As filed with the Securities and Exchange File No. 2-53038
Commission on April 25, 1996 File No. 811-2568
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 39
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30
AETNA VARIABLE ENCORE FUND
(Exact Name of Registrant as Specified in Charter)
151 Farmington Avenue RE4C, Hartford, Connecticut 06156
(Address of Principal Executive Offices)
(860) 273-7834
(Registrant's Telephone Number, including Area Code)
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue RE4C, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (Check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on _______________________ pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on May 1, 1996 pursuant to paragraph (a)(2) of Rule 485
Aetna Variable Encore Fund has registered an indefinite number of its securities
under the Securities Act of 1933 pursuant to Rule 24f-2 of the Investment
Company Act of 1940. The Registrant filed its Rule 24f-2 Notice for its fiscal
year ended December 31, 1995 on February 29, 1996.
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Aetna Variable Encore Fund
Cross-Reference Sheet
Form N-1A
Item No. Caption in Prospectus
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objective
Investment Policies and
Restrictions
5. Management of the Fund Management of the Fund
5A. Management's Discussion of Fund Financial Highlights - Incorporated
Performance by Reference to the Annual Report
6. Capital Stock and Other Securities General Information
Tax Matters
7. Purchase of Securities Being Offered Management of the Fund
Net Asset Value
8. Redemption or Repurchase Sale and Redemption of Shares
9. Pending Legal Proceedings Not applicable
Caption in Statement of Additional
Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information and History
13. Investment Objectives and Policies General Information and History
Investment Objective and Policies
of the Fund
Description of Various Securities
and Investment Techniques
14. Management of the Funds Trustees and Officers of the Fund
15. Control Persons and Principal Control Persons and Principal
Holders of Securities Shareholders of the Fund
16. Investment Advisory and Other Investment Advisory Agreement;
Services Administrative Services
Agreement; Custodian;
Independent Auditors
17. Brokerage Allocation and Other Brokerage Allocation and Trading
Practices Policies
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption and Pricing Sale and Redemption of Shares
of Securities Being Offered Net Asset Value
20. Tax Status Tax Matters
21. Underwriters Not Applicable
22. Calculation of Performance Data Not Applicable
23. Financial Statements Financial Statements
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AETNA VARIABLE ENCORE FUND
151 Farmington Avenue
Hartford, Connecticut 06156
1-800-525-4225
Prospectus dated: May 1, 1996
Aetna Variable Encore Fund (the "Fund") is a diversified, open-end management
investment company whose shares are currently sold to variable annuity or
variable life insurance separate accounts to fund variable annuity contracts
(VA Contracts) and variable life insurance policies (VLI Policies) issued by
Aetna Life Insurance and Annuity Company ("ALIAC" or "Company") and its
affiliates and subsidiaries.
Encore Fund seeks to provide high current return, consistent with
preservation of capital and liquidity, through investment in high-quality
money market instruments. An investment in Aetna Variable Encore Fund is
neither insured nor guaranteed by the U.S. Government.
This Prospectus sets forth concisely information about the Fund that you
should know before investing. Additional information about the Fund is
contained in a Statement of Additional Information (SAI) dated May 1, 1996,
which has been filed with the Securities and Exchange Commission (SEC) and is
incorporated by reference. You can request an SAI, without charge, by writing
to the Fund at the address listed above or by calling the Fund at
1-800-525-4225.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, the securities of the Fund in any jurisdiction in which such
sale, offer to sell, or solicitation may not be lawfully made.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this Prospectus and retain for future reference.
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TABLE OF CONTENTS
FINANCIAL HIGHLIGHTS 3
INVESTMENT OBJECTIVE 4
INVESTMENT POLICIES AND RESTRICTIONS 4
Investment Policies 4
Industry Concentration 4
Illiquid and Restricted Securities 4
International Securities 5
Repurchase Agreements 5
Securities Lending 5
Securities Borrowing 5
MANAGEMENT OF THE FUND 5
Trustees 5
Investment Adviser 5
Portfolio Management 5
Expenses and Fund Administration 5
GENERAL INFORMATION 6
Declaration of Trust 6
Capital Stock 6
Shareholder Meetings 6
Voting Rights 6
TAX MATTERS 6
The Fund 6
Fund Distributions 6
Share Redemptions 6
SALE AND REDEMPTION OF SHARES 6
NET ASSET VALUE 7
GLOSSARY 8
2
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FINANCIAL HIGHLIGHTS
The selected data presented below for, and as of the end of, each of the
years in the ten-year period ended December 31, 1995 are derived from the
financial statements of the Fund, which statements have been audited by KPMG
Peat Marwick LLP, independent auditors. The financial statements as of
December 31, 1995, and for each of the years in the two-year period then
ended, and the independent auditors' report thereon, are included in the SAI.
Year Ended December 31
-----------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- ---------
Net asset value per
share, beginning of
year $12.544 $12.535 $12.557 $12.628 $12.685
Income from
Investment
Operations
Net investment
income .755 .526 .397 .502 .795
Net realized and
unrealized gain
(loss) on
investments .009 (.022) .001 (.042) .033
-------- -------- -------- -------- ---------
Total from
Investment
Operations .764 .504 .398 .460 .828
Less Distributions
Dividends from net
investment income (.010) (.495) (.420) (.531) (.885)
Dividends from
realized gains on
investments -- -- -- -- --
-------- -------- -------- -------- ---------
Net asset value per
share, end of year $13.298 $12.544 $12.535 $12.557 $12.628
======== ======== ======== ======== =========
Total Return* 6.05% 4.09% 3.19% 3.67% 6.53%
Net assets, end of
year (000's) $514,037 $483,039 $380,249 $461,991 $502,510
Ratio of total
expenses to average
net assets .30% .32% .31% .37% .36%
Ratio of net
investment income
to average net
assets 5.82% 4.16% 3.14% 3.96% 6.09%
1990 1989 1988 1987 1986
-------- -------- -------- -------- ---------
Net asset value per
share, beginning of
year $ 12.574 $ 12.639 $ 12.602 $ 13.557 $ 13.943
Income from
Investment
Operations
Net investment
income 1.057 1.179 .947 .882 .895
Net realized and
unrealized gain
(loss) on
investments .004 .006 (.003) (.011) .004
-------- -------- -------- -------- ---------
Total from
Investment
Operations 1.061 1.185 .944 .871 .899
Less Distributions
Dividends from net
investment income (.950) (1.248) (.907) (1.826) (1.258)
Dividends from
realized gains on
investments -- (.002) -- -- (.027)
-------- -------- -------- -------- ---------
Net asset value per
share, end of year $ 12.685 $ 12.574 $ 12.639 $ 12.602 $ 13.557
======== ======== ======== ======== =========
Total Return* 8.44% 9.39% 7.50% 6.81% 6.88%
Net assets, end of
year (000's) $553,240 $416,802 $391,234 $340,894 $312,650
Ratio of total
expenses to average
net assets .33% .36% .47% .31% .35%
Ratio of net
investment income
to average net
assets 8.13% 9.00% 7.28% 6.70% 6.67%
Per share data calculated using weighted average number of shares outstanding
throughout the year.
* The total return percentage does not reflect the mortality and expense
charges, or other expenses, applicable to the separate accounts that invest
in the Fund. Inclusion of these expenses would reduce the total return
figures.
Additional information about the performance of the Fund is contained in the
Fund's Annual Report dated December 31, 1995. The Annual Report is
incorporated herein by reference and is available, without charge, by writing
to the Fund at the address listed on the cover of this Prospectus or by
calling 1-800-525-4225.
3
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INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide high current return,
consistent with preservation of capital and liquidity, through investment in
high-quality money market instruments. The Fund's investment objective is
fundamental and may not be changed without the vote of a majority of its
outstanding voting securities as defined by the Investment Company Act of
1940 ("1940 Act"). There can be no assurance that the Fund will meet its
investment objective.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies The Fund will invest primarily in (a) money market
instruments that have a maturity at the time of purchase, as defined under
federal securities laws, of 397 days or less (762 days or less for U.S.
Government securities) and (b) debt securities with a longer maturity, if the
Fund has the absolute right to sell such securities back to the issuer for at
least the face amount of the debt obligation within 397 days after the date
of purchase. The Fund invests in U.S. Treasury bills, notes and bonds;
obligations of agencies and instrumentalities of the U.S. Government;
obligations of domestic banks and U.S. dollar denominated obligations of
foreign banks, finance company commercial paper, corporate commercial paper
(including variable-rate instruments); documented discount notes of banks,
domestic banker's acceptances eligible for discount at the Federal Reserve,
Yankee certificates of deposit, Yankee commercial paper, Eurodollar
securities, repurchase agreements, corporate bonds and notes and other debt
instruments, and may purchase securities on a when-issued or delayed-delivery
basis. The Fund will not invest more than 25% of its total assets in
securities or obligations of foreign issuers. All securities and obligations
purchased by the Fund will be U.S. dollar denominated. The Fund may engage in
transactions on a when-issued or forward commitment basis and may enter into
forward currency contracts; however, the Fund does not intend to invest more
than 5% of its total assets in such securities. The average maturity of the
portfolio will depend on the investment adviser's appraisal of money market
conditions; however, it will not exceed 90 days. All earned income and
realized capital gains will be reinvested.
In addition, the Fund will invest at least 95% of its total assets in
high-quality securities. High-quality securities are those receiving the
highest credit rating by any two rating agencies (or one, if only one agency
has rated the security). High-quality securities may also include unrated
securities if the investment adviser determines the security to be of
comparable quality. The remainder of the Fund's assets will be invested in
securities rated within the two highest rating categories by any two rating
agencies (or one, if only one rating agency has rated the security) and
unrated securities if the investment adviser determines the security to be of
comparable quality. With respect to these securities, the Fund may not invest
more than 1% of the market value of its total assets or $1 million, whichever
is greater, in the securities or obligations of any one issuer. The Fund will
use nationally recognized rating agencies such as Standard & Poor's
Corporation and Moody's Investors Service, Inc. when determining security
credit ratings. All investments will be determined by the Investment Adviser
to present minimal credit risks.
Industry Concentration The Fund will not concentrate its investments in any
one industry, and, therefore the Fund will not invest 25% or more of its
total assets in securities issued by companies principally engaged in one
industry. This limitation will not, however, apply to securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities;
securities invested in, or repurchase agreements for, U.S. Government
securities; and certificates of deposit, bankers' acceptances, or securities
of banks and bank holding companies. For purposes of this restriction,
finance companies will be classified as separate industries according to the
end users of their services, such as automobile finance, computer finance and
consumer finance. Also, the Fund will not hold securities constituting more
than 5% of its total assets in the securities of any one issuer or hold more
than 10% of the outstanding voting securities of any one issuer. This latter
restriction applies only to 75% of the Fund's total assets and does not
include securities issued or guaranteed by the U.S. Government, its agencies
and instrumentalities.
Illiquid and Restricted Securities The Fund may invest up to 10% of its
total assets in illiquid securities. Illiquid securities are securities that
are not readily marketable or cannot be disposed of promptly within seven
days in the ordinary course of business without taking a materially reduced
price. In addition, the Fund may invest in securities that are subject to
legal or contractual restrictions as to resale, including securities
purchased under Rule 144A and Section 4(2) of the Securities Act of 1933.
Because of the absence of a trading market for some of these securities, the
Fund may take longer to liquidate the position and may realize less than the
amount originally paid by the Fund. The Investment Adviser, in accordance
with the powers adopted by the Board of Trustees, shall determine whether a
particular security is deemed to be liquid based on the trading markets for
the specific security and other factors.
4
<PAGE>
International Securities The Fund may invest up to 25% of its total assets
in U.S. dollar denominated securities of obligations of foreign issuers.
Investments in securities of foreign issuers involve risks not present in
domestic markets. Such risks may include: currency fluctuations; less
liquidity; price or income volatility; less government supervision and
regulation of stock exchanges where the securities may be traded, brokers and
listed companies; possible difficulty in obtaining and enforcing judgments
against foreign entities; adverse foreign political and economic
developments; different accounting procedures and auditing standards; the
possible imposition of withholding taxes on interest income payable on
securities; the possible seizure or nationalization of foreign assets; the
possible establishment of exchange controls or other foreign laws or
restrictions which might adversely affect the payment and transferability of
principal and interest on securities; higher transaction costs; possible
settlement delays and less publicly available information about foreign
issuers.
Repurchase Agreements Under a repurchase agreement, the Fund may acquire a
debt instrument for a relatively short period subject to an obligation by the
seller to repurchase and by the Fund to resell the instrument at a fixed
price and time. Assets may be invested in repurchase agreements with domestic
banks and broker-dealers. Such agreements, although fully collateralized,
involve the risk that the seller of the securities may fail to repurchase
them. In that event, the Fund may incur costs in liquidating the collateral
or a loss if the collateral declines in value. If the default on the part of
the seller is due to insolvency and the seller initiates bankruptcy
proceedings, the ability of the Fund to liquidate the collateral may be
delayed or limited. The Fund's Board of Trustees has established credit
standards for issuers of repurchase agreements entered into by the Fund.
Securities Lending The Fund may lend portfolio securities; however, the
value of the loaned securities (together with all other assets that are
loaned, including those subject to repurchase agreements) may not exceed
one-third of the Fund's total assets. The Fund will not lend portfolio
securities to affiliates. Though fully collateralized, lending portfolio
securities involves certain risks, including the possibility that the
borrower may become insolvent or default on the loan. In the event of a
disparity between the value of the loaned security and the collateral, there
is the additional risk that the borrower may fail to return the securities or
provide additional collateral. A loan may be terminated at any time by the
borrower or lender upon proper notice.
Borrowing The Fund may borrow up to 5% of the value of its total assets for
temporary or emergency purposes. The Fund does not intend to borrow for
leveraging purposes. It has the authority to do so, but only if, after the
borrowing, the value of the Fund's net assets, including proceeds from the
borrowings, is equal to at least 300% of all outstanding borrowings.
Leveraging can increase the volatility of the Fund since it exaggerates the
effects of changes in the value of the securities purchased with the borrowed
funds.
The Fund is subject to further investment restrictions described in the SAI.
MANAGEMENT OF THE FUND
Trustees The operations of the Fund are managed under the direction of the
Board of Trustees (Trustees). The Trustees set broad policies for the Fund.
Information about the Trustees is found in the SAI.
Investment Adviser ALIAC, the investment adviser for the Fund, is a
Connecticut insurance corporation located at 151 Farmington Avenue, Hartford,
Connecticut 06156. It is an indirectly wholly owned subsidiary of Aetna
Retirement Services, Inc., which is in turn a wholly owned subsidiary of
Aetna Life and Casualty Company. ALIAC is registered with the SEC as an
investment adviser and manages over $22 billion in assets including those
held by the Fund.
Under an investment advisory agreement with the Fund, ALIAC is responsible
for managing the assets of the Fund in accordance with the Fund investment
objective and policies. ALIAC determines what securities and other
instruments are purchased and sold by the Fund and is responsible for
obtaining and evaluating financial data relevant to the Fund's portfolio.
ALIAC receives a management fee at an annual rate of 0.25% of the average
daily net assets of the Fund.
Portfolio Management Jeanne Wong-Boehm, Managing Director, ALIAC, has been
the Portfolio Manager for Aetna Variable Encore Fund for over 6 years. Ms.
Wong-Boehm joined ALIAC in 1983 as a fixed income portfolio analyst, and
shortly thereafter assumed portfolio responsibilities for various general
account segments within the Aetna group of companies. In 1989 she was also
assigned primary responsibility for the money market operations.
Expenses and Fund Administration Under an Administrative Services Agreement
with the Fund effective May 1, 1996, ALIAC will provide all administrative
services necessary for the Fund's operations and will be responsible for the
supervision of the Fund's other service providers. ALIAC will also assume all
ordinary recurring direct costs of the Fund such as custodian fees, directors
fees, transfer agency costs and accounting expenses. For the services
provided under the Administrative Services Agreement, ALIAC will receive an
annual fee, payable monthly, at a rate of 0.10% of the average daily net
assets of the Fund.
5
<PAGE>
GENERAL INFORMATION
Declaration of Trust The Fund was organized as a "Massachusetts business
trust" under the laws of Massachusetts on January 25, 1984. It began
operations on May 1, 1984 upon succeeding to the assets of Aetna Variable
Encore Fund, Inc., a corporation that was formed in 1974. Massachusetts law
provides that shareholders of the Fund can, under certain circumstances, be
held personally liable for the obligations of the Fund. The Fund has been
structured, and will be operated in such a way, so as to ensure as much as
possible, that shareholders will not be liable for obligations of the Fund.
The Declaration of Trust (Declaration) contains an express disclaimer of
shareholder liability for acts or obligations of the Fund under Massachusetts
law, and requires that notification of this disclaimer be given in each
agreement, obligation or instrument entered into by the Fund or the Trustees.
A more complete discussion of potential liability of shareholders of the Fund
under Massachusetts law is contained in the SAI under "Description of Shares
- -- Shareholder and Trustee Liability."
Capital Stock The Declaration permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest in the Fund. All
shares are nonassessable, other than as disclosed above. There are no
preemptive rights.
As of March 31, 1996, there were 39,556,634 shares of the Fund outstanding,
all of which were owned by ALIAC and its affiliates and held in separate
accounts to fund obligations under VA Contracts and VLI Policies.
Shareholder Meetings The Fund is not required to hold annual shareholder
meetings. The Declaration provides for meetings of shareholders to elect
Trustees at such time as may be determined by the Trustees or as required by
the 1940 Act. If requested by the holders of at least 10% of the Fund's
outstanding shares, the Fund will hold a shareholder meeting for the purpose
of voting on the removal of one or more Trustees and will assist with
communications concerning that shareholder meeting.
Voting Rights Shareholders are entitled to one vote for each full share
held and fractional votes for fractional shares held on matters submitted to
the shareholders of the Fund. Voting rights are not cumulative. Persons who
select the Fund for investment through their VA Contract or VLI Policy are
not the shareholders of the Fund, but may have the right to direct the voting
of Fund shares at shareholder meetings if required by law. Contract holders
and/or Participant voting rights are discussed in the prospectus for the
applicable VA Contract or VLI Policy.
TAX MATTERS
The following discussion of federal income tax consequences is based on tax
laws and regulations in effect on the date of this Prospectus, and is subject
to change by legislative or administrative action. The following discussion
is for general information only; a more detailed discussion of federal income
tax considerations is contained in the SAI. The term "shareholders", as used
below, refers to insurance company separate accounts who hold shares in
connection with variable annuity or variable life insurance contracts.
Holders of VA Contracts or VLI Policies should consult the prospectuses of
their respective contracts or policies for information concerning federal
income tax consequences to them.
The Fund The Fund intends to continue to qualify as a regulated investment
company by satisfying the requirements under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code") concerning: (1) the
diversification of assets; (2) the distribution of income; and (3) the source
of income. It is the policy of the Fund to distribute all of its investment
income (net of expenses) and any capital gains (net of capital losses) to
shareholders in accordance with the timing requirements imposed by the Code.
In addition, the Fund intends to comply with the variable asset
diversification requirements under Section 817(h) of the Code, which are
described more fully in the SAI.
Fund Distributions Distributions by the Fund are taxable, if at all, to the
insurance company separate accounts, and not to VA Contract or VLI Policy
holders. Contract holders and/or Participants should review the prospectus
for their VA Contract or VLI Policy for information regarding the tax
treatment of their contracts and policies and distributions from the Fund to
the separate accounts.
SALE AND REDEMPTION OF SHARES
Shares of the Fund are sold and redeemed at their net asset value next
determined after receipt of a purchase or redemption order in acceptable
form. No sales charge or redemption charge is made.
6
<PAGE>
NET ASSET VALUE
The net asset value per share (NAV) of the Fund is determined as of 4:15 p.m.
Eastern time, on each day that the New York Stock Exchange is open for
trading. The NAV is computed by dividing the total value of the Fund's
securities, plus any cash or other assets less all liabilities (including
accrued expenses), by the number of shares outstanding.
Portfolio securities are valued primarily by independent pricing services,
based on market quotations. Short-term debt instruments maturing in less than
60 days are valued at amortized cost. Securities for which market quotations
are not readily available are valued at their fair value in such manner as
may be determined under the authority of the Trustees.
7
<PAGE>
GLOSSARY
This glossary describes some of the securities in which Encore Fund may
invest in pursuing its investment objective.
U.S. Government Direct Obligations -- issued by the Treasury Department and
include bills, notes, and bonds.
(bullet) Treasury bills are issued with maturities of any period up to one
year. They are issued in bearer form and are sold on a discount
basis to pay the face amount at maturity. The income for the
investor is the difference between the purchase price and the
maturity value (or the sale price if sold prior to maturity).
(bullet) Treasury notes are intermediate-term securites with original
maturities of one to ten years. The income is paid to the investor
in semi-annual interest payments.
(bullet) Treasury bonds are long-term, debt instruments with original
maturities from ten to thirty years. The income is paid to the
investor in semi-annual interest payments.
U.S. Government Agencies Securities -- Federal agencies have been established
as instrumentalities of the United States Government to supervise and finance
certain types of activities. These agencies include the Banks for
Cooperatives, Federal Land Banks, Federal Intermediate Credit Banks, Federal
Home Loan Banks, Federal National Mortgage Association, Government National
Mortgage Association, Export-Import Bank, and Tennessee Valley Authority.
Issues of these agencies, while not direct obligations of the United States
Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing
agencies' right to borrow from the Treasury.
Banker's Acceptances -- A banker's acceptance is a time draft drawn on and
accepted by a commercial bank. It is generally used by corporations to
finance the shipment and storage of goods. When the draft is accepted by a
bank, the bank unconditionally guarantees to pay the face value of the
instrument on its maturity date. An investor can purchase a bankers'
acceptance in the secondary market at the going rate of discount for a
specific maturity. Maturities of the instrument are generally six months or
less.
Certificates of Deposit -- A certificate of deposit is a receipt issued
by a bank or savings and loan association in exchange for the deposit of
funds. It earns a specified rate of return over a definite period of time.
Normally a certificate can be traded in a secondary market prior to maturity.
Eurodollar certificates of deposit are dollar-denominated deposits in banks
outside the United States. The bank may be a foreign bank or a foreign branch
of a United States bank. Yankee certificates of deposit are United States
dollar-denominated deposits issued and payable by United States branches of
foreign banks.
Commercial Paper -- Commercial paper is the term used to designate unsecured
short-term debt instruments issued by corporations and finance companies.
Maturities on these issues vary from a few days to nine months. Yankee
commercial paper is issued by foreign institutions in the United States
markets and payable in United States dollars.
Repurchase Agreement -- A repurchase agreement is an agreement between a
seller and buyer, usually of U.S. Government securities to sell and
subsequently repurchase securities at a fixed price on a future date. Under a
reverse repurchase agreement, the Fund would in effect sell portfolio
securities to another entity, with an agreement to repurchase at a specified
future date. The repurchase price under any type of repurchase agreement
reflects an agreed-upon interest rate for the period of purchase, which tends
to reflect current interest rates in the market rather than original issue
rate on the security.
8
<PAGE>
Statement of Additional Information dated: May 1, 1996
AETNA VARIABLE
ENCORE FUND
151 Farmington Avenue
Hartford, Connecticut 06156
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the current prospectus for Aetna Variable Encore
Fund dated May 1, 1996.
A free prospectus is available upon request from the local Aetna Life
Insurance and Annuity Company office, by writing to Aetna Variable Encore
Fund at the address listed above or by calling 1-800-525-4225.
Read the prospectus before you invest.
TABLE OF CONTENTS
General Information and History 2
Investment Objective and Policies of the Fund 2
Description of Various Securities and Investment Techniques 4
Trustees and Officers of the Fund 5
Control Persons and Principal Shareholders of the Fund 7
Investment Advisory Agreement 8
Administrative Services Agreement 9
Brokerage Allocation and Trading Policies 9
Description of Shares 10
Tax Matters 11
Sale and Redemption of Shares 14
Net Asset Value 15
Custodian 15
Independent Auditors 15
Financial Statements F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Variable Encore Fund (the "Fund") is an open-end diversified management
investment company which sells its shares of beneficial interest to variable
annuity or variable life insurance separate accounts to fund variable annuity
contracts (VA Contracts) or variable life insurance policies (VLI Policies)
issued by Aetna Life Insurance and Annuity Company ("ALIAC" or "Company") and
its affiliates and subsidiaries.
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The investment objective of the Fund is to provide high current return,
consistent with preservation of capital and liquidity, through investment in
high-quality money market instruments.
The Fund will operate under the following restrictions, which together with
its investment objective, are matters of fundamental policy and cannot be
changed without the approval of a majority of the outstanding voting
securities of the Fund as defined by the Investment Company Act of 1940 (the
"1940 Act"). This means the lesser of: (i) 67% of the shares of the Fund
present or represented at a shareholders' meeting if the holders of more than
50% of the shares then outstanding are present or represented; or (ii) more
than 50% of the outstanding voting securities of the Fund.
In seeking to accomplish its investment objective, the Fund will not:
(1) issue any senior security as defined in the 1940 Act, except that (a)
the Fund may enter into commitments to purchase securities in accordance
with the Fund's investment program, including reverse repurchase
agreements, delayed delivery and when-issued securities, which may be
considered the issuance of senior securities; (b) the Fund may engage in
transactions that may result in the issuance of a senior security to the
extent permitted under applicable regulations, interpretations of the
1940 Act or an exemptive order, and (c) subject to fundamental
restrictions, the Fund may borrow money as authorized by the 1940 Act;
(2) hold more than 5% of the value of its total assets in the securities of
any one issuer or hold more than 10% of the outstanding voting
securities of any one issuer; this restriction applies only to 75% of
the value of the Fund's total assets; securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities are excluded
from this restriction;
(3) concentrate its investments in any one industry except that the Fund may
invest up to 25% of its total assets in securities issued by companies
principally engaged in any one industry. For purposes of this
restriction, finance companies will be classified as separate industries
according to the end users of their services, such as automobile
finance, computer finance and consumer finance. This limitation will
not, however, apply to securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities; securities invested in,
or repurchase agreements for, U.S. Government securities; and
certificates of deposit, bankers' acceptances, or securities of banks
and bank holding companies;
(4) make loans, except that, to the extent appropriate under its investment
program, the Fund may (a) purchase bonds, debentures or other debt
securities, including short-term obligations, (b) enter into repurchase
transactions and (c) lend portfolio securities provided that the value
of such loaned securities does not exceed one-third of the Fund's total
assets;
(5) invest in commodity contracts, except that the Fund may, to the extent
appropriate under its investment program, purchase securities of
companies engaged in such activities, may engage in transactions on a
when-issued or forward commitment basis, and may enter into forward
currency contracts;
(6) borrow money, except that (a) the Fund may enter into commitments to
purchase securities in accordance with the Fund's investment program,
including delayed-delivery and when-issued securities and reverse
repurchase agreements; and (b) for temporary, emergency purposes, the
Fund may borrow money in amounts not exceeding 5% of the value of its
total assets at the time the loan is made;
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<PAGE>
(7) purchase real estate, interests in real estate or real estate limited
partnership interests except that, to the extent appropriate under its
investment program, the Fund may invest in securities secured by real
estate or interests therein or issued by companies, including real
estate investment trusts, which deal in real estate or interests
therein; or
(8) act as an underwriter of securities except to the extent that, in
connection with the disposition of portfolio securities by the Fund, the
Fund may be deemed to be an underwriter under the provisions of the
Securities Act of 1933 (the "1933 Act").
(Note that as a money market fund, the Fund's investment program does
not currently allow investment in futures contracts.)
The Fund has also adopted certain other investment restrictions which may be
changed by the Fund's Trustees and without shareholder vote. Under such
restrictions, the Fund will not:
(1) make short sales of securities, other than short sales "against the
box," or purchase securities on margin except for short-term credits
necessary for clearance of portfolio transactions, provided that this
restriction will not be applied to limit the use of options, futures
contracts and related options, in the manner otherwise permitted by the
investment restrictions, policies and investment program of the Fund;
(2) invest more than 10% of its total assets in illiquid securities.
Illiquid securities are securities that are not readily marketable or
cannot be disposed of promptly within seven days and in the usual course
of business without taking a materially reduced price. Such securities
include, but are not limited to, time deposits and repurchase agreements
with maturities longer than seven days. Securities that may be resold
under Rule 144A or securities offered pursuant to Section 4(2) of the
1933 Act, as amended, shall not be deemed illiquid solely by reason of
being unregistered. The Investment Adviser shall determine whether a
particular security is deemed to be liquid based on the trading markets
for the specific security and other factors;
(3) purchase the securities of any other investment company, except as
permitted under the 1940 Act;
(4) invest in companies for the purpose of exercising control or management;
or
(5) invest more than 25% of its total assets in securities or obligations of
foreign issuers, including marketable securities of, or guaranteed by,
foreign governments (or any instrumentality or subdivision thereof). The
Fund will invest in securities or obligations of foreign banks only if
such banks have a minimum of $5 billion in assets and a primary capital
ratio of at least 4.25%. The Fund may only purchase foreign securities
or obligations that are U.S. dollar denominated.
Where the Fund's investment objective or policies restricts it to a specified
percentage of its total assets in any type of instrument, that percentage is
measured at the time of purchase. There will be no violation of any
investment policy or restriction if that restriction is complied with at the
time the relevant action is taken notwithstanding a later change in the
market value of an investment, in net or total assets, in the securities
rating of the investment or any other change.
The Fund will invest at least 95% of its total assets in high-quality
securities. High-quality securities are those receiving the highest credit
rating by any two nationally recognized statistical rating organizations (or
one, if only one rating organization has rated the security) and the
conditions of Rule 2a-7 under the 1940 Act are met. High-quality securities
may also include unrated securities if the investment adviser determines the
security to be of comparable quality.
The remainder of the Fund's assets will be invested in securities rated
within the two highest rating categories by any two nationally recognized
statistical rating organizations (or one, if only one rating organization has
rated the security) and unrated securities if the investment adviser
determines the security to be of comparable quality. With respect to this
group of securities, the Fund may not, however, invest more than 1% of the
market value of its total assets or $1 million, whichever is greater, in the
securities or obligations of a single issuer.
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<PAGE>
DESCRIPTION OF VARIOUS SECURITIES AND INVESTMENT TECHNIQUES
The following information supplements and should be read in conjunction with
the section of the prospectus entitled "Investment Policies and
Restrictions."
Repurchase Agreements
The Fund may enter into repurchase agreements with domestic banks and
broker-dealers meeting certain size and creditworthiness standards
established by the Fund's Board of Trustees. A repurchase agreement allows
the Fund to determine the yield during the Fund's holding period. This
results in a fixed rate of return insulated from market fluctuations during
such period. Such underlying debt instruments serving as collateral will meet
the quality standards of the Fund. The market value of the underlying debt
instruments will, at all times, be equal to the dollar amount invested, even
though the maturity of the underlying instruments may exceed the 397-day
maturity limitation (762 days for U.S. Government securities) of the Fund.
Repurchase agreements, although fully collateralized, involve the risk that
the seller of the securities may fail to repurchase them from the Fund. In
that event, the Fund may incur (a) disposition costs in connection with
liquidating the collateral, or (b) a loss if the collateral declines in
value. Also, if the default on the part of the seller is due to insolvency
and the seller initiates bankruptcy proceedings, the Fund's ability to
liquidate the collateral may be delayed or limited. Under the 1940 Act,
repurchase agreements are considered loans by the Fund. Repurchase agreements
maturing in more than seven days will not exceed 10 percent of the total
assets of the Fund.
The Company will not make loans, enter into repurchase agreements or lend
portfolio securities unless it receives collateral that is at least equal to
the value of the loan, including accrued interest.
Reverse Repurchase Agreements
The Fund may enter into "reverse repurchase agreements" in which the Fund, as
seller of the securities, agrees to repurchase them at an agreed upon time
and price. When engaging in reverse repurchase agreements with banks or
broker-dealers, the Fund will receive cash and will deposit collateral in the
form of cash or cash equivalents in a segregated account maintained by Mellon
Bank, N.A. Such collateral will be maintained at all times in an amount equal
to at least 100% of the amount due to the bank or broker-dealer with which
the Fund entered into the reverse repurchase agreement.
When-Issued or Delayed-Delivery Securities
During any period that the Fund has outstanding a commitment to purchase
securities on a when-issued or delayed-delivery basis, the Fund will maintain
with its custodian bank a segregated account consisting of cash, U.S.
Government securities or other high-quality debt obligations. To the extent
that the market value of securities held in this segregated account falls
below the amount that the Fund will be required to pay on settlement,
additional assets may be required to be added to the segregated account. Such
segregated accounts could affect the Fund's liquidity and ability to manage
its portfolio. When the Fund engages in when-issued or delayed-delivery
transactions, it is effectively relying on the seller of such securities to
consummate the trade; failure of the seller to do so may result in the Fund's
incurring a loss or missing an opportunity to invest funds held in the
segregated account more advantageously.
The Fund will not pay for securities purchased on a when-issued or
delayed-delivery basis, or start earning interest on such securities, until
the securities are actually received. However, any security so purchased will
be recorded as an asset of the Fund at the time the commitment is made.
Because the market value of securities purchased on a when-issued or
delayed-delivery basis may increase or decrease prior to settlement as a
result of changes in interest rates or other factors, such securities will be
subject to changes in market value prior to settlement and a loss may be
incurred if the value of the security to be purchased declines prior to
settlement.
Maturity Policies
The average dollar-weighted maturity of securities in the Fund's portfolio
will not exceed ninety days. In addition, no security in the Fund's portfolio
will have a maturity of greater than thirteen months (397 calendar days), or,
in the case of United States Government securities, no greater than
twenty-five months (762 calendar days).
4
<PAGE>
TRUSTEES AND OFFICERS OF THE FUND
The investments and administration of the Fund are under the direction of the
Board of Trustees. The Trustees and executive officers of the Fund and their
principal occupations for the past five years are listed below. Those
trustees who are "interested persons," as defined in the 1940 Act, are
indicated by an asterisk (*). All Trustees and officers hold similar
positions with other investment companies in the same Fund Complex managed by
the Investment Adviser. Fund Complex presently consists of: Aetna Series
Fund, Inc., Aetna Variable Fund, Aetna Income Shares, Aetna Variable Encore
Fund, Aetna Investment Advisers Fund, Inc., Aetna GET Fund (Series B) and
Aetna Generation Portfolios, Inc.
<TABLE>
<CAPTION>
Principal Occupation During Past Five Years
Position(s) Held (and Positions held with Affiliated Persons
Name, Address and Age with Registrant or Principal Underwriters of the Registrant)
<S> <C> <C>
Shaun P. Mathews* Trustee and Vice President, Products Group, Aetna
151 Farmington President Retirement Services, Inc., February 1996 to
Avenue Present; Senior Vice President, Strategic
Hartford, Markets and Products, ALIAC, February 1993 to
Connecticut February 1996; Chief Executive, Aetna
Age 40 Investment Services, Inc., October 1995 to
Present; President, Aetna Investment
Services, Inc., March 1994 to Present;
Director and Chief Operations Officer, Aetna
Investment Services, Inc., July 1993 to
Present; Director and Senior Vice President,
Aetna Insurance Company of America, February
1993 to Present; Senior Vice President,
Pensions, ALIAC, and Director of ALIAC, March
1991 to February, 1993; Vice President of
Aetna Life Insurance Company, 1991 to
Present.
James C. Hamilton Vice President Chief Financial Officer, Aetna Investment
151 Farmington and Treasurer Services, Inc., July 1993 to Present;
Avenue Director, Vice President and Treasurer, Aetna
Hartford, Insurance Company of America, February 1993
Connecticut to Present; Director, Aetna Private Capital,
Age 55 Inc., November 1990 to Present; Vice
President and Treasurer of ALIAC, October
1988 to Present; Vice President and Actuary,
Aetna Life Insurance Company, 1988 to
Present.
Susan E. Bryant Secretary Counsel, Aetna Life and Casualty Company,
151 Farmington March 1993 to Present; General Counsel and
Avenue Corporate Secretary, First Investors
Hartford, Corporation, April 1991 to March 1993;
Connecticut Administrator, Oklahoma Department of
Age 48 Securities, March 1986 to April 1991.
Morton Ehrlich Trustee Chairman and Chief Executive Officer,
1000 Venetian Way Integrated Management Corp. (an
Miami, Florida entrepreneurial company) and Universal
Age 61 Research Technologies, 1992 to Present;
Director and Chairman, Audit Committee,
National Bureau of Economic Research, 1985 to
1992; President, LIFECO, Travel Services
Corp., October 1988 to December 1991.
Maria T. Fighetti Trustee Manager/Attorney, Health Services, New York
325 Piermont Road City Department of Mental Health, Mental
Closter, New Jersey Retardation and Alcohol Services, 1973 to
Age 52 Present.
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<PAGE>
David L. Grove Trustee Private Investor; Economic/Financial
5 The Knoll Consultant, December 1985 to Present.
Armonk, New York
Age 78
Timothy A. Holt* Trustee Director, Senior Vice President and Chief
151 Farmington Financial Officer, ALIAC, February 1996 to
Avenue Present; Senior Vice President, Business
Hartford, Strategy & Finance, Aetna Retirement
Connecticut Services, Inc., February 1996 to Present;
Age 43 Vice President, Portfolio Management/
Investment Group, Aetna Life and Casualty
Company, June 1991 to February 1996;
Treasurer, Aetna Investment Management, Inc.,
February 1990 to June 1991.
Daniel P. Kearney* Trustee Director, President, and Chief Executive
151 Farmington Officer, ALIAC, December 1993 to Present;
Avenue Executive Vice President of Aetna Life and
Hartford, Casualty Company, December 1993 to Present;
Connecticut Group Executive, Aetna Life and Casualty
Age 56 Company, 1991 to 1993; Director, Aetna
Investment Services, Inc., November 1994 to
Present; Director, Aetna Insurance Company of
America, May 1994 to Present.
Sidney Koch Trustee Financial Adviser, self-employed, January
455 East 86th 1993 to Present; Senior Adviser, Daiwa
Street Securities America, Inc., January 1992 to
New York, New York January 1993; Executive Vice President,
Age 61 Member of Executive Committee, Daiwa
Securities America, Inc., January 1986 to
January 1992.
Corine T. Norgaard** Trustee, Chair Professor, Accounting and Dean of the School
School of Audit Committee of Management, Binghamton University
Management and Contract (Binghamton, NY), August 1993 to Present;
Binghamton Committee Professor, Accounting, University of
University Connecticut (Storrs, Connecticut), September
Binghamton, New 1969 to June 1993; Director, The Advest Group
York (holding company for brokerage firm).
Age 58
Richard G. Scheide Trustee Trust and Private Banking Consultant, David
11 Lily Street Ross Palmer Consultants, July 1991 to
Nantucket, Present; Executive Vice President and
Massachusetts Manager, Bank of New England, N.A., June 1976
Age 66 to July 1991.
</TABLE>
**Dr. Norgaard is a director of a holding company that has as a subsidiary a
broker-dealer that sells contracts for Aetna Life Insurance and Annuity
Company. The Fund is offered as an investment option under the Contracts. Her
position as a director of the holding company may cause her to be an
"interested person" for purposes of the 1940 Act.
During the year ended December 31, 1995, members of the Boards of the Funds
within the Aetna Mutual Fund Complex who are also directors, officers or
employees of Aetna Life and Casualty Company and its affiliates were not
entitled to any compensation from the Funds. Effective November 1, 1995,
members of the Boards who are not affiliated as employees of Aetna or its
subsidiaries are entitled to receive an
6
<PAGE>
annual retainer of $30,000 for service on the Boards of the Funds within the
Aetna Mutual Fund Complex. In addition, each such member will receive a fee
of $5,000 per meeting for each regularly scheduled Board meeting, $5,000 for
each Contract Committee meeting which is held on any day on which a regular
Board meeting is not scheduled; and $3,000 for each committee meeting other
than for a Contract Committee meeting on and day on which a regular Board
meeting is not scheduled. A Committee Chairperson fee of $2,000 each will be
paid to the Chairperson of the Contract and Audit Committees. All of the
above fees are to be allocated proportionately to each Fund within the Aetna
Mutual Fund Complex based on the net assets of the Fund as of the date
compensation is earned.
