AETNA SERIES FUND INC, 485BPOS, 1996-02-29

AETNA SERIES FUND INC
485BPOS, 1996-02-29

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As filed with the Securities and Exchange File No. 33-85620
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. 2

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 19

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.

AETNA SERIES FUND, INC.
Cross-Reference Sheet

Form N-1A
Item No. Caption in Prospectus
- -------- ---------------------

Part A
- ------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Highlights
Fee Tables
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Description of the Generation Funds
Risk Factors and Other Considerations
Investment Restrictions
General Information
5. Management of the Fund Management of the Generation Funds
Portfolio Management
5A. Management's Discussion of Fund Financial Highlights
Performance
6. Capital Stock and Other Securities Highlights
Shareholder Services
Fund Distributions
Taxes
General Information
7. Purchase of Securities Being Offered Management of the Generation Funds
Net Asset Value
Shareholder Services
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

Part B 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 Generation 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 The Administrative Services Agreement
Distribution Arrangements
Custodian
Independent Auditors
17. Brokerage Allocation and Other Brokerage Allocation and Trading Policies
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
Generation Funds
[AETNA Logo] March 1, 1996 Prospectus

Aetna Ascent
Aetna Crossroads
Aetna Legacy

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. This Prospectus describes three of the Funds: Aetna Ascent,
Aetna Crossroads and Aetna Legacy (collectively, the "Generation Funds").
Each Fund is an asset allocation fund that allocates its investments among
equities and fixed income securities and is designed for investors with
different investment horizons and risk tolerances. Each Fund is currently
authorized to offer two classes of shares, the Adviser Class and the Select
Class. The Select Class 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. You can find more information about
the Funds in the March 1, 1996 Statement of Additional Information ("SAI"). 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. The SAI has been filed with the Securities and Exchange
Commission ("Commission") and is incorporated into this Prospectus by reference.

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 Ascent seeks to provide capital appreciation. Aetna Crossroads seeks to
provide total return (i.e., income and capital appreciation, both realized and
unrealized). Aetna Legacy seeks to provide total return consistent with
preservation of capital.

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

Highlights 3
Fee Tables 5
Financial Highlights 7
Description of the Generation Funds 8
How Investment Objectives are Pursued 8
Investment Techniques 13
Risk Factors and Other Considerations 16
Investment Restrictions 20
Shareholder Services 20
Other Features 27
Cross-Fund Investing 27
Management of the Generation Funds 28
Portfolio Management 29
Fund Distributions 30
Net Asset Value 30
Taxes 31
General Information 32
Performance Data 34
Appendix A--Glossary of Investment Terms 35
Appendix B--Description of Corporate Bond Ratings 38

2 Aetna Generation Funds Prospectus

<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.

What Funds Are Offered? The Company offers the following Funds through this
Prospectus. The Funds are asset allocation funds that seek to maximize long-term
investment returns at an acceptable level of risk. Aetna Ascent is designed for
investors who have an investment horizon exceeding 15 years and who have a high
level of risk tolerance. Aetna Crossroads is designed for investors who have an
investment horizon exceeding 10 years and who have a moderate level of risk
tolerance. Aetna Legacy is designed for investors who have an investment horizon
exceeding five years and who have a low level of risk tolerance.

Risk Factors The different types of securities purchased and investment
techniques used by the Generation Funds 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."

What is the Select Class of Shares? Each Fund has two classes of shares: Select
Class and Adviser Class. 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

Aetna Generation Funds Prospectus 3
<PAGE>

1%, declining to 0% after four years from the date of initial purchase.
Additionally, Adviser Class shares of each Fund are subject to an annual
distribution fee of 0.50% and a service fee of 0.25% of the value of the
average daily net assets of the Funds in the Adviser Class.

How Can I Purchase Shares? You may purchase Select 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"). 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. See "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 more
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. See "Management of the Generation Funds" for
further information.

What if l have further questions? Shareholders in the Generation Funds enjoy
a high level of personalized service. Please call your representative at
1-800-367-7732 for details or see "Shareholder Services" for additional
information.

4 Aetna Generation Funds Prospectus
<PAGE>

Fee Tables

The following is provided to assist you in understanding the various charges
and expenses you would bear directly or indirectly as an investor in the
Funds. A complete description of these charges and expenses starts on page
28.

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)

Total Fund
Management/ Administrative Other Operating
Advisory Fee Fee Expenses Expenses
----------------- ------------ ------------- -------- ----------
Aetna Ascent 0.80% 0.25% 0.33% 1.38%
Aetna Crossroads 0.80% 0.25% 0.35% 1.40%
Aetna Legacy 0.80% 0.25% 0.37% 1.42%

The expenses shown above are based on actual annualized expenses for the period
from inception of the Funds (January 4, 1995) through October 31, 1995.

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
----------------- ------ ------- ------- ---------
Aetna Ascent $14 $44 $76 $166
Aetna Crossroads 14 44 77 168
Aetna Legacy 14 45 78 170

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

Deferred Sales Sales Charge
Sales Charge Charge on on Dividend Exchange
on Purchases Redemptions(1) Reinvestment Fee
---------------- ------------ --------------- -------------- ----------
Aetna Ascent None 1.0% None None
Aetna Crossroads None 1.0% None None
Aetna Legacy None 1.0% None None

(1)The contingent deferred sales charge set forth in the above table is the
maximum redemption charge imposed on Adviser Class shares. Investors may pay
charges less than 1.0%, depending on the length of time the shares are held.
Adviser Class shares are also subject to an annual distribution fee ("Rule 12b-1
fee") of 0.50% and an annual service fee of 0.25% of the value of average daily
net assets of the Funds of the Adviser Class. See "Fees and Charges."

Aetna Generation Funds Prospectus 5
<PAGE>
Adviser Class
Estimated Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Total Fund
Management/ Administrative 12b-1 Other Operating
Advisory Fee Fee Fee Expenses Expenses
--------------- ------------ ------------- ----- -------- ----------
Aetna Ascent 0.80% 0.25% 0.50% 0.58% 2.13%
Aetna Crossroads 0.80% 0.25% 0.50% 0.60% 2.15%
Aetna Legacy 0.80% 0.25% 0.50% 0.62% 2.17%

Amounts reflected in "Other Expenses" and "Total Fund Operating Expenses" are
estimated amounts based on the actual, annual expenses incurred by the Select
Class series of shares for the ten months ended October 31, 1995. Actual
expenses may be greater or less than estimated. These expenses as a percentage
of assets are higher than those paid by most investment companies.

Adviser Class
Example

Using the above expenses, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return:
1 Year 3 Years 5 Years 10 Years
-------------------------------------- ------ ------- ------- --------
Aetna Ascent
Redemption at end of each time period $32 $72 114 $246
No Redemption 22 67 114 246
Aetna Crossroads
Redemption at end of each time period 32 72 115 248
No Redemption 22 67 115 248
Aetna Legacy
Redemption at end of each time period 32 73 116 250
No Redemption 22 68 116 250

This example should not be considered an indication of past or future
expenses. Actual expenses may be greater or less than those shown.

Because 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 different classes of the Funds.
Additional information regarding each Fund's classes of shares may be
obtained by calling your representative or 1-800-367-7732.

6 Aetna Generation Funds Prospectus
<PAGE>
Financial Highlights

(for one outstanding share throughout each period)

The selected data presented below for, and as of the end of, the period from
January 4, 1995 to October 31, 1995 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 period ended October 31, 1995, and the independent auditors' report thereon,
are included in the SAI.

Ascent Crossroads Legacy
------- ---------- -------
Net Asset Value, Beginning of Period $ 10.00 $ 10.00 $ 10.00
Income from Investment Operations
Net Investment Income .25 .29 .33
Net Realized and Change in Unrealized Gain 1.42 1.24 1.08
------- ---------- -------
Net Asset Value, End of Period $ 11.67 $ 11.53 $ 11.41
======= ========== =======
Total Return* 16.70% 15.30% 14.10%
Net Assets, End of Period (000's) 20,433 20,370 19,651
Ratio of Total Investment Expenses to
Average Net Assets** 1.38% 1.40% 1.42%
Ratio of Net Investment Income to Average
Net Assets** 2.80% 3.26% 3.75%
Portfolio Turnover Rate 164.09% 166.93% 179.88%

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

* Not Annualized.

** Annualized.

Additional information about the performance of the Generation Funds 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 first page of this Prospectus or
by calling 1-800-367-7732.

Aetna Generation Funds Prospectus 7
<PAGE>
Description of the Generation Funds

Investment Objectives

Aetna Ascent seeks to provide capital appreciation.

Aetna Crossroads seeks to provide total return (i.e., income and capital
appreciation, both realized and unrealized).

Aetna Legacy seeks to provide total return consistent with preservation of
capital.

Each Fund is a diversified management investment company under the Investment
Company Act of 1940 (the "1940 Act"). Each Fund's investment objective is
fundamental 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 securities used by the Generation Funds is
contained in Appendix A.

How Investment Objectives Are Pursued

Investment Strategies

Each Fund has a different asset allocation strategy, which corresponds with
different investment objectives and levels of investment risk. The strategy
establishes separate allocation benchmarks and ranges for each asset class.
The benchmark allocations describe a typical asset allocation strategy under
neutral market conditions. The allocation ranges describe the permissible
range of asset allocations allowed. The ranges are designed to allow the
Investment Adviser to achieve optimal allocation of assets, based on
different investment objectives and levels of investment risk. The Investment
Adviser may adjust the asset class mix of a particular Fund within the ranges
described below.

Aetna Ascent

is managed for investors seeking capital appreciation who generally have an
investment horizon exceeding 15 years, and who have a high level of risk
tolerance.

Aetna Crossroads

is managed for investors seeking a balance between income and capital
appreciation who generally have an investment horizon exceeding 10 years and
who have a moderate level of risk tolerance. Aetna Crossroads will invest no
more than 60% of its assets in any combination of the following asset
classes, which are defined below: securities in the Small Capitalization
Stock Class with capitalization of less

8 Aetna Generation Funds Prospectus
<PAGE>

than $.5 billion, securities in the U.S. Dollar Bond Class that are below
investment grade (which are characterized as high risk, high-yield securities
or "junk bonds"), securities in the International Stock Class, and securities
in the International Bond Class.

Aetna Legacy is managed for investors primarily seeking total return consistent
with capital preservation, who generally have an investment horizon exceeding
five years and who have a low level of risk tolerance. Aetna Legacy will invest
no more than 35% of its assets in any combination of the following asset
classes, which are defined below: securities in the Small Capitalization Stock
Class with capitalization of less than $.5 billion, securities in the U.S.
Dollar Bond Class that are characterized as high risk, high-yield securities,
securities in the International Stock Class and securities in the International
Bond Class.
The allocation benchmarks and asset class ranges and comparative indexes are
shown below:
<TABLE>
<CAPTION>
Aetna Aetna Aetna Comparative
Asset Class Ascent Crossroads Legacy Index
------------------------------ -------- ------------ -------- ---------------------
<S> <C> <C> <C> <C>
Equities
Large Capitalization Stocks
Range 0-60% 0-45% 0-30% Standard & Poor's 500
Benchmark 20% 15% 10% Stock Index
Small Capitalization Stocks
Range 0-40% 0-30% 0-20% Russell 2000 Small Cap
Benchmark 20% 15% 10% Stock Index
International Stocks
Range 0-40% 0-30% 0-20% Morgan Stanley Capital
International Europe,
Australia and Far East
Index
Benchmark 20% 15% 10%
Real Estate Stocks
Range 0-40% 0-30% 0-20% National Association of
Real Estate Investment
Trusts Equity REIT Index
Benchmark 20% 15% 10%
Fixed Income
U.S. Dollar Bonds
Range 0-30% 0-70% 0-100% Salomon Brothers Broad
Investment Grade Index
Benchmark 10% 25% 40%
International Bonds
Range 0-20% 0-20% 0-20% Salomon Brothers Non-U.S
World Government Bond
Index
Benchmark 10% 10% 10%
Money Market Instruments
Range 0-30% 0-30% 0-30% 91 Day T-Bill
Benchmark 0% 5% 10%
</TABLE>

Aetna Generation Funds Prospectus 9
<PAGE>

The Investment Adviser will allocate the assets of each Fund within the
specified ranges. The benchmark asset mix represents (1) how a Fund may
allocate its assets under neutral market conditions and (2) a basis for
measuring the performance of each Fund. The Investment Adviser monitors a
"hypothetical benchmark portfolio" consisting of a benchmark allocation in
each comparative index. The Investment Adviser may compare the performance of
each Fund to its corresponding hypothetical benchmark portfolio.

