The Pep Boys - Manny, Moe & Jack ........ 800 7,300
TJX Companies, Inc. ..................... 8,300 169,631
Toys "R" Us, Inc. + ..................... 2,700 38,644
Wal-Mart Stores, Inc. ................... 95,400 6,594,525
------------
15,301,344
------------
DIVERSIFIED FINANCIAL SERVICES (2.2%)
American Express Co. .................... 6,700 1,113,875
Citigroup Inc. .......................... 55,600 3,089,275
Providian Financial Corp. ............... 3,150 286,847
------------
4,489,997
------------
DRUGS (5.1%)
Allergan, Inc. .......................... 2,000 99,500
American Home Products Corp. ............ 10,800 425,925
128 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
----------- ------------
DRUGS (CONTINUED)
Baxter International, Inc. .............. 5,300 $ 332,906
Bristol-Myers Squibb Co. ................ 31,700 2,034,744
Johnson & Johnson ....................... 22,200 2,067,375
Merck & Co., Inc. ....................... 19,300 1,294,306
Pfizer, Inc. ............................ 83,000 2,692,312
Pharmacia & Upjohn, Inc. ................ 7,800 351,000
Schering Plough ......................... 12,100 510,469
Warner Lambert Co. ...................... 6,800 557,175
------------
10,365,712
------------
ELECTRIC UTILITIES (1.6%)
AES Corp. + ............................. 1,500 112,125
Ameren Corp. ............................ 3,800 124,450
American Electric Power Co. ............. 1,600 51,400
Central & South West Corp. .............. 6,400 128,000
CMS Energy Corp. ........................ 1,600 49,900
Consolidated Edison, Inc. ............... 5,500 189,750
Constellation Energy Group .............. 3,800 110,200
Dominion Resources, Inc. ................ 3,200 125,600
DTE Energy Co. .......................... 2,500 78,437
Duke Energy Corp. ....................... 6,030 302,254
Edison International Inc. ............... 5,200 136,175
Entergy Corp. ........................... 6,000 154,500
FirstEnergy Corp. ....................... 5,000 113,437
Florida Progress Corp. .................. 1,500 63,469
FPL Group, Inc. ......................... 3,800 162,687
GPU, Inc. ............................... 3,300 98,794
Northern States Power Co. ............... 2,000 39,000
Peco Energy Co. ......................... 2,800 97,300
PG&E Corp. .............................. 6,300 129,150
Pinnacle West Capital Corp. ............. 1,300 39,731
PP&L Resources, Inc. .................... 4,100 93,787
Public Service Enterprise Group, Inc. ... 5,900 205,394
Reliant Energy Inc. ..................... 4,715 107,856
Southern Co. ............................ 11,500 270,250
Texas Utilities Co. ..................... 4,657 165,615
Unicom Corp. ............................ 3,600 120,600
------------
3,269,861
------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.6%)
Lexmark International Group, Inc. + ..... 3,000 271,500
PE Corp-PE Biosystems Group ............. 1,500 180,469
Pitney Bowes, Inc. ...................... 4,700 227,069
Rockwell International Corp. ............ 4,500 215,437
Tektronix, Inc. ......................... 900 34,988
Xerox Corp. ............................. 11,000 249,562
------------
1,179,025
------------
ELECTRONIC MEDIA (1.9%)
CBS Corp. + ............................. 12,072 771,854
Clear Channel Communications, Inc. + .... 5,400 481,950
Comcast Corp. ........................... 11,700 591,581
Mediaone Group, Inc. + .................. 9,700 745,081
Time Warner, Inc. ....................... 9,700 702,644
Viacom, Inc. + .......................... 8,300 501,631
------------
3,794,741
------------
FOOD AND BEVERAGE (2.4%)
Anheuser-Busch Co., Inc. ................ 9,100 644,962
Bestfoods ............................... 4,500 236,531
Brown-Forman Corp. + .................... 800 45,800
Campbell Soup Co. ....................... 3,500 135,406
Coca-Cola Co. ........................... 20,400 1,188,300
Coca-Cola Enterprises, Inc. ............. 6,800 136,850
Conagra, Inc. ........................... 7,900 178,244
Coors (Adolph) Co. ...................... 1,000 52,500
Fortune Brands, Inc. .................... 5,300 175,231
General Mills, Inc. ..................... 4,600 164,450
Kellogg Co. ............................. 6,700 206,444
PepsiCo, Inc. ........................... 22,100 779,025
Quaker Oats Co. ......................... 2,000 131,250
Ralston-Ralston Purina Group ............ 2,400 66,900
Sara Lee Corp. .......................... 14,700 324,319
Seagram Co. Ltd. ........................ 6,900 310,069
Wrigley (Wm.) Jr. Co. + ................. 2,000 165,875
------------
4,942,156
------------
FOOD AND DRUG RETAIL (0.6%)
Albertson's, Inc. ....................... 3,500 112,875
CVS Corp. ............................... 5,900 235,631
Great Atlantic & Pacific Tea Co., Inc. .. 600 16,725
Kroger Co. (The) + ...................... 12,700 239,713
Longs Drug Stores, Inc. ................. 800 20,650
Safeway, Inc. + ......................... 4,100 145,806
SUPERVALU, Inc. ......................... 3,800 76,000
Sysco Corp. ............................. 4,900 193,856
Walgreen Co. ............................ 8,300 242,775
Winn-Dixie Stores, Inc. ................. 1,400 33,513
------------
1,317,544
------------
FOREST PRODUCTS AND BUILDING MATERIALS (1.1%)
Armstrong World Industries, Inc. ........ 801 26,703
Ball Corp. .............................. 600 23,625
Bemis Co., Inc. ......................... 1,700 59,288
Boise Cascade Corp. ..................... 1,100 44,550
Champion International Corp. ............ 1,900 117,681
Crown Cork & Seal Co., Inc. ............. 2,000 44,750
Fort James Corp. ........................ 3,500 95,813
Georgia-Pacific Corp. ................... 4,600 233,450
International Paper Co. ................. 6,600 372,487
Louisiana-Pacific Corp. ................. 2,400 34,200
Masco Corp. ............................. 8,200 208,075
Mead Corp. .............................. 800 34,750
Owens Corning ........................... 800 15,450
Owens-Illinois, Inc. + .................. 2,500 62,656
Pactiv Corp. + .......................... 1,300 13,813
See Notes to Portfolio of Investments. 129
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES C (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
----------- ------------
FOREST PRODUCTS AND BUILDING MATERIALS (CONTINUED)
Potlatch Corp. .......................... 400 $ 17,850
Sealed Air Corp. + ...................... 1,300 67,356
Temple-Inland Inc. ...................... 1,600 105,500
Vulcan Materials Co. .................... 1,600 63,900
Westvaco Corp. .......................... 1,000 32,625
Weyerhaeuser Co. ........................ 5,600 402,150
Willamette Industries, Inc. ............. 2,500 116,094
------------
2,192,766
------------
GAS UTILITIES (0.7%)
Coastal Corp. (The) ..................... 4,900 173,644
Consolidated Natural Gas Co. ............ 1,800 116,887
Eastern Enterprises ..................... 500 28,719
El Paso Energy Corp. .................... 3,600 139,725
Enron Corp. ............................. 12,800 568,000
NICOR, Inc. ............................. 900 29,250
People's Energy Corp. ................... 600 20,100
Sempra Energy ........................... 4,311 74,904
Williams Co., Inc. (The) ................ 6,900 210,881
------------
1,362,110
------------
HEALTH SERVICES (0.4%)
Cardinal Health, Inc. ................... 4,400 210,650
Columbia/HCA Healthcare Corp. ........... 10,300 301,919
HEALTHSOUTH Corp. + ..................... 6,700 36,013
IMS Health, Inc. ........................ 4,700 127,781
Shared Medical Systems Corp. ............ 400 20,375
United Healthcare Corp. ................. 2,000 106,250
Wellpoint Health Networks, Inc. + ....... 1,000 65,937
------------
868,925
------------
HEAVY MACHINERY (0.2%)
Cummins Engine Co., Inc. ................ 900 43,481
Deere & Co. ............................. 3,500 151,812
NACCO Industries, Inc. .................. 200 11,113
Navistar International Corp. + .......... 2,300 108,963
PACCAR, Inc. ............................ 2,300 101,919
------------
417,288
------------
HOUSING AND FURNISHINGS (0.2%)
Centex Corp. ............................ 3,000 74,062
Fleetwood Enterprises, Inc. ............. 700 14,438
Kaufman & Broad Home Corp. .............. 900 21,769
Leggett & Platt, Inc. ................... 3,200 68,600
Maytag Corp. ............................ 1,800 86,400
Pulte Corp. ............................. 1,000 22,500
Tupperware Corp. ........................ 1,100 18,631
Whirlpool Corp. ......................... 2,100 136,631
------------
443,031
------------
INDUSTRIAL SERVICES (0.1%)
Fluor Corp. ............................. 2,400 110,100
USA Waste Management, Inc. .............. 9,900 170,156
------------
280,256
------------
INSURANCE (2.5%)
AFLAC, Inc. ............................. 5,900 278,406
American General Corp. .................. 4,864 369,056
American International Group, Inc. ...... 24,698 2,670,471
Aon Corp. ............................... 4,275 171,000
CIGNA Corp. ............................. 3,500 281,969
Cincinnati Financial Corp. .............. 1,200 37,425
Hartford Financial Services Group, Inc. . 1,800 85,275
Jefferson-Pilot Corp. ................... 1,600 109,200
Lincoln National Corp. .................. 3,000 120,000
Marsh & McLennan Co., Inc. .............. 4,000 382,750
MBIA, Inc. .............................. 2,400 126,750
MGIC Investment Corp. ................... 2,500 150,469
Progressive Corp. ....................... 1,200 87,750
St. Paul Co., Inc. ...................... 2,296 77,346
Torchmark Corp. ......................... 2,300 66,844
UnumProvident Corp. ..................... 2,400 76,950
------------
5,091,661
------------
INVESTMENT SERVICES (1.8%)
Bear Stearns Co., Inc. (The) ............ 1,995 85,286
Charles Schwab Corp. .................... 20,300 779,012
Franklin Resources, Inc. ................ 4,300 137,869
Lehman Brothers Holdings Inc. ........... 2,900 245,594
Merrill Lynch & Co., Inc. ............... 6,200 517,700
Morgan Stanley Dean Witter & Co. ........ 11,975 1,709,431
Paine Webber Group Inc. ................. 2,300 89,269
T. Rowe Price & Associates .............. 1,800 66,488
------------
3,630,649
------------
MAJOR TELECOMMUNICATIONS (7.1%)
ALLTEL Corp. ............................ 4,300 355,556
AT&T Corp. .............................. 50,807 2,578,455
Bell Atlantic Corp. ..................... 25,700 1,582,156
BellSouth Corp. ......................... 29,700 1,390,331
CenturyTel, Inc. ........................ 2,100 99,488
GTE Corp. ............................... 15,000 1,058,438
MCI Worldcom, Inc. + .................... 60,900 3,231,506
Nextel Communications, Inc. + ........... 7,400 763,125
SBC Communications, Inc. ................ 28,100 1,369,875
Sprint Corp. ............................ 11,900 801,019
Sprint PCS + ............................ 9,200 943,000
U.S. WEST, Inc. ......................... 4,200 302,400
------------
14,475,349
------------
MISCELLANEOUS METALS (0.1%)
Freeport-McMoRan Copper & Gold, Inc. + .. 1,500 31,688
Homestake Mining Co. .................... 4,200 32,812
Inco Ltd. + ............................. 2,900 68,150
Phelps Dodge Corp. ...................... 1,200 80,550
------------
213,200
------------
OIL (4.8%)
Amerada Hess Corp. ...................... 1,400 79,450
Anadarko Petroleum Corp. ................ 1,900 64,838
Apache Corp. ............................ 2,200 81,262
130 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
----------- ------------
OIL (CONTINUED)
Ashland Oil, Inc. ....................... 1,300 $ 42,819
Atlantic Richfield Co. .................. 7,700 666,050
Burlington Resources, Inc. .............. 3,500 115,719
Chevron Corp. ........................... 9,800 848,925
Conoco Inc. ............................. 6,500 161,687
Exxon Mobil Corp. ....................... 55,500 4,471,199
Kerr-McGee Corp. ........................ 1,300 80,600
Occidental Petroleum Corp. .............. 5,200 112,450
Phillips Petroleum Co. .................. 4,200 197,400
Royal Dutch Petroleum Co. ............... 35,400 2,139,487
Texaco, Inc. ............................ 8,400 456,225
Unocal Corp. ............................ 3,900 130,894
USX-Marathon Group ...................... 6,800 167,875
------------
9,816,880
------------
OIL SERVICES (0.4%)
Halliburton Co. ......................... 3,500 140,875
McDermott International, Inc., ADR ...... 1,000 9,063
Schlumberger, Ltd. ...................... 9,100 511,875
Tosco Corp. ............................. 3,000 81,562
Transocean Sedco Forex Inc. ............. 1,765 59,472
------------
802,847
------------
OTHER TELECOMMUNICATIONS (0.3%)
Global Crossing Holdings Ltd. + ......... 11,700 585,000
---------------
PRINT MEDIA (0.8%)
Dow Jones & Co., Inc. ................... 2,200 149,600
Dun & Bradstreet Corp. .................. 2,800 82,600
Equifax, Inc. ........................... 1,200 28,275
Gannett Co., Inc. ....................... 4,900 399,657
Harcourt General, Inc. .................. 800 32,200
Knight-Ridder, Inc. ..................... 1,900 113,050
McGraw-Hill Co., Inc. ................... 3,200 197,200
Meredith Corp. .......................... 1,500 62,531
New York Times Co. ...................... 5,400 265,275
Times Mirror Co. ........................ 1,000 67,000
Tribune Co. ............................. 3,600 198,225
------------
1,595,613
------------
PRODUCER GOODS (2.8%)
Allegheny Technologies Incorporated ..... 2,600 58,337
Avery Dennison Corp. .................... 1,700 123,887
Cooper Industries, Inc. ................. 2,800 113,225
Corning, Inc. ........................... 4,000 515,750
Danaher Corp. ........................... 2,900 139,925
Dover Corp. ............................. 1,700 77,137
Ecolab, Inc. ............................ 3,400 133,025
Emerson Electric Co. .................... 8,100 464,737
FMC Corp. + ............................. 600 34,388
Honeywell International Inc. ............ 14,013 808,346
Ikon Office Solutions, Inc. ............. 2,200 14,988
Illinois Tool Works, Inc. ............... 4,400 297,275
Ingersoll-Rand Co. ...................... 3,900 214,744
ITT Industries, Inc. .................... 1,300 43,469
Milacron, Inc. .......................... 900 13,838
Millipore Corp. ......................... 700 27,038
Minnesota Mining and Manufacturing Co. .. 6,700 655,762
Pall Corp. .............................. 1,900 40,969
Parker-Hannifin Corp. ................... 1,700 87,231
PPG Industries, Inc. .................... 3,300 206,456
Sherwin-Williams Co. .................... 4,300 90,300
Thomas & Betts Corp. .................... 1,700 54,187
Timken Co. .............................. 1,000 20,438
Tyco International Ltd. ................. 36,600 1,422,825
------------
5,658,277
------------
SEMICONDUCTORS AND ELECTRONICS (10.1%)
Adaptec, Inc. + ......................... 2,300 114,713
ADC Telecommunications, Inc. + .......... 3,600 261,225
Advanced Micro Devices Corp. + .......... 2,400 69,450
Analog Devices, Inc. + .................. 2,600 241,800
Andrew Corp. + .......................... 600 11,363
Applied Materials, Inc. + ............... 9,400 1,190,862
Comverse Technology, Inc. + ............. 1,700 246,075
General Instrument Corp. + .............. 2,700 229,500
Intel Corp. ............................. 26,500 2,181,281
KLA Instruments Corp. + ................. 2,000 222,750
LSI Logic Corp. + ....................... 3,400 229,500
Lucent Technologies, Inc. ............... 51,800 3,875,287
Micron Technology, Inc. + ............... 4,100 318,775
Motorola, Inc. .......................... 12,600 1,855,350
National Semiconductor Corp. + .......... 2,600 111,313
Nortel Networks Corp. ................... 29,300 2,959,300
QUALCOMM Inc. + ......................... 16,000 2,818,000
Solectron Corp. + ....................... 6,600 627,825
Tellabs, Inc. + ......................... 9,400 603,362
Teradyne, Inc. + ........................ 4,200 277,200
Texas Instruments, Inc. ................. 18,800 1,821,250
Xilinx, Inc. + .......................... 7,600 345,563
------------
20,611,744
------------
SPECIALTY CHEMICALS (0.2%)
Air Products and Chemicals, Inc. ........ 4,200 140,962
Engelhard Corp. ......................... 4,100 77,388
Grace (W.R.) & Co. + .................... 1,800 24,975
Great Lakes Chemical Corp. .............. 700 26,731
Praxair, Inc. ........................... 1,300 65,406
Sigma-Aldrich Corp. ..................... 1,900 57,119
------------
392,581
------------
STEEL (0.1%)
Nucor Corp. ............................. 1,900 104,144
Worthington Industries .................. 1,300 21,531
------------
125,675
------------
SURFACE TRANSPORT (0.3%)
Burlington Northern Santa Fe Corp. ...... 7,800 189,150
CSX Corp. ............................... 3,500 109,813
Kansas City Southern Industries, Inc. ... 1,700 126,862
See Notes to Portfolio of Investments. 131
<PAGE>
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES C (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
----------- ------------
SURFACE TRANSPORT (CONTINUED)
Norfolk Southern Corp. .................. 6,300 $ 129,150
Union Pacific Corp. ..................... 2,300 100,338
------------
655,313
------------
TEXTILES AND APPAREL (0.2%)
Liz Claiborne, Inc. ..................... 1,900 71,488
Nike, Inc. .............................. 3,800 188,337
Russell Corporation ..................... 500 8,375
Springs Industries, Inc. ................ 200 7,988
VF Corp. ................................ 2,000 60,000
------------
336,188
------------
TOBACCO (0.0%)
Nabisco Group Holdings Corp. ............ 4,900 52,063
UST, Inc. ............................... 2,600 65,487
------------
117,550
------------
TOTAL COMMON STOCKS (COST $144,432,456) 195,989,928
------------
PRINCIPAL
AMOUNT
------------
LONG-TERM BONDS AND NOTES (3.0%)
U.S. Treasury Strip,Zero
Coupon,11/15/01-02/15/02................ $ 7,055,000 6,253,833
------------
TOTAL LONG-TERM BONDS AND NOTES (COST $6,449,570) 6,253,833
------------
SHORT-TERM INVESTMENTS (1.0%)
Federal Home Loan Bank,1.50%,01/03/00 ... 1,791,000 1,791,000
U.S. Treasury Bill,4.80%,02/17/00 ....... 200,000 198,800
------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,989,800) 1,989,800
------------
TOTAL INVESTMENTS (COST $152,871,826)(A) 204,233,561
OTHER ASSETS LESS LIABILITIES (21,912)
------------
TOTAL NET ASSETS $204,211,649
============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$154,585,163. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains................................ $54,834,254
Unrealized losses............................... (5,185,856)
-----------
Net unrealized gain............................ $49,648,398
===========
+ Non-income producing security.