As of December 31, 1995, the unaffiliated members of the Board of Trustees
were compensated as follows:
Total
Compensation
from
Aggregate Registrant
Compensation and Fund
Name of Person, from Complex Paid
Position Registrant to Trustees
----------------------------- ------------- -------------
Corine Norgaard $3,116 $51,000
Trustee and
Chairman, Audit and
Contract Committees
Sidney Koch $2,825 $47,000
Trustee and
Member, Audit and
Contract Committees
Maria T. Fighetti $2,825 $46,000
Trustee and
Member, Audit and
Contract Committees
Morton Ehrlich $2,825 $46,000
Trustee and
Member, Audit and
Contract Committees
Richard G. Scheide $2,825 $46,500
Trustee and
Member, Audit and
Contract Committees
David L. Grove $2,825* $46,500*
Trustee and
Member, Audit and
Contract Committees
* Mr. Grove elected to defer all such compensation.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS OF THE FUND
As of March 31, 1996, all of the shares of the Fund were owned by the Company
and its affiliates and allocated to variable annuity and variable life
insurance separate accounts to fund obligations under VA Contracts and VLI
Policies. Contract holders in these separate accounts are provided the right
to direct the voting of Fund shares at shareholder meetings. The Company and
its affiliates vote the shares they own in these separate accounts in
accordance with contract holders' directions. Undirected shares of the Fund
will be voted for each Account in the same proportion as directed shares. The
Company is a wholly
7
<PAGE>
owned subsidiary of Aetna Retirement Holdings, Inc., which is in turn a
wholly owned subsidiary of Aetna Retirement Services, Inc. and an indirect
wholly owned subsidiary of Aetna Life and Casualty Company located at 151
Farmington Avenue, Hartford, Connecticut 06156.
INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an Investment Advisory Agreement (the "Management
Agreement") with the Company, in effect since April 1994. It has been
confirmed each year and is currently effective through December 31, 1997. A
prior investment advisory agreement with the Company, with substantially
identical terms, was previously in effect. Under the Management Agreement and
subject to the direction of the Board of Trustees of the Fund, the Company
has responsibility for (i) supervising all aspects of the operations of the
Fund; (ii) selecting the securities to be purchased, sold or exchanged by the
Fund or otherwise represented in the Fund's investment portfolio, place
trades for all such securities; (iii) formulating and implementing continuing
programs for the purchase and sale of securities; (iv) obtaining and
evaluating pertinent information about significant developments and economic,
statistical and financial data, domestic, foreign or otherwise, whether
affecting the economy generally, the Fund, securities held by or under
consideration for the Fund, or the issuers of those securities; (v) providing
economic research and securities analyses as the Adviser considers necessary
or advisable in connection with the Adviser's performance of its duties
hereunder; (vi) obtaining the services of, contracting with, and providing
instructions to custodians and/or subcustodians of the Fund's securities,
transfer agents, dividend paying agents, pricing services and other service
providers as are necessary to carry out the terms of this Agreement; (vii)
perparing financial and performance reports, calculating and reporting daily
net asset values, and preparing any other financial data or reports, as the
Adviser from time to time, deems necessary or as is requested by the Board;
and (viii) taking any actions which appear to the Adviser and the Board
necessary.
The Management Agreement provides that the Company shall pay (a) the
salaries, employment benefits and other related costs of those of its
personnel engaged in providing investment advice to the Fund, including,
without limitation, office space, office equipment, telephone and postage
costs and (b) any fees and expenses of all Trustees officers and employees,
if any, of the Fund who are employees of the Company or an affiliated entity
and any salaries and employment benefits payable to those persons. The
Management Agreement provides that the Fund will pay (i) investment advisory
fees; (ii) broker's commissions and certain other transaction fees including
the portion of such fees, if any, which is attributable to brokerage research
services; (iii) fees and expenses of the Fund's independent auditors and
outside legal counsel; (iv) expenses of printing and distributing proxies,
proxy statements, prospectuses and reports to shareholders of the Fund,
except as such expenses may be borne by the distributor; (v) interest and
taxes; (vi) fees and expenses of those of the Fund's Trustees who are not
"interested persons" (as defined by the 1940 Act) of the Fund or the Company;
(vii) costs and expenses of promoting the sale of shares in the Fund,
including preparing prospectuses and reports to shareholders of the Fund;
(viii) administrator, transfer agent, custodian and dividend disbursing agent
fees and expenses; (ix) fees of dividend, accounting and pricing agents
appointed by the Fund; (x) fees payable to the Securities and Exchange
Commission ("SEC") or in connection with the registration of shares of the
Fund under the laws of any state or territory of the United States or the
District of Columbia; (xi) fees and assessments of the Investment Company
Institute or any successor organization and other association memberships
approved by the Board of Trustees; (xii) such nonrecurring or extraordinary
expenses as may arise; (xiii) all other ordinary business expenses incurred
in the operations of the Fund, unless specifically allocable otherwise by the
Management Agreement; (xiv) costs attributable to investor services,
administering shareholder accounts and handling shareholder relations; (xv)
all expenses incident to the payment of any dividend, distribution,
withdrawal or redemption; and (xvi) insurance premiums on property and
personnel (including officers and Trustees) of the Fund which benefit the
Fund. Some of the costs payable by the Fund under the Management Agreement
are being assumed by the Company under the terms of the Administrative
Services Agreement (see "Administrative Services Agreement").
The Management Agreement provides that if, for any fiscal year, the total of
all ordinary business expenses of the Fund, including all investment advisory
fees but excluding brokerage commissions, dis-
8
<PAGE>
tribution fees, taxes, interest and extraordinary expenses and certain other
excludable expenses, would exceed the most restrictive expense limits imposed
by any statute or regulatory authority of any jurisdiction in which shares of
the Fund are offered for sales (unless a waiver is obtained), the Company
shall reduce its advisory fee in order to reduce such excess expenses, but
will not be required to reimburse the Fund for any ordinary business expenses
which exceed the amount of its advisory fee for such fiscal year.
The Management Agreement provides that it will continue in effect from year
to year provided that it is specifically approved at least annually by the
Board of Trustees of the Fund and by a majority of the non-interested
Trustees by votes cast at a meeting called for such purpose. The Management
Agreement provides that it may be terminated at any time by vote of the
Fund's Trustees or by vote of a majority of the Fund's outstanding voting
securities, or the Company, on sixty (60) days' written notice to the other
party. The Management Agreement will terminate automatically in the event of
its assignment.
Pursuant to the terms of the previous management agreement, the Company
received an annual investment advisory fee of 0.25% of the average daily net
assets of the Fund. For the years 1993, 1994 and 1995, the Fund paid the
Company an investment advisory fee of $1,026,406, $1,061,521 and $1,242,199,
respectively.
The service mark of the Aetna Variable Encore Fund and the name "Aetna" have
been adopted by the Fund with the permission of Aetna Life and Casualty
Company and their continued use is subject to the right of Aetna Life and
Casualty Company to withdraw this permission in the event the Company or
another subsidiary or affiliated corporation of Aetna Life and Casualty
Company should not be the investment adviser of the Fund.
ADMINISTRATIVE SERVICES AGREEMENT
The Fund has entered into an Administrative Services Agreement with the
Company effective May 1, 1996 under which the Company has agreed to provide
all administrative services in support of the Fund. In addition, the Company
has agreed to pay on behalf of the Fund, all ordinary recurring direct costs
of the Fund that it would otherwise be required to pay under the terms of the
Investment Advisory Agreement except brokerage costs and other transaction
costs in connection with the purchase and sale of securities for its
portfolio (Transaction Costs). As a result, the Fund's costs and fees are
limited to its advisory fee, the administrative services charge and
Transaction Costs. For the services under the Administrative Services
Agreement, the Company will receive an annual fee, payable monthly at a rate
of 0.10% of the average daily net assets of the Fund. Prior to May 1, 1996,
the Company had an Administrative Services Agreement that provided for the
reimbursement of a proportionate share of the Company's overhead in
administering the Fund. Prior to May 1, 1996, the Fund was obligated to pay
its own direct costs. The total of the direct costs and administrative costs
for the years ended December 31, 1993, 1994 and 1995 were $245,027, $313,575
and $277,840, respectively.
The Administrative Services Agreement will remain in effect until January 1,
1997. It will then remain in effect from year-to-year if approved annually by
a majority of the Trustees. It may be terminated by either party on sixty
days' written notice.
BROKERAGE ALLOCATION AND TRADING POLICIES
Subject to the direction of the Fund's Board of Trustees, the Company has
responsibility for making the Fund's investment decisions and for effecting
the execution of trades for the Fund's portfolio. Purchases and sales of
portfolio securities will usually be made in principal transactions, which
will result in the payment of no brokerage commission. In such transactions,
portfolio securities will normally be purchased directly from or sold to the
issuer or an underwriter or market-maker for these securities.
The primary criterion used in the allocation of purchase transactions is the
availability of a security which best meets the requirements of the Fund's
portfolio strategy. This determination is based on the safety,
9
<PAGE>
liquidity, yield and maturity of the security in relation to other money
market instruments then available. The primary criterion used in the
allocation of sale transactions will be that of obtaining the best price and
execution of such transactions under the circumstances then prevailing.
Certain executive officers of the Company also have supervisory
responsibility with respect to the securities portfolio of the Company's own
general account. Further, the Company also acts as investment adviser to
other investment companies registered under the 1940 Act. The Company has
adopted policies designed to prevent disadvantaging the Fund in placing
orders for the purchase and sale of debt securities for the Fund, the Company
will normally use its own facilities and there will not be allocations of
such orders between the Fund and the Company's general account. However, to
the extent the Company has other clients, the Fund and another advisory
client of the Company may desire to buy or sell the same publicly traded
security at or about the same time. In such a case, the purchases or sales
will normally be allocated as nearly as practicable on a pro rata basis in
proportion to the amounts to be purchased or sold by each. In some cases the
smaller orders will be filled first. In determining the amounts to be
purchased and sold, the main factors to be considered are the respective
investment objectives of the Fund and the other portfolios, the relative size
of portfolio holdings of the same or comparable securities, availability of
cash for investment by the Fund and the other portfolios, and the size of
their respective investment commitments. Trades may be executed between Funds
and such trades are executed at "current market price" in compliance with SEC
Rule 17a-7.
The Fund did not pay any brokerage commissions for 1993, 1994, and 1995.
DESCRIPTION OF SHARES
Aetna Variable Encore Fund was established as a Maryland corporation in 1974
and converted to a Massachusetts business trust on May 1, 1984. It operates
under a Declaration of Trust ("Declaration") dated January 25, 1984.
The Declaration permits the Trustees to issue an unlimited number of full and
fractional shares of beneficial interest of a single class, each of which
represents a proportionate interest in the Fund equal to each other share.
The Trustees have the power to divide or combine the shares into a greater or
lesser number of shares without thereby changing the proportional beneficial
interest in the Fund.
Upon liquidation of the Fund, shareholders are entitled to share pro rata in
the net assets of the Fund available for distribution to shareholders. Fund
shares are fully paid and non-assessable, except as set forth below.
Shareholder and Trustee Liability
The Fund is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such business trusts may,
under certain circumstances, be held personally liable as partners for the
obligations of the Fund, which is not true in the case of a corporation. The
Declaration provides that shareholders shall not be subject to any personal
liability for the acts or obligations of the Fund and that every written
agreement, obligation, instrument or undertaking made by the Fund shall
contain a provision to the effect that shareholders are not personally liable
thereunder. With respect to tort claims, contract claims where the provision
referred to is omitted from the undertaking, and claims for taxes and certain
statutory liabilities in other jurisdictions, a shareholder may be held
personally liable to the extent that claims are not satisfied by the Fund.
However, upon payment of any such liability the shareholder will be entitled
to reimbursement from the general assets of the Fund. The Trustees intend to
conduct the operations of the Fund, with the advice of counsel, in such a way
as to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund.
The Declaration further provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law, but nothing in the Declaration
protects a Trustee against any liability to which he or she would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his or her
office.
Voting Rights
Shareholders are entitled to one vote for each full share held (and
fractional votes for fractional shares held) and will vote in the election of
Trustees (to the extent hereinafter provided) and on other matters submitted
to the vote of shareholders. The shareholders of the Fund are the insurance
companies for
10
<PAGE>
their separate accounts using the Fund to fund VA Contracts and VLI Policies.
The insurance company depositors of the separate accounts pass rights for
shares held for VA Contracts or VLI Policies through to Contract holders or
Participants as described in the prospectus for the applicable VA Contract or
VLI Policy. A meeting of the shareholders at which Trustees were elected was
most recently held on April 13, 1994. Thereafter, no further meeting of
shareholders for the purpose of electing Trustees will be held unless and
until such time as less than a majority of the Trustees holding office have
been elected by shareholders, at which time the Trustees then in office will
call a shareholders' meeting for election of Trustees. Vacancies occurring
between such meetings shall be filled in an otherwise legal manner if,
immediately after filling any such vacancy, at least two-thirds of the
Trustees holding office have been elected by shareholders. Except as set
forth above, the Trustees shall continue to hold office and may appoint
successor Trustees. Trustees may be removed from office (1) at any time by
two-thirds vote of the Trustees; (2) by a majority vote of Trustees where any
Trustee becomes mentally or physically incapacitated; (3) at a special
meeting of shareholders by a two-thirds vote of the outstanding shares; (4)
by written declaration filed with Mellon Bank, N.A., the Fund's custodian,
signed by two-thirds of the Fund's shareholders. Any Trustee may also
voluntarily resign from office.
Voting rights are not cumulative, so that the holders of more than 50% of the
shares voting in the election of Trustees can, if they choose to do so, elect
all the Trustees of the Fund, in which event the holders of the remaining
shares will be unable to elect any person as a Trustee.
The Declaration may be amended by an affirmative vote of a majority of the
shares at any meeting of shareholders or by written instrument signed by a
majority of the Trustees and consented to by a majority of the shareholders.
The Trustees may also amend the Declaration without the vote or consent of
shareholders if they deem it necessary to conform the Declaration to the
requirements of applicable federal laws or regulations or the requirements of
the regulated investment company provisions of the Internal Revenue Code of
1986, as amended, but the Trustees shall not be liable for failing to do so.
Shares have no preemptive or conversion rights.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Fund or its shareholders, and the discussions here and
in the Prospectus are not intended as substitutes for careful tax planning.
Holders of VA Contracts or VLI Policies should consult the prospectuses of
their respective contracts or policies for information concerning the federal
income tax consequences of owning such VA Contracts or VLI Policies.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
As a regulated investment company, the Fund generally is not subject to
federal income tax on the portion of its net investment income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses) and
capital gain net income (i.e., the excess of capital gains over capital
losses) that it distributes to shareholders, provided that it distributes at
least 90% of its investment company taxable income (i.e., net investment
income and the excess of net short-term capital gain over net long-term
capital loss) for the taxable year (the "Distribution Requirement"), and
satisfies certain other requirements of the Code that are described below.
Distributions by the Fund made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year, will
be considered distributions of income and gains of the taxable year and can
therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing
11
<PAGE>
in stock or securities) and other income (including but not limited to gains
from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive of
certain gains on designated hedging transactions that are offset by realized
or unrealized losses on offsetting positions) from the sale or other
disposition of stock, securities or foreign currencies (or options, futures
or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). However, foreign currency gains, including those
derived from options, futures and forwards, will not in any event be
characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options
or futures thereon). Because of the Short-Short Gain Test, the Fund may have
to limit the sale of appreciated securities that it has held for less than
three months. However, the Short-Short Gain Test will not prevent the Fund
from disposing of investments at a loss, since the recognition of a loss
before the expiration of the three-month holding period is disregarded for
this purpose. Interest (including original issue discount) received by the
Fund at maturity or upon the disposition of a security held for less than
three months will not be treated as gross income derived from the sale or
other disposition of such security within the meaning of the Short-Short Gain
Test. However, income that is attributable to realized market appreciation
will be treated as gross income from the sale or other disposition of
securities for this purpose.
Finally, the Fund must satisfy an asset diversification test in order to
qualify as a regulated investment company. Under this test, at the close of
each quarter of the Fund's taxable year, at least 50% of the value of the
Fund's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and
securities of other issuers (as to which the Fund has not invested more than
5% of the value of the Fund's total assets in securities of such issuer and
as to which the Fund does not hold more than 10% of the outstanding voting
securities of such issuer), and no more than 25% of the value of its total
assets may be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option
(call or put) with respect to a security is treated as issued by the issuer
of the security not the issuer of the option. However, with regard to forward
currency contracts, there does not appear to be any formal or informal
authority which identifies the issuer of such instrument. For purposes of
asset diversification testing, obligations issued by or guaranteed by
agencies and instrumentalities of the U.S. Government such as the Federal
Agricultural Mortgage Corporation, the Farm Credit System Financial
Assistance Corporation, the Federal Home Loan Bank, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the
Government National Mortgage Corporation, and the Student Loan Marketing
Association are treated as U.S. Government securities.
If for any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
Qualification of Segregated Asset Accounts
Under Code section 817(h), a segregated asset account upon which a variable
annuity contract or variable life insurance policy is based must be
"adequately diversified." A segregated asset account will be adequately
diversified if it satisfies one of two alternative tests set forth in the
Treasury Regulations. Specifically, the Treasury Regulations provide, that
except as permitted by the "safe harbor" discussed below, as of the end of
each calendar quarter (or within 30 days thereafter) no more than 55% of a
fund's total assets may be represented by any one investment, no more than
70% by any two investments, no more than 80% by any three investments and no
more than 90% by any four investments. For this purpose, all securities of
the same issuer are considered a single investment, and while each U.S.
Government agency and instrumentality is considered a separate issuer, a
particular foreign government and its agencies, instrumentalities and
political subdivisions may be considered the same issuer. As a safe harbor,
12
<PAGE>
a separate account will be treated as being adequately diversified if the
diversification requirements under Subchapter M are satisfied and no more
than 55% of the value of the account's total assets are cash and cash items,
U.S. government securities and securities of other regulated investment
companies.
For purposes of these alternative diversification tests, a segregated asset
account investing in shares of a regulated investment company will be
entitled to "look-through" the regulated investment company to its pro rata
portion of the regulated investment company's assets, provided the regulated
investment company satisfies certain conditions relating to the ownership of
the shares.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year
ending November 30 or December 31, for its taxable year (a "taxable year
election")). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses from Section 988 transactions incurred
after October 31 of any year (or after the end of its taxable year if it has
made a taxable year election) in determining the amount of ordinary taxable
income for the current calendar year (and, instead, include such gains and
losses in determining ordinary taxable income for the succeeding calendar
year).
The Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid
excise tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment company
taxable income for each taxable year. Such distributions will be taxable to
ALIAC as ordinary income and treated as dividends for federal income tax
purposes.
The Fund may either retain or distribute to ALIAC its net capital gain, if
any, for each taxable year. The Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to ALIAC as long-term capital gain, regardless
of the length of time ALIAC has held its shares or whether such gain was
recognized by the Fund prior to the date on which ALIAC acquired shares. All
distributions paid to ALIAC, whether characterized as ordinary income or
capital gain, are not taxable to VA Contract or VLI Policy holders.
If the Fund elects to retain its net capital gain, the Fund will be taxed
thereon (except to the extent of any available capital loss carryovers) at
the 35% corporate tax rate. Where the Fund elects to retain its net capital
gain, it is expected that the Fund also will elect to have shareholders of
record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit
for his pro rata share of tax paid by the Fund on the gain, and will increase
the tax basis for his shares by an amount equal to the deemed distribution
less the tax credit.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested in various
countries is not known.
13
<PAGE>
Distributions by the Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his shares; any
excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions paid to ALIAC will be reinvested in additional shares.
Shareholders receiving a distribution in the form of additional shares will
be treated as receiving a distribution in an amount equal to the fair market
value of the shares received, determined as of the reinvestment date. In
addition, if the net asset value at the time a shareholder purchases shares
of the Fund reflects undistributed net investment income or recognized
capital gain net income, or unrealized appreciation in the value of the
assets of the Fund, distributions of such amounts will be taxable to the
shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31
of such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the
year.
Sale or Redemption of Shares
ALIAC will recognize gain or loss on the sale or redemption of shares of the
Fund in an amount equal to the difference between the proceeds of the sale or
redemption and the shareholder's adjusted tax basis in the shares. All or a
portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were
held for longer than one year. However, any capital loss arising from the
sale or redemption of shares held, or deemed under Code rules to be held, for
six months or less will be treated as a long-term capital loss to the extent
of the amount of capital gain dividends received on such shares. Although
gain or loss realized on shares redeemed through the direction of VA Contract
or VLI Policy holders is taxable to ALIAC or its affiliates, such VA Contract
or VLI Policy holders will not be subject to tax.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect
on the date of this Statement of Additional Information. Future legislative
or administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are
urged to consult their tax advisers as to the consequences of these and other
state and local tax rules affecting investment in the Fund.
SALE AND REDEMPTION OF SHARES
Shares of the Fund are sold and redeemed at the net asset value next
determined after receipt of a purchase or redemption order in acceptable form
by the Company. No sales charge or redemption charge is made.
The value of shares redeemed may be more or less than the shareholder's cost,
depending upon the market value of the portfolio securities at the time of
redemption. Payment for shares redeemed will be made to the Company by the
Fund within seven days or the maximum period allowed by law, if shorter,
after the redemption request is received by the Company acting as transfer
agent for the Fund. The right to redeem Fund shares may be suspended or
payment therefore postponed for any period during which
14
<PAGE>
(a) trading on the New York Stock Exchange is restricted as determined by the
SEC or such Exchange is closed for other than weekends and holidays; (b) an
emergency exists, as determined by the SEC, as a result of which (i) disposal
by the Fund of securities owned by it is not reasonably practicable, or (ii)
it is not reasonably practicable for the Fund to determine fairly the value
of its net assets; or (c) the SEC by order so permits for the protection of
shareholders of the Fund.
NET ASSET VALUE
Short-term debt securities which have a maturity date of more than sixty days
will be valued at the mean of the last bid and asked price obtained from
principal market makers. Generally, short-term debt securities maturing in
sixty days or less at the date of purchase will be valued using the
"amortized cost" method of valuation. This involves valuing an instrument at
its cost and thereafter assuming a constant amortization of premium or
increase of discount.
CUSTODIAN
Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, Pennsylvania 15258
serves as custodian for assets of the Fund. The custodian does not
participate in determining the investment policies of the Fund or in deciding
which securities are purchased or sold by the Fund. The Fund, however, may
invest in obligations of the custodian and may purchase or sell securities
from or to the custodian.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103 serves
as independent auditors to the Fund. KPMG Peat Marwick LLP provides audit
services, assistance and consultation in connection with SEC filings.
15
<PAGE>
FINANCIAL STATEMENTS
Portfolios of Investments
Statements of Assets and Liabilities
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Independent Auditors' Report
F-1
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995
- ------------------------------------------------
Number of Market
Shares Value
------- ---------
COMMON STOCKS (90.8%)
Aerospace and Defense (1.2%)
Kaman Corp. Class A..... 34,700 $ 386,038
Lockheed Martin Corp.... 139,504 11,020,816
McDonnell-Douglas Corp.. 527,200 48,502,399
United Technologies
Corp.................. 75,000 7,115,625
---------
67,024,878
---------
Apparel and Cosmetics (1.5%)
Chic By H I S, Inc.+.... 19,000 104,500
Coats Viyella Plc....... 342,700 931,133
Helene Curtis
Industries, Inc....... 5,000 158,125
Maybelline, Inc......... 39,000 1,413,750
Nike, Inc............... 1,166,000 81,182,749
Wolverine World Wide,
Inc................... 22,500 708,750
---------
84,449,007
---------
Autos and Auto Equipment (0.2%)
Autoliv AB.............. 6,800 398,105
Bandag, Inc............. 33,000 1,786,125
Borg Warner Automotive,
Inc................... 86,700 2,774,400
Kaydon Corp............. 38,000 1,154,250
Masland Corp............ 38,500 539,000
Mitsubishi Motors Corp.. 120,000 978,334
Smith (A.O.) Corp....... 65,000 1,348,750
Volvo AB Class B........ 36,000 738,751
---------
9,717,715
---------
Banks (5.8%)
Associated Banc-Corp.... 14,700 601,781
Banca Popolare Di
Bergamo............... 40,000 553,437
Bank of Boston Corp..... 763,200 35,298,000
Bank of New York Co.,
Inc................... 409,600 19,968,000
Bankers Corp............ 42,000 682,500
BayBanks, Inc........... 41,900 4,116,675
Brooklyn Bancorp, Inc.+. 38,000 1,548,500
Canadian Imperial Bank
of Commerce........... 1 20
CCB Financial Corp...... 14,500 804,750
Charter One Financial,
Inc................... 38,000 1,163,750
Chemical Banking Corp... 1,079,600 63,426,499
CITICORP................ 506,652 34,072,347
Citizens Bancorp........ 10,000 322,500
City National Corp...... 242,900 3,400,600
Coast Savings
Financial, Inc.+...... 27,800 962,575
Comercial Net
Lease Realty.......... 41,700 531,675
Cullen/Frost
Bankers, Inc.......... 38,000 1,900,000
Den Danske Bank......... 16,300 1,126,471
FFY Financial Corp...... 21,500 451,500
First American
Corp. (Tenn.)......... 84,900 4,022,138
First Chicago Corp...... 1,196,772 47,272,493
First Commonwealth
Financial Corp........ 15,600 273,000
First Empire State Corp. 3,900 850,200
First Interstate Bancorp 49,500 6,756,750
First of America Bank
Corp.................. 61,700 2,737,938
First Tennessee
National Corp......... 31,800 1,923,900
Banks (continued)
Golden West Financial
Corp.................. 80,300 $4,436,575
HSBC Holdings Plc....... 124,737 1,887,461
JSB Financial, Inc...... 27,700 876,013
Jyske Bank AS........... 4,500 308,553
KeyCorp................. 63,500 2,301,875
Mark Twain Bancshares,
Inc................... 14,900 577,375
National Australia Bank
Ltd................... 70,000 630,083
Nations Bank, Inc....... 863,900 60,149,037
North Fork
Bancorporation, Inc... 50,000 1,262,500
Northern Trust Corp..... 56,100 3,141,600
Oversea-Chinese Banking. 87,000 1,088,653
PNC Bancorp............. 18,900 1,240,313
Premier Bancorp, Inc.... 22,000 514,250
Queens County Bancorp,
Inc................... 50,000 1,978,125
Reliance Bancorp, Inc... 74,900 1,095,413
River Forest Bancorp,
Inc................... 4,600 117,300
Royal Bank of Canada.... 39,800 908,259
Security Capital Corp... 33,000 1,988,250
Silicon Valley
Bancshares+........... 6,500 156,000
St. Francis Capital
Corp.................. 12,200 283,650
Standard
Financial, Inc.+...... 44,000 643,500
Star Banc Corp.......... 62,100 3,694,950
Susquehanna Bancshares,
Inc................... 5,600 148,400
Trustmark Corp.......... 9,100 207,025
Union Bank.............. 80,200 4,350,850
Zion Bancorporation..... 36,500 2,929,125
---------
331,683,134
---------
Building Materials and Construction (0.7%)
American Buildings Co.+. 53,300 1,199,250
Beazer Homes USA, Inc.+. 55,200 1,138,500
Butler Manufacturing Co. 6,300 247,275
Centex Corp............. 93,800 3,259,550
Champion Enterprises,
Inc.+................. 135,800 4,192,825
Clayton Homes, Inc...... 217,375 4,646,391
Continental Homes
Holding Corp.......... 31,200 768,300
Det Danske
Traelastkompagni...... 4,600 311,259
Elcor Corp.............. 36,800 800,400
Fujita Corp............. 230,000 1,039,019
Granite
Construction, Inc..... 85,900 2,705,850
Jacobs Engineering
Group, Inc.+.......... 8,500 212,500
Kon. Volker Stevin N.V.. 7,000 423,554
Lennar Corp............. 76,000 1,909,500
Lindab AB Class B....... 29,000 596,536
NCI Building Systems,
Inc.+................. 11,000 272,250
Nippon Densetsu Kogyo... 163,000 1,643,352
Radex-Heraklith
Industrial AG......... 12,800 387,663
Redman Industries, Inc.+ 49,700 1,677,375
Skyline Corp............ 32,000 664,000
Stone & Webster, Inc.... 18,000 645,750
Strabag Oesterreich AG.. 3,400 263,003
Texas Industries, Inc... 36,300 1,923,900
Toll Brothers, Inc.+.... 88,000 2,024,000
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- ---------------------------------------------
Number of Market
Shares Value
------- ---------
Building Materials and Construction (continued)
Tredegar
Industries, Inc....... 11,000 $ 357,500
U S Home Corp.+......... 20,000 582,500
VA Technologie AG....... 8,800 1,118,503
Vulcan Materials Co..... 35,800 2,062,975
Webb (Del E.) Corp...... 52,900 1,064,613
WHX Corp.+.............. 101,200 1,100,550
---------
39,238,643
---------
Chemicals (2.4%)
ARCO Chemical Co........ 66,200 3,218,975
Cabot Corp.............. 34,800 1,874,850
Chemed Corp............. 28,700 1,115,713
Cytec Industries+....... 29,900 1,865,013
Dexter Corp............. 21,500 507,938
Dow Chemical Co......... 522,400 36,763,899
Du Pont (E.I.) de
Nemours............... 9,100 635,863
Eastman Chemical Co..... 203,800 12,762,975
Fuji Photo Film......... 52,000 1,502,205
Geon Co. (The).......... 39,900 972,563
Goodrich (B.F.) Co...... 64,000 4,360,000
Great Lakes Chemical
Corp.................. 10,400 748,800
Lyondell Petrochemical
Co.................... 174,000 3,980,250
Morton International,
Inc................... 215,300 7,723,888
Norsk Hydro AS.......... 83,800 3,528,086
OM Group, Inc........... 28,200 934,125
PPG Industries, Inc..... 575,000 26,306,250
Praxair, Inc............ 484,500 16,291,313
Shin-Etsu Chemical Co... 50,000 1,037,274
Solvay SA Class A....... 1,000 540,265
Valspar Corp............ 8,400 374,850
Vigoro Corp............. 83,200 5,137,600
Wellman, Inc............ 152,000 3,458,000
---------
135,640,695
---------
Commercial Services (0.4%)
ADVO, Inc............... 24,400 634,400
California Water
Service Co............ 2,100 68,513
Devry, Inc.+............ 85,600 2,311,200
GATX Corp............... 105,300 5,120,213
Health Management
Systems, Inc.+........ 14,200 553,800
Inchcape Plc............ 332,079 1,283,809
Kindercare Learning
Centers, Inc.+........ 65,000 820,625
Manpower, Inc........... 124,200 3,493,125
Measurex Corp........... 42,300 1,194,975
Robert Half
International, Inc.+.. 145,600 6,097,000
Royal PTT Nederland N.V. 38,983 1,417,696
---------
22,995,356
---------
Computer Software (2.9%)
Acxiom Corp.+........... 35,000 958,125
American Management
Systems, Inc.+........ 44,500 1,335,000
Analysts International
Corp.................. 8,700 261,000
Boole & Babbage, Inc.+.. 24,000 588,000
Cadence Design Systems,
Inc.+................. 162,300 6,816,600
Computer Software (continued)
Cheyenne Software, Inc.+ 135,000 $ 3,526,875
Cisco Systems, Inc.+.... 822,900 61,408,912
Computer Associates
International, Inc.... 549,800 31,269,875
Computer Horizons Corp.+ 9,100 345,800
Computer Sciences Corp.+ 85,400 5,999,350
Comshare, Inc.+......... 17,700 460,200
Continum, Inc.+......... 5,600 221,200
Diamond Multimedia
Systems, Inc.+........ 30,900 1,108,538
DST Systems, Inc.+...... 24,200 689,700
Henry (Jack) &
Associates............ 15,300 378,675
Hogan Systems, Inc.+.... 61,500 837,938
Hyperion Software Corp.+ 29,600 629,000
Kronos, Inc.+........... 19,700 935,750
Macneal-Schwendler Corp. 21,000 336,000
Microsoft Corp.+........ 404,000 35,450,999
Project Software &
Development, Inc.+.... 27,600 962,550
Reynolds & Reynolds Co.. 71,600 2,783,450
Security Dynamics
Technologies, Inc.+... 4,400 239,800
Shiva Corp.+............ 5,200 378,300
Softdesk, Inc.+......... 15,700 310,075
SPSS, Inc.+............. 16,800 327,600
Structural Dynamics
Research Corp.+....... 105,000 3,084,375
Sungard Data Systems,
Inc.+................. 125,300 3,571,050
System Software
Associates, Inc....... 28,350 616,613
TGV Software, Inc.+..... 36,800 349,600
---------
166,180,950
---------
Computers and Office Equipment (3.0%)
Acma Ltd................ 78,000 259,173
Adaptec, Inc.+.......... 55,800 2,287,800
Bay Networks, Inc.+..... 113,500 4,667,688
Cabletron Systems, Inc.+ 272,400 22,064,400
CANON, Inc.............. 115,000 2,084,727
Ceridian Corp.+......... 322,200 13,290,750
Champion
Industries, Inc....... 7,500 170,625
Comdisco, Inc........... 92,850 2,100,731
Compaq Computer Corp.+.. 400,000 19,200,000
Computervision Corp.+... 81,200 1,248,450
Dell Computer Corp.+.... 158,800 5,498,450
Digital Equipment Corp.+ 20,200 1,295,325
Fujitsu, Ltd............ 190,000 2,118,172
Harris Corp............. 57,000 3,113,625
HBO & Co................ 19,100 1,463,538
In Focus Systems, Inc.+. 75,500 2,727,438
International Business
Machines, Inc......... 77,000 7,064,750
Komag, Inc.+............ 50,000 2,306,250
Kurabo Industries....... 365,000 1,397,654
Read-Rite Corp.+........ 205,000 4,766,250
Standard Register Co.... 31,700 637,963
Sun Microsystems, Inc.+. 1,118,000 51,008,749
Trident Microsystems,
Inc.+................. 35,300 829,550
Xerox Corp.............. 146,700 20,097,900
---------
171,699,958
---------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- ---------------------------------------------------------
Number of Market
Shares Value
------- -------
Consumer Products (1.5%)
Dekalb Genetics Corp.
Class B............... 8,400 $ 379,040
Eastman Kodak Co........ 716,800 48,025,599
First Brands Corp....... 78,500 3,738,563
Libbey, Inc............. 18,000 405,000
Liz Claiborne, Inc...... 1,029,700 28,574,175
Reckitt & Coleman Plc... 145,646 1,612,307
---------
82,734,694
---------
Diversified (1.7%)
Alusuisse-Lonza Holding
AG.................... 615 488,494
Astec Industries, Inc.+. 21,400 211,325
Dover Corp.............. 1,232,800 45,459,499
Hagemeyer N.V........... 11,016 575,847
Harrisons & Crosfield
Plc................... 638,798 1,586,876
Harsco Corp............. 95,700 5,562,563
Helix Technology Corp... 16,900 667,550
Lonrho Plc.............. 684,510 1,870,476
Lydall, Inc.+........... 19,700 448,175
Opal, Inc.+............. 35,200 448,800
Oriental Holdings Bhd... 156,000 792,596
Orkla AS Class A........ 43,000 2,143,841
Plantronics, Inc.+...... 9,100 328,738
Standex International
Corp.................. 14,100 461,775
Teledyne, Inc........... 49,000 1,255,625
Textron, Inc............ 329,700 22,254,750
Valmet Corp. Class A.... 18,200 456,865
Varlen Corp............. 24,000 516,000
VF Corp................. 165,500 8,730,125
---------
94,259,920
---------
Electrical and Electronics (3.0%)
Amphenol Corp.+......... 88,000 2,134,000
Applied Materials, Inc.+ 110,600 4,354,875
Austria Mikro Systeme
International......... 6,120 993,605
Bang & Olufsen Holding
Co.................... 17,000 524,540
BMC Industries, Inc..... 66,400 1,543,800
Cohu, Inc............... 20,600 525,300
CTS Corporation......... 4,600 173,650
Cypress Semiconductor
Corp.+................ 280,000 3,570,000
Dallas Semiconductor
Corp.................. 55,500 1,151,625
Dovatron International,
Inc.+................. 18,000 607,500
Electro Scientific
Industries, Inc.+..... 13,000 380,250
Esterline Technologies+. 57,000 1,346,625
Glenayre Technologies,
Inc.+................. 66,300 4,127,175
Hadco Corp.+............ 112,400 3,161,250
Hewlett Packard Co...... 651,300 54,546,374
Hitachi Koki............ 185,000 1,678,639
Intel Corp.............. 62,300 3,535,525
Kyocera Corp............ 19,000 1,412,728
Logicon, Inc............ 78,200 2,150,500
Matsushita Electric
Industrial Co. Ltd.... 87,000 1,416,897
Maxim Integrated
Products, Inc.+....... 83,400 3,210,900
Micron Technology, Inc.. 551,900 21,869,038
MTS Systems Corp........ 11,300 372,900
Electrical and Electronics (continued)
Nintendo Co. Ltd........ 17,000 $ 1,293,684
Novellus Systems, Inc.+. 47,300 2,554,200
Philips Electronics N.V. 52,200 1,888,591
Pioneer Standard
Electronics........... 11,300 149,725
Quickturn Design
System, Inc.+......... 92,800 928,000
Ramtron International
Corp.+................ 40,500 263,250
Rohm Co................. 26,000 1,469,439
Seagate
Technology, Inc.+..... 135,300 6,426,750
Telefonaktiebolaget
Ericsson.............. 37,500 735,583
Tencor Instruments+..... 45,300 1,104,188
Texas Instruments, Inc.. 712,200 36,856,349
Unitrode Corp.+......... 22,100 624,325
Wyle Electronics........ 31,500 1,106,438
---------
170,188,218
---------
Electrical Equipment (2.5%)
ADflex Solutions, Inc.+. 38,000 1,016,500
Allgon AB Class B....... 20,000 277,635
Avnet, Inc.............. 85,000 3,803,750
Belden, Inc............. 35,800 921,850
Burr-Brown Corp.+....... 48,450 1,235,475
Charter Power Systems,
Inc................... 14,700 422,625
Cidco, Inc.+............ 67,000 1,708,500
Dionex Corp.+........... 9,000 510,750
Draka Holding N.V....... 14,000 362,423
Emerson Electric Co..... 17,400 1,422,450
Fore Systems, Inc.+..... 16,300 969,850
General Electric Co..... 920,200 66,254,399
Grainger (W. W.), Inc... 101,600 6,731,000
Harman International
Industries............ 50,715 2,034,939
Hitachi Ltd. (Hit.
