As filed with the Securities and Exchange File No. 33-27247
Commission on April 11, 1997 File No. 811-5773
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 15
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 21
AETNA INVESTMENT ADVISERS FUND, INC.
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151 Farmington Avenue RE4A, Hartford, Connecticut 06156
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(860) 273-7834
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue RE4A, Hartford, Connecticut 06156
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(Name and Address of Agent for Service)
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It is proposed that this filing will become effective:
X on May 1, 1997 pursuant to paragraph (b) of Rule 485
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Aetna Investment Advisers Fund, Inc. has registered an indefinite number of its
securities under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The Registrant filed its Rule 24f-2 Notice for
its fiscal year ended December 31, 1996 on February 28, 1997.
<PAGE>
Aetna Investment Advisers Fund, Inc.
Cross-Reference Sheet
Form N-1A
Item No. Part A Caption in Prospectus
- -------- ------ ---------------------
1. Cover Page....................... Cover Page
2. Synopsis......................... Not Applicable
3. Condensed Financial Information.. Financial Highlights
4. General Description of Registrant Investment Objective;
Investment Policies and
Restrictions
5. Management of the Fund........... Management of the Fund
5A Management's Discussion of Fund Not Applicable
Performance......................
6. Capital Stock and Other Securities General Information;
Tax Matters
7. Purchase of Securities Being Management of the Fund;
Offered.......................... Purchase and Redemption of Shares;
Net Asset Value
8. Redemption or Repurchase......... Purchase and Redemption of Shares;
Net Asset Value
9. Legal Proceedings................ Not applicable
<PAGE>
Form N-1A Caption in Statement of
Item No. Part B Additional Information
- -------- ------ ----------------------
10. Cover Page....................... Cover Page
11 Table of Contents................ Table of Contents
12. General Information and History.. General Information and
History
13. Investment Objectives and Policies General Information and
History;
Investment Objective and
Policies of the Fund;
Description of Various
Securities and Investment
Techniques
14. Management of the Fund........... Directors and Officers of the
Fund
15. Control Persons and Principal Control Persons and Principal
Holders of Securities............ Holders of the Fund
16. Investment Advisory and Other Investment Advisory
Services ........................ Agreement; Administrative
Services Agreement;
Custodian; Independent Auditors
17. Brokerage Allocation............. Brokerage Allocation and
Trading Polices
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption and Pricing Purchase and Redemption of Shares;
of Securities Being Offered...... Net Asset Value
20. Tax Status....................... Tax Matters
21. Underwriters..................... Not Applicable
22. Calculation of Performance Data.. Performance Information
23. Financial Statements............. Financial Statements
<PAGE>
Part C
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Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
<PAGE>
AETNA
INVESTMENT ADVISERS FUND, INC.
151 Farmington Avenue
Hartford, CT 06156-8972
1-800-525-4225
Prospectus dated: May 1, 1997
Aetna Investment Advisers Fund, Inc. (Fund) is a diversified, open-end
management investment company whose shares are currently sold to fund variable
annuity contracts (VA Contracts) and variable life insurance policies (VLI
Policies) issued by Aetna Life Insurance and Annuity Company (Aetna) and its
affiliates for allocation to their separate accounts in connection with annuity
contracts.
The Fund seeks to maximize investment return consistent with reasonable safety
of principal by investing in one or more of the following asset classes: stocks,
bonds and cash equivalents, based on the Company's judgment of which of those
sectors or mix thereof offers the best investment prospects. An investment in
the Fund is neither insured nor guaranteed by the U.S. Government.
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 (Statement) dated May 1, 1997, which
has been filed with the Securities and Exchange Commission (Commission) and is
incorporated by reference. You can obtain a Statement, without charge, by
writing to the Fund at the address listed above or by calling the Fund at
1-800-525-4225. Additional information filed with the Commission can be obtained
by contacting the Commission at its Web Site (http://www.sec.gov).
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
FINANCIAL HIGHLIGHTS ................................. 3
INVESTMENT OBJECTIVE ................................. 4
INVESTMENT POLICIES AND RESTRICTIONS .................. 4
Investment Policies ................................. 4
Asset Allocation Calculations ........................ 4
Industry Concentration .............................. 4
Illiquid and Restricted Securities .................. 4
Asset-Backed Securities .............................. 4
Borrowing .......................................... 4
Options, Futures and Other Derivatives ............... 4
High-Risk, High-Yield Securities ..................... 5
Foreign Securities ................................. 5
Depositary Receipts ................................. 5
Mortgage-Backed Securities ........................... 5
Repurchase Agreements .............................. 5
Securities Lending ................................. 6
Proprietary Software ................................. 6
MANAGEMENT OF THE FUND .............................. 6
Directors .......................................... 6
Investment Adviser ................................. 6
Subadviser .......................................... 6
Portfolio Management ................................. 6
Expenses and Fund Administration ..................... 6
GENERAL INFORMATION ................................. 6
Articles of Incorporation ........................... 6
Capital Stock ....................................... 6
Shareholder Meetings ................................. 7
Voting Rights ....................................... 7
Mixed Funding ....................................... 7
TAX MATTERS .......................................... 7
The Fund ............................................. 7
Fund Distributions ................................. 7
PURCHASE AND REDEMPTION OF SHARES ..................... 7
NET ASSET VALUE ....................................... 7
APPENDIX--DESCRIPTION OF CORPORATE BOND RATINGS ...... 8
2 Aetna Investment Advisers Fund, Inc.
<PAGE>
FINANCIAL HIGHLIGHTS
The selected data presented below for, and as of the end of, each of the years
or period in the eight-year period ended December 31, 1996 are derived from the
financial statements of the Fund which statements have been audited by KPMG Peat
Marwick LLP, independent auditors. The financial statements and the
independent auditors' report thereon, are included in the Fund's annual report
dated December 31, 1996 which is incorporated by reference into the Statement.
<TABLE>
<CAPTION>
Year Ended December 31,
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1996 1995+ 1994+ 1993+
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value per share, beginning of year ......... $14.502 $12.226 $12.798 $12.066
------- ------- ------- -------
Income From Investment Operations
Net investment income ................................. .469 .539 .480 .441
Net realized and unrealized gain (loss) on investments 1.585 2.737 (.532) .741
------- ------- ------- -------
Total from investment operations ..................... 2.054 3.276 (.052) 1.182
------- ------- ------- -------
Less Distributions
Dividends from net investment income .................. (.350) (.670) (.451) (.440)
Dividends from net realized gains on investments ...... (1.088) (.330) (.069) (.010)
------- ------- ------- -------
Net asset value per share, end of year ............... $15.118 $14.502 $12.226 $12.798
======= ======= ======= =======
Total return** ....................................... 15.17% 27.23% (.35)% 9.90%
Net assets, end of year (millions) ..................... $1,364 $1,196 $958 $920
Ratio of total expenses to average net assets ......... .45% .31% .32% .31%
Ratio of net investment income to average net assets ... 3.21% 3.96% 3.83% 3.53%
Portfolio turnover rate .............................. 107.80% 141.21% 112.05% 24.71%
Average Commission Rate Paid Per Share ............... $.0576 -- -- --
------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1992+ 1991+ 1990+ 1989*+
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value per share, beginning of year ......... $11.841 $10.467 $10.508 $10.000
------- ------- ------- -------
Income From Investment Operations
Net investment income ................................. .450 .560 .624 .580
Net realized and unrealized gain (loss) on investments .297 1.357 (.023) .148
------- ------- ------- -------
Total from investment operations ..................... .747 1.917 .601 .728
------- ------- ------- -------
Less Distributions
Dividends from net investment income .................. (.506) (.543) (.580) (.216)
Dividends from net realized gains on investments ...... (.016) .000 (.062) (.004)
------- ------- ------- -------
Net asset value per share, end of year ............... $12.066 $11.841 $10.467 $10.508
======= ======= ======= =======
Total return** ....................................... 6.39% 18.38% 5.72% 5.33%
Net assets, end of year (millions) ..................... $730 $456 $286 $147
Ratio of total expenses to average net assets ......... .32% .33% .40% .36%
Ratio of net investment income to average net assets ... 4.05% 4.94% 6.03% 4.97%
Portfolio turnover rate .............................. 15.51% 6.60% 11.84% 3.24%
Average Commission Rate Paid Per Share ............... -- -- -- --
------- ------- ------- -------
</TABLE>
* Date of Initial Capitalization was April 3, 1989.
** The performance data reflects deduction of an investment advisory fee at an
annual rate of 0.25% of the Fund's average daily net assets, prior to August
1, 1996 and 0.50% of average daily net assets thereafter and deductions for
Fund administrative services and other expenses at cost prior to May 1, 1996,
and at an annual rate of 0.08% of average daily net assets thereafter.
Performance data above is for the Fund and not for the separate accounts
investing in the Fund. Therefore, the performance does not reflect insurance
charges for mortality and expense risks, contract maintenance charges,
deferred sales charges or other charges relating to the separate account
using the Fund for VA Contracts or VLI Policies. Inclusion of these expenses
would reduce the total return figures.
+ Per share data calculated using weighted average number of shares outstanding
throughout the year.
Additional information about the performance of the Fund is contained in the
Fund's Annual Report dated December 31, 1996. The Annual Report may be obtained,
without charge, by writing to the Fund at the address listed on the cover of
this Prospectus or by calling 1-800-525-4225.
Aetna Investment Advisers Fund, Inc. 3
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Fund is to maximize investment return,
consistent with reasonable safety of principal by investing in a diversified
portfolio of one or more of the following asset classes: stocks, bonds and cash
equivalents, based on the Company's judgment of which of those sectors or mix
thereof offers the best investment prospects. The Fund's investment objective is
fundamental and may not be changed without the vote of a majority of the
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's assets will be allocated among common and
preferred stocks, bonds, including mortgage-related and other asset-backed
securities, U.S. Government securities, U.S. Government derivatives, and money
market instruments, including variable-rate instruments and repurchase
agreements. The Fund may also invest in when-issued or delayed-delivery
securities. Investors should be aware that the investment results of the Fund
partly depend upon the Investment Adviser's ability to anticipate correctly the
relative performance of stocks, bonds and money market instruments.
While the Adviser has substantial experience in managing all asset classes,
there can be no assurance that the Adviser will always allocate assets to the
best performing sectors. The Fund's performance would suffer if a major
proportion of its assets were allocated to stocks in a declining market or,
similarly, if a major proportion of its assets were allocated to bonds at a time
of adverse interest rate movement.
Asset Allocation Calculations The Adviser employs current market statistics and
economic indicators to forecast returns for each sector of the securities market
for the Fund. These calculations provide a framework for assessing the relative
attractiveness of stocks, bonds and cash equivalents.
Industry Concentration The Fund will not concentrate its investments in any one
industry, and therefore, the Fund will not invest 25% or more of its total
assets in securities issued by companies principally engaged in any one
industry. This limitation will not, however, apply to securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities,
securities invested in, or repurchase agreements for, U.S. Government
securities; and certificates of deposit, banker's acceptances, or securities of
banks and bank holding companies. For purposes of this restriction, finance
companies will be classified as separate industries according to the end users
of their services, such as automobile finance, computer finance and consumer
finance. Also, the Fund will not hold securities constituting more than 5% of
its total assets in the securities of any one issuer or hold more than 10% of
the outstanding voting securities of any one issuer. This latter restriction
applies only to 75% of the Fund's total assets and does not include securities
issued or guaranteed by the U.S. Government, its agencies and instrumentalities.
The Fund does not invest in the securities of companies determined by the
Adviser to be primarily involved in the production or distribution of tobacco
products.
Illiquid and Restricted Securities. The Fund 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 in the
ordinary course of business without taking a materially reduced price. In
addition, the Fund may invest in securities that are subject to legal or
contractual restrictions on resale, including securities purchased under Rule
144A and Section 4(2) of the Securities Act of 1933. The Board of Directors of
the Fund (Directors) has established a policy concerning investments in
restricted and illiquid securities.
Asset-Backed Securities The Fund may purchase securities collateralized by a
specified pool of assets, including automobile loans, home equity loans, mobile
home loans, recreational vehicles or credit card receivables. These securities
are subject to prepayment risk. In periods of declining interest rates,
reinvestment would thus be made at lower and less attractive rates.
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.
Options, Futures and Other Derivatives The Fund may occasionally engage in
hedging and other strategies using 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, structured
notes, and collateralized mortgage obligations (CMOs). 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
4 Aetna Investment Advisers Fund, Inc.
<PAGE>
notes are privately placed fixed income securities whose coupon and/or final
payment depends on the return of a market index, portfolio or security. Further
information about CMOs is contained in the Statement. 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 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 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 Statement.
High-Risk, High-Yield Securities The Fund may invest up to 25% of its total
assets in high-risk, high-yield securities, often called junk bonds. These
securities are rated BB or below by Standard & Poor's Corporation (S&P) or Ba or
below by Moody's Investors Service, Inc. (Moody's) (securities with capacity to
meet interest and principal payments but greater vulnerability to default), or,
if unrated, considered by the Adviser to be of comparable quality. High-risk,
high-yield 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.
Foreign Securities The Fund may invest up to 25% of its total assets in equity
and debt securities of foreign issuers. 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
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 international securities for purposes of
the Fund's investment limitation concerning investment in international
securities.
Mortgage-Backed Securities The Fund 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. The Fund may also
invest in private pass-through securities backed by a pool of conventional
fixed-rate or adjustable-rate mortgage loans. In addition, the Fund may invest
in collateralized mortgage obligations (CMOs) and securities issued by real
estate mortgage investment conduits (REMICs). Mortgage-backed securities are
subject to the same prepayment risk as asset-backed securities.
Repurchase Agreements The Fund may enter into repurchase agreements with
domestic banks and broker-dealers. Under a repurchase agreement, the Fund may
acquire a debt instrument for a relatively short period subject to an obligation
by
Aetna Investment Advisers Fund, Inc. 5
<PAGE>
the seller to repurchase and by the Fund to resell the instrument at a fixed
price and time. Assets may be invested in repurchase agreements with domestic
banks and broker-dealers. Such agreements, although fully collateralized,
involve the risk that the seller of the securities may fail to repurchase them.
In that event, the Fund may incur costs in liquidating the securities (or other
collateral for the agreement) or a loss if the collateral declines in value. If
the default on the part of the seller is due to insolvency and the seller
initiates bankruptcy proceedings, the ability of the Fund to liquidate the
collateral may be delayed or limited.
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.
Proprietary Software The Adviser uses proprietary computer programs to identify
trends in interest rates and economic conditions and to help calculate the
optimal asset exposure over specified time periods. Advisers Fund is not,
however, solely driven by quantitative techniques and asset allocation decisions
will always remain at the discretion of the Adviser.
The Fund is subject to additional investment restrictions described in the
Statement.
MANAGEMENT OF THE FUND
Directors The business operations of the Fund are managed under the supervision
of the Directors. The Directors set broad policies for the Fund. Information
about the Directors is found in the Statement.
Investment Adviser Aetna serves as the investment adviser for the Fund and
Aeltus Investment Management, Inc. (Aeltus) serves as the subadviser. Aetna is a
Connecticut insurance corporation with its principal offices located at 151
Farmington Avenue, Hartford, Connecticut 06156. Aetna and Aeltus (collectively,
the "Adviser") are both indirect, wholly-owned subsidiaries of Aetna Retirement
Services, Inc., which is in turn an indirect wholly-owned subsidiary of Aetna
Inc. Aetna is registered with the Commission as an investment adviser. Aetna
receives a management fee at an annual rate of 0.50% of the average daily net
assets of the Fund, payable monthly.
Subadviser The Fund and Aetna have engaged Aeltus as subadviser of the Fund.
Aeltus is a Connecticut corporation with its principal offices located at 242
Trumbull Street, Hartford, Connecticut 06156-1205. Aeltus is registered as an
investment adviser with the Commission.