The asset allocation of each Fund may be above or below the benchmark
allocation, based on the Investment Adviser's ongoing evaluation of the
expected returns and risks of each asset class relative to other classes. If
the Investment Adviser believes that the expected return for a particular
asset class is higher than normal relative to the other classes, investment
in the class generally will be weighted more heavily than it would be in the
Fund's benchmark allocation. If the expected return for a particular asset
class is less than normal in relation to the other classes, generally it will
be underweighted relative to the Fund's benchmark allocation.

The Investment Adviser regularly reviews the investment allocations of
each Fund and will vary the amount invested in each class within the ranges
set forth above, depending upon its assessment of business, economic, market
and other conditions. For example, the Investment Adviser may adjust the
allocation mix in response to changes in circumstances with respect to
particular issuers or industries, in response to interest rate movements or
other economic conditions. In determining the asset mix of a particular Fund,
the Investment Adviser will consider many specific factors, including, among
other things: the dividend discount model, expected returns, bond yields,
price-to-earnings ratios, dividend yields and inflation. There can be no
assurance that any given allocation is the optimal allocation, although the
Investment Adviser allocates assets in a manner it believes will aid in
achieving a Fund's investment objective.

The asset allocation limits described above apply at the time of purchase
of a particular security. Each Fund may also invest in other securities not
included in the asset classes listed above. These securities are described
below.

The securities in which the Funds invest involve risks, which are
described below in "Investment Techniques" and "Risk Factors and Other
Considerations."

Equity Securities

Each Fund may invest its assets in equity securities that the Investment
Adviser believes have the potential for capital appreciation. These may
include the equity securities of larger, widely-traded companies, smaller,
less well-known securities, foreign securities and real estate-related
securities.

10 Aetna Generation Funds Prospectus
<PAGE>
Securities in this asset class include convertible debentures and
preferred securities and warrants.

Large Capitalization Stock Class. Equity securities in this class generally
have equity market capitalizations at the time of purchase of more than $1
billion, are U.S. domiciled and generally are widely traded on U.S.
exchanges.

Small Capitalization Stock Class. Equity securities in this class are issued
by smaller, less well-known U.S. companies with equity market capitalization
generally less than $1.0 billion. These securities may involve greater risks,
because their issuers may be untested in adverse market conditions, may have
limited product lines or financial resources or may trade less frequently
than larger-capitalized companies. As a result, the prices of these
securities may fluctuate more than prices of larger, more widely-traded
companies.

International Stock Class. Equity securities in this class may be issued by
companies domiciled or engaged in business principally in countries outside
of the United States. The Investment Adviser believes that investment in
foreign securities offers significant potential for long-term capital
appreciation and affords substantial opportunities for investment
diversification. Each Fund may invest in ordinary foreign shares, American
Depositary Receipts ("ADRs"), futures contracts on foreign stock indices and
other derivative securities within the limits set forth below. Investments in
securities of foreign companies and in securities denominated in foreign
currencies involve certain risks. See "Risk Factors and Other Considerations"
for more information.

Real Estate Stock Class. Equity securities in this class include equity real
estate investment trusts ("REITs"), real estate development and real estate
operating companies, and shares of companies engaged in other real estate
related businesses. Each Fund will invest the real estate portion of its
portfolio primarily in equity REITs, which are trusts that sell shares to
investors and use the proceeds to invest in real estate or interests in real
estate. A REIT may focus on a particular project, such as apartment
complexes, or geographic region, such as the Northeastern United States, or
both.

Fixed Income Securities

Each Fund may invest in fixed income securities, including obligations of the
United States and foreign governments as well as obligations of corporations.

Aetna Generation Funds Prospectus 11
<PAGE>
increase or decrease in value is affected by other factors, including the
maturity of the security. Fixed income securities are subject to various
risks, including the creditworthiness of the issuer and other economic
factors.

U.S. Dollar Bonds Class consists of any fixed income security denominated in
U.S. dollars. Examples of securities in this class include U.S. Government
securities, debt securities issued by U.S. corporations, supranational
agencies, tax-exempt municipal bonds and mortgage-backed securities.

U.S. Government Securities consists of direct obligations of the U.S.
Government, such as treasury bills, notes and bonds that are backed by the
full faith and credit of the United States, or obligations of the U.S.
Government, such as notes and bonds that are guaranteed by agencies and
instrumentalities of the U.S. Government. Securities of these agencies and
instrumentalities are backed by either the full faith and credit of the
United States, the right of the issuer to borrow from the U.S. Treasury, or
the credit of the agency or instrumentality. Securities in this group also
include repurchase agreements collateralized by U.S. Government agency
securities, separately traded principal and interest components of certain
U.S. Government securities (STRIPs) and zero coupon bonds.

Corporate Bonds include investment grade debt securities and high risk,
high-yield securities. Investment grade debt securities include corporate
bonds, mortgage-backed and other asset-backed and debt securities (described
below) rated in the four highest categories by Standard & Poor's Corporation
("Standard & Poor's") or Moody's Investor Services, Inc. ("Moody's"), and
other debt instruments with similar ratings by other nationally recognized
statistical rating organizations or, if unrated, considered by the Investment
Adviser to be of similar quality. High risk, high-yield securities, or "junk
bonds," carry more credit risk and are rated BB or below by Standard & Poor's
or Ba or below by Moody's or, if unrated, are considered by the Investment
Adviser to be of comparable quality. Each Fund will not invest more than 15%
of its assets in high risk, high-yield securities and will not invest in any
debt security rated lower than B.

Mortgage-backed securities 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 or returned in a lump sum at maturity.
They consist of pass-through securities issued by the U.S. Government and
corporations. Payments of interest and principal on U.S. mortgage-backed
securities may be guaranteed by an agency or instrumentality of the United
States. These agencies and instrumentalities include, but are not limited to,
the Government National Mortgage Association ("GNMA"), the Federal National

12 Aetna Generation Funds Prospectus
<PAGE>

Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). Private mortgage pass-through securities are backed by pools of
conventional fixed-rate or adjustable-rate mortgage loans but are not
guaranteed as to payment of interest and/or principal by the issuer. In
addition, the Funds may invest in collateralized mortgage obligations
("CMOs") and securities issued by real estate mortgage investment conduits
("REMICs"). Mortgage-backed securities are subject to prepayment risk
resulting from early prepayment by individual homeowners.

International Bond Class. Securities in this class include debt securities
denominated in currencies other than the U.S. dollar. Generally, these
securities are issued by foreign corporations and foreign governments and are
traded on foreign markets. Investment in international debt securities that
are denominated in foreign currencies involves certain risks. See "Risk
Factors and Other Considerations."

Money Market Class

Each Fund may invest in high quality money market obligations that present
minimal credit risk.

Money Market securities include U.S. Government obligations, repurchase
agreements, certificates of deposit, banker's acceptances, bank deposits,
other financial institution obligations, commercial paper and other
short-term commercial obligations. These securities may include instruments
that have variable interest rates which, in the opinion of the Investment
Adviser, will maintain a value at or close to the face value of the security.
Each Fund may keep a portion of its assets in cash.

Investment Techniques

The Generation Funds may use the following investment techniques:

Borrowing A Fund may borrow up to 5% of the value of its total assets for
temporary or emergency purposes. The Funds do not intend to borrow for
leveraging purposes; but they have the authority to do so. 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 Generation Funds Prospectus 13
<PAGE>
lend portfolio securities to affiliates. Though fully collateralized, lending
portfolio securities involves certain risks, including the possibility that
the borrower may become insolvent or default on the loan. In the event of a
disparity between the value of the loaned security and the collateral, there
is the additional risk that the borrower may fail to return the securities or
provide additional collateral.

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 Board of Directors has established credit standards for repurchase
transactions entered into by the Funds.

Asset-Backed Securities Each Fund may purchase securities collateralized by a
specified pool of assets, including, but not limited to, credit card
receivables, automobile loans, home equity loans, computer leases, boat
loans, mobile home loans, or recreational vehicle loans. These securities may
be subject to prepayment risk. In periods of declining interest rates,
reinvestment would thus be made at lower and less attractive rates.

Zero Coupon and Pay-in-Kind Bonds Each Fund may invest in zero coupon
securities and pay-in-kind bonds. Zero coupon securities are debt securities
that pay no cash income but are sold at substantial discounts to their value
at maturity. Some zero coupon securities call for the commencement of regular
interest payments at a deferred date. Pay-in-kind bonds pay all or a portion
of their interest in the form of additional debt or equity securities. Zero
coupon securities and pay-in-kind bonds are subject to greater price
fluctuations in response to changes in interest rates than are ordinary
interest-paying securities with similar maturities. The value of zero coupon
securities and pay-in-kind bonds appreciate more during periods of declining
interest rates and depreciate more during periods of rising interest rates.

Bank Obligations Each Fund may invest in obligations issued by domestic or
foreign banks (including banker's acceptances, commercial

14 Aetna Generation Funds Prospectus
<PAGE>
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%.

Options, Futures Contracts and Other Derivative Instruments A derivative is a
financial instrument, the value of which is "derived" from the performance of
an underlying asset (such as a security or index of securities). In addition
to futures and options, derivatives include, but are not limited to, forward
contracts, swaps, structured notes, and CMOs.

A Fund may engage in various strategies using derivatives, including managing
its exposure to changing interest rates, securities prices and currency
exchange rates (collectively known as hedging strategies), or increasing its
investment return. For purposes other than hedging, a Fund will invest no
more than 5% of its total assets in derivatives which at the time of purchase
are considered by management to involve high risk to the Fund. These would
include inverse floaters, interest-only and principal-only securities.

Each Fund may buy and sell options (including index options and options on
foreign securities), and may invest in futures contracts and related options
with respect to foreign currencies, fixed income securities, and foreign
stock indices.

Some of these strategies, such as selling futures contracts, buying puts
and writing calls, hedge against price fluctuations. Other strategies, such
as buying futures contracts, writing puts, buying calls and interest rate
swaps, tend to increase market exposure. In some cases, a Fund may buy a
futures contract for the purpose of increasing its exposure in a particular
market segment, which may be considered speculative, rather than hedging. The
aggregate futures market prices of financial instruments required to be
delivered or purchased under open futures contracts may not exceed 30% of
Aetna Legacy's total assets, 60% of Aetna Crossroads total assets and 100% of
Aetna Ascent's total assets. With respect to futures contracts or related
options that are entered into for purposes that may be considered
speculative, the aggregate initial margin for futures contracts and premiums
for options will not exceed 5% of a Fund's net assets, after taking into
account realized profits and unrealized losses on such futures contracts.

When a Fund writes a call option, it gives the purchaser the right, but
not the obligation, to buy a particular security at a set price within a set
time. The Fund receives income from the premium paid by the purchaser. The
calls are "covered," which means that the Fund owns the securities that are
subject to the call (although it may substitute other qualifying securities).
There is no limit on the amount of a Fund's total assets that may be subject
to calls.

Aetna Generation Funds Prospectus 15
<PAGE>

When a Fund writes a put option, it gives the purchaser the right, but not
the obligation, to require the Fund to buy a particular security at a set
price within a set time. Writing puts requires the segregation of liquid
assets to cover the put. A Fund will not write a put if it will require more
than 50% of the Fund's net assets to be segregated to cover the put
obligation.

All of the instruments discussed above are referred to as "hedging
instruments." Investment in these hedging instruments involves certain risks,
which are described below under "Risk Factors and Other Considerations" and in
the SAI.

Supranational Agencies Each Fund may invest up to 10% of its net assets in
securities of supranational agencies such as: the International Bank for
Reconstruction and Development (commonly referred to as the World Bank),
which was chartered to finance development projects in developing member
countries; the European Community, which is a twelve-nation organization
engaged in cooperative economic activities; the European Coal and Steel
Community, which is an economic union of various European nations' steel and
coal industries; and the Asian Development Bank, which is an international
development bank established to lend funds, promote investment and provide
technical assistance to member nations in the Asian and Pacific regions.
Securities of supranational agencies are not considered government securities
and are not supported directly or indirectly by the U.S. Government.