Category percentages are based on net assets.
132 See Notes to Financial Statements.
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES D
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------- -------------
COMMON STOCKS (66.7%)
AIR TRANSPORT (0.2%)
AMR Corp. + ........................ 5,600 $ 375,200
Delta Air Lines, Inc. .............. 6,900 343,706
FDX Corp. + ........................ 12,000 491,250
Southwest Airlines Co. ............. 20,300 328,606
-------------
1,538,762
-------------
ALUMINUM (0.4%)
Alcan Aluminum Ltd. ................ 12,500 514,844
Alcoa Inc. ......................... 22,100 1,834,300
Reynolds Metals Co. ................ 2,400 183,900
-------------
2,533,044
-------------
AUTO PARTS AND HARDWARE (0.1%)
Black & Decker Corp. ............... 3,500 182,875
Briggs & Stratton Corp. ............ 800 42,900
Cooper Tire & Rubber Co. ........... 2,700 42,019
Genuine Parts Co. .................. 7,100 176,169
Goodyear Tire & Rubber Co. (The) ... 5,800 163,487
Snap-On, Inc. ...................... 1,500 39,844
Stanley Works (The) ................ 2,400 72,300
-------------
719,594
-------------
AUTOMOTIVE (0.8%)
Dana Corp. ......................... 6,600 197,588
Delphi Automotive Systems Corp. .... 28,043 441,677
Eaton Corp. ........................ 3,500 254,187
Ford Motor Co. ..................... 45,700 2,442,094
General Motors Corp. + ............. 25,700 1,868,069
Johnson Controls, Inc. ............. 3,400 193,375
TRW, Inc. .......................... 6,800 353,175
-------------
5,750,165
-------------
BANKS AND THRIFTS (3.1%)
AmSouth Bancorporation ............. 19,500 376,594
Bank of America Corp. .............. 68,600 3,442,862
Bank of New York Co., Inc. ......... 29,600 1,184,000
Bank One Corp. ..................... 22,000 705,375
BB&T Corp. ......................... 13,300 364,088
Chase Manhattan Corp. .............. 33,200 2,579,225
Comerica, Inc. ..................... 6,300 294,131
Fifth Third Bancorp ................ 11,700 858,487
Firstar Corp. ...................... 47,436 1,002,085
Fleet Boston Financial Corp. ....... 36,773 1,280,160
Golden West Financial Corp. ........ 6,500 217,750
Huntington Bancshares Inc. ......... 9,190 219,411
J.P. Morgan & Co. .................. 6,700 848,388
KeyCorp ............................ 12,800 283,200
Mellon Financial Corp. ............. 20,700 705,094
National City Corp. ................ 14,700 348,206
Northern Trust Corp. ............... 8,500 450,500
Old Kent Financial Corp. ........... 4,300 152,113
PNC Bank Corp. ..................... 14,300 636,350
Regions Financial Corp. ............ 5,200 130,650
SouthTrust Corp. ................... 8,800 332,750
State Street Corp. ................. 6,400 467,600
Summit Bancorp ..................... 7,000 214,375
Suntrust Banks, Inc. ............... 12,900 887,681
Synovus Financial Corp. ............ 10,700 212,663
Union Planters Co. ................. 5,700 224,794
Wachovia Corp. ..................... 7,800 530,400
Washington Mutual, Inc. ............ 23,200 603,200
Wells Fargo & Co. .................. 66,000 2,668,875
-------------
22,221,007
-------------
BIOTECH AND MEDICAL PRODUCTS (0.7%)
Amgen, Inc. + ...................... 41,100 2,468,569
Bard (C.R.) Inc. ................... 1,300 68,900
Bausch & Lomb, Inc. ................ 3,400 232,687
Biomet, Inc. ....................... 4,500 180,000
Boston Scientific Corp. + .......... 23,800 520,625
Guidant Corp. + .................... 8,700 408,900
Mallinckrodt Inc. .................. 1,800 57,262
Medtronic, Inc. + .................. 22,900 834,419
Saint Jude Medical, Inc. + ......... 2,100 64,444
-------------
4,835,806
-------------
CHEMICALS (0.7%)
Dow Chemical Co. ................... 8,800 1,175,900
Du Pont (E.I.) de Nemours .......... 41,900 2,760,162
Hercules, Inc. ..................... 4,000 111,500
Monsanto Co. ....................... 11,800 420,375
Rohm & Haas Co. .................... 8,369 340,514
Union Carbide Corp. ................ 5,000 333,750
-------------
5,142,201
-------------
COMMERCIAL SERVICES (0.2%)
Deluxe Corp. ....................... 2,000 54,875
Interpublic Group of Co., Inc. (The) 11,300 651,869
Omnicom Group, Inc. ................ 6,800 680,000
Paychex, Inc. ...................... 5,700 228,000
RR Donnelley & Sons Co. ............ 3,200 79,400
Young And Rubicam, Inc. + .......... 800 56,600
-------------
1,750,744
-------------
COMPUTERS (3.0%)
Apple Computer, Inc. + ............. 8,000 822,500
Cabletron Systems, Inc. + ......... 6,700 174,200
Gateway, Inc. + .................... 15,800 1,138,587
Hewlett Packard Co. ................ 41,000 4,671,437
International Business Machines
Corp............................... 72,500 7,830,000
Sun Microsystems, Inc. + ........... 84,000 6,504,750
Unisys Corp. + ..................... 13,800 440,738
-------------
21,582,212
-------------
CONGLOMERATE AND AEROSPACE (3.7%)
Boeing Co. ......................... 56,300 2,339,968
Crane Co. .......................... 1,700 33,787
General Dynamics Corp. ............. 9,300 490,575
General Electric Co. ............... 131,800 20,396,050
See Notes to Portfolio of Investments. 133
<PAGE>
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES D (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------- -------------
CONGLOMERATE AND AEROSPACE (CONTINUED)
Goodrich (B.F.) Co. ................ 4,400 $ 121,000
Loews Corp. ........................ 4,900 297,369
National Service Industries, Inc. .. 1,100 32,450
Northrop Grumman Corp. ............. 2,700 145,969
Perkin-Elmer Inc. + ................ 1,300 54,194
Raytheon Co. ....................... 8,800 233,750
Textron, Inc. ...................... 5,700 437,119
United Technologies Corp. .......... 25,000 1,625,000
-------------
26,207,231
-------------
CONSUMER FINANCE (1.1%)
Associates First Capital Corp. ..... 29,300 803,919
Capital One Financial Corp. ........ 11,400 549,337
Countrywide Credit Industries, Inc. 3,500 88,375
Freddie Mac Corp. .................. 28,000 1,317,750
Federal National Mortgage
Association........................ 41,200 2,572,425
Household International, Inc. ...... 23,500 875,375
MBNA Corp. ......................... 40,000 1,090,000
Ryder System, Inc. ................. 2,600 63,538
SLM Holding Corp. .................. 6,400 270,400
-------------
7,631,119
-------------
CONSUMER PRODUCTS (1.4%)
Avon Products, Inc. ................ 9,700 320,100
Colgate-Palmolive Co. .............. 23,400 1,521,000
Gillette Co. ....................... 22,500 926,719
International Flavors & Fragrances,
Inc................................ 4,200 158,550
Kimberly-Clark Corp. ............... 21,900 1,428,975
Procter & Gamble Co. ............... 52,800 5,784,900
-------------
10,140,244
-------------
CONSUMER SERVICES (0.8%)
Carnival Corp. ..................... 24,700 1,180,969
Cendant Corp. + .................... 27,300 725,156
Darden Restaurants, Inc. ........... 4,400 79,750
H&R Block, Inc. .................... 4,000 175,000
Harrah's Entertainment, Inc. + ..... 4,500 118,969
Hilton Hotels Corp. ................ 7,000 67,375
Marriott International, Inc. ....... 9,400 296,687
McDonald's Corp. ................... 54,400 2,193,000
Mirage Resorts, Inc. + ............. 7,800 119,438
Tricon Global Restaurants, Inc. + .. 8,300 320,587
Wendy's International, Inc. ........ 4,100 84,563
-------------
5,361,494
-------------
CONSUMER SPECIALTIES (0.0%)
Brunswick Corp. .................... 2,300 51,175
Hasbro, Inc. ....................... 7,750 147,735
Jostens, Inc. ...................... 1,300 31,606
Mattel, Inc. ....................... 8,000 105,000
-------------
335,516
-------------
DATA AND IMAGING SERVICES (11.1%)
Adobe Systems, Inc. ................ 7,200 484,200
America Online, Inc. + ............. 134,800 10,168,975
Autodesk, Inc. ..................... 2,500 84,375
Automatic Data Processing, Inc. .... 25,100 1,352,262
BMC Software, Inc. + ............... 9,700 775,394
Cisco Systems, Inc. + .............. 178,800 19,153,950
Citrix Systems, Inc. + ............. 3,200 393,600
Computer Associates International,
Inc................................ 21,700 1,517,644
Computer Sciences Corp. + .......... 6,200 586,675
Compuware Corp. + .................. 9,400 350,150
Eastman Kodak Co. .................. 12,100 801,625
Electronic Data Systems Corp. ...... 23,500 1,573,031
EMC Corp. + ........................ 41,400 4,522,950
First Data Corp. ................... 21,900 1,079,944
Microsoft Corp. + .................. 207,400 24,213,950
Network Appliance, Inc. + .......... 6,000 498,375
Novell, Inc. + ..................... 13,400 535,162
Oracle Corp. + ..................... 57,250 6,415,578
Parametric Technology Co. + ........ 9,800 265,213
Seagate Technology, Inc. + ......... 7,400 344,563
Yahoo! Inc. + ...................... 10,600 4,586,487
-------------
79,704,103
-------------
DISCRETIONARY RETAIL (4.6%)
AutoZone, Inc. + ................... 5,600 180,950
Bed Bath & Beyond, Inc. + .......... 7,300 253,675
Best Buy Co., Inc. + ............... 12,400 622,325
Circuit City Stores, Inc. .......... 11,400 513,712
Consolidated Stores Corp. + ........ 3,000 48,750
Costco Wholesale Corp. + ........... 10,800 985,500
Dayton Hudson Co. .................. 22,900 1,681,719
Dollar General Corp. ............... 10,075 229,206
Federated Department Stores, Inc. + 11,700 591,581
Gap, Inc. .......................... 51,300 2,359,800
Home Depot, Inc. ................... 120,300 8,248,069
Kmart Corp. + ...................... 19,300 194,206
Kohl's Corp. + ..................... 6,600 476,437
Lowe's Co., Inc. ................... 23,100 1,380,225
May Department Stores Co. .......... 5,900 190,275
Nordstrom, Inc. .................... 3,400 89,038
Office Depot, Inc. + ............... 14,100 154,219
Sears, Roebuck & Co. ............... 18,900 575,269
Staples, Inc. + .................... 18,900 392,175
Tandy Corp. ........................ 10,800 531,225
The Limited, Inc. .................. 12,400 537,075
The Pep Boys - Manny, Moe & Jack ... 1,400 12,775
TJX Companies, Inc. ................ 11,100 226,856
Toys "R" Us, Inc. + ................ 12,200 174,613
Wal-Mart Stores, Inc. .............. 179,000 12,373,375
-------------
33,023,050
-------------
DIVERSIFIED FINANCIAL SERVICES (1.9%)
American Express Co. ............... 18,000 2,992,500
Citigroup Inc. ..................... 176,200 9,790,112
Providian Financial Corp. .......... 7,600 692,075
-------------
13,474,687
-------------
134 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------- -------------
DRUGS (3.4%)
Allergan, Inc. ..................... 7,100 $ 353,225
American Home Products Corp. ....... 26,300 1,037,206
Baxter International, Inc. ......... 11,200 703,500
Bristol-Myers Squibb Co. ........... 79,700 5,115,744
Johnson & Johnson .................. 55,900 5,205,687
Merck & Co., Inc. .................. 47,000 3,151,938
Pfizer, Inc. ....................... 155,600 5,047,275
Pharmacia & Upjohn, Inc. ........... 20,800 936,000
Schering Plough .................... 29,500 1,244,531
Warner Lambert Co. ................. 17,300 1,417,519
-------------
24,212,625
-------------
ELECTRIC UTILITIES (1.0%)
AES Corp. + ........................ 8,300 620,425
Ameren Corp. ....................... 5,500 180,125
American Electric Power Co. ........ 7,200 231,300
Carolina Power & Light Co. ......... 3,200 97,400
Central & South West Corp. ......... 6,600 132,000
Cinergy Corp. ...................... 6,100 147,162
CMS Energy Corp. ................... 4,400 137,225
Consolidated Edison, Inc. .......... 8,200 282,900
Constellation Energy Group ......... 6,900 200,100
Dominion Resources, Inc. ........... 7,300 286,525
DTE Energy Co. ..................... 5,800 181,975
Duke Energy Corp. .................. 14,000 701,750
Edison International Inc. .......... 13,300 348,294
Entergy Corp. ...................... 9,700 249,775
FirstEnergy Corp. .................. 9,400 213,262
Florida Progress Corp. ............. 3,500 148,094
FPL Group, Inc. .................... 7,200 308,250
GPU, Inc. .......................... 3,300 98,794
Niagara Mohawk Holdings Inc. + ..... 3,800 52,963
Peco Energy Co. .................... 9,300 323,175
PG&E Corp. ......................... 13,800 282,900
Pinnacle West Capital Corp. ........ 3,400 103,912
PP&L Resources, Inc. ............... 6,100 139,537
Public Service Enterprise Group,
Inc................................ 12,400 431,675
Reliant Energy Inc. ................ 11,000 251,625
Southern Co. ....................... 27,100 636,850
Texas Utilities Co. ................ 11,100 394,744
Unicom Corp. ....................... 8,700 291,450
-------------
7,474,187
-------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.3%)
Lexmark International Group, Inc. + 4,600 416,300
PE Corp-PE Biosystems Group ........ 4,100 493,281
Pitney Bowes, Inc. ................. 10,700 516,944
Rockwell International Corp. ....... 7,200 344,700
Tektronix, Inc. .................... 1,300 50,537
-------------
1,821,762
-------------
ELECTRONIC MEDIA (1.1%)
CBS Corp. + ........................ 30,663 1,960,516
Clear Channel Communications, Inc. + 13,600 1,213,800
Comcast Corp. ...................... 28,700 1,451,144
Mediaone Group, Inc. + ............. 24,600 1,889,587
Viacom, Inc. + ..................... 22,100 1,335,669
-------------
7,850,716
-------------
FOOD AND BEVERAGE (1.7%)
Anheuser-Busch Co., Inc. ........... 21,200 1,502,550
Archer-Daniels-Midland Co. ......... 11,700 142,594
Bestfoods .......................... 10,400 546,650
Brown-Forman Corp. + ............... 1,100 62,975
Campbell Soup Co. .................. 8,000 309,500
Coca-Cola Co. ...................... 49,600 2,889,200
Coca-Cola Enterprises, Inc. ........ 7,900 158,988
Conagra, Inc. ...................... 12,900 291,056
Coors (Adolph) Co. ................. 1,200 63,000
Fortune Brands, Inc. ............... 6,600 218,213
General Mills, Inc. ................ 11,700 418,275
Heinz (H.J.) Co. ................... 13,600 541,450
Kellogg Co. ........................ 15,100 465,269
PepsiCo, Inc. ...................... 58,500 2,062,125
Quaker Oats Co. .................... 5,300 347,812
Ralston-Ralston Purina Group ....... 12,100 337,287
Sara Lee Corp. ..................... 34,300 756,744
Seagram Co. Ltd. ................... 17,400 781,912
Wrigley (Wm.) Jr. Co. + ............ 3,700 306,869
-------------
12,202,469
-------------
FOOD AND DRUG RETAIL (0.4%)
Albertson's, Inc. .................. 6,827 220,171
CVS Corp. .......................... 11,500 459,281
Great Atlantic & Pacific Tea Co.,
Inc................................ 1,100 30,662
Kroger Co. (The) + ................. 33,400 630,425
SUPERVALU, Inc. .................... 3,800 76,000
Sysco Corp. ........................ 12,300 486,619
Walgreen Co. ....................... 40,400 1,181,700
-------------
3,084,858
-------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.7%)
Ball Corp. ......................... 1,201 47,250
Bemis Co., Inc. .................... 1,600 55,800
Boise Cascade Corp. ................ 3,300 133,650
