As filed with the Securities and Exchange File No. 33-41694
Commission on February 29, 1996 File No. 811-6352
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
- --------------------------------------------------------------------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 12
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 18
AETNA SERIES FUND, INC.
(Exact Name of Registrant as Specified in Charter)
151 Farmington Avenue RE4C, Hartford, Connecticut 06156
(Address of Principal Executive Offices)
(860) 273-7834
(Registrant's Telephone Number, including Area Code)
Susan E. Bryant, Counsel
Aetna Life Insurance and Annuity Company
151 Farmington Avenue RE4C, Hartford, Connecticut 06156
(Name and Address of Agent for Service)
- --------------------------------------------------------------------------------
Approximate date of proposed public offering - as soon after effectiveness as is
practicable.
It is proposed that this filing will become effective (check appropriate
space):
_____ immediately upon filing pursuant to paragraph (b) of Rule 485
__X__ on March 1, 1996 pursuant to paragraph (b) of Rule 485
_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
_____ on_____________________ pursuant to paragraph (a)(1) of Rule 485
_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
_____ on _____________________ pursuant to paragraph (a)(2) of Rule 485
Aetna Series Fund, Inc. has registered an indefinite number of its securities
under the Securities Act of 1933 pursuant to Rule 24f-2 of the Investment
Company Act of 1940. Aetna Series Fund, Inc. filed its Rule 24f-2 Notice for its
fiscal year ended October 31, 1995 on December 29, 1995.
<PAGE>
AETNA SERIES FUND, INC.
Cross-Reference Sheet
<TABLE>
<CAPTION>
Form N-1A
Item No. Caption in Prospectus
- -------- ---------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Fee Tables
Highlights
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Description of the Funds
Risk Factors and Other Considerations
Investment Restrictions
General Information
5. Management of the Fund Financial Highlights
Management of the Funds
Portfolio Management
5A. Management's Discussion of Fund Financial Highlights - Incorporated by Reference
Performance to the Annual Report
6. Capital Stock and Other Securities General Information
Shareholder Services
Fund Distributions
Taxes
7. Purchase of Securities Being Offered Shareholder Services
Management of the Funds
Net Asset Value
Fees and Charges (Adviser Class Prospectus only)
8. Redemption or Repurchase Shareholder Services
Fees and Charges (Adviser Class Prospectus only)
9. Pending Legal Proceedings Not applicable
Caption in Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Additional Investment Restrictions and Policies of
the Funds
Description of Various Securities and Investment
Techniques
14. Management of the Funds Directors and Officers of the Company
15. Control Persons and Principal Control Persons and Principal Holders of the Funds
Holders of Securities
<PAGE>
16. Investment Advisory and Other The Investment Advisory Contract
Services Sub-Advisory Agreements
The Administrative Services Agreement
Distribution Arrangements
Custodian
Independent Auditors
17. Brokerage Allocation and Other Brokerage Allocation
Practices
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption and Pricing Sale and Redemption of Shares
of Securities Being Offered Net Asset Value
Distribution Arrangements
20. Tax Status Tax Status
21. Underwriters Principal Underwriter
Distribution Arrangements
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
Select Class
Aetna
Mutual Funds
[Aetna logo] March 1, 1996 Prospectus
Aetna Series Fund, Inc. (the "Company") is an open-end management investment
company authorized to issue multiple series of shares, each representing a
diversified portfolio of investments (collectively, the "Funds," or
individually, a "Fund") with different investment objectives, policies and
restrictions. Currently, each Fund is authorized to offer two classes of
shares, the Select Class and the Adviser Class. The Select Class of shares of
each Fund is no-load.
This Prospectus sets forth concisely the information about the Funds that you
should know before investing. Please read this Prospectus carefully before
investing and retain for future reference. A Statement of Additional
Information ("SAI") dated March 1, 1996, containing additional information
about the Funds has been filed with the Securities and Exchange Commission
("Commission") and is incorporated by reference into this Prospectus. The SAI
is available upon request and without charge by calling 1-800-367-7732 or by
writing to Aetna Series Fund, Inc., at 151 Farmington Avenue, Hartford,
Connecticut 06156-8962.
This Prospectus is for investors eligible to purchase Select Class shares. A
separate Prospectus is available for investors eligible to purchase Adviser
Class shares. Sales charges, expenses and performance will vary with respect
to each class.
Investment Objectives
Aetna Money Market Fund seeks to provide high current return, consistent with
preservation of capital and liquidity, through investment in high-quality money
market instruments.
Although the Money Market Fund will strive to maintain a $1.00 net asset
value per share, there is no assurance that it will be able to do so.
Investments in this Fund are neither insured nor guaranteed by the U.S.
Government.
Aetna Government Fund seeks to provide income consistent with the preservation
of capital through investment in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
Aetna Bond Fund seeks to provide high total return (i.e., income and capital
appreciation), consistent with reasonable risk, primarily through investment in
a diversified portfolio of high-quality corporate bonds and securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
The Aetna Fund seeks to maximize total return with reasonable safety of
principal by investing in a diversified portfolio of stocks, bonds and money
market instruments; the Aetna Fund may involve less investment risk than a
portfolio consisting entirely of common stocks.
<PAGE>
Aetna Growth and Income Fund seeks long-term growth of capital and income
through investment in a diversified portfolio primarily of common stocks and
securities convertible into common stocks believed to offer above-average
growth potential.
Aetna Growth Fund seeks growth of capital through investment in a diversified
portfolio primarily of common stocks and securities convertible into common
stocks believed to offer growth potential.Aetna Mutual Funds ProspectusAetna
Mutual Funds Prospectus
Aetna Small Company Growth Fund seeks growth of capital primarily through
investment in a diversified portfolio of common stocks and securities
convertible into common stocks of companies with smaller market
capitalizations.
Aetna International Growth Fund seeks long-term capital growth primarily
through investment in a diversified portfolio of common stocks principally
traded in countries outside of North America.
Aetna Asian Growth Fund seeks long-term growth of capital primarily through
investment in a diversified portfolio of common stocks principally traded in
countries in Asia excluding Japan.
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.
2 Aetna Mutual Funds Prospectus
<PAGE>
Table of Contents
Highlights 4
Fee Tables 7
Financial Highlights 12
Description of the Funds 16
Risk Factors and Other Considerations 22
Investment Restrictions 27
Shareholder Services 28
Other Features 34
Cross-Fund Investing 35
Management of the Funds 35
Portfolio Management 38
Fund Distributions 40
Net Asset Value 40
Taxes 41
General Information 42
Performance Data 44
Appendix A--Glossary of Investment Terms 45
Appendix B--Description of Corporate Bond Ratings 48
Aetna Mutual Funds Prospectus 3
<PAGE>
Highlights
What is a Mutual Fund and What are its Advantages? A mutual fund is an
investment company that buys and sells securities on behalf of individuals
sharing common financial goals. Mutual funds allow you to pool your money
with others, to spread risk through diversification and to benefit from
professional management. You have immediate access to your money simply by
writing a letter or, in the case of the Aetna Money Market Fund, by writing a
check.
What Funds are Offered? The Company currently offers the following Funds
through this Prospectus, each with its own objective and policies and all of
which are diversified portfolios under the Investment Company Act of 1940
(the "1940 Act").
[filled box] Aetna Money Market Fund - a portfolio consisting of high-quality
money market instruments
[filled box] Aetna Government Fund - a portfolio of U.S. Government
securities
[filled box] Aetna Bond Fund - a portfolio primarily of high-quality
corporate and U.S. Government securities
[filled box] The Aetna Fund - a flexible portfolio of stocks, bonds and money
market instruments
[filled box] Aetna Growth and Income Fund - a common stock portfolio
[filled box] Aetna Growth Fund - a common stock portfolio of companies
believed to have potential for growth
[filled box] Aetna Small Company Growth Fund - a common stock portfolio of
companies with smaller market capitalizations
[filled box] Aetna International Growth Fund - a common stock portfolio of
companies principally traded outside North America
[filled box] Aetna Asian Growth Fund - a common stock portfolio of companies
traded in Asia excluding Japan
Risk Factors The different types of securities purchased and investment
techniques used by a Fund involve varying amounts of risk. For example,
equity securities are subject to a decline in the stock market or in the
value of the company and preferred stocks have price risk and some interest
rate and credit risk. The value of debt securities may be affected by changes
in general interest rates and in the creditworthiness of the issuer. In
addition, foreign securities have currency risk. For more information, see
"Risk Factors and Other Considerations."
4 Aetna Mutual Funds Prospectus
<PAGE>
What is the Select Class of Shares? Each Fund has two classes of shares, the
Select Class shares and the Adviser Class shares. Select Class shares are only
offered to certain corporate retirement plans, salaried employees and persons
retired from salaried positions (including members of employees' and retired
persons' immediate families) of Aetna Life Insurance and Annuity Company
("ALIAC") and its affiliates, insurance companies (including separate accounts),
registered investment companies, investment advisers and broker-dealers acting
for their own account; current shareholders at the time of first offering of
Adviser Class shares and their immediate family members, as long as they
maintain a shareholder account; Directors of the Funds; and members of such
other groups as may be approved by the Company's Board of Directors from time to
time. Adviser Class shares are offered to those persons not eligible to buy
Select Class shares. Select Class shares are no-load, which means you do not pay
any sales charges, distribution or service fees.
Adviser Class shares are subject to a contingent deferred sales charge at a
maximum rate of 1%, declining to 0% after 4 years from the date of initial
purchase (except for direct purchases into the Money Market Fund).
Additionally, Adviser Class shares of each Fund other than the Money Market
Fund are subject to an annual distribution fee of 0.50% and an annual service
fee of 0.25% (0.10% for the Money Market Fund) of the value of the average
daily net assets of the Funds in the Adviser Class.
How Can I Purchase Shares? You may purchase shares by completing an
application and sending it as disclosed under "Shareholder Services." Your
initial purchase must be for a minimum of $1,000 for each Fund with a minimum
of $500 for Individual Retirement Accounts ("IRA"). Participants in
employer-sponsored retirement plans should refer to their enrollment
materials. We also offer a systematic investment program that enables
investors to purchase shares on a regular basis. Please refer to "Shareholder
Services" and "Other Features" for complete details.
When Can I Redeem Shares? Shares may be redeemed on each day that the New
York Stock Exchange Inc. (NYSE) is open for business. Select Class shares are
redeemable at net asset value. See "Shareholder Services" for further
information.
Who is the Investment Adviser? ALIAC is the investment adviser to each Fund
("Investment Adviser"). ALIAC is a wholly owned subsidiary of Aetna
Retirement Services, Inc., which is in turn a wholly owned subsidiary of
Aetna Life and Casualty Company.
Aetna Mutual Funds Prospectus 5
<PAGE>
Aeltus Investment Management, Inc. ("Aeltus"),an affiliate of ALIAC,
is the sub-adviser to the Growth Fund and the Small Company Growth Fund.
Please refer to "Management of the Funds" for further information.
What if I have further questions? Shareholders in the Funds enjoy a high
level of personalized service. Please call 1-800-367-7732 for details or
refer to "Shareholder Services" for additional information.
6 Aetna Mutual Funds Prospectus
<PAGE>
Fee Tables
The following is provided to assist you in understanding the various charges
and expenses that you would bear directly or indirectly as an investor in the
Funds. A complete description of these charges and expenses starts on page
35.
Select Class Shareholder Transaction Expenses
Select Class shares are not subject to Shareholder Transaction Expenses which
include sales charges on purchases, deferred sales charges on redemptions,
sales charges on dividend reinvestments and exchange fees.
Select Class
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Total Fund
Operating
Management/ Administrative Expenses
Advisory Fee Fee (after fee
(after fee (after fee Other waiver/expense
waiver) waiver) Expenses reimbursement)
---------------------- ---------------- ---------------- ------- --------------
<S> <C> <C> <C> <C>
Money Market 0.00% 0.07% 0.23% 0.30%
Government 0.00% 0.15% 0.55% 0.70%
Bond 0.19% 0.25% 0.31% 0.75%
Aetna Fund 0.80% 0.25% 0.25% 1.30%
Growth and Income 0.69% 0.25% 0.16% 1.10%
Growth 0.70% 0.25% 0.35% 1.30%
Small Company Growth 0.85% 0.25% 0.39% 1.49%
International Growth 0.85% 0.25% 0.40% 1.50%
Asian Growth 0.54% 0.25% 0.76% 1.55%
</TABLE>
From time to time, the Investment Adviser may agree to waive all or a portion
of its Management/Advisory Fee and/or its Administrative Fee for a particular
Fund and to reimburse some or all of a particular Fund's Other Expenses. Such
fee waiver/expense reimbursement arrangements will increase a Fund's total
return and may be modified or terminated at any time.
The expenses shown above are based on the year ended October 31, 1995 and
reflect the most current fee waiver/ expense reimbursement arrangements as of
the date of this Prospectus. Fee waiver/expense reimbursement arrangements
are currently in effect for the Money Market Fund, the Government Fund, the
Bond Fund and the Asian Growth Fund. These arrangements limit the Total Fund
Operating Expenses for these Funds to the amounts shown above. Without these
arrangements, expenses would have been as follows: Money Market Fund's
Management/Advisory Fees, Administrative Fees and Total Fund Operating
Expenses would have been 0.40%, 0.25%, and 0.88%, respectively; Government
Fund's Management/Advisory Fees, Administrative Fees and Total Fund Operating
Expenses would have been 0.50%, 0.25%, and 1.30%, respectively; Bond Fund's
Management/Advisory Fees and Total Fund Operating Expenses would have been
0.50% and 1.06%, respectively; and Asian Growth Fund's Management/Advisory
Fees and Total Fund Operating Expenses would have been 1.00% and 2.01%,
respectively.
Aetna Mutual Funds Prospectus 7
<PAGE>
Select Class
Example
Using the above expenses, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each of
the periods shown:
1 Year 3 Years 5 Years 10 Years
---------------------- --------- --------- --------- ----------
Money Market $ 3 $10 $17 $ 38
Government 7 22 39 87
Bond 8 24 42 93
Aetna Fund 13 41 71 157
Growth and Income 11 35 61 134
Growth 13 41 71 157
Small Company Growth 15 47 81 178
International Growth 15 47 82 179
Asian Growth 16 49 84 185
This example should not be considered an indication of past or future
expenses. Actual expenses may be greater or less than those shown.
Adviser Class
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Deferred Sales Sales Charge
Sales Charge Charge on on Dividend Exchange
on Purchases Redemptions(1) Reinvestment Fee
----------------------- -------------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
Money Market None 1.0% None None
Government None 1.0% None None
Bond None 1.0% None None
Aetna Fund None 1.0% None None
Growth and Income None 1.0% None None
Growth None 1.0% None None
Small Company Growth None 1.0% None None
International Growth None 1.0% None None
Asian Growth None 1.0% None None
</TABLE>
(1) The contingent deferred sales charge set forth in the above table is the
maximum redemption charge imposed on Adviser Class shares. Direct purchases
into the Money Market Fund are not subject to a sales charge on redemption.
Investors may pay charges less than 1.0%, depending on the length of time the
shares are held. Adviser Class shares of each Fund other than the Money
Market Fund are also subject to an annual distribution fee of 0.50% and an
annual service fee of 0.25% (0.10% for Money Market Fund) of the value of
average daily net assets of the Adviser Class. See "Fees and Charges" in the
Adviser Class prospectus.
8 Aetna Mutual Funds Prospectus
<PAGE>
Adviser Class
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Total Fund
Other Operating
Management/ Expenses Expenses
Advisory Fee Administrative (after (after fee
(after fee Fee 12b-1 expense waiver/expense
waiver) (after fee waiver) Fee reimbursement) reimbursement)
---------------------- ---------------- ------------------ ----- ------------- --------------
<S> <C> <C> <C> <C> <C>
Money Market 0.00% 0.07% 0.00% 0.23% 0.30%
Government 0.00% 0.15% 0.50% 0.80% 1.45%
Bond 0.19% 0.25% 0.50% 0.56% 1.50%
Aetna Fund 0.80% 0.25% 0.50% 0.50% 2.05%
Growth and Income 0.69% 0.25% 0.50% 0.41% 1.85%
Growth 0.70% 0.25% 0.50% 0.60% 2.05%
Small Company Growth 0.85% 0.25% 0.50% 0.64% 2.24%
International Growth 0.85% 0.25% 0.50% 0.65% 2.25%
Asian Growth 0.54% 0.25% 0.50% 1.01% 2.30%
</TABLE>
From time to time, the Investment Adviser may agree to waive all or a portion
of its Management/Advisory Fee and/or its Administrative Fee for a particular
Fund and to reimburse some or all of a particular Fund's Other Expenses. Such
fee waiver/expense reimbursement arrangements will increase a Fund's total
return and may be modified or terminated at any time.
The expenses shown above are based on the year ended October 31, 1995 and
reflect the most current fee waiver/ expense reimbursement arrangements as of
the date of this Prospectus. Fee waiver/expense reimbursement arrangements
are currently in effect for the Money Market Fund, the Government Fund, the
Bond Fund and the Asian Growth Fund. These arrangements limit the Total Fund
Operating Expenses for these Funds to the amounts shown above. Without these
arrangements, expenses would have been as follows: Money Market Fund's
Management/Advisory Fees, Administrative Fees, Other Expenses and Total Fund
Operating Expenses would have been 0.40%, 0.25%, 0.33%, and 0.98%,
respectively; Government Fund's Management/Advisory Fees, Administrative Fees
and Total Fund Operating Expenses would have been 0.50%, 0.25%, and 2.05%,
respectively; Bond Fund's Management/Advisory Fees and Total Fund Operating
Expenses would have been 0.50% and 1.81%, respectively; and Asian Growth
Fund's Management/Advisory Fees and Total Fund Operating Expenses would have
been 1.00% and 2.50%, respectively (2.76% actual total expense reduced to
comply with California state law).
Aetna Mutual Funds Prospectus 9
<PAGE>
Adviser Class
Example
Using the above expenses, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and either redemption at the end of
each of the periods shown or no redemption:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
Money Market*
Redemption at end of each time period $ 3 $10 $ 17 $ 38
No Redemption 3 10 17 38
Government
Redemption at end of each time period 25 51 79 174
No Redemption 15 46 79 174
Bond
Redemption at end of each time period 25 52 82 179
No Redemption 15 47 82 179
Aetna Fund
Redemption at end of each time period 31 69 110 238
No Redemption 21 64 110 238
Growth and Income
Redemption at end of each time period 29 63 100 217
No Redemption 19 58 100 217
Growth
Redemption at end of each time period 31 69 110 238
No Redemption 21 64 110 238
Small Company Growth
Redemption at end of each time period 33 75 120 257
No Redemption 23 70 120 257
International Growth
Redemption at end of each time period 33 75 120 258
No Redemption 23 70 120 258
Asian Growth
Redemption at end of each time period 33 77 123 264
No Redemption 23 72 123 264
</TABLE>
This example should not be considered an indication of past or future
expenses. Actual expenses may be greater or less than those shown. This
example reflects, among other things, the application of the maximum Deferred
Sales Charge imposed on Adviser Class shares.
*These numbers do not reflect a Contingent Deferred Sales Charge since
a Deferred Sales Charge is only applied to proceeds from Money
Market Fund share redemptions when the shares were purchased through an
exchange from another Fund and the Deferred Sales Charge has been deferred.
(See "Fees and Charges--Contingent Deferred Sales Charge.")
10 Aetna Mutual Funds Prospectus
<PAGE>
As noted on previous page, each Fund has two classes, Select Class and
Adviser Class. Because the expenses and sales charges vary between the
classes, the performance of each class will vary. Registered representatives
may receive different levels of compensation when selling shares of the
Fund's classes. Additional information regarding each Fund's classes may be
obtained by calling your representative or 1-800-367-7732.
Aetna Mutual Funds Prospectus 11
<PAGE>
Financial Highlights
(for one outstanding share throughout each period)
The selected data presented below for, and as of the end of, each of the
periods listed are derived from the financial statements of Aetna Series
Fund, Inc., which financial statements have been audited by KPMG Peat Marwick
LLP, independent auditors. The financial statements as of, and for the year
ended October 31, 1995 and the independent auditors' report thereon, are
included in the SAI.
Select Class Shares+
<TABLE>
<CAPTION>
Net
Realized and
Change in
Net Asset Unrealized Total Dividends Dividends
Value Net Gain (Loss) from from Net in Excess of
Beginning Investment on Investment Investment Net Investment
of Period Income Investments Operations Income Income
--------- --------- ------------ ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund
Year Ended October 31, 1995 $ 1.00 $0.06 $ 0.00 $ 0.06 $(0.06) $ 0.00
Ten-month period ended
October 31, 1994 1.00 0.03 0.00 0.03 (0.03) 0.00
Year Ended December 31, 1993 1.00 0.03 0.00 0.03 (0.03) 0.00
Year Ended December 31, 1992 1.00 0.04 0.00 0.04 (0.04) 0.00
Government Fund
Year Ended October 31, 1995 9.41 0.64 0.59 1.23 (0.63) 0.00
Ten-month period ended
October 31, 1994 10.00 0.40 (0.63) (0.23) (0.36) 0.00
Bond Fund
Year Ended October 31, 1995 9.58 0.65 0.65 1.30 (0.61) 0.00
Ten-month period ended
October 31, 1994 10.37 0.52 (0.86) (0.34) (0.45) 0.00
Year Ended December 31, 1993 9.99 0.55 0.45 1.00 (0.55) (0.07)
Year Ended December 31, 1992 10.00 0.53 0.16 0.69 (0.53) (0.17)
The Aetna Fund
Year Ended October 31, 1995 10.65 0.35 1.69 2.04 (0.33) 0.00
Ten-month period ended
October 31, 1994 10.82 0.23 (0.28) (0.05) (0.12) 0.00
Year Ended December 31, 1993 10.18 0.34 0.64 0.98 (0.30) (0.01)
Year Ended December 31, 1992 10.00 0.43 0.24 0.67 (0.39) (0.10)
</TABLE>
+The Company commenced offering Adviser Class shares on April 15, 1994. Prior
to that date, the Company offered only Select Class shares. The Government
Fund, Growth Fund, Small Company Growth Fund and Asian Growth Fund commenced
operations on January 2, 1994.
*Annualized for periods less than one year.
Per share data calculated using average number of shares outstanding
throughout the period.
Additional information about the performance of Aetna Series Fund, Inc. is
contained in the Annual Report dated October 31, 1995. The Annual Report is
incorporated herein by reference and is available, without charge, by writing
to the Company at the address listed on the cover of this Prospectus or by
calling 1-800-367-7732.
12 Aetna Mutual Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
Ratio of
Total Ratio of
Distributions Net Invest- Net Invest-
from Asset Net Assets ment ment
Realized Value End of Expenses Income to
Gain on End of Total Period to Average Average
Investments Period Return (in thousands) Net Assets* Net Assets*
<S> <C> <C> <C> <C> <C>
$ 0.00 $ 1.00 5.95% $275,524 0.27% 5.78%
0.00 1.00 3.33% 161,756 0.21% 4.05%
0.00 1.00 3.29% 107,844 0.00% 3.33%
0.00 1.00 3.98% 36,522 0.00% 3.93%
0.00 10.01 13.58% 19,154 0.70% 6.79%
0.00 9.41 (2.37)% 26,110 0.41% 5.29%
0.00 10.27 14.06% 32,778 0.79% 6.56%
0.00 9.58 (3.31)% 27,584 0.76% 6.29%
0.00 10.37 10.20% 46,788 0.47% 5.34%
0.00 9.99 7.23% 37,209 0.05% 5.44%
0.00 12.36 19.45% 83,941 1.27% 3.14%
0.00 10.65 (0.42)% 76,267 1.09% 2.65%
(0.03) 10.82 9.84% 63,982 0.93% 3.21%
0.00 10.18 6.64% 37,726 0.07% 4.31%
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Ratio of Net
Net Investment
Investment Income
Expense Before
Before Reimburse-
Reimburse- ment
ment and Waiver
and Waiver to Average
to Average Net Portfolio
Net Assets* Assets* Turnover
<S> <C> <C>
0.88% 5.17% N/A
0.85% 3.38% N/A
0.95% 2.38% N/A
1.04% 2.87% N/A
1.30% 6.19% 117.31%
1.16% 4.54% 43.63%
1.06% 6.25% 56.99%
1.06% 5.98% 51.80%
1.01% 4.80% 50.01%
1.10% 4.39% 57.05%
1.30% 3.11% 129.05%
1.32% 2.42% 86.10%
1.34% 2.79% 19.95%
1.47% 2.91% 13.35%
</TABLE>
Aetna Mutual Funds Prospectus 13
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
Select Class Shares+
<TABLE>
<CAPTION>
Net
Realized Total
Net Asset and Income Dividends Dividends
Value Net Change in from from Net in Excess of
Beginning Investment Unrealized Investment Investment Net Investment
of Period Income Gain (Loss) Operations Income Income
--------- --------- ----------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund
Year Ended October 31, 1995 $11.11 $0.21 $ 2.27 $ 2.48 $(0.13) $ 0.00
Ten-month period ended
October 31, 1994 11.03 0.12 0.04 0.16 (0.08) 0.00
Year Ended December 31, 1993 10.51 0.19 0.50 0.69 (0.16) 0.00
Year Ended December 31, 1992 10.00 0.26 0.51 0.77 (0.26) 0.00
Growth Fund
Year Ended October 31, 1995 10.78 0.04 3.02 3.06 (0.08) 0.00
Ten-month period ended
October 31, 1994 10.00 0.09 0.69 0.78 0.00 0.00
Small Company Growth Fund
Year Ended October 31, 1995 10.39 0.00 3.15 3.15 (0.02) 0.00
Ten-month period ended
October 31, 1994 10.00 0.02 0.37 0.39 0.00 0.00
International Growth Fund
Year Ended October 31, 1995 11.56 0.11 (0.09) 0.02 (0.40) 0.00
Ten-month period ended
October 31, 1994 11.17 0.06 0.33 0.39 0.00 0.00
Year Ended December 31, 1993 8.88 0.05 2.65 2.70 (0.05) (0.34)
Year Ended December 31, 1992 10.00 0.06 (1.15) (1.09) (0.03) 0.00
Asian Growth Fund
Year Ended October 31, 1995 9.49 0.09 (1.16) (1.07) (0.07) 0.00
Ten-month period ended
October 31, 1994 10.00 0.05 (0.56) (0.51) 0.00 0.00
</TABLE>
+The Company commenced offering Adviser Class shares on April 15, 1994. Prior
to that date, the Company offered only Select Class shares. The Government
Fund, Growth Fund, Small Company Growth Fund and Asian Growth Fund commenced
operations on January 2, 1994.
*Annualized for periods less than one year.
Per share data calculated using average number of shares outstanding
throughout the period.
Additional information about the performance of Aetna Series Fund, Inc. is
contained in the Annual Report dated October 31, 1995. The Annual Report is
incorporated herein by reference and is available, without charge, by writing
to the Company at the address listed on the cover of this Prospectus or by
calling 1-800-367-7732.
14 Aetna Mutual Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
Ratio of
Total Ratio of
Distributions Net Invest- Net Invest-
from Asset Net Assets ment ment
Realized Value End of Expenses Income to
Gain on End of Total Period to Average Average
Investments Period Return (in thousands) Net Assets* Net Assets*
- ----------------- ---------------- ---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
$ 0.00 $13.46 22.58% $356,803 1.10% 1.73%
0.00 11.11 1.40% 301,360 0.92% 1.51%
(0.01) 11.03 6.58% 60,127 1.13% 1.77%
0.00 10.51 7.81% 31,473 0.33% 2.83%
(0.01) 13.75 28.79% 36,936 1.20% 0.36%
0.00 10.78 7.70% 27,188 0.92% 1.10%
0.00 13.52 30.39% 33,511 1.41% (0.01)%
0.00 10.39 3.90% 25,879 1.15% 0.21%
(0.56) 10.62 (0.04)% 25,102 1.37% 1.02%
0.00 11.56 3.49% 31,479 1.66% 0.71%
(0.02) 11.17 30.37% 39,847 1.48% 0.50%
0.00 8.88 (10.84)% 26,640 0.50% 1.36%
0.00 8.35 (11.54)% 22,309 1.17% 1.13%
0.00 9.49 (5.10)% 29,386 1.25% 0.71%
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Ratio of Net
Net Investment
Investment Income
Expense Before
Before Reimburse-
Reimburse- ment
ment and Waiver
and Waiver to Average
to Average Net Portfolio
Net Assets* Assets* Turnover
- ----------------- ---------------- -----------------
<S> <C> <C>
1.10% 1.73% 127.43%
1.03% 1.39% 54.13%
1.27% 1.55% 23.60%
1.72% 1.44% 14.44%
1.30% 0.26% 171.75%
1.42% 0.60% 120.32%
1.49% (0.08)% 156.43%
1.58% (0.22)% 116.28%
1.50% 0.88% 32.91%
1.80% 0.57% 81.67%
1.77% 0.20% 110.38%
2.98% (1.12)% 81.74%
2.01% 0.29% 64.97%
1.81% 0.15% 65.50%
</TABLE>
Aetna Mutual Funds Prospectus 15
<PAGE>
Description of the Funds
Each Fund is a diversified, management investment company under the 1940 Act.
Each has an investment objective which is a fundamental policy and may not be
changed without the vote of a majority of the holders of that Fund's
outstanding shares. There can be no assurance that the Funds will meet their
investment objectives. Each Fund is subject to investment restrictions
described in this Prospectus and in the SAI, some of which are fundamental
policies. No fundamental investment policy may be changed without shareholder
approval.
A glossary describing various investment terms relating to securities that
may be held by the Funds is contained in Appendix A.
Aetna Money Market Fund
Description of
Money Market
Fund
Investment Objective The Money Market Fund seeks to provide high current
return, consistent with preservation of capital and liquidity, through
investment in high-quality money market instruments.
Investment Policy The Money Market Fund invests in U.S. Treasury bills, notes
and bonds; obligations of agencies and instrumentalities of the U.S.
Government; obligations of domestic banks and U.S. dollar denominated
obligations of foreign banks (providing the issuing bank has reported assets
in excess of $5 billion and meets strict capital and profitability criteria),
finance company commercial paper, corporate commercial paper (including
variable-rate instruments), discounted notes of domestic banks, domestic
banker's acceptances eligible for discounting at the Federal Reserve, Yankee
certificates of deposit, Yankee commercial paper, Eurodollar securities,
repurchase agreements, corporate bonds and notes and other debt instruments.
The Fund may purchase securities on a when-issued or delayed-delivery basis.
All investments will have a maturity at the time of purchase, as defined
under the federal securities laws, of 397 days or less. Any foreign
securities or obligations will be U.S. dollar denominated.
The Money Market Fund will invest at least 95% of its total assets in
high-quality securities. High-quality securities are those receiving the
highest credit rating by any two rating agencies (or one, if only one rating
agency has rated the security). High-quality securities may also include
unrated securities if the Investment Adviser determines the security to be of
comparable quality. The remainder of the Money Market Fund's assets will be
invested in securities rated within the two highest rating categories by any
two rating agencies (or one, if only one rating agency has rated the
security) and unrated securities if the Investment Adviser determines the
security to be of comparable quality. With respect to these securities, the
Money Market Fund will not invest more than 1% of the market value of its
total assets or $1
16 Aetna Mutual Funds Prospectus
<PAGE>
million, whichever is greater, in the securities or obligations of any one
issuer.
The Money Market Fund will use nationally recognized rating agencies such
as Standard & Poor's Corporation ("Standard & Poors") and Moody's Investors
Service, Inc. ("Moody's") when determining security credit ratings. All
investments will be determined to present minimal credit risks.
The Money Market Fund's dollar weighted average maturity will not exceed
90 days. Although the Investment Adviser will use its best efforts to
maintain a constant net asset value of $1.00 per share, there can be no
assurance that the net asset value will not vary.
Aetna Government Fund
Description of
Government Fund
Investment Objective The Government Fund seeks to provide income consistent
with the preservation of capital through investment in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
Investment Policy The Government Fund invests at least 65% of its assets in
direct obligations of the U.S. Government, such as treasury bills, notes and
bonds which are backed by the full faith and credit of the United States, or
in indirect obligations of the U.S. Government, such as notes and bonds which
are guaranteed by agencies and instrumentalities of the U.S. Government.
Securities of such agencies and instrumentalities are backed by either the
full faith and credit of the U.S. Treasury, the right of the issuer to borrow
from the U.S. Treasury, or the credit of the agency or instrumentality. Such
agencies and instrumentalities include, but are not limited to, the
Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation
("FHLMC") and the Student Loan Marketing Association ("SLMA").
The Government Fund may also invest in repurchase agreements collateralized
by U.S. Government agency securities, STRIPs, zero coupon bonds and options
and futures contracts.
Aetna Bond Fund
Description of
Bond Fund
Investment Objective The Bond Fund seeks to provide high total return (i.e.,
income and capital appreciation), consistent with reasonable risk, primarily
through investment in a diversified portfolio of high-quality corporate bonds
and securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Investment Policy The Bond Fund will normally invest at least 65% of its
total assets in high-quality corporate bonds, mortgage-related
Aetna Mutual Funds Prospectus 17
<PAGE>
and other asset-backed and debt securities, and securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities. Such
securities will be rated AA or above by Standard & Poor's, Aa or above by
Moody's, similarly rated by other nationally recognized statistical rating
organizations, or be considered by the Investment Adviser to be of comparable
quality. The Fund will not target any given maturity, thus giving it
flexibility to invest in short and long-term securities as market conditions
change. The Bond Fund may also invest in repurchase agreements, equity
securities (not to exceed 5% of total assets) and securities issued by any
foreign corporation or instrumentality or political subdivision of foreign
governments (not to exceed 25% of total assets). The Bond Fund may also
purchase securities on a when-issued or delayed-delivery basis.
Additionally, the Bond Fund may invest in commercial paper and other
short-term investments, including variable-rate instruments, all having a
maturity of less than one year, and in debt securities with equity features,
convertibles, and straight debt securities.
The Bond Fund may invest up to 15% of its total assets in high risk,
high-yield securities or "junk bonds" (securities rated BB/Ba or below, or,
if unrated, considered by the Investment Adviser to be of comparable
quality). This will limit the Fund's ability to earn a higher return which
may be associated with high risk, non-investment grade securities. See "Risk
Factors and Other Considerations" for further information.
As of October 31, 1995, the weighted average distribution of bonds in the
Bond Fund based on Standard & Poor's and Moody's bond ratings was 60% in AAA,
10% in AA, 12% in A, 7% in BBB, 3% in BB, 1% in B and 7% in unrated bonds.
See Appendix B for further information on bond ratings.
The Aetna Fund
Description of
Aetna Fund
Investment Objective The Aetna Fund seeks to maximize total return with
reasonable safety of principal by investing in a diversified portfolio of
stocks, bonds and money market instruments. An investment in the Aetna Fund
may involve less investment risk than an investment in a portfolio consisting
entirely of common stocks.
Investment Policy The Aetna Fund will allocate its assets 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, in proportions that reflect the anticipated returns and risks of
each asset class.
18 Aetna Mutual Funds Prospectus
<PAGE>
The Aetna Fund will not invest more than 15% of the total value of its
assets in high risk, high-yield securities, or "junk bonds." It may buy and
sell listed covered put and call options and stock index futures contracts
and related options. The Aetna Fund may also purchase securities on a
when-issued or delayed-delivery basis.
The Investment Adviser employs current market statistics and economic
indicators to forecast returns for each sector of the securities market for
the Aetna Fund. These calculations provide a disciplined framework for
assessing the relative attractiveness of stocks, bonds, and cash equivalents.
The Investment Adviser uses proprietary computer programs to help calculate
the optimal asset exposure over specified time periods for the Aetna Fund.
Special Considerations Investors should be aware that the investment results
of the Aetna Fund partly depend upon the Investment Adviser's ability to
correctly anticipate the relative performance of stocks, bonds and money
market instruments.
While the Investment Adviser has substantial experience in managing all asset
classes, there can be no assurance that the Investment Adviser will always
allocate assets to the best performing sectors. The Aetna Fund's performance
would suffer if a major portion of its assets were allocated to stocks in a
declining market or, similarly, if a major portion of its assets were
allocated to bonds at a time of adverse interest rate movement.
Aetna Growth and Income Fund
Description of
Growth and
Income Fund
Investment Objectives The Growth and Income Fund seeks long-term growth of
capital and income through investment in a diversified portfolio primarily of
common stocks and securities convertible into common stocks believed to offer
above-average growth potential.
Investment Policies The Growth and Income Fund invests primarily in common
stocks which have significant potential for capital or income growth. It may
also invest in convertible and nonconvertible preferred stocks, debt
securities, rights and warrants.
Additionally, the Growth and Income Fund may lend portfolio securities,
write and buy listed covered call options and buy and sell listed covered put
options and stock index futures and options. The Growth and Income Fund may
also enter into repurchase agreements with domestic banks and broker dealers,
purchase commercial paper and other short-term instruments, invest up to 25%
of its assets in foreign securities, engage in currency hedging and purchase
securities on a when-issued or delayed-delivery basis. The Growth and Income
Aetna Mutual Funds Prospectus 19
<PAGE>
Fund will not invest more than 15% of the total value of its assets in high
risk, high-yield securities or "junk bonds."
Aetna Growth Fund
Description of
Growth Fund
Investment Objective The Growth Fund seeks growth of capital through
investment in a diversified portfolio primarily of common stocks and
securities convertible into common stocks believed to offer growth potential.
Investment Policy The Growth Fund will normally invest at least 65% of its
total assets in common stocks which have potential for capital growth. It may
also invest in convertible and non-convertible preferred stocks.
Additionally, the Growth Fund may lend portfolio securities, buy and sell
put and call options, and stock index futures and options. The Growth Fund
may also enter into repurchase agreements with domestic banks and broker
dealers, purchase commercial paper and other short-term instruments, invest
up to 25% of its assets in foreign securities, engage in currency hedging and
purchase securities on a when-issued, delayed delivery or forward commitment
basis. The Growth Fund will not invest more than 15% of the total value of
its assets in high risk, high-yield securities or "junk bonds."
Aetna Small Company Growth Fund
Description of
Small Company
Growth Fund
Investment Objective The Small Company Growth Fund seeks growth of capital
primarily through investment in a diversified portfolio of common stocks and
securities convertible into common stocks of companies with smaller market
capitalizations.
Investment Policy The Small Company Growth Fund will normally invest at least
65% of its total assets in the common stock of companies with equity market
capitalizations at the time of purchase of $1 billion or less. The Small
Company Growth Fund may also invest in securities convertible into stocks.
Additionally, the Small Company Growth Fund may lend portfolio securities,
buy and sell put and call options and stock index futures and options. The
Small Company Growth Fund may also enter into repurchase agreements with
domestic banks and broker dealers, purchase commercial paper and other
short-term instruments, invest up to 25% of its assets in foreign securities,
engage in currency hedging and purchase securities on a when-issued, delayed
delivery or forward commitment basis. The Small Company Growth Fund will not
invest
20 Aetna Mutual Funds Prospectus
<PAGE>
more than 15% of the total value of its assets in high risk, high-yield
securities or "junk bonds."
Aetna International Growth Fund
Description of
International
Growth Fund
Investment Objective The International Growth Fund seeks long-term capital
growth primarily through investment in a diversified portfolio of common
stocks principally traded in countries outside of North America. The
International Growth Fund will not target any given level of current income.
Investment Policy The International Growth Fund will invest at least 65% of
its total assets among securities principally traded in three or more
countries including Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Indonesia, Italy, Japan, Korea, Luxembourg, Malaysia, New
Zealand, the Netherlands, Norway, the Philippines, Singapore, Spain, Sweden,
Switzerland, Taiwan, Thailand, and the United Kingdom.
The International Growth Fund will invest primarily in equity securities
including securities convertible into stocks. Further, from time to time the
International Growth Fund may hold up to 10% of its total assets in long-term
debt securities with an equivalent Standard & Poor's or Moody's rating of
AA/Aa or above.
The International Growth Fund may enter into forward foreign exchange
contracts or purchase financial futures or options (including options on
futures) as a means to moderate the impact of foreign currency fluctuations.
It may also purchase money market instruments and securities on a when-issued
or delayed-delivery basis.
Aetna Asian Growth Fund
Description of
Asian Growth
Fund
On September 29, 1995, the Board of Directors of the Company adopted a Plan
of Reorganization and Liquidation on behalf of the Aetna Asian Growth Fund
(the "Plan"). If the Plan is approved by the Asian Growth Fund shareholders,
the Aetna International Growth Fund would acquire all of the assets of the
Asian Growth Fund, the shareholders of the Asian Growth Fund would become
shareholders of the International Growth Fund, and the Asian Growth Fund
would be liquidated.
Investment Objective The Asian Growth Fund seeks long-term growth of capital
primarily through investment in a diversified portfolio of common stocks
principally traded in countries in Asia excluding Japan. The Asian Growth
Fund will not target any given level of current income.
Aetna Mutual Funds Prospectus 21
<PAGE>
Investment Policy The Asian Growth Fund will invest at least 65% of its total
assets among securities principally traded in China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Sri
Lanka, Taiwan, and Thailand.
The Asian Growth Fund will invest primarily in equity securities including
securities convertible into stocks. In addition, the Asian Growth Fund may
invest up to 10% of its assets in long-term debt securities if the Investment
Adviser believes they will provide superior returns to common stocks. The
Asian Growth Fund may also enter into forward foreign exchange contracts and
purchase financial futures or options, and purchase money market instruments
and securities on a when-issued or delayed-delivery basis.
A special note
for Investors in
International
Growth Fund and
Asian Growth
Fund
Special Considerations for International Investors In the last 30 years,
foreign economic growth has frequently outpaced that of the United States and
returns from equity investments have often exceeded those on comparable U.S.
securities. The Investment Adviser believes that investment in foreign
securities offers significant potential for long-term capital appreciation
and affords substantial opportunities for investment diversification.
However, investments in securities of foreign companies and in securities
denominated in foreign currencies involve additional risks not present in
U.S. securities. Please refer to "Risk Factors and Other Considerations"
below for further information.
Risk Factors and Other Considerations
General Considerations The different types of securities purchased and
investment techniques used by a Fund involve varying amounts of risk. For
example, equity securities are subject to a decline in the stock market or in
the value of the company and preferred stocks have price risk and some
interest rate and credit risk. The value of debt securities may be affected
by changes in general interest rates and in the creditworthiness of the
issuer. Debt securities with longer maturities (for example, over ten years)
are more affected by changes in interest rates and provide less price
stability than securities with short term maturities (for example, one to ten
years). Also, on each debt security, there is a risk of principal and
interest default which will be greater with higher-yielding, lower-grade
securities. High risk, high-yield securities ("junk bonds") may provide a
higher return but with added risk. In addition, foreign securities have
currency risk.
Portfolio Turnover Portfolio turnover refers to the frequency of portfolio
transactions and the percentage of portfolio assets being bought and sold in
the aggregate during the year. Although the Funds (excluding the Money Market
Fund) do not purchase securities with the intention of
22 Aetna Mutual Funds Prospectus
<PAGE>
profiting from short-term trading, each Fund may buy and sell securities when
the Investment Adviser or Subadviser believes such action is advisable. It is
anticipated that the average annual turnover rate for the Growth and Income
Fund and the Government Fund may exceed 125% during fiscal year 1996, and
that the turnover rate for The Aetna Fund, the Growth Fund and the Small
Company Growth Fund may exceed 150%. The annual portfolio turnover rate for
each of the other Funds is not expected to exceed 100%. Turnover rates in
excess of 125% have resulted and are expected to continue to result in higher
transaction costs relating to stock or equity transactions, which costs are
borne directly by the Fund. The Investment Adviser anticipates that these
higher costs are offset by the potentially improved performance that is
sought by numerous portfolio transactions. High turnover rates may also
result in a possible increase in short-term capital gains or losses. See
"Fund Distributions," "Taxes" and the SAI for additional information.
Cash or Cash Equivalents All Funds reserve the right to temporarily depart
from their investment objective by investing up to 100% of their assets in
cash or cash equivalents to defend against potential market decline. Such
cash equivalents will be the same type of instruments invested in by the
Money Market Fund.
All the Funds may use the following:
Derivatives In order to manage its exposure to changing interest rates,
securities prices and currency exchange rates, or to increase its investment
return, a Fund may engage in hedging and other strategies using derivatives.
A derivative is a financial instrument whose value depends on (or "derives"
from) the value of an underlying asset, such as a security, interest rate,
currency rate or index. Derivatives that may be used by the Funds include,
but are not limited to, forward contracts, swaps, structured notes,
collateralized mortgage obligations ("CMOs"), futures and options (see
"Futures Contracts" and "Options" below). The risks involved in using
derivatives include the risk that the derivative may experience greater price
swings than other securities and may be less liquid than other securities.
Leveraged derivatives involve borrowing. The Funds may use derivatives as a
hedge against foreign currency, equity market or interest rate risk, or to
gain additional exposure to certain markets for investment purposes, within
the limitations set forth below. In addition, they may be used to enhance a
Fund's yield. For purposes other than hedging, a Fund will invest no more
than 5% of its assets in derivatives which at the time of purchase are
considered by management to involve high risk to the Fund, such as inverse
floaters, interest only and principal only debt instruments. Each Fund
(except the Money Market Fund) may invest up to 30% of its assets in lower
risk derivatives for hedg-
Aetna Mutual Funds Prospectus 23
<PAGE>
ing, to gain additional exposure to certain markets for investment purposes,
and in order to maintain liquidity to meet shareholder redemptions or to
minimize trading costs.
Borrowing Each Fund may borrow up to 5% of the value of its total assets from
a bank for temporary or emergency purposes. The Funds do not intend to borrow
for other purposes, except that they may invest in leveraged derivatives
which have certain risks as outlined above. A Fund may borrow for leveraging
purposes 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 a Fund
since it exaggerates the effects of changes in the value of the securities
purchased with the borrowed funds.
Repurchase Agreements Under a repurchase agreement, a Fund may acquire a debt
instrument for a relatively short period subject to an obligation by the
seller to repurchase and by the Fund to resell the instrument at a fixed
price and time.
The Funds may enter into repurchase agreements with domestic banks and
broker-dealers. Such agreements, although fully collateral-ized, involve the
risk that the seller of the securities may fail to repurchase them. In that
event, a Fund may incur costs in liquidating the collateral or a loss if the
collateral declines in value. If the default on the part of the seller is due
to insolvency and the seller initiates bankruptcy proceedings, the ability of
a Fund to liquidate the collateral may be delayed or limited.
The Company's Board of Directors has established credit standards for
issuers of repurchase agreements entered into by a Fund.
Asset-Backed Securities Each Fund may purchase securities collateralized by a
specified pool of assets including, but not limited to, automobile loans,
computer leases, boat 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.
Bank Obligations Each Fund may invest in obligations issued by domestic or
foreign banks (including bankers' acceptances, commercial paper, bank notes,
time deposits and certificates of deposit) provided the issuing bank has a
minimum of $5 billion in assets and a primary capital ratio of at least
4.25%.
Illiquid and Restricted Securities Each Fund may invest up to 15% of its
total assets in illiquid securities (10% in the case of the Money
24 Aetna Mutual Funds Prospectus
<PAGE>
Market Fund). Illiquid securities are securities that are not readily
marketable or cannot be disposed of within seven days in the ordinary course
of business without taking a materially reduced price. In addition, a Fund
may invest in securities that are subject to legal or contractual
restrictions as to resale, including securities purchased under Rule 144A and
Section 4(2) of the Securities Act of 1933. The Board of Directors has
established a policy to monitor the liquidity of such securities.
Foreign Securities The purchase of foreign securities may involve certain
additional risks. Such risks include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; possible difficulty in obtaining and enforcing judgments
against foreign entities; adverse foreign political and economic
developments; different accounting procedures and auditing standards; the
possible imposition of withholding taxes on interest income payable on
securities; the possible seizure or nationalization of foreign assets; the
possible establishment of exchange controls or other foreign laws or
restrictions which might adversely affect the payment and transferability of
principal, interest and dividends on securities; higher transaction costs;
possible settlement delays; and less publicly available information about
foreign issuers.
All Funds except the Money Market Fund
may also use the following:
Futures Contracts A Fund may enter into futures contracts or options on
futures to manage the risk of changes in interest rates, equity prices,
currency exchange rates or in anticipation of future purchases or sales of
securities.
Certain risks are involved in futures contracts including but not limited
to: no assurance that transactions in futures contracts can be effected at
favorable prices; possible reduction in a Fund's total return and yield;
possible reduction in value of the futures instrument; the inability of a
Fund to limit losses by closing its position due to lack of a liquid
secondary market or due to daily limits of price fluctuation; imperfect
correlation between the value of the futures contracts and the related
securities; and potential losses in excess of the amount invested in the
futures contracts themselves.
The use of futures involves a high degree of leverage because of the low
margin requirements. As a result, small price movements in futures contracts
may result in immediate and potentially unlimited losses or gains to a Fund.
The amount of gains or losses on invest-
Aetna Mutual Funds Prospectus 25
<PAGE>
ments in futures contracts depends on the portfolio manager's ability to
predict correctly the direction of stock prices, interest rates and other
economic factors.
Options Options are used to minimize principal fluctuation or to generate
additional premium income but they do involve risks. Writing call options,
for example, involves the risk of not being able to effect closing
transactions at favorable prices or to participate in the appreciation of the
underlying securities. Purchasing put options involves the risk of losing the
entire purchase price of the option.
All Funds except the Money Market Fund,
Government Fund, International Growth Fund
and Asian Growth Fund may also use the following:
High Risk, High-Yield Securities A Fund may invest in high risk, high-yield
securities, often called "junk bonds". These securities are rated BB/Ba or
below, or, if unrated, are considered by the Investment Adviser to be of
comparable quality. The Funds will not invest in high-yield securities rated
below B (securities with the capacity to meet interest and principal payments
but with greater vulnerability to default). These securities tend to offer
higher yields than investment-grade bonds because of the additional risks
associated with them. These risks include: a lack of liquidity; an
unpredictable secondary market; a greater likelihood of default; increased
sensitivity to difficult economic and corporate developments; call provisions
which may adversely affect investment returns; and loss of the entire
principal and interest.
Although junk bonds are high risk investments, the Investment Adviser may
purchase these securities if they are thought to offer good value. This may
happen if, for example, the rating agencies have, in the Investment Adviser's
opinion, misclassified the bonds or overlooked the potential for the issuer's
enhanced creditworthiness.
The Government Fund, Bond Fund
and Aetna Fund may also use the following:
Mortgage-Backed Securities A 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 GNMA, the FHLMC and the FNMA. These securities
represent part ownership of a pool of mortgage loans where 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. A Fund may also invest in private
mortgage pass-through securities backed by pools of conventional fixed-rate
or adjustable-rate
26 Aetna Mutual Funds Prospectus
<PAGE>
mortgage loans. In addition, a Fund may invest in CMOs and securities issued
by real estate mortgage investment conduits ("REMICs"). Mortgage-backed
securities are also subject to the same prepayment risk as asset-backed
securities.
The Aetna Fund, Growth and Income Fund,
Growth Fund and Small Company Growth Fund
may also use the following:
Small Capitalization Companies These companies are smaller, less well-known
U.S. companies with equity market capitalization generally less than $1.0
billion and may be in an early developmental stage or older companies
entering a new stage of growth due to management changes, new technology,
products or markets. The securities of small capitalization companies may
also be undervalued due to poor economic conditions, market decline or actual
or unanticipated unfavorable developments affecting the companies.
Securities of small capitalization companies tend to offer greater
potential for growth than securities of larger, more established issuers but
there are additional risks associated with them. These risks include: limited
marketability; more abrupt or erratic market movements than securities of
larger capitalization companies; and less publicly available information
about the issuer. In addition, these companies may be dependent on relatively
few products or services, have limited financial resources and lack of
management depth, and may have less of a track record or historical pattern
of performance.
Investment Restrictions
A Fund will not concentrate its investments in any one industry except that a
Fund may invest up to 25% of its total assets in securities issued by
companies principally engaged in any one industry. For purposes of this
restriction, finance companies will be classified as separate industries
according to the end users of their services, such as automobile finance,
computer finance and consumer finance. This limitation will not apply to
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities and, in the case of the Money Market Fund, to securities
invested in, or repurchase agreements for, U.S. Government securities, and
certificates of deposit, bankers' acceptances, or securities of banks and
bank holding companies. Also, a Fund will not invest more than 5% of its
total assets in the securities of any one issuer (excluding securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) or
purchase more than 10% of the outstanding voting securities of any one
issuer. This restriction applies only to 75% of a Fund's total assets. See
the SAI for additional restrictions.
Aetna Mutual Funds Prospectus 27
<PAGE>
Shareholder Services
The Company offers several services to its Fund shareholders. These may be
selected on the application or you may call 1-800-367-7732 to select these
services at a later date.
These services may not be available through employer-sponsored retirement
plans. For information on services that are available under
employer-sponsored retirement plans, such as 401(k) plans, please refer to
your enrollment materials. The specific provisions of your plan will govern
the investment options and services available to you.
Shareholder Inquiries If you have any questions about the Funds or the
shareholder services described below, please call 1-800-367-7732.
How to
Purchase
Shares
How to Purchase Shares Select Class shares may be purchased directly from the
Company, through a registered representative of a broker-dealer affiliated
with the Company, through a registered representative of an unaffiliated
broker-dealer, or through an employer-sponsored retirement plan (if you are
purchasing through such a plan, please refer to your enrollment materials).
How to Open an Account To open an account, please complete and submit an
application with the amount to be invested as directed below under "Purchase
by Mail." You may open an account with a minimum investment of $1,000 or $500
for IRAs. Once you have opened an account in a Fund, additional investments
may be made by mail ($100 minimum), wire transfer ($500 minimum) or exchange
from the same class of another Fund in the Aetna Series Fund, Inc. All checks
must be drawn on a bank located within the United States and payable in U.S.
dollars. Minimum investments may be waived if an investment is made through
exchange of the entire amount invested in another Fund. Minimums may also be
waived for certain circumstances such as for persons investing through
certain benefit plans, insurance settlement options or by systematic
investments. (Please refer to "Other Features--Systematic Investment.")
Crediting of Shares Shares for new accounts will be purchased at the net
asset value determined as of 4:15 p.m. eastern time on any day that the New
York Stock Exchange is open for business ("Business Day") so long as the
completed and signed application accompanied by a check in payment for the
share purchase is received by Firstar Trust Company (the transfer agent) at
its Milwaukee offices prior to 4:00 p.m. Additional investments and exchanges
will also be processed at the net asset value determined as of 4:15 p.m. if
the
28 Aetna Mutual Funds Prospectus
<PAGE>
check or wire for the purchase price or the exchange request is received by
4:00 p.m. Orders received after 4:00 p.m. will be processed at the net asset
value determined on the following Business Day. For investors purchasing
shares in connection with retirement plans offered by certain institutions
(Institutions) under Section 401 of the Internal Revenue Code, shares will be
purchased at the next price calculated on a day the NYSE is open provided
that the Institution receives the investor's request before the time
specified by such Institution. Investors participating in such a plan should
refer to their enrollment materials for a discussion of any specific
instructions on the timing or restrictions on the purchase of shares. Please
refer to "Net Asset Value" for information on how the Funds are valued.
You can make
a purchase
by mail
Purchase by Mail To purchase shares by mail, please complete and sign the
application, make a check payable to the Aetna Series Fund, Inc. and mail to
the transfer agent, as follows:
Aetna Series Fund, Inc.
c/o Mutual Fund Services, 3rd Floor
P.O. Box 701
Milwaukee, WI 53201-0701
Applications mailed by overnight courier should be sent to the transfer agent
as follows:
Aetna Series Fund, Inc.
c/o Mutual Fund Services, 3rd Floor
615 E. Michigan Street
Milwaukee, WI 53202
You can make additional investments to your accounts by using the
investment stubs from your confirmation statements or by writing to the
Company at the address listed above. Your letter should indicate your name,
account numbers, the Select Class shares of which Funds you wish to invest
in, and the amount to be invested. When opening an account, your check should
be made payable to Aetna Series Fund, Inc. or Firstar Trust Company. Cash,
credit cards and third party checks cannot be used to open an account.
Firstar will accept checks for subsequent purchases which are made payable to
the account owner(s) and endorsed to the Company.
You can
purchase by
wire, electronic
funds transfer
or exchange
Purchase by Wire You may also purchase additional Select Class shares of a
Fund through a wire transfer. For federal funds wire instructions, please
call 1-800-367-7732. Federal funds wire purchase orders will be accepted only
when the Fund and custodian bank are open for business.
Purchase by Electronic Funds Transfer Once an account has been established in
any of the Funds, you may purchase additional Select
Aetna Mutual Funds Prospectus 29
<PAGE>
Class shares by using Electronic Funds Transfer ("EFT") facilities under the
Systematic Investment feature. See "Other Features." EFT will allow you to
transfer money between a bank account and a specific Fund. You must elect EFT
capability on the application in order to authorize this option.
Purchase by Exchange You may open an account or purchase additional Select
Class shares by making an exchange among Select Class shares of any of the
Funds of the Company, provided shares of such Fund may be legally sold in
your state of residence. An exchange may be made by submitting a written
request to make the exchange and specifying the name and account number of
your current Fund account, the name of the Fund you wish to exchange into,
the amount to be exchanged, and the signatures of all shareholders. Send your
request to the address listed above under "Purchase by Mail."
You may also exchange your Select Class shares by calling 1-800-367-7732.
Please provide the Fund names, account number, your Social Security number or
taxpayer identification number, account address and the amount to be
exchanged. Requests received prior to 4:00 p.m. eastern time will be
processed that Business Day.
You should carefully consider the following before making an exchange:
[filled box] Each exchange may result in a gain or loss and is treated as a
sale and as a purchase of shares for tax purposes.
[filled box] An exchange which represents an initial investment in a Fund
must meet the minimum investment requirements described under
"Shareholder Services - How to Open an Account."
[filled box] The shares received in an exchange must be identically
registered. A letter with signature guarantees must accompany
any exchange request to transfer shares into a Fund account that
is not registered identically to the transferring Fund account.
[filled box] Following an investment in a Fund, there is a required eight-day
holding period before those shares can be exchanged.
There is currently no limit on the number of exchanges. However, each Fund
reserves the right to temporarily or permanently terminate the exchange
privilege for any person who makes more than five exchanges out of a Fund per
calendar year. In addition, each Fund reserves the right to refuse exchange
purchases by any person or group if, in the Investment Adviser's judgment,
that Fund would be unable to invest effectively in accordance with its
investment objective as a result of such exchange. Each Fund also reserves
the right to revise the exchange privilege at any time.
30 Aetna Mutual Funds Prospectus
<PAGE>
You automatically receive telephone exchange privileges when you establish
your account. If you do not want telephone exchange privileges, write to the
transfer agent at the above address or call 1-800-367-7732. The Funds have
established reasonable procedures to confirm that instructions received are
genuine. If these procedures are not followed, the Funds may be liable for
any losses due to unauthorized or fraudulent instructions. For your
protection, all telephone exchange transactions will be recorded, and you
will be asked for certain identifying information.
Your distribution
option can be
changed at any time by calling
1-800-367-7732
Distribution Options When completing an application, you must select one of
the following options for dividends and capital gains distributions:
[filled box] Full Reinvestment - Both dividends and capital gains
distributions from a Fund will be reinvested in additional Select Class
shares of that Fund. This option will be selected automatically unless one of
the other options is specified. (Please refer to "Fund Distributions.")