Under the Subadvisory Agreement, Aeltus is responsible for managing the assets
of the Fund in accordance with the Fund's investment objective and policies
subject to the supervision of Aetna, the Fund and the Directors. Aeltus
determines what securities and other instruments are purchased and sold by the
Fund and handles certain related accounting and administrative functions,
including determining the Fund's net asset value on a daily basis and preparing
and providing such reports, data and information as Aetna or the Directors
request from time to time. Aeltus receives a fee at an annual rate of up to
0.30% of the average daily net assets of the Fund, payable monthly.
Aetna has overall responsibility for monitoring the investment program
maintained by the Subadviser for compliance with applicable laws and regulations
and the Fund's investment objective and policies.
Portfolio Management John Y. Kim, Managing Director and Chief Investment
Officer, Aeltus, has been the portfolio manager for the Fund for the past three
years. Mr. Kim joined the Aetna organization in 1983 as an analyst. He
subsequently was promoted to Senior Investment Officer and Senior Portfolio
Manager. He also served as a Vice President for Investor Relations. Mr. Kim
joined Mitchell Hutchins Institutional Investors in 1993. In 1994 he returned to
the Aetna organization, as Chief Investment Officer of ALIAC. Mr. Kim is
assisted by a team of portfolio managers.
Expenses and Fund Administration Under an Administrative Services Agreement with
the Fund effective since May 1, 1996, Aetna provides all administrative services
necessary for the Fund's operations and is responsible for the supervision of
the Fund's other service providers. Aetna also assumes 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 Service Agreement, Aetna receives an annual fee, payable monthly,
at a rate of 0.08% of the average daily net assets of the Fund.
GENERAL INFORMATION
Articles of Incorporation The Fund is a corporation incorporated under the laws
of Maryland on December 14, 1988.
Capital Stock The Articles of Incorporation (Articles) allow the Directors to
issue two billion shares of capital stock of the Fund. All shares are
nonassessable, transferable and redeemable. There are no preemptive rights.
6 Aetna Investment Advisers Fund, Inc.
<PAGE>
As of March 31, 1997, there were 90,436,700.592 shares of the Fund outstanding,
all of which were owned by Aetna and its affiliates and held in separate
accounts to fund obligations under VA Contracts and VLI Policies.
Shareholder Meetings The Fund is not required to hold annual shareholder
meetings. The Articles provide for meetings of shareholders to elect Directors
at such time as may be determined by the Directors 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 Directors 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.
Mixed Funding Because the Fund is sold to fund variable annuity contracts and
variable life insurance policies issued by Aetna, certain conflicts of interest
could arise. If a conflict of interest were to occur, one of the separate
accounts invested in the Fund might withdraw its investment in the Fund, which
might force the Fund to sell its portfolio of securities at disadvantageous
prices, causing its per share value to decrease. The Directors have agreed to
monitor events in order to identify any material irreconcilable conflicts which
might arise and to determine what action, if any, should be taken to address
such conflict.
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 Statement. 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 (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 the separate accounts which
hold the shares of the Fund 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 Statement.
Fund Distributions Distributions by the Fund are taxable, if at all, to the
insurance company separate accounts, and not to VA Contract or VLI Policy
holders.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are purchased and redeemed at their net asset value next
determined after receipt of a purchase or redemption order in acceptable form.
Orders for the purchase or redemption of shares of the Fund that are received by
the insurance company before the close of regular trading on the New York Stock
Exchange (normally 4 p.m. eastern time) are effected at the net asset value per
share determined that day, as described below (see Net Asset Value). The
insurance company shall be the designee of the Fund for receipt of purchase and
redemption orders. Therefore, receipt of an order by the insurance company
constitutes receipt by the Fund; provided that the Fund receives notice of the
order by 9:30 a.m. the next day on which the New York Stock Exchange is open for
trading. No sales charge or redemption charge is made.
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
Commission.
NET ASSET VALUE
The net asset value per share (NAV) of the Fund is determined as of the earlier
of 15 minutes after the close of the New York Stock Exchange or 4:15 p.m.
eastern time on each day that the New York Stock Exchange is open for trading.
The NAV is computed by dividing the total value of the Fund's securities, plus
any cash or other assets less all liabilities (including accrued expenses), by
the number of shares outstanding.
Portfolio securities are valued primarily by independent pricing services, based
on market quotations. Short-term debt instruments maturing in less than 60 days
are valued at amortized cost. Securities for which market quotations are not
readily available, are valued at their fair value in such manner as may be
determined under the authority of the Directors.
Aetna Investment Advisers Fund, Inc. 7
<PAGE>
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
Moody's Investors Service, Inc.
"Aaa" Rating
Bonds which are rated Aaa are judged to be of the best quality and carry the
smallest degree of investment risk. Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
"Aa" Rating
Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat greater than in Aaa securities.
"A" Rating
Bonds which are rated A possess many favorable investment attributes and are
considered upper-medium-grade obligations. Factors relating to security of
principal and interest are considered adequate but elements may be present which
suggest possible impairment sometime in the future.
"Baa" Rating
Bonds which are rated Baa are considered medium-grade obligations (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and have
speculative characteristics.
"Ba" Rating
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
other good and bad times over the future. Uncertainty of position characterizes
this class of bond.
"B" Rating
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
The modifier 1 indicates that the bond ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its rating category.
Standard & Poor's Corporation
"AAA" Rating
Bonds which are rated AAA have the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
"AA" Rating
Bonds which are rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
"A" Rating
Bonds which are rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
"BBB" Rating
Bonds which are rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
"BB" Rating
Bonds which are rated BB have less near-term vulnerability to default than other
speculative issues. However, the bonds face major uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
"B" Rating
Bonds which are rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The ratings from "AA" to "B" may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
8 Aetna Investment Advisers Fund, Inc.
<PAGE>
Statement of Additional Information dated: May 1, 1997
AETNA INVESTMENT
ADVISERS FUND, INC.
151 Farmington Avenue
Hartford, Connecticut 06156
This Statement of Additional Information (Statement) is not a prospectus and
should be read in conjunction with the current prospectus for Aetna Investment
Advisers Fund, Inc., dated May 1, 1997.
A free prospectus is available upon request from the local Aetna office, by
writing to Aetna Investment Advisers Fund, Inc. at the address listed above or
by calling 1-800-525-4225.
Read the prospectus before you invest.
TABLE OF CONTENTS
General Information and History ................................. 2
Investment Objective and Policies of the Fund ..................... 2
Description of Various Securities and Investment Techniques ...... 4
Directors and Officers of the Fund .............................. 14
Control Persons and Principal Shareholders of the Fund ............ 17
Investment Advisory Agreement .................................... 18
Subadvisory Agreement ............................................. 18
Administrative Services Agreement ................................. 19
License Agreement ................................................ 19
Brokerage Allocation and Trading Policies ........................ 19
Description of Shares ............................................. 20
Tax Matters ...................................................... 21
Voting Rights ................................................... 25
Purchase and Redemption of Shares ................................. 25
Principal Underwriter ............................................. 26
Net Asset Value ................................................... 26
Performance Information .......................................... 27
Custodian ......................................................... 27
Independent Auditors ............................................. 27
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Investment Advisers Fund, Inc. (Fund) is an open-end, diversified
management investment company whose shares are currently sold to fund variable
annuity contracts (VA Contracts) or variable life insurance policies (VLI
Policies) issued by Aetna Life Insurance and Annuity Company ("Aetna" or the
"Company") and its affiliates for allocation to their separate accounts in
connection with the purchase of annuity contracts.
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The Fund's investment objective is to produce the maximum investment return
consistent with reasonable safety of principal. The Fund's investment objective
and policies, as well as restrictions, are described in the prospectus under the
caption "Investment Policies and Restrictions." In seeking to achieve its
investment objective the Fund may employ some of the techniques described below.
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 (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 or related options shall not be
considered to involve the issuance of senior security; and (e) subject to
fundamental restrictions, the Fund may borrow money as authorized by the
1940 Act;
(2) with respect to 75% of the value of the Fund's total assets, 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.
Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities are excluded from these restrictions;
(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;
(6) borrow money, except that (a) the Fund may enter into certain futures
contracts or options related thereto; (b) the Fund may enter into
commitments to purchase securities in accordance with the
2 Aetna Investment Advisers Fund, Inc.
<PAGE>
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 that may be
changed by the Fund's Directors and without shareholder vote. Under such
restrictions, the Fund will not:
(1) 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, as amended,
shall not be deemed illiquid solely by reason of being unregistered. The
Investment Adviser shall determine whether a particular security is deemed
to be liquid based on the trading markets for the specific security and
other factors;
(2) invest in companies for the purpose of exercising control or management;
(3) invest more than 25% of its total assets in securities or obligations of
foreign issuers, including marketable securities of, or guaranteed by,
foreign governments (or any instrumentality or subdivision thereof). The
Fund will invest in securities or obligations of foreign banks only if such
banks have a minimum of $5 billion in assets and a primary capital ratio of
at least 4.25%;
(4) invest more than 25% of the total value of its assets in fixed income
securities, including convertible securities, rated below BBB or Baa by S&P
or Moody's or other comparable nationally recognized statistical rating
organizations (sometimes referred to as high risk, high-yield securities,
or "junk bonds") or, if not rated, considered by the Investment Adviser to
be of comparable quality;
(5) 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; or
(6) purchase the securities of any other investment company, except as
permitted under the 1940 Act or by Order of the Securities and Exchange
Commission (Commission);
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 of
purchase notwithstanding a later change in the market value of an investment, in
net or total assets, in the securities rating of the investment or any other
change.
Aetna Investment Advisers Fund, Inc. 3
<PAGE>
DESCRIPTION OF VARIOUS SECURITIES AND INVESTMENT TECHNIQUES
The following information supplements and should be read in conjunction with the
section of the prospectus entitled "Investment Policies and Restrictions."
Futures Contracts
The Fund may enter into interest rate or stock index futures contracts
("futures" or "futures contracts") or options thereon as a hedge against changes
in prevailing levels of interest rates or 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 the effect of expected increases
in interest rates or 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 that 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 (CFTC).
Although techniques other than sales and purchases of futures contracts could be
used to reduce the Fund's exposure 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.
Although interest rate futures contracts typically require actual future
delivery of and payment for the underlying instruments, those contracts are
usually closed out before the delivery date. 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 interest rates or
equities prices.
"Margin" is the amount of funds that must be deposited by 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
4 Aetna Investment Advisers Fund, Inc.
<PAGE>
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 Advisers 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 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. With regard to transactions involving
futures contracts, the Fund maintains a segregated account holding liquid assets
in accordance with applicable Commission staff positions.
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.
Call and Put Options on Securities
The Fund may write (sell) covered call options (call options) and purchase 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 on securities will be
to reduce the effect of price fluctuations of the securities owned by the Fund
(and underlying 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.
Aetna Investment Advisers Fund, Inc. 5
<PAGE>
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 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 of an
identical option in a closing transaction, or exercising the option.
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 open 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 Investment Advisers Fund, Inc.
<PAGE>
Additional Risk Factors
In addition to any risk factors 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 Investment Advisers Fund, Inc. 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 Directors. 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 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 part of it. A loan may be terminated at any time by the borrower or
lender upon proper notice.
8 Aetna Investment Advisers Fund, Inc.
<PAGE>
Foreign Securities
The Fund may invest up to 25% of its total assets in foreign equity and debt
securities. Investments in foreign securities offer potential benefits not
available solely through investment in securities of domestic issuers. Foreign
securities offer the opportunity to invest in foreign issuers that appear to
offer growth potential, or in foreign countries with economic policies or
business cycles different from those of the United States, or to reduce
fluctuations in portfolio value by taking advantage of foreign stock markets
that may not move in a manner parallel to U.S. markets.
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
(typically, Luxembourg) as well as in the United States; 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 may 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 (Commission) 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 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.
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
Aetna Investment Advisers Fund, Inc. 9
<PAGE>
placed securities even though such securities are not registered under the 1933
Act. The Company, under the supervision of the Board of Directors 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.
Mortgage-Related Debt Securities
Federal mortgage-related securities include obligations issued or guaranteed by
the Government National Mortgage Association (GNMA), the Federal National
Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation
(FHLMC). GNMA is a wholly owned corporate instrumentality of the United States
whose securities and guarantees are backed by the full faith and credit of the
United States. FNMA, a federally chartered and privately owned corporation, and
FHLMC, a federal corporation, are instrumentalities of the United States, with
Presidentially-appointed board members. The obligations of FNMA and FHLMC are
not explicitly guaranteed by the full faith and credit of the federal
government.
Pass-through mortgage-related securities are characterized by monthly payments
to the holder, reflecting the monthly payments made by the borrowers who
received the underlying mortgage loans. The payments to the security holders
like the payments on the underlying loans, represent both principal and
interest. Although the underlying mortgage loans are for specified periods of
time, often twenty or thirty years, the borrowers can repay such loans sooner.
Thus, the security holders frequently receive repayments of principal, in
addition to the principal that is part of the regular monthly payment. A
borrower is more likely to repay a mortgage that bears a relatively high rate of
interest.
This means that in times of declining interest rates, some higher yielding
securities held by the Fund might be converted to cash, and the Fund could be
expected to reinvest such cash at the then prevailing lower rates. The increased
likelihood of prepayment when interest rates decline also limits market price
appreciation of mortgage-related securities. If the Fund buys mortgage-related
securities at a premium, mortgage foreclosures or mortgage prepayments may
result in losses of up to the amount of the premium paid since only timely
payment of principal and interest is guaranteed.
As noted in the Prospectus, the Fund may also invest in collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs). CMOs
and REMICs are securities that are collateralized by mortgage pass-through
securities. Cash flows from underlying mortgages are allocated to various
classes or tranches in a predetermined, specified order. Each sequential tranche
has a "stated maturity"--the latest date by which the tranche can be completely
repaid, assuming no prepayments--and has an "average life"--the average time to
receipt of a principal payment weighted by the size of the principal payment.
The average life is typically used as a proxy for maturity because the debt is
amortized, rather than being paid off entirely at maturity, as would be the case
in a straight debt instrument.
CMOs and REMICs are typically structured as "pass-through" securities. In these
arrangements, the underlying mortgages are held by the issuer, which then issues
debt collateralized by the underlying mortgage assets. The security holder thus
owns an obligation of the issuer and payment of interest and principal on such
obligations is made from payments generated by the underlying mortgage assets.
The underlying mortgages may be guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. Government such as GNMA or
otherwise backed by FNMA or FHLMC. Alternatively,
10 Aetna Investment Advisers Fund, Inc.
<PAGE>
such securities may be backed by mortgage insurance, letters of credit,
subordination or other credit enhancing features. Both CMOs and REMICs are
issued by private entities. They are not directly guaranteed by any government
agency and are secured by the collateral held by the issuer.
Asset-Backed Securities
Asset-backed securities are collateralized by short-term loans such as
automobile loans, home equity loans, or credit card receivables. The payments
from the collateral are passed through to the security holder. As noted above
with respect to CMOs and REMICs, the average life for these securities is the
conventional proxy for maturity. Asset-backed securities may pay all interest
and principal to the holder, or they may pay a fixed rate of interest, with any
excess over that required to pay interest going either into a reserve account or
to a subordinate class of securities, which may be retained by the originator.
The originator may guarantee interest and principal payments. These guarantees
often do not extend to the whole amount of principal, but rather to an amount
equal to a multiple of the historical loss experience of similar portfolios.
Two varieties of asset-backed securities are CARs and CARDs. CARs are
securities, representing either ownership interests in fixed pools of automobile
receivables, or debt instruments supported by the cash flows from such a pool.
CARDs are participations in fixed pools of credit accounts. These securities
have varying terms and degrees of liquidity.
Asset-backed securities may be subject to the type of prepayment risk discussed
above due to the possibility that prepayments on the underlying assets will
alter the cash flow. Faster prepayments will shorten the security's average life
and slower prepayments will lengthen it.
The coupon rate of interest on mortgage-related and asset-backed securities is
lower than the interest rates paid on the mortgages included in the underlying
pool, by the amount of the fees paid to the mortgage pooler, issuer, and/or
guarantor. Actual yield may vary from the coupon rate, however, if such
securities are purchased at a premium or discount, traded in the secondary
market at a premium or discount, or to the extent that the underlying assets are
prepaid as noted above.