Champion International Corp. ....... 5,000 309,687
Crown Cork & Seal Co., Inc. ........ 4,600 102,925
Fort James Corp. ................... 8,300 227,212
Georgia-Pacific Corp. .............. 10,300 522,725
International Paper Co. ............ 21,633 1,220,912
Louisiana-Pacific Corp. ............ 4,400 62,700
Masco Corp. ........................ 7,900 200,462
Mead Corp. ......................... 4,100 178,094
Owens Corning ...................... 1,800 34,763
Owens-Illinois, Inc. + ............. 5,800 145,363
Pactiv Corp. + ..................... 6,700 71,188
See Notes to Portfolio of Investments. 135
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES D (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------- -------------
FOREST PRODUCTS AND BUILDING MATERIALS (CONTINUED)
Potlatch Corp. ..................... 800 $ 35,700
Sealed Air Corp. + ................. 3,400 176,162
Temple-Inland Inc. ................. 2,900 191,219
Vulcan Materials Co. ............... 3,800 151,763
Westvaco Corp. ..................... 2,500 81,563
Weyerhaeuser Co. ................... 13,600 976,650
Willamette Industries, Inc. ........ 5,800 269,337
-------------
5,195,125
-------------
GAS UTILITIES (0.5%)
Coastal Corp. (The) ................ 8,200 290,588
Columbia Energy Group .............. 3,300 208,725
Consolidated Natural Gas Co. ....... 3,900 253,256
El Paso Energy Corp. ............... 8,500 329,906
Enron Corp. ........................ 37,400 1,659,625
NICOR, Inc. ........................ 1,400 45,500
People's Energy Corp. .............. 1,300 43,550
Sempra Energy ...................... 9,000 156,375
Williams Co., Inc. (The) ........... 16,700 510,394
-------------
3,497,919
-------------
HEALTH SERVICES (0.3%)
Cardinal Health, Inc. .............. 8,200 392,575
Columbia/HCA Healthcare Corp. ...... 21,800 639,012
HEALTHSOUTH Corp. + ................ 11,300 60,738
IMS Health, Inc. ................... 11,800 320,812
Shared Medical Systems Corp. ....... 700 35,656
Tenet Healthcare Corp. + ........... 11,900 279,650
United Healthcare Corp. ............ 9,800 520,625
Wellpoint Health Networks, Inc. + .. 2,500 164,844
-------------
2,413,912
-------------
HEAVY MACHINERY (0.1%)
Cummins Engine Co., Inc. ........... 1,700 82,131
Deere & Co. ........................ 8,700 377,363
NACCO Industries, Inc. ............. 200 11,113
Navistar International Corp. + ..... 3,800 180,025
PACCAR, Inc. ....................... 4,100 181,681
-------------
832,313
-------------
HOUSING AND FURNISHINGS (0.1%)
Centex Corp. ....................... 2,500 61,719
Fleetwood Enterprises, Inc. ........ 900 18,563
Kaufman & Broad Home Corp. ......... 2,000 48,375
Leggett & Platt, Inc. .............. 7,400 158,637
Maytag Corp. ....................... 3,600 172,800
Newell Rubbermaid Inc. ............. 10,800 313,200
Pulte Corp. ........................ 1,800 40,500
Tupperware Corp. ................... 1,600 27,100
Whirlpool Corp. .................... 3,000 195,187
-------------
1,036,081
-------------
INDUSTRIAL SERVICES (0.1%)
Fluor Corp. ........................ 3,100 142,213
USA Waste Management, Inc. ......... 18,200 312,812
-------------
455,025
-------------
INSURANCE (1.9%)
AFLAC, Inc. ........................ 13,900 655,906
Allstate Corp. (The) ............... 15,500 372,000
American General Corp. ............. 9,900 751,162
American International Group, Inc. . 62,275 6,733,484
Aon Corp. .......................... 10,300 412,000
Chubb Corp. ........................ 3,400 191,463
CIGNA Corp. ........................ 10,700 862,019
Cincinnati Financial Corp. ......... 6,600 205,838
Hartford Financial Services Group,
Inc................................ 8,700 412,162
Jefferson-Pilot Corp. .............. 4,200 286,650
Lincoln National Corp. ............. 6,600 264,000
Marsh & McLennan Co., Inc. ......... 10,700 1,023,856
MBIA, Inc. ......................... 4,000 211,250
MGIC Investment Corp. .............. 5,300 318,994
Progressive Corp. .................. 1,300 95,063
St. Paul Co., Inc. ................. 8,500 286,344
Torchmark Corp. .................... 5,300 154,031
UnumProvident Corp. ................ 9,636 308,954
-------------
13,545,176
-------------
INVESTMENT SERVICES (1.3%)
Bear Stearns Co., Inc. (The) ....... 6,126 261,886
Charles Schwab Corp. ............... 49,400 1,895,725
Franklin Resources, Inc. ........... 10,100 323,831
Lehman Brothers Holdings Inc. ...... 6,900 584,344
Merrill Lynch & Co., Inc. .......... 16,600 1,386,100
Morgan Stanley Dean Witter & Co. ... 29,100 4,154,025
Paine Webber Group Inc. ............ 7,500 291,094
T. Rowe Price & Associates ......... 4,800 177,300
-------------
9,074,305
-------------
MAJOR TELECOMMUNICATIONS (4.9%)
ALLTEL Corp. ....................... 12,600 1,041,863
AT&T Corp. ......................... 128,450 6,518,837
Bell Atlantic Corp. ................ 62,400 3,841,500
BellSouth Corp. .................... 75,700 3,543,706
CenturyTel, Inc. ................... 4,450 210,819
GTE Corp. .......................... 39,100 2,758,994
MCI Worldcom, Inc. + ............... 114,150 6,057,084
Nextel Communications, Inc. + ...... 16,700 1,722,188
SBC Communications, Inc. ........... 68,600 3,344,250
Sprint Corp. ....................... 31,600 2,127,075
Sprint PCS + ....................... 22,500 2,306,250
U.S. WEST, Inc. .................... 20,300 1,461,600
-------------
34,934,166
-------------
MISCELLANEOUS METALS (0.1%)
Barrick Gold Corp. ................. 14,700 260,006
Freeport-McMoRan Copper & Gold,
Inc. + ............................ 4,000 84,500
Homestake Mining Co. ............... 9,700 75,781
Inco Ltd. + ........................ 10,400 244,400
136 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------- -------------
MISCELLANEOUS METALS (CONTINUED)
Newmont Mining Corp. ............... 6,400 $ 156,800
Phelps Dodge Corp. ................. 3,000 201,375
-------------
1,022,862
-------------
OIL (4.0%)
Amerada Hess Corp. ................. 4,500 255,375
Anadarko Petroleum Corp. ........... 5,100 174,038
Apache Corp. ....................... 6,500 240,094
Ashland Oil, Inc. .................. 1,900 62,581
Atlantic Richfield Co. ............. 19,500 1,686,750
Burlington Resources, Inc. ......... 3,900 128,944
Chevron Corp. ...................... 26,400 2,286,900
Conoco Inc. ........................ 16,400 407,950
Exxon Mobil Corp. .................. 180,840 14,568,960
Kerr-McGee Corp. ................... 5,200 322,400
Occidental Petroleum Corp. ......... 20,500 443,313
Phillips Petroleum Co. ............. 14,600 686,200
Royal Dutch Petroleum Co. .......... 86,200 5,209,712
Texaco, Inc. ....................... 22,200 1,205,737
Union Pacific Resources Group Inc. . 9,600 122,400
Unocal Corp. ....................... 12,100 406,106
USX-Marathon Group ................. 15,000 370,313
-------------
28,577,773
-------------
OIL SERVICES (0.4%)
Baker Hughes, Inc. ................. 12,600 265,387
Halliburton Co. .................... 17,800 716,450
McDermott International, Inc., ADR . 2,200 19,938
Rowan Co., Inc. + .................. 4,400 95,425
Schlumberger, Ltd. ................. 22,100 1,243,125
Tosco Corp. ........................ 9,200 250,125
Transocean Sedco Forex Inc. ........ 4,287 144,432
-------------
2,734,882
-------------
OTHER TELECOMMUNICATIONS (0.2%)
Global Crossing Holdings Ltd. + .... 31,980 1,599,000
-------------
PRINT MEDIA (0.5%)
Dow Jones & Co., Inc. .............. 2,600 176,800
Dun & Bradstreet Corp. ............. 6,500 191,750
Equifax, Inc. ...................... 3,500 82,469
Gannett Co., Inc. .................. 11,200 913,500
Harcourt General, Inc. ............. 1,300 52,325
Knight-Ridder, Inc. ................ 3,400 202,300
McGraw-Hill Co., Inc. .............. 7,900 486,837
Meredith Corp. ..................... 1,100 45,856
New York Times Co. ................. 6,500 319,313
Times Mirror Co. ................... 1,300 87,100
Tribune Co. ........................ 11,800 649,737
-------------
3,207,987
-------------
PRODUCER GOODS (1.8%)
Avery Dennison Corp. ............... 5,600 408,100
Cooper Industries, Inc. ............ 3,800 153,662
Corning, Inc. ...................... 9,800 1,263,587
Danaher Corp. ...................... 4,900 236,425
Dover Corp. ........................ 7,800 353,925
Ecolab, Inc. ....................... 5,200 203,450
Emerson Electric Co. ............... 16,700 958,162
FMC Corp. + ........................ 900 51,581
Grainger (W.W.), Inc. .............. 3,500 167,344
Honeywell International Inc. ....... 31,938 1,842,395
Ikon Office Solutions, Inc. ........ 5,300 36,106
Illinois Tool Works, Inc. .......... 11,500 776,969
Ingersoll-Rand Co. ................. 5,900 324,869
ITT Industries, Inc. ............... 2,500 83,594
Milacron, Inc. ..................... 1,000 15,375
Millipore Corp. .................... 1,200 46,350
Minnesota Mining and Manufacturing
Co................................. 16,100 1,575,787
Pall Corp. ......................... 3,000 64,688
Parker-Hannifin Corp. .............. 5,600 287,350
PPG Industries, Inc. ............... 6,700 419,169
Sherwin-Williams Co. ............... 6,700 140,700
Thermo Electron Corp. + ............ 6,100 91,500
Thomas & Betts Corp. ............... 1,500 47,813
Timken Co. ......................... 1,700 34,744
Tyco International Ltd. ............ 88,856 3,454,277
-------------
13,037,922
-------------
SEMICONDUCTORS AND ELECTRONICS (7.4%)
Adaptec, Inc. + .................... 6,200 309,225
ADC Telecommunications, Inc. + ..... 8,400 609,525
Advanced Micro Devices Corp. + ..... 4,000 115,750
Analog Devices, Inc. + ............. 10,500 976,500
Andrew Corp. + ..................... 3,300 62,494
Applied Materials, Inc. + .......... 22,800 2,888,475
Comverse Technology, Inc. + ........ 4,600 665,850
General Instrument Corp. + ......... 6,200 527,000
Intel Corp. ........................ 67,100 5,523,169
KLA Instruments Corp. + ............ 5,000 556,875
LSI Logic Corp. + .................. 8,300 560,250
Lucent Technologies, Inc. .......... 125,980 9,424,879
Micron Technology, Inc. + .......... 10,200 793,050
Molex, Inc. ........................ 1,600 90,700
Motorola, Inc. ..................... 36,700 5,404,075
National Semiconductor Corp. + ..... 9,900 423,844
Nortel Networks Corp. .............. 71,400 7,211,400
QUALCOMM Inc. + .................... 39,600 6,974,550
Scientific-Atlanta, Inc. ........... 4,700 261,437
Solectron Corp. + .................. 17,700 1,683,712
Tellabs, Inc. + .................... 24,300 1,559,756
Teradyne, Inc. + ................... 10,300 679,800
Texas Instruments, Inc. ............ 47,400 4,591,875
Xilinx, Inc. + ..................... 18,400 836,625
-------------
52,730,816
-------------
SPECIALTY CHEMICALS (0.1%)
Air Products and Chemicals, Inc. ... 8,800 295,350
Engelhard Corp. .................... 3,400 64,175
See Notes to Portfolio of Investments. 137
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES D (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------- -------------
SPECIALTY CHEMICALS (CONTINUED)
Grace (W.R.) & Co. + ............... 2,500 $ 34,688
Great Lakes Chemical Corp. ......... 1,500 57,281
Praxair, Inc. ...................... 7,900 397,469
Sigma-Aldrich Corp. ................ 2,400 72,150
-------------
921,113
-------------
STEEL (0.1%)
Nucor Corp. ........................ 3,300 180,881
USX-US Steel Group, Inc. ........... 4,400 145,200
Worthington Industries ............. 2,400 39,750
-------------
365,831
-------------
SURFACE TRANSPORT (0.2%)
Burlington Northern Santa Fe Corp. . 16,300 395,275
CSX Corp. .......................... 8,100 254,138
Kansas City Southern Industries,
Inc................................ 6,400 477,600
Norfolk Southern Corp. ............. 6,800 139,400
Union Pacific Corp. ................ 9,500 414,437
-------------
1,680,850
-------------
TEXTILES AND APPAREL (0.1%)
Liz Claiborne, Inc. ................ 3,100 116,638
Nike, Inc. ......................... 9,400 465,887
Russell Corporation ................ 1,200 20,100
Springs Industries, Inc. ........... 300 11,981
VF Corp. ........................... 4,800 144,000
-------------
758,606
-------------
TOBACCO (0.2%)
Nabisco Group Holdings Corp. ....... 12,200 129,625
Philip Morris Co., Inc. ............ 47,600 1,103,725
UST, Inc. .......................... 8,500 214,098
1,447,448
-------------
TOTAL COMMON STOCKS (COST $427,194,632) 477,666,708
-------------
PRINCIPAL
AMOUNT
--------------
LONG-TERM BONDS AND NOTES (39.8%)
Bank of Boston,6.88%,07/15/03 @ .... $ 5,375,000 5,284,378
Countrywide Funding
Corp.,6.25%,05/25/14............... 424,910 364,028
Dana Corp.,6.25%,03/01/04 @ ........ 10,000,000 9,510,700
Delta Air Lines, Inc.,6.65%,03/15/04
@.................................. 7,500,000 7,178,325
DLJ Commercial Mortgage
Corp.,6.08%,08/10/08............... 11,982,184 11,407,758
Federal Home Loan
Bank,5.62%,01/19/00................ 50,000,000 49,875,111
Federal Home Loan
Bank,6.50%,11/12/28 # ............. 101,400,000 95,538,066
GE Capital Mortgage Services,
Inc.,6.25%,03/25/14................ 544,558 476,318
Green Tree Financial Corp.,
8.41%,12/01/30 @ .................. 9,000,000 8,150,273
Nationslink Funding Corp.,
6.04%,11/20/07 * .................. 13,501,328 12,852,259
Norwest Asset Securities
Corp.,6.75%,02/25/13............... 402,937 368,828
Norwest Asset Securities
Corp.,6.75%,10/25/28............... 891,779 771,211
Saks Inc.,7.25%,12/01/04 @ ......... 5,000,000 4,698,850
U.S. Treasury Strip,Zero
Coupon,08/15/03-02/15/04........... 95,426,000 73,621,878
USX Corp.,9.63%,08/15/03 ........... 4,410,000 4,693,254
-------------
TOTAL LONG-TERM BONDS AND NOTES (COST $291,120,416) 284,791,237
-------------
SHORT-TERM INVESTMENTS (11.3%)
Federal Home Loan
Bank,1.50%,01/03/00................ 35,000,000 35,000,000
Federal Home Loan
Bank,5.20%,01/26/00................ 45,756,000 45,603,989
U.S. Treasury Bill,5.02%,02/17/00 @ 100,000 99,373
U.S. Treasury Bill,5.04%,02/17/00 .. 500,000 496,853
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $81,200,215) 81,200,215
-------------
TOTAL INVESTMENTS (COST $799,515,263)(A) 843,658,160
OTHER ASSETS LESS LIABILITIES (127,573,593)
-------------
TOTAL NET ASSETS $ 716,084,567
=============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$808,762,558. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains............................... $ 60,015,160
Unrealized losses.............................. (25,119,558)
------------
Net unrealized gain........................... $ 34,895,602
============
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- ---------------------- ---------- ----------- ------------ ---------------
S&P 500 Index Futures 7 $ 2,597,350 Mar 00 $ 56,870
=========== ===============
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
# When-issued or delayed delivery security. The cost of the total
when-issued or delayed delivery securities is $96,808,980.
* Segregated securities for purchases of delayed delivery or when-issued
securities held at December 31, 1999.
Category percentages are based on net assets.
