AETNA VARIABLE FUND, 497, 1996-05-07

AETNA VARIABLE FUND
497, 1996-05-07

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AETNA VARIABLE FUND

151 Farmington Avenue
Hartford, Connecticut 06156
1-800-238-6263

Prospectus dated: May 1, 1996

Aetna Variable Fund (the "Fund") is a diversified, open-end management
investment company whose shares are currently available to (i) 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) and its affiliates
and subsidiaries and (ii) other shareholders of the Fund only through
dividend reinvestment.

The Fund seeks to maximize total return through investments in a diversified
portfolio of common stocks and securities convertible into common stock. It
is anticipated that capital appreciation and investment income will both be
major factors in achieving total return.

This Prospectus sets forth concisely the 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
1-800-238-6263.

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.

<PAGE>
TABLE OF CONTENTS

FEE TABLE 3
FINANCIAL HIGHLIGHTS 4
INVESTMENT OBJECTIVE 5
INVESTMENT POLICIES AND RESTRICTIONS 5
Investment Policies 5
Industry Concentration 5
International Securities 5
Depositary Receipts 5
Securities Lending 5
Repurchase Agreements 5
Borrowing 5
High Risk, High-Yield Securities 6
Options, Futures and Other Derivatives 6
MANAGEMENT OF THE FUND 6
Trustees 6
Investment Adviser 6
Portfolio Management 6
Expenses and Fund Administration 6
GENERAL INFORMATION 7
Declaration of Trust 7
Capital Stock 7
Shareholder Inquiries and Distribution Options 7
Shareholder Meetings 7
Voting Rights 7
TAX MATTERS 7
The Fund 7
Fund Distributions 7
Share Redemptions 8
Tax Withholding 8
SALE AND REDEMPTION OF SHARES 8
NET ASSET VALUE 8

2 Aetna Variable Fund
<PAGE>
FEE TABLE

The Fee Table is provided to help the investor understand the various fees
and costs that an investor will bear directly or indirectly. It does not
include charges due under a VA Contract or a VLI Policy. VA Contract holders
and participants, and VLI Policy holders should refer to the appropriate
contract or policy prospectus for a description of the contract or policy
charges or fees.

Annual Fund Operating Expenses
(as a percentage of average net assets)

Management Fee 0.25%
Other Expenses* 0.06%
TOTAL FUND OPERATING EXPENSES 0.31%

*These expenses reflect the amendment to the Administrative Service Agreement
that is effective May 1, 1996. See "Management of the Fund" for additional
information concerning the fees payable to ALIAC as the Fund's investment
adviser and administrator.

Hypothetical Illustration (Example)
THE FOLLOWING EXAMPLE IS PURELY HYPOTHETICAL. IT SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OR EXPECTED RETURN. ACTUAL EXPENSES
AND/OR RETURN MAY BE GREATER OR LESS THAN THOSE SHOWN BELOW.

<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
------ ------- ------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption
at the end of each time period: $3 $10 $17 $39
</TABLE>

Refer to the applicable VA Contract or VLI Policy prospectus for an
explanation of contract/policy charges and expenses.

Aetna Variable Fund 3
<PAGE>
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.

<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of year $26.229 $31.245 $31.602 $30.954 $25.498 $25.977 $22.461
Income From Investment
Operations
Net investment income .724 .765 .822 .810 .922 .935 1.041
Net realized and unrealized gain
(loss) on investments 7.620 (1.071) 1.287 1.229 5.780 (.084) 5.402
------- ------- ------- ------- ------- ------- -------
Total from investment
operations 8.344 (.306) 2.109 2.039 6.702 .851 6.443
Less Distributions
Dividends from net investment
income (.723) (.811) (.814) (.866) (.942) (.960) (1.056)
Distribution from net realized
gains on investments (4.795) (3.899) (1.652) (.525) (.304) (.370) (1.871)
------- ------- ------- ------- ------- ------- -------
Net asset value per share,
end of year $29.055 $26.229 $31.245 $31.602 $30.954 $25.498 $25.977
======= ======= ======= ======= ======= ======= =======
Total Return* 32.25% (.96)% 6.74% 6.70% 26.41% 3.31% 29.06%
Net assets, end of year (millions) $5,662 $4,424 $4,988 $4,552 $3,818 $2,768 $2,592
Ratio of total expenses to average
net assets .29% .30% .29% .30% .30% .30% .29%
Ratio of net investment income to
average net assets 2.42% 2.52% 2.57% 2.86% 3.22% 3.70% 4.01%
Portfolio turnover rate 96.63% 84.27% 25.22% 16.26% 12.08% 19.40% 28.79%
</TABLE>

Year Ended December 31
---------------------------
1988 1987 1986
------- ------- -------
Net asset value per share,
beginning of year $20.961 $23.941 $21.990
Income From Investment
Operations
Net investment income .874 .866 .736
Net realized and unrealized gain
(loss) on investments 2.187 .713 3.350
------- ------- -------
Total from investment
operations 3.061 1.579 4.086
Less Distributions
Dividends from net investment
income (.892) (.868) (.771)
Distribution from net realized
gains on investments (.669) (3.691) (1.364)
------- ------- -------
Net asset value per share,
end of year $22.461 $20.961 $23.941
======= ======= =======
Total Return* 14.63% 5.40% 18.97%
Net assets, end of year (millions) $2,042 $ 1,834 $ 1,845
Ratio of total expenses to average
net assets .38% .29% .31%
Ratio of net investment income to
average net assets 3.81% 3.12% 3.25%
Portfolio turnover rate 24.96% 36.52% 38.80%

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 1-800-238-6263.

4 Aetna Variable Fund
<PAGE>
INVESTMENT OBJECTIVE

The investment objective of the Fund is to maximize total return through
investments in a diversified portfolio of common stocks and securities
convertible into common stock. It is anticipated that capital appreciation
and investment income will both be major factors in achieving total return.
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 generally will seek to achieve its investment
objective by investing principally in common stocks and securities
convertible into common stock which ALIAC believes have significant potential
for capital appreciation and/or investment income.

In addition, the Fund may invest in nonconvertible preferred stocks, debt
securities, rights and warrants. The Fund may maintain a reserve of cash and
high-grade, short-term debt securities. The Fund may purchase securities on a
when-issued or delayed-delivery basis and may invest up to 15% of its total
assets in illiquid securities; however, it intends to limit investments in
illiquid securities to no more than 5% of its total assets.

Industry Concentration The Fund will not 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.
This limitation will not, however, apply to securities issued or guaranteed
by the U.S. Government, its agencies and instrumentalities. Also, the Fund
will not 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 and does not include securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities.

International Securities The Fund may invest up to 25% of its assets in
international equity securities. These securities will be marketable equity
securities including common and preferred stock, depositary receipts for
stock and fixed income or equity securities exchangeable for or convertible
into stock. Investments in securities of foreign issuers or securities
denominated in foreign currencies involve risks not present in domestic
markets. Such risks include: currency fluctuations and related currency
conversion costs; less liquidity; price or income volatility; less government
supervision and regulation of stock exchanges where 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 income payable on securities or
on capital gains; 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, interest and dividends on securities; higher transaction costs;
possible settlement delays; and less publicly available information about
foreign issuers.

Depositary Receipts The Fund can invest in both sponsored and unsponsored
depositary receipts. Unsponsored depositary receipts, which are typically
traded in the over-the-counter market, may be less liquid than sponsored
depositary receipts and therefore may involve more risk. In addition, there
may be less information available about issuers of unsponsored depositary
receipts. The Fund may acquire American Depositary Receipts (ADRs) which are
dollar denominated, although their market price is subject to fluctuations of
the foreign currency in which the underlying securities are denominated. All
depositary receipts will be considered international securities for purposes
of the Fund's investment limitation concerning investment in international
securities.

Securities Lending The Fund may lend its 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.

Repurchase Agreements The Fund currently does not intend to enter into
repurchase agreements although it is authorized to do so with domestic banks
and broker-dealers. No more than 10% of the Fund's assets may be invested in
repurchase agreements maturing in more than seven days.

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.

Aetna Variable Fund 5
<PAGE>
High Risk, High-Yield Securities The Fund may invest in securities rated BB
or below by Standard and Poor's Corporation or Ba or below by Moody's
Investors Services, Inc., or other ratings agencies, or, if not rated,
considered by the investment adviser to be of comparable quality (high risk,
high-yield securities commonly called "junk bonds"). The Fund does not intend
to invest more than 5% of its assets in such securities, although it may
invest up to 10% of its total assets in high risk, high-yield securities.