High-Risk, High-Yield Securities
The Fund may invest in high risk, high-yield securities (junk bonds) as
described in the Prospectus. 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.
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
Aetna Investment Advisers Fund, Inc. 11
<PAGE>
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 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 (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,
12 Aetna Investment Advisers Fund, Inc.
<PAGE>
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.
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.
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 practice of short-term trading,
although it may occasionally realize short-term gains or losses. Purchases
Aetna Investment Advisers Fund, Inc. 13
<PAGE>
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 1995 and 1996 were 141% and 108%
respectively.
DIRECTORS AND OFFICERS OF THE FUND
The investments and administration of the Fund are under the direction of the
Directors. The Directors and executive officers of the Fund and their principal
occupations for the past five years are listed below. Those directors who are
"interested persons," as defined in the 1940 Act, are indicated by an asterisk
(*). All Directors and officers hold similar positions with other investment
companies in the same Fund Complex managed by the Investment Adviser. Fund
Complex presently consists of: Aetna Series Fund, Inc., Aetna Variable Fund,
Aetna Income Shares, Aetna Variable Encore Fund, Aetna Investment Advisers Fund,
Inc., Aetna GET Fund (Series B), and Aetna Generation Portfolios, Inc.
<TABLE>
<CAPTION>
Principal Occupation During Past Five Years
Position(s) Held (and Positions held with Affiliated Persons or
Name, Address and Age with Registrant Principal Underwriters of the Registrant)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shaun P. Mathews* Director and Vice President/Senior Vice President, Aetna Life
151 Farmington Avenue President Insurance and Annuity Company, March 1991 to present and
Hartford, Connecticut Vice President, Aetna Life Insurance Company, 1991 to
Age 41 present. Director and President, Aetna Investment Services,
Inc.; and Director and Senior Vice President, Aetna
Insurance Company of America, March 1991 to present.
Wayne F. Baltzer Vice President Assistant Vice President, Aetna Life Insurance and Annuity
151 Farmington Avenue Company, May 1991 to present; Vice President, Aetna
Hartford, Connecticut Investment Services, Inc. July 1993 to present.
Age 53
Martin T. Conroy Vice President Assistant Treasurer, Aetna Life Insurance and Annuity
151 Farmington Avenue Company, October 1991 to present.
Hartford, Connecticut
Age 57
J. Scott Fox Vice President and Director and Senior Vice President, Aetna Life
242 Trumbull Street Treasurer Insurance and Annuity Company, March 1997 to
Hartford, Connecticut present; Director, Managing Director, Chief
Age 42 Operating Officer, Chief Financial Officer and
Treasurer, Aeltus Investment Management, Inc.
(Aeltus), April 1994 to March 1997; Managing
Director and Treasurer, Equitable Capital
management Corp., March 1987 to September 1993.
Director and Chief Financial Officer, Aeltus Capital,
Inc. and Aeltus Trust Company, Inc.; Director,
President and Chief Executive Officer, Aetna
Investment Management (Bermuda) Holding, Ltd.
Susan E. Bryant Secretary Counsel, Aetna Inc. (formerly Aetna Life and
151 Farmington Avenue Casualty Company) March 1993 to present; General
Hartford, Connecticut Counsel and Corporate Secretary, First Investors
Age 49 Corporation, April 1991 to March 1993. Secretary,
Aetna Investment Services, Inc. and Vice President
and Senior Counsel, Aetna Financial Services, Inc.
</TABLE>
14 Aetna Investment Advisers Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
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>
Morton Ehrlich Director Chairman and Chief Executive Officer, Integrated
1000 Venetian Way Management Corp. (an entrepreneurial company)
Miami, Florida and Universal Research Technologies, 1992 to
Age 62 present; Director and Chairman, Audit Committee,
National Bureau of Economic Research, 1985 to
1992.
Maria T. Fighetti Director Manager/Attorney, Health Services, New York City
325 Piermont Road Department of Mental Health, Mental Retardation
Closter, New Jersey and Alcohol Services, 1973 to present.
Age 53
David L. Grove Director Private Investor; Economic/Financial Consultant,
5 The Knoll December 1985 to present.
Armonk, New York
Age 78
Timothy A. Holt* Director Director, Senior Vice President and Chief Financial
151 Farmington Avenue Officer, Aetna Life Insurance and Annuity Company,
Hartford, Connecticut February 1996 to present; Vice President, Portfolio
Age 43 Management/Investment Group, Aetna Inc. (formerly
Aetna Life and Casualty Company), June 1991 to
February 1996. Director and Vice President Aetna
Retirement Holdings, Inc.
Daniel P. Kearney* Director Director, President, and Chief Executive Officer,
151 Farmington Avenue Aetna Life Insurance and Annuity Company, December
Hartford, Connecticut 1993 to present; Executive Vice President, Aetna Inc.
Age 57 (formerly Aetna Life and Casualty Company), December
1993 to present; Group Executive, Aetna Inc. (formerly
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 Director Financial Adviser, self-employed, January 1993 to
455 East 86th Street present; Senior Adviser, Daiwa Securities America,
New York, New York Inc., January 1992 to January 1993; Executive Vice
Age 61 President, Member of Executive Committee, Daiwa
Securities America, Inc., January 1986 to January
1992.
Corine T. Norgaard Director, Chair Dean of the Barney School of Business, University
556 Wormwood Hill Audit Committee of Hartford, (West Hartford, CT), August 1996 to
Mansfield Center, and Contract present; Professor, Accounting and Dean of the
Connecticut Committee School of Management, Binghamton University,
Age 59 (Binghamton, NY), August 1993 to August 1996;
Professor, Accounting, University of Connecticut,
(Storrs, Connecticut), September 1969 to June
1993; Director, The Advest Group (holding
company for brokerage firm) through September
1996.
</TABLE>
Aetna Investment Advisers Fund, Inc. 15
<PAGE>
<TABLE>
<CAPTION>
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>
Richard G. Scheide Director Trust and Private Banking Consultant, David Ross
11 Lily Street Palmer Consultants, July 1991 to present.
Nantucket, Massachusetts
Age 67
</TABLE>
* Interested persons as defined in the Investment Company Act of 1940 (1940
Act).
During the year ended December 31, 1996, members of the Boards of the Funds
within the Aetna Mutual Fund Complex who are also directors, officers or
employees of Aetna Inc. 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.
16 Aetna Investment Advisers Fund, Inc.
<PAGE>
As of December 31, 1996, the unaffiliated members of the Board of Directors were
compensated as follows:
Total
Compensation
from Registrant
Aggregate and Fund
Name of Person, Compensation Complex Paid
Position from Registrant to Directors
- --------------------- ------------------ -----------------
Corine Norgaard $9,445.00 $72,950.00
Director and
Chairman, Audit and
Contract Committees
Sidney Koch $9,445.00 $72,950.00
Director and
Member, Audit and
Contract Committees
Maria T. Fighetti $8,280.00 $63,950.00
Director and
Member, Audit and
Contract Committees
Morton Ehrlich $8,280.00 $63,950.00
Director and
Member, Audit and
Contract Committees
Richard G. Scheide $8,927.00 $68,950.00
Director and
Member, Audit and
Contract Committees
David L. Grove* $8,927.00 $68,950.00
Director and
Member, Audit and
Contract Committees
* Mr. Grove elected to defer all such compensation under an existing deferred
compensation plan.
The Fund has applied for an Order by the Securities and Exchange Commission to
allow the Members of the Board of Directors who are not affiliated with Aetna
Inc. or any of its subsidiaries to defer all or a portion of their compensation
in accordance with the terms of a new Deferred Compensation Plan (Plan). Under
the Plan, compensation deferred by an unaffiliated Director is periodically
adjusted as though an equivalent amount had been invested and reinvested in
shares of one or more Series of Aetna Series Fund, Inc. designated by the
Director. The amount paid to the unaffiliated Director under the Plan will be
based upon the performance of such investments. Deferral of compensation in
accordance with the Plan will have a negligible effect on the assets,
liabilities, and net income per share, and will not obligate the Fund to retain
the services of any Director or to pay any particular level of compensation to
the Director.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS OF THE FUND
As of March 31, 1997, all of the shares of the Fund were owned by the Company
and its affiliates and allocated to variable annuity and variable life insurance
separate accounts to fund obligations under VA Contracts and VLI Policies.
Contract holders in these separate accounts are provided the right to direct the
voting of the 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
Aetna Investment Advisers Fund, Inc. 17
<PAGE>
of the Fund will be voted for each Account in the same proportion as directed
shares.
INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an Investment Advisory Agreement (Advisory Agreement)
appointing Aetna as its Investment Adviser. The Advisory Agreement was adopted
by the Directors in February 1996, and approved by the shareholders in July ,
1996. The Advisory Agreement will initially be effective from August, 1, 1996
through December 31, 1997. The Advisory Agreement will remain in effect
thereafter if approved at least annually by a majority of the Directors,
including a majority of the Directors who are not "interested persons" of the
Fund, at a meeting called for that purpose and held in person. The Advisory
Agreement may be terminated without penalty at any time by the Directors or by a
majority vote of the outstanding voting securities of the Fund, or it may be
terminated on sixty days' written notice by Aetna. The Advisory Agreement
terminates automatically in the event of assignment.
This Advisory Agreement replaces a prior agreement with Aetna that was approved
by the shareholders of the Fund in April, 1994. Under the Advisory Agreement and
subject to the direction of the Directors, Aetna has responsibility for
supervising all aspects of the operations of the Fund including the selection,
purchase and sale of securities, the calculation of net asset values and the
preparation of financial and other reports as requested by Directors. Under the
agreement, Aetna is given the right to delegate any or all of its obligations to
a subadviser.
The Advisory Agreement provides that Aetna is responsible for payment of all
costs of its personnel, its overhead and of its employees who also serve as
officers or Directors of the Fund. The Fund is responsible for payment of all of
its other costs; however, under the Administrative Services Agreement described
below, Aetna has agreed to pay all direct expenses for the Fund except for
brokers' commissions and other costs incurred in effecting transactions on
behalf of the Fund.
For its services under the prior Advisory Agreement, Aetna received a monthly
fee at an annual rate of 0.25% of the average daily net assets of the Fund.
Under the new Advisory Agreement, Aetna receives an advisory fee at an annual
rate of 0.50% of the average daily net assets of the Fund, payable monthly. For
the years ended December 31, 1994, 1995 and 1996, the Fund paid Aetna investment
advisory fees of $2,369,486, $2,674,612 and $4,616,886, respectively.
SUBADVISORY AGREEMENT
The Fund and Aetna have entered into a Subadvisory Agreement with Aeltus
Investment Management, Inc. (Aeltus) effective August 1, 1996 through December
31, 1997. The Subadvisory Agreement will remain in effect thereafter if approved
at least annually by a majority of the Directors, including a majority of the
Directors who are not "interested persons" of the Fund, at a meeting called for
that purpose and held in person. The Subadvisory Agreement may be terminated
without penalty at any time by the Directors or by a majority of the outstanding
voting securities of the Fund or terminated on sixty days' written notice by the
Adviser, the fund or the Subadviser. The Subadvisory Agreement terminates
automatically in the event of its assignment.
Under the Subadvisory Agreement, Aeltus is responsible for maintaining the
assets of the Fund in accordance with the Fund's investment objective and
policies subject to the supervision of Aetna and the Directors and for preparing
and providing accounting and financial information as requested by the Adviser
and the Directors. The Subadviser pays the salaries, employment benefits and
other related costs of its personnel. For its services, Aetna has agreed to pay
the Subadviser a fee at an annual rate of up to 0.30% of the average daily net
assets of the Fund, payable monthly. This fee is not charged to the Fund but is
paid by Aetna out of its investment advisory fees.
18 Aetna Investment Advisers Fund, Inc.
<PAGE>
Aetna, as the Investment Adviser retains overall responsibility for monitoring
the investment program maintained by Aeltus for compliance with applicable laws
and regulations and the Fund's investment objective and policies.
ADMINISTRATIVE SERVICES AGREEMENT
The Fund entered into an Administrative Services Agreement with Aetna effective
May 1, 1996 under which Aetna provides all administrative services for the Fund
and pays all ordinary recurring costs of the Fund (except brokerage costs and
other transaction costs). These are costs that the Fund would otherwise be
required to pay under the terms of the Investment Advisory Agreement. As a
result, the Fund's costs and fees are limited to the advisory fee, the
administrative services charge and brokerage and transaction costs. For its
services and as reimbursement for the costs it incurs under the Administrative
Services Agreement, Aetna receives an annual fee, payable monthly at a rate of
0.08% of the average daily net assets of the Fund.
The Administrative Services Agreement will continue in effect if approved
annually by a majority of the Trustees. It may be terminated by either party on
sixty days' written notice.
Prior to May 1, 1996, Aetna provided administrative services under an agreement
that allowed for the reimbursement of a proportionate share of Aetna's overhead
in administering the Fund and the Fund reimbursed Aetna directly for all other
costs. The total of the direct costs and administrative costs reimbursed to
Aetna for the years ended December 31, 1994, 1995 and 1996 were $631,529,
$583,165 and $851,380, respectively.
LICENSE AGREEMENT
The Fund uses the service mark of Aetna Variable Encore Fund and the name
"Aetna" with the permission of Aetna Inc. granted under a License Agreement. The
continued use is subject to the right of Aetna Inc. to withdraw this permission
in the event Aetna or another subsidiary or affiliated corporation of Aetna Inc.
should not be the investment adviser of the Fund.
BROKERAGE ALLOCATION AND TRADING POLICIES
Subject to the direction of the Fund's Board of Directors, Aetna and Aeltus have
responsibility for making the Fund's investment decisions, for effecting the
execution of trades for the Fund and for negotiating any brokerage commissions
thereon. It is the policy of Aetna and Aeltus to obtain the best quality of
execution available, giving attention to net price (including commissions where
applicable), execution capability (including the adequacy of a brokerage 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 their trading policy, Aetna and Aeltus may place the Fund's
portfolio transactions with such brokers or dealers and for execution in such
markets as, in the opinion of the Aetna and Aeltus, will lead to the best
overall quality of execution.
Aetna and Aeltus currently receive 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. Aetna and
Aeltus consider 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 and may pay higher commission rates than the lowest available when it
is reasonable to do so in light of the
Aetna Investment Advisers Fund, Inc. 19
<PAGE>
value of the brokerage and research services received generally or in connection
with a particular transaction. Aetna and Aeltus' policy in selecting a broker to
effect a particular transaction is to seek to obtain "best execution," which
means prompt and efficient execution of the transaction at the best obtainable
price with payment of commissions which are reasonable in relation to the value
of the services provided by the broker, taking into consideration research and
other services provided. When either Aetna or Aeltus believes that more than one
broker can provide best execution, preference may be given to brokers who
provide additional services to Aetna or Aeltus.
Consistent with securities laws and regulations, Aetna and Aeltus 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.
Aetna's and Aeltus' judgment as to whether and how they will obtain the specific
brokerage and research services will be based upon their analysis of the quality
for such services and the cost (depending upon the various methods of payment
which may be offered by brokerage firms) and will reflect Aetna's and Aeltus'
opinion as to which services and which means of payment are in the long-term
best interests of the Fund. Research services furnished by brokers through whom
the Fund effects securities transactions may be used by Aetna and Aeltus in
servicing all of their accounts; not all such services will be used to benefit
the Fund. The Fund has no present intention to effect any brokerage transactions
in Fund securities with Aetna or any affiliate of the Fund or Aetna except in
accordance with applicable Commission rules. All transactions will comply with
Rule 17e-1 under the 1940 Act.
Certain officers of Aetna and Aeltus also manage the securities portfolios of
Aetna's own accounts. Further, Aetna and Aeltus also act as investment adviser
to other investment companies registered under the 1940 Act and other client
accounts. Aetna and Aeltus have adopted policies designed to prevent
disadvantaging the Fund in placing orders for the purchase and sale of
securities for the Fund.