Seisakusho)........... 217,000 2,187,776
Honeywell, Inc.......... 210,000 10,211,250
International Rectifier
Corp.+................ 236,600 5,915,000
Kemet Corp.+............ 118,400 2,826,800
Kent Electronics Corp.+. 95,100 5,551,463
Linear Technology Corp.. 11,000 431,750
Marshall Industries+.... 35,000 1,124,375
Mentor Graphics Corp.+.. 242,000 4,416,500
Methode Electronics,
Inc. Class A.......... 51,500 733,875
Microchip Technology
Corp.+................ 154,800 5,650,200
Nichicon................ 110,000 1,620,862
Park Electrochemical
Corp.................. 32,400 1,069,200
Pittway Corp. Class A... 12,700 860,425
Raychem Corp............ 59,600 3,389,750
SCI Systems, Inc.+...... 55,000 1,705,000
Sundstrand Corp......... 34,000 2,392,750
Tektronix, Inc.......... 14,700 722,138
Teradyne, Inc.+......... 132,200 3,305,000
Valmont Industries...... 200 4,950
---------
141,791,210
---------
Financial Services (4.3%)
Abbey National Plc...... 132,126 1,304,683
ABN-Amro Holding N.V.... 25,049 1,142,213
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- ---------------------------------------------------------
Number of Market
Shares Value
------- -------
Financial Services (continued)
Advanta Corp. Class A... 31,000 $1,185,750
ALBANK Financial Corp... 22,100 663,000
Alex Brown & Sons, Inc.. 72,000 3,024,000
Astoria Financial Corp.. 36,800 1,679,000
AT&T Capital Corp....... 9,700 371,025
Bank of Montreal........ 57,419 1,305,074
Barclays Plc............ 135,600 1,555,836
Bear Sterns Co., Inc.... 237,000 4,710,375
CNA Financial Corp.+.... 32,700 3,711,450
Commercial Federal Corp. 50,000 1,887,500
Crestar Financial Corp. 51,000 3,015,375
Dean Witter Discover
and Co. .............. 436,300 20,506,100
Deposit Guaranty Corp. . 25,800 1,148,100
Edwards (A.G.), Inc. ... 24,800 592,100
Federal National
Mortgage Association . 210,100 26,078,663
Fokus Banken AS+ ....... 80,000 433,042
Fort Wayne
National Corp. ....... 6,400 201,600
Great Financial Corp. .. 40,000 940,000
Greenpoint
Financial Corp. ...... 123,600 3,306,300
Home Financial Corp. ... 54,700 847,850
Household
International, Inc. .. 170,000 10,051,250
HSBC Holdings Plc ...... 25 381
Internationale
Nederlanden Groep N.V. 19,100 1,277,225
Leader Financial Corp. . 70,000 2,616,250
Legg Mason, Inc. ....... 20,600 566,500
Liberty Financial Co. .. 4 121
Lion Land Bhd .......... 471,000 467,475
Merrill Lynch &
Co., Inc. ............ 701,500 35,776,499
Peoples Heritage
Financial Group ....... 71,000 1,615,250
Phoenix Duff & Phelps
Corp ................. 78,000 536,250
Pioneer Group, Inc. .... 16,400 446,900
Promise Co., Ltd. ...... 30,400 1,464,670
Rashid Hussain Bhd ..... 153,000 457,976
RCSB Financial, Inc. ... 55,100 1,308,625
Sanyo Shinpan Finance
Co ................... 20,100 1,656,245
Schweizerischer
Bankverein............ 2,080 851,377
Skandinaviska Enskilda
Banken................ 58,600 486,314
Svenska Handelsbanken .. 30,000 624,679
TCF Financial Corp. .... 30,200 1,000,375
TR Financial Corp. ..... 64,100 1,634,550
Transamerica Corp. ..... 312,100 22,744,288
Travelers, Inc. ........ 1,135,000 71,363,124
Union Planters Corp. ... 152,700 4,867,313
Unitas Bank Ltd. Class
A+.................... 223,700 566,694
United Overseas Bank
Ltd................... 33,600 323,054
---------
242,312,421
---------
Foods and Beverages (6.2%)
Cagle's, Inc. .......... 18,000 252,000
Campbell Soup Co. ...... 339,400 20,364,000
Cerebos Pacific Ltd. ... 107,000 741,322
Coca-Cola Co. .......... 647,100 48,047,174
Coca-Cola Enterprises,
Inc .................. 97,000 2,594,750
Foods and Beverages (continued)
Conagra, Inc. .......... 1,457,564 $ 60,124,514
CPC International, Inc.. 374,100 25,672,613
Cultor Oy .............. 9,500 393,810
Goodmark Foods, Inc. ... 12,900 228,975
Heinz (H.J.) Co. ....... 348,000 11,527,500
Hershey Foods Corp. .... 54,700 3,555,500
Hometown Buffet, Inc.+ . 31,200 345,150
Hormel Foods Corp. ..... 58,000 1,428,250
Hudson Foods, Inc.
Class A............... 148,800 2,566,800
Huhtamaki Group Class I 15,100 365,137
IBP, Inc. .............. 108,600 5,484,300
International
Multifoods Corp. ..... 60,700 1,221,588
Katokichi .............. 63,000 1,313,073
Kroger Co. (The)+ ...... 530,000 19,875,000
Molson Companies Ltd. .. 66,500 1,097,038
Mondavi (Robert) Corp.+ 55,200 1,524,900
Nash-Finch Co. ......... 17,000 310,250
Nestle SA Registered ... 805 892,657
Oester Brau-Beteiligungs 8,200 373,741
PepsiCo, Inc. .......... 870,000 48,611,249
Quaker Oats Co. ........ 500,400 17,263,800
Safeway, Inc.+ ......... 92,300 4,753,450
Sara Lee Corp. ......... 1,738,000 55,398,749
Smith's Food & Drug
Centers, Inc. ........ 39,700 1,002,425
Super Food
Services, Inc. ....... 23,000 299,000
Superfos AS ............ 4,100 358,805
Supervalu, Inc. ........ 220,000 6,930,000
Thorn Apple Valley ..... 17,800 298,150
Unilever N.V ........... 25,800 3,631,350
Universal Foods Corp. .. 23,700 950,963
---------
349,797,983
---------
Health Services (0.5%)
Bergen Brunswig Corp.
Class A .............. 40,000 995,000
Genetics
Institute, Inc.+ ..... 22,100 1,182,350
Health Management
Associates, Inc.+ .... 29,250 764,156
Horizon/CMS Healthcare
Corp.+ ............... 163,900 4,138,475
Invacare Corp. ......... 79,400 2,004,850
Laboratory Corp. of
America+.............. 49,900 467,813
Lincare Holdings, Inc.+. 148,600 3,715,000
Nellcor, Inc.+ ......... 62,500 3,625,000
Sun Healthcare Group,
Inc.+................. 105,000 1,417,500
Tenet Healthcare Corp.+. 318,300 6,604,725
Universal Health
Services, Inc.+....... 63,000 2,795,625
Wellpoint Health
Networks, Inc.+....... 43,300 1,391,013
---------
29,101,507
---------
Health Technology (0.1%)
Alpharma, Inc. Class A .. 14,500 378,813
Spacelabs Medical, Inc.+ 2,900 83,375
Sybron International
Corp.+ ................ 131,800 3,130,250
---------
3,592,438
---------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- ----------------------------------------------------------
Number of Market
Shares Value
------- -------
Home Furnishings and Appliances (0.1%)
Electrolux AB Class B ... 10,500 $ 431,730
Haverty Furniture Co.,
Inc ................... 32,000 444,000
Kimball International,
Inc. Class B .......... 11,500 290,375
Leggett & Platt, Inc. ... 170,000 4,122,500
Oneida Ltd. ............. 19,800 348,975
---------
5,637,580
---------
Hotels and Restaurants (1.7%)
La Quinta Inns, Inc. .... 71,900 1,968,263
Marcus Corp. ............ 13,400 366,825
Marriott International,
Inc ................... 855,800 32,734,350
McDonald's Corp. ........ 1,264,800 57,074,099
Prime Hospitality Corp.+ 110,000 1,100,000
Promus Hotel Corp.+ ..... 13,700 304,825
RFS Hotel
Investors, Inc. ....... 180,000 2,767,500
Sonic Corp.+ ............ 65,600 1,246,400
---------
97,562,262
---------
Household Products (0.1%)
AJL PEPS Trust+ ......... 47,000 916,500
Carlisle Cos., Inc. ..... 7,400 298,775
Premark International,
Inc ................... 80,000 4,050,000
Springs Industries,
Inc. Class A ......... 3,400 140,675
Toro Co. ................ 36,000 1,183,500
Wing Tai Holdings ....... 334,000 682,404
---------
7,271,854
---------
Insurance (3.8%)
Acceptance Insurance
Cos., Inc.+ ......... 3,600 53,550
Aegon N.V ............. 32,481 1,438,535
AFLAC, Inc. ........... 73,600 3,192,400
Allied Group, Inc. .... 18,400 662,400
Allmerica Property &
Casualty Cos., Inc. .. 21,400 577,800
Allstate Corp. ........ 1,205,043 49,557,392
American Bankers
Insurance Group ..... 76,100 2,967,900
American Financial
Group, Inc. ......... 43,700 1,338,313
American General Corp. 112,700 3,930,413
Capital American
Financial Corp....... 13,900 314,488
Cigna Corp. ........... 193,400 19,968,550
CMAC Investment Corp. . 77,700 3,418,800
Conseco, Inc. ......... 31,300 1,960,163
EA-Generali AG ........ 3,600 1,079,578
Equitable of Iowa Cos . 23,400 751,725
Financial Security
Assurance Holdings
Ltd ................. 3,492 86,871
Fremont General Corp. . 72,380 2,659,965
Frontier Insurance
Group, Inc. ......... 9,400 300,800
Fund American
Enterprises, Inc. ... 11,244 837,678
Gallagher (Arthur J.) &
Co .................. 27,200 1,013,200
General Re Corp. ...... 334,500 51,847,499
Guardian Royal Exchange
Plc. ................ 338,000 1,448,389
Healthwise of America,
Inc.+ .............. 41,000 1,599,000
Horace Mann Educators . 89,600 2,800,000
Corp ................
Lawyers Title Corp. ... 8,000 153,000
Insurance (continued)
Loews Corp. ........... 53,000 $ 4,153,875
Maic Holdings, Inc.+ .. 10,600 360,400
Markel Corp.+ ......... 5,000 377,500
Maxicare Health Plans,
Inc.+ ............... 182,000 4,891,250
NAC Re Corp. .......... 15,000 540,000
Old Republic
International Corp. . 128,600 4,565,300
Orion Capital Corp. ... 32,800 1,422,700
Penncorp Financial
Group, Inc. ......... 31,000 910,625
Pohjola Insurance Group 18,000 232,140
Pxre Corp. ............ 15,000 397,500
Reliastar Financial
Corp ................ 34,000 1,508,750
Royal Insurance
Holdings Plc ....... 229,478 1,361,018
Safeco Corp. .......... 218,000 7,521,000
Security-Connecticut
Corp ................ 29,000 786,625
Selective Insurance
Group ............... 32,000 1,136,000
TIG Holdings, Inc. .... 645,000 18,382,500
Transatlantic Holdings,
Inc ................. 42,800 3,140,450
Transport
Holdings, Inc.+...... 4,575 186,431
Trenwick Group, Inc. .. 4,100 230,625
UNI Storebrand AS+ .... 178,500 988,826
Unitrin, Inc. ......... 48,700 2,337,600
Vesta Insurance Group,
Inc ................. 62,000 3,379,000
Winterthur
Schweizerische
Versicherungs........ 670 478,613
Zurich
Versicherungs-
Gesellschaft ........ 3,345 1,002,890
---------
214,250,027
---------
Machinery and Equipment (1.7%)
Acme-Cleveland Corp..... 36,500 684,375
Allied Products, Corp... 20,000 480,000
Applied Power, Inc...... 15,800 474,000
Barnes Group, Inc....... 12,000 432,000
Black & Decker Corp..... 211,300 7,448,325
Blount, Inc. Class A.... 45,000 1,181,250
Brunswick Corp.......... 123,400 2,961,600
Danaher Corp............ 49,700 1,577,975
Electroglas, Inc.+...... 17,700 433,650
Fluor Corp.............. 452,800 29,884,800
FSI International, Inc.+ 22,600 457,650
Georg Fischer AG........ 240 312,853
Global Industrial
Technologies, Inc.+... 105,000 1,981,875
Illinois Tool
Works, Inc............ 142,700 8,419,300
Jenbacher Werke AG...... 3,900 588,644
JLG Industries, Inc..... 40,000 1,190,000
Kone Corp. Class B...... 2,400 200,636
Lam Research Corp.+..... 57,000 2,607,750
Landis & Gyr............ 505 412,532
Parker-Hannifin Corp.... 786,500 26,937,625
Regal Beloit............ 61,500 1,337,625
Tecumseh Products Co.
Class A............... 21,500 1,112,625
Tsubakimoto Chain....... 276,000 1,661,538
Tsukishima Kikai........ 93,700 1,998,352
---------
94,776,980
---------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- -------------------------------------------------------
Number of Market
Shares Value
------- -------
Media and Entertainment (0.7%)
AMC Entertainment+ ..... 8,600 $ 201,025
Belo Corp. Class A ..... 35,600 1,237,100
Callaway Golf Co. ...... 263,600 5,963,950
Carmike Cinemas Class A+ 7,000 157,500
Chris-Craft
Industries, Inc.+ .... 53,900 2,331,175
Clear Channel
Communications, Inc.+ 10,800 476,550
Genting Bhd ............ 99,000 826,625
Granada Group Plc ...... 75,100 752,072
Grand Casinos, Inc.+ ... 96,000 2,232,000
Gtech Holdings Corp.+ .. 238,500 6,201,000
King World Production,
Inc.+ ............... 375,000 14,578,125
Magnum Corp. Bhd ....... 282,000 533,123
Media General, Inc. .... 29,700 902,138
Mirage Resorts, Inc.+ .. 97,000 3,346,500
Regal Cinemas, Inc.+ ... 84,300 2,507,925
---------
42,246,808
---------
Medical Supplies (1.5%)
Baxter
International, Inc. .. 94,800 3,969,750
Coherent, Inc.+ ........ 79,800 3,231,900
Cordis Corp.+ .......... 54,600 5,487,300
Guidant Corp. .......... 272,819 11,526,603
Haemonetics Corp.+ ..... 44,400 788,100
McKesson Corp. ......... 15,900 804,938
Medtronic, Inc. ........ 991,400 55,394,474
North American
Biologicals, Inc.+ ... 187,600 2,016,700
Sola International,
Inc.+ ............... 31,300 790,325
---------
84,010,090
---------
Metals and Mining (2.4%)
Acme Metals, Inc.+ ...... 20,500 292,125
AK Steel Holding Corp. .. 42,000 1,438,500
Alcan Aluminum Ltd. ..... 370,900 11,542,958
Aluminum Co. of America.. 371,500 19,643,063
Asarco, Inc. ............ 190,000 6,080,000
Ashland Coal, Inc. ...... 14,400 307,800
Brenco, Inc. ............ 12,700 130,175
Carpenter Technology
Corp .................. 82,200 3,380,475
Cleveland-Cliffs, Inc. .. 58,000 2,378,000
Commonwealth Aluminum
Corp .................. 80,000 1,240,000
Cyprus Amax Minerals Co. 815,200 21,297,100
Dofasco, Inc. ........... 66,555 841,753
Falconbridge Ltd. ....... 40,200 854,755
Handy & Harman .......... 82,200 1,356,300
J & L Specilty
Steel, Inc. ........... 162,100 3,039,375
Kalmar Industries ....... 16,000 265,564
Kennametal, Inc. ........ 56,300 1,787,525
Kon. Ned. Hoogovens En .. 16 536
Lukens, Inc. ............ 36,100 1,037,875
MAF Bancorp, Inc. ....... 6,380 159,500
Magma Copper Co.+ ....... 157,400 4,387,525
Minerals Technologies,
Inc ................... 18,700 682,550
Mueller ............
Industries, Inc.+
Phelps Dodge Corp. ...... 120,000 3,510,000
Metals and Mining (continued)
Quanex Corp. ............ 15,200 $ 294,500
Santa Fe Pacific Gold ... 424,800 5,150,700
Corp ..................
SSAB Svenskt Sta AB ..... 44,000 451,459
---------
137,210,487
---------
Oil and Gas (10.0%)
Alberta Energy Co. Ltd.+ 55,200 885,329
Amoco Corp. ............. 528,109 37,957,833
Atlantic Richfield Co. .. 45,200 5,005,900
BJ Services Co.+ ........ 83,000 2,407,000
Burmah Castrol Plc ...... 91,700 1,329,768
Camco International,
Inc ................... 70,100 1,962,800
Chesapeake Energy Corp.+ 46,800 1,556,100
Columbia Gas System,
Inc.+ ................. 46,900 2,057,738
Conwest Exploration Co. . 45,600 911,064
Devon Energy Corp. ...... 13,400 341,700
Diamond Shamrock, Inc. .. 64,000 1,656,000
Enron Oil & Gas Co. ..... 66,600 1,598,400
Exxon Corp. ............. 1,665,000 133,408,124
Global Industries Ltd.+ 18,000 540,000
Halliburton Co. ......... 946,100 47,896,312
Imperial Oil Ltd. ....... 1 18
KCS Energy, Inc. ........ 21,000 315,000
Leviathan Gas Pipeline
Partners L. P ......... 65,600 1,861,400
Mobil Corp. ............. 789,900 88,468,799
NGC Corp. ............... 33,000 292,875
OEMV AG ................. 9,500 825,423
Oneok, Inc. ............. 95,000 2,173,125
Panhandle Eastern Corp.. 299,800 8,356,925
Petro-Canada ............ 80,000 923,821
Petronas Gas Bhd ........ 110,000 374,754
Pride Petroleum
Services, Inc.+ ....... 118,000 1,253,750
Royal Dutch Petroleum
Co .................... 812,800 114,706,399
Shell Transport &
Trading Co. ........... 123,000 10,009,125
Smith
International, Inc.+ .. 292,500 6,873,750
Sonat Offshore Drilling
Co .................... 198,800 8,896,300
Sun Company, Inc. ....... 520,900 14,259,638
Tesoro Petroleum Corp.+ 70,000 603,750
Texaco, Inc. ............ 795,800 62,470,299
Tide West Oil Co.+ ...... 14,000 187,250
TransCanada Pipelines
Ltd ................... 1 12
Union Texas Petroleum
Holdings, Inc. ........ 141,200 2,735,750
---------
565,102,231
---------
Paper and Containers (2.0%)
Abitibi-Price, Inc. ..... 51,100 735,272
ACX Technologies, Inc.+ 10,400 157,300
Asia Pulp & Paper Co. ... 146,000 1,186,250
Ltd.+
Bobst SA ................ 105 164,248
Champion International .. 565,200 23,738,400
Corp ..................
Chesapeake Corp. ........ 103,000 3,051,375
Consolidated ............ 72,800 4,085,900
Papers, Inc. ..........
Georgia-Pacific Corp. ... 240,600 16,511,175
Glatfelter (P.H.) Co. ... 24,800 424,700
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Paper and Containers (continued)
Kymmene OY .............. 23,900 $ 632,974
Leykam-Muerztaler
Papier+ ............... 9,600 304,093
Macmillan Bloedel Ltd. .. 68,500 847,524
MayrMelnhof Karton AG ... 10,500 526,533
Mead Corp. .............. 529,900 27,687,275
Metsa Serla Class B ..... 14,800 456,727
Missouri Och Domsjoe AB . 8,100 345,882
Rayoner, Inc. ........... 123,800 4,131,825
Repola Oy ............... 42,800 808,254
Rock-Tenn Co. Class A ... 2,900 47,125
Stone-Consolidated
Corp.+ ................ 62,400 800,645
Stora Kopparbergs ....... 35,000 411,926
Temple-Inland, Inc. ..... 269,900 11,909,338
Willamette Industries,
Inc ................... 281,500 15,834,375
---------
114,799,116
---------
Pharmaceuticals (7.9%)
Abbott Laboratories ..... 399,800 16,691,650
Alliance Pharmaceutical+ 35,100 478,238
Autoimmune, Inc.+ ....... 15,600 175,500
Becton, Dickinson & Co.. 477,900 35,842,499
Bristol-Myers Squibb Co. 996,100 85,540,087
COR Therapeutics, Inc.+. 119,500 1,000,813
Immulogic
Pharmaceutical Corp.+ . 42,100 810,425
Immunex Corp.+ .......... 11,500 189,750
Johnson & Johnson ....... 1,255,900 107,536,437
Jones Medical
Industries, Inc. ...... 23,900 576,588
Merck & Co., Inc. ....... 586,700 38,575,524
Novo-Nordisk AS ......... 10,800 1,481,054
Pfizer, Inc. ............ 1,508,400 95,029,199
R.P. Scherer Corp.+ ..... 87,400 4,293,525
Rhone-Poulenc Rorer,
Inc ................... 80,000 4,260,000
Roche Holding AG ........ 135 1,070,544
Schering Plough ......... 894,800 48,990,299
Vical, Inc.+ ............ 23,200 281,300
Watson Pharmaceuticals,
Inc.+ ................. 68,400 3,351,600
---------
446,175,032
---------
Printing and Publishing (1.4%)
Banta Corp. ............. 171,200 7,532,800
Cadmus Communications ... 5,300 143,100
Corp ..................
Central Newspapers, ..... 50,700 1,590,713
Inc. Class A
Devon Group, Inc.+ ...... 23,000 668,438
Gannett Company, Inc. ... 286,600 17,590,075
Lee Enterprises, Inc. ... 20,000 460,000
Meredith Corp. .......... 31,200 1,306,500
Mondadori (Arnoldo) ..... 90,000 780,611
Editore SpA
New York Times Co. ...... 280,500 8,309,813
Pulitzer Publishing Co. . 41,000 1,957,750
Scholastic Corp.+ ....... 72,600 5,644,650
Scientific Games ........ 46,800 1,766,700
Holdings Corp.+
Toppan Printing Co. Ltd. 140,000 1,845,766
Tribune Co. ............. 461,000 28,178,625
Printing and Publishing (continued)
VNU-Verenigde ...........
Nederlands Uitgev 6,200 $ 852,012
---------
78,627,553
---------
Real Estate Investment Trusts (3.0%)
AMLI Residential
Properities Trust ..... 55,900 1,118,000
Amoy Properties Ltd. .... 200,000 199,167
Apartment Investment &
Management ............ 27,500 536,250
Associated Estates
Realty Corp. .......... 118,000 2,537,000
Beacon Properties Corp. . 200,800 4,618,400
Bre Properties, Inc.
Class A ............... 42,500 1,514,063
CALI Realty Corp. ....... 85,800 1,876,875
Camden Property Trust ... 90,600 2,163,075
Carr Realty Corp. ....... 36,300 884,813
CBL & Associates
Properties, Inc. ...... 107,900 2,346,825
Centerpoint Properties
Corp .................. 23,400 541,125
Chelsea GCA Realty, Inc. 126,900 3,807,000
Colonial Properties
Trust ................. 111,400 2,840,700
Cousins Properties, Inc. 29,000 587,250
Crescent Real Estate
Equities, Inc. ........ 216,500 7,388,063
Crown America Realty
Trust ................. 228,300 1,797,863
Debartolo Realty Corp. .. 403,300 5,242,900
Developers Diversified
Realty Corp. .......... 172,500 5,175,000
Duke Realty
Investments, Inc. ..... 276,700 8,681,463
Equity Inns, Inc. ....... 186,500 2,144,750
Equity Residential
Properties Trust ...... 242,500 7,426,563
Essex Property
Trust, Inc. ........... 48,000 924,000
Evans Withycombe
Residential, Inc. ..... 35,000 752,500
Excel Realty Trust, Inc. 114,800 2,353,400
First Industrial Realty
Trust, Inc. ........... 118,200 2,659,500
General Growth
Properties ............ 184,900 3,836,675
Healthcare Realty
Trust, Inc. ........... 63,000 1,449,000
HGI Realty, Inc. ........ 150,300 3,438,113
Highwood
Properties, Inc. ...... 310,400 8,768,800
Hong Kong Land Holdings
Ltd ................... 600,000 1,110,000
JP Realty, Inc. ......... 27,000 590,625
Kimco Realty Corp. ...... 187,050 5,097,113
Kranzco Realty Trust .... 45,300 668,175
LTC Properties, Inc. .... 22,400 336,000
Manufactured Home
Communities, Inc. ..... 44,800 784,000
Merry Land & Investment
Co., Inc. ............. 144,000 3,402,000
MGI Properties, Inc. .... 72,300 1,211,025
Mid-America Apartment
Communities, Inc. ..... 52,500 1,299,375
National Golf
Properties, Inc. ...... 97,200 2,223,450
National Health
Investors, Inc. ....... 152,800 5,061,500
O.Y.L. Industries Bhd ... 23,000 178,456
Oasis Residential, Inc.. 264,200 6,010,550
Patriot American
Hospitality, Inc. ..... 46,600 1,199,950
Post Properties, Inc. ... 119,000 3,793,125
Price REIT, Inc. ........ 17,500 485,625
Prime Residential, Inc... 118,900 2,199,650
Public Storage, Inc. .... 429,900 8,168,100
Realty Income Corp. ..... 76,000 1,710,000
Santa Anita Realty
Enterprises, Inc. ..... 5,800 68,875
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Real Estate Investment Trusts (continued)
RPS Realty Trust ........ 65,900 $ 304,788
Security Capital
Industrial Trust ...... 121,000 2,117,500
Sekisui House ........... 149,000 1,906,645
Smith (Charles E.)
Residential Realty Co. 16,400 387,450
South West
Property Trust ........ 211,900 2,860,650
Spieker Properties, Inc.. 252,100 6,334,013
Starwood Lodging Trust .. 33,800 1,005,550
Storage USA, Inc. ....... 29,500 962,438
Tanger Factory Outlet
Centers, Inc. ......... 94,100 2,352,500
Vornado Realty Trust .... 188,800 7,080,000
Walden Residential
Properties, Inc. ...... 164,800 3,440,200
Weeks Corp. ............. 26,800 673,350
Weingarten Realty
Investors ............. 120,100 4,563,800
Winston Hotels, Inc. .... 46,600 553,375
---------
167,748,986
---------
Retail (2.2%)
Albertson's, Inc. ....... 127,600 4,194,850
Arbor Drugs, Inc. ....... 23,600 495,600
Asda Group Plc .......... 600,000 1,029,374
Big B, Inc. ............. 107,400 1,074,000
Bruno's, Inc. ........... 2,380 24,990
Burton Group Plc ........ 1,263,759 2,639,041
Cardinal Health, Inc. ... 47,600 2,606,100
Casey's General Stores,
Inc ................... 35,100 767,813
CDW Computer Centers,
Inc.+ ................ 12,200 494,100
Claire's Stores, Inc. ... 85,000 1,498,125
Consolidated
Stores Corp.+ ......... 26,200 569,850
Eckerd Corp.+ ........... 27,900 1,245,038
Egghead, Inc.+ .......... 51,500 331,531
Fabri-Centers of
America Class A ...... 11,000 145,750
Fabri-Centers of
America Class B+ ...... 8,100 87,075
Familymart .............. 40,300 1,820,542
Fay's Drug Co. .......... 52,300 392,250
Fingerhut Companies,
Inc ................... 36,000 499,500
General Host Corp.+ ..... 79,600 318,400
Hannaford Brothers, Co. . 71,000 1,748,375
Hudson's Bay Co. ........ 29,100 418,717
Ito-Yokado Co., Ltd. .... 25,000 1,541,370
JUSCO Co. ............... 65,000 1,695,022
Kesko ................... 51,700 644,137
Koninklijke Ahold N.V ... 24,003 980,723
Kroger Equity, Inc.+ .... 22,700 241,188
Laclede Gas Co. ......... 41,200 870,350
Merkur Holding AG ....... 1,225 269,336
Proffitt's Inc.+ ........ 23,000 603,750
Rex Stores Corp.+ ....... 25,000 443,750
Rite Aid Corp. .......... 567,000 19,419,750
Robinson & Co. Ltd. ..... 65,000 271,121
Ross Stores, Inc. ....... 115,000 2,199,375
Ruddick Corp. ........... 26,200 301,300
Russ Berrie & Co., Inc. . 33,000 416,625
Sears, Roebuck & Co. .... 1,335,000 52,064,999
Retail (continued)
Shopko Stores, Inc. ..... 17,600 $ 198,000
Urban Shopping Centers,
Inc ................... 68,200 1,457,775
Viking Office Products,
Inc.+ ................. 41,200 1,915,800
Vons Companies, Inc.+ ... 133,000 3,757,250
Waban, Inc.+ ............ 75,000 1,406,250
Wal-Mart Stores, Inc. ... 416,600 9,321,425
Zale Corp.+ ............. 25,000 403,125
---------
122,823,442
---------
Specialty Consumer Durables (0.1%)
Bio-Rad Labs, Inc.
Class A+ .............. 38,000 1,615,000
Collagen Corp. .......... 26,000 549,250
Fusion Systems Corp.+ ... 12,200 341,600
Polaris Industries, Inc. 147,850 4,343,094
---------
6,848,944
---------
Telecommunications (2.5%)
Ameritech Corp. ......... 1,436,700 84,765,299
AT&T Corp. .............. 729,400 47,228,649
Cascade Communications
Corp.+ ................ 55,100 4,697,275
Case Corp. .............. 99,900 4,570,425
GN Store Nord AS ........ 4,100 329,213
Holophane Corp.+ ........ 68,550 1,490,963
---------
143,081,824
---------
Transportation (1.8%)
Alaska Air Group, Inc.+ 22,100 359,125
American President
Cos., Ltd. ............ 185,300 4,261,900
AMR Corp.+ .............. 677,100 50,274,674
Bergesen d.y. AS Class B 15,000 294,392
British Airways Plc ..... 151,200 1,093,950
Canadian National
Railway Co.+ .......... 134,400 2,016,000
Comair Holdings, Inc. ... 157,500 4,232,813
Conrail, Inc. ........... 117,300 8,211,000
CSX Corp. ............... 140,000 6,387,500
Eagle USA Airfreight,
Inc.+ ................. 9,300 244,125
East Japan Railway Co. .. 244 1,187,417
Expeditors International
of Washington, Inc. ... 27,100 707,988
Florida East Coast
Industries, Inc. ...... 6,500 443,625
Harper Group, Inc. ...... 57,000 1,011,750
Hornbeck Offshore
Services, Inc.+ ....... 24,500 480,813
Kvaerner AS ............. 37,500 1,329,514
M.S. Carriers, Inc.+ .... 38,800 776,000
Malaysian International
Shipping Bhd .......... 93,000 243,580
Navistar International
Corp.+ ................ 645,700 6,779,850
Nippon Express Co. Ltd. . 120,000 1,156,318
Peninsular & Orient
Steam Navigation Co. .. 205,400 1,517,983
PHH Corp. ............... 66,200 3,094,850
Singapore Airlines Ltd. . 119,000 1,110,498
UAL Corp.+ .............. 27,100 4,837,350
Werner Enterprises, Inc. 28,000 567,000
---------
102,620,015
---------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- ---------------------------------------------------------
Number of Market
Shares Value
------- -------
Utilities - Electric (4.6%)
Boston Edison Co. ............ 137,400 $ 4,053,300
California Energy Co.,
Inc.+ ...................... 95,000 1,852,500
Centerior Energy Corp. ....... 66,000 585,750
Central Hudson Gas &
Electric Co. ............... 41,900 1,293,663
Cilcorp, Inc. ................ 30,300 1,283,963
Commonwealth Energy
System, Inc. ............... 24,200 1,082,950
Consolidated Edison Co.
of New York, Inc. .......... 620,000 19,840,000
Destec Energy, Inc.+ ......... 3,600 49,500
DQE, Inc. .................... 152,550 4,690,913
Electrowatt AG ............... 1,720 630,781
Entergy Corp. ................ 744,000 21,762,000
Florida Progress Corp. ....... 112,400 3,976,150
General Public
Utilities Corp. ............ 110,000 3,740,000
Green Mountain Power
Corp ....................... 3,000 83,250
Hawaiian Electric
Industries, Inc. ........... 18,700 724,625
Hokkaido Electric Power Co. .. 140 3,257
Houston Industries, Inc. 200,000 4,850,000
IES Industries, Inc. ......... 86,000 2,279,000
Illinova Corp. ............... 213,600 6,408,000
IPALCO Enterprises, Inc. ..... 10,300 392,688
Korea Electric Power
Corp. ADR .................. 40,000 1,070,000
LG&E Corp. ................... 35,400 1,495,650
MDU Resources Group, Inc. .... 41,400 822,825
Midamerican Energy Co. ....... 25,000 418,750
National Power PLC ADR (d) ... 42,050 388,963
New England Electric
System ..................... 93,000 3,685,125
New York State Electric
& Gas Corp. ................ 226,100 5,850,338
Nipsco Industries, Inc.. ..... 135,200 5,171,400
Northeast Utilities .......... 121,300 2,956,688
Northern States Power Co. .... 115,400 5,669,025
Oklahoma Gas & Electric Co. .. 58,700 2,524,100
Orange & Rockland
Utilities, Inc. ............ 40,000 1,430,000
Pacific Gas and
Electric Co. ............... 410,200 11,639,425
Peco Energy Co. .............. 661,900 19,939,738
Pinnacle West Capital Corp. .. 223,400 6,422,750
Portland General Corp. ....... 132,000 3,844,500
Powergen PLC ADR (d) ......... 42,050 551,906
Public Service Co.
of Colorado+ ............... 124,600 4,407,725
Public Service Co. of
New Mexico+ ................ 180,000 3,172,500
Rochester Gas &
Electric Corp. ............. 69,300 1,567,913
San Diego Gas &
Electric Co. ............... 126,200 2,997,250
SCEcorp ...................... 1,909,800 33,898,950
Sierra Pacific Resources ..... 124,400 2,907,850
Sithe Energies, Inc.+ ........ 587,200 3,523,200
Southwestern Public
Service Co. ................ 19,600 641,900
Texas Utilities Co. .......... 148,700 6,115,288
TNP Enterprises, Inc. ........ 24,300 455,625
Tohoku Electric Power ........ 38,000 917,260
Transalta Corp. .............. 80,800 866,412
Unicom Corp. ................. 1,217,100 39,860,024
United Illuminating Co. ...... 36,000 1,345,500
Utilities - Electric (continued)
Western Resources, Inc. ...... 59,300 $ 1,979,138
WPS Resources Corp. .......... 36,300 1,234,200
---------
259,354,208
---------
Utilities - Oil and Gas (1.0%)
Atlanta Gas Light Co. ........ 223,000 4,404,250
Brooklyn Union Gas Co. (The) . 82,700 2,418,975
Coastal Corp. (The) .......... 366,500 13,652,125
Connecticut Energy Corp. ..... 11,800 262,550
MCN Corp. .................... 34,300 797,475
New Jersey Resources Corp. ... 43,000 1,295,375
Northwest Natural Gas Co. .... 12,100 399,300
Pacific Enterprises .......... 225,100 6,359,075
Phoenix Resource Co., Inc. ... 64,400 1,110,900
Piedmont Natural Gas, Inc. ... 15,500 360,375
Public Service Co. of
North Carolina ............. 4,400 78,650
Southern Indiana Gas &
Electric Co. ............... 15,000 521,250
Valero Energy Corp. .......... 88,000 2,156,000
Washington Gas Light Co. ..... 26,200 537,100
Wicor, Inc. .................. 11,100 357,975
Williams Cos., Inc. .......... 510,100 22,380,638
---------
57,092,013
---------
Utilities - Telephone (4.4%)
Bell Atlantic Corp. .......... 360,000 24,075,000
BellSouth Corp. .............. 1,749,200 76,090,199
Century Telephone
Enterprises ................ 156,000 4,953,000
Cincinnati Bell, Inc. ........ 342,000 11,884,500
Citizens Utilities Co.+ ..... 21,641 275,920
DDI Corp. .................... 214 1,659,638
Frontier Corp. ............... 26,600 798,000
GTE Corp. .................... 351,000 15,444,000
Nippon Telegraph &
Telephone Corp. ............ 229 1,853,667
NYNEX Corp. .................. 280,100 15,125,400
SBC Communications, Inc. ..... 420,000 24,150,000
Southern New England
Telecommunications Corp. ... 135,100 5,370,225
Sprint Corp. ................. 1,695,000 67,588,124
Telecom Italia SpA ........... 350,000 544,927
Tellabs, Inc.+ ............... 37,200 1,376,400
---------
251,189,000
---------
Utilities - Water (0.0%)
Welsh Water Plc .............. 72,083 867,354
Total Common Stocks
(cost $3,891,283,962) ...... $5,141,754,533
---------
PREFERRED STOCKS (3.7%)
Banks (1.2%)
BankAmerica Corp. ............ 981,300 63,539,174
Barnett Banks, Inc. .......... 23,000 2,564,500
Creditanstalt-Bankverein ..... 18,600 956,726
---------
67,060,400
---------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Chemicals (0.6%)
Union Carbide Corp. .......... 902,300 $33,836,250
---------
Commercial Services (0.1%)
Alco Standard Corp. .......... 20,800 2,111,200
---------
Computers and Office Equipment (0.0%)
Ceridian Corp. ............... 21,000 1,942,500
---------
Diversified (0.0%)
Sea Containers, Ltd. ......... 36,000 1,575,000
---------
Electrical Equipment (0.7%)
FPL Group, Inc. .............. 785,600 36,432,199
Nokia AB Class A ............. 76,000 2,992,953
---------
39,425,152
---------
Financial Services (0.8%)
Alexander & Alexander(b) ..... 49,000 2,376,500
American Express Exch Note ... 663,900 36,846,449
Phoenix Duff & Phelps Corp. .. 7,800 196,950
Travelers, Inc. .............. 41,800 3,647,050
---------
43,066,949
---------
Foods and Beverages (0.0%)
Corning Delaware L.P. ........ 13,900 700,213
Union Planters Co. ........... 18,600 737,025
---------
1,437,238
---------
Machinery and Equipment (0.0%)
Case Corp.(b) ................ 14,200 1,604,600
---------
Media and Entertainment (0.0%)
AMC Entertainment ............ 15,850 645,888
---------
Metals and Mining (0.1%)
Cyprus Amax Minerals Co. ..... 42,100 2,473,375
---------
Paper and Containers (0.0%)
International
Paper Co.(b) ............... 9,300 413,850
---------
Pollution Control (0.0%)
William Cos., Inc. ........... 27,900 2,064,600
---------
Real Estate Investment Trusts (0.0%)
Security Capital .............
Pacific Trust 19,400 475,300
---------
Retail (0.2%)
Dillard Department
Stores, Inc. ............... 249,500 7,110,750
Tanger Factory Outlet
Centers, Inc. .............. 55,800 1,283,400
---------
8,394,150
---------
Utilities - Oil and Gas (0.0%)
Valero Energy Corp. .......... 37,200 1,915,800
---------
Utilities - Water (0.0%)
Welsh Water Plc .............. 77,850 131,748
Total Preferred Stocks
(cost $165,464,349) ........ $208,574,000
--------
Warrants (0.0%)
Morgan Stanley American
Express Hong ...............