Options, Futures and Other Derivatives The Fund may occasionally engage in
hedging and other strategies using other types of derivatives to manage its
exposure to changing interest rates, securities prices and currency exchange
rates, or to increase its investment return. A derivative is a financial
instrument the value of which is "derived" from the performance of an
underlying asset (such as a security or index of securities). In addition to
futures and options, derivatives include such instruments as forward
contracts, swaps, and structured notes. A forward contract is a purchase or
sale of a specific quantity of a commodity, government security, foreign
currency, or other financial instrument at the current price, with delivery
and settlement at a specified future date. A swap is an exchange of one
security for another and may be executed to exchange the maturities of a bond
portfolio or the quality of the issues in a stock or bond portfolio.
Structured notes are privately placed fixed income securities whose coupon
and/or final payment depends on the return of a stock market index, portfolio
or security. Except for the purpose of hedging, the Fund may not invest more
than 5% of its assets in derivatives which management deems to involve high
risk to the Fund, such as inverse floaters, Interest Only and Principal Only
Securities.

The Fund may write covered call options and purchase covered put options, on
securities and indices. Put options will be acquired only for temporary
defensive purposes. The Fund may purchase call options and sell put options
to close out positions previously opened by the Fund. At any one time, the
Fund may not have outstanding call options on more than 30% of its assets and
it may not buy put options if more than 3% of the assets of the Fund would be
invested in put options.

The Fund may enter into futures contracts including stock index futures or
options on futures contracts only for hedging purposes. The Fund may not
enter into a futures contract if the current market prices of instruments
required to be delivered and purchased under open futures contracts would
exceed 30% of the Fund's assets. No more than 5% of the Fund's total assets
may be committed to margin deposits on futures contracts.

Options and futures contracts can be volatile investments and involve certain
risks. The Fund may be unable to limit losses by closing a position due to
lack of a liquid market or similar factors. Losses may also occur if there is
not a perfect correlation between the value of the contracts and the related
securities. The use of futures may involve a high degree of leverage because
of low margin requirements. As a result, small price movements in futures
contracts may result in immediate and potentially unlimited gains or losses
to the Fund. The amount of gains or losses on investments in futures
contracts depends on the portfolio manager's ability to predict correctly the
direction of stock prices, interest rates and other economic factors. Further
information about the use of futures, options and other derivative
instruments, and the associated risks, is contained in the SAI.

The Fund is subject to further investment restrictions that are 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 indirect 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's 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. The Fund intends to solicit shareholders of the
Fund for a change in the management fee to 0.50% of the average daily net
assets of the Fund to be effective August 1, 1996. Any changes in the
management fee is subject to the approval of the shareholders.

Portfolio Management Kevin M. Means, Chief Equity Officer, ALIAC, has been
the lead portfolio manager for the Fund since he joined ALIAC in July, 1994.
He was Chief Investment Officer at INVESCO Management and Research, Boston,
from 1993 to 1994, and Director of Quantitative Research and Equity Portfolio
Manager at INVESCO Capital Management, Atlanta, from 1987 to 1993. Mr. Means
is assisted by a team of portfolio managers who specialize in various asset
classes.

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 0.06% of the average daily net
assets of the Fund.

6 Aetna Variable Fund
<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
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 194,345,621 shares of the Fund outstanding,
98% of which were owned by ALIAC and held in its separate accounts to fund
ALIAC's obligations under its VA Contracts and VLI Policies. An additional
1.6% of the Fund's shares were owned by affiliates of ALIAC at that date. The
balance of the shares were held directly by shareholders who acquired their
interests before the Fund was prohibited from selling shares both directly to
investors and to fund VA Contracts and VLI Policies. Direct shareholders may
not purchase additional shares except through dividend reinvestments.

Shareholder Inquiries and Distribution Options Any questions about the Fund
can be addressed to the Fund at the address listed on the cover of this
Prospectus or by calling 1-800-238-6263. Shareholders may elect to receive
dividends and capital gains distributions in cash or to reinvest in
additional shares in the Fund. See "Tax Matters--Fund Distributions" below.

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. 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, or
other shareholders holding direct shares of the Fund. 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 of net long-term capital gains
are taxable to shareholders as long-term capital gains regardless of the
length of time a shareholder has held the shares. Distributions by the Fund
of its net investment income and its net short-term capital gains are taxable
to shareholders as ordinary income. Distributions paid by the Fund to the
insurance company separate accounts and redemption of Fund shares held by the
separate accounts will not result in taxable income to holders of VA
Contracts and VLI Policies. Contract holders and 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.

Aetna Variable Fund 7
<PAGE>
In general, shareholders include distributions in their taxable income in
the year in which they are received (whether paid in cash or reinvested).
However, distributions declared in December and paid in January are taxable
as if paid on December 31 of the year of declaration. A statement will be
sent to shareholders indicating the tax status of all distributions made
during the previous year.

Share Redemptions Any gain or loss recognized upon a taxable disposition of a
shareholder's shares generally will be treated as a taxable long-term or
short-term capital gain or loss (depending on whether the shareholder has held
the shares more than one year). Any loss realized upon a taxable disposition of
a Fund's shares may be subject to limitations that are described more fully in
the SAI.

Tax Withholding The Fund will be required to withhold taxes from any
distributions unless the shareholder provides the Fund with a correct social
security or taxpayer identification number or certifies that the shareholder is
a corporation or otherwise exempt from or not subject to withholding by the
Internal Revenue Service (IRS). If a shareholder is subject to backup
withholding, the IRS can require the Fund to withhold 31% of taxable dividends,
capital gains distributions and redemptions.

SALE AND REDEMPTION OF SHARES

ALIAC is the principal underwriter of the Fund's shares. Except for the
reinvestment of dividends described under "General Information--Capital
Stock," shares may only be purchased by ALIAC as the depositor of variable
annuity and variable life insurance separate accounts as directed by the
holders of the VA Contracts or VLI Policies. Refer to the prospectus for the
applicable VA Contract or VLI Policy for information on how to direct
investments in or redemptions from a Fund and any fees that may apply.

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. Shareholders redeeming directly from the Fund and not through a VA
Contract or VLI Policy must provide a signature guarantee regardless of the
redemption amount. No sales charge or redemption charge is made.

If the value of shares held directly by a shareholder is less than $1,000,
the shares may be liquidated upon six months' notice. Shares will be redeemed
at the net asset value determined on the day the account is closed. The Fund
may suspend redemptions or postpone payments when the New York Stock Exchange
is closed or when trading is restricted for any reason (other than weekends
or holidays) or under emergency circumstances as determined by the SEC.

If such a shareholder holds shares directly having a net asset value of
$5,000 or more, the shareholder may establish a systematic withdrawal
program. Further information about this program may be obtained from the
Fund.

NET ASSET VALUE

The net asset value per share (NAV) 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 costs. Securities and other 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.

8 Aetna Variable Fund
<PAGE>
INVESTMENT ADVISER

Aetna Life Insurance
and Annuity Company
151 Farmington Avenue
Hartford, Connecticut 06156

CUSTODIAN

Mellon Bank N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258

TRANSFER, DIVIDEND DISBURSING
AND REDEMPTION AGENT

Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP
CityPlace II
Hartford, Connecticut 06103-4103

[AETNA LOGO]

Aetna Life Insurance and Annuity Company

<PAGE>

AETNA VARIABLE FUND

151 Farmington Avenue
Hartford, Connecticut 06156
1-800-238-6263

Prospectus dated: May 1, 1996

Aetna Variable Fund (the "Fund") is a diversified, open-end management
investment company whose shares are currently available to (i) 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) and its affiliates and
subsidiaries and (ii) other shareholders of the Fund only through dividend
reinvestment.

Please read this Prospectus and retain for future reference.

<PAGE>
TABLE OF CONTENTS

FINANCIAL HIGHLIGHTS 3
INVESTMENT OBJECTIVE 4
INVESTMENT POLICIES AND RESTRICTIONS 4
Investment Policies 4
Industry Concentration 4
International Securities 4
Depositary Receipts 4
Securities Lending 4
Repurchase Agreements 4
Borrowing 4
High Risk, High-Yield Securities 5
Options, Futures and Other Derivatives 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 Inquiries and Distribution Options 6
Shareholder Meetings 6
Voting Rights 6
TAX MATTERS 6
The Fund 6
Fund Distributions 6
Share Redemptions 7
Tax Withholding 7
SALE AND REDEMPTION OF SHARES 7
NET ASSET VALUE 7

2 Aetna Variable Fund
<PAGE>
FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------
1995 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of year $26.229 $31.245 $31.602 $30.954 $25.498 $25.977
Income From Investment
Operations
Net investment income .724 .765 .822 .810 .922 .935
Net realized and unrealized gain
(loss) on investments 7.620 (1.071) 1.287 1.229 5.780 (.084)
------- ------- ------- ------- ------- -------
Total from investment
operations 8.344 (.306) 2.109 2.039 6.702 .851
Less Distributions
Dividends from net investment
income (.723) (.811) (.814) (.866) (.942) (.960)
Distribution from net realized
gains on investments (4.795) (3.899) (1.652) (.525) (.304) (.370)
------- ------- ------- ------- ------- -------
Net asset value per share,
end of year $29.055 $26.229 $31.245 $31.602 $30.954 $25.498
======= ======= ======= ======= ======= =======
Total Return* 32.25% (.96)% 6.74% 6.70% 26.41% 3.31%
Net assets, end of year (millions) $5,662 $4,424 $4,988 $4,552 $3,818 $2,768
Ratio of total expenses to average
net assets .29% .30% .29% .30% .30% .30%
Ratio of net investment income to
average net assets 2.42% 2.52% 2.57% 2.86% 3.22% 3.70%
Portfolio turnover rate 96.63% 84.27% 25.22% 16.26% 12.08% 19.40%
</TABLE>