Illiquid and Restricted Securities Each Fund may invest up to 15% of its
total assets in illiquid securities. Illiquid securities are securities that
are not readily marketable or cannot be disposed of promptly within seven
days in the ordinary course of business without taking a materially reduced
price. In addition, a Fund may invest in securities that are subject to legal
or contractual restrictions on resale, including securities purchased under
Rule 144A and Section 4(2) of the Securities Act of 1933. The Board of
Directors has established a policy to monitor the liquidity of such
securities.

Other Investments In addition, each Fund may use other investment techniques,
including "when-issued" and delayed-delivery securities and variable rate
instruments. These techniques are described in Appendix A and the SAI.

Risk Factors and Other Considerations

16 Aetna Generation Funds Prospectus
<PAGE>

securities may be affected by changes in general interest rates and in the
creditworthiness of the issuer. Debt securities with longer maturities (for
example, over ten years) are generally more affected by changes in interest
rates and provide less price stability than securities with short term
maturities (for example, one to ten years). Also, on each debt security, the
risk of principal and interest default is greater with higher-yielding,
lower-grade securities. High risk high-yield securities may provide a higher
return but with added risk. In addition, foreign securities may 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 do not purchase securities
with the intention of profiting from short-term trading, each Fund may buy
and sell securities when the Investment Adviser believes such action is
advisable. It is anticipated that the average annual portfolio turnover rate
will not exceed 125%. Turnover rates in excess of 125% may result in higher
transaction costs relating to stock or equity transactions, which costs are
borne directly by the Fund. 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 depart from their
investment objectives temporarily by investing up to 100% of their assets in
cash or securities in the Money Market Class for defense against potential
market declines.

International Securities The purchase of international securities may involve
certain risks. These risks may 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 that might adversely affect the payment and transferability of
principal, interest and dividends on securities; higher transaction costs;
possible settlement delays; and less publicly available information about
foreign issuers.

Depositary Receipts The Funds can invest in both sponsored and unsponsored
depositary receipts. Unsponsored depositary receipts,

Aetna Generation Funds Prospectus 17
<PAGE>

which are typically traded in the over-the-counter market, may be less liquid
than sponsored depositary receipts and therefore may involve more risk. In
addition, there may be less information available about issuers of
unsponsored depositary receipts.

The Funds will generally acquire American Depositary Receipts (ADRs) which
are dollar denominated, although their market price is subject to
fluctuations of the foreign currency in which the underlying securities are
denominated. All depositary receipts will be considered foreign securities
for purposes of a Fund's investment limitation concerning investment in
foreign securities. See Appendix A and the SAI for more information.

Real Estate Securities A Fund's investments in real estate securities may be
subject to certain of the same risks associated with the direct ownership of
real estate. These risks may include: declines in the value of real estate;
risks related to general and local economic conditions, overbuilding and
competition; increases in property taxes and operating expenses; and
variations in rental income. In addition, equity REITs may be dependent upon
management skill, may not be diversified, and may be subject to the risks of
obtaining adequate financing for projects on favorable terms. Equity REITs
also are subject to the possibility of failing to qualify for tax-free
pass-through of income under the Internal Revenue Code and failing to
maintain exemption from the Investment Company Act of 1940, as amended ("1940
Act").

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 but at least B (securities with capacity to meet interest and principal
payments but greater vulnerability to default), or, if unrated, considered by
the Investment Adviser to be of comparable quality. 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.

Derivatives

Derivatives can be volatile investments and involve certain risks. As
described above under "Investment Techniques--Options, Futures and

18 Aetna Generation Funds Prospectus
<PAGE>

Other Derivative Instruments," the Funds may use derivative instruments
including 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.

Options and futures contracts can be volatile investments and involve
certain risks, including, but not limited to: no assurance that futures
contracts transactions can be effected at favorable prices; possible
reduction in a Fund's total return and yield; possible reduction in the 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
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 gains or losses 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.

In writing puts, there is the risk that a Fund may be required to buy the
underlying security at a disadvantageous price. In addition, it must
segregate assets to cover its obligations with respect to the sale of a put.
In writing calls, a Fund may forego profits on an increase in the price of
an underlying security if the purchaser exercises the call option. In
addition, a Fund could experience capital losses that might cause
previously-distributed income to be recharacterized for tax purposes as a
return of capital to shareholders.

The use of forward currency contracts may reduce the gain that otherwise
would result from a change in the relationship between the U.S. dollar and a
foreign currency. To limit its exposure in foreign currency exchange
contracts, the Funds limit their exposure to the amount of their respective
assets denominated in the foreign currency. Interest rate swaps are subject
to credit risks (if the other party fails to meet its obligations) and also
to interest rate risks, because the Funds could be obligated to pay more
under its swap agreements than they receive under them, as a result of
interest rate changes.

Cross-hedging entails a risk of loss on both the value of the security that
is the basis of the hedge and the currency contract that was used in the
hedge. These risks are described in greater detail in the SAI.

Aetna Generation Funds Prospectus 19
<PAGE>

Variable Rate Instruments, When-Issued and Delayed-Delivery
Transactions "When-issued," "delayed-delivery" and variable rate instruments
may be subject to liquidity risks, credit risks and risks of loss of
principal due to market fluctuations. Each Fund will establish a segregated
account in which it will maintain liquid assets in an amount at least equal
to the Fund's commitments to purchase securities on a when-issued or
delayed-delivery basis. For more information about these securities, see
Appendix A and the SAI.

Special Considerations Investors should be aware that the investment results
of the Funds depend in part 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 it will always allocate assets to the
best performing sectors. A 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.

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. 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. A Fund may not
purchase a call or a put if the value of all the Fund's call and put options
would exceed 5% of the value of its total assets.

Shareholder Services

The Company offers several services to its Generation 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

20 Aetna Generation Funds Prospectus
<PAGE>
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 Generation Funds or
the shareholder services described below, please call your representative or
1-800-367-7732.

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 shares of another Generation Fund (or any other Fund
of the Company). All checks must be drawn on a bank located within the United
States and be payable in U.S. dollars. Minimum investments may be waived if
an investment is made through exchange of the entire amount invested in the
same class of another portfolio of the Company (including any of the
Generation Funds). Minimums may also be waived for certain circumstances such
as for persons investing through certain benefit plans, insurance settlement
options or by systematic investments. (See "Other Features--Systematic
Investment.")

Crediting of Shares If a completed and signed application accompanied by a
check in payment for the shares is received by Firstar Trust Company, the
transfer agent, at its Milwaukee offices, prior to 4:00 p.m. Eastern time on
any day that the New York Stock Exchange is open for business ("Business
Day"), the Select Class shares will be purchased at the net asset value
determined as of 4:15 p.m. on that date. Orders received after 4:00 p.m. will
be processed at the net asset value determined on the following Business Day.
See "Net Asset Value" for information on how the Generation Funds are valued.

Aetna Generation Funds Prospectus 21
<PAGE>

transfer agent at the address listed below. You can make additional
investments to your accounts by using the investment stubs from your
confirmation statements or by letter. Your letter should indicate your name,
account number(s), the Select Class shares of the Generation Fund(s) in which
you wish to invest, and the amount to be invested. Letters should be mailed
to the transfer agent as follows:

Aetna Series Funds, Inc.--Generation Funds
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 Funds, Inc.--Generation Funds
c/o Mutual Fund Services, 3rd Floor
617 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.

Purchase by Wire If you have an account in a Generation Fund, you may
purchase additional Select Class shares of that 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 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 (1) the name and account number of your
current Fund account; (2) the name of the Fund you wish to exchange into; (3)
the amount to be exchanged; and (4) the signatures of all shareholders.

22 Aetna Generation Funds Prospectus
<PAGE>

Requests should be mailed 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:

(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.

Distribution Options When completing an application, you must select one of
the following options for dividends and capital gains distributions:

(box) Full Reinvestment--Both dividends and capital gains distributions from a
Fund will be reinvested in additional Select Class shares of

Aetna Generation Funds Prospectus 23
<PAGE>

that Fund. This option will be selected automatically unless one of the
other options is specified. (See "Fund Distributions.")

(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.

(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 next determined after receipt
of the redemption request by the transfer agent. Redemptions received by 4:00
p.m. Eastern time will be processed at the net asset value determined as of
4:15 p.m. on that date if all required documentation is received by the
transfer agent by 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.

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.

24 Aetna Generation Funds Prospectus
<PAGE>

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 NYSE 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.

For help with redemptions, call your agent or representative or
1-800-367-7732.

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.

Aetna Generation Funds Prospectus 25
<PAGE>

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 determined 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.

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

Systematic Investment The Systematic Investment feature, using the EFT
capability (see "Shareholder Services--Purchase by Electronic

26 Aetna Generation Funds Prospectus
<PAGE>

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.

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.

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

Dividend Investing --You may elect to have dividend and/or capital gains
distributions automatically invested in another Select Class Fund account.

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 "Purchase by Exchange" section
carefully. There may be tax

Aetna Generation Funds Prospectus 27
<PAGE>

consequences associated with these exchanges. Please consult your tax
adviser.

Cross-Fund Investing may only be made into 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.

Management of the Generation 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.

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
Generation 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 objective and policies subject to the supervison 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 and 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 at an annual rate based upon
the average net assets of each Generation Fund as follows: 0.80% on the first
$500 million; 0.775% on the next $500 million; 0.75% on the next $500
million; 0.725% on the next $500 million; and 0.70% on assets over $2
billion.

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, shareholder communications and
supervising the custodian and transfer agent.

For these services, each Fund pays ALIAC a monthly fee at an annual rate
based upon the 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 billion.

28 Aetna Generation Funds Prospectus
<PAGE>

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 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.

Kevin M. Means is the lead portfolio manager for the Generation Funds and has
been responsible for determining the allocation of each Fund's investments
among the seven asset classes described under "Investment Strategies" since
their inception in January 1995. 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 is responsible for the selection of
securities for the Generation Funds in the Large Capitalization Stocks class.

The following individuals are responsible for the selection of securities for
the Generation Funds in each of the asset classes other than the Large
Capitalization Stock class:

Vince Fioramonti, International Stocks and International Bonds, is currently
managing 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.

Aetna Generation Funds Prospectus 29
<PAGE>

joined ALIAC in early 1994 as an Associate in Real Estate Investments Group.
Prior to joining Aetna, Mr. Tepper consulted in the area of real estate
finance, valuations, and asset restructuring.

Donald Townswick, Small Capitalization Stocks, joined ALIAC in July of 1994
after serving as Vice President at INVESCO Management and Research, Boston.
Mr. Townswick was at INVESCO from 1992 to 1994. Prior to his position at
INVESCO, he was an engineer in the Aerospace Industry with Rockwell
International and Douglas Aircraft Company.

Jeanne Wong-Boehm, U.S. Dollar Bonds and Money Market Investments, 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.

Fund Distributions

Each Generation Fund declares and pays dividends annually. 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 and service fees applicable to the Adviser Class.

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 will be reduced by the amount of such payment.

Net Asset Value

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. Each Fund's
NAV is computed by dividing the total value of a Fund's securities, plus any
cash or other assets (including dividends and interest 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

30 Aetna Generation Funds Prospectus
<PAGE>

fair value in such manner as may be determined, from time to time, under the
authority of, the Directors.

Taxes

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 advisor.

Each Fund intends to qualify as a regulated investment company by satisfying
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), including requirements with respect to diversification
of assets, distribution of income and sources of income. It is the policy of
each Fund to distribute to shareholders all of its investment income (net of
expenses) and any capital gains (net of capital losses) in accordance with
the timing requirements imposed by the Code so that each Fund will satisfy
the distribution requirement of Subchapter M and not be subject to federal
income taxes or the 4% excise tax.

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.
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. 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
October through December to shareholders of record on a date in October
through December and paid in January of the following year will be
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 (or deemed made) during the previous year and any foreign
taxes "passed-through" to shareholders.

Buying a Dividend If you buy shares of a Fund just before the ex-dividend
date, you may be taxed on the entire amount of the dividend received.