138 See Notes to Financial Statements.
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES E
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
COMMON STOCKS (71.8%)
AIR TRANSPORT (0.2%)
AMR Corp. + .......................... 3,400 $ 227,800
Delta Air Lines, Inc. ................ 3,700 184,306
FDX Corp. + .......................... 11,800 483,062
Southwest Airlines Co. ............... 17,400 281,663
------------
1,176,831
------------
ALUMINUM (0.4%)
Alcan Aluminum Ltd. .................. 9,900 407,756
Alcoa Inc. ........................... 18,300 1,518,900
Reynolds Metals Co. .................. 3,000 229,875
------------
2,156,531
------------
AUTO PARTS AND HARDWARE (0.1%)
Black & Decker Corp. ................. 2,500 130,625
Briggs & Stratton Corp. .............. 500 26,813
Cooper Tire & Rubber Co. ............. 800 12,450
Genuine Parts Co. .................... 3,400 84,362
Goodyear Tire & Rubber Co. (The) ..... 2,600 73,287
Snap-On, Inc. ........................ 1,900 50,469
Stanley Works (The) .................. 2,800 84,350
------------
462,356
------------
AUTOMOTIVE (0.9%)
Dana Corp. ........................... 4,800 143,700
Delphi Automotive Systems Corp. ...... 20,000 315,000
Eaton Corp. .......................... 1,700 123,463
Ford Motor Co. ....................... 37,000 1,977,187
General Motors Corp. + ............... 30,500 2,216,969
Johnson Controls, Inc. ............... 3,000 170,625
TRW, Inc. ............................ 3,000 155,812
------------
5,102,756
------------
BANKS AND THRIFTS (3.2%)
AmSouth Bancorporation ............... 17,500 337,969
Bank of America Corp. ................ 56,700 2,845,631
Bank of New York Co., Inc. ........... 22,300 892,000
Bank One Corp. ....................... 19,100 612,394
BB&T Corp. ........................... 13,200 361,350
Chase Manhattan Corp. ................ 28,100 2,183,019
Comerica, Inc. ....................... 4,100 191,419
Fifth Third Bancorp .................. 9,200 675,050
Firstar Corp. ........................ 41,482 876,307
Fleet Boston Financial Corp. ......... 27,920 971,965
Golden West Financial Corp. .......... 6,000 201,000
Huntington Bancshares Inc. ........... 5,300 126,538
J.P. Morgan & Co. .................... 5,300 671,112
KeyCorp .............................. 10,600 234,525
Mellon Financial Corp. ............... 15,600 531,375
Northern Trust Corp. ................. 5,800 307,400
Old Kent Financial Corp. ............. 3,800 134,425
PNC Bank Corp. ....................... 12,500 556,250
Regions Financial Corp. .............. 5,500 138,187
SouthTrust Corp. ..................... 4,300 162,594
State Street Corp. ................... 3,900 284,944
Summit Bancorp ....................... 4,100 125,563
Suntrust Banks, Inc. ................. 9,700 667,481
Synovus Financial Corp. .............. 6,500 129,188
U.S. Bancorp ......................... 24,600 585,787
Union Planters Co. ................... 4,300 169,581
Wachovia Corp. ....................... 5,400 367,200
Washington Mutual, Inc. .............. 15,800 410,800
Wells Fargo & Co. .................... 56,000 2,264,500
------------
18,015,554
------------
BIOTECH AND MEDICAL PRODUCTS (0.7%)
Amgen, Inc. + ........................ 34,000 2,042,125
Bard (C.R.) Inc. ..................... 1,500 79,500
Bausch & Lomb, Inc. .................. 1,900 130,031
Biomet, Inc. ......................... 2,500 100,000
Boston Scientific Corp. + ............ 18,800 411,250
Guidant Corp. + ...................... 10,300 484,100
Mallinckrodt Inc. .................... 2,200 69,988
Medtronic, Inc. + .................... 17,200 626,725
Saint Jude Medical, Inc. + ........... 900 27,619
------------
3,971,338
------------
CHEMICALS (0.8%)
Dow Chemical Co. ..................... 9,000 1,202,625
Du Pont (E.I.) de Nemours ............ 33,000 2,173,875
Hercules, Inc. ....................... 2,000 55,750
Monsanto Co. ......................... 19,200 684,000
Rohm & Haas Co. ...................... 4,900 199,369
Union Carbide Corp. .................. 3,400 226,950
------------
4,542,569
------------
COMMERCIAL SERVICES (0.3%)
Deluxe Corp. ......................... 1,500 41,156
Interpublic Group of Co., Inc. (The) . 8,500 490,344
Omnicom Group, Inc. .................. 5,900 590,000
Paychex, Inc. ........................ 6,300 252,000
RR Donnelley & Sons Co. .............. 3,300 81,881
------------
1,455,381
------------
COMPUTERS (3.3%)
Apple Computer, Inc. + ............... 6,300 647,719
Cabletron Systems, Inc. + ........... 6,000 156,000
Gateway, Inc. + ...................... 13,700 987,256
Hewlett Packard Co. .................. 33,900 3,862,481
International Business Machines Corp. 59,900 6,469,200
Sun Microsystems, Inc. + ............. 76,800 5,947,200
Unisys Corp. + ....................... 11,700 373,669
------------
18,443,525
------------
CONGLOMERATE AND AEROSPACE (3.8%)
Boeing Co. ........................... 45,500 1,891,094
Crane Co. ............................ 1,700 33,787
General Dynamics Corp. ............... 7,700 406,175
General Electric Co. ................. 109,100 16,883,225
Goodrich (B.F.) Co. .................. 1,100 30,250
See Notes to Portfolio of Investments. 139
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES E (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
CONGLOMERATE AND AEROSPACE (CONTINUED)
Lockheed Martin Corp. ................ 5,900 $ 129,062
Loews Corp. .......................... 3,600 218,475
National Service Industries, Inc. .... 800 23,600
Northrop Grumman Corp. ............... 2,600 140,562
Perkin-Elmer Inc. + .................. 600 25,013
Raytheon Co. ......................... 5,500 146,094
Textron, Inc. ........................ 4,000 306,750
United Technologies Corp. ............ 21,100 1,371,500
------------
21,605,587
------------
CONSUMER FINANCE (1.1%)
Associates First Capital Corp. ....... 22,100 606,369
Capital One Financial Corp. .......... 9,000 433,687
Countrywide Credit Industries, Inc. .. 2,800 70,700
Federal Home Loan Mortgage Corp. ..... 23,200 1,091,850
Federal National Mortgage Association 35,000 2,185,312
Household International, Inc. ........ 20,300 756,175
MBNA Corp. ........................... 31,600 861,100
Ryder System, Inc. ................... 1,800 43,988
SLM Holding Corp. .................... 3,900 164,775
------------
6,213,956
------------
CONSUMER PRODUCTS (1.5%)
Alberto-Culver Co. ................... 1,300 33,556
Avon Products, Inc. .................. 6,300 207,900
Clorox Co. ........................... 5,900 297,213
Colgate-Palmolive Co. ................ 19,000 1,235,000
Gillette Co. ......................... 17,500 720,781
International Flavors & Fragrances,
Inc.................................. 2,700 101,925
Kimberly-Clark Corp. ................. 17,700 1,154,925
Procter & Gamble Co. ................. 43,700 4,787,881
------------
8,539,181
------------
CONSUMER SERVICES (0.7%)
Carnival Corp. ....................... 18,700 894,094
Cendant Corp. + ...................... 18,600 494,062
Darden Restaurants, Inc. ............. 6,600 119,625
H&R Block, Inc. ...................... 2,400 105,000
Harrah's Entertainment, Inc. + ....... 7,900 208,856
Hilton Hotels Corp. .................. 4,900 47,163
Marriott International, Inc. ......... 6,400 202,000
McDonald's Corp. ..................... 45,000 1,814,062
Mirage Resorts, Inc. + ............... 3,800 58,188
Tricon Global Restaurants, Inc. + .... 5,300 204,712
Wendy's International, Inc. .......... 3,300 68,063
------------
4,215,825
------------
CONSUMER SPECIALTIES (0.0%)
Brunswick Corp. ...................... 2,400 53,400
Hasbro, Inc. ......................... 5,000 95,312
Jostens, Inc. ........................ 1,100 26,744
------------
175,456
------------
DATA AND IMAGING SERVICES (13.1%)
3Com Corp. + ......................... 10,400 488,800
Adobe Systems, Inc. .................. 6,000 403,500
America Online, Inc. + ............... 114,400 8,630,050
Automatic Data Processing, Inc. ...... 18,900 1,018,238
BMC Software, Inc. + ................. 7,200 575,550
Cisco Systems, Inc. + ................ 161,000 17,247,125
Citrix Systems, Inc. + ............... 2,900 356,700
Computer Associates International,
Inc.................................. 16,300 1,139,981
Computer Sciences Corp. + ............ 4,100 387,963
Compuware Corp. + .................... 10,500 391,125
Eastman Kodak Co. .................... 10,500 695,625
Electronic Data Systems Corp. ........ 19,400 1,298,587
EMC Corp. + .......................... 45,300 4,949,025
First Data Corp. ..................... 19,200 946,800
Microsoft Corp. + .................... 218,300 25,486,525
Network Appliance, Inc. + ............ 3,600 299,025
Novell, Inc. + ....................... 11,600 463,275
Oracle Corp. + ....................... 46,300 5,188,494
Parametric Technology Co. + .......... 8,900 240,856
Seagate Technology, Inc. + ........... 6,100 284,031
Yahoo! Inc. + ........................ 8,700 3,764,381
------------
74,255,656
------------
DISCRETIONARY RETAIL (5.4%)
AutoZone, Inc. + ..................... 4,700 151,869
Bed Bath & Beyond, Inc. + ............ 6,400 222,400
Best Buy Co., Inc. + ................. 9,300 466,744
Circuit City Stores, Inc. ............ 8,800 396,550
Consolidated Stores Corp. + .......... 2,100 34,125
Costco Wholesale Corp. + ............. 8,700 793,875
Dayton Hudson Co. .................... 20,900 1,534,844
Dollar General Corp. ................. 6,300 143,325
Federated Department Stores, Inc. + .. 9,500 480,344
Gap, Inc. ............................ 41,800 1,922,800
Home Depot, Inc. ..................... 99,450 6,818,540
Kmart Corp. + ........................ 20,900 210,306
Kohl's Corp. + ....................... 6,600 476,437
Lowe's Co., Inc. ..................... 18,700 1,117,325
May Department Stores Co. ............ 11,500 370,875
Nordstrom, Inc. ...................... 3,500 91,656
Office Depot, Inc. + ................. 10,000 109,375
Sears, Roebuck & Co. ................. 14,900 453,519
Staples, Inc. + ...................... 12,200 253,150
Tandy Corp. .......................... 9,600 472,200
The Limited, Inc. .................... 10,500 454,781
The Pep Boys - Manny, Moe & Jack ..... 1,000 9,125
TJX Companies, Inc. .................. 13,700 279,994
Toys "R" Us, Inc. + .................. 8,700 124,519
Wal-Mart Stores, Inc. ................ 188,200 13,009,325
------------
30,398,003
------------
DIVERSIFIED FINANCIAL SERVICES (2.0%)
American Express Co. ................. 15,300 2,543,625
Citigroup Inc. ....................... 145,700 8,095,456
140 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
Providian Financial Corp. ............ 6,200 $ 564,588
------------
11,203,669
------------
DRUGS (4.1%)
Allergan, Inc. ....................... 4,400 218,900
American Home Products Corp. ......... 20,900 824,244
Baxter International, Inc. ........... 8,800 552,750
Bristol-Myers Squibb Co. ............. 65,900 4,229,956
Johnson & Johnson .................... 46,200 4,302,375
Merck & Co., Inc. .................... 74,200 4,976,038
Pfizer, Inc. ......................... 163,800 5,313,262
Pharmacia & Upjohn, Inc. ............. 16,600 747,000
Schering Plough ...................... 23,900 1,008,281
Warner Lambert Co. ................... 14,000 1,147,125
------------
23,319,931
------------
ELECTRIC UTILITIES (1.0%)
AES Corp. + .......................... 6,200 463,450
Ameren Corp. ......................... 3,100 101,525
American Electric Power Co. .......... 4,700 150,988
Central & South West Corp. ........... 5,200 104,000
Cinergy Corp. ........................ 5,100 123,038
CMS Energy Corp. ..................... 3,500 109,156
Consolidated Edison, Inc. ............ 8,000 276,000
Constellation Energy Group ........... 3,100 89,900
Dominion Resources, Inc. ............. 6,400 251,200
DTE Energy Co. ....................... 5,100 160,012
Duke Energy Corp. .................... 11,000 551,375
Edison International Inc. ............ 12,200 319,487
Entergy Corp. ........................ 9,700 249,775
FirstEnergy Corp. .................... 6,000 136,125
Florida Progress Corp. ............... 1,900 80,394
FPL Group, Inc. ...................... 4,600 196,937
GPU, Inc. ............................ 4,500 134,719
Peco Energy Co. ...................... 9,200 319,700
PG&E Corp. ........................... 12,500 256,250
PP&L Resources, Inc. ................. 6,500 148,688
Public Service Enterprise Group, Inc. 8,000 278,500
Reliant Energy Inc. .................. 7,000 160,125
Southern Co. ......................... 20,700 486,450
Texas Utilities Co. .................. 7,300 259,606
Unicom Corp. ......................... 5,500 184,250
------------
5,591,650
------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.3%)
Lexmark International Group, Inc. + .. 5,200 470,600
PE Corp-PE Biosystems Group .......... 2,400 288,750
Pitney Bowes, Inc. ................... 6,700 323,694
Rockwell International Corp. ......... 4,500 215,437
Tektronix, Inc. ...................... 900 34,988
Xerox Corp. .......................... 20,100 456,019
------------
1,789,488
------------
ELECTRONIC MEDIA (1.1%)
CBS Corp. + .......................... 25,358 1,621,327
Clear Channel Communications, Inc. + . 10,200 910,350
Comcast Corp. ........................ 21,500 1,087,094
Mediaone Group, Inc. + ............... 19,200 1,474,800
Viacom, Inc. + ....................... 16,700 1,009,306
------------
6,102,877
------------
FOOD AND BEVERAGE (1.7%)
Anheuser-Busch Co., Inc. ............. 19,200 1,360,800
Archer-Daniels-Midland Co. ........... 10,100 123,094
Bestfoods ............................ 8,400 441,525
Brown-Forman Corp. + ................. 1,300 74,425
Campbell Soup Co. .................... 7,000 270,812
Coca-Cola Co. ........................ 40,200 2,341,650
Coca-Cola Enterprises, Inc. .......... 5,400 108,675
Conagra, Inc. ........................ 12,100 273,006
Coors (Adolph) Co. ................... 900 47,250
Fortune Brands, Inc. ................. 4,300 142,169
General Mills, Inc. .................. 11,200 400,400
Heinz (H.J.) Co. ..................... 11,900 473,769
Kellogg Co. .......................... 10,000 308,125
PepsiCo, Inc. ........................ 48,400 1,706,100
Quaker Oats Co. ...................... 3,500 229,688
Ralston-Ralston Purina Group ......... 7,700 214,638
Sara Lee Corp. ....................... 27,000 595,687
Seagram Co. Ltd. ..................... 11,900 534,756
Wrigley (Wm.) Jr. Co. + .............. 2,500 207,344
------------
9,853,913
------------
FOOD AND DRUG RETAIL (0.6%)
Albertson's, Inc. .................... 5,400 174,150
CVS Corp. ............................ 13,500 539,156
Great Atlantic & Pacific Tea Co., Inc. 700 19,513
Kroger Co. (The) + ................... 22,100 417,137
Longs Drug Stores, Inc. .............. 700 18,069
Safeway, Inc. + ...................... 11,700 416,081
SUPERVALU, Inc. ...................... 3,200 64,000
Sysco Corp. .......................... 10,000 395,625
Walgreen Co. ......................... 33,400 976,950
Winn-Dixie Stores, Inc. .............. 3,600 86,175
------------
3,106,856
------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.7%)
Ball Corp. ........................... 700 27,567
Bemis Co., Inc. ...................... 1,800 62,775
Boise Cascade Corp. .................. 1,100 44,550
Champion International Corp. ......... 4,400 272,525
Crown Cork & Seal Co., Inc. .......... 2,300 51,463
Fort James Corp. ..................... 7,000 191,625
Georgia-Pacific Corp. ................ 7,700 390,775
International Paper Co. .............. 17,300 976,369
Louisiana-Pacific Corp. .............. 3,500 49,875
Masco Corp. .......................... 13,400 340,025
See Notes to Portfolio of Investments. 141
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES E (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
FOREST PRODUCTS AND BUILDING MATERIALS (CONTINUED)
Mead Corp. ........................... 1,100 $ 47,781
Owens Corning ........................ 1,900 36,694
Owens-Illinois, Inc. + ............... 4,600 115,287
Pactiv Corp. + ....................... 5,100 54,188
Potlatch Corp. ....................... 600 26,775
Sealed Air Corp. + ................... 2,200 113,987
Temple-Inland Inc. ................... 2,500 164,844
Vulcan Materials Co. ................. 3,200 127,800
Westvaco Corp. ....................... 1,900 61,987
Weyerhaeuser Co. ..................... 10,700 768,394
Willamette Industries, Inc. .......... 4,200 195,037
------------
4,120,323
------------
GAS UTILITIES (0.5%)
Coastal Corp. (The) .................. 5,500 194,906
Columbia Energy Group ................ 2,100 132,825
Consolidated Natural Gas Co. ......... 2,400 155,850
Eastern Enterprises .................. 400 22,975
El Paso Energy Corp. ................. 6,900 267,806
Enron Corp. .......................... 30,900 1,371,187
NICOR, Inc. .......................... 1,200 39,000
People's Energy Corp. ................ 600 20,100
Sempra Energy ........................ 6,100 105,988
Williams Co., Inc. (The) ............. 13,100 400,369
------------
2,711,006
------------
HEALTH SERVICES (0.4%)
Cardinal Health, Inc. ................ 7,000 335,125
Columbia/HCA Healthcare Corp. ........ 21,400 627,287
HEALTHSOUTH Corp. + .................. 7,900 42,463
IMS Health, Inc. ..................... 8,000 217,500
Shared Medical Systems Corp. ......... 500 25,469
Tenet Healthcare Corp. + ............. 9,100 213,850
United Healthcare Corp. .............. 7,800 414,375
Wellpoint Health Networks, Inc. + .... 1,900 125,281
------------
2,001,350
------------
HEAVY MACHINERY (0.1%)
Cummins Engine Co., Inc. ............. 1,200 57,975
Deere & Co. .......................... 6,100 264,587
NACCO Industries, Inc. ............... 200 11,113
Navistar International Corp. + ....... 1,900 90,013
PACCAR, Inc. ......................... 3,400 150,662
------------
574,350
------------
HOUSING AND FURNISHINGS (0.1%)
Centex Corp. ......................... 2,200 54,313
Fleetwood Enterprises, Inc. .......... 800 16,500
Kaufman & Broad Home Corp. ........... 700 16,931