Year Ended December 31
-------------------------------------
1989 1988 1987 1986
------- ------- ------- -------
Net asset value per share,
beginning of year $22.461 $20.961 $23.941 $21.990
Income From Investment
Operations
Net investment income 1.041 .874 .866 .736
Net realized and unrealized gain
(loss) on investments 5.402 2.187 .713 3.350
------- ------- ------- -------
Total from investment
operations 6.443 3.061 1.579 4.086
Less Distributions
Dividends from net investment
income (1.056) (.892) (.868) (.771)
Distribution from net realized
gains on investments (1.871) (.669) (3.691) (1.364)
------- ------- ------- -------
Net asset value per share,
end of year $25.977 $22.461 $20.961 $23.941
======= ======= ======= =======
Total Return* 29.06% 14.63% 5.40% 18.97%
Net assets, end of year (millions) $2,592 $2,042 $1,834 $1,845
Ratio of total expenses to average
net assets .29% .38% .29% .31%
Ratio of net investment income to
average net assets 4.01% 3.81% 3.12% 3.25%
Portfolio turnover rate 28.79% 24.96% 36.52% 38.80%

Per share data calculated using weighted average number of shares outstanding
throughout the year.

Aetna Variable Fund 3
<PAGE>
INVESTMENT OBJECTIVE

INVESTMENT POLICIES AND RESTRICTIONS

Investment Policies The Fund generally will seek to achieve its investment
objective by investing principally in common stocks and securities convertible
into common stock which ALIAC believes have significant potential for capital
appreciation and/or investment income.

4 Aetna Variable Fund
<PAGE>
High Risk, High-Yield Securities The Fund may invest in securities rated BB
or below by Standard and Poor's Corporation or Ba or below by Moody's
Investors Services, Inc., or other ratings agencies, or, if not rated,
considered by the investment adviser to be of comparable quality (high risk,
high-yield securities commonly called "junk bonds"). The Fund does not intend
to invest more than 5% of its assets in such securities, although it may
invest up to 10% of its total assets in high risk, high-yield securities.

The Fund is subject to further investment restrictions that are described in
the SAI.

MANAGEMENT OF THE FUND

Aetna Variable Fund 5
<PAGE>
GENERAL INFORMATION

TAX MATTERS

6 Aetna Variable Fund
<PAGE>
In general, shareholders include distributions in their taxable income in the
year in which they are received (whether paid in cash or reinvested).
However, distributions declared in December and paid in January are taxable
as if paid on December 31 of the year of declaration. A statement will be
sent to shareholders indicating the tax status of all distributions made
during the previous year.

Share Redemptions Any gain or loss recognized upon a taxable disposition of a
shareholder's shares generally will be treated as a taxable long-term or
short-term capital gain or loss (depending on whether the shareholder has
held the shares more than one year). Any loss realized upon a taxable
disposition of a Fund's shares may be subject to limitations that are
described more fully in the SAI.

Tax Withholding The Fund will be required to withhold taxes from any
distributions unless the shareholder provides the Fund with a correct social
security or taxpayer identification number or certifies that the shareholder
is a corporation or otherwise exempt from or not subject to withholding by
the Internal Revenue Service (IRS). If a shareholder is subject to backup
withholding, the IRS can require the Fund to withhold 31% of taxable
dividends, capital gains distributions and redemptions.

SALE AND REDEMPTION OF SHARES

NET ASSET VALUE

Aetna Variable Fund 7
<PAGE>

Statement of Additional Information dated: May 1, 1996

AETNA VARIABLE 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 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 Fund at
the address listed above or by calling 1-800-238-6263.

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 3
Trustees and Officers of the Fund 13
Control Persons and Principal Shareholders of the Fund 16
Investment Advisory Agreement 16
Administrative Services Agreement 17
Brokerage Allocation and Trading Policies 18
Description of Shares 19
Sale and Redemption of Shares 20
Principal Underwriter 20
Tax Matters 20
Net Asset Value 26
Custodian 26
Independent Auditors 26
Financial Statements F-1

<PAGE>
GENERAL INFORMATION AND HISTORY

Aetna Variable Fund (the "Fund") is an open-end diversified management
investment company which sells its shares of beneficial interest to (i)
variable annuity and 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
the "Company") and its affiliates and subsidiaries, and (ii) other
shareholders of the Fund only through reinvestment of dividends.

INVESTMENT OBJECTIVE AND POLICIES OF THE FUND

The investment objective of the Fund is to maximize total return through
investments in a diversified portfolio of common stocks and securities
convertible into common stock. It is anticipated that capital appreciation
and investment income will both be major factors in achieving such return.
The Fund's investment adviser may invest principally in common stocks having
significant potential for capital appreciation, or may purchase common stocks
principally for their income potential through dividends and option writing,
or may acquire securities having a mix of these characteristics.

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; (c) the Fund may engage in short sales
of securities to the extent permitted in its investment program and
other restrictions; (d) the purchase or sale of futures contracts and
related options shall not be considered to involve the issuance of
senior securities; and (e) 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. This limitation will not,
however, apply to securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities;

(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 enter into transactions in
financial and index futures contracts and related options, may engage in
transactions on a when-issued or forward commitment basis, and may enter
into forward currency contracts;

2 Aetna Variable Fund
<PAGE>
(6) borrow money, except that (a) the Fund may enter into certain futures
contracts and options related thereto; (b) 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; (c) 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; and
(d) for purposes of leveraging, the Fund may borrow money from banks
(including its custodian bank) only if, immediately after such
borrowing, the value of the Fund's assets, including the amount
borrowed, less its liabilities, is equal to at least 300% of the amount
borrowed, plus all outstanding borrowings. If, at any time, the value of
the Fund's assets fails to meet the 300% asset coverage requirement
relative only to leveraging, the Fund will, within three days (not
including Sundays and holidays), reduce its borrowings to the extent
necessary to meet the 300% test;

(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, as amended (the "1933 Act").

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 in companies for the purpose of exercising control or management;

(3) purchase the securities of any other investment company, except as
permitted under the 1940 Act; or

(4) invest more than 15% 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, 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.

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 securities rating
of the investment or any other change.

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."

Futures Contracts
The Fund may enter into stock index futures contracts ("futures" or "futures
contracts") or options thereon as a hedge against changes in prevailing
levels of equities prices and in anticipation of future purchases or sales of
securities. The Fund's investment techniques may include sales of futures as
an offset against

Aetna Variable Fund 3
<PAGE>

the effect of expected declines in equities prices. The Fund will enter into
futures contracts or options thereon for hedging purposes only and will only
enter into futures contracts or options thereon which are traded on national
futures exchanges and are standardized as to maturity date and underlying
financial instrument. Futures exchanges and trading are regulated under the
Commodity Exchange Act by the Commodities Futures Trading Commission (the
"CFTC").

Although techniques other than sales and purchases of futures contracts could
be used to reduce the exposure of the Fund to market fluctuations, the Fund
may be able to hedge its exposure more effectively and perhaps at a lower
cost through using futures contracts. The Fund will not enter into a futures
contract if, as a result thereof, (i) the then current aggregate futures
market prices of financial instruments required to be delivered and purchased
under open futures contracts would exceed 30% of the Fund's total assets,
(taken at market value at the time of entering into the contract), or (ii)
more than 5% of the Fund's total assets (taken at market value at the time of
entering into the contract), would be committed to margin deposits on such
futures contracts.

A futures contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument(s)
(debt security) or a specific stock market index for a specified price at a
designated date, time, and place. Brokerage fees are incurred when a futures
contract is bought or sold and at expiration and margin deposits must be
maintained. Stock index futures contracts do not contemplate actual future
delivery and will be settled in cash at expiration or closed out prior to
expiration. Closing out an open futures contract sale or purchase is effected
by entering into an offsetting futures contract purchase or sale,
respectively, for the same aggregate amount of the identical type of
underlying instrument and the same delivery date. There can be no assurance,
however, that the Fund will be able to enter into an offsetting transaction
with respect to a particular contract at a particular time. If the Fund is
not able to enter into an offsetting transaction, it will continue to be
required to maintain the margin deposits on the contract.