[filled box] Or . . . Capital Gains Reinvestment - Capital gains
distributions from a Fund will be reinvested in additional Select Class
shares of that Fund and all net income from dividends will be distributed in
cash.
[filled box] Or . . . All Cash - Dividends and capital gains distributions
will be paid in cash.
If you select a cash distribution option, you can elect to have
distributions automatically invested in Select Class shares of another Fund
of the Company.
If you make no selection, income dividends and capital gains distributions
with respect to a particular Fund will be reinvested in additional Select
Class shares of that Fund. Distributions paid in shares will be credited to
your account at the next determined net asset value per share.
If you wish to change the manner in which you receive income dividends and
capital gains distributions, your notification of such change must be
received by the transfer agent at least ten days before the next scheduled
distribution.
How to Redeem Shares To redeem all or a portion of the Select Class shares in
your account, a redemption request should be submitted as described below.
Shares will be redeemed at the net asset value determined as of 4:15 p.m.
eastern time on any Business Day so long as the redemption request and all
required documentation is received by Firstar Trust Company (the transfer
agent) at its Milwaukee offices prior to 4:00 p.m. Redemption requests
received after 4:00 p.m. will
Aetna Mutual Funds Prospectus 31
<PAGE>
be processed at the net asset value determined on the following Business Day.
The Company has the right to satisfy redemption requests by delivering
securities from its investment portfolio rather than cash when it decides
that distributing cash would not be in the best interests of shareholders.
However, a Fund is obligated to redeem its shares solely in cash up to an
amount equal to the lesser of $250,000 or 1% of its net assets for any one
shareholder of a Fund in any 90 day period. To the extent possible, the
Company will distribute readily marketable securities, in conformity with
applicable rules of the Commission. In the event such redemption is requested
by institutional investors, the Company will weigh the effects on individual
nonredeeming shareholders in applying this policy. Securities distributed to
shareholders may be difficult to sell and may result in additional costs to
the shareholders. See the SAI for additional information on redemptions in
kind.
For help with
redemptions, call
1-800-367-7732
Redeem by Mail Shares of any Fund may be redeemed by sending written
instructions to the transfer agent. The instructions should identify the
Fund, the number of shares or dollar amount to be redeemed, your name and the
Fund account number. The instructions must be signed by all person(s)
required to sign for the Fund account, exactly as the account is registered,
and accompanied by a signature guarantee(s). (See "Signature Guarantee"
below.) Certain nonindividual shareholders may also be required to furnish
copies of a corporate resolution, trust document or other supporting
documents.
Once shares are redeemed, the Fund will normally send the proceeds of such
redemption within one or two business days. However, if making immediate
payment could adversely affect a Fund, the Fund may defer distribution for up
to seven days or the maximum period allowed by law, if shorter. Also, a Fund
will hold payment of redemption proceeds until a purchase check or systematic
investment clears, which may take up to 12 calendar days. The Fund(s) may
suspend redemptions or postpone payments when the New York Stock Exchange is
closed or when trading is restricted for any reason other than its customary
weekend or holiday closings, or under any emergency circumstances as
determined by the Commission.
Redeem by Wire Redemption proceeds will be transferred by wire to your
designated bank account if federal funds wire instructions are provided with
your redemption request accompanied by a signature guarantee as described
below. A $10.00 fee will be charged for this service. A minimum redemption of
$1,000 is required for wire transfers.
Signature Guarantee A signature guarantee is verification of the authenticity
of the signature given by certain authorized institutions.
32 Aetna Mutual Funds Prospectus
<PAGE>
The Funds will waive the signature guarantee requirement for redemption
requests for amounts of $10,000 or less. However, if you wish to have your
redemption proceeds transferred by wire to your designated bank account, paid
to someone other than the shareholder of record, or sent somewhere other than
the shareholder address of record, you must provide a signature guarantee
with your written redemption instructions regardless of the amount of
redemption.
The Funds reserve the right to amend or discontinue this policy at any
time and establish other criteria for verifying the authenticity of any
redemption request.
You can obtain a signature guarantee from any one of the following
institutions: a national or state bank (or savings bank in New York or
Massachusetts only); a trust company; a federal savings and loan association;
or a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges. Please note that signature guarantees are not provided by notary
publics.
Minimum Account Balance To keep your account open, you must maintain a
minimum balance of $500 in each Fund account. If this minimum balance is not
maintained due to redemptions, the Fund reserves the right to redeem all of
your remaining shares in that account and mail the proceeds to you at the
address of record. Shares will be redeemed at net asset value on the day the
account is closed. The Fund will give you 60 days notice that such redemption
will occur unless you make an additional investment to increase the account
balance to the $500 minimum.
Information you
will receive
Tax-Deferred Retirement Plans The Funds can be used for investment by a
variety of tax-deferred plans. These plans let you save for retirement and
allow you to defer taxes on your investment income. Some of these plans are:
[filled box] IRAs, available to individuals who work and their spouses.
[filled box] 401(k) programs, available to corporations of all sizes to
benefit their employees.
Shareholder Information The transfer agent will maintain shareholder
accounts. A confirmation statement will be sent to you after every
transaction that affects your share balance or account registration. A Form
1099 will also be sent each year by January 31. You will also receive an
annual and semiannual report of the Funds. The transfer agent may charge you
a fee for special requests such as an historical transcript of your account
and copies of cancelled checks.
Consolidated statements reflecting current account values and year-to-date
transactions will be sent to you each quarter. All accounts
Aetna Mutual Funds Prospectus 33
<PAGE>
identified by the same social security number and address will be
consolidated. For example, you could receive a Consolidated Statement showing
your individual and IRA accounts. With the prior permission of the other
shareholders involved, you have the option of requesting that accounts
controlled by those other shareholders be shown on one Consolidated
Statement. For example, information on your individual account, your IRA,
your spouse's individual account and your spouse's IRA may be shown on one
Consolidated Statement.
Other Features
A convenient
way to make
regular
investments
Systematic Investment The Systematic Investment feature, using the EFT
capability (see "Shareholder Services--Purchase by Electronic Funds
Transfer"), allows you to make automatic monthly investments in any of the
Funds. On the application, you may select the amount of money to be moved and
the Fund(s) to be invested in. There is no minimum initial cash investment
required to open your account if you elect to use the EFT feature. The
minimum monthly Systematic Investment is $50 per Fund account. Your
application must be received at least 15 business days prior to the first EFT
transaction. The Systematic Investment feature and EFT capability will be
terminated upon total redemption of your account. Also, a Fund will hold
payment of redemption proceeds until a Systematic Investment has cleared,
which may take up to 12 calendar days.
For more
information, call
1-800-367-7732
Automatic Cash Withdrawal Plan The Automatic Cash Withdrawal Plan provides a
convenient way for you to receive a systematic distribution while maintaining
an investment in the Funds. The Automatic Cash Withdrawal Plan permits you to
have payments of $100 or more automatically transferred from your Fund to
your designated bank account on a monthly basis. In order to enroll in this
plan, you must have a minimum balance of $10,000 in any Fund utilizing this
feature. Your automatic cash withdrawals will be processed on a regular basis
beginning on or about the first day of the month. There may be tax
consequences associated with these transactions. Please consult your tax
adviser.
Be sure to
sign up for
checkwriting
services
Checkwriting Service Checkwriting is available with the Money Market Fund.
There is currently no charge for this service. Checks must be for a minimum
of $250 and the checkwriting service may not be used for a complete
redemption of your account. If the amount of the check is greater than the
value of your account, the check will be returned unpaid. In addition, checks
written against shares purchased by check or Systematic Investment during the
past 12 calendar days will be returned unpaid due to uncollected funds. You
may select the checkwriting service by indicating your election on the
Application or
34 Aetna Mutual Funds Prospectus
<PAGE>
by calling 1-800-367-7732 for further information. All notices with respect
to checks must be given to the transfer agent. The checkwriting service is
not available for IRAs or other retirement accounts.
TDD Service Firstar Trust Company, the transfer agent, offers
Telecommunication Device for the Deaf (TDD) services for hearing impaired
shareholders. The dedicated number for this service is 1-800-684-3416 and
appears on shareholder account statements.
Changes to Service The Funds reserve the right to amend the shareholder
services described above or to change the terms or conditions of such
services at any time.
Cross-Fund Investing
[filled box] Dividend Investing - You may elect to have dividend and/or
capital gains distributions automatically invested in one other
Select Class Fund account.
[filled box] Systematic Exchange - You may establish an automatic exchange of
Select Class shares from one Fund account to another. The
exchange will occur on or about the 15th day of each month and
must be for a minimum of $50 per month. Since this transaction
is treated as an exchange, the policies related to the exchange
privilege apply. Please read the "Shareholder Services--Purchase
by Exchange" section carefully. There may be tax consequences
associated with these exchanges. Please consult your tax
adviser.
Cross-Fund Investing may only be made in a Fund account that has been
previously established with the Fund's minimum investment. To request either
or both of these features, please call 1-800-367-7732 to obtain the
appropriate application.
Management of the Funds
Directors The business affairs of each Fund are managed under the
direction of the Board of Directors ("Directors"). The Directors set broad
policies for the Company and each Fund. Information about the Directors is
found in the SAI.
The Fund's
Investment
Adviser
Investment Adviser ALIAC, the Investment Adviser for each Fund, is a
Connecticut corporation with its principal offices at 151 Farmington Avenue,
Hartford, Connecticut 06156. ALIAC is registered with the Commission as an
investment adviser and currently manages over $22 billion in assets for the
Funds, other investment companies and for its general account.
Aetna Mutual Funds Prospectus 35
<PAGE>
Under an investment advisory agreement with each Fund, the Investment
Adviser is responsible for managing the assets of each Fund in accordance
with its investment objectives and policies subject to the supervision of the
Directors.
The Investment Adviser furnishes all necessary facilities and pays the
salaries and other related costs of personnel engaged in providing investment
advice to the Funds. It also pays salary, other fees and expenses for
Directors and officers of the Company who are employees or affiliated persons
of the Investment Adviser.
The Investment Adviser receives a monthly fee from each Fund at an annual
rate based on average daily net assets of each Fund as follows:
Advisory
Fees
Fee Assets
---------------------------- ------ ------------------------
Money Market Fund 0.400% On first $500 million
0.350% On next $500 million
0.340% On next $1 billion
0.330% On next $1 billion
0.300% Over $3 billion
---------------------------- ------ ------------------------
Government Fund 0.500% On first $250 million
0.475% On next $250 million
0.450% On next $250 million
0.425% On next $1.25 billion
0.400% Over $2 billion
---------------------------- ------ ------------------------
Bond Fund 0.500% On first $250 million
0.475% On next $250 million
0.450% On next $250 million
0.425% On next $1.25 billion
0.400% Over $2 billion
---------------------------- ------ ------------------------
Aetna Fund 0.800% On first $500 million
0.750% On next $500 million
0.700% On next $1 billion
0.650% Over $2 billion
---------------------------- ------ ------------------------
Growth and Income Fund 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
---------------------------- ------ ------------------------
Growth Fund 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
36 Aetna Mutual Funds Prospectus
<PAGE>
Fee Assets
---------------------------- ------ ------------------------
Small Company Growth Fund 0.850% On first $250 million
0.800% On next $250 million
0.775% On next $250 million
0.750% On next $1.25 billion
0.725% Over $2 billion
---------------------------- ------ ------------------------
International Growth Fund 0.850% On first $250 million
0.800% On next $250 million
0.775% On next $250 million
0.750% On next $1.25 billion
0.700% Over $2 billion
---------------------------- ------ ------------------------
Asian Growth 1.000% On first $250 million
0.875% On next $250 million
0.850% On next $250 million
0.825% On next $1.25 billion
0.800% Over $2 billion
The investment advisory and administrative service fees (see
"Administrator" below) applicable to the Aetna Fund, Growth and Income Fund,
Growth Fund, Small Company Growth Fund, International Growth Fund and Asian
Growth Fund when taken together (before expense reimbursement) are higher
than those charged by some other investment advisers to other registered
investment companies.
Sub-adviser to
Aetna Series
Fund, Inc.
Sub-Adviser The Investment Adviser has engaged Aeltus as the sub-adviser to
the Growth Fund and the Small Company Growth Fund. Aeltus is a Connecticut
corporation located at 242 Trumbull Street, Hartford, Connecticut 06156.
Aeltus is a wholly owned subsidiary of Aetna Life Insurance Company which is
in turn owned by Aetna Life and Casualty Company. Aeltus is registered as an
investment adviser with the Commission.
Under sub-advisory agreements, the sub-adviser is subject to the
supervision of the Investment Adviser and the Directors, and is responsible
for managing the assets of each of the Funds in accordance with its
investment objectives and policies. The sub-adviser pays the salaries and
other related costs of its personnel engaged in providing investment advice
to the Funds including office space, facilities and equipment.
The Investment Adviser has overall responsibility for monitoring the
investment program maintained by the sub-adviser for compliance with
applicable laws and regulations and the respective Fund's investment
objective.
Aetna Mutual Funds Prospectus 37
<PAGE>
Administrator ALIAC acts as administrator for each Fund and performs certain
administrative and internal accounting services, including maintaining
general ledger accounts, regulatory compliance, preparing financial
information for semiannual and annual reports, preparing registration
statements, calculating net asset values (except for the International Growth
and Asian Growth Funds), shareholder communications and supervising the
custodians and transfer agent.
For these services, each Fund pays ALIAC a monthly fee at an annual rate
based on average daily net assets of the Fund as follows: 0.25% on the first
$250 million; 0.24% on the next $250 million; 0.23% on the next $250 million;
0.22% on the next $250 million; 0.20% on the next $1 billion; and 0.18% on
assets over $2.0 billion.
Principal Underwriter ALIAC is the principal underwriter for the Company.
ALIAC may contract with various broker-dealers, including one or more of its
affiliates, for distribution of Select Class shares.
Transfer Agent Firstar Trust Company acts as each Fund's transfer and
dividend-paying agent. Firstar is responsible for the issuance, transfer and
redemption of shares and the opening and maintenance of shareholder accounts.
Fund Expenses Each Fund bears the costs of its operations. Expenses directly
attributable to a Fund are charged to that Fund. Some expenses are allocated
proportionately among all the Funds in relation to the net assets of each
Fund and some expenses are allocated equally to each Fund. Fund expenses are
set forth in the Fee Tables.
Portfolio Management
The following individuals are primarily responsible for the day-to-day
management of the Funds, as indicated below. All of the following individuals
may also decide as a group what strategy may benefit all of the Funds.
Money Market Fund, Government Fund and Bond Fund Jeanne Wong-Boehm, Managing
Director, ALIAC, has been managing the Money Market Fund and the Bond Fund
since January 1992. She has been managing the Government Fund since its
inception in January 1994. Ms. Wong-Boehm joined ALIAC in 1983 as a fixed
income portfolio analyst, and shortly thereafter assumed portfolio
responsibilities for various general account segments within the Aetna group
of companies. In 1989 she was also assigned primary responsibility for the
money market operations.
38 Aetna Mutual Funds Prospectus
<PAGE>
The Aetna Fund John Y. Kim, Chief Investment Officer, ALIAC. Mr. Kim has been
managing The Aetna Fund since May 1994. He joined Aetna Life Insurance
Company in 1983 as a Bond Analyst and in 1989 he advanced to Senior
Investment Officer. In October 1989, Mr. Kim joined ALIAC as Fixed Income
Portfolio Manager. He subsequently served as a Vice President of
Investor Relations for Aetna Life and Casualty Company ("Aetna")
and later became Vice President and Senior Portfolio
Manager for Aetna's Property/ Casualty portfolios. In 1993, John joined
Mitchell Hutchins Institutional Investors as Managing Director and Head of
Institutional Fixed Income. In 1994 he returned to ALIAC as its Chief
Investment Officer.
Growth and Income Fund Kevin Means, Chief Equity Officer, ALIAC, has managed
the Growth and Income Fund since July 1994. Mr. Means is responsible for the
management of over $6 billion in variable annuity and mutual funds. Mr. Means
joined ALIAC in July of 1994 after serving as Chief Investment Officer at
INVESCO Management and Research, Boston from 1993 to 1994. He also served
from 1987 to 1993 as the Director of Quantitative Research and Equity
Portfolio Manager at INVESCO Capital Management, Atlanta. At INVESCO, Mr.
Means managed mutual funds and institutional accounts. Mr. Means heads a team
of portfolio managers who specialize in various asset classes used in the
management of the Growth and Income Fund.
International Growth Fund and Asian Growth Fund Vince Fioramonti,
International Portfolio Manager, has been the Lead Portfolio Manager for
Aetna International Growth Fund and Asian Growth Fund since December 1995.
Mr. Fioramonti manages international stocks and non-U.S. dollar government
bonds for several ALIAC investment funds. Mr. Fioramonti joined ALIAC in 1994
after serving as Vice President for The Travelers Investment Management
Company. He began his investment career with Travelers in 1988. Kevin Means
assists Mr. Fioramonti on country asset allocation and currency hedging
policies.
The following Funds are subadvised by Aeltus:
Growth Fund Peter Canoni, Managing Director, Aeltus, has managed the Growth
Fund since its inception in January 1994. Mr. Canoni has worked as a fund
manager for Aeltus since 1980.
Small Company Growth Fund Thomas DiBella, Investment Officer, Aeltus, has
managed the Small Company Growth Fund since its inception in January 1994.
Mr. DiBella joined Aetna in 1991 in the equity investment area of Aeltus. He
is currently responsible for the management of small capitalization
portfolios. Prior to joining Aetna, Mr. DiBella was an investment officer
with Bethlehem Steel from 1989 to 1991.
Aetna Mutual Funds Prospectus 39
<PAGE>
Fund Distributions
How to
receive
dividends
[filled box] The Money Market Fund declares dividends daily and pays monthly.
[filled box] The Government Fund and the Bond Fund declare and pay dividends
monthly.
[filled box] The Aetna Fund and the Growth and Income Fund declare and pay
dividends semiannually.
[filled box] The Growth Fund, Small Company Growth Fund, International Growth
Fund and Asian Growth Fund declare and pay dividends annually.
[filled box] All capital gains distributions, if any, are paid on an annual
basis.
Income dividends are derived from investment income, including dividends,
interest, realized short-term capital gains, and certain foreign currency
gains received by a Fund. Capital gains distributions are derived from each
Fund's realized long-term capital gains. The per share dividends and
distributions of Select Class shares will be higher than the per share
dividends and distributions of the Adviser Class as a result of the
distribution fees and service fees applicable to the Adviser Class.
Money Market Fund shares begin to accrue dividends the next Business Day
after they are purchased; a redemption will include dividends declared
through the redemption date.
Both income dividends and capital gains distributions are paid by each
Fund on a per-share basis. As a result, at the time of such payment, the net
asset value per share of a Fund (except the Money Market Fund) will be
reduced by the amount of such payment.
Net Asset Value
Pricing
your Fund
The net asset value per share ("NAV") of each Fund is determined as of 4:15
p.m. eastern time on each day that the NYSE is open for trading. Except for
the Money Market Fund, the NAV is computed by dividing the total value of a
Fund's securities, plus any cash or other assets (including dividends accrued
but not collected) less all liabilities (including accrued expenses), by the
number of shares outstanding.
Portfolio securities are valued primarily on the basis of market
quotations. All other assets, including restricted securities and other
securities for which market quotations are not readily available, are valued
at their fair value in such manner as may be determined, from time to time,
under the authority of the Directors.
The Money Market Fund's portfolio securities are valued by the amortized
cost method of valuation. The Money Market Fund's use of
40 Aetna Mutual Funds Prospectus
<PAGE>
amortized cost is part of its effort to maintain a constant net asset value
of $1.00 per share.
Taxes
Form 1099-DIV
will be mailed
to you in January
Introduction The tax information described below is only a summary of federal
income tax consequences and is based on tax laws and regulations in effect as
of the date of this Prospectus. Please refer to the SAI for a more detailed
discussion of federal income tax considerations. In addition to federal
taxes, you may be subject to state and local taxes and you should discuss
your individual tax situation with your tax adviser.
Shareholder Distributions The Company intends to qualify for treatment under
Subchapter M of the Code. Therefore, the Funds will distribute all of their
net income and gains to shareholders. Such distributions will be taxable to
the shareholders and not the Funds. Distributions of net long-term capital
gains are taxable to you as long-term capital gains regardless of the length
of time you have owned your shares. Distributions of net investment income
and net short-term capital gains are taxable to you as ordinary income.
Depending on a Fund's investments, part or all of ordinary income dividends
could be treated as: (1) "U.S. Government Interest Dividends" which are
exempt from state and local taxes in some jurisdictions or (2) "Qualifying
Dividends" which for eligible corporate shareholders qualify for the corporate
dividends-received deduction. Dividends paid by the Government Fund may be
U.S. Government Interest Dividends. Substantially all dividends paid by the
Growth and Income Fund, and, to a lesser degree, the Aetna Fund, the Growth
Fund and the Small Company Growth Fund will be Qualifying Dividends for which
eligible corporate shareholders may claim a partial deduction.
Investment income from foreign securities may be subject to foreign taxes
withheld at the source. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Fund's assets to be invested in
various countries is not known. The International Growth and Asian Growth
Funds may elect to "pass through" foreign taxes paid in order to permit
shareholders to claim a credit or deduction, if more than 50% of the value of
such Fund's assets at the close of a taxable year consist of stock or
securities of foreign corporations.
A Fund's distributions are taxable in the year they are received,
regardless of whether you take them in cash or reinvest them in additional
shares. However, distributions declared in December to shareholders of record
on a date in December and paid in January of the following year are taxable
as if paid on December 31 of the year of declaration. Each Fund will send a
statement to shareholders by January 31 indicating the tax status of
distributions
Aetna Mutual Funds Prospectus 41
<PAGE>
made during the previous year, and any foreign taxes "passed-through" to
shareholders.
Buying a Dividend If you buy shares of a Fund (other than the Money Market
Fund) just before the ex-dividend date, you may be taxed on the entire
amount of the dividend received.
Share Redemptions Any gain or loss realized when you redeem (sell) or
exchange shares of a Fund will be treated as a taxable long-term or
short-term capital gain or loss. Please see the SAI for information regarding
any limitation on deductibility of such losses.
Tax Withholding When you fill out your application, you will be asked to
certify that your Social Security or taxpayer identification number is
correct and that you are not subject to 31% backup withholding by the
Internal Revenue Service ("IRS"). If you are subject to backup withholding,
or fail to properly certify your taxpayer identification number, the IRS can
require a Fund to withhold 31% of your taxable dividends, capital gains
distributions and redemption proceeds.
General Information
Articles of Incorporation The Company was incorporated under the laws of
Maryland on June 17, 1991. The Articles of Incorporation ("Articles") provide
for the issuance of multiple series of shares each representing a portfolio
of investments with different investment objectives, policies and
restrictions. The Company currently offers 12 series of Funds, nine of which
are described in this Prospectus.
Share Classes Each Fund offers shares of common stock currently classified
into two classes, Select Class shares and Adviser Class shares. Each class of
shares has the same rights, privileges and preferences, except with respect
to: (a) the effect of the respective sales charge, if any, for each class;
(b) the distribution and/or service fees borne by each class; (c) the
expenses allocable exclusively to each class; (d) voting rights on matters
exclusively affecting a single class; and (e) the exchange privilege of each
class. The Board of Directors does not anticipate that there will be any
conflicts among the interests of the holders of the different classes of
shares of the Funds. The Directors continue to consider whether any such
conflicts exist and, if so, will take appropriate action.
The Company has obtained a ruling from the IRS with respect to the Funds
described in this Prospectus to the effect that differing distributions among
the classes of its shares will not result in a Fund's dividends or other
distributions being regarded as "preferential dividends" under the Code. For
additional information, see the SAI.
42 Aetna Mutual Funds Prospectus
<PAGE>
Capital Stock The Articles currently authorize the issuance of 4.8 billion
shares of capital stock of the Company. All shares are nonassessable,
transferable and redeemable. There are no preemptive rights.
As of January 31, 1996, the following shares of the Company were owned by
ALIAC and its affiliates:
ALIAC
----------------------
Select Adviser
--------- ----------
Money Market Fund 119,499 0
Government Fund 714,990 0
Bond Fund 76,449 209,998
The Aetna Fund 12,013 0
Growth and Income Fund 11,347 0
Growth Fund 950,612 0
Small Company Growth Fund 2,446,721 0
International Growth Fund 11,702 1,912,492
Asian Growth Fund 467,409 0
Aetna Ascent 1,840,324 0
Aetna Crossroads 1,791,527 0
Aetna Legacy 1,826,236 0
Aetna Life Insurance Company
----------------------
Select Adviser
--------- ----------
Asian Growth Fund 2,066,778 0
All shares were acquired for investment and can be disposed of only by
redemption. ALIAC and its affiliates may make additional investments into the
Funds.
Shareholder Meetings The Company is not required and does not intend to hold
annual shareholder meetings. The Articles provide for meetings of
shareholders to elect Directors at such times as may be determined by the
Directors or as required by the 1940 Act. If requested by the holders of at
least 10% of a Fund's outstanding shares, the Company will hold a shareholder
meeting for the purpose of voting on the removal of one or more Directors and
will assist with communication concerning that shareholder meeting.
Voting Rights Shareholders of each class are entitled to one vote for each
full share held and fractional votes for fractional shares of each class held
on matters submitted to the shareholders of the Company. Voting rights are
not cumulative. Generally, shares of the Company will be voted on a
Company-wide basis on all matters except matters affecting only the interests
of one Fund or one class of shares.
Payments to Dealers From time to time, ALIAC or its affiliates may make
payments (up to 0.25%, computed on an annualized basis, of
Aetna Mutual Funds Prospectus 43
<PAGE>
average monthly account values) to other dealers and/or their agents who sell
Select Class shares or who provide shareholder services to you. These
payments are made from the resources of the paying entity so the price you
pay for Select Class shares and the value of your investment will be
unaffected.
Performance Data
The Funds may compare their performance to other mutual funds with similar
investment objectives and to the industry as a whole, as quoted by ranking
services and publications of general interest. These may include the Standard
& Poor's 500 Stock Index ("S&P 500"); Shearson Lehman Aggregate Bond Index;
Dow Jones Industrial Average ("DJIA"); Lipper Analytical Services, Inc.;
IBC/Donoghue's Taxable MFA; the Morgan Stanley Capital International Europe,
Australia, Far East ("EAFE") Index; and the Morgan Stanley Capital
International Far East Free ("FEF ex. Japan") Index.
44 Aetna Mutual Funds Prospectus
<PAGE>
Appendix A--Glossary of Investment Terms
This glossary describes some of the securities used by the Funds. Further
information is available in the SAI:
Banker's Acceptance A banker's acceptance is a time draft drawn on and
accepted by a bank and is customarily used by corporations as a means of
financing payment for traded goods. When a draft is accepted by a bank, the
bank guarantees to pay the face value of the debt at maturity.
Certificates of Deposit For large deposits not withdrawable on demand, banks
issue certificates of deposit ("CDs") as evidence of ownership. CDs are
usually negotiable and traded among investors such as mutual funds and banks.
Commercial Paper Commercial paper is unsecured short-term debt instruments
issued by companies or banks with a maturity ranging from two to 270 days.
Eurodollars Eurodollars are U.S. dollars held in banks outside the United
States, mainly in Europe but also in other countries, and are commonly used
for the settlement of international transactions. There are many types of
Eurodollar securities including Eurodollar CDs and bonds; these securities
are not registered with the Commission. Certain Eurodollar deposits are not
FDIC insured and may be subject to future political and economic developments
and governmental restrictions.
High Risk, High-Yield Securities Bonds of low quality security backing rated
BB or below by Standard & Poor's Corp. or Ba or below by Moody's Investors
Service, Inc., or other agencies, or, if unrated, considered by the
Investment Adviser to be of comparable quality. These bonds are often called
"junk bonds" because of the greater possibility of default.
Pay-in-Kind Bonds Pay-in-kind bonds are bonds that pay all or a portion of
their interest through the issuance of additional bonds.
Repurchase Agreements A repurchase agreement or "repo" is an agreement
between a seller and buyer, usually of U.S. Government securities, to sell
and subsequently repurchase securities at a fixed price on a future date. The
primary attraction of repurchase agreements is the flexibility of maturities.
Aetna Mutual Funds Prospectus 45
<PAGE>
U.S. Government Derivatives A Fund may purchase separately traded principal
and interest components of certain U.S. Government securities ("STRIPS"). In
addition, a Fund may acquire custodial receipts that represent ownership in a
U.S. Government security's future interest or principal payments. These
securities are known by such exotic names as TIGRS and CATS and may be issued
at a discount to face value. They are generally more volatile than normal
fixed income securities because interest payments are accrued rather than
paid out in regular installments.
U.S. Government Securities Securities issued by the U.S. Government and its
agencies.
Direct Obligations of the U.S. Government are:
Treasury Bills - issued with short maturities (one year or less) and priced
at a discount to face value. The income for investors is the difference
between the purchase price and the face value.
Treasury Notes - intermediate-term securities with maturities of between
one to ten years. Income to investors is paid in semiannual interest
payments.
Treasury Bonds - long-term debt instruments with maturities from ten years
to up to thirty years. Income is paid to investors on a semi-annual basis.
In addition, U.S. Government Agencies issue debt securities to finance
activities for the U.S. Government. These agencies include among others the
Federal Home Loan Bank, Federal National Mortgage Association ("FNMA" or
"Fannie Mae"), Government National Mortgage Association ("GNMA" or "Ginnie
Mae"), Export-Import Bank and the Tennessee Valley Authority.
Not all agencies are backed by the full faith and credit of the United
States; for example the FNMA may borrow money from the U.S. Treasury only
under certain circumstances. There is no guarantee that the government will
support these types of securities and they therefore involve more risk than
direct government obligations.
Variable Rate Instruments A variable or floating rate instrument is one whose
terms provide for the adjustment of its interest rate on set dates and which
can reasonably be expected to have a market value close to par value.
Yankee Bonds A bond issued in the United States by foreign countries,
corporations and banks. Similarly, Yankee CDs are issued in the U.S. by
branches of foreign banks.
46 Aetna Mutual Funds Prospectus
<PAGE>
Zero Coupon Bonds Bonds issued at a deep discount to face value. These bonds
pay no interest but are redeemed at full face value. The price of zero coupon
bonds are more volatile than bonds which pay interest but are rated on the
same principles as all fixed-income investments.
The Funds also use some of the following securities to manage risk and
volatility:
Call Option The right to buy a security, currency or stock index at a stated
price, or strike price, within a fixed period. A call option will be
exercised if the spot price rises above the strike price; if not, the option
expires worthless.
Convertible Stock Corporate securities, which may be either bonds or
preferred shares, that can be exchanged for shares at a fixed price.
Covered Call Options A call option backed by the securities underlying the
option. The owner of a security will normally sell covered call options to
collect premium income or to reduce price fluctuations of the security. A
covered call option limits the capital appreciation of the underlying
security.
Futures Contracts to buy securities, currencies or stock indexes in the
future at a price agreed in advance. A futures contract obliges the buyer to
purchase the security and the seller to sell it, unlike an option where the
buyer can choose whether or not to exercise the option.
Preferred Stock Shares which pay a fixed dividend, in contrast to common
stock whose dividends depend on the profits of the company.
Put Option The right to sell a security, currency or stock index at a stated
price, or strike price, within a fixed period. A put option will be exercised
if the market price falls below the strike price; if not, the option expires
worthless.
Warrants A security, normally offered with bonds or preferred stock, that
entitles investors to buy shares at a prescribed price within a named or
stated period to perpetuity. The time period is usually longer than that of a
call option.
Aetna Mutual Funds Prospectus 47
<PAGE>
Appendix B--Description of Corporate Bond Ratings
Moody's Investors Service, Inc.
"Aaa" Rating Bonds 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 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 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 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 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 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;
48 Aetna Mutual Funds Prospectus
<PAGE>
and the modifier 3 indicates that the issue ranks in the lower end of its
rating category.
Standard & Poor's Corporation
"AAA" Rating Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
"AA" Rating Bonds 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 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 rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit 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 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 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.
Aetna Mutual Funds Prospectus 49
<PAGE>
[Aetna logo] Aetna Series Fund, Inc.
151 Farmington Avenue
Hartford, CT 06156-8962
1-800-367-7732
Investment Adviser
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, CT 06156
Custodians
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Brown Brothers Harriman & Company
40 Water Street
Boston, MA 02109
Transfer Agent
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-0701
Independent Auditors
KPMG Peat Marwick LLP
CityPlace II
Hartford, CT 06103-4103
This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities of a Fund in
any jurisdiction in which such sale, offer to sell, or
solicitation may not be lawfully made.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Adviser Class
Aetna
Mutual Funds
Prospectus
(Aetna logo)
March 1, 1996
Aetna Series Fund, Inc. (the "Company") is an open-end management investment
company authorized to issue multiple series of shares, each representing a
diversified portfolio of investments (collectively, the "Funds," or
individually, a "Fund") with different investment objectives, policies and
restrictions. Currently, each Fund is authorized to offer two classes of
shares, the Adviser Class and the Select Class.
This Prospectus sets forth concisely the information about the Funds that you
should know before investing. Please read this Prospectus carefully before
investing and retain for future reference. A Statement of Additional
Information ("SAI") dated March 1, 1996 containing additional information
about the Funds has been filed with the Securities and Exchange Commission
("Commission") and is incorporated by reference into this Prospectus. The SAI
is available upon request and without charge by calling 1-800-367-7732 or by
writing to Aetna Series Fund, Inc. at 151 Farmington Avenue, Hartford,
Connecticut 06156-8962, or ask your representative.
This Prospectus is for investors eligible to purchase Adviser Class shares. A
separate Prospectus is available for investors eligible to purchase Select
Class shares. Sales charges, expenses and performance will vary with respect
to each class.
Investment Objectives
Aetna Money Market Fund seeks to provide high current return, consistent with
preservation of capital and liquidity, through investment in high-quality
money market instruments.
Although the Money Market Fund will strive to maintain a $1.00 net asset
value per share, there is no assurance that it will be able to do so.
Investments in this Fund are neither insured nor guaranteed by the U.S.
Government.
Aetna Government Fund seeks to provide income consistent with the
preservation of capital through investment in securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
Aetna Bond Fund seeks to provide high total return (i.e., income and capital
appreciation), consistent with reasonable risk, primarily through investment
in a diversified portfolio of high-quality corporate bonds and securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
The Aetna Fund seeks to maximize total return with reasonable safety of
principal by investing in a diversified portfolio of stocks, bonds and money
market instruments; the Aetna Fund may involve less investment risk than a
portfolio consisting entirely of common stocks.
<PAGE>
Aetna Growth and Income Fund seeks long-term growth of capital and income
through investment in a diversified portfolio primarily of common stocks and
securities convertible into common stocks believed to offer above-average
growth potential.
Aetna Growth Fund seeks growth of capital through investment in a diversified
portfolio primarily of common stocks and securities convertible into common
stocks believed to offer growth potential.
Aetna Small Company Growth Fund seeks growth of capital primarily through
investment in a diversified portfolio of common stocks and securities
convertible into common stocks of companies with smaller market
capitalizations.
Aetna International Growth Fund seeks long-term capital growth primarily
through investment in a diversified portfolio of common stocks principally
traded in countries outside of North America.
Aetna Asian Growth Fund seeks long-term growth of capital primarily through
investment in a diversified portfolio of common stocks principally traded in
countries in Asia excluding Japan.
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.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<S> <C>
Highlights 4
Fee Tables 6
Financial Highlights 10
Description of the Funds 14
Risk Factors and Other Considerations 20
Investment Restrictions 25
Shareholder Services 25
Other Features 31
Cross-Fund Investing 32
Fees and Charges 33
Management of the Funds 34
Portfolio Management 38
Fund Distributions 39
Net Asset Value 40
Taxes 40
General Information 42
Performance Data 44
Appendix A--Glossary of Investment Terms 45
Appendix B--Description of Corporate Bond
Ratings 48
</TABLE>
Aetna Mutual Funds Prospectus 3
<PAGE>
Highlights
What is a Mutual Fund and What are its Advantages? A mutual fund is an
investment company that buys and sells securities on behalf of individuals
sharing common financial goals. Mutual funds allow you to pool your money with
others, to spread risk through diversification and to benefit from professional
management. You have immediate access to your money simply by writing a letter
or, in the case of the Aetna Money Market Fund, by writing a check.
What Funds are Offered? The Company currently offers the following Funds through
this Prospectus, each with its own objective and policies and all of which are
diversified portfolios under the Investment Company Act of 1940 (the "1940
Act").
(box) Aetna Money Market Fund - a portfolio consisting of high-quality money
market instruments
(box) Aetna Government Fund - a portfolio of U.S. Government securities
(box) Aetna Bond Fund - a portfolio primarily of high-quality corporate and U.S.
Government securities
(box) The Aetna Fund - a flexible portfolio of stocks, bonds and money market
instruments
(box) Aetna Growth and Income Fund - a common stock portfolio
(box) Aetna Growth Fund - a common stock portfolio of companies believed to have
potential for growth
(box) Aetna Small Company Growth Fund - a common stock portfolio of companies
with smaller market capitalizations
(box) Aetna International Growth Fund - a common stock portfolio of companies
principally traded outside North America
(box) Aetna Asian Growth Fund - a common stock portfolio of companies traded in
Asia excluding Japan
Risk Factors The different types of securities purchased and investment
techniques used by a Fund involve varying amounts of risk. For example,
equity securities are subject to a decline in the stock market or in the
value of the company and preferred stocks have price risk and some interest
rate and credit risk. The value of debt securities may be affected by changes
in general interest rates and in the credit worthiness of the issuer. In
addition, foreign securities have currency risk. For more information, see
"Risk Factors and Other Considerations."
What is the Adviser Class of Shares? Each Fund has two classes of shares:
Adviser Class shares, which are offered primarily to the general public, and
Select Class shares, which are offered principally to institutions.
Adviser Class shares (except for certain purchases of Money Market Fund
shares--see "Contingent Deferred Sales Charge" for details)
4 Aetna Mutual Funds Prospectus
<PAGE>
are subject to a contingent deferred sales charge ("CDSC"). The maximum CDSC
is 1.0% (see "Contingent Deferred Sales Charge" for details), declining by
0.25% each year after the date of purchase to zero, so that no charge is
imposed on shares purchased over four years prior to redemption. Adviser
Class shares of each Fund are also subject to an annual service fee of 0.25%
(0.10% for the Money Market Fund) and (except for the Money Market Fund) an
annual distribution fee of 0.50% of the value of average daily net assets.
See "Fees and Charges" for more information.
How Can I Purchase Shares? You may purchase Adviser Class shares by
completing an application and sending it as disclosed under "Shareholder
Services." Your initial purchase must be for a minimum of $1,000 for each
Fund with a minimum of $500 for Individual Retirement Accounts ("IRA"). We
also offer a systematic investment program that enables investors to purchase
shares on a regular basis. Please refer to "Shareholder Services" and "Other
Features" for complete details.
When Can I Redeem Shares? Shares may be redeemed on each day the New York
Stock Exchange, Inc. (NYSE) is open for business. Adviser Class shares are
redeemable at net asset value less any applicable CDSC. See "Shareholder
Services" for more information.
Who is the Investment Adviser? Aetna Life Insurance and Annuity Company
("ALIAC") is the investment adviser to each Fund ("Investment Adviser").
ALIAC is a wholly owned subsidiary of Aetna Retirement Services, Inc., which
is in turn a wholly owned subsidiary of Aetna Life and Casualty Company.
Aeltus Investment Management, Inc. ("Aeltus"), an affiliate of ALIAC,
is the sub-adviser to the Growth Fund and the Small Company Growth Fund.
Please refer to "Management of the Funds" for further information.
What if I have further questions? Shareholders in the Funds enjoy a high
level of personalized service. Please call your representative for details or
refer to "Shareholder Services" for additional information.
Aetna Mutual Funds Prospectus 5
<PAGE>
Fee Tables
The following is provided to assist you in understanding the various charges
and expenses that you would bear directly or indirectly as an investor in the
Funds. A complete description of these charges and expenses starts on page
32.
Adviser Class
Shareholder Transaction Expenses
<TABLE>
<CAPTION>
Deferred Sales Sales Charge
Sales Charge Charge on on Dividend
on Purchases Redemptions(1) Reinvestment Exchange Fee
----------------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Money Market None 1.0% None None
Government None 1.0% None None
Bond None 1.0% None None
Aetna Fund None 1.0% None None
Growth and Income None 1.0% None None
Growth None 1.0% None None
Small Company Growth None 1.0% None None
International Growth None 1.0% None None
Asian Growth None 1.0% None None
</TABLE>
(1)The contingent deferred sales charge set forth in the above table is the
maximum redemption charge imposed on Adviser Class shares. Direct
purchases into the Money Market Fund are not subject to a sales charge on
redemption. Investors may pay charges less than 1.0%, depending on the
length of time the shares are held. Adviser Class shares of each Fund
other than the Money Market Fund are also subject to an annual
distribution fee of 0.50% and an annual service fee of 0.25% (0.10% for
Money Market Fund) of the value of average daily net assets of the Adviser
Class. See "Fees and Charges."
Adviser Class
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Total Fund
Other Operating
Management/ Expenses Expenses
Advisory Fee Administrative (after (after fee
(after fee Fee (after 12b-1 expense waiver/expense
waiver) fee waiver) Fee reimbursement) reimbursement)
--------------------- ------------- ------------- ----- ------------- ---------------------
<S> <C> <C> <C> <C> <C>
Money Market 0.00% 0.07% 0.00% 0.23% 0.30%
Government 0.00% 0.15% 0.50% 0.80% 1.45%
Bond 0.19% 0.25% 0.50% 0.56% 1.50%
Aetna Fund 0.80% 0.25% 0.50% 0.50% 2.05%
Growth and Income 0.69% 0.25% 0.50% 0.41% 1.85%
Growth 0.70% 0.25% 0.50% 0.60% 2.05%
Small Company Growth 0.85% 0.25% 0.50% 0.64% 2.24%
International Growth 0.85% 0.25% 0.50% 0.65% 2.25%
Asian Growth 0.54% 0.25% 0.50% 1.01% 2.30%
</TABLE>
From time to time, the Investment Adviser may agree to waive all or a portion
of its Management/Advisory Fee and/or its Administrative Fee for a particular
Fund and to reimburse some or all of a particular Fund's Other Expenses. Such
fee waiver/expense reimbursement arrangements will increase a Fund's total
return and may be modified or terminated at any time.
The expenses shown above are based on the year ended October 31, 1995 and
reflect the most current fee waiver/expense reimbursement arrangements as of
the date of this Prospectus. Fee waiver/expense reimbursement arrangements
are in effect for the Money Market Fund, the Government Fund, the Bond Fund
and the Asian Growth Fund. These arrangements currently limit the Total Fund
Operating Expenses for these Funds at the amounts shown above. Without these
arrangements, expenses would have been as follows: Money Market Fund's
Management/Advisory Fees, Administrative Fees, Other Expenses and Total Fund
Operating Expenses would have been 0.40%, 0.25%, 0.33%, and 0.98%,
respectively; Government Fund's Management/Advisory Fees, Administrative Fees
and Total Fund Operating Expenses would have been 0.50%, 0.25%, and 2.05%,
respectively; Bond Fund's Management/Advisory Fees and Total Fund Operating
Expenses would have been 0.50% and 1.81%, respectively; and Asian Growth
Fund's Management/Advisory Fees and Total Fund Operating Expenses would have
been 1.00% and 2.50%, respectively (2.76% actual total expense reduced to
comply with California state law).
6 Aetna Mutual Funds Prospectus
<PAGE>
Adviser Class
Example
Using the above expenses, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and either redemption at the end of
each of the periods shown or no redemption:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
---------------------------------------- ------ ------- ------- ---------
<S> <C> <C> <C> <C>
Money Market*
Redemption at end of each time period $ 3 $10 $ 17 $ 38
No Redemption 3 10 17 38
Government
Redemption at end of each time period 25 51 79 174
No Redemption 15 46 79 174
Bond
Redemption at end of each time period 25 52 82 179
No Redemption 15 47 82 179
Aetna Fund
Redemption at end of each time period 31 69 110 238
No Redemption 21 64 110 238
Growth and Income
Redemption at end of each time period 29 63 100 217
No Redemption 19 58 100 217
Growth
Redemption at end of each time period 31 69 110 238
No Redemption 21 64 110 238
Small Company Growth
Redemption at end of each time period 33 75 120 257
No Redemption 23 70 120 257
International Growth
Redemption at end of each time period 33 75 120 258
No Redemption 23 70 120 258
Asian Growth
Redemption at end of each time period 33 77 123 264
No Redemption 23 72 123 264
</TABLE>
This example should not be considered an indication of past or future
expenses. Actual expenses may be greater or less than those shown. This
example reflects, among other things, the application of the maximum Deferred
Sales Charge imposed on Adviser Class shares.
*These numbers do not reflect a Contingent Deferred Sales Charge since
a Deferred Sales Charge is only applied to proceeds from Money
Market Fund share redemptions when the shares were purchased through an
exchange from another Fund and the Deferred Sales Charge has been deferred.
(See "Fees and Charges--Contingent Deferred Sales Charge.")
Aetna Mutual Funds Prospectus 7
<PAGE>
Select Class Shareholder Transaction Expenses
Select Class shares are not subject to Shareholder Transaction Expenses which
include sales charges on purchases, deferred sales charges on redemptions,
sales charges on dividend reinvestments and exchange fees.
Select Class
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Total Fund
Operating
Management/ Expenses
Advisory Fee Administrative (after fee waiver/
(after fee Fee Other expense
waiver) (after fee waiver) Expenses reimbursement)
--------------------- ------------- ------------------- -------- -------------------
<S> <C> <C> <C> <C>
Money Market 0.00% 0.07% 0.23% 0.30%
Government 0.00% 0.15% 0.55% 0.70%
Bond 0.19% 0.25% 0.31% 0.75%
Aetna Fund 0.80% 0.25% 0.25% 1.30%
Growth and Income 0.69% 0.25% 0.16% 1.10%
Growth 0.70% 0.25% 0.35% 1.30%
Small Company Growth 0.85% 0.25% 0.39% 1.49%
International Growth 0.85% 0.25% 0.40% 1.50%
Asian Growth 0.54% 0.25% 0.76% 1.55%
</TABLE>
From time to time, the Investment Adviser may agree to waive all or a portion
of its Management/Advisory Fee and/or its Administrative Fee for a particular
Fund and to reimburse some or all of a particular Fund's Other Expenses. Such
fee waiver/expense reimbursement arrangements will increase a Fund's total
return and may be modified or terminated at any time.
The expenses shown above are based on the year ended October 31, 1995 and
reflect the most current fee waiver/ expense reimbursement arrangements as of
the date of this Prospectus. Fee waiver/expense reimbursement arrangements
are in effect for the Money Market Fund, the Government Fund, the Bond Fund
and the Asian Growth Fund. These arrangements currently limit the Total Fund
Operating Expenses for these Funds at the amounts shown above. Without these
arrangements, expenses would have been as follows: Money Market Fund's
Management/Advisory Fees, Administrative Fees and Total Fund Operating
Expenses would have been 0.40%, 0.25%, and 0.88%, respectively; Government
Fund's Management/Advisory Fees, Administrative Fees and Total Fund Operating
Expenses would have been 0.50%, 0.25%, and 1.30%, respectively; Bond Fund's
Management/Advisory Fees and Total Fund Operating Expenses would have been
0.50% and 1.06%, respectively; and Asian Growth Fund's Management/Advisory
Fees and Total Fund Operating Expenses would have been 1.00% and 2.01%,
respectively.
8 Aetna Mutual Funds Prospectus
<PAGE>
Select Class
Example
Using the above expenses, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each of
the periods shown:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
--------------------- ------ ------- ------- ---------
<S> <C> <C> <C> <C>
Money Market $ 3 $10 $17 $ 38
Government 7 22 39 87
Bond 8 24 42 93
Aetna Fund 13 41 71 157
Growth and Income 11 35 61 134
Growth 13 41 71 157
Small Company Growth 15 47 81 178
International Growth 15 47 82 179
Asian Growth 16 49 84 185
</TABLE>
This example should not be considered an indication of past or future
expenses. Actual expenses may be greater or less than those shown.
As noted above, each Fund has two classes, Adviser Class and Select Class.
Because the expenses and sales charges vary between the classes, the
performance of each class will vary. Registered representatives may receive
different levels of compensation when selling shares of the Fund's classes.
Additional information regarding each Fund's classes may be obtained by
calling your representative or 1-800-367-7732.
Aetna Mutual Funds Prospectus 9
<PAGE>
Financial Highlights
(for one outstanding share throughout each period)
The selected data presented below for, and as of the end of, each of the
periods listed are derived from the financial statements of Aetna Series
Fund, Inc., which financial statements have been audited by KPMG Peat Marwick
LLP, independent auditors. The financial statements as of, and for the year
ended October 31, 1995 and the independent auditors' report thereon, are
included in the SAI.
Adviser Class Shares+
<TABLE>
<CAPTION>
Net
Realized and
Net Asset Change in Total Dividends Dividends
Value Net Unrealized from from Net in Excess of
Beginning Investment Gain (Loss) Investment Investment Net Investment
of Period Income on Investments Operations Income Income
--------- --------- -------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund
Year Ended October 31, 1995 $ 1.00 $0.06 $ 0.00 $ 0.06 $(0.06) $0.00
Period from April 15, 1994--
October 31, 1994 1.00 0.03 0.00 0.03 (0.03) 0.00
Government Fund
Year Ended October 31, 1995 9.41 0.60 0.56 1.16 (0.57) 0.00
Period from April 15, 1994--
October 31, 1994 9.67 0.24 (0.24) 0.00 (0.26) 0.00
Bond Fund
Year Ended October 31, 1995 9.58 0.56 0.66 1.22 (0.53) 0.00
Period from April 15, 1994--
October 31, 1994 9.92 0.28 (0.35) (0.07) (0.27) 0.00
The Aetna Fund
Year Ended October 31, 1995 10.62 0.23 1.91 2.14 (0.42) 0.00
Period from April 15, 1994--
October 31, 1994 10.54 0.19 0.00 0.19 (0.11) 0.00
</TABLE>
+ The Company commenced offering Adviser Class shares on April 15, 1994.
Prior to that date, the Company offered only Select Class shares. The
Government Fund, Growth Fund, Small Company Growth Fund and Asian Growth
Fund commenced operations on January 2, 1994.
* The Total Return percentage does not reflect the Contingent Deferred Sales
Charge imposed on Adviser Class shares. Inclusion of this charge would
reduce the total return figures.
** Annualized for periods less than one year.
Per share data calculated using average number of shares outstanding
throughout the period.
Additional information about the performance of Aetna Series Fund, Inc. is
contained in the Annual Report dated October 31, 1995. The Annual Report is
incorporated herein by reference and is available, without charge, by writing
to the Company at the address listed on the cover of this Prospectus or by
calling 1-800-367-7732.
10 Aetna Mutual Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
Ratio of
Net
Investment
Ratio of Income
Net Before
Investment Reimburse-
Ratio of Expense ment
Total Ratio of Before and
Distributions Net Net Assets Invest- Net Invest- Reimburse- Waiver
from Asset End of ment ment ment to
Realized Value Period Expenses Income to and Waiver Average
Gain on End of Total (in to Average Average to Average Net Portfolio
Investments Period Return* thousands) Net Assets** Net Assets** Net Assets** Assets** Turnover
------------ ------ ------- ----------- ------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $ 1.00 5.95% $78,726 0.26% 5.79% 0.87% 5.19% N/A
0.00 1.00 2.41% 47,350 0.21% 4.27% 0.92% 3.67% N/A
0.00 10.00 12.60% 405 1.51% 6.02% 2.11% 5.42% 117.31%
0.00 9.41 (0.06)% 151 1.28% 4.68% 2.11% 3.85% 43.63%
0.00 10.27 13.28% 7,340 1.50% 5.91% 1.82% 5.60% 56.99%
0.00 9.58 (0.68)% 25,405 1.49% 5.36% 1.81% 5.04% 51.80%
0.00 12.34 18.32% 1,362 2.04% 2.61% 2.07% 2.58% 129.05%
0.00 10.62 1.84% 26,396 1.87% 1.90% 2.06% 1.67% 86.10%
</TABLE>
Aetna Mutual Funds Prospectus 11
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
Adviser Class Shares+
<TABLE>
<CAPTION>
Net
Realized and
Change in
Net Asset Unrealized Total Dividends Dividends
Value Net Gain (Loss) from from Net in Excess of
Beginning Investment on Investment Investment Net Investment
of Period Income Investments Operations Income Income
--------- --------- ------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund
Year Ended October 31, 1995 $11.08 $ 0.12 $ 2.31 $ 2.43 $(0.08) $0.00
Period from April 15, 1994--
October 31, 1994 10.75 0.11 0.30 0.41 (0.08) 0.00
Growth Fund
Year Ended October 31, 1995 10.74 (0.06) 3.00 2.94 (0.05) 0.00
Period from April 15, 1994--
October 31, 1994 10.26 (0.02) 0.50 0.48 0.00 0.00
Small Company Growth Fund
Year Ended October 31, 1995 10.35 (0.11) 3.15 3.04 0.00 0.00
Period from April 15, 1994--
October 31, 1994 10.24 (0.04) 0.15 0.11 0.00 0.00
International Growth Fund
Year Ended October 31, 1995 11.51 0.03 (0.20) (0.17) (0.27) 0.00
Period from April 15, 1994--
October 31, 1994 11.24 0.01 0.26 0.27 0.00 0.00
Asian Growth Fund
Year Ended October 31, 1995 9.46 0.03 (1.13) (1.10) (0.03) 0.00
Period from April 15, 1994--
October 31, 1994 8.56 (0.01) 0.91 0.90 0.00 0.00
</TABLE>
+The Company commenced offering Adviser Class shares on April 15, 1994. Prior
to that date, the Company offered only Select Class shares. The Government
Fund, Growth Fund, Small Company Growth Fund and Asian Growth Fund commenced
operations on January 2, 1994.
* The Total Return percentage does not reflect the Contingent Deferred Sales
Charge imposed on Adviser Class shares. Inclusion of this charge would reduce
the total return figures.
**Annualized for periods less than one year.
Per share data calculated using average number of shares outstanding
throughout the period.
Additional information about the performance of Aetna Series Fund, Inc. is
contained in the Annual Report dated October 31, 1995. The Annual Report is
incorporated herein by reference and is available, without charge, by writing
to the Company at the address listed on the cover of this Prospectus or by
calling 1-800-367-7732.
12 Aetna Mutual Funds Prospectus
<PAGE>
<TABLE>
<CAPTION>
Ratio of
Net
Investment
Ratio of Income
Net Before
Ratio of Investment Reimburse-
Total Expense ment
Invest- Ratio of Before and
Distributions Net Net Assets ment Net Invest- Reimburse- Waiver
from Asset End of Expenses ment ment to
Realized Value Period to Average Income to and Waiver Average
Gain on End of Total (in Net Average to Average Net Portfolio
Investments Period Return* thousands) Assets** Net Assets** Net Assets** Assets** Turnover
------------ ------ -------- ----------- ----------- ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $13.43 21.90% $ 2,217 1.84% 1.14% 1.84% 1.14% 127.43%
0.00 11.08 3.71% 5,740 2.32% 1.74% 2.42% 1.65% 54.13%
0.00 13.63 27.92% 1,727 2.03% (0.47)% 2.14% (0.58)% 171.75%
0.00 10.74 4.58% 417 1.72% (0.25)% 2.17% (0.71)% 120.32%
0.00 13.39 29.44% 1,285 2.23% (0.89)% 2.30% (0.97)% 156.43%
0.00 10.35 0.98% 205 1.78% (0.72)% 2.14% (1.07)% 116.28%
(0.48) 10.59 (0.81)% 26,464 2.12% 0.27% 2.25% 1.98% 32.91%
0.00 11.51 2.40% 26,647 2.27% 0.17% 2.41% 0.02% 81.67%
0.00 8.33 (12.11)% 687 1.90% 0.31% 2.72% (0.50)% 64.97%
0.00 9.46 10.51% 314 1.42% (0.24)% 1.73% (0.55)% 65.50%
</TABLE>
Aetna Mutual Funds Prospectus 13
<PAGE>
Description of the Funds
Each Fund is a diversified, management investment company under the 1940 Act.
Each has an investment objective which is a fundamental policy and may not be
changed without the vote of a majority of the holders of that Fund's
outstanding shares. There can be no assurance that the Funds will meet their
investment objectives. Each Fund is subject to investment restrictions
described in this Prospectus and in the SAI, some of which are fundamental
policies. No fundamental investment policy may be changed without shareholder
approval.
A glossary describing various investment terms relating to securities that
may be held by the Funds is contained in Appendix A.
Aetna Money Market Fund
Investment Objective The Money Market Fund seeks to provide high current
return, consistent with preservation of capital and liquidity, through
investment in high-quality money market instruments.
Description of Money Market Fund
Investment Policy The Money Market Fund invests in U.S. Treasury bills, notes
and bonds; obligations of agencies and instrumentalities of the U.S.
Government; obligations of domestic banks and U.S. dollar denominated
obligations of foreign banks (providing the issuing bank has reported assets
in excess of $5 billion and meets strict capital and profitability criteria),
finance company commercial paper, corporate commercial paper (including
variable-rate instruments), discounted notes of domestic banks, domestic
banker's acceptances eligible for discounting at the Federal Reserve, Yankee
certificates of deposit, Yankee commercial paper, Eurodollar securities,
repurchase agreements, corporate bonds and notes and other debt instruments.
The Fund may purchase securities on a when-issued or delayed-delivery basis.
All investments will have a maturity at the time of purchase, as defined
under the federal securities laws, of 397 days or less. Any foreign
securities or obligations will be U.S. dollar denominated.
The Money Market Fund will invest at least 95% of its total assets in
high-quality securities. High-quality securities are those receiving the
highest credit rating by any two rating agencies (or one, if only one rating
agency has rated the security). High-quality securities may also include
unrated securities if the Investment Adviser determines the security to be of
comparable quality. The remainder of the Money Market Fund's assets will be
invested in securities rated within the two highest rating categories by any
two rating agencies (or one, if only one rating agency has rated the
security) and unrated securities if the Investment Adviser determines the
security to be of comparable quality. With respect to these securities, the
Money Market Fund will not invest more than 1% of the market value of its
total assets or $1 million, whichever is greater, in the securities or
obligations of any one issuer.
14 Aetna Mutual Funds Prospectus
<PAGE>
The Money Market Fund will use nationally recognized rating agencies such
as Standard & Poor's Corporation ("Standard & Poor's") and Moody's Investors
Service, Inc. ("Moody's") when determining security credit ratings. All
investments will be determined to present minimal credit risks.
The Money Market Fund's dollar weighted average maturity will not exceed
90 days. Although the Investment Adviser will use its best efforts to
maintain a constant net asset value of $1.00 per share, there can be no
assurance that the net asset value will not vary.
Aetna Government Fund
Investment Objective The Government Fund seeks to provide income consistent
with the preservation of capital through investment in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
Description of Government Fund
Investment Policy The Government Fund invests at least 65% of its assets in
direct obligations of the U.S. Government, such as treasury bills, notes and
bonds which are backed by the full faith and credit of the United States, or in
indirect obligations of the U.S. Government, such as notes and bonds which are
guaranteed by agencies and instrumentalities of the U.S. Government. Securities
of such agencies and instrumentalities are backed by either the full faith and
credit of the U.S. Treasury, the right of the issuer to borrow from the U.S.