Aetna Generation Funds Prospectus 31
<PAGE>

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 authorized the organization of the Generation Funds
by amendment to its Articles on September 27, 1994.

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 Directors do 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 Generation Funds have sought a ruling from the IRS 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 Internal Revenue Code. While similar rulings have been
issued by the IRS, including a ruling with respect to other Funds of the
Company, complete assurance cannot, of course, be given that the Generation
Funds will receive such a ruling. For additional information, including a
discussion of the consequences if the IRS does not grant the requested
ruling, see the SAI.

32 Aetna Generation Funds Prospectus
<PAGE>

Capital Stock The Articles 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
Aetna Ascent 1,840,324 0
Aetna Crossroads 1,791,527 0
Aetna Legacy 1,826,236 0
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 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 the interest of
only one Fund or one class of shares.

Aetna Generation Funds Prospectus 33
<PAGE>
Payments to Dealers From time to time, ALIAC or its affiliates may make
payments (up to 0.25%, computed on an annualized basis, of 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 Generation 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"); the Russell 2000 Index;
Shearson Lehman Aggregate Bond Index; Dow Jones Industrial Average ("DJIA");
Lipper Analytical Services, Inc.; the National Association of Real Estate
Investment Trusts ("NAREIT") Equity REIT Index; IBC/Donoghue's Taxable MFA;
the Morgan Stanley Capital International Europe, Australia, Far East ("EAFE")
Index; the Morgan Stanley Capital International Far East Free ("FEF ex.
Japan") Index; Salomon Brothers Broad Investment Grade Index; and the Salomon
Brothers Non-U.S. Bond Index.

34 Aetna Generation Funds Prospectus
<PAGE>
Appendix A--Glossary of Investment Terms

This glossary describes some of the securities used by the Generation 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.

Depositary Receipts Depositary receipts are negotiable certificates
evidencing ownership of shares of a non-U.S. corporation, government, or
foreign subsidiary of a U.S. Corporation. A U.S. bank typically issues
depositary receipts, which are backed by ordinary shares that remain on
deposit with a custodian bank in the issuer's home market.

A depositary receipt can either be "sponsored" by the issuing company or
established without the involvement of the company, which is referred to as
"unsponsored."

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.

Aetna Generation Funds Prospectus 35
<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.

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.

When-Issued and Delayed-Delivery Transactions When-issued and
delayed-delivery transactions are trading practices in which payment and
delivery for securities takes place at a future date. The market value of a
security could change during the interim period, which could affect yield.

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 is more volatile than bonds which pay interest but are rated on the
same principles as all fixed-income investments.

The Generation 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 of common stock 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.

36 Aetna Generation Funds Prospectus
<PAGE>

Covered Put Option A written put option covered by segregated liquid assets
equal to the value of the exercise price of the put. Writing a put has
similar economic effect as writing a call. The writer receives a premium, but
also assumes the obligation during the option period to buy the underlying
investment from the buyer at the exercise price, even though the value of the
investment may fall below the exercise price.

Futures Contracts to buy securities, currencies or stock indexes in the
future at a price agreed to 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 Generation Funds Prospectus 37
<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; and the
modifier 3 indicates that the issue ranks in the lower end of its rating
category.

38 Aetna Generation Funds Prospectus
<PAGE>
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 Generation Funds Prospectus 39
<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>

Adviser Class

Aetna
Generation Funds
[Aetna logo] March 1, 1996 Prospectus

Aetna Ascent
Aetna Crossroads
Aetna Legacy

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. You can find more information
about the Funds in the March 1, 1996 Statement of Additional Information
("SAI"). The SAI is available upon request and without charge by calling
1-800-367-7732 or by writing to Aetna Series Fund, Inc., 151 Farmington
Avenue, Hartford, Connecticut 06156-8962. The SAI has been filed with the
Securities and Exchange Commission ("Commission") and is incorporated into
this Prospectus by reference.

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 Ascent seeks to provide capital appreciation.

Aetna Crossroads seeks to provide total return (i.e., income and capital
appreciation, both realized and unrealized).

Aetna Legacy seeks to provide total return consistent with preservation of
capital.

Aetna Generation Funds Prospectus 1
<PAGE>
Table of Contents

Highlights 3
Fee Tables 5
Description of the Generation Funds 8
How Investment Objectives are Pursued 8
Investment Techniques 13
Risk Factors and Other Considerations 17
Investment Restrictions 20
Shareholder Services 21
Other Features 27
Cross-Fund Investing 28
Fees and Charges 28
Management of the Generation Funds 30
Portfolio Management 32
Fund Distributions 33
Net Asset Value 33
Taxes 33
General Information 35
Performance Data 37
Appendix A--Glossary of Investment Terms 37
Appendix B--Description of Corporate Bond Ratings 40

2 Aetna Generation Funds Prospectus
<PAGE>

Highlights

What Funds Are Offered? The Company offers the following Funds through this
Prospectus. The Funds are designed to achieve your retirement savings
objectives through asset allocation and to maximize long-term investment
returns at an acceptable level of risk. Aetna Ascent is designed for
investors who have an investment horizon exceeding 15 years and who have a
high level of risk tolerance. Aetna Crossroads is designed for investors who
have an investment horizon exceeding 10 years and who have a moderate level
of risk tolerance. Aetna Legacy is designed for investors who have an
investment horizon exceeding five years and who have a low level of risk
tolerance.

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 are subject to a contingent deferred sales charge
("CDSC") at a maximum rate of 1%, 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. Additionally, Adviser Class shares of each
Fund are subject to an annual distribution fee of 0.50% and a service fee of
0.25% of the value of the average daily net assets of the Funds in the
Adviser Class. 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

Aetna Generation Funds Prospectus 3
<PAGE>
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. See
"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. 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. See
"Management of the Generation Funds" for further information.

What if I have further questions? Shareholders in the Generation Funds enjoy
a high level of personalized service. Please call your representative at
1-800-367-7732 for details or see "Shareholder Services" for additional
information.

4 Aetna Generation Funds Prospectus
<PAGE>

Fee Tables

Adviser Class Shareholder Transaction Expenses
Deferred Sales Sales Charge
Sales Charge Charge on on Dividend Exchange
on Purchases Redemptions(1) Reinvestment Fee
--------------- -------------- --------------- -------------- --------

Aetna Ascent None 1.0% None None
Aetna
Crossroads None 1.0% None None
Aetna Legacy None 1.0% None None

(1)The contingent deferred sales charge set forth in the above table is the
maximum redemption charge imposed on Adviser Class shares. Investors may pay
charges less than 1.0%, depending on the length of time the shares are held.
Adviser Class shares are also subject to an annual distribution fee ("Rule
12b-1 fee") of 0.50% and an annual service fee of 0.25% of the value of
average daily net assets of the Funds of the Adviser Class. See "Fees and
Charges."

Adviser Class Estimated Annual Fund Operating Expenses
(as a percentage of average daily net assets)

Total Fund
Management/ Administrative 12b-1 Other Operating
Advisory Fee Fee Fee Expenses Expenses
------------- ------------ ------------- ----- -------- ----------

Aetna Ascent 0.80% 0.25% 0.50% 0.58% 2.13%
Aetna
Crossroads 0.80% 0.25% 0.50% 0.60% 2.15%
Aetna Legacy 0.80% 0.25% 0.50% 0.62% 2.17%

Amounts reflected in "Other Expenses" and "Total Fund Operating Expenses" are
estimated amounts based on expenses for comparable funds. Actual expenses may
be greater or less than estimated. These expenses as a percentage of assets
are higher than those paid by most investment companies.

Aetna Generation Funds Prospectus 5
<PAGE>

Adviser Class Example

Using the above expenses, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return:

1 Year 3 Years 5 Years 10 Years
- ------------------------------ ------ ------- ------- ---------

Aetna Ascent
Redemption at end of each
time period $32 $72 $114 $246
No Redemption 22 67 114 246
Aetna Crossroads
Redemption at end of each
time period 32 72 115 248
No Redemption 22 67 115 248
Aetna Legacy
Redemption at end of each
time period 32 73 116 250
No Redemption 22 68 116 250

This example should not be considered an indication of past or future
expenses. Actual expenses may be greater or less than those shown.

Select Class Shareholder Transaction Expenses

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

Total Fund
Management/ Administrative Other Operating
Advisory Fee Fee Expenses Expenses
--------------- ------------ ------------- -------- ----------

Aetna Ascent 0.80% 0.25% 0.33% 1.38%
Aetna
Crossroads 0.80% 0.25% 0.35% 1.40%
Aetna Legacy 0.80% 0.25% 0.37% 1.42%

The expenses shown above are based on actual annualized expenses for the period
from inception of the Funds (January 4, 1995) through October 31, 1995.

6 Aetna Generation 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:

1 Year 3 Years 5 Years 10 Years
--------------- ------ ------- ------- ---------

Aetna Ascent $14 $44 $76 $166
Aetna Crossroads 14 44 77 168
Aetna Legacy 14 45 78 170

This example should not be considered an indication of past or future
expenses. Actual expenses may be greater or less than those shown.

Aetna Generation Funds Prospectus 7
<PAGE>
Description of the Generation Funds

Investment Objectives

Aetna Ascent seeks to provide capital appreciation.

Aetna Crossroads seeks to provide total return (i.e., income and capital
appreciation, both realized and unrealized).

Aetna Legacy seeks to provide total return consistent with preservation of
capital.

Each Fund is a diversified management investment company under the
Investment Company Act of 1940 ("1940 Act"). Each Fund's investment objective
is fundamental 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 securities used by the Generation Funds is
contained in Appendix A.

How Investment Objectives Are Pursued

Investment Strategies

Aetna Ascent is managed for investors seeking capital appreciation who
generally have an investment horizon exceeding 15 years, and who have a high
level of risk tolerance.

Aetna Crossroads is managed for investors seeking a balance between income
and capital appreciation who generally have an investment horizon exceeding
10 years and who have a moderate level of risk tolerance. Aetna Crossroads
will invest no more than 60% of its assets in any com-

8 Aetna Generation Funds Prospectus
<PAGE>
bination of the following asset classes, which are defined below: securities
in the Small Capitalization Stock Class with capitalization of less than $.5
billion, securities in the U.S. Dollar Bond Class that are below investment
grade (which are characterized as high risk, high-yield securities or "junk
bonds"), securities in the International Stock Class, and securities in the
International Bond Class.

Aetna Aetna Aetna Comparative
Asset Class Ascent Crossroads Legacy Index
- --------------------- -------- ------------ -------- -----------------
Equities
Large Capitalization
Stocks
Range Standard & Poor's
0-60% 0-45% 0-30% 500 Stock Index
Benchmark 20% 15% 10%
Small Capitalization
Stocks
Range Russell 2000
Small Cap Stock
0-40% 0-30% 0-20% Index
Benchmark 20% 15% 10%
International Stocks
Range Morgan Stanley
Capital
International
Europe, Australia
and Far East
0-40% 0-30% 0-20% Index
Benchmark 20% 15% 10%
Real Estate Stocks
Range National
Association of
Real Estate
Investment Trusts
0-40% 0-30% 0-20% Equity REIT Index
Benchmark 20% 15% 10%
Fixed Income
U.S. Dollar Bonds
Range Salomon Brothers
Broad Investment
0-30% 0-70% 0-100% Grade Index
Benchmark 10% 25% 40%
International Bonds
Range Salomon Brothers
Non-U.S. World
Government Bond
0-20% 0-20% 0-20% Index
Benchmark 10% 10% 10%

Aetna Generation Funds Prospectus 9
<PAGE>
Money Market
Instruments
Range 0-30% 0-30% 0-30% 91 Day T-Bill
Benchmark 0% 5% 10%

The securities in which the Funds invest involve risks, which are
described below in "Investment Techniques" and "Risk Factors and Other
Considerations."

10 Aetna Generation Funds Prospectus
<PAGE>
Equity Securities

Securities in this asset class include convertible debentures and
preferred securities and warrants.

Aetna Generation Funds Prospectus 11
<PAGE>
Fixed Income Securities

Each Fund may invest in fixed income securities, including obligations of the
United States and foreign governments as well as obligations of corporations.