Persons who engage in futures contracts transactions may be broadly
classified as "hedgers" and "speculators." Hedgers, such as the Fund, whose
business activity involves investment in securities, use the futures markets
primarily to offset unfavorable changes in value that may occur because of
fluctuations in the value of the securities held or expected to be acquired
by them. Debtors and other obligors may also hedge the interest cost of their
obligations. The speculator, like the hedger, generally expects neither to
deliver nor to receive the financial instrument underlying the futures
contract, but, unlike the hedger, hopes to profit from fluctuations in
prevailing equities prices. "Margin" is the amount of funds that must be
deposited by the the Fund with a commodities broker in a custodian account in
order to initiate futures trading and to maintain open positions in the
Fund's futures contracts. A margin deposit is intended to assure the Fund's
performance of the futures contract. The margin required for a particular
futures contract is set by the exchange on which the Contract is traded and
may be significantly modified from time to time by the exchange during the
term of the contract. If the price of an open futures contract changes (by
increase in the case of a sale or by decrease in the case of a purchase) so
that the loss on the futures contract reaches a point at which the margin on
deposit does not satisfy margin requirements, the broker will require an
increase in the margin. However, if the value of a position increases because
of favorable price changes in the futures contract so that the margin deposit
exceeds the required margin, the broker will promptly pay the excess to the
Fund. These daily payments to and from the Fund are called variation margin.
At times of extreme price volatility such as occurred during the week of
October 19, 1987, intra- day variation margin payments may be required. In
computing daily net asset values, the Fund will mark to market the current
value of its open futures contracts. The Fund expects to earn interest income
on its initial margin deposits.

Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, small price movements in
futures contracts may result in immediate and potentially unlimited loss or
gain to the Fund relative to the size of the margin commitment. For example,
if at the time of purchase 10% of the value of the futures contract is
deposited as margin, a subsequent 10% decrease in the value of the futures
contract would result in a total loss of the margin deposit before any
deduction

4 Aetna Variable Fund
<PAGE>
for the transaction costs, if the contract were then closed out. A 15%
decrease in the value of the futures contract would result in a loss equal to
150% of the original margin deposit, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount initially invested in the futures contract. However, the Fund would
presumably have sustained comparable losses if, instead of the futures
contract, it had invested in the underlying financial instrument and sold it
after the decline. Furthermore, in the case of a futures contract purchase,
the Fund deposits in a segregated account money market instruments sufficient
to meet all futures contract initial margin requirements.

Restrictions on the Use of Futures and Option Contracts
CFTC regulations require that all short futures positions be entered into for
the purpose of hedging the value of securities held in the Fund's portfolio,
and that all long futures positions either constitute bona fide hedging
transactions, as defined in such regulations, or have a total value not in
excess of an amount determined by reference to certain cash and securities
positions maintained for the Fund, and accrued profits on such positions.

The Fund's ability to engage in the hedging transactions described herein may
be limited by the current federal income tax requirement that a Fund derive
less than 30% of its gross income from the sale or other disposition of stock
or securities held for less than three months.

Covered Call and Put Options on Securities
The Fund may write (sell) covered call options ("call options") and purchase
covered put options ("put options") on securities and indices, and purchase
call and sell put options to close out positions previously opened by the
Fund, provided, however, that it will not have call options outstanding at
any one time on more than 30% of its total assets nor will it buy put options
if more than 3% of the assets of the Fund immediately following such purchase
would consist of put options. The purpose of writing call options and
purchasing put options will be to reduce the effect of price fluctuations of
the securities owned by the Fund (and involved in the options) on the net
asset value per share of the Fund.

A call option gives the holder (buyer) the right to purchase a security at a
specified price (the exercise price) at any time until a certain date (the
expiration date). So long as the obligation of the writer of a call option
continues, he may be assigned an exercise notice by the broker-dealer through
whom such option was settled, requiring him to deliver the underlying
security against payment of the exercise price. This obligation terminates
upon the expiration of the call option, the exercise of the call option, or
by entering into an offsetting transaction. To secure his obligation to
deliver the underlying security in the case of a call option, a writer is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the clearing corporations and of the exchanges.
A put option gives the holder (buyer) the right to sell a security at a
specified price (the exercise price) at any time until a certain date (the
expiration date). The Fund will only write a call option on a security which
it already owns and will not write call options on when-issued securities.
The Fund may purchase a put option on a security that it already owns and on
stock indices.

The Fund will write call options and purchase put options in standard
contracts listed on national securities exchanges, or write call options with
and purchase put options directly from investment dealers meeting the
creditworthiness criteria of the Company.

When writing a call option, the Fund, in return for the premium, gives up the
opportunity to profit from a price increase in the underlying security above
the exercise price, but conversely retains the risk of loss should the price
of the security decline. If a call option which the Fund has written expires,
the Fund will realize a gain in the amount of the premium; however, such gain
may be offset by a decline in the market value of the underlying security
during the option period. If the call option is exercised, the Fund will
realize a gain or loss from the sale of the underlying security. The Fund
will purchase put options involving portfolio securities only when the
Company believes that a temporary defensive position is desirable in light of
market conditions, but does not desire to sell the portfolio security.
Therefore, the purchase of put options will be used to protect the Fund's
holdings in an underlying security against a substantial decline in market
value. Such protection is, of course, only provided during the life of the
put option when the

Aetna Variable Fund 5
<PAGE>

Fund, as the holder of the put option, is able to sell the underlying security
at the put exercise price regardless of any decline in the underlying security's
market price. By using put options in this manner, the Fund will reduce any
profit it might otherwise have realized in its underlying security by the
premium paid for the put option and by transaction costs. The security covering
the call or put option will be segregated at the Fund's custodian.

The premium the Fund will receive from writing a call option, or the Fund
will pay when purchasing a put option, will reflect, among other things, the
current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, the length of the option period, and the general
interest rate environment. The premium received by the Fund for writing
covered call options will be recorded as a liability in the statement of
assets and liabilities of the Fund. This liability will be adjusted daily to
the option's current market value. The liability will be extinguished upon
expiration of the option, by the exercise of the option, or by entering into
an offsetting transaction. Similarly, the premium paid by the Fund when
purchasing a put option will be recorded as an asset in the statement of
assets and liabilities of the Fund. This asset will be adjusted daily to the
option's current market value. The asset will be extinguished upon expiration
of the option, by selling an identical option in a closing transaction, or
exercising the option.

When writing put options on securities, to secure its obligation to pay for
the underlying security, the Fund will deposit in escrow liquid assets with a
value equal to or greater than the exercise price of the put option. The Fund
therefore foregoes the opportunity of investing the segregated assets or
writing calls against those assets. As long as the obligation of the Fund as
the put writer continues, it may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring the Fund to take
delivery of the underlying security against payment of the exercise price.
The Fund has no control over when it may be required to purchase the
underlying security, since it may be assigned an exercise notice at any time
prior to the termination of its obligation as the writer of the put. This
obligation terminates upon expiration of the put, or such earlier time at
which the Fund effects a closing purchase transaction by purchasing a put of
the same series as that previously sold.

Closing transactions will be effected in order to realize a profit on an
outstanding call or put option, to prevent an underlying security from being
called or put, or to permit the exchange or tender of the underlying
security. Furthermore, effecting a closing transaction will permit the Fund
to write another call option, or purchase another put option, on the
underlying security with either a different exercise price or expiration date
or both. If the Fund desires to sell a particular security from its portfolio
on which it has written a call option, or purchased a put option, it will
seek to effect a closing transaction prior to, or concurrently with, the sale
of the security. There is, of course, no assurance that the Fund will be able
to effect such closing transactions at a favorable price. If the Fund cannot
enter into such a transaction, it may be required to hold a security that it
might otherwise have sold, in which case it would continue to be at market
risk on the security. The Fund will pay brokerage commissions in connection
with the sale or purchase of options to close out previously established
option positions. Such brokerage commissions are normally higher as a
percentage of underlying asset values than those applicable to purchases and
sales of portfolio securities.

The exercise price of the options may be below, equal to, or above the
current market values of the underlying securities at the time the options
are written. From time to time, the Fund may purchase an underlying security
for delivery in accordance with an exercise notice of a call option assigned
to it, rather than delivering such security from its portfolio. In such cases
additional brokerage commissions will be incurred. The Fund will realize a
profit or loss from a closing purchase transaction if the cost of the
transaction is less or more than the premium received from the writing of the
call option; however, any loss so incurred in a closing purchase transaction
may be partially or entirely offset by the premium received from a
simultaneous or subsequent sale of a different call or put option. Also,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in
part by appreciation of the underlying security owned by the Fund. Any
profits from writing covered call options are considered short-term gain for
federal income tax purposes and, when distributed by the Fund, are taxable as
ordinary income.

6 Aetna Variable Fund
<PAGE>
Additional Risk Factors for Futures and Options
In addition to any risk factors which may be described above, the following
sets forth certain information regarding the potential risks associated with
the Fund's futures and options transactions.