Treasury, or the credit of the agency or instrumentality. Such agencies and
instrumentalities include, but are not limited to, the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and the Student
Loan Marketing Association ("SLMA").
The Government Fund may also invest in repurchase agreements collateralized
by U.S. Government agency securities, STRIPs, zero coupon bonds and options
and futures contracts.
Aetna Bond Fund
Investment Objective The Bond Fund seeks to provide high total return (i.e.,
income and capital appreciation), consistent with reasonable risk, primarily
through investment in a diversified portfolio of high-quality corporate bonds
and securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Description of
Bond Fund
Investment Policy The Bond Fund will normally invest at least 65% of its total
assets in high-quality corporate bonds, mortgage-related and other asset-backed
and debt securities, and securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities. Such securities will be rated AA or above by
Standard & Poor's, Aa or above by Moody's, similarly rated by other nationally
recognized
Aetna Mutual Funds Prospectus 15
<PAGE>
statistical rating organizations, or be considered by the Investment Adviser
to be of comparable quality. The Fund will not target any given maturity,
thus giving it flexibility to invest in short and long- term securities as
market conditions change. The Bond Fund may also invest in repurchase
agreements, equity securities (not to exceed 5% of total assets) and
securities issued by any foreign corporation or instrumentality or political
subdivision of foreign governments (not to exceed 25% of total assets). The
Bond Fund may also purchase securities on a when-issued or delayed-delivery
basis.
Additionally, the Bond Fund may invest in commercial paper and other
short-term investments, including variable-rate instruments, all having a
maturity of less than one year, and in debt securities with equity features,
convertibles, and straight debt securities.
The Bond Fund may invest up to 15% of its total assets in high risk,
high-yield securities or "junk bonds" (securities rated BB/Ba or below, or if
unrated, considered by the Investment Adviser to be of comparable quality).
This will limit the Fund's ability to earn a higher return which may be
associated with high risk, non-investment grade securities. See "Risk Factors
and Other Considerations" for further information.
As of October 31, 1995, the weighted average distribution of bonds in the
Bond Fund based on Standard & Poor's and Moody's bond ratings was 60% in AAA,
10% in AA, 12% in A, 7% in BBB, 3% in BB, 1% in B and 7% in unrated bonds.
See Appendix B for further information on bond ratings.
The Aetna Fund
Investment Objective The Aetna Fund seeks to maximize total return with
reasonable safety of principal by investing in a diversified portfolio of
stocks, bonds and money market instruments. An investment in the Aetna Fund may
involve less investment risk than an investment in a portfolio consisting
entirely of common stocks.
Description of
Aetna Fund
Investment Policy The Aetna Fund will allocate its assets 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, in proportions that reflect the anticipated returns and risks of
each asset class.
The Aetna Fund will not invest more than 15% of the total value of its
assets in high risk, high-yield securities, or "junk bonds." It may buy and
sell listed covered put and call options and stock index futures contracts
and related options. The Aetna Fund may also purchase securities on a
when-issued or delayed-delivery basis.
The Investment Adviser employs current market statistics and economic
indicators to forecast returns for each sector of the securities
16 Aetna Mutual Funds Prospectus
<PAGE>
market for the Aetna Fund. These calculations provide a disciplined framework
for assessing the relative attractiveness of stocks, bonds, and cash
equivalents. The Investment Adviser uses proprietary computer programs to
help calculate the optimal asset exposure over specified time periods for the
Aetna Fund.
Special Considerations Investors should be aware that the investment results
of the Aetna Fund partly depend upon the Investment Adviser's ability to
correctly anticipate the relative performance of stocks, bonds and money
market instruments.
While the Investment Adviser has substantial experience in managing all
asset classes, there can be no assurance that the Investment Adviser will
always allocate assets to the best performing sectors. The Aetna Fund's
performance would suffer if a major portion of its assets were allocated to
stocks in a declining market or, similarly, if a major portion of its assets
were allocated to bonds at a time of adverse interest rate movement.
Aetna Growth and Income Fund
Description of Growth and Income Fund
Investment Objectives The Growth and Income Fund seeks long-term growth of
capital and income through investment in a diversified portfolio primarily of
common stocks and securities convertible into common stocks believed to offer
above-average growth potential.
Investment Policies The Growth and Income Fund invests primarily in common
stocks which have significant potential for capital or income growth. It may
also invest in convertible and nonconvertible preferred stocks, debt
securities, rights and warrants.
Additionally, the Growth and Income Fund may lend portfolio securities, write
and buy listed covered call options and buy and sell listed covered put
options and stock index futures and options. The Growth and Income Fund may
also enter into repurchase agreements with domestic banks and broker dealers,
purchase commercial paper and other short-term instruments, invest up to 25%
of its assets in foreign securities, engage in currency hedging and purchase
securities on a when-issued or delayed-delivery basis. The Growth and Income
Fund will not invest more than 15% of the total value of its assets in high
risk, high-yield securities or "junk bonds."
Aetna Growth Fund
Description of Growth Fund
Investment Objective The Growth Fund seeks growth of capital through investment
in a diversified portfolio primarily of common stocks and securities
convertible into common stocks believed to offer growth potential.
Investment Policy The Growth Fund will normally invest at least 65% of its
total assets in common stocks which have potential for
Aetna Mutual Funds Prospectus 17
<PAGE>
capital growth. It may also invest in convertible and non-convertible
preferred stocks.
Additionally, the Growth Fund may lend portfolio securities, buy and sell put
and call options, and stock index futures and options. The Growth Fund may
also enter into repurchase agreements with domestic banks and broker dealers,
purchase commercial paper and other short-term instruments, invest up to 25%
of its assets in foreign securities, engage in currency hedging and purchase
securities on a when-issued, delayed delivery or forward commitment basis.
The Growth Fund will not invest more than 15% of the total value of its
assets in high risk, high-yield securities or "junk bonds."
Aetna Small Company Growth Fund
Investment Objective The Small Company Growth Fund seeks growth of capital
primarily through investment in a diversified portfolio of common stocks and
securities convertible into common stocks of companies with smaller market
capitalizations.
Description of Small Company Growth Fund
Investment Policy The Small Company Growth Fund will normally invest at least
65% of its total assets in the common stock of companies with equity market
capitalizations at the time of purchase of $1 billion or less. The Small
Company Growth Fund may also invest in securities convertible into stocks.
Additionally, the Small Company Growth Fund may lend portfolio securities,
buy and sell put and call options and stock index futures and options. The
Small Company Growth Fund may also enter into repurchase agreements with
domestic banks and broker dealers, purchase commercial paper and other
short-term instruments, invest up to 25% of its assets in foreign securities,
engage in currency hedging and purchase securities on a whenissued, delayed
delivery or forward commitment basis. The Small Company Growth Fund will not
invest more than 15% of the total value of its assets in high risk,
high-yield securities or "junk bonds."
Aetna International Growth Fund
Investment Objective The International Growth Fund seeks long-term capital
growth primarily through investment in a diversified portfolio of common
stocks principally traded in countries outside of North America. The
International Growth Fund will not target any given level of current income.
Description of International Growth Fund
Investment Policy The International Growth Fund will invest at least 65% of
its total assets among securities principally traded in three or more
countries including Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Indonesia, Italy, Japan, Korea,
18 Aetna Mutual Funds Prospectus
<PAGE>
Luxembourg, Malaysia, New Zealand, the Netherlands, Norway, the Philippines,
Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, and the United
Kingdom.
The International Growth Fund will invest primarily in equity securities
including securities convertible into stocks. Further, from time to time the
International Growth Fund may hold up to 10% of its total assets in long-term
debt securities with an equivalent Standard & Poor's or Moody's rating of
AA/Aa or above.
The International Growth Fund may enter into forward foreign exchange
contracts or purchase financial futures or options (including options on
futures) as a means to moderate the impact of foreign currency fluctuations.
It may also purchase money market instruments and securities on a when-issued
or delayed-delivery basis.
Aetna Asian Growth Fund
On September 29, 1995, the Board of Directors of the Company adopted a Plan
of Reorganization and Liquidation on behalf of the Aetna Asian Growth Fund
(the "Plan"). If the Plan is approved by the Asian Growth Fund shareholders,
the Aetna International Growth Fund would acquire all of the assets of the
Asian Growth Fund, the shareholders of the Asian Growth Fund would become
shareholders of the International Growth Fund, and the Asian Growth Fund
would be liquidated.
Description of Asian Growth Fund
Investment Objective The Asian Growth Fund seeks long-term growth of capital
primarily through investment in a diversified portfolio of common stocks
principally traded in countries in Asia excluding Japan. The Asian Growth
Fund will not target any given level of current income.
Investment Policy The Asian Growth Fund will invest at least 65% of its total
assets among securities principally traded in China, Hong Kong, India,
Indonesia, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Sri
Lanka, Taiwan, and Thailand.
The Asian Growth Fund will invest primarily in equity securities including
securities convertible into stocks. In addition, the Asian Growth Fund may
invest up to 10% of its assets in long-term debt securities if the Investment
Adviser believes they will provide superior returns to common stocks. The
Asian Growth Fund may also enter into forward foreign exchange contracts and
purchase financial futures or options, and purchase money market instruments
and securities on a when-issued or delayed-delivery basis.
Aetna Mutual Funds Prospectus 19
<PAGE>
A special note for Investors in International Growth Fund and Asian Growth
Fund
Special Considerations for International Investors In the last 30 years,
foreign economic growth has frequently outpaced that of the United States and
returns from foreign equity investments have often exceeded those on
comparable U.S. securities. The Investment Adviser believes that investment
in foreign securities offers significant potential for long-term capital
appreciation and affords substantial opportunities for investment
diversification.
However, investments in securities of foreign companies and in securities
denominated in foreign currencies involve additional risks not present in
U.S. securities. Please refer to "Risk Factors and Other Considerations"
below for further information.
Risk Factors and Other Considerations
General Considerations The different types of securities purchased and
investment techniques used by a Fund involve varying amounts of risk. For
example, equity securities are subject to a decline in the stock market or in
the value of the company and preferred stocks have price risk and some
interest rate and credit risk. The value of debt securities may be affected
by changes in general interest rates and in the creditworthiness of the
issuer. Debt securities with longer maturities (for example, over ten years)
are more affected by changes in interest rates and provide less price
stability than securities with short term maturities (for example, one to ten
years). Also, on each debt security, there is a risk of principal and
interest default which will be greater with higher-yielding, lower-grade
securities. High risk, high-yield securities ("junk bonds") may provide a
higher return but with added risk. In addition, foreign securities have
currency risk.
Portfolio Turnover Portfolio turnover refers to the frequency of portfolio
transactions and the percentage of portfolio assets being bought and sold in
the aggregate during the year. Although the Funds (excluding the Money Market
Fund) do not purchase securities with the intention of profiting from
short-term trading, each Fund may buy and sell securities when the Investment
Adviser or Subadviser believes such action is advisable. It is anticipated
that the average annual turnover rate for the Growth and Income Fund and the
Government Fund may exceed 125% during fiscal year 1996, and that the
turnover rate for The Aetna Fund, the Growth Fund and the Small Company
Growth Fund may exceed 150%. The annual portfolio turnover rate for each of
the other Funds is not expected to exceed 100%. Turnover rates in excess of
125% have resulted and are expected to continue to result in higher
transaction costs relating to stock or equity transactions, which costs are
borne directly by the Fund. The Investment Adviser anticipates that these
higher costs are offset by the potentially improved performance that is
sought by numerous
20 Aetna Mutual Funds Prospectus
<PAGE>
portfolio transactions. High turnover rates may also result in a possible
increase in short-term capital gains or losses. See "Fund Distributions,"
"Taxes" and the SAI for additional information.
Cash or Cash Equivalents All Funds reserve the right to temporarily depart
from their investment objective by investing up to 100% of their assets in
cash or cash equivalents to defend against potential market decline. Such
cash equivalents will be the same type of instruments invested in by the
Money Market Fund.
All the Funds may use the following:
Derivatives In order to manage its exposure to changing interest rates,
securities prices and currency exchange rates, or to increase its investment
return, a Fund may engage in hedging and other strategies using derivatives.
A derivative is a financial instrument whose value depends on (or "derives"
from) the value of an underlying asset, such as a security, interest rate,
currency rate or index. Derivatives that may be used by the Funds include,
but are not limited to, forward contracts, swaps, structured notes,
collateralized mortgage obligations ("CMOs"), futures and options (see
"Futures Contracts" and "Options" below). The risks involved in using
derivatives include the risk that the derivative may experience greater price
swings than other securities and may be less liquid than other securities.
Leveraged derivatives involve borrowing. The Funds may use derivatives as a
hedge against foreign currency, equity market or interest rate risk, or to
gain additional exposure to certain markets for investment purposes, within
the limitations set forth below. In addition, they may be used to enhance a
Fund's yield. For purposes other than hedging, a Fund will invest no more
than 5% of its assets in derivatives which at the time of purchase are
considered by management to involve high risk to the Fund, such as inverse
floaters, interest only and principal only debt instruments. Each Fund
(except the Money Market Fund) may invest up to 30% of its assets in lower
risk derivatives for hedging, to gain additional exposure to certain markets
for investment purposes, and in order to maintain liquidity to meet
shareholder redemptions or to minimize trading costs.
Borrowing Each Fund may borrow up to 5% of the value of its total assets from
a bank for temporary or emergency purposes. The Funds do not intend to borrow
for other purposes, except that they may invest in leveraged derivatives
which have certain risks as outlined above. A Fund may borrow for leveraging
purposes 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 a Fund
since it exaggerates the effects of changes in the value of the securities
purchased with the borrowed funds.
Aetna Mutual Funds Prospectus 21
<PAGE>
Repurchase Agreements Under a repurchase agreement, a Fund may acquire a debt
instrument for a relatively short period subject to an obligation by the
seller to repurchase and by the Fund to resell the instrument at a fixed
price and time.
The Funds may enter into repurchase agreements with domestic banks and
broker-dealers. Such agreements, although fully collateralized, involve the
risk that the seller of the securities may fail to repurchase them. In that
event, a Fund may incur costs in liquidating the collateral or a loss if the
collateral declines in value. If the default on the part of the seller is due
to insolvency and the seller initiates bankruptcy proceedings, the ability of
a Fund to liquidate the collateral may be delayed or limited.
The Company's Board of Directors has established credit standards for
issuers of repurchase agreements entered into by a Fund.
Asset-Backed Securities Each Fund may purchase securities collateralized by a
specified pool of assets including, but not limited to, automobile loans,
computer leases, boat 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.
Bank Obligations Each Fund may invest in obligations issued by domestic or
foreign banks (including bankers' acceptances, commercial paper, bank notes,
time deposits and certificates of deposit) provided the issuing bank has a
minimum of $5 billion in assets and a primary capital ratio of at least
4.25%.
Illiquid and Restricted Securities Each Fund may invest up to 15% of its
total assets in illiquid securities (10% in the case of the Money Market
Fund). Illiquid securities are securities that are not readily marketable or
cannot be disposed of within seven days in the ordinary course of business
without taking a materially reduced price. In addition, a Fund may invest in
securities that are subject to legal or contractual restrictions as to
resale, including securities purchased under Rule 144A and Section 4(2) of
the Securities Act of 1933. The Board of Directors has established a policy
to monitor the liquidity of such securities.
Foreign Securities The purchase of foreign securities may involve certain
additional risks. Such risks include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; possible difficulty in obtaining and enforcing judgments
against foreign entities; adverse foreign political and economic
developments; different accounting procedures and auditing standards; the
possible imposition of withholding taxes on interest income payable
22 Aetna Mutual Funds Prospectus
<PAGE>
on securities; the possible seizure or nationalization of foreign assets; the
possible establishment of exchange controls or other foreign laws or
restrictions which might adversely affect the payment and transferability of
principal, interest and dividends on securities; higher transaction costs;
possible settlement delays; and less publicly available information about
foreign issuers.
All Funds except the Money Market Fund
may also use the following:
Futures Contracts A Fund may enter into futures contracts or options on
futures to manage the risk of changes in interest rates, equity prices,
currency exchange rates or in anticipation of future purchases or sales of
securities.
Certain risks are involved in futures contracts including but not limited
to: no assurance that transactions in futures contracts can be effected at
favorable prices; possible reduction in a Fund's total return and yield;
possible reduction in value of the futures instrument; the inability of a
Fund to limit losses by closing its position due to lack of a liquid
secondary market or due to daily limits of price fluctuation; imperfect
correlation between the value of the futures contracts and the related
securities; and potential losses in excess of the amount invested in the
futures contracts themselves.
The use of futures involves a high degree of leverage because of the low
margin requirements. As a result, small price movements in futures contracts
may result in immediate and potentially unlimited losses or gains to a 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.
Options Options are used to minimize principal fluctuation or to generate
additional premium income but they do involve risks. Writing call options,
for example, involves the risk of not being able to effect closing
transactions at favorable prices or to participate in the appreciation of the
underlying securities. Purchasing put options involves the risk of losing the
entire purchase price of the option.
All Funds except the Money Market Fund,
Government Fund, International Growth Fund,
and Asian Growth Fund may also use the following:
High Risk, High-Yield Securities A Fund may invest in high risk, high- yield
securities, often called "junk bonds." These securities are rated BB/Ba or
below, or, if unrated, are considered by the Investment Adviser to be of
comparable quality. The Funds will not invest in high-yield securities rated
below B (securities with the capacity to meet interest and
Aetna Mutual Funds Prospectus 23
<PAGE>
principal payments but with greater vulnerability to default). These
securities tend to offer higher yields than investment-grade bonds because of
the additional risks associated with them. These risks include: a lack of
liquidity; an unpredictable secondary market; a greater likelihood of
default; increased sensitivity to difficult economic and corporate
developments; call provisions which may adversely affect investment returns;
and loss of the entire principal and interest.
Although junk bonds are high risk investments, the Investment Adviser may
purchase these securities if they are thought to offer good value. This may
happen if, for example, the rating agencies have, in the Investment Adviser's
opinion, misclassified the bonds or overlooked the potential for the issuer's
enhanced creditworthiness.
The Government Fund,
Bond Fund and Aetna Fund
may also use the following:
Mortgage-Backed Securities A 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 GNMA, the FHLMC and the FNMA. These securities
represent part ownership of a pool of mortgage loans where 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. A Fund may also invest in private
mortgage pass-through securities backed by pools of conventional fixed-rate
or adjustable- rate mortgage loans. In addition, a Fund may invest in CMOs
and securities issued by real estate mortgage investment conduits ("REMICs").
Mortgage-backed securities are also subject to the same prepayment risk as
asset-backed securities.
The Aetna Fund, Growth and Income Fund,
Growth Fund and Small Company Growth Fund
may also use the following:
Small Capitalization Companies These companies are smaller, less well-known
U.S. companies with equity market capitalization generally less than $1.0
billion and may be in an early developmental stage or older companies
entering a new stage of growth due to management changes, new technology,
products or markets. The securities of small capitalization companies may
also be undervalued due to poor economic conditions, market decline or actual
or unanticipated unfavorable developments affecting the companies.
Securities of small capitalization companies tend to offer greater
potential for growth than securities of larger, more established issuers but
there are additional risks associated with them. These risks
24 Aetna Mutual Funds Prospectus
<PAGE>
include: limited marketability; more abrupt or erratic market movements than
securities of larger capitalization companies; and less publicly available
information about the issuer. In addition, these companies may be dependent
on relatively few products or services, have limited financial resources and
lack of management depth, and may have less of a track record or historical
pattern of performance.
Investment Restrictions
A Fund will not concentrate its investments in any one industry except that a
Fund may invest up to 25% of its total assets in securities issued by
companies principally engaged in any one industry. For purposes of this
restriction, finance companies will be classified as separate industries
according to the end users of their services, such as automobile finance,
computer finance and consumer finance. This limitation will not apply to
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities and in the case of the Money Market Fund, to securities
invested in, or repurchase agreements for, U.S. Government securities, and
certificates of deposit, bankers' acceptances, or securities of banks and
bank holding companies. Also, a Fund will not invest more than 5% of its
total assets in the securities of any one issuer (excluding securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) or
purchase more than 10% of the outstanding voting securities of any one
issuer. This restriction applies only to 75% of a Fund's total assets. See
the SAI for additional restrictions.
Shareholder Services
The Company offers several services to its Fund shareholders. These may be
selected on the application or you may call 1-800- 367-7732 to select these
services at a later date.
These services may not be available through employer-sponsored retirement
plans. For information on services that are available under
employer-sponsored retirement plans, such as 401(k) plans, please refer to
your enrollment materials. The specific provisions of your plan will govern
the investment options and services available to you.
Shareholder Inquiries If you have any questions about the Funds or the
shareholder services described below, please call your representative or
1-800-367-7732.
How to
Purchase
Shares
How to Purchase Shares Adviser Class shares may be purchased directly from the
Company, through a registered representative of a broker-dealer affiliated with
the Company, through a registered representative of an unaffiliated
broker-dealer, or through an employer-sponsored retirement plan (if you are
purchasing through such a plan, please refer to your enrollment materials).
Aetna Mutual Funds Prospectus 25
<PAGE>
How to Open an Account To open an account, please complete and submit an
application with the amount to be invested as directed below under "Purchase
by Mail." You may open an account with a minimum investment of $1,000 or $500
for IRAs.
Once you have opened an account in a Fund, additional investments may be
made by mail ($100 minimum), wire transfer ($500 minimum) or exchange from
the same class of another Fund in the Aetna Series Fund, Inc.
All checks must be drawn on a bank located within the United States and
payable in U.S. dollars. Minimum investments may be waived if an investment
is made through exchange of the entire amount invested in another Fund.
Minimums may also be waived for certain circumstances such as for persons
investing through certain benefit plans, insurance settlement options or by
systematic investments. (Please refer to "Other Features--Systematic
Investment.")
Crediting of Shares Shares for new accounts will be purchased at the net
asset value determined as of 4:15 p.m. eastern time on any day that the New
York Stock Exchange is open for business ("Business Day") so long as the
completed and signed application accompanied by a check in payment for the
share purchase is received by Firstar Trust Company (the transfer agent) at
its Milwaukee offices prior to 4:00 p.m. Additional investments and exchanges
will also be processed at the net asset value determined as of 4:15 p.m. if
the check or wire for the purchase price or the exchange request is received
by 4:00 p.m. Orders received after 4:00 p.m. will be processed at the net
asset value determined on the following Business Day. For investors
purchasing shares in connection with retirement plans offered by certain
institutions (Institutions) under Section 401 of the Internal Revenue Code,
shares will be purchased at the next price calculated on a day the NYSE is
open provided that the Institution receives the investor's request before the
time specified by such Institution. Investors participating in such a plan
should refer to their enrollment materials for a discussion of any specific
instructions on the timing or restrictions on the purchase of shares. Please
refer to "Net Asset Value" for information on how the Funds are valued.
No initial sales charge is imposed at the time of purchase. A CDSC is
imposed, however, on certain redemptions of Adviser Class shares. See "Fees
and Charges--Contingent Deferred Sales Charge" which describes the CDSC in
greater detail.
You can make
a purchase by
mail
Purchase by Mail To purchase shares by mail, please complete and sign the
application, make a check payable to the Aetna Series Fund, Inc. and return
both to your agent or representative.
You can make additional investments to your accounts by using the
investment stubs from your confirmation statements or by writing to
26 Aetna Mutual Funds Prospectus
<PAGE>
the Company at the address listed below. Your letter should indicate your
name, account numbers, the Adviser Class shares of which Funds you wish to
invest in, and the amount to be invested. Letters should be mailed to the
transfer agent as follows:
Aetna Series Fund, Inc.
c/o Mutual Fund Services, 3rd Floor
P.O. Box 701
Milwaukee, WI 53201-0701
Correspondence mailed by overnight courier should be sent to the transfer
agent at the following address:
Aetna Series Fund, Inc.
c/o Mutual Fund Services, 3rd Floor
615 E. Michigan Street
Milwaukee, WI 53202
When opening an account, your check should be made payable to Aetna Series
Fund, Inc. or Firstar Trust Company. Cash, credit cards and third party
checks cannot be used to open an account. Firstar will accept checks for
subsequent purchases which are made payable to the account owner(s) and
endorsed to the Company.
You can
purchase by
wire, electronic funds transfer
or exchange
Purchase by Wire You may also purchase additional Adviser Class shares of a
Fund through a wire transfer. For federal funds wire instructions, please
call 1-800-367-7732. Federal funds wire purchase orders will be accepted only
when the Fund and custodian bank are open for business.
Purchase by Electronic Funds Transfer Once an account has been established in
any of the Funds, you may purchase additional Adviser Class shares by using
Electronic Funds Transfer ("EFT") facilities under the Systematic Investment
feature. See "Other Features." EFT will allow you to transfer money between a
bank account and a specific Fund. You must elect EFT capability on the
application in order to authorize this option.
Purchase by Exchange You may open an account or purchase additional Adviser
Class shares by making an exchange among Adviser Class shares of any of the
Funds of the Company, provided shares of such Fund may be legally sold in
your state of residence. An exchange may be made by submitting a written
request to make the exchange and specifying the name and account number of
your current Fund account, the name of the Fund you wish to exchange into,
the amount to be exchanged, and the signatures of all shareholders. Send your
request to the address listed above under "Purchase by Mail."
You may also exchange your Adviser Class shares by calling
1-800-367-7732. Please provide the Fund names, account number,
Aetna Mutual Funds Prospectus 27
<PAGE>
your Social Security number or taxpayer identification number, account
address and the amount to be exchanged. Requests received prior to 4:00 p.m.
eastern time will be processed that Business Day.
You should carefully consider the following before making an exchange:
(box) Each exchange may result in a gain or loss and is treated as a sale and as
a purchase of shares for tax purposes.
(box) An exchange which represents an initial investment in a Fund must meet the
minimum investment requirements described under "Shareholder Services--How
to Open an Account."
(box) The shares received in an exchange must be identically registered. A
letter with signature guarantees must accompany any exchange request to
transfer shares into a Fund account that is not registered identically to
the transferring Fund account.
(box) Following an investment in a Fund, there is a required eight-day holding
period before those shares can be exchanged.
There is currently no limit on the number of exchanges. However, each Fund
reserves the right to temporarily or permanently terminate the exchange
privilege for any person who makes more than five exchanges out of a Fund per
calendar year. In addition, each Fund reserves the right to refuse exchange
purchases by any person or group if, in the Investment Adviser's judgment,
that Fund would be unable to invest effectively in accordance with its
investment objective as a result of such exchange. Each Fund also reserves
the right to revise the exchange privilege at any time.
You automatically receive telephone exchange privileges when you establish
your account. If you do not want telephone exchange privileges, write to the
transfer agent at the above address or call 1-800-367-7732. The Funds have
established reasonable procedures to confirm that instructions received are
genuine. If these procedures are not followed, the Funds may be liable for
any losses due to unauthorized or fraudulent instructions. For your
protection, all telephone exchange transactions will be recorded, and you
will be asked for certain identifying information.
Your distribution option can be changed at any time by calling 1-800-367-7732
Distribution Options When completing an application, you must select one of
the following options for dividends and capital gain distributions:
(box) Full Reinvestment--Both dividends and capital gains distributions from a
Fund will be reinvested in additional Adviser Class shares of that Fund.
This option will be selected automatically unless one of the other options
is specified. (Please refer to "Fund Distributions".)
28 Aetna Mutual Funds Prospectus
<PAGE>
(box) Or . . . Capital Gains Reinvestment--Capital gains distributions from a
Fund will be reinvested in additional Adviser Class shares of that Fund and
all net income from dividends will be distributed in cash.
(box) Or . . . All Cash--Dividends and capital gains distributions will be paid
in cash.
If you select a cash distribution option, you can elect to have distributions
automatically invested in Adviser Class shares of another Fund of the
Company.
If you make no selection, income dividends and capital gains distributions
with respect to a particular Fund will be reinvested in additional Adviser
Class shares of that Fund. Distributions paid in shares will be credited to
your account at the next determined net asset value per share.
If you wish to change the manner in which you receive income dividends and
capital gains distributions, your notification of such change must be
received by the transfer agent at least ten days before the next scheduled
distribution.
How to Redeem Shares To redeem all or a portion of the Adviser Class shares
in your account, a redemption request should be submitted as described below.
Shares will be redeemed at the net asset value determined as of 4:15 p.m.
eastern time on any Business Day so long as the redemption request and all
required documentation is received by Firstar Trust Company (the transfer
agent) at its Milwaukee offices prior to 4:00 p.m. Redemption requests
received after 4:00 p.m. will be processed at the net asset value determined
on the following Business Day. Redemptions may be subject to a contingent
deferred sales charge. See "Fees and Charges" for more information.
The Company has the right to satisfy redemption requests by delivering
securities from its investment portfolio rather than cash when it decides
that distributing cash would not be in the best interests of shareholders.
However, a Fund is obligated to redeem its shares solely in cash up to an
amount equal to the lesser of $250,000 or 1% of its net assets for any one
shareholder of a Fund in any 90 day period. To the extent possible, the
Company will distribute readily marketable securities, in conformity with
applicable rules of the Commission. In the event such redemption is requested
by institutional investors, the Company will weigh the effects on individual
nonredeeming shareholders in applying this policy. Securities distributed to
shareholders may be difficult to sell and may result in additional costs to
the shareholders. See the SAI for additional information on redemptions in
kind.
Aetna Mutual Funds Prospectus 29
<PAGE>
For help with
redemptions call your
agent or representative
or 1-800-367-7732
Redeem by Mail Shares of any Fund may be redeemed by sending written
instructions to the transfer agent. The instructions should identify the
Fund, the number of shares or dollar amount to be redeemed, your name and the
Fund account number. The instructions must be signed by all person(s)
required to sign for the Fund account, exactly as the account is registered,
and accompanied by a signature guarantee(s). (See "Signature Guarantee"
below.) Certain nonindividual shareholders may also be required to furnish
copies of a corporate resolution, trust document or other supporting
documents.
Once shares are redeemed, the Fund will normally send the proceeds of such
redemption within one or two business days. However, if making immediate
payment could adversely affect a Fund, the Fund may defer distribution for up
to seven days or the maximum period allowed by law, if shorter. Also, a Fund
will hold payment of redemption proceeds until a purchase check or systematic
investment clears, which may take up to 12 calendar days. The Fund(s) may
suspend redemptions or postpone payments when the New York Stock Exchange is
closed or when trading is restricted for any reason other than its customary
weekend or holiday closings, or under any emergency circumstances as
determined by the Commission.
Redeem by Wire Redemption proceeds will be transferred by wire to your
designated bank account if federal funds wire instructions are provided with
your redemption request accompanied by a signature guarantee as described
below. A $10.00 fee will be charged for this service. A minimum redemption of
$1,000 is required for wire transfers.
Signature Guarantee A signature guarantee is verification of the authenticity
of the signature given by certain authorized institutions. The Funds will
waive the signature guarantee requirement for redemption requests for amounts
of $10,000 or less. However, if you wish to have your redemption proceeds
transferred by wire to your designated bank account, paid to someone other
than the shareholder of record, or sent somewhere other than the shareholder
address of record, you must provide a signature guarantee with your written
redemption instructions regardless of the amount of redemption.
The Funds reserve the right to amend or discontinue this policy at any
time and establish other criteria for verifying the authenticity of any
redemption request.
You can obtain a signature guarantee from any one of the following
institutions: a national or state bank (or savings bank in New York or
Massachusetts only); a trust company; a federal savings and loan association;
or a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges. Please note that signature guarantees are not provided by notary
publics.
30 Aetna Mutual Funds Prospectus
<PAGE>
Minimum Account Balance To keep your account open, you must maintain a
minimum balance of $500 in each Fund account. If this minimum balance is not
maintained due to redemptions, the Fund reserves the right to redeem all of
your remaining shares in that account and mail the proceeds to you at the
address of record. Shares will be redeemed at net asset value on the day the
account is closed. The Fund will give you 60 days notice that such redemption
will occur unless you make an additional investment to increase the account
balance to the $500 minimum.
Tax-Deferred Retirement Plans The Funds can be used for investment by a
variety of tax-deferred plans. These plans let you save for retirement and
allow you to defer taxes on your investment income. Some of these plans are:
(box) IRAs, available to individuals who work and their spouses.
(box) 401(k) programs, available to corporations of all sizes to benefit their
employees.
Information you will receive
Shareholder Information The transfer agent will maintain shareholder accounts. A
confirmation statement will be sent to you and your agent or representative
after every transaction that affects your share balance or account registration.
A Form 1099 will also be sent each year by January 31. You will also receive an
annual and semiannual report of the Funds. The transfer agent may charge you a
fee for special requests such as an historical transcript of your account and
copies of cancelled checks.
Consolidated Statements reflecting current account values and year-to-
date transactions will be sent to you each quarter. All accounts identified
by the same social security number and address will be consolidated. For
example, you could receive a Consolidated Statement showing your individual
and IRA accounts. With the prior permission of the other shareholders
involved, you have the option of requesting that accounts controlled by those
other shareholders be shown on one Consolidated Statement. For example,
information on your individual account, your IRA, your spouse's individual
account and your spouse's IRA may be shown on one Consolidated Statement.
Other Features
A convenient way to make regular investments
Systematic Investment The Systematic Investment feature, using the EFT
capability (see "Shareholder Services--Purchase by Electronic Funds
Transfer"), allows you to make automatic monthly investments in any of the
Funds. On the application you may select the amount of money to be moved and
the Fund(s) to be invested in. There is no minimum initial cash investment
required to open your account if you elect to use the EFT feature. The
minimum monthly Systematic
Aetna Mutual Funds Prospectus 31
<PAGE>
Investment is $50 per Fund account. Your application must be received at
least 15 business days prior to the first EFT transaction. The Systematic
Investment feature and EFT capability will be terminated upon total
redemption of your account. Also, a Fund will hold payment of redemption
proceeds until a Systematic Investment has cleared, which may take up to 12
calendar days.
For more information, call your agent or representative
or 1-800-367-7732
Automatic Cash Withdrawal Plan The Automatic Cash Withdrawal Plan provides a
convenient way for you to receive a systematic distribution while maintaining
an investment in the Funds. The Automatic Cash Withdrawal Plan permits you to
have payments of $100 or more automatically transferred from your Fund to
your designated bank account on a monthly basis. In order to enroll in this
plan, you must have a minimum balance of $10,000 in any Fund utilizing this
feature. Your automatic cash withdrawals will be processed on a regular basis
beginning on or about the first day of the month. There may be tax
consequences associated with these transactions. Please consult your tax
adviser.
Be sure to sign up for checkwriting services
Checkwriting Service Checkwriting is available with the Money Market Fund and
any applicable CDSC will be charged to your account. Checks must be for a
minimum of $250 and the checkwriting service may not be used for a complete
redemption of your account. If the amount of the check including any applicable
CDSC is greater than the value of your account, the check will be returned
unpaid. In addition, checks written against shares purchased by check or
Systematic Investment during the past 12 calendar days will be returned unpaid
due to uncollected funds. You may select the checkwriting service by indicating
your election on the Application or by calling 1-800-367-7732 for further
information. All notices with respect to checks must be given to the transfer
agent. The checkwriting service is not available for IRAs or other retirement
accounts.
TDD Service Firstar Trust Company, the transfer agent, offers
Telecommunication Device for the Deaf (TDD) services for hearing impaired
shareholders. The dedicated number for this service is 1-800-684-3416 and
appears on shareholder account statements.
Changes to Service The Funds reserve the right to amend the shareholder
services described above or to change the terms or conditions of such
services at any time.
Cross-Fund Investing
(box) Dividend Investing--You may elect to have dividend and/or capital gains
distributions automatically invested in one other Adviser Class Fund account.
(box) Systematic Exchange--You may establish an automatic exchange of Adviser
Class shares from one Fund account to another. The
32 Aetna Mutual Funds Prospectus
<PAGE>
exchange will occur on or about the 15th day of each month and must be for
a minimum of $50 per month. Since this transaction is treated as an
exchange, the policies related to the exchange privilege apply. Please read
the "Shareholder Services--Purchase by Exchange" section carefully. There
may be tax consequences associated with these exchanges. Please consult
your tax adviser.
Cross-Fund Investing may only be made in a Fund account that has been
previously established with the Fund's minimum investment. To request either
or both of these features, please call your agent or representative, or call
1-800-367-7732.
Fees and Charges
Shareholder Services Fee Under a Shareholder Services Plan approved by the
Board of Directors, ALIAC is paid a service fee at an annual rate of 0.25%
(0.10% for the Money Market Fund) of the daily net assets of the Adviser
Class shares of each Fund. This fee is used as compensation for expenses
incurred in servicing shareholder accounts.
12b-1 Distribution Fee The Board of Directors and the Adviser Class
shareholders have approved a Distribution Plan under Rule 12b-1 of the 1940
Act. Under this plan, ALIAC is paid a 12b-1 distribution fee at an annual
rate of 0.50% of the average daily net assets of the Adviser Class shares of
each Fund except the Money Market Fund.
The 12b-1 distribution fee may be used to cover expenses incurred in
promoting the sale of Adviser Class shares, including (i) costs of printing
and distributing each Funds' prospectus, SAI and sales literature to
prospective investors; (ii) payments to registered representatives and other
persons who provide support services in connection with the distribution of
shares; (iii) overhead and other ALIAC distribution related expenses; and
(iv) accruals for interest on the amount of the foregoing expenses that
exceed 12b-1 distribution fees and the CDSC received by ALIAC.
How we calculate the deferred sales charge
Contingent Deferred Sales Charge You may buy Adviser Class shares of any Fund
without an initial sales charge. However, ALIAC will impose a contingent
deferred sales charge (CDSC) on certain Fund share redemptions.
There is no CDSC on redemptions of Adviser Class shares purchased through
reinvestment of dividends or capital gains distributions or shares purchased
more than four years prior to the redemption. In addition, there is no CDSC
on Money Market Fund redemptions unless those shares were purchased through
an exchange from another Fund within four years prior to the redemption.
Redemptions of Adviser Class shares within four years of purchase are subject
to a CDSC. The charge is assessed on an amount equal to the lesser of the
current market value or the original cost of the shares being redeemed. The
result is there is no
Aetna Mutual Funds Prospectus 33
<PAGE>
sales charge on increases in the net asset value of shares above the initial
purchase price.
The CDSC is calculated by multiplying the lesser of the current market
value or the original cost of the shares being redeemed, by the percentage
shown below based on the time invested:
<TABLE>
<CAPTION>
Redemption During CDSC
-------------------------- --------
<S> <C>
1st year since purchase 1.00%
2nd year since purchase .75%
3rd year since purchase .50%
4th year since purchase .25%
5th year and thereafter None
</TABLE>
When you request a redemption of Adviser Class shares, to determine
whether the CDSC is applicable, the Company will assume that you are
redeeming shares not subject to the CDSC first. In determining the number of
years the shares have been held, each Fund will aggregate all purchases of
Adviser Class shares made during a month and consider them made on the first
day of the month.
For example, assume that you have made purchase payments for Adviser Class
shares of a Fund of $2,000 annually for 2 years (total $4,000) and that the
value of your investment, including appreciation and reinvested
distributions, has grown to $5,200 in the third year. Since there is no CDSC
on appreciation or reinvested dividends, you could redeem $1,200 without
incurring a charge. For a redemption of $2,000, the first $1,200 would not be
subject to a CDSC, but the remaining $800 would be subject to the CDSC and
would be assumed to have come from your oldest purchase payment. Thus, a
0.50% CDSC would be imposed (for redemptions of shares in the third year
since purchase), for a total charge of $4.00.
Because the CDSC is assessed on a fund-by-fund basis, shareholders who
contemplate a redemption and have invested in multiple Funds should consider
redeeming from the Fund that would produce the lowest CDSC.
Waivers of CDSC The CDSC will be waived on (a) exchanges; (b) redemptions of
shares following the death or disability of the shareholder; (c) redemptions of
shares in connection with distributions and withdrawals from retirement plans or
IRAs; (d) redemptions of shares purchased by active or retired employees of the
Underwriter or affiliated companies; (e) redemptions by shareholders with a
current account balance of $1 million or more in the account from which they
wish to redeem; and (f) involuntary redemptions.
Management of the Funds
The Fund's Investment Adviser
Directors The business affairs of each Fund are managed under the direction of
the Board of Directors (Directors). The Directors set
34 Aetna Mutual Funds Prospectus
<PAGE>
broad policies for the Company and each Fund. Information about the Directors
is found in the SAI.
Investment Adviser ALIAC, the Investment Adviser for each Fund, is a
Connecticut corporation with its principal offices at 151 Farmington Avenue,
Hartford, Connecticut 06156. ALIAC is registered with the Commission as an
investment adviser and currently manages over $22 billion in assets for the
Funds, other investment companies and for its general account.
Under an investment advisory agreement with each Fund, the Investment
Adviser is responsible for managing the assets of each Fund in accordance
with its investment objectives and policies subject to the supervision of the
Directors.
The Investment Adviser furnishes all necessary facilities and pays the
salaries and other related costs of personnel engaged in providing investment
advice to the Funds. It also pays salary, other fees and expenses for
Directors and officers of the Company who are employees or affiliated persons
of the Investment Adviser.
The Investment Adviser receives a monthly fee from each Fund at an annual
rate based on average daily net assets of each Fund as follows:
Advisory
Fees
<TABLE>
<CAPTION>
Fee Assets
------------------------ ---------- ------------------------
<S> <C> <C>
Money Market Fund 0.400% On first $500 million
0.350% On next $500 million
0.340% On next $1 billion
0.330% On next $1 billion
0.300% Over $3 billion
------------------------ ---------- ------------------------
Government Fund 0.500% On first $250 million
0.475% On next $250 million
0.450% On next $250 million
0.425% On next $1.25 billion
0.400% Over $2 billion
------------------------ ---------- ------------------------
Bond Fund 0.500% On first $250 million
0.475% On next $250 million
0.450% On next $250 million
0.425% On next $1.25 billion
0.400% Over $2 billion
------------------------ ---------- ------------------------
Aetna Fund 0.800% On first $500 million
0.750% On next $500 million
0.700% On next $1 billion
0.650% Over $2 billion
------------------------ ---------- ------------------------
Aetna Mutual Funds Prospectus 35
<PAGE>
- ------------------------ ---------- ------------------------
Growth and Income Fund 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
------------------------ ---------- ------------------------
Growth Fund 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
------------------------ ---------- ------------------------
Small Company Growth
Fund 0.850% On first $250 million
0.800% On next $250 million
0.775% On next $250 million
0.750% On next $1.25 billion
0.725% Over $2 billion
------------------------ ---------- ------------------------
International Growth
Fund 0.850% On first $250 million
0.800% On next $250 million
0.775% On next $250 million
0.750% On next $1.25 billion
0.700% Over $2 billion
------------------------ ---------- ------------------------
Asian Growth 1.000% On first $250 million
0.875% On next $250 million
0.850% On next $250 million
0.825% On next $1.25 billion
0.800% Over $2 billion
</TABLE>
The above investment advisory and administrative service fees (see
"Administrator" below) applicable to the Aetna Fund, Growth and Income Fund,
Growth Fund, Small Company Growth Fund, International Growth Fund and Asian
Growth Fund when taken together (before expense reimbursement) are higher
than those charged by some other investment advisers to other registered
investment companies.
Sub-adviser to Aetna Series Fund, Inc.
Sub-Adviser The Investment Adviser has engaged Aeltus as the sub- adviser to
the Growth Fund and the Small Company Growth Fund. Aeltus is a Connecticut
corporation located at 242 Trumbull Street, Hartford, Connecticut, 06156.
Aeltus is a wholly owned subsidiary of Aetna Life Insurance and Annuity
Company which is in turn owned by Aetna Life and Casualty Company. The
sub-adviser is registered as an investment adviser with the Commission.
36 Aetna Mutual Funds Prospectus
<PAGE>
Under sub-advisory agreements, the sub-adviser is subject to the
supervision of the Investment Adviser and the Directors, and is responsible
for managing the assets of each of the Funds in accordance with its
investment objectives and policies. The sub-adviser pays the salaries and
other related costs of its personnel engaged in providing investment advice
to the Funds including office space, facilities and equipment.
The Investment Adviser has overall responsibility for monitoring the
investment program maintained by the sub-adviser for compliance with
applicable laws and regulations and the respective Fund's investment
objective.
Administrator ALIAC acts as administrator for each Fund and performs certain
administrative and internal accounting services, including maintaining
general ledger accounts, regulatory compliance, preparing financial
information for semiannual and annual reports, preparing registration
statements, calculating net asset values (except for the International Growth
and Asian Growth Funds), shareholder communications and supervising the
custodians and transfer agent.
For these services, each Fund pays ALIAC a monthly fee at an annual rate
based on average daily net assets of the Fund as follows: 0.25% on the first
$250 million; 0.24% on the next $250 million; 0.23% on the next $250 million;
0.22% on the next $250 million; 0.20% on the next $1 billion; and 0.18% on
assets over $2.0 billion.
Principal Underwriter ALIAC is the principal underwriter for the Company.
ALIAC may contract with various broker-dealers, including one or more of its
affiliates, for distribution of Adviser Class shares. ALIAC may also sell
shares of the Funds directly. ALIAC is paid an annual service fee and an
annual 12b-1 distribution fee with respect to Adviser Class shares for all
Funds (except the Money Market Fund). The fees are authorized under a
Shareholder Services Plan and a Distribution Plan (Plans) adopted by the
Board of Directors with respect to the Adviser Class shares of each Fund. See
"Fees and Charges" for more information.
Although it is anticipated that some promotional activities will be
conducted on a Company-wide basis, payments made by a Fund under the
Distribution Plan generally will be used to finance the distribution of
shares of that Fund. Expenses incurred in connection with Company-wide
activities may be allocated pro-rata among all Funds of the Company on the
basis of their relative net assets.
Payments under the Plans are not tied exclusively to the distribution and
shareholder service expenses actually incurred by ALIAC, and the payments may
exceed expenses actually incurred. The Company's Board of Directors evaluates
the appropriateness of the Plans
Aetna Mutual Funds Prospectus 37
<PAGE>
and the payment terms on a continuing basis and in doing so will consider all
relevant factors, including expenses borne by ALIAC and the amounts received
under the Plans and the proceeds of the CDSC.
On a quarterly basis, the Company's Board of Directors reviews a report on
expenditures under the Plans and the purposes for which those expenditures
were made. The Directors conduct an additional, more extensive review
annually in determining whether the Plans will be continued. By their terms,
continuation of the Plans from year to year is contingent on annual approval
by a majority of the Company's Directors and by a majority of the Directors
who are not "interested persons" as defined in the 1940 Act, and who have no
direct or indirect financial interest in the operation of the Plans or
related agreements (the "Plan Directors"). The Distribution Plan may be
terminated by the Plan Directors or a majority of the outstanding shares of
the Funds. The Shareholder Services Plan may be terminated by the Directors.
Transfer Agent Firstar Trust Company acts as each Fund's transfer and
dividend-paying agent. Firstar is responsible for the issuance, transfer and
redemption of shares and the opening and maintenance of shareholder accounts.
Fund Expenses Each Fund bears the costs of its operations. Expenses directly
attributable to a Fund are charged to that Fund. Some expenses are allocated
proportionately among all the Funds in relation to the net assets of each
Fund and some expenses are allocated equally to each Fund. Fund expenses are set
forth in the Fee Tables.
Portfolio Management
The following individuals are primarily responsible for the day-to-day
management of the Funds, as indicated below. All of the following individuals
may also decide as a group what strategy may benefit all of the Funds.
Money Market Fund, Government Fund and Bond Fund Jeanne Wong-Boehm, Managing
Director, ALIAC, has been managing the Money Market Fund and the Bond Fund
since January 1992. She has been managing the Government Fund since its
inception in January 1994. Ms. Wong-Boehm joined ALIAC in 1983 as a fixed
income portfolio analyst, and shortly thereafter assumed portfolio
responsibilities for various general account segments within the Aetna group
of companies. In 1989 she was also assigned primary responsibility for the
money market operations.
The Aetna Fund John Y. Kim, Chief Investment Officer, ALIAC. Mr. Kim has been
managing The Aetna Fund since May 1994. He joined Aetna Life Insurance Company
in 1983 as a Bond Analyst and in 1989 he advanced to Senior Investment Officer.
In October 1989,
38 Aetna Mutual Funds Prospectus
<PAGE>
Mr. Kim joined ALIAC as Fixed Income Portfolio Manager. He subsequently
served as a Vice President of Investor Relations for Aetna Life and Casualty
Company ("Aetna") and later became Vice
President and Senior Portfolio Manager for Aetna's Property/Casualty
portfolios. In 1993, John joined Mitchell Hutchins Institutional Investors as
Managing Director and Head of Institutional Fixed Income. In 1994 he returned
to ALIAC as its Chief Investment Officer.
Growth and Income Fund Kevin Means, Chief Equity Officer, ALIAC, has managed
the Growth and Income Fund since July 1994. Mr. Means is responsible for the
management of over $6 billion in variable annuity and mutual funds. Mr. Means
joined ALIAC in July of 1994 after serving as Chief Investment Officer at
INVESCO Management and Research, Boston from 1993 to 1994. He also served
from 1987 to 1993 as the Director of Quantitative Research and Equity
Portfolio Manager at INVESCO Capital Management, Atlanta. At INVESCO, Mr.
Means managed mutual funds and institutional accounts. Mr. Means heads a team
of portfolio managers who specialize in various asset classes used in the
management of the Growth and Income Fund.
International Growth Fund and Asian Growth Fund Vince Fioramonti,
International Portfolio Manager, has been the Lead Portfolio Manager for
Aetna International Growth Fund and Asian Growth Fund since December 1995.
Mr. Fioramonti manages international stocks and non-U.S. dollar government
bonds for several ALIAC investment funds. Mr. Fioramonti joined ALIAC in 1994
after serving as Vice President for The Travelers Investment Management
Company. He began his investment career with Travelers in 1988. Kevin Means
assists Mr. Fioramonti on country asset allocation and currency hedging
policies.
The following Funds are subadvised by Aeltus:
Growth Fund Peter B. Canoni, Managing Director, Aeltus, has managed the
Growth Fund since its inception in January 1994. Mr. Canoni has worked as a
fund manager for Aeltus since 1980.
Small Company Growth Fund Thomas DiBella, Investment Officer, Aeltus, has
managed the Small Company Growth Fund since its inception in January 1994.
Mr. DiBella joined Aetna in 1991 in the equity investment area of Aeltus. He
is currently responsible for the management of small capitalization
portfolios. Prior to joining Aetna, Mr. DiBella was an investment officer
with Bethlehem Steel from 1989 to 1991.
Fund Distributions
How to receive dividends
(box) The Money Market Fund declares dividends daily and pays monthly.
Aetna Mutual Funds Prospectus 39
<PAGE>
(box) The Government Fund and the Bond Fund declare and pay dividends monthly.
(box) The Aetna Fund and the Growth and Income Fund declare and pay dividends
semiannually.
(box) The Growth Fund, Small Company Growth Fund, International Growth Fund and
Asian Growth Fund declare and pay dividends annually.
(box) All capital gains distributions, if any, are paid on an annual basis.
Income dividends are derived from investment income, including dividends,
interest, realized short-term capital gains, and certain foreign currency
gains received by a Fund. Capital gains distributions are derived from each
Fund's realized long-term capital gains. The per share dividends and
distributions on Adviser Class shares will be less than the per share
dividends and distributions of the Select Class as a result of the
distribution fees and service fees applicable to the Adviser Class.
Money Market Fund shares begin to accrue dividends the next Business Day
after they are purchased; a redemption will include dividends declared
through the redemption date.
Both income dividends and capital gains distributions are paid by each
Fund on a per-share basis. As a result, at the time of such payment, the net
asset value per share of a Fund (except the Money Market Fund) will be
reduced by the amount of such payment.
Net Asset Value
Pricing
your Fund
The net asset value per share ("NAV") of each Fund is determined as of 4:15
p.m. eastern time on each day that the NYSE is open for trading. Except for
the Money Market Fund, the NAV is computed by dividing the total value of a
Fund's securities, plus any cash or other assets (including dividends accrued
but not collected) less all liabilities (including accrued expenses), by the
number of shares outstanding. Portfolio securities are valued primarily on
the basis of market quotations. All other assets, including restricted
securities and other securities for which market quotations are not readily
available, are valued at their fair value in such manner as may be
determined, from time to time, under the authority, of the Directors.
The Money Market Fund's portfolio securities are valued by the amortized
cost method of valuation. The Money Market Fund's use of amortized cost is
part of its effort to maintain a constant net asset value of $1.00 per share.
Taxes
Form 1099-DIV will be mailed to you in January
Introduction The tax information described below is only a summary of federal
income tax consequences and is based on tax laws and regulations in effect as of
the date of this Prospectus. Please refer to
40 Aetna Mutual Funds Prospectus
<PAGE>
the SAI for a more detailed discussion of federal income tax considerations.
In addition to federal taxes, you may be subject to state and local taxes and
you should discuss your individual tax situation with your tax adviser.
Shareholder Distributions The Company intends to qualify for treatment under
Subchapter M of the Code. Therefore, the Funds will distribute all of their
net income and gains to shareholders. Such distributions will be taxable to
the shareholders and not the Funds. Distributions of net long-term capital
gains are taxable to you as long-term capital gains regardless of the length
of time you have owned your shares. Distributions of net investment income
and net short-term capital gains are taxable to you as ordinary income.
Depending on a Fund's investments, part or all of ordinary income dividends
could be treated as: (1) "U.S. Government Interest Dividends" which are
exempt from state and local taxes in some jurisdictions or (2) "Qualifying
Dividends" which for eligible corporate shareholders qualify for the corporate
dividends-received deduction. Dividends paid by the Government Fund may be U.S.
Government Interest Dividends. Substantially all dividends paid by the Growth
and Income Fund, and, to a lesser degree, the Aetna Fund, the Growth Fund and
the Small Company Growth Fund will be Qualifying Dividends for which eligible
corporate shareholders may claim a partial deduction.
Investment income from foreign securities may be subject to foreign taxes
withheld at the source. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Fund's assets to be invested in
various countries is not known. The International Growth and Asian Growth
Funds may elect to "pass through" foreign taxes paid in order to permit
shareholders to claim a credit or deduction, if more than 50% of the value of
such Fund's assets at the close of a taxable year consist of stock or
securities of foreign corporations.
A Fund's distributions are taxable in the year they are received,
regardless of whether you take them in cash or reinvest them in additional
shares. However, distributions declared in December to shareholders of record
on a date in December and paid in January of the following year are taxable as
if paid on December 31 of the year of declaration. Each Fund will send a
statement to shareholders by January 31 indicating the tax status of
distributions made during the previous year, and any foreign taxes
"passed- through" to shareholders.
Buying a Dividend If you buy shares of a Fund (other than the Money Market
Fund) just before the ex-dividend date, you may be taxed on the entire
amount of the dividend received.
Share Redemptions Any gain or loss realized when you redeem (sell) or
exchange shares of a Fund will be treated as a taxable long- term or
short-term capital gain or loss. Please see the SAI for information regarding
any limitation on deductibility of such losses.
Aetna Mutual Funds Prospectus 41
<PAGE>
Tax Withholding When you fill out your Application, you will be asked to
certify that your Social Security or taxpayer identification number is
correct and that you are not subject to 31% backup withholding by the
Internal Revenue Service ("IRS"). If you are subject to backup withholding,
or fail to properly certify your taxpayer identification number, the IRS can
require a Fund to withhold 31% of your taxable dividends, capital gains
distributions and redemption proceeds.
General Information
Articles of Incorporation The Company was incorporated under the laws of
Maryland on June 17, 1991. The Articles of Incorporation ("Articles") provide
for the issuance of multiple series of shares each representing a portfolio
of investments with different investment objectives, policies and
restrictions. The Company currently offers 12 series or Funds, nine of which
are described in this Prospectus.
Share Classes Each Fund offers shares of common stock currently classified
into two classes, Select Class shares and Adviser Class shares. Each class of
shares has the same rights, privileges and preferences, except with respect
to: (a) the effect of the respective sales charge, if any, for each class;
(b) the distribution and/or service fees borne by each class; (c) the
expenses allocable exclusively to each class; (d) voting rights on matters
exclusively affecting a single class; and (e) the exchange privilege of each
class. The Board of Directors does not anticipate that there will be any
conflicts among the interests of the holders of the different classes of
shares of the Funds. The Directors continue to consider whether any such
conflicts exist and, if so, will take appropriate action.
The Company has obtained a ruling from the IRS with respect to the Funds
described in this Prospectus to the effect that differing distributions among
the classes of its shares will not result in a Fund's dividends or other
distributions being regarded as "preferential dividends" under the Code. For
additional information, see the SAI.
Capital Stock The Articles currently authorize the issuance of 4.8 billion
shares of capital stock of the Company. All shares are nonassessable,
transferable and redeemable. There are no preemptive rights.
As of January 31, 1996, the following shares were owned by ALIAC and its
affiliates:
<TABLE>
<CAPTION>
ALIAC
----------------------
Adviser Select
--------- ----------
<S> <C> <C>
Money Market Fund 0 119,499
Government Fund 0 714,990
Bond Fund 209,998 76,449
The Aetna Fund 0 12,013
42 Aetna Mutual Funds Prospectus
<PAGE>
ALIAC
----------------------
Adviser Select
--------- ----------
Growth and Income Fund 0 11,347
Growth Fund 0 950,612
Small Company Growth
Fund 0 2,446,721
International Growth
Fund 1,912,492 11,702
Asian Growth Fund 0 467,409
Aetna Ascent 0 1,840,324
Aetna Crossroads 0 1,791,527
Aetna Legacy 0 1,826,236
</TABLE>
Aetna Life Insurance Company
-------------------
Adviser Select
------- ---------
Asian Growth Fund 0 2,066,778
All shares were acquired for investment and can be disposed of only by
redemption. ALIAC and its affiliates may make additional investments into the
Funds.
Shareholder Meetings The Company is not required and does not intend to hold
annual shareholder meetings. The Articles provide for meetings of
shareholders to elect Directors at such times as may be determined by the
Directors or as required by the 1940 Act. If requested by the holders of at
least 10% of a Fund's outstanding shares, the Company will hold a shareholder
meeting for the purpose of voting on the removal of one or more Directors and
will assist with communication concerning that shareholder meeting.
Voting Rights Shareholders of each class are entitled to one vote for each
full share held and fractional votes for fractional shares of each class held
on matters submitted to the shareholders of the Company. Voting rights are
not cumulative. Generally, shares of the Company will be voted on a
Company-wide basis on all matters except matters affecting only the interest
of one Fund or one class of shares.
Payments to Dealers For sales of Funds' shares (other than Money Market
Fund), ALIAC may pay registered representatives a sales commission of up to
4% of the amount invested for initial and subsequent sales. Registered
representatives receive payments of up to 0.50% for distribution-related
services and for services to shareholders (see "Fees and Charges"). From time
to time, ALIAC may also award merchandise or trips with an estimated value up
to $1,000 to registered representatives that sell a certain amount of fund
shares or establish a certain number of new accounts or to the maximum extent
allowed under applicable regulations, if less. Incentive commissions and
prizes are paid by ALIAC so the price you pay for Adviser Class shares and
the value of your investment will be unaffected.