The value of fixed income securities fluctuates in response to changes in
interest rates. Generally, when interest rates fall, the value of fixed
income securities increases. Conversely, when interest rates rise, the value
of fixed income securities decreases. The amount of increase or decrease in
value is affected by other factors, including the maturity of the security.
Fixed income securities are subject to various risks, including the
creditworthiness of the issuer and other economic factors.

12 Aetna Generation Funds Prospectus
<PAGE>
Mortgage-backed securities 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 or returned in a lump sum at maturity.
They consist of pass-through securities issued by the U.S. Government and
corporations. Payments of interest and principal on U.S. mortgage-backed
securities may be guaranteed by an agency or instrumentality of the United
States. These agencies and instrumentalities include, but are not limited to,
the Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"). Private mortgage pass-through securities are backed by pools of
conventional fixed-rate or adjustable-rate mortgage loans but are not
guaranteed as to payment of interest and/or principal by the issuer. In
addition, the Funds may invest in collateralized mortgage obligations
("CMOs") and securities issued by real estate mortgage investment conduits
("REMICs"). Mortgage-backed securities are subject to prepayment risk
resulting from early prepayment by individual homeowners.

Money Market Class

Each Fund may invest in high quality money market obligations that present
minimal credit risk.
Money Market securities include U.S. Government obligations, repurchase
agreements, certificates of deposit, banker's acceptances, bank deposits,
other financial institution obligations, commercial paper and other
short-term commercial obligations. These securities may include instruments
that have variable interest rates which, in the opinion of the Investment
Adviser, will maintain a value at or close to the face value of the security.
Each Fund may keep a portion of its assets in cash.

Investment Techniques

The Generation Funds may use the following investment techniques:

Aetna Generation Funds Prospectus 13
<PAGE>

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.

Securities Lending A Fund may lend its portfolio securities; however, the
value of the loaned securities (together with all other assets that are
loaned, including those subject to repurchase agreements) may not exceed
one-third of the Fund's total assets. A Fund will not lend portfolio
securities to affiliates. Though fully collateralized, lending portfolio
securities involves certain risks, including the possibility that the
borrower may become insolvent or default on the loan. In the event of a
disparity between the value of the loaned security and the collateral, there
is the additional risk that the borrower may fail to return the securities or
provide additional collateral.

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 Board of Directors has established credit standards for repurchase
transactions entered into by the Funds.

Asset-Backed Securities Each Fund may purchase securities collateralized by
a specified pool of assets, including, but not limited to, credit card
receivables, automobile loans, home equity loans, computer leases, boat
loans, mobile home loans, or recreational vehicle loans. These securities may
be subject to prepayment risk. In periods of declining interest rates,
reinvestment would thus be made at lower and less attractive rates.

14 Aetna Generation Funds Prospectus
<PAGE>
additional debt or equity securities. Zero coupon securities and pay-in-kind
bonds are subject to greater price fluctuations in response to changes in
interest rates than are ordinary interest-paying securities with similar
maturities. The value of zero coupon securities and pay-in-kind bonds
appreciate more during periods of declining interest rates and depreciate
more during periods of rising interest rates.

Bank Obligations Each Fund may invest in obligations issued by domestic or
foreign banks (including banker's 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%.

Options, Futures Contracts and Other Derivative Instruments A derivative is
a financial instrument, the value of which is "derived" from the performance
of an underlying asset (such as a security or index of securities). In
addition to futures and options, derivatives include, but are not limited to,
forward contracts, swaps, structured notes, and CMOs.

A Fund may engage in various strategies using derivatives, including
managing its exposure to changing interest rates, securities prices and
currency exchange rates (collectively known as hedging strategies), or
increasing its investment return. For purposes other than hedging, a Fund
will invest no more than 5% of its total assets in derivatives which at the
time of purchase are considered by management to involve high risk to the
Fund. These would include inverse floaters, interest-only and principal-only
securities.

Aetna Generation Funds Prospectus 15
<PAGE>
taking into account realized profits and unrealized losses on such futures
contracts.

16 Aetna Generation Funds Prospectus
<PAGE>

Other Investments In addition, each Fund may use other investment
techniques, including "when-issued" and delayed-delivery securities and
variable rate instruments. These techniques are described in Appendix A and
the SAI.

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 generally more affected by changes in interest rates and provide less
price stability than securities with short term maturities (for example, one
to ten years). Also, on each debt security, the risk of principal and
interest default is greater with higher-yielding, lower-grade securities.
High risk high-yield securities may provide a higher return but with added
risk. In addition, foreign securities may have currency risk.

Aetna Generation Funds Prospectus 17
<PAGE>
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 that might adversely affect the payment and
transferability of principal, interest and dividends on securities; higher
transaction costs; possible settlement delays; and less publicly available
information about foreign issuers.

Depositary Receipts The Funds can invest in both sponsored and unsponsored
depositary receipts. Unsponsored depositary receipts, which are typically
traded in the over-the-counter market, may be less liquid than sponsored
depositary receipts and therefore may involve more risk. In addition, there
may be less information available about issuers of unsponsored depositary
receipts.

Real Estate Securities A Fund's investments in real estate securities may
be subject to certain of the same risks associated with the direct ownership
of real estate. These risks may include: declines in the value of real
estate; risks related to general and local economic conditions, overbuilding
and competition; increases in property taxes and operating expenses; and
variations in rental income. In addition, equity REITs may be dependent upon
management skill, may not be diversified, and may be subject to the risks of
obtaining adequate financing for projects on favorable terms. Equity REITs
also are subject to the possibility of failing to qualify for tax-free
pass-through of income under the Internal Revenue Code and failing to
maintain exemption from the 1940 Act.

18 Aetna Generation Funds Prospectus
<PAGE>
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.

Derivatives

Derivatives can be volatile investments and involve certain risks. As
described above under "Investment Techniques--Options, Futures and Other
Derivative Instruments," the Funds may use derivative instruments including
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.
Options and futures contracts can be volatile investments and involve
certain risks, including, but not limited to: no assurance that futures
contracts transactions can be effected at favorable prices; possible
reduction in a Fund's total return and yield; possible reduction in the 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
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 gains or losses 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.

Aetna Generation Funds Prospectus 19
<PAGE>
The use of forward currency contracts may reduce the gain that otherwise
would result from a change in the relationship between the U.S. dollar and a
foreign currency. To limit its exposure in foreign currency exchange
contracts, the Funds limit their exposure to the amount of their respective
assets denominated in the foreign currency. Interest rate swaps are subject
to credit risks (if the other party fails to meet its obligations) and also
to interest rate risks, because the Funds could be obligated to pay more
under its swap agreements than they receive under them, as a result of
interest rate changes.
Cross-hedging entails a risk of loss on both the value of the security that
is the basis of the hedge and the currency contract that was used in the
hedge. These risks are described in greater detail in the SAI.

Variable Rate Instruments, When-Issued and Delayed-Delivery Transactions
"When-issued," "delayed-delivery" and variable rate instruments may be
subject to liquidity risks, credit risks and risks of loss of principal due
to market fluctuations. Each Fund will establish a segregated account in
which it will maintain liquid assets in an amount at least equal to the
Fund's commitments to purchase securities on a when-issued or
delayed-delivery basis. For more information about these securities, see
Appendix A and the SAI.

Special Considerations Investors should be aware that the investment
results of the Funds depend in part 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 it will always allocate assets
to the best performing sectors. A 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.

Investment Restrictions

20 Aetna Generation Funds Prospectus
<PAGE>
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. A Fund
may not purchase a call or a put if the value of all the Fund's call and put
options would exceed 5% of the value of its total assets.

Shareholder Services

The Company offers several services to its Generation 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 Generation Funds
or the shareholder services described below, please call your representative
or 1-800-367-7732.

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 Generation Funds Prospectus 21
<PAGE>

Crediting of Shares If a completed and signed application accompanied by a
check in payment for the shares is received by Firstar Trust Company, the
transfer agent, at its Milwaukee offices, prior to 4:00 p.m. Eastern time on
any day that the New York Stock Exchange is open for business ("Business
Day"), the Adviser Class shares will be purchased at the net asset value
determined as of 4:15 p.m. on that date. Orders received after 4:00 p.m. will
be processed at the net asset value determined on the following Business Day.
See "Net Asset Value" for information on how the Funds are valued.

No initial sales charge is imposed at the time of purchase. A contingent
deferred sales charge ("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.

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 or mail to the transfer agent at the
address listed below. You can make additional investments to your accounts by
using the investment stubs from your confirmation statements or by letter.
Your letter should indicate your name, account number(s), the Adviser Class
shares of the Generation Fund(s) in which you wish to invest, and the amount
to be invested. Letters should be mailed to the transfer agent as follows:

Aetna Series Funds, Inc.--Generation Funds
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 Funds, Inc.--Generation Funds
c/o Mutual Fund Services, 3rd Floor
617 E. Michigan Street
Milwaukee, WI 53202

Purchase by Wire If you have an account in a Generation Fund, you may
purchase additional Adviser Class shares of that 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.

22 Aetna Generation Funds Prospectus
<PAGE>

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 (1) the name and account number
of your current Fund account; (2) the name of the Fund you wish to exchange
into; (3) the amount to be exchanged; and (4) the signatures of all
shareholders. Requests should be mailed 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, 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:

(bullet) Each exchange may result in a gain or loss and is treated as a sale
and as a purchase of shares for tax purposes.

(bullet) 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."

(bullet) 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.

(bullet) Following an investment in a Fund, there is a required eight-day
holding period before those shares can be exchanged.

Aetna Generation Funds Prospectus 23
<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.

Distribution Options When completing an application, you must select one of the
following options for dividends and capital gains distributions:

(bullet) 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. (See "Fund Distributions.")

(bullet) 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.

(bullet) 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.

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 next determined after
receipt of the redemption request by the transfer agent. Redemptions received
by 4:00 p.m. Eastern time will be processed at the net asset value determined
as of 4:15 p.m. on that date if all required documentation is received by the
transfer agent by

24 Aetna Generation Funds Prospectus
<PAGE>

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.

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.

For help with redemptions, call your agent or representative or
1-800-367-7732.

Aetna Generation Funds Prospectus 25
<PAGE>

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.

(bullet) IRAs, available to individuals who work and their spouses.

(bullet) 401(k) programs, available to corporations of all sizes to benefit
their employees.

26 Aetna Generation Funds Prospectus
<PAGE>

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

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.

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.

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.

Aetna Generation Funds Prospectus 27
<PAGE>
Cross-Fund Investing

Dividend Investing--You may elect to have dividend and/or capital gains
distributions automatically invested in another Adviser Class Fund account.

Systematic Exchange--You may establish an automatic exchange of Adviser
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 "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 into 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% 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.

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.

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.

28 Aetna Generation Funds Prospectus
<PAGE>
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. 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 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 by the percentage shown below based on the time
invested:

Redemption During CDSC
--------------------------- --------

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

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 CDS, 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

Aetna Generation Funds Prospectus 29
<PAGE>
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 Generation Funds

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 $ billion in assets for the
Generation 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 objective and policies subject to the supervison of the
Directors.

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, shareholder
communications and supervising the custodian and transfer agent.

Principal Underwriter ALIAC is the principal underwriter for the Company.
ALIAC may contract with various broker-dealers, including

30 Aetna Generation Funds Prospectus
<PAGE>
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. 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
Adviser Class 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 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.

Aetna Generation Funds Prospectus 31
<PAGE>
Portfolio Management

Kevin M. Means is the lead portfolio manager for the Generation Funds and
has been responsible for determining the allocation of each Fund's
investments among the seven asset classes described under "Investment
Strategies" since their inception in January 1995. 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 is responsible for the selection of
securities for the Generation Funds in the Large Capitalization Stocks class.

The following individuals are responsible for the selection of securities
for the Generation Funds in each of the asset classes other than the Large
Capitalization Stock class:

Vince Fioramonti, International Stocks and International Bonds, is
currently managing 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.

Yaniv Tepper, Real Estate Stocks, has responsibility for Real Estate
Investment Trust (REIT) holdings on the equity side, and non-agency mortgage
backed securities on the fixed income side. Mr. Tepper joined ALIAC in early
1994 as an Associate in Real Estate Investments Group. Prior to joining
Aetna, Mr. Tepper consulted in the area of real estate finance, valuations,
and asset restructuring.