Kong Call+ 294,000 1,249,500
---------
Total Warrants (cost
$1,447,583) ................ $1,249,500
--------
LONG TERM BONDS AND NOTES (1.0%)
Corporate Bonds - Convertible (1.0%)
Building Materials and Construction (0.0%)
Continental Homes
Holding Corp., ............. 700,000 $ 746,069
6.875%, 11/01/02 ---------
Commercial Services (0.0%)
Ogden Corp., 6.00%,
06/01/02 ................... 475,000 446,500
---------
Computer Software (0.0%)
Automatic Data
Processing, Inc.,
0.00%, 02/20/12 ............ 3,800,000 1,838,495
---------
Electrical and Electronics (0 1%)
Motorola, Inc., 0.00%,
09/27/13 ................... 1,000,000 763,750
National Semiconductor
Corp.(b), 6.50%,
10/01/02 ................... 4,650,000 4,312,875
Seagate Technology,
Inc., 6.75%, 05/01/12 ...... 1,860,000 2,180,850
---------
7,257,475
---------
Financial Services (0.1%)
Mitsubishi Bank, 3.00%,
11/30/02 ................... 1,680,000 1,943,592
Old Republic International,
5.75%, 08/15/02 ............ 1,415,000 1,938,550
---------
3,882,142
---------
Health Services (0.0%)
Integrated Health Services,
5.75%, 01/01/01 ............ 930,000 925,350
---------
Household Products (0.0%)
Fieldcrest Cannon, Inc.,
6.00%, 03/15/12 ............ 450,000 307,125
---------
Insurance (0.1%)
Horace Mann Educators
Corp., 6.50%, 12/01/99 ..... 930,000 953,250
NAC Re Corp.(b), 5.25%,
12/15/02 ................... 930,000 930,000
---------
1,883,250
---------
Machinery and Equipment (0.1%)
AGCO Corp., 6.50%,
06/01/08 ................... 1,260,000 4,959,940
Lam Research Corp., 6.00%,
05/01/03 ................... 232,000 462,840
---------
5,422,780
---------
Media and Entertainment (0.0%)
Carnival Corp., 4.50%,
07/01/97 ................... 680,000 986,000
---------
Metals and Mining (0.1%)
Agnico-Eagle Mines
Ltd., 3.50%, 01/27/04 ...... 2,900,000 2,465,461
Allegheny Ludlum Corp.,
5.875%, 03/15/02 ........... 930,000 962,921
Battle Mountain Gold
Co., 6.00%, 01/04/05 ....... 500,000 412,500
---------
3,840,882
---------
Oil and Gas (0.2%)
Apache Corp.(b), 6.00%,
01/15/02 ................... 1,470,000 1,675,800
Baker Hughes, Inc.,
0.00%, 05/05/08 ............ 9,975,000 6,422,916
Consolidated Natural
Gas Co., 7.25%,
12/15/15 ................... 950,000 983,250
Pennzoil Co., 4.75%,
10/01/03 ................... 1,000,000 1,008,750
Pogo Producing, 5.50%,
03/15/04 ................... 1,395,000 1,886,738
---------
11,977,454
---------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Fund
Portfolio of Investments - December 31, 1995 (continued)
- ---------------------------------------------------------
Number of Market
Shares Value
------- -------
Pharmaceuticals (0.0%)
Bindley Western, 6.50%,
10/01/02 ................... $ 930,000 $ 963,713
---------
Pollution Control (0.1%)
Browning-Ferris
Industries, Inc.,
6.75%, 07/18/05 ............ 2,850,000 2,857,125
---------
Printing and Publishing (0.1%)
Omnicom Group(b),
4.50%, 09/01/00 ............ 1,395,000 1,879,763
---------
Retail (0.1%)
Costco Wholesale Inc., ....... 2,225,000 2,147,234
5.75%, 05/15/02
Hechinger Co., 5.50%, ........ 1,500,000 701,250
04/01/12
Office Depot, Inc., .......... 1,100,000 759,000
0.00%, 12/11/07
Proffitt's Inc., 4.75%,
11/01/03 ................... 1,860,000 1,618,200
---------
5,225,684
---------
Telecommunications (0.0%)
Aspect Telecommunications(b),
5.00%, 10/15/03 ............ 930,000 1,660,050
---------
Transportation (0.0%)
AMR Corp., 6.125%,
11/01/24 ................... 930,000 976,128
---------
Utilities - Electric (0.0%)
California Energy Co.,
Inc.(b), 5.00%, 07/31/00 ... 950,000 957,125
Potomac Electric Power, 7.00%,
01/15/18 ..................... 750,000 766,875
---------
1,724,000
Total Corporate Bonds - Convertible
(cost $49,824,523) ......... $54,799,985
---------
U.S. Government Obligations (0.3%)
U.S. Treasury Note(e),
5.125%, 03/31/96............ 900,000 899,859
U.S. Treasury Note(c),
9.25%, 01/15/96............. 3,500,000 13,524,705
---------
Total U.S. Government
Obligations (cost
$14,413,401) ............... $14,424,564
---------
Total Long Term Bonds and
Notes (cost $64,237,924) .. $69,224,549
---------
Short-Term Investments (3.6%)
Abbey National North
America, Comm. Paper,
6.15%, 01/02/96 ........... 25,000,000 25,000,000
Detroit Edison Co.,
Corp. Note, 6.15%,
01/02/96 .................. 17,000,000 17,000,000
General American
Transportation Corp.,
Comm. Paper, 6.05%,
01/12/96 .................. 1,790,000 1,786,992
General Motors
Acceptance Corp.,
Corp. Note, 6.00%,
01/02/96 .................. 33,581,000 33,581,000
IBM Corp., Comm. Paper,
5.95%, 01/03/96 ........... 25,000,000 24,995,868
Public Service Co. of
Colorado, Comm ............
Paper, 6.05%, 01/02/96 .... 9,400,000 9,377,336
Sundstrand Corp., Comm ......
Paper, 6.05%, 01/02/96 .... 39,152,000 39,152,000
TCI Communications,
Inc., Comm. Paper,
6.20%, 01/22/96 ........... 10,000,000 9,965,556
TCI Communications,
Inc., Comm. Paper,
6.38%, 01/09/96 ........... 10,000,000 9,987,594
TCI Communications,
Inc., Comm. Paper,
6.25%, 01/17/96 ........... 9,000,000 8,976,563
Texas Utilities
Electric Co., Comm ........
Paper, 6.30%, 01/05/96 .... 10,000,000 9,994,750
USL Capital Corp.,
Comm. Paper, 6.00%,
01/04/96 .................. 15,000,000 14,995,000
Total Short-Term
Investments
(cost $204,812,657) ....... $ 204,812,659
---------
TOTAL INVESTMENTS ........... $5,625,615,241
(cost $4,327,246,475)(a)
Other assets less
liabilities ............... 35,891,365
---------
Total Net Assets
$5,661,506,606
==============
Notes to Portfolio of Investments
Category percentages are based on net assets.
+Non-income producing security.
(a) The cost of investments for federal income tax purposes amounted to
$4,333,946,215. Unrealized gains and losses, based on identified tax cost at
December 31, 1995 are as follows:
Unrealized gains ....... $1,374,418,711
Unrealized losses ...... (82,749,685)
--------------
Net unrealized gain... $1,291,669,026
==============
(b) 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 determined by the Board of Trustees.
(c) At December 31, 1995, U.S. Treasury Note, 9.25%, 01/15/96, principal amount
$13,500,000, was pledged to cover margin requirements for open futures
contracts (see Note 1of Notes to Financial Statements). Information concerning
open futures contracts is shown below:
No. of
Long Initial Expiration Unrealized
Contracts Value Date Gain/(Loss)
---------- ---------- -------- -----------
All Ordinaries Share
Price Index Futures ....... 260 $10,895,697 March 96 $(53,635)
TSE 35 Index Futures ........ 28 2,562,109 March 96 (23,103)
German DAX Index Futures .... 133 21,202,534 March 96 (104,206)
Topix Index Futures ......... 105 15,598,908 March 96 698,076
Hang Seng Index Futures ..... 59 3,820,4456 March 96 47,044
CAC 40 Stock Index Futures .. 128 9,550,652 March 96 202,045
FTSE 100 Index Futures ...... 50 7,659,894 March 96 (7,452)
--------
$758,769
========
(d) Represents an installment purchase. Remaining amounts to be paid are
$950,241 on February 6, 1996 and $744,133 on September 17, 1996. Future
commitment is collateralized by a U.S. Treasury Note 5.125%, 03/31/96,
principal amount $900,000.
(e) Security segregated as collateral for installment purchase.
See Notes to Financial Statements.
<PAGE>
Aetna Income Shares
Portfolio of Investments - December 31, 1995
- ---------------------------------------------
Principal Market
Amount Value
-------- ------
LONG TERM BONDS AND NOTES (81.3%)
U.S. Government and Agency
Obligations (31.9%)
Agency Mortgage-Backed Securities (6.7%)
Federal Home Loan
Mortgage Corp.
206-B, 2.24%, 07/15/19 ...... $ 1,771,737 $ 1,729,658
Federal National
Mortgage Association,
5.99%, 06/25/19 ........... 2,140,681 1,953,007
Government National
Mortgage Association,
7.50%, 03/15/24 -
10/15/25 .................. 9,665,249 9,949,167
Government National
Mortgage Association,
10.00%, 10/15/09 -
01/15/21 .................. 13,637,980 14,993,250
Government National
Mortgage Association,
10.50%, 02/15/13 -
01/15/21 .................. 14,275,261 15,863,377
Government National
Mortgage Association,
11.00%, 02/15/10 .......... 39,439 44,073
Government National
Mortgage Association,
11.25%, 12/15/15 .......... 88,289 99,214
--------------
44,631,746
--------------
U.S. Agencies (2.9%)
Small Business
Administration 92-20K,
7.55%, 11/01/12 ........... 9,748,247 10,116,731
Student Loan Marketing
Association, 7.82%,
10/14/99 .................. 9,000,000 9,137,610
--------------
19,254,341
--------------
U.S. Treasuries (22.3%)
U.S. Treasury Bond,
5.75%, 08/15/03 ........... 25,000,000 25,308,562
U.S. Treasury Bond,
5.875%, 02/15/04 .......... 20,000,000 20,428,050
U.S. Treasury Bond,
7.25%, 05/15/16 ........... 20,000,00 22,843,649
U.S. Treasury Bond,
7.625%, 02/15/25 .......... 10,000,000 12,229,663
U.S. Treasury Bond,
10.375%, 11/15/12 ......... 15,000,000 20,739,843
U.S. Treasury Note,
6.875%, 03/31/00 -
07/31/99 .................. 45,000,000 47,430,561
--------------
148,980,328
--------------
Total U.S. Government and Agency Obligations
(cost $203,978,001) ... $212,866,415
--------------
Corporate Bonds (44.2%)
Financial Services (14.2%)
American General,
8.125%, 08/15/09 .......... 10,000,000 11,526,850
Associates Corp., 7.95%,
02/15/10 .................. 15,000,000 17,112,374
Capital One Bank,
8.625%, 01/15/97 .......... 5,000,000 5,142,000
Chemical Bank, 6.625%,
01/15/98 .................. 10,000,000 10,202,500
Dean Witter, Discover &
Co., 6.00%, 03/01/98 ........ 6,000,000 6,056,250
Ford Motor Credit Corp.,
FRN, 6.588%, 06/02/98 ..... 7,000,000 7,022,540
Ford Motor Credit Corp.,
FRN, 6.188%, 02/22/99 ..... 15,000,000 14,966,100
General Electric Capital
Corp., 8.625%, 06/15/08 ... 10,000,000 12,106,550
General Electric Capital
Corp., 7.96%, 02/02/98 ... 10,000,000 10,513,000
--------------
94,648,164
--------------
Foreign and Supranationals (12.6%)
African Development
Bank, 8.80%, 09/01/19 ..... $ 11,650,000 $ 14,778,491
Banco Nacional de
Comercia Exterior,
S.N.C., 7.25%, 02/02/04 ... 5,000,000 3,896,875
Bank of China, 6.75%,
03/15/99 .................. 5,000,000 5,081,275
Bank of China, 8.25%,
03/15/14 .................. 5,000,000 4,980,375
China International
Trust, 9.00%, 10/15/06 ... 10,000,000 11,393,050
Interamerican
Development Bank,
12.25%, 12/15/08 .......... 4,000,000 6,168,800
International Bank For
Reconstruction and
Development, 9.25%,
07/15/17 .................. 11,000,000 14,635,500
Korean Development Bank,
9.25%, 06/15/98 ........... 5,000,000 5,365,875
Quebec Province, 7.125%,
02/09/24 .................. 5,000,000 5,043,450
Republic of Argentina,
10.95%, 11/01/99 .......... 3,000,000 3,215,625
Rogers Cablesystem,
10.00%, 03/15/05 .......... 8,500,000 9,158,750
--------------
83,718,066
--------------
Other Corporate Bonds (17.4%)
Alliance Entertainment,
11.25%, 07/15/05 .......... 5,000,000 5,050,000
Bruno's Inc., 10.50%,
08/01/05 .................. 5,000,000 4,962,500
Columbia/HCA Healthcare,
6.91%, 06/15/05 ........... 9,000,000 9,435,375
Georgia-Pacific Corp.,
9.50%, 12/01/11 ............. 10,500,000 12,996,323
Grand Casinos Inc.,
10.125%, 12/01/03 ......... 5,100,000 5,361,375
MGM Grand Hotel, 12.00%,
05/01/02 .................. 8,000,000 8,790,000
News America Holdings
Inc., 9.25%, 02/01/13 ..... 10,000,000 11,805,550
Paramount Communications
Inc., 7.50%, 07/15/23 ..... 11,500,000 11,114,060
Ralph's Grocery, 10.45%,
06/15/04 .................. 5,000,000 5,087,500
Stone Container Corp.,
9.875%, 02/01/01 .......... 4,500,000 4,387,500
Telewest Plc, 11.00%,
10/01/07 .................. 6,850,000 4,144,250
Tenet Healthcare Corp.,
9.625%, 09/01/02 .......... 6,220,000 6,849,775
Time Warner
Entertainment, 9.625%,
05/01/02 .................. 5,000,000 5,798,850
Time Warner, Inc.,
7.45%, 02/01/98 ........... 7,000,000 7,198,380
TRW Inc., 9.35%, 06/04/20 ... 10,000,000 13,353,300
--------------
116,334,738
--------------
Total Corporate Bonds
(cost 274,961,401) .... $294,700,968
--------------
Non-Agency Mortgage-Backed Securities (3.3%)
Asset-Backed Securities (3.3%)
Chase Mortgage Finance,
6.75%, 11/25/09 ........... 10,915,000 10,950,815
First Chicago Master
Trust 94I-a, 6.045%,
01/15/99 .................. 8,000,000 8,012,160
Security Pacific
National Bank, 8.50%,
09/01/16 .................. 353,601 358,734
Security Pacific
National Bank, 8.50%,
03/01/17 .................. 2,905,132 2,883,343
--------------
22,205,052
--------------
Total Non-Agency
Mortgage-Backed
Securities
(cost $21,873,230) ........ $ 22,205,052
--------------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Income Shares
Portfolio of Investments - December 31, 1995 (continued)
- ----------------------------------------------------------
Principal Market
Amount Value
-------- ------
Corporate Bonds - Convertible (1.0%)
Foreign and Supranationals (1.0%)
Petronas Gas Bhd(b),
7.125%, 08/15/05 .......... $ 6,000,000 $ 6,363,750
--------------
Total Corporate Bonds -
Convertible
(cost $5,968,675) ......... $ 6,363,750
--------------
Corporate Notes (0.9%)
Foreign and Supranationals (0.9%)
Swire Pacific, Ltd(b),
8.50%, 09/29/04 ........... 5,500,000 6,047,937
--------------
Total Corporate Notes
(cost $5,491,192) ........... $ 6,047,937
--------------
Total Long Term
Bonds and Notes
(cost $512,272,499) ....... $ 542,184,122
--------------
Number of Market
Shares Value
------- -------
COMMON STOCKS (0.6%)
Banks (0.6%)
CITICORP .................... 60,370 4,059,883
--------------
Total Common Stocks
(cost $3,040,516) ......... $ 4,059,883
--------------
Principal Market
Amount Value
-------- ------
Short-Term Investments (16.5%)
Detroit Edison Co.,
Corp. Note, 6.15%,
01/02/96 .................. $ 20,000,000 $ 20,000,000
Mapco, Inc., Corp. Note,
6.375%, 01/19/96 .......... 10,000,000 9,969,896
Public Service Co. of
Colorado, Comm. Paper,
6.05%, 01/02/96 ........... 10,000,000 9,975,889
Sears Roebuck Acceptance
Corp., Comm. Paper,
6.00%, 01/05/96 ........... 15,000,000 14,992,500
Source One Mortgage
Services Corp., Comm ......
Paper, 6.15%, 01/09/96 ... 10,000,000 9,988,042
Sundstrand Corp., Comm ......
Paper, 6.05%, 01/02/96 ... 27,353,000 27,353,000
TCI Communications,
Inc., Comm. Paper,
6.20%, 01/22/96 ........... 9,500,000 9,498,316
TCI Communications,
Inc., Comm. Paper,
6.38%, 01/09/96 ........... 8,000,000 7,990,076
--------------
Total Short-Term
Investments
(cost $109,767,719) ....... $ 109,767,719
--------------
TOTAL
INVESTMENTS ............... $ 656,011,724
(cost $625,080,734)(a)
Other assets less
liabilities ............... 10,948,765
--------------
Total Net Assets
$ 666,960,489
==============
Notes to Portfolio of Investments
Category percentages are based on net assets.
(a) The cost of investments for federal income tax purposes amount to
$625,730,151. Unrealized gains and losses, based on identified tax cost at
December 31, 1995 are as follows:
Unrealized gains ........ $31,064,363
Unrealized losses ....... (782,790)
===========
Net unrealized gain.... $30,281,573
===========
(b) 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
.
See Notes to Financial Statements.
<PAGE>
Aetna Variable Encore Fund
Portfolio of Investments - December 31, 1995
- -----------------------------------------------------------
Principal Market
Amount Value
-------- ------
Asset-Backed Securities (3.9%)
Bridgestone/Firestone
Master Trust, Inc.(b),
5.80%, 02/20/96 ........... $ 4,000,000 $ 4,000,000
Dakota Certificates -
Standard Credit Card
Master Trust 1(b),
5.71%, 02/09/96 ........... 7,000,000 6,957,809
Dakota Certificates -
Standard Credit Card
Master Trust 1(b),
5.73%, 01/17/96 ........... 2,000,000 1,995,225
Dakota Certificates -
Standard Credit Card
Master Trust 1(b),
6.05%, 01/04/96 ........... 3,000,000 2,998,992
Dakota Certificates -
Standard Credit Card
Master Trust 1(b),
6.05%, 01/05/96 ........... 2,654,000 2,652,662
Ford Credit Auto Lease,
6.00%, 05/15/96 ........... 1,528,234 1,528,234
--------------
Total Asset-Backed
Securities ................ $ 20,132,922
--------------
Certificates of Deposit (1.9%)
Deutsche Bank AG, 5.98%,
07/15/96 .................... 10,000,000 10,017,400
--------------
Total Certificates of
Deposit ................... $ 10,017,400
--------------
Commercial Paper - Domestic (28.3%)
A.H. Robins Co.,
Inc.(b), 5.70%,
02/07/96 .................. 5,000,000 4,971,500
American Home Products
Corp.(b), 5.55%,
03/26/96 .................. 5,500,000 5,426,685
American Honda Finance
Corp., 5.62%, 04/18/96 ... 3,500,000 3,440,955
American Honda Finance
Corp., 5.65%, 04/22/96 ... 2,000,000 1,965,040
American Honda Finance
Corp., 5.67%, 03/14/96 ... 2,000,000 1,976,480
American Honda Finance
Corp., 5.68%, 03/14/96 ... 3,000,000 2,964,720
Central & Southwest
Corp., 5.75%, 02/13/96 ... 7,300,000 7,251,029
Central & Southwest
Corp., 5.80%, 02/21/96 ... 10,000,000 9,919,444
Ciesco, L.P., 5.90%,
01/03/96 .................. 3,000,000 2,983,521
Cooper Industries, Inc.,
6.00%, 01/02/96 ........... 10,228,000 10,221,181
Cooperative Association
of Tractor Dealers,
Inc., 5.65%, 03/12/96 ..... 1,500,000 1,482,975
Cooperative Association
of Tractor Dealers,
Inc., 5.72%, 02/15/96 ..... 4,000,000 3,972,036
Cooperative Association
of Tractor Dealers,
Inc., 5.72%, 02/28/96 ..... 700,000 693,427
Cooperative Association
of Tractor Dealers,
Inc., 5.75%, 02/08/96 ..... 1,000,000 994,090
Cooperative Association
of Tractor Dealers,
Inc., 5.80%, 01/12/96 ..... 1,000,000 998,389
Cooperative Association
of Tractor Dealers,
Inc., 6.00%, 01/02/96 ..... 14,300,000 14,290,467
Cooperative Association
of Tractor Dealers,
Inc., 6.05%, 01/05/96 ..... 3,000,000 2,972,280
Corporate Asset Funding
Co., Inc., 5.65%,
01/30/96 .................. 2,000,000 1,991,211
Corporate Asset Funding
Co., Inc., 5.65%,
02/15/96 .................. 2,000,000 1,986,189
Corporate Asset Funding
Co., Inc., 6.10%,
01/11/96 .................. 4,000,000 3,993,900
Countrywide Funding
Corp., 5.80%, 02/14/96 ... 8,500,000 8,441,114
Countrywide Funding
Corp., 6.00%, 01/22/96 ... $ 6,000,000 $ 5,980,000
Dealers Capital Access
Trust, Inc., 5.65%,
03/11/96 .................. 2,000,000 1,977,400
Dealers Capital Access
Trust, Inc., 5.70%,
03/05/96 .................. 1,800,000 1,781,334
Dealers Capital Access
Trust, Inc., 5.95%,
01/12/96 .................. 1,600,000 1,597,356
Finova Capital Corp.,
6.10%, 01/03/96 ........... 700,000 696,788
Fleetwood Credit
Corp.(b), 5.80%,
01/24/96 .................. 3,750,000 3,736,708
Fleetwood Credit
Corp.(b), 5.80%,
01/25/96 .................. 4,000,000 3,985,178
Fleetwood Credit Corp.,
5.85%, 01/04/96 ........... 3,000,000 2,988,979
Norwest Financial, Inc.,
5.65%, 02/16/96 ........... 1,000,000 992,938
PSE&G Fuel Corp., 5.85%,
01/18/96 .................. 5,271,000 5,257,295
Sears Roebuck Acceptance
Corp., 6.00%, 01/05/96 ... 8,000,000 7,990,667
Sheffield Receivables
Corp., 5.65%, 02/26/96 ... 4,000,000 3,965,472
Source One Mortgage
Services Corp., 6.15%,
01/09/96 .................. 1,500,000 1,494,363
Source One Mortgage
Services Corp., 6.20%,
01/02/96 .................. 3,500,000 3,497,589
Textron Financial Corp.,
6.00%, 01/08/96 ........... 570,000 569,430
Whirlpool Financial
Corp., 5.72%, 02/05/96 ... 6,000,000 5,967,587
--------------
Total Commercial Paper -
Domestic .................. $ 145,415,717
--------------
Commercial Paper - Foreign (7.2%)
Abbey National North
America, 6.15%,
01/02/96 .................. 3,000,000 3,000,000
British Columbia
(Province of), 5.60%,
03/18/96 .................. 3,200,000 3,160,960
British Columbia
(Province of), 5.60%,
04/12/96 .................. 1,600,000 1,574,752
Export Import Bank of
Korea, 7.85%, 11/01/96 ... 7,525,000 7,661,654
Ford Capital B.V.,
9.00%, 06/01/96 ........... 1,550,000 1,570,600
Government Development
Bank of Puerto Rico,
Mato Rey, 5.80%,
01/19/96 .................. 1,905,000 1,898,555
Government Development
Bank of Puerto Rico,
Mato Rey, 5.80%,
01/31/96 .................. 4,000,000 3,981,311
Skandinaviska Enskilda
Banken Funding, Inc.,
5.76%, 01/16/96 ........... 5,000,000 4,988,800
Svenska Handelsbanken,
Inc., 5.64%, 02/29/96 ..... 4,800,000 4,753,920
Svenska Handelsbanken,
Inc., 5.68%, 02/14/96 ..... 4,500,000 4,469,470
--------------
Total Commercial Paper -
Foreign ................... $ 37,060,022
--------------
Corporate Notes (24.4%)
Bank One, Dayton, N.A.,
5.95%, 10/02/96 ........... 23,600,000 23,600,000
Carco Auto Loan Trust,
5.925%, 11/15/98 .......... 15,500,000 15,551,150
Caterpillar Financial
Services Corp., 5.83%,
07/29/96 .................. 7,000,000 7,000,000
Caterpillar Inc.,
9.125%, 12/15/96 .......... 600,000 619,500
Chrysler Financial
Corp., 6.00%, 04/15/96 ... 1,000,000 1,000,340
Chrysler Financial
Corp., 6.25%, 11/15/96 ... 9,000,000 9,018,000
Columbia/HCA Healthcare
Corp., 5.812%, 07/28/97 ... 4,200,000 4,200,000
See Notes to Portfolio of Investments.
<PAGE>
Aetna Variable Encore Fund
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Principal Market
Amount Value
-------- ------
Corporate Asset Funding
Co., Inc.(b), 5.841%,
12/02/96 .................. $ 9,000,000 $ 9,000,000
FNB Boston Corp., 6.00%,
05/10/96 .................. 4,000,000 4,005,840
General Motors
Acceptance Corp.,
6.00%, 01/02/96 ........... 2,400,000 2,400,240
General Motors
Acceptance Corp.,
8.625%, 07/15/96 .......... 1,000,000 1,015,810
General Motors
Acceptance Corp.,
8.75%, 02/01/96 ........... 3,500,000 3,503,932
Greyhound Financial
Corp., 6.195%, 02/15/96 ... 4,400,000 4,400,273
Greyhound Financial
Corp., 6.195%, 02/15/96 ... 17,000,000 17,002,317
Hertz Corp., 9.125%,
08/01/96 .................. 1,800,000 1,836,000
Sears Roebuck & Co.,
8.55%, 08/01/96 ........... 1,000,000 1,016,890
Weyerhauser Co., 8.40%,
05/17/96 .................. 20,000,000 20,200,000
--------------
Total Corporate Notes
$ 125,370,292
--------------
Medium Term Notes (24.9%)
American Honda Finance
Corp.(b), 5.959%,
08/01/96 .................. 9,000,000 8,999,010
AT&T Capital Corp.,
7.87%, 07/01/96 ........... 6,000,000 6,069,420
Chrysler Financial
Corp., 7.13%, 09/30/96 .... 900,000 909,837
Dean Witter, Discover &
Co., 5.81%, 09/29/96 ...... 3,000,000 3,002,970
Deere (John) Capital
Corp., 5.929%, 03/11/96 ... 16,750,000 16,695,562
Discover Credit Corp.,
8.92%, 03/15/96 ........... 10,160,000 10,236,199
Fleetwood Credit
Corp.(b), 6.153%,
02/08/96 .................. 6,000,000 6,000,969
Ford Motor Credit Co.,
5.00%, 03/25/96 ........... 3,100,000 3,095,381
Ford Motor Credit Co.,
8.95%, 06/14/96 ........... 1,000,000 1,014,310
Ford Motor Credit Co.,
9.00%, 07/26/96 ........... 1,180,000 1,202,090
Ford Motor Credit Co.,
9.10%, 06/10/96 ........... 3,400,000 3,447,634
Ford Motor Credit Co.,
9.20%, 07/16/96 ........... 500,000 508,965
General Electric Capital
Corp., 5.90%, 01/10/96 .... 10,000,000 9,999,955
General Motors
Acceptance Corp.,
5.805%, 04/13/98 .......... 10,500,000 10,507,602
General Motors
Acceptance Corp.,
6.187%, 04/22/96 .......... 3,350,000 3,366,750
GMAC Australia Finance,
6.082%, 12/06/96 .......... 4,000,000 4,004,696
PACCAR Financial Corp.,
5.83%, 09/20/96 ........... 9,000,000 9,010,080
Potomac Capital
Investment Corp.(b),
6.32%, 02/16/96 ........... 5,000,000 5,001,563
Sears DC Corp., 8.92%,
03/15/96 .................. 1,000,000 1,005,840
Shawmut Bank of
Connecticut, 5.895%,
05/10/96 ...... 24,000,000 24,028,799
--------------
Total Medium Term Notes ..... $ 128,107,632
--------------
U.S. Government Agency
Obligations (10.1%)
Federal Farm Credit
Bank, 5.60%, 04/24/96 ..... 12,000,000 11,993,531
Federal Home Loan Bank,
5.90%, 04/27/98 ........... 20,000,000 19,960,000
Federal National
Mortgage Association,
6.34%, 02/18/97 ........... 10,000,000 10,022,000
Student Loan Marketing
Association, FRN,
5.95%, 01/21/97 ........... 10,000,000 10,012,500
--------------
Total U.S. Government
Agency Obligations
$ 51,988,031
--------------
TOTAL INVESTMENTS
(cost $517,984,607)(a) $ 518,092,016
Other assets less
liabilities ............... (4,055,413)
--------------
Total Net Assets
$ 514,036,603
==============
Notes to Portfolio of Investments
Category percentages are based on net assets.
(a) The cost of investments for federal income tax purposes are identical.
Unrealized gains and losses, based on identified tax cost at December 31,
1995 are as follows:
Unrealized gains ........ $225,013
Unrealized losses ....... (117,604)
========
Net unrealized gain.... $107,409
========
(b) 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.
See Notes to Financial Statements.
<PAGE>
Aetna Investment Advisers Fund, Inc
Portfolio of Investments - December 31, 1995
- ---------------------------------------------
Number of Market
Shares Value
------- -------
COMMON STOCKS (62.4%)
Aerospace and Defense (0.6%)
Kaman Corp. Class A ......... 26,000 $ 289,250
Lockheed Martin Corp. ....... 400 31,600
McDonnell-Douglas Corp. ..... 74,900 6,890,799
--------------
7,211,649
--------------
Apparel and Cosmetics (1.2%)
Block Drug Co. Class A ...... 2,472 85,902
Burlington Industries,
Inc.+ ..................... 33,500 439,688
Helene Curtis
Industries, Inc. .......... 10,900 344,713
Herbalife
International, Inc. ....... 1,900 16,388
Maybelline, Inc. ............ 43,200 1,566,000
Nike, Inc. .................. 133,000 9,260,124
Oshkosh B'Gosh, Inc. ........ 25,000 437,500
St. John Knits, Inc. ........ 5,400 286,875
TJX Companies, Inc. (The) ... 102,400 1,932,800
Unifirst Corp. .............. 5,900 106,200
--------------
14,476,190
--------------
Autos and Auto Equipment (0.5%)
Borg Warner Automotive,Inc. . 4,700 150,400
Excel Industries, Inc. ...... 8,300 116,200
Kaydon Corp. ................ 15,000 455,625
PACCAR, Inc. ................ 30,000 1,263,750
Smith (A.O.) Corp. .......... 24,000 498,000
Snap On, Inc. ............... 40,000 1,810,000
Varity Corp.+ ............... 40,000 1,485,000
Wynn's International, Inc. .. 3,400 100,725
--------------
5,879,700
--------------
Banks (3.6%)
Associated Banc-Corp ........ 1,750 71,641
Bank of New York Co., Inc. .. 20,223 985,871
Bankers First Corp. ......... 5,600 156,100
BanPonce Corp. .............. 5,100 197,625
BayBanks, Inc. .............. 7,000 687,750
CCB Financial Corp. ......... 9,100 505,050
Charter One Financial, Inc. . 11,400 349,125
Chemical Banking Corp. ...... 125,100 7,349,624
Citizens Bancorp ............ 11,500 370,875
City National Corp. ......... 112,200 1,570,800
Comerica, Inc. .............. 27,500 1,103,438
Community Bank System, Inc. . 2,600 83,200
Compass Bancshares, Inc. .... 9,400 310,200
Cullen/Frost
Bankers, Inc. ............. 31,800 1,590,000
FFY Financial Corp. ......... 2,000 42,000
First American
Corp. (Tenn.) ............. 16,400 776,950
First Chicago Corp. ......... 169,778 6,706,230
First Commonwealth
Financial Corp. ........... 4,100 71,750
First Empire State Corp. .... 3,500 763,000
First of America Bank
Corp ...................... 30,200 1,340,125
Fulton Financial Corp. ...... 3,400 70,550
KeyCorp ..................... 13,400 485,750
Liberty Bancorp, Inc. ....... 10,200 379,950
Banks (continued)
Mark Twain Bancshares,
Inc ....................... 900 $ 34,875
N.S. Bancorp, Inc. .......... 5,700 220,875
Nations Bank, Inc. .......... 100,400 6,990,349
North Side Savings Bank ..... 17,600 536,800
PNC Bancorp ................. 3,800 249,375
Provident Bancorp ........... 6,400 300,800
Queens County Bancorp,
Inc ....................... 29,600 1,171,050
Reliance Bancorp, Inc. ...... 32,000 468,000
River Forest Bancorp,
Inc ....................... 8,200 209,100
Roosevelt Financial
Group, Inc. ............... 37,700 730,438
Security Capital Corp. ...... 6,200 373,550
Silicon Valley
Bancshares+ ............... 10,600 254,400
Standard Federal
Bancorporation ............ 23,900 941,063
Standard
Financial, Inc.+ .......... 43,900 642,038
Star Banc Corp. ............. 10,900 648,550
Susquehanna Bancshares,
Inc ....................... 1,400 37,100
Trans Financial, Inc. ....... 11,600 207,350
Trustmark Corp. ............. 5,600 127,400
Union Bank .................. 17,600 954,800
Usbancorp, Inc. ............. 2,700 89,100
Webster Financial Corp. ..... 6,200 182,900
Zion Bancorporation ......... 18,500 1,484,625
--------------
42,822,142
--------------
Building Materials and Construction (1.6%)
American Buildings Co.+ .... 24,600 553,500
Ameron, Inc. ................ 5,200 195,650
Beazer Homes USA, Inc.+ .... 41,500 855,938
Butler Manufacturing Co. .... 13,900 545,575
Centex Corp. ................ 90,900 3,158,775
Champion Enterprises, Inc.+ . 75,300 2,324,888
Continental Homes
Holding Corp. ............. 37,100 913,588
Elcor Corp. ................. 12,100 263,175
Granite
Construction, Inc. ........ 59,100 1,861,650
Jacobs Engineering
Group, Inc.+ .............. 4,800 120,000
Lennar Corp. ................ 36,600 919,575
Lone Star Industries ........ 6,000 150,000
MDC Holdings, Inc. .......... 18,400 131,100
NCI Building Systems, Inc.+ . 8,200 202,950
NVR, Inc.+ .................. 32,700 327,000
Pulte Corp. ................. 71,400 2,400,825
Redman Industries, Inc.+ .... 5,100 172,125
Stone and Webster, Inc. ..... 17,400 624,225
Texas Industries, Inc. ...... 25,800 1,367,400
Toll Brothers, Inc.+ ........ 11,100 255,300
Tredegar Industries, Inc. ... 5,000 162,500
U S Home Corp.+ ............. 24,100 701,913
Webb (Del E.) Corp. ......... 17,600 354,200
WHX Corp.+ .................. 75,700 823,238
--------------
19,385,090
--------------
Chemicals (1.1%)
ARCO Chemical Co. ........... 10,800 525,150
Dexter Corp. ................ 18,400 434,700
See Notes to Portfolio of Investments.
<PAGE>
Aetna Investment Advisers Fund, Inc
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Chemicals (continued)
Dow Chemical Co. ............ 74,100 $ 5,214,788
Eastman Chemical Co. ........ 43,200 2,705,400
Geon Co. (The) .............. 11,900 290,063
Goodrich (B.F.) Co. ......... 8,900 606,313
Learonal, Inc. .............. 14,100 324,300
Lyondell Petrochemical Co. .. 45,800 1,047,675
Praxair, Inc. ............... 28,200 948,225
Synalloy Corp. .............. 3,600 76,050
Wellman, Inc. ............... 36,000 819,000
--------------
12,991,664
--------------
Commercial Services (0.5%)
Affiliated Computer
Services, Inc.+ ........... 3,000 112,500
Devry, Inc.+ ................ 22,900 618,300
GATX Corp. .................. 21,700 1,055,163
Health Management
Systems, Inc.+ ............ 14,200 553,800
Interim Services, Inc.+ .... 13,000 451,750
Jenny Craig, Inc.+ .......... 8,500 83,938
Kindercare Learning
Centers, Inc.+ ............ 16,000 202,000
Measurex Corp. .............. 30,300 855,975
Robert Half
International, Inc.+ ...... 13,200 552,750
Terra Industries, Inc. ...... 67,900 959,088
--------------
5,445,264
--------------
Computer Software (3.0%)
Acxiom Corp.+ ............... 13,500 369,563
Analysts International
Corp ...................... 5,600 168,000
Applix, Inc.+ ............... 77,000 2,098,250
Boole and Babbage, Inc.+ .... 3,450 84,525
Cadence Design Systems, Inc.+ 47,900 2,011,800
Cheyenne Software, Inc.+ .... 6,000 156,750
Cisco Systems, Inc.+ ........ 112,300 8,380,387
Computer Associates
International, Inc. ....... 39,900 2,269,313
Computer Horizons Corp.+ .... 14,400 547,200
Computer Sciences Corp.+ .... 80,200 5,634,050
Computer Task Group, Inc .... 24,300 479,925
Comshare, Inc.+ ............. 22,950 596,700
Datastream Systems,
Inc.+ ..................... 38,200 725,800
Diamond Multimedia
Systems, Inc.+ ............ 41,900 1,503,163
Henry (Jack) and
Associates ................ 18,600 460,350
Hogan Systems, Inc.+ ........ 35,400 482,325
Hyperion Software Corp.+ .... 9,800 208,250
Inso Corp.+ ................. 5,000 212,500
Keane, Inc.+ ................ 16,200 358,425
Kronos, Inc.+ ............... 5,100 242,250
Macneal-Schwendler Corp. .... 6,900 110,400
Microsoft Corp.+ ............ 42,600 3,738,150
National Instruments
Corp.+ .................... 6,900 139,725
PHAMIS, Inc.+ ............... 9,200 273,700
Phoenix Technologies
Ltd.+ ..................... 45,200 711,900
Pinnacle Systems, Inc.+ .... 6,300 155,925
Project Software and
Development, Inc.+ ........ 23,300 812,588
Shiva Corp.+ ................ 1,900 138,225
Softdesk, Inc.+ ............. 5,200 102,700
Computer Software (continued)
SPSS, Inc.+ ................. 21,300 $ 415,350
Structural Dynamics
Research Corp.+ ........... 50,800 1,492,250
Sungard Data Systems,
Inc.+ ..................... 12,200 347,700
Triad Systems Corp.+ ........ 22,700 139,038
--------------
35,567,177
--------------
Computers and Office Equipment (2.8%)
American Business
Products, Inc. ............ 6,800 193,800
Bay Networks, Inc.+ ......... 27,400 1,126,825
Cabletron Systems, Inc.+ .... 10,900 882,900
Ceridian Corp.+ ............. 43,100 1,777,875
Comdisco, Inc. .............. 34,700 785,088
Compaq Computer Corp.+ ...... 70,000 3,360,000
Computervision Corp.+ ....... 98,600 1,515,975
Dell Computer Corp.+ ........ 32,700 1,132,238
Harris Corp. ................ 30,000 1,638,750
In Focus Systems, Inc.+ .... 65,700 2,373,413
International Business
Machines, Inc. ............ 7,600 697,300
Komag, Inc.+ ................ 9,000 415,125
Moore Corp., Ltd. ........... 125,000 2,328,125
New England Business
Service, Inc. ............. 5,000 109,375
Optical Data Systems, Inc.+ . 11,900 300,475
Read-Rite Corp.+ ............ 109,900 2,555,175
Standard Register Co. ....... 20,800 418,600
Sun Microsystems, Inc.+ ..... 139,600 6,369,249
Xerox Corp. ................. 38,100 5,219,700
--------------
33,199,988
--------------
Consumer Products (1.1%)
Eastman Kodak Co. ........... 132,600 8,884,199
Liz Claiborne, Inc. ......... 141,700 3,932,175
--------------
12,816,374
--------------
Diversified (1.3%)
Astec Industries, Inc.+ .... 6,800 67,150
Dover Corp. ................. 172,400 6,357,249
Harsco Corp. ................ 22,900 1,331,063
Johnson Controls, Inc. ...... 15,000 1,031,250
Katy Industries ............. 15,000 138,750
Opal, Inc.+ ................. 11,700 149,175
Standex International
Corp ...................... 4,900 160,475
Textron, Inc. ............... 60,000 4,050,000
Varlen Corp. ................ 30,300 651,450
VF Corp. .................... 42,000 2,215,500
--------------
16,152,062
--------------
Electrical and Electronics (2.5%)
Applied Materials, Inc.+ .... 30,000 1,181,250
BMC Industries, Inc. ........ 80,500 1,871,625
CTS Corporation ............. 5,200 196,300
Cypress Semiconductor
Corp.+ .................... 49,500 631,125
Dallas Semiconductor
Corp ...................... 18,800 390,100
Dovatron International,
Inc.+ ..................... 18,000 607,500
Esterline Technologies+ .... 43,800 1,034,775
Glenayre Technologies,
Inc.+ ..................... 12,750 793,688
See Notes to Portfolio of Investments.