Aetna Mutual Funds Prospectus 43
<PAGE>
Performance Data
The Funds may compare their performance to other mutual funds with similar
investment objectives and to the industry as a whole, as quoted by ranking
services and publications of general interest. These may include the Standard
& Poor's 500 Stock Index ("S&P 500"); Shearson Lehman Aggregate Bond Index;
Dow Jones Industrial Average ("DJIA"); Lipper Analytical Services, Inc.;
IBC/Donoghue's Taxable MFA; the Morgan Stanley Capital International Europe,
Australia, Far East ("EAFE") Index; and the Morgan Stanley Capital
International Far East Free ("FEF ex. Japan") Index.
44 Aetna Mutual Funds Prospectus
<PAGE>
Appendix A--Glossary of Investment Terms
This glossary describes some of the securities used by the Funds. Further
information is available in the SAI:
Banker's Acceptance A banker's acceptance is a time draft drawn on and
accepted by a bank and is customarily used by corporations as a means of
financing payment for traded goods. When a draft is accepted by a bank, the
bank guarantees to pay the face value of the debt at maturity.
Certificates of Deposit For large deposits not withdrawable on demand, banks
issue certificates of deposit ("CDs") as evidence of ownership. CDs are
usually negotiable and traded among investors such as mutual funds and banks.
Commercial Paper Commercial paper is unsecured short-term debt instruments
issued by companies or banks with a maturity ranging from two to 270 days.
Eurodollars Eurodollars are U.S. dollars held in banks outside the United
States, mainly in Europe but also in other countries, and are commonly used
for the settlement of international transactions. There are many types of
Eurodollar securities including Eurodollar CDs and bonds; these securities
are not registered with the Commission. Certain Eurodollar deposits are not
FDIC insured and may be subject to future political and economic developments
and governmental restrictions.
High Risk High-Yield Securities Bonds of low quality security backing rated
BB or below by Standard & Poor's Corp. or Ba or below by Moody's Investors
Service, Inc., or other agencies or, if unrated, considered by the Investment
Adviser to be of comparable quality. These bonds are often called "junk
bonds" because of the greater possibility of default.
Pay-in-Kind Bonds Pay-in-kind bonds are bonds that pay all or a portion of
their interest through the issuance of additional bonds.
Repurchase Agreements A repurchase agreement or "repo" is an agreement
between a seller and buyer, usually of U.S. Government securities, to sell
and subsequently repurchase securities at a fixed price on a future date. The
primary attraction of repurchase agreements is the flexibility of maturities.
U.S. Government Derivatives A Fund may purchase separately traded principal
and interest components of certain U.S. Government securities ("STRIPS"). In
addition, a Fund may acquire custodial receipts that represent ownership in a
U.S. Government security's future interest or principal payments. These
securities are known by such exotic names as TIGRS and CATS and may be issued
at a discount to face value. They are generally more volatile than normal
Aetna Mutual Funds Prospectus 45
<PAGE>
fixed income securities because interest payments are accrued rather than
paid out in regular installments.
U.S. Government Securities Securities issued by the U.S. Government and its
agencies.
Direct Obligations of the U.S. Government are:
Treasury Bills--issued with short maturities (one year or less) and priced
at a discount to face value. The income for investors is the difference
between the purchase price and the face value.
Treasury Notes--intermediate-term securities with maturities of between
one to ten years. Income to investors is paid in semiannual interest
payments.
Treasury Bonds--long-term debt instruments with maturities from ten years
to up to thirty years. Income is paid to investors on a semiannual basis.
In addition, U.S. Government Agencies issue debt securities to finance
activities for the U.S. Government. These agencies include among others the
Federal Home Loan Bank, Federal National Mortgage Association ("FNMA" or
"Fannie Mae"), Government National Mortgage Association ("GNMA" or "Ginnie
Mae"), Export-Import Bank and the Tennessee Valley Authority.
Not all agencies are backed by the full faith and credit of the United
States; for example the FNMA may borrow money from the U.S. Treasury only
under certain circumstances. There is no guarantee that the government will
support these types of securities and they therefore involve more risk than
direct government obligations.
Variable Rate Instruments A variable or floating rate instrument is one whose
terms provide for the adjustment of its interest rate on set dates and which
can reasonably be expected to have a market value close to par value.
Yankee Bonds A bond issued in the United States by foreign countries,
corporations and banks. Similarly, Yankee CDs are issued in the U.S. by
branches of foreign banks.
Zero Coupon Bonds Bonds issued at a deep discount to face value. These bonds
pay no interest but are redeemed at full face value. The price of zero coupon
bonds are more volatile than bonds which pay interest but are rated on the
same principles as all fixed-income investments.
46 Aetna Mutual Funds Prospectus
<PAGE>
The Funds also use some of the following securities to manage risk and
volatility:
Call Option The right to buy a security, currency or stock index at a stated
price, or strike price, within a fixed period. A call option will be
exercised if the spot price rises above the strike price; if not, the option
expires worthless.
Convertible Stock Corporate securities, which may be either bonds or
preferred shares, that can be exchanged for shares at a fixed price.
Covered Call Options A call option backed by the securities underlying the
option. The owner of a security will normally sell covered call options to
collect premium income or to reduce price fluctuations of the security. A
covered call option limits the capital appreciation of the underlying
security.
Futures Contracts to buy securities, currencies or stock indexes in the
future at a price agreed in advance. A futures contract obliges the buyer to
purchase the security and the seller to sell it, unlike an option where the
buyer can choose whether or not to exercise the option.
Preferred Stock Shares which pay a fixed dividend, in contrast to common
stock whose dividends depend on the profits of the company.
Put Option The right to sell a security, currency or stock index at a stated
price, or strike price, within a fixed period. A put option will be exercised
if the market price falls below the strike price; if not, the option expires
worthless.
Warrants A security, normally offered with bonds or preferred stock, that
entitles investors to buy shares at a prescribed price within a named or
stated period to perpetuity. The time period is usually longer than that of a
call option.
Aetna Mutual Funds Prospectus 47
<PAGE>
Appendix B--Description of Corporate Bond Ratings
Moody's Investors Service, Inc.
"Aaa" Rating Bonds 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 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 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 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 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.
48 Aetna Mutual Funds Prospectus
<PAGE>
"B" Rating Bonds 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 rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
"AA" Rating Bonds 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 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 rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit 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 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 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.
Aetna Mutual Funds Prospectus 49
<PAGE>
(Aetna Logo)
Aetna Series Fund, Inc.
151 Farmington Avenue
Hartford, CT 06156-8962
1-800-367-7732
Investment Adviser
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, CT 06156
Custodians
Mellon Bank N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Brown Brothers Harriman & Company
40 Water Street
Boston, MA 02109
Transfer Agent
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-0701
Independent Auditors
KPMG Peat Marwick LLP
CityPlace II
Hartford, CT 06103-4103
This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, the securities of a Fund in any jurisdiction in
which such sale, offer to sell, or solicitation may not be lawfully made.
50 Aetna Mutual Funds Prospectus
<PAGE>
<PAGE>
AETNA SERIES FUND, INC.
151 Farmington Avenue
Hartford, Connecticut 06156-8962
Statement of Additional Information dated: March 1, 1996
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the current prospectus for Aetna Series Fund, Inc.
dated March 1, 1996. A free prospectus is available upon request by writing
or calling:
Aetna Series Fund, Inc.
151 Farmington Avenue
Hartford, Connecticut 06156-8962
1-800-367-7732
Read the prospectus before you invest
TABLE OF CONTENTS
General Information and History 2
Additional Investment Restrictions and Policies of the Funds 2
Description of Various Securities and Investment Techniques 4
Directors and Officers of the Company 12
Control Persons and Principal Holders of the Funds 15
The Investment Advisory Contract 15
Sub-Advisory Agreements 17
The Administrative Services Agreement 18
Custodian 19
Independent Auditors 19
Principal Underwriter 19
Distribution Arrangements 19
Brokerage Allocation 20
Description of Shares 21
Sale and Redemption of Shares 22
Net Asset Value 22
Tax Status 23
Performance Information 27
Financial Statements F-1
<PAGE>
GENERAL INFORMATION AND HISTORY
Aetna Series Fund, Inc. (Company) is an open-end management investment
company which currently offers twelve different series of Funds, each
representing a diversified portfolio of investments with different investment
objectives, policies and restrictions. The following Funds are described in this
Statement of Additional Information:
1. Aetna Money Market Fund, a portfolio consisting of high-quality money
market instruments;
2. Aetna Government Fund, a portfolio of U.S. Government securities;
3. Aetna Bond Fund, a portfolio primarily of high-quality corporate and U.S.
Government securities;
4. The Aetna Fund, a flexible portfolio of stocks, bonds and money market
instruments;
5. Aetna Growth and Income Fund, a common stock portfolio;
6. Aetna Growth Fund, a common stock portfolio of companies believed to have
potential for growth;
7. Aetna Small Company Growth Fund, a common stock portfolio of companies
with smaller market capitalizations;
8. Aetna International Growth Fund, a common stock portfolio of companies
principally traded outside North America;
9. Aetna Asian Growth Fund, a common stock portfolio of companies traded in
Asia excluding Japan.
The investment objectives and general investment policies of each Fund are
described in the Prospectus.
ADDITIONAL INVESTMENT RESTRICTIONS AND POLICIES OF THE FUNDS
The investment objectives and certain investment restrictions of the Funds
are matters of fundamental policy for purposes of the Investment Company Act
of 1940 (the "1940 Act") and therefore cannot be changed, with regard to a
particular Fund, without the approval of a majority of the outstanding voting
securities of that Fund. This means the lesser of: (i) 67% of the shares of a
Fund present at a shareholders' meeting if the holders of more than 50% of
the shares of that Fund then outstanding are present in person or by proxy;
or (ii) more than 50% of the outstanding voting securities of a Fund.
As a matter of fundamental policy, the Funds will not:
(1) hold more than 5% of the value of its total assets in the securities of
any one issuer or hold more than 10% of the outstanding voting securities
of any one issuer. This restriction applies only to 75% of the value of a
Fund's total assets. Securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities are excluded from this
restriction;
(2) concentrate its investments in any one industry except that a Fund may
invest up to 25% of its total assets in securities issued by companies
principally engaged in any one industry. For purposes of this
restriction, finance companies will be classified as separate industries
according to the end user of their services, such as automobile finance,
computer finance and consumer finance. This limitation will not, however,
apply to securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities. Additionally, for the Money Market Fund,
investments in the following shall not be subject to the 25% limitation:
securities invested in, or repurchase agreements for, U.S. Government
securities; and certificates of deposit, bankers' acceptances, or
securities of banks and bank holding companies;
(3) make loans, except that, to the extent appropriate under its investment
program, a 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;
(4) issue any senior security (as defined in the 1940 Act), except that (a) a
Fund may enter into commitments to purchase securities in accordance with
that Fund's investment program, including reverse repurchase agreements,
delayed delivery and when-issued securities, which may be considered the
issuance of senior securities, (b) a 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) a Fund (other than the Money Market Fund) may engage
in short sales of securities to the extent permitted in its investment
program and other restrictions; (d) the purchase or sale of futures
contracts and related options shall not be considered to involve the
issuance of senior securities; and (e) subject to fundamental
restrictions, a Fund may borrow money as authorized by the 1940 Act;
(5) purchase real estate, interests in real estate or real estate limited
partnership interests except that, to the extent appropriate under its
investment program, a 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;
(6) invest in commodity contracts, except that a Fund may, to the extent
appropriate under its investment program, purchase securities of
companies engaged in such activities; may (other than the Money Market
Fund) 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;
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(7) borrow money, except that (a) a Fund (other than the Money Market Fund)
may enter into certain futures contracts and options related thereto; (b)
a Fund may enter into commitments to purchase securities in accordance
with that Fund's investment program, including delayed delivery and
when-issued securities and reverse repurchase agreements; (c) for
temporary emergency purposes, a 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, a Fund (other than the Money
Market Fund) may borrow money from banks (including its custodian bank)
only if, immediately after such borrowing, the value of that 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 that Fund's assets fails to meet the 300%
asset coverage requirement relative only to leveraging, that Fund will,
within three days (not including Sundays and holidays), reduce its
borrowings to the extent necessary to meet the 300% test; or
(8) act as an underwriter of securities except to the extent that, in
connection with the disposition of portfolio securities by a Fund, that
Fund may be deemed to be an underwriter under the provisions of the
Securities Act of 1933.
The Company also has adopted certain other investment restrictions reflecting
the current investment practices of the Funds which may be changed by the
Company's directors and without shareholder vote. Under such restrictions,
none of the Funds will:
(1) make short sales of securities, other than short sales "against the box,"
or purchase securities on margin except for short-term credits necessary
for clearance of portfolio transactions, provided that this restriction
will not be applied to limit the use of options, futures contracts and
related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of each Fund;
(2) except for the International Growth Fund and Asian Growth Fund, 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). A Fund will
invest in securities or obligations of foreign banks only if such banks
have a minimum of $5 billion in assets and a primary capital ratio of at
least 4.25%. The Money Market Fund may only purchase foreign securities
or obligations that are U.S. dollar denominated;
(3) invest in companies for the purpose of exercising control or management;
(4) purchase the securities of any other investment company, except as
permitted under the 1940 Act;
(5) purchase interests in oil, gas or other mineral exploration programs;
however, this limitation will not prohibit the acquisition of securities
of companies engaged in the production or transmission of oil, gas, or
other minerals; or
(6) invest more than 25% of the total value of its assets in high risk
high-yield securities or "junk bonds" (securities rated BB/Ba or lower by
Standard & Poor's Corporation or Moody's Investors Service, Inc., or, if
unrated, considered by the Investment Adviser to be of comparable
quality).
In order to permit the sale of its shares in certain states, the Funds have
undertaken to adhere to the following investment policies, each of which may
be changed without shareholder approval:
(1) No Fund will invest more than 5% of the value of a Fund's net assets in
warrants, valued at the lower of cost or market. Included within that
amount, but not more than 2% of the value of a Fund's net assets, may be
warrants which are not listed on the New York, American or any recognized
foreign stock exchange. Warrants acquired by a Fund in units or attached
to securities may be deemed to be without value;
(2) No Fund will invest more than 15% (10% for the Money Market Fund) 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 Securities Act of 1933, 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; and
(3) A Fund may not purchase securities of companies which together with their
predecessors have a record of less than three years' continuous
operations, if, as a result, more than 5% of such Fund's net assets would
then be invested in such securities.
A Fund may make additional commitments more restrictive than the
investment limitations described in the preceding paragraphs in order to sell
its shares in a particular state. Should a Fund determine that any such
commitment, either those currently in effect or any future commitment, is no
longer in its best interest, it will revoke the commitment and terminate
sales of its shares in the state involved.
Where a Fund's investment objective or policy restricts it to a specified
percentage of its total assets in any type of instrument, that percentage is
measured at the time of purchase. There will be no violation of any
investment policy or restriction if that restriction is complied with at the
time the relevant action is taken notwithstanding a later change in the
market value of an investment, in net or total assets, in the securities
rating of the investment or any other change.
3
<PAGE>
DESCRIPTION OF VARIOUS SECURITIES AND INVESTMENT TECHNIQUES
Futures Contracts
Each Fund, except the Money Market Fund, may enter into interest rate or
stock index futures contracts (futures or futures contracts) or options
thereon as a hedge against changes in interest rates, equities prices, or
currency exchange rates, and in anticipation of future purchases or sales of
securities (see discussion in the Prospectus under the caption "Risk Factors
and Other Considerations"). A Fund's hedging may include sales of futures as
an offset against the effect of expected increases in interest rates or
declines in equities prices. Although techniques other than sales and
purchases of futures contracts could be used to reduce the exposure of a Fund
to market fluctuations, it may be able to hedge its exposure more effectively
and perhaps at a lower cost through using futures contracts.
A Fund may enter into futures contracts or options thereon which are traded
on national futures exchanges and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading in the United
States are regulated under the Commodity Exchange Act by the Commodities
Futures Trading Commission (the "CFTC").
A Fund (other than the Money Market Fund) may purchase and sell futures
contracts and related options under the following conditions: (a) the
then-current aggregate futures market prices of financial instruments
required to be delivered and purchased under open futures contracts shall not
exceed 30% of a Fund's total assets, at market value; and (b) no more than 5%
of the assets, at market value at the time of entering into a contract, shall
be committed to margin deposits in relation to futures contracts. As evidence
of this hedging intent, each Fund expects that at least 75% of futures
contract purchases will be "completed"; that is, upon the sale of these long
contracts, equivalent amounts of related securities will have been or are
then being purchased by that Fund in the cash market.
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) 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 a Fund will be able to enter into an
offsetting transaction with respect to a particular contract at a particular
time. If a Fund is not able to enter into an offsetting transaction, it will
continue to be required to maintain the margin deposits on the contract.
The prices of futures contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates and equities
prices, which in turn are affected by fiscal and monetary policies and
national and international political and economic events.
When using futures contracts as a hedging technique, at best, the
correlation between changes in prices of futures contracts and of the
securities being hedged can be only approximate. The degree of imperfection
of correlation depends upon circumstances such as: variations in speculative
market demand for futures and for securities, including technical influences
in futures trading; and differences between the financial instruments being
hedged and the instruments underlying the standard futures contracts
available for trading. Even a well-conceived hedge may be unsuccessful to
some degree because of unexpected market behavior or stock market or interest
rate trends.
Most United States futures exchanges limit the amount of fluctuation
permitted in interest rate futures contract prices during a single trading
day, and, as noted, temporary regulations limiting price fluctuations for
stock index futures contracts are also now in effect. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type
of contract, no trades may be made on that day at a price beyond that limit.
The daily limit governs only price movement during a particular trading day
and therefore does not limit potential losses, because the limit may prevent
the liquidation of unfavorable positions. Futures contract prices have
occasionally moved to the daily limit for several consecutive trading days
with little or no trading, thereby preventing prompt liquidation of futures
positions and subjecting some persons engaging in futures transactions to
substantial losses.
The risk involved in writing options on futures contracts or market indices
is that there could be an increase in the market value of such contracts or
indices. If that occurred, the option would be exercised and the Fund
involved would not benefit from any increase in value above the exercise
price. Usually, this risk can be eliminated by entering into an offsetting
transaction. However, the cost to do an offsetting transaction and terminate
the Fund's obligation might be more or less than the premium received when it
originally wrote the option. Further, the Fund might occasionally not be able
to close the option because of insufficient activity in the options market.
Sales of futures contracts which are intended to hedge against a change in
the value of securities held by a Fund may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such
securities upon disposition.
"Margin" is the amount of funds that must be deposited by a Fund with a
commodities broker in a custodian account in order to initiate futures
trading and to maintain open positions in a Fund's futures contracts. A
margin deposit is intended to assure the Fund's
4
<PAGE>
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 a Fund. These
daily payments to and from a 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, each Fund will mark to market the current value of its open
futures contracts. Each Fund expects to earn interest income on its initial
margin deposits. Furthermore, in the case of a futures contract purchase,
each Fund has deposited in a segregated account money market instruments
sufficient to meet all futures contract initial margin requirements.
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 losses or
gains to a 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, a
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.
Covered Call and Put Options on Securities
Each Fund (except the Money Market Fund) may write (sell) covered call
options and purchase put options on securities and indices, and purchase call
and sell put options to close out positions previously opened by a 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 a Fund immediately following such purchase would
consist of put options. A Fund will only write a call option on a security
which it already owns and will not write call options on when-issued
securities. A Fund may purchase a put option on a security that it already
owns and on stock indices. Securities it "already owns" include any stock
which it has the right to acquire without any additional payment, at its
discretion for as long as the put or call remains outstanding. The purpose of
writing call options and purchasing put options will be to reduce the effect
of price fluctuations of the securities owned by a Fund (and involved in the
options) on the net asset value per share of a Fund.
A 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 Investment Adviser or subadviser.
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, by 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).
When writing a call option, in return for the premium, the writer gives up
the opportunity to profit from the 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 expires unexercised, the
writer 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 writer would
realize a gain or loss from the transaction depending on what it received
from the call and what it paid for the underlying security.
In the case of a put option, as long as the obligation of the put writer
continues, it may be assigned an exercise notice by the broker-dealer through
which such option was sold, requiring the writer to take delivery of the
underlying security against payment of the exercise price. A writer has no
control over when it may be required to purchase the underlying security,
since it may be assigned an exercise notice at any time prior to the
expiration date. This obligation terminates earlier if the writer effects a
closing purchase transaction by purchasing a put of the same series as that
previously sold.
To secure its obligation to pay for the underlying security, the writer of a
put generally must deposit in escrow liquid assets with a value equal to or
greater than the exercise price of the put option. The writer therefore
foregoes the opportunity of investing the
5
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segregated assets or writing calls against those assets. A Fund may write put
options on debt securities or futures, only if such puts are covered by
segregated liquid assets.
In writing puts, there is the risk that a writer may be required to buy the
underlying security at a disadvantageous price. Writing a put covered by
segregated liquid assets equal to the exercise of the put has the same
economic effect as writing a covered call option. The premium the writer
receives from writing a put option represents a profit, as long as the price
of the underlying instrument remains above the exercise price; however, if
the put is exercised, the writer is obligated during the option period to buy
the underlying instrument from the buyer of the put at the exercise price,
even though the value of the investment may have fallen below the exercise
price. If the put lapses unexercised, the writer realizes a gain in the
amount of the premium. If the put is exercised, the writer may incur a loss,
equal to the difference between the exercise price and the current market
value of the underlying instrument.
A Fund will purchase put options only when the Investment Adviser or sub
adviser 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 utilized to protect a 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 a 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,
a 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 maintained in a
segregated account of a Fund's custodian. The Funds do not consider a
security covered by a call or put option to be "pledged" as that term is used
in their policies which limit the pledging or mortgaging of their assets.
The premium a Fund will receive from writing a call option, or that a 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 a Fund for writing call
options will be recorded as a liability in the statement of assets and
liabilities of that 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 a Fund when purchasing a put option will be
recorded as an asset in the statement of assets and liabilities of that Fund.
This asset will be adjusted daily to the option's current market value. The
asset will be extinguished upon expiration of the option, by selling an
identical option in a closing transaction, or by 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 a 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 a 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 a Fund will be able to
effect a closing transaction at a favorable price. If a 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. A Fund will pay brokerage commissions in connection with the
sale or purchase of options to close out previously established option
positions. Such brokerage commissions are normally higher as a percentage of
underlying asset values than those applicable to purchases and sales of
portfolio securities.
The exercise price of an option may be below, equal to, or above the current
market price of the underlying security at the time the option is written.
From time to time, a Fund may purchase an underlying security for delivery in
accordance with an exercise notice of a call option assignment, rather than
delivering such security from its portfolio. In such cases additional
brokerage commissions will be incurred. A 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 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 a Fund. Any profits from writing covered call options are
considered short-term gain for federal income tax purposes and, when
distributed by a Fund, are taxable as ordinary income.
Additional Risk Factors
In addition to any risk factors which may be described above, the following
sets forth certain information regarding the potential risks associated with
a Fund's futures and options transactions.
Risk of Imperfect Correlation--A 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,
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the hedging strategy for a 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 contracts 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 a 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.
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, a Fund's overall performance may be poorer than if it had
not entered into any such contract. For example, if a 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 a Fund's portfolio.
Restrictions on the Use of Futures and Option Contracts
Regulations of the CFTC require that the Fund enter into transactions in
futures contracts and options thereon for hedging purposes only, in order to
assure that they are not deemed to be "commodity pools" under such
regulations. In particular, 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,
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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.
A Fund's ability to engage in the hedging transactions described herein may
be further 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.
Repurchase Agreements
Each Fund may enter into repurchase agreements with domestic banks and
broker-dealers meeting certain size and creditworthiness standards
established by the Company's Board of Directors. Under a repurchase
agreement, a Fund may acquire a debt instrument for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase and a Fund to resell the instrument at a fixed price and time,
thereby determining the yield during a 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 a 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 a Fund. In that event, a
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, a Fund's ability to liquidate the
collateral may be delayed or limited. Under the 1940 Act, repurchase
agreements are considered loans by a Fund. Repurchase agreements maturing in
more than seven days will not exceed 10% of the total assets of a Fund.
Variable Rate Demand Instruments
Variable rate demand instruments (including floating rate instruments) held
by a Fund may have maturities of more than one year, provided: (i) the Fund
is entitled to the payment of principal at any time, or during specified
intervals not exceeding one year, upon giving the prescribed notice (which
may not exceed 30 days), and (ii) the rate of interest on such instruments is
adjusted at periodic intervals not to exceed one year. In determining whether
a variable rate demand instrument has a remaining maturity of one year or
less, each instrument will be deemed to have a maturity equal to the longer
of the period remaining until its next interest rate adjustment or the period
remaining until the principal amount can be recovered through demand. A Fund
will be able (at any time or during specified periods not exceeding one year,
depending upon the note involved) to demand payment of the principal of a
note. If an issuer of a variable rate demand note defaulted on its payment
obligation, a Fund might be unable to dispose of the note and a loss would be
incurred to the extent of the default. A Fund may invest in variable rate
demand notes only when the investment is deemed to involve minimal credit
risk. The continuing creditworthiness of issuers of variable rate demand
notes held by a Fund will also be monitored to determine whether such notes
should continue to be held. Variable and floating rate instruments with
demand periods in excess of seven days and which cannot be disposed of
promptly within seven business days and in the usual course of business
without taking a reduced price will be treated as illiquid securities that
are subject to the limitations on illiquid securities set forth in this SAI.
Securities Lending
The Funds can lend portfolio securities subject to the following conditions:
(i) the borrower will provide at least 100% collateral throughout the life of
the loan; (ii) loans will be made subject to the rules of the New York Stock
Exchange; (iii) the loan collateral will be either cash or direct obligations
of the U.S. government or agencies thereof; (iv) cash collateral will be
invested only in highly liquid short-term investments; (v) during the
existence of a loan, a Fund will continue to receive any distributions paid
on the borrowed securities or amounts equivalent thereto; and (vi) no more
than one-third of the net assets of a Fund will be on loan at any one time. A
loan may be terminated at any time by the borrower or lender upon proper
notice.
In the Investment Adviser's opinion, lending portfolio securities to
qualified broker-dealers affords a Fund a means of increasing the yield on
its portfolio. A 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. A 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 Investment Adviser
or subadviser will regain or direct the vote with respect to loaned
securities.
The primary risk a 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 the security loaned, and the borrower would be unable
to furnish additional collateral. The borrower would be liable for any
shortage, but a Fund would be an unsecured creditor as to such shortage and
might not be able to recover all or any part of it.
Foreign 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
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advantage of foreign stock markets that may not move in a manner parallel to
U.S. markets. Investments in securities of foreign issuers involve certain
risks not ordinarily associated with investments in securities of domestic
issuers. Such risks include fluctuations in exchange rates, adverse foreign
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. Since the Funds
(except the Money Market Fund) may invest in securities denominated or quoted
in currencies other than the U.S. dollar, changes in foreign currency
exchange rates will affect the value of securities in the portfolio and the
unrealized appreciation or depreciation of investments so far as U.S.
investors are concerned. In addition, with respect to certain countries,
there is the possibility of expropriation of assets, confiscatory taxation,
political or social instability, or diplomatic developments that could
adversely affect investments in those countries.
There may be less publicly available information about a foreign company
than about a U.S. company, and foreign companies may not be subject to
accounting, auditing, and financial reporting standards and requirements
comparable to or as uniform as those of U.S. companies. Foreign securities
markets, while growing in volume, have, for the most part, substantially less
volume than U.S. markets. Securities of many foreign companies are less
liquid and their prices more volatile than securities of comparable U.S.
companies. Transactional costs in non-U.S. securities markets are generally
higher than in U.S. securities markets. There is generally less government
supervision and regulation of exchanges, brokers, and issuers than there is
in the U.S. The Company might have greater difficulty taking appropriate
legal action with respect to foreign investments in non-U.S. courts than with
respect to domestic issuers in U.S. courts. In addition, transactions in
foreign securities may involve greater time from the trade date until
settlement than domestic securities transactions and involve the risk of
possible losses through the holding of securities by custodians and
securities depositories in foreign countries.
Currently, direct investment in equity securities in China and Taiwan is
restricted, and investments may only be made through a limited number of
approved vehicles. At present this includes investment in listed and unlisted
investment companies, subject to limitations under the 1940 Act. Investment
in these closed-end funds may involve the payment of additional premiums to
acquire shares in the open-market and the yield of these securities will be
reduced by the operating expenses of such companies. In addition, an investor
should recognize that he will bear not only his proportionate share of the
expenses of the Fund, but also indirectly bear similar expenses of the
underlying closed-end fund. Also, as a result of a Fund's policy of investing
in closed-end mutual funds, investors in the Fund may receive taxable capital
gains distributions to a greater extent than if he or she had invested
directly in the underlying closed-end fund.
Dividend and interest income from foreign securities may generally be
subject to withholding taxes by the country in which the issuer is located
and may not be recoverable by a Fund or its investors.
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: American
Depositary Receipts (ADRs), which are typically designed for U.S. investors.
The ADR securities are held either in physical form or in book entry form;
European Depositary Receipts (EDRs), which are similar to ADRs, but may be
listed and traded on a European exchange as well as in the U.S. Typically,
these securities are traded on the Luxembourg exchange in Europe; and Global
Depositary Receipts (GDRs), which are similar to EDRs, although they may be
held through foreign clearing agents, such as Euroclear and other foreign
depositories. All depositary receipts will be considered foreign securities
for purposes of a Fund's investment limitation concerning investment in
foreign securities.
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, and
typically do, repay such loans sooner. Thus, the security holders frequently
receive repayments of principal, in addition to the principal which is part
of the regular monthly payment. A borrower is more likely to repay a mortgage
which bears a relatively high rate of interest. This means that in times of
declining interest rates, some higher yielding securities held by a 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 a 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, a Fund may also invest in collateralized
mortgage obligations (CMOs) and real estate mortgage investment conduits
(REMICs). CMOs and REMICs are securities which 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 repayments--and has an "average
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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 of such obligations is made from payment 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,
such securities may be backed by mortgage insurance, letters of credit 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. CMOs and REMICs may be issued
in a number of classes or "tranches" with different maturities. These classes
are retired in sequence as the underlying mortgages are repaid.
Asset-Backed Securities
Asset-backed securities are collateralized by short-term loans such as
automobile loans, computer leases, 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.
Other asset-backed securities are similar to CMOs and REMICs in structure
and operations. 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.
CMOs, REMICs and other asset-backed securities are subject to the type of
prepayment risk discussed above due to the possibility that prepayments on
the underlying assets will alter the cash flow. The collateral behind
asset-backed securities tends to have prepayment rates that do not vary with
interest rates; the short-term nature of the loans may also tend to reduce
the impact of any change in prepayment level. However, faster prepayments
will shorten the average life and slower prepayments will lengthen it.
Asset-backed securities may be pass-through, representing actual equity
ownership of the underlying assets, or pay-through, representing debt
instruments supported by cash flows from the underlying assets.
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
All of the Funds except the Money Market Fund, Government Fund,
International Growth Fund and Asian Growth Fund may invest in high risk,
high-yield securities (junk bonds) which are fixed income securities that
offer a current yield above that generally available on debt securities rated
in the four highest categories by Moody's Investors Service, Inc. (Moody's)
and Standard & Poor's Corporation (S&P) or other rating agencies, or, if
unrated, are considered to be of comparable quality by the Investment
Adviser. These securities include:
(a) fixed rate corporate debt obligations (including bonds, debentures and
notes) rated Ba or lower by Moody's or BB or lower by S&P;
(b) preferred stocks that have yields comparable to those of high-yielding
debt securities; and
(c) any securities convertible into any of the foregoing.
Debt obligations rated BB/Ba or lower are regarded as speculative, and
generally involve more risk of loss of principal and income than higher-rated
securities. Also their yields and market values tend to fluctuate more.
Fluctuations in value do not affect the cash income from the securities but
are reflected in a 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 a
Fund's objectives, the Investment Adviser seeks to identify situations in
which the rating agencies have not fully perceived the value of the security
or in which the Investment Adviser believes that future developments will
enhance the creditworthiness and the ratings of the issuer.
High risk, high-yield securities (junk bonds) will constitute no more than
25% of the assets of any Fund (5% of the assets of the Tax-Free Fund).
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The yields earned on high risk high-yield securities (junk bonds) generally
are related to the quality ratings assigned by recognized ratings agencies.
The securities in which the Funds invest tend to offer higher yields than
those of other securities with the same maturities because of the additional
risks associated with them. These risks include:
(1) Sensitivity to Interest Rate and Economic Changes. High risk, high-yield
securities (junk bonds) are more sensitive to adverse economic changes or
individual corporate developments but less sensitive to interest rate
changes than are investment grade bonds. As a result, when interest rates
rise, causing bond prices to fall, the value of these securities may not
fall as much as investment grade corporate bonds. Conversely, when
interest rates fall, these securities may underperform investment grade
corporate bonds because the prices of high risk, high-yield securities
(junk bonds) 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 these securities 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 a 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 a 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)
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 these securities 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 tend to
be institutions rather than individuals, a factor that further limits the
secondary market. Many of such 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 these securities 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 Investment
Adviser 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 a Fund's investment objective may be more dependent on the Investment
Adviser's own credit analysis than might be the case for a fund which
does not invest in these securities.
(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
All of the Funds may invest in zero coupon securities and all Funds except
the Money Market Fund may invest in pay-in-kind securities. In addition, the
Funds may invest in STRIPS (Separate Trading of Registered Interest and
Principal of Securities). Zero coupon, or deferred interest, securities are
debt obligations that do not entitle the holder to any periodic payment of
interest prior to maturity or a specified date when the securities begin
paying current interest (the "cash payment date") and therefore are issued
and traded at a discount from their face amounts or par value. The discount
varies, depending on the time remaining until maturity or cash payment date,
prevailing interest rates, liquidity of the security and the perceived credit
quality of the issuer. The discount, in the absence of financial difficulties
of the issuer, decreases as the final maturity or cash payment date of the
security approaches. STRIPS are created by the Federal reserve bank by
separating the interest and principal components of an outstanding U.S.
treasury bond and selling them as individual securities. The market prices of
zero coupon, STRIPS and delayed 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 apply to these
securities. Zero coupon and pay-in-kind securities are also subject to the
risk that in the event of a default, the Funds may realize no return on its
investment, because these securities do not pay cash interest.
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Convertibles
A convertible bond or convertible preferred stock gives the holder the
option of converting these securities into common stock. Some convertible
securities 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 subscribe for new shares in the issuing company
within a specified time period, according to a predetermined formula
governing the number of shares per warrant and the price to be paid for those
shares. Warrants may be issued separately or in association with a new issue
of bonds, preferred stock, common stock or other securities.
Covered warrants allow the holder to purchase existing shares in the issuing
company, or in a company associated with the issuer, or in a company in which
the issuer has or may have a share stake which covers all or part of the
warrant's subscription rights.
When-Issued or Delayed-Delivery Securities
During any period that a Fund has outstanding a commitment to purchase
securities on a when-issued or delayed-delivery basis, that 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 purchasing 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 purchasing Fund's
liquidity and ability to manage its portfolio. When a 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. A 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 purchasing 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.
Portfolio Turnover
For the periods ended October 31, 1994 and October 31, 1995 the portfolio
turnover rates were as follows:
1994 1995
Government Fund 43.63% 117.31%
Bond Fund 51.80% 56.99%
The Aetna Fund 86.10% 129.05%
Growth and Income Fund 54.13% 127.43%
Growth Fund 120.32% 171.75%
Small Company Growth Fund 116.28% 156.43%
International Growth Fund 81.67% 32.91%
Asian Growth Fund 65.50% 64.97%
Portfolio turnover rates in The Aetna Fund and Growth and Income Fund were
higher in 1995 partly due to a new management team and to a transition in
equity portfolio holdings from 100% large capitalization equities to a mix of
large, mid and small capitalization equities. The portfolio managers of The
Aetna Fund and the Growth and Income Fund expect that the benefits of lowered
portfolio risk through increased diversification and increased portfolio
returns through participation in these asset classes will more than justify
the requisite transaction costs over the long term. Additionally, 1995 was a
year of high returns and volatility in comparison to 1994 which offered lower
returns and volatility.
The portfolio turnover rate for the Government Fund was higher than expected
due to very large withdrawals by the Fund's largest investor. This was a
one-time event and is not expected to occur again in the same magnitude.
Portfolio turnover rates for the Aetna Growth Fund and Aetna Small Company
Fund were higher in 1995 than 1994. This was due in part to a number of
factors, including, but not limited to, (1) the fact that the stock market in
1995 was very strong and rising; (2) there was a rotation among different
stock sectors complimented by merger and acquisition activity which resulted
in the sale of stock positions owned by the Growth Fund and Small Company
Fund; and (3) the fact that the Growth Fund and Small Company Fund are
actively managed portfolios.
DIRECTORS AND OFFICERS OF THE COMPANY
The investments and administration of the Company are under the direction of
the Board of Directors. The Directors and executive officers of the Company
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 (*), and hold similar positions with other
investment companies in the same fund complex managed by the Investment
Adviser.
12
<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>
Shaun P. Mathews* Director and Chief Executive, Aetna Investment Services, Inc.,
151 Farmington Avenue President October 1995 to Present; President, Aetna Investment
Hartford, Connecticut Services, Inc., March 1994 to Present; Director and
Age 40 Chief Operations Officer, Aetna Investment Services,
Inc., July 1993 to Present; Director and Senior Vice
President, Aetna Insurance Company of America, February
1993 to Present; Senior Vice President and Director of
ALIAC, March 1991 to Present; Vice President of Aetna
Life Insurance Company, 1991 to Present.
---------------------------------------------------------------------------------------------------------
James C. Hamilton Vice President Chief Financial Officer, Aetna Investment Services,
151 Farmington Avenue and Treasurer Inc., July 1993 to Present; Director, Vice President and
Hartford, Connecticut Treasurer, Aetna Insurance Company of America, February
Age 54 1993 to Present; Director, Aetna Private Capital, Inc.,
November 1990 to Present; Vice President and Treasurer
of ALIAC, October 1988 to Present; Vice President and
Actuary, Aetna Life Insurance Company, 1988 to Present.
---------------------------------------------------------------------------------------------------------
John Y. Kim* Director and President, Chief Executive Officer, and Chief Investment
151 Farmington Avenue Vice President Officer, Aeltus Investment Management, Inc., December
Hartford, Connecticut 1995 to Present; Senior Vice President and Director,
Age 35 ALIAC and Chief Investment Officer, Aetna Life and
Casualty Company, May 1994 to Present; Managing
Director, Mitchell Hutchins Institutional Investors, New
York, NY, September 1993 to April 1994; Vice President
of Investor Relations and Senior Portfolio Manager,
Aetna Life and Casualty Company, October 1991 to August
1993.
---------------------------------------------------------------------------------------------------------
Susan E. Bryant Secretary Counsel, Aetna Life and Casualty Company, March 1993 to
151 Farmington Avenue Present; General Counsel and Corporate Secretary, First
Hartford, Connecticut Investors Corporation, April 1991 to March 1993;
Age 48 Administrator, Oklahoma Department of Securities, March
1986 to April 1991.
---------------------------------------------------------------------------------------------------------
Morton Ehrlich Director Chairman and Chief Executive Officer, Integrated
1000 Venetian Way Management Corp. (an entrepreneurial company) and
Miami, Florida Universal Research Technologies, 1992 to Present;
Age 61 Director and Chairman, Audit Committee, National Bureau
of Economic Research, 1985 to 1992; President, LIFECO,
Travel Services Corp., October 1988 to December 1991.
---------------------------------------------------------------------------------------------------------
Maria T. Fighetti Director Manager/Attorney, Health Services, New York City
325 Piermont Road Department of Mental Health, Mental Retardation and
Closter, New Jersey Alcohol Services, 1973 to Present.
Age 52
---------------------------------------------------------------------------------------------------------
David L. Grove Director Private Investor; Economic/Financial Consultant,
5 The Knoll December 1985 to Present.
Armonk, New York
Age 77
---------------------------------------------------------------------------------------------------------
13
<PAGE>
Principal Occupation During Past Five Years
Position(s) Held (and Positions held with Affiliated Persons or
Name, Address and Age with Registrant Principal Underwriters of the Registrant)**
- -----------------------------------------------------------------------------------------------------------
Daniel P. Kearney* Director Executive Vice President of Aetna Life and Casualty
151 Farmington Avenue Company, 1993 to Present; Group Executive, Aetna Life
Hartford, Connecticut and Casualty Company, 1991 to 1993.
Age 56
---------------------------------------------------------------------------------------------------------
Sidney Koch Director Financial Adviser, self-employed, January 1993 to
455 East 86th Street Present; Senior Adviser, Daiwa Securities America, Inc.,
New York, New York January 1992 to January 1993; Executive Vice President,
Age 60 Member of Executive Committee, Daiwa Securities America,
Inc., January 1986 to January 1992.
---------------------------------------------------------------------------------------------------------
Corine T. Norgaard Director, Chair Professor, Accounting and Dean of the School of
School of Management Audit Committee Management, Binghamton University (Binghamton, NY),
Binghamton University and Contract August 1993 to Present; Professor, Accounting,
Binghamton, New York Committee University of Connecticut (Storrs, Connecticut),
Age 58 September 1969 to June 1993; Director, The Advest Group
(holding company for brokerage firm).
---------------------------------------------------------------------------------------------------------
Richard G. Scheide Director Trust and Private Banking Consultant, David Ross Palmer
11 Lily Street Consultants, July 1991 to Present; Executive Vice
Nantucket, Massachusetts President and Manager, Bank of New England, N.A., June
Age 66 1976 to July 1991.
---------------------------------------------------------------------------------------------------------
</TABLE>
** All of the above persons hold the same positions with all the other
registered investment companies that comprise the Aetna Mutual Fund
Complex.
During the year ended October 31, 1995, members of the Board of Directors who
are also directors, officers or employees of Aetna Life and Casualty Company and
its affiliates were not entitled to any compensation from the Funds. Members of
the Board of Directors who are not affiliated as employees of Aetna or its
subsidiaries received an annual retainer of $5,000 for service on the Board, and
a fee of $200 per Fund for each meeting of such Board (equal to an aggregate
annual fee of $10,400). They also received a fee of $1,000 per Audit Committee
meeting, and $2,500 per Contract Committee meeting.
As of October 31, 1995, the unaffiliated members of the Board of Directors
received compensation in the amounts included in the following table. None of
these Directors were entitled to receive pension or retirement benefits.
Total Compensation
Aggregate from Registrant
Name of Person, Compensation and Fund Complex*
Position from Registrant Paid to Directors
----------------------------------------------------------------
Corine Norgaard $18,550 $49,500
Director and
Chairman, Audit and
Contract Committees
----------------------------------------------------------------
Sidney Koch $16,800 $45,500
Director and
Member, Audit and
Contract Committees
----------------------------------------------------------------
Maria T. Fighetti $15,800 $44,500
Director and
Member, Audit and
Contract Committees
----------------------------------------------------------------
14
<PAGE>
Total Compensation
Aggregate from Registrant
Name of Person, Compensation and Fund Complex*
Position from Registrant Paid to Directors
----------------------------------------------------------------
Morton Ehrlich $15,800 $44,500
Director and
Member, Audit and
Contract Committees
----------------------------------------------------------------
Richard G. Scheide $16,725 $45,000
Director and
Member, Audit and
Contract Committees
----------------------------------------------------------------
David L. Grove $16,725** $45,000**
Director and
Member, Audit and
Contract Committees
----------------------------------------------------------------
* 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.
** Mr. Grove elected to defer all such compensation.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF THE FUNDS
As of January 31, 1996, for the Select Class shares, ALIAC owned 119,499
(0.05%) shares of the Money Market Fund; 76,449 (2.28%) shares of the Bond
Fund; 12,013 (0.18%) shares of The Aetna Fund; 11,347 (0.04%) shares of the
Growth and Income Fund; 11,702 (0.71%) shares of the International Growth
Fund; 714,990 (47.58%) shares of the Government Fund; 950,612 (31.41%) shares
of the Growth Fund; 2,446,721 (91.60%) shares of the Small Company Growth
Fund; and 467,409 (17.39%) shares of the Asian Growth Fund. In addition,
Aetna Life Insurance Company (ALIC) owned 2,066,778 (76.91%) shares of the
Asian Growth Fund.
As of January 31, 1996, for the Adviser Class shares, ALIAC owned 209,998
(79.82%) shares of the Bond Fund; and 1,912,492 (95.38%) shares of the
International Growth Fund.
As of January 31, 1996, officers and Directors owned less than 1% of the
outstanding shares of any of the Funds.
THE INVESTMENT ADVISORY CONTRACT
On December 12, 1995 the Company's Board of Directors (Directors) reapproved
investment advisory contracts between the Investment Adviser and each of the
Funds. Under the contracts, the Investment Adviser has responsibility for
managing the investment and reinvestment of the assets of the Funds, subject
to the supervision of the Directors. The contracts direct the Investment
Adviser to establish continuously an investment program for each Fund,
determine what securities and other instruments should be purchased or sold
by each Fund, obtain and evaluate economic, statistical and financial data
affecting any Fund's portfolio, and take any actions necessary to carry out
its investment advisory responsibilities.
The Investment Adviser furnishes to the Company all necessary office space,
facilities and equipment and pays the salaries, employment benefits and other
related costs of personnel engaged in providing investment advice. In
addition, the Investment Adviser pays any fees and expenses of all Directors
of the Company who are employees of the Investment Adviser or an affiliated
corporation and any salaries and employment benefits of officers of the
Company who are affiliated persons of the Investment Adviser for acting as
officers of the Company.
For its services the Investment Adviser receives the following annual
investment advisory fees expressed as a percentage of the daily net assets of
each Fund:
Money Market Fund
Fee Assets
--------- ------------------------
0.40% On first $500 million
0.35% On next $500 million
0.34% On next $1 billion
0.33% On next $1 billion
0.30% Over $3 billion
Government Fund
Bond Fund
Fee Assets
--------- ------------------------
0.50% On first $250 million
0.475% On next $250 million
0.450% On next $250 million
0.425% On next $1.25 billion
0.40% Over $2 billion
15
<PAGE>
The Aetna Fund
Fee Assets
--------- ------------------------
0.80% On first $500 million
0.75% On next $500 million
0.70% On next $1 billion
0.65% Over $2 billion
Growth and Income Fund
Growth Fund
Fee Assets
--------- ------------------------
0.70% On first $250 million
0.65% On next $250 million
0.625% On next $250 million
0.60% On next $1.25 billion
0.55% Over $2 billion
Small Company Growth Fund
Fee Assets
--------- ------------------------
0.850% On first $250 million
0.80% On next $250 million
0.775% On next $250 million
0.75% On next $1.25 billion
0.725% On next $2 billion
Asian Growth Fund
Fee Assets
--------- ------------------------
1.00% On first $250 million
0.875% On next $250 million
0.85% On next $250 million
0.825% On next $1.25 billion
0.80% Over $2 billion
International Growth Fund
Fee Assets
--------- ------------------------
0.85% On first $250 million
0.80% On next $250 million
0.775% On next $250 million
0.75% On next $1.25 billion
0.70% Over $2 billion
The Investment Adviser has agreed to reimburse the Funds for any expenses
(including management fees, but excluding taxes, interest, brokerage
commissions and certain extraordinary expenses) which may be incurred in any
one year in excess of the allowable expense limitations of the state in which
shares of the Fund are registered for sale having the most stringent expense
reimbursement provisions. As of the date of this SAI, the most stringent
limitation rate applicable to a Fund is 2-1/2% of the first $30 million of a
Fund's average net assets, 2% of the next $70 million of such Fund's average
net assets, and 1-1/2% of the remaining average net assets of such Fund for
any fiscal year. In addition, the Investment Adviser has reimbursed some of
the Funds for expenses in the past and continues to do so. See "Fee Tables"
in the Prospectus.
The Investment Adviser received investment advisory fees as follows:
<TABLE>
<CAPTION>
Total Investment Net Investment
Investment Adviser Advisory Fees
Advisory Fees Reimbursement Paid
<S> <C> <C> <C>
For Year Ended December 31, 1993
Money Market Fund $289,838 $289,838 $ 0
Bond Fund 213,990 180,946 33,044
The Aetna Fund 380,035 188,012 192,023
Growth and Income Fund 296,943 61,659 235,284
International Growth Fund 267,280 92,553 174,727
For Period Ended October 31, 1994*
Money Market Fund $544,857 $544,857 $ 0
Government Fund 91,999 91,999 0
Bond Fund 210,162 128,686 81,476
The Aetna Fund 569,014 156,406 412,608
Growth and Income Fund 625,998 101,043 524,955
Growth Fund 121,917 87,583 34,334
Small Company Growth Fund 144,601 73,512 71,089
International Growth Fund 357,374 55,230 302,144
Asian Growth Fund 183,192 111,555 71,637
16
<PAGE>
For Year Ended October 31, 1995
Money Market Fund $1,083,771 $1,083,771 $ 0
Government Fund 109,261 109,261 0
Bond Fund 227,665 143,622 84,043
The Aetna Fund 706,625 26,507 680,118
Growth and Income Fund 2,288,249 0 2,288,249
Growth Fund 231,452 34,500 196,952
Small Company Growth Fund 257,552 22,162 235,390
International Growth Fund 472,412 74,627 397,785
Asian Growth Fund 248,201 204,181 44,020
</TABLE>
* In 1994, the Company changed its fiscal year to end on October 31.
Unless terminated earlier, the contracts remain in effect from year-to-year
if approved annually by a majority vote of the Directors, including a
majority of the Directors who are not "interested persons," cast in person at
a meeting called for that purpose. Each contract may be terminated without
penalty at any time on sixty days' written notice by (i) the Directors, (ii)
a majority vote of the outstanding voting securities of that Fund, or (iii)
the Investment Adviser. The contracts terminate automatically in the event of
assignment.
The service mark of each Fund and the name "Aetna" have been adopted by the
Company 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 Investment Adviser or another
subsidiary or affiliated corporation of Aetna Life and Casualty Company
should not be the investment adviser of the Funds. The Investment Adviser is
a wholly owned subsidiary of Aetna Retirement Services, Inc., a holding
company incorporated in Connecticut on December 29, 1995. Aetna Retirement
Services, Inc. is a wholly owned subsidiary of Aetna Life and Casualty
Company.
SUB-ADVISORY AGREEMENTS
On December 12, 1995, the Directors reapproved the sub-advisory agreement
between the Investment Adviser and Aeltus Investment Management, Inc.
(Aeltus) with respect to the Growth Fund and the Small Company Growth Fund to
continue through December 31, 1996. The sub-advisory agreement remains in
effect from year-to-year if approved annually by a majority vote of the
Directors, including a majority of the Directors who are not "interested
persons," in person, at a meeting called for that purpose. The sub-advisory
agreement may be terminated without penalty at any time on sixty days'
written notice by (i) the Directors, (ii) a majority vote of the outstanding
voting securities of the respective Funds, (iii) the Investment Adviser, or
(iv) Aeltus. The sub-advisory agreement terminates automatically in the event
of its assignment or in the event of the termination of the Investment
Advisory Agreement with ALIAC.
Under the sub-advisory agreement, the sub-adviser supervises the investment
and reinvestment of cash and securities comprising the assets of the
applicable Funds. The sub-advisory agreement also directs the sub-adviser to
(a) determine the securities to be purchased or sold by the Funds, and (b)
take any actions necessary to carry out their investment sub-advisory
responsibilities.
The sub-adviser pays the salaries, employment benefits and other related
costs of personnel engaged in providing investment advice including office
space, facilities and equipment.
As compensation, the Investment Adviser pays the sub-adviser a monthly fee
at an annual rate based on the average daily net assets of each Fund as
follows:
Small Company Growth Fund
Fee Assets
0.55% On first $50 million
0.40% On next $50 million
0.30% On next $50 million
0.25% On excess
$100,000 minimum
Growth Fund
Fee Assets
0.45% On first $50 million
0.40% On next $50 million
0.30% On next $50 million
0.25% On excess
$100,000 minimum
17
<PAGE>
The Investment Adviser has certain obligations under the sub-advisory
agreement and retains overall responsibility for monitoring the investment
program maintained by Aeltus for compliance with applicable laws and
regulations and each Funds' respective investment objectives. The Investment
Adviser will also obtain and evaluate data regarding economic trends in the
United States and industries in which the Funds invest and consult with the
subadviser on such data and trends. In addition, the Investment Adviser will
consult with and assist the subadviser in maintaining appropriate policies,
procedures and records and oversee matters relating to promotion, marketing
materials and reports by the subadviser to the Directors.
THE ADMINISTRATIVE SERVICES AGREEMENT
Pursuant to the Administrative Services Agreements described below, ALIAC
acts as administrator and provides certain administrative and shareholder
services necessary for Company operations and is responsible for the
supervision of other service providers. The services provided by ALIAC
include: (1) internal accounting services; (2) regulatory compliance, such as
reports and filings with the Commission and state securities commissions; (3)
preparing financial information for proxy statements; (4) preparing
semiannual and annual reports to shareholders; (5) preparing federal, state
and local income tax returns; (6) overseeing the determination and
publication of net asset values; (7) certain shareholder communications; (8)
supervision of the custodians and transfer agent; and (9) reporting to the
Directors.
For its services, each Fund pays ALIAC a monthly fee at an annual rate based
on average net assets as follows: 0.25% on the first $250 million, 0.24% on
the next $250 million, 0.23% on the next $250 million, 0.22% on the next $250
million, 0.20% on the next $1 billion and 0.18% on assets over $2.0 billion.
ALIAC received administrative service fees as follows:
<TABLE>
<CAPTION>
Net
Total Investment Administrative
Administrative Adviser Service Fee
Service Fees Reimbursement Paid
<S> <C> <C> <C>
For Year Ended December 31, 1993
Money Market Fund $181,154 $181,154 $ 0
Bond Fund 106,995 42,167 64,828
The Aetna Fund 118,761 8,060 110,701
Growth and Income Fund 106,050 0 106,050
International Growth Fund 78,613 0 78,613
For Period Ended October 31, 1994*
Money Market Fund $340,536 $340,536 $ 0
Government Fund 46,000 46,000 0
Bond Fund 105,128 0 105,128
The Aetna Fund 177,792 0 177,792
Growth and Income Fund 223,571 0 223,571
Growth Fund 43,542 0 43,542
Small Company Growth Fund 42,530 0 42,530
International Growth Fund 105,110 0 105,110
Asian Growth Fund 45,798 0 45,798
For Year Ended October 31, 1995
Money Market Fund $677,357 $514,954 $162,403
Government Fund 54,630 21,312 33,318
Bond Fund 113,832 0 113,832
The Aetna Fund 220,820 0 220,820
Growth and Income Fund 830,718 0 830,718
Growth Fund 82,661 0 82,661
Small Company Growth Fund 75,751 0 75,751
International Growth Fund 138,945 0 138,945
Asian Growth Fund 62,050 0 62,050
</TABLE>
*In 1994, the Company changed its fiscal year to end on October 31.
Unless terminated earlier, the Administrative Services Agreements remain in
effect from year-to-year if approved annually by a majority of the Directors
who are not "interested persons" as defined in the 1940 Act. They may be
terminated by either party on sixty days' written notice.
18
<PAGE>
CUSTODIAN
Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, Pennsylvania, 15258
serves as custodian for the assets of all Funds except the International
Growth and Asian Growth Funds. Brown Brothers Harriman & Company, 40 Water
Street, Boston, Massachusetts 02109 serves as custodian for the assets of the
International Growth and Asian Growth Funds. Neither custodian participates
in determining the investment policies of a Fund or in deciding which
securities are purchased or sold by a Fund. A Fund may, however, invest in
obligations of the custodian and may purchase or sell securities from or to
the custodians.
Regarding portfolio securities which are purchased outside the United
States, Brown Brothers Harriman & Company has entered into sub-custodian
agreements with several foreign banks or clearing agencies which are designed
to comply with Rule 17f-5 under the 1940 Act with respect to portfolio
securities held in custody by foreign banks.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103-4103 serves
as independent auditors to the Funds. KPMG Peat Marwick LLP provides audit
services, assistance and consultation in connection with Commission filings.
PRINCIPAL UNDERWRITER
Shares of the Funds are offered on a continuous basis. ALIAC has agreed to
use its best efforts to distribute the shares as the principal underwriter of
the Funds pursuant to an Underwriting Agreement between it and the Company.
The agreement was reapproved on December 12, 1995 to continue through
December 31, 1996. The Underwriting Agreement may be continued from year to
year if approved annually by the Directors or by a vote of holders of a
majority of each Fund's shares, and by a vote of a majority of the Directors
who are not "interested persons," as that term is defined in the 1940 Act, of
ALIAC, and who are not interested persons of the Company, appearing in person
at a meeting called for the purpose of approving such agreement. This
agreement terminates automatically upon assignment, and may be terminated at
any time on sixty (60) days' written notice by the Directors or ALIAC or by
vote of holders of a majority of a Fund's shares without the payment of any
penalty.
ALIAC is registered as a broker-dealer with the Commission and is a member
of the National Association of Securities Dealers, Inc.
DISTRIBUTION ARRANGEMENTS
Shares of the Company are distributed on a best efforts basis by ALIAC which
contracts with various broker-dealers, including one or more affiliates, for
distribution of shares of the Company. On December 13, 1995, ALIAC entered
into an agreement (Dealer Agreement) with Aetna Investment Services Inc., an
affiliate of ALIAC, to distribute shares of the Company. To compensate ALIAC
for the services it provides Adviser Class shareholders, ALIAC is paid an
annual service fee with respect to Adviser Class shares of the Funds at the
rate of 0.25% (0.10% for the Money Market Fund) of the average daily net
assets of the class pursuant to a Shareholder Services Plan. ALIAC is also
paid an annual distribution fee with respect to Adviser Class shares of the
Funds (other than the Money Market Fund) at the rate of 0.50% of average
daily net assets attributable to those shares under a Distribution Plan
adopted by the Company pursuant to Rule 12b-1 of the 1940 Act to cover
expenses primarily intended to result in the sale of Adviser Class shares. It
may reallow all or a portion of these fees to broker-dealers entering into
selling agreements with it.
For the year ended December 31, 1993, ALIAC received no payments under the
Shareholder Services Plan or Distribution Plan. For the period ended October
31, 1994 and the year ended October 31, 1995, Shareholder Services and
Distribution Fees in the amounts of $17,959 and $64,022, respectively, were
waived for the Money Market Fund. For the period ended October 31, 1994 and
the year ended October 31, 1995, ALIAC received Shareholder Services and
Distribution fees as follows:
1994* 1995
Government Fund $ 229 $ 2,110
Bond Fund 102,308 118,895
The Aetna Fund 103,950 57,241
Growth and Income Fund 102,402 19,108
Growth Fund 545 7,194
Small Company Growth Fund 321 5,012
International Growth Fund 104,655 202,548
Asian Growth Fund 305 3,549
*In 1994, the Company changed its fiscal year to end on October 31.
19
<PAGE>
The Shareholder Services Plan and the Distribution Plan (Plans) continue
from year-to-year, provided such continuance is approved annually by vote of
the Directors, including a majority of Directors who are not interested
persons of the Company and who have no direct or indirect financial interest
in the operation of the Plans (Independent Directors). The Distribution Plan
may not be amended to increase the amount to be spent for the services
provided by ALIAC without shareholder approval. All amendments to the Plans
must be approved by the Directors in the manner described above. The Plans
may be terminated at any time, without penalty, by vote of a majority of the
independent Directors on not more than 30 days written notice to any other
party to the Plan. Pursuant to the Plans, ALIAC will provide the Directors
periodic reports of amounts expended under the Plans and the purpose for
which such expenditures were made. For the fiscal year ended October 31,
1995, approximately $40,000, $65,000, and $147,000 of total distribution
expenses were expended in connection with printing and mailing of
prospectuses, total commissions paid to sales personnel and advertising,
respectively.