Jeanne Wong-Boehm, U.S. Dollar Bonds and Money Market Investments, joined
ALIAC in 1983 as a fixed income portfolio analyst, and

32 Aetna Generation Funds Prospectus
<PAGE>

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.

Fund Distributions

Each Generation Fund declares and pays dividends annually. 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 Adviser Class shares will be less than the per share
dividends and distributions of the Select Class as a result of the
distribution and service fees applicable to the Adviser Class.

Net Asset Value

Taxes

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.

Aetna Generation Funds Prospectus 33
<PAGE>

respect to diversification of assets, distribution of income and sources of
income. It is the policy of each Fund to distribute to shareholders all of
its investment income (net of expenses) and any capital gains (net of capital
losses) in accordance with the timing requirements imposed by the Code so
that each Fund will satisfy the distribution requirement of Subchapter M and
not be subject to federal income taxes or the 4% excise tax.

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. 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. 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 October through December to shareholders of record on a date in October
through December and paid in January of the following year will be 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 (or deemed made) during the previous year and any foreign
taxes "passed-through" to shareholders.

Buying a Dividend If you buy shares of a Fund just before the ex-dividend
date, you may be taxed on the entire amount of the dividend received.

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.

34 Aetna Generation Funds Prospectus
<PAGE>
General Information

Capital Stock The Articles 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

Aetna Ascent 1,840,324 0
Aetna Crossroads 1,791,527 0
Aetna Legacy 1,826,236 0
Money Market Fund 119,499 0
Government Fund 714,990 0

Aetna Generation Funds Prospectus 35
<PAGE>
ALIC
----------------------
Select Adviser
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 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.

Payments to Dealers For sales of Funds' shares, 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.

36 Aetna Generation Funds Prospectus
<PAGE>
Performance Data

Appendix A--Glossary of Investment Terms

This glossary describes some of the securities used by the Generation Funds.
Further information is available in the SAI:

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.

A depositary receipt can either be "sponsored" by the issuing company or
established without the involvement of the company, which is referred to as
"unsponsored."

Aetna Generation Funds Prospectus 37
<PAGE>
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.

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.

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 is more volatile than bonds which pay interest but are rated on
the same principles as all fixed-income investments.

38 Aetna Generation Funds Prospectus
<PAGE>
The Generation 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 of common stock at a fixed
price.

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.

Aetna Generation Funds Prospectus 39
<PAGE>
Appendix B--Description of Corporate Bond Ratings

Moody's Investors Service, Inc.

"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.

40 Aetna Generation Funds Prospectus
<PAGE>
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.

"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.

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 Generation Funds Prospectus 41
<PAGE>
[Back cover]

[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

<PAGE>

AETNA SERIES FUND, INC.
AETNA GENERATION FUNDS
Adviser Class Shares and Select Class Shares
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 Generation Funds,
which are series portfolios of Aetna Series Fund, Inc., dated March 1, 1996.
A free prospectus is available upon request by writing to Aetna Series Fund,
Inc. at the address listed above or by calling 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 Generation Funds 2
Description of Various Securities and Investment Techniques 3
Directors and Officers of the Company 14
Control Persons and Principal Holders of the Funds 16
The Investment Advisory Contract 16
The Administrative Services Agreement 17
Custodian 17
Independent Auditors 17
Principal Underwriter 17
Distribution Arrangements 17
Brokerage Allocation and Trading Policies 18
Description of Shares 19
Sale and Redemption of Shares 19
Net Asset Value 20
Tax Status 20
Performance Information 25
Financial Statements F-1

1
<PAGE>
GENERAL INFORMATION AND HISTORY

Aetna Series Fund, Inc. (the "Company") is an open-end management investment
company which currently offers twelve series of Funds, each representing a
diversified portfolio of investments with different investment objectives,
policies and restrictions. This Statement of Additional Information relates to
the following three Funds only: (1) Aetna Ascent, (2) Aetna Crossroads, and (3)
Aetna Legacy (hereafter, the "Fund(s)"). Each Fund is currently authorized to
offer two classes of shares, the Adviser Class and the Select Class.

The investment objective and general investment policies of each Fund are
described in the Prospectus.

ADDITIONAL INVESTMENT RESTRICTIONS AND POLICIES OF THE
GENERATION FUNDS

The investment policies and restrictions of the Funds, set forth below, 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. In addition, for purposes of this
restriction, real estate stocks will be classified as separate industries
according to property type, such as apartment, retail, office and
industrial. This limitation will not, however, apply to securities issued
or guaranteed by the U.S. Government, its agencies and instrumentalities;

(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 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: (a) 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; or (b)
a Fund may acquire real estate as a result of ownership of securities or
other interests (this could occur for example if a Fund holds a security
that is collateralized by an interest in real estate and the security
defaults);

(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 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;

(7) borrow money, except that (a) a 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 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

2
<PAGE>
(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 "1933 Act").

The Company has also 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. Some of these restrictions
are described in the prospectus. In addition, the Funds will not:

(1) make short sales of securities, other than short sales "against the box,"
or purchase securities on margin except for short-term credits necessary
for clearance of portfolio transactions, provided that this restriction
will not be applied to limit the use of options, futures contracts and
related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of each Fund, as described
here and in the prospectus;

(2) invest in companies for the purpose of exercising control or management;

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

(4) 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.

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% 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.

DESCRIPTION OF VARIOUS SECURITIES AND INVESTMENT TECHNIQUES

Options, Futures and Other Derivative Instruments
The Generation Funds may use derivative instruments as described in the
prospectus under "Investment Techniques." The following provides additional
information about these instruments.

Futures Contracts--Each Fund may enter into futures contracts as described
in the prospectus. A Fund may enter into futures contracts which are traded
on national futures exchanges and are standardized as to maturity date and
underlying financial instrument. The futures exchanges and trading in the
United States are regulated under the Commodity Exchange Act by the
Commodities Futures Trading Commission (the "CFTC").

A futures contract provides for the future sale by one party and purchase
by another party of a specified amount of a specific commodity, 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 or commodities, those
contracts are usually closed out before the delivery date. Stock index
futures contracts do not contemplate actual future

3
<PAGE>
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.

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 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 loss or
gain 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.

A Fund can enter into options on futures contracts. See "Covered Call and
Put Options" below. 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.

Covered Call and Put Options--Each Fund may write (sell) covered call
options and purchase put options and may purchase call and sell put options
including options on securities, indices and futures as discussed in the
prospectus and in this section. A call option

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<PAGE>
gives the holder (buyer) the right to buy and to obligate the writer (seller)
to sell a security or financial instrument at a stated price (strike price)
at any time until a designated future date when the option expires
(expiration date). A put option gives the holder (buyer) the right to sell
and to obligate the writer (seller) to purchase a security or financial
instrument at a stated price at any time until the expiration date. A Fund
may write or purchase put or call options listed on national securities
exchanges in standard contracts or may write or purchase put or call options
with or directly from investment dealers meeting the creditworthiness
criteria of the Investment Adviser.

So long as the obligation of the writer of a call option continues, the
writer may be assigned an exercise notice by the broker-dealer through which
such option was settled, requiring the writer 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 the writer's
obligation to deliver the underlying security, a writer of a call option 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 Fund will only write a call option on a security which it already owns and
will not write call options on when-issued securities.

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 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, 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 may purchase put options when the Investment Adviser believes that
a temporary defensive position is desirable in light of market conditions,
but does not desire to sell a portfolio security. The purchase of put options
for these purposes may be used 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 premium received from writing a call or put option, or paid for
purchasing a call or 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,

5
<PAGE>
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 value 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.

Foreign Futures Contracts and Foreign Options--The Funds may engage in
transactions in foreign futures contracts and foreign options. Participation
in foreign futures contracts and foreign options transactions involves the
execution and clearing of trades on or subject to the rules of a foreign
board of trade. Neither the CFTC, the National Futures Association (the
"NFA") nor any domestic exchange regulates activities of any foreign boards
of trade including the execution, delivery and clearing of transactions, or
has the power to compel enforcement of the rules of a foreign board of trade
or any applicable foreign laws. Generally, the foreign transaction will be
governed by applicable foreign law. This is true even if the exchange is
formally linked to a domestic market so that a position taken on the market
may be liquidated by a transaction on another market. Moreover, such laws or
regulations will vary depending on the foreign country in which the foreign
futures contracts or foreign options transaction occurs. Investors which
trade foreign futures contracts or foreign options contracts may not be
afforded certain of the protective measures provided by domestic exchanges,
including the right to use reparations proceedings before the CFTC and
arbitration proceedings provided by the NFA. In particular, funds received
from customers for foreign futures contracts or foreign options transactions
may not be provided the same protections as funds received for transactions
on United States futures exchanges. The price of any foreign futures
contracts or foreign options contract and, therefore, the potential profit
and loss thereon, may be affected by any variance in the foreign exchange
rate between the time an order is placed and the time it is liquidated,
offset or exercised.

Options on Foreign Currencies--Each Fund may write and purchase calls on
foreign currencies. A Fund may purchase and write puts and calls on foreign
currencies that are traded on a securities or commodities exchange or quoted
by major recognized dealers in such options for the purpose of protecting
against declines in the dollar value of foreign securities and against
increases in the dollar cost of foreign securities to be acquired. If a rise
is anticipated in the dollar value of a foreign currency in which securities
to be acquired are denominated, the increased cost of such securities may be
partially offset by purchasing calls or writing puts on that foreign
currency. If a decline in the dollar value of a foreign currency is
anticipated, the decline in value of portfolio securities denominated in that
currency may be partially offset by writing calls or purchasing puts on that
foreign currency. In the event of rate fluctuations adverse to a Fund's
position, it would lose the premium it paid and transactions costs. A call
written on a foreign currency by a Fund is covered if the Fund owns the
underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated
account by its custodian) upon conversion or exchange of other foreign
currency held in its portfolio. A call may be written by a Fund on a foreign
currency to provide a hedge against a decline due to an expected adverse
change in the exchange rate in the U.S. dollar value of a security which the
Fund owns or has the right to acquire and which is denominated in the
currency underlying the option. This is a "cross-hedging" strategy. In such
circumstances, the Fund collateralizes the position by maintaining in a
segregated account with the Fund's custodian cash or U.S. Government
securities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily.

Forward Exchange Contracts--Each Fund may enter into forward contracts for
foreign currency ("forward exchange contracts"), which obligate the seller to
deliver and the purchaser to take a specific amount of a specified foreign
currency at a future date at a price set at the time of the contract. These
contracts are generally traded in the interbank market conducted directly
between currency traders and their customers. A Fund may enter into a forward
exchange contract in order to "lock in" the U.S. dollar price of a security
denominated in a foreign currency which it has purchased or sold but which
has not yet settled (a "transaction hedge"); or to lock in the value of an
existing portfolio security (a "position hedge"); or to protect against a
possible loss resulting from an adverse change in the relationship between
the U.S. dollar and a foreign currency. There is a risk that use of forward
exchange contracts may reduce the gain that would otherwise result from a
change in the relationship between the U.S. dollar and a foreign currency.
Forward exchange

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<PAGE>
contracts include standardized foreign currency futures contracts which are
traded on exchanges and are subject to procedures and regulations applicable
to futures. Each Fund may also enter into a forward exchange contract to sell
a foreign currency which differs from the currency in which the underlying
security is denominated. This is done in the expectation that there is a
greater correlation between the foreign currency of the forward exchange
contract and the foreign currency of the underlying investment than between
the U.S. dollar and the foreign currency of the underlying investment. This
technique is referred to as "cross hedging." The success of cross hedging is
dependent on many factors, including the ability of the Investment Adviser to
correctly identify and monitor the correlation between foreign currencies and
the U.S. dollar. To the extent that the correlation is not identical, a Fund
may experience losses or gains on both the underlying security and the cross
currency hedge.

Each Fund may use forward exchange contracts to protect against
uncertainty in the level of future exchange rates. The use of forward
exchange contracts does not eliminate fluctuations in the prices of the
underlying securities the Fund owns or intends to acquire, but it does fix a
rate of exchange in advance. In addition, although forward exchange contracts
limit the risk of loss due to a decline in the value of the hedged
currencies, at the same time they limit any potential gain that might result
should the value of the currencies increase.