Risk of Imperfect Correlation--The Fund's ability to hedge effectively all or
a portion of its portfolio through transactions in futures, options on
futures or options on securities and indexes depends on the degree to which
movements in the value of the securities or index underlying such hedging
instrument correlate with movements in the value of the relevant portion of
the Fund's portfolio. If the values of the portfolio securities being hedged
do not move in the same amount or direction as the underlying security or
index, the hedging strategy for the Fund might not be successful and the Fund
could sustain losses on its hedging transactions which would not be offset by
gains on its portfolio. It is also possible that there may be a negative
correlation between the security or index underlying a futures or option
contract and the portfolio securities being hedged, which could result in
losses both on the hedging transaction and the portfolio securities. In such
instances, the Fund's overall return could be less than if the hedging
transactions had not been undertaken. Stock index futures or options based on
a narrower index of securities may present greater risk than options or
futures based on a broad market index, as a narrower index is more
susceptible to rapid and extreme fluctuations resulting from changes in the
value of a small number of securities. The Fund would, however, effect
transactions in such futures or options only for hedging purposes (or to
close out open positions).

The trading of futures and options on indexes involves the additional risk of
imperfect correlation between movements in the futures or option price and
the value of the underlying index. The anticipated spread between the prices
may be distorted due to differences in the nature of the markets, such as
differences in margin requirements, the liquidity of such markets and the
participation of speculators in the futures and options market. The purchase
of an option on a futures contract also involves the risk that changes in the
value of underlying futures contract will not be fully reflected in the value
of the option purchased. The risk of imperfect correlation, however,
generally tends to diminish as the maturity date of the futures contract or
termination date of the option approaches. The risk incurred in purchasing an
option on a futures contract is limited to the amount of the premium plus
related transaction costs, although it may be necessary under certain
circumstances to exercise the option and enter into the underlying futures
contract in order to realize a profit. Under certain extreme market
conditions, it is possible that the Fund will not be able to establish
hedging positions, or that any hedging strategy adopted will be insufficient
to completely protect the Fund.

The Fund will purchase or sell futures contracts or options only if, in the
Company's judgment, there is expected to be a sufficient degree of
correlation between movements in the value of such instruments and changes in
the value of the relevant portion of the Fund's portfolio for the hedge to be
effective. There can be no assurance that the Company's judgment will be
accurate.

Potential Lack of a Liquid Secondary Market--The ordinary spreads between
prices in the cash and futures markets, due to differences in the natures of
those markets, are subject to distortions. First, all participants in the
futures market are subject to initial deposit and variation margin
requirements. This could require the Fund to post additional cash or cash
equivalents as the value of the position fluctuates. Further, rather than
meeting additional variation margin requirements, investors may close futures
contracts through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the liquidity of
the futures or options market may be lacking. Prior to exercise or
expiration, a futures or option position may be terminated only by entering
into a closing purchase or sale transaction, which requires a secondary
market on the exchange on which the position was originally established.
While the Fund will establish a futures or option position only if there
appears to be a liquid secondary market therefor, there can be no assurance
that such a market will exist for any particular futures or option contract
at any specific time. In such event, it may not be possible to close out a
position held by the Fund, which could require the Fund to purchase or sell
the instrument underlying the position, make or receive a cash settlement, or
meet ongoing variation margin requirements. The inability to close out
futures or option positions also could have an adverse impact on the Fund's
ability effectively to hedge its portfolio, or the relevant portion thereof.

Aetna Variable Fund 7
<PAGE>
The liquidity of a secondary market in a futures contract or an option on a
futures contract may be adversely affected by "daily price fluctuation
limits" established by the exchanges, which limit the amount of fluctuation
in the price of a contract during a single trading day and prohibit trading
beyond such limits once they have been reached. The trading of futures and
options contracts also is subject to the risk of trading halts, suspensions,
exchange or clearing house equipment failures, government intervention,
insolvency of the brokerage firm or clearing house or other disruptions of
normal trading activity, which could at times make it difficult or impossible
to liquidate existing positions or to recover excess variation margin
payments.

Risk of Predicting Interest Rate Movements--Investments in futures contracts
on fixed income securities and related indexes involve the risk that if the
Company's investment judgment concerning the general direction of interest
rates is incorrect, the Fund's overall performance may be poorer than if it
had not entered into any such contract. For example, if the Fund has been
hedged against the possibility of an increase in interest rates which would
adversely affect the price of bonds held in its portfolio and interest rates
decrease instead, the Fund will lose part or all of the benefit of the
increased value of its bonds which have been hedged because it will have
offsetting losses in its futures positions. In addition, in such situations,
if the Fund has insufficient cash, it may have to sell bonds from its
portfolio to meet daily variation margin requirements, possibly at a time
when it may be disadvantageous to do so. Such sale of bonds may be, but will
not necessarily be, at increased prices which reflect the rising market.

Trading and Position Limits--Each contract market on which futures and option
contracts are traded has established a number of limitations governing the
maximum number of positions which may be held by a trader, whether acting
alone or in concert with others. The Company does not believe that these
trading and position limits will have an adverse impact on the hedging
strategies regarding the Fund's portfolio.

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.
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 Fund does not intend to use reverse repurchase
agreements.

Securities Lending
The Fund may lend up to one-third of its total assets, although it is
anticipated that less than 10% of such assets will be on loan at any one
time. In the Company's opinion, lending portfolio securities to qualified
broker-dealers affords the Fund a means of increasing the yield on its
portfolio. All such loans will be fully collateralized with either cash or
direct obligations of the U.S. government or agencies thereof, and the Fund
will be entitled either to receive a fee from the borrower or to retain some
or all of the income derived from its investment of cash collateral. The Fund
will continue to receive the interest or dividends paid on any securities
loaned, or amounts equivalent thereto. Although voting rights will pass to
the borrower of securities, whenever a material event affecting the borrowed
securities is to be voted on, the Fund may terminate the loan to vote such
proxy.

The primary risk the Fund assumes in loaning securities is that the borrower
may become insolvent on a day on which the loaned security is rapidly
increasing in price. In such event, if the borrower fails to return the

8 Aetna Variable Fund
<PAGE>
loaned securities, the existing collateral might be insufficient to purchase
back the full amount of security loaned, and the borrower would be unable to
furnish additional collateral. The borrower would be liable for any shortage,
but the Fund would be an unsecured creditor as to such shortage and might not
be able to recover all or any of it. A loan may be terminated at any time by
the borrower or lender upon proper notice.

Foreign Securities
The Fund may invest up to 25% of its total assets in foreign equity
securities. These securities will be marketable equity securities (including
common and preferred stock, depository receipts for stock and fixed income or
equity securities exchangeable for or convertible into stock) of foreign
companies which generally are listed on recognized foreign securities
exchanges or are traded in a foreign over-the-counter market. The Fund also
invests in foreign securities listed on recognized U.S. securities exchanges
or traded in the U.S. over-the-counter market. Such foreign securities may be
issued by foreign companies located in developing countries in various
regions of the world. A "developing country" is a country in the initial
stages of its industrial cycle. As compared to investment in the securities
markets of developed countries, investment in the securities markets of
developing countries involves exposure to markets that may have substantially
less trading volume and greater price volatility, economic structures that
are less diverse and mature, and political systems that may be less stable.

Depositary receipts are typically dollar denominated, although their market
price is subject to fluctuations of the foreign currency in which the
underlying securities are denominated. Depositary receipts include: (1)
American Depositary Receipts (ADRs), which are typically designed for U.S.
investors and held either in physical form or in book entry form; (2)
European Depositary Receipts (EDRs), which are similar to ADRs but may be
listed and traded on a European exchange as well as in the United States.
Typically, these securities are traded on the Luxembourg exchange in Europe;
and (3) Global Depositary Receipts (GDRs), which are similar to EDRs although
they may be held through foreign clearing agents such as Euroclear and other
foreign depositaries. All depositary receipts will be considered foreign
securities for purposes of a Fund's investment limitation concerning
investment in foreign securities.

Investments in securities of foreign issuers involve certain risks not
ordinarily associated with investments in securities of domestic issuers.
These risks include the following:

Currency Risk--The value of the Fund's foreign investments will be affected
by changes in currency exchange rates. The U.S. dollar value of a foreign
security decreases when the value of the U.S. dollar rises against the
foreign currency in which the security is denominated, and increases when the
value of the U.S. dollar falls against such currency.

Political and Economic Risk--The economies of many of the countries in which
the Fund may invest are not as developed as the U.S. economy and may be
subject to significantly different forces. Political or social instability,
expropriation or confiscatory taxation and limitation upon the removal of
funds or other assets could adversely affect the value of the Fund's
investments.

Regulatory Risk--Foreign companies are not registered with the Securities and
Exchange Commission (the "SEC") and are generally not subject to the
regulatory controls imposed on United States issuers and, as a consequence,
there is generally less publicly available information about foreign
securities than is available regarding domestic securities. Foreign companies
are not subject to uniform accounting, auditing and financial standards,
practices and requirements comparable to those applicable to U.S. companies.
Income from foreign securities owned by the Fund may be subject to
withholding taxes imposed at the source which would reduce dividend income
payable to the Fund's shareholders.