<PAGE>
Aetna Investment Advisers Fund, Inc
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Electrical and Electronics (continued)
Hewlett Packard Co. ......... 78,400 $ 6,565,999
Intel Corp. ................. 8,800 499,400
Logicon, Inc. ............... 7,600 209,000
Maxim Integrated
Products, Inc.+ ........... 29,500 1,135,750
Micron Technology, Inc. ..... 106,100 4,204,213
National Service
Industries, Inc. .......... 28,500 922,688
Pioneer Standard
Electronics ............... 2,950 39,088
Quickturn Design
System, Inc.+ ............. 30,800 308,000
Ramtron International
Corp.+ .................... 8,600 55,900
Rogers Corp.+ ............... 2,000 43,500
Seagate
Technology, Inc.+ ......... 24,100 1,144,750
Siliconix, Inc.+ ............ 5,600 207,200
Sterling Electronics
Corp.+ .................... 7,400 126,725
Tencor Instruments+ ......... 37,600 916,500
Texas Instruments, Inc. ..... 96,800 5,009,400
Triquint Semiconductor,
Inc.+ ..................... 32,100 433,350
Ultratech Stepper, Inc.+ .... 12,800 329,600
Unitrode Corp.+ ............. 16,900 477,425
Wyle Electronics ............ 4,100 144,013
--------------
29,478,864
--------------
Electrical Equipment (2.3%)
ADflex Solutions, Inc.+ .... 11,000 294,250
Avnet, Inc. ................. 17,400 778,650
Burr-Brown Corp.+ ........... 18,150 462,825
C-Cube Microsystems,
Inc.+ ..................... 22,200 1,387,500
Dionex Corp.+ ............... 1,800 102,150
Fluke Corp. ................. 36,500 1,377,875
Fore Systems, Inc.+ ......... 18,900 1,124,550
General Electric Co. ........ 118,600 8,539,199
International Rectifier
Corp.+ .................... 63,000 1,575,000
Kemet Corp.+ ................ 46,600 1,112,575
Kent Electronics Corp.+ .... 31,800 1,856,325
Marshall Industries+ ........ 5,600 179,900
Mentor Graphics Corp.+ ...... 54,400 992,800
Merix Corp.+ ................ 13,900 417,000
Methode Electronics,
Inc. Class A .............. 23,800 339,150
Park Electrochemical Corp. .. 58,900 1,943,700
Raychem Corp. ............... 60,700 3,452,313
Sundstrand Corp. ............ 8,500 598,188
Tektronix, Inc. ............. 5,200 255,450
Teradyne, Inc.+ ............. 36,700 917,500
Valmont Industries .......... 4,600 113,850
--------------
27,820,750
--------------
Financial Services (2.8%)
Advanta Corp. Class A ....... 15,800 604,350
Alex Brown and Sons, Inc. ... 25,700 1,079,400
Astoria Financial Corp. ..... 41,700 1,902,563
ATandT Capital Corp. ........ 7,500 286,875
Bear Stearns Co., Inc. ...... 13,300 264,338
BHC Financial, Inc. ......... 8,200 147,600
Commercial Federal Corp. .... 4,800 181,200
Crestar Financial Corp. ..... 16,000 946,000
Financial Services (continued)
Deposit Guaranty Corp. ...... 30,400 $ 1,352,800
Federal National
Mortgage Association ...... 35,000 4,344,375
Great Financial Corp. ....... 46,600 1,095,100
Greenpoint
Financial Corp. ........... 20,500 548,375
Home Financial Corp. ........ 34,300 531,650
Household
International, Inc. ....... 21,300 1,259,363
Leader Financial Corp. ...... 39,800 1,487,525
Merrill Lynch and
Co., Inc. ................. 30,000 1,530,000
Morgan Keegan, Inc. ......... 15,900 200,738
Patlex Corp.+ ............... 2,625 38,719
Peoples Heritage
Financial Group ........... 16,500 375,375
Phoenix Duff and Phelps
Corp ...................... 17,700 121,688
RCSB Financial, Inc. ........ 18,500 439,375
TR Financial Corp. .......... 21,500 548,250
Transamerica Corp. .......... 53,400 3,891,525
Travelers, Inc. ............. 160,000 10,059,999
Union Planters Corp. ........ 22,700 723,563
--------------
33,960,746
--------------
Foods and Beverages (2.7%)
Cagle's, Inc. ............... 3,500 49,000
Campbell Soup Co. ........... 42,600 2,556,000
Coca-Cola Co. ............... 74,800 5,553,900
CPC International, Inc. ..... 3,200 219,600
Goodmark Foods, Inc. ........ 3,700 65,675
Heinz (H.J.) Co. ............ 45,000 1,490,625
Hometown Buffet, Inc.+ ...... 10,400 115,050
Hormel Foods Corp. .......... 21,800 536,825
Hudson Foods, Inc.
Class A ................... 18,700 322,575
IBP, Inc. ................... 23,500 1,186,750
International
Multifoods Corp. .......... 45,200 909,650
Kroger Co. (The)+ ........... 15,000 562,500
Mondavi (Robert) Corp.+ .... 20,800 574,600
Nash-Finch Co. .............. 6,600 120,450
PepsiCo, Inc. ............... 140,000 7,822,499
Quaker Oats Co. ............. 70,600 2,435,700
Safeway, Inc.+ .............. 14,900 767,350
Sara Lee Corp. .............. 135,100 4,306,313
Smith's Food and Drug
Centers, Inc. ............. 65,300 1,648,825
Supervalu, Inc. ............. 11,300 355,950
Universal Foods Corp. ....... 8,400 337,050
--------------
31,936,887
--------------
Health Services (0.6%)
Genetics Institute, Inc.+ ... 17,800 952,300
Laboratory Corp. of
America+ .................. 67,900 636,563
Lincare Holdings, Inc.+ .... 56,600 1,415,000
Nellcor, Inc.+ .............. 27,172 1,575,976
NovaCare, Inc.+ ............. 44,600 228,575
Prime Medical Services,
Inc.+ ..................... 9,500 85,500
RightCHOICE Managed
Care, Inc.+ ............... 13,600 176,800
Universal Health
Services, Inc.+ ........... 40,900 1,814,938
Wellpoint Health
Networks, Inc.+ ........... 27,000 867,375
--------------
7,753,027
--------------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Investment Advisers Fund, Inc
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Health Technology (0.0%)
Spacelabs Medical, Inc.+ .... 6,400 $ 184,000
Sybron International
Corp.+ .................... 10,400 247,000
--------------
431,000
--------------
Home Furnishings and Appliances (0.0%)
Kimball International,
Inc. Class B .............. 7,000 176,750
Oneida, Ltd. ................ 8,600 151,575
--------------
328,325
--------------
Hotels and Restaurants (1.3%)
Lone Star Steakhouse
and Saloon+ ............... 23,200 890,300
Marcus Corp. ................ 10,400 284,700
Marriott International, Inc. 92,400 3,534,300
McDonald's Corp. ............ 177,000 7,987,124
Prime Hospitality Corp.+ .... 44,200 442,000
Promus Hotel Corp.+ ......... 47,700 1,061,325
Rio Hotel and Casino, Inc.+ . 47,000 558,125
Rock Bottom
Restaurants, Inc.+ ........ 21,000 273,000
--------------
15,030,874
--------------
Household Products (0.1%)
Premark International, Inc. . 5,000 253,125
Springs Industries,
Inc. Class A .............. 8,400 347,550
Toro Co. .................... 20,800 683,800
--------------
1,284,475
--------------
Insurance (2.5%)
Allied Group, Inc. .......... 26,400 950,400
Allmerica Property and
Casualty Cos., Inc. ....... 40,200 1,085,400
Allstate Corp. .............. 162,478 6,681,907
American Bankers
Insurance Group ........... 27,000 1,053,000
American National
Insurance Co. ............. 3,700 246,050
Capital RE Corp. ............ 3,700 113,775
Commerce Group, Inc. ........ 19,800 408,375
Conseco, Inc. ............... 16,700 1,045,838
Financial Security
Assurance Holdings Ltd. ... 2,821 70,165
Foremost Corp. of America ... 4,000 203,000
Fremont General Corp. ....... 48,800 1,793,400
Fund American
Enterprises, Inc. ......... 4,600 342,700
Healthwise of America,
Inc.+ ..................... 34,800 1,357,200
Home Beneficial Corp.
Class B ................... 2,400 57,600
Horace Mann Educators
Corp ...................... 2,400 57,600
Lawyers Title Corp. ......... 3,700 70,763
Loews Corp. ................. 6,000 470,250
Maxicare Health Plans,
Inc.+ ..................... 40,000 1,075,000
Mercury General Corp. ....... 12,000 573,000
MMI Cos., Inc. .............. 3,000 72,000
Old Republic
International Corp. ....... 31,500 1,118,250
Orion Capital Corp. ......... 21,300 923,888
Presidential Life Corp. ..... 12,200 120,475
Pxre Corp. .................. 15,000 397,500
Reinsurance Group of
America ................... 22,000 805,750
Safeco Corp. ................ 100,000 3,450,000
Security-Connecticut
Corp ...................... 17,900 485,538
Selective Insurance
Group ..................... 17,700 628,350
Insurance (continued)
Transatlantic Holdings,
Inc ....................... 8,700 $ 638,363
Transnational Re Corp.
Class A ................... 20,500 502,250
Transport
Holdings, Inc.+ ........... 600 24,450
Vesta Insurance Group, Inc. . 19,500 1,062,750
Washington National Corp. ... 15,900 439,238
--------------
29,547,875
--------------
Machinery and Equipment (1.3%)
Acme-Cleveland Corp. ........ 8,600 161,250
Barnes Group, Inc. .......... 6,500 234,000
Bearings, Inc. .............. 6,400 187,200
Blount, Inc. Class A ........ 36,000 945,000
Brunswick Corp. ............. 115,400 2,769,600
Central Sprinkler Corp.+ .... 8,500 301,750
Cooper Cameron Corp.+ ....... 26,300 933,650
Fluor Corp. ................. 20,400 1,346,400
FSI International, Inc.+ .... 59,100 1,196,775
Global Industrial
Technologies, Inc.+ ....... 14,100 266,138
Graco, Inc. ................. 9,800 298,900
Hughes Supply, Inc. ......... 15,900 449,175
IDEX Corp. .................. 4,000 163,000
Illinois Tool
Works, Inc. ............... 45,000 2,655,000
JLG Industries, Inc. ........ 39,900 1,187,025
Lam Research Corp.+ ......... 10,000 457,500
Lindsay Manufacturing Co.+ .. 5,300 204,050
Oceaneering
International, Inc.+ ...... 22,200 285,825
Raymond Corp. (The)+ ........ 11,810 268,678
Regal Beloit ................ 46,200 1,004,850
Zero Corp. .................. 6,900 122,475
--------------
15,438,241
--------------
Media and Entertainment (0.8%)
AMC Entertainment+ .......... 35,500 829,813
Callaway Golf Co. ........... 47,200 1,067,900
Carmike Cinemas Class A+ .... 8,400 189,000
Chris-Craft
Industries, Inc.+ ......... 11,700 506,025
Gtech Holdings Corp.+ ....... 56,900 1,479,400
King World Production,
Inc.+ ..................... 107,000 4,159,625
Media General, Inc. ......... 20,300 616,613
Mirage Resorts, Inc.+ ....... 14,800 510,600
Regal Cinemas, Inc.+ ........ 2,400 71,400
--------------
9,430,376
--------------
Medical Supplies (1.5%)
Coherent, Inc.+ ............. 30,200 1,223,100
Cordis Corp.+ ............... 13,100 1,316,550
Daig Corp.+ ................. 11,800 271,400
Guidant Corp. ............... 71,363 3,015,087
Haemonetics Corp.+ .......... 44,000 781,000
Life Technologies, Inc. ..... 8,000 218,000
McKesson Corp. .............. 9,100 460,688
MediSense, Inc.+ ............ 35,500 1,122,688
Medtronic, Inc. ............. 113,600 6,347,399
North American
Biologicals, Inc.+ ........ 62,700 674,025
See Notes to Portfolio of Investments.
<PAGE>
Aetna Investment Advisers Fund, Inc
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Medical Supplies (continued)
Respironics, Inc.+ .......... 9,300 $ 195,300
Sola International,
Inc.+ ..................... 56,600 1,429,150
Utah Medical Products,
Inc.+ ..................... 14,800 293,225
Vital Signs, Inc. ........... 37,700 994,338
--------------
18,341,950
--------------
Metals and Mining (1.6%)
AK Steel Holding Corp. ...... 14,000 479,500
Alumax, Inc.+ ............... 16,300 499,188
Aluminum Co. of America ..... 47,200 2,495,700
Asarco, Inc. ................ 27,800 889,600
Ashland Coal, Inc. .......... 3,100 66,263
Carpenter Technology Corp. .. 23,400 962,325
Castle (A.M.) and Co. ....... 16,800 472,500
Cleveland-Cliffs, Inc. ...... 2,300 94,300
Commonwealth Aluminum Corp. . 4,000 62,000
Cyprus Amax Minerals Co. 116,600 3,046,175
Handy and Harman ............ 28,700 473,550
J & L Specilty
Steel, Inc. ............... 36,700 688,125
MAF Bancorp, Inc. ........... 5,900 147,500
Magma Copper Co.+ ........... 30,300 844,613
Mueller
Industries, Inc.+ ......... 48,000 1,404,000
Phelps Dodge Corp. .......... 98,000 6,100,500
Zeigler Coal Holding Co. .... 28,600 396,825
--------------
19,122,664
--------------
Oil and Gas (6.2%)
Amoco Corp. ................. 13,409 963,774
Atlantic Richfield Co. ...... 4,900 542,675
Berry Petroleum Co. ......... 19,300 195,413
Box Energy Corp. Class
B+ ........................ 19,800 170,775
Camco International,
Inc ....................... 7,200 201,600
Chesapeake Energy Corp.+ .... 16,950 563,588
Coda Energy, Inc.+ .......... 19,000 141,313
Columbia Gas System,
Inc.+ ..................... 9,300 408,038
Devon Energy Corp. .......... 8,600 219,300
Diamond Shamrock, Inc. ...... 25,500 659,813
El Paso Natural Gas Co. ..... 34,200 970,425
Enron Oil and Gas Co. ....... 2,700 64,800
Exxon Corp. ................. 191,000 15,303,874
Fina, Inc. Class A .......... 2,500 126,250
Halliburton Co. ............. 132,900 6,728,062
Leviathan Gas Pipeline
Partners L. P ............. 43,500 1,234,313
Mobil Corp. ................. 106,000 11,871,999
NGC Corp. ................... 40,600 360,325
NUI Corp. ................... 19,000 332,500
Oneok, Inc. ................. 34,200 782,325
Panhandle Eastern Corp. ..... 36,200 1,009,075
Pride Petroleum
Services, Inc.+ ........... 119,400 1,268,625
Royal Dutch Petroleum
Co ........................ 113,000 15,947,124
Smith
International, Inc.+ ...... 63,000 1,480,500
Sonat Offshore Drilling Co. . 57,700 2,582,075
Sun Company, Inc. ........... 73,100 2,001,113
Oil and Gas (continued)
Tesoro Petroleum Corp.+ .... 60,900 $ 525,263
Texaco, Inc. ................ 88,500 6,947,249
Tide West Oil Co.+ .......... 9,000 120,375
Wiser Oil Co. ............... 21,100 253,200
--------------
73,975,761
--------------
Paper and Containers (1.1%)
ACX Technologies, Inc.+ .... 9,200 139,150
Champion International
Corp ...................... 69,900 2,935,800
Chesapeake Corp. ............ 35,000 1,036,875
Consolidated
Papers, Inc. .............. 14,100 791,363
Mead Corp. .................. 100,000 5,225,000
Mercer International,
Inc.+ ..................... 42,800 877,400
Rayoner, Inc. ............... 21,800 727,575
Temple-Inland, Inc. ......... 800 35,300
Willamette Industries,
Inc ....................... 14,900 838,125
--------------
12,606,588
--------------
Pharmaceuticals (5.7%)
Abbott Laboratories ......... 70,100 2,926,675
Alliance Pharmaceutical+ .... 13,500 183,938
American Home Products
Corp ...................... 106,800 10,359,599
Autoimmune, Inc.+ ........... 38,400 432,000
Barr Laboratories, Inc.+ .... 5,400 160,650
Becton, Dickinson
and Co. ................... 117,400 8,804,999
Bristol-Myers Squibb Co. .... 142,800 12,262,949
COR Therapeutics, Inc.+ .... 39,800 333,325
ICN Pharmaceuticals,
Inc ....................... 35,539 684,121
Immulogic
Pharmaceutical Corp.+ .... 23,100 444,675
Immunex Corp.+ .............. 4,300 70,950
Johnson & Johnson ........... 165,400 14,162,374
Jones Medical
Industries, Inc. .......... 29,000 699,625
Merck and Co., Inc. ......... 60,200 3,958,150
Pfizer, Inc. ................ 33,000 2,079,000
R.P. Scherer Corp.+ ......... 28,900 1,419,713
Rhone-Poulenc Rorer,
Inc ....................... 12,700 676,275
Schering Plough ............. 97,600 5,343,600
Vical, Inc.+ ................ 26,500 321,313
Watson Pharmaceuticals,
Inc.+ ..................... 47,000 2,303,000
--------------
67,626,931
--------------
Printing and Publishing (0.5%)
American Media, Inc. ........ 32,000 136,000
Banta Corp. ................. 30,700 1,350,800
Cadmus Communications
Corp ...................... 32,100 866,700
Central Newspapers,
Inc. Class A ............. 21,500 674,563
Devon Group, Inc.+ .......... 13,600 395,250
Harte-Hanks
Communications ............ 12,000 237,000
New York Times Co. .......... 23,600 699,150
Pulitzer Publishing Co. ..... 6,300 300,825
Scholastic Corp.+ ........... 10,000 777,500
Washington Post Co. ......... 2,000 564,000
--------------
6,001,788
--------------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Investment Advisers Fund, Inc
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Real Estate Investment Trusts (0.0%)
Santa Anita Realty
Enterprises, Inc. ......... 2,300 $ 27,313
Smith (Charles E.)
Residential Realty Co. .... 5,900 139,388
--------------
166,701
--------------
Retail (0.9%)
Carson Pirie Scott and Co.+ . 31,800 632,025
Claire's Stores, Inc. ....... 33,200 585,150
Designs, Inc.+ .............. 5,400 37,800
Egghead, Inc.+ .............. 17,100 110,081
Fay's Drug Co. .............. 43,200 324,000
Friedman's, Inc. Class A+ ... 12,100 232,925
General Host Corp.+ ......... 59,500 238,000
Hannaford Brothers Co. ...... 5,500 135,438
Hills Stores Co.+ ........... 6,400 63,200
Mercantile Stores Co., Inc. . 18,000 832,500
Proffitt's, Inc.+ ........... 8,500 223,125
Rex Stores Corp.+ ........... 10,000 177,500
Riser Foods, Inc. Class A ... 5,400 87,075
Ross Stores, Inc. ........... 38,900 743,963
Ruddick Corp. ............... 29,600 340,400
Russ Berrie and Co. Inc. .... 8,000 101,000
Sears, Roebuck and Co. ...... 115,000 4,485,000
Waban, Inc.+ ................ 37,600 705,000
Wal-Mart Stores, Inc. ....... 42,100 941,988
Weis Markets, Inc. .......... 5,000 141,250
--------------
11,137,420
--------------
Specialty Consumer Durables (0.2%)
Bio-Rad Labs, Inc. ..........
Class A+ .................. 3,400 144,500
Fusion Systems Corp.+ ....... 24,400 683,200
Polaris Industries, Inc. .... 60,000 1,762,500
Superior Surgical
Manufacturing Co. ......... 9,100 86,450
--------------
2,676,650
--------------
Telecommunications (1.4%)
Ameritech Corp. ............. 93,000 5,487,000
Ascend Communications,
Inc.+ ..................... 13,300 1,078,963
ATandT Corp. ................ 99,900 6,468,524
Cascade Communications
Corp.+ .................... 13,200 1,125,300
Case Corp. .................. 22,200 1,015,650
Harmonic Lightwaves,
Inc.+ ..................... 8,800 96,800
Holophane Corp.+ ............ 16,650 362,138
Lincoln
Telecommunications Co. .... 8,800 185,900
U.S. Robotics Corp.+ ........ 6,700 587,925
--------------
16,408,200
--------------
Transportation (0.9%)
Alaska Air Group, Inc.+ .... 7,300 118,625
American President Cos Ltd .. 40,600 933,800
AMR Corp.+ .................. 52,500 3,898,125
Comair Holdings, Inc. ....... 57,000 1,531,875
Expeditors
International of
Washington, Inc. .......... 9,800 256,025
Florida East Coast
Industries, Inc. .......... 9,100 621,075
Hornbeck Offshore
Services, Inc.+ ........... 8,100 158,963
Transportation (continued)
M.S. Carriers, Inc.+ ........ 4,500 $ 90,000
Navistar International
Corp.+ .................... 88,500 929,250
PHH Corp. ................... 19,600 916,300
Rural/Metro Corp.+ .......... 9,100 205,888
UAL Corp.+ .................. 4,900 874,650
--------------
10,534,576
--------------
Utilities - Electric (4.2%)
Boston Edison Co. ........... 30,300 893,850
California Energy Co.,
Inc.+ ..................... 36,500 711,750
Centerior Energy Corp. ...... 33,200 294,650
Central Hudson Gas and
Electric Co. .............. 28,500 879,938
Central Louisiana
Electric .................. 7,000 188,125
Central Vermont Public
Service ................... 19,200 256,800
Cilcorp, Inc. ............... 19,100 809,363
Consolidated Edison Co.
of New York, Inc. ......... 90,000 2,880,000
Destec Energy, Inc.+ ........ 25,100 345,125
DQE, Inc. ................... 36,400 1,119,300
Entergy Corp. ............... 107,800 3,153,150
Florida Progress Corp. ...... 41,600 1,471,600
General Public
Utilities Corp. ........... 14,300 486,200
Green Mountain Power Corp. .. 7,400 205,350
Hawaiian Electric
Industries, Inc. .......... 8,800 341,000
Houston Industries, Inc. .... 36,000 873,000
IES Industries, Inc. ........ 16,200 429,300
Illinova Corp. .............. 51,100 1,533,000
Interstate Power Co. ........ 18,000 598,500
IPALCO Enterprises, Inc. .... 10,300 392,688
LGandE Corp. ................ 8,900 376,025
MDU Resources Group, Inc. ... 13,200 262,350
New England Electric System . 16,700 661,738
New York State Electric
and Gas Corp. ............. 54,100 1,399,838
Nipsco Industries, Inc. ..... 40,700 1,556,775
Northeast Utilities ......... 66,600 1,623,375
Northern States Power Co. ... 22,800 1,120,050
Northwestern Public
Service Co. ............... 11,000 308,000
Oklahoma Gas and
Electric Co. .............. 25,100 1,079,300
Orange and Rockland
Utilities, Inc. ........... 10,000 357,500
Peco Energy Co. ............. 4,700 141,588
Pinnacle West Capital Corp. . 54,200 1,558,250
Portland General Corp. ...... 31,000 902,875
Public Service Co.
of Colorado+ .............. 36,100 1,277,038
Rochester Gas and
Electric Corp. ............ 19,400 438,925
SCEcorp ..................... 352,400 6,255,100
Sierra Pacific Resources .... 76,500 1,788,188
Southwestern Public
Service Co. ............... 21,900 717,225
Texas Utilities Co. ......... 6,700 275,538
TNP Enterprises, Inc. ....... 31,800 596,250
Unicom Corp. ................ 209,100 6,848,024
United Illuminating Co. ..... 27,700 1,035,288
Western Resources, Inc. ..... 9,600 320,400
WPS Resources Corp. ......... 26,500 901,000
--------------
49,663,329
--------------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Investment Advisers Fund, Inc
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Number of Market
Shares Value
------- -------
Utilities - Oil and Gas (1.2%)
Atlanta Gas Light Co. ....... 31,400 $ 620,150
Coastal Corp. (The) ......... 60,000 2,235,000
Connecticut Energy Corp. .... 10,000 222,500
Energen Corp. ............... 30,800 743,050
Indiana Energy, Inc. ........ 21,900 522,863
MCN Corp. ................... 45,400 1,055,550
New Jersey Resources Corp. .. 28,200 849,525
Northwest Natural Gas Co. ... 6,900 227,700
Pacific Enterprises ......... 59,400 1,678,050
Pennsylvania
Enterprises, Inc. ......... 13,500 511,313
Piedmont Natural Gas, Inc. .. 5,200 120,900
Public Service Co. of
North Carolina ............ 18,000 321,750
South Jersey
Industries, Inc. .......... 10,200 235,875
Southern Indiana Gas
and Electric Co. .......... 11,700 406,575
Washington Gas Light Co. .... 21,200 434,600
Wicor, Inc. ................. 29,600 954,600
Williams Cos., Inc. ......... 72,300 3,172,163
--------------
14,312,164
--------------
Utilities - Telephone (2.9%)
Bell Atlantic Corp. ......... 120,000 8,024,999
BellSouth Corp. ............. 161,600 7,029,599
GTE Corp. ................... 110,000 4,840,000
NYNEX Corp. ................. 39,900 2,154,600
SBC Communications, Inc. .... 59,900 3,444,250
Southern New England
Telecommunications Corp. .. 26,300 1,045,425
Sprint Corp. ................ 199,300 7,947,087
Tellabs, Inc.+ .............. 19,500 721,500
--------------
35,207,460
--------------
Utilities - Water (0.0%)
Philadelphia Suburban
Corp ...................... 6,300 130,725
Southern California
Water Co. ................. 6,300 127,575
--------------
258,300
--------------
Total Common
Stocks (cost $618,645,994). $ 746,429,222
--------------
PREFERRED STOCKS (1.8%)
Aerospace and Defense (0.3%)
Kaman Corp. ................. 74,562 $ 3,588,296
--------------
Banks (0.7%)
BankAmerica Corp. ........... 137,300 8,890,174
--------------
Chemicals (0.4%)
Union Carbide Corp. ......... 120,000 4,500,000
--------------
Electrical Equipment (0.4%)
FPL Group, Inc. ............. 107,500 4,985,313
--------------
Financial Services (0.0%)
Phoenix Duff and Phelps
Corp. ....................... 1,770 44,693
--------------
Total Preferred
Stocks
(cost $17,519,988) ........ $ 22,008,476
--------------
LONG TERM BONDS AND NOTES (27.5%)
Corporate Bonds (12.1%)
App International
Finance, 10.25%,
10/01/00 .................... 4,650,000 $ 4,626,750
App International
Finance, 11.75%,
10/01/05 .................... 6,500,000 6,402,499
African Development
Bank, 8.80%, 09/01/19 ....... 7,000,000 8,879,779
American General
Finance, 8.45%,
10/15/09 .................... 7,000,000 8,354,114
CMS Energy, 0.00%,
10/01/99 .................... 6,000,000 6,245,520
Centennial Cellular
Corp., 10.125%,
05/15/05 .................... 10,150,000 10,695,562
Continental Cablevision(b),
8.30%, 05/15/06 ............. 7,000,000 7,034,999
Exide Corp., 10.75%,
12/15/02 .................... 2,000,000 2,177,500
Exide Corp., 10.00%,
04/15/05 .................... 7,595,000 8,259,562
General Motors
Acceptance Corp.,
6.15%, 01/16/01 ............. 9,350,000 9,416,010
Grand Casinos Inc.,
10.125%, 12/01/03 ........... 1,400,000 1,471,750
News American Holdings,
8.50%, 02/23/25 ............. 9,300,000 10,797,392
Pitney Bowes Credit
Corp., 8.55%, 09/15/09 ...... 13,100,00 15,906,019
Pittston Co., 4.00%,
07/01/97 .................... 3,249,000 3,090,611
Ralph's Grocery,
10.45%, 06/15/04 ............ 10,000,000 10,174,999
Stone Container Corp.,
9.875%, 02/01/01 ............ 11,980,000 11,680,49
Telewest Plc, 11.00%,
10/01/07 .................... 14,850,000 8,984,249
Viacom, Inc., 8.00%,
07/07/06 .................... 10,000,000 10,187,499
--------------
Total Corporate Bonds
(cost $133,549,124) ......... $ 144,385,313
--------------
U.S. Government and Agency Obligations (10.2%)
Federal Home Loan
Mortgage Corp.,
6.00%, 11/15/08 ............. 8,200,000 7,956,377
U.S. Treasury Bond,
7.625%, 02/15/25 ............ 4,650,000 5,686,793
U.S. Treasury Note,
6.25%, 08/31/96 ............. 20,050,000 20,169,021
U.S. Treasury Note,
7.50%, 01/31/97 ............. 36,600,000 37,469,112
U.S. Treasury Note,
5.75%, 10/31/00 ............. 16,600,000 16,843,729
U.S. Treasury Strip,
5.82%, 05/15/04 ............. 54,000,000 33,987,559
--------------
Total U.S. Government and
Agency Obligations (cost
$118,524,772) ............... $ 122,112,591
--------------
Non-Agency Mortgage-Backed Securities (2.9%)
American Southwest
Financial Securities
Corp., 8.00%, 01/18/09 ...... 7,723,998 8,153,644
Chase Mortgage Finance,
6.75%, 11/25/09 ............. 5,000,000 5,016,406
Kidder Peabody
Acceptance Corp.,
6.50%, 11/25/25 ............. 5,000,000 4,926,563
Kidder Peabody
Acceptance Corp.,
8.80%, 04/01/07 ............. 5,000,000 5,539,063
Merrill Lynch Mortgage
Investors, Inc.,
7.795%, 06/15/21 ............ 10,474,943 10,808,831
--------------
Total Non-Agency Mortgage-Backed
Securities (cost
$31,628,543) ................ $ 34,444,507
--------------
See Notes to Portfolio of Investments.
<PAGE>
Aetna Investment Advisers Fund, Inc
Portfolio of Investments - December 31, 1995 (continued)
- --------------------------------------------------------
Principal Market
Amount Value
-------------- --------------
Foreign Obligations (1.0%)
Transportadora de Gas
de Sur, S.A., 7.75%,
12/23/98 .................... $ 4,600,000 $ 4,424,625
Poland Discount Bond,
7.125%, 10/27/24 ............ 10,000,000 7,549,999
--------------
Total Foreign Obligations
(cost $12,429,630) .......... $ 11,974,624
--------------
Corporate Notes (0.9%)
Swire Pacific, Ltd(b),
8.50%, 09/29/04 ............. 10,000,000 10,996,249
--------------
Total Corporate Notes
(cost $9,983,986) ........... $ 10,996,249
--------------
Corporate Bonds - Convertible (0.4%)
Aerospace and Defense (0.4%)
Kaman Corp., 6.00%,
03/15/12 .................... 6,275,000 5,145,500
--------------
Total Corporate Bonds - Convertible
(cost $4,310,202) ........... $ 5,145,500
--------------
Total Long Term Bonds and Notes
(cost $310,426,257) ......... $ 329,058,784
--------------
Short-Term Investments (6.4%)
Dealers Capital Access
Trust, Inc., Comm Paper,
5.65%, 03/11/96 ...... 10,000,000 9,996,639
Ford Motor Credit Co.,
Medium Term Notes,
5.00%, 03/25/96 ............. 42,868,000 42,868,000
Mid-Atlantic Fuel Co.,
Comm. Paper, 6.25%,
01/03/96 .................... 6,610,000 6,608,852
Sundstrand Corp., Comm
Paper, 6.05%, 01/02/96 ...... 5,031,000 5,031,000
Tenneco Inc., Comm
Paper, 6.45%, 01/08/96 ...... 10,000,000 9,989,250
U.S. Treasury Note,
Time Deposit, 9.25%,
01/15/96 .................... 2,000,000 2,003,660
--------------
Total Short-Term Investments
(cost $76,496,160) .......... $ 76,497,401
--------------
TOTAL INVESTMENTS
(cost
$1,023,088,399)(a) .......... $1,173,993,883
Other assets less
liabilities ................. 21,993,197
--------------
Total Net Assets ............ $1,195,987,080
==============
Notes to Portfolio of Investments
Category percentages are based on net assets.
+Non-income producing security.
(a) The cost of investments for federal income tax purposes amount to
$1,023,533,297. Unrealized gains and losses, based on identified tax cost at
December 31, 1995 are as follows:
Unrealized gains ....... $162,810,456
Unrealized losses ...... (12,349,870)
=========
Net unrealized gain... $150,460,586
=========
(b) 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.
See Notes to Financial Statements.
<PAGE>
Statements of Assets and Liabilities-December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aetna Aetna
Aetna Aetna Variable Investment
Variable Income Encore Advisers
Fund Shares Fund Fund, Inc.
--------- ---------- -------- -------------
<S> <C> <C> <C> <C>
Assets:
Investments, at market value (Note 1) .. $5,625,615,241 $656,011,724 $518,092,016 $1,173,993,883
Cash ................................... 535,257 -- 46,948 33,041
Cash denominated in foreign currencies . 3,960,054 -- -- --
Receivable for:
Dividends and interest .............. 10,604,251 10,161,902 4,169,334 7,255,433
Investments sold .................... 53,648,138 -- -- 15,036,915
Fund shares sold .................... 5,145 1,076,696 1,687,308 1,327,196
Recoverable taxes ................... 40,839 -- -- --
Gross unrealized gain on forward
foreign currency
exchange contracts (Note 6)....... 1,519,200 -- -- --
----------- ---------- ---------- -----------
Total assets ..................... 5,695,928,125 667,250,322 523,995,606 1,197,646,468
----------- ---------- ---------- -----------
Liabilities:
Payable for:
Cash overdraft ....................... -- 49,782 -- --
Dividends ............................ 186,007 -- -- --
Investments purchased ................ 4,797,025 -- 9,828,872 1,343,532
Fund shares redeemed ................. 27,367,904 6,613 -- --
Variation margin ..................... 187,177 -- -- --
Gross unrealized loss on forward
foreign currency exchange contracts 409,223 -- -- --
(Note 6) ............................
Accrued investment advisory fees ....... 1,239,311 144,406 110,457 259,737
Accrued administrative and service fees 163,441 18,012 10,479 28,670
Accrued custodian fees ................. 67,961 11,546 9,195 26,932
Other liabilities ...................... 3,470 59,474 -- 517
----------- ---------- ---------- -----------
Total liabilities ................ 34,421,519 289,833 9,959,003 1,659,388
----------- ---------- ---------- -----------
Net assets applicable to outstanding
shares ............................... $5,661,506,606 $666,960,489 $514,036,603 $1,195,987,080
============== ============ ============ ==============
Net assets represented by:
Paid-in capital ........................ $4,415,828,671 $649,822,576 $485,162,242 $959,579,062
Net unrealized gain..................... 1,300,188,239 30,930,990 107,409 150,905,484
Undistributed/(Distributions in excess
of) net investment income............... 13,766,310 (116,781) 28,830,703 1,726,572
Accumulated net realized gain (loss).... (68,276,614) (13,676,296) (63,751) 83,775,962
-------------- ------------- ------------ -------------
Total--representing net assets
applicable to outstanding
shares ......................... $5,661,506,606 $666,960,489 $514,036,603 $1,195,987,080
============== ============ ============ ==============
Par value .............................. $ 1.00 $ 1.00 $ 1.00 $ 0.001
Shares outstanding ..................... 194,850,885 51,297,679 38,656,540 82,469,336
Net asset value per share .............. $ 29.06 $ 13.00 $ 13.30 $ 14.50
Cost of investments .................... $4,327,246,475 $625,080,734 $517,984,607 $1,023,088,399
Cost of foreign currencies ............. $ 3,996,218 -- -- --
</TABLE>
See Notes to Financial Statements.
<PAGE>
Statements of Operations--Year Ended December 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aetna Aetna
Aetna Aetna Variable Investment
Variable Income Encore Advisers
Fund Shares Fund Fund, Inc.
--------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Investment Income: (Note 1)
Interest ................................. $ 14,942,399 $ 44,108,048 $30,657,854 $29,055,521
Dividends ................................ 122,668,124 499,880 -- 16,607,313
-------------- ------------ ----------- ------------
137,610,523 44,607,928 30,657,854 45,662,834
Foreign taxes withheld ................... (1,384,488) -- -- (179,507)
-------------- ------------ ----------- ------------
Total investment income ............ 136,226,035 44,607,928 30,657,854 45,483,327
-------------- ------------ ----------- ------------
Expenses: (Note 2)
Investment advisory fee .................. 12,573,737 1,534,803 1,242,199 2,674,612
Administrative personnel and service fees 1,869,356 206,010 118,541 327,918
Custodian and transfer agent fees ........ 129,807 83,918 21,652 69,546
Trustees'/Directors' fees ................ 15,095 15,095 15,095 15,095
Audit fees ............................... 27,901 25,013 22,700 27,353
Miscellaneous ............................ 160,785 84,245 99,852 143,253
-------------- ------------ ----------- ------------
Total expenses ..................... 14,776,681 1,949,084 1,520,039 3,257,777
-------------- ------------ ----------- ------------
Net investment income..................... 121,449,354 42,658,844 29,137,815 42,225,550
-------------- ------------ ----------- ------------
Net Realized and Unrealized Gain (Loss): (Notes 1 and 3)
Net realized gain (loss) on:
Sale of investments .................... 608,181,649 5,369,075 (52,156) 98,063,466
Written options ........................ (142,053) -- -- --
Futures and forward foreign exchange 10,915,948 56,354 -- (10,223,135)
contracts .............................
Foreign currency related transactions .. (470,670) 123,002 -- 227,175
-------------- ------------ ----------- ------------
Net realized gain/(loss) on
investments....................... 618,484,874 5,548,431 (52,156) 88,067,506
-------------- ------------ ----------- ------------
Net change in unrealized gain (loss) on:
Investments ............................ 653,868,627 53,970,465 472,281 125,951,337
Futures and forward foreign exchange 1,868,745 -- -- --
contracts .............................
Foreign currency related transactions .. (49,272) -- -- --
-------------- ------------ ----------- ------------
Net change in unrealized gain on
investments....................... 655,688,100 53,970,465 472,281 125,951,337
-------------- ------------ ----------- ------------
Net realized and change in unrealized gain 1,274,172,974 59,518,896 420,125 214,018,843
-------------- ------------ ----------- ------------
Net increase in net assets resulting from
operations ............................. $1,395,622,328 $102,177,740 $29,557,940 $256,244,393
============== ============ =========== ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
Statements of Changes in Net Assets - Years Ended December 31, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aetna Variable Fund Aetna Income Shares
------------------------ -----------------------
1995 1994 1995 1994
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income..................... $ 121,449,354 $118,921,019 $42,658,844 $37,526,101
Net realized gain (loss)on investments.... 618,484,874 692,123,546 5,548,431 (14,516,626)
Net change in unrealized gain (loss)on
investments............................. 655,688,100 (854,769,952) 53,970,465 (47,425,831)
-------------- ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations ............. 1,395,622,328 (43,725,387) 102,177,740 (24,416,356)
-------------- ------------ ----------- -----------
Distributions to Shareholders: (Note 1)
From net investment income ............... (121,467,727) (119,240,804) (40,862,116) (37,526,100
In excess of net investment income ....... -- -- -- (908,894)
From net realized gains .................. (812,495,987) (573,117,509) -- --
-------------- ------------ ----------- -----------
Decrease in net assets from (933,963,714) (692,358,313) (40,862,116) (38,434,994)
distributions to shareholders .........