To the extent Aetna or Aeltus desires to buy or sell the same security at or
about the same time for more than one client, the purchases or sales will
normally be aggregated (or "bunched") and allocated as nearly as practicable on
a pro rata basis in proportion to the amounts to be purchased or sold by each,
taking into consideration the respective investment objectives of the clients,
the relative size of portfolio holdings of the same or comparable securities,
availability of cash for investment, and the size of their respective investment
commitments. Prices are averaged for those transactions. In some cases, this
procedure may adversely affect the size of the position obtained for or disposed
of by the Fund or the price paid or received by the Fund.
The Board of Directors has adopted a policy allowing trades to be made between
registered investment companies provided they meet the terms of Rule 17a-7 under
the 1940 Act. Pursuant to this policy, the Fund may buy a security from or sell
another security to another registered investment company advised by Aetna.
The Directors have adopted a Code of Ethics governing personal trading by
persons who manage or who have access to trading activity by a Fund. The Code of
Ethics allows trades to be made in securities that may be held by a Fund;
however, it prohibits a person from taking advantage of Fund trades or from
acting on inside information.
For 1994, 1995 and 1996, the Fund paid brokerage commissions of $2,051,044,
$3,963,689 and $2,131,638, respectively.
For the fiscal year ended December 31, 1996, portfolio transactions in the
amount of $308,153,125 were directed to certain brokers because of research
services, of which commissions in the amount of $366,494 were paid with respect
to such transactions. No brokerage business was placed with any brokers
affiliated with Aetna during the last three fiscal years.
DESCRIPTION OF SHARES
Aetna Investment Advisers Fund, Inc. was established under the laws of Maryland
through Articles of Incorporation ("Articles") dated December 14, 1988.
20 Aetna Investment Advisers Fund, Inc.
<PAGE>
The Articles permit the Directors to issue two billion transferable full and
fractional shares of common stock with a par value of $.001 per share.
Upon liquidation of the Fund, its shareholder (the Company) is entitled to share
pro rata in the net assets of the Advisers Fund available for distribution to
shareholders. Fund shares are fully paid and nonassessable.
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.
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 (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 (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 (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
(Short-Short Gain Test). However, foreign currency gains, including those
derived from options, futures and forwards, will not in any event be
characterized as Short-Short Gain if they are directly related to the regulated
investment company's investments in stock or securities (or options or futures
thereon). Because of the Short-Short Gain Test, the Fund may have to limit the
sale of appreciated securities that it has held for less than three months.
However, the Short-Short Gain Test will not prevent the Fund from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded for this purpose. Interest
(including original issue discount) received by the Fund at maturity or upon the
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of such security within
the meaning of the Short-Short Gain Test. However, income that is attributable
to realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
Finally, the Fund must satisfy an asset diversification test in order to qualify
as a regulated investment company. Under this test, at the close of each quarter
of the Fund's taxable year, at least 50% of the value of the Fund's assets must
consist of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which the
Fund has not invested more than 5% of the value of the Fund's total assets in
securities of such issuer and as to which the Fund
Aetna Investment Advisers Fund, Inc. 21
<PAGE>
does not hold more than 10% of the outstanding voting securities of such
issuer), and no more than 25% of the value of its total assets may be invested
in the securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or
businesses. Generally, an option (call or put) with respect to a security is
treated as issued by the issuer of the security not the issuer of the option.
However, with regard to forward currency contracts, there does not appear to be
any formal or informal authority which identifies the issuer of such instrument.
For purposes of asset diversification testing, obligations issued by or
guaranteed by agencies and instrumentalities of the U.S. Government such as the
Federal Agricultural Mortgage Corporation, the Farm Credit System Financial
Assistance Corporation, a 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 (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).
22 Aetna Investment Advisers Fund, Inc.
<PAGE>
The Fund intends to make sufficient distributions or deemed distributions of its
ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment company
taxable income for each taxable year. Such distributions will be taxable to
Aetna 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 Aetna 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 Aetna as long-term capital gain, regardless of the length of time
Aetna 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 Aetna, 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
Aetna Investment Advisers Fund, Inc. 23
<PAGE>
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
(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 Aetna will be reinvested in additional shares.
Shareholders receiving a distribution in the form of additional shares will be
treated as receiving a distribution in an amount equal to the fair market value
of the shares received, determined as of the reinvestment date. In addition, if
the net asset value at the time a shareholder purchases shares of the Fund
reflects undistributed net investment income or recognized capital gain net
income, or unrealized appreciation in the value of the assets of the Fund,
distributions of such amounts will be taxable to the shareholder in the manner
described above, although such distributions economically constitute a return of
capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
Sale or Redemption of Shares
Aetna 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 Aetna, 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.
24 Aetna Investment Advisers Fund, Inc.
<PAGE>
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.
VOTING RIGHTS
The shareholder is entitled to one vote for each full share held (and fractional
votes for fractional shares held) and will vote in the election of Directors (to
the extent hereinafter provided) and on other matters submitted to the vote of
the shareholder. The shareholders of the Fund are the insurance company
depositors of various separate accounts. The insurance companies pass voting
rights for shares held by the separate accounts for VA Contracts and 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 was held on April 13, 1994, at which Directors were elected and the
Management Agreement submitted for approval.
After the initial meeting, no further meeting of the shareholder for the purpose
of electing Directors will be held unless and until such time as less than a
majority of the Directors holding office have been elected by the shareholder,
at which time the Directors then in office will call a shareholder meeting for
election of Directors. Vacancies occurring between any such meetings shall be
filled in an otherwise legal manner if immediately after filling any such
vacancy, at least two-thirds of the Directors holding office have been elected
by the shareholder.
Special shareholder meetings may be called when requested in writing by the
holders of not less than 10% of the outstanding voting shares of the Fund. Any
request must state the purposes of the proposed meeting.
Except as set forth above, the Directors shall continue to hold office and may
appoint successor Directors. Directors may be removed from office (1) at any
time by two-thirds vote of the Directors; (2) by a majority vote of Directors
where any Director 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 Director 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 Directors can,
if they choose to do so, elect all the Directors of the Fund, in which event the
holders of the remaining shares will be unable to elect any person as a
Director.
The Articles 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 Directors and consented to by a majority of the shareholders. The Directors
may also amend the Articles without the vote or consent of shareholders if they
deem it necessary to conform the Articles 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
Directors shall not be liable for failing to do so.
Shares have no preemptive or conversion rights.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are purchased and redeemed at the net asset value next
determined after receipt of a purchase or redemption order in acceptable form by
the Company. No sales charge or redemption charge is made.
The value of shares redeemed may be more or less than the shareholder's costs,
depending upon the market value of the portfolio securities at the time of
redemption. Payment for shares redeemed will be made to the Company by the Fund
within seven days or the maximum period allowed by law, if shorter, after the
redemption request is received by the Company acting as the transfer agent for
the Fund. The right to redeem shares of the Fund 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 Commission
Aetna Investment Advisers Fund, Inc. 25
<PAGE>
or such exchange is closed for other than weekends and holidays; (b) an
emergency exists, as determined by the Commission, as a result of which (i)
disposal by the Fund of portfolio 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.
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 Directors of the Fund or by a
vote of holders of a majority of the Fund's shares. This 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.
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. Generally, short-term debt securities
maturing in sixty days or less at the date of purchase will be valued using the
"amortized cost" method of valuation. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization of premium or increase of
discount. 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.
PERFORMANCE INFORMATION
Total return of a Fund for periods longer than one year is determined by
calculating the actual dollar amount of investment return on a $10,000
investment in the (Fund) made at the beginning of each period, then calculating
the average annual compounded rate of return which would produce the same
investment return on the $10,000 investment over the same period. Total return
for a period of one year or less is equal to the actual investment return on a
$10,000 investment in the Fund during that period. Total return calculations
assume that all (Fund) distributions are reinvested at net asset value on their
respective reinvestment dates.
The performance of the Fund may, from time to time, be compared to that of other
mutual funds tracked by mutual fund rating services, to broad groups of
comparable mutual funds, or to unmanaged indices which may assume investment of
dividends but generally do not reflect deductions for administrative and
management costs.
The performance of the Fund is commonly measured as total return. An average
annual compounded rate of return ("T") may be computed by using the redeemable
value at the end of a specified period ("ERV") of a hypothetical initial
investment of $10,000 ("P") over a period of time ("n") according to the
formula:
n
P(1 + T) = ERV
26 Aetna Investment Advisers Fund, Inc.
<PAGE>
The total returns of the Fund calculated based on the formula above for one
year, five years and since inception (4/3/89) for the periods ended December 31,
1996 are 15.17%, 11.26% and 11.29%, respectively.
CUSTODIAN
Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, PA, 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 Commission filings.
FINANCIAL STATEMENTS
Financial Statements for Aetna Investment Advisers Fund, Inc. are incorporated
herein by reference to the Annual Report dated December 31, 1996. The Annual
Report is available upon request and without charge by calling 1-800-525-4225 or
by writing to Aetna Investment Advisers Fund, Inc. at 151 Farmington Avenue, CT
06156.
Aetna Investment Advisers Fund, Inc. 27
<PAGE>
PART C
OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
- -------------------------------------------
<TABLE>
<S> <C>
(a) Financial Statements:
(1) Included in Part A:
Financial Highlights
(2) Included in Part B by incorporation by reference to the Fund's
Annual Report dated December 31, 1996, as filed electronically
with the Securities and Exchange Commission on March 7, 1997
(File No. 811-5773):
Portfolio of Investments
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995
Notes to Financial Statements
Independent Auditors' Report
(b) Exhibits:
(1)(a) Articles of Incorporation(1)
(1)(b) Articles of Amendment (March 8, 1989)
(2) Amended and Restated Bylaws (adopted by Board of Directors
September 25, 1996)(1)
(3) Not Applicable
(4) Instruments defining rights of holders(2)
(5)(a) Investment Advisory Agreement between Aetna Life Insurance and Annuity Company
and Aetna Investment Advisers Fund, Inc. (August 1, 1996)
(5)(b) Subadvisory Agreement between Aetna Life Insurance and Annuity Company and Aeltus
Investment Management, Inc. (August 1, 1996)
(6) Underwriting Agreement between Aetna Life Insurance and Annuity Company and Aetna
Investment Advisers Fund, Inc. (April 30, 1996)
(7) Not Applicable
(8) Custodian Agreements and Depository Contracts
(September 1, 1992)(1)
(9)(a) Administrative Services Agreement between Aetna Life Insurance and Annuity
Company and Aetna Investment Advisers Fund, Inc.
(May 1, 1996)(2)
(9)(b) License Agreement (April 4, 1989)
(10)(a) Opinion of Counsel(3)
(10)(b) Consent of Counsel
<PAGE>
(11) Consent of Independent Auditors
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Schedule for Computation of Performance Data
(17) See exhibit 27 below
(18) Not Applicable
(19) Powers of Attorney
(27) Financial Data Schedule
</TABLE>
1. Incorporated herein by reference to Post-Effective Amendment No. 12 to the
Registration Statement on Form N-1A (File No. 33-27247), as filed
electronically on April 25, 1996.
2. Incorporated herein by reference to Post-Effective Amendment No. 14 to
Registration Statement on Form N-1A (File No. 33-27247), as filed
electronically on June 7, 1996.
3. Incorporated herein by reference to Registrant's Rule 24f-2 Notice for the
fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission on February 28, 1997.
<PAGE>
Item 25. Persons Controlled by or Under Common Control
- ------------------------------------------------------
Registrant is a Maryland corporation for which separate financial
statements are filed. As of February 28, 1997, Aetna Life Insurance and
Annuity Company owned 99.94% of Registrant's outstanding voting
securities.
Aetna Life Insurance and Annuity Company is a wholly owned subsidiary
of Aetna Retirement Holdings, Inc. which is in turn a wholly owned
subsidiary of Aetna Retirement Services, Inc. which is a wholly owned
subsidiary of Aetna Services, Inc., and an indirectly wholly owned
subsidiary of Aetna Inc.
A list of all persons directly or indirectly under common control with
the Registrant and a list which indicates the principal business of
each such company referenced in the diagram are incorporated herein by
reference to Item 26 of Post-Effective Amendment No. 2 to the
Registration Statement on Form N-4 (File No. 33-61897), as filed
electronically with the Securities and Exchange Commission on April 11,
1997.
Item 26. Number of Holders of Securities
- ----------------------------------------
(1) Title of Class (2) Number of Record Holders
------------------ ----------------------------
Shares of Common Stock 2 as of February 28, 1997
$1.00 par value
Item 27. Indemnification
- ------------------------
Article 8, Section (d) of the Registrant's Articles of Incorporation
which are incorporated by reference to Post-Effective Amendment No. 12
to Registration Statement on Form N-1A (File No. 33-27247), as filed
electronically on April 25, 1996, provides for indemnification of
directors and officers. In addition, the Registrant's officers and
directors are covered under a directors and officers errors and
omissions liability insurance policy issued by Gulf Insurance Company
which expires on October 1, 1997.
Reference is also made to Section 2-418 of the Corporations and
Associations Article of the Annotated Code of Maryland which provides
generally that (1) a corporation may (but is not required to) indemnify
its directors for judgments, fines and expenses in proceedings in which
the director is named a party solely by reason of being a director,
provided the director has not acted in bad faith, dishonestly or
unlawfully, and provided further that the director has not received any
"improper personal benefit"; and (2) that a corporation must (unless
otherwise provided in the corporation's charter or articles of
incorporation) indemnify a director who is successful on the merits in
defending a suit against him by reason of being a director for
"reasonable expenses." The statutory provisions are not exclusive;
i.e., a corporation may provide greater indemnification rights than
those provided by statute.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
- --------------------------------------------------------------
The Investment Adviser, Aetna Life Insurance and Annuity Company
(Aetna), is an insurance company that issues variable and fixed
annuities, and variable and universal life insurance policies and acts
as principal underwriter and depositor for separate accounts holding
assets for variable contracts and policies. It also acts as the
principal underwriter and investment adviser for the Registrant and
Aetna Series Fund, Inc., Aetna Variable Fund, Aetna Income Shares,
Aetna Variable Encore Fund, Aetna Variable Portfolio, Inc., Aetna GET
Fund, and Aetna Generation Portfolios, Inc. (all management investment
companies registered under the Investment Company Act of 1940 (1940
Act)). Additionally, Aetna acts as the principal underwriter and
depositor for Variable Annuity Account B of Aetna, Variable Annuity
Account C of Aetna, Variable Annuity Account G of Aetna, and Variable
Life Account B of Aetna (separate accounts of Aetna registered as unit
investment trusts under the 1940 Act). Aetna is also the principal
underwriter for Variable Annuity Account I of Aetna Insurance Company
of America (AICA) (a separate account of AICA registered as a unit
investment trust under the 1940 Act).
The following table summarizes the business connections of the
directors and principal officers of the Investment Adviser.
- -------------------------------------------------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1994/Addresses*/**
- -------------------------------------------------------------------------------
Daniel P. Kearney Director, President Director and President (since
and Executive Officer March 1996) -- Aetna Retirement
Holdings, Inc.; President (since
December 1995) -- Aetna Retirement
Services, Inc.; President (since
December 1993) -- Aetna Life
Insurance and Annuity Company;
Executive Vice President (since
December 1993) -- Aetna Inc.
(formerly Aetna Life and Casualty
Company); Director (since 1992) --
MBIA, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1994/Addresses*/**
- -------------------------------------------------------------------------------
Christopher J. Burns Director and Senior Director, Aetna Financial
Vice President Services, Inc. (since January
1996), and Aetna Investment
Services, Inc. (since July
1992) and President, Chief
Operations Officer (since
November 1996) -- Aetna
Investment Services, Inc.;
Director (since March 1996) --
Aetna Retirement Holdings, Inc.
Laura R. Estes Director and Senior Director (since December 1996)
Vice President -- Aetna Insurance Agency
Holding Company, Inc.); Director
(since March 1996) -- Aetna
Retirement Holdings, Inc; Senior
Vice President (since March 1991)
-- Aetna Life Insurance and
Annuity Company.