BROKERAGE ALLOCATION
Subject to the direction of the Directors, the Investment Adviser and
Subadvisers (Advisers) have responsibility for making a Fund's investment
decisions, for effecting the execution of trades for a Fund's portfolio and
for negotiating any brokerage commissions thereon. It is the Advisers' policy
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.
The Advisers receive a variety of brokerage and research services from
brokerage firms in return for the execution by such brokerage firms of trades
on behalf of the Funds. 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 Funds and
other investment companies, services related to the execution of trades in a
Fund's securities and advice as to the valuation of securities, the providing
of equipment used to communicate research information, and specialized
consultations with Fund personnel with respect to computerized systems and
data furnished to the Fund as a component of other research services. The
Advisers 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 a Fund's
securities and may pay higher commission rates than the lowest available when
it is reasonable to do so in light of the value of the brokerage and research
services received generally or in connection with a particular transaction.
ALIAC's 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
the trader believes that more than one broker can provide best execution,
preference may be given to brokers who provide additional services to ALIAC.
The research services provided by a particular broker may be useful only to
one or more of the advisory accounts of ALIAC and its affiliates. Investment
research received for the commission of those other accounts may be useful to
one or more of the Funds and such other accounts.
Consistent with federal law, the Advisers may obtain such brokerage and
research services regardless of whether they are paid for (1) by means of
commissions, or (2) by means of separate, non-commission payments. The
Adviser's judgment as to whether and how it will obtain the specific
brokerage and research services will be based upon its analysis of the
quality of such services and the cost (depending upon the various methods of
payment which may be offered by brokerage firms) and will reflect the
Adviser's opinion as to which services and which means of payment are in the
long-term best interests of the Funds. The Funds will not effect any
brokerage transactions in portfolio securities with ALIAC or any affiliate of
the Funds or the Investment Adviser except in accordance with applicable
Commission rules. All transactions will comply with Rule 17e-1 of the 1940
Act.
Certain executive officers of the Investment Adviser also have supervisory
responsibility with respect to the securities portfolio of the Investment
Adviser's own general account. Further, the Investment Adviser also acts as
investment adviser to other investment companies registered under the 1940
Act. In placing orders for the purchase and sale of debt securities for a
Fund, the Investment Adviser will normally use its own facilities. A Fund and
another advisory client of the Investment Adviser, or the Investment Adviser
itself, may desire to buy or sell the same publicly traded security at or
about the same time. In such a case, the purchases or sales will normally be
allocated as nearly as practicable on a pro rata basis in proportion to the
amounts to be purchased or sold by each. In some cases the smaller orders
will be filled first. In determining the amounts to be purchased and sold,
the main factors to be considered are the investment objectives of a Fund and
the other portfolios, the relative size of portfolio holdings of the same or
comparable securities, availability of cash for investment by a Fund and the
other portfolios, and the size of the Funds' respective investment
commitments. Trades may be executed between Funds and such trades are
executed at "current market price" in compliance with Rule 17a-7 under the
1940 Act.
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Brokerage commissions were paid as follows:
<TABLE>
<CAPTION>
For Year Ended For Period Ended For Year Ended
Dec. 31, 1993* Oct. 31, 1994** Oct. 31, 1995
<S> <C> <C> <C>
Bond Fund $ 3,708 $ 5,112 $ 2,400
The Aetna Fund 56,633 129,278 321,699
Growth and Income Fund 58,319 278,919 1,765,123
Growth Fund 0 96,666 142,354
Small Company Growth Fund 0 122,178 172,008
International Growth Fund 277,873 142,000 117,138
Asian Growth Fund 0 118,000 164,000
</TABLE>
* The Growth Fund, Small Company Growth Fund and Asian Growth Fund commenced
operations on January 2, 1994.
** In 1994, the Company changed its fiscal year end to October 31.
Commissions paid by The Aetna Fund and Growth and Income Fund were higher in
1995 as a result of a high rate of portfolio turnover attributable to a new
management team and to a transition in equity portfolio holdings from 100% large
capitalization equities to a mix of large, mid and small capitalization
equities.
For the fiscal year ended October 31, 1995, portfolio transactions in the
amounts listed below were directed to certain brokers because of research
services, of which commissions in the amounts listed were paid with respect
to such transactions:
Commissions Paid on
Total Transactions Total Transactions
The Aetna Fund $ 49,458,119 $ 51,200
Growth and Income Fund 190,399,993 317,805
Growth Fund 14,700
Small Company Growth Fund 9,500
No portfolio transactions for the Bond Fund, International Growth Fund and
Asian Growth Fund were directed to certain brokers because of research or other
services. No brokerage business was placed with any brokers affiliated with
ALIAC during the last three fiscal years.
DESCRIPTION OF SHARES
The Company's Articles of Incorporation, as amended (Articles) permit the
Directors to cause the Company to issue full and fractional shares of one or
more series, each of which represents a proportionate interest in one Fund
equal to each other share in that Fund. The Directors have the power to
divide or combine the shares of a particular series into a greater or lesser
number of shares without thereby changing the proportional beneficial
interest in a Fund. The Directors also have the power to subdivide each
series into classes of shares having different attributes so long as each
share of each class represents a proportionate interest in one Fund equal to
each other share in that Fund. The Company currently issues shares in
thirteen Series with each Series issuing common stock classified into two
classes, Adviser Class shares and Select Class shares. Each class of shares
has the same rights, privileges and preferences, except with respect to: (a)
the effect of the respective sales charges, if any, for each class; (b) the
distribution and/or service fees borne by each class; (c) the expenses
allocable exclusively to each class; (d) voting rights on matters exclusively
affecting a single class; and (e) the exchange privilege of each class. Each
share of a Fund has the same rights to share in dividends declared by a Fund.
The Company has obtained a ruling from the Internal Revenue Service (IRS)
with respect to the Funds described in this SAI to the effect that differing
distributions among the classes of its shares will not result in the Fund's
dividends or other distributions being regarded as "preferential dividends"
under the Internal Revenue Code of 1986, as amended. Generally, a
preferential dividend is a dividend which a Fund cannot treat as having been
distributed for purposes of determining (i) whether the Fund qualifies as a
regulated investment company (RIC) for federal income tax purposes and (ii)
the Fund's tax calculations. In order to qualify as a RIC, each Fund must
satisfy certain requirements, including an income distribution requirement.
If a Fund so qualifies, it generally will not be subject to federal tax on
income timely distributed to shareholders. The Company is currently seeking a
similar ruling for its three newest Funds.
Upon liquidation of any Fund, shareholders of the series of shares
representing an interest in that Fund are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders. Shares of each
Fund are fully paid and nonassessable when issued. Nothing in the Articles
protects a Director against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his or her office.
Shares have no preemptive or conversion rights and are nonassessable.
Voting Rights
Shareholders of each class are entitled to one vote for each full share held
(and fractional votes for fractional shares of each class held) and will vote
on the election of Directors and on other matters submitted to the vote of
shareholders. Generally, all shareholders have voting rights on all matters
except matters affecting only the interests of one Fund or one class of
shares. 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, in which event the holders of the remaining
shares will be unable to elect any person as a Director.
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<PAGE>
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.
SALE AND REDEMPTION OF SHARES
Adviser and Select Class shares of the Funds are sold and redeemed at the
net asset value next determined after receipt of a purchase or redemption
order in acceptable form by Firstar Trust Company, the transfer agent for
each Fund as described under "Shareholder Services" in the Prospectus.
Occasionally orders may be submitted through a broker. It is the broker's
responsibility to promptly remit orders to the transfer agent and shares will
be purchased as described in the Prospectus. No sales charge or redemption
charge is imposed on Select Class shares. No initial sales charge is imposed
at the time of purchase on Adviser Class shares; however, a contingent
deferred sales charge is imposed on certain redemptions of Adviser Class
shares. The value of shares redeemed may be more or less than the
shareholder's cost, depending upon the market value of the portfolio
securities at the time of redemption. Payment for shares redeemed will be
made within seven days after the redemption request is received in proper
form by the transfer agent. Any written request to redeem shares must bear
the signatures of all the registered holders of those shares. The signatures
must be guaranteed by a national or state bank, trust company or a member of
a national securities exchange as described under "Shareholder Services" in
the Prospectus. Information about any additional requirements for shares held
in the name of a corporation, partnership, trustee, guardian or in any other
representative capacity can be obtained from the transfer agent.
The right to redeem a Fund's shares may be suspended or payment therefor
postponed for any period during which (a) trading on the New York Stock
Exchange (Exchange) is restricted as determined by the Securities and
Exchange Commission (Commission) 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 a Fund of securities owned
by it is not reasonably practicable, or (ii) it is not reasonably practicable
for a Fund to determine fairly the value of its net assets; or (c) the
Commission by order so permits for the protection of shareholders of a Fund.
An open account is automatically set up and maintained for each shareholder
to facilitate the voluntary accumulation of each Fund's shares. The open
account system makes unnecessary the issuance and delivery of stock
certificates, thereby relieving shareholders of the responsibility of
safekeeping. Through the open account system, each shareholder is informed of
his or her holdings after any transaction affecting the number of shares he
or she owns. Share certificates will not be issued.
There is a $1,000 minimum initial investment for each Fund with a minimum of
$500 for Individual Retirement Accounts. All minimum dollar amount
requirements may be waived for employees and retirees of, and persons
associated with, Aetna, or for persons electing the Systematic Investment
feature.
Checks sent to shareholders who have requested dividends and/or capital
gains distributions to be paid in cash and which are subsequently returned by
the United States Postal Service as not deliverable or which remain uncashed
for six months or more will be reinvested in the Fund and credited to the
shareholder's account at the then current net asset value. Further,
subsequent dividends and distributions will be automatically reinvested in
the Fund and credited to the shareholder's account.
A Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase of a Fund's
shares by making payment, in whole or in part, in securities chosen by that
Fund and valued in the same way as they would be valued for purposes of
computing that Fund's net asset value. If payment is made in securities, a
shareholder may incur transactions costs in converting these securities into
cash. The Funds have elected, however, to be governed by Rule 18f-1 under the
1940 Act so that a Fund is obligated to redeem its shares solely in cash up
to the lesser of $250,000 or 1% of its net asset value during any 90-day
period for any one shareholder of a Fund.
NET ASSET VALUE
Securities of the Funds are generally valued by independent pricing
services. Equity securities of a Fund which are traded on a registered
securities exchange are valued at the last sale price or, if there has been
no sale that day, at the mean of the last bid and asked price on the exchange
where the security is principally traded. Securities traded over the counter
are valued at the mean of the last bid and asked price if current market
quotations are not readily available. Short-term debt securities which have a
maturity date of more than sixty days will be valued at the mean of the last
bid and asked price obtained from principal market makers. Short-term debt
securities maturing in sixty days or less at the date of purchase, and all
securities in the Money Market Fund, 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 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.
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<PAGE>
Options are valued at the mean of the last bid and asked price on the
exchange where the option is primarily 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.
TAX STATUS
The following is only a summary of certain additional tax considerations
generally affecting each 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 each Fund or its shareholders, and the discussions here and
in the Prospectus are not intended as substitutes for careful tax planning.
Qualification as a Regulated Investment Company
Each 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, a 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) and at least 90% of its tax-exempt income (net of expenses
llocable thereto) for the taxable year (Distribution Requirement), and
satisfies certain other requirements of the Code that are described below.
Distributions by a 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). For
purposes of these calculations, gross income includes tax-exempt income.
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, a 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 a 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 a Fund at maturity or upon
the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income
that is attributable to realized market appreciation will be treated as gross
income from the sale or other disposition of securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an asset
will be a capital gain or loss. However, gain recognized on the disposition
of a debt obligation (including municipal obligations) purchased by a Fund at
a market discount (generally, at a price less than its principal amount) will
be treated as ordinary income to the extent of the portion of the market
discount which accrued during the period of time the Fund held the debt
obligation. In addition, under the rules of Code Section 988, gain or loss
recognized on the disposition of a debt obligation denominated in a foreign
currency or an option with respect thereto (but only to the extent
attributable to changes in foreign currency exchange rates), and gain or loss
recognized on the disposition of a foreign currency forward contract, futures
contract, option or similar financial instrument, or of foreign currency
itself, except for regulated futures contracts or non-equity options subject
to Code Section 1256 (unless the Fund elects otherwise), will generally be
treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset
is used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset
so used, (2) the asset is otherwise held by the Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the
Fund grants a qualified covered call option (which, among other things, must
not be deep-in-the-money) with respect thereto) or (3) the asset is stock and
the Fund grants an in-the-money qualified covered call option with respect
thereto. However, for purposes of the Short-Short Gain Test, the holding
period of the asset disposed of may be reduced only in the case of clause (1)
above. In addition, a Fund may be required to defer the recognition of a loss
on the disposition of an asset held as part of a straddle to the extent of
any unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the
23
<PAGE>
holding period of an option written by a Fund will commence on the date it is
written and end on the date it lapses or the date a closing transaction is
entered into. Accordingly, a Fund may be limited in its ability to write
options which expire within three months and to enter into closing
transactions at a gain within three months of the writing of options.
Transactions that may be engaged in by a Fund (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes
and futures contracts) will be subject to special tax treatment as "Section
1256 contracts." Section 1256 contracts are treated as if they are sold for
their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of
the year-end deemed disposition of Section 1256 contracts is taken into
account for the taxable year together with any other gain or loss that was
previously recognized upon the termination of Section 1256 contracts during
that taxable year. Any capital gain or loss for the taxable year with respect
to Section 1256 contracts (including any capital gain or loss arising as a
consequence of the year-end deemed sale of such contracts) is generally
treated as 60% long-term capital gain or loss and 40% short-term capital gain
or loss. A Fund, however, may elect not to have this special tax treatment
apply to Section 1256 contracts that are part of a "mixed straddle" with
other investments of the Fund that are not Section 1256 contracts. The IRS
has held in several private rulings (and Treasury Regulations now provide)
that gains arising from Section 1256 contracts will be treated for purposes
of the Short-Short Gain Test as being derived from securities held for not
less than three months if the gains arise as a result of a constructive sale
under Code Section 1256.
A Fund may purchase securities of certain foreign investment funds or trusts
which constitute passive foreign investment companies (PFICs) for federal
income tax purposes. If a Fund invests in a PFIC, it may elect to treat the
PFIC as a qualifying electing fund (QEF) in which event the Fund will each
year have ordinary income equal to its pro rata share of the PFIC's ordinary
earnings for the year and long-term capital gain equal to its pro rata share
of the PFIC's net capital gain for the year, regardless of whether the Fund
receives distributions of any such ordinary earning or capital gain from the
PFIC. If a Fund does not (because it is unable to, chooses not to or
otherwise) elect to treat the PFIC as a QEF, then in general (1) any gain
recognized by the Fund upon sale or other disposition of its interest in the
PFIC or any excess distribution received by the Fund from the PFIC will be
allocated ratably over the Fund's holding period of its interest in the PFIC,
(2) the portion of such gain or excess distribution so allocated to the year
in which the gain is recognized or the excess distribution is received shall
be included in the Fund's gross income for such year as ordinary income (and
the distribution of such portion by the Fund to shareholders will be taxable
as an ordinary income dividend, but such portion will not be subject to tax
at the Fund level), (3) the Fund shall be liable for tax on the portions of
such gain or excess distribution so allocated to prior years in an amount
equal to, for each such prior year, (i) the amount of gain or excess
distribution allocated to such prior year multiplied by the highest tax rate
(individual or corporate) in effect for such prior year plus (ii) interest on
the amount determined under clause (i) for the period from the due date for
filing a return for such prior year until the date for filing a return for
the year in which the gain is recognized or the excess distribution is
received at the rates and methods applicable to underpayments of tax for such
period, and (4) the distribution by the Fund to shareholders of the portions
of such gain or excess distribution so allocated to prior years (net of the
tax payable by the Fund thereon) will again be taxable to the shareholders as
an ordinary income dividend.
Under recently proposed Treasury regulations a Fund can elect to recognize
as gain the excess, as of the last day of its taxable year, of the fair
market value of each share of PFIC stock over the Fund's adjusted tax basis
in that share ("mark to market gain"). Such mark to market gain will be
included by the Fund as ordinary income, such gain will not be subject to the
Short-Short Gain Test, and the Fund's holding period with respect to such
PFIC stock commences on the first day of the next taxable year. If a Fund
makes such election in the first taxable year it holds PFIC stock, the Fund
will include ordinary income from any mark to market gain, if any, and will
not incur the tax described in the previous paragraph.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess
of net long-term capital gain over net short-term capital loss) for any
taxable year, to elect (unless it has made a taxable year election for excise
tax purposes as discussed below) to treat all or any part of any net capital
loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, each 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 a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which
the Fund has not invested more than 5% of the value of the Fund's total
assets in securities of such issuer and as to which the Fund does not hold
more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses. Generally, an option (call or put) with respect to a
security is treated as issued by the issuer of the security not the issuer of
the option. However, with regard to forward currency contracts, there does
not appear to be any formal or informal authority which identifies the issuer
of such instrument. For purposes of asset diversification testing,
obligations issued or guaranteed by agencies or instrumentalities of the U.S.
Government such as the Federal Agricultural Mortgage Cor-
24
<PAGE>
poration, 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 a 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.
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)). Tax-exempt interest on municipal obligations is not subject to
the excise tax.) 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).
Each 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 a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid
excise tax liability.
Fund Distributions
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Depending on a Fund's
investment's, distributions by a Fund may be treated as a net capital gain
dividend, an ordinary income dividend, a U. S. Government interest dividend,
a qualifying dividend, or an exempt interest dividend. Dividends paid on
Select Class and Advisor Class shares are calculated at the same time and in
the same manner. In general, dividends on Advisor Class shares are expected
to be lower than those on Select Class shares due to the higher distribution
expenses borne by the Advisor Class shares. Dividends may also differ between
classes as a result of differences in other class specific expenses.
Each Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each Fund currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a capital
gain dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or
whether such gain was recognized by the Fund prior to the date on which the
shareholder acquired his shares. The Code provides, however, that under
certain conditions only 50% of the capital gain recognized upon the Fund's
disposition of domestic "small business" stock will be subject to tax.
Conversely, if a 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. If 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 a 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 a
Fund from domestic corporations for the taxable year and if the shareholder
meets eligibility requirements in the Code. Generally, substantially all of the
dividends paid by the Growth and Income Fund, and, to a lesser degree, by the
Aetna Fund, the Growth Fund, and the Small Company Growth Fund, will qualify for
the dividends-received deduction. A dividend received by a 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
25
<PAGE>
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 (1) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Fund or (2) by application of
Code Section 246(b) which in general limits the dividends-received deduction.
For purposes of the corporate alternative minimum tax (AMT) and the
environmental superfund 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 alternative minimum taxable income (AMTI).
However, corporate shareholders will generally be required to take the full
amount of any dividend received from a 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 a 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 a 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 a Fund's assets to be invested in various countries is
not known. The International Growth Fund and the Asian Growth Fund anticipate
investing substantially in foreign securities. If more than 50% of the value
of a Fund's total assets at the close of its taxable year consist of the
stock or securities of foreign corporations, the Fund may elect to "pass
through" to the Fund shareholders the amount of foreign taxes paid by the
Fund. If the Fund so elects, each shareholder would be required to include in
gross income, even though not actually received, his pro rata share of the
foreign taxes paid by the Fund, but would be treated as having paid his pro
rata share of such foreign taxes and would therefore be allowed to either
deduct such amount in computing taxable income or use such amount (subject to
various Code limitations) as a foreign tax credit against federal income tax
(but not both). For purposes of the foreign tax credit limitation rules of
the Code, each shareholder would treat as foreign source income his pro rata
share of such foreign taxes plus the portion of dividends received from a
Fund representing income derived from foreign sources. No deduction for
foreign taxes could be claimed by an individual shareholder who does not
itemize deductions. Each shareholder should consult his own tax adviser
regarding the potential application of foreign tax credits.
Distributions by a Fund that do not constitute ordinary income dividends,
exempt-interest 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 by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). 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 a 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 a 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 a 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.
Each Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all,
(2) who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it
is a corporation or other "exempt recipient."
Sale or Redemption of Shares
The Money Market Fund seeks to maintain a stable net asset value of $1.00
per share; however, there can be no assurance that the Money Market Fund will
do this. In such a case, and in the case of all other Funds, a shareholder
will recognize gain or loss on the sale or redemption of shares of a 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 (even if
the gain is attributable to a dividend that would otherwise be received
tax-free by the shareholder). All or a portion of any loss so recognized may
be disallowed if the shareholder purchases other shares of the
26
<PAGE>
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 a 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 the Code to be held, for six months or less will be
disallowed to the extent of the amount of exempt-interest dividends received
on such shares and (to the extent not disallowed) will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on such shares.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership (foreign shareholder), depends on whether the income from a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income dividends paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate
of 30% (or lower treaty rate) upon the gross amount of the dividend.
Furthermore, such a foreign shareholder may be subject to U.S. withholding
tax at the rate of 30% (or lower treaty rate) on the gross income resulting
from the Fund's election to treat any foreign taxes paid by it as paid by its
shareholders, but may not be allowed a deduction against this gross income or
a credit against this U.S. withholding tax for the foreign shareholder's pro
rata share of such foreign taxes which it is treated as having paid. Such a
foreign shareholder would generally be exempt from U.S. federal income tax on
gains realized on the sale of shares of the Fund, capital gain dividends and
exempt-interest dividends and amounts retained by the Fund that are
designated as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to
U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisers with respect
to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is
based on the Code and the Treasury Regulations issued thereunder as in effect
on the date of this Statement of Additional Information. Future legislative
or administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends,
exempt-interest 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 a Fund.
PERFORMANCE INFORMATION
Performance information for each class of shares of the Funds including the
yield and effective yield of the Money Market Fund, the yield of the Bond
Fund and Government Fund, and the total return of all Funds, may appear in
reports or promotional literature to current or prospective shareholders.
Money Market Fund Yields
Current yield for the Money Market Fund will be computed by determining the
net change, exclusive of capital changes, at the beginning of a seven-day
period in the value of a hypothetical investment of one share, subtracting
any deductions from shareholder accounts, and dividing the difference by the
value of the hypothetical investment at the beginning of the base period to
obtain the base period return. This base period return is then multiplied by
(365/7) with the resulting yield figure carried to at least the nearest
hundredth of one percent. Calculation of "effective yield" begins with the
same "base period return" used in the calculation of yield, which is then
annualized to reflect weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)(365/7)]- 1
27
<PAGE>
The yield and effective yield for the Money Market Fund for the seven days
ended October 31, 1995 were 5.65% and 5.81%, respectively.
30-Day Yield for Non-Money Market Funds
Quotations of yield for the Bond Fund and the Government Fund will be based
on all investment income per share earned during a particular 30-day period,
less expenses accrued during the period ("net investment income"), and will
be computed by dividing net investment income by the value of a share on the
last day of the period, according to the following formula:
YIELD = 2[(a-b + 1)(6) - 1]
cd
Where: a=dividends and interest earned during the period
b=the expenses accrued for the period (net of reimbursements)
c=the average daily number of shares outstanding during the
period
d=the maximum offering price per share on the last day of the
period
The yield for the Bond Fund for the 30-day period ended October 31, 1995
was 6.56% for the Select Class, and 5.80% for the Adviser Class. The yield
for the Government Fund for the 30-day period ended October 31, 1995 was
5.66% for the Select Class, and 4.92% for the Adviser Class.
Average Annual Total Return for Non-Money Market Funds
Quotations of average annual total return for any Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in a Fund over a period of one, five and ten years (or, if less,
up to the life of the Fund), calculated pursuant to the formula:
P(1 + T)(n) = ERV
Where: P=a hypothetical initial payment of $1,000
T=an average annual total return
n=the number of years
ERV=the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year period at the end
of the 1, 5, or 10 year period (or fractional portion thereof)
Performance information for a Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index (S&P
500), Shearson Lehman Aggregate Bond Index, Dow Jones Industrial Average
(DJIA), Donoghue Money Market Averages, Russell 2000 or other indices that
measure performance of a pertinent group of securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of investment companies tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds and other
investment companies by overall performance, investment objectives, and
assets, or tracked by other services, companies, publications, or persons who
rank such investment companies on overall performance of other criteria;
(iii) the Consumer Price Index (measure for inflation) to assess the real
rate of return from an investment in a Fund; (iv) the Morgan Stanley Capital
International Europe, Australia, Far East (EAFE) Index and (v) the Morgan
Stanley Capital International Far East Free (FEF ex. Japan) Index.
The Funds may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above
in order to compare more accurately the performance of a Fund with other
measures of investment return. For example: Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Total Return Quotations as of October 31, 1995:
Select Class
Since Inception
1 Year Inception Date
-------- --------- ---------
Money Market 5.95% 4.32% 1/1/92
Government 13.58% 5.81% 1/1/94
Bond 14.06% 7.15% 1/1/92
The Aetna Fund 19.45% 9.05% 1/1/92
Growth and Income 22.58% 9.75% 1/1/92
Growth 28.79% 19.55% 1/1/94
Small Company Growth 30.39% 18.01% 1/1/94
International Growth (0.04)% 4.93% 1/1/92
Asian Growth (11.54)% (9.12)% 1/1/94
28
<PAGE>
Adviser Class
Since Inception
1 Year Inception Date
-------- --------- ---------
Money Market 5.95% 5.41% 4/15/94
Government 11.60% 7.50% 4/15/94
Bond 12.28% 7.49% 4/15/94
The Aetna Fund 17.32% 12.41% 4/15/94
Growth and Income 20.90% 16.00% 4/15/94
Growth 26.92% 20.36% 4/15/94
Small Company Growth 28.44% 18.55% 4/15/94
International Growth (1.81)% 0.53% 4/15/94
Asian Growth (13.11)% (2.36)% 4/15/94
All figures are based on actual investment performance. Performance
figures for the Adviser Class shares reflect the deduction of the maximum
contingent deferred sales charge of 1%, assuming shares were redeemed at the
end of the period.
From time to time sales materials and advertisements may include
discussions which compare the cost of borrowing a specific amount of money at
a given loan rate over a set period of time to the cost of a monthly
investment program, over the same time period, which earns the same rate of
return. The comparison may involve historical rates of return on a given
index, or may involve performance of any of the Funds. In addition, the value
of a college education may be expressed in sales and advertising materials as
a comparison of salaries between college graduates and non-college graduates.
29
<PAGE>
Portfolio of Investments
October 31, 1995
Money Market Fund
Principal Market
Amount Value
----------- -------------
Asset-Backed Securities (9.0%)
Bridgestone/Firestone Master Trust, Inc.,
5.80%, 11/02/95+++ $ 4,000,000 $ 4,000,000
Bridgestone/Firestone Master Trust, Inc.,
5.80%, 12/18/95+++ 3,000,000 3,000,000
Bridgestone/Firestone Master Trust, Inc.,
5.82%, 12/27/95+++ 8,400,000 8,400,000
Dakota Certificates--Standard Credit Card
Master Trust 1, 5.67%, 12/05/95+++ 7,198,000 7,159,455
Dakota Certificates--Standard Credit Card
Master Trust 1, 5.73%, 01/17/96+++ 3,000,000 2,963,233
Dakota Certificates--Standard Credit Card
Master Trust 1, 5.78%, 12/14/95+++ 4,000,000 3,972,384
Ford Credit Auto Lease, 6.00%, 05/15/96 2,558,124 2,557,685
------------
32,052,757
------------
Certificate of Deposit (1.4%)
Deutsche Bank AG, 5.98%, 07/15/96 5,000,000 5,000,000
------------
Commercial Paper - Domestic (40.9%)
A. H. Robins Co., 5.70%, 02/07/96+++ 2,000,000 1,968,967
American Express Credit Corp., 5.68%,
12/06/95 5,000,000 4,972,389
American Honda Finance Corp., 5.65%,
04/22/96 2,000,000 1,945,697
Avon Capital Corp., 5.90%, 12/15/95+++ 2,500,000 2,481,972
Caterpillar Financial Services Corp.,
5.72%, 11/17/95 1,000,000 997,458
CCU of Michigan, 5.90%, 11/01/95 17,104,000 17,104,000
Ciesco L.P., 5.65%, 02/06/96 2,000,000 1,969,553
Corporate Asset Funding Co., Inc., 5.65%,
01/30/96 1,200,000 1,183,050
Corporate Asset Funding Co., Inc., 5.65%,
02/15/96 1,200,000 1,180,037
Corporate Asset Funding Co., Inc., 5.65%,
11/03/95 1,400,000 1,399,561
Countrywide Funding Corp., 5.80%,
11/13/95 4,000,000 3,992,267
Countrywide Funding Corp., 5.90%,
11/02/95 4,252,000 4,251,303
Dayton Hudson Corp., 5.77%, 12/04/95 2,500,000 2,486,777
Dayton Hudson Corp., 5.78%, 12/05/95 2,315,000 2,302,363
Finova Capital Corp., 5.90%, 11/21/95 6,000,000 5,980,333
Fleetwood Credit Corp., 5.86%, 11/03/95+++ 2,000,000 1,999,349
Fleetwood Credit Corp., 5.75%, 11/29/95+++ 3,000,000 2,986,583
General Signal Corp., 5.80%, 11/08/95+++ 4,000,000 3,995,489
Government Development Bank of Puerto Rico,
Mato Rey, 5.72%, 12/28/95 2,500,000 2,477,358
Hertz Corp., 5.67%, 11/07/95 8,775,000 8,766,707
ITT Corp., 6.00%, 11/03/95+++ 1,100,000 1,099,633
PACCAR Financial Corp., 5.67%, 11/09/95 $ 2,500,000 $ 2,496,850
Prudential Funding Corp., 5.90%, 11/01/95 17,000,000 17,000,000
Sears Roebuck Acceptance Corp., 5.80%,
11/03/95 7,160,000 7,157,693
Sheffield Receivables Corp., 5.69%,
11/14/95 3,985,000 3,976,812
Transamerica Finance Corp., 5.66%,
11/10/95 1,500,000 1,497,878
Transamerica Finance Corp., 5.67%,
11/30/95 2,000,000 1,990,865
Transamerica Finance Corp., 5.70%,
11/20/95 5,000,000 4,984,958
Travelers, Inc., 5.90%, 11/01/95 17,000,000 17,000,000
USL Capital Corp., 5.75%, 11/15/95 6,000,000 5,986,583
Whirlpool Corp., 5.75%, 11/21/95 1,600,000 1,594,889
Whirlpool Financial Corp., 5.72%, 02/05/96 4,500,000 4,431,360
Whirlpool Financial Corp., 5.75%, 11/28/95 1,100,000 1,095,256
------------
144,753,990
------------
Commercial Paper - Foreign (8.0%)
Abbey National Plc, 5.67%, 11/15/95 6,000,000 5,986,770
Ford Capital B.V., 9.00%, 06/01/96 950,000 965,749
Province of British Columbia, 5.60%,
03/18/96 4,000,000 3,914,133
Province of British Columbia, 5.60%,
04/12/96 1,300,000 1,267,038
Skandinaviska Enskilda Banken Funding Inc.,
5.76%, 01/16/96 3,000,000 2,963,520
Svenska Handelsbanken Inc., 5.64%, 02/29/96 3,000,000 2,943,600
Svenska Handelsbanken Inc., 5.68%, 02/14/96 3,000,000 2,950,300
Svenska Handelsbanken Inc., 5.70%, 11/27/95 5,000,000 4,979,417
Xerox Mexicana S.A. de C.V., 5.80%,
11/09/95 2,400,000 2,396,907
------------
28,367,434
------------
Corporate Notes (16.3%)
American Express Credit Corp., 8.75%,
06/15/96 1,000,000 1,016,205
Bank One, Dayton, N.A., 5.95%, 10/02/96 16,400,000 16,400,000
Carco Auto Loan Trust 1993-2, 5.915%,
11/15/98 4,500,000 4,500,000
Caterpillar Financial Services Corp.,
5.810%, 07/29/96 5,000,000 5,000,000
Chrysler Financial Corp., 6.00%, 04/15/96 1,000,000 1,000,026
Columbia/HCA Healthcare Corp., 5.96%,
07/28/97 1,750,000 1,749,462
See Notes to Portfolio of Investments.
F-1
<PAGE>
Portfolio of Investments
October 31, 1995
Money Market Fund
Principal Market
Amount Value
----------- -------------
Columbia/HCA Healthcare Corp., 5.96%,
07/28/97 $ 1,000,000 $ 1,000,000
Commercial Credit Co., 9.875%, 12/01/95 1,800,000 1,805,747
Dean Witter, Discover & Co., 6.079%,
12/15/95 7,000,000 7,001,253
FNB Boston Corp., 6.00%, 05/10/96 2,500,000 2,500,000
General Motors Acceptance Corp., 6.025%,
03/01/96 1,100,000 1,100,000
General Motors Acceptance Corp., 8.75%,
02/01/96 1,770,000 1,776,098
Greyhound Financial Corp., 6.125%,
02/15/96 3,425,000 3,425,577
Greyhound Financial Corp., 6.125%,
02/15/96 6,325,000 6,326,970
Hertz Corp., 9.125%, 08/01/96 1,200,000 1,226,014
Lockheed Martin Corp., 4.875%, 02/15/96 2,000,000 1,992,868
------------
57,820,220
------------
Medium Term Notes (19.5%)
American Honda Finance Corp., 5.905%,
08/01/96+++ 3,500,000 3,499,746
AT&T Capital Corp., 7.87%, 07/01/96 4,000,000 4,050,526
Deere (John) Capital Corp., 5.875%,
03/11/96 8,250,000 8,250,000
Discover Credit Corp., 8.92%, 03/15/96 5,250,000 5,303,314
Federal National Mortgage Corp., 6.34%,
02/18/97 4,000,000 4,004,323
General Electric Capital Services, Inc.,
6.15%, 01/10/96 5,000,000 4,999,801
Fleetwood Credit Corp., 6.09%, 02/08/96+++ 4,000,000 4,001,729
Ford Motor Credit Co., 5.00%, 03/25/96 1,900,000 1,893,208
Ford Motor Credit Co., 8.95%, 06/14/96 1,000,000 1,018,137
Ford Motor Credit Co., 9.07%, 07/05/96 500,000 509,997
Ford Motor Credit Co., 9.10%, 06/10/96 3,600,000 3,659,388
Ford Motor Credit Co., 9.20%, 07/16/96 500,000 509,906
General Motors Acceptance Corp., 6.055%,
04/13/98 6,500,000 6,504,018
General Motors Acceptance Corp., 6.187%,
04/22/96 1,650,000 1,651,070
International Lease Finance Corp., 4.98%,
09/02/96 500,000 495,824
Potomac Capital Investment Corp., 6.398%,
02/16/96+++ 3,000,000 3,002,229
Shawmut Bank of Connecticut, 5.895%,
05/10/96 13,000,000 12,999,882
Textron Financial Corp., 6.28%, 11/24/95+++ $ 2,700,000 $ 2,700,168
------------
69,053,266
------------
U.S. Government Agency Obligations (3.1%)
Federal Farm Credit Bank, 5.85%, 04/24/96 6,000,000 5,998,419
Student Loan Marketing Association, FRN,
6.20%, 01/21/97 5,000,000 5,003,164
------------
11,001,583
------------
Total Investments
(cost $348,049,250) (a) $348,049,250
Other assets less liabilities 6,200,881
------------
Total Net Assets $354,250,131
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes is identical.
There were no unrealized gains and losses at October 31, 1995.
+++ Securities that may be resold to "qualified institutional buyers"
under Rule 144A or securities offered pursuant to section 4(2) of the
Securities Act of 1933, as amended. These securities have been
determined to be liquid under guidelines established by the Board of
Directors.
Category percentages are based on net assets.
See Notes to Financial Statements.
F-2
<PAGE>
Portfolio of Investments
October 31, 1995
Government Fund
Principal Market
Amount Value
---------- ------------
Long Term Bonds and Notes (87.4%)
U.S. Government Obligations (29.1%)
U.S. Treasury Bond, 7.50%, 11/15/24 $1,500,000 $ 1,717,031
U.S. Treasury Bond, 10.375%, 11/15/12 2,000,000 2,686,874
U.S. Treasury Strip, Zero Coupon,
05/15/03 2,000,000 1,281,774
-----------
5,685,679
-----------
U.S. Government Agency Mortgage-Backed Securities (25.9%)
Federal National Mortgage Association,
4.95%, 09/30/98 4,000,000 3,894,860
Government National Mortgage Association,
9.00%, 07/15/16 560,240 589,478
Government National Mortgage Association,
9.00%, 05/15/16 547,785 576,373
-----------
5,060,711
-----------
U.S. Agency Obligations (24.0%)
Private Export Funding Corp., 5.48%,
09/15/03 800,000 782,640
Small Business Administration 92-20K,
7.55%, 11/01/12 931,153 953,500
Small Business Administration, 8.25%,
11/01/11 877,495 937,305
Student Loan Marketing Association,
6.72%, 07/23/97 1,000,000 1,013,034
Student Loan Marketing Association,
7.82%, 10/14/99 1,000,000 1,017,671
-----------
4,704,150
-----------
Foreign & Supranational Obligations (3.3%)
International Bank for Reconstruction and
Development, 9.25%, 07/15/07 500,000 640,494
-----------
Corporate Obligations (5.1%)
First Chicago Corp. 94i-A, 6.045%,
01/15/99 1,000,000 1,002,270
-----------
Total Long Term Bonds and Notes (cost $16,496,420) $17,093,304
-----------
Short Term Investments (11.1%)
Federal Home Loan Mortgage Association,
5.82%, 11/01/95 2,168,000 2,168,000
-----------
Total Short Term Investments
(cost $2,168,000) $ 2,168,000
-----------
Total Investments
(cost $18,664,420) (a) $19,261,304
Other assets less liabilities 297,003
-----------
Total Net Assets $19,558,307
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at October 31,
1995 are as follows:
Unrealized gains $657,501
Unrealized losses (60,617)
--------
Net unrealized gains $596,884
========
Category percentages are based on net assets.
See Notes to Financial Statements.
F-3
<PAGE>
Portfolio of Investments
October 31, 1995
Bond Fund
<TABLE>
<CAPTION>
Principal Market
Amount Value
---------- ------------
<S> <C> <C>
Long Term Bonds and Notes (86.9%)
U.S. Government Agency Mortgage-Backed Securities (5.7%)
Federal Home Loan Mortgage Corp., 7.63%, 12/01/22 $ 984,968 $ 1,004,052
Federal National Mortgage Association, Zero Coupon, 06/25/19 457,081 409,687
Government National Mortgage Association, 9.50%, 07/15/18 412,382 441,249
Government National Mortgage Association, 10.00%, 07/15/19 142,711 156,046
Government National Mortgage Association, 10.00%, 04/15/19 94,188 102,989
Government National Mortgage Association, 10.00%, 11/15/18 142,854 156,202
-----------
Total U.S. Government Agency Mortgage-Backed Securities
(cost $2,210,680) $ 2,270,225
-----------
U.S. Agency Obligations (8.8%)
Private Export Funding Corp., 5.48%, 09/15/03 1,600,000 1,565,280
Student Loan Marketing Association, 6.72%, 07/23/97 1,000,000 1,013,034
Small Business Administration 92-20K, 7.55%, 11/01/12 931,153 953,500
-----------
Total U.S. Agency Obligations (cost $3,576,958) $ 3,531,814
-----------
U.S. Government Obligations (16.1%)
U.S. Treasury Bond, 6.875%, 03/31/00 4,000,000 4,166,248
U.S. Treasury Bond, 7.5%, 11/15/24 2,000,000 2,289,374
-----------
U.S. Government Obligations
(cost $6,123,519) $ 6,455,622
-----------
Corporate Bonds (17.8%)
Financial Services (8.4%)
American Express FDC, 8.50%, 06/15/99 1,000,000 1,067,730
Associates Corp. N.A., 8.55%, 07/15/09 1,000,000 1,159,101
Commercial Credit Co., 8.70%, 06/15/09 1,000,000 1,170,788
-----------
3,397,619
-----------
Other Corporate Bonds (9.4%)
Columbia/HCA Healthcare Corp., 6.91%, 06/15/05 1,000,000 1,014,577
Paramount Communications, Ltd., 7.50%, 07/15/23 500,000 482,762
Rogers Cablesystems of America, 10.00%, 03/15/05 500,000 522,500
Stone Container Corp., 9.875%, 02/1/01 500,000 497,500
TRW, Inc., 9.35%, 06/04/20 1,000,000 1,244,671
-----------
3,762,010
-----------
Total Corporate Bonds
(cost $6,732,144) $ 7,159,629
-----------
Foreign & Supranational Obligations (22.0%)
African Development Bank, 8.80%, 09/01/19 $ 250,000 $ 309,927
Bank of China, 8.25%, 03/15/14 500,000 483,009
China International Trust, 9.00%, 10/15/06 1,000,000 1,087,210
Empresa Dist Sur, 9.887%, 05/17/96 1,500,000 1,485,000
European Investment Bank, 13.00%, 08/31/96 614,000 647,770
Interamerican Development Bank, 12.25%, 12/15/08 1,200,000 1,808,385
International Bank For Reconstruction & Development, 9.25%, 07/15/17 1,500,000 1,921,482
KFW International Finance, 8.85%, 6/15/99 500,000 544,814
Swire Pacific, Ltd., 8.50%, 09/29/04 +++ 500,000 531,000
-----------
Total Foreign & Supranational Obligations (cost $8,246,377) $ 8,818,597
-----------
Non-Agency Mortgage-Backed
Securities (16.5%)
Chase Mortgage Finance 1992-F, 8.25%, 05/25/08 1,059,000 1,055,823
First Chicago 94I-A, 6.045%, 01/15/99 2,000,000 2,004,540
Marine Midland 92, 8.00%, 04/25/23 962,015 998,743
Prudential Home Mortgage 1992 13 M1, 7.50%, 06/25/07 682,664 687,357
Prudential Home Mortgage 92-39 M, 7.00%, 12/25/07 883,884 879,712
Resolution Trust Corp. 1991-17 B6, 8.20%, 09/25/21 1,000,000 1,000,591
-----------
Total Non-Agency Mortgage-Backed Securities
(cost $6,488,142) $ 6,626,766
-----------
Total Long Term Bonds and Notes
(cost $33,377,820) $34,862,653
-----------
Short Term Investments (11.9%)
Archer-Daniels-Midland Co., Comm. Paper, 5.85%, 11/07/95 1,000,000 999,025
Countrywide Funding Corp., Comm. Paper, 5.90%, 11/02/95 2,000,000 1,999,672
Finova Capital Corp. Comm. Paper, 5.95%, 11/01/95 1,775,000 1,775,000
-----------
Total Short Term Investments
(cost $4,773,697) $ 4,773,697
-----------
Total Investments
(cost $38,151,517) (a) $39,636,350
Other assets less liabilities 482,312
-----------
Total Net Assets $40,118,662
</TABLE>
See Notes to Portfolio of Investments.
F-4
<PAGE>
Portfolio of Investments
October 31, 1995
Bond Fund
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at October 31,
1995 are as follows:
Unrealized gains $1,575,353
Unrealized losses (90,520)
----------
Net unrealized gains $1,484,833
==========
+++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the
Securities Act of 1933, as amended. These securities have been determined
to be liquid under guidelines established by the Board of Directors.
Category percentages are based on net assets.
See Notes to Financial Statements.
F-5
<PAGE>
Portfolio of Investments
October 31, 1995
Tax-Free Fund
Principal Market
Amount Value
---------- ------------
Long Term Bonds and Notes (97.4%)
Airport (4.4%)
City and County of Denver, Colorado,
Airport System Revenue Bonds, 7.00%,
11/15/99 $1,000,000 $ 1,063,750
-----------
Electric Revenue (8.4%)
Southern Minnesota Municipal Power Agency,
Power Supply System Revenue Bonds, 5.50%,
01/01/03 1,000,000 1,045,900
Washington Public Power Supply System,
Nuclear Project No. 2, Revenue Refunding
Bonds, 5.375%, 07/01/11 1,000,000 950,000
-----------
1,995,900
-----------
General Obligation (12.6%)
Cedar Rapids, Iowa, 5.125%, 06/01/11 1,000,000 973,750
City and County of Honolulu, Hawaii, 5.50%,
04/01/06 1,000,000 1,036,250
State of Michigan, 5.75%, 10/01/12 1,000,000 1,002,500
-----------
3,012,500
-----------
Highway (4.4%)
City and County of Arapahoe, Colorado,
6.90%, 08/31/15 1,000,000 1,056,250
-----------
Housing (4.2%)
Virginia Housing Development Authority,
Mortgage Revenue Bonds, 5.70%, 01/01/11 1,000,000 997,500
-----------
Insured (12.5%)
Atlanta, Georgia, Airport Facilities
Revenue Refunding Bonds, (AMBAC-Insured),
5.30%, 01/01/03 1,000,000 1,036,250
Florida Municipal Power Agency, All
Requirements Power Supply Revenue
Bonds (AMBAC-Insured), 5.10%, 10/01/14 1,000,000 938,750
Kentucky Turnpike Authority, Economic
Development Road Revenue Refunding
Bonds (AMBAC-Insured), 5.50%, 07/01/09 1,000,000 1,016,250
-----------
2,991,250
-----------
Lease (4.5%)
Indiana Transportation Finance Authority,
Airport Facilities Lease Revenue Bonds,
6.50%, 11/01/07 1,000,000 1,078,750
-----------
Pollution Control (4.1%)
Illinois Development Finance Authority,
Pollution Control Revenue Refund Bonds
(Commonwealth Edison Project), 5.85%,
01/15/14 1,000,000 968,750
-----------
Prerefunded (8.9%)
San Antonio, Texas, General Obligation
Limited Tax Bonds (Prerefunded 8/01/97 @
100), 7.875%, 08/01/10 $1,000,000 $ 1,063,750
Tarrant County, Texas Water Control and
Improvement District No. 1, Water Revenue
Bonds (Prerefunded 03/01/98
@ 100), 7.70%, 03/01/00 1,000,000 1,077,500
-----------
2,141,250
-----------
Sales/Special Tax (4.0%)
State of Illinois, Sales Tax Revenue Bonds,
5.25%, 06/15/13 1,000,000 958,750
-----------
University (8.4%)
California Educational Facility Authority
Revenue Bonds, University of Southern
California Project, 5.80%, 10/01/15 1,000,000 1,010,000
Dormitory Authority of the State of New
York, Consolidated City University Revenue
Bonds, 5.75%, 07/01/09 1,000,000 996,250
-----------
2,006,250
-----------
Water/Sewer (21.0%)
DuPage Water Commission, Illinois, Water
Revenue Refunding Bonds, 5.25%, 05/01/11 1,000,000 968,750
Massachusetts Water Resources Authority,
General Revenue Refunding Bonds, 5.25%,
03/01/13 1,000,000 952,500
City of Philadelphia Water and Wastewater,
5.625%, 06/15/09 1,000,000 1,035,000
Portland, Oregon Sewer System Revenue
Bonds, 6.10%, 06/01/10 1,000,000 1,065,000
Spokane, Washington Regional Solid Waste
Management Services Revenue Bond, 5.50%,
12/01/09 1,000,000 1,010,000
-----------
5,031,250
-----------
Total Long Term Bonds and Notes (Cost $22,783,649) $23,302,150
-----------
Short Term Investments (1.0%)
Federal Home Loan Mortgage Corp., Disc.
Note, 5.82%, 11/01/95 238,000 238,000
-----------
Total Short Term Investments
(cost $238,000) $ 238,000
-----------
Total Investments
(cost $23,021,649) (a) $23,540,150
Other assets less liabilities 389,762
-----------
Total Net Assets $23,929,912
-----------
See Notes to Portfolio of Investments.
F-6
<PAGE>
Portfolio of Investments
October 31, 1995
Tax-Free Fund
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at October
31, 1995 are as follows:
Unrealized gains $ 719,740
Unrealized losses (201,239)
---------
Net unrealized gains $ 518,501
=========
Category percentages are based on net assets.
See Notes to Financial Statements.
F-7
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Number of Market
Shares Value
--------- ------------
Common Stocks (66.4%)
Aerospace & Defense (0.7%)
Applix Inc.+ 1,400 $ 39,025
Kaman Corp. Class A 2,300 25,013
Lockheed Martin Corp. 2,000 136,250
McDonnell Douglas Corp. 5,100 416,925
-----------
617,213
-----------
Apparel (0.7%)
Guilford Mills, Inc. 300 6,638
Nike, Inc. 10,000 567,500
Oshkosh B'Gosh, Inc. 1,700 22,738
Phillips-Van Heusen 100 1,013
Superior Surgical Manufacturing Co., Inc. 600 5,700
-----------
603,589
-----------
Autos & Auto Equipment (0.6%)
Borg-Warner Automotive, Inc. 400 11,800
Johnson Controls, Inc. 1,100 64,075
Kaydon Corp. 600 17,325
Liz Claiborne, Inc. 7,400 209,975
Masland Corp. 100 1,388
Smith (A.O.) Corp 1,900 39,425
Snap-On, Inc. 2,800 118,650
Varity Corp.+ 2,000 72,500
-----------
535,138
-----------
Banks (5.9%)
Associated Banc-Corp. 125 4,750
Bank of Boston Corp. 8,000 356,000
Bank of New York Co., Inc. 1,362 57,204
BankAmerica Corp. 12,000 690,000
Bankers First Corp. 400 11,350
Banponce Corp. 400 15,450
Barnett Banks, Inc. 1,500 82,875
Baybanks, Inc. 500 40,438
Bell Bancorp, Inc. 400 11,850
CCB Financial Corp. 600 29,625
Charter One Financial, Inc. 700 19,819
Chemical Banking Corp. 9,500 540,313
Citicorp 7,031 456,136
Citizens Bancorp 700 23,013
City National Corp. 7,500 99,375
Coast Savings Financial Inc.+ 1,600 42,200
Cullen/Frost Bankers 2,000 101,250
FFY Financial Corp. 400 8,625
First American Corp. (Tenn.) 1,100 $ 48,194
First Chicago Corp. 6,300 427,613
First Commonwealth Financial Corp. 300 4,950
First Empire State Corp. 200 39,350
First Interstate Bancorp 4,300 554,700
Firstier Financial, Inc. 100 4,275
Fulton Financial Corp. 220 4,730
KeyCorp 950 32,063
Liberty Bancorp, Inc. 700 25,200
MAF Bancorp, Inc. 220 5,500
Mark Twain Bancshares, Inc. 200 6,975
Midlantic Corp. 900 47,813
N.S. Bancorp, Inc. 400 14,525
NationsBank, Corp. 12,300 808,725
North Side Savings Bank 900 26,663
Northern Trust Corp. 600 28,500
Provident Bancorp 400 16,800
Queens County Bancorp, Inc. 1,700 68,425
Reliance Bancorp, Inc. 1,700 24,756
River Forest Bancorp, Inc. 600 14,025
Security Capital Corp.+ 500 27,313
Silicon Valley Bancshares+ 900 17,663
Standard Financial, Inc.+ 3,900 54,113
Star Banc Corp. 800 44,300
Susquehanna Bancshares, Inc. 300 8,738
Union Planters Corp. 3,000 91,875
-----------
5,038,057
-----------
Building Materials &
Construction (0.6%)
American Buildings Co.+ 500 12,563
Ameron, Inc. 100 3,425
Butler Manufacturing Co. 600 17,625
Champion Enterprises, Inc.+ 5,200 134,550
Continental Homes Holding Corp. 500 10,250
Elcor Corp. 600 12,600
Florida Rock Industries, Inc. 200 5,400
Granite Construction, Inc. 2,500 71,250
Kasler Holding Co.+ 200 1,150
Lone Star Industries, Inc. 200 4,575
Navistar Internat+ 3,100 31,775
NCI Building Systems, Inc.+ 600 14,100
Redman Industries, Inc.+ 300 7,875
Stone & Webster, Inc. 1,200 40,350
Texas Industries, Inc. 1,000 52,625
Toll Brothers, Inc.+ 800 14,300
See Notes to Portfolio of Investments.
F-8
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Number of Market
Shares Value
--------- ------------
Tredegar Industries, Inc. 400 $ 11,650
Webb (Del E.) Corp. 1,200 24,900
-----------
470,963
-----------
Chemicals (2.3%)
ARCO Chemical Co. 800 39,200
Cytec Industries 2,100 114,975
Dow Chemical Co. 5,700 391,163
Du Pont (E.I.) de Nemours 3,500 218,313
Eastman Chemical Co. 3,200 190,400
Goodrich (B.F.) Co. 700 46,113
Great Lakes Chemical Corp. 2,000 134,250
Learonal Inc. 1,500 34,125
Lyondell Petrochemical Co. 1,900 40,613
OM Group, Inc. 300 8,756
PPG Industries, Inc. 3,300 140,250
Sigma-Aldrich Corp. 3,000 143,250
Synalloy Corp. 300 6,263
The Geon Co. 3,100 77,113
Union Carbide Corp. 9,400 356,025
Vigoro Corp. 600 26,025
-----------
1,966,834
-----------
Commercial Services (0.3%)
Barefoot Inc. 600 7,163
Devry, Inc.+ 1,600 36,000
Health Management Systems, Inc.+ 50 1,613
Interim Services, Inc.+ 1,100 32,450
Jacobs Engineering Group Inc.+ 500 10,938
Jenny Craig, Inc.+ 600 5,550
Kindercare Learning Centers, Inc.+ 1,200 16,200
Manpower, Inc. 1,500 40,688
PHH Corp. 1,700 74,375
Robert Half International Inc.+ 1,000 36,500
-----------
261,477
-----------
Computer Software (0.5%)
Acxiom Corp.+ 900 26,775
Analysts International Corp. 300 8,888
Boole & Babbage, Inc.+ 200 7,275
Borland International, Inc.+ 1,000 13,563
Cadence Design Systems, Inc.+ 2,550 82,238
Cheyenne Software, Inc.+ 500 10,438
Cirrus Logic Inc+ 1,400 58,888
Electronic Arts, Inc.+ 700 25,681
Hogan Systems, Inc.+ 1,700 15,194
Hyperion Software+ 400 19,550
Inso Corp.+ 400 $ 14,200
Kronos, Inc.+ 400 18,750
Medic Computer Systems, Inc.+ 200 10,675
Micro Warehouse Inc.+ 500 22,375
Policy Management Systems+ 100 4,713
Reynolds & Reynolds Co. 1,700 60,563
Shiva Corp.+ 100 6,013
Softdesk, Inc.+ 400 9,150
Triad Systems Corp.+ 1,700 9,456
-----------
424,385
-----------
Computers & Office
Equipment (3.6%)
Banctec, Inc.+ 59 1,121
Ceridian Corp.+ 3,400 147,900
Comdisco, Inc. 2,600 79,300
Compaq Computer Corp.+ 5,300 295,475
Dell Computer Corp.+ 2,200 102,438
Fair Isaac & Co., Inc. 200 5,550
Gateway 2000, Inc.+ 200 6,688
Harris Corp. 2,200 127,875
HBO & Co. 300 21,188
In Focus Systems, Inc.+ 4,300 141,363
International Business Machines Corp. 5,600 544,600
Komag, Inc.+ 500 28,531
Macneal-Schwendler Corp. 900 13,725
Microsoft Corp.+ 3,700 370,231
Moore Corp., Ltd. 9,000 172,125
Read-Rite Corp.+ 7,300 255,044
Sun Microsystems, Inc.+ 4,700 367,188
Xerox Corp. 3,200 415,200
-----------
3,095,542
-----------
Consumer Products (0.4%)
Alberto-Culver Co. Class B 3,400 106,675
Block Drug Co. Class A 200 7,725
Eastman Kodak Co. 1,600 100,200
First Brands Corp. 300 13,725
Helene Curtis Industries, Inc. 400 11,950
Maybelline, Inc. 2,800 66,150
-----------
306,425
-----------
Diversified (1.6%)
Astec Industries, Inc.+ 100 1,206
BIC Corp. 200 8,050
Dover Corp. 12,300 485,850
Griffon Corp.+ 100 838
See Notes to Portfolio of Investments.
F-9
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Number of Market
Shares Value
--------- ------------
Harsco Corp. 1,000 $ 52,750
Katy Industries 800 8,200
Kulicke & Soffa Industries, Inc.+ 4,800 169,800
Lydall, Inc.+ 400 9,100
Mercer International, Inc.+ 100 2,306
Opal, Inc.+ 600 9,075
Standex International Corp. 600 19,650
Textron Inc. 4,500 309,375
Varlen Corp 900 24,300
VF Corp. 5,600 268,100
-----------
1,368,600
-----------
Electrical & Electronics (2.3%)
Applied Materials, Inc.+ 2,200 110,413
CTS Corp. 300 9,975
Cypress Semiconductor Corp.+ 1,600 56,400
Dallas Semiconductor Corp. 1,500 31,875
Dovatron International, Inc.+ 1,100 34,100
Esterline Technologies Corp.+ 2,300 53,188
FPL Group, Inc. 8,300 347,563
Fusion Systems Corp.+ 2,000 55,250
Glenayre Technologies, Inc.+ 900 58,163
Hadco Corp.+ 2,500 70,000
Hewlett Packard Co. 5,900 546,488
Intel Corp. 1,000 69,938
Logicon, Inc 600 13,725
Merix Corp.+ 1,000 36,750
Micron Technology Inc. 3,400 240,125
Pioneer Standard Electronics 300 4,106
Quickturn Design System, Inc.+ 2,300 23,575
Ramtron International+ 100 1,006
Rogers Corp.+ 400 9,000
Seagate Technology, Inc.+ 1,600 71,600
Tencor Instruments+ 800 34,200
Unitrode Corp.+ 1,200 32,250
Western Digital Corp.+ 200 3,100
Wyle Electronics 400 17,050
-----------
1,929,840
-----------
Electrical Equipment (2.9%)
3Com Corp.+ 1,200 56,325
ADFlex Solutions, Inc.+ 900 23,513
AMP Inc. 2,100 82,425
Avnet, Inc. 1,200 60,450
Burr-Brown Corp.+ 1,350 42,863
Cellstar Corp.+ 1,100 30,250
Charter Power Systems, Inc. 100 $ 2,538
Circuit City Stores, Inc. 1,100 36,713
Dionex Corp.+ 100 5,363
Emerson Electric Co. 800 57,000
General Electric Co. 9,500 600,875
Honeywell, Inc. 2,300 96,600
International Rectifier Corp.+ 2,300 103,788
Kemet Corp.+ 1,600 54,800
Kent Electronics Corp.+ 2,300 112,125
Marshall Industries+ 500 17,625
Microchip Technology Corp.+ 200 7,925
Park Electrochemical Corp. 4,000 125,000
Parker-Hannifin Corp. 7,200 243,000
Sundstrand Corp. 700 42,875
Tektronix, Inc. 400 23,700
Teradyne, Inc.+ 2,400 80,100
Texas Instruments, Inc. 8,600 586,950
Valmont Industries 500 12,094
-----------
2,504,897
-----------
Financial Services (3.1%)
Advanta Corp. Class A 1,600 62,200
Alex Brown & Sons, Inc. 1,800 87,975
Astoria Financial Corp. 2,800 120,400
AT&T Capital Corp. 500 20,000
Bear Stearns Co., Inc. 1,500 29,813
BHC Financial, Inc. 600 11,025
CNA Financial Corp.+ 400 45,600
Crestar Financial Corp. 500 28,500
Dean Witter Discover and Co. 3,600 179,100
Deposit Guaranty Corp. 1,200 52,950
Duff & Phelps Corp. 1,600 17,400
Federal National 2,600 272,675
Great Financial Corp. 3,100 64,131
Greenpoint Financial Corp. 1,400 37,975
Home Financial Corp. 2,800 43,050
Household International, Inc. 3,000 168,750
John Nuveen & Co., Inc. 200 4,825
Leader Financial Corp. 2,700 96,525
Legg Mason, Inc. 400 11,500
Mercury Finance Co. 2,300 44,275
Merrill Lynch & Co., Inc. 2,300 127,650
Morgan Keegan, Inc. 950 10,331
Patlex Corp+ 187 888
Peoples Heritage Financial Group 1,100 21,038
See Notes to Portfolio of Investments.