Leggett & Platt, Inc. ................ 6,200 132,912
Maytag Corp. ......................... 4,300 206,400
Newell Rubbermaid Inc. ............... 5,800 168,200
Pulte Corp. .......................... 1,100 24,750
Tupperware Corp. ..................... 1,100 18,631
Whirlpool Corp. ...................... 1,900 123,619
------------
762,256
------------
INDUSTRIAL SERVICES (0.1%)
Fluor Corp. .......................... 2,100 96,338
USA Waste Management, Inc. ........... 19,600 336,875
------------
433,213
------------
INSURANCE (1.9%)
AFLAC, Inc. .......................... 10,500 495,469
Allstate Corp. (The) ................. 12,100 290,400
American General Corp. ............... 7,500 569,062
American International Group, Inc. ... 52,800 5,709,000
Aon Corp. ............................ 6,300 252,000
Chubb Corp. .......................... 2,900 163,306
CIGNA Corp. .......................... 8,400 676,725
Cincinnati Financial Corp. ........... 5,000 155,937
Conseco, Inc. ........................ 7,700 137,638
Hartford Financial Services Group,
Inc.................................. 6,800 322,150
Jefferson-Pilot Corp. ................ 3,600 245,700
Lincoln National Corp. ............... 5,400 216,000
Marsh & McLennan Co., Inc. ........... 8,000 765,500
MBIA, Inc. ........................... 3,100 163,719
MGIC Investment Corp. ................ 2,800 168,525
Progressive Corp. .................... 2,100 153,562
St. Paul Co., Inc. ................... 6,900 232,444
Torchmark Corp. ...................... 3,200 93,000
UnumProvident Corp. .................. 7,500 240,469
------------
11,050,606
------------
INVESTMENT SERVICES (1.3%)
Bear Stearns Co., Inc. (The) ......... 5,460 233,415
Charles Schwab Corp. ................. 40,000 1,535,000
Franklin Resources, Inc. ............. 5,900 189,169
Lehman Brothers Holdings Inc. ........ 5,000 423,437
Merrill Lynch & Co., Inc. ............ 14,100 1,177,350
Morgan Stanley Dean Witter & Co. ..... 23,600 3,368,900
Paine Webber Group Inc. .............. 6,300 244,519
T. Rowe Price & Associates ........... 2,300 84,956
------------
7,256,746
------------
MAJOR TELECOMMUNICATIONS (5.3%)
ALLTEL Corp. ......................... 10,100 835,144
AT&T Corp. ........................... 106,200 5,389,650
Bell Atlantic Corp. .................. 51,600 3,176,625
BellSouth Corp. ...................... 62,600 2,930,462
CenturyTel, Inc. ..................... 6,100 288,988
GTE Corp. ............................ 31,000 2,187,437
MCI Worldcom, Inc. + ................. 120,150 6,375,459
Nextel Communications, Inc. + ........ 14,600 1,505,625
SBC Communications, Inc. ............. 55,500 2,705,625
Sprint Corp. ......................... 24,700 1,662,619
Sprint PCS + ......................... 18,200 1,865,500
U.S. WEST, Inc. ...................... 16,800 1,209,600
------------
30,132,734
------------
142 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
MISCELLANEOUS METALS (0.1%)
Barrick Gold Corp. ................... 12,900 $ 228,169
Freeport-McMoRan Copper & Gold, Inc. + 2,800 59,150
Homestake Mining Co. ................. 8,800 68,750
Inco Ltd. + .......................... 8,800 206,800
Newmont Mining Corp. ................. 5,600 137,200
Phelps Dodge Corp. ................... 1,500 100,687
------------
800,756
------------
OIL (4.0%)
Amerada Hess Corp. ................... 2,600 147,550
Anadarko Petroleum Corp. ............. 2,400 81,900
Apache Corp. ......................... 3,400 125,588
Ashland Oil, Inc. .................... 1,700 55,994
Atlantic Richfield Co. ............... 16,100 1,392,650
Burlington Resources, Inc. ........... 4,900 162,006
Chevron Corp. ........................ 20,700 1,793,137
Conoco Inc. .......................... 12,000 298,500
Exxon Mobil Corp. .................... 149,600 12,052,127
Kerr-McGee Corp. ..................... 2,200 136,400
Occidental Petroleum Corp. ........... 17,900 387,088
Phillips Petroleum Co. ............... 9,800 460,600
Royal Dutch Petroleum Co. ............ 71,300 4,309,194
Texaco, Inc. ......................... 16,700 907,019
Unocal Corp. ......................... 7,300 245,006
USX-Marathon Group ................... 10,800 266,625
------------
22,821,384
------------
OIL SERVICES (0.3%)
Baker Hughes, Inc. ................... 5,000 105,312
Halliburton Co. ...................... 13,400 539,350
McDermott International, Inc., ADR ... 1,900 17,219
Schlumberger, Ltd. ................... 16,700 939,375
Tosco Corp. .......................... 7,600 206,625
Transocean Sedco Forex Inc. .......... 3,240 109,141
------------
1,917,022
------------
OTHER TELECOMMUNICATIONS (0.2%)
Global Crossing Holdings Ltd. + ...... 26,460 1,323,000
------------
PRINT MEDIA (0.5%)
Dow Jones & Co., Inc. ................ 1,900 129,200
Dun & Bradstreet Corp. ............... 4,500 132,750
Equifax, Inc. ........................ 1,500 35,344
Gannett Co., Inc. .................... 9,200 750,375
Harcourt General, Inc. ............... 1,300 52,325
Knight-Ridder, Inc. .................. 2,200 130,900
McGraw-Hill Co., Inc. ................ 6,800 419,050
Meredith Corp. ....................... 900 37,519
New York Times Co. ................... 6,300 309,487
Times Mirror Co. ..................... 1,300 87,100
Tribune Co. .......................... 10,300 567,144
------------
2,651,194
------------
PRODUCER GOODS (1.8%)
Avery Dennison Corp. ................. 3,500 255,062
Cooper Industries, Inc. .............. 2,900 117,269
Corning, Inc. ........................ 7,400 954,137
Danaher Corp. ........................ 3,500 168,875
Dover Corp. .......................... 5,600 254,100
Ecolab, Inc. ......................... 3,300 129,113
Emerson Electric Co. ................. 13,200 757,350
FMC Corp. + .......................... 700 40,119
Grainger (W.W.), Inc. ................ 3,200 153,000
Honeywell International Inc. ......... 28,413 1,639,046
Ikon Office Solutions, Inc. .......... 3,700 25,206
Illinois Tool Works, Inc. ............ 9,600 648,600
Ingersoll-Rand Co. ................... 5,600 308,350
ITT Industries, Inc. ................. 2,800 93,625
Milacron, Inc. ....................... 500 7,688
Millipore Corp. ...................... 900 34,763
Minnesota Mining and Manufacturing Co. 12,200 1,194,075
Parker-Hannifin Corp. ................ 4,400 225,775
PPG Industries, Inc. ................. 4,200 262,762
Sherwin-Williams Co. ................. 4,100 86,100
Thomas & Betts Corp. ................. 1,000 31,875
Timken Co. ........................... 1,200 24,525
Tyco International Ltd. .............. 72,200 2,806,775
------------
10,218,190
------------
SEMICONDUCTORS AND ELECTRONICS (7.5%)
Adaptec, Inc. + ...................... 4,600 229,425
ADC Telecommunications, Inc. + ....... 7,500 544,219
Advanced Micro Devices Corp. + ....... 2,800 81,025
Analog Devices, Inc. + ............... 7,900 734,700
Applied Materials, Inc. + ............ 18,900 2,394,394
Comverse Technology, Inc. + .......... 3,400 492,150
General Instrument Corp. + ........... 7,900 671,500
Intel Corp. .......................... 54,400 4,477,800
KLA Instruments Corp. + .............. 4,100 456,638
LSI Logic Corp. + .................... 6,600 445,500
Lucent Technologies, Inc. ............ 104,200 7,795,462
Micron Technology, Inc. + ............ 10,000 777,500
Motorola, Inc. ....................... 30,400 4,476,400
National Semiconductor Corp. + ....... 6,600 282,563
Nortel Networks Corp. ................ 57,800 5,837,800
QUALCOMM Inc. + ...................... 31,200 5,495,100
Scientific-Atlanta, Inc. ............. 3,200 178,000
Solectron Corp. + .................... 14,100 1,341,262
Tellabs, Inc. + ...................... 18,300 1,174,631
Teradyne, Inc. + ..................... 6,700 442,200
Texas Instruments, Inc. .............. 38,400 3,720,000
Xilinx, Inc. + ....................... 14,400 654,750
------------
42,703,019
------------
SPECIALTY CHEMICALS (0.1%)
Air Products and Chemicals, Inc. ..... 5,100 171,169
Engelhard Corp. ...................... 1,600 30,200
Grace (W.R.) & Co. + ................. 1,300 18,038
Great Lakes Chemical Corp. ........... 1,500 57,281
See Notes to Portfolio of Investments. 143
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES E (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
SPECIALTY CHEMICALS (CONTINUED)
Praxair, Inc. ........................ 6,900 $ 347,156
Sigma-Aldrich Corp. .................. 2,700 81,169
------------
705,013
------------
STEEL (0.0%)
Nucor Corp. .......................... 2,100 115,106
Worthington Industries ............... 1,000 16,563
------------
131,669
------------
SURFACE TRANSPORT (0.3%)
Burlington Northern Santa Fe Corp. ... 18,300 443,775
CSX Corp. ............................ 7,400 232,175
Kansas City Southern Industries, Inc. 5,500 410,437
Norfolk Southern Corp. ............... 12,200 250,100
Union Pacific Corp. .................. 8,900 388,263
------------
1,724,750
------------
TEXTILES AND APPAREL (0.1%)
Liz Claiborne, Inc. .................. 1,700 63,962
Nike, Inc. ........................... 9,200 455,975
Russell Corporation .................. 1,100 18,425
Springs Industries, Inc. ............. 200 7,988
VF Corp. ............................. 2,900 87,000
------------
633,350
------------
TOBACCO (0.2%)
Nabisco Group Holdings Corp. ......... 8,200 87,125
Philip Morris Co., Inc. .............. 39,300 911,269
UST, Inc. ............................ 4,000 100,750
------------
1,099,144
------------
TOTAL COMMON STOCKS (COST $361,831,823) 407,469,964
------------
PRINCIPAL
AMOUNT
-------------
LONG-TERM BONDS AND NOTES (27.3%)
Federal National Mortgage
Association,Zero Coupon,07/24/04 .... $ 7,777,000 5,711,195
Federal Home Loan Bank,Zero
Coupon,02/25/04...................... 15,550,000 11,749,891
FICO Strip,Zero Coupon,09/07/04 ...... 12,167,000 8,834,094
Federal Home Loan Mortgage Corp.,Zero
Coupon,08/16/04...................... 63,790,000 46,595,405
Israel Government Trust
Certificate,Zero Coupon,05/15/04 .... 15,731,000 11,643,300
Tennessee Valley Authority Strip, Zero
Coupon,11/01/04...................... 10,781,000 7,779,138
Turkey Government Trust
Certificate,Zero Coupon,05/15/04 .... 9,218,000 6,822,703
U.S. Treasury Strips,Zero
Coupon,08/15/04-05/15/05............. 76,889,000 55,582,208
------------
TOTAL LONG-TERM BONDS AND NOTES (COST $157,530,721) 154,717,934
------------
SHORT-TERM INVESTMENTS (0.6%)
Federal Home Loan Bank,1.50%,01/03/00 3,192,000 3,192,000
U.S. Treasury Bill,5.04%,02/17/00 @ .. 400,000 397,480
U.S. Treasury Bill,5.08%,02/17/00 @ .. 100,000 99,365
------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,688,845) 3,688,845
------------
TOTAL INVESTMENTS (COST $523,051,389)(A) 565,876,743
OTHER ASSETS LESS LIABILITIES 1,802,015
------------
TOTAL NET ASSETS $567,678,758
============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$529,068,908. Unrealized gains and losses, based on identified tax cost at
December 31, 1999, are as follows:
Unrealized gains............................... $ 53,340,610
Unrealized losses.............................. (16,532,775)
------------
Net unrealized gain........................... $ 36,807,835
============
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- ---------------------- ----------- ------------ ------------ ---------------
S&P 500 Index Futures 9 $ 3,339,450 Mar 00 $ 109,764
============ ===============
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
Category percentages are based on net assets.
144 See Notes to Financial Statements.
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES G
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
COMMON STOCKS (68.1%)
AIR TRANSPORT (0.2%)
AMR Corp. + ........................... 1,500 $ 100,500
Delta Air Lines, Inc. ................. 1,600 79,700
FDX Corp. + ........................... 4,500 184,219
Southwest Airlines Co. ................ 7,400 119,787
------------
484,206
------------
ALUMINUM (0.3%)
Alcan Aluminum Ltd. ................... 3,900 160,631
Alcoa Inc. ............................ 8,200 680,600
Reynolds Metals Co. ................... 700 53,638
------------
894,869
------------
AUTO PARTS AND HARDWARE (0.1%)
Black & Decker Corp. .................. 1,100 57,475
Briggs & Stratton Corp. ............... 200 10,725
Cooper Tire & Rubber Co. .............. 300 4,669
Genuine Parts Co. ..................... 1,400 34,738
Goodyear Tire & Rubber Co. (The) ...... 1,900 53,556
Snap-On, Inc. ......................... 800 21,250
Stanley Works (The) ................... 1,000 30,125
------------
212,538
------------
AUTOMOTIVE (0.8%)
Dana Corp. ............................ 2,000 59,875
Delphi Automotive Systems Corp. ....... 8,500 133,875
Eaton Corp. ........................... 700 50,838
Ford Motor Co. ........................ 17,600 940,500
General Motors Corp. + ................ 11,600 843,175
Johnson Controls, Inc. ................ 1,300 73,937
TRW, Inc. ............................. 1,300 67,519
------------
2,169,719
------------
BANKS AND THRIFTS (2.9%)
AmSouth Bancorporation ................ 6,900 133,256
Bank of America Corp. ................. 25,000 1,254,687
Bank of New York Co., Inc. ............ 11,300 452,000
Bank One Corp. ........................ 9,800 314,212
BB&T Corp. ............................ 5,600 153,300
Chase Manhattan Corp. ................. 12,100 940,019
Comerica, Inc. ........................ 1,700 79,369
Fifth Third Bancorp ................... 4,700 344,862
Firstar Corp. ......................... 15,300 323,212
Fleet Boston Financial Corp. .......... 13,900 483,894
Golden West Financial Corp. ........... 2,600 87,100
Huntington Bancshares Inc. ............ 2,200 52,525
J.P. Morgan & Co. ..................... 2,700 341,887
KeyCorp ............................... 4,500 99,563
Mellon Financial Corp. ................ 7,900 269,094
Northern Trust Corp. .................. 2,400 127,200
PNC Bank Corp. ........................ 4,600 204,700
Regions Financial Corp. ............... 2,300 57,788
SouthTrust Corp. ...................... 1,800 68,063
State Street Corp. .................... 1,600 116,900
Summit Bancorp ........................ 1,700 52,063
Suntrust Banks, Inc. .................. 3,900 268,369
Synovus Financial Corp. ............... 2,800 55,650
Union Planters Co. .................... 1,500 59,156
Wachovia Corp. ........................ 2,300 156,400
Washington Mutual, Inc. ............... 6,700 174,200
Wells Fargo & Co. ..................... 25,500 1,031,156
------------
7,700,625
------------
BIOTECH AND MEDICAL PRODUCTS (0.7%)
Amgen, Inc. + ......................... 15,700 942,981
Bard (C.R.) Inc. ...................... 800 42,400
Bausch & Lomb, Inc. ................... 800 54,750
Becton, Dickinson & Co. ............... 1,200 32,100
Biomet, Inc. .......................... 1,100 44,000
Boston Scientific Corp. + ............. 7,400 161,875
Guidant Corp. + ....................... 2,400 112,800
Mallinckrodt Inc. ..................... 800 25,450
Medtronic, Inc. + ..................... 8,400 306,075
Saint Jude Medical, Inc. + ............ 400 12,275
------------
1,734,706
------------
CHEMICALS (0.7%)
Dow Chemical Co. ...................... 3,200 427,600
Du Pont (E.I.) de Nemours ............. 15,800 1,040,825
Hercules, Inc. ........................ 1,200 33,450
Monsanto Co. .......................... 3,700 131,812
Rohm & Haas Co. ....................... 2,600 105,788
Union Carbide Corp. ................... 1,600 106,800
------------
1,846,275
------------
COMMERCIAL SERVICES (0.2%)
Deluxe Corp. .......................... 600 16,463
Interpublic Group of Co., Inc. (The) .. 3,400 196,137
Omnicom Group, Inc. ................... 2,800 280,000
Paychex, Inc. ......................... 2,600 104,000
RR Donnelley & Sons Co. ............... 1,400 34,738
------------
631,338
------------
COMPUTERS (3.1%)
Apple Computer, Inc. + ................ 3,200 329,000
Cabletron Systems, Inc. + ............ 3,000 78,000
Gateway, Inc. + ....................... 6,200 446,787
Hewlett Packard Co. ................... 15,700 1,788,819
International Business Machines Corp. . 27,900 3,013,200
Sun Microsystems, Inc. + .............. 31,400 2,431,537
Unisys Corp. + ........................ 4,900 156,494
------------
8,243,837
------------
CONGLOMERATE AND AEROSPACE (3.8%)
Boeing Co. ............................ 21,900 910,219
Crane Co. ............................. 700 13,913
General Dynamics Corp. ................ 1,800 94,950
General Electric Co. .................. 50,800 7,861,300
Goodrich (B.F.) Co. ................... 400 11,000
Lockheed Martin Corp. ................. 1,900 41,562
See Notes to Portfolio of Investments. 145
<PAGE>
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PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES G (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
CONGLOMERATE AND AEROSPACE (CONTINUED)
Loews Corp. ........................... 1,300 $ 78,894
National Service Industries, Inc. ..... 500 14,750
Northrop Grumman Corp. ................ 1,100 59,469
Perkin-Elmer Inc. + ................... 300 12,506
Raytheon Co. .......................... 5,000 132,812
Textron, Inc. ......................... 1,700 130,369
United Technologies Corp. ............. 9,700 630,500
------------
9,992,244
------------
CONSUMER FINANCE (1.0%)
Associates First Capital Corp. ........ 8,700 238,706
Capital One Financial Corp. ........... 4,600 221,663
Countrywide Credit Industries, Inc. ... 1,200 30,300
Freddie Mac Corp. ..................... 10,100 475,331
Federal National Mortgage Association . 14,700 917,831
Household International, Inc. ......... 9,300 346,425
MBNA Corp. ............................ 11,700 318,825
Ryder System, Inc. .................... 800 19,550
SLM Holding Corp. ..................... 1,600 67,600
------------
2,636,231
------------
CONSUMER PRODUCTS (1.5%)
Alberto-Culver Co. .................... 600 15,488
Avon Products, Inc. ................... 2,600 85,800
Colgate-Palmolive Co. ................. 9,000 585,000
Gillette Co. .......................... 7,900 325,381
International Flavors & Fragrances,
Inc................................... 1,100 41,525
