AETNA GET FUND
Series C Shares
151 Farmington Avenue, Hartford, CT 06156-8962, 1-800-525-4225
Prospectus dated: September 3, 1996
Aetna GET Fund (Trust or Fund) is a diversified, open-end management investment
company organized as a Massachusetts Business Trust and authorized to issue
multiple series of shares. Series C shares will be offered from September 16,
1996 through December 16, 1996, the "Offering Period." Series C will be offered
as a funding option under certain variable annuity contracts (Contracts) issued
by Aetna Life Insurance and Annuity Company.
This Prospectus sets forth concisely the information about the Trust and Series
C that you ought to know before investing. Additional information about the
Trust and Series C is contained in a Statement of Additional Information
(Statement) dated September 3, 1996, which has been filed with the Securities
and Exchange Commission (Commission) and is incorporated herein by reference.
The Statement is available, without charge, by writing to the Trust at the
address listed above or by calling 1-800-525-4225.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, the securities of Series C 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 carefully before investing and retain it for future
reference.
TABLE OF CONTENTS
Page
SUMMARY ......................................................................
DESCRIPTION OF SERIES C........................................................
Investment Objective..................................................
Investment Policy.....................................................
Special Considerations................................................
Other Considerations..................................................
Equity Component......................................................
Fixed Component.......................................................
INVESTMENT TECHNIQUES, RISK FACTORS AND OTHER CONSIDERATIONS...................
General Considerations................................................
Asset-Backed Securities...............................................
Options, Futures and Other Derivative Instruments.....................
High Risk, High-Yield Securities......................................
Industry Concentration................................................
Foreign Securities....................................................
Mortgage-Backed Securities............................................
Repurchase Agreements.................................................
Securities Lending....................................................
Borrowing.............................................................
Illiquid and Restricted Securities....................................
Depositary Receipts...................................................
Variable Rate Instruments, When-Issued and Delayed Delivery
Transactions.......................................................
Proprietary Software..................................................
Portfolio Turnover....................................................
MANAGEMENT OF THE FUND.........................................................
Trustees .............................................................
Investment Adviser....................................................
Subadviser............................................................
Portfolio Management and Performance..................................
Expenses and Trust Administration.....................................
GENERAL INFORMATION............................................................
Declaration of Trust..................................................
Capital Stock.........................................................
Shareholder Meetings..................................................
Voting Rights.........................................................
DISTRIBUTIONS AND TAX STATUS...................................................
SALE AND REDEMPTION OF SHARES..................................................
NET ASSET VALUE................................................................
SUMMARY
1. Investment Objective
The goal of Series C is to achieve maximum total return without
compromising a minimum targeted rate of return by participating in favorable
equity market performance during the Guaranteed Period from December 17, 1996
through December 16, 2001, the Maturity Date. (See "Description of Series C-
Investment Objective.")
2. Investment Strategy
The Series C assets will be invested entirely in money market instruments
prior to December 17, 1996. After that date, the assets will be allocated
between equities and fixed income securities. The equities will consist
principally of common stocks, preferred stocks and convertible securities. The
fixed income securities will consist primarily of short-to-intermediate-term
debt securities. Series C may also invest in other types of equity securities
and debt securities and in options, futures and other derivative instruments.
(See "Description of Series C - Investment Policy.")
3. Risks
- The performance of Series C depends on the value of its holdings. Stock
values fluctuate in response to the activities of individual companies, and
general market and economic conditions. In the short term, stock prices can
fluctuate dramatically in response to these factors.
- Bond values fluctuate based on changes in interest rates, and in the
credit quality of the issuer. Lower-rated bonds may be particularly sensitive to
these factors.
- Investments in foreign securities involve risks that are in addition to
those of U.S. investments, including increased political and economic risk, as
well as exposure to currency fluctuations.
- Derivative instruments can involve greater risk and may be less liquid
and more volatile than conventional instruments.
- Consistent with the minimum targeted rate of return, a portion of the
assets of Series C is invested in fixed income securities; therefore Series C
may not participate as fully in upward equity market movements as other equity
funds.
(See "Investment Techniques, Risk Factors and Other Considerations.")
4. Investment Adviser and Sub-Adviser
Aetna Life Insurance and Annuity Company ("ALIAC") is the Investment
Adviser for the Trust. ALIAC has engaged Aeltus Investment Management, Inc.
("Aeltus") as the subadviser to Series C. ALIAC and Aeltus are indirect
wholly-owned subsidiaries of Aetna Inc. ("Aetna") which, with affiliated
companies, is one of the world's largest insurance and financial services
organizations. As of June 30, 1996, ALIAC managed over $22 billion in assets and
Aeltus managed over $11 billion in assets. (See "Management of the Fund -
Investment Adviser" and "Subadviser.")