Market Risk--The securities markets in many of the countries in which the
Fund may invest have substantially less trading volume than the major U.S.
markets. Consequently, the securities of some foreign issuers may be less
liquid and experience more price volatility than comparable domestic
securities. Indeed, custodian costs, as well as administrative costs (such as
the need to use foreign custodians) may be associated with the maintenance of
assets in foreign jurisdictions. There is generally less government
regulation and supervision of foreign stock exchanges, brokers and issuers
which may make it difficult

Aetna Variable Fund 9
<PAGE>
to enforce contractual obligations. In addition, transaction costs in foreign
commission rates in foreign jurisdictions are likely to be higher than in the
United States.

High Risk, High-Yield Securities
The Fund may invest in high risk, high-yield securities ("junk bonds") which
are fixed income securities that offer a current yield above that generally
available on debt securities rated in the four highest categories by Moody's
Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P")
or, if unrated, considered to be of comparable quality by the investment
adviser. These securities include:

(a) fixed rate corporate debt obligations (including bonds, debentures and
notes) rated Ba or lower by Moody's or BB or lower by S&P;
(b) preferred stocks that have yields comparable to those of high-yielding
debt securities; and
(c) any securities convertible into any of the foregoing.

Debt obligations rated BB/Ba or lower are regarded as speculative, and
generally involve more risk of loss of principal and income than higher-rated
securities. Also their yields and market values tend to fluctuate more.
Fluctuations in value do not affect the cash income from the securities but
are reflected in the Fund's net asset value. The greater risks and
fluctuations in yield and value occur, in part, because investors generally
perceive issuers of lower-rated and unrated securities to be less
creditworthy. Lower ratings, however, may not necessarily indicate higher
risks. In pursuing the Fund's objectives, the Company seeks to identify
situations in which the rating agencies have not fully perceived the value of
the security or in which the Company believes that future developments will
enhance the creditworthiness and the ratings of the issuer.

High risk, high-yield securities (junk bonds) may not constitute more than
10% of the total assets of the Fund. The Fund will not invest in any debt
security rated lower than B.

The yields earned on high risk, high-yield securities (junk bonds) generally
are related to the quality ratings assigned by recognized ratings agencies.
These securities tend to offer higher yields than those of other securities
with the same maturities because of the additional risks associated with
them. These risks include:

(1) Sensitivity to Interest Rate and Economic Changes. High risk, high-yield
securities (junk bonds) are more sensitive to adverse economic changes
or individual corporate developments but less sensitive to interest rate
changes than are investment grade bonds. As a result, when interest
rates rise, causing bond prices to fall, the value of these securities
may not fall as much as investment grade corporate bonds. Conversely,
when interest rates fall, these securities may underperform investment
grade corporate bonds because the prices of these securities tend not to
rise as much as the prices of these other bonds.

Also, the financial stress resulting from an economic downturn or
adverse corporate developments could have a greater negative effect on
the ability of issuers of high risk, high-yield securities (junk bonds)
to service their principal and interest payments, to meet projected
business goals and to obtain additional financing, than on more
creditworthy issuers. Holders of these securities could also be at
greater risk because these securities are generally unsecured and
subordinated to senior debt holders and secured creditors. If the issuer
of a high risk, high-yield security (junk bond) owned by the Fund
defaults, the Fund may incur additional expenses to seek recovery. In
addition, periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of these securities and
the Fund's net asset value. Furthermore, in the case of high risk,
high-yield securities (junk bonds) structured as zero coupon or
pay-in-kind securities, their market prices are affected to a greater
extent by interest rate changes and thereby tend to be more speculative
and volatile than securities which pay interest periodically and in
cash.

(2) Payment Expectations. High risk, high-yield securities (junk bonds),
like other debt instruments, present risks based on payment
expectations. For example, these securities may contain redemption or
call provisions. If an issuer exercises these provisions in a declining
interest rate market, the Fund may have to replace the securities with a
lower yielding security, resulting in a decreased

10 Aetna Variable Fund
<PAGE>

return for investors. Also, the value of these securities may decrease
in a rising interest rate market. In addition, there is a higher risk of
non-payment of interest and/or principal by issuers of junk bonds than
in the case of investment grade bonds.

(3) Liquidity and Valuation Risks. High risk, high-yield securities (junk
bonds) are often traded among a small number of broker-dealers rather
than in a broad secondary market. Purchasers of these securities in the
past tended to be institutions rather than individuals, a factor that
further limits the secondary market. Many of these securities may not be
as liquid as investment grade bonds. The ability to value or sell these
securities will be adversely affected to the extent that such securities
are thinly traded or illiquid. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease
or increase the values and liquidity of high risk, high- yield
securities (junk bonds) more than other securities, especially in a
thinly-traded market.

(4) Limitations of Credit Ratings. The credit ratings assigned to high risk,
high-yield securities (junk bonds) may not accurately reflect the true
risks of an investment. Credit ratings typically evaluate the safety of
principal and interest payments rather than the market value risk of
such securities. In addition, credit agencies may fail to adjust credit
ratings to reflect rapid changes in economic or company conditions that
affect a security's market value. Although the ratings of recognized
rating services such as Moody's and S&P are considered, the Company
primarily relies on its own credit analysis which includes a study of
existing debt, capital structure, ability to service debts and to pay
dividends, the issuer's sensitivity to economic conditions, its
operating history and the current trend of earnings. Thus the
achievement of the Fund's investment objective may be more dependent on
the Company's own credit analysis than might be the case for a fund
which does not invest in high risk high-yield securities (junk bonds).

(5) Legislation. Legislation may have a negative impact on the market for
high risk, high-yield securities (junk bonds), such as legislation
requiring federally-insured savings and loan associations to divest
themselves of their investments in these securities.

Zero Coupon and Pay-in-Kind Securities
Zero coupon, or deferred interest, securities are debt obligations that do
not entitle the holder to any periodic payment of interest prior to maturity
or a specified date when the securities begin paying current interest (the
"cash payment date") and therefore are issued and traded at a discount from
their face amounts or par value. The discount varies, depending on the time
remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer. The
discount, in the absence of financial difficulties of the issuer, decreases
as the final maturity or cash payment date of the security approaches. The
market prices of zero coupon and deferred interest securities generally are
more volatile than the market prices of securities with similar maturities
that pay interest periodically and are likely to respond to changes in
interest rates to a greater degree than do non-zero coupon securities having
similar maturities and credit quality.

The risks associated with lower-rated debt securities may apply to zero
coupon and pay-in-kind securities. These securities are also subject to the
risk that in the event of a default, the Fund may realize no return on its
investment, because these securities do not pay cash interest.

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
a segregated account consisting of cash, U.S. Government securities or other
high-quality debt obligations with its custodian bank. 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.

Aetna Variable Fund 11
<PAGE>
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.

Convertibles
A convertible bond or convertible preferred stock gives the holder the option
of converting these securities into common stock. Convertible securities also
contain a call feature whereby the issuer may redeem the security at a
stipulated price, thereby limiting the possible appreciation.

Illiquid and Restricted Securities
The Fund may invest up to 15% of its total assets in illiquid securities. For
this purpose, "illiquid securities" are those which cannot be sold in seven
days in the ordinary course of business without taking a materially reduced
price. Because of the absence of a trading market for these investments, the
Fund may take longer to liquidate the position and may realize less than the
amount originally paid by the Fund. The Fund may purchase securities, which,
while privately placed, are eligible for purchase and sale pursuant to Rule
144A under the 1933 Act. This rule permits certain qualified institutional
buyers, such as the Fund, to trade in privately placed securities even though
such securities are not registered under the 1933 Act. The Company, under the
supervision of the Board of Trustees of the Fund, will consider whether
securities purchased under Rule 144A and other restricted securities are
illiquid and thus subject to the Fund's restriction of investing no more than
15% of the Fund's total assets in illiquid securities. In making this
determination, the Company will consider the trading markets for the specific
security taking into account the unregistered nature of the Rule 144A
security. In addition, the Company may consider, among other things, the (i)
frequency of trades and quotes, (ii) number of dealers and potential
purchasers, (iii) dealer undertakings to make a market, and (iv) nature of
the security and market place trades. The liquidity of Rule 144A securities
will also be monitored by the Company and, if as a result of changed
conditions, it is determined that a Rule 144A security is no longer liquid,
the Fund's holdings of illiquid securities will be reviewed to assure that
the Fund does not invest more than 15% of its total assets in illiquid
securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the Fund's investments in illiquid securities if
qualified institutional buyers are unwilling to purchase such securities. At
the present time, it is not possible to predict with certainty how the market
for Rule 144A securities will continue to operate.