Kimberly-Clark Corp. .................. 8,200 535,050
Procter & Gamble Co. .................. 20,400 2,235,075
------------
3,823,319
------------
CONSUMER SERVICES (0.8%)
Carnival Corp. ........................ 8,900 425,531
Cendant Corp. + ....................... 10,800 286,875
Darden Restaurants, Inc. .............. 2,800 50,750
H&R Block, Inc. ....................... 1,000 43,750
Harrah's Entertainment, Inc. + ........ 1,900 50,231
Hilton Hotels Corp. ................... 3,000 28,875
Marriott International, Inc. .......... 2,700 85,219
McDonald's Corp. ...................... 21,200 854,625
Mirage Resorts, Inc. + ................ 2,300 35,219
Tricon Global Restaurants, Inc. + ..... 2,300 88,838
Wendy's International, Inc. ........... 1,400 28,875
------------
1,978,788
------------
CONSUMER SPECIALTIES (0.0%)
Brunswick Corp. ....................... 1,000 22,250
Hasbro, Inc. .......................... 2,100 40,031
Jostens, Inc. ......................... 400 9,725
------------
72,006
------------
DATA AND IMAGING SERVICES (11.5%)
Adobe Systems, Inc. ................... 2,800 188,300
America Online, Inc. + ................ 52,000 3,922,750
Autodesk, Inc. ........................ 600 20,250
Automatic Data Processing, Inc. ....... 9,700 522,587
BMC Software, Inc. + .................. 3,600 287,775
Ceridian Corp. + ...................... 1,500 32,344
Cisco Systems, Inc. + ................. 66,000 7,070,250
Citrix Systems, Inc. + ................ 1,200 147,600
Computer Associates International, Inc. 7,800 545,512
Computer Sciences Corp. + ............. 2,600 246,025
Compuware Corp. + ..................... 4,100 152,725
Eastman Kodak Co. ..................... 5,000 331,250
Electronic Data Systems Corp. ......... 7,100 475,256
EMC Corp. + ........................... 15,700 1,715,225
First Data Corp. ...................... 8,700 429,019
Microsoft Corp. + ..................... 79,900 9,328,325
Network Appliance, Inc. + ............. 1,800 149,513
Novell, Inc. + ........................ 4,900 195,694
Oracle Corp. + ........................ 22,100 2,476,581
Parametric Technology Co. + ........... 3,700 100,131
Polaroid Corp. ........................ 200 3,763
Seagate Technology, Inc. + ............ 3,700 172,281
Yahoo! Inc. + ......................... 4,100 1,774,019
------------
30,287,175
------------
DISCRETIONARY RETAIL (4.8%)
AutoZone, Inc. + ...................... 1,700 54,931
Bed Bath & Beyond, Inc. + ............. 2,000 69,500
Best Buy Co., Inc. + .................. 3,600 180,675
Circuit City Stores, Inc. ............. 3,700 166,731
Consolidated Stores Corp. + ........... 1,300 21,125
Costco Wholesale Corp. + .............. 4,000 365,000
Dayton Hudson Co. ..................... 8,900 653,594
Dollar General Corp. .................. 2,600 59,150
Federated Department Stores, Inc. + ... 4,600 232,587
Gap, Inc. ............................. 18,800 864,800
Home Depot, Inc. ...................... 46,500 3,188,156
J.C. Penney Co., Inc. ................. 1,200 23,925
Kmart Corp. + ......................... 8,800 88,550
Kohl's Corp. + ........................ 2,800 202,125
Lowe's Co., Inc. ...................... 9,100 543,725
May Department Stores Co. ............. 4,900 158,025
Nordstrom, Inc. ....................... 1,500 39,281
Office Depot, Inc. + .................. 4,200 45,938
Sears, Roebuck & Co. .................. 5,800 176,538
Staples, Inc. + ....................... 5,100 105,825
Tandy Corp. ........................... 4,000 196,750
The Limited, Inc. ..................... 4,100 177,581
The Pep Boys - Manny, Moe & Jack ...... 600 5,475
TJX Companies, Inc. ................... 5,800 118,538
Toys "R" Us, Inc. + ................... 3,600 51,525
Wal-Mart Stores, Inc. ................. 69,100 4,776,537
------------
12,566,587
------------
DIVERSIFIED FINANCIAL SERVICES (2.0%)
American Express Co. .................. 6,500 1,080,625
Citigroup Inc. ........................ 67,900 3,772,693
146 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
DIVERSIFIED FINANCIAL SERVICES (CONTINUED)
Providian Financial Corp. ............. 2,700 $ 245,869
------------
5,099,187
------------
DRUGS (3.7%)
Allergan, Inc. ........................ 1,900 94,525
American Home Products Corp. .......... 9,700 382,544
Baxter International, Inc. ............ 3,600 226,125
Bristol-Myers Squibb Co. .............. 30,600 1,964,137
Johnson & Johnson ..................... 20,800 1,937,000
Merck & Co., Inc. ..................... 23,600 1,582,675
Pfizer, Inc. .......................... 60,100 1,949,494
Pharmacia & Upjohn, Inc. .............. 7,900 355,500
Schering Plough ....................... 15,100 637,031
Warner Lambert Co. .................... 6,700 548,981
------------
9,678,012
------------
ELECTRIC UTILITIES (0.9%)
AES Corp. + ........................... 2,500 186,875
Ameren Corp. .......................... 1,300 42,575
American Electric Power Co. ........... 900 28,913
Central & South West Corp. ............ 2,200 44,000
CMS Energy Corp. ...................... 1,300 40,544
Consolidated Edison, Inc. ............. 2,200 75,900
Constellation Energy Group ............ 1,500 43,500
Dominion Resources, Inc. .............. 1,900 74,575
DTE Energy Co. ........................ 2,200 69,025
Duke Energy Corp. ..................... 5,700 285,712
Edison International Inc. ............. 5,200 136,175
Entergy Corp. ......................... 3,800 97,850
FirstEnergy Corp. ..................... 2,500 56,719
Florida Progress Corp. ................ 1,200 50,775
FPL Group, Inc. ....................... 1,900 81,344
GPU, Inc. ............................. 1,900 56,881
Peco Energy Co. ....................... 3,900 135,525
PG&E Corp. ............................ 4,500 92,250
Pinnacle West Capital Corp. ........... 800 24,450
PP&L Resources, Inc. .................. 2,800 64,050
Public Service Enterprise Group, Inc. . 3,400 118,362
Reliant Energy Inc. ................... 3,000 68,625
Southern Co. .......................... 8,100 190,350
Texas Utilities Co. ................... 3,100 110,244
Unicom Corp. .......................... 2,300 77,050
------------
2,252,269
------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.3%)
Lexmark International Group, Inc. + ... 2,200 199,100
PE Corp-PE Biosystems Group ........... 1,000 120,312
Pitney Bowes, Inc. .................... 2,900 140,106
Rockwell International Corp. .......... 1,900 90,963
Tektronix, Inc. ....................... 600 23,325
Xerox Corp. ........................... 6,800 154,275
------------
728,081
------------
ELECTRONIC MEDIA (1.4%)
CBS Corp. + ........................... 11,900 760,857
Clear Channel Communications, Inc. + .. 5,200 464,100
Comcast Corp. ......................... 10,800 546,075
Mediaone Group, Inc. + ................ 8,800 675,950
Time Warner, Inc. ..................... 5,900 427,381
Viacom, Inc. + ........................ 10,800 652,725
------------
3,527,088
------------
FOOD AND BEVERAGE (1.7%)
Anheuser-Busch Co., Inc. .............. 7,000 496,125
Bestfoods ............................. 4,300 226,019
Brown-Forman Corp. + .................. 500 28,625
Campbell Soup Co. ..................... 2,100 81,244
Coca-Cola Co. ......................... 19,100 1,112,575
Coca-Cola Enterprises, Inc. ........... 4,900 98,612
Conagra, Inc. ......................... 5,100 115,069
Coors (Adolph) Co. .................... 400 21,000
Fortune Brands, Inc. .................. 1,800 59,513
General Mills, Inc. ................... 4,700 168,025
Heinz (H.J.) Co. ...................... 5,000 199,062
Kellogg Co. ........................... 6,500 200,281
PepsiCo, Inc. ......................... 21,100 743,775
Quaker Oats Co. ....................... 1,500 98,438
Ralston-Ralston Purina Group .......... 3,300 91,988
Sara Lee Corp. ........................ 13,700 302,256
Seagram Co. Ltd. ...................... 5,000 224,687
Wrigley (Wm.) Jr. Co. + ............... 1,900 157,581
------------
4,424,875
------------
FOOD AND DRUG RETAIL (0.5%)
Albertson's, Inc. ..................... 2,100 67,725
CVS Corp. ............................. 5,700 227,644
Great Atlantic & Pacific Tea Co., Inc. 400 11,150
Kroger Co. (The) + .................... 9,300 175,537
Longs Drug Stores, Inc. ............... 300 7,744
SUPERVALU, Inc. ....................... 1,400 28,000
Sysco Corp. ........................... 4,000 158,250
Walgreen Co. .......................... 15,600 456,300
Winn-Dixie Stores, Inc. ............... 1,600 38,300
------------
1,170,650
------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.7%)
Armstrong World Industries, Inc. ...... 400 13,353
Ball Corp. ............................ 300 11,813
Bemis Co., Inc. ....................... 800 27,900
Boise Cascade Corp. ................... 900 36,450
Champion International Corp. .......... 1,600 99,100
Crown Cork & Seal Co., Inc. ........... 1,400 31,325
Fort James Corp. ...................... 2,600 71,175
Georgia-Pacific Corp. ................. 3,200 162,400
International Paper Co. ............... 8,200 462,787
Louisiana-Pacific Corp. ............... 1,500 21,375
Masco Corp. ........................... 5,400 137,025
See Notes to Portfolio of Investments. 147
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES G (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
FOREST PRODUCTS AND BUILDING MATERIALS (CONTINUED)
Mead Corp. ............................ 400 $ 17,375
Owens Corning ......................... 800 15,450
Owens-Illinois, Inc. + ................ 1,800 45,113
Pactiv Corp. + ........................ 2,000 21,250
Potlatch Corp. ........................ 400 17,850
Sealed Air Corp. + .................... 900 46,631
Temple-Inland Inc. .................... 1,000 65,938
Vulcan Materials Co. .................. 1,200 47,925
Westvaco Corp. ........................ 1,200 39,150
Weyerhaeuser Co. ...................... 5,400 387,787
Willamette Industries, Inc. ........... 1,800 83,587
------------
1,862,759
------------
GAS UTILITIES (0.4%)
Coastal Corp. (The) ................... 2,300 81,506
Columbia Energy Group ................. 1,200 75,900
Consolidated Natural Gas Co. .......... 1,000 64,937
El Paso Energy Corp. .................. 2,700 104,794
Enron Corp. ........................... 13,200 585,750
NICOR, Inc. ........................... 500 16,250
People's Energy Corp. ................. 300 10,050
Sempra Energy ......................... 1,100 19,113
Williams Co., Inc. (The) .............. 5,100 155,869
------------
1,114,169
------------
HEALTH SERVICES (0.3%)
Cardinal Health, Inc. ................. 2,900 138,838
Columbia/HCA Healthcare Corp. ......... 8,300 243,294
HEALTHSOUTH Corp. + ................... 4,800 25,800
IMS Health, Inc. ...................... 3,400 92,438
Shared Medical Systems Corp. .......... 300 15,281
Tenet Healthcare Corp. + .............. 3,200 75,200
United Healthcare Corp. ............... 3,100 164,687
Wellpoint Health Networks, Inc. + ..... 800 52,750
------------
808,288
------------
HEAVY MACHINERY (0.1%)
Cummins Engine Co., Inc. .............. 700 33,819
Deere & Co. ........................... 2,700 117,112
NACCO Industries, Inc. ................ 100 5,556
Navistar International Corp. + ........ 800 37,900
PACCAR, Inc. .......................... 1,400 62,038
------------
256,425
------------
HOUSING AND FURNISHINGS (0.1%)
Centex Corp. .......................... 900 22,219
Fleetwood Enterprises, Inc. ........... 300 6,188
Kaufman & Broad Home Corp. ............ 300 7,256
Leggett & Platt, Inc. ................. 1,900 40,731
Maytag Corp. .......................... 1,800 86,400
Newell Rubbermaid Inc. ................ 2,900 84,100
Pulte Corp. ........................... 500 11,250
Tupperware Corp. ...................... 900 15,244
Whirlpool Corp. ....................... 1,400 91,087
------------
364,475
------------
INDUSTRIAL SERVICES (0.1%)
Fluor Corp. ........................... 900 41,288
USA Waste Management, Inc. ............ 7,400 127,187
------------
168,475
------------
INSURANCE (1.9%)
AFLAC, Inc. ........................... 5,500 259,531
Allstate Corp. (The) .................. 3,900 93,600
American General Corp. ................ 3,600 273,150
American International Group, Inc. .... 24,100 2,605,812
Aon Corp. ............................. 2,700 108,000
Chubb Corp. ........................... 1,300 73,206
CIGNA Corp. ........................... 3,400 273,913
Cincinnati Financial Corp. ............ 2,000 62,375
Conseco, Inc. ......................... 4,000 71,500
Hartford Financial Services Group, Inc. 2,800 132,650
Jefferson-Pilot Corp. ................. 1,600 109,200
Lincoln National Corp. ................ 2,300 92,000
Marsh & McLennan Co., Inc. ............ 3,800 363,612
MBIA, Inc. ............................ 1,300 68,656
MGIC Investment Corp. ................. 2,000 120,375
Progressive Corp. ..................... 700 51,188
St. Paul Co., Inc. .................... 2,800 94,325
Torchmark Corp. ....................... 1,400 40,688
UnumProvident Corp. ................... 2,900 92,981
------------
4,986,762
------------
INVESTMENT SERVICES (1.2%)
Bear Stearns Co., Inc. (The) .......... 2,300 98,325
Charles Schwab Corp. .................. 17,800 683,075
Franklin Resources, Inc. .............. 2,500 80,156
Lehman Brothers Holdings Inc. ......... 2,100 177,844
Merrill Lynch & Co., Inc. ............. 5,700 475,950
Morgan Stanley Dean Witter & Co. ...... 10,700 1,527,425
Paine Webber Group Inc. ............... 2,700 104,794
T. Rowe Price & Associates ............ 1,400 51,712
------------
3,199,281
------------
MAJOR TELECOMMUNICATIONS (5.1%)
ALLTEL Corp. .......................... 4,200 347,288
AT&T Corp. ............................ 48,400 2,456,300
Bell Atlantic Corp. ................... 23,000 1,415,937
BellSouth Corp. ....................... 29,300 1,371,606
CenturyTel, Inc. ...................... 2,600 123,175
GTE Corp. ............................. 14,400 1,016,100
MCI Worldcom, Inc. + .................. 44,100 2,340,056
Nextel Communications, Inc. + ......... 5,400 556,875
SBC Communications, Inc. .............. 28,500 1,389,375
Sprint Corp. .......................... 13,400 901,988
Sprint PCS + .......................... 8,300 850,750
U.S. WEST, Inc. ....................... 7,500 540,000
------------
13,309,450
------------
148 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
MISCELLANEOUS METALS (0.1%)
Barrick Gold Corp. .................... 6,300 $ 111,431
Freeport-McMoRan Copper & Gold, Inc. + 1,700 35,913
Inco Ltd. + ........................... 2,100 49,350
Phelps Dodge Corp. .................... 900 60,412
------------
257,106
------------
OIL (4.1%)
Amerada Hess Corp. .................... 1,100 62,425
Anadarko Petroleum Corp. .............. 1,500 51,188
Apache Corp. .......................... 1,600 59,100
Ashland Oil, Inc. ..................... 700 23,056
Atlantic Richfield Co. ................ 6,800 588,200
Burlington Resources, Inc. ............ 2,100 69,431
Chevron Corp. ......................... 10,300 892,237
Conoco Inc. ........................... 8,800 218,900
Exxon Mobil Corp. ..................... 69,700 5,615,206
Kerr-McGee Corp. ...................... 1,100 68,200
Occidental Petroleum Corp. ............ 6,900 149,213
Phillips Petroleum Co. ................ 4,600 216,200
Royal Dutch Petroleum Co. ............. 32,300 1,952,131
Texaco, Inc. .......................... 8,700 472,519
Unocal Corp. .......................... 5,200 174,525
USX-Marathon Group .................... 4,600 113,563
------------
10,726,094
------------
OIL SERVICES (0.4%)
Baker Hughes, Inc. .................... 5,500 115,844
Halliburton Co. ....................... 5,400 217,350
McDermott International, Inc., ADR .... 700 6,344
Schlumberger, Ltd. .................... 8,500 478,125
Tosco Corp. ........................... 2,300 62,531
Transocean Sedco Forex Inc. ........... 1,649 55,550
------------
935,744
------------
OTHER TELECOMMUNICATIONS (0.2%)
Global Crossing Holdings Ltd. + ....... 11,500 575,000
------------
PRINT MEDIA (0.4%)
Dow Jones & Co., Inc. ................. 800 54,400
Dun & Bradstreet Corp. ................ 1,900 56,050
Equifax, Inc. ......................... 600 14,138
Gannett Co., Inc. ..................... 4,100 334,406
Harcourt General, Inc. ................ 600 24,150
Knight-Ridder, Inc. ................... 900 53,550
McGraw-Hill Co., Inc. ................. 2,900 178,712
Meredith Corp. ........................ 400 16,675
New York Times Co. .................... 2,600 127,725
Times Mirror Co. ...................... 600 40,200
Tribune Co. ........................... 3,600 198,225
------------
1,098,231
------------
PRODUCER GOODS (1.9%)
Allegheny Technologies Incorporated ... 1,000 22,438
Avery Dennison Corp. .................. 1,500 109,313
Cooper Industries, Inc. ............... 1,200 48,525
Corning, Inc. ......................... 3,800 489,962
Danaher Corp. ......................... 2,600 125,450
Dover Corp. ........................... 2,400 108,900
Ecolab, Inc. .......................... 1,400 54,775
Emerson Electric Co. .................. 6,600 378,675
FMC Corp. + ........................... 300 17,194
Grainger (W.W.), Inc. ................. 900 43,031
Honeywell International Inc. .......... 17,800 1,026,837
Ikon Office Solutions, Inc. ........... 1,700 11,581
Illinois Tool Works, Inc. ............. 4,600 310,788
Ingersoll-Rand Co. .................... 2,400 132,150
ITT Industries, Inc. .................. 1,200 40,125
Milacron, Inc. ........................ 200 3,075
Millipore Corp. ....................... 500 19,313
Minnesota Mining and Manufacturing Co. 6,100 597,037
Parker-Hannifin Corp. ................. 1,700 87,231
PPG Industries, Inc. .................. 1,800 112,613
Sherwin-Williams Co. .................. 1,700 35,700
Thomas & Betts Corp. .................. 400 12,750
Timken Co. ............................ 700 14,306
Tyco International Ltd. ............... 32,500 1,263,437
------------
5,065,206
------------
SEMICONDUCTORS AND ELECTRONICS (7.6%)
Adaptec, Inc. + ....................... 1,900 94,763