-------------- ------------ ----------- -----------
Share Transactions:
Proceeds from shares sold ................ 293,617,310 339,330,848 70,377,292 52,636,460
Net asset value of shares issued upon
reinvestment of distributions .......... 933,736,815 692,177,111 40,782,267 38,350,232
Payments for shares redeemed ............. (451,382,489) (859,162,291) (67,218,527) (107,860,652)
-------------- ------------ ----------- -----------
Net increase (decrease) in net assets
from share transactions ............... 775,971,636 172,345,668 43,941,032 (16,873,960)
-------------- ------------ ----------- -----------
Change in net assets ..................... 1,237,630,250 (563,738,032) 105,256,656 (79,725,310)
Net assets:
Beginning of year ........................ 4,423,876,356 4,987,614,385 61,703,833 641,429,143
-------------- ------------- ----------- -----------
End of year .............................. $5,661,506,606 $4,423,876,356 $666,960,489 $561,703,833
============== ============ =========== ===========
End of year net assets includes
undistributed (distributions in excess
of) net investment income .............. $ 13,766,310 $9,617,086 $(116,781) $(2,092,866)
============== ============ =========== ===========
Share Transactions
Shares sold .............................. 10,162,782 11,045,632 5,565,388 4,260,197
Shares issued upon reinvestment .......... 31,806,470 25,965,977 3,165,606 3,224,948
Shares redeemed .......................... (15,783,222) (27,976,805) (5,364,352) (8,698,147)
-------------- ------------- ----------- -----------
Net increase (decrease)................... 26,186,030 9,034,804 3,366,642 (1,213,002)
============== ============ =========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
Statements of Changes in Net Assets - Years Ended December 31, 1995 and 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aetna Variable Aetna Investment
Encore Fund Advisers Fund, Inc.
---------------------- ----------------------
1995 1994 1995 1994
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income..................... $29,137,815 $17,683,948 $42,225,550 $ 36,334,686
Net realized gain (loss)on investments.... (52,156) -- 88,067,506 26,834,272
Net change in unrealized gain (loss)on
investments............................. 472,281 (404,280) 125,951,337 (66,993,020)
----------- ----------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations ............. 29,557,940 17,279,668 256,244,393 (3,824,062)
----------- ----------- ----------- ------------
Distributions to Shareholders: (Note 1)
From net investment income ............... (385,007) (17,696,304) (52,754,265) (34,225,507)
From net realized gains .................. -- -- (25,336,005) (5,204,325)
----------- ----------- ----------- ------------
Decrease in net assets from
distributions to shareholders ......... (385,007) (17,696,304) (78,090,270) (39,429,832)
----------- ----------- ----------- ------------
Share Transactions:
Proceeds from shares sold ................ 245,248,012 338,351,549 74,184,396 118,669,062
Net asset value of shares issued upon
reinvestment of distributions .......... 385,007 17,696,304 78,090,270 39,429,832
Payments for shares redeemed ............. (243,808,588) (252,841,342) (92,449,914) (77,284,617)
----------- ----------- ----------- ------------
Net increase in net assets from share
transactions .......................... 1,824,431 103,206,511 59,824,752 80,814,277
----------- ----------- ----------- ------------
Change in net assets ..................... 30,997,364 102,789,875 237,978,875 37,560,383
Net assets:
Beginning of year ........................ 483,039,239 380,249,364 958,008,205 920,447,822
----------- ------------ ----------- ------------
End of year .............................. $514,036,603 $483,039,239 $1,195,987,088 $958,008,205
=========== ============ =========== ============
End of year net assets includes
undistributed net investment income .... $28,830,703 $ 66,300 $1,726,572 $ 11,804,800
=========== =========== =========== ============
Share Transactions
Shares sold .............................. 19,041,695 26,697,083 5,556,544 9,425,078
Shares issued upon reinvestment .......... 28,953 1,409,510 5,582,169 3,232,168
Shares redeemed .......................... (18,919,850) (19,935,586) (7,030,152) (6,216,426)
----------- ------------ ----------- ------------
Net increase.............................. 150,798 8,171,007 4,108,561 6,440,820
=========== =========== =========== ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
Notes to Financial Statements
December 31, 1995
1. Summary of Significant Accounting Policies
Aetna Variable Fund (Variable Fund) is registered under the Investment Company
Act of 1940 as a diversified open-end management investment company whose shares
are currently sold to Aetna Life Insurance and Annuity Company ("Company"), an
Aetna Life Insurance Company Separate Account, and other shareholders of the
Variable Fund only through reinvestment of dividends. The Company's shares are
allocated to certain of its variable life/annuity accounts. The Company's
accounts and affiliates held 98% of the Variable Fund's shares outstanding at
December 31, 1995. The investment objective of Variable Fund is to maximize
total return through investments in a diversified portfolio of common stocks and
securities convertible into common stock.
Aetna Income Shares (Income Shares) is registered under the Investment Company
Act of 1940 as a diversified open-end management investment company whose shares
are currently sold to the Company for allocation to certain of its variable
life/annuity accounts and other shareholders of Income Shares only through
reinvestment of dividends. The Company's accounts and affiliates held 99% of
Income Shares' outstanding shares at December 31, 1995. The investment objective
of Income Shares is to maximize total return, consistent with reasonable risk,
through investments in a diversified portfolio consisting primarily of debt
securities.
Aetna Variable Encore Fund (Encore Fund) is registered under the Investment
Company Act of 1940 as a diversified open-end management investment company
organized by the Company to serve as an investment vehicle for certain of the
Company's variable life/annuity accounts. The Company's accounts held 100% of
Encore Fund's outstanding shares at December 31, 1995. The investment objective
of Encore Fund is to provide high current return, consistent with preservation
of capital and liquidity, through investment in high-quality money market
instruments.
Aetna Investment Advisers Fund, Inc. (Advisers Fund) is registered under the
Investment Company Act of 1940 as a diversified open-end management investment
company whose shares are currently sold to the Company for allocation to certain
of its variable life/annuity separate accounts. The separate accounts held 100%
of Advisers Fund's shares outstanding at December 31, 1995. The investment
objective of Advisers Fund is to produce the maximum investment return
consistent with reasonable safety of principal.
Variable Fund, Income Shares, Encore Fund, and Advisers Fund are referred to
individually as a "Fund", collectively the "Funds".
The accompanying financial statements of the Funds have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Funds.
a. Valuation of Investments
Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter
securities, at the mean of the bid and asked prices. Short-term investments
maturing in more than sixty days for which market quotations are readily
available are valued at current market value. Short-term investments maturing
in less than sixty days are valued at amortized cost which when combined with
accrued interest approximates market. Securities for which market quotations
are not considered to be readily available are valued in good faith using
methods approved by the Board of Trustees/Directors.
The accounting records of the Funds are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates of
exchange at the end of the period. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
<PAGE>
1. Summary of Significant Accounting Policies (continued)
b. Option Contracts
The Funds may purchase put and call options and write covered call options as
a hedge against adverse movements in the value of portfolio holdings or to
increase market exposure.
Option contracts are valued daily. Unrealized gains or losses are recorded
based upon the last sales price on the principal exchange on which the option
is traded.
The Funds will realize a gain or loss upon the expiration or closing of the
option contract. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost of the security for a written put
option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
The risk in writing a call option is that the Funds give up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Funds may incur a
loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Funds pay a premium
whether or not the option is exercised. Risks may also arise from an illiquid
secondary market, or from the inability of counterparties to meet the terms
of the contract.
c. Futures and Foreign Currency Exchange Contracts
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Funds "sell" futures
contracts as a hedge against declines in the value of portfolio securities.
The Funds may also purchase futures contracts to gain market exposure as it
may be more cost effective than purchasing individual securities.
Upon entering into a futures contract, each Fund is required to deposit with
a broker, an amount (initial margin) equal to a percentage of the purchase
price indicated by the futures contract. Subsequent deposits (variation
margin) are received or paid each day by each Fund equal to the daily
fluctuations in the market value of the contract. These amounts are recorded
by each Fund as unrealized gains or losses. When a contract is closed, each
Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it
was closed. Generally, futures contracts are closed prior to expiration.
A forward foreign currency exchange contract is an agreement to pay or
receive specific amounts of a currency at a future date in exchange for
another currency at an agreed upon exchange rate. The Funds may use forward
foreign currency exchange contracts to hedge certain foreign currency assets.
Contracts are recorded at market value and marked-to-market daily.
The risks associated with futures and forward foreign currency exchange
contracts may arise from an imperfect correlation between the change in
market value of the securities held by the Funds and the price of futures
contracts. Risks may also arise from an illiquid secondary market, or from
the inability of counterparties to meet the terms of the contract.
Realized and unrealized gains or losses on futures and foreign currency
exchange contracts are reflected in the accompanying financial statements.
For federal tax purposes, any futures and forward foreign currency exchange
contracts which remain open at the end of the fiscal year are
marked-to-market and the resultant net gain or loss is included in federal
taxable income.
<PAGE>
1. Summary of Significant Accounting Policies (continued)
d. Federal Income Taxes
As qualified regulated investment companies, the Funds are relieved of
federal income and excise taxes by distributing their net taxable investment
income and capital gains, if any, in compliance with the applicable
provisions of the Internal Revenue Code.
e. Distributions
The Funds distribute all net investment income and net capital gains, if any,
to shareholders semi-annually. Distributions from net investment income are
based on taxable net income. Distributions are recorded on the ex-dividend
date. Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency-related contracts and deferred losses on wash sales.
f. Other
Investment transactions are accounted for on the day following trade-date,
except same day settlements which are accounted for on the trade date.
Interest income is recorded on an accrual basis. Discounts and premiums on
securities purchased are amortized, using an effective yield method, over the
life of the respective security. Dividend income and stock splits are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions are determined on an identified cost basis.
2. Investment Advisory Fee and Other Expenses
Each Fund pays the Company (its investment adviser) an investment advisory
fee at an annual rate of one-quarter of one percent (.25%) of its average
daily net assets.
In addition, the Funds have entered into a management agreement (Agreement)
with the Company. Under the Agreement, the Company is paid a fee for certain
administrative and personnel services incurred by the Funds. This fee is
equal to the direct costs incurred by the Company to administer the funds.
For the year ended December 31, 1995, each Fund paid the Company the
following administrative personnel and service fees:
Administrative
Personnel and
Service Fees
Aetna Variable Fund $1,869,356
Aetna Income Shares 206,010
Aetna Variable Encore Fund 118,541
Aetna Investment Advisers Fund, Inc. 327,918
Other than expenses specifically assumed by the Company under the Agreement,
all expenses incurred in the operation of the Fund are borne by the Fund.
3. Purchases and Sales of Investments
Purchases and sales of investment securities, excluding short-term
investments, for all Funds except Aetna Variable Encore Fund, a money market
fund, for the year ended December 31, 1995 were:
Cost of Proceeds from
Purchases Sales
-------------- --------------
Aetna Variable Fund $4,676,479,269 $4,621,060,432
Aetna Income Shares 603,648,415 600,896,809
Aetna Investment Advisers Fund, Inc. 1,436,109,752 1,421,202,594
<PAGE>
4. Capital Loss Carryforward
At December 31, 1995, for federal income tax purposes, Aetna Income Shares
and Aetna Variable Encore Fund had the following capital loss carryforwards
available to offset future long term capital gains of approximately:
Capital Loss Carryforward Year of Expiration
------------------------- ------------------
Aetna Income Shares $13,000,000 2002
Aetna Variable Encore Fund 64,000 2003
5. Options
The following reflects the Funds call and put option activity for the year
ended December 31, 1995:
Aetna Variable Fund
Put Options Purchased
---------------------------------------------
Number of
Option Premium Realized
Contracts Paid Gain (Loss)
--------- -------- ---------
Outstanding December 31, 1994 - $ - $ -
Purchased.................... 2,000 177,380 -
Closed....................... (1,472) (131,243) (95,916)
Expired...................... (528) (46,137) (46,137)
--------- -------- ---------
Outstanding December 31, 1995 - $ - $(142,053)
--------- -------- ---------
Aetna Investment Advisers Fund, Inc.
Call Options Written
---------------------------------------------
Number of Deferred
Option Premium Realized
Contracts Received Gain (Loss)
---------- --------- ----------
Outstanding December 31, 1994 - $ - $ -
24 610,160 -
Written.................... (24) (610,160) -
Exercised.................. - - -
Outstanding December 31, 1995 - $ - $ -
---------- --------- ----------
<PAGE>
6. Forward Foreign Currency Exchange Contracts
At December 31, 1995, Aetna Variable Fund had the following open forward
foreign currency exchange contracts that obligate the Fund to deliver
currencies at specified future dates. The unrealized gain of $1,109,977 on
these contracts is included in the accompanying financial statements. The
terms of the open contracts are as follows:
<TABLE>
<CAPTION>
Currency U.S. $Value Currency U.S. $Value
Exchange to be as of to be as of Unrealized
Date Delivered December 31, 1995 Received December 31, 1995 Gain (Loss)
---- --------- ----------------- -------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
2/9/96 7,136,000 $6,229,159 6,320,638 $6,320,638 $91,479
Swiss Franc U.S. Dollar
------------------------------------------------------------------------------------
2/9/96 642,570 642,570 752,000 656,436 13,866
U.S Dollar Swiss Franc
------------------------------------------------------------------------------------
1/3/96 2,289,000 413,111 410,289 410,289 (2,822)
Danish Krone U.S. Dollar
------------------------------------------------------------------------------------
4/18/96 13,130,000 2,374,820 2,353,637 2,353,637 (21,183)
Danish Krone U.S. Dollar
------------------------------------------------------------------------------------
1/3/96 1,851,000 2,879,076 2,850,984 2,850,984 (28,092)
British Pound U.S. Dollar
------------------------------------------------------------------------------------
3/1/96 1,489,752 1,489,752 968,000 1,500,574 10,822
U.S. Dollar British Pound
------------------------------------------------------------------------------------
6/14/96 15,116,000 23,380,690 23,076,464 23,076,464 (304,226)
British Pound U.S. Dollar
------------------------------------------------------------------------------------
6/14/96 2,273,335 2,273,335 1,481,000 2,290,738 17,403
U.S. Dollar British Pound
------------------------------------------------------------------------------------
1/2/96 1,350,406 1,350,406 2,162,550,000 1,365,419 15,013
U.S. Dollar Italian Lira
------------------------------------------------------------------------------------
3/13/96 1,960,304,000 19,005,410 19,681,569 19,681,569 676,159
Japanese Yen U.S. Dollar
------------------------------------------------------------------------------------
6/19/96 1,799,400,000 17,447,682 18,140,026 18,140,026 692,344
Japanese Yen U.S. Dollar
------------------------------------------------------------------------------------
4/18/96 14,405,000 9,040,297 8,987,397 8,987,397 (52,900)
Dutch Guilder U.S. Dollar
------------------------------------------------------------------------------------
4/15/96 3,470,000 2,471,334 2,473,448 2,473,448 2,114
Singapore U.S. Dollar
Dollar
------------------------------------------------------------------------------------
$1,109,977
============
</TABLE>
7. Federal Tax Status of Dividends Declared During the Fiscal Year (Unaudited)
As of December 31, 1995, the following funds declared long term capital
gain dividends as follows:
Variable Fund $0.791 July 1995
3.310 December 1995
Investment Advisers 0.300 December 1995
All of the income dividends paid by each fund were ordinary income for
Federal Income Tax purposes. The percentage of income dividends that were
qualifying dividends for the corporate dividends received deduction were:
Qualifying Dividend
-------------------
Variable Fund 44%
Investment Advisers 17%
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Trustees/Directors of Aetna Variable Fund, Aetna
Income Shares, Aetna Variable Encore Fund and Investment Advisers Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund and Aetna
Investment Advisers Fund, Inc. (the Funds), including the portfolios of
investments, as of December 31, 1995, the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and financial highlights for each of
the years in the five-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Aetna
Variable Fund, Aetna Income Shares, Aetna Variable Encore Fund and Aetna
Investment Advisers Fund, Inc. as of December 31, 1995, the results of their
operations for the year then ended, the changes in their net assets for each of
the years in the two-year period then ended and financial highlights for each of
the years in the five-year period then ended in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Hartford, Connecticut
February 16, 1996
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Included in Part A:
Financial Highlights
(2) Included in Part B:
Portfolios of Investments
Statements of Assets and Liabilities as of December 31, 1995
Statements of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Notes to Financial Statements
Independent Auditors' Report
(b) Exhibits:
(1) Charter (Declaration of Trust)
(2) Amended Bylaws (adopted by Board of Directors
September 14, 1994)
(3) Not Applicable
(4) Instruments Defining Rights of Holders - Article VI
of the Declaration of Trust which is included in this
filing as Exhibit 24(b)(1) sets forth the rights of
shareholders; Copies of Securities Issued and
Registered by Registrant(1)
(5) Investment Advisory Agreement(1)
(6) Not Applicable
(7) Not Applicable
(8) Custodian Agreements and Depository Contracts
(9) Form of Administrative Services Agreement(2)
(10.1) Opinion of Counsel(3)
(10.2) Consent of Counsel
(11) Consent of Independent Auditors
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(17) Financial Data Schedule
(18) Powers of Attorney(2)
<PAGE>
1. Incorporated herein by reference to Post-Effective Amendment No. 37 to the
Registration Statement on Form N-1A (File No. 2-51739), as filed with the
Securities and Exchange Commission on April 26, 1994.
2. Incorporated herein by reference to Post-Effective Amendment No. 48 to the
Registration Statement on Form N-1A (File No. 2-51739), as filed with the
Securities and Exchange Commission on April 25, 1996.
3. Incorporated herein by reference to Registrant's 24f-2 Notice for the fiscal
year ended December 31, 1995, as filed electronically with the Securities
and Exchange Commission on February 28, 1996.
Item 25. Persons Controlled by or Under Common Control
Registrant is a Massachusetts business trust for which separate
financial statements are filed. As of March 31, 1996, ownership of
the Registrant's outstanding shares of beneficial interest was as
follows:
Aetna Insurance Company of America .046%
Aetna Life Insurance and Annuity Company 99.954%
Aetna Insurance Company of America is a wholly owned subsidiary of
Aetna Life Insurance and Annuity Company and Aetna Life Insurance and
Annuity Company is a wholly owned subsidiary of Aetna Retirement
Holdings, Inc., which is in turn a wholly owned subsidiary of Aetna
Retirement Services, Inc. and an indirectly wholly owned subsidiary
of Aetna Life and Casualty Company.
A diagram of all persons directly or indirectly under common control
with the Registrant is incorporated herein by reference to Item 26 of
Post-Effective Amendment No. 5 to the Registration Statement on Form
N-4 (File No. 33-75986) filed electronically with the Securities and
Exchange Commission on April 12, 1996, as supplemented by
Post-Effective Amendment No. 6 to Registration Statement on Form N-4
(File No. 33-75986) filed electronically on April 22, 1996.
Item 26. Number of Holders of Securities
(1) Title of Class (2) Number of Record Holders
-------------- ------------------------
Shares of Beneficial Interest 2 as of March 31, 1996
$1.00 par value
Item 27. Indemnification
Article V of the Registrant's Declaration of Trust, which is included
in this filing as Exhibit 24(b)(1), provides indemnification for
Registrant's trustees and officers.
In addition, the Registrant's trustees and officers are covered under
director and officer liability policies, issued by National Union
Fire Insurance Company, which generally indemnify the Registrant's
trustees and officers for judgments and expenses in proceedings
brought against them solely by reason of their positions as trustees
and officers (in the absence of gross neglect or misfeasance). The
policy expires on October 1, 1996.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
The Investment Adviser is an insurance company that issues variable
and fixed annuities, variable and universal life insurance policies
and acts as depositor for separate accounts holding assets for
variable contracts and policies. The following table summarizes the
business connections of the directors and principal officers of the
Investment Adviser.
<TABLE>
<CAPTION>
------------------------- ---------------------------- --------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1993/Addresses*/**
------------------------- ---------------------------- --------------------------------------
<S> <C> <C>
Daniel P. Kearney Director, President and President (since December 1993),
Chief Executive Officer Aetna Life Insurance and Annuity
Company; Executive Vice President
(since December 1993), and Group
Executive, Financial Division
(February 1991 - December 1993),
Aetna Life and Casualty Company.
Director: Aetna Investment Services,
Inc. (since November 1994):; Aetna
Insurance Company of America (since
May 1994); MBIA, Inc. (since 1992).
Christopher J. Burns Director and Senior Vice Senior Vice President, Sales &
President Service (since February 1996), and
Senior Vice President, Life (March
1991 - February 1996), Aetna Life
Insurance and Annuity Company.
Director: Aetna Financial Services,
Inc. (since January 1996); Aetna
Investment Services, Inc. (since
July 1992).
<PAGE>
------------------------- ---------------------------- --------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1993/Addresses*/**
------------------------- ---------------------------- --------------------------------------
Laura R. Estes Director and Senior Vice Senior Vice President, Manage/
President Design Products & Services (since
February 1996), and Senior Vice
President, Pensions (March 1991 -
February 1996), Aetna Life Insurance
and Annuity Company. Director:
Aetna Financial Services, Inc.
(since January 1996); Aetna
Investment Services, Inc. (since
July 1993).
Timothy A. Holt Director, Senior Vice Senior Vice President, Strategy &
President and Chief Finance and Chief Financial Officer
Financial Officer (since February 1996), Aetna Life
Insurance and Annuity Company;
Vice President, Portfolio Management/
Investment Group (August 1992 -
February 1996), Aetna Life and
Casualty Company.
Gail P. Johnson Director and Vice President Vice President, Service and Retain
Customers (since February 1996);
Vice President, Defined Benefit
Services (September 1994 - February
1996); Vice President, Plan
Services, Pensions and Financial
Services (December 1992 - September
1994) -- Aetna Life Insurance and
Annuity Company.
John Y. Kim Director and Senior Vice President (since December 1995),
President Aeltus Investment Management, Inc.;
Chief Investment Officer
(since May 1994), Aetna
Life and Casualty Company; Managing
Director (September 1993 - April 1994),
Mitchell Hutchings Institutional
Investors (New York, New York).
<PAGE>
------------------------- ---------------------------- --------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1993/Addresses*/**
------------------------- ---------------------------- --------------------------------------
Shaun P. Mathews Director and Vice President Vice President, Products Group
(since February 1996); Senior Vice
President, Strategic Markets and
Products (February 1993 - February
1996) -- Aetna Life Insurance and
Annuity Company. Director: Aetna
Investment Services, Inc. (since
July 1993); Aetna Insurance Company
of America (since February 1993).
Glen Salow Director and Vice President Vice President, Information
Technology (since February 1996),
Vice President, Information
Technology, Investments and
Financial Services (February 1995 -
February 1996), Vice President,
Investment Systems (1992 - 1995),
AIT - Aetna Life Insurance and
Annuity Company.
Creed R. Terry Director and Vice President Vice President, Select and Manage
Markets, Market Strategist (August
1995 - February 1996); Aetna Life
Insurance and Annuity Company;
President, (1991 - 1995) Chemical
Technology Corporation (a subsidiary
of Chemical Bank).
Zoe Baird Senior Vice President and Senior Vice President and General
General Counsel Counsel (since April 1992), Aetna
Life and Casualty Company;
Director: Zurn Industries, Inc.
(since April 1993); Southern New
England Telecommunication Corp. and
Southern New England Telephone
Company (since November 1990).
<PAGE>
------------------------- ---------------------------- --------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1993/Addresses*/**
------------------------- ---------------------------- --------------------------------------
Susan E. Schechter Counsel and Corporate Counsel (since November 1993), Aetna
Secretary Life and Casualty Company; Associate
Attorney (September 1986 - October 1993),
Steptoe & Johnson.
Eugene M. Trovato Vice President and Vice President and Treasurer,
Treasurer, Corporate Corporate Controller (since February
Controller 1996), Vice President and Controller
(February 1995 - February 1996), Aetna
Life Insurance and Annuity Company;
Vice President, Financial Reporting
(December 1991 - February 1995), Aetna
Life and Casualty Company.
Diane B. Horn Vice President and Chief Vice President and Chief Compliance
Compliance Officer Officer (since February 1996), and
Senior Compliance Officer (August 1993 -
February 1996), Aetna Life Insurance and
Annuity Company.
</TABLE>
* The principal business address of each person named is 151 Farmington
Avenue, Hartford, Connecticut 06156.
** Certain officers and directors of the investment adviser currently hold
(or have held during the past two years) other positions with affiliates
of the Registrant which are not deemed to be principal positions.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records
As required by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder, the Registrant and its investment adviser,
ALIAC, maintain physical possession of each account, book or other
documents, except shareholder records, at its principal offices at
151 Farmington Avenue, Hartford, Connecticut 06156.
Item 31. Management Services
Not applicable.
<PAGE>
Item 32. Undertakings
The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Fund's latest annual report
to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the Securities Act of 1933 and the Investment Company Act of 1940,
Aetna Variable Encore Fund (Registrant) certifies that it meets the requirements
of Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment
No. 39 to its registration Statement on Form N-1A (2-53038) and has duly caused
this Post-Effective Amendment No. 39 to the Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of
Hartford, and State of Connecticut, on the 25th day of April, 1996.
AETNA VARIABLE ENCORE FUND
(Registrant)
By Shaun P. Mathews *
------------------------
Shaun P. Mathews
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons on April 25, 1996 in the capacities indicated.
Signature Title
Shaun P. Mathews* President and Trustee
- ----------------------------- (Principal Executive Officer)
Morton Ehrlich* Trustee
- -----------------------------
Maria T. Fighetti* Trustee
- -----------------------------
David L. Grove* Trustee
- -----------------------------
Timothy A. Holt* Trustee
- -----------------------------
Daniel P. Kearney* Trustee
- -----------------------------
Sidney Koch* Trustee
- -----------------------------
Corine T. Norgaard* Trustee
- -----------------------------
<PAGE>
Richard G. Scheide* Trustee
- -----------------------------
James C. Hamilton* Vice President and Treasurer
- ----------------------------- (Principal Financial and Accounting
Officer)
By: /s/ Julie E. Rockmore
---------------------
*Julie E. Rockmore
Attorney-in-Fact
<PAGE>
Aetna Variable Encore Fund
EXHIBIT INDEX
Exhibit No. Exhibit Page
99-(b)(1) Charter (Declaration of Trust) _____
99-(b)(2) Amended Bylaws _____
99-(b)(4) Instruments Defining Rights of Holders -
Article VI of the Declaration of Trust which
is included in this filing as Exhibit 24(b)(1)
sets forth the rights of shareholders;
Copies of Securities Issued and Registered
by Registrant *
99-(b)(5) Investment Advisory Agreement *
99-(b)(8) Custodian Agreements and Depository Contracts _____
99-(b)(9) Form of Administrative Services Agreement *
99-(b)(10.1) Opinion of Counsel *
99-(b)(10.2) Consent of Counsel _____
99-(b)(11) Consent of Independent Auditors _____
99-(b)(18) Powers of Attorney *
27 Financial Data Schedule _____
* Incorporated herein by reference.
DECLARATION OF TRUST
OF
AETNA VARIABLE ENCORE FUND
<PAGE>
TABLE OF CONTENTS
ARTICLE I......................................................................1
The Trust...................................................................1
1.1. Name.................................................................1
1.2. Definitions..........................................................1
ARTICLE II.....................................................................2
Board of Trustees...........................................................2
2.1. Number; Service......................................................2
2.2. Election of Trustees at 1984 Meeting of Shareholders.................3
2.3. Term of Office of Trustees...........................................3
2.4. Termination of Service and Appointment of Trustees...................3
2.5. By-Laws..............................................................3
2.6. Officers.............................................................4
ARTICLE III....................................................................4
Powers of Trustees..........................................................4
3.1. General..............................................................4
3.2. Investments..........................................................4
3.3. Legal Title..........................................................5
3.4. Borrow Money.........................................................5
3.5. Delegation; Committees...............................................5
3.6. Collection and Payment...............................................5
3.7. Expenses.............................................................6
3.8. Miscellaneous Powers.................................................6
3.9. Further Powers.......................................................6
ARTICLE IV.....................................................................7
Advisory, Management and Distribution Arrangements..........................7
4.1. Advisory, Management and Distribution Arrangements...................7
4.2. Distribution Arrangements............................................7
4.3. Parties to Contract..................................................7
4.4. Provisions and Amendments............................................8
ARTICLE V......................................................................8
Limitations of Liability of Shareholders, Trustees and Others...............8
5.1. No Personal Liability of Shareholders, Trustees, etc.................8
5.2. Non-Liability of Trustees, and Others................................8
5.3. Indemnification......................................................8
5.4. No Bond Required of Trustees........................................10
5.5. No Duty or Investigation; Notice in Trust Instruments...............10
5.6. Reliance on Experts.................................................11
<PAGE>
ARTICLE VI....................................................................11
Shares of Beneficial Interest..............................................11
6.1. Beneficial Interest.................................................11
6.2. Rights of Shareholders..............................................11
6.3. Trust Only..........................................................11
6.4. Issuance of Shares..................................................12
6.5. Register of Shares..................................................12
6.6. Transfer Agent......................................................12
6.7. Transfer of Shares..................................................12
ARTICLE VII...................................................................13
Custodians.................................................................13
7.1. Appointment and Duties..............................................13
7.2. Central Certificate System..........................................13
ARTICLE VIII..................................................................14
Redemption.................................................................14
8.1. Redemption..........................................................14
8.2. Involuntary Redemption of Shares; Disclosure of Holding.............14
8.3. Redemption of Small Accounts; Service Charges on Small Accounts.....14
ARTICLE IX....................................................................15
Determination of Net Asset Value, Net Income and Distributions.............15
9.1. Net Asset Value.....................................................15
9.2. Distributions to Shareholders.......................................15
9.3. Power to Modify Foregoing Procedures................................15
ARTICLE X.....................................................................16
Shareholders...............................................................16
10.1. Meetings of Shareholders...........................................16
10.2. Voting Powers......................................................16
10.3. Notice of Meetings.................................................16
10.4. Record Date for Meeting............................................17
10.5. Proxies............................................................17
10.6. Reports............................................................17
10.7. Inspection of Records..............................................18
10.8. Shareholder Action by Written Consent..............................18
ARTICLE XI....................................................................18
Duration; Termination of Trust; Amendment; Mergers, Etc....................18
11.1. Duration...........................................................18
11.2. Termination........................................................18
11.3. Amendment Procedure................................................19
11.4. Merger, Consolidation and Sale of Assets...........................20
<PAGE>
ARTICLE XII...................................................................20
Miscellaneous..............................................................20
12.1. Notices............................................................20
12.2. Filing.............................................................20
12.3. Resident Agent.....................................................21
12.4. Governing Law......................................................21
12.5. Reliance by Third Parties..........................................21
12.6. Provisions in Conflict With Law or Regulations.....................21
12.7. Trust Name.........................................................22
<PAGE>
DECLARATION OF TRUST
OF
AETNA VARIABLE ENCORE FUND
THE DECLARATION OF TRUST of Aetna Variable Encore Fund (the "Trust") is
made this 25th day of January, 1984 by the parties signatory hereto, as trustees
(the "Trustees").
W I T N E S S E T H :
WHEREAS, the Trustees desire to form a trust fund, Aetna Variable Encore
Fund, as a Massachusetts Business Trust to participate in a reorganization with
Aetna Variable Encore Fund, Inc., whereby Aetna Variable Encore Fund, Inc.,
would be converted from a Maryland Corporation to a Massachusetts Business Trust
pursuant to an Agreement and Plan of Reorganization and Liquidation involving
the Trust, and the shareholders of Aetna Variable Encore Fund, Inc. would become
shareholders of the Trust pursuant to the Reorganization;
WHEREAS, the Trustees desire to use the Trust for the investment and
reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust IN TRUST for the benefit of the holders from time to time
of the shares of beneficial interest issued hereunder as herein set forth below.
ARTICLE I
The Trust
1.1. Name.
The name of the trust created hereby shall be "Aetna Variable
Encore Fund", and so far as may be practicable the Trustees shall conduct the
activities of the Trust, execute all documents and sue or be sued under that
name, which name (and the word "Trust" wherever hereinafter used) shall refer to
the Trustees as Trustees, and not individually, and shall not refer to the
officers, agents, employees or Shareholders of the Trust.
1.2. Definitions.
As used in this Declaration of Trust, the following terms shall
have the following meanings:
<PAGE>
The terms "Affiliated Person", "Assignment", "Commission", "Interested
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the third
sentence of Section 2(a)(42) of the Investment Company Act of 1940, whichever
may be applicable) and "Principal Underwriter" shall have the meanings given
them in the Investment Company Act of 1940, as amended from time to time.
"Declaration" shall mean this Declaration of Trust as amended from time
to time.
"Fundamental Policies" shall mean the investment restrictions set forth
in the Prospectus and designated as fundamental policies therein.
"Person" shall mean and include individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
"Prospectus" shall mean the currently effective prospectus of the Trust
under the Securities Act of 1933 as amended.
"Shareholders" shall mean all holders of record of outstanding Shares.
"Shares" means the equal proportionate units of interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares.
"Trustees" refer to the individual Trustees in their capacity as
Trustees hereunder of the Trust and their successor or successors for the time
being in office as such Trustees;
"Trust Property" shall mean all property, real or personal, tangible or
intangible, owned or held by or for the account of the Trust.
The "1940 Act" refers to the Investment Company Act of 1940 and the
regulations promulgated thereunder, as amended from time to time.
ARTICLE II
Board of Trustees
2.1. Number; Service.
The Board of Trustees (the "Board") shall consist of not less
than three and not more than fifteen Trustees as determined by vote of the
Board, or in the absence thereof, shall consist of the number of Trustees last
elected at a meeting of Shareholders. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary
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and desirable to carry out that responsibility. The Trustees who shall serve
until the election of Trustees at the 1984 Meeting of Shareholders shall be
Donald G. Conrad, David L. Grove, James E. Mulvihill, Corine T. Norgaard, and
Dean E. Wolcott.
2.2. Election of Trustees at 1984 Meeting of Shareholders.
In the year 1984, on a date fixed by the Trustees which shall be
prior to the effective time of the Reorganization with Aetna Variable Encore
Fund, Inc., the Shareholders shall elect Trustees.
2.3. Term of Office of Trustees.
The Trustees shall hold office during the lifetime of this Trust,
and until its termination as hereinafter provided; except (a) that any Trustee
may resign his trust by written instrument signed by him and delivered to the
other Trustees, which shall take effect upon such delivery or upon such later
date as is specified therein; (b) that any Trustee may be removed at any time by
written instrument signed by at least two-thirds of the number of Trustees prior
to such removal, specifying the date when such removal shall become effective;
(c) that any Trustee who requests in writing to be retired or who has become
mentally or physically incapacitated may be retired by written instrument signed
by a majority of the other Trustees, specifying the date of his retirement; and
(d) a Trustee may be removed at any special meeting of Shareholders of the Trust
by a vote of two-thirds of the outstanding Shares or by written instrument
signed by the holders of at least two-thirds of the outstanding shares.
2.4. Termination of Service and Appointment of Trustees.
In case of the death, resignation, retirement, removal or mental
or physical incapacity of any of the Trustees, or in case a vacancy shall, by
reason of an increase in number, or for any other reason, exist, the remaining
Trustees shall fill such vacancy by appointing such other person as they in
their discretion shall see fit. Such appointment shall be effected by the
signing of a written instrument by a majority of the Trustees in office. An
appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in the number of Trustees. As soon as any
Trustee so appointed shall have accepted this Trust, the trust estate shall vest
in the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance. Any appointment authorized by this Section 2.4 is
subject to the provisions of Section 16(a) of the 1940 Act.
2.5. By-Laws.
The Trustees may adopt and from time to time amend or repeal the
By-Laws for the conduct of the business of the Trust.
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2.6. Officers.
The Trustees shall annually elect a President, one or more
Vice-Presidents, a Secretary and a Treasurer and may elect such other officers
as they deem appropriate. The Trustees may authorize the President or any Vice
President to appoint such other officers or agents with such powers as the
Trustees may deem to be advisable. The President shall be a Trustee. The general
powers of the officers shall be set forth in the By-Laws.
ARTICLE III
Powers of Trustees
3.1. General.
The Trustees shall have exclusive and absolute control over the
Trust Property and over the business of the Trust to the same extent as if the
Trustees were the sole owners of the Trust Property and business in their own
right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees may perform such acts as in their sole discretion are
proper for conducting the business of the Trust. The enumeration of any specific
power herein shall not be construed as limiting such discretion and power. Such
powers of the Trustees may be exercised without order of or resort to any court.
3.2. Investments.
The Trustees shall have power, subject to any applicable
limitation in this Declaration of Trust and in the By-Laws of the Trust, to:
(a) conduct, operate and carry on the business of an
investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of negotiable or non-negotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, reverse repurchase agreements and other
securities, including, without limitation, those issued, guaranteed or sponsored
by any state, territory or possession of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or by
the United States Government or its agencies or instrumentalities, or
international instrumentalities, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States and, to the extent provided in the Prospectus and not prohibited by the
Fundamental Policies, organized under foreign laws; and to exercise any and all
rights, powers and privileges of ownership or interest in respect of any and all
such investments of every kind and description, including, without limitation,
the right to consent and otherwise act with respect thereto, with power to
designate one or more persons, firms, associations or corporations to exercise
any of said rights,
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powers and privileges in respect of any of said instruments; and the Trustees
shall be deemed to have the foregoing powers with respect to any additional
securities in which the Trust may invest should the investment policies set
forth in the Prospectus or the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by fiduciaries.
3.3. Legal Title.
Legal Title to all the Trust Property shall be vested in the
Trustees as joint tenants except that the Trustees shall have power to cause
legal title to any Trust Property to be held by or in the name of any other
Person as nominee, on such terms as the Trustees may determine, provided that
the interest of the Trust is appropriately protected.
Upon the resignation, removal or death of a Trustee, that Trustee shall
automatically cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
3.4. Borrow Money.
Subject to the Fundamental Policies and the Trust By-Laws, the
Trustees shall have power to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security the
assets of the Trust, including the lending of portfolio securities, and to
endorse, guarantee, or undertake the performance of any obligation, contract or
engagement of any other person, firm, association or corporation.
3.5. Delegation; Committees.
The Trustees shall have power, consistent with their continuing
exclusive authority over the management of the Trust and the Trust Property, to
delegate to committees of Trustees or to officers, employees or agents of the
Trust, the doing of such things and the execution of such instruments as the
Trustees may deem expedient, to the same extent as such delegation is permitted
to directors of a Massachusetts business corporation and is permitted by the
1940 Act.
3.6. Collection and Payment.
The Trustees shall have power to collect all property due to the
Trust; to pay all claims, including taxes, against the Trust Property; to
prosecute, defend, compromise or abandon
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<PAGE>
any claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
3.7. Expenses.
The Trustees shall have power to incur and pay any expenses which
in the opinion of the Trustees are necessary to carry out any of the purposes of
this Declaration, and to pay reasonable compensation from the funds of the Trust
to themselves as Trustees. The Trustees may reimburse themselves for expenses
reasonably incurred by themselves on behalf of the Trust.