F-10
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Number of Market
Shares Value
--------- ------------
Pioneer Group, Inc. 100 $ 2,625
RCSB Financial, Inc. 1,400 31,238
TR Financial Corp. 1,600 39,800
Transamerica Corp. 3,800 257,450
Travelers, Inc. 11,500 580,750
Union Bank 500 25,125
United Insurance Companies, Inc.+ 400 6,725
Wells Fargo & Co. 200 42,025
Zion Bancorp. 1,200 83,400
-----------
2,627,714
-----------
Foods & Beverages (5.0%)
American Maize-Products Co. Class A 700 27,738
Brown-Forman Corp. Class B 1,100 41,938
Cagle's, Inc. 300 4,500
Coca-Cola Co. 8,500 610,938
ConAgra, Inc. 16,700 645,038
CPC International Inc. 6,500 431,438
Goodmark Foods, Inc. 300 5,475
Heinz (H.J.) Co. 2,500 116,250
Hometown Buffet Inc.+ 200 2,588
Hormel Foods Corp. 1,400 32,200
Hudson Foods, Inc. Class A 1,400 19,775
IBP, Inc. 1,300 77,838
International Multifoods Corp. 1,900 38,950
Kroger Co. (The)+ 7,600 253,650
McDonald's Corp. 13,300 545,300
Mondavi (Robert) Corp.+ 1,200 34,050
Nash-Finch Co. 500 8,844
PepsiCo, Inc. 9,000 474,750
Richfood Holdings, Inc. 500 12,563
Safeway, Inc.+ 1,000 47,250
Sara Lee Corp. 18,500 543,438
Supervalu, Inc. 8,300 255,225
Unilever N.V. 300 39,300
-----------
4,269,036
-----------
Health Services (0.9%)
Baxter International, Inc. 4,400 169,950
Columbia/HCA Healthcare Corp. 3,900 191,588
Genetics Institute, Inc. Dep Shrs+ 300 11,213
Health Management Associates Class A+ 600 12,900
Healthdyne Technologies, Inc.+ 500 5,469
Horizon/CMS Healthcare Corp.+ 4,700 95,175
Invacare Corp. 600 15,000
Lincare Holdings, Inc.+ 2,800 70,175
Nellcor, Inc.+ 2,068 $ 119,427
Sun Healthcare Group, Inc.+ 300 3,563
Universal Health Services, Inc.+ 2,800 105,000
-----------
799,460
-----------
Health Technology (0.4%)
Alpharma Inc.--Class A 100 2,400
Barr Labs Inc.+ 500 10,875
Bio-Rad Labs, Inc. Class A+ 300 11,400
Guidant Corp. 4,102 131,264
Haemonetics Corp.+ 1,900 35,863
Life Technologies, Inc. 500 12,438
Rhone-Poulenc Rorer, Inc. 700 32,988
Sybron International Corp.+ 2,200 93,500
Utah Medical Products, Inc.+ 1,000 13,875
Vital Signs, Inc. 1,400 25,638
-----------
370,241
-----------
Home Funishings &
Appliances (0.1%)
Kimball International, Inc. Class B 300 7,744
Leggett & Platt, Inc. 2,400 57,600
National Presto Industries, Inc. 100 4,050
-----------
69,394
-----------
Hotels & Restaurants (0.5%)
Marcus Corp. 200 6,925
Marriott International, Inc. 9,500 350,313
Prime Hospitality Corp.+ 3,200 31,600
Rio Hotel & Casino, Inc.+ 4,100 52,275
-----------
441,113
-----------
Household Products (0.1%)
Carnival Corp. 600 13,950
Oneida Ltd. 400 6,600
Premark International, Inc. 400 18,500
Toro Co. 1,500 43,313
-----------
82,363
-----------
Insurance (2.4%)
AFLAC, Inc. 1,700 69,275
Allied Group, Inc. 1,100 35,338
Allstate Corp. 12,825 471,319
American Bankers Insurance Group 2,000 71,500
Capital American Financial Corp. 200 3,925
Capital Guaranty Corp. 300 6,638
Chubb Corp. 1,100 98,863
Cigna Corp. 1,900 188,338
See Notes to Portfolio of Investments.
F-11
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Number of Market
Shares Value
--------- ------------
Commerce Group, Inc. 1,300 $ 26,406
Fremont General Corp. 1,100 31,900
Fund American Enterprises, Inc.+ 390 26,910
Gainsco, Inc. 15 129
General Re Corp. 500 72,438
Healthwise of America, Inc.+ 2,700 81,000
Home Beneficial Corp. Class B 200 4,925
Horace Mann Educators Corp. 3,100 82,538
Lawyers Title Corp. 200 3,225
Loews Corp. 200 29,325
Maxicare Health Plans, Inc.+ 3,100 54,250
Mercury General Corp. 900 37,800
MMI Companies, Inc. 200 4,475
Old Republic Intl 1,300 37,213
Orion Capital Corp. 800 32,800
Pxre Corporation 1,100 27,638
Reinsurance Group of America 1,700 58,438
Rightchoice Managed Care, Inc.+ 900 11,475
Safeco Corporation 3,700 237,494
Security-Connecticut Corp. 1,600 41,600
Selective Insurance Group 1,200 44,550
Transatlantic Holdings, Inc. 600 40,425
Transnational Re Corp. Class A+ 1,100 24,681
Transport Holdings, Inc.+ 57 2,266
Unitrin, Inc. 700 32,638
Vesta Insurance Group, Inc. 1,600 64,600
Washington National Corp. 1,100 25,025
-----------
2,081,360
-----------
Machinery & Equipment (1.8%)
Acme-Cleveland Corp. 1,600 35,000
Barnes Group, Inc. 400 15,000
Blount, Inc. Class A 1,800 78,075
Case Corp. 1,100 41,938
Centerior Energy Corp. 1,800 18,000
Central Sprinkler Corp.+ 600 19,350
Commercial Intertech Corp. 1,700 28,688
Danaher Corp. 1,700 52,700
Entergy Corp. 19,800 564,300
Fluor Corp. 2,000 113,000
FSI International, Inc.+ 4,000 95,500
Idex Corp. 400 15,100
Illinois Tool Works, Inc. 4,000 232,500
Indresco Inc.+ 1,200 20,550
JLG Industries, Inc. 1,600 37,400
Lam Research Corp.+ 700 $ 42,613
Lindsay Manufacturing Co.+ 400 13,900
Paccar, Inc. 2,200 92,400
Raymond Corp. (The) 1,050 21,263
Regal Beloit 1,500 27,000
Zero Corp. 500 7,625
-----------
1,571,902
-----------
Media & Entertainment (0.7%)
AMC Entertainment, Inc.+ 1,300 23,563
Belo Corp. Class A 1,400 48,475
Callaway Golf Co. 3,100 50,763
Chris-Craft Industries Inc. 824 32,857
GTECH Holdings Corp.+ 1,100 26,950
King World Productions, Inc.+ 7,600 265,050
Media General, Inc. 1,400 38,850
Polaris Industries, Inc. 4,350 121,800
Regal Cinemas, Inc.+ 100 3,913
-----------
612,221
-----------
Medical Supplies (0.1%)
CONMED Corp.+ 1,000 35,250
North American Biologicals, Inc.+ 2,900 23,381
-----------
58,631
-----------
Metals & Mining (2.4%)
AK Steel Holding Corp. 1,000 31,000
Alcan Aluminum Ltd. 7,300 230,863
Aluminum Co. of America 3,600 183,600
Ashland Coal, Inc. 200 4,750
Carpenter Technology Corp. 2,100 79,538
Castle, (A.M.) & Co. 1,400 34,125
Cleveland-Cliffs, Inc. 900 33,638
Commonwealth Aluminum Corp. 300 4,800
Cyprus Amax Minerals Co. 6,800 177,650
Handy & Harman 3,100 43,788
J & L Specialty Steel, Inc. 4,000 65,500
Kennametal Inc. 1,300 40,463
Lukens, Inc. 500 15,375
Magma Copper Co. 2,500 41,875
Mueller Industries, Inc.+ 3,400 79,900
Phelps Dodge Corp. 13,900 880,913
Rouge Steel 500 10,875
Santa Fe Pacific Gold Corp. 3,400 33,575
WHX Corp.+ 2,500 25,938
Zeigler Coal Holding Co. 1,200 14,100
-----------
2,032,266
-----------
See Notes to Portfolio of Investments.
F-12
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Number of Market
Shares Value
--------- ------------
Oil & Gas (5.7%)
Atlantic Richfield Co. 3,500 $ 373,625
Berry Petroleum Class A 1,000 10,250
Box Energy Corp. Class B+ 1,600 15,000
Camco International, Inc. 500 11,438
Chesapeake Energy Corp.+ 700 20,475
Chevron Corp. 2,200 102,850
Coda Energy, Inc.+ 1,500 11,297
Diamond Shamrock, Inc. 800 20,600
Enron Corp. 200 4,000
Exxon Corp. 14,700 1,122,649
Halliburton Co. 7,400 307,100
Hornbeck Offshore Services, Inc.+ 800 11,600
Laclede Gas Co. 200 4,075
Leviathan Gas Pipeline Partners L.P 3,300 82,088
Mobil Corp. 8,200 826,150
Oneok, Inc. 2,600 63,375
Pride Petroleum Services, Inc.+ 8,100 70,875
Royal Dutch Petroleum Co. 8,400 1,032,136
Schlumberger, Ltd. 300 18,675
Smith International, Inc.+ 5,000 80,000
Sonat Offshore Drilling Co. 2,300 73,025
Sun Company, Inc. 5,500 157,438
Tesoro Petroleum Corp.+ 2,300 18,113
Texaco 6,100 415,563
Tide West Oil Co.+ 600 7,125
Union Texas Petroleum Holdings, Inc. 1,900 34,200
Wiser Oil Co. 900 9,900
-----------
4,903,622
-----------
Paper & Containers (2.2%)
ACX Technologies Inc.+ 800 12,700
Boise Cascade Corp. 3,600 130,500
Champion International Corp. 5,300 283,550
Chesapeake Corp. 2,800 85,750
Consolidated Papers, Inc. 1,100 62,975
Georgia-Pacific Corp. 2,000 165,000
Longview Fibre Co. 2,000 29,000
Mead Corp. 7,300 420,663
Rayoner Inc. 1,400 52,500
Temple-Inland, Inc. 6,000 273,000
Willamette Industries, Inc. 6,200 361,150
-----------
1,876,788
-----------
Pharmaceuticals (5.1%)
Becton, Dickinson & Co. 7,300 474,500
Bristol-Myers Squibb Co. 7,000 $ 533,750
COR Therapeutics+ 1,300 13,325
Eli Lilly & Co. 1,925 186,003
Immulogic Pharmaceutical+ 400 4,650
Immunex Corp.+ 300 3,788
Johnson & Johnson 12,700 1,035,050
Medtronic, Inc. 8,800 508,200
Merck & Co., Inc. 5,400 310,500
Pfizer, Inc. 9,000 516,375
Schering Plough 10,600 568,425
Watson Pharmaceuticals, Inc.+ 3,100 139,500
-----------
4,294,066
-----------
Printing & Publishing (1.0%)
American Media Inc. 2,300 11,213
Banta Corp. 600 26,100
Cadmus Communications Corp. 1,600 39,200
Central Newspapers, Inc.--Class A 400 11,800
Devon Group, Inc.+ 900 34,875
Gannett Company, Inc. 4,900 266,438
Harte-Hanks Communications, Inc. 600 18,150
Lee Enterprises, Inc. 400 15,950
Pulitzer Publishing Co. 500 22,625
Scholastic Corp.+ 300 18,563
Tribune Co. 4,400 277,750
Washington Post Co. 500 145,000
-----------
887,664
-----------
Real Estate Investment Trusts (0.0%)
Santa Anita Realty Enterprises, Inc. 200 2,450
Smith (Charles E.) Residential Realty Co. 500 11,625
-----------
14,075
-----------
Retail (1.5%)
Albertson's, Inc. 6,400 212,800
Arbor Drugs, Inc. 600 10,875
Casey's General Stores, Inc. 1,200 27,750
Cash America International, Inc. 2,100 10,763
Claire's Stores, Inc. 1,800 35,325
Delchamps, Inc. 200 3,600
Fay's Drug Co. 2,900 23,200
Friedman's Inc. Class A+ 900 18,000
General Host Corp.+ 4,600 22,425
General Nutrition Companies, Inc.+ 2,800 69,300
Hannaford Brothers, Co. 400 10,450
Hills Stores Co.+ 500 3,750
See Notes to Portfolio of Investments.
F-13
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Number of Market
Shares Value
--------- ------------
Mac Frugal's Bargains+ 100 $ 1,188
Neiman Marcus Group, Inc. 3,400 58,225
Proffitt's Inc.+ 700 16,450
Rex Stores Corp.+ 300 5,100
Rite Aid Corp. 10,800 291,600
Russ Berrie & Co. Inc. 600 8,325
Sears Roebuck & Co. 8,000 272,000
St. John Knits, Inc. 700 33,513
Waban, Inc.+ 2,100 32,813
Wal-Mart Stores, Inc. 4,300 92,988
Weis Markets, Inc. 300 8,363
-----------
1,268,803
-----------
Telecommunications (2.2%)
AT& T Corp. 7,500 480,000
Ameritech Corp. 18,000 972,000
Computer Associates International, Inc. 6,350 349,250
Holophane Corp.+ 1,100 29,769
Lincoln Telecommunications Co. 600 10,425
Mobile Telecommunications Technologies Corp.+ 100 2,850
-----------
1,844,294
-----------
Transportation (0.8%)
Alaska Air Group, Inc.+ 500 7,438
American President Cos. Ltd. 2,100 50,925
AMR Corp.+ 4,100 270,600
Comair Holdings, Inc. 2,550 71,878
Conrail, Inc. 1,200 82,500
Expeditors International of Washington, Inc. 800 21,300
Florida East Coast Industries, Inc. 500 33,438
Landstar Systems, Inc.+ 200 5,300
M.S. Carriers, Inc.+ 100 1,575
Rural/Metro Corp.+ 1,000 24,125
UAL Corp.+ 400 70,350
-----------
639,429
-----------
Utilities - Electric (4.1%)
Boston Edison Co. 1,500 41,063
California Energy Co.+ 2,500 45,313
Central Hudson Gas & Electric Co. 2,000 61,250
Consolidated Edison Co. of New York 13,500 410,063
DQE, Inc. 1,500 41,250
General Public Utilities Corp. 7,900 246,875
Green Mountain Power Corp. 500 13,625
Houston Industrie 1,300 60,288
Illinova Corp. 1,300 36,888
Interstate Power Co. (Del.) 1,400 $ 40,600
LG&E Corp. 700 29,050
MDU Resources Group, Inc. 750 15,844
New England Electric System 1,100 42,900
New York State Electric & Gas Corp. 600 15,150
Nipsco Industries, Inc. 1,500 54,750
Northeast Utilities 900 22,275
Northwestern Public Service Co. 800 21,200
Oklahoma Gas & Electric Co. 1,200 48,000
Orange & Rockland Utilities, Inc. 700 24,588
Pacific Gas & Electric Co. 18,700 549,313
Peco Energy Co. 7,500 219,375
Philadelphia Suburban Corp. 300 5,775
Pinnacle West Capital Corp. 2,400 66,000
Portland General Corp. 2,100 56,963
San Diego Gas & Electric Co. 800 18,600
SCE Corp. 30,600 520,200
Sierra Pacific Resources 2,600 60,775
Southern California Water Co. 300 5,663
TNP Enterprises, Inc. 1,500 27,188
Unicom Corp. 15,800 517,450
United Illuminating Co. 1,900 72,200
Western Resources, Inc. 700 23,538
WPS Resources Corp. 1,400 43,575
-----------
3,457,587
-----------
Utilities - Natural Gas (0.5%)
Brooklyn Union Gas Co. (The) 1,400 35,175
Coastal Corp. (The) 4,400 142,450
South Jersey Industries, Inc. 800 16,400
Williams Cos. Inc. 5,600 216,300
-----------
410,325
-----------
Utilities - Oil & Gas (0.7%)
Atlanta Gas Light Co. 4,200 162,225
Connecticut Energy Corp. 200 3,875
Energen Corp. 1,800 40,725
Indiana Energy, Inc. 800 16,900
MCN Corp. 4,000 87,000
New Jersey Resources Corp. 600 15,000
Northwest Natural Gas Co. 400 12,900
Pacific Enterprises 3,100 76,725
Pennsylvania Enterprises, Inc. 300 10,425
Piedmont Natural Gas, Inc. 800 17,600
Public Service Co. 1,100 17,325
Southern Indiana Gas & Electric Co. 1,000 33,750
See Notes to Portfolio of Investments.
F-14
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Number of Market
Shares Value
--------- ------------
Southwest Gas Corp. 100 $ 1,513
Valero Energy Corp. 2,200 51,975
Washington Gas Light Co. 100 1,913
Wicor, Inc. 1,000 29,625
-----------
579,476
-----------
Utilities - Telephone (2.7%)
Bell Atlantic Corp. 9,400 598,075
BellSouth Corp. 5,000 382,500
Citizens Utilities Co.+ 37 407
GTE Corp. 8,300 342,375
Southern New England Telecom. Corp. 1,400 50,575
Sprint Corp. 23,000 885,500
Tellabs, Inc.+ 1,400 47,775
-----------
2,307,207
-----------
Total Common Stocks
(cost $48,010,099) $56,621,997
-----------
Preferred Stock (0.0%)
Citicorp, PERCS 1,876 34,002
Total Preferred Stocks
(cost $37,151) $ 34,002
-----------
Principal Market
Amount Value
---------- ------------
Long Term Bonds & Notes (30.7%)
U.S. Government Agency Mortgage-Backed Security (4.0%)
FNMA 1991-3 Z Tranche, 8.50%, 01/25/21 $3,289,660 $ 3,428,615
-----------
U.S. Treasury Securities (5.1%)
U.S. Treasury Bond, 7.625%, 02/15/25 250,000 290,469
U.S. Treasury Bond, 6.25%, 08/31/96 450,000 452,390
U.S. Treasury Bond, 7.50%, 01/31/97 1,400,000 1,431,937
U.S. Treasury Strip, 0.00%, 05/15/04 3,650,000 2,188,806
-----------
4,363,602
-----------
Corporate Bonds (16.5%)
Aerospace & Defense (0.5%)
Kaman Corp., 6.00%, 03/15/12 499,000 424,150
-----------
Autos & Auto Equipment (1.0%)
Exide Corp., 10.75%, 12/15/02 250,000 271,250
Exide Corp., 10.00%, 04/15/05 525,000 565,688
-----------
836,938
-----------
Diversified (1.4%)
Alcan Aluminum Ltd., 9.00%, 12/01/04 1,500,000 1,221,413
-----------
Financial Services (6.5%)
American General Finance Corp., 8.45%,
10/15/09 $1,000,000 $ 1,155,981
APP International Finance Co., 10.25%,
10/01/00 350,000 358,750
APP International Finance Co., 11.75%,
10/01/05 500,000 512,500
Commercial Credit Corp., 8.70%, 06/15/09 1,000,000 1,170,788
General Motors Acceptance Corp., 6.15%,
01/16/01 1,300,000 1,285,024
Swire Pacific, 8.50%, 09/29/04+++ 1,000,000 1,062,000
-----------
5,545,043
-----------
Media (2.8%)
News American Holdings, Inc., 8.50%,
02/23/25 700,000 795,258
Telewest Plc, 11.0%, 10/01/07 1,000,000 585,000
Viacom, 8.00%, 07/07/06 1,000,000 996,250
-----------
2,376,508
-----------
Paper & Containers (1.2%)
Stone Container Corp., 9.875%, 02/01/01 1,020,000 1,014,900
-----------
Retail (1.2%)
Ralph's Grocery, 10.45%, 06/15/04 1,000,000 1,007,500
-----------
Telecommunications (1.0%)
Centennial Cellular Corp., 10.125%,
05/15/05 850,000 875,500
-----------
Utilities--Electric (0.9%)
CMS Energy Corp., 9.875%, 10/01/99 750,000 772,405
-----------
Total Corporate Bonds
(cost $13,326,397) $14,074,357
-----------
Foreign & Supranational Obligations (2.8%)
African Development Bank, 8.80%,
09/01/19 1,000,000 1,239,709
Poland Discount Bond, 7.125%, 10/27/24 1,000,000 766,250
Transport de Gas Del Sur, 7.75%,
12/23/98 400,000 357,000
-----------
2,362,959
-----------
Non-Agency Mortgage-Backed Securities (2.3%)
Merrill Lynch Mortgage Investors,
7.7945%, 06/15/21 958,330 975,999
Resolution Trust Corp. 1991 17B6, 8.20%,
09/25/21 1,000,000 1,000,591
-----------
1,976,590
-----------
Total Long-Term Bonds & Notes
(cost $25,279,662) $26,206,123
-----------
See Notes to Portfolio of Investments.
F-15
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Principal Market
Amount Value
---------- ------------
Short-Term Investments (2.2%)
Columbia/HCA Healthcare Corp., 6.00%,
11/01/95+++ $1,698,000 $ 1,698,000
U.S. Treasury Note, 9.25%, 01/15/96 200,000 201,460
-----------
Total Short-Term Investments
(cost $1,899,395) $ 1,899,460
-----------
(cost $75,226,307) (a) $84,761,582
Other assets less liabilities 541,304
-----------
Total Net Assets $85,302,886
-----------
Notes to Portfolio of Investments
+ Non-income producing security.
+++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the
Securities Act of 1933, as amended. These securites have been determined
to be liquid under guidelines established by the Board of Directors.
(a) The cost of investments for federal income tax purposes is $75,249,819.
Unrealized gains and losses, based on identified tax cost at October 31,
1995 are as follows:
Unrealized gains $10,291,422
Unrealized losses (732,635)
-----------
Net unrealized gains $ 9,558,787
===========
Category percentages are based on net assets.
See Notes to Financial Statements.
F-16
<PAGE>
Portfolio of Investments
October 31, 1995
The Aetna Fund
Information concerning open futures contracts is shown below:
No. of Initial Expiration Unrealized
Contracts Value Date Gain/Loss
--------- ---------- --------- ----------
S&P 500 December 95 short 9 $2,600,100 12/15/95 $(27,225)
S&P 500 December 95 short 16 4,646,666 12/15/95 (24,134)
S&P 500 December 95 short 4 1,171,500 12/15/95 3,800
---------
$(47,559)
=========
See Notes to Financial Statements.
F-17
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Common Stocks (93.4%)
Aerospace & Defense (1.2%)
Gencorp, Inc. 2,400 $ 25,200
Kaman Corp. Class A 2,700 29,363
Lockheed Martin Corp. 12,500 851,563
McDonnell Douglas Corp. 36,000 2,942,999
United Technologies Corp. 5,100 452,625
------------
4,301,750
------------
Apparel (1.5%)
Chic By H I S, Inc.+ 1,400 7,700
Coats Viyella Plc 21,200 62,554
Kurabo Industries 33,000 112,318
Nike, Inc. 57,600 3,268,799
VF Corp. 40,200 1,924,574
Wolverine World Wide, Inc. 1,500 45,000
------------
5,420,945
------------
Autos & Auto Equipment (0.8%)
Autoliv AB 700 40,144
Bandag, Inc. 1,800 92,250
Borg Warner Automotive, Inc. 6,500 191,750
Johnson Controls, Inc. 8,000 466,000
Kaydon Corp. 2,800 80,850
Masland Corp. 2,600 36,075
Mitsubishi Motors Corp. 12,000 99,995
Smith (A.O.) Corp. 4,300 89,225
Snap On, Inc. 25,000 1,059,375
Varity Corp.+ 16,000 580,000
Volvo AB Class B 2,000 45,006
------------
2,780,670
------------
Banks (7.7%)
AMMB Holdings Bhd 2,000 24,774
Associated Banc-Corp. 1,050 39,900
Bank of Boston Corp. 16,600 738,700
Bank of New York Co., Inc. 28,000 1,176,000
BankAmerica Corp. 65,200 3,748,999
Bankers Corp. 3,100 52,894
Barnes Group, Inc. 1,100 41,250
Barnett Banks, Inc. 26,400 1,458,599
Baybanks, Inc. 3,200 258,800
Bell Bancorp, Inc. 200 5,925
Brooklyn Bancorp, Inc.+ 2,200 86,763
Canadian Imperial Bank of Commerce 1 17
CCB Financial Corp. 1,000 49,375
Charter One Financial, Inc. 2,400 $ 67,950
Chemical Banking Corp. 74,600 4,242,874
Citicorp 37,600 2,439,299
Citizens Bancorp 600 19,725
City National Corp. 15,700 208,025
Coast Savings Financial, Inc.+ 4,400 116,050
Comercial Net Lease Realty 1,600 20,400
Commerce Asset Holdings Bhd 8,000 39,638
Corestates Financial Corp. 17,500 636,563
Creditanstalt-Bankverein 1,500 74,771
Cullen/Frost Bankers, Inc. 2,600 131,625
Den Danske Bank 1,100 72,844
Development Bank of Singapore Ltd. 12,000 137,424
FFY Financial Corp. 1,700 36,656
First American Corp. (Tenn.) 5,700 249,731
First Chicago Corp. 43,800 2,972,924
First Commonwealth Financial Corp. 1,100 18,150
First Empire State Corp. 300 59,025
First Interstate Bancorp 25,700 3,315,299
First Tennessee National Corp. 2,100 112,875
Firstier Financial, Inc. 300 12,825
Hawkeye Bancorporation 100 2,431
JSB Financial, Inc. 2,100 64,706
Jyske Bank AS 300 19,647
KeyCorp 4,300 145,125
Loyola Capital Corp. 300 10,725
Mark Twain Bancshares, Inc. 1,200 41,850
Michigan National Corp. 1,200 131,850
Midlantic Corp. 700 37,188
N.S. Bancorp, Inc. 100 3,631
Nationsbank, Corp. 45,800 3,011,349
North Fork Bancorporation, Inc. 3,200 70,000
Northern Trust Corp. 3,800 180,500
Iversea-Chinese Banking 8,000 93,878
Premier Bancorp, Inc. 1,100 22,756
Queens County Bancorp, Inc. 3,200 128,800
Reliance Bancorp, Inc. 4,200 61,163
River Forest Bancorp, Inc. 400 9,350
Security Capital Corp.+ 2,400 131,100
Silicon Valley Bancshares+ 500 9,813
St. Francis Capital Corp.+ 800 18,100
Standard Financial, Inc.+ 2,300 31,913
See Notes to Portfolio of Investments.
F-18
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Star Banc Corp. 4,100 $ 227,038
Susquehanna Bancshares, Inc. 400 11,650
Trustmark Corp. 600 11,475
U.S. Trust Corp. 300 14,438
Union Planters Corp. 8,100 248,063
Zion Bancorporation 2,000 139,000
------------
27,544,208
------------
Building Materials & Construction (0.7%)
American Buildings Co.+ 2,500 62,813
Butler Manufacturing Co. 600 17,625
Champion Enterprises, Inc.+ 10,000 258,750
Clayton Homes Inc. 9,600 252,000
Continental Homes Holding Corp. 1,400 28,700
Det Danske Traelastkompagni 300 21,403
Elcor Corp. 1,800 37,800
Fujita Corp. 26,000 118,245
Granite Construction, Inc. 4,800 136,800
Hume Industries (Malaysia) Bhd 4,000 21,392
Kon. Volker Stevin N.V. 500 32,118
Lennar Corp. 4,700 107,513
Lindab AB Class B 2,000 43,538
Metra OY Class B 700 30,327
NCI Building Systems, Inc.+ 900 21,150
Nippon Densetsu Kogyo 15,000 143,039
Pulte Corp. 10,000 316,250
Radex-Heraklith Industrial AG 1,000 29,666
Redman Industries, Inc.+ 3,800 99,750
Sanki Engineering 5,000 48,413
Skyline Corp. 1,800 31,500
Stone & Webster, Inc. 1,200 40,350
Strabag Oesterreich AG 300 29,969
Texas Industries, Inc. 2,200 115,775
Toll Brothers, Inc.+ 5,700 101,888
Tredegar Industries, Inc. 900 26,213
U S Home Corp.+ 1,200 32,250
UNR Industries, Inc. 1,500 12,422
VA Technologie AG 700 81,088
Vulcan Materials Co. 900 50,063
Webb (Del E.) Corp. 3,300 68,475
Wienerberger Baustoffindustrie AG 225 45,181
Wing Tai Holdings 54,000 93,525
------------
2,555,991
------------
Chemicals (3.4%)
Airgas, Inc.+ 600 15,975
ARCO Chemical Co. 3,900 $ 191,100
B.F. Goodrich Co. 4,300 283,263
Cabot Corp. 3,100 147,250
Chemed Corp. 1,600 56,000
Cytec Industries+ 2,400 131,400
Dow Chemical Co. 35,000 2,401,874
du Pont (E.I.) de Nemours 36,000 2,245,499
Dyno Industrier AS 1,300 26,296
Eastman Chemical Co. 13,700 815,150
Great Lakes Chemical Corp. 2,300 154,388
Lyondell Petrochemical Co. 12,600 269,325
Norsk Hydro AS 6,400 254,808
OM Group, Inc. 2,200 64,213
PPG Industries, Inc. 21,300 905,250
Sekisui Chemical Co. 11,000 143,088
Sigma-Aldrich Corp. 27,000 1,289,250
The Geon Co. 9,900 246,263
Union Carbide Corp. 56,000 2,120,999
Valspar Corp. 100 3,900
Vigoro Corp. 6,300 273,263
Wellman, Inc. 10,900 256,150
------------
12,294,704
------------
Commercial Services (0.3%)
ADVO, Inc. 1,900 48,450
California Water Service Co. 400 13,300
Devry, Inc.+ 6,400 144,000
GRC International, Inc.+ 2,100 46,463
Health Management Systems, Inc.+ 150 4,838
Inchcape Plc 22,823 112,719
Interim Services, Inc.+ 500 14,750
Kindercare Learning Centers, Inc.+ 4,200 56,700
Manpower, Inc. 8,300 225,138
Orkla AS Class A 3,000 155,081
Robert Half International Inc.+ 9,400 343,100
Stewart Enterprises, Inc. 600 20,250
------------
1,184,789
------------
Computer & Office Equipment (3.7%)
Adaptec, Inc.+ 4,200 187,425
CANON, Inc. 10,000 171,158
Ceridian Corp.+ 20,800 904,800
Champion Industries, Inc. 600 12,525
Comdisco, Inc. 3,200 97,600
Compaq Computer Corp.+ 27,000 1,505,249
Dell Computer Corp.+ 12,000 558,750
See Notes to Portfolio of Investments.
F-19
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Ennis Business Forms, Inc. 100 $ 1,425
Fair Isaac & Co., Inc. 200 5,550
Fujitsu Ltd. 14,000 167,050
Gateway 2000, Inc.+ 4,300 143,781
Harris Corp. 3,900 226,688
In Focus Systems, Inc.+ 5,100 167,663
International Business Machines, Inc. 39,900 3,880,274
Komag, Inc.+ 2,900 165,481
Moore Corp. Ltd. 45,000 860,625
Read-Rite Corp.+ 15,100 527,556
Standard Register Co. 700 15,925
Sun Microsystems, Inc.+ 28,500 2,226,562
Telxon Corp. 100 2,294
Trident Microsystems, Inc.+ 2,000 60,000
Xerox Corp. 9,300 1,206,675
------------
13,095,056
------------
Computer Software (1.1%)
Acxiom Corp.+ 2,500 74,375
American Management Systems, Inc.+ 1,600 46,500
Analysts International Corp. 400 11,850
Autodesk, Inc. 4,000 135,250
BMC Software Inc.+ 4,000 143,000
Boole & Babbage, Inc.+ 1,000 36,375
Borland International, Inc.+ 5,700 77,306
Cadence Design Systems, Inc.+ 11,100 357,975
Cheyenne Software, Inc.+ 8,500 177,438
Cirrus Logic, Inc.+ 8,400 353,325
Computron Software, Inc.+ 5,000 86,250
Continum, Inc.+ 200 7,875
Electronic Arts, Inc.+ 4,700 172,431
Hogan Systems, Inc.+ 4,300 38,431
Hyperion Software Corp.+ 1,000 48,875
Inso Corp.+ 200 7,100
Kronos, Inc.+ 1,500 70,313
Macneal-Schwendler Corp. 2,000 30,500
Microsoft Corp.+ 12,900 1,290,805
Policy Management Systems+ 100 4,713
Reynolds & Reynolds Co. 4,700 167,438
Security Dynamics Technologies, Inc.+ 200 6,450
Shiva Corp.+ 300 18,038
Softdesk, Inc.+ 1,000 22,875
Sterling Software, Inc.+ 6,000 276,750
Sungard Data Systems, Inc.+ 5,600 156,100
TGV Software, Inc.+ 1,700 $ 15,725
------------
3,834,063
------------
Consumer Products (0.8%)
Block Drug Co. Class A 500 19,313
Cobra Golf, Inc.+ 4,700 123,375
Dekalb Genetics Corp. Class B 400 17,000
Eastman Kodak Co. 13,200 826,650
First Brands Corp. 6,100 279,075
Guilford Mills, Inc. 500 11,063
Helene Curtis Industries, Inc. 400 11,950
Libbey, Inc. 800 16,400
Liz Claiborne Inc. 45,900 1,302,412
Maybelline, Inc. 2,300 54,338
Reckitt & Coleman Plc 10,331 109,708
------------
2,771,284
------------
Diversified (1.4%)
Alusuisse-Lonza Holding 40 30,550
Astec Industries, Inc.+ 900 10,856
BIC Corp. 1,300 52,325
Dover Corp. 84,200 3,325,899
GN Store Nord AS 300 22,226
Griffon Corp.+ 2,800 23,450
Hagemeyer N.V. 1,020 50,739
Harrisons & Crosfield Plc 40,340 92,296
Harsco Corp. 5,100 269,025
Helix Technology Corp. 1,200 44,400
Kulicke & Soffa Industries, Inc.+ 10,000 353,750
Lonrho Plc 33,300 82,231
Lydall, Inc.+ 1,300 29,575
Oasis Residential Inc. 24,000 522,000
Plantronics, Inc.+ 700 23,363
SPS Technologies, Inc.+ 400 15,600
Standex International Corp. 1,100 36,025
Valmet Corp. Class A 2,000 55,567
Varlen Corp. 1,560 42,120
------------
5,081,997
------------
Electrical & Electronics (3.3%)
Amphenol Corp.+ 5,400 116,775
Applied Materials, Inc.+ 10,000 501,875
Austria Mikro Systeme International 300 55,549
See Notes to Portfolio of Investments.
F-20
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Bang & Olufsen Holding Co. 1,000 $ 30,916
Cohu, Inc. 1,400 43,225
CTS Corporation 500 16,625
Cypress Semiconductor Corp.+ 9,200 324,300
Dallas Semiconductor Corp. 3,800 80,750
Dovatron International, Inc.+ 1,000 31,000
Electro Scientific Industries, Inc.+ 800 25,000
Esterline Technologies+ 3,200 74,000
FPL Group, Inc. 50,800 2,127,249
Glenayre Technologies, Inc.+ 4,950 319,894
Hadco Corp.+ 6,700 187,600
Hewlett Packard Co. 38,000 3,519,749
Hitachi Koki 17,000 151,636
Intel Corp. 6,700 468,581
Kyocera Corp. 1,000 81,960
Logicon Inc. 5,200 118,950
Matsushita Electric Industrial Co. 9,000 127,635
Mentor Graphics Corp.+ 3,600 76,050
Micron Technology Inc. 19,800 1,398,374
MTS Systems Corp. 300 8,588
Nintendo Co. Ltd. 3,000 220,646
Nokia AB Class A 4,700 268,913
Novellus Systems, Inc.+ 2,900 199,375
Philips Electronics N.V. 3,800 146,700
Pioneer Standard Electronics 1,050 14,372
Quickturn Design System, Inc.+ 6,200 63,550
Ramtron International Corp.+ 300 3,019
Rohm Co. 3,000 182,209
Seagate Technology, Inc.+ 8,900 398,275
Telefonaktiebolaget Ericsson 2,200 46,692
Tencor Instruments+ 2,100 89,775
Unitrode Corp.+ 1,600 43,000
Varian Associates, Inc. 5,600 287,700
Venture Manufacturing Ltd. 11,000 33,593
Wyle Electronics 2,100 89,513
------------
11,973,613
------------
Electrical Equipment (4.6%)
3Com Corp.+ 6,600 309,788
ADflex Solutions, Inc.+ 2,100 54,863
Allgon AB Class B 1,500 22,691
AMP Inc. 8,200 321,850
Arrow Electronics, Inc.+ 7,352 373,114
Avnet, Inc. 5,900 297,213
Belden Inc. 2,700 65,138
Burr-Brown Corp.+ 3,600 $ 114,300
Cellstar Corp.+ 200 5,500
Charter Power Systems, Inc. 200 5,075
Cidco, Inc.+ 1,600 47,100
Dionex Corp.+ 700 37,538
Draka Holding N.V. 1,200 33,036
Emerson Electric Co. 13,700 976,125
General Electric Co. 66,400 4,199,799
Harman International Industries 3,465 159,823
Hitachi Ltd. (Hit. Seisakusho) 22,000 225,928
Honeywell, Inc. 14,000 588,000
International Rectifier Corp.+ 8,900 401,613
Kemet Corp.+ 4,300 147,275
Kent Electronics Corp.+ 6,300 307,125
Linear Technology Corp. 800 35,100
Marshall Industries+ 1,900 66,975
Methode Electronics, Inc. Class A 1,000 23,250
Microchip Technology Corp.+ 11,700 463,613
Nichicon 5,000 67,485
Park Electrochemical Corp. 2,400 75,000
Parker-Hannifin Corp. 76,500 2,581,874
Pittway Corp. Class A 900 53,888
Ross Stores Inc. 7,200 112,950
SCI Systems, Inc.+ 3,400 119,850
Sundstrand Corp. 2,200 134,750
Tektronix, Inc. 1,000 59,250
Teradyne, Inc.+ 10,000 333,750
Texas Instruments, Inc. 52,400 3,576,299
Valmont Industries 700 16,931
------------
16,413,859
------------
Financial Services (4.0%)
Abbey National Plc 11,900 100,551
ABN-Amro Holding N.V. 1,762 73,942
Advanta Corp. Class A 1,100 42,763
ALBANK Financial Corp. 1,600 46,400
Alex Brown & Sons, Inc. 4,800 234,600
Astoria Financial Corp. 2,700 116,100
AT&T Capital Corp. 700 28,000
Bank of Montreal 3,700 81,840
Barclays Plc 10,600 124,272
Bear Sterns Co., Inc. 10,700 212,663
CNA Financial Corp.+ 2,300 262,200
See Notes to Portfolio of Investments.
F-21
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Commercial Federal Corp. 2,700 $ 88,763
Crestar Financial Corp. 3,800 216,600
Dean Witter Discover and Co. 29,100 1,447,724
Deposit Guaranty Corp. 1,600 70,600
Donaldson Lukin & Jenrette, Inc.+ 1,700 50,469
Duff & Phelps Corp. 5,900 64,163
Edwards (A.G.), Inc. 1,400 35,700
Federal National Mortgage Association 15,900 1,667,512
Fokus Banken AS+ 5,000 26,489
Fort Wayne National Corp. 400 12,600
Great Financial Corp. 2,800 57,925
Greenpoint Financial Corp. 9,200 249,550
Home Financial Corp. 4,100 63,038
HSBC Holdings Plc 8,837 129,399
Internationale Nederlanden Groep N.V. 1,300 77,419
Kagoshima Bank 6,000 44,599
Leader Financial Corp. 4,300 153,725
Legg Mason, Inc. 1,200 34,500
Liberty Financial Co. 50 1,388
Lion Land Bhd 45,000 48,663
Merrill Lynch & Co., Inc. 30,000 1,664,999
Orient Corp. 10,000 45,381
Peoples Heritage Financial Group 5,000 95,625
Pioneer Group, Inc. 1,500 39,375
Promise Co. Ltd. 2,400 94,596
Rashid Hussain Bhd 12,000 29,729
RCSB Financial, Inc. 3,900 87,019
Royal Bank of Canada 2,900 64,954
Sanyo Shinpan Finance Co. 2,000 142,794
Schweizerischer Bankverein 140 57,404
Skandinaviska Enskilda Banken 3,900 26,299
Student Loan Corp. 100 3,150
Svenska Handelsbanken 2,500 43,839
Topdanmark AS+ 200 23,415
TR Financial Corp. 4,400 109,450
Transamerica Corp. 28,700 1,944,424
Travelers, Inc. 76,300 3,853,149
Union Bank 4,000 201,000
Unitas Bank Ltd. Class A+ 14,900 36,135
United Overseas Bank Ltd. 3,600 31,557
Yasuda Trust & Banking 9,000 40,227
------------
14,498,678
------------
Foods & Beverages (7.1%)
Bols Wessanen CVA 13 257
Cadbury Schweppes Plc 10,000 $ 82,524
Cagle's, Inc. 1,300 19,500
Cerebos Pacific Ltd. 7,000 43,546
Coca-Cola Co. 55,100 3,960,312
Coca-Cola Enterprises, Inc. 7,800 207,675
Conagra, Inc. 108,400 4,186,949
CPC International Inc. 33,000 2,190,374
Cultor Oy 800 33,152
Danisco AS 1,500 68,325
Goodmark Foods, Inc. 900 16,425
Heinz (H.J.) Co. 8,000 372,000
Hershey Foods Corp. 3,500 209,125
Hillsdown Holdings Plc 30,707 81,400
Hometown Buffet, Inc.+ 900 11,644
Hormel Foods Corp. 2,300 52,900
Hudson Foods, Inc. Class A 11,250 158,906
Huhtamaki Group Class I 1,500 44,501
IBP, Inc. 7,400 443,075
International Multifoods Corp. 3,500 71,750
Katokichi 8,000 146,315
Kikkoman+ 12,000 85,677
Kroger Co. (The)+ 35,000 1,168,125
McDonald's Corp. 85,000 3,484,999
Michael Foods, Inc. 1,600 19,700
Molson Companies Ltd. 3,200 51,450
Mondavi (Robert) Corp.+ 3,400 96,475
Nash-Finch Co. 1,300 22,994
Nestle SA Registered 55 57,589
Oester Brau-Beteiligungs 700 35,953
PepsiCo, Inc. 44,700 2,357,924
Richfood Holdings, Inc. 500 12,563
Safeway, Inc.+ 6,700 316,575
Sara Lee Corp. 99,600 2,925,749
Super Food Services, Inc. 1,400 18,725
Superfos AS 300 26,617
Supervalu, Inc. 70,000 2,152,499
Thorn Apple Valley 1,000 16,875
Unilever N.V. 1,800 235,800
Universal Foods Corp. 1,700 58,225
------------
25,545,169
------------
Health Services (1.1%)
AHI Healthcare Systems, Inc.+ 6,000 85,500
Baxter International, Inc. 31,500 1,216,688
Bergen Brunswig Corp. Class A 2,800 58,100
See Notes to Portfolio of Investments.
F-22
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Columbia/HCA Healthcare Corp. 25,300 $1,242,863
Genetics Institute, Inc.+ 400 14,950
Health Management Associates, Inc.+ 2,100 45,150
HealthCare Compare Corp.+ 2,400 89,100
Healthdyne Technologies, Inc.+ 1,400 15,313
Horizon/CMS Healthcare Corp.+ 12,200 247,050
Invacare Corp. 6,200 155,000
Lincare Holdings, Inc.+ 7,800 195,488
Nellcor, Inc.+ 3,600 207,900
North American Biologicals, Inc.+ 7,700 62,081
Sun Healthcare Group, Inc.+ 4,600 54,625
Universal Health Services, Inc.+ 4,300 161,250
Vencor, Inc.+ 2,337 64,852
------------
3,915,910
------------
Health Technology (0.9%)
Alpharma Inc. Class A 2,100 50,400
Becton, Dickinson & Co. 30,000 1,949,999
Guidant Corp. 17,297 553,504
Haemonetics Corp.+ 2,200 41,525
Immunex Corp.+ 800 10,100
Rhone-Poulenc Rorer, Inc. 5,800 273,325
Spacelabs Medical, Inc.+ 700 17,850
Sybron International Corp.+ 5,300 225,250
------------
3,121,953
------------
Home Furnishings & Appliances (0.1%)
Electrolux AB Class B 700 29,924
Forbo Holding AG 50 21,073
Haverty Furniture Co., Inc. 2,500 34,375
Kimball International, Inc. Class B 600 15,488
Leggett & Platt, Inc. 7,800 187,200
------------
288,060
------------
Hotels & Restaurants (0.6%)
Compass Group Plc 13,100 88,883
Hotel Properties Ltd. 18,000 27,230
La Quinta Inns Inc. 5,200 133,900
Marcus Corp. 400 13,850
Marriott International, Inc. 43,800 1,615,124
Prime Hospitality Corp.+ 7,300 72,088
RFS Hotel Investors Inc. 11,300 172,325
Sonic Corp.+ 6,250 135,938
------------
2,259,338
------------
Household Products (0.2%)
Carlisle Cos., Inc. 600 $ 24,675
Oneida, Ltd. 600 9,900
Premark International, Inc. 5,200 240,500
Springs Industries, Inc. Class A 8,000 343,000
Toro Co. 2,200 63,525
------------
681,600
------------
Insurance (3.2%)
Acceptance Insurance Cos. Inc.+ 1,400 21,000
Aegon N.V. 2,856 108,268
Aflac, Inc. 8,800 358,600
Allied Group, Inc. 1,400 44,975
Allstate Corp. 76,342 2,805,568
American Bankers Insurance Group 5,200 185,900
American Financial Group, Inc. 2,500 70,000
Baloise Holding Ltd. 15 30,752
Capital American Financial Corp. 1,100 21,588
Capital Guaranty Corp. 400 8,850
Cigna Corp. 12,900 1,278,713
CMAC Investment Corp. 5,900 280,250
Conseco, Inc. 1,900 98,563
EA-generali AG 300 82,037
Equitable of Iowa Cos. 1,600 56,000
Fremont General Corp. 5,110 148,190
Frontier Insurance Group, Inc. 700 20,038
Fund American Enterprises, Inc.+ 804 55,476
Gallagher (Arthur J.) & Co. 2,100 74,288
General Re Corp. 21,500 3,114,812
Guardian Royal Exchange Plc 23,700 85,637
Healthwise of America, Inc.+ 3,500 105,000
Horace Mann Educators Corp. 6,000 159,750
Lawyers Title Corp. 600 9,675
Loews Corp. 1,900 278,588
Maic Holdings, Inc.+ 400 12,100
Markel Corp.+ 400 29,250
Maxicare Health Plans, Inc.+ 11,400 199,500
NAC Re Corp. 700 24,588
Orion Capital Corp. 2,200 90,200
Penncorp Financial Group, Inc. 1,300 31,038
Prudential Reinsurance Holdings, Inc.+ 3,400 69,275
Pxre Corp. 900 22,613
Reliastar Financial Corp. 2,445 102,079
Royal Insurance Holdings Plc 13,800 85,140
Safeco Corp. 6,100 391,544
Security-Connecticut Corp. 2,200 57,200
See Notes to Portfolio of Investments.
F-23
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Selective Insurance Group 2,100 $ 77,963
Transatlantic Holdings, Inc. 2,900 195,388
Transport Holdings, Inc.+ 381 15,145
Trenwick Group, Inc. 300 14,925
UNI Storebrand AS+ 28,500 143,667
Unitrin, Inc. 3,800 177,175
Vesta Insurance Group, Inc. 4,400 177,650
Winterthur Schweizerische Versich 45 30,132
Zurich Versicherungs-Gesellschaft 225 64,342
------------
11,513,432
------------
Leisure & Entertainment (0.2%)
Chris-Craft Industries Inc. 3,830 152,721
Grand Casinos, Inc.+ 3,200 127,200
HBO & Co. 1,200 84,750
Leisure Management Bhd 15,000 38,635
Mirage Resorts, Inc.+ 7,000 229,250
------------
632,556
------------
Machinery & Equipment (0.9%)
Acme-Cleveland Corp. 2,000 43,750
Allied Products, Corp. 1,000 21,000
Applied Power, Inc. 1,300 39,488
Blount, Inc. Class A 1,400 60,725
Case Corp. 6,600 251,625
Danaher Corp. 3,600 111,600
Electroglas, Inc.+ 200 14,200
Fluor Corp. 18,700 1,056,550
FSI International, Inc.+ 1,000 23,875
Georg Fischer AG 15 20,722
Illinois Tool Works, Inc. 9,600 558,000
Indresco Inc.+ 7,900 135,288
Jenbacher Werke AG 300 48,435
JLG Industries, Inc. 1,600 37,400
Kone Corp. Class B 200 18,224
Koyo Seiko Co. Ltd. 10,000 79,711
Lam Research Corp.+ 3,700 225,238
Landis & Gyr 35 21,095
Modine Manufacturing Co. 500 13,875
Opal, Inc.+ 1,700 25,713
Raymond Corp. (The) 525 10,631
Regal Beloit 2,300 41,400
Tecumseh Products Co. Class A 1,400 66,325
Tsubakimoto Chain 23,000 107,976
Tsukishima Kikai 5,100 99,760
------------
3,132,606
------------
Manufacturing (0.4%)
Fuji Photo Film 4,000 $ 98,978
Teledyne, Inc. 3,200 79,600
Textron Inc. 16,700 1,148,125
------------
1,326,703
------------
Media & Entertainment (0.6%)
Belo Corp. Class A 5,400 186,975
Carmike Cinemas Class A+ 900 18,788
Finnair OY 2,500 18,130
Genting Bhd 6,000 51,671
Granada Group Plc 5,500 58,666
GTECH Holdings Corp.+ 4,600 112,700
Heritage Media Corp. Class A+ 300 8,325
King World Production, Inc.+ 46,000 1,604,249
Magnum Corp. Bhd 21,000 35,674
Media General, Inc. 2,300 63,825
Regal Cinemas, Inc.+ 3,600 140,850
------------
2,299,853
------------
Metals & Mining (2.9%)
Acme Metals, Inc.+ 1,500 22,406
AK Steel Holding Corp. 2,800 86,800
Alcan Aluminum Ltd. 36,700 1,160,744
Aluminum Co. of America 22,700 1,157,700
Asarco Inc. 14,300 461,175
Ashland Coal Inc. 1,100 26,125
Brenco, Inc. 1,100 12,925
British Steel Plc 100 258
Carpenter Technology Corp. 6,000 227,250
Cleveland-Cliffs, Inc. 3,900 145,763
Commonwealth Aluminum Corp. 4,600 73,600
Cyprus Amax Minerals Co. 85,600 2,236,299
Dofasco, Inc. 4,824 60,972
Falconbridge Ltd. 2,200 48,457
Handy & Harman 6,100 86,163
J & L Specilty Steel, Inc. 10,600 173,575
Kalmar Industries 1,100 17,882
Kennametal Inc. 17,100 532,238
Kon. Ned. Hoogovens En 23 786
Lukens, Inc. 2,500 76,875
MAF Bancorp, Inc. 440 11,000
Magma Copper Co. 11,800 197,650
Minerals Technologies, Inc. 500 19,938
Mueller Industries, Inc.+ 7,600 178,600
Nucor Corp. 4,300 206,938
See Notes to Portfolio of Investments.
F-24
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Phelps Dodge Corp. 44,500 $ 2,820,187
Quanex Corp. 1,000 19,750
Rautaruukki Oy 5,000 27,430
Santa Fe Pacific Gold Corp. 32,800 323,900
SSAB Svenskt Sta AB 3,000 30,029
WHX Corp.+ 6,700 69,513
------------
10,512,928
------------
Oil & Gas (9.0%)
Alberta Energy Co. Ltd.+ 2,200 34,349
Amoco Corp. 13,790 880,836
Atlantic Richfield Co. 12,700 1,355,724
BJ Services Co.+ 6,200 145,700
Box Energy Corp. Class B+ 1,200 11,250
Burmah Castrol Plc 6,700 104,134
Camco International, Inc. 5,400 123,525
Chesapeake Energy Corp.+ 2,200 64,350
Coda Energy, Inc.+ 1,500 11,297
Conwest Exploration Co. 3,300 57,965
Diamond Shamrock, Inc. 4,500 115,875
Enron Oil & Gas Co. 4,200 84,000
Exxon Corp. 100,000 7,637,499
Global Industries Ltd.+ 2,700 71,550
Halliburton Co. 44,800 1,859,199
Imperial Oil Ltd. 9 344
KCS Energy, Inc. 1,200 13,650
Leviathan Gas Pipeline Partners L. P. 4,700 116,913
Mobil Corp. 55,400 5,581,549
Newpark Resources, Inc.+ 100 1,606
Occidental Petroleum Corp. 34,000 731,000
OEMV AG 800 69,020
Oneok, Inc. 6,500 158,438
Panhandle Eastern Corp. 19,700 497,425
Petro-Canada 5,800 62,528
Petronas Gas Bhd+ 8,000 27,055
Pride Petroleum Services, Inc.+ 6,700 58,625
Royal Dutch Petroleum Co. 54,000 6,635,249
Schlumberger Ltd. 1,900 118,275
Shell Transport & Trading Co. 18,600 1,325,249
Smith International, Inc.+ 19,200 307,200
Sonat Offshore Drilling Co. 6,500 206,375
Sun Company, Inc. 34,600 $ 990,425
Tesoro Petroleum Corp.+ 5,300 41,738
Texaco, Inc. 37,900 2,581,937
Tide West Oil Co.+ 1,200 14,250
Union Texas Petroleum Holdings, Inc. 9,900 178,200
------------
32,274,304
------------
Paper & Containers (2.6%)
Abitibi-Price Inc. 2,600 45,428
ACX Technologies, Inc.+ 1,000 15,875
Asia Pulp & Paper Co. Ltd.+ 16,000 164,000
Bobst SA 7 10,594
Boise Cascade Corp. 20,000 725,000
Champion International Corp. 37,600 2,011,599
Chesapeake Corp. 7,600 232,750
Consolidated Papers Inc. 5,400 309,150
Glatfelter (P.H.) Co. 1,500 27,750
Kymmene OY 1,600 43,700
Leykam-Muerztaler Papier+ 700 27,618
Longview Fibre Co. 600 8,700
Macmillan Bloedel Ltd. 5,000 65,985
MayrMelnhof Karton AG 950 55,408
Mead Corp. 35,000 2,016,874
Metsa Serla Class B 1,000 37,202
Missouri Och Domsjoe AB 500 25,438
Rayoner Inc. 8,200 307,500
Repola Oy 2,900 56,128
Rock-Tenn Co. Class A 400 6,600
Royal PTT Nederland N.V. 2,814 98,840
Stone-Consolidated Corp.+ 2,900 40,158
Stora Kopparbergs Bergs 2,500 30,292
Temple-Inland, Inc. 18,000 819,000
Willamette Industries, Inc. 36,100 2,102,824
------------
9,284,413
------------
Pharmaceuticals (7.4%)
Abbott Laboratories 42,100 1,673,474
Bristol-Myers Squibb Co. 61,700 4,704,624
Carter--Wallace, Inc. 300 3,150
COR Therapeutics, Inc.+ 3,600 36,900
Eli Lilly & Co. 8,032 776,092
Immulogic Pharmaceutical Corp.+ 1,200 13,950
Johnson & Johnson 87,500 7,131,249
See Notes to Portfolio of Investments.
F-25
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Medtronic, Inc. 59,400 $ 3,430,349
Merck & Co., Inc. 16,700 960,250
Novo-Nordisk AS 700 88,997
Pfizer, Inc. 30,400 1,744,199
Roche Holding AG 10 72,591
Schering Plough 91,600 4,912,049
Upjohn Co. 11,000 558,250
Watson Pharmaceuticals, Inc.+ 4,800 216,000
Yamanouchi Pharmaceuticals 3,000 66,898
------------
26,389,022
------------
Printing & Publishing (1.6%)
Banta Corp. 9,200 400,200
Cadmus Communications Corp. 400 9,800
Central Newspapers, Inc.Class A 3,000 88,500
Devon Group, Inc.+ 1,700 65,875
Gannett Company, Inc. 30,000 1,631,249
Lee Enterprises, Inc. 600 23,925
Meredith Corp. 2,400 85,800
Pulitzer Publishing Co. 2,825 127,831
Scholastic Corp.+ 5,200 321,750
Scientific Games Holdings Corp.+ 3,700 122,563
Tribune Co. 27,100 1,710,687
VNU-Verenigde Nederlands Uitgev 300 41,997
Washington Post Co. 4,000 1,160,000
------------
5,790,177
------------
Real Estate Investment Trusts (2.7%)
American Health Properties, Inc. 100 2,063
AMLI Residential Properities Trust 4,300 82,775
Apartment Investment & Management 2,000 40,250
Associated Estates Realty Corp. 8,700 178,350
Beacon Properties Corp. 13,300 289,275
Bre Properties, Inc. Class A 1,700 54,400
Camden Property Trust 7,600 157,700
Carr Realty Corp. 2,400 45,600
CBL & Associates Properties, Inc. 7,800 165,750
Centerpoint Properties Corp. 1,100 24,888
Chelsea GCA Realty, Inc. 9,400 260,850
Colonial Properties Trust 7,500 187,500
Cousins Properties, Inc. 2,200 38,225
Crescent Real Estate Equities, Inc. 13,000 416,000
Crown America Realty Trust 13,900 105,988
Debartolo Realty Corp. 29,800 387,400
Developers Diversified Realty Corp. 3,700 105,450
Duke Realty Investments, Inc. 17,000 520,625
Equity Inns, Inc. 13,400 $ 155,775
Equity Residential Properties Trust 17,400 487,200
Essex Property Trust, Inc. 3,600 65,700
Evans Withycombe Residential, Inc. 2,400 45,300
Excel Realty Trust, Inc. 5,000 94,375
First Industrial Realty Trust, Inc. 7,100 144,663
General Growth Properties 9,500 191,188
Health Care Property Investors, Inc. 1,100 37,263
Healthcare Realty Trust, Inc. 4,600 92,575
HGI Realty, Inc. 6,700 148,238
Highwood Properties, Inc. 22,600 601,725
Irvine Apartment Communities, Inc. 9,400 168,025
JP Realty, Inc. 3,300 67,650
Kimco Realty Corp. 6,900 254,438
Kranzco Realty Trust 3,300 50,325
LTC Properties, Inc. 10,300 149,350
Macerich Co. (The) 4,500 90,563
Manufactured Home Communities, Inc. 3,000 49,500
Mark Centers Trust 300 3,225
Merry Land & Investment Co., Inc. 14,200 298,200
MGI Properties, Inc. 3,500 54,250
Mills Corp. 1,500 25,688
National Golf Properties, Inc. 7,500 162,188
National Health Investors, Inc. 7,000 210,000
Pelangi Bhd 2,000 1,950
Post Properties, Inc. 9,200 276,000
Price REIT, Inc. 700 20,475
Prime Residential, Inc. 6,900 122,044
Realty Income Corp. 1,700 33,363
Regency Realty Corp. 500 8,500
RPS Realty Trust 4,500 19,125
Santa Anita Realty Enterprises, Inc. 600 7,350
Security Capital Industrial Trust 9,100 149,013
Sekisui House 8,000 92,327
Smith (Charles E.) Residential Realty 1,600 37,200
South West Property Trust 11,475 139,134
Spieker Properties, Inc. 17,700 429,225
Storage Equities Inc. 28,800 529,200
Tanger Factory Outlet Centers, Inc. 7,100 166,850
Vornado Realty Trust 13,200 473,550
Walden Residential Properties, Inc. 7,500 137,813
Weingarten Realty Investors 9,300 320,850
Wellsford Residential Property Trust 6,800 134,300
------------
9,808,762
------------
See Notes to Portfolio of Investments.