ADC Telecommunications, Inc. + ........ 3,600 261,225
Advanced Micro Devices Corp. + ........ 1,700 49,194
Analog Devices, Inc. + ................ 4,200 390,600
Andrew Corp. + ........................ 400 7,575
Applied Materials, Inc. + ............. 8,900 1,127,519
Comverse Technology, Inc. + ........... 1,300 188,175
General Instrument Corp. + ............ 3,200 272,000
Intel Corp. ........................... 25,200 2,074,275
KLA Instruments Corp. + ............... 1,500 167,062
LSI Logic Corp. + ..................... 2,600 175,500
Lucent Technologies, Inc. ............. 48,600 3,635,887
Micron Technology, Inc. + ............. 4,400 342,100
Motorola, Inc. ........................ 14,300 2,105,675
National Semiconductor Corp. + ........ 2,400 102,750
Nortel Networks Corp. ................. 27,000 2,727,000
QUALCOMM Inc. + ....................... 15,200 2,677,100
Scientific-Atlanta, Inc. .............. 1,400 77,875
Solectron Corp. + ..................... 6,200 589,775
Tellabs, Inc. + ....................... 9,200 590,525
Teradyne, Inc. + ...................... 4,000 264,000
Texas Instruments, Inc. ............... 18,600 1,801,875
Xilinx, Inc. + ........................ 5,800 263,719
------------
19,986,169
------------
SPECIALTY CHEMICALS (0.1%)
Air Products and Chemicals, Inc. ...... 2,200 73,837
Engelhard Corp. ....................... 700 13,213
Grace (W.R.) & Co. + .................. 600 8,325
Great Lakes Chemical Corp. ............ 600 22,912
See Notes to Portfolio of Investments. 149
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES G (CONTINUED)
================================================================================
NUMBER OF MARKET
SHARES VALUE
------------ ------------
SPECIALTY CHEMICALS (CONTINUED)
Praxair, Inc. ......................... 3,100 $ 155,969
Sigma-Aldrich Corp. ................... 1,100 33,069
------------
307,325
------------
STEEL (0.0%)
Nucor Corp. ........................... 1,600 87,700
Worthington Industries ................ 400 6,625
------------
94,325
------------
SURFACE TRANSPORT (0.2%)
Burlington Northern Santa Fe Corp. .... 7,100 172,175
CSX Corp. ............................. 2,200 69,025
Kansas City Southern Industries, Inc. . 2,400 179,100
Norfolk Southern Corp. ................ 1,900 38,950
Union Pacific Corp. ................... 3,800 165,775
------------
625,025
------------
TEXTILES AND APPAREL (0.1%)
Liz Claiborne, Inc. ................... 700 26,338
Nike, Inc. ............................ 4,900 242,856
Russell Corporation ................... 400 6,700
Springs Industries, Inc. .............. 100 3,994
VF Corp. .............................. 1,200 36,000
------------
315,888
------------
TOBACCO (0.2%)
Nabisco Group Holdings Corp. .......... 3,500 37,187
Philip Morris Co., Inc. ............... 20,000 463,750
UST, Inc. ............................. 1,700 42,819
------------
543,756
------------
TOTAL COMMON STOCKS (COST $171,244,210) 178,754,578
------------
PRINCIPAL
AMOUNT
--------------
LONG-TERM BONDS AND NOTES (29.2%)
U.S. Treasury Note,Zero Coupon,
11/15/04 ............................ $105,284,000 76,763,617
------------
TOTAL LONG-TERM BONDS AND NOTES (COST $77,357,329) 76,763,617
------------
SHORT-TERM INVESTMENTS (2.7%)
Federal Home Loan Bank,1.50%,01/03/00 . 5,956,000 5,956,000
U.S. Treasury Bill,5.00%,02/17/00 @ ... 100,000 99,375
U.S. Treasury Bill,5.02%,02/17/00 @ ... 900,000 894,353
------------
TOTAL SHORT-TERM INVESTMENTS (COST $6,949,727) 6,949,728
------------
TOTAL INVESTMENTS (COST $255,551,266)(A) 262,467,923
OTHER ASSETS LESS LIABILITIES 89,201
------------
TOTAL NET ASSETS $262,557,124
============
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses at December 31, 1999, are as follows:
Unrealized gains............................ $ 9,992,787
Unrealized losses........................... (3,076,130)
-----------
Net unrealized gain........................ $ 6,916,657
===========
Information concerning open futures contracts at December 31, 1999 is shown
below:
NOTIONAL
NO. OF MARKET EXPIRATION UNREALIZED
LONG CONTRACTS CONTRACTS VALUE DATE GAIN/(LOSS)
- ---------------------- ----------- ------------ ------------ --------------
S&P 500 Index Futures 14 $ 5,194,700 Mar 00 $ 34,991
============ ==============
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1999.
Category percentages are based on net assets.
150 See Notes to Financial Statements.
<PAGE>
AETNA GET FUND
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1999
SERIES H
================================================================================
PRINCIPAL MARKET
AMOUNT VALUE
----------- ----------
SHORT-TERM INVESTMENTS (95.7%)
Archer Daniels Midland,5.50%,02/04/00 .... 150,000 $ 149,267
Countrywide Home Loans,5.35%,01/10/00 .... 160,000 159,834
Federal Farm Credit Bank,5.25%,01/12/00 .. 650,000 649,147
Federal Home Loan Bank,1.50%,01/03/00 .... 650,000 650,000
Federal Home Loan Bank,5.60%,03/15/00 .... 300,000 296,640
Federal Home Loan Bank,5.77%,03/17/00 .... 300,000 296,607
Federal National Mortgage
Associates,5.82%,03/16/00................ 535,000 528,847
Jefferson Smurfit Finance
Co.,5.95%,02/08/00....................... 125,000 124,256
Merrill Lynch & Co., Inc.,5.55%,01/28/00 150,000 149,422
U.S. Treasury Bill,5.15%,03/16/00 ........ 575,000 569,083
----------
TOTAL SHORT-TERM INVESTMENTS (COST $3,572,688) 3,573,103
----------
TOTAL INVESTMENTS (COST $3,572,688)(A) 3,573,103
OTHER ASSETS LESS LIABILITIES 159,521
----------
TOTAL NET ASSETS $3,732,624
==========
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses at December 31, 1999, are as follows:
Unrealized gains.............................. $ 415
Unrealized losses............................. --
--------
Net unrealized gain.......................... $ 415
========
Category percentages are based on net assets.
See Notes to Financial Statements. 151
<PAGE>
AETNA GET FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
================================================================================
ASSETS:
Investments, at market value ..........................................
Cash ..................................................................
Receivable for:
Dividends and interest ...............................................
Investments sold .....................................................
Fund shares sold .....................................................
Variation margin .....................................................
Prepaid expenses ......................................................
Total assets .....................................................
LIABILITIES:
Payable for:
Investments purchased ................................................
Fund shares redeemed .................................................
Accrued investment advisory fees ......................................
Accrued administrative service fees ...................................
Accrued custody fees ..................................................
Other liabilities .....................................................
Total liabilities ................................................
NET ASSETS ......................................................
NET ASSETS REPRESENTED BY:
Paid-in capital .......................................................
Net unrealized gain on investments and open futures contracts .........
Undistributed net investment income ...................................
Accumulated net realized gain (loss) on investments ...................
NET ASSETS ......................................................
Cost of investments ...................................................
CAPITAL SHARES:
Par Value .............................................................
Outstanding ...........................................................
Net asset value, offering and redemption price per share (net assets
divided by shares outstanding) .......................................
152 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
SERIES C SERIES D SERIES E SERIES G SERIES H
--------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
$204,233,561 $843,658,160 $565,876,743 $262,467,923 $3,573,103
11,028 20,382 16,562 1,132 550
152,760 1,595,011 289,532 57,697 --
-- 48,215 1,898,520 149,508 9,937
-- -- -- -- 159,330
-- 5,950 7,650 11,900 --
2,131 6,378 2,771 46 --
------------ ------------ ------------ ------------ ----------
204,399,480 845,334,096 568,091,778 262,688,206 3,742,920
------------ ------------ ------------ ------------ ----------
-- 128,617,971 -- -- --
48,191 165,562 51,343 21,663 --
108,123 388,575 303,808 86,826 229
13,515 48,572 37,976 11,906 69
13,348 5,201 3,898 2,025 506
4,654 23,648 15,995 8,662 9,492
------------ ------------ ------------ ------------ ----------
187,831 129,249,529 413,020 131,082 10,296
------------ ------------ ------------ ------------ ----------
$204,211,649 $716,084,567 $567,678,758 $262,557,124 $3,732,624
============ ============ ============ ============ ==========
$137,741,930 $674,154,312 $531,705,869 $255,117,209 $3,727,694
51,361,735 44,199,767 42,935,118 6,951,648 415
303,500 5,917,007 1,570,177 468,819 4,515
14,804,484 (8,186,519) (8,532,406) 19,448 --
------------ ------------ ------------ ------------ ----------
$204,211,649 $716,084,567 $567,678,758 $262,557,124 $3,732,624
============ ============ ============ ============ ==========
$152,871,826 $799,515,263 $523,051,389 $255,551,266 $3,572,688
$ 0.001 $ 0.001 $ 0.001 $ 0.001 $ 0.001
15,995,752 67,249,388 52,720,690 25,315,141 372,325
$ 12.77 $ 10.65 $ 10.77 $ 10.37 $ 10.03
</TABLE>
See Notes to Financial Statements. 153
<PAGE>
AETNA GET FUND
STATEMENTS OF OPERATIONS
DECEMBER 31, 1999
================================================================================
INVESTMENT INCOME:
Dividends .............................................................
Interest ..............................................................
Foreign taxes withheld on dividends ...................................
Total investment income ..........................................
INVESTMENT EXPENSES:
Investment advisory fees ..............................................
Administrative services fees ..........................................
Printing and postage fees .............................................
Custody fees ..........................................................
Transfer agent fees ...................................................
Audit fees ............................................................
Trustees' fees ........................................................
Registration fees .....................................................
Miscellaneous expenses ................................................
Expenses before reimbursement and waiver from Investment Adviser ......
Expense reimbursement and waiver from Investment Adviser ..............
Net expenses .....................................................
Net investment income .................................................
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ..........................................................
Futures contracts ....................................................
Net realized gain (loss) on investments ..........................
Net change in unrealized gain or loss on:
Investments ..........................................................
Futures contracts ....................................................
Net change in unrealized gain or loss on investments .............
Net realized and change in unrealized gain or loss on investments .....
Net increase in net assets resulting from operations ..................
154 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
SERIES C SERIES D SERIES E SERIES G SERIES H
YEAR ENDED YEAR ENDED PERIOD FROM JUNE 15, 1999 PERIOD FROM SEPTEMBER 15, 1999 PERIOD FROM DECEMBER 15, 1999
DECEMBER 31, DECEMBER 31, (COMMENCEMENT OF OPERATIONS) (COMMENCEMENT OF OPERATIONS) (COMMENCEMENT OF OPERATIONS)
1999 1999 TO DECEMBER 31, 1999 TO DECEMBER 31, 1999 TO DECEMBER 31, 1999
------------ ------------ ---------------------------- ------------------------------ -----------------------------
<S> <C> <C> <C> <C>
$ 2,268,793 $ 4,306,372 $ 1,021,210 $ 58,039 $ --
320,833 21,604,109 5,494,417 776,320 4,874
----------- ----------- ----------- ---------- -------
2,589,626 25,910,481 6,515,627 834,359 4,874
(23,044) (46,458) (1,385) -- --
----------- ----------- ----------- ---------- -------
2,566,582 25,864,023 6,514,242 834,359 4,874
----------- ----------- ----------- ---------- -------
1,164,188 4,338,938 1,061,278 98,538 229
145,523 552,059 147,657 15,420 69
4,494 15,873 3,627 1,976 1,696
20,615 18,192 4,515 2,097 506
2,576 2,073 1,517 867 217
23,002 12,672 17,211 17,058 5,025
5,990 19,959 5,241 3,987 784
(5,275) 15,000 7,503 1,347 1,584
7,798 15,204 2,084 573 186
----------- ----------- ----------- ---------- -------
1,368,911 4,989,970 1,250,633 141,863 10,296
-- (4,158) (5,094) (17,356) (9,937)
----------- ----------- ----------- ---------- -------
1,368,911 4,985,812 1,245,539 124,507 359
----------- ----------- ----------- ---------- -------
1,197,671 20,878,211 5,268,703 709,852 4,515
----------- ----------- ----------- ---------- -------
30,949,511 (8,390,178) (8,090,640) (303,656) --
382,961 205,955 (441,766) 323,104 --
----------- ----------- ----------- ---------- -------
31,332,472 (8,184,223) (8,532,406) 19,448 --
----------- ----------- ----------- ---------- -------
9,390,331 44,142,897 42,825,354 6,916,657 415
-- 56,870 109,764 34,991 --
----------- ----------- ----------- ---------- -------
9,390,331 44,199,767 42,935,118 6,951,648 415
----------- ----------- ----------- ---------- -------
40,722,803 36,015,544 34,402,712 6,971,096 415
----------- ----------- ----------- ---------- -------
$41,920,474 $56,893,755 $39,671,415 $7,680,948 $ 4,930
=========== =========== =========== ========== =======
</TABLE>
See Notes to Financial Statements. 155
<PAGE>
AETNA GET FUND
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
SERIES C
-------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
FROM OPERATIONS:
Net investment income ................. $ 1,197,671 $ 2,311,496
Net realized gain on investments....... 31,332,472 41,726,160
Net change in unrealized gain or loss
on investments........................ 9,390,331 16,257,595
------------ ------------
Net increase in net assets resulting
from operations....................... 41,920,474 60,295,251
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (1,612,703) (1,999,433)
From net realized gains................ (57,111,643) (26,131,436)
------------ ------------
Decrease in net assets from
distributions to shareholders......... (58,724,346) (28,130,869)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares exchanged*........ 30,881 1,331,190
Net asset value of shares issued upon
reinvestment of distributions........ 58,724,346 28,130,869
Payments for shares redeemed........... (64,946,688) (82,171,253)
------------ ------------
Net decrease in net assets from fund
share transactions.................... (6,191,461) (52,709,194)
------------ ------------
Net change in net assets............. (22,995,333) (20,544,812)
NET ASSETS:
Beginning of period.................... 227,206,982 247,751,794
------------ ------------
End of period.......................... $204,211,649 $227,206,982
============ ============
End of period net assets includes
undistributed net investment income... $ 303,500 $ 718,532
============ ============
SHARE TRANSACTIONS:
Number of shares exchanged*............ 2,121 97,439
Number of shares issued upon
reinvestment of distributions........ 4,829,305 2,094,000
Number of shares redeemed.............. (4,553,632) (6,120,999)
------------ ------------
Net increase (decrease)............... 277,794 (3,929,560)
============ ============
* Exchanges into the Series are from initial shareholders who have exchange
privileges.
156 See Notes to Financial Statements.
<PAGE>
================================================================================
SERIES D
---------------------------------------
PERIOD FROM
OCTOBER 15, 1998
(COMMENCEMENT OF
YEAR ENDED OPERATIONS)
DECEMBER 31, 1999 TO DECEMBER 31, 1998
----------------- --------------------
FROM OPERATIONS:
Net investment income ................. $ 20,878,211 $ 1,649,066
Net realized loss on investments ...... (8,184,223) (2,296)
Net change in unrealized gain or
loss on investments .................. 44,199,767 --
------------- -------------
Net increase in net assets
resulting from operations ............ 56,893,755 1,646,770
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............ (14,978,076) (1,632,194)
------------- -------------
Decrease in net assets from
distributions to shareholders ........ (14,978,076) (1,632,194)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold/exchanged* .. 380,855,808 383,646,817
Net asset value of shares issued
upon reinvestment of distributions .. 14,978,076 1,632,194
Payments for shares redeemed .......... (106,958,583) --
------------- -------------
Net increase in net assets from
fund share transactions .............. 288,875,301 385,279,011
------------- -------------
Net change in net assets ............ 330,790,980 385,293,587
NET ASSETS:
Beginning of period ................... 385,293,587 --
------------- -------------
End of period ......................... $ 716,084,567 $ 385,293,587
============= =============
End of period net assets includes
undistributed net investment income .. $ 5,917,007 $ 16,872
============= =============
SHARE TRANSACTIONS:
Number of shares sold/exchanged* ...... 37,852,335 38,171,760
Number of shares issued upon
reinvestment of distributions ....... 1,444,410 162,473
Number of shares redeemed ............. (10,381,590) --
------------- -------------
Net increase ......................... 28,915,155 38,334,233
============= =============
* Exchanges into the Series are from initial shareholders who have exchange
privileges.