J. Scott Fox Director and Senior Director and Senior Vice
Vice President President (since March 1997) --
Aetna Retirement Holdings, Inc.;
Senior Vice President (since March
1997) -- Aetna Life Insurance and
Annuity Company; Managing
Director, Chief Operating Officer,
Chief Financial Officer, Treasurer
(April 1994 - March 1997) --
Aeltus Investment Management, Inc.
<PAGE>
- -------------------------------------------------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1994/Addresses*/**
- -------------------------------------------------------------------------------
Timothy A. Holt Director, Senior Vice Senior Vice President and Chief
President and Chief Financial Officer (since
Financial Officer February 1996) -- Aetna Life
Insurance and Annuity Company;
Vice President (June 1991 -
February 1996) -- Portfolio
Management/Investment Group, Aetna
Inc. (formerly known as Aetna Life
and Casualty Company); Director
(since March 1996) -- Aetna
Retirement Holdings, Inc.; Vice
President (since September 1996)
-- Aetna Retirement Holdings, Inc.
Gail P. Johnson Director and Vice Vice President (since December
President 1992) -- Aetna Life Insurance
and Annuity Company.
John Y. Kim Director and Senior President (since December 1995)
Vice President -- Aeltus Investment
Management, Inc.; Chief
Investment Officer (since May
1994) -- Aetna Life Insurance
and Annuity Company.
Shaun P. Mathews Director and Vice Director (since December 1996)
President -- Aetna Insurance Agency
Holding Company, Inc.; Vice
President (since February 1996),
Senior Vice President (March 1991
- Present) -- Aetna Life Insurance
and Annuity Company; Director,
Aetna Investment Services, Inc.
(since July 1993), and Aetna
Insurance Company of America
(since February 1993).
Glen Salow Director and Vice Vice President (since 1992) --
President Aetna Life Insurance and
Annuity Company.
<PAGE>
- -------------------------------------------------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1994/Addresses*/**
- -------------------------------------------------------------------------------
Creed R. Terry Director and Vice Vice President (since February
President 1996), Market Strategist
(August 1995 -- February 1996) --
Aetna Life Insurance and Annuity
Company; President, (1991 - 1995)
Chemical Technology Corporation (a
subsidiary of Chemical Bank).
Kirk P. Wickman Vice President, Vice President, General Counsel
General Counsel and and Corporate Secretary (since
Secretary March 1997) -- Aetna Retirement
Holdings, Inc.; Vice President,
General Counsel and Secretary
(since November 1996) -- Aetna
Life Insurance and Annuity
Company; Vice President and
Counsel (June 1992 - November
1996) -- Aetna Life Insurance
Company.
Deborah Koltenuk Vice President and Vice President, Investment
Treasurer, Corporate Planning and Financial
Controller Reporting (April 1996 to July
1996) -- Aetna Life Insurance
Company; Vice President,
Investment Planning and Financial
Reporting (October 1994 to April
1996) Aetna Life Insurance
Company, the Aetna Casualty and
Surety Company and The Standard
Fire and Insurance Company; Vice
President and Treasurer, Corporate
Controller (since March 1996) --
Aetna Retirement Holdings, Inc.
Frederick D. Kelsven Vice President and Director of Compliance (January
Chief Compliance 1985 to September 1996) --
Officer Nationwide Life Insurance
Company.
* The principal business address of each person named is 151 Farmington
Avenue, Hartford, Connecticut 06156.
<PAGE>
** Certain officers and directors of the investment adviser currently hold
(or have held during the past two years) other positions with affiliates
of the Registrant that are not deemed to be principal positions.
For information regarding Aeltus Investment Management, Inc. (Aeltus), the
subadviser for the Fund, reference is hereby made to "Management of The Fund" in
the Prospectus. For information as to the business, profession, vocation or
employment of a substantial nature of each of the officers and directors of
Aeltus, reference is hereby made to the current Form ADV (File No. 801-9046) of
Aeltus filed under the Investment Advisers Act of 1940, incorporated herein by
reference.
Item 29. Principal Underwriters
- -------------------------------
(a) In addition to serving as the principal underwriter and investment
adviser for the Registrant, Aetna Life Insurance and Annuity
Company (Aetna) also acts as the principal underwriter and
investment adviser for Aetna Variable Fund, Aetna Variable Encore
Fund, Aetna Series Fund, Inc., Aetna Income Shares, Aetna
Generation Portfolios, Inc., Aetna GET Fund and Aetna Variable
Portfolios, Inc. (all registered management investment companies
under the Investment Company Act of 1940 (1940 Act)).
Additionally, Aetna acts as the principal underwriter and
depositor for Variable Annuity Accounts B of Aetna, Variable
Annuity Account C of Aetna, Variable Annuity Account G of Aetna
and Variable Life Account B of Aetna (separate accounts of Aetna
registered as unit investment trusts under the 1940 Act). Aetna is
also the principal underwriter for Variable Annuity Account I of
Aetna Insurance Company of America (AICA) (a separate account of
AICA registered as a unit investment trust under the 1940 Act).
(b) The following are the directors and principal officers of the Underwriter:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------------
<S> <C> <C>
Daniel P. Kearney Director and President Director
Christopher J. Burns Director and Senior Vice
President
Laura R. Estes Director and Senior Vice
President
J. Scott Fox Director and Senior Vice Vice President and Treasurer
President
Timothy A. Holt Director, Senior Vice Director
President and Chief Financial
Officer
<PAGE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------------
<S> <C> <C>
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice
President
Shaun P. Mathews Director and Vice President Director and President
Glen Salow Director and Vice President
Creed R. Terry Director and Vice President
Kirk P. Wickman Vice President, General
Counsel and Secretary
Deborah Koltenuk Vice President and Treasurer,
Corporate Controller
Frederick D. Kelsven Vice President and Chief
Compliance Officer
</TABLE>
* The principal business address of all directors and officers listed is 151
Farmington Avenue, Hartford, Connecticut 06156.
(c) Not applicable.
Item 30. Location of Accounts and Records
- -----------------------------------------
As required by Section 31(a) of the 1940 Act and the rules thereunder,
the Registrant and its investment adviser, Aetna, maintain physical
possession of each account, book and other documents at their principal
place of business located at:
151 Farmington Avenue
Hartford, Connecticut 06156.
Item 31. Management Services
- ----------------------------
Not applicable.
Item 32. Undertakings
- ---------------------
The Registrant undertakes that if requested by the holders of at least
10% of the Registrant's outstanding shares, the Registrant will hold a
shareholder meeting for the purpose of voting on the removal of one or
more Directors and will assist with
<PAGE>
communication concerning that shareholder meeting as if Section 16(c)
of the 1940 Act applied.
The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of its latest annual report to
shareholders, upon request and without charge.
Insofar as indemnification for liability arising under the Securities
Act of 1933 (1933 Act) may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
----------
Pursuant to the Securities Act of 1933 and the Investment Company Act of 1940,
Aetna Investment Advisers Fund, Inc. (Registrant) certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment No. 15 to Registration Statement on Form N-1A (File No.
33-27247) and has duly caused this Post-Effective Amendment No. 15 to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Hartford, and State of Connecticut, on the 11th
day of April, 1997.
AETNA INVESTMENT ADVISERS
FUND, INC.
-----------------------------
Registrant
By Shaun P. Mathews *
-------------------------
Shaun P. Mathews
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons on April 11, 1997 in the capacities indicated.
Signature Title Date
- --------- ----- ----
Shaun P. Mathews* President and Director )
- -------------------------- (Principal Executive Officer) )
Shaun P. Mathews
)
Morton Ehrlich* Director )
- --------------------------
Morton Ehrlich )
)
Maria T. Fighetti* Director ) April
- --------------------------
Maria T. Fighetti ) 11, 1997
)
David L. Grove* Director )
- --------------------------
David L. Grove )
)
Timothy A. Holt* Director )
- --------------------------
Timothy A. Holt )
<PAGE>
)
Daniel P. Kearney* Director )
- --------------------------
Daniel P. Kearney )
)
Sidney Koch* Director )
- --------------------------
Sidney Koch )
)
Corine T. Norgaard* Director )
- --------------------------
Corine T. Norgaard )
)
Richard G. Scheide* Director )
- --------------------------
Richard G. Scheide )
)
J. Scott Fox* Vice President and Treasurer )
- --------------------------
J. Scott Fox (Principal Financial and Accounting
Officer) )
By:/s/Susan E. Bryant
----------------------------------
*Susan E. Bryant
Attorney-in-Fact
<PAGE>
Aetna Investment Advisers Fund, Inc.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
<S> <C> <C>
99-(b)(1)(a) Articles of Incorporation *
99-(b)(1)(b) Articles of Amendment (March 8, 1989)
--------------
99-(b)(2) Amended and Restated Bylaws *
99-(b)(4) Instruments Defining Rights of Holders *
99-(b)(5)(a) Investment Advisory Agreement between Aetna Life
Insurance and Annuity Company and Aetna Investment
Advisers Fund, Inc.
--------------
99-(b)(5)(b) Subadvisory Agreement between Aetna Life Insurance
and Annuity Company and Aeltus Investment
Management, Inc.
--------------
99-(b)(6) Underwriting Agreement between Aetna Life
Insurance and Annuity Company and Aetna Investment
Advisers Fund, Inc.
--------------
99-(b)(8) Custodian Agreements and Depository Contracts *
99-(b)(9)(a) Administrative Services Agreement between Aetna *
Life Insurance and Annuity Company and Aetna
Investment Advisers Fund, Inc.
99-(b)(9)(b) License Agreement
--------------
99-(b)(10)(a) Opinion of Counsel *
99-(b)(10)(b) Consent of Counsel
--------------
99-(b)(11) Consent of Independent Auditors
--------------
99-(b)(16) Schedule for Computation of Performance Data
--------------
99-(b)(19) Powers of Attorney --------------
27 Financial Data Schedule
--------------
</TABLE>
* Incorporated by Reference
AETNA MAXIMA FUND, INC.
Articles of Amendment
Aetna Maxima Fund, Inc., a Maryland corporation, whose principal office in the
State of Maryland is in the City of Baltimore, at 32 South Street, Baltimore,
Maryland 21202, hereinafter called the Corporation, hereby certifies to the
State Department of Assessments and Taxation of Maryland, that:
The Board of Directors of the Corporation on March 8, 1989, duly adopted a
vote in which was set forth the following amendment to the Articles of
Incorporation of the Corporation. No stock entitled to be voted on the matter
was outstanding or subscribed for at the time of approval.
VOTED: The Articles of Incorporation are hereby amended by deleting
the present Section FIRST thereof, and inserting in lieu
thereof the following:
FIRST: The name of the Corporation is Aetna Investment
Advisers Fund, Inc.
IN WITNESS WHEREOF, Aetna Maxima Fund, Inc. has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on March 8. 1989.
Aetna Maxima Fund, Inc.
/s/ John W. McGonigle
----------------------
John W. McGonigle
President
Witness:
/s/ G. Andrew Bonnewell
- --------------------------
G. Andrew Bonnewell
Secretary
THE UNDERSIGNED, President of Aetna Maxima Fund, Inc., who executed on behalf of
said corporation the foregoing Articles of Amendment, of which this certificate
is made a part, hereby acknowledges, in the name and on behalf of said
corporation, the foregoing Articles of Amendment to be the corporate act of said
corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ John W. McGonigle
----------------------
John W. McGonigle
President
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between AETNA LIFE INSURANCE AND ANNUITY COMPANY,
a Connecticut corporation (the "Adviser") and AETNA INVESTMENT ADVISERS FUND,
INC., a Maryland corporation (the "Fund"), as of the date set forth below.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Fund is registered with the Securities and Exchange Commission (the
"Commission") as an open-end, diversified, management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser is registered with the Commission as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
is in the business of acting as an investment adviser; and
WHEREAS, the Fund and the Adviser desire to enter into an agreement to provide
for investment advisory and management services for the Fund on the terms and
conditions hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
Subject to the terms and conditions of this Agreement and the policies and
control of the Fund's Board of Directors (the "Board"), the Fund hereby appoints
the Adviser to serve as the investment adviser to the Fund, to provide the
investment advisory services set forth below in Section II. The Adviser agrees
that, except as required to carry out its duties under this Agreement or
otherwise expressly authorized, it is acting as an independent contractor and
not as an agent of the Fund and has no authority to act for or represent the
Fund in any way.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall do the following:
1. supervise all aspects of the operations of the Fund;
2. select 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 and regularly report thereon to the Board;
3. formulate and implement continuing programs for the purchase and sale
of securities and regularly report thereon to the Board;
4. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy
<PAGE>
generally, the Fund, securities held by or under consideration for the
Fund, or the issuers of those securities;
5. provide economic research and securities analyses as the Adviser
considers necessary or advisable in connection with the Adviser's
performance of its duties hereunder;
6. obtain the services of, contract with, and provide 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;
7. prepare financial and performance reports, calculate and report daily
net asset values, and prepare any other financial data or reports, as
the Adviser from time to time, deems necessary or as are requested by
the Board; and
8. take any other actions which appear to the Adviser and the Board
necessary to carry into effect the purposes of this Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Adviser
Adviser hereby represents and warrants to the Fund as follows:
1. Due Incorporation and Organization. The Adviser is duly organized
and is in good standing under the laws of the State of
Connecticut and is fully authorized to enter into this Agreement
and carry out its duties and obligations hereunder.
2. Registration. The Adviser is registered as an investment adviser
with the Commission under the Advisers Act, and is registered or
licensed as an investment adviser under the laws of all
jurisdictions in which its activities require it to be so
registered or licensed. The Adviser shall maintain such
registration or license in effect at all times during the term of
this Agreement.
3. Best Efforts. The Adviser at all times shall provide its best
judgment and effort to the Fund in carrying out its obligations
hereunder.
B. Representations and Warranties of the Fund
The Fund hereby represents and warrants to the Adviser as follows:
1. Due Incorporation and Organization. The Fund has been duly
incorporated under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its
obligations hereunder.
-2-
<PAGE>
2. Registration. The Fund is registered as an investment company
with the Commission under the 1940 Act and shares of the Fund are
registered for offer and sale to the public under the Securities
Act of 1933, as amended (the "1933 Act") and all applicable state
securities laws. Such registrations will be kept in effect during
the term of this Agreement.
IV. DELEGATION OF RESPONSIBILITIES
A. Appointment of Subadviser
Subject to the approval of the Board and the shareholders of the Fund, the
Adviser may enter into a Subadvisory Agreement to engage a subadviser (the
"Subadviser") to the Adviser with respect to the Fund.
B. Duties of Subadviser
Under a Subadvisory Agreement, the Subadviser may be delegated some
or all of the following duties of the Adviser:
1. select 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 and regularly report thereon
to the Board;
2. formulate and implement continuing programs for the purchase and
sale of the securities of such issuers and regularly report
thereon to the Board;
3. obtain and evaluate 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;
4. provide economic research and securities analyses as the Adviser
considers necessary or advisable in connection with the Adviser's
performance of its duties hereunder;
5. give instructions to the custodian and/or sub-custodian of the
Fund appointed by the Board, as to deliveries of securities,
transfers of currencies and payments of cash for the Fund as
required to carry out the investment activities of the Fund, in
relation to the matters contemplated by this Agreement; and
6. provide such financial support, administrative services and other
duties as the Adviser deems necessary and appropriate.
-3-
<PAGE>
C. Duties of the Adviser
In the event the Adviser delegates certain responsibilities hereunder to a
Subadviser, the Adviser shall, among other things:
1. monitor the investment program maintained by the Subadviser for
the Fund and the Subadviser's compliance program to ensure that
the Fund's assets are invested in compliance with the Subadvisory
Agreement and the Fund's investment objectives and policies as
adopted by the Board and described in the most current effective
amendment of the registration statement for the Fund, as filed
with the Commission under the 1933 Act, and the 1940 Act
("Registration Statement");
2. review all data and financial reports prepared by the Subadviser
to assure that they are in compliance with applicable
requirements and meet the provisions of applicable laws and
regulations;
3. establish and maintain regular communications with the Subadviser
to share information it obtains with the Subadviser concerning
the effect of developments and data on the investment program
maintained by the Subadviser; and
4. oversee all matters relating to the offer and sale of the Fund's
shares, the Fund's corporate governance, reports to the Board,
contracts with all third parties on behalf of the Fund for
services to the Fund, reports to regulatory authorities and
compliance with all applicable rules and regulations affecting
the Fund's operations.