There is no limitation as to the percentage of a Fund's assets that may be
committed to forward exchange contracts. The Funds will not enter into a
"cross hedge," unless it is denominated in a currency or currencies that the
Investment Adviser believes will have price movements that tend to correlate
closely with the currency in which the investment being hedged is
denominated.

The Generation Funds' custodian will place cash or U.S. Government
securities or other liquid high-quality debt securities in a separate account
of each Fund having a value equal to the aggregate amount of that Fund's
commitments under forward contracts entered into with respect to position
hedges and cross hedges. If the value of the securities placed in the
separate account declines, additional cash or securities will be placed in
the account on a daily basis so that the value of the account will equal the
amount of the Fund's commitments with respect to such contracts. As an
alternative to maintaining all or part of the separate account, a Fund may
purchase a call option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale con tract at a price no higher than
the forward contract price, or a Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward purchase
contract at a price as high or higher than the forward contract price.
Unanticipated changes in currency prices may result in poorer overall
performance for a Fund than if it had not entered into such contracts.

The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value
of such securities in foreign currencies will change as a consequence of
market movements in the value of these securities between the date the
forward contract is entered into and the date it is sold. Accordingly, it may
be necessary for a Fund to purchase additional foreign currency on the spot
(i.e., cash) market (and bear the expense of such purchase), if the market
value of the security is less than the amount of foreign currency the Fund is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. The projection of short-term currency
market movements is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. Forward contracts involve
the risk that anticipated currency movements will not be accurately
predicted, causing the Fund to sustain losses on these contracts and
transactions costs.

At or before the maturity of a forward exchange contract requiring a Fund
to sell a currency, the Fund may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing a
second contract pursuant to which the Fund will obtain, on the same maturity
date, the same amount of the currency that it is obligated to deliver.
Similarly, a Fund may close out a forward contract requiring it to purchase a
specified currency by entering into a second contract entitling it to sell
the same amount of the same currency on the maturity date of the first
contract. The Fund would realize a gain or loss as a result of entering into
such an offsetting forward contract under either circumstance to the extent
the exchange rate(s) between the currencies involved moved between the
execution dates of the first contract and the offsetting contract.

The cost to a Fund of engaging in forward exchange contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, a Fund must
evaluate the credit and performance risk of each particular counterparty
under a forward contract.

Although the Funds value their assets daily in terms of U.S. dollars, they
do not intend to convert their holdings of foreign currencies into U.S.
dollars on a daily basis. The Funds may convert foreign currency from time to
time. Foreign exchange dealers do not charge a fee for conversion, but they
do seek to realize a profit based on the difference between the prices at
which they buy and sell various currencies. Thus, a dealer may offer to sell
a foreign currency to the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the dealer.

Restrictions on the Use of Futures and Option Contracts--CFTC regulations
require that all short futures positions be entered into for the purpose of
hedging the value of securities held, and that all long futures positions
either constitute bona fide hedging transactions,

7
<PAGE>
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, and accrued profits on such positions. With respect to futures
contracts or related options that are entered into for purposes that may be
considered speculative, the aggregate initial margin for future contracts and
premiums for options will not exceed 5% of a Fund's net assets, after taking
into account realized profits and unrealized losses on such futures
contracts.

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

Interest Rate Swap Transactions--Swap agreements entail both interest rate
risk and credit risk. There is a risk that, based on movements of interest
rates in the future, the payments made by a Fund under a swap agreement will
have been greater than those received by it. Credit risk arises from the
possibility that the counterparty will default. If the counterparty to an
interest rate swap defaults, a Fund's loss will consist of the net amount of
contractual interest payments that a Fund has not yet received. The
Investment Adviser will monitor the creditworthiness of counterparties to a
Fund's interest rate swap transactions on an ongoing basis. A Fund will enter
into swap transactions with appropriate counterparties pursuant to master
netting agreements. A master netting agreement provides that all swaps done
between a Fund and that counterparty under that master agreement shall be
regarded as parts of an integral agreement. If on any date amounts are
payable in the same currency in respect of one or more swap transactions, the
net amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults generally
or on one swap, the counterparty may terminate the swaps with that party.
Under such agreements, if there is a default resulting in a loss to one
party, the measure of that party's damages is calculated by reference to the
average cost of a replacement swap with respect to each swap (i.e., the
mark-to-market value at the time of the termination of each swap). The gains
and losses on all swaps are then netted, and the result is the counterparty's
gain or loss on termination. The termination of all swaps and the netting of
gains and losses on termination is generally referred to as "aggregation."

Additional Risk Factors in Using Derivatives--In addition to any risk
factors which may be described elsewhere in this section, or in the
prospectus under "Investment Techniques" and "Risk Factors and Other
Considerations," the following sets forth certain information regarding the
potential risks associated with a Fund's transactions in derivatives.

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 assets being hedged.
If the values of the assets being hedged do not move in the same amount or
direction as the underlying security or index, 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 indices 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 the underlying futures contract will not be fully reflected in the
value of the option purchased. The risk of imperfect correlation, however,
generally tends to diminish as the maturity date of the futures contract or
termination date of the option approaches. The risk incurred in purchasing an
option on a futures contract is limited to the amount of the premium plus
related transaction costs, although it may be necessary under certain
circumstances to exercise the option and enter into the underlying futures
contract in order to realize a profit. Under certain extreme market
conditions, it is possible that a Fund will not be able to establish hedging
positions, or that any hedging strategy adopted will be insufficient to
completely protect the Fund.

The Funds will purchase or sell futures contracts or options for hedging
purposes only if, in the Investment Adviser'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 assets
being hedged for the hedge to be effective. There can be no assurance that
the Investment Adviser'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. 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

8
<PAGE>

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 a 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 indices involve the risk
that if the Investment Adviser's 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 the Generation Funds' portfolios.

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 the Fund to resell the instrument at a fixed price and time,
thereby determining the yield during the Fund's holding period. This results
in a fixed rate of return insulated from market fluctuations during such
period. Such underlying debt instruments serving as collateral will meet the
quality standards of 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 percent of the total assets of a
Fund. The Funds do not intend to use reverse repurchase agreements.

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.

9
<PAGE>

Securities Lending

The Funds can lend portfolio securities subject to the following conditions:
(a) the borrower will provide at least 100% collateral throughout the life of
the loan; (b) loans will be made subject to the rules of the New York Stock
Exchange; (c) the loan collateral will be either cash or direct obligations
of the U.S. government or agencies thereof; (d) cash collateral will be
invested only in highly liquid short-term investments; (e) during the
existence of a loan, a Fund will continue to receive any distributions paid
on the borrowed securities or amounts equivalent thereto; and (f) 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 the securities, whenever a material event
affecting the borrowed securities is to be voted on, the In vestment 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 of it.

Foreign Securities

Investments in foreign securities, including futures and options contracts,
offer potential benefits not available solely through investment in
securities of domestic issuers. Foreign securities offer the opportunity to
invest in foreign issuers that appear to offer growth potential, or in
foreign countries with economic policies or business cycles different from
those of the United States, or to reduce fluctuations in portfolio value by
taking advantage of foreign stock markets that may not move in a manner
parallel to U.S. markets. 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 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 issuer
than about a U.S. company, and foreign issuers may not be subject to
accounting, auditing, and financial reporting standards and requirements
comparable to or as uniform as those of U.S. issuers. Foreign securities
markets, while growing in volume, have, for the most part, substantially less
volume than U.S. markets. Securities of many foreign issuers are less liquid
and their prices more volatile than securities of comparable U.S. issuers.
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 United
States. 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 be made only 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: (a)
American Depositary Receipts (ADRs), which are typically designed for U.S.
investors and held either in physical form or in book entry form; (b)
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

10
<PAGE>
Luxembourg exchange in Europe; and (c) 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, the securities and guarantees of which 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 Prospectuses, the Funds 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
life"--the average time to receipt of a principal payment weighted by the
size of the principal payment. The average life is typically used as a proxy
for maturity because the debt is amortized, rather than being paid off
entirely at maturity, as would be the case in a straight debt instrument.

CMOs and REMICs are typically structured as "pass-through" securities. In
these arrangements, the underlying mortgages are held by the issuer, which
then issues debt collateralized by the underlying mortgage assets. The
security holder thus owns an obligation of the issuer and payment of interest
and principal on such obligations is made from payments generated by the
underlying mortgage assets. The underlying mortgages may be guaranteed as to
payment of principal and interest by an agency or instrumentality of the U.S.
Government such as GNMA or otherwise backed by FNMA or FHLMC. Alternatively,
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.

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. 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

11
<PAGE>
vary from the coupon rate, however, if such securities are purchased at a
premium or discount, traded in the secondary market at a premium or discount,
or to the extent that the underlying assets are prepaid as noted above.

High Risk, High-Yield Securities

The Funds 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

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
15% of the assets of any Fund. The Funds will not invest in any debt security
rated lower than B.

The yields earned on high risk, high-yield securities (junk bonds)
generally are related to the quality ratings assigned by recognized ratings
agencies. 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 these securities may not be as liquid as
investment grade bonds. The ability to value or sell these securities
will be adversely affected to the extent that such securities are thinly
traded or illiquid. Adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may decrease or increase the value
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

12
<PAGE>

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

The Funds may invest in zero coupon securities and 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 deferred interest securities
generally are more volatile than the market prices of securities with similar
maturities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do non-zero coupon
securities having similar maturities and credit quality.

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

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 war rant 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 warrants' 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 Fund will be required to pay on settlement,
additional assets may be required to be added to the segregated account. Such
segregated accounts could affect the Fund's liquidity and ability to manage
its portfolio. When 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

The Funds do not intend to make a general practice of short-term trading,
although they may occasionally realize short-term gains or losses. Purchases
and sales will be made whenever such action is deemed prudent and consistent
with a Fund's investment objective. It is anticipated that the average annual
portfolio turnover rates for each of the Funds will not exceed 125% although
in any particular year market conditions could result in a greater degree of
portfolio activity. A high turnover rate involves greater expenses and may
involve greater risk to a Fund.

13
<PAGE>

For the period ended October 31, 1995, the portfolio turnover rates were
164.09% for Aetna Ascent, 166.93% for Aetna Crossroads, and 179.88% for Aetna
Legacy. The portfolio turnover rates were higher than expected due to very
large withdrawals by the Funds' largest investor. This was a one-time event
and is not expected to occur again in the same magnitude. Had these
activities not occurred, the portfolio turnover rates would have been 102.69%
for Aetna Ascent, 115.99% for Aetna Crossroads, and 136.31% for Aetna Legacy.

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.