See Notes to Financial Statements. 157
<PAGE>
AETNA GET FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
SERIES E
----------------------
PERIOD FROM
JUNE 15, 1999
(COMMENCEMENT OF
OPERATIONS)
TO DECEMBER 31, 1999
--------------------
FROM OPERATIONS:
Net investment income ................................. $ 5,268,703
Net realized loss on investments....................... (8,532,406)
Net change in unrealized gain or loss on investments... 42,935,118
------------
Net increase in net assets resulting from operations.. 39,671,415
------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................. (3,698,526)
------------
Decrease in net assets from distributions to
shareholders.......................................... (3,698,526)
------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold/exchanged*................... 542,018,402
Net asset value of shares issued upon reinvestment of
distributions........................................ 3,698,519
Payments for shares redeemed........................... (14,011,052)
------------
Net increase in net assets from fund share
transactions.......................................... 531,705,869
------------
Net change in net assets............................. 567,678,758
NET ASSETS:
Beginning of period.................................... --
------------
End of period.......................................... $567,678,758
============
End of period net assets includes undistributed net
investment income..................................... $ 1,570,177
============
SHARE TRANSACTIONS:
Number of shares sold/exchanged*....................... 53,728,873
Number of shares issued upon reinvestment of
distributions........................................ 354,604
Number of shares redeemed.............................. (1,362,787)
------------
Net increase.......................................... 52,720,690
============
* Exchanges into the Series are from initial shareholders who have exchange
privileges.
158 See Notes to Financial Statements.
<PAGE>
================================================================================
SERIES G
----------------------
PERIOD FROM
SEPTEMBER 15, 1999
(COMMENCEMENT OF
OPERATIONS)
TO DECEMBER 31, 1999
--------------------
FROM OPERATIONS:
Net investment income ................................. $ 709,852
Net realized gain on investments....................... 19,448
Net change in unrealized gain or loss on investments... 6,951,648
------------
Net increase in net assets resulting from operations.. 7,680,948
------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............................. (241,033)
------------
Decrease in net assets from distributions to
shareholders.......................................... (241,033)
------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold/exchanged*................... 255,281,122
Net asset value of shares issued upon reinvestment of
distributions........................................ 241,033
Payments for shares redeemed........................... (404,946)
------------
Net increase in net assets from fund share
transactions.......................................... 255,117,209
------------
Net change in net assets............................. 262,557,124
NET ASSETS:
Beginning of period.................................... --
------------
End of period.......................................... $262,557,124
============
End of period net assets includes undistributed net
investment income..................................... $ 468,819
============
SHARE TRANSACTIONS:
Number of shares sold/exchanged*....................... 25,330,752
Number of shares issued upon reinvestment of
distributions........................................ 23,926
Number of shares redeemed.............................. (39,537)
------------
Net increase.......................................... 25,315,141
============
* Exchanges into the Series are from initial shareholders who have exchange
privileges.
See Notes to Financial Statements. 159
<PAGE>
AETNA GET FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
SERIES H
----------------------
PERIOD FROM
DECEMBER 15, 1999
(COMMENCEMENT OF
OPERATIONS)
TO DECEMBER 31, 1999
--------------------
FROM OPERATIONS:
Net investment income ................................. $ 4,515
Net change in unrealized gain or loss on investments... 415
----------
Net increase in net assets resulting from operations.. 4,930
----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............................. 3,727,694
----------
Net increase in net assets from fund share
transactions.......................................... 3,727,694
----------
Net change in net assets............................. 3,732,624
NET ASSETS:
Beginning of period.................................... --
----------
End of period.......................................... $3,732,624
==========
End of period net assets includes undistributed net
investment income..................................... $ 4,515
==========
SHARE TRANSACTIONS:
Number of shares sold.................................. 372,325
----------
Net increase.......................................... 372,325
==========
160 See Notes to Financial Statements.
<PAGE>
AETNA GET FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
================================================================================
1. ORGANIZATION
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, each of which has its own investment
objective, policies and restrictions.
Currently there are five diversified Series of the Fund, Aetna GET Fund, Series
C (GET C), Aetna GET Fund, Series D (GET D), Aetna GET Fund, Series E (GET E),
Aetna GET Fund Series G (GET G) and Aetna GET Fund series H (GET H)
(individually, a Series and collectively, the Series). Each 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 (Guarantee Period). The minimum targeted return for
each Series during the Guarantee Period is 1.5% (except for GET C and GET D
which is 2.5%) before asset based contract charges and each Series' cost of
operations.
ACCUMULATION GUARANTEE MATURITY
PERIOD PERIOD DATE
------ ------ ----
GET C* 09/16/96 - 12/16/96 12/17/96 - 12/16/01 12/16/01
GET D* 10/15/98 - 01/15/99 01/16/99 - 01/15/04 01/15/04
GET E* 06/15/99 - 09/14/99 09/15/99 - 09/14/04 09/14/04
GET G* 09/15/99 - 12/14/99 12/15/99 - 12/14/04 12/14/04
GET H 12/15/99 - 03/14/00 03/15/00 - 03/14/05 03/14/05
* Closed to new investors.
Shares of the Series' are offered to insurance company separate accounts that
fund both annuity and life insurance contracts and to certain tax-qualified
retirement plans. At December 31, 1999, separate accounts of Aetna Life
Insurance and Annuity Company (ALIAC) and its affiliates held all the shares
outstanding of each Series.
Aeltus Investment Management, Inc. (Aeltus) serves as the investment adviser to
each Series. ALIAC serves as the principal underwriter to each Series. Aeltus
and ALIAC are both indirect wholly-owned subsidiaries of Aetna Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of each 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.
A. VALUATION OF INVESTMENTS
Exchange traded equity investments are stated at market values based upon prices
furnished by external pricing sources as reported on national securities
exchanges. Over-the-counter securities are stated at the last sale price, or if
there has been no sale that day, at the mean of the bid and asked prices. Fixed
income securities, with the exception of high yield securities, maturing in more
than sixty days for which market quotations are readily available are valued at
the mean of the last bid and asked price. High yield securities are priced at
bid by external pricing sources or brokers making a market in the security.
Short-term investments maturing in sixty days or less are valued at amortized
cost, which when combined with accrued interest, approximates market value.
Securities and fixed income investments for which market quotations are not
considered to be readily available are valued using methods approved by the
Board of Trustees (Board).
161
<PAGE>
AETNA GET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the prevailing rates of exchange at the end
of each day. 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. The Funds do not isolate the portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in their market prices.
Such fluctuations are included in net realized and unrealized gain or loss on
investments.
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 invests in
financial futures contracts as a hedge against its existing portfolio
securities, to manage the risk of changes in interest rates, equity prices or in
anticipation of future purchases and sales of portfolio securities.
Upon entering into a futures contract, each 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.
The risks associated with financial futures may arise from an imperfect
correlation between the change in market value of the securities held by the
Series 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 financial futures are reflected in
the accompanying financial statements. The amounts at risk under such futures
may exceed the amounts reflected in the financial statements. For federal income
tax purposes, any futures contracts which remain open at year end are
marked-to-market and the resultant net gain or loss is reported to shareholders
as 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 a Series to sell them promptly at an
acceptable price. Restricted securities are those which can only be sold under
Rule 144A of the Securities Act of 1933 (1933 Act) or are securities offered
pursuant to Section 4(2) of the 1933 Act, and are subject to legal or
contractual restrictions on resale and may not be publicly sold without
registration under the 1933 Act. Each Series may invest up to 15% of its total
assets in illiquid securities. In the absence of market quotations, the
securities are valued based upon their fair value determined under procedures
approved by the Board. The Series will not pay the costs of disposition of
restricted securities other than ordinary brokerage fees, if any.
D. FEDERAL INCOME TAXES
Each Series intends to meet the requirements to be taxed as a regulated
investment company for the current year. As such, each Series is relieved of
federal income taxes by distributing all of its net taxable investment income
and capital gains, if any, in compliance with the applicable provisions of the
Internal Revenue Code. Thus, the financial statements contain no provision for
federal income taxes.
162
<PAGE>
================================================================================
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 differing treatments for futures contracts and repurchases of
certain securities sold at a loss. In addition, distributions of realized gains
from sales of securities held one year or less are taxable to shareholders at
ordinary income tax rates rather than preferred capital gain tax rates in
accordance with the applicable provisions of the Internal Revenue Code.
F. LINE OF CREDIT
Certain series of Aetna GET Fund (GET C and GET D), certain portfolios of Aetna
Variable Portfolios, Inc., Aetna Generation Portfolios, Inc., Aetna Balanced VP
Inc., Aetna Variable Fund, Aetna Income Shares, and certain series of Aetna
Series Fund Inc., collectively Aetna Mutual Funds, have entered into a revolving
credit facility, of up to $300,000,000, with a syndicate of banks led by
Citibank, N.A. For its services as Agent, Citibank, N.A. received an agent fee
of $200,000. In addition, the revolving credit facility requires the payment of
an annual commitment fee of 0.09% based on the average daily unused amount of
the credit facility. Each of the Aetna Mutual Funds will pay its pro rata share
of both the agent fee and commitment fee. Generally, borrowings under the
facility accrue interest at the Federal Funds Rate plus a specified margin.
Repayments generally must be made within 30 days after the date of a revolving
credit advance. The revolving credit facility became effective on November 30,
1999, and there was no outstanding balance as of December 31, 1999.
G. 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 accreted or amortized, respectively, using an effective yield
method over the life of the 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.
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICE FEES
Each Series pays Aeltus an investment advisory fee expressed as a percentage of
each Series' average daily net assets. Each Series pays Aeltus 0.60% of their
respective average daily net assets during the Guarantee Period. (0.25% of its
average daily net assets during the Accumulation Period)
Each Series pays Aeltus an administrative services fee in exchange for receiving
certain administrative and shareholder services and to compensate Aeltus for
supervising the Series' other service providers. Each Series pays Aeltus an
administrative services fee at an annual rate based on its average daily net
assets. The rate for each Series is 0.075% on the first $5 billion in assets and
0.050% on assets over $5 billion.
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Series, in
exchange for fees payable by Aeltus, of up to 0.30% of the Series' average daily
net assets. For the year ending December 31, 1999, Aeltus paid ALIAC $3,310,393.
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus may, from time to time, make reimbursements to GET C for some or all of
its operating expenses or it may waive fees in order to maintain a certain
expense ratio. Aeltus is contractually obligated for GET D, GET E, GET G and GET
H to reimburse the Series' for some or all of their operating expenses or to
waive fees in order to maintain a certain expense ratio. Reimbursement and
waiver arrangements will increase a Series' yield and total return. Actual
expenses for the year ended December 31, 1999 were at or below contractual
limits. Actual expense ratios are included in the Financial Highlights.
163
<PAGE>
AETNA GET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
================================================================================
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the year ended December 31, 1999 were:
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
GET C $ 97,684,935 $ 157,722,922
GET D 2,132,301,497 1,650,632,862
GET E 805,567,382 281,640,891
GET G 305,361,795 56,697,742
6. CAPITAL LOSS CARRYFORWARD
In accordance with applicable provisions of the Internal Revenue Code, as of
December 31, 1999, GET E incurred a capital loss carryforward of $2,405,124
which expires on December 31, 2007.
164
<PAGE>
AETNA GET FUND
ADDITIONAL INFORMATION
DECEMBER 31, 1999
================================================================================
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR (UNAUDITED)
In accordance with federal tax authorities, certain portions of the dividends
taxable as ordinary income qualify for the corporate dividends received
deduction. The following percentages reflect the portions of such dividends
paid:
GET C 16.60%
GET D 17.56%
GET E 18.12%
GET G 8.18%
In accordance with federal tax authorities, GET C paid $34,517,537 and $2.7219
of aggregate and per share dividends, respectively, which qualify to be taxed at
long-term capital gain rates.
YEAR 2000 (UNAUDITED)
The Fund's Year 2000 remediation efforts have been completed. Currently, the
Fund has no information that indicates a mission-critical vendor or service
provider will be unable to sell goods or provide services to the Fund or that
any customer will be unable to purchase from the Fund because of Year 2000
issues. As of today, the Fund has not experienced any significant disruptions to
its financial reporting or operating activities that were caused by failure of
its computerized systems resulting from Year 2000 issues.
165
<PAGE>
AETNA GET FUND
FINANCIAL HIGHLIGHTS
SERIES C
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17, 1996
YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, DECEMBER 31, OPERATIONS)
1999 1998 1997 TO DECEMBER 31, 1996
------------ ------------ ------------ --------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period ..... $ 14.46 $ 12.61 $ 10.23 $ 10.13
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income ... 0.09 0.14 0.19+ 0.01+
Net realized and
change in unrealized
gain or loss on
investments ............. 2.78 3.23 2.39 0.14
----------- ----------- ----------- -----------
Total from
investment
operations ........... 2.87 3.37 2.58 0.15
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
From net investment
income .................. (0.12) (0.12) (0.18) (0.05)
From net realized
gains on investments .... (4.44) (1.40) (0.02) --
----------- ----------- ----------- -----------
Total distributions ... (4.56) (1.52) (0.20) (0.05)
----------- ----------- ----------- -----------
Net asset value, end
of period ............... $ 12.77 $ 14.46 $ 12.61 $ 10.23
=========== =========== =========== ===========
Total return* ............ 23.56% 27.76% 25.25% 1.52%
Net assets, end of
period (000's) .......... $ 204,212 $ 227,207 $ 247,752 $ 208,442
Ratio of net expenses
to average net assets ... 0.71% 0.72% 0.75% 0.75%(1)
Ratio of net
investment income to
average net assets ...... 0.62% 0.89% 1.58% 3.04%(1)
Portfolio turnover
rate .................... 51.05% 108.16% 126.43% 6.25%
</TABLE>
(1) Annualized.
* 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 period.
166 See Notes to Financial Statements.
<PAGE>
SERIES D
================================================================================
Selected data for a fund share outstanding throughout each period:
PERIOD FROM
OCTOBER 15, 1998
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS)
1999 TO DECEMBER 31, 1998
------------ --------------------
Net asset value, beginning of period .... $ 10.05 $ 10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.31 0.10
Net realized and change in unrealized
gain or loss on investments ............ 0.51 --
-------- --------
Total from investment operations ..... 0.82 0.10
-------- --------
LESS DISTRIBUTIONS:
From net investment income ............. (0.22) (0.05)
-------- --------
Total distributions .................. (0.22) (0.05)
-------- --------
Net asset value, end of period .......... $ 10.65 $ 10.05
======== ========
Total return* ........................... 8.01%# --
Net assets, end of period (000's) ....... $716,085 $385,294
Ratio of net expenses to average net
assets.................................. 0.68% 0.36%(1)
Ratio of net investment income to average
net assets ............................. 2.84% 4.59%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ....... 0.68% 0.38%(1)
Portfolio turnover rate ................. 223.85% --
(1) Annualized.
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
# Total return calculation began on January 16, 1999, the first day of its
Guarantee Period.
See Notes to Financial Statements. 167
<PAGE>
AETNA GET FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
SERIES E
================================================================================
Selected data for a fund share outstanding throughout each period:
PERIOD FROM
JUNE 15, 1999
(COMMENCEMENT OF
OPERATIONS)
TO DECEMBER 31, 1999
--------------------
Net asset value, beginning of period .................. $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.10
Net realized and change in unrealized gain or loss on
investments........................................... 0.74
--------
Total from investment operations ................... 0.84
--------
LESS DISTRIBUTIONS:
From net investment income ........................... (0.07)
--------
Total distributions ................................ (0.07)
--------
Net asset value, end of period ........................ $ 10.77
========
Total return* ......................................... 7.14%#
Net assets, end of period (000's) ..................... $567,679
Ratio of net expenses to average net assets ........... 0.63%(1)
Ratio of net investment income to average net assets .. 2.68%(1)
Ratio of expenses before reimbursement and waiver to
average net assets ................................... 0.64%(1)
Portfolio turnover rate ............................... 51.75%
(1) Annualized.
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
# Total return calculation began on September 15, 1999, the first day of its
Guarantee Period.
168 See Notes to Financial Statements.
<PAGE>
SERIES G
================================================================================
Selected data for a fund share outstanding throughout each period:
PERIOD FROM
SEPTEMBER 15, 1999
(COMMENCEMENT OF
OPERATIONS)
TO DECEMBER 31, 1999
--------------------
Net asset value, beginning of period .................. $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.06
Net realized and change in unrealized gain or loss on
investments........................................... 0.35
--------
Total from investment operations ................... 0.41
--------
LESS DISTRIBUTIONS:
From net investment income ........................... (0.04)
--------
Total distributions ................................ (0.04)
--------
Net asset value, end of period ........................ $ 10.37
========
Total return* ......................................... 2.86%#
Net assets, end of period (000's) ..................... $262,557
Ratio of net expenses to average net assets ........... 0.61%(1)
Ratio of net investment income to average net assets .. 3.45%(1)
Ratio of expenses before reimbursement and waiver to
average net assets ................................... 0.69%(1)
Portfolio turnover rate ............................... 22.19%
(1) Annualized.
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
# Total return calculation began on December 15, 1999, the first day of its
Guarantee Period.
See Notes to Financial Statements. 169
<PAGE>
AETNA GET FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
SERIES H
================================================================================
Selected data for a fund share outstanding throughout each period:
PERIOD FROM
DECEMBER 15, 1999
(COMMENCEMENT OF
OPERATIONS)
TO DECEMBER 31, 1999
--------------------
Net asset value, beginning of period .................. $10.00
------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.01
Net realized and change in unrealized gain or loss on
investments........................................... 0.02
------
Total from investment operations ................... 0.03
------
Net asset value, end of period ........................ $10.03
======
Total return .......................................... --++
Net assets, end of period (000's) ..................... $3,733
Ratio of net expenses to average net assets ........... 0.37%(1)
Ratio of net investment income to average net assets .. 4.65%(1)
Ratio of expenses before reimbursement and waiver to
average net assets ................................... 10.60%(1)
(1) Annualized.
++ GET H is in its Accumulation Period. Total return calculation will begin
on March 15, 2000, the first day of its Guarantee Period.
170 See Notes to Financial Statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of Aetna GET Fund:
We have audited the accompanying statements of assets and liabilities of Aetna
GET Fund, Series C, Series D, Series E, Series G and Series H (collectively the
Funds), including the portfolios of investments as of December 31, 1999, and the
related statements of operations for the year or period then ended, the
statements of changes in net assets for each of the years or periods in the
two-year period then ended and financial highlights for each of the years or
periods in the four-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, 1999, 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 C, Series D, Series E, Series G and Series H as of December 31,
1999, results of their operations for the year then ended, changes in their net
assets for each of the years or periods in the two-year period then ended, and
financial highlights for each of the years or periods in the four-year period
then ended, in conformity with generally accepted accounting principles.
/s/ KPMG LLP
Hartford, Connecticut
February 4, 2000
171