Warrants
Warrants allow the holder to purchase new shares in the issuing company at a
predetermined price within either a specified length of time or perpetually.
Warrants may be sold individually or attached to preferred stock or bonds.

The purchaser of a warrant expects that the market price of a security will
exceed the purchase price of the warrant plus the exercise price of the
warrant, thus giving him a profit. Since the market price may never exceed
the exercise price before the expiration date of the warrant, the purchaser
of the warrant risks the loss of the entire purchase price of the warrant.

Borrowing
The Fund may borrow up to 5% of the value of its total assets for temporary
or emergency purposes. The Fund may also borrow up to one-third of the value
of its total assets from banks (including its custodian bank) to increase its
holdings of portfolio securities. Leveraging by means of borrowing may affect
the Fund's net asset value by exaggerating any increase or decrease in the
value of portfolio securities, and money borrowed is subject to interest and
other costs which may or may not exceed the income derived from the
securities purchased with borrowed funds. There is no present intention to
leverage the Fund.

Portfolio Turnover
Portfolio turnover refers to the frequency of portfolio transactions and the
percentage of portfolio assets being bought and sold in the aggregate during
the year. The Fund does not intend to make a general

12 Aetna Variable Fund
<PAGE>

practice of short-term trading, although it may occasionally realize
short-term gains or losses. Purchases and sales will be made whenever such
action is deemed prudent and consistent with investment objectives. It is
anticipated that under normal market conditions the average annual portfolio
turnover rate will not exceed 125%. A high turnover rate involves greater
expenses and may involve greater risk to the Fund. The portfolio turnover
rates for 1994 and 1995 were 84% and 97% respectively.

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.

Principal Occupation During Past Five Years
Position(s) Held (and Positions held with Affiliated Persons or
Name, Address and Age with Registrant Principal Underwriters of the Registrant)
<S> <C> <C>
Shaun P. Mathews* Trustee and Vice President, Products Group, Aetna Retirement
151 Farmington Avenue President Services, Inc., February 1996 to Present; Senior Vice
Hartford, Connecticut President, Strategic Markets and Products, ALIAC,
Age 40 February 1993 to February 1996; Chief Executive, Aetna
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, 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 Services, Inc.,
151 Farmington Avenue and Treasurer July 1993 to Present; Director, Vice President and
Hartford, Connecticut Treasurer, Aetna Insurance Company of America, February
Age 55 1993 to Present; Director, Aetna Private Capital, Inc.,
November 1990 to Present; Vice President and Treasurer,
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, March 1993 to
151 Farmington Avenue Present; General Counsel and Corporate Secretary, First
Hartford, Connecticut Investors Corporation, April 1991 to March 1993;
Age 48 Administrator, Oklahoma Department of Securities, March
1986 to April 1991.

Aetna Variable Fund 13
<PAGE>
Principal Occupation During Past Five Years
Position(s) Held (and Positions held with Affiliated Persons or
Name, Address and Age with Registrant Principal Underwriters of the Registrant)

Morton Ehrlich Trustee Chairman and Chief Executive Officer, Integrated
1000 Venetian Way Management Corp. (an entrepreneurial company) and
Miami, Florida Universal Research Technologies, 1992 to Present;
Age 61 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 City
325 Piermont Road Department of Mental Health, Mental Retardation and
Closter, New Jersey Alcohol Services, 1973 to Present.
Age 52

David L. Grove Trustee Private Investor; Economic/Financial Consultant, December
5 The Knoll 1985 to Present.
Armonk, New York
Age 78

Timothy A. Holt* Trustee Director, Senior Vice President, and Chief Financial
151 Farmington Avenue Officer, ALIAC, February 1996 to Present; Senior Vice
Hartford, Connecticut President, Business Strategy & Finance, Aetna Retirement
Age 43 Services, Inc., February 1996 to Present; 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 Officer, ALIAC,
151 Farmington Avenue December 1993 to Present; Executive Vice President, Aetna
Hartford, Connecticut Life and Casualty Company, December 1993 to Present;
Age 56 Group Executive, Aetna Life and Casualty 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 1993 to
455 East 86th Street Present; Senior Adviser, Daiwa Securities America, Inc.,
New York, New York January 1992 to 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 of
School of Management Audit Committee Management, Binghamton University (Binghamton, NY),
Binghamton University and Contract August 1993 to Present; Professor, Accounting, University
Binghamton, New York Committee of Connecticut (Storrs, Connecticut), September 1969 to
Age 58 June 1993; Director, The Advest Group (holding company
for brokerage firm).

Richard G. Scheide Trustee Trust and Private Banking Consultant, David Ross Palmer
11 Lily Street Consultants, July 1991 to Present; Executive Vice
Nantucket, Massachusetts President and Manager, Bank of New England, N.A., June
Age 66 1976 to July 1991.
</TABLE>

14 Aetna Variable Fund
<PAGE>

** 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 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 any 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 Registrant
Aggregate and Fund
Name of Person, Compensation Complex Paid
Position from Registrant to Trustees
------------------ ----------------- -----------------
Corine Norgaard
Trustee and
Chairman, Audit
and
Contract
Committees $19,486 $51,000

Sidney Koch
Trustee and
Member, Audit and
Contract
Committees $17,464 $47,000

Maria T. Fighetti
Trustee and
Member, Audit and
Contract
Committees $17,464 $46,000

Morton Ehrlich
Trustee and
Member, Audit and
Contract
Committees $17,464 $46,000

Richard G. Scheide
Trustee and
Member, Audit and
Contract
Committees $17,464 $46,500

David L. Grove
Trustee and
Member, Audit and
Contract
Committees $17,464* $46,500*

* Mr. Grove elected to defer all such compensation.

Aetna Variable Fund 15
<PAGE>

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS OF THE FUND

As of March 31, 1996, 190,452,559 (98%) 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 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, effective January 1, 1996. A prior investment
advisory agreement, 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) preparing 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 other 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 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 or 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

16 Aetna Variable Fund
<PAGE>

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, distribution 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 $11,939,379, $11,824,204 and
$12,573,737 respectively.

The service mark of Aetna Variable Fund and the name "Aetna" have been
adopted by the Variable 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, of 0.06%
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. 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 $2,080,230, $2,445,487 and $2,202,944,
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.

Aetna Variable Fund 17
<PAGE>

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, for effecting the
execution of trades for the Fund's portfolio and for negotiating any
brokerage commissions thereon. It is the policy of the Company to obtain the
best quality of execution available, giving attention to net price (including
commissions where applicable), execution capability (including the adequacy
of a firm's capital position), research and other services related to
execution; the relative priority given to these factors will depend on all of
the circumstances regarding a specific trade.

In implementing its trading policy, the Company may place the Fund's
portfolio transactions with such brokers or dealers and for execution in such
markets as, in the opinion of the Company, will lead to best overall quality
of execution for the Fund's portfolio.

The Company currently receives a variety of brokerage and research services
from brokerage firms in return for the execution by such brokerage firms of
trades in securities held by the Fund. These brokerage and research services
include, but are not limited to, quantitative and qualitative research
information and purchase and sale recommendations regarding securities and
industries, analyses and reports covering a broad range of economic factors
and trends, statistical data relating to the strategy and performance of the
Fund and other investment companies, services related to the execution of
trades in the Fund's securities and advice as to the valuation of securities.
The Company considers the quantity and quality of such brokerage and research
services provided by a brokerage firm along with the nature and difficulty of
the specific transaction in negotiating commissions for trades in the Fund's
securities.

Consistent with federal legislation, the Company may obtain such brokerage
and research services regardless of whether they are paid for (1) by means of
commissions, or (2) by means of separate, non- commission payments. The
Company's judgment as to whether and how it will obtain the specific
brokerage and research services will be based upon its analysis of the
quality of such services and the cost (depending upon the various methods of
payment which may be offered by brokerage firms) and will reflect the
Company's opinion as to which services and which means of payment are in the
long-term best interests of the Fund. The Fund has no present intention of
effecting any brokerage transactions in portfolio securities with the Company
or any affiliate of the Fund or the Company.

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 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.

For 1993, 1994, and 1995, the Fund paid brokerage commissions of $4,270,255,
$13,406,837 and $17,298,663 respectively.

For the fiscal year ended December 31, 1995, portfolio transactions in the
amount of $1,453,111,538 were directed to certain brokers because of research
services, of which commissions in the amount of $2,041,807 were paid with
respect to such transactions. No brokerage business was placed with any
brokers affiliated with ALIAC during the last three fiscal years.

18 Aetna Variable Fund
<PAGE>
DESCRIPTION OF SHARES

Aetna Variable Fund was originally established as a Maryland corporation in
1974 and was 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 nonassessable, 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. Participants who select the Fund for investment
through their VA Contract or VLI Policy are not the shareholders of the Fund.
The insurance company depositors of the separate accounts pass voting 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 held most recently 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.

Aetna Variable Fund 19
<PAGE>
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.