3.8. Miscellaneous Powers.
The Trustees shall have the power to: (a) employ or contract with
such Persons as the Trustees may deem desirable for the transaction of the
business of the Trust, provided that the selection and retention of independent
public accountants be done in a manner consistent with the 1940 Act; (b) enter
into joint ventures, partnerships and any other combinations or associations;
(c) purchase, and pay for out of Trust Property, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers or independent contractors of the Trust against
all claims arising by reason of holding any such position or by reason of any
action taken or omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have the power to
indemnify such Person against such liability; (d) establish pension,
profit-sharing, share purchase, and other retirement, incentive and benefit
plans for any Trustees, officers, employees and agents of the Trust; (e) to the
extent permitted by law and the By-Laws, indemnify any Person with whom the
Trust has dealings, including any adviser, administrator, manager, underwriter,
transfer agent, custodian and selected dealers, to such extent as the Trustees
shall determine; (f) guarantee indebtedness or contractual obligations of
others; and (g) determine and change the fiscal year of the Trust and the method
in which its accounts shall be kept.
3.9. Further Powers.
The Trustees shall have power to conduct the business of the
Trust and maintain offices in any and all states of the United States of
America, in the District of Columbia, and in any and all commonwealths,
territories, dependencies, colonies, possessions, agencies or instrumentalities
of the United State of America and of foreign governments, and to do all such
other things as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interest of the Trust made by
the Trustees in good faith shall be conclusive.
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ARTICLE IV
Advisory, Management and Distribution Arrangements
4.1. Advisory, Management and Distribution Arrangements.
Subject to a Majority Shareholder Vote, the Trustees may in their
discretion enter into advisory, administration or management contracts whereby
the other party to such contact shall undertake to furnish the Trustees with
advisory, administrative and management services. Notwithstanding any contrary
provisions of this Declaration, the Trustees may authorize any adviser,
administrator or manager (subject to such instructions as the Trustees may
adopt) to effect purchases, sales, loans or exchanges of portfolio securities on
behalf of the Trustees, or may authorize any officer, employee or Trustee to
effect such purchases, sales, loans or exchanges pursuant to recommendations of
any such adviser, administrator or manager (and all without further action by
the Trustees). Any purchases, sales, loans and exchanges shall be deemed to have
been authorized by all of the Trustees.
4.2. Distribution Arrangements.
The Trustees may enter into contracts providing for the sale of
the Shares of the Trust to net the Trust not less than the net asset value per
share. The Trust may either agree to sell the Shares to the other party to the
contract or appoint such other party its sales agent for such Shares. In either
case, the contract shall be on such terms and conditions as the Trustees may in
their discretion determine not inconsistent with the provisions of this Article
IV or the By-Laws. The contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer agreements with registered
securities dealers to further the purpose of the distribution or repurchase of
the Shares.
4.3. Parties to Contract.
Any contract of the character described in Section 4.1 and 4.2 of
this Article IV or in Article VII may be entered into with any corporation,
firm, trust or association, although one or more of the Trustees or officers of
the Trust may be an officer, director, Trustee, shareholder, or member of such
other party to the contract, and no such contract shall be invalidated or
rendered voidable by reason of the existence of any such relationship, nor shall
any person holding such relationship be liable merely by reason of said contract
or accountable for any profit realized directly or indirectly therefrom,
provided that the with the provisions of this Article IV or the By-Laws. The
same person (including a firm, corporation, trust, or association) may be the
other party to contracts entered into pursuant to Section 4.1 and 4.2 above or
Article VII, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 4.3.
7
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4.4. Provisions and Amendments.
Any contract entered into pursuant to Section 4.1 and 4.2 of this
Article IV shall be consistent with and subject to the requirements of Section
15 of the 1940 Act with respect to its continuance in effect, its termination,
and the method of authorization and approval of such contract or renewal
thereof.
ARTICLE V
Limitations of Liability of Shareholders, Trustees and Others
5.1. No Personal Liability of Shareholders, Trustees, etc.
No Shareholder shall be subject to any personal liability to any
Person in connection with Trust Property or the acts, obligations or affairs of
the Trust. No Trustee, officer, employee or agent of the Trust shall be subject
to any personal liability to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, willful misfeasance, gross negligence or
reckless disregard of a duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not on account thereof be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities, to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him. The
rights accruing to a Shareholder under this Section 5.1 shall not exclude any
other right to which such Shareholder may be lawfully entitled, nor shall
anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein.
5.2. Non-Liability of Trustees, and Others.
No Trustee, officer, employee or agent of the Trust shall be
liable to the Trust, its Shareholders, or to any Shareholder, Trustee, officer,
employee, or agent for any action or failure to act (including the failure to
compel in any way any former or acting Trustee to redress any breach of trust),
except upon a showing of bad faith, willful misfeasance, gross negligence or
reckless disregard of duties.
5.3. Indemnification.
(a) Every person who is or was a Trustee, office or employee of
this Trust or a director, officer or employee of any corporation which he served
at the request of this Trust (and his firm, executors and administrators) shall
have a right to be indemnified by this Trust against all
8
<PAGE>
liability and reasonable expenses incurred by him in connection with or
resulting from any claim, action, suit or proceeding in which he may become
involved as a party or otherwise by reason of his being or having been a
Trustee, officer or employee of this Trust or a director, officer or employee of
such corporation, provided (1) said claim, action, suit or proceeding shall be
prosecuted to a final determination and he shall be vindicated on the merits, or
(2) in the absence of such final determination vindicating him on the merits,
the Board shall determine that he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Trust, and, with respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful; said determination to be made (i) by
the Board, by a majority vote of a quorum consisting of disinterested Trustees;
or (ii) if such quorum is not obtainable or if a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion, or (iii)
by the Shareholders.
(b) For purposes of the preceding subsection: (1) "liability and
reasonable expenses" shall include, but not be limited to, reasonable counsel
fees and disbursements, amounts of any judgment, fine or penalty, and reasonable
amounts paid in settlement; (2) "claim, action, suit or proceeding" shall
include every such claim, action, suit or proceeding, whether civil or criminal,
derivative or otherwise, administrative, judicial or investigative, any appeal
relating thereto, and shall include any reasonable apprehension or threat of
such a claim, action, suit or proceeding; (3) a settlement, plea of nolo
contendere, consent judgment, adverse civil judgment, or conviction shall not of
itself create a presumption that the conduct of the person seeking
indemnification did not meet the standard of conduct set forth in subsection (2)
hereof.
(c) Notwithstanding the foregoing, the following additional
limitations shall apply with respect to any action by or in the right of the
Trust: (1) no indemnification shall be made in respect of any claim, issue or
matter as to which the person seeking indemnification shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
Trust unless the court which made such a finding, or any other court of equity
in the county where the Trust has its principal office determines that despite
the adjudication of liability, such person is fairly and reasonably entitled to
indemnity for some or all of such expenses; and (2) indemnification shall extend
only to reasonable expenses, including reasonable counsel's fees and
disbursements, and shall not include judgments, fines and amounts paid in
settlement.
(d) The right of indemnification shall extend to any person
otherwise entitled to it under this Article whether or not that person continues
to be a Trustee, office or employee of this Trust or a director, officer or
employee of such corporation at the time such liability or expense shall be
incurred. The right of indemnification shall extend to the legal representative
and heirs of any person otherwise entitled to indemnification. If a person meets
the requirements of this Article with respect to some matters in a claim,
action, suit or proceeding, but not with respect to others, he shall be entitled
to indemnification as to the former. Expenses incurred in defending an action,
suit or proceeding may be paid by the Trust in advance of the final disposition
of such action, suit or proceeding as authorized by the Board in the specific
case: 1)
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upon receipt of an undertaking for which security has been provided by or on
behalf of the Trustee, director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Trust as authorized in this Article, or 2) if the Trust is at the time of
such advance insured against losses arising by reason of the advance.
(e) This Article shall not exclude any other rights of
indemnification or other rights to which any Trustee, officer, or employee may
be entitled to by contract, vote of the Shareholders or as a matter of law. If
any clause, provision or application of this Section 5.3 shall be determined to
be invalid, the other clauses, provisions or applications of this section shall
not be affected, but shall remain in full force and effect.
(f) The trust shall have the power to purchase and maintain
insurance on behalf of any person who is or was a Trustee, officer, employee or
agent of the Trust, or is or was serving at the request of the Trust as a
director, officer, employee or agent of a corporation, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Trust would have the power to indemnify
him against such liability under the provisions of this Article.
5.4. No Bond Required of Trustees.
No Trustee shall be obligated to give any bond or other security
for the performance of any of his duties.
5.5. No Duty or Investigation; Notice in Trust Instruments.
No purchaser, lender, transfer agent or other person dealing with
the Trustees or with any officer, employee or agent of the Trust shall be bound
to make any inquiry concerning the validity of any transact on purporting to be
made by the Trustees or by said officer, employee or agent regarding the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, undertaking, instrument, certificate, Share, other security of the
Trust, and every other act in connection with the Trust shall be conclusively
taken to have been executed or done only by persons acting in their capacity as
Trustees under this Declaration or in their capacity as officers, employees or
agents of the Trust. Every written obligation, contract, undertaking,
instrument, or security of the Trust made or issued by the Trustees or by any
officers, employees or agents of the Trust, in their capacity as such, shall
contain an appropriate recital to the effect that the Shareholders, Trustees,
officers, employees and agents of the Trust shall not personally be bound by or
liable thereunder, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, Shareholders, officers, employees or
agents of the Trust. The Trustees may maintain insurance for the protection of
the Trust Property, its Shareholders, Trustees, officers, employees and agents
in such amount the Trustees shall deem adequate to cover possible tort
liability, and such other insurance as the Trustees in their sole judgment shall
deem advisable.
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5.6. Reliance on Experts.
Each Trustee and officer or employee of the Trust shall, in the
performance of his duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust, upon an opinion of
counsel, or upon reports made to the Trust by any of its officers or employees
or by any adviser, administrator, manager, distributor, selected dealer,
accountant, appraiser or other expect or consultant selected with reasonable
care by the Trustees, officers or employees of the Trust.
ARTICLE VI
Shares of Beneficial Interest
6.1. Beneficial Interest.
The beneficial interest in the Trust shall at all times be
divided into transferable Shares, with par value of $1.00 per share, each of
which shall represent an equal proportionate interest in the Trust with each
other Share outstanding, none having priority or preference over another. The
number of Shares which may be issued is unlimited. The Trustee may from time to
time divide or combine the outstanding Shares into a greater or lesser number
without thereby changing the proportionate beneficial interest in the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares plus any fraction of a Share. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend in
Shares or a split of Shares, shall be fully paid and nonassessable.
6.2. Rights of Shareholders.
The ownership of the Trust Property and the right to conduct any
business described in this declaration are vested exclusively in the Trustees,
and the Shareholders shall have no interest therein other than the beneficial
interest conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The Shares
shall not entitle the holder to preference, preemptive, appraisal or conversion
rights.
6.3. Trust Only.
It is the intention of the Trustees to create only the
relationship of Trustee and beneficiary between the Trustees and each
Shareholder. It is not the intention of the Trustees to create a general
partnership, limited partnership, joint stock association, corporation, bailment
or any form of legal relationship other than a trust.
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6.4. Issuance of Shares.
The Trustees, in their discretion, may from time to time without
vote of the Shareholders issue Shares in addition to the then issued and
outstanding Shares and Shares held in the treasury, to such party or parties and
for such amount not less than par value and type of consideration, including
cash or property, at such time or times and on such terms as the Trustees may
deem best, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with the assumption of,
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares. Contributions to the Trust may be accepted
for, and Shares shall be redeemed as, whole Shares and/or 1/1,000ths of a Share
or multiples thereof.
6.5. Register of Shares.
A register shall be kept at the principal office of the Trust or
of any transfer agent duly appointed by the Trustees under the direction of the
Trustees which shall contain the names and addresses of the Shareholders, the
number of Shares held by them and a record of all transfers thereof. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to such Shareholder as herein provided,
until such Shareholder has given his address to a transfer agent or such other
officer or agent of the Trustees as shall keep the register for entry thereon.
Certificates will not be issued for the Shares.
6.6. Transfer Agent.
The Trustees may enter into transfer agency and shareholder
services contracts whereby the other party shall undertake to furnish the
Trustees transfer agency and shareholder services. Such services may be provided
by one or more entities.
6.7. Transfer of Shares.
Shares shall be transferable on the records of the Trust only by
the record holder thereof or by the record holder's agent thereto duly
authorized in writing, upon delivery to the Trustees or a transfer agent of the
Trust of a duly executed instrument of transfer, together with such evidence of
the genuineness of each such execution and authorization and of other matters as
the Trustees or transfer agent may reasonably require. Upon such delivery the
transfer shall be recorded on the applicable register of the Trust. Until such
records is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereof and neither the Trustees nor any transfer
agent or registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the applicable register of Shares as the holder of
such Shares upon production of the proper evidence to the Trustees or a transfer
agent of the Trust, but until such record is made, the Shareholder of
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record shall be deemed to be the holder of such Shares for all purposes and
neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
ARTICLE VII
Custodians
7.1. Appointment and Duties.
The Trustees shall at all times employ a custodian or custodians
who shall meet the qualifications for custodians for portfolio securities of
investment companies contained in the 1940 Act. Any custodian shall have
authority as agent of the Trust, but subject to such restrictions, limitations
and other requirements, if any, as may be contained in the By-Laws of the Trust
and the 1940 Act:
(1) to hold the securities owned by the Trust and deliver
the same uponwritten order;
(2) to receive any moneys due to the Trust and deposit the
same in its own banking department (if a bank) or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net
income of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize each custodian to employ one or more
sub-custodians to perform such of the acts and services of the custodian, and
upon such terms and conditions, as may be agreed upon between the custodian and
such sub-custodian and approved by the Trustees, provided that in every case
such sub-custodian shall meet the qualifications for custodians contained in the
1940 Act.
7.2. Central Certificate System.
Subject to such rules, regulations and orders as the Commission
may adopt, the Trustees may direct the custodian to deposit all or any part of
the securities owned by the Trust in a system for the central handling of
securities established by a national securities exchange or a
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national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
custodian at the direction of the Trustees.
ARTICLE VIII
Redemption
8.1. Redemption.
All outstanding Shares of the Trust may be redeemed at the option
of the Shareholders thereof, upon and subject to the terms and conditions
provided in this Article VIII. The Trust shall, upon application of any
Shareholder, redeem or repurchase from such Shareholder outstanding Shares for
an amount per share determined by the application of a formula adopted for such
purpose by the Trustees (which formula shall be consistent with the 1940 Act);
provided that (a) such amount per share shall not exceed the cash equivalent of
the proportionate interest of each share in the assets of the Trust at the time
of the purchase or redemption and (b) if so authorized by the Trustees, the
Trust, to the extent permitted under the 1940 Act, may charge fees for effecting
such redemption, at such rates as the trustees may establish, to the extent
permitted under the 1940 Act and from time to time, pursuant to such Act,
suspend such right of redemption.
8.2. Involuntary Redemption of Shares; Disclosure of Holding.
If the Trustees shall in good faith be of the opinion that direct
or indirect ownership of Shares or other securities of the Trust has or may
become concentrated in any person to an extent which would disqualify the Trust
as a regulated investment company under the Internal Revenue Code, then the
Trustees shall have the power to compel the redemption of shares, reject any
order for the purchase of shares or refuse to give effect to the transfer of
shares.
8.3. Redemption of Small Accounts; Service Charges on Small Accounts.
Due to the relatively high cost of maintaining small investment
accounts, the Trustees shall have the power to require the redemption of Shares
of any Shareholder having a small value in the aggregate at a redemption price
determined in accordance with Section 8.1 or to impose monthly service charges
on such accounts.
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ARTICLE IX
Determination of Net Asset Value, Net Income and Distributions
9.1. Net Asset Value.
The net asset value of each outstanding Share of the Trust shall
be determined at such time as the Trustees may determine, in accordance with the
1940 Act. The method of determination of net asset value shall be determined by
the Trustees. The power and duty to make the daily calculations may be delegated
by the Trustees to the adviser, administrator, manager, custodian, transfer
agent or such other persons as the Trustees may determine. The Trustees may
suspend the daily determination of net asset value to the extent permitted by
the 1940 Act.
9.2. Distributions to Shareholders.
The Trustees shall from time to time distribute ratably among the
Shareholders such proportion of the net profits, surplus (including paid-in
surplus), capital, or assets held by the Trustees as they may deem proper. Such
distribution may be made in cash or property (including without limitation any
type of obligations of the Trust or any assets thereof), and the Trustees may
distribute ratably among the Shareholders additional Shares in such manner, at
such times, and on such terms as the Trustees may deem proper. Such
distributions may be among the Shareholders of record at the time of declaring a
distribution or among the Shareholders of record at such later date as the
Trustees shall determine. The Trustees may always retain from the net profits
such amount as they may deem necessary to pay the debts or expenses of the Trust
or to meet obligations of the Trust, or as they may deem desirable to use in the
conduct of its affairs or to retain for future requirements or extensions of the
business. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof under generally accepted
accounting principles, the above provisions shall be interpreted to give the
Trustees the power to distribute for any fiscal year as ordinary dividends and
as capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
9.3. Power to Modify Foregoing Procedures.
Notwithstanding any of the foregoing provisions of this Article
IX, the Trustees may prescribe such other bases and times for determining the
per share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions as they may deem necessary to enable the
Trust to comply with any provision of the 1940 Act, or the requirements of any
securities association registered under the Securities Exchange Act of 1934, or
any order of exemption issued by the Commission, all as in effect now or
hereafter amended or modified.
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ARTICLE X
Shareholders
10.1. Meetings of Shareholders.
(a) Meetings. The initial Meetings of the Shareholders shall be
held, at such place within or without the Commonwealth of Massachusetts on such
day and at such time as the Trustees shall designate. Such meetings may be
called by the Trustees or the President and shall be called by the Trustees upon
written request of Shareholders owning at least one-tenth of the outstanding
Shares entitled to vote. The Secretary shall give at least ten and not more than
ninety days written notice of any meeting.
(b) Quorum. At any Shareholder meeting, unless otherwise provided
by law, this Declaration, or the By-Laws, the presence in person or by proxy of
one-fourth of the votes entitled to be cast constitutes a quorum, and a majority
of the votes so present is sufficient to approve any matter properly before the
meeting.
10.2. Voting Powers.
The Shareholders shall have power to vote (i) for the election of
Trustees as provided in Section 2.2; (ii) for the removal of Trustees as
provided in Section 2.3(d); (iii) with respect to any investment adviser or
sub-investment adviser as provided in Section 4.1; (iv) with respect to any
termination or reorganization of the Trust as provided in Sections 11.2, 11.3,
and 11.4; (v) with respect to the amendment of this Declaration of Trust as
provided in Section 11.3; (vi) to the same extent as the shareholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders; and (vii) with respect to
such additional matters relating to the Trust as may be required by law, by this
Declaration of Trust, or the By-Laws of the Trust or any registration of the
Trust or its Shares with the Securities and Exchange Commission or any State, or
as the Trustees may consider desirable. Each whole Share shall be entitled to
one vote as to any matter on which it is entitled to vote, and each fractional
Share shall be entitled to a proportionate fractional vote. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required or permitted by law, this
Declaration of Trust or the By-Laws of the Trust to be taken by Shareholders.
10.3. Notice of Meetings.
Notice of each meeting of the Shareholders, stating the time,
place and purposes of the meeting, shall be given by the Trustees by mail to
each Shareholder at his registered address, mailed at least 10 days and not more
than 60 days before the meeting. Only the business stated in the notice of the
meeting shall be considered at such meeting. Any adjourned meeting may be held
as adjourned without further notice.
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10.4. Record Date for Meeting.
For the purpose of determining the Shareholders who are entitled
to notice of and to vote at any meeting, or to participate in any distribution,
or for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding 30 days, as the Trustees may
determine; or without closing the transfer books the Trustees may fix a date not
more than 60 days prior to the date of any meeting of Shareholders or daily
dividends or other action as a record date for the determination of the persons
to be treated as Shareholders of record for such purposes, except for dividend
payments, which shall be governed by Section 9.2
10.5. Proxies.
At any meeting of Shareholders, any holder of Shares entitled to
vote may vote by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Secretary, or with such other
officer or agent of the Trust as the Secretary may direct, for verification
prior to the time at which such vote shall be taken. Pursuant to a resolution of
a majority of the Trustees, proxies may be solicited in the name of one or more
Trustees or one or more of the officers of the Trust. Only Shareholders of
record shall be entitled to vote. Each full Share shall be entitled to one vote
and fractional Shares shall be entitled to a vote of such fraction. When any
Share is held jointly by several persons, any one of them may vote at any
meeting in person or by proxy in respect of such Share, but if more than one of
them shall be present at such meeting in person or by proxy, and such joint
owners or their proxies so present disagree as to any vote to be cast, such vote
shall not be received in respect of such Share. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden of proving invalidity
shall rest on the challenger. If the holder of any such Share is a minor or a
person of unsound mind, and subject to guardianship or to the legal control of
any other person as regards the charge or management of such Share, he may vote
by his guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy. Unless a proxy provides otherwise, it
is not valid more than 11 months after its date.
10.6. Reports.
The Trustees shall cause to be prepared at least annually a
report of operations containing a balance sheet and statement of income and
undistributed income of the Trust prepared in conformity with generally accepted
accounting principles and an opinion of an independent public accountant on such
financial statements. Copies of such reports shall be mailed to all Shareholders
of record within the time required by the 1940 Act. The Trustees shall, in
addition, furnish to the Shareholders at least semiannually interim reports
containing an unaudited balance sheet as of the end of such period and an
unaudited statement of income and surplus for the period from the beginning of
the current fiscal year to the end of such period.
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10.7. Inspection of Records.
The records of the Trust shall be open to inspection by
Shareholders to the same extent as is permitted shareholders of a Massachusetts
business corporation.
10.8. Shareholder Action by Written Consent.
Any action which may be taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by any express provision
of this Declaration) consent to the action in writing and the written consents
are filed with the records of the meetings of Shareholders. Such consent shall
be treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE XI
Duration; Termination of Trust; Amendment; Mergers, Etc.
11.1. Duration.
Subject to possible termination in accordance with the provisions
of Section 11.2 hereof, the Trust created hereby shall continue until the
expiration of 20 years after the death of the last survivor of the initial
Trustees named herein and the following named persons:
Name Address Date of Birth
- ---- ------- -------------
Tyler V. Hill 85 Ledyard Road 2/25/75
West Hartford, CT 06117
Rebecca D. Ellis 130 Country View Drive 5/19/77
South Windsor, CT 06074
11.2. Termination.
(a) The Trust may be terminated by the affirmative vote of the
holders of not less than two-thirds of the Shares of the Trust at any meeting of
Shareholders or by an instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of not less than
two-thirds of such Shares. Upon the termination of the Trust,
(i) The Trust shall carry on no business except for
the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs
of the Trust and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust,
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collect its assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property to one or more
persons at public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to liquidate its business;
provided that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property shall require
approval of the principal terms of the transaction and the nature and amount of
the consideration by vote or consent of the holders of a majority of the Shares
entitled to vote.
(iii) After paying or adequately providing for the
payment of all liabilities, and upon receipt of such releases, indemnities and
refunding agreements, as they deem necessary for their protection, the Trustees
may distribute the remaining Trust Property, in cash or in kind or partly in
each, among the Shareholders according to their respective rights.
(b) After termination of the Trust and distribution to the
Shareholders, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination. Upon termination of the Trust, the Trustees shall be discharged
from all further liabilities and duties hereunder, and the rights and interests
of all Shareholders shall cease.
11.3. Amendment Procedure.
(a) This Declaration may be amended by the affirmative vote of
the holders of not less than a majority of the Shares at any meeting of
Shareholders or by an instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of not less than a
majority of such Shares. The Trustees may also amend this Declaration without
the vote or consent of Shareholders if they deem it necessary to conform this
Declaration to the requirements of applicable federal laws or regulations, or
the requirements of the regulated investment company provisions of the Internal
Revenue Code, but the Trustees shall not be liable for failing so to do.
(b) No amendment may be made, under Section 11.3 (a) above, which
would change any rights with respect to any Shares of the Trust by reducing the
amount payable thereon upon liquidation of the Trust or by diminishing or
eliminating any voting rights pertaining thereto, except with the vote or
consent of the holders of two-thirds of the Shares. Nothing contained in this
Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust, or to permit assessments upon Shareholders.
(c) A certification in recordable form signed by a majority of
the Trustees setting forth an amendment and reciting that it was duly adopted by
the Shareholders or by the Trustees as aforesaid, or a copy of the Declaration,
as amended, in recordable form, and executed by a majority of the Trustees,
shall be conclusive evidence of such amendment when lodged among the records of
the Trust.
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Notwithstanding any other provision hereof, until the 1984 meeting of
the shareholder or shareholders of the Trust, this Declaration may be terminated
or amended in any respect by the affirmative vote of a majority of the Trustees
or by an instrument signed by a majority of the Trustees.
11.4. Merger, Consolidation and Sale of Assets.
The Trust may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all or
substantially all of the Trust Property, including its good will, upon such
terms and conditions and for such consideration when and as authorized at any
meeting of Shareholders called for that purpose, by the affirmative vote of the
holders of not less than two-thirds of the Shares, or by an instrument or
instruments in writing without a meeting, consented to by the holders of not
less than two-thirds of such Shares, and any such merger, consolidation, sale,
lease or exchange shall be deemed for all purposes to have been accomplished
under and pursuant to the statutes of the Commonwealth of Massachusetts. In
respect of any such merger, consolidation, sale or exchange of assets, any
Shareholder shall be entitled to rights of appraisal of his Shares to the same
extent as a shareholder of a Massachusetts business corporation in respect of a
merger, consolidation, sale or exchange of assets of a Massachusetts business
corporation, and such rights shall be his exclusive remedy in respect of his
dissent from any such action.
ARTICLE XII
Miscellaneous
12.1. Notices.
Whenever under applicable law, this Declaration or the By-Laws,
notice is required to be given to any Trustee, committee member, officer or
Shareholder, such notice may be given, in the case of Shareholders, by mail by
depositing the same in a United States post office or letter box, in a postpaid,
sealed wrapper, addresses to such Shareholder, at such address as appears on the
books of the Trust, and, in the case of Trustees, committee members and
officers, by telephone, or by mail or by telegram to the last business or home
address known to the Secretary. Such notice shall be deemed given when mailed,
telegraphed or telephoned.
12.2. Filing.
This Declaration and any amendment hereto shall be filed in the
office of the Secretary of the Commonwealth of Massachusetts and in such other
places as may be required under the laws of Massachusetts and may also be filed
or recorded in such other places as the Trustees deem appropriate. Each
amendment so filed shall be accompanied by a certificate signed and acknowledged
by a Trustee stating that such action was duly taken in a manner provided
herein, and unless such amendment or such certificate sets forth some later time
for the effectiveness of such amendment, such amendment shall be effective upon
its filing. A restated Declaration, containing the original Declaration and all
amendments made, may be executed by a
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majority of the Trustees and shall, upon filing with the State Secretary of the
Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
12.3. Resident Agent.
The Trust shall maintain a resident agent in the Commonwealth of
Massachusetts, which agent shall initially be CT Corporation System, 2 Oliver
Street, Boston, MA 02109. The Trustees may designate a successor resident agent,
provided, however, that such appointment shall not become effective until
written notice thereof is delivered to the office of the Secretary of the
Commonwealth.
12.4. Governing Law.
This Declaration is executed by the Trustees and delivered in the
Commonwealth of Massachusetts. The rights of all parties and the validity and
construction of every provision shall be subject to and construed according to
the laws of said State, and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists.
12.5. Reliance by Third Parties.
Any certificate executed by an individual who, according to the
records of the Trust, or of any recording office in which this Declaration may
be recorded, appears to be a Trustee hereunder, certifying to: (a) the number or
identity of Trustees or Shareholders, (b) the name of the Trust, (c) the due
authorization of the execution of any instrument or writing, (d) the form of any
vote passed at a meeting of Trustees or Shareholders, (e) the fact that the
number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (f) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (g) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any person dealing with the Trustees and their successors.
12.6. Provisions in Conflict With Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
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(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction, and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
12.7. Trust Name.
The Trust is adopting its name by permission of Aetna Life and
Casualty Company, and the Trust's right to use the name "Aetna" is subject to
the right of Aetna Life and Casualty Company or its assigns to elect that the
Trust stop using the name "Aetna" in any literature or reference whatsoever, in
the event that the securities portfolio of the Trust shall cease to be managed
by Aetna Life and Casualty Company or some other corporation controlled by, or
affiliated with it. The use by this Trust of the name "Aetna" shall in no way
prevent Aetna Life and Casualty Company, or any corporation or other entity
controlled by or affiliated with said company or its respective successors or
assigns, from using or permitting the use of the name "Aetna" for, by or in
connection with any other entity or business, whether or not the same directly
or indirectly competes or conflicts with this Trust or its business in any
manner.
/s/ Donald G. Conrad /s/ James E. Mulvihill
- -------------------- ----------------------
Donald G. Conrad James E. Mulvihill
/s/ David L. Grove /s/ Corine T. Norgaard
- -------------------- -----------------------
David L. Grove Corine T. Norgaard
/s/ Dean E. Wolcott
-------------------
Dean E. Wolcott
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TRUSTEES
NAME ADDRESS
- ---- -------
Donald G. Conrad 151 Farmington Avenue
Hartford, Connecticut 06156
David L. Grove U.S. Council for International Business
21st Floor
1212 Avenue of the Americas
New York, New York 10036
James E. Mulvihill Vice President for Health Affairs
University of Conn. Health Center
Farmington, Connecticut 06032
Corine T. Norgaard School of Business Administration
University of Connecticut
Storrs, Connecticut 06268
Dean E. Wolcott 151 Farmington Avenue
Hartford, Connecticut 06156
23
AETNA VARIABLE ENCORE FUND
AMENDED AND RESTATED BY-LAWS
ARTICLE I
NAME, OFFICES
Section 1. Nameof Trust. The name of the Trust shall be the Aetna
Variable Encore Fund (the "Trust").
Section 2. Principal Office. Until changed by the Trustees, the principal
office of the trust in the Commonwealth of Massachusetts shall be in Boston or
such other place as the officers of the Trust may determine from time to time.
The principal office outside the Commonwealth of Massachusetts shall be in
Hartford, Connecticut.
Section 3. Other Offices. The Trust may have offices in such other
places without as well as within the Commonwealth of Massachusetts as the
Trustees may from time to time determine.
ARTICLE II
BOARD OF TRUSTEES
Section 1. Powers. The business and affairs of the Trust shall be
managed by the Trustees, and they shall have all powers necessary and desirable
to carry out that responsibility.
Section 2. Meetings. The Trustees may in their discretion provide for
annual or regular meetings of the Board of Trustees (the "Board"). Special
meetings of the Board shall be held whenever called by the President or any
Trustee. The Board may hold its meetings at such place or places as it may from
time to time determine.
Section 3. Notice. The Secretary or Assistant Secretary shall give, at
least two days before the meeting, notice of each meeting of the Board, whether
annual, regular or special, to each member of the Board by mail, telegram or
telephone to his last known address. It should not be necessary to state the
purpose or business to be transacted in the notice of any annual or regular
meeting. The notice of a Special Meeting shall state the purpose or purposes for
which it is called. Personal attendance at any meeting by a Trustee other than
to protest the validity of said meeting shall constitute a waiver of the
foregoing requirement of notice.
Section 4. Quorum. A majority of the Trustees at the time in office shall
constitute a quorum, except as the Investment Company Act of 1940 shall require
a larger quorum for specific purposes. A majority of the Trustees present and
constituting a quorum shall
<PAGE>
decide matters before the Board, unless a greater vote is required by law, these
By-Laws, or the Declaration of Trust.
Section 5. Informal Action by Trustees. Any action required or permitted
to be taken at any annual, regular or special meeting of the Board may be taken
at a telephonic meeting or without a meeting, if a written consent to such
action is signed by all members of the Board and such written consent is filed
with the minutes of proceedings of the Board.
Section 6. Compensation of Trustees. The Trustees may receive a stated
salary for their services as Trustees, and by Resolution of the Board a fixed
fee and expenses of attendance may be allowed for attendance at each Meeting.
Nothing herein contained shall be construed to preclude any Trustee from serving
the Trust in any other capacity, as an officer, agent or otherwise, and
receiving compensation therefor.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive Committee. The Board may elect from its members an
Executive Committee of not less than three which may, when the Board is not in
session, exercise all the powers of the Board except the power to declare
dividends, to issue stock or to recommend to shareholders any action requiring
shareholder approval. The Executive Committee may make rules for the holding and
conduct of its meetings and keeping the records thereof, and shall report its
action to the Board.
Section 2. Audit Committee. The Board may elect from its members an Audit
Committee of not less than three non-officer Trustees. The Committee shall be
responsible for reviewing the audit procedures of the Trust, the qualifications
of independent certified public accountants performing the audit functions, the
annual reports of such accountants and shall perform such other functions as are
consistent with the general purposes of an audit committee.
Section 3. Other Committees. The Board may elect from its members such
other committees from time to time as it may desire. The number composing such
committees and the powers conferred upon them shall be determined by the Board
at its own discretion.
Section 4. Consents. Any action required or permitted to be taken at any
meeting of the Executive Committee or any other duly appointed Committee may be
taken without a meeting if written consent to such action is signed by all
members.
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<PAGE>
ARTICLE IV
OFFICERS
Section 1. Selection. The Trust shall have a President (who shall also be
a Trustee), one or more Vice Presidents, a Secretary, a Treasurer, and such
other officers as the Board of Trustees may elect. All officers shall be elected
annually by the Board, and unless the Board otherwise provides, shall serve
until the next annual meeting of the Board following their election. The Board
may elect or appoint additional officers or agents at any regular or special
meeting of the Board. The Trustees may delegate to any officer or committee the
power to appoint any subordinate officers or agents. The Secretary and Treasurer
may be the same person. A Vice President and the Treasurer or a Vice President
and the Secretary may be the same person, but the offices of Vice President,
Secretary and Treasurer shall not be held by the same person. The President
shall hold no other office. Except as above provided, the same person may hold
more than one office.
Section 2. Removal. Any officer elected by the Board may be removed with
or without cause at any time upon a vote of the majority of the entire Board.
Any other employee of the Trust may be removed or dismissed at any time with or
without cause by the President. Any vacancy in any of the offices may be filled
for the unexpired portion of the term by the Board at any regular or special
meeting of the Board.
Section 3. The President. The President shall be the chief executive
officer of the Trust; shall have general and active management of the business,
affairs and property of the Trust; shall see that all orders and resolutions of
the Board are carried into effect; and shall preside at meetings of shareholders
and of the Board.
Section 4. The Vice President. The Vice President (or if more than one,
the Senior Vice President) shall have such powers and perform such duties as may
be assigned to him by the Board, the Executive Committee or the President. In
the absence or disability of the President, the Vice President shall perform all
duties and may exercise any of the powers of the President, subject to the
control of the Board.
Section 5. The Secretary. The Secretary shall keep or cause to be kept
accurate minutes of all meetings of the shareholders and the Board; shall see
that all Notices are duly given in accordance with these By-Laws and as required
by law; and shall perform all duties commonly incident to the office and such
other duties and have such other powers as the Board, the Executive Committee or
the President shall from time to time designate.
Section 6. The Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust. Subject to the order of the Board and in
accordance with any arrangements approved by the Board, the Treasurer shall have
the custody of the funds and securities of the Trust and shall have and exercise
all powers and duties commonly incident to the office and as provided by law and
such other duties as may be from time to
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<PAGE>
time assigned to him by the Board, the Executive Committee or the President. The
Treasurer, whenever required by the Board, shall make and render a statement of
the accounts of the Trust and such other statements as may be required.
Section 7. Assistant Vice President. The Assistant Vice President or Vice
Presidents of the Trust shall have such authority and perform such duties as may
be assigned to them by the Board, the Executive Committee or the President.
Section 8. Assistant Secretaries and Assistant Treasurers. The Assistant
Secretary or Secretaries and the Assistant Treasurer or Treasurers shall perform
the duties of the Secretary and of the Treasurer respectively, in the absence of
those officers, and shall have such further powers and perform such other duties
as may be assigned to them, respectively, by the Board, the Executive Committee
or the President.
Section 9. Salaries. The salaries of the officers shall be fixed from
time to time by the Board. No officer shall be prevented from receiving such
salary by reason of the fact that he is also a Trustee.
ARTICLE V
CUSTODIAN
Section 1. Appointment. All securities and cash owned by the Trust or any
series thereof shall, as hereinafter provided, be held by or deposited with a
bank or trust company having (according to its last published report) not less
than five million dollars ($5,000,000) aggregate capital, surplus and undivided
profits (which bank or trust company is hereby designated as "Custodian"),
provided such a Custodian can be found ready and willing to act.
Section 2. Subcustodian. The Trustees may authorize the Custodian to
employ one or more Subcustodians from time to time to perform such of the acts
and services of the Custodian and upon such terms and conditions as may be
agreed upon between the Custodian and such sub-Custodian and approved by the
Trustees, provided that in every case such sub-Custodian shall be a bank or
trust company organized under the laws of the United States or one of the states
thereof and having capital, surplus and undivided profits of at least
$5,000,000.
Section 3. Contract; Successor Custodian. The Trust shall enter into a
written contract with the Custodian regarding the powers, duties and
compensation of the Custodian with respect to the cash and securities of the
Trust held by the Custodian. Said contract and all amendments thereto shall be
approved by the Board of Trustees of the Trust. The following provisions shall
apply to the employment of a Custodian pursuant to this Article V and to any
contract entered into with the Custodian so employed:
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(a) The Trustees shall cause to be delivered to the Custodian all securities
owned by the Trust or to which it may become entitled, and shall order the
same to be delivered by the Custodian only upon completion of a sale,
exchange, transfer, pledge, or other disposition thereof, and upon receipt
by the Custodian of the consideration therefor or a certificate of deposit
or a receipt of an issuer or of its Transfer Agent, all as the Trustees may
generally or from time to time require or approve, or to a successor
Custodian; and the Trustees shall cause all funds owned by the Trust or to
which it may become entitled to be paid to the Custodian, and shall order
the same disbursed only for investment against delivery of the securities
acquired, or in payment of expenses, including management compensation, and
liabilities of the Trust, including distributions to shareholders, or to a
successor Custodian; provided, however, that nothing herein shall prevent
delivery of securities for examination to the broker purchasing the same in
accord with the "street delivery" custom whereby such securities are
delivered to such broker in exchange for a delivery receipt exchanged on
the same day for an uncertified check of such broker to be presented on the
same day for certification.
(b) In case of the resignation, removal or inability to serve of any such
Custodian, the Trust shall promptly appoint another bank or trust company
meeting the requirements of this Article V as successor Custodian. The
agreement with the Custodian shall provide that the retiring Custodian
shall, upon receipt of notice of such appointment, deliver all Trust
Property in its possession to such successor, and that pending appointment
of a successor Custodian, or a vote of the Shareholders to function without
a Custodian, the Custodian shall not deliver any Trust property to the
Trust, but may deliver all or any part of the Trust property to a bank or
trust company of its own selection, having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least
$5,000,000; provided that arrangements are made for the Trust property to
be held under terms similar to those on which they were held by the
retiring Custodian.
ARTICLE VI
GENERAL PROVISIONS
Section 1. Waivers of Notice. Whenever any notice whatever is required to
be given under the provisions of any statute of the Commonwealth of
Massachusetts, or under the provisions of the Declaration of Trust or these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. A person's presence shall waive notice.
Section 2. Execution of Documents. Except as otherwise provided in these
By-Laws, all documents may be executed on behalf of the Trust by the President
or any Vice
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President or by any other officer or agent authorized to act in such matters,
whether by law, the Declaration of Trust, these By-Laws or any authorization of
the Board.