<TABLE>
<CAPTION>
Principal Occupation During Past Five Years
Name, Address and Position(s) Held (and Positions held with Affiliated Persons or
Age with Registrant Principal Underwriters of the Registrant)**

<S> <C> <C>
Shaun P. Mathews* Director and Chief Executive, Aetna Investment Services, Inc.,
151 Farmington President October 1995 to Present; President, Aetna Investment
Avenue Services, Inc., March 1994 to Present; Director and
Hartford, Chief Operations Officer, Aetna Investment Services,
Connecticut Inc., July 1993 to Present; Director and Senior Vice
Age 40 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 and Treasurer Inc., July 1993 to Present; Director, Vice President
Avenue and Treasurer, Aetna Insurance Company of America,
Hartford, February 1993 to Present; Director, Aetna Private
Connecticut Capital, Inc., November 1990 to Present; Vice President
Age 54 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 Vice President Officer, Aeltus Investment Management, Inc., December
Avenue 1995 to Present; Senior Vice President and Director,
Hartford, ALIAC and Chief Investment Officer, Aetna Life and
Connecticut Casualty Company, May 1994 to Present; Managing
Age 35 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 Present; General Counsel and Corporate Secretary, First
Avenue Investors Corporation, April 1991 to March 1993;
Hartford, Administrator, Oklahoma Department of Securities, March
Connecticut 1986 to April 1991.
Age 48

Morton Ehrlich Director Chairman and Chief Executive Officer, Integrated
1000 Venetian Management Corp. (an entrepreneurial company) and
Way Universal Research Technologies, 1992 to Present;
Miami, Florida Director and Chairman, Audit Committee, National Bureau
Age 61 of Economic Research, 1985 to 1992; President, LIFECO,
Travel Services Corp., October 1988 to December 1991.
</TABLE>

14
<PAGE>

<S> <C> <C>
Maria T. Fighetti Director Manager/Attorney, Health Services, New York City
325 Piermont Department of Mental Health, Mental Retardation and
Road Alcohol Services, 1973 to Present.
Closter, New
Jersey
Age 52

David L. Grove Director Private Investor; Economic/Financial Consultant,
5 The Knoll December 1985 to Present.
Armonk, New
York
Age 77

Daniel P. Director Executive Vice President of Aetna Life and Casualty
Kearney* Company, 1993 to Present; Group Executive, Aetna Life
151 Farmington and Casualty Company, 1991 to 1993.
Avenue
Hartford,
Connecticut
Age 56

Sidney Koch Director Financial Adviser, self-employed, January 1993 to
455 East 86th Present; Senior Adviser, Daiwa Securities America,
Street Inc., January 1992 to January 1993; Executive Vice
New York, New President, Member of Executive Committee, Daiwa
York Securities America, Inc., January 1986 to January 1992.
Age 60

Corine T. Director, Chair Professor, Accounting and Dean of the School of
Norgaard Audit Committee Management, Binghamton University (Binghamton, NY),
School of and Contract August 1993 to Present; Professor, Accounting,
Management Committee University of Connecticut (Storrs, Connecticut),
Binghamton September 1969 to June 1993; Director, The Advest Group
University (holding company for brokerage firm).
Binghamton, New
York
Age 58

Richard G. Director Trust and Private Banking Consultant, David Ross Palmer
Scheide Consultants, July 1991 to Present; Executive Vice
11 Lily Street President and Manager, Bank of New England, N.A., June
Nantucket, 1976 to July 1991.
Massachusetts
Age 66
</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 period ended October 31, 1995, members of the Board of Directors who
were 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 from
Aggregate Registrant
Name of Person, Compensation and Fund Complex* Paid to
Position from Registrant Directors
- ------------------------ ---------------- ----------------------------
Corine Norgaard
Director and Chairman,
Audit and Contract
Committees $5,250 $49,500
Sidney Koch
Director and Member,
Audit and Contract
Committees $5,000 $45,500

15
<PAGE>
Maria T. Fighetti
Director and Member,
Audit and Contract
Committees $5,000 $44,500
Morton Ehrlich
Director and Member,
Audit and Contract
Committees $5,000 $44,500
- ------------------------ ---------------- ----------------------------
Richard G. Scheide
Director and Member,
Audit and Contract
Committees $4,575 $45,000
- ------------------------ ---------------- ----------------------------
David L. Grove
Director and Member,
Audit and Contract
Committees $4,575** $45,000**

*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 1,840,324
(91.82%) shares of Aetna Ascent; 1,791,527 (89.56%) shares of Aetna
Crossroads; and 1,826,236 (93.61%) shares of Aetna Legacy.

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) approved
investment advisory contracts between the Investment Adviser and each of the
Generation 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 as described in the
prospectus.

For its services the Investment Adviser receives the following annual
investment advisory fees expressed as a percentage of the average daily net
assets of each Generation Fund:

0.80% on the first $500 million; 0.775% on the next $500 million; 0.75% on
the next $500 million;
0.725% on the next $500 million; and 0.70% on assets over $2 billion.

The Investment Adviser received investment advisory fees in the amount of
$157,225 from Aetna Ascent; $156,356 from Aetna Crossroads; and $155,255 from
Aetna Legacy for the period ended October 31, 1995.

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.

Unless terminated earlier, the contracts will remain in effect for one year.
Thereafter, the contracts will 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," in person, at a meeting called
for that purpose. Each contract may be terminated as to a particular Fund
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 their assignment.

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The service mark of the Generation Funds 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.

THE ADMINISTRATIVE SERVICES AGREEMENT

Pursuant to an Administrative Services Agreement between Aetna Life Insurance
and Annuity Company ("ALIAC") and the Company, 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 are described in the prospectus.

Each Fund pays ALIAC a monthly fee for its services at an annual rate based
on average daily 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 in the amount of $49,133 from Aetna
Ascent; $48,861 from Aetna Crossroads; and $48,517 from Aetna Legacy for the
period ended October 31, 1995.

Unless terminated earlier, the Administrative Services Agreement remains 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. It may be
terminated by either party on sixty days' written notice.

CUSTODIAN

Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, Pennsylvania, 15258
serves as custodian for the assets of the Funds. The custodian does not
participate 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 custodian.

INDEPENDENT AUDITORS

KPMG Peat Marwick LLP, CityPlace II, Hartford, Connecticut 06103 serves as
independent auditors to the Generation Funds. KPMG Peat Marwick LLP provides
audit services, assistance and consultation in connection with Securities and
Exchange Commission (SEC) filings.

PRINCIPAL UNDERWRITER

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. ALIAC is registered as a broker-dealer
with the SEC and is a member of the National Association of Securities
Dealers, Inc. 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. The Underwriting
Agreement terminates automatically upon assignment, and may be terminated at
any time upon sixty (60) days' written notice by the Directors or ALIAC or by
a vote of the holders of a majority of a Fund's shares without the payment of
any penalty.

DISTRIBUTION ARRANGEMENTS

Shares of the Funds are distributed on a best efforts basis by ALIAC which
contracts with various other broker-dealers for distribution of such shares.
To compensate ALIAC for the services it provides Adviser Class shareholders
of the Funds, ALIAC is paid an annual service fee at the rate of 0.25% of the
value 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 at the rate of 0.50% of the value 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.

The Shareholder Services Plan and the Distribution Plan (the "Plans")
continue from year to year, provided such continuance is approved annually by
vote of the Board of 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 (the "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.

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<PAGE>
Pursuant to the Plans, ALIAC will provide the Board of Directors periodic
reports of amounts expended under the Plans and the purpose for which such
expenditures were made.

BROKERAGE ALLOCATION AND TRADING POLICIES

Subject to the direction of the Directors, the Investment Adviser and any
subadvisers (the "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 the best quality of execution available, giving
attention to net price (including commissions where applicable), execution
capability (including the adequacy of a firm's capital position), research
and other services related to execution; the relative priority given to these
factors will depend on all of the circumstances regarding a specific trade.

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 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. The Investment Adviser has adopted policies designed to prevent
disadvantaging the Funds in placing orders for the purchase and sale of
securities for a Fund.

To the extent the Investment Adviser desires to buy or sell the same publicly
traded security at or about the same time for more than one client, 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,
taking into consideration the respective investment objectives of the
clients, the relative size of portfolio holdings of the same or comparable
securities, availability of cash for investment, and the size of their
respective investment commitments. Orders for different clients received at
approximately the same time may be bunched for purposes of placing trades, as
authorized by regulatory directives. Prices are averaged for those
transactions.

Brokerage commissions were paid in the amount of $289,353 from Aetna Ascent;
$225,220 from Aetna Crossroads; and $156,342 from Aetna Legacy for the period
ended October 31, 1995.

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 Total
Transactions Transactions

Aetna Ascent $23,892,905 $44,365
Aetna
Crossroads 18,945,767 33,788
Aetna Legacy 14,207,397 25,080

No brokerage business was placed with any brokers affiliated with ALIAC.

The Board of Directors has adopted a policy allowing trades to be made
between registered investment companies provided they meet the terms of Rule
17a-7 under the 1940 Act. Pursuant to this policy, a Fund may buy a security
from or sell another security to another registered investment company
advised by the Investment Adviser.

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<PAGE>

The Board of Directors has also adopted a Code of Ethics governing personal
trading by persons who manage, or who have access to trading activity by, a
Fund. The Code allows trades to be made in securities that may be held by a
Fund, however, it prohibits a person from taking advantage of Fund trades or
from acting on inside information.

DESCRIPTION OF SHARES

The Company's Articles of Incorporation ("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 Generation Funds have sought a ruling from the Internal Revenue Service
(IRS) to the effect that differing distributions among the classes of its
shares will not result in each Fund's dividends and 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.
While similar rulings have been issued previously by the IRS, including a
ruling for the Company's ten existing portfolios, complete assurance cannot
be given that the Generation Funds will receive such a ruling. Although an
adverse determination by the IRS is not currently expected, the Generation
Funds may be required to reassess their multiple class share structure (and
reserve the right to do so) if the IRS does not rule favorably since such
discussion could impact the Funds' ability to qualify as RICs. In addition,
if the IRS does not rule favorably, each Fund might make additional
distributions (which could carry interest and interest-related charges to the
Fund) if doing so would assist the Funds in complying with their general
practice of distributing sufficient income to reduce or eliminate U.S.
federal taxes.

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. Fund
shares 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.

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 a purchase or redemption order is received
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

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<PAGE>

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 SEC or such Exchange
is closed for other than weekends and holidays; (b) an emergency exists, as
determined by the SEC, as a result of which (i) disposal by 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 SEC 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.

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 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.
The values for equity securities traded on registered securities exchanges
are based on the last sale price or, if there has been no sale that day, at
the mean of the last bid and asked price on the exchange where the security
is principally traded. Securities traded over the counter are valued at the
mean of the last bid and asked price if current market quotations are not
readily available. Short-term debt securities which have a maturity date of
more than sixty days will be valued at the mean of the last bid and asked
price obtained from principal market makers. 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.

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 which 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 (the "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
allocable thereto) for the taxable year (the "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.

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<PAGE>

In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive of
certain gains on designated hedging transactions that are offset by realized
or unrealized losses on offsetting positions) from the sale or other
disposition of stock, securities or foreign currencies (or options, futures
or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). 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 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 (a "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

21
<PAGE>
the Fund receives distributions of any such ordinary earnings 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 of two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses or related 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 Corporation, the Farm Credit System Financial Assistance
Corporation, a Federal Home Loan Bank, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the Government
National Mortgage Corporation, and the Student Loan Marketing Association are
treated as U.S. Government securities.

If for any taxable year 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 (a "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).

22
<PAGE>

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
investments, distributions by a Fund may be treated as a net capital gain
dividend, an ordinary income dividend, or an exempt interest dividend.
Dividends paid on Select Class and Adviser Class shares are calculated at the
same time and in the same manner. In general, dividends on Adviser Class
shares are expected to be lower than those on Select Class shares due to the
higher distribution expenses borne by the Adviser 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.
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, or has made and not closed a short sale of
substantially identical stock or securities, is the grantor of a
deep-in-the-money or otherwise nonqualified option to buy substantially
identical stock or securities, or has otherwise diminished its risk of loss
by holding other positions with respect to substantially similar or related
property, 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.

Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum marginal rate
of 28% for noncorporate taxpayers and 20% for corporate taxpayers on the
excess of the taxpayer's alternative minimum taxable income ("AMTI") over an
exemption amount. In addition, under the Superfund Amendments and
Reauthorization Act of 1986, a tax is imposed for taxable years beginning
after 1986 and before 1996 at the rate of 0.12% on the excess of a corporate
taxpayer's AMTI (determined without regard to the deduction for that tax and
the AMT net operating loss deduction) over $2 million. The corporate
dividends-received deduction is not itself an item of tax preference that
must be added back to taxable income or is otherwise disallowed in
determining a corporation's AMTI for these purposes. 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. 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 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

23
<PAGE>
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
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
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 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. For this purpose,
the special holding period rules of Code Section 246(c)(3) and (4) (discussed
above in connection with the dividends-received deduction for corporations)
generally will apply in determining the holding period of shares. Long-term
capital gains of noncorporate taxpayers are currently taxed at a maximum rate
11.6% lower than the maximum rate applicable to ordinary income. Capital
losses in any year are deductible only to the extent of capital gains plus,
in the case of a noncorporate taxpayer, $3,000 of ordinary income.

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.

24
<PAGE>

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
their 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 may appear in
reports or promotional literature to current or prospective shareholders.

Average Annual Total Return

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), 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 Generation 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.

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.

The Funds commenced operations for the Select Class shares on January 4,
1995. The total return for the Funds since inception was 16.70% for Aetna
Ascent; 15.30% for Aetna Crossroads; and 14