F-26
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Retail (1.9%)
Albertson's, Inc. 36,100 $ 1,200,325
Arbor Drugs, Inc. 2,100 38,063
Argyll Group Plc 14,500 73,672
Big B, Inc. 8,200 119,925
Burton Group Plc 79,200 126,219
Caldor Corp. (The) 100 488
CALI Realty Corp. 6,000 117,000
Callaway Golf Co. 17,600 288,200
Cardinal Health Inc. 3,400 174,675
Casey's General Stores, Inc. 3,000 69,375
Cash America International, Inc. 1,400 7,175
CDW Computer Centers, Inc.+ 700 34,388
Circuit City Stores, Inc. 8,100 270,338
Claire's Stores, Inc. 5,300 104,013
Consolidated Stores Corp.+ 300 6,938
Dai Nippon Printing Co. 9,000 143,479
Eckerd Corp.+ 2,100 83,213
Elkjop Norge AS 2,000 51,694
Fabri-Centers of America Class A+ 600 8,925
Fabri-Centers of America Class B+ 600 6,975
Familymart 3,000 126,461
Fastenal Co. 3,100 107,919
Fay's Drug Co. 3,500 28,000
Fingerhut Companies, Inc. 1,400 19,075
General Host Corp.+ 3,400 16,575
Genovese Drug Stores, Inc. 200 1,975
Hannaford Brothers, Co. 4,600 120,175
Hudson's Bay Co. 2,000 37,361
Ito-Yokado Co. Ltd. 3,000 164,018
JUSCO Co. 5,000 117,365
Kesko 2,800 35,073
Koninklijke Ahold N.V. 1,957 74,064
Kroger Equity, Inc.+ 1,700 16,363
Laclede Gas Co. 2,800 57,050
Mac Frugal's Bargains+ 200 2,375
Medicine Shoppe International, Inc. 400 17,350
Merkur Holding AG 80 17,809
Micro Warehouse, Inc.+ 2,700 120,825
Neiman Marcus Group, Inc. 1,400 23,975
Oriental Holdings Bhd 9,000 41,408
Oshkosh B'Gosh, Inc. 100 1,338
Proffitt's Inc.+ 1,000 23,500
Rex Stores Corp.+ 1,600 27,200
Robinson & Co. Ltd. 7,000 $ 29,690
Ruddick Corp. 1,800 22,950
Russ Berrie & Co. Inc. 2,500 34,688
Sears, Roebuck & Co. 33,900 1,152,600
Shopko Stores, Inc. 1,300 13,975
Stop & Shop Co., Inc.+ 1,900 39,425
Strawbridge & Clothier Class A 800 15,000
Tesco Plc 426 2,017
Urban Shopping Centers, Inc. 5,000 106,250
Viking Office Products, Inc.+ 5,800 258,463
Vons Companies, Inc.+ 7,300 185,238
Waban Inc.+ 5,000 78,125
Wal-Mart Stores, Inc. 27,900 603,338
Zale Corp.+ 2,100 31,106
------------
6,695,199
------------
Specialty Consumer Durables (0.1%)
Bio-Rad Labs, Inc. Class A+ 2,600 98,800
Collagen Corp. 1,200 21,900
Conmed Corp.+ 300 10,575
Department 56, Inc.+ 1,200 54,450
Fusion Systems Corp.+ 500 13,813
Polaris Industries, Inc. 7,050 197,400
Superior Surgical Manufacturing Co. 800 7,600
------------
404,538
------------
Telecommunications (3.1%)
Ameritech Corp. 111,300 6,010,199
AT&T Corp. 47,400 3,033,599
Computer Associates International, Inc. 36,900 2,029,499
Holophane Corp.+ 3,300 89,306
Mobile Telecomm. Technologies Corp.+ 1,200 34,200
Tekelec+ 1,200 17,700
Tel-Save Holdings, Inc.+ 300 4,200
------------
11,218,703
------------
Transportation (1.5%)
Alaska Air Group, Inc.+ 1,100 16,363
American President Cos. Ltd. 11,400 276,450
AMR Corp.+ 30,500 2,012,999
Bergesen d.y. AS Class B 3,000 61,647
British Airways Plc 11,800 84,717
Comair Holdings, Inc. 7,650 215,634
Conrail, Inc. 14,100 969,375
Det Danske Luftfartselskap AS 300 24,970
Det Norske Luftfartselsk AS 1,400 64,729
See Notes to Portfolio of Investments.
F-27
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
East Japan Railway Co. 22 $ 103,927
Expeditors International of Washington, Inc. 1,800 47,925
Florida East Coast Industries, Inc. 400 26,750
Flughafen Wien AG 1,200 77,012
GATX Corp. 3,200 152,000
Harper Group, Inc. 3,700 65,213
Hornbeck Offshore Services, Inc.+ 1,600 23,200
Kobenhavns Lufthavne AS 400 30,001
Kvaerner AS 3,000 126,184
Landstar Systems, Inc. 1,600 42,400
M.S. Carriers, Inc.+ 2,800 44,100
Navistar International Corp.+ 20,000 205,000
Peninsular & Orient Steam Navigation 14,000 106,477
PHH Corp. 4,100 179,375
Singapore Airlines Ltd. 8,000 74,085
UAL Corp.+ 2,000 351,750
Werner Enterprises, Inc. 900 16,931
------------
5,399,214
------------
Utilities--Electric (5.7%)
Boston Edison Co. 9,000 246,375
California Energy Co., Inc.+ 7,000 126,875
Centerior Energy Corp. 4,400 44,000
Central Hudson Gas & Electric Co. 3,300 101,063
Cilcorp, Inc. 1,900 74,100
Commonwealth Energy System, Inc. 1,400 59,325
Consolidated Edison Co. of New York 80,000 2,429,999
DQE, Inc. 8,850 243,375
Electrowatt AG 115 34,707
Entergy Corp. 82,800 2,359,799
General Public Utilities Corp. 7,900 246,875
Green Mountain Power Corp. 800 21,800
Hawaiian Electric Industries, Inc. 600 23,400
Hokkaido Electric Power Co. 4,000 92,718
Houston Industries, Inc. 7,000 324,625
IES Industries, Inc. 4,000 106,500
Illinova Corp. 12,100 343,338
Korea Electric Power Corp. ADR+ 4,000 99,000
LG&E Corp. 2,800 116,200
MDU Resources Group, Inc. 2,700 57,038
Midamerican Energy Co. 1,900 30,400
National Power PLC ADR 5,350 66,875
New England Electric System 6,200 241,800
New York State Electric & Gas Corp. 12,400 313,100
Nipsco Industries, Inc. 6,400 233,600
Northeast Utilities 5,100 $ 126,225
Northern States Power Co. (Minn.) 5,100 240,975
Oklahoma Gas & Electric Co. 1,600 64,000
Orange & Rockland Utilities, Inc. 2,800 98,350
Pacific Gas and Electric Co. 90,600 2,661,374
Peco Energy Co. 30,300 886,275
Pinnacle West Capital Corp. 13,100 360,250
Portland General Corp. 8,400 227,850
Powergen Plc ADR 5,350 88,944
Public Service Co. of New Mexico+ 12,900 216,075
Public Service Co. of Colorado 6,400 218,400
Rochester Gas & Electric Corp. 3,100 72,850
San Diego Gas & Electric Co. 8,600 199,950
SCEcorp 229,000 3,892,999
Sierra Pacific Resources 5,400 126,225
Siliconix, Inc.+ 200 5,800
TNP Enterprises, Inc. 1,400 25,375
Transalta Corp. 5,800 62,528
Unicom Corp. 83,400 2,731,349
United Illuminating Co. 2,200 83,600
Western Resources, Inc. 3,600 121,050
WPS Resources Corp. 2,700 84,038
------------
20,631,369
------------
Utilities--Natural Gas (0.5%)
Brooklyn Union Gas Co. (The) 5,600 140,700
Coastal Corp. (The) 9,900 320,513
Williams Cos. Inc. 34,300 1,324,837
------------
1,786,050
------------
Utilities--Oil & Gas (0.3%)
Atlanta Gas Light Co. 6,400 247,200
Connecticut Energy Corp. 900 17,438
New Jersey Resources Corp. 2,900 72,500
Northwest Natural Gas Co. 1,000 32,250
Pacific Enterprises 21,000 519,750
Phoenix Resource Co., Inc. 5,200 92,300
Piedmont Natural Gas, Inc. 700 15,400
Public Service Co. of North Carolina 800 12,600
Southern Indiana Gas & Electric Co. 1,200 40,500
Valero Energy Corp. 4,000 94,500
Washington Gas Light Co. 600 11,475
------------
1,155,913
------------
See Notes to Portfolio of Investments.
F-28
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Number of Market
Shares Value
----------- -------------
Utilities--Telephone (4.3%)
Bell Atlantic Corp. 46,000 $ 2,926,749
BellSouth Corp. 49,900 3,817,349
Cable & Wireless Plc 13,100 85,576
Century Telephone Enterprises 6,100 176,900
Citizens Utilities Co.+ 1,607 17,677
DDI Corp. 16 129,728
Frontier Corp. 1,000 27,000
GTE Corp. 15,000 618,750
Nippon Telegraph & Telephone Corp. 19 155,910
Nynex Corp. 15,000 705,000
SBC Communications, Inc. 26,100 1,458,337
Southern New England Telecomm. Corp. 6,500 234,813
Sprint Corp. 131,353 5,057,090
Tellabs, Inc.+ 2,600 88,725
------------
15,499,604
------------
Utilities--Water (0.0%)
Welsh Water Plc 5,333 63,368
------------
Total Common Stocks
(cost $284,644,992) $335,382,351
------------
Preferred Stocks (0.5%)
Banks (0.1%)
Barnett Banks, Inc. 2,000 210,000
------------
Commercial Services (0.0%)
Alco Standard Corp. 900 89,550
------------
Computer & Office Equipment (0.0%)
Ceridian Corp. 1,500 146,250
------------
Diversified (0.0%)
Sea Containers, Ltd. 1,500 72,188
------------
Financial Services (0.2%)
Alexander & Alexander+++ 3,700 186,850
Travelers, Inc. 3,200 225,600
------------
412,450
------------
Foods & Beverages (0.0%)
Conagra, Inc. 700 27,475
Corning Delaware L.P. 1,100 49,500
Union Planters Co. 1,400 53,725
------------
130,700
------------
Health Care (0.0%)
AMC Entertainment 1,250 42,188
------------
Machinery & Equipment (0.0%)
Case Corp.+++ 800 $ 80,400
------------
Metals & Mining (0.1%)
Cyprus Amax Minerals Co. 2,900 173,275
------------
Paper & Containers (0.0%)
International Paper Co.+++ 700 31,150
------------
Pollution Control (0.1%)
William Cos. Inc. 2,100 143,588
------------
Retail (0.0%)
Tanger Factory Outlet Centers, Inc. 4,200 91,350
------------
Utilities--Oil & Gas (0.0%)
Valero Energy Corp. 2,800 141,050
------------
Utilities--Water (0.0%)
Welsh Water Plc 5,760 9,452
------------
Total Preferred Stocks
(cost $1,672,984) 1,773,591
------------
Warrants (0.0%)
Morgan Stanley American Express Hong Kong+ 20,000 90,000
------------
Total Warrants
(cost $98,475) $ 90,000
------------
Principal Market
Amount Value
---------- ------------
Long Term Bonds and Notes (1.2%)
Commercial Services (0.0%)
Ogden Corp., 6.00%, 06/01/02 $ 25,000 $ 23,438
-----------
Computer Software (0.0%)
Automatic Data Processing, Inc., 0.00%,
02/20/12 200,000 95,250
-----------
Consumer Products (0.0%)
Fieldcrest Cannon, Inc., 6.00%,
03/15/12 50,000 40,250
-----------
Electrical & Electronics (0.2%)
National Semiconductor Corp.+++, 6.50%,
10/01/02 350,000 337,750
Seagate Technology, Inc., 6.75%,
05/01/12 140,000 158,200
-----------
495,950
-----------
See Notes to Portfolio of Investments.
F-29
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Principal Market
Amount Value
---------- ------------
Electrical Equipment (0.0%)
Proffitt's Inc., 4.75%, 11/01/03 $ 140,000 $ 116,900
-----------
Financial Services (0.2%)
Fremont General Corp., 0.00%, 10/12/13 300,000 120,750
Mitsubishi Bank, 3.00%, 11/30/02 140,000 145,691
Old Republic International, 5.75%,
08/15/02 85,000 95,838
-----------
362,279
-----------
Health Services (0.0%)
Integrated Health Services, 5.75%,
01/01/01 70,000 70,350
-----------
Hotels & Restaurants (0.0%)
Carnival Corp., 4.50%, 07/01/97 20,000 27,500
-----------
Household Appliances (0.0%)
Horace Mann, 6.50%, 12/01/99 70,000 71,400
NAC Re Corp.+++, 5.25%, 12/15/02 70,000 69,300
-----------
140,700
-----------
Machinery & Equipment (0.1%)
AGCO Corp., 6.50%, 06/01/08 95,000 342,356
Lam Research Corp., 6.00%, 05/01/03 18,000 45,630
-----------
387,986
-----------
Metals & Mining (0.1%)
Agnico-Eagle Mines Ltd., 3.50%,
01/27/04 100,000 76,750
Allegheny Ludlum Corp., 5.88%, 03/15/02 70,000 72,013
-----------
148,763
-----------
Oil & Gas (0.2%)
Apache Corp.+++, 6.00%, 01/15/02 30,000 32,250
Baker Hughes Inc., 0.00%, 05/05/08 525,000 313,688
Consolidated Natural Gas Co., 7.25%,
12/15/15 50,000 51,813
Pogo Producing, 5.50%, 03/15/04 105,000 112,350
-----------
510,101
-----------
Pollution Control (0.0%)
Browning-Ferris Industries, Inc., 6.75%,
07/18/05 150,000 148,125
-----------
Printing & Publishing (0.0%)
Omnicom Group,+++ 4.50%, 09/01/00 105,000 126,131
-----------
Retail (0.2%)
Costco Wholesale Inc., 5.75%,
05/15/02 175,000 164,500
Office Depot, Inc., 0.00%, 12/11/07 100,000 84,375
Rite Aid Corp., 0.00%, 07/24/06 800,000 402,000
-----------
650,875
-----------
Specialty Consumer Durables (0.1%)
Aspect Telecommunications+++, 5.00%,
10/15/03 $ 70,000 $ 125,300
Bindley Western, 6.50%, 10/01/02 70,000 71,575
-----------
196,875
-----------
Transportation (0.0%)
AMR Corp., 6.13%, 11/01/24 70,000 68,688
-----------
U. S. Treasuries (0.0%)
U.S. Treasury Note, 5.125%, 03/31/96++++ 150,000 149,813
-----------
Utilities--Electric (0.1%)
California Energy Co., Inc., 5.00%,
07/31/00+++ 50,000 49,500
Oryx Energy Co., 7.50%, 05/15/14 50,000 43,188
Potomac Electric Power, 7.00%, 01/15/18 250,000 251,250
-----------
343,938
-----------
Total Long Term Bonds and
Notes (cost $3,851,528) $ 4,103,912
-----------
Short-Term Investments (4.0%)
U.S. Treasury Note, Time Deposit, 9.25%,
01/15/96 250,000 251,825
Columbia/HCA Healthcare Corp., Comm.
Paper, 6.00%, 11/01/95 10,632,000 10,632,000
Bridgestone Firestone Inc., Comm. Paper,
5.80%, 11/02/95 3,409,000 3,409,000
U.S. Treasury Note, Time Deposit, 4.00%,
01/31/96 150,000 149,449
Total Short-Term
Investments
(cost $14,442,195) $ 14,442,274
-----------
Total Investments
(cost $304,710,174)(a) $355,792,128
Other assets less liabilities 3,227,621
-----------
Total Net Assets $359,019,749
-----------
See Notes to Portfolio of Investments.
F-30
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes amount to
$305,063,487. Unrealized gains and losses, based on identified tax cost
at October 31, 1995 are as follows:
Unrealized gains 738,259
Unrealized losses (629,385)
---------
Net unrealized losses $ 108,874
=========
+ Non-income producing security.
+++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the
Securities Act of 1933, as amended. These securities have been
determined to be liquid under guidelines established by the Board of
Trustees.
++++ Security pledged to cover initial margin deposits on open futures
contracts at October 31, 1995.
Category percentages are based on net assets.
See Notes to Financial Statements.
F-31
<PAGE>
Portfolio of Investments
October 31, 1995
Growth and Income Fund
Information concerning open futures contracts is shown below:
<TABLE>
<CAPTION>
No. of Initial Expiration Unrealized
Contracts Value Date Gain/(Loss)
-------- --------- -------- -----------
<S> <C> <C> <C> <C>
All Ordinaries Share Price Index 18 $ 729,934 12/29/95 $ (31,493)
TSE 35 Index Future 2 181,703 12/14/95 (5,881)
German DAX Index Future 7 1,087,254 12/14/95 (56,913)
CAC 40 Stock Index Future 9 677,544 12/29/95 (35,133)
FTSE 100 Index Future 4 556,642 12/15/95 (7,416)
Topex Index Future 2 284,005 12/04/95 (11,345)
Hang Seng Index Future 6 381,656 11/29/95 (1,423)
-----------
$(149,604)
===========
</TABLE>
See Notes to Financial Statements.
F-32
<PAGE>
Portfolio of Investments
October 31, 1995
Growth Fund
Number of Market
Shares Value
----------- ------------
Common Stocks (96.6%)
Aerospace & Defense (6.8%)
Boeing Co. 21,000 $ 1,378,125
United Technologies Corp. 14,000 1,242,500
-----------
2,620,625
-----------
Apparel (2.3%)
Nike, Inc. 16,000 908,000
-----------
Autos & Auto Equipment (5.2%)
Ford Motor Co. 40,000 1,150,000
General Motors Co. 20,000 875,000
-----------
2,025,000
-----------
Banks (2.9%)
Bank of Boston Corp. 25,000 1,112,500
-----------
Chemicals (7.3%)
Engelhard Corp. 37,500 932,813
Monsanto Co. 10,000 1,047,500
W.R Grace & Co. 15,000 836,250
-----------
2,816,563
-----------
Computer Software (3.1%)
America Online, Inc.+ 15,000 1,200,938
-----------
Computers & Office Equipment (9.2%)
Bay Networks Inc.+ 20,000 1,327,500
Cray Research, Inc.+ 40,000 830,000
Hewlett-Packard Co. 15,000 1,389,375
-----------
3,546,875
-----------
Consumer Products (2.2%)
Liz Claiborne, Inc. 30,000 851,250
-----------
Electrical & Electronics (8.9%)
Intel Corp. 22,500 1,573,592
Motorola, Inc. 19,000 1,246,875
Tandy Corp. 12,000 592,500
-----------
3,412,967
-----------
Financial Services (5.8%)
Ahmanson (H.F.) & Co. 33,100 827,500
Franklin Resources, Inc. 28,000 1,421,000
-----------
2,248,500
-----------
Insurance (5.2%)
American International Group, Inc. 13,000 1,096,875
PartnerRe Ltd. 35,000 929,688
-----------
2,026,563
-----------
Machinery & Equipment (8.2%)
Caterpillar, Inc. 10,000 $ 561,250
Deere & Co. 15,000 1,340,625
Fluor Corp. 22,500 1,271,250
-----------
3,173,125
-----------
Metals & Mining (6.7%)
Aluminum Co. of America 15,000 765,000
Inco Ltd. 20,000 687,500
Phelps Dodge Corp. 18,000 1,140,750
-----------
2,593,250
-----------
Oil & Gas (4.3%)
Atlantic Richfield Co. 7,000 747,250
Tidewater, Inc. 35,000 923,125
-----------
1,670,375
-----------
Paper & Containers (1.8%)
Crown Vantage, Inc.+ 2,000 39,750
James River Corp. of Virginia 20,000 642,500
-----------
682,250
-----------
Pharmaceuticals (7.4%)
Amgen Inc.+ 38,500 1,850,406
Upjohn Co. 20,000 1,015,000
-----------
2,865,406
-----------
Telecommunications (5.0%)
AT&T Corp. 12,000 768,000
Cisco Systems, Inc.+ 15,000 1,163,438
-----------
1,931,438
-----------
Transportation (4.3%)
AMR Corp.+ 15,000 990,000
Conrail, Inc. 10,000 687,500
-----------
1,677,500
-----------
Total Common Stocks
(cost $32,392,925) $37,363,125
-----------
Principal Market
Amount Value
--------- -----------
Short Term Investments (2.1%)
Federal Home Loan Mortgage Corp.,
Disc. Note, 5.82%, 11/01/95 $794,000 $ 794,000
-----------
Total Short-Term Investments
(Cost $794,000) $ 794,000
-----------
Total Investments
(cost $33,186,925) (a) $38,157,125
Other assets less liabilities 506,468
-----------
Total Net Assets $38,663,593
-----------
See Notes to Portfolio of Investments.
F-33
<PAGE>
Portfolio of Investments
October 31, 1995
Growth Fund
Notes to Portfolio of Investments
+ Non-income producing security.
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at October 31,
1995 are as follows:
Unrealized gains $5,475,360
Unrealized losses (505,160)
----------
Net unrealized gain $4,970,200
==========
Category percentages are based on net assets.
See Notes to Financial Statements.
F-34
<PAGE>
Portfolio of Investments
October 31, 1995
Small Company Growth Fund
Number of Market
Shares Value
----------- ------------
Common Stocks (93.2%)
Autos & Auto Equipment (3.9%)
Andros, Inc.+ 20,000 $ 345,000
Copart, Inc.+ 20,000 460,000
Lear Seating Corp.+ 19,500 541,125
-----------
1,346,125
-----------
Building Materials & Construction (2.7%)
American Buildings Co.+ 15,000 376,875
Lone Star Industries, Inc. 25,000 571,875
-----------
948,750
-----------
Chemicals (4.3%)
Hexcel Corp.+ 100,000 837,500
Vigoro Corp. 15,000 650,625
-----------
1,488,125
-----------
Computer Software (3.4%)
Bolt Beranek and Newman, Inc.+ 10,000 308,750
FTP Software, Inc.+ 32,500 879,530
-----------
1,188,280
-----------
Computers & Office Equipment (5.4%)
Cray Research, Inc.+ 25,000 518,750
Data General Corp.+ 25,000 287,500
Stratus Computer, Inc.+ 35,000 1,089,375
-----------
1,895,625
-----------
Diversified (1.7%)
Figgie International, Inc.--Class A+ 50,000 593,750
-----------
Electrical & Electronics (8.7%)
Amphenol Corp.+ 20,000 432,500
BMC Industries, Inc. 30,000 1,158,750
Integrated Process Equipment+ 10,000 371,250
Nimbus CD International, Inc.+ 75,000 600,000
Silicon Valley Group Inc.+ 15,000 483,750
-----------
3,046,250
-----------
Financial Services (2.5%)
Dime Bancorp, Inc.+ 35,000 371,875
Cullen/Frost Bankers, Inc. 10,000 506,250
-----------
878,125
-----------
Foods & Beverages (5.3%)
Delta & Pine Land Co. 15,000 575,625
International Multifoods Corp. 20,000 410,000
Ralcorp Holdings, Inc.+ 15,000 345,000
Universal Foods Corp. 15,000 513,750
-----------
1,844,375
-----------
Health Technology (6.2%)
Medeva Plc 35,000 $ 599,375
MGI Pharma, Inc.+ 50,000 296,875
Palomar Medical Technologies, Inc.+ 100,000 531,250
Quidel Corp.+ 135,000 725,625
-----------
2,153,125
-----------
Hotels & Restaurants (1.2%)
Sun International Hotels Ltd.--Class A+ 14,000 406,000
-----------
Insurance (7.1%)
Allmerica Financial Corp.+ 18,000 452,250
American Eagle Group, Inc. 30,000 348,750
Liberty Corp. (The) 15,000 502,500
Markel Corp.+ 6,300 460,688
Security-Connecticut Corp. 28,000 728,000
-----------
2,492,188
-----------
Machinery & Equipment (5.2%)
Acme-Cleveland Corp. 19,700 430,938
Indresco Inc.+ 60,000 1,027,500
Media General, Inc. 13,000 360,750
-----------
1,819,188
-----------
Media & Entertainment (8.0%)
Bet Holdings, Inc. Class A+ 10,000 207,500
National Gaming Corp.+ 100,000 925,000
New World Communications Group+ 45,000 745,313
Topps Co., Inc.+ 145,000 906,250
-----------
2,784,063
-----------
Metals & Mining (1.0%)
Brush Wellman Inc. 20,000 335,000
-----------
Oil & Gas (5.0%)
Arethusa (Off-Shore) Ltd. 20,000 391,250
Basic Petroleum International Ltd.+ 15,000 412,500
Chesapeake Energy Corp.+ 10,000 292,500
Seagull Energy Corp.+ 20,000 342,500
Sonat Offshore Drilling Co. 10,000 317,500
-----------
1,756,250
-----------
Paper & Containers (1.0%)
Aptargroup, Inc. 10,000 342,500
-----------
Personal Care (1.4%)
Helen of Troy Ltd.+ 25,000 471,875
-----------
Pharmaceuticals (5.9%)
Biovail Corp. International+ 35,000 1,356,250
Foxmeyer Health Corp.+ 30,000 682,500
-----------
2,038,750
-----------
See Notes to Portfolio of Investments.
F-35
<PAGE>
Portfolio of Investments
October 31, 1995
Small Company Growth Fund
Number of Market
Shares Value
----------- ------------
Pollution Control (0.5%)
Energy Biosystems Corp.+ 20,000 $ 172,500
-----------
Retail (7.1%)
Friedman's Inc. Class A+ 15,000 300,000
Greenman Brothers, Inc.+ 30,000 386,250
Medicine Shoppe International, Inc. 15,000 650,625
Wolverine World Wide, Inc. 37,500 1,125,000
-----------
2,461,875
-----------
Telecommunications (2.7%)
C-Tec Corp.+ 20,000 427,500
General Cable Plc ADR+ 35,000 520,625
-----------
948,125
-----------
Utilities (3.0%)
Valero Energy Corp. 25,000 590,625
Atlantic Tele-Network, Inc.+ 41,700 448,275
-----------
1,038,900
-----------
Total Common Stocks
(cost $27,411,436) $32,449,744
-----------
Principal Market
Amount Value
---------- ------------
Short Term Investments (5.2%)
Federal Home Loan Bank, Disc. Note,
5.82%, 11/01/95 $1,000,000 $ 1,000,000
Federal Home Loan Mortgage Corp.,
Disc. Note, 5.82%, 11/01/95 792,000 792,000
-----------
Total Short Term Investments
(cost $1,792,000) $ 1,792,000
-----------
Total Investments
(cost $29,203,436) (a) $34,241,744
Other assets less liabilities 553,669
-----------
Total Net Assets
$34,795,413
-----------
Notes to Portfolio of Investments
+ Non-income producing security.
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at October 31,
1995 are as follows:
Unrealized gains $5,679,606
Unrealized losses (641,298)
----------
Net unrealized gain $5,038,308
==========
Category percentages are based on net assets.
See Notes to Financial Statements.
F-36
<PAGE>
Portfolio of Investments
October 31, 1995
International Growth Fund
Number of Market
Shares Value
----------- ------------
Common Stocks (93.4%)
Australia (3.1%)
Coal Mining & Steel (1.6%)
Australian National Industries, Ltd. 508,000 $ 398,578
Broken Hill Proprietary Co. Ltd. 33,000 446,949
-----------
845,527
-----------
Hotels & Restaurants (0.4%)
AAPC Ltd. 378,000 218,835
-----------
Metals (0.6%)
QNI Ltd. 150,000 287,941
-----------
Oil & Gas Utilities (0.5%)
Australian Gas & Light Co., Ltd. 70,000 242,617
-----------
Total Australia 1,594,920
-----------
France (7.8%)
Autos & Auto Equipment (0.5%)
Peugeot SA+ 2,000 260,478
-----------
Banks (1.8%)
Banque Nationale de Paris 10,800 444,498
Credit Local de France 6,300 498,616
-----------
943,114
-----------
Building Materials & Construction (0.9%)
Lafarge SA 6,930 459,213
-----------
Financial Services (0.7%)
Cetelem Group 2,325 370,783
-----------
Petroleum (0.9%)
Societe Nationale Elf Aquitaine 7,150 486,802
-----------
Pharmaceuticals (0.7%)
Sanofi SA 5,500 350,736
-----------
Retail (1.2%)
Pinault-Printemps SA 2,800 606,829
-----------
Textiles & Garments (1.1%)
Christian Dior SA 6,000 588,837
-----------
Total France 4,066,792
-----------
Germany (5.9%)
Building Materials & Trade (0.7%)
Bilfinger & Berger Bau AG 1,000 368,172
-----------
Banks (1.0%)
Deutsche Bank AG 11,250 509,107
-----------
Machinery & Equipment (2.4%)
Linde AG 900 553,325
Mannesmann AG 2,000 658,588
-----------
1,211,913
-----------
Retail (0.8%)
Asko Deutsche Kaufhaus 800 $ 415,651
-----------
Transportation (1.0%)
Veba AG 12,500 513,433
-----------
Total Germany 3,018,276
-----------
Great Britain (17.9%)
Banks (1.2%)
Abbey National 74,000 626,463
-----------
Building Materials & Trade (1.6%)
BPB Industries 95,000 418,267
T & N 181,000 410,615
-----------
828,882
-----------
Chemicals (1.3%)
Albright And Wilson Plc 150,000 377,045
Hanson 100,000 306,299
-----------
683,344
-----------
Commercial Services (0.1%)
Inchcape 10,000 49,403
-----------
Communications (1.3%)
British Telecommunications+ 109,700 652,077
-----------
Finance (1.9%)
Ladbroke Group 180,000 472,373
Tomkins Plc 129,000 508,821
-----------
981,194
-----------
Food (0.5%)
Hillsdown Holdings 100,000 264,801
-----------
Hotels & Restaurants (1.1%)
Greenalls Group Plc 73,000 558,564
-----------
Machine & Apparatus Construction (1.2%)
Siebe 50,000 594,814
-----------
Metals (1.3%)
Cookson Group 144,000 667,013
-----------
Petroleum (0.6%)
British Petroleum 40,759 299,627
-----------
Pharmaceutical (0.9%)
Smithkline Beecham 44,711 458,030
-----------
Retail (0.8%)
Tesco 85,000 403,130
-----------
See Notes to Portfolio of Investments.
F-37
<PAGE>
Portfolio of Investments
October 31, 1995
International Growth Fund
Number of Market
Shares Value
----------- ------------
Textile & Garments (0.9%)
Coats Viyella 150,000 $ 443,443
-----------
Transportation (0.7%)
Peninsular & Oriental Steam 45,000 342,897
-----------
Utilities (1.9%)
British Gas 95,800 364,995
North West Water 48,500 455,825
Powergen Plc 44,000 178,073
-----------
998,893
-----------
Wines & Spirits (0.6%)
Grand Metropolitan 51,000 353,141
-----------
Total Great Britain 9,205,716
-----------
Hong Kong (2.7%)
Banks (0.6%)
HSBC Holdings Ord 22,400 325,931
-----------
Diversified (0.7%)
Hutchison Whampoa 65,000 358,136
-----------
Real Estate (0.8%)
Sun Hung Kai Properties 15,000 119,799
Swire Pacific Class A 40,000 300,063
-----------
419,862
-----------
Utilities (0.6%)
Hong Kong Electric 90,000 306,142
-----------
Total Hong Kong 1,410,071
-----------
Italy (2.3%)
Building Materials & Trade (0.6%)
Italcementi Itl. 48,100 297,446
-----------
Telecommunications (1.7%)
Stet D Risp Port 400,000 872,653
-----------
Total Italy 1,170,099
-----------
Japan (36.9%)
Autos & Auto Equipment (4.5%)
Honda Motor Co. 65,000 1,131,596
Mazda Motor+ 130,000 408,137
Nippondenso Co. Ltd. 42,000 768,155
-----------
2,307,888
-----------
Banks (4.1%)
Shizuoka Bank 44,000 520,710
Sumitomo Bank 60,000 1,062,155
Mitsubishi Bank 27,000 528,143
-----------
2,111,008
-----------
Chemicals (1.7%)
Shin-etsu Chemical Co. 43,000 $ 878,967
-----------
Consumer Products (3.1%)
Canon Inc. 57,000 975,598
Shimano Inc. 34,000 631,816
-----------
1,607,414
-----------
Electrical & Equipment (7.6%)
Hitachi Ltd. 119,000 1,222,065
Mitsubishi Electric Corp. 110,000 821,947
Sony Corp. 19,000 854,810
TDK Corp. 20,000 1,030,857
-----------
3,929,679
-----------
Electric Utilities (1.2%)
Tohoku Electric Power Co. Inc. 27,270 640,110
-----------
Financial Services (1.4%)
Nomura Securities Co. Ltd. 40,000 731,576
-----------
Machinery & Engineering (7.5%)
Amada Sonoike Co. Ltd. 110,000 673,480
Fuji Machine Manufacturing 12,000 451,856
Mitsubishi Heavy Industries Ltd. 126,000 972,312
NTN Corp. 132,000 806,885
Sumitomo Corp. 105,000 955,059
-----------
3,859,592
-----------
Publishing (1.5%)
Toppan Printing Co. Ltd. 60,000 792,215
-----------
Retail (1.6%)
Best Denki Co., Ltd. 57,000 819,502
-----------
Textiles (1.3%)
Kuraray Co., Ltd. 65,000 642,085
-----------
Transportation (1.4%)
Nippon Express Co. 90,000 730,598
-----------
Total Japan 19,050,634
-----------
Malaysia (1.4%)
Consumer Products (0.3%)
Sime Darby Bhd 67,000 167,434
-----------
Financial Services (0.2%)
AMMB Holdings Bhd 11,000 136,364
-----------
Metals (0.3%)
Aluminum Company of Malaysia 92,000 141,204
-----------
See Notes to Portfolio of Investments.
F-38
<PAGE>
Portfolio of Investments
October 31, 1995
International Growth Fund
Number of Market
Shares Value
----------- ------------
Transportation (0.6%)
Malaysian International Ship 56,666 $ 149,414
Malaysian Airline Systems 54,000 147,698
-----------
297,112
-----------
Total Malaysia 742,114
-----------
Netherlands (6.8%)
Banks (0.9%)
ABN Amro Holdings N.V. 10,506 441,594
-----------
Electrical Equipment (1.2%)
Philips Electronics 16,000 618,760
-----------
Financial Services (1.5%)
Internatinale Nederlanden Groep N.V. 13,100 781,507
-----------
Publishing (1.8%)
Ver Ned Uitgevers 6,500 911,529
-----------
Wholesale (1.4%)
Hagermeyer 15,000 747,457
-----------
Total Netherlands 3,500,847
-----------
Norway (0.9%)
Chemicals (0.9%)
Norsk Hydro AS 11,111 442,702
-----------
Total Norway 442,702
-----------
Singapore (1.8%)
Banks (0.9%)
Development Bank of Singapore Ltd. 22,000 252,229
United Overseas Bank Ltd. 23,680 207,808
-----------
460,037
-----------
Transportation (0.9%)
Jurong Shipyard Ltd. 31,000 206,228
Singapore Airlines Ltd. (Foreign-Registered
shares) 27,000 250,318
-----------
456,546
-----------
Total Singapore 916,583
-----------
Spain (2.3%)
Building Materials & Construction (1.4%)
Fomento Construcciones Y Contrat 5,000 353,411
Repsol SA 12,000 358,659
-----------
712,070
-----------
Metals (0.9%)
Acerinox SA 4,400 463,616
-----------
Total Spain 1,175,686
-----------
Sweden (2.1%)
Electrical Equipment (1.1%)
Electrolux Ab B Free 13,500 $ 577,523
-----------
Manufacturing (1.0%)
Atlas Copco Ab Free 34,250 518,494
-----------
Total Sweden 1,096,017
-----------
Switzerland (1.5%)
Electrical Engineering & Electronics (1.5%)
BBC Brown Boveri AG 660 765,563
-----------
Total Switzerland 765,563
-----------
Total Common Stocks
(cost $46,945,784) $48,156,020
-----------
Preferred Stock (1.1%)
Italy (1.1%)
Auto & Auto Equipment
Fiat SpA 280,000 553,727
-----------
Total Preferred Stock
(cost $593,578) 553,727
-----------
Warrants (0.0%)
Italy (0.0%)
Italcementi 12/31/96 11,100 2,209
-----------
Total Warrants
(cost $3,459) 2,209
-----------
Principal Market
Amount Value
---------- ------------
Ford Motor Co., 5.85%,
11/01/95 $2,339,000 $ 2,339,000
-----------
Total Short-term Investments
(cost $2,339,000) 2,339,000
-----------
Total Investments (a)
(cost $49,881,821) $51,050,956
Other assets less liabilities 514,884
-----------
Total Net Assets
$51,565,840
-----------
Notes to Portfolio of Investments
+ Non-income producing security.
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at October 31,
1995 are as follows:
Unrealized gains $ 4,283,887
Unrealized losses (3,114,752)
-----------
Net unrealized gain $ 1,169,135
===========
Category percentages are based on net assets.
See Notes to Financial Statements.
F-39
<PAGE>
Portfolio of Investments
October 31, 1995
Asian Growth Fund
Number of Market
Shares Value
--------- ------------
Common Stocks (94.6%)
Hong Kong (34.0%)
Banks (6.0%)
HSBC Holdings Plc 50,800 $ 739,165
Bank of East Asia 180,000 635,565
-----------
1,374,730
-----------
Diversified (8.5%)
Citic Pacific Ltd. 320,000 999,521
Hutchison Whampoa 173,000 953,193
-----------
1,952,714
-----------
Electric Utilities (3.4%)
China Light & Power Co., Ltd. 50,000 266,436
Hong Kong Electric Holdings, Ltd. 150,000 510,237
-----------
776,673
-----------
Real Estate (14.5%)
HKR International, Ltd. 550,000 476,609
Cheung Kong (Holdings) Ltd. 164,000 926,937
Hysan Development 230,000 586,029
New World Development, Ltd. 150,000 583,960
Swire Pacific Class A 100,000 750,158
-----------
3,323,693
-----------
Telephone Utilities (1.6%)
Hong Kong Telecommunications Ltd. 210,000 366,672
-----------
Total Hong Kong 7,794,482
-----------
Indonesia (8.5%)
Banks (3.4%)
Bank Danamon Pt (Foreign-Registered
shares) 230,000 334,214
Bank Tiara Asia (Foreign-Registered
shares) 326,500 373,800
Modern Bank (Foreign-Registered shares) 121,500 72,226
-----------
780,240
-----------
Financial Services (0.8%)
Wicaksana Overseas International (Foreign-
Registered shares) 74,000 192,250
-----------
Paper & Containers (2.2%)
Indorayon (Foreign-Registered shares) 250,000 308,234
Pabrik Kertas Tjiwi Kimia (Foreign-
Registered shares) 111,720 206,616
-----------
514,850
-----------
Real Estate (2.1%)
Kawsan Industri Jabeka (Foreign-Registered
shares) 250,000 481,616
-----------
Total Indonesia $1,968,956
-----------
South Korea (5.9%)
Chemicals (2.0%)
LG Chemical Ltd. +++ 19,000 463,030
Korea Electric Power ADR+ 20,000 492,500
-----------
955,530
-----------
Oil & Gas (1.8%)
Yukong Ltd.+ 1,150 41,783
Yukong 9,600 361,341
-----------
403,124
-----------
Total South Korea 1,358,654
-----------
Malaysia (14.4%)
Banking (3.9%)
Hong Leong Bank Bhd 180,000 485,242
Malayan Banking Bhd 50,000 403,384
-----------
888,626
-----------
Finance (2.2%)
Sungei Way Holdings 153,000 514,817
-----------
Paper & Containers (2.3%)
Land & General Bhd 232,500 539,846
-----------
Real Estate (6.0%)
Econstates Bhd 322,000 382,700
Kampong Lanjut Tin Dredging+ 175,000 385,675
Metroplex Bhd 500,000 391,578
Tan & Tan Development Bhd 250,000 221,370
-----------
1,381,323
-----------
Total Malaysia 3,324,612
-----------
Philippines (6.8%)
Commercial Services (2.4%)
Ayala Land, Inc. 265,000 305,652
SM Prime Holdings Inc.+ 910,000 244,906
-----------
550,558
-----------
Electric Utilities (0.0%)
Manila Electric Co. Class B 200 1,492
-----------
Finance (0.6%)
South East Asia Cement Holdings, Inc.+ 1,000,000 130,719
-----------
Home Builders (2.0%)
C & P Homes, Inc.+ 700,000 450,788
-----------
Home Furnishings & Appliances (0.6%)
Sanitary Wares Manufacturing Corp. 434,700 148,744
-----------
See Notes to Portfolio of Investments.
F-40
<PAGE>
Portfolio of Investments
October 31, 1995
Asian Growth Fund
Number of Market
Shares Value
--------- ------------
Telephone Utilities (1.2%)
Philippine Long Distance Telephone 5,000 $ 278,739
-----------
Total Philippines 1,561,040
-----------
Singapore (9.5%)
Banks (5.1%)
Development Bank of Singapore (Foreign-
Registered shares) 55,000 630,573
United Overseas Bank (Foreign-Registered
shares) 61,600 540,580
-----------
1,171,153
-----------
Diversified (2.4%)
Straits Steamship Land Ltd. 200,000 560,510
-----------
Finance (2.0%)
DBS Land 153,000 452,611
-----------
Total Singapore 2,184,274
-----------
Thailand (15.5%)
Auto Parts Replacement (1.0%)
Swedish Motor (Foreign-Registered shares)+ 50,000 222,531
-----------
Banks (5.7%)
Bank Of Ayudhya Public Co. Ltd. (Foreign-
Registered shares)+ 115,000 662,627
Bangkok Metropolitan Bank (Foreign-
Registered shares)+ 641,666 637,459
-----------
1,300,086
-----------
Building Materials & Construction (2.8%)
Siam Cement Public Co. Ltd. (Foreign-
Registered shares) 7,000 381,641
TPI Polene Public Co. Ltd. (Foreign-
Registered shares) 40,000 270,217
-----------
651,858
-----------
Electrical Equipment (3.6%)
Electricity Generating Public Co. Ltd.
(Foreign-Registered shares)+ 242,000 827,022
-----------
Electronics (1.0%)
KR Precision PCL 16,500 115,398
KR Precision PCL (Foreign-Registered
shares) 15,500 110,868
-----------
226,266
-----------
Financial Services (0.6%)
Siam General Factoring (Foreign-Registered
Shares) 63,800 145,778
-----------
Metals (0.8%)
Sahavirya Steel Industry Public Co. Ltd.
(Foreign-Registered shares) 125,000 $ 191,238
-----------
Total Thailand 3,564,779
-----------
Total Common Stocks
(cost $20,514,237) $21,756,797
-----------
Principal Market
Amount Value
---------- ------------
Short-term Investments (4.4%)
Ford Motor Co., Comm. Paper,
5.85%, 11/01/95 $1,017,000 $ 1,017,000
-----------
Total Short-term Investments
(cost $1,017,000) $ 1,017,000
-----------
Total Investments
(cost $21,531,237) (a) $22,773,797
Other assets less liabilities 222,320
-----------
Total Net Assets
$22,996,117
-----------
Notes to Portfolio of Investments
(a) The cost of investments for federal income tax purposes is $21,662,266.
Unrealized gains and losses, based on identified tax cost at October 31,
1995 are as follows:
Unrealized gains $ 2,926,530
Unrealized losses (1,552,941)
-----------
Net unrealized gain $ 1,373,589
===========
+ Non-income producing security.
+++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to Section 4(2) of the Security
Act of 1933, as amended. These securities have been determined to be
liquid under guidelines established by the Board of Directors.
Category percentages are based on net assets.
See Notes to Financial Statements.
F-41
<PAGE>
Statements of Assets and Liabilities
October 31, 1995
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Money Market Fund Government Fund
- ------------------------------------------ ------------------- ---------------------
<S> <C> <C>
Assets:
Investments, at market value (Note 1) $348,049,250 $19,261,304
Cash 1,228 191
Receivable for:
Dividends and interest 1,314,264 271,785
Investments sold 0 0
Fund shares sold 5,933,374 24,111
Variation margin 0 0
Reimbursement from Investment Advisor 230,985 38,406
Deferred organizational expenses 15,735 0
------------------ -------------------
Total assets 355,544,836 19,595,797
------------------ -------------------
Liabilities:
Payable for:
Dividends 256,190 1,084
Investments purchased 0 0
Fund shares redeemed 670,071 0
Other liabilities 368,444 36,406
------------------ -------------------
Total liabilities 1,294,705 37,490
------------------ -------------------
NET ASSETS applicable to outstanding
fund shares $354,250,131 $19,558,307
================== ===================
Net assets represented by:
Paid-in capital $354,250,131 $19,645,117
Unrealized gain (loss) on investments 0 596,884
Undistributed net investment income 0 133,130
Accumulated net realized gain (loss) on
investments 0 (816,824)
------------------ -------------------
Total--representing net assets applicable
to outstanding fund shares $354,250,131 $19,558,307
================== ===================
Capital shares, $.001 par value
Select Class: Outstanding 275,524,492 1,914,147
Net Assets $275,524,492 $19,153,665
Net Asset Value per share $ 1.00 $ 10.01
Adviser Class: Outstanding 78,725,639 40,455
Net Assets $ 78,725,639 $ 404,642
Net Asset Value per share $ 1.00 $ 10.00
Cost of Investments $348,049,250 $18,664,420
================== ===================
</TABLE>
See Notes to Financial Statements.
F-42
<PAGE>
Bond Fund Tax-Free Fund The Aetna Fund
- --------------------- ------------------- ---------------------
$39,636,350 $23,540,150 $84,761,582
9,607 773 17,760
527,120 400,843 422,334
2 0 1,328,656
3,347 0 1,497
0 0 41,325
27,146 40,332 8,794
15,735 0 15,735
- --------------------- ------------------ -------------------
40,219,307 23,982,098 86,597,683
- --------------------- ------------------ -------------------
15,454 649 0
0 0 1,014,127
21,792 470 154,585
63,399 51,067 126,085
- --------------------- ------------------ -------------------
100,645 52,186 1,294,797
- --------------------- ------------------ -------------------
$40,118,662 $23,929,912 $85,302,886
===================== ================== ===================
$39,710,127 $24,096,334 $71,211,537
1,484,833 518,501 9,488,430
203,781 69,443 988,683
(1,280,079) (754,366) 3,614,236
- --------------------- ------------------ -------------------
$40,118,662 $23,929,912 $85,302,886
===================== ================== ===================
3,192,325 177,686 6,791,958
$32,778,351 $ 1,748,415 $83,941,102
$ 10.27 $ 9.84 $ 12.36
714,938 2,255,231 110,350
$ 7,340,311 $22,181,497 $ 1,361,784
$ 10.27 $ 9.84 $ 12.34
$38,151,517 $23,021,649 $75,226,307
===================== ================== ===================
See Notes to Financial Statements.
F-43
<PAGE>
Statements of Assets and Liabilities
October 31, 1995 Report
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Growth and Income Fund Growth Fund
--------------------------------------------- ----------------------- ------------------------
<S> <C> <C>
Assets:
Investments, at market value (Note 1) $355,792,128 $38,157,125
Cash 120,993 998
Cash denominated in foreign currencies 155,132 0
Receivable for:
Dividends and interest 521,833 53,834
Investments sold 8,405,394 1,400,943
Fund shares sold 27,221 172,247
Recoverable taxes 4,167 0
Variation margin 22,327 0
Unrealized gain on forward foreign currency
exchange contracts (Note 7) 68,011 0
Reimbursement from Investment Advisor 0 26,740
Deferred organizational expenses 15,763 0
---------------------- -----------------------
Total assets 365,132,969 39,811,887
---------------------- -----------------------
Liabilities:
Payable for:
Dividends 0 0
Investments purchased 5,321,585 963,535
Fund shares redeemed 257,221 130,195
Unrealized loss on forward foreign
currency exchange contracts (Note 7) 210,380 0
Other liabilities 324,034 54,564
---------------------- -----------------------
Total liabilities 6,113,220 1,148,294
---------------------- -----------------------
NET ASSETS applicable to outstanding fund
shares $359,019,749 $38,663,593
====================== =======================
Net assets represented by:
Paid-in capital $285,612,018 $28,723,064
Unrealized gain (loss) on investments 50,832,028 4,970,200
Undistributed (distributions in excess of)
net investment income 2,597,556 95,593
Accumulated net realized gain (loss) on
investments 19,978,147 4,874,736
---------------------- -----------------------
Total--representing net assets applicable to
outstanding fund shares $359,019,749 $38,663,593
====================== =======================
Capital shares, $.001 par value
Select Class: Outstanding 26,505,559 2,685,664
Net Assets $356,802,578 $36,936,273
Net Asset Value per share $ 13.46 $ 13.75
Adviser Class: Outstanding 165,101 126,736
Net Assets $ 2,217,171 $ 1,727,320
Net Asset Value per share $ 13.43 $ 13.63
Cost of Investments $304,710,174 $33,186,925
====================== =======================
</TABLE>
See Notes to Financial Statements.
F-44
<PAGE>
<TABLE>
<CAPTION>
Small Company Growth Fund International Growth Fund Asian Growth Fund
---------------------------- --------------------------- ----------------------------
<S> <C> <C>
$34,241,744 $51,050,956 $22,773,797
4,329 4 0
0 601 165,590
1,702 156,234 31,137
582,021 0
8,981 20,956 1,594
0 124,064 936
0 0 0
0 235,937
16,582 46,213 61,140
0 15,763 0
---------------------------- ------------------------- --------------------------
34,855,359 51,650,728 23,034,194
---------------------------- ------------------------- --------------------------
0 1,059 39
0 0 0
0 10,145 3,444
0 0
59,946 73,684 34,594
---------------------------- ------------------------- --------------------------
59,946 84,888 38,077
---------------------------- ------------------------- --------------------------
$34,795,413 $51,565,840 $22,996,117
============================ ========================= ==========================
$26,145,736 $48,806,092 $24,796,893
5,038,308 1,411,893 1,242,172
(20,927) 385,313 166,458
3,632,296 962,542 (3,209,406)
---------------------------- ------------------------- --------------------------
$34,795,413 $51,565,840 $22,996,117
============================ ========================= ==========================
2,477,988 2,364,208 2,670,972
$33,510,817 $25,101,467 $22,309,082
$ 13.52 $ 10.62 $ 8.35
95,923 2,499,422 82,506
$ 1,284,596 $26,464,373 $ 687,035
$ 13.39 $ 10.59 $ 8.33
$29,203,436 $49,881,821 $21,531,237
============================ ========================= ==========================
</TABLE>
See Notes to Financial Statements.
F-45
<PAGE>
Statements of Operations
Year ended October 31, 1995
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Money Market Fund Government Fund
----------------------------------------- ------------------- ---------------------
<S> <C> <C>
Investment income: (Note 1)
Dividends $ 0 $ 0
Interest 16,428,062 1,634,757
------------------ -------------------
16,428,062 1,634,757
Foreign taxes withheld 0 0
------------------ -------------------
Total investment income 16,428,062 1,634,757
------------------ -------------------
Investment expenses: (Notes 2 and 3)
Investment advisory fee 1,083,771 109,261
Administrative service fee 677,357 54,630
12b-1 and service fees 64,022 2,110
Organizational expenses 10,012 (260)
Printing/Postage 29,854 3,349
Custody fees 20,853 12,579
Transfer agent fees 286,714 23,866
Audit fees 16,779 18,911
Directors' fees 9,800 9,800
State and federal fees 140,436 45,733
Miscellaneous 41,795 5,473
------------------ -------------------
Expenses before reimbursement and waiver
from Adviser 2,381,393 285,452
Expense reimbursement and waiver from
Adviser (1,662,747) (130,573)
------------------ -------------------
Total investment expenses 718,646 154,879
------------------ -------------------
Net investment income 15,709,416 1,479,878
------------------ -------------------
Realized and unrealized gain (loss):
(Notes 1,4,5 and 7)
Realized gain (loss) on:
Sales of investments (excluding
short-term investments) 0 (545,932)
Futures and forward currency contracts 0 0
Foreign currencies 0 0
------------------ -------------------
Net realized gain (loss) 0 (545,932)
------------------ -------------------
Net change in unrealized gain (loss) on:
Investments 0 1,737,685
Futures and forward currency contracts 0 0
Foreign currency related transactions 0 0
------------------ -------------------
Net change in unrealized gain (loss) 0 1,737,685
------------------ -------------------
Net realized and change in unrealized
gain (loss) on investments 0 1,191,753
------------------ -------------------
Increase in net assets resulting from
operations $15,709,416 $2,671,631
================== ===================
</TABLE>
See Notes to Financial Statements.
F-46
<PAGE>
Bond Fund Tax-Free Fund The Aetna Fund
- --------------------- ------------------- ---------------------
$ 18,503 $ 0 $ 1,402,799
3,342,704 1,385,132 2,517,726
- --------------------- ------------------ -------------------
3,361,207 1,385,132 3,920,525
0 0 (16,636)
- --------------------- ------------------ -------------------
3,361,207 1,385,132 3,903,889
- --------------------- ------------------ -------------------
227,665 121,039 706,625
113,832 60,519 220,820
118,895 168,720 57,241
10,012 0 10,012
6,599 3,459 12,459
10,534 8,358 39,751
35,640 23,479 53,492
18,417 20,092 18,331
9,800 9,800 9,800
42,193 46,818 53,342
10,382 5,407 20,791
- --------------------- ------------------ -------------------
603,969 467,691 1,202,664
(143,622) (93,274) (26,507)
- --------------------- ------------------ -------------------
460,347 374,417 1,176,157
- --------------------- ------------------ -------------------
2,900,860 1,010,715 2,727,732
- --------------------- ------------------ -------------------
(287,323) (246,800) 5,255,986
0 0 (191,453)
0 0 (2,468)
- --------------------- ------------------ -------------------
(287,323) (246,800) 5,062,065
--------------------- ------------------ -------------------
3,094,180 2,386,069 6,920,381
0 0 (47,559)
0 0 714
- --------------------- ------------------ -------------------
3,094,180 2,386,069 6,873,536
- --------------------- ------------------ -------------------
2,806,857 2,139,269 11,953,601
- --------------------- ------------------ -------------------
$5,707,717 $3,149,984 $14,663,333
===================== ================== ===================
See Notes to Financial Statements.
F-47
<PAGE>
Statements of Operations
Year ended October 31, 1995
<TABLE>
<CAPTION>
Growth and Income
Aetna Series Fund, Inc. Fund Growth Fund
--------------------------------------------------------- --------------------- ----------------------
<S> <C> <C>
Investment income: (Note 1)
Dividends $ 8,548,439 $ 442,140
Interest 963,983 81,879
-------------------- ---------------------
9,512,422 524,019
Foreign taxes withheld (101,551) (7,375)
-------------------- ---------------------
Total investment income 9,410,871 516,644
-------------------- ---------------------
Investment expenses: (Notes 2 and 3)
Investment advisory fee 2,288,249 231,452
Administrative service fee 830,718 82,661
12b-1 and service fees 19,108 7,194
Organizational expenses 9,984 0
Printing/Postage 52,237 3,953
Custody fees 38,161 8,813
Transfer agent fees 22,312 25,370
Audit fees 16,924 18,311
Directors' fees 8,990 9,800
State and federal fees 303,830 46,970
Miscellaneous 88,315 5,397
-------------------- ---------------------
Expenses before reimbursement and waiver from Adviser 3,678,828 439,921
Expense reimbursement and waiver from Adviser 0 (34,500)
-------------------- ---------------------
Total investment expenses 3,678,828 405,421
-------------------- ---------------------
Net investment income (loss) 5,732,043 111,223
-------------------- ---------------------
Realized and unrealized gain (loss):
(Notes 1,4,5 and 7)
Realized gain (loss) on:
Sales of investments (excluding short-term
investments) 21,116,507 5,686,709
Written options 0 (779,593)
Futures and forward currency contracts 1,182,936 0
Foreign currencies (56,463) 0
-------------------- ---------------------
Net realized gain (loss) 22,242,980 4,907,116
-------------------- ---------------------
Net change in unrealized gain (loss) on:
Investments 40,906,977 3,776,468
Futures and forward currency contracts (291,973) 0
Foreign currency related transactions 42,046 0
-------------------- ---------------------
Net change in unrealized gain (loss) 40,657,050 3,776,468
-------------------- ---------------------
Net realized and change in unrealized gain (loss) on
investments 62,900,030 8,683,584
-------------------- ---------------------
Increase (decrease) in net assets resulting from
operations $68,632,073 $8,794,807
==================== =====================
</TABLE>
See Notes to Financial Statements.
F-48
<PAGE>
<TABLE>
<CAPTION>
Small Company Growth Fund International Growth Fund Asian Growth Fund
---------------------------- --------------------------- ----------------------------
<S> <C> <C>
$ 330,672 $ 1,260,491 $ 527,485
96,972 184,753 70,196
---------------------------- ------------------------- --------------------------
427,644 1,445,244 597,681
(1,015) (124,821) (40,145)
---------------------------- ------------------------- --------------------------
426,629 1,320,423 557,536
---------------------------- ------------------------- --------------------------
257,552 472,412 248,201
75,751 138,945 62,050
5,012 202,548 3,549
0 9,984 0
3,684 4,838 2,415
11,341 94,442 72,728
24,318 34,766 24,684
18,911 17,756 19,355
9,800 9,800 9,800
44,983 42,901 46,286
5,167 5,736 3,015
---------------------------- ------------------------- --------------------------
456,519 1,034,128 492,083
(22,162) (74,627) (204,181)
---------------------------- ------------------------- --------------------------
434,357 959,501 287,902
---------------------------- ------------------------- --------------------------
(7,728) 360,922 269,634
---------------------------- ------------------------- --------------------------
4,597,414 1,158,774 (2,927,707)
0 0 0
0 (128,140) 0
0 (59,919) 7,090
---------------------------- ------------------------- --------------------------
4,597,414 970,715 (2,920,617)
---------------------------- ------------------------- --------------------------
3,558,853 (2,095,160) (782,372)
0 461,168 0
0 (4,133) (1,849)
---------------------------- ------------------------- --------------------------
3,558,853 (1,638,125) (784,221)
---------------------------- ------------------------- --------------------------
8,156,267 (667,410) (3,704,838)
---------------------------- ------------------------- --------------------------
$8,148,539 ($ 306,488) ($ 3,435,204)
============================ ========================= ==========================
</TABLE>
See Notes to Financial Statements.