Section 3. Limitation Concerning Participating by Interested Persons in
Investment Decisions. In any case where an officer or Trustee of the Trust, or a
member of an advisory committee or portfolio committee of the Trust, is also an
officer or a director or Trustee of another corporation, and the purchase or
sale of shares issued by that other corporation is under consideration, such
individual or committee member will abstain from participating in any decision
made on behalf of the Trust to purchase or sell any securities issued by such
other corporation.
ARTICLE VII
AMENDMENTS
Section 1. The Board shall have the power, at any annual, regular or
special meeting, if notice thereof be included in the notice of such meeting, to
alter, amend or repeal any By-Laws of the Trust and to make new By-Laws.
Section 2. The shareholders shall have the power, at any annual meeting or
at any special meeting if notice thereof be included in the notice of such
meeting, to alter, amend or repeal any By-Laws of the Trust or to make new
By-Laws.
6
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Custodian Agreement
between
Mellon Bank, N.A.
and
Aetna Variable Encore Fund
------------------------------------------------------------------
<PAGE>
INDEX
Paragraph Page
1. Appointment.......................................................... 1
2. Delivery of Documents................................................ 1
3. Definitions.......................................................... 2
4. Delivery and Registration of the Property............................ 3
5. Receipt and Disbursement of Money.................................... 4
6. Receipt of Securities................................................ 4
7. Use of Book-Entry System............................................. 5
8. Instructions Consistent with Declaration, Etc........................ 6
9. Transactions Not Requiring Instructions.............................. 7
10. Transactions Requiring Instructions.................................. 8
11. Segregated Accounts; Securities Lending.............................. 9
12. Dividends and Distributions.......................................... 11
13. Purchases of Securities.............................................. 11
14. Sales of Securities.................................................. 12
15. Records.............................................................. 12
16. Reports.............................................................. 13
17. Cooperation with Accountants......................................... 13
18. Confidentiality...................................................... 13
19. Right to Receive Advice.............................................. 14
20. Compensation......................................................... 15
21. Indemnification...................................................... 15
22. Responsibility of the Bank........................................... 15
23. Collections.......................................................... 16
24. Duration and Termination............................................. 17
25. Notices.............................................................. 19
26. Further Actions...................................................... 19
27. Amendments........................................................... 19
28. Counterparts......................................................... 19
29. Miscellaneous........................................................ 20
<PAGE>
CUSTODIAN AGREEMENT
THIS AGREEMENT is made by and between AETNA VARIABLE ENCORE FUND, a
Massachusetts business trust (the "Fund"), and MELLON BANK, N.A., a national
banking association (the "Bank").
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund, for which Aetna Life and Annuity Company ("Adviser")
serves as investment adviser, desires to retain the Bank to serve as the Fund's
custodian on the terms set forth herein, and the Bank is willing to serve as
such;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Bank to act as custodian of
the portfolio securities, cash and other property belonging to the Fund for the
period and on the terms set forth in this Agreement. The Bank accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Paragraph 20 of this Agreement. The Bank agrees
to comply with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder.
2. Delivery of Documents. The Fund has furnished the Bank with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of the Bank as custodian of the portfolio securities, cash and other
property belonging to the Fund and approving this Agreement;
<PAGE>
(b) Appendix A identifying and containing the signatures of the Fund's
officers and/or officers of the Fund's Adviser authorized to issue Oral
Instructions and to sign Written Instructions, as hereinafter defined, on behalf
of the Fund;
(c) The Fund's Declaration of Trust as filed with the Secretary of the
Commonwealth of Massachusetts and all amendments thereto (such Declaration of
Trust, as presently in effect and as it shall from time to time be amended, is
herein called the "Declaration");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
(e) The Investment Advisory Agreement currently in effect (the
"Advisory Agreement") between the Fund and the Adviser; and
(f) The Fund's most recent prospectus and statement of additional
information relating to shares of the Fund's units of beneficial interest
("Shares") (such prospectus and statement of additional information as presently
in effect and all amendments and supplements thereto are herein called the
"Prospectus");
The Fund will furnish the Bank from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the officers of the Fund or the Adviser
(whether or not any such person is an officer or employee of the Fund): (i) who
is duly authorized by the Board of Trustees of the Fund or under the terms of
the Advisory Agreement, the Declaration or the By-Laws, as each may from time to
time be amended, to act on behalf of the Fund; and (ii) whose name is listed on
the Certificate annexed hereto as Appendix A or any amendment thereto as may be
received by the Bank from time to time.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system
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<PAGE>
maintained by a clearing agency registered with the Securities and Exchange
Commission (the "SEC") under Section 17A of the Securities Exchange Act of 1934
(the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by the Bank from an
Authorized Person or from a person reasonably believed by the Bank to be an
Authorized Person. The Fund agrees to deliver to the Bank, at the time and in
the manner specified in Paragraph 8(b) of this Agreement, Written instructions
confirming Oral Instructions.
(d) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property which the Fund may
from time to time deposit, or cause to be deposited, with the Bank or which
the Bank may from time to time hold for the Fund;
(ii)all income in respect of any of such securities or other
property;
(iii) all proceeds of the sale of any such securities or other
property; and (iv)all proceeds of the sale of securities issued by the
Fund, which are received by the Bank from time to time from or on behalf of
the Fund.
(e) "Written Instructions". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand (including
Federal Express or other express courier), certified or registered mail, return
receipt requested, tested telegram, cable, telex or facsimile sending device,
received by the Bank and signed by an Authorized Person and shall also include
computer transmission with coded access as agreed upon by the Bank and the Fund.
4. Delivery and Registration of the Property. The Fund will deliver or
cause to be delivered to the Bank all securities and all moneys owned by it,
including cash received for the issuance of Shares, at any time during the
period of this Agreement. The Bank will not be responsible for such securities
and such moneys until actually received by it. All securities delivered to the
Bank (other than in bearer form) shall be registered in the name of the Fund or
in the name of a nominee of the Fund or in the name of any nominee of the Bank
(with or without indication of fiduciary status), or in the name of any
sub-custodian or any nominee of any such
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<PAGE>
sub-custodian appointed pursuant to Paragraph 6 hereof or shall be properly
endorsed and in form for transfer satisfactory to the Bank.
5. Receipt and Disbursement of Money.
(a) Not less frequently than once on the afternoon of each business
day, all cash held in the custody account, other than cash required to settle
securities transactions on such business day, shall be transferred to the
trustee under a Trust Agreement of even date herewith between the Bank and the
Fund and attached hereto as Exhibit A.
The Bank shall make payments of cash to, or for the account of, the Fund
from such cash only (i) for the purchase of securities for the Fund's portfolio
as provided in Paragraph 13 hereof; (ii) upon receipt of Written Instructions,
for the payment of interest, dividends, taxes, fees or expenses of the Fund;
(iii) upon receipt of Written instructions, for payments in connection with the
conversion, exchange or surrender of securities owned or subscribed to by the
Fund and held by or to be delivered to the Bank; (iv) to a sub-custodian
pursuant to Paragraph 6 hereof; (v) for the redemption of Shares; (vi) for
payment of the amount of dividends received in respect of securities sold short
against the box; or (vii) upon receipt of Written Instructions, for other proper
Fund purposes. No payment pursuant to (i) above shall be made unless the Bank
has received a copy of the broker's or dealer's confirmation or the payee's
invoice, as appropriate.
(b) The Bank is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian for the
account of the Fund.
6. Receipt of Securities.
(a) Except as provided by Paragraph 7 hereof, the Bank shall hold and
physically segregate in a separate account, identifiable at all times from those
of any other persons, firms, or corporations, all securities and non-cash
property received by it for the account of the Fund. All such securities and
non-cash property are to be held or disposed of by the Bank for the Fund
pursuant to the terms of this Agreement. In the absence of Written Instructions
accompanied by a certified resolutions of the Fund's Board of Directors
authorizing the transaction, the Bank shall have no power or authority to
withdraw, deliver, assign, hypothecate, pledge or otherwise dispose
4
<PAGE>
of any such securities and investments except in accordance with the express
terms provided for in this Agreement. In no case may any director, officer,
employee or agent of the Fund withdraw any securities.
In connection with its duties under this Paragraph 6, the Bank may, at its
own expense, enter into sub-custodian agreements with other banks or trust
companies for the receipt of certain securities and cash to be held by the Bank
for the account of the Fund pursuant to this Agreement, provided that each such
bank or trust company has an aggregate capital, surplus and undivided profits,
as shown by its last published report, of not less than ten million dollars
($10,000,000) and that such bank or trust company agrees with the Bank to comply
with all relevant provisions of the 1940 Act and applicable rules and
regulations thereunder. The Bank shall remain responsible for the performance of
all of its duties under this Agreement and shall hold the Fund harmless from the
acts and omissions, under the standards of care applicable to the Bank under
Paragraph 22 hereof, of any bank or trust company that it might choose pursuant
to this Paragraph 6 or of the Book-Entry System.
(b) Where securities are transferred to an account of the Fund
established pursuant to paragraph 7 hereof, the Bank shall also by book-entry or
otherwise identify as belonging to the Fund the quantity of securities in a
fungible bulk of securities registered in the name of the Bank (or its nominee)
or shown in the Bank's account on the books of the Book-Entry System. The Bank
shall furnish the Fund with reports relating to Property held for the Fund under
this Agreement in accordance with Paragraph 16 hereof.
7. Use of Book-Entry System. The Fund shall deliver to the Bank certified
resolutions of the Board of Directors of the Fund approving, authorizing and
instructing the Bank on a continuous and on-going basis until instructed to the
contrary by Oral or Written Instructions actually received by the Bank (a) to
deposit in the Book-Entry System all securities belonging to the Fund eligible
for deposit therein and (b) to use the Book-Entry System to the extent possible
in connection
5
<PAGE>
with settlements of purchases and sales of securities by the Fund, and
deliveries and returns of securities loaned, subject to repurchase agreements or
used as collateral in connection with borrowings. Without limiting the
generality of such use, it is agreed that the following provisions shall apply
thereto;
(a) Securities and any cash of the Fund deposited in the Book-Entry
System will at all times be segregated from any assets and cash controlled by
the Bank in other than a fiduciary or custodian capacity but may be commingled
with other assets held in such capacities.
(b) All books and records maintained by the Bank which relate to the
Fund's participation in the Book-Entry System will at all times during the
Bank's regular business hours be open to the inspection of the Fund's duly
authorized employees or agents, and the Fund will be furnished with all
information in respect of the services rendered to it as it may require.
(c) The Bank will provide the Fund with copies of any report obtained
by the Bank on the system of internal accounting control of the Book-Entry
System promptly after receipt of such a report by the Bank. The Bank will also
provide the Fund with such reports on its own system of internal control as the
Fund may reasonably request from time to time.
8. Instructions Consistent with Declaration, Etc.
(a) Unless otherwise provided in this Agreement, the Bank shall act
only upon Oral and Written Instructions. Although the Bank may know of the
provisions of the Declaration and By-Laws of the Fund, the Bank may assume that
any Oral or Written Instructions received hereunder are not in any way
inconsistent with any provisions of such Declaration or By-Laws or any vote,
resolution or proceeding or the Fund's shareholders, or of its board of
trustees, or of any committee thereof.
(b) The Bank shall be entitled to rely upon any Oral Instructions and
any Written Instructions actually received by the Bank pursuant to this
Agreement. The Fund agrees to forward to the Bank Written Instructions
confirming Oral Instructions in such manner that the Written Instructions are
received by the Bank by the close of business of the same day that such Oral
Instructions are given to the Bank. The Fund agrees that the fact that such
confirming Written Instructions are not received by the Bank shall in no way
affect the validity of the transactions or enforceability of the transactions
authorized by the Fund by giving Oral Instructions. The Fund agrees that the
Bank shall incur no liability to the Fund in acting upon Oral
6
<PAGE>
Instructions given to the Bank hereunder concerning such transactions, provided
such instructions reasonably appear to the Bank to have been received from an
Authorized Person.
9. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, the Bank is authorized to take the following actions:
(a) Collections of Income and Other Payments. The Bank shall:
(i) collect and receive for the account of the Fund, all income
and other payments and distributions, including (without limitation) stock
dividends, rights, bond coupons, option premiums and similar items,
included or to be included in the Property, and promptly advise the Fund of
such receipt and shall credit such income, as collected, to the Fund's
custodian account;
(ii)endorse and deposit for collection, in the name of the Fund,
checks, drafts, or other orders for the payment of money on the same day as
received;
(iii) receive and hold for the account of the Fund all securities
received as a distribution on the Fund's portfolio securities as a result
of a stock dividend, share split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of rights or similar
securities issued with respect to any portfolio securities belonging to the
Fund held by the Bank hereunder;
(iv)present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or retired, or
otherwise become payable on the date such securities become payable; and
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts, and other
negotiable instruments as described in paragraph 23 of this Agreement.
7
<PAGE>
(b) Miscellaneous Transactions. The Bank is authorized to deliver or
cause to be delivered Property against payment of other consideration or written
receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the
Fund in accordance with street delivery custom;
(ii)for the exchange of interim receipts or temporary securities
for definitive securities; and
(iii) for transfer of securities into the name of the Fund or
the Bank or nominee of either, or for exchange of securities for a
different number of bonds, certificates, or other evidence, representing
the same aggregate face amount or number of units bearing the same interest
rate, maturity date and call provisions, if any; provided that, in any such
case, the new securities are to be delivered to the Bank.
10. Transactions Requiring Instructions. Upon receipt of Oral or Written
Instructions and not otherwise, the Bank, directly or through the use of the
Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in such
Oral or Written Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(c) deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said Oral or Written Instructions to be
for the purpose of effectuating
8
<PAGE>
any duly authorized plan of liquidation, reorganization, merger, consolidation
or recapitalization of the Fund;
(e) release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities shall be released only upon
payment to the Bank of the monies to be received by the Bank in accordance with
such Oral or Written Instructions, except that in cases where additional
collateral is required to secure a borrowing already made, in which case and
subject to receipt by the Bank of "Oral or Written Instructions", further
securities may be released for that purpose; and repay such loan upon redelivery
to it of the securities pledged or hypothecated therefor and upon surrender of
the note or notes evidencing the loan;
(f) release and deliver securities owned by the Fund in connection with
any repurchase agreement entered into on behalf of the Fund, but only on receipt
of payment therefor; and pay out moneys of the Fund in connection with such
repurchase agreements, but only upon the delivery of the securities; and
(g) otherwise transfer, exchange or deliver securities in accordance
with Oral or Written Instructions.
11. Segregated Accounts; Securities Lending.
(a) The Bank shall upon receipt of Written or Oral Instructions
establish and maintain a segregated account or accounts on its records for and
on behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities in the Book-Entry System (i) for the
purposes of compliance by the Fund with the procedures required by a securities
or option exchange, provided such procedures comply with the 1940 Act and
Investment Company Act Release No. 10666 (April 18, 1979) or any subsequent
release or releases of the SEC relating to the maintenance of segregated
accounts by registered investment companies, and (ii) for other proper corporate
purposes, but only, in the case of clause (ii), upon receipt of Written
Instructions.
9
<PAGE>
(b) The Bank hereby acknowledges that the Fund may require it to enter
into one or more third-party custodial agreements regarding Fund's the purchases
and sales of futures contracts and options thereon, and that any such
third-party agreement with a futures commission merchant may contain any
provisions which the Fund and the futures commission merchant reasonably deem
necessary and which do not subject the Bank to higher standards of care (except
as may be required by law) than does this Agreement.
(c) The Fund may, from time to time, furnish the Bank with copies of
securities loan agreements (singly "Securities Loan Agreement" and collectively
"Securities Loan Agreements"), pursuant to which the Fund may lend securities of
any series of the Fund to the respective brokerage firms named therein (singly
the "Brokerage Firm" and collectively the "Brokerage Firms").
In each such case, and until the Fund shall have given the Bank Written
Instructions that such Securities Loan Agreement has terminated, the Fund
authorizes the Bank, as its agent in connection with the lending of securities
from time to time upon receipt by the Bank of Oral and Written Instructions: (a)
to deliver to the Brokerage Firm named in the Securities Loan Agreement specific
securities held for the Fund's account, it being understood that in each case
the Bank will give prompt notice thereof to the Fund; (b) to receive from the
Brokerage Firm a certified or bank cashier's check, in immediately available
funds, or obligations of the U. S. Government in an amount equal to the then
market value of the securities, as specified in such Instructions.
The Fund will evaluate on a daily basis its rights and obligations under
each Securities Loan Agreement, such as marking to market, and will demand that
additional collateral be delivered to the Bank by the Brokerage Firm under
proper advice to the Bank, or shall give Oral or Written Instructions to the
Bank to release excess collateral to the Brokerage Firm.
The Bank may, through its commercial, trust or other departments, be a
creditor for its own account, or represent in a fiduciary capacity other
creditors and/or customers, or any Brokerage Firm, even though any of such
interests may potentially be in conflict with those of the Fund.
10
<PAGE>
The Fund represents that it has the power and authority to lend the
securities in accordance with a Securities Loan Agreement and that such lending
as provided in such Securities Loan Agreement and as provided herein, has been
duly authorized by all necessary action, has received any required regulatory
approval and will not violate any law, regulation, Declaration, By-law or other
instrument, restriction or provision applicable to the Fund.
With respect to acting as agent for the Fund in connection with the lending
of securities to Brokerage Firms pursuant to Securities Loan Agreements, the
Bank shall have no duties or responsibilities except those expressly set forth
herein and the Fund will indemnify the Bank against any liability which it may
incur in connection with such lending in accordance with Paragraph 21 hereof;
the Bank shall have no responsibility in connection with the present or future
financial condition of any such Brokerage Firm or any failure on the part of any
such Brokerage Firm to return any such securities for any reason whatsoever or
to comply with any provision of any Securities Loan Agreement or any failure on
the part of any such Brokerage Firm to comply with any law or regulation, all
such risks being assumed by the Fund.
12. Dividends and Distributions.
The Fund shall furnish the Bank with appropriate evidence of action by the
Fund's Board of Trustees declaring and authorizing the payment of any dividends
and distributions. Upon receipt by the Bank of Written Instructions with respect
to dividends and distributions declared by the Fund's Board of Trustees and
payable to shareholders of the Fund who have elected in the proper manner to
receive their distributions or dividends in cash, and in conformance with
procedures mutually agreed upon by the Bank, the Fund, and the Fund's transfer
agent, the Bank shall pay to the Fund's transfer agent, as agent for the Fund's
shareholders, an amount equal to the amount indicated in said Written
Instructions as payable by the Fund to such shareholders for distributions in
cash by the transfer agent to such shareholders.
13. Purchases of Securities. Promptly after each decision to purchase
securities by the Advisor, the Fund, through the Advisor, shall deliver to the
Bank Written or Oral Instructions specifying with respect to each such purchase:
(a) the name of the issuer and the title of the
11
<PAGE>
securities, (b) the number of shares or the principal amount purchased and
accrued interest, if any, (c) the date of purchase and settlement, (d) the
purchase price per unit, (e) the total amount payable upon such purchase and (f)
the name of the person from whom or the broker through whom the purchase was
made. Oral Instructions shall be confirmed by Written Instructions. The Bank
shall upon receipt of securities purchased by or for the Fund pay out of the
moneys held for the account of the Fund the total amount payable to the person
from whom or the broker through whom the purchase was made, provided that the
same conforms to the total amount payable as set forth in such Oral Instructions
in accordance with current industry practices.
14. Sales of Securities. Promptly after each decision to sell securities by
the Advisor or exercise of an option written by the Fund, the Fund, through the
Advisor, shall deliver to the Bank Oral or Written Instructions, specifying with
respect to each such sale: (a) the name of the issuer and the title of the
security, (b) the number of shares or principal amount sold, and accrued
interest, if any, (c) the date of sale and settlement, (d) the sale price per
unit, (e) the total amount payable to the Fund upon such sale, and (f) the name
of the broker through whom or the person to whom the sale was made. The Bank
shall deliver the securities upon receipt of the total amount payable to the
Fund upon such sale, provided that the same conforms to the total amount payable
as set forth in such Oral Instructions in accordance with current industry
practice. Subject to the foregoing, the Bank may accept payment in such form as
shall be satisfactory to it, and may deliver securities and arrange for payment
in accordance with the customs prevailing among dealers in securities.
15. Records. The books and records pertaining to the Fund which are in the
possession of the Bank shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and regulations. The Fund, or the Fund's authorized
representatives, shall have access to such books and records at all times during
the Bank's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by the Bank to the Fund
or the Fund's authorized representative at the Fund's expense.
12
<PAGE>
16. Reports.
(a) The Bank shall furnish the Fund the following reports: (1) such
periodic and special reports as the Fund may reasonably request;
(2) a daily report detailing all transactions (cash and
securities) that have
been posted to the fund's account; such report, which shall be in such form
as may be agreed upon by the Bank and the Fund from time to time, shall be
received not later than the morning of the business day next following the
day to which the report relates;
(3) statements, at such intervals as the Fund may reasonably
request but not less frequently than monthly, summarizing all transactions
and entries for the account of the Fund, listing the portfolio securities
belonging to the Fund with the adjusted average cost of each issue and the
market value at the end of such month, and stating the cash account of the
Fund including disbursements;
(4) the reports to be furnished to the Fund pursuant to Rule 17f-4
under the 1940 Act; and
(5) such other information as may be agreed upon from time to time
between the Fund and the Bank.
(b) The Bank shall transmit promptly to the Fund any proxy statement,
proxy materials, notice of a call or conversion or similar communications
received by it as Custodian of the Property.
17. Cooperation with Accountants. The Bank shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
opinion, as such may be required from time to time by the Fund.
18. Confidentiality. The Bank agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the Fund
and its prior, present, or potential shareholders, except, after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Bank may
13
<PAGE>
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Fund.
19. Right to Receive Advise.
(a) Advise of Fund. If the Bank shall be in doubt as to any action to
be taken or omitted by it, it may request, and shall receive, from the Fund
directions or advice, including Oral or Written Instructions where appropriate.
(b) Advise of Counsel. If the Bank shall be in doubt as to any question
of law involved in any action to be taken or omitted by the Bank, it may request
advice at its own cost from counsel of its own choosing (who may be counsel for
the Advisor, the Fund or the Bank, at the option of the Bank).
(c) Conflicting Advice. In case of conflict between directions, advice
or Oral or Written Instructions received by the Bank pursuant to subparagraph
(a) of this Paragraph and advice received by the Bank pursuant to subparagraph
(b) of this Paragraph, the Bank shall be entitled to rely on and follow the
advice received pursuant to the latter provision alone.
(d) Protection of the Bank. The Bank shall be protected in any action
or inaction which it takes in reliance on any directions, advice or Oral or
Written Instructions received pursuant to subparagraphs (a) or (b) of this
Paragraph which the Bank, after receipt of any such directions, advice or Oral
or Written Instructions, in good faith believes to be consistent with such
directions, advice or Oral or Written Instructions, as the case may be. However,
nothing in this Paragraph shall be construed as imposing upon the Bank any
obligation (i) to seek such directions, advice or Oral or Written Instructions,
or (ii) to act in accordance with such directions, advice or Oral or Written
Instructions when received, unless, under the terms of another provision of this
Agreement, the same is a condition to the Bank's properly taking or omitting to
take such action. Nothing in this subsection shall excuse the Bank when an
action or omission on the part of the Bank constitutes willful misfeasance, bad
faith, negligence or reckless disregard by the Bank of any duties or obligations
under this Agreement.
14
<PAGE>
20. Compensation. As compensation for the services rendered by the Bank
during the term of this Agreement, the Fund will pay to the Bank fees in
accordance with the fee schedule agreed upon from time to time in writing by the
Bank and the Fund.
21. Indemnification. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless the Bank and its nominees from all taxes, charges,
expenses, assessments, claims and liabilities and expenses, including attorneys'
fees and disbursements, arising directly or indirectly from any action or thing
which the Bank takes or does or omits to take or do upon receipt of Oral or
Written Instructions or under this Agreement, provided, that neither the Bank
nor any of its nominees shall be indemnified against any liability to the Fund
or to its shareholders (or any expenses incident to such liability) arising out
of the Bank's or such nominee's own willful misfeasance, bad faith, negligence
or reckless disregard of its duties or responsibilities under this Agreement.
22. Responsibility of the Bank.
(a) In the performance of its duties hereunder, the Bank shall be
obligated to exercise care and diligence and to act in good faith and to use its
best efforts to assure the accuracy and completeness of all services performed
under this Agreement. Except as provided in (b) below, the Bank shall be
responsible for all direct losses occasioned by the Bank's negligent failure to
perform its duties under this Agreement, including but not limited to losses
related to inaccuracies in the daily reports (upon which the Fund and its agents
rely in calculating the Fund's net asset value and in determining whether the
Fund is in compliance with the 1940 Act and the requirements of Subchapter M of
the Internal Revenue Code of 1986 (as amended) to be provided under Paragraph 16
hereof or otherwise. However, the Bank shall not be liable for any incidental,
consequential or punitive damages.
(b) The Bank shall assume entire responsibility for loss occasioned by
robbery, burglary, fire, theft or mysterious disappearance irrespective of
whether such losses occur while such Property is in possession of the Bank or
the possession of one of the Bank's agents, nominees, depositories,
correspondents or sub-custodians appointed pursuant to Paragraph 6
15
<PAGE>
hereof or any Book-Entry System. In the event of any such loss the Bank's
liability shall be limited to the replacement value thereof as of the date of
the discovery of such loss and the Bank, at the Fund's option, shall make prompt
replacement of Property with like kind and quality or shall make prompt
restitution to the Fund for such loss. In addition, in the event of any loss of
the Property due to any other cause, unless the Bank can prove that it and its
agents, nominees, depositories and correspondents were not negligent and did not
act with willful misconduct, the Bank will be liable for such loss.
Notwithstanding the foregoing, the Bank shall not be liable for losses occurring
by reason of acts of civil or military authority, national emergencies, floods,
acts of God, insurrections, wars, riots or similar catastrophes.
(c) The Bank shall not have any duty or obligation to inquire (i) into
the validity or invalidity or authority or lack thereof of any Oral or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, if any, and which the Bank reasonably believes
to be genuine; (ii) the validity or invalidity of the issuance of any securities
included or to be included in the Property, the legality or illegality of the
purchase of such securities, or the propriety or impropriety of the amount paid
therefor; (iii) the legality or illegality of the sale (or exchange) of any
Property or the propriety or impropriety of the amount for which such Property
is sold (or exchanged); or (iv) whether any Property at any time delivered to or
held by the Bank may properly be held by or for the Fund.
23. Collections. All collections of monies or other property in respect, or
which are to become part, of the Property (but not the safekeeping thereof upon
receipt by the Bank) shall be at the sole risk of the Fund, provided that the
Bank agrees to the following procedures:
(i) upon maturity of any security held by the Fund, proceeds will
be credited and available for investment by the Fund on the
maturity date;
(ii)with respect to sales of securities held by the Fund and
provided the Bank receives timely and accurate notification of
any such sale, sale proceeds will be credited and available
for investment by the Fund on the settlement date for
16
<PAGE>
transactions settled in Federal funds, and on settlement date
plus one for transactions settled in Clearinghouse funds;
(iii) with respect to income and principal from securities held by
the Fund, where the precise amount to be received is known
prior to payable date, such moneys will be credited to the
Fund on the payable date and will be made available to the
Fund for investment on such date in cases where such moneys
are to be received in Federal funds or, in cases where such
moneys are to be received in Clearinghouse funds, on the day
following the payable date;
(iv)with respect to any income and principal payment on securities
held by the Fund the amount of which is unknown either by the
Bank or the Adviser, such payments will be credited to the
Fund upon receipt by the Bank, it being understood that the
Bank will make every effort to collect such payments as
quickly as possible.
With respect to items referred to in (i), (ii) and (iii) above, in any case
where the Bank does not receive any payment due to the Fund within a reasonable
time after the Bank has made proper demands for the same, it shall so notify the
Fund in writing, including copies of all demand letters, any written responses
thereto, and memoranda of all oral responses thereto and to telephonic demands,
and shall thereafter have the right to reverse the credit previously posted to
the Fund with respect to such item. The Bank shall not be obliged to take legal
action for collection of any unpaid item unless and until reasonably indemnified
to its satisfaction.
24. Duration and Termination. This Agreement shall continue until
termination by the Fund on 60 days written notice or by the Bank on 120 days'
written notice. In the event of such notice of termination, the Fund's Board of
Trustees shall, by resolution duly adopted, promptly appoint a Successor
Custodian to serve upon the terms set forth in this Agreement. Upon termination
hereof the Fund shall pay to the Bank such compensation as may be due as of the
date of such termination and shall likewise reimburse the Bank for its
reasonable costs, expenses and
17
<PAGE>
disbursements incurred prior to such termination. The Bank shall have no lien,
right of set-off, or claim of any kind whatsoever against any Property of the
Fund (including records relating to the Fund maintained by the Bank) in the
possession of the Bank.
If a Successor Custodian is appointed by the Trustees, the Bank shall, upon
termination, deliver to such Successor Custodian the records of the Bank with
respect to the Fund, and duly endorsed an in form for transfer, all securities
then held hereunder and all funds or other properties of the Fund deposited with
or held by the Bank under this Agreement.
In the event that no such Successor Custodian is appointed within 90 days
after the date of any such notice of termination by the Bank, Fund will promptly
submit to its shareholders the question whether they wish to terminate the Fund
or to function without a bank custodian, and the Bank shall deliver the funds
and property of the Fund to the Fund only pursuant to a certified copy of a
resolution of the Fund's Board of Trustees, signed by a majority of the Board of
Trustees of the Fund in the exercise of such power conferred upon the Fund by
its shareholders, such delivery to be made in accordance with such Resolution.
In the event that the Bank is not notified of the appointment of a
Successor Custodian on or before the date of the termination of this Agreement,
the Bank shall have the right to deliver to a bank or trust company of its own
selection (a) with significant experience in serving as a custodian for
registered investment companies; and (b) having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of not less than
$10,000,000, all securities, records, and other properties then held by the Bank
to be held by such bank or trust company provided that such bank or trust
company agrees to serve as custodian for such securities, records and other
properties substantially in accordance with the term hereof and in accordance
with its customary fee schedule for such services.
In the event that securities, funds, and other properties remain in the
possession of the Bank after the date of termination hereof owing to failure of
the Board of Trustees to appoint a Successor Custodian, the Bank shall be
entitled to fair compensation for its services during such period and the
provisions of this Agreement relating to the duties and obligations of the Bank
18
<PAGE>
shall remain in full force and effect. If any Property remains in the custody of
the Bank pursuant to the preceding sentence for more than six months, the Bank
shall be entitled to receive a premium of one and one-half percent over the fees
to which it would otherwise be entitled for its services for each succeeding
month during which the Bank remains in possession of such property.
25. Notices. All notices and other communications (collectively referred to
as "Notice" or "Notices" in this Paragraph) under this Agreement (other than
Written or Oral Instructions as defined in this Agreement and as referred to in
Paragraph 8 (b)) must be in writing and will be deemed to have been duly given
or delivered when delivered by hand (including by Federal Express or similar
express courier) or three days after being mailed by prepaid registered or
certified mail, return receipt requested: (a) if to the Bank at the Bank's
address, 1735 Market Street, Philadelphia, Pennsylvania 19101-7899, marked for
the attention of Donna Owens, Trust Officer (or her successor); (b) if to the
Fund, at the address of the Fund, 151 Farmington Avenue, Hartford, CT
06156-8962, marked for the attention of the Fund's Treasurer; or (c) to such
other address as shall have been last designated by Notice in accordance with
this Paragraph 25. All postage, cable, telegram, telex and facsimile sending
device charges arising from the sending of a Notice hereunder shall be paid by
the sender.
26. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
27. Amendments. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
28. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19
<PAGE>
29. Miscellaneous.
(a) Bank acknowledges that the Fund is a Massachusetts business trust, and
that it is required by the Trust Agreement to limit its liability in all
agreements to the assets of the Fund. Consequently, Bank agrees that any claims
by it against the Fund may be satisfied only from the assets of the fund, and no
shareholders, trustees or officers of the Fund may be held personally liable or
responsible for any obligations arising out of this Agreement.
(b) This Agreement embodies the entire agreement and understanding between
the parties hereto, and supersedes all prior agreements and understandings
relating to the subject matter hereof, provided that the parties hereto may
embody in one or more separate documents their agreement, if any, with respect
to delegated and/or Oral Instructions. The captions in this Agreement are
included for convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in Pennsylvania and governed by
Pennsylvania law. If any provision of this Agreement shall be held or made
invalid by a court decision, statue, rule or otherwise, the remainder of this
Agreement shall not be affected thereby. This Agreement shall be binding and
shall inure to the benefit of the parties hereto and their respective
successors.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on this 1st day of Sept.,1992.
[SEAL] MELLON BANK, N. A.
Attest: /s/ Sandy McKenna By: /s/Donna Owens
--------------------- -----------------------
[SEAL] AETNA VARIABLE ENCORE FUND
Attest: /s/ George N. Gingold By: /s/ James C. Hamilton
--------------------- -----------------------
21
<PAGE>
- -------------------------------------------------------------------------------
EXHIBIT A
- -------------------------------------------------------------------------------
TRUST AGREEMENT
THIS TRUST AGREEMENT is made between AETNA VARIABLE ENCORE FUND, a
Massachusetts business trust (the "Fund") as Settlor, and MELLON BANK, N. A., a
national banking association (the "Bank") as Trustee.
I. Background: The background of this Agreement is as follows:
A. The Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940,
as amended;
B. The Fund has retained the Bank to serve as the Fund's custodian
under a Custodian Agreement of even date herewith ("Custodian
Agreement"), and the Bank is willing to serve as such; and
C. The Fund intends to transfer to the Bank to hold as trustee
under this Agreement all the income and principal cash balances
which are transferred to it in accordance with Paragraph 5(a)
of the Custodian Agreement (the Bank in such capacity is
hereinafter referred to as the "Trustee"), and hereby directs
the Trustee to hold such cash balances in accordance with the
following terms.
II. Dispositive Terms: The Trustee shall invest and manage the income
and principal cash balances of the Fund in accordance with the provisions of
Article III hereof for the purpose of safekeeping pending distributions to or
from the trust shall be as directed from time to time by the Fund.
III.Management Provisions: The Trustee shall invest as it deems
appropriate in any one or more money market demand accounts of the Bank or of
any other bank, provided the accounts are fully insured by the FDIC and any
excess above the insurance limit is collateralized by securities in accordance
with Regulation 9.10(b) of the Comptroller of the Currency, 12 CFR 9.10 (b).
IV. Accounting: The Trustee will send the Fund statements at least
monthly showing the transactions in the trust. The Fund must report any errors
to the Trustee, including the non-receipt of a statement, within 90 days after
the Fund normally receives a statement. Otherwise, the Fund, at the Trustee's
discretion, may be deemed to have accepted the transactions as stated.
V. Provisions Regarding the Trustee:
A. The "Authorized Person" to act for the Fund and the methods of
properly acting for the Fund under this Agreement shall be the
same as specified in the Custodian Agreement, as that may be
amended from time to time;
<PAGE>
B. The fact that the Bank is Trustee and in such capacity deposits
trust assets of the Fund in banking accounts of the Bank shall
not be deemed a conflict of interest. The Bank may receive its
usual charges or profits for that service; and
C. The Trustee may resign upon 120 days' notice to the Fund;
Settlor may terminate this Agreement at any time. Immediately
upon termination the Trustee shall pay all trust assets held
hereunder to the Successor Custodian or the Fund in accordance
with Paragraph 24 of the Custodian Agreement.
VI. Situs and Governing Law: The situs of this Trust shall be in
Pennsylvania, and all questions as to the construction, validity, effect or
administration of this trust shall be governed by Pennsylvania law.
VII.Rights Reserved: The Fund reserves the right to revoke this trust by
writing delivered to the Trustee and to amend this trust with the Trustee's
approval.
Signed: Sept 1st,1992
ATTEST: AETNA VARIABLE ENCORE FUND
/s/ George N. Gingold By: James C. Hamilton
- --------------------- -----------------------
The foregoing trust was delivered, and is hereby accepted in Pennsylvania on
Sept 21, 1992.
ATTEST: MELLON BANK, N.A.
/s/ Sandy McKenna By: /s/ Donna Owens
- -------------------- ---------------------
2
<PAGE>
Institutional Trust Services Group Mellon Bank
- ------------------------------------------------------------------------------
MELLON BANK DOMESTIC FEE SCHEDULE
Account Fee:
$500 per account, per year.
Asset Fee:
Domestic Assets - 1/6 Basis Point (0.0000166) on all assets
Euroclear Assets - 1.4 Basis Points (0.00014) on all assets
Transaction Fees:
$7 per book entry transaction (purchase - sale - maturity) $15 per
physical transaction (purchase - sale - maturity) $25 per Euroclear
transaction (purchase - sale - maturity) $50 per option and future
transaction (open - close)
The foregoing fee schedule shall remain in effect for not less than
three years from the effective date of the Custodian Agreement between
the Fund and Mellon Bank, N. A.
/s/ Donna Ownes
Mellon Bank, N.A.
/s/ James C. Hamilton
Aetna Variable Encore Fund
[Aetna letterhead] 151 Farmington Avenue Susan E. Bryant
Hartford, CT 06156 Counsel
Law and Regulatory Affairs,
RE4C
(860) 273-7834
Fax: (860) 273-8340
April 24, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Filing Desk
Re: Aetna Variable Encore Fund - File No. 2-53038
Gentlemen:
As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I hereby
consent to the use of my opinion dated February 29, 1996 (incorporated herein by
reference to the 24f-2 Notice for the fiscal year ended December 31, 1995 filed
on behalf of Aetna Variable Encore Fund) as an exhibit to this Post-Effective
Amendment No. 39 to the Registration Statement on Form N-1A (File No. 2-53038).
Very truly yours,
/s/ Susan E. Bryant
Susan E. Bryant
Counsel
Aetna Life Insurance and Annuity Company
Exhibit 24(b)(11)
Consent of Independent Auditors
The Board of Trustees
Aetna Variable Encore Fund:
We consent to the use of our report dated February 16, 1996, included herein and
to the references to our Firm under the headings "Financial Highlights" in the
Prospectus and "Independent Auditors" in the Statement of Additional
Information.
/s/ KPMG Peat Marwick LLP
April 25, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000002663
<NAME> AETNA VARIABLE ENCORE FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 517,984,607
<INVESTMENTS-AT-VALUE> 518,092,016
<RECEIVABLES> 5,856,642
<ASSETS-OTHER> 46,948
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 523,995,606
<PAYABLE-FOR-SECURITIES> 9,828,872
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 130,131
<TOTAL-LIABILITIES> 9,959,003
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 485,162,242
<SHARES-COMMON-STOCK> 38,656,540
<SHARES-COMMON-PRIOR> 38,505,742
<ACCUMULATED-NII-CURRENT> 28,830,703
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 63,751
<ACCUM-APPREC-OR-DEPREC> 107,409
<NET-ASSETS> 514,036,603
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 30,657,854
<OTHER-INCOME> 0
<EXPENSES-NET> 1,520,039
<NET-INVESTMENT-INCOME> 29,137,815
<REALIZED-GAINS-CURRENT> (52,156)
<APPREC-INCREASE-CURRENT> 472,281
<NET-CHANGE-FROM-OPS> 29,557,940
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 385,007
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,041,695
<NUMBER-OF-SHARES-REDEEMED> 18,919,850
<SHARES-REINVESTED> 28,953
<NET-CHANGE-IN-ASSETS> 30,997,364
<ACCUMULATED-NII-PRIOR> 66,300
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 364,872
<GROSS-ADVISORY-FEES> 1,242,199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,520,039
<AVERAGE-NET-ASSETS> 500,714,778
<PER-SHARE-NAV-BEGIN> 12.54
<PER-SHARE-NII> .76
<PER-SHARE-GAIN-APPREC> .01
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.30
<EXPENSE-RATIO> .30
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