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 Firstar Trust Company ("Firstar"). 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 within seven days
after the redemption request is received in proper form by Firstar. Any
written request to redeem shares must bear the signatures of all the
registered holders of those shares. The signatures must be guaranteed by a
commercial bank, trust company or a member of a national securities exchange.
Firstar will, on request, explain any additional requirements for shares held
in the name of a corporation, partnership, trustee, guardian or in any other
representative capacity. However, the right to redeem Fund shares may be
suspended or payment therefore postponed for any period during which (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.

An open account is automatically set up and maintained for each shareholder
to facilitate the voluntary accumulation of Fund shares. The open account
system makes unnecessary the issuance and delivery of stock certificates,
thereby relieving shareholders of the responsibility of safekeeping. Through
the open account system, each shareholder is informed of his or her holdings
after any transaction affecting the number of shares he or she owns. Share
certificates will not be issued.

PRINCIPAL UNDERWRITER

The Company is the principal underwriter of the Fund pursuant to a contract
("Underwriting Agreement") between it and the Fund. The Underwriting Agreement
will remain in effect through December 1997 and may be continued annually
thereafter if approved annually by the Board of Trustees of the Fund or by a
vote of holders of a majority of the Fund's shares. The Underwriting Agreement
may be terminated at any time, by either party, without the payment of any
penalty, on sixty (60) days' written notice to the other party.

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 must 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.

20 Aetna Variable Fund
<PAGE>

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 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.

In general, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an
option with respect thereto (but only to the extent attributable to changes
in foreign currency exchange rates), and gain or loss recognized on the
disposition of a foreign currency forward contract, futures contract, option
or similar financial instrument, or of foreign currency itself, except for
regulated futures contracts or non-equity options subject to Code Section
1256, will generally be treated as ordinary income or loss.

For purposes of determining whether capital gain or loss recognized by the
Fund on the disposition of an asset is long-term or short-term, the holding
period of the asset may be affected if (i) the asset is used to close a
"short sale" (which includes for certain purposes the acquisition of a put
option) or is substantially identical to another asset so used, (ii) the
asset is otherwise held by the Fund as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Fund grants a
qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (iii) the asset is stock and the
Fund grants an in-the-money qualified covered call option with respect
thereto.

Aetna Variable Fund 21
<PAGE>
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (i) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.

Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option
written by the Fund will commence on the date it is written and end on the
date it lapses or the date a closing transaction is entered into.
Accordingly, the Fund may be limited in its ability to write options which
expire within three months and to enter into closing transactions at a gain
within three months of the writing of options.

Transactions that may be engaged in by the Fund (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes
and futures contracts) will be subject to special tax treatment as "Section
1256 contracts." Section 1256 contracts are treated as if they are sold for
their fair market value on the last day of the taxable year, even though a
taxpayer's obligations (or rights) under such contracts have not terminated
(by delivery, exercise, entering into a closing transaction or otherwise) as
of such date. Any gain or loss recognized as a consequence of the year-end
deemed disposition of Section 1256 contracts is taken into account for the
taxable year together with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. Any capital gain or loss for the taxable year with respect to Section
1256 contracts (including any capital gain or loss arising as a consequence
of the year-end deemed sale of such contracts) is generally treated as 60%
long-term capital gain or loss and 40% short-term capital gain or loss. The
Fund, however, may elect not to have this special tax treatment apply to
Section 1256 contracts that are part of a "mixed straddle" with other
investments of the Fund that are not Section 1256 contracts. The IRS has held
in several private rulings that gains arising from Section 1256 contracts
will be treated for purposes of the Short-Short Gain Test as being derived
from securities held for not less than three months if the gains arise as a
result of a constructive sale under Code Section 1256, provided that the
contract is actually held by the Fund uninterrupted for a total of at least
three months.

Because only a few regulations regarding the treatment of swap agreements and
other financial derivatives have been issued, the tax consequences of
transactions in these types of instruments are not always entirely clear. The
Fund intends to account for derivatives transactions in a manner deemed by it
to be appropriate, but the Internal Revenue Service might not necessarily
accept such treatment. If it did not, the status of a Fund as a regulated
investment company and/or its compliance with the diversification requirement
under Code section 817(h) might be affected. The Fund intends to monitor
developments in this area. Certain requirements that must be met under the
Code in order for the Fund to qualify as a regulated investment company may
limit the extent to which it will be able to engage in swap agreements.

Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess
of net long-term capital gain over net short-term capital loss) for any
taxable year, to elect (unless it has made a taxable year election for excise
tax purposes as discussed below) to treat all or any part of any net capital
loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.

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,

22 Aetna Variable Fund
<PAGE>
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, 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.

Aetna Variable Fund 23
<PAGE>

Fund Distributions
The Fund anticipates distributing substantially all of its investment company
taxable income for each taxable year. Such distributions will be taxable to
shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they may qualify for the dividends-received deduction for
corporate shareholders to the extent discussed below.

The Fund may either retain or distribute to shareholders its net capital gain
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 shareholders as long-term capital gain,
regardless of the length of time a shareholder has held its shares or whether
such gain was recognized by the Fund prior to the date on which the
shareholder acquired his shares. All distributions paid to ALIAC or its
affiliates, 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.

Ordinary income dividends paid by the Fund with respect to a taxable year may
qualify for the dividends- received deduction generally available to
corporations (other than corporations, such as S corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and
the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable
year and if the shareholder meets eligibility requirements in the Code. A
dividend received by the Fund will not be treated as a qualifying dividend
(1) if it has been received with respect to any share of stock that the Fund
has held for less than 46 days (91 days in the case of certain preferred
stock), excluding for this purpose under the rules of Code Section 246(c) (3)
and (4): (i) any day more than 45 days (or 90 days in the case of certain
preferred stock) after the date on which the stock becomes ex-dividend and
(ii) any period during which the Fund has an option to sell, is under a
contractual obligation to sell, has made and not closed a short sale of, is
the grantor of a deep-in-the-money or otherwise nonqualified option to buy,
or has otherwise diminished its risk of loss by holding other positions with
respect to, such (or substantially identical) stock; (2) to the extent that
the Fund is under an obligation (pursuant to a short sale or otherwise) to
make related payments with respect to positions in substantially similar or
related property; or (3) to the extent the stock on which the dividend is
paid is treated as debt-financed under the rules of Code Section 246A.
Moreover, the dividends-received deduction for a corporate shareholder may be
disallowed or reduced (i) if the corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of the Fund or (ii) by
application of Code Section 246(b) which in general limits the
dividends-received deduction.

Alternative Minimum Tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate
of 28% for noncorporate taxpayers and 20% for corporate taxpayers on the
excess of the taxpayer's alternative minimum taxable income ("AMTI") over an
exemption amount. In addition, under the Superfund Amendments and
Reauthorization Act of 1986, a tax is imposed for taxable years beginning
after 1986 and before 1996 at the rate of 0.12% on the excess of a corporate
taxpayer's AMTI (determined without regard to the deduction for this tax and
the AMT net operating loss deduction) over $2 million. For purposes of the
corporate AMT and the environmental super fund tax (which are discussed
above), the corporate dividends-received deduction is not itself an item of
tax preference that must be added back to taxable income or is otherwise
disallowed in determining a corporation's AMTI. However, corporate
shareholders will generally be required to take the full amount of any
dividend received from the Fund into account (without a dividends-received
deduction) in determining its adjusted current earnings, which are used in
computing an additional corporate preference item

24 Aetna Variable Fund
<PAGE>
(i.e., 75% of the excess of a corporate taxpayer's adjusted current earnings
over its AMTI (determined without regard to this item and the AMT net
operating loss deduction)) includable in AMTI.

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.

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 and its affiliates will be reinvested in
additional shares. Distributions to other shareholders will be reinvested in
additional Fund shares unless Firstar Trust Company, the Fund's transfer
agent, is otherwise notified in writing prior to the record date for such
distributions.

Shareholders receiving a distribution in the form of either cash or
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
Shareholders 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.

Aetna Variable Fund 25
<PAGE>
NET ASSET VALUE

Securities of the Fund are generally valued by independent pricing services.
Equity securities of the Fund which are traded on a registered securities
exchange are based on the last sale price or, if there has been no sale that
day, at the mean of the last bid and asked price on the exchange where the
security is principally traded. Securities traded over the counter are valued
at the mean of the last bid and asked price if current market quotations are
not readily available. 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. 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. Long-term debt securities traded on a national
securities exchange are valued at the mean of the last bid and asked price of
such securities obtained from a broker who is a market-maker in the
securities or a service providing quotations based upon the assessment of
market-makers in those securities.

Call options written by the Fund and put options are valued at the mean of
the last bid and asked price on the principal exchange where the option is
traded. Stock index futures contracts and interest rate futures contracts are
valued daily at a settlement price based on rules of the exchange where the
futures contract is primarily traded.

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.

26 Aetna Variable Fund
<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
========

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