V. BROKER-DEALER RELATIONSHIPS
A. Portfolio Trades
The Adviser, at its own expense, shall place all orders for the purchase
and sale of portfolio securities for the Fund with brokers or dealers
selected by the Adviser, which may include brokers or dealers affiliated
with the Adviser. The Adviser shall use its best efforts to seek to
execute portfolio transactions at prices that are advantageous to the Fund
and at commission rates that are reasonable in relation to the benefits
received.
B. Selection of Broker-Dealers
In selecting broker-dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Fund and/or the other accounts over which the
Adviser or its affiliates exercise investment discretion. The Adviser may
also select brokers or dealers to effect transactions for the Fund who
provide payment for expenses of the Fund. The Adviser is authorized to pay
a broker or dealer who provides such brokerage and research services or
expenses, a commission for executing a portfolio transaction for the Fund
that is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if
-4-
<PAGE>
the Adviser determines in good faith that such amount of commission is
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer and is paid in compliance with Section
28(e) or other rules and regulations of the Commission. This determination
may be viewed in terms of either that particular transaction or the
overall responsibilities that the Adviser and its affiliates have with
respect to accounts over which they exercise investment discretion. The
Board shall periodically review the commissions paid by the Fund to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits received.
VI. CONTROL BY THE BOARD OF DIRECTORS
Any investment program undertaken by the Adviser pursuant to this Agreement, as
well as any other activities undertaken by the Adviser on behalf of the Fund
pursuant thereto, shall at all times be subject to any directives of the Board.
VII. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Adviser shall at all
times conform to:
1. all applicable provisions of the 1940 Act, the Advisers Act and
any rules or regulations adopted thereunder;
2. all policies and procedures of the Fund as adopted by the Board
and as described in the Registration Statement;
3. the provisions of the Fund's Articles of Incorporation, as
amended;
4. the provisions of the Bylaws of the Fund, as amended; and
5. any other applicable provisions of state and federal law.
VIII. COMPENSATION
For the services to be rendered, the facilities furnished and the expenses
assumed by the Adviser, the Fund shall pay to the Adviser an annual fee, payable
monthly, equal to .50% of the average daily net assets of the Fund. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily at the rate of 1/365 of .50% of the daily net assets of the Fund.
If this Agreement becomes effective subsequent to the first day of a month or
terminates before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees set forth above. Subject to the provisions of
Section X hereof, payment of the Adviser's compensation for the preceding month
shall be made as promptly as possible. For so long as a Subadvisory Agreement is
in effect, the Fund acknowledges that the Adviser will pay to the Subadviser, as
compensation for acting as Subadviser to the Fund, the fees specified in the
Subadvisory Agreement.
-5-
<PAGE>
IX. EXPENSES
The expenses in connection with the management of the Fund shall be allocated
between the Fund and the Adviser as follows:
A. Expenses of the Adviser
The Adviser shall pay:
1. the salaries, employment benefits and other related costs and
expenses of those of its personnel engaged in providing
investment advice to the Fund, including without limitation,
office space, office equipment, telephone and postage costs;
2. all fees and expenses of all Directors, officers and employees,
if any, of the Fund who are employees of the Adviser or an
affiliated entity, including any salaries and employment
benefits payable to those persons;
B. Expenses of the Fund
The Fund shall pay:
1. investment advisory fees pursuant to this Agreement;
2. brokers' commissions, issue and transfer taxes or other
transaction fees payable in connection with any transactions in
the securities in the Fund's investment portfolio or other
investment transactions incurred in managing the Fund's assets,
including portions of commissions that may be paid to reflect
brokerage research services provided to the Adviser;
3. fees and expenses of the Fund's independent accountants and
legal counsel and the independent Directors' legal counsel;
4. fees and expenses of any administrator, transfer agent,
custodian, dividend, accounting, pricing or disbursing agent of
the Fund;
5. interest and taxes;
6. fees and expenses of any membership in the Investment Company
Institute or any similar organization in which the Board deems
it advisable for the Fund to maintain membership;
7. insurance premiums on property or personnel (including officers
and Directors) of the Fund which benefit the Fund;
-6-
<PAGE>
8. all fees and expenses of the Fund's directors, who are not
"interested persons" (as defined in the 1940 Act) of the Fund or
the Adviser;
9. expenses of preparing, printing and distributing proxies, proxy
statements, prospectuses and reports to shareholders of the
Fund, except for those expenses paid by third parties in
connection with the distribution of Fund shares and all costs
and expenses of shareholders' meetings;
10. all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares of the
Fund or in cash;
11. costs and expenses of promoting the sale of shares in the Fund,
including preparing prospectuses and reports to shareholders of
the Fund, provided, nothing in this Agreement shall prevent the
charging of such costs to third parties involved in the
distribution and sale of Fund shares;
12. fees payable by the Fund to the Commission or to any state
securities regulator or other regulatory authority for the
registration of shares of the Fund in any state or territory of
the United States or in the District of Columbia;
13. all costs attributable to investor services, administering
shareholder accounts and handling shareholder relations,
(including, without limitation, telephone and personnel
expenses), which costs may also be charged to third parties by
the Adviser; and
14. any other ordinary, routine expenses incurred in the management
of the Fund's assets, and any nonrecurring or extraordinary
expenses, including organizational expenses, litigation
affecting the Fund and any indemnification by the Fund of its
officers, directors or agents.
X. EXPENSE LIMITATION
If, for any fiscal year, the total of all ordinary business expenses payable by
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 sale (unless a waiver is obtained), the
Adviser shall reduce its advisory fee to the extent necessary to meet such
expense limit, but the Adviser 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 amount of any such reduction is to be borne by the Adviser
and shall be deducted from the monthly advisory fee otherwise payable to the
Adviser during such fiscal year. For the purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the current fiscal year which shall
have elapsed prior to the date hereof and shall include the portion of the then
current fiscal year which shall have elapsed at the date of termination of this
Agreement.
-7-
<PAGE>
XI. ADDITIONAL SERVICES
Upon the request of the Board, the Adviser may perform certain accounting,
shareholder servicing or other administrative services on behalf of the Fund
that are not required by this Agreement. Such services will be performed on
behalf of the Fund and the Adviser may receive from the Fund such reimbursement
for costs or reasonable compensation for such services as may be agreed upon
between the Adviser and the Board on a finding by the Board that the provision
of such services by the Adviser is in the best interests of the Fund and its
shareholders. Payment or assumption by the Adviser of any Fund expense that the
Adviser is not otherwise required to pay or assume under this Agreement shall
not relieve the Adviser of any of its obligations to the Fund nor obligate the
Adviser to pay or assume any similar Fund expense on any subsequent occasions.
Such services may include, but are not limited to, (a) the services of a
principal financial officer of the Fund (including applicable office space,
facilities and equipment) whose normal duties consist of maintaining the
financial accounts and books and records of the Fund and the services (including
applicable office space, facilities and equipment) of any of the personnel
operating under the direction of such principal financial officer; (b) the
services of staff to respond to shareholder inquiries concerning the status of
their accounts, providing assistance to shareholders in exchanges among the
investment companies managed or advised by the Adviser, changing account
designations or changing addresses, assisting in the purchase or redemption of
shares; or otherwise providing services to shareholders of the Fund; and (c)
such other administrative services as may be furnished from time to time by the
Adviser to the Fund at the request of the Board.
XII. NONEXCLUSIVITY
The services of the Adviser to the Fund are not to be deemed to be exclusive,
and the Adviser shall be free to render investment advisory or other services to
others (including other investment companies) and to engage in other activities,
so long as its services under this Agreement are not impaired thereby. It is
understood and agreed that officers and directors of the Adviser may serve as
officers or directors of the Fund, and that officers or directors of the Fund
may serve as officers or directors of the Adviser to the extent permitted by
law; and that the officers and directors of the Adviser are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, officers, directors or trustees of any
other firm or trust, including other investment companies.
XIII. TERM
This Agreement shall become effective at the close of business on July 31, 1996,
and shall remain in force and effect through December 31, 1997, unless earlier
terminated under the provisions of Article XV.
XIV. RENEWAL
Following the expiration of its initial term, the Agreement shall continue in
force and effect from year to year, provided that such continuance is
specifically approved at least annually:
-8-
<PAGE>
1. a. by the Fund's directors, or
b. by the vote of a majority of the Fund's outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act), and
2. by the affirmative vote of a majority of the directors who are not parties
to this Agreement or interested persons of a party to this Agreement
(other than as a director of the Fund), by votes cast in person at a
meeting specifically called for such purpose.
XV. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Fund's Directors or by vote of a majority of the Fund's
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
or by the Adviser, on sixty (60) days' written notice to the other party. The
notice provided for herein may be waived by the party required to be notified.
This Agreement shall automatically terminate in the event of its "assignment",
as that term is defined in Section 2(a)(4) of the 1940 Act.
XVI. LIABILITY
The Adviser shall be liable to the Fund and shall indemnify the Fund for any
losses incurred by the Fund, whether in the purchase, holding or sale of any
security or otherwise, to the extent that such losses resulted from an act or
omission on the part of the Adviser or its officers, directors or employees,
that is found to involve willful misfeasance, bad faith or negligence, or
reckless disregard by the Adviser of its duties under this Agreement, in
connection with the services rendered by the Adviser hereunder.
XVII. NOTICES
Any notices under this Agreement shall be in writing, addressed and delivered,
mailed postage paid, or sent by other delivery service, or by facsimile
transmission to each party at such address as each party may designate for the
receipt of notice. Until further notice, such addresses shall be:
if to the Fund or the Adviser:
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Fax number: 860/273-8340
Attention: Secretary
-9-
<PAGE>
XVIII. QUESTIONS OF INTERPRETATION
This Agreement shall be governed by the laws of the State of Connecticut. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Commission issued pursuant to the 1940 Act. In addition, where the effect
of a requirement of the 1940 Act reflected in the provisions of this Agreement
is revised by rule, regulation or order of the Commission, such provisions shall
be deemed to incorporate the effect of such rule, regulation or order.
XIX. SERVICE MARK
The service mark of the Fund and the name "Aetna" have been adopted by the Fund
with the permission of Aetna Life and Casualty Company and their continued use
is subject to the right of Aetna Life and Casualty Company to withdraw this
permission in the event the Adviser or another subsidiary or affiliated
corporation of Aetna Life and Casualty Company should not be the investment
adviser of the Fund.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the 1st day of August, 1996.
AETNA LIFE INSURANCE AND ANNUITY
COMPANY
By: /s/ Shaun P. Mathews
----------------------------------
Name: Shaun P. Mathews
--------------------------------
Title: Vice President
-------------------------------
Attest:
/s/ DeAnn S. Anastasio
- ---------------------------------
DeAnn S. Anastasio AETNA INVESTMENT ADVISERS FUND, INC.
Assistant Corporate Secretary
By: /s/ Shaun P. Mathews
----------------------------------
Name: Shaun P. Mathews
--------------------------------
Attest: Title: President
--------------------------------
/s/ Susan E. Bryant
- ---------------------------------
Susan E. Bryant
Secretary
-11-
SUBADVISORY AGREEMENT
THIS AGREEMENT is made by and among AETNA LIFE INSURANCE AND ANNUITY COMPANY, a
Connecticut insurance corporation (the "Adviser"), AETNA INVESTMENT ADVISERS
FUND, INC., a Maryland Corporation (the "Fund") and AELTUS INVESTMENT
MANAGEMENT, INC., a Connecticut corporation (the "Subadviser") as of the date
set forth below.
W I T N E S S E T H
-------------------
WHEREAS, the Fund is registered with the Securities and Exchange Commission (the
"Commission") as an open-end, diversified, management investment company, under
the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, both the Adviser and the Subadviser are registered with the Commission
as investment advisers under the Investment Advisers Act of 1940, as amended
(the "Advisers Act") and both are in the business of acting as investment
advisers; and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement with the
Fund (the "Investment Advisory Agreement") which appoints the Adviser as the
investment adviser for the Fund; and
WHEREAS, Article IV of the Investment Advisory Agreement authorizes the Adviser
to delegate all or a portion of its obligations under the Investment Advisory
Agreement to a subadviser;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
Subject to the terms and conditions of this Agreement, the Adviser and the Fund
hereby appoint the Subadviser to manage the assets of the Fund as set forth
below in Section II, under the supervision of the Adviser and subject to the
approval and direction of the Fund's Board of Directors (the "Board"). The
Subadviser hereby accepts such appointment and agrees that it shall, for all
purposes herein, undertake such obligations as an independent contractor and not
as an agent of the Adviser. The Subadviser agrees, that except as required to
carry out its duties under this Agreement or otherwise expressly authorized, it
has no authority to act for or represent the Fund in any way.
<PAGE>
II. DUTIES OF THE SUBADVISER AND THE ADVISER
A. Duties of the Subadviser
The Subadviser shall regularly provide investment advice with respect to
the assets held by the Fund and shall continuously supervise the
investment and reinvestment of cash, securities and instruments or other
property comprising the assets of the Fund. In carrying out these duties,
the Subadviser shall:
1. select 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 and regularly report thereon
to the Adviser and, at the request of the Adviser, to the Board;
2. formulate and implement continuing programs for the purchase and
sale of securities and regularly report thereon to the Adviser
and, at the request of the Adviser or the Fund, to the Board;
3. obtain and evaluate 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;
4. provide economic research and securities analyses as requested by
the Adviser from time to time, or as the Adviser considers
necessary or advisable in connection with the Subadviser's
performance of its duties hereunder; and
5. give instructions to the custodian and/or sub-custodian of the
Fund appointed by the Board, concerning deliveries of securities,
transfers of currencies and payments of cash for the Fund, as
required to carry out the investment activities of the Fund as
contemplated by this Agreement; and
6. provide such financial support, administrative and other
services, such as preparation of financial data, determination of
the Fund's net asset value, preparation of financial and
performance reports, as the Adviser from time to time, deems
necessary and appropriate and which the Subadviser is willing and
able to provide.
-2-
<PAGE>
B. Duties of the Adviser
The Adviser shall retain responsibility for oversight of all activities of
the Subadviser and for monitoring its activities on behalf of the Fund. In
carrying out its obligations under this Agreement and the Investment
Advisory Agreement, the Adviser shall:
1. monitor the investment program maintained by the Subadviser for
the Fund and the Subadviser's compliance program to ensure that
the Fund's assets are invested in compliance with the Subadvisory
Agreement and the Fund's investment objectives and policies as
adopted by the Board and described in the most current effective
amendment of the registration statement for the Fund, as filed
with the Commission under the Securities Act of 1933, as amended
(the "1933 Act"), and the 1940 Act ("Registration Statement");
2. review all data and financial reports prepared by the Subadviser
to assure that they are in compliance with applicable
requirements and meet the provisions of applicable laws and
regulations;
3. file all periodic reports required to be filed by the Fund with
the applicable regulatory authorities;
4. review and deliver to the Board all financial, performance and
other reports prepared by the Subadviser under the provisions of
this Agreement or as requested by the Adviser;
5. establish and maintain regular communications with the Subadviser
to share information it obtains concerning the effect of
developments and data on the investment program maintained by the
Subadviser;
6. maintain contact with and enter into arrangements with the
custodian, transfer agent, auditors, outside counsel, and other
third parties providing services to the Fund;
7. oversee all matters relating to (i) the offer and sale of shares
of the Fund, including promotions, marketing materials,
preparation of prospectuses, filings with the Commission and
state securities regulators, and negotiations with
broker-dealers; (ii) shareholder services, including,
confirmations, correspondence and reporting to shareholders;
(iii) all corporate matters on behalf of the Fund, including
monitoring the corporate records of the Fund, maintaining contact
with the Board, preparing for, organizing and attending meetings
of the Board and the Fund's shareholders; (iv) preparation of
proxies when required; and (v)
-3-
<PAGE>
any other matters not expressly delegated to the Subadviser by
this Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Subadviser
The Subadviser hereby represents and warrants to the Adviser as follows:
1. Due Incorporation and Organization. The Subadviser is duly
organized and is in good standing under the laws of the State of
Connecticut and is fully authorized to enter into this Agreement
and carry out its duties and obligations hereunder.