F-49
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Money Market Fund
--------------------------------------------------------- ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ 15,709,416 $ 5,571,226
Net realized gain (loss) 0 0
Net change in unrealized gain (loss) 0 0
---------------- -----------------
Increase (decrease) in net assets resulting from
operations 15,709,416 5,571,226
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (11,991,698) (4,776,403)
In excess of net investment income 0 0
From realized gain on investments 0 0
Adviser Class:
From net investment income (3,717,718) (794,823)
In excess of net investment income 0 0
From realized gain on investments 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (15,709,416) (5,571,226)
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 303,179,867 184,288,133
Reinvestment of distributions 9,929,370 4,313,330
Cost of shares redeemed (199,341,125) (134,729,463)
Adviser Class:
Proceeds from shares sold 113,465,548 49,918,444
Reinvestment of distributions 3,576,944 788,233
Cost of shares redeemed (85,667,348) (3,356,170)
---------------- -----------------
Increase in net assets from fund share transactions 145,143,256 101,222,507
---------------- -----------------
Change in net assets 145,143,256 101,222,507
---------------- -----------------
Net Assets:
Beginning of period 209,106,875 107,884,368
---------------- -----------------
End of period $ 354,250,131 $ 209,106,875
================ =================
End of period net assets includes undistributed net
investment income $ 0 $ 0
================ =================
</TABLE>
See Notes to Financial Statements.
F-50
<PAGE>
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Government Fund
------------------------------------------------------------ ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ 1,479,878 $ 975,250
Net realized gain (loss) (545,932) (298,826)
Net change in unrealized gain (loss) 1,737,685 (1,140,801)
---------------- -----------------
Increase (decrease) in net assets resulting from operations 2,671,631 (464,377)
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (1,440,305) (836,799)
In excess of net investment income 0 0
From realized gain on investments 0 0
Adviser Class:
From net investment income (15,128) (1,832)
In excess of net investment income 0 0
From realized gain on investments 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (1,455,433) (838,631)
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 11,590,278 26,189,218
Reinvestment of distributions 1,434,827 1,222,008
Cost of shares redeemed (21,180,558) (904)
Adviser Class:
Proceeds from shares sold 369,917 165,129
Reinvestment of distributions 14,695 2,374
Cost of shares redeemed (147,521) (14,346)
---------------- -----------------
Increase (decrease) in net assets from fund share
transactions (7,918,362) 27,563,479
---------------- -----------------
Change in net assets (6,702,164) 26,260,471
---------------- -----------------
Net Assets:
Beginning of period 26,260,471 0
---------------- -----------------
End of period $ 19,558,307 $26,260,471
================ =================
End of period net assets includes undistributed net
investment income $ 133,130 $ 108,685
================ =================
</TABLE>
See Notes to Financial Statements.
F-51
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Bond Fund
------------------------------------------------------------ ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ 2,900,860 $ 2,507,230
Net realized gain (loss) (287,323) (882,788)
Net change in unrealized gain (loss) 3,094,180 (3,401,549)
---------------- -----------------
Increase (decrease) in net assets resulting from operations 5,707,717 (1,777,107)
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (1,855,003) (1,488,587)
In excess of net investment income 0 0
From realized gain on investments 0 0
Adviser Class:
From net investment income (896,133) (709,993)
In excess of net investment income 0 0
From realized gain on investments 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (2,751,136) (2,198,580)
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 11,304,362 13,687,226
Reinvestment of distributions 1,689,033 1,375,268
Cost of shares redeemed (9,913,625) (31,166,825)
Adviser Class:
Proceeds from shares sold 240,905 25,571,124
Reinvestment of distributions 895,776 709,934
Cost of shares redeemed (20,043,606) (231)
---------------- -----------------
Increase (decrease) in net assets from fund share
transactions (15,827,155) 10,176,496
---------------- -----------------
Change in net assets (12,870,574) 6,200,809
---------------- -----------------
Net Assets:
Beginning of period 52,989,236 46,788,427
---------------- -----------------
End of period $ 40,118,662 $ 52,989,236
================ =================
End of period net assets includes undistributed net
investment income $ 203,781 $ 54,057
================ =================
</TABLE>
See Notes to Financial Statements.
F-52
<PAGE>
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Tax-Free Fund
------------------------------------------------------------ ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ 1,010,715 $ 841,965
Net realized gain (loss) (246,800) (507,566)
Net change in unrealized gain (loss) 2,386,069 (1,867,568)
---------------- -----------------
Increase (decrease) in net assets resulting from operations 3,149,984 (1,533,169)
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (81,588) (178,416)
In excess of net investment income 0 0
From realized gain on investments 0 0
Adviser Class:
From net investment income (876,283) (646,950)
In excess of net investment income 0 0
From realized gain on investments 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (957,871) (825,366)
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 677,584 28,310,131
Reinvestment of distributions 80,267 177,341
Cost of shares redeemed (632,497) (25,636,777)
Adviser Class:
Proceeds from shares sold 909,721 25,973,435
Reinvestment of distributions 869,986 645,691
Cost of shares redeemed (7,212,924) (65,624)
---------------- -----------------
Increase (decrease) in net assets from fund share
transactions (5,307,863) 29,404,197
---------------- -----------------
Change in net assets (3,115,750) 27,045,662
---------------- -----------------
Net Assets:
Beginning of period 27,045,662 0
---------------- -----------------
End of period $23,929,912 $ 27,045,662
================ =================
End of period net assets includes undistributed
net investment income $ 69,443 $ 16,599
================ =================
</TABLE>
See Notes to Financial Statements.
F-53
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. The Aetna Fund
------------------------------------------------------------ ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ 2,727,732 $ 1,981,437
Net realized gain (loss) 5,062,065 (802,729)
Net change in unrealized gain (loss) 6,873,536 (1,255,675)
---------------- -----------------
Increase (decrease) in net assets resulting from operations 14,663,333 (76,967)
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (2,366,265) (729,483)
In excess of net investment income 0 0
From realized gain on investments 0 0
Adviser Class:
From net investment income (346,417) (267,325)
In excess of net investment income 0 0
From realized gain on investments 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (2,712,682) (996,808)
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 18,047,983 50,816,381
Reinvestment of distributions 2,339,294 1,709,717
Cost of shares redeemed (24,943,784) (38,967,995)
Adviser Class:
Proceeds from shares sold 890,189 25,942,576
Reinvestment of distributions 306,603 267,247
Cost of shares redeemed (25,950,245) (14,313)
---------------- -----------------
Increase (decrease) in net assets from fund share
transactions (29,309,960) 39,753,613
---------------- -----------------
Change in net assets (17,359,309) 38,679,838
---------------- -----------------
Net Assets:
Beginning of period 102,662,195 63,982,357
---------------- -----------------
End of period $ 85,302,886 $102,662,195
================ =================
End of period net assets includes undistributed
net investment income $ 988,683 $ 973,633
================ =================
</TABLE>
See Notes to Financial Statements.
F-54
<PAGE>
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Growth and Income Fund
------------------------------------------------------------ ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ 5,732,043 $ 1,391,759
Net realized gain (loss) 22,242,980 (1,478,608)
Net change in unrealized gain (loss) 40,657,050 5,934,488
---------------- -----------------
Increase in net assets resulting from operations 68,632,073 5,847,639
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (3,718,581) (609,602)
In excess of net investment income 0 0
From realized gain on investments 0 0
Adviser Class:
From net investment income (19,523) (178,540)
In excess of net investment income 0 0
From realized gain on investments 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (3,738,104) (788,142)
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 74,993,372 283,178,288
Reinvestment of distributions 3,714,435 607,349
Cost of shares redeemed (87,967,109) (47,350,637)
Adviser Class:
Proceeds from shares sold 1,598,535 26,073,067
Reinvestment of distributions 19,466 178,486
Cost of shares redeemed (5,332,821) (20,772,927)
---------------- -----------------
Increase (decrease) in net assets from fund share
transactions (12,974,122) 241,913,626
---------------- -----------------
Change in net assets 51,919,847 246,973,123
---------------- -----------------
Net Assets:
Beginning of period 307,099,902 60,126,779
---------------- -----------------
End of period $359,019,749 $307,099,902
================ =================
End of period net assets includes undistributed
net investment income $ 2,597,556 $ 603,617
================ =================
</TABLE>
See Notes to Financial Statements.
F-55
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Growth Fund
--------------------------------------------------------- ------------------------------------
Ten-month
period ended
Year ended October 31,
October 31, 1995 1994
------------------ ---------------
<S> <C> <C>
From Operations:
Net investment income $ 111,223 $ 191,217
Net realized gain (loss) 4,907,116 (1,009)
Net change in unrealized gain (loss) 3,776,468 1,193,732
---------------- --------------
Increase (decrease) in net assets resulting from
operations 8,794,807 1,383,940
---------------- --------------
Distributions to Shareholders:
Select Class:
From net investment income (218,963) 0
In excess of net investment income 0 0
From realized gain on investments (15,187) 0
Adviser Class:
From net investment income (3,720) 0
In excess of net investment income 0 0
From realized gain on investments (348) 0
---------------- --------------
Decrease in net assets from distributions to shareholders (238,218) 0
---------------- --------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 16,700,945 25,821,070
Reinvestment of distributions 234,137 0
Cost of shares redeemed (15,489,540) (6,065)
Adviser Class:
Proceeds from shares sold 1,319,960 406,304
Reinvestment of distributions 4,068 0
Cost of shares redeemed (267,563) (252)
---------------- --------------
Increase in net assets from fund share transactions 2,502,007 26,221,057
---------------- --------------
Change in net assets 11,058,596 27,604,997
---------------- --------------
Net Assets:
Beginning of period 27,604,997 0
---------------- --------------
End of period $ 38,663,593 $27,604,997
================ ==============
End of period net assets includes undistributed
net investment income $ 95,593 $ 207,053
================ ==============
</TABLE>
See Notes to Financial Statements.
F-56
<PAGE>
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Small Company Growth Fund
------------------------------------------------------------ ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ (7,728) $ 35,562
Net realized gain (loss) 4,597,414 (964,005)
Net change in unrealized gain (loss) 3,558,853 1,479,455
---------------- -----------------
Increase in net assets resulting from operations 8,148,539 551,012
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (49,874) 0
In excess of net investment income 0 0
From realized gain on investments 0 0
Adviser Class:
From net investment income 0 0
In excess of net investment income 0 0
From realized gain on investments 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (49,874) 0
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 1,069,365 25,355,267
Reinvestment of distributions 49,835 0
Cost of shares redeemed (1,421,580) (22,139)
Adviser Class:
Proceeds from shares sold 1,080,943 199,540
Reinvestment of distributions 0 0
Cost of shares redeemed (165,246) (249)
---------------- -----------------
Increase in net assets from fund share transactions 613,317 25,532,419
---------------- -----------------
Change in net assets 8,711,982 26,083,431
---------------- -----------------
Net Assets:
Beginning of period 26,083,431 0
---------------- -----------------
End of period $34,795,413 $26,083,431
================ =================
End of period net assets includes undistributed
(distributions in excess of) net investment income $ (20,927) $ 36,675
================ =================
</TABLE>
See Notes to Financial Statements.
F-57
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. International Growth Fund
------------------------------------------------------------ ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ 360,922 $ 203,386
Net realized gain (loss) 970,715 3,714,070
Net change in unrealized gain (loss) (1,638,125) (2,277,817)
---------------- -----------------
Increase (decrease) in net assets resulting from
operations (306,488) 1,639,639
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (510,337) 0
In excess of net investment income 0 0
From realized gain on investments (2,093,986) 0
Return of capital distributions 0 0
Adviser Class:
From net investment income (221,683) 0
In excess of net investment income 0 0
From realized gain on investments (1,697,440) 0
Return of capital distributions 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (4,523,446) 0
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 5,891,177 17,741,029
Reinvestment of distributions 2,576,315 0
Cost of shares redeemed (12,040,660) (27,138,021)
Adviser Class:
Proceeds from shares sold 22,544,184 26,042,111
Reinvestment of distributions 1,918,360 0
Cost of shares redeemed (22,619,626) (5,489)
---------------- -----------------
Increase (decrease) in net assets from fund share
transactions (1,730,250) 16,639,630
---------------- -----------------
Change in net assets (6,560,184) 18,279,269
---------------- -----------------
Net Assets:
Beginning of period 58,126,024 39,846,755
---------------- -----------------
End of period $ 51,565,840 $ 58,126,024
================ =================
End of period net assets includes undistributed
net investment income $ 385,313 $ 1,795,158
================ =================
</TABLE>
See Notes to Financial Statements.
F-58
<PAGE>
<TABLE>
<CAPTION>
Aetna Series Fund, Inc. Asian Growth Fund
------------------------------------------------------------ ---------------------------------------
Ten-month
Year ended period ended
October 31, 1995 October 31, 1994
------------------ -------------------
<S> <C> <C>
From Operations:
Net investment income $ 269,634 $ 142,060
Net realized gain (loss) (2,920,617) (329,231)
Net change in unrealized gain (loss) (784,221) 2,026,393
---------------- -----------------
Increase (decrease) in net assets resulting from operations (3,435,204) 1,839,222
---------------- -----------------
Distributions to Shareholders:
Select Class:
From net investment income (203,012) 0
In excess of net investment income 0 0
From realized gain on investments 0 0
Adviser Class:
From net investment income (1,782) 0
In excess of net investment income 0 0
From realized gain on investments 0 0
---------------- -----------------
Decrease in net assets from distributions to shareholders (204,794) 0
---------------- -----------------
Fund Share Transactions:
Select Class:
Proceeds from shares sold 1,504,158 27,568,716
Reinvestment of distributions 203,011 0
Cost of shares redeemed (5,190,185) (10,261)
Adviser Class:
Proceeds from shares sold 482,511 303,864
Reinvestment of distributions 1,781 0
Cost of shares redeemed (65,497) (1,205)
---------------- -----------------
Increase (decrease) in net assets from fund share
transactions (3,064,221) 27,861,114
---------------- -----------------
Change in net assets (6,704,219) 29,700,336
---------------- -----------------
Net Assets:
Beginning of period 29,700,336 0
---------------- -----------------
End of period $22,996,117 $29,700,336
================ =================
End of period net assets includes undistributed
net investment income $ 166,458 $ 101,618
================ =================
</TABLE>
See Notes to Financial Statements.
F-59
<PAGE>
Aetna Series Fund, Inc.
Notes to Financial Statements
October 31, 1995
1. Summary of Significant Accounting Policies
Aetna Series Fund, Inc. ("Company") is registered under the Investment
Company Act of 1940 as an open-end management investment company incorporated
under the laws of Maryland on June 17, 1991. The Articles of Incorporation
permit the Company to offer separate funds ("Funds") each of which has its
own investment objectives, policies and restrictions.
Shares of each Fund are available to all investors including employers and
employees who utilize the Funds as investment options under retirement plans.
Each Fund is diversified and offers two classes of shares, the Select Class
and the Adviser Class. The Select Class is offered principally to
institutions and is not subject to sales charges or service fees. The Adviser
Class is offered primarily to the general public and is subject to deferred
sales charges payable upon redemption within four calendar years after the
year of purchase. The Adviser Class was made available to the public on April
15, 1994. Additionally, the Adviser Class is subject to a shareholder service
fee and an annual Rule 12b-1 distribution plan expense.
As of October 31, 1995, the Company offers the following Funds:
Aetna Money Market Fund Aetna Growth Fund
Aetna Government Fund Aetna Small Company Growth Fund
Aetna Bond Fund Aetna International Growth Fund
The Aetna Fund Aetna Asian Growth Fund
Aetna Growth and Income Fund
The Board of Directors voted to liquidate the Aetna Tax-Free Fund. As a
result, the Fund has not been offered since October 13, 1995.
Aetna Life Insurance and Annuity Company ("ALIAC") serves as the Investment
Adviser and principal underwriter to each Fund. Aeltus Investment Management,
Inc. ("Aeltus") is employed as a sub-adviser to the Tax-Free Fund, the Growth
Fund and the Small Company Growth Fund. Aeltus Investment Management
International (F.E.) Limited ("Aeltus Far East") is employed as a sub-adviser
to the Asian Growth Fund. During the period covered by this report, Dunedin
Fund Managers Ltd. ("Dunedin") was employed as the sub-adviser to the
International Growth Fund.
Effective October 31, 1994, the Company changed its fiscal year end from
December 31 to October 31.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Valuation of Investments
Except in the Money Market Fund, investments are stated at market values
based upon closing sales prices as reported on national securities exchanges
or, for over-the-counter securities, at the mean of the bid and asked prices.
Short-term investments maturing in more than sixty days for which market
quotations are readily available are valued at current market value.
Short-term investments maturing in less than sixty days are valued at
amortized cost which when combined with accrued interest approximates market.
Securities for which market quotations are not considered to be readily
available are valued in good faith using methods approved by the Board of
Directors. The Money Market Fund states all investments at amortized cost
which approximates market value.
The accounting records of the Funds are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the prevailing rates of
exchange at the end of the period. Purchases and sales of securities, income
receipts, and expense payments are translated into U.S. dollars at the
prevailing exchange rate on the respective dates of the transactions.
B. Option Contracts
The Funds, except Money Market Fund, may purchase and sell put and call
options and write covered call options as a hedge against adverse movements
in the value of portfolio holdings.
Option contracts are valued daily, and unrealized gains or losses are
recorded based upon the last sales price on the principal exchange on which
the options are traded.
F-60
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
The Funds will realize a gain or loss upon the expiration or closing of the
option contract. When an option is exercised, the proceeds on sales for a
written call option, the purchase cost for a written put option, or the cost
of the security for a purchased put or call option is adjusted by the amount
of premium received on a written option or paid on a purchased option.
Realized and unrealized gains or losses on option contracts are reflected in
the accompanying financial statements.
The risk in writing a call option is that the Funds give up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Funds may incur a
loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Funds pay a premium
whether or not the option is exercised. Risks may also arise from an illiquid
secondary market, or from the inability of counterparties to meet the terms
of the contract.
C. Futures and Forward Foreign Currency Exchange Contracts
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Funds use futures
contracts as a hedge against declines in the value of portfolio securities.
The Funds may also purchase futures contracts to gain market exposure as it
may be more cost effective than purchasing individual securities.
Upon entering into a futures contract, the Funds are required to deposit with
a broker an amount (initial margin) equal to a percentage of the purchase
price indicated by the futures contract. Subsequent deposits (variation
margin) are received or paid each day by the Funds equal to the daily
fluctuations in the market value of the contract. These amounts are recorded
by the Funds as unrealized gains or losses. When a contract is closed, the
Funds record a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it
was closed. Generally, futures contracts are closed prior to expiration.
A forward foreign currency exchange contract is an agreement to pay or
receive specific amounts of a currency at a future date in exchange for
another currency at an agreed upon exchange rate. The Funds may use forward
foreign currency exchange contracts to hedge certain foreign currency assets.
Contracts are recorded at market value and marked-to-market daily.
The risks associated with futures and foreign currency exchange contracts may
arise from an imperfect correlation between the change in market value of the
securities held by the Funds and the price of the contracts. Risks may also
arise from an illiquid secondary market, or from the inability of
counterparties to meet the terms of the contracts.
Realized and unrealized gains or losses on futures and foreign currency
exchange contracts are reflected in the accompanying financial statements.
For federal tax purposes, any futures contracts and forward foreign currency
exchange contracts which remain open at the end of the fiscal year are
marked-to-market and the resultant net gain or loss is included in federal
taxable income.
D. Illiquid and Restricted Securities
Illiquid securities are securities that are not readily marketable. Disposing
of illiquid investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the Funds to sell them
promptly at an acceptable price. Restricted securities are subject to legal
or contractual restrictions on resale and may not be publicly sold without
registration under the Federal Securities Act of 1933. The Funds may invest
up to 15% (10% in the case of the Money Market Fund) of its total assets in
illiquid securities. Illiquid and restricted securities are valued using
market quotations when readily available. In the absence of market
quotations, the securities are valued based upon their fair value determined
under procedures approved by the Board of Directors. The Funds will not pay
the costs of disposition of restricted securities other than ordinary
brokerage fees, if any.
E. Federal Income Taxes
As a qualified regulated investment company, each Fund is relieved of federal
income and excise taxes by distributing its net taxable investment income and
capital gains, if any, in compliance with the applicable provisions of the
Internal Revenue Code.
F. Distributions
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences
are primarily due to differing treatments for foreign currency transactions
and losses deferred due to wash sales.
F-61
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
G. Other
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date.
Interest income is recorded on an accrual basis. Discounts and premiums on
securities purchased are amortized over the life of the respective security.
Dividend income is recorded on the ex-dividend date. Realized gains and
losses from investment transactions are determined on an identified cost
basis.
H. Deferred Organizational Costs
The Company paid organizational expenses in connection with the start-up and
initial registration of the Company. These organizational expenses have been
capitalized and allocated equally to the Money Market Fund, the Bond Fund,
The Aetna Fund, the Growth and Income Fund, and the International Growth
Fund. Organizational expenses are being amortized over 60 months on a
straight-line basis beginning with the commencement of operations. If any or
all of the shares representing initial capital of each Fund are redeemed by
any holder thereof prior to the end of the amortization period, the proceeds
will be reduced by the unamortized organizational expense balance in the same
proportion as the number of shares redeemed bears to the number of initial
shares outstanding immediately preceding the redemption.
2. Investment Advisory, Management, Shareholder Service and Distribution Fees
The Funds pay the Investment Adviser annual fees expressed as a weighted
average percentage of average daily net assets of each Fund. As the Funds'
net assets exceed predetermined thresholds, lower advisory fees are applied.
Below are the Funds' Investment Advisor fee ranges and the effective rates as
of October 31, 1995:
<TABLE>
<CAPTION>
Fee Effective Fee Effective
Range Rate Range Rate
--------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Money Market Fund .40%-.30% .40% Growth and Income Fund .70%-.55% .69%
Government Fund .50%-.40% .50% Growth Fund .70%-.55% .70%
Bond Fund .50%-.40% .50% Small Company Growth Fund .85%-.725% .85%
Tax-Free Fund .50%-.40% .50% International Growth Fund .85%-.70% .85%
The Aetna Fund .80%-.65% .80% Asian Growth Fund 1.00%-.80% 1.00%
</TABLE>
During the period covered by this report, the Investment Adviser entered into
sub-advisory agreements with Aeltus, Aeltus Far East, and Dunedin. The
sub-advisers supervise the investment and reinvestment of cash and securities
and receive fees from the Investment Adviser based on the average daily net
assets of the Funds. The fees range from .20% to .65% depending on the
investment objective and the average daily net assets of the fund.
The Company has entered into an administrative services agreement under which
ALIAC acts as administrator and provides certain administrative and
shareholder services and is responsible for the supervision of other service
providers. Currently, each Fund pays ALIAC a monthly fee at an annual rate
based on average daily net assets of 0.25% on the first $250 million. As each
Fund's net assets exceed $250 million, under the current fee schedule, lower
fees will apply.
The Funds have adopted a Shareholder Service Plan for the Adviser Class
shares. Under the Shareholder Service Plan, ALIAC is paid a service fee at an
annual rate of 0.25% (0.10% for the Money Market Fund) of the daily net
assets of the Adviser Class of each fund. This fee is used as compensation
for expenses incurred in servicing shareholder accounts. For the year ended
October 31, 1995, the Funds paid ALIAC $194,741 in service fees.
The Funds have adopted a Distribution Plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940. The Distribution Plan provides for payments
to ALIAC at an annual rate 0.50% of the daily net assets of the Adviser Class
shares of each Fund, except for the Money Market Fund. Amounts paid by the
Funds are used to pay expenses incurred by ALIAC in promoting the sales of
the Adviser Class shares. For the year ended October 31, 1995, the Funds paid
ALIAC $389,635 in Rule 12b-1 fees. The plan may be terminated upon a majority
vote of the Funds independent trustees. Presently, the Funds' class specific
expenses are limited to Shareholder Service and Distribution Plan expenses
incurred by the Adviser Class shares.
3. Reimbursement from Investment Adviser
The Investment Adviser may, from time to time, make reimbursements to a Fund
for some or all of its operating expenses or it may waive fees. Reimbursement
and waiver arrangements, which may be terminated at any time without notice,
will increase a Fund's yield and total return.
F-62
<PAGE>
4. Purchase and Sales of Investment Securities
Purchases and sales of investment securities, excluding short-term
investments, for all Funds except the Money Market Fund, for the year ended
October 31, 1995:
Cost of Proceeds
Purchases from Sales
---------------- -----------------
Money Market Fund $6,370,883,672 $6,222,342,448
Government Fund 21,591,829 26,540,460
Bond Fund 24,094,751 40,517,361
Tax-Free Fund 5,812,888 9,757,128
The Aetna Fund 108,725,183 137,428,889
Growth and Income Fund 406,039,376 422,137,524
Growth Fund 56,307,709 54,575,388
Small Company Growth Fund 44,964,772 44,664,214
International Growth Fund 17,849,305 22,896,536
Asian Growth Fund 15,661,336 17,377,008
5. Options
All Funds except the Money Market Fund may use options. For the year ended
October 31, 1995, the following reflects the covered call and put option
activity:
The Aetna Fund
----------------------------------------
Number of Deferred
Call Option Premium Realized
Contracts Received Gain (Loss)
------------ ---------- ------------
Outstanding October 31, 1994 -- $ -- $--
Written 400 47,340 --
Canceled -- -- --
Exercised (400) (47,340) --
Expired -- -- --
----------- --------- -----------
Outstanding October 31, 1995 0 $ 0 $ 0
=========== ========= ===========
Growth Fund
----------------------------------------
Number of Deferred
Call Option Premium Realized
Contracts Received Gain (Loss)
------------ --------- -------------
Outstanding October 31, 1994 595 $ 228,645 $ --
Written 1,030 523,205 --
Canceled (1,410) (647,998) (701,657)
Exercised -- -- --
Expired (215) (103,852) 103,852
----------- -------- ------------
Outstanding October 31, 1995 0 $ 0 $(597,805)
=========== ======== ============
Growth Fund
----------------------------------------
Number of Deferred
Put Option Premium Realized
Contracts Received Gain (Loss)
------------ --------- -------------
Outstanding October 31, 1994 325 $ 306,600 $ --
Written 200 233,100 --
Canceled (325) (306,600) 51,312
Exercised -- -- --
Expired (200) (233,100) (233,100)
---------- -------- ------------
Outstanding October 31, 1995 0 $ 0 $(181,788)
========== ======== ============
F-63
<PAGE>
6. Capital Loss Carryforwards
At October 31, 1995, for federal income tax purposes the Funds had the
following capital loss carryforwards:
Year of
Fund Capital Loss Carryforward Expiration
- ------------------- --------------------------- -----------------
Government Fund $ 271,000 2002
546,000 2003
- ------------------- ------------------------- ----------------
Bond Fund 129,000 2001
835,000 2002
287,000 2003
- ------------------- ------------------------- ----------------
Tax-Free Fund 508,000 2002
247,000 2003
- ------------------- ------------------------- ----------------
Asian Growth Fund 289,000 2002
2,797,000 2003
The Board of Directors will not distribute any realized gains until the
capital loss carryforwards have been offset or expire.
7. Forward Foreign Currency Exchange Contracts
At October 31, 1995, the Growth and Income Fund and the International Growth
Fund had the following open forward foreign currency exchange contracts that
obligate the Fund to deliver currencies at specified future dates. The
unrealized loss of $142,369 and unrealized gain of $235,937, respectively, on
these contracts are included in the accompanying financial statements. The
terms of the open contracts are as follows:
Growth and Income Fund:
<TABLE>
<CAPTION>
Unrealized
Exchange Currency to be U.S. $ Value as of Currency to be U.S. $ Value as of Gain
Date Delivered October 31, 1995 Received October 31, 1995 (Loss)
---------- --------------- ------------------ ---------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
12/13/95 7,590,000 $ 767,162 735,323 $ 735,323 $(31,839)
Austrian Shilling U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
12/13/95 62,625 62,625 620,000 62,667 42
U.S. Dollar Austrian Schilling
---------- -------------- ---------------- --------------- ---------------- ---------
11/1/95 129,000 94,894 94,909 94,909 15
Canadian Dollar U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
11/9/95 529,200 466,510 457,746 457,746 (8,764)
Swiss Franc U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
11/9/95 59,276 59,276 67,000 59,063 (213)
U.S. Dollar Swiss Franc
---------- -------------- ---------------- --------------- ---------------- ---------
11/1/95 401,000 73,539 73,578 73,578 39
Danish Krone U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
12/18/95 2,540,000 464,856 440,972 440,972 (23,884)
Danish Krone U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
12/18/95 73,610 73,610 401,000 73,389 (221)
U.S. Dollar Danish Krone
---------- -------------- ---------------- --------------- ---------------- ---------
12/21/95 3,220,000 758,707 727,355 727,355 (31,352)
Finnish Markka U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
12/21/95 129,531 29,531 550,000 129,593 62
U.S. Dollar Finnish Markka
---------- -------------- ---------------- --------------- ---------------- ---------
11/2/95 11,000 17,348 17,446 17,446 98
British Pound U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
11/3/95 108,000 170,322 170,247 170,247 (75)
British Pound U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
12/14/95 1,250,000 1,970,525 1,923,250 1,923,250 (47,275)
British Pound U.S. Dollar
---------- -------------- ---------------- --------------- ---------------- ---------
12/14/95 187,528 187,528 119,000 187,594 66
U.S. Dollar British Pound
---------- -------------- ---------------- --------------- ---------------- ---------
</TABLE>
F-64
<PAGE>
7. Forward Foreign Currency Exchange Contracts (Continued)
Growth and Income Fund (continued)
<TABLE>
<CAPTION>
Unrealized
Exchange Currency to be U.S. $ Value as of Currency to be U.S. $ Value as of Gain
Date Delivered October 31, 1995 Received October 31, 1995 (Loss)
---------- --------------- ------------------ ---------------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
11/1/95 23,020,000 $ 226,639 255,908 $ 225,908 (731)
Japanese Yen U.S. Dollar
---------- -------------- ---------------- -------------- ---------------- ---------
12/13/95 213,020,000 2,098,108 2,156,370 2,156,370 58,262
Japanese Yen U.S. Dollar
---------- -------------- ---------------- -------------- ---------------- ---------
12/19/95 185,560,000 1,829,470 1,838,887 1,838,887 9,417
Japanese Yen U.S. Dollar
---------- -------------- ---------------- -------------- ---------------- ---------
12/19/95 227,605 227,605 23,020,000 226,958 (647)
U.S. Dollar Japanese Yen
---------- -------------- ---------------- -------------- ---------------- ---------
10/31/95 1,000 393 396 396 3
Malaysian Ringgit U.S. Dollar
---------- -------------- ---------------- -------------- ---------------- ---------
11/2/95 13,000 5,111 5,118 5,118 7
Malaysian Ringgit U.S. Dollar
---------- -------------- ---------------- -------------- ---------------- ---------
12/18/95 1,090,000 691,678 655,915 655,915 (35,763)
Dutch Guilder U.S. Dollar
---------- -------------- ---------------- -------------- ---------------- ---------
12/18/95 14,817 14,817 23,000 14,595 (222)
U.S. Dollar Dutch Guilder
---------- -------------- ---------------- -------------- ---------------- ---------
12/7/95 5,160,000 828,924 808,537 808,537 (20,387)
Norwegian Krone U.S. Dollar
---------- -------------- ---------------- -------------- ---------------- ---------
12/7/95 12,851 12,851 80,000 12,851 -0-
U.S. Dollar Norwegian Krone
---------- -------------- ---------------- -------------- ---------------- ---------
12/14/95 716,000 507,837 498,830 498,830 (9,007)
Singapore Dollar U.S. Dollar
---------
$(142,369)
=========
</TABLE>
International Growth Fund:
<TABLE>
<CAPTION>
U.S. $ Value as U.S. $ Value as
Currency to of Currency to of Unrealized
Exchange be October 31, be October 31, Gain
Date Delivered 1995 Received 1995 (Loss)
---------- ------------- --------------- ------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
11/16/95 778,426,000 $7,964,063 8,200,000 $8,200,000 $235,937
=========
Japanese Yen U.S. Dollar
</TABLE>
8. Authorized Capital Shares and Capital Share Transactions
The Funds are authorized to issue a total of 4.0 billion shares. Of those 4.0
billion shares, 3.8 billion have been designated to the Funds as follows: All
of the Funds, except Money Market, have been allocated 100 million shares
each of Select and Adviser Class shares. Money Market has been allocated one
billion shares each of Select and Adviser Class shares. Share transactions
for each Fund were as follows:
<TABLE>
<CAPTION>
Money Market Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 303,179,868 184,288,133 113,465,547 49,918,444
Shares issued upon reinvestment 9,929,370 4,313,330 3,576,944 788,233
Shares redeemed (199,341,125) (134,729,463) (85,667,348) (3,356,170)
-------------- -------------- -------------- ---------------
Net increase 113,768,113 53,872,000 31,375,143 47,350,507
============== ============== ============== ===============
</TABLE>
F-65
<PAGE>
8. Authorized Capital Shares and Capital Share Transactions (Continued)
<TABLE>
<CAPTION>
Government Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 1,193,587 2,647,126 38,421 17,344
Shares issued upon reinvestment 136,326 126,976 1,326 162
Shares redeemed (2,189,773) (95) (15,295) (1,503)
-------------- -------------- -------------- ---------------
Net increase (decrease) (859,860) 2,774,007 24,452 16,003
============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Bond Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 1,140,369 1,375,291 24,045 2,577,890
Shares issued upon reinvestment 170,990 161,898 91,739 73,112
Shares redeemed (998,454) (3,169,473) (2,051,824) (24)
-------------- -------------- -------------- ---------------
Net increase (decrease) 312,905 (1,632,284) (1,936,040) 2,650,978
============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Tax-Free Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 71,693 2,896,031 96,648 2,770,659
Shares issued upon reinvestment 8,514 19,126 92,619 87,705
Shares redeemed (65,562) (2,752,116) (785,103) (7,297)
-------------- -------------- -------------- ---------------
Net increase (decrease) 14,645 163,041 (595,836) 2,851,067
============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
The Aetna Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 1,654,411 4,761,580 78,916 2,469,921
Shares issued upon reinvestment 216,866 166,181 29,573 16,842
Shares redeemed (2,238,432) (3,684,549) (2,483,536) (1,366)
-------------- -------------- -------------- ---------------
Net increase (decrease) (367,155) 1,243,212 (2,375,047) 2,485,397
============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Growth and Income Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 6,670,390 26,001,787 130,556 2,425,064
Shares issued upon reinvestment 322,995 57,454 1,755 16,760
Shares redeemed (7,621,288) (4,378,789) (485,408) (1,923,626)
-------------- -------------- -------------- ---------------
Net increase (decrease) (627,903) 21,680,452 (353,097) 518,198
============== ============== ============== ===============
</TABLE>
F-66
<PAGE>
8. Authorized Capital Shares and Capital Share Transactions (Continued)
<TABLE>
<CAPTION>
Growth Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 1,378,209 2,522,145 109,935 38,832
Shares issued upon reinvestment 22,556 0 393 0
Shares redeemed (1,236,680) (566) (22,400) (24)
-------------- -------------- -------------- ---------------
Net increase 164,085 2,521,579 87,928 38,808
============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Small Company Growth Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 86,407 2,492,687 88,948 19,811
Shares issued upon reinvestment 4,983 0 0 0
Shares redeemed (103,946) (2,143) (12,812) (24)
-------------- -------------- -------------- ---------------
Net increase (decrease) (12,556) 2,490,544 76,136 19,787
============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
International Growth Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 576,518 1,569,806 2,284,778 2,315,445
Shares issued upon reinvestment 232,686 0 177,272 0
Shares redeemed (1,168,155) (2,413,248) (2,277,588) (485)
-------------- -------------- -------------- ---------------
Net increase (decrease) (358,951) (843,442) 184,462 2,314,960
============== ============== ============== ===============
</TABLE>
<TABLE>
<CAPTION>
Asian Growth Fund
------------------------------------------------------------------------
Select Adviser
---------------------------------- -----------------------------------
Ten-month Ten-month
Year ended period ended Year ended period ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
---------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Shares sold 197,383 3,099,129 56,991 33,362
Shares issued upon reinvestment 11,728 0 67 0
Shares redeemed (636,165) (1,103) (7,782) (132)
-------------- -------------- -------------- ---------------
Net increase (decrease) (427,054) 3,098,026 49,276 33,230
============== ============== ============== ===============
</TABLE>
F-67
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
Aetna Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities of
Money Market Fund, Government Fund, Bond Fund, Tax-Free Fund, The Aetna Fund,
Growth and Income Fund, Growth Fund, Small Company Growth Fund, International
Growth Fund, and Asian Growth Fund, portfolios of Aetna Series Fund, Inc.
(the Funds), including the portfolios of investments, as of October 31, 1995,
and the related statements of operations for the year then ended, the
statements of changes in net assets for the year then ended and ten-month
period ended October 31, 1994, financial highlights for Select Class shares
for the year ended October 31, 1995 and the ten month period ended October
31, 1994, financial highlights for the Adviser Class shares for the year
ended October 31, 1995 and the period from April 15, 1994 (date of initial
public offering) to October 31, 1994 and the financial highlights for each of
the years in the two-year period ended December 31, 1993 for Select Class
shares of the Money Market Fund, Bond Fund, The Aetna Fund, Growth and Income
Fund and International Growth Fund. These financial statements and financial
highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of October 31, 1995 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of October 31, 1995, the results of their operations, changes in
their net assets and the financial highlights for the years and periods
specified in the first paragraph above in conformity with generally accepted
accounting principles.
KPMG Peat Marwick llp
Hartford, Connecticut
December 15, 1995
F-68
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements:
(1) Included in Part A:
Financial Highlights
(2) Included in Part B:
Audited financial statements as of October 31, 1995, which include the
following: Statements of Assets and Liabilities as of October 31,
1995 Statements of Operations for the year ended October 31, 1995
Statements of Changes in Net Assets for the year ended October
31, 1995 and the
ten-month period ended October 31, 1994
Notes to Financial Statements
Portfolios of Investments
Independent Auditors' Report
(b) Exhibits:
(1) Articles of Incorporation, including Articles
Supplementary1
(2) By-laws (as amended September 13, 1994)(1)
(3) Not applicable
(4) Not applicable
(5)(a) Form of Investment Advisory Agreement between each Fund
and Aetna Life Insurance and Annuity Company ("ALIAC")(2)
(5)(b) Form of Subadvisory Agreements between Aetna Life
Insurance and Annuity Company and Aeltus (formerly
Aetna Capital Management Inc.) (2)
(6)(a) Underwriting Agreement between the Registrant and ALIAC1
(6)(b) Dealer Agreement for Registrant between ALIAC and Aetna
Investment Services, Inc. for Aetna Series Fund, Inc.
(February 8, 1994)(1)
(7) Not applicable
(8)(a)(1) Custodian Agreement - Mellon Bank, N.A.(1)
(8)(a)(2) Amendments to Custodian Agreement - Mellon Bank, N.A.(1)
(9)(a) Form of Administrative Services Agreement(1)
(9)(b) License Agreement(1)
(10)(a) Consent of Counse(l)
(10)(b) Opinion of Counsel(3)
(11) Consent of Independent Auditors
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15)(a) Distribution Plan(1)
(15)(b) Form of Shareholder Services Plan(1)
(16) Schedule for Computation of Performance Data
(17) Financial Data Schedules (see Exhibit 99.27)
(18) Not Applicable
(19) Powers of Attorney(4)
1 Incorporated herein by reference to the Registration Statement on Form
N-1A, File No. 33-85620, as filed electronically with the Securities and
Exchange Commission on June 28, 1995.
2 Incorporated herein by reference to the Registration Statement on Form
N-1A, File No. 33-41694, as filed electronically with the Securities and
Exchange Commission on November 17, 1995.
3 Incorporated herein by reference to the Rule 24f-2 notice filed with the
Securities and Exchange Commission on December 29, 1995.
4 Incorporated herein by reference to the Registration Statement on Form
N-1A, File No. 33-41694, as filed electronically with the Securities and
Exchange Commission on December 28, 1995.
Item 25. Persons Controlled by or Under Common Control
Registrant is a Maryland corporation for which separate financial
statements are filed. As of December 31,1995, Aetna Life Insurance
Company owned 0.71% of the Select Class, and Aetna Life Insurance and
Annuity Company owned 3.62% of the Select Class and 4.83% of the
Adviser Class of the Registrant's outstanding shares of beneficial
interest. All these companies are directly or indirectly owned by
Aetna Life and Casualty Company, a Connecticut company.
A diagram of all persons directly or indirectly under common control
with the Registrant is incorporated herein by reference to Item 26 of
Post-Effective Amendment No. 5 to the Registration Statement on Form
N-4, File No. 33-75982, as filed electronically with the Securities
and Exchange Commission on February 20, 1996.
<PAGE>
Item 26. Number of Holders of Securities
- ----------------------------------------
(1) Title of Series (2) Number of Record Holders
--------------- ------------------------
As of December 31, 1995
Select Class Adviser Class
------------ -------------
Money Market 6,115 4,173
Government 87 64
Bond 1,065 87
Tax-Free 40 56
The Aetna 2,225 339
Growth and Income 1,667 669
Growth 419 682
Small Company Growth 293 504
International Growth 1,039 342
Asian Growth 149 222
Ascent 4 0
Crossroads 4 0
Legacy 4 0
Item 27. Indemnification
- -------- ---------------
Article 9, Section (d) of the Registrant's Articles of Incorporation,
provide 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 in October, 1996.
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.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
The Investment Adviser is an insurance company that issues variable
and fixed annuities, variable and universal life insurance policies
and acts as depositor for separate accounts holding assets for
variable contracts and policies. The following table summarizes the
business connections of the directors and principal officers of the
Investment Adviser.
<TABLE>
<CAPTION>
================================================================================
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1993/Addresses*/**
- --------------------------------------------------------------------------------
<S> <C> <C>
Daniel P. Kearney Director, President and Executive Vice President (since
Chairman, Executive December 1993), and Group Executive,
Committee (Principal Financial Division (February 1993 -
Executive Officer) December 1993), Aetna Life and
Casualty Company; Director, Aetna
Insurance Company of America (since
February 1993).
Christopher J. Burns Director (1991); Senior Director, Aetna Financial Services,
Vice President Inc. (since January 1996); Director
(since July 1993) of Aetna Investment
Services, Inc.; Director (1992 -
April 1995) and Senior Vice President,
North American Operations (1993 - April
1995) of Aetna International, Inc.
Laura R. Estes Director and Senior Vice Director, Aetna Financial Services,
President Inc. (since January 1996); Director
and Senior Vice President, Aetna
Insurance Company of America (since
February 1993); Director, Aetna
Investment Services, Inc. (since
July 1993).
Timothy A. Holt Director, Senior Vice Senior Vice President, Business
President and Chief Strategy & Finance, Aetna Retirement
Financial Officer (1996) Services (since February 1996); Vice
President, Aetna Portfolio
Management/Investment
Group (August 1992 - February 1996).
Gail P. Johnson Director and Vice President Vice President, Service and Retain
Customers, Aetna Retirement Services
(since February 1996); Vice
President, Defined Benefit Services
(September 1994 - February 1996);
Vice President, Plan Services,
Pensions and Financial Services
(December 1992 - September 1994).
John Y. Kim Director and Senior Vice President, Aeltus Investment
President Management, Inc. (since December
1995); Chief Investment Officer,
Aetna Life and Casualty Company (since
May 1994); Managing Director, Mitchell
Hutchins Institutional Investors,
New York, NY (September 1993 - April 1994).
Shaun P. Mathews Director and Vice President Senior Vice President, Strategic
Markets and Products (February 1993
- January 1996), of Aetna Life
Insurance and Annuity Company;
Director and Senior Vice President,
Aetna Insurance Company of America
(since February 1993); Vice
President of Aetna Life Insurance
Company (since 1991).
Glen Salow Director and Vice President Vice President, Information
Technology, Investments and
Financial Services (February 1995 -
February 1996); Vice President,
Investment Systems, AIT (1992 -
1995).
Creed R. Terry Director and Vice President Vice President, Select and Manage
Markets, Aetna Retirement Services
(since February 1996); ALIAC Market
Strategist (August 1995 - February
1996); President, Chemical
Technology Corporation (a subsidiary
of Chemical Bank) (1991 - 1995).
Zoe Baird Senior Vice President and Senior Vice President and General
General Counsel Counsel of Aetna Life and Casualty
Company (since April 1992).
Susan E. Schechter Counsel and Corporate Counsel, Aetna Life and Casualty
Secretary Company (since November 1993).
Eugene M. Trovato Vice President and Vice President and Controller,
Treasurer, Corporate (February 1995 - Present), Assistant
Controller Vice President, Planning, Reporting,
and Analysis (October 1992 -
February 1995), Aetna Life Insurance
and Annuity Company.
Diane B. Horn Vice President and Chief Senior Compliance Officer (August 1993-
Compliance Officer February 1996), Aetna Life Insurance and
Annuity Company and Aetna Life Insurance
Company.
</TABLE>
* The principal business address of each person named is 151 Farmington
Avenue, Hartford, Connecticut 06156.
** Certain officers and directors of the investment adviser currently hold
(or have held during the past two years) other positions with affiliates
of the Registrant which are not deemed to be principal positions.
Item 29. Principal Underwriters
(a) In addition to serving as the principal underwriter for the
Registrant, Aetna Life Insurance and Annuity Company (ALIAC) also
acts as the principal underwriter for Aetna Variable Fund, Aetna
Income Shares, Aetna Variable Encore Fund, Aetna Investment
Advisers Fund, Inc., Aetna GET Fund, and Aetna Generation
Portfolios, Inc. (all registered management investment companies
under the 1940 Act), and for Variable Annuity Accounts B, C and
G, and Variable Life Account B (separate accounts of ALIAC
registered as unit investment trusts under the 1940 Act), and
Variable Annuity Account I (a separate account of Aetna Insurance
Company of America registered as a unit investment trust under
the 1940 Act). ALIAC is also the depositor of Variable Life
Account B, and Variable Annuity Accounts B, C and G.
Additionally, ALIAC is the investment adviser for Aetna Variable
Fund, Aetna Income Shares, Aetna Variable Encore Fund, Aetna
Investment Advisers Fund, Inc., Aetna GET Fund, Aetna Series
Fund, Inc. and Aetna Generation Portfolios, Inc.
(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
Timothy A. Holt Director, Senior Vice President and
Chief Financial Officer
Christopher J. Burns Director and Senior Vice President
Laura R. Estes Director and Senior Vice President
Gail P. Johnson Director and Vice President
John Y. Kim Director and Senior Vice President Director and 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
Zoe Baird Senior Vice President and General
Counsel
Susan E. Schechter Corporate Secretary and Counsel
Eugene M. Trovato Vice President and Treasurer,
Corporate Controller
Diane B. Horn 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
promulgated thereunder, the Registrant and its investment adviser,
ALIAC, maintain physical possession of each account, book or other
documents, except shareholder records, at its principal offices at
151 Farmington Avenue, Hartford, Connecticut 06156.
Shareholder records are maintained by the transfer agent, Firstar
Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53261.
Item 31. Management Services
- ------------------------------
Not applicable.
Item 32. Undertakings
- -----------------------
The Registrant undertakes that if requested by the holders of at
least 10% of a Fund'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 communication concerning that
shareholder meeting as if Section 16(c) of the Investment Company Act
of 1940 applied.
The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Fund's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
----------
Pursuant to the Securities Act of 1933 and the Investment Company Act of 1940,
Aetna Series Fund, Inc. certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective Amendment No. 12
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 29th day of February, 1996.
AETNA SERIES FUND, INC.
-----------------------
Registrant
By Shaun P. Mathews*
---------------------
Shaun P. Mathews
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons on February 29, 1996 in the capacities indicated.
Signature Title
- --------- -----
Shaun P. Mathews* President and Director
- ----------------------------------- (Principal Executive Officer)
James C. Hamilton* Vice President and Treasurer
- ----------------------------------- (Principal Financial and Accounting
Officer)
Morton Ehrlich* Director
- -----------------------------------
Maria T. Fighetti* Director
- -----------------------------------
David L. Grove* Director
- -----------------------------------
Daniel P. Kearney* Director
- -----------------------------------
John Y. Kim* Director
- -----------------------------------
Sidney Koch* Director
- -----------------------------------
Corine T. Norgaard* Director
- -----------------------------------
Richard G. Scheide* Director
- -----------------------------------
By: /s/ Susan E. Bryant
-------------------
* Susan E. Bryant
Attorney-in-Fact
<PAGE>
AETNA SERIES FUND, INC.
EXHIBIT INDEX
Exhibit No. Exhibit Page
- ----------- ------- ----
99-b(1) Articles of Incorporation, including Articles *
Supplementary
99-b(2) By-laws (as amended September 13, 1994) *
99-b(5)(a) Form of Investment Advisory Agreements *
between Registrant and Aetna Life Insurance
and Annuity Company ("ALIAC")
99-b(5)(c) Form of Subadvisory Agreements between Aetna *
Life Insurance and Annuity Company and Aeltus
(formerly Aetna Capital Management Inc.)
99-b(6)(a) Underwriting Agreement between the Registrant *
and ALIAC
99-b(6)(b) Dealer Agreement for registrant between ALIAC *
and Aetna Investment Services, Inc. (February
8, 1994)
99-b(8)(a)(1) Custodian Agreement - Mellon Bank, N.A. *
99-b(8)(a)(2) Amendments to Custodian Agreement - Mellon *
Bank, N.A.
99-b(9)(a) Form of Administrative Services Agreement *
99-b(9)(b) License Agreement *
99-b(10)(a) Consent of Counsel __
99-b(10)(b) Opinion of Counsel *
99-b(11) Consent of Independent Auditors __
99-b(15)(a) Distribution Plan *
99-b(15)(b) Form of Shareholder Services Plan *
99-b(16) Schedule for Computation of Performance Data __
99-b(19) Powers of Attorney *
27 Financial Data Schedules __
* Incorporated by reference.
Exhibit 99b(10)(a)
[Aetna 151 Farmington Avenue Susan E. Bryant
Logo] Hartford, CT 06156 Counsel
Law & Regulatory
Affairs, RE4C
(860) 273-7834
Fax: (860) 273-8340
February 29, 1996
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 December 29, 1995 (incorporated by
reference to the 24f-2 Notice for the fiscal year ended October 31, 1995 filed
on behalf of Aetna Series Fund, Inc. ) as an exhibit to this Post-Effective
Amendment No. 12 on Form N-1A to Registration Statement (File Nos. 33-41694 and
811-6352). I also consent to my being named under the caption "Legal Matters"
in the prospectus contained in the Post-Effective Amendment.
Sincerely,
/s/ Susan E. Bryant
Susan E. Bryant
Counsel
Exhibit 24(b)(11)
Consent of Independent Auditors
The Board of Directors
Aetna Series Fund, Inc.:
We consent to the use of our report, included herein, and to the references to
our Firm under the headings "Financial Highlights" in the prospectuses and
"Independent Auditors" in the Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
Hartford, Connecticut
February 29, 1996
AETNA SERIES FUND, INC.
COMPUTATION OF PERFORMANCE DATA
TOTAL RETURN QUOTATIONS
In calculating the total return quotations, a hypothetical account was
established using a $1,000 initial payment.
Formula
P(1 + T)(n) = ERV
P = a hypothetical initial payment of $1,000,
T = average annual total return,
n = number of years,
ERV = ending redeemable value at the end of the 1, 5, or 10 year
periods (or fractional portion thereof) of a hypothetical
$1,000 payment made at the beginning of the 1, 5, or 10 year
periods.
Select Class Shares
Assumptions:
- - The 1-year figure assumes the redemption on October 31, 1995 of values
attributable to a $1,000 payment made on November 1, 1994.
- - The Since Inception figure assumes the redemption on October 31, 1995 of
values attributable to a $1,000 payment made on January 1, 1992 (effective date
of Funds).
Aetna Money Market Fund
1 Year $1,000(1 + 5.95%)(1) = $1,060
Since Inception $1,000(1 + 4.32%)3.83 = $1,176
Aetna Bond Fund
1 Year $1,000(1 + 14.06%)(1) = $1,141
Since Inception $1,000(1 + 7.15%)3.83 = $1,303
The Aetna Fund
1 Year $1,000(1 + 19.45%)(1) = $1,195
Since Inception $1,000(1 + 9.05%)3.83 = $1,393
Aetna Growth and Income Fund
1 Year $1,000(1 + 22.58%)(1) = $1,226
Since Inception $1,000(1 + 9.75%)3.83 = $1,428
Aetna International Growth Fund
1 Year $1,000(1 + (0.04)%)(1) = $1,000
Since Inception $1,000(1 + 4.93%)3.83 = $1,202
<PAGE>
COMPUTATION OF PERFORMANCE DATA
TOTAL RETURN QUOTATIONS (continued)
Assumptions:
- - The 1-year figure assumes the redemption on October 31, 1995 of values
attributable to a $1,000 payment made on November 1, 1994.
- - The Since Inception figure assumes the redemption on October 31, 1995 of
values attributable to a $1,000 payment made on January 1, 1994 (effective date
of Funds).
Aetna Government Fund
1 Year $1,000(1 + 13.58%)(1) = $1,136
Since Inception $1,000(1 + 5.81%)(1.83) = $1,109
Aetna Growth Fund
1 Year $1,000(1 + 28.79%)(1) = $1,288
Since Inception $1,000(1 + 19.55%)(1.83) = $1,386
Aetna Small Company Growth Fund
1 Year $1,000(1 + 30.39%)(1) = $1,304
Since Inception $1,000(1 + 18.01%)(1.83) = $1,354
Aetna Asian Growth Fund
1 Year $1,000(1 + (11.54)%)(1) = $ 885
Since Inception $1,000(1 + (9.12)%)(1.83) = $ 839
<PAGE>
COMPUTATION OF PERFORMANCE DATA
TOTAL RETURN QUOTATIONS (continued)
Adviser Class Shares
Assumptions:
- - The 1-year figure assumes the redemption on October 31, 1995 of values
attributable to a $1,000 payment made on November 1, 1994.
- - The Since Inception figure assumes the redemption on October 31, 1995 of
values attributable to a $1,000 payment made on April 15, 1994 (effective date
of Adviser Class shares).
- - The performance reflects the deduction of the maximum contingent deferred
sales charge of 1%, declining by 0.25% each year after the date of purchase to
zero, assuming shares were redeemed at the end of the period.
Aetna Money Market Fund
1 Year $1,000(1 + 5.95%)(1) = $1,060
Since Inception $1,000(1 + 5.41%)(1.55) = $1,085
Aetna Government Fund
1 Year $1,000(1 + 11.60%)(1) = $1,116
Since Inception $1,000(1 + 7.50%)(1.55) = $1,119
Aetna Bond Fund
1 Year $1,000(1 + 12.28%)(1) = $1,123
Since Inception $1,000(1 + 7.49%)(1.55) = $1,119
The Aetna Fund
1 Year $1,000(1 + 17.32%)(1) = $1,173
Since Inception $1,000(1 + 12.41%)(1.55) = $1,199
Aetna Growth and Income Fund
1 Year $1,000(1 + 20.90%)(1) = $1,209
Since Inception $1,000(1 + 16.00%)(1.55) = $1,259
Aetna Growth Fund
1 Year $1,000(1 + 26.92%)(1) = $1,269
Since Inception $1,000(1 + 20.36%)(1.55) = $1,333
Aetna Small Company Growth Fund
1 Year $1,000(1 + 28.44%)(1) = $1,284
Since Inception $1,000(1 + 18.55%)(1.55) = $1,302
Aetna International Growth Fund
1 Year $1,000(1 + (1.81)%)(1) = $ 982
Since Inception $1,000(1 + 0.53%)(1.55) = $1,008
Aetna Asian Growth Fund
1 Year $1,000(1 + (13.11)%)(1) = $ 869
Since Inception $1,000(1 + (2.36)%)(1.55) = $ 964
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
<NUMBER> 011
<NAME> MONEY MARKET FUND - CLASS A
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 348,049,250
<INVESTMENTS-AT-VALUE> 348,049,250
<RECEIVABLES> 7,478,623
<ASSETS-OTHER> 1,228
<OTHER-ITEMS-ASSETS> 15,735
<TOTAL-ASSETS> 355,544,836
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,294,705
<TOTAL-LIABILITIES> 1,294,705
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 354,250,131
<SHARES-COMMON-STOCK> 275,524,492
<SHARES-COMMON-PRIOR> 161,756,379
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 354,250,131
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,428,062
<OTHER-INCOME> 0
<EXPENSES-NET> 718,646
<NET-INVESTMENT-INCOME> 15,709,416
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15,709,416
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 11,991,698
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 303,179,868
<NUMBER-OF-SHARES-REDEEMED> 199,341,125
<SHARES-REINVESTED> 9,929,370
<NET-CHANGE-IN-ASSETS> 145,143,256
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,083,771
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,381,393
<AVERAGE-NET-ASSETS> 207,293,280
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
<NUMBER> 012
<NAME> MONEY MARKET FUND - CLASS B
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 348,049,250
<INVESTMENTS-AT-VALUE> 348,049,250
<RECEIVABLES> 7,478,623
<ASSETS-OTHER> 1,228
<OTHER-ITEMS-ASSETS> 15,735
<TOTAL-ASSETS> 355,544,836
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,294,705
<TOTAL-LIABILITIES> 1,294,705
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 354,250,131
<SHARES-COMMON-STOCK> 78,725,639
<SHARES-COMMON-PRIOR> 47,350,496
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 354,250,131
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 16,428,062
<OTHER-INCOME> 0
<EXPENSES-NET> 718,646
<NET-INVESTMENT-INCOME> 15,709,416
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 15,709,416
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,717,718
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 113,465,547
<NUMBER-OF-SHARES-REDEEMED> 85,667,348
<SHARES-REINVESTED> 3,576,944
<NET-CHANGE-IN-ASSETS> 145,143,256
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,083,771
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,381,393
<AVERAGE-NET-ASSETS> 64,144,724
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
<NUMBER> 021
<NAME> GOVERNMENT FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 18,664,420
<INVESTMENTS-AT-VALUE> 19,261,304
<RECEIVABLES> 334,302
<ASSETS-OTHER> 191
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,595,797
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 37,490
<TOTAL-LIABILITIES> 37,490
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,645,117
<SHARES-COMMON-STOCK> 1,914,147
<SHARES-COMMON-PRIOR> 2,774,007
<ACCUMULATED-NII-CURRENT> 133,130
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (816,824)
<OVERDISTRIBUTION-GAINS> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> AETNA SERIES FUND, INC.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> AETNA SERIES FUND, INC.
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<NAME> AETNA SERIES FUND, INC.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
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<NAME> AETNA SERIES FUND, INC.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
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<NAME> SMALL COMPANY GROWTH FUND - CLASS A
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
<NUMBER> 092
<NAME> SMALL COMPANY GROWTH FUND - CLASS B
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
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<NAME> ASIAN GROWTH FUND
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> AETNA SERIES FUND, INC.
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<NAME> ASIAN GROWTH FUND - CLASS B
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