DESCRIPTION OF SERIES C
Investment Objective
Series C seeks to achieve maximum total return without compromising a minimum
targeted rate of return (Targeted Return) by participating in favorable equity
market performance during the "Guaranteed Period" from December 17, 1996 through
December 16, 2001, the "Maturity Date" of Series C. To achieve this objective,
the Series C assets (Assets) will be allocated beginning December 17, 1996,
between equities and fixed income securities in a changing mix. Prior to
December 17, 1996, the Assets will be invested entirely in money market
instruments. Assuming interest rates on December 17, 1996 are identical to
interest rates as of the date of this Prospectus, then the Assets will be
allocated approximately 65% to equities and 35% to fixed income securities at
the beginning of the Guaranteed Period.
THE MINIMUM TARGETED RATE OF RETURN (TARGETED RETURN) IS 2.50% PER YEAR OVER THE
GUARANTEED PERIOD. THERE IS NO ASSURANCE THAT THE MINIMUM TARGETED RATE OF
RETURN WILL BE ACHIEVED. PLEASE REFER TO YOUR CONTRACT PROSPECTUS FOR ADDITIONAL
INFORMATION ON ALIAC AND THE ALIAC GUARANTEE.
ALIAC RESERVES THE RIGHT TO REFUSE ADDITIONAL DEPOSITS DURING THE OFFERING
PERIOD IF THE ASSETS EXCEED $400 MILLION. FURTHERMORE, IF SERIES C HAS LESS THAN
$75 MILLION OF ASSETS BY THE END OF THE OFFERING PERIOD, ALIAC RESERVES THE
RIGHT TO DISCONTINUE SERIES C. ALIAC ALSO RESERVES THE RIGHT TO CONTINUE TO
ACCEPT DEPOSITS DURING THE GUARANTEED PERIOD (SEE "OTHER CONSIDERATIONS").
Series C has adopted an investment objective which is a fundamental policy and
may not be changed without the approval by holders of a majority of outstanding
shares. There can be no assurance that Series C will meet its investment
objective but it will follow the investment approach described in the Investment
Policy section. Series C is subject to additional investment restrictions
described in the Statement of Additional Information (Statement). To the extent
those restrictions are fundamental policies, they cannot be changed without
the vote of a majority of outstanding shares.
Investment Policy
Prior to December 17, 1996, the Assets will be invested entirely in money market
instruments. Beginning December 17, 1996, ALIAC will allocate Series C Assets
daily between a portfolio consisting primarily of equities and one consisting of
fixed income securities (Equity Component and Fixed Component, respectively) in
proportions that will not compromise Series C's minimum targeted rate of return.
ALIAC uses proprietary computer programs on a daily basis to determine the
percentage of Assets which may be allocated between the Fixed Component and the
Equity Component. Generally, as the value of the Equity Component rises, more
Assets are allocated to the Equity Component. As the value of the Equity
Component declines, more Assets are allocated to the Fixed Component.
ALIAC, with the assistance of the proprietary software programs, reallocates
assets as needed between the Equity Component and the Fixed Component so that if
the value of the Equity Component were to decline by 30% in a single day, a
complete reallocation to the Fixed Component might occur to ensure that the
minimum targeted rate of return would be achieved at the end of the Guaranteed
Period. While the performance of the Equity Component may be better or worse
than the performance of major stock market indices such as the Dow Jones
Industrial Average and the Standard and Poor's 500 Stock Index, neither of those
indices has declined as much as 30% in a single day since 1929. There can be no
assurance that a decline of 30% or more will not occur during the Guaranteed
Period. (For a further description of the asset allocation process, please see
"The Asset Allocation Process" in the Statement.)
Special Considerations
If during the guaranteed period of Series C the equity markets rise, the assets
may become largely invested in the Equity Component, as the likelihood of not
realizing the minimum targeted rate of return would be low. CONVERSELY, IF
DURING THIS SAME PERIOD THE EQUITY MARKETS EXPERIENCED A GENERAL DECLINE, THE
ASSETS MAY BECOME LARGELY INVESTED IN THE FIXED COMPONENT IN ORDER TO INCREASE
THE LIKELIHOOD OF ACHIEVING THE MINIMUM TARGETED RATE OF RETURN AT THE MATURITY
DATE.
The amount of Assets invested in the Fixed Component will increase or decrease
depending upon a number of factors, including but not limited to the current
value of the Equity Component. Use of the Fixed Component reduces Series C's
ability to participate as fully in upward equity market movements, and therefore
represents some loss of opportunity, or opportunity cost, compared to a fund
which is fully invested in equities. In addition, a major decline in the equity
markets, particularly a decline well before the Maturity Date, could cause the
Assets to be fully invested in the Fixed Component. Were this to happen, it is
unlikely that there would be a meaningful reallocation of the Assets into the
Equity Component, even if there were significant upward movement in the equity
markets.
Other Considerations
If Series C Assets do not reach $75 million at the end of the Offering Period,
the Board of Trustees reserves the right not to operate Series C in accordance
with its Investment Objectives and Policies. In that event, ALIAC will notify
Contract owners within 15 days after the end of the Offering Period that Series
C is being discontinued and they will have 45 days following the end of the
Offering Period to transfer their money from Series C. If at the end of the 45
day period, no election is made, all Series C Contract values will be
transferred to Aetna Variable Encore Fund, a money market fund. Please note:
Assets will be invested in money market instruments during this 45 day period.
In the event Assets reach or exceed $400 million during the Offering Period,
ALIAC reserves the right to prohibit future deposits to Series C. If this
decision is made, ALIAC will notify Series C's distributors that deposits
received more than 10 calendar days after such notification has been sent will
be returned to the distributor. Only those deposits post-marked or received on
or before the date of notification will be accepted. In the event future
deposits are prohibited, the Guaranteed Period will still not commence until its
scheduled date of December 17, 1996.
In addition, ALIAC reserves the right to continue to accept additional deposits,
including both new annuity monies and internal variable annuity transfers,
during the Guaranteed Period and to discontinue these deposits at its discretion
at any time. In the event of any extraordinary or unusual market conditions such
as a sudden, abrupt drop in the equity market and/or abrupt rise in the bond
market that, in ALIAC's opinion, could jeopardize the attainment of the Targeted
Return, ALIAC could immediately cease to accept additional deposits into the
Fund and would notify distributors and existing variable annuity customers of
this decision immediately. If the decision to cease accepting additional
deposits is made, ALIAC would accept into the Fund only those deposits which had
been received in good order and deposited into the separate account prior to the
decision to disallow additional deposits. Conversely, during normal market
conditions so determined by ALIAC, ALIAC will notify its distributors and
existing variable annuity customers of its decision to close the Fund to new
deposits and will allow additional deposits received no more than 10 days from
the date of notification into the Fund provided market conditions remain normal
during these 10 days. Once the decision to close the Fund to new deposits has
been made, the Fund may not reopen for new deposits.
Equity Component
With the Equity Component, ALIAC seeks to maximize total return through
investment in a diversified portfolio of common and preferred stocks and
securities convertible into common and preferred stocks believed to offer
above-average growth potential. It is anticipated that capital appreciation and
investment income will both be major factors in achieving total return.
The Equity Component may also invest to a limited extent in non-convertible
preferred stocks, debt securities, rights and warrants. The Equity Component may
engage, within specified limits, in the lending of portfolio securities, in the
writing and repurchase of covered call options, in the buying and disposal of
covered put options, in the buying and selling of stock index futures contracts
and options thereon, and in the buying and selling of equity-based stock index
options for hedging purposes. The Equity Component may maintain a moderate
reserve of cash and high-grade short-term debt securities and may invest in
foreign securities and when-issued and delayed- delivery securities. When
near-term equity market prospects are deemed unfavorable, the Equity Component
may place a larger proportion of its investments in high-grade, short-term debt
instruments, convertible securities, and common stocks of companies in what are
perceived to be relatively stable industries. Both the Equity and Fixed
Components may borrow money from a bank for temporary or emergency purposes.
Fixed Component
The Fixed Component seeks to provide values which, together with the value of
the Equity Component at any given time, will enable Series C to achieve the
Targeted Return at the Maturity Date. The Fixed Component will be managed so
that its financial characteristics will, at any point in time, closely resemble
those of a portfolio of zero coupon bonds which mature on the Maturity Date.
Because the Fixed Component can be invested in a variety of debt securities, as
described below, the Fixed Component will provide somewhat greater opportunities
and risks than if invested solely in United States Government securities.
However, ALIAC will not make or retain investments for the Fixed Component which
appear in ALIAC's judgment to present significant credit risks.
The Fixed Component of Series C will at any time consist primarily of short-to
intermediate-term debt securities, with the length to maturity decreasing as
Series C nears its Maturity Date. Through investment in a diversified portfolio
of such debt securities, Series C seeks to maximize total return for the Fixed
Component.
The Fixed Component will primarily consist of:
(1) Corporate obligations which are rated at the time of purchase within
the four highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa, A
or Baa) or Standard & Poor's Corporation (AAA, AA, A or BBB);
(2) Securities of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities;
(3) Obligations of, or guaranteed by, national or state banks or bank
holding companies, which either are rated in the four highest ratings assigned
by Fitch Investors Services, Inc. (AAA, AA, A or BBB), or, if not so rated, are
considered by ALIAC to have investment quality comparable to securities which
may be purchased under (1) above;
(4) Domestic bank certificates of deposit of banks having assets (as most
recently reported) in excess of one billion dollars;
(5) Domestic bankers' acceptances eligible for discounting at the Federal
Reserve System; and
(6) Commercial paper rated A-1 by Standard & Poor's Corporation and P-1 by
Moody's Investors Service, Inc. Where yield disparities in the market warrant
it, Series C may acquire commercial paper rated A-2 or P-2 so long as such
investments do not exceed 10% of the total assets of the Fixed Component.
Both the Fixed and Equity Components may invest in debt securities with equity
features, including convertibles, and straight debt securities rated below
BBB/Baa but not lower than B, which are high risk, high yield securities or
"junk bonds." These securities will not exceed 5% of Series C's total Assets.
For further information on high risk, high yield securities please see
"Investment Techniques, Risk Factors and Other Considerations."
The Fixed Component may also engage in the lending of portfolio securities and
may purchase debt securities on a when-issued basis. Repurchase agreements with
domestic banks and broker-dealers meeting creditworthiness standards approved by
the Trust's Board of Trustees may also be considered for investment.
The relative size of the Fixed Component's investments in any grade or type of
securities will vary from time to time depending on a number of factors,
including yields for such securities, their market supply and general economic
outlook. There can be no assurance that the Fixed Component will show a positive
return.
INVESTMENT TECHNIQUES, RISK FACTORS AND OTHER CONSIDERATIONS
General Considerations
The different types of securities purchased and investment techniques used by
Series C involve varying amounts of risk. For example, equity securities are
subject to a decline in the stock market or in the value of the issuer, and
preferred stocks have price risk and some interest rate and credit risk. The
value of debt securities may be affected by changes in general interest rates
and in the creditworthiness of the issuer. Debt securities with longer
maturities (for example, over ten years) are generally more affected by changes
in interest rates and provide less price stability than securities with short
term maturities (for example, one to ten years). Also, on each debt security,
the risk of principal and interest default is greater with higher-yielding,
lower-grade securities. High risk, high-yield securities may provide a higher
return but with added risk. In addition, foreign securities have various risks,
including currency risk. Some of the risks involved in the securities acquired
by Series C are discussed in this section. Additional discussion is contained
in the Statement.
Asset-Backed Securities
Series C may purchase securities collateralized by a specified pool of assets,
including, but not limited to, credit card receivables, automobile loans, home
equity loans, mobile home loans, or recreational vehicle loans. These securities
are subject to prepayment risk. In periods of declining interest rates,
reinvestment of prepayment proceeds would be made at lower and less attractive
interest rates.
Options, Futures and Other Derivative Instruments
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).
Derivatives include, but are not limited to, futures, options and forward
contracts.
Series C may engage in various strategies using derivatives including managing
its exposure to changing interest rates, securities prices and currency exchange
rates (collectively known as hedging strategies), or, with respect to the Equity
Component, increasing its investment return. For purposes other than hedging,
the Equity Component of Series C will invest no more than 5% of the total assets
of the Equity Component in derivatives which at the time of purchase are
considered to involve high risk to Series C.
Series C may buy and sell options contracts including index options and options
on foreign securities. There is no limit on the amount of Series C's total
assets that may be subject to call options; however, writing a put option
requires the segregation of liquid assets to cover the contract. Series C will
not write a put option if it will require more than 50% of the Series' net
assets to be segregated to cover the put obligation nor will it write a put
option if after it is written more than 3% of the Series' assets would consist
of put options.
Investments in futures contracts and related options with respect to foreign
currencies, fixed income securities and foreign stock indices may also be made
by Series C. Although these investments are primarily made to hedge against
price fluctuations, in some cases, the Equity Component of Series C may buy a
futures contract for the purpose of increasing its exposure in a particular
asset class or market segment, which strategy may be considered speculative.
This strategy is typically used to manage better portfolio transaction costs.
With respect to futures contracts or related options that may be entered into
for speculative purposes, the aggregate initial margin for futures contracts and
premiums for options will not exceed 5% of the Equity Component of Series C's
net assets, after taking into account realized profits and unrealized losses on
such futures contracts.
Series C may invest in forward contracts on foreign currency ("forward exchange
contracts"). These contracts may involve "cross-hedging," a technique in which
the Series hedges with currencies which differ from the currency in which the
underlying asset is denominated.
Series C may also invest in interest rate swap transactions. Interest rate swaps
are subject to credit risks (if the other party fails to meet its obligations)
and also interest rate risks, because Series C could be obligated to pay more
under its swap agreements than it receives under them as a result of interest
rate changes.
Derivatives can be volatile investments and involve certain risks. Series C may
be unable to limit its 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 futures or forward 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 Series C.
Leverage may exaggerate losses of principal. The amount of gains or losses on
investments in futures contracts depends on ALIAC's ability to predict correctly
the direction of stock prices, interest rates and other economic factors.
The use of forward exchange contracts may reduce the gain that would otherwise
result from a change in the relationship between the U.S. dollar and a foreign
currency. In an attempt to limit its risk in forward exchange contracts, Series
C limits its exposure to the amount of its assets denominated in the foreign
currency being cross-hedged. Cross-hedging entails a risk of loss on both the
value of the security that is the basis of the hedge and the currency contract
that was used in the hedge. These risks are described in greater detail in the
Statement.
Options are used to minimize principal fluctuation or to generate additional
premium income but they do involve risks. Writing covered call options, for
example, involves the risk of not being able to effect closing transactions at a
favorable price or to participate in the appreciation of the underlying
securities. Purchasing covered put options involves the risk of losing the
entire purchase price of the option.
High Risk, High-Yield Securities
Series C may invest in high risk, high-yield securities, often called "junk
bonds". These securities tend to offer higher yields than investment-grade bonds
because of the additional risks associated with them. These risks include: a
lack of liquidity; an unpredictable secondary market; a greater likelihood of
default; increased sensitivity to difficult economic and corporate developments;
call provisions which may adversely affect investment returns; and loss of the
entire principal and interest. Although junk bonds are high risk investments,
ALIAC may purchase these securities if they are thought to offer good value.
This may happen if, for example, the rating agencies have, in ALIAC's
opinion, misclassified the bonds or overlooked the potential for the issuer's
enhanced creditworthiness.
Industry Concentration
Series C will not concentrate its investments in any one industry, except that
Series C may invest up to 25% of its total assets in securities issued by
companies principally engaged in any one industry. For purposes of this
restriction, finance companies will be classified as separate industries
according to the end users of their services, such as automobile finance,
computer finance and consumer finance. This limitation will not apply to
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities.
Additionally, Series C will not invest more than 5% of its total assets in the
securities of any one issuer (excluding securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) or purchase more than 10% of
the outstanding voting securities of any one issuer. This restriction applies
only to 75% of Series C's total assets. See the Statement for additional
restrictions.
Foreign Securities
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 foreign stock exchanges, brokers and listed companies; possible
difficulty in obtaining and enforcing judgments against foreign entities;
adverse foreign political and economic developments; different accounting
procedures and auditing standards; the possible imposition of withholding taxes
on interest income payable on securities; the possible seizure or
nationalization of foreign assets; the possible establishment of exchange
controls or other foreign laws or restrictions which might adversely affect the
payment and transferability of principal, interest and dividends on securities;
higher transaction costs; possible settlement delays; and less publicly
available information about foreign issuers.
Mortgage-Backed Securities
Series C may invest in mortgage-backed and other pass-through securities.
Payments of interest and principal on these securities may be guaranteed by an
agency or instrumentality of the U.S. government such as the Government National
Mortgage Association (GNMA), the Federal Home Loan Mortgage Corporation (FHLMC)
and the Federal National Mortgage Association (FNMA). These securities represent
part ownership of a pool of mortgage loans and principal is scheduled to be paid
back by the borrower over the length of the loan rather than returned in a lump
sum at maturity. Series C may also invest in mortgage pass-through securities
backed by pools of conventional fixed-rate or adjustable-rate mortgage loans. In
addition, Series C may invest in collateralized mortgage obligations (CMOs) and
securities issued by real estate mortgage investment conduits (REMICs).
Mortgage-backed securities are also subject to the same prepayment risk as
asset-backed securities.
Repurchase Agreements
Under a repurchase agreement, Series C may acquire a debt instrument for a
relatively short period subject to an obligation by the seller to repurchase and
by Series C to resell the instrument at a fixed price and time. Series C may
enter into repurchase agreements with domestic banks and broker-dealers. Such
agreements, although fully collateralized, involve the risk that the seller of
the securities may fail to repurchase them. In that event, Series C may incur
costs in liquidating the collateral or a loss if the collateral declines in
value. If the default on the part of the seller is due to insolvency and the
seller initiates bankruptcy proceedings, the ability of Series C to liquidate
the collateral may be delayed or limited. The Board of Trustees has established
credit standards for repurchase transactions entered into by Series C.
Securities Lending
Series C 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 Series C's total
assets. Series C will not lend portfolio securities to affiliates. Though fully
collateralized, lending portfolio securities involves certain risks, including
the possibility that Series C may incur costs in liquidating the collateral or a
loss if the collateral declines in value. 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.
Borrowing
Series C may borrow money from banks, but only for temporary or emergency
purposes in an amount up to 15% of the value of Series C's total assets
(including the amount borrowed), valued at the lesser of cost or market, less
liabilities (not including the amount borrowed), at the time the borrowing is
made. When borrowings exceed 5% of Series C's total assets, Series C will not
make additional investments.
Series C does not intend to borrow for leveraging purposes. It has the authority
to do so, but only if, after the borrowing, the value of Series C's net assets,
including proceeds from the borrowings, is equal to at least 300% of all
outstanding borrowings. Leveraging can increase the volatility of Series C since
it exaggerates the effects of changes in the value of the securities purchased
with the borrowed funds.
Illiquid and Restricted Securities
Series C may invest up to 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 ordinary course of business
without taking a materially reduced price. In addition, Series C may invest in
securities that are subject to legal or contractual restrictions on resale,
including securities purchased under Rule 144A and Section 4(2) of the
Securities Act of 1933.
Because of the absence of a trading market for illiquid and certain restricted
securities, it may take longer to liquidate these securities than it would
unrestricted, liquid securities. Series C may realize less than the amount
originally paid by Series C for the security. The Board of Trustees has
established a policy to monitor the liquidity of such securities.
Depositary Receipts
Series C can invest in depositary receipts which are negotiable certificates
evidencing ownership of shares of a non-U.S. corporation, government, or foreign
subsidiary of a U.S. corporation. A U.S. bank typically issues depositary
receipts, which are backed by ordinary shares that remain on deposit with a
custodian bank in the issuer's home market. A depositary receipt can either be
"sponsored" by the issuing company or established without the involvement of the
company, which is referred to as "unsponsored." 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.
Series C will generally 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 foreign securities for purposes of Series
C's investment limitation concerning investment in foreign securities.
See the Statement for more information.
Variable Rate Instruments, When-Issued and Delayed Delivery Transactions
A variable rate instrument is an instrument which provides for the adjustment of
its interest rate on set dates and which can reasonably be expected to have a
market value close to par value. A when-issued transaction is one that is made
as of a current date, but conditioned on the actual issuance of a security that
is authorized but not yet issued. A delayed-delivery transaction is one where
both parties agree that the security will be delivered and the transaction
completed at a future date.
When-issued, delayed-delivery and variable rate instruments may be subject to
liquidity risks and risks of loss of principal due to market fluctuations.
Series C will establish a segregated account in which it will maintain liquid
assets in an amount at least equal to Series C's commitments to purchase
securities on a when-issued or delayed-delivery basis. For more information
about these securities, see the Statement.
Proprietary Software
The proprietary software programs will consider factors such as current interest
rates, estimated transaction costs, time to Maturity Date and market volatility
based on experience and historical market performance to determine the Asset mix
between the Equity and Fixed Components. This software is not used to select
particular securities or to predict market performance.
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. Although Series C does not purchase securities with the intention of
profiting from short-term trading, it may buy and sell securities when ALIAC (or
Aeltus) believes such action is advisable. It is anticipated that the average
annual turnover rate of Series C may exceed 125%. Turnover rates in excess of
125% may result in higher transaction costs (which are borne directly by Series
C) and a possible increase in short-term capital gains (or losses). See "Tax
Status" in the Statement.
MANAGEMENT OF THE FUND
Trustees
The operations of Series C are managed under the direction of the Board of
Trustees (Trustees). The Trustees set broad policies for Series C. Information
about the Trustees of the Trust is found in the Statement.
Investment Adviser
ALIAC serves as the Investment Adviser for Series C. ALIAC is a Connecticut
insurance corporation with its principal offices at 151 Farmington Avenue,
Hartford, Connecticut 06156, and is registered with the SEC as an investment
adviser. As of June 30, 1996, ALIAC managed over $22 billion in assets. ALIAC is
an indirect wholly-owned subsidiary of Aetna Retirement Services, Inc., which is
in turn an indirect wholly-owned subsidiary of Aetna Inc.
Under the terms of the Investment Advisory Agreement between the Trust and ALIAC
with respect to Series C, ALIAC, subject to the supervision of the Trustees, is
obligated to manage and oversee the Trust's day-to-day operations and to manage
the investments of Series C.
The Investment Advisory Agreement gives ALIAC broad latitude in selecting
securities for Series C subject to the Trustees' oversight. Under the Investment
Advisory Agreement, ALIAC may delegate to a subadviser its functions in
managing the investments of Series C, subject to ALIAC's oversight. The
Investment Advisory Agreement allows ALIAC to place trades through brokers of
its choosing and to take into consideration the quality of the brokers' services
and execution, as well as services such as research, providing equipment to the
Trust, or paying Trust expenses, in setting the amount of commissions paid to a
broker. ALIAC will only use these commissions for services and expenses to the
extent authorized by applicable law and by the rules and regulations of the SEC.
ALIAC receives a monthly fee from Series C of .60% of the average daily net
assets of Series C during the Guaranteed Period and of .25% of the average daily
net assets of Series C during the Offering Period.
Under the Investment Advisory Agreement, ALIAC has agreed to reduce its fee or
reimburse Series C if the expenses borne by Series C would exceed the expense
limitations of any jurisdiction in which Series C's shares are qualified for
sale. ALIAC is not obligated to reimburse Series C for any expenses which exceed
the amount of its advisory fee for that year. The Investment Advisory Agreement
also provides that ALIAC is responsible for all of its own costs including costs
of ALIAC's personnel required to carry out its investment advisory duties.
Subadviser
The Fund and ALIAC have engaged Aeltus as Subadviser of Series C of the Fund.
Aeltus is a Connecticut corporation with its principal offices located at 242
Trumbull Street, Hartford, Connecticut 06103-1205. Aeltus is an indirect
wholly-owned subsidiary of Aetna Retirement Services, Inc., which is in turn an
indirect wholly-owned subsidiary of Aetna Inc. Aeltus is registered as an
investment adviser with the SEC.
Under the Subadvisory Agreement, Aeltus is responsible for managing the assets
of Series C of the Fund in accordance with Series C's investment objective and
policies subject to the supervision of ALIAC, the Fund and the Fund's Trustees.
Aeltus determines what securities and other instruments are purchased and sold
by Series C of the Fund and handles certain related accounting and
administrative functions, including determining Series C's net asset value on a
daily basis and preparing and providing such reports, data and information as
ALIAC or the Trustees request from time to time.
ALIAC has overall responsibility for monitoring the investment program
maintained by Aeltus for compliance with applicable laws and regulations,
and Series C's investment objective and policies.
The Subadvisory Agreement gives Aeltus broad latitude in selecting securities
for Series C subject to the ALIAC's oversight. The Agreement also allows Aeltus
to place trades through brokers of its choosing and to take into consideration
the quality of the brokers' services and execution, as well as services such as
research and providing equipment or paying Trust expenses, in setting the amount
of commissions paid to a broker. The use of research and expense reimbursements
in determining and paying commissions is referred to as "soft dollar" practices.
Aeltus will only use soft dollars for services and expenses to the extent
authorized under the Investment Advisory Agreement, but only as authorized by
applicable law and the rules and regulations of the SEC.
The Subadvisory Agreement provides that ALIAC will pay Aeltus a fee at an annual
rate of up to .375% of the average daily net assets of Series C. This fee is not
charged back to, or paid by, Series C; it is paid by ALIAC out of its own
resources, including fees and charges it receives from or in connection with
Series C.
The Subadvisory Agreement requires Aeltus to reduce its fee if ALIAC is required
to reduce its fee under the Investment Advisory Agreement. ALIAC has agreed to
reduce its fee or reimburse Series C if the expenses borne by Series C would
exceed the expense limitations of any jurisdiction in which Series C's shares
are qualified for sale. ALIAC would not be obligated to reimburse Series C for
any expenses which exceed the amount of its advisory fee for that year. The
Subadvisory Agreement obligates Aeltus to reduce its fee by approximately 60% of
the amount of ALIAC's fee reduction.
Portfolio Management and Performance
The following individuals are primarily responsible for the day-to-day
management of Series C.
Geoffrey A. Brod will be responsible for managing the Equity Component of Series
C. Mr. Brod, Vice President, Aeltus, has over 30 years experience in
quantitative applications and has over 9 years of experience in equity
investing. Mr. Brod has been with Aetna since 1966.
Jeanne Wong-Boehm will be responsible for managing the Fixed Component of Series
C. Ms. Wong-Boehm, Managing Director, Aeltus, joined Aetna in 1983 as a fixed
income portfolio analyst, and shortly thereafter assumed portfolio
responsibility for various general account segments within the Aetna group of
companies.
GET Series "A" Performance
The following shows in tabular form the graph which appears here:
(000s omitted)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GET A S&P 500 Lehman Aggregate
Aug - 87 10.01 10.37 9.95
Nov - 87 10.11 7.30 10.16
Feb - 88 11.20 8.57 10.79
May - 88 11.25 8.47 10.56
Aug - 88 11.05 8.53 10.79
Nov - 88 11.42 9.01 11.10
Feb - 89 11.98 9.59 11.19
May - 89 13.15 10.74 11.78
Aug - 89 14.14 11.87 12.21
Nov - 89 14.26 11.79 12.69
Feb - 90 13.86 11.40 12.62
May - 90 15.12 12.53 12.88
Aug - 90 14.14 11.28 13.09
Nov - 90 14.39 11.38 13.66
Feb - 91 16.05 13.08 14.16
May - 91 16.73 14.00 14.50
Aug - 91 16.78 14.32 15.01
Nov - 91 16.66 13.70 15.62
Feb - 92 17.94 15.17 15.97
May - 92 18.15 15.39 16.30
Aug - 92 18.17 15.45 17.03
Nov - 92 18.51 16.22 17.01
</TABLE>
The above graph reflects the results of a $10,000 investment in Series A of the
Aetna GET Fund from its inception, August 17, 1987 through its liquidation on
November 30, 1992. It should be noted that the stock market fell sharply on
October 19, 1987. Series A was invested in money market securities at that time
and was not affected by the fall. This explains the large divergence between the
performance of Series A noted above and performance of the S&P 500 index during
the first months of Series A operations. The above information takes into
account the advisory fee payable under Series A of .50%. The advisory fee for
Series C of the Aetna GET Fund offered by this prospectus is .60%. Neither the
Series A administrative services charge, nor the separate account insurance
charges are reflected in the graph above. If this performance information
included the effect of such charges, the performance numbers shown would be
lower. Please refer to your Contract prospectus for Contract charges. The
percentage mix of fixed income and equity securities in Series C is expected to
be different than that of Series A, since it is based on the economic factors at
the beginning of the Guaranteed Period of the Series.
GET Series "B" Performance
The following shows in tabular form the graph which appears here:
(000s omitted)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
GET B S&P 500 Lehman Aggregate
Jul - 94 10.25 10.33 10.20
Sep - 94 10.23 10.49 10.06
Dec - 94 10.18 10.49 10.10
Mar - 95 10.75 11.51 10.61
Jun - 95 11.66 12.61 11.26
Sep - 95 12.50 13.61 11.48
Dec - 95 13.07 14.43 11.97
Mar - 96 13.86 15.20 11.75
Jun - 96 14.44 15.88 11.82
</TABLE>
The above graph reflects the results of a $10,000 investment in Series B of the
Aetna GET Fund from its inception, July 1, 1994 through June 30, 1996. The
maturity date of Series B is June 30, 1999. The above information takes into
account the advisory fee payable under Series B of .75%, which is .15% higher
than the advisory fee to be paid with respect to Series C. Neither the
Series B administrative services charge, nor the separate account insurance
charges are reflected in the graph above. If this performance information
included the effect of such charges, the performance numbers shown would be
lower. Please refer to your Contract prospectus for Contract charges. The
percentage mix of fixed income and equity securities in Series C is expected
to be different than that of Series B, since it is based on the economic
factors at the beginning of the Guaranteed Period of the Series.
Expenses and Trust Administration
Under an Administrative Services Agreement with the Trust, ALIAC provides all
administrative services necessary for Series C's operations and is responsible
for the supervision of Series C's other service providers. ALIAC also assumes
all ordinary recurring direct costs of Series C, such as custodian fees,
trustees' fees, transfer agency costs and accounting expenses. For the services
provided under the Administrative Services Agreement, ALIAC receives an annual
fee, payable monthly, at a rate of 0.15% of the average daily net assets of
Series C.
GENERAL INFORMATION
Declaration of Trust
The Trust is a diversified, open-end management investment company organized as
a "series-type" business trust under Massachusetts law on March 9, 1987. The
Declaration of Trust ("Declaration") provides for the issuance of multiple
series of shares, each representing a portfolio of investments with different
investment objectives, policies and restrictions.
The Declaration contains an express disclaimer for shareholder liability for
acts or obligations of the Trust under Massachusetts law, and requires that
notification of such be given in each agreement, obligation or instrument
entered into by the Trust or the Trustees.
Capital Stock
The Declaration permits the Trustees to issue an unlimited number of full and
fractional shares of beneficial interest in each series of the Trust. All shares
are nonassessable, transferable and redeemable. There are no preemptive rights.
Shareholder Meetings
The Trust is not required to hold annual shareholder meetings. The Declaration
provides for meetings of shareholders to elect Trustees at such times as may be
determined by the Trustees or as required by the Investment Company Act of 1940.
If requested by the holders of at least 10% of a series' outstanding shares, the
series will hold a shareholder meeting for the purpose of voting on the removal
of one or more Trustees and will assist with communication 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 a
series. Voting rights are not cumulative. ALIAC's separate accounts are the
shareholders of Series C under a variable annuity contract, not the contract
holder. ALIAC does, however, provide variable annuity contract holders the right
to direct the voting of shares at shareholder meetings to the extent required by
law.
DISTRIBUTIONS AND TAX STATUS
Dividends and distributions made by Series C to ALIAC are taxable, if at all, to
ALIAC; they are not taxable to variable annuity contract holders. Series C
intends to make such distributions, which will be automatically reinvested in
additional Series C shares at the net asset value thereof.
Series C intends to qualify as a "regulated investment company" (RIC) under the
Internal Revenue Code of 1986, as amended (Code). As a RIC, Series C will not be
liable for federal income taxes on that part of its net investment income and
net capital gains, if any, distributed to shareholders. Series C intends to
maintain diversification of investments as required by the Code in order to
qualify as a RIC.
Series C also intends to comply with the diversification requirements of Section
817(h) of the Code for variable annuity contracts so that the Contract owners
should not be subject to federal tax on distributions of dividends and income
from Series C to the insurance company separate accounts. Contract owners should
review the Contract prospectus for information regarding the tax consequences to
them of purchasing a Contract.
SALE AND REDEMPTION OF SHARES
Shares are sold and redeemed at their net asset value next determined after
receipt of a purchase or redemption order in acceptable form. No sales charge or
redemption charge is made. Registered representatives of broker-dealers selling
the shares of Series C may participate in sales contests sponsored by ALIAC
and/or its affiliates for which prizes will be awarded based on sales volumes
achieved.
During the Offering Period, Assets of Series C will be invested entirely in
money market instruments.
NET ASSET VALUE
The net asset value per share (NAV) of Series C 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 Series C's securities, plus
any cash or other assets (including dividends and interest accrued but not
collected) and subtracting all liabilities (including accrued expenses), and
dividing the total by the number of shares outstanding. Portfolio securities are
valued primarily by independent pricing services, based on market quotations.
Short-term debt instruments maturing in less than 60 days are valued at
amortized cost. Securities for which market quotations are not readily
available, are valued at their fair value in such manner as may be determined
under the authority of the Trustees.