2. Registration. The Subadviser is registered as an investment
adviser with the Commission under the Advisers Act, and is
registered or licensed as an investment adviser under all of the
laws of all jurisdictions in which its activities require it to
be so registered or licensed. The Subadviser shall maintain such
registration or license in effect at all times during the term of
this Agreement.
3. Regulatory Orders. The Subadviser is not subject to any stop
orders, injunctions or other orders of any regulatory authority
affecting its ability to carry out the terms of this Agreement.
The Subadviser will notify the Adviser and the Fund immediately
if any such order is issued or if any proceeding is commenced
that could result in such an order.
4. Compliance. The Subadviser has in place compliance systems and
procedures designed to meet the requirements of the Advisers Act
and the 1940 Act and it shall at all times assure that its
activities in connection with managing the Fund follow these
procedures.
5. Authority. The Subadviser is authorized to enter into this
Agreement and carry out the terms hereunder.
6. Best Efforts. The Subadviser at all times shall provide its best
judgment and effort to the Fund in carrying out its obligations
hereunder.
B. Representations and Warranties of the Adviser
The Adviser hereby represents and warrants to the Subadviser as follows:
-4-
<PAGE>
1. Due Incorporation and Organization. The Adviser is duly organized
and is in good standing under the laws of the State of
Connecticut and is fully authorized to enter into this Agreement
and carry out its duties and obligations hereunder.
2. Registration. The Adviser is registered as an investment adviser
with the Commission under the Advisers Act, and is registered or
licensed as an investment adviser under all of the laws of all
jurisdictions in which its activities require it to be so
registered or licensed. The Adviser shall maintain such
registration or license in effect at all times during the term of
this Agreement.
3. Regulatory Orders. The Adviser is not subject to any stop orders,
injunctions or other orders of any regulatory authority affecting
its ability to carry out the terms of this Agreement. The Adviser
will notify the Subadviser and the Fund immediately if any such
order is issued or if any proceeding is commenced that could
result in such an order.
4. Authority. The Adviser is authorized to enter into this Agreement
and carry out the terms hereunder.
5. Best Efforts. The Adviser at all times shall provide its best
judgment and effort to the Fund in carrying out its obligations
hereunder.
C. Representations and Warranties of the Fund
The Fund hereby represents and warrants to the Adviser as follows:
1. Due Incorporation and Organization. The Fund has been duly formed
as a business trust under the laws of the Commonwealth of
Massachusetts and it is authorized to enter into this Agreement
and carry out its obligations hereunder.
2. Registration. The Fund is registered as an investment company
with the Commission under the 1940 Act and shares of the Fund are
registered for offer and sale to the public under the 1933 Act,
and all applicable state securities laws. Such registrations will
be kept in effect during the term of this Agreement.
-5-
<PAGE>
IV. BROKER-DEALER RELATIONSHIPS
A. Portfolio Trades
The Subadviser shall place all orders for the purchase and sale of
portfolio securities for the Fund with brokers or dealers selected by the
Subadviser, which may include brokers or dealers affiliated with the
Subadviser. The Subadviser shall use its best efforts to seek to execute
portfolio transactions at prices that are advantageous to the Fund giving
consideration to the services and research provided and at commission
rates that are reasonable in relation to the benefits received.
B. Selection of Broker-dealers
In selecting broker-dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Fund and/or the other accounts over which the
Subadviser or its affiliates exercise investment discretion. The
Subadviser may also select brokers or dealers to effect transactions for
the Fund who provide payment for expenses of the Fund. The Subadviser is
authorized to pay a broker or dealer who provides such brokerage and
research services or expenses, a commission for executing a portfolio
transaction for the Fund that is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction
if the Subadviser determines in good faith that such amount of commission
is reasonable in relation to the value of the brokerage, research and
other services provided by such broker or dealer and is paid in compliance
with Section 28(e) or other rules and regulations of the Commission. This
determination may be viewed in terms of either that particular transaction
or the overall responsibilities that the Subadviser and its affiliates
have with respect to accounts over which they exercise investment
discretion. The Board shall periodically review the commissions paid by
the Fund to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits received.
V. CONTROL BY THE BOARD OF DIRECTORS
Any investment program undertaken by the Subadviser pursuant to this Agreement,
as well as any other activities undertaken by the Subadviser at the direction of
the Adviser with respect to the Fund, shall at all times be subject to any
directives of the Board.
VI. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Subadviser shall at
all times conform to:
-6-
<PAGE>
1. all applicable provisions of the 1940 Act, the Advisers Act and any
rules and regulations adopted thereunder;
2. all policies and procedures of the Fund as adopted by the Board and as
described in the Registration Statement;
3. the provisions of the Articles of Incorporation of the Fund, as amended
from time to time;
4. the provisions of the Bylaws of the Fund, as amended from time to time;
and
5. any other applicable provisions of state or federal law.
VII. COMPENSATION
A. Payment Schedule
The Adviser shall pay the Subadviser, as compensation for services
rendered hereunder, from its own assets, an annual fee of up to .30% of
the average daily net assets in the Fund, payable monthly. Except as
hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily at the rate of 1/365 of the annual
Subadvisory fee of up to .30% applied to the daily net assets of the Fund.
If this Agreement becomes effective subsequent to the first day of a month
or shall terminate before the last day of a month, compensation for that
part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees set forth above.
B. Reduction
Payment of the Subadviser's compensation for the preceding month shall be
made as promptly as possible, except as provided below. The Subadviser
acknowledges that, pursuant to the Investment Advisory Agreement, the
Adviser has agreed to reduce its fee or reimburse the Fund if the expenses
borne by the Fund exceed the expense limitations applicable to the Fund
imposed by the securities laws or regulations of any jurisdiction in which
the Fund shares are qualified for sale. Accordingly, the Subadviser agrees
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, 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 sale
(unless a waiver is obtained), the Subadviser shall reduce its advisory
fee to the extent necessary to meet such expense limit, but will not be
required to reimburse the Fund for any ordinary business expenses which
exceed the amount of its advisory fee for the fiscal year. The Subadviser
shall
-7-
<PAGE>
contribute to the amount of such reduction by reimbursing the Adviser in
proportion to the amounts which the Adviser and Subadviser would have been
entitled to receive for such year. For the purposes of this paragraph, the
term "fiscal year" shall exclude the portion of the current fiscal year
which elapsed prior to the effective date of this Agreement, but shall
include the portion of the then current fiscal year has elapsed at the
date of termination of this Agreement.
VIII. ALLOCATION OF EXPENSES
The Subadviser shall pay the salaries, employment benefits and other related
costs of those of its personnel engaged in providing investment advice to the
Fund hereunder, including, but not limited to, office space, office equipment,
telephone and postage costs. In the event the Subadviser incurs any expense that
is the obligation of the Adviser as set out in this Agreement, the Adviser shall
reimburse the Subadviser for such expense on presentation of a statement
indicating the expenses incurred and the amount paid by the Subadviser.
IX. NONEXCLUSIVITY
The services of the Subadviser with respect to the Fund are not to be deemed to
be exclusive, and the Subadviser shall be free to render investment advisory and
administrative or other services to others (including other investment
companies) and to engage in other activities. It is understood and agreed that
officers or directors of the Subadviser may serve as officers or directors of
the Adviser or officers or directors of the Fund; that officers or directors of
the Adviser or officers or directors of the Fund may serve as officers or
directors of the Subadviser to the extent permitted by law; and that the
officers and directors of the Subadviser are not prohibited from engaging in any
other business activity or from rendering services to any other person, or from
serving as partners, officers, directors or trustees of any other firm or trust,
including other investment advisory companies.
X. TERM
This Agreement shall become effective at the close of business on July 31, 1996,
and shall remain in force and effect through December 31, 1997, unless earlier
terminated under the provisions of Article XI. Following the expiration of its
initial term, the Agreement shall continue in force and effect for one year
periods, provided such continuance is specifically approved at least annually:
1. (a) by the Fund's directors or (b) by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and
-8-
<PAGE>
2. by the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of a party to this
Agreement (other than as a director of the Fund), by votes cast in
person at a meeting specifically called for such purpose.
XI. TERMINATION
This Agreement may be terminated:
1. at any time, without the payment of any penalty, by vote of the Fund's
directors or by vote of a majority of the outstanding voting securities
of the Fund; or
2. by the Adviser, the Fund or the Subadviser on sixty (60) days' written
notice to the other party, unless written notice is waived by the party
required to be notified; or
3. automatically in the event there is an "assignment" of this Agreement,
as defined in Section 2 (a) (4) of the 1940 Act.
XII. LIABILITY
The Subadviser shall be liable to the Fund and the Adviser and shall indemnify
the Fund and the Adviser for any losses incurred by the Fund, or the Adviser
whether in the purchase, holding or sale of any security or otherwise, to the
extent that such losses resulted from an act or omission on the part of the
Subadviser or its officers, directors or employees, that is found to involve
willful misfeasance, bad faith or negligence, or reckless disregard by the
Subadviser of its duties under this Agreement, in connection with the services
rendered by the Subadviser hereunder.
XIII. NOTICES
Any notices under this Agreement shall be in writing, addressed and delivered,
mailed postage paid, or sent by other delivery service, or by facsimile
transmission to each party at such address as each party may designate for the
receipt of notice. Until further notice, such address shall be:
if to the Fund or the Adviser:
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Fax number: 860/273-8340
Attn: Secretary
-9-
<PAGE>
if to the Subadviser:
242 Trumbull Street
Hartford, Connecticut 06103-1205
Fax number: 860/275-4440
Attention: President
XIV. QUESTIONS OF INTERPRETATION
This Agreement shall be governed by the laws of the State of Connecticut. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States Courts or, in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Commission issued pursuant to the 1940 Act. In addition, where the effect
of a requirement of the 1940 Act reflected in any provision of the Agreement is
revised by rule, regulation or order of the Commission, such provision shall be
deemed to incorporate the effect of such rule, regulation or order.
XV. SERVICE MARK
The service mark of the Fund and Adviser, and the name "Aetna" have been adopted
by the Fund with the permission of Aetna Life and Casualty Company and their
continued use is subject to the right of Aetna Life and Casualty Company to
withdraw this permission in the event the Subadviser or another subsidiary or
affiliated corporation of Aetna Life and Casualty Company should not be the
investment adviser of the Fund.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the 1st day of August, 1996.
Aetna Life Insurance and Annuity Company
By: /s/ Shaun P. Mathews
----------------------------------------
Attest: Name: Shaun P. Mathews
Title: Vice President
/s/ DeAnn S. Anastasio
- -----------------------------
DeAnn S. Anastasio
Assistant Corporate Secretary
Aeltus Investment Management, Inc.
Attest: By: /s/ John Y. Kim
----------------------------------------
Name: John Y. Kim
Title: President
/s/ Melinda L. Dziavit
- -----------------------------
Assistant Secretary
Aetna Investment Advisers Fund, Inc.
By: /s/ Shaun P. Mathews
----------------------------------------
Name: Shaun P. Mathews
Attest: Title: President
/s/ Susan E. Bryant
- -----------------------------
Susan E. Bryant
Secretary
-11-
AETNA INVESTMENT ADVISERS FUND, INC.
UNDERWRITING AGREEMENT
THIS AGREEMENT, is entered into this 30th day of April, 1996, by and between
Aetna Life Insurance and Annuity Company, Inc., a Connecticut corporation
(Aetna), and Aetna Investment Advisers Fund, Inc., a Maryland Corporation
(Fund).
WHEREAS, the Fund is an open-end management investment company registered with
the Securities and Exchange Commission (Commission) under the Investment Company
Act of 1940, as amended (1940 Act); and
WHEREAS the Fund has registered the shares of its common stock (Shares) for
offer and sale to the public under the Securities Act of 1933, as amended; and
WHEREAS, the Fund wishes to retain Aetna, and Aetna is willing to act, as
principal underwriter in connection with the offer and sale of the Shares; and
NOW, THEREFORE, in consideration of the promises and mutual covenants herein
contained, the parties agree as follows:
1. Appointment of Underwriter. The Fund hereby appoints Aetna and Aetna hereby
accepts appointment as underwriter in connection with the distribution of the
Shares. The Fund authorizes Aetna to solicit orders for the purchase of the
Shares as set forth in the Registration Statement currently effective with the
Commission for the Shares. It is understood that the Shares are offered only
through variable annuity contracts and variable life policies issued by Aetna
and its affiliates.
2. Compensation. Aetna shall receive no separate compensation for providing
services under this Agreement. It is understood that the compensation Aetna
receives in connection with the issuance of the variable annuity contracts or
variable life policies shall be the only consideration it receives for serving
as underwriter hereunder.
3. Aetna Expenses. Aetna shall be responsible for any costs of printing and
distributing prospectuses and statements of additional information necessary to
offer and sell the Shares, and such other sales literature, reports, forms and
advertisements in connection as it elects to prepare, provided such materials
comply with the applicable provisions of federal and state law.
4. Fund Expenses. The Fund shall be responsible for the costs of registering the
Shares with the Commission and for the costs of preparing prospectuses,
statements of additional information and such other documents as are required to
maintain the registration of the Shares with the Commission.
5. Share Certificates. The Fund shall not issue certificates representing
Shares.
<PAGE>
6. Status of Underwriter and Other Persons. Aetna is an independent contractor
and shall be agent for the Fund only in respect to the sale and redemption of
the Shares. Any person, even though also an officer, director, employee or agent
of Aetna, who may be or become an officer, director, employee or agent of the
Fund, shall be deemed, when rendering services to the Fund or acting in any
business of the Fund, to be rendering such services to or acting solely for the
Fund and not as an officer, director, employee or agent or one under the control
or direction of Aetna even though paid by Aetna.
7. Nonexclusivity. The services of Aetna to the Fund under this Agreement are
not to be deemed exclusive, and Aetna shall be free to render similar services
or other services to others and to engage in other activities related or
unrelated to those provided under this agreement.
8. Effectiveness and Termination of Agreement. This Agreement shall become
effective at the close of business on the date set forth in the first paragraph
of this Agreement and shall remain in force and effect, through December 31,
1997, unless earlier terminated under the provisions of Section 9. Following the
expiration of its initial term, the Agreement shall continue in force and effect
for one year periods, provided such continuance is specifically approved at
least annually by the Fund's trustees, or by the vote of a majority of the
Fund's outstanding voting securities (as defined in Section 2(a)(42) of the 1940
Act.
9. Termination. This 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.
10. Liability of Aetna. Aetna shall be liable to the Fund and shall indemnify
the Fund for any losses incurred by the Fund, to the extent that such losses
resulted from an act or omission on the part of Aetna or its officers, directors
or employees in carrying out its duties hereunder, that is found to involve
willful misfeasance, bad faith or negligence, or reckless disregard by Aetna of
its duties under this Agreement.
11. Liability of Trustees. A copy of the Declaration of Trust of the Fund is on
file with the Secretary of The Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the trustees of the
Fund as trustees and not individually and that the obligations of this
instrument are not binding upon any of the trustees or shareholders individually
but are binding only upon the assets and property of the Fund. No provision of
this Agreement shall be construed to protect any trustee or officer of the Fund
or director or officer of the Aetna, from liability in violation of Section
17(h) and (i) of the 1940 Act.
12. Amendments. This Agreement may be amended or changed only by an instrument
in writing signed by both parties.
13. Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of Connecticut and the 1940 Act. To the extent that the
applicable laws of the State of Connecticut conflict with the applicable
provisions of the 1940 Act, however, the latter shall control.
-2-
<PAGE>
14. Notices. Any notices under this Agreement shall be in writing, addressed and
delivered, mailed postage paid, or sent by other delivery service, or by
facsimile transmission to each party at such address as each party may designate
for the receipt of notice. Until further notice, such addresses shall be:
if to the Fund or Aetna:
151 Farmington Avenue, RE4C
Hartford, Connecticut 06156
Fax number: 860/273-8340
15. Questions of Interpretation. This Agreement shall be governed by the laws of
the State of Connecticut. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States Courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Commission issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
the provisions of this Agreement is revised by rule, regulation or order of the
Commission, such provisions shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the 30th day of April, 1996.
AETNA LIFE INSURANCE AND ANNUITY
COMPANY
ATTEST: By:/s/Shaun P. Mathews
--------------------------------
Name:Shaun P. Mathews
--------------------------------
/s/ DeAnn S. Anastasio Title:Vice President
- ------------------------- --------------------------------
Assistant Secretary
AETNA INVESTMENT ADVISERS FUND, INC.
By:/s/Shaun P. Mathews
--------------------------------
Name:Shaun P. Mathews
------------------------------
ATTEST: Title:President
-----------------------------
/s/ Susan E. Bryant
- -------------------------
Secretary
-3-
LICENSE AGREEMENT
This Agreement, made at Hartford, Connecticut, this 4th day of April, 1989
by and between Aetna Life and Casualty Company, a Connecticut corporation with a
principal place of business at 151 Farmington Avenue, Hartford, Connecticut
(hereinafter called "Licensor") and Aetna Investment Advisers Fund, Inc., a
Maryland corporation with a principal place of business at 1001 Liberty Avenue,
Pittsburgh, Pennsylvania (hereinafter called "Licensee").
WITNESSETH:
- -----------
WHEREAS, Licensor either directly or by its affiliated companies has
adopted and is using and is the owner of the service mark and registration
thereof listed on Schedule A attached hereto and made a party hereof
(hereinafter referred to collectively as the "Licensed Service Mark"), which
service mark has become valuable and important in identifying the high quality
of services rendered under the said mark by the Licensor, and
WHEREAS, Licensee is a related company of Licensor by virtue of the
management of the assets of Licensee by Aetna Life Insurance and Annuity
Company, a wholly-owned subsidiary of Licensor; and
WHEREAS, the parties deem it in the interest of each, and it is the
intention and desire of the parties, that Licensee be permitted to use the
Licensed Service Mark as identifying the services of Licensee specified
hereinafter and that it be permitted to use the name of "Aetna" as a part of its
name; and
WHEREAS, both parties recognize the desire to maintain and preserve the
validity and integrity of the Licensed Service Mark forming the subject matter
of this Agreement,
NOW, THEREFORE, for good and valuable consideration, the receipt whereof
is hereby acknowledged, and in consideration and of their mutual promises and
undertakings, the parties hereto agree as follows:
1. Licensor grants to Licensee and Licensee accepts a nonexclusive license
to use the Licensed Service Mark throughout the United States and Canada in
connection with and for identifying the investment services provided by
Licensee.
2. The license granted in paragraph 1 hereof includes the grant of
permission to Licensee to use the name "Aetna" as a part of its name.
3. No right is granted to Licensee to use any other service mark of
Licensor not now or hereafter listed in Schedule A hereof.
<PAGE>
4. Licensor shall have the right to control the nature and quality of the
services performed by Licensee under the Licensed Service Mark and Licensee
agrees to maintain the same high quality of services as are maintained by
Licensor and that it will conform to the performance standards established by
Licensor. Licensee shall submit to Licensor such evidence as Licensor may
reasonably require to insure Licensee's compliance with its obligations set
forth herein.
5. It is expressly stipulated that the use of the Licensed Service Mark by
Licensee shall inure to the benefit of Licensor and any registration of said
name covering the services performed by Licensee under this license shall be
registered in the name of Licensor, it being understood that the present license
will not in any way affect the ownership by Licensor of the Licensed Service
Mark which shall continue to be the exclusive property of Licensor. Licensee
shall not at any time do or cause to be done any act contesting or in any way
impairing or tending to impair Licensor's entire right, title and interest in
the Licensed service Mark and the registration thereof.
6. Licensor shall have the right to control the form and manner in which
the Licensed Service Mark is used by Licensee upon or in connection with
advertisements, brochures or other printed material used in the sale or
advertising of Licensee's shares and Licensee agrees, upon request of Licensor,
to furnish Licensor with specimens of all such advertisements, brochures or
other printed material used by Licensee and that it will discontinue the use of
any such advertisements, brochures or other printed material which is not or
ceases to be approved by Licensor.
7. The consideration for the grant of this license shall be fixed at the
rate of One Dollar per year, Licensee to make payments annually.
8. Licensee shall not be deemed by virtue of this Agreement to be the
agent or legal representative of Licensor and shall not by virtue of this
Agreement have the right or authority to pledge the credit of or incur, any
obligation, expressed or implied, on behalf of Licensor.
9. The right to institute and prosecute suits for infringement of the
Licensed Service Mark is reserved exclusively to Licensor, and Licensor shall
have the right to join Licensee in any such suit as a formal party. Licensee
agrees to assist Licensor to the best of its ability and at Licensor's expense
in any such suit brought by Licensor. It is understood, however, that Licensor
is not obligated to institute and prosecute any such suits in any case in which
it, in its sole judgment, may consider it inadvisable to do so.
10. Unless sooner terminated as hereinafter provided, this Agreement shall
continue in full force and effect for a period of one (1) year from its
effective date and shall be automatically renewed thereafter from year to year.
Licensor shall have the unrestricted right to cancel this Agreement at any time
upon written notice to Licensee.
11. This Agreement shall automatically terminate in the event that:
<PAGE>
a) Licensee does not comply with any provisions of this Agreement
and the breach is not remedied within twenty (20) days of
written request thereof from Licensor.
b) Aetna Life Insurance and Annuity Company or another affiliate
of Licensor ceases to manage, directly or indirectly, the
assets of Licensee.
c) Licensee is dissolved, or a petition of bankruptcy is filed
against it, or if Licensee is placed in the hands of a
receiver or otherwise enter into any scheme or composition
with creditors, or makes an unauthorized assignment for the
benefit of creditors.
12. Neither this Agreement nor any rights hereunder may be assigned or
otherwise transferred by Licensee nor shall they inure to the benefit of any
trustee in bankruptcy, receiver or successor of Licensee, whether by operation
of law or otherwise without the written consent of Licensor, and any assignment
or transfer without such consent shall be null and void.
13. Upon termination of this Agreement, Licensee shall immediately
discontinue all use of the Licensed Service Mark and shall not thereafter use
any Mark which is similar or likely to cause confusion therewith.
14. This Agreement supersedes all other agreements between Licensor and
Licensee with respect to the use of the Licensed ServiceMark.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
AETNA LIFE AND CASUALTY COMPANY
By /s/ Lucille M. Nickerson
------------------------
Title Corporate Secretary
------------------------
ATTEST:
/s/ Paige L. Falasco
- -------------------------
Paige L. Falasco
Assistant Corporate Secretary
AETNA INVESTMENT ADVISERS FUND, INC.
By /s/ John McGongile
------------------------
Title President
------------------------
ATTEST:
/s/ George N. Gingold
- -------------------------
George N. Gingold
<PAGE>
SCHEDULE A
The following service mark and registrations are hereby licensed by
Licensor to Licensee in accordance with the terms of the Agreement dated April
4, 1989 by and between Aetna Life and Casualty Company (Licensor) and Aetna
Investment Advisers Fund, Inc. (Licensee).
1. Service Mark:
Aetna logo - block design, without legend.
2. Registration:
Reg. No. 822,577, Class 102, issued January 17, 1967 in the United States
Patent Office.
<PAGE>
APPLICATION FOR LICENSE TO USE AETNA NAME
1. Name of entity to be Licensed (Licensee)
Aetna Investment Advisers Fund, Inc.
------------------------------------
2. Name of person submitting application: George N. Gingold
Phone Number (203) 273-4686 -----------------
--------------
3. Address of Licensee's principal place of business:
1001 Liberty Avenue
-------------------
Pittsburgh, Pennsylvania 15222-3779
-----------------------------------
4. State of Incorporation of filing: Maryland
--------
5. Type of entity - e.g., Corporation, Partnership: Corporation
-----------
6. Any other name under which Licensee operates: None
----
7. Nature of Licensee's business: Diversified open-end management investment
company (mutual fund) ------------------------------------------
--------------------
8. Does Licensee want to use the orange block logo? Yes
---
19. Does Licensee want to use the logo with the words "Aetna Life & Casualty"
beneath it? If so, please briefly why.
No
--
10. Trace ownership of Licensee back to Aetna Life and Casualty Company - Show
exact percentages of holdings of each Aetna affiliate in the ownership
chain.
Aetna Investment Advisers Fund, Inc. is a diversified open-end management
-------------------------------------------------------------------------
investment company whose shares are sold only to Aetna Life Insurance and
-------------------------------------------------------------------------
Annuity Company ("Company"), a wholly-owned subsidiary of Aetna Life and
------------------------------------------------------------------------
Casualty Company, for allocation to its separate accounts established for
-------------------------------------------------------------------------
the purpose of funding variable annuity contracts issued by the Company.
------------------------------------------------------------------------
At the date of this application, the Company owns 100% of the Fund's
--------------------------------------------------------------------
shares outstanding, having provided $125,000 of initial capital to the
----------------------------------------------------------------------
Fund.
-----
11. If Licensee will be doing any business out of the United States, what has
the Tax Section of the Law Department recommended as an annual fee?
Not Applicable
--------------
151 Farmington Avenue
Hartford, CT 06156
April 11, 1997 SUSAN E. BRYANT
Counsel
Law Division, RE4A
Investments & Financial
Services
(860) 273-7834
Fax: (860) 273-0356
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir or Madam:
As Counsel of Aetna Life Insurance and Annuity Company (the "Company"), I hereby
consent to the use of my opinion dated February 28, 1997 (incorporated herein by
reference to the Rule 24f-2 Notice for the fiscal year ended December 31, 1996
filed on behalf of Aetna Investment Advisers Fund, Inc.) as an exhibit to this
Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A (File
No. 33-27247 and 811-5773).
Sincerely,
/s/Susan E. Bryant
Susan E. Bryant
Counsel
Consent of Independent Auditors
The Board of Directors
Aetna Investment Advisers Fund, Inc.:
We consent to the use of our report incorporated herein by reference and to the
references to our Firm under the headings "Financial Highlights" in the
Prospectus and "Independent Auditors" in the Statement of Additional
Information.
/S/KPMG Peat Marwick LLP
---------------------------
KPMG Peat Marwick LLP
Hartford, Connecticut
April 11, 1997
SCHEDULE FOR COMPUTATION OF PERFORMANCE DATA
AETNA INVESTMENT ADVISERS FUND, INC.
TOTAL RETURN CALCULATION
One Year Period Ended December 31, 1996
n
Formula P (1+T) = ERV
Initial Investment 10,000.00 = P
Ending Redeemable Value 11,517.03 = ERV
One Year Period Ended 12/31/96 1 = n
TOTAL RETURN FOR THE PERIOD 15.17% = T
TOTAL RETURN CALCULATION
Five Year Period Ended December 31, 1996
n
Formula P (1+T) = ERV
Initial Investment 10,000.00 = P
Ending Redeemable Value 17,055.24 = ERV
Five Year Period Ended 12/31/96 5 = n
TOTAL RETURN FOR THE PERIOD 11.27% = T
<PAGE>
TOTAL RETURN CALCULATION
Inception (April 3, 1989) through December 31, 1996
n
Formula P (1+T) = ERV
Initial Investment 10,000.00 = P
Ending Redeemable Value 22,899.68 = ERV
Inception (4/3/89) through 12/31/96 7.7509 = n
TOTAL RETURN FOR THE PERIOD 11.28% = T
POWER OF ATTORNEY
We, the undersigned directors and officers of Aetna Series Fund Inc., Aetna
Investment Advisers Fund, Inc., Aetna Generation Portfolios, Inc. and Aetna
Variable Portfolios, Inc. hereby severally constitute and appoint Susan E.
Bryant, Amy R. Doberman and Julie E. Rockmore, and each of them individually,
our true and lawful attorneys, with full power to them and each of them to sign
for us, and in our names and in the capacities indicated below, any and all
amendments, to the Registration Statements listed below filed with the
Securities and Exchange Commission under the Securities Act of 1933, and the
Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
Aetna Series Fund, Inc. 33-41694
Aetna Series Fund, Inc. -
(Aetna Generation Funds) 33-85620
Aetna Investment Advisers Fund, Inc. 33-27247
Aetna Generation Portfolios, Inc. 33-88334
Aetna Variable Portfolios, Inc. 333-05173
Registration Statements filed under the Investment Company Act of 1940:
Aetna Series Fund, Inc. 811-6352
Aetna Investment Advisers Fund, Inc. 811-5773
Aetna Generation Portfolios, Inc. 811-8934
Aetna Variable Portfolios, Inc. 811-7651
hereby ratifying and confirming on this 3rd day of April, 1997, our signatures
as they may be signed by our said attorneys to any such Registration Statements
and any and all amendments thereto.
Signature/Title Signature/Title
--------------- ---------------
/s/ Shaun P. Mathews /s/ J. Scott Fox
- -------------------------------------- --------------------------------------
Shaun P. Mathews J. Scott Fox
President and Director Treasurer and Vice President
(Principal Executive Officer) (Principal Financial and Accounting
Officer)
/s/ Morton Ehrlich, Director
- -------------------------------------- --------------------------------------
Morton Ehrlich, Director Timothy A. Holt, Director
/s/ Maria T. Fighetti, Director /s/ Sidney Koch, Director
- -------------------------------------- --------------------------------------
Maria T. Fighetti, Director Sidney Koch, Director
/s/ David L. Grove, Director /s/ Corine T. Norgaard, Director
- -------------------------------------- --------------------------------------
David L. Grove, Director Corine T. Norgaard, Director
/s/ Richard G. Scheide, Director
- -------------------------------------- --------------------------------------
Daniel P. Kearney, Director Richard G. Scheide, Director
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Aetna Series Fund Inc., Aetna
Investment Advisers Fund, Inc., Aetna Generation Portfolios, Inc. and Aetna
Variable Portfolios, Inc. hereby severally constitute and appoint Susan E.
Bryant, Amy R. Doberman and Julie E. Rockmore, and each of them individually,
our true and lawful attorneys, with full power to them and each of them to sign
for us, and in our names and in the capacities indicated below, any and all
amendments, to the Registration Statements listed below filed with the
Securities and Exchange Commission under the Securities Act of 1933, and the
Investment Company Act of 1940:
Registration Statements filed under the Securities Act of 1933:
Aetna Series Fund, Inc. 33-41694
Aetna Series Fund, Inc. -
(Aetna Generation Funds) 33-85620
Aetna Investment Advisers Fund, Inc. 33-27247
Aetna Generation Portfolios, Inc. 33-88334
Aetna Variable Portfolios, Inc. 333-05173
Registration Statements filed under the Investment Company Act of 1940:
Aetna Series Fund, Inc. 811-6352
Aetna Investment Advisers Fund, Inc. 811-5773
Aetna Generation Portfolios, Inc. 811-8934
Aetna Variable Portfolios, Inc. 811-7651
hereby ratifying and confirming on this 8th day of April, 1997, our signatures
as they may be signed by our said attorneys to any such Registration Statements
and any and all amendments thereto.
Signature/Title Signature/Title
--------------- ---------------
- -------------------------------------- --------------------------------------
Shaun P. Mathews J. Scott Fox
President and Director Treasurer and Vice President
(Principal Executive Officer) (Principal Financial and Accounting
Officer)
/s/ Timothy A. Holt
- -------------------------------------- --------------------------------------
Morton Ehrlich, Director Timothy A. Holt, Director
- -------------------------------------- --------------------------------------
Maria T. Fighetti, Director Sidney Koch, Director
- -------------------------------------- --------------------------------------
David L. Grove, Director Corine T. Norgaard, Director
/s/ Daniel P. Kearney
- -------------------------------------- --------------------------------------
Daniel P. Kearney, Director Richard G. Scheide, Director
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<NAME> AETNA INVESTMENT ADVISERS FUND, INC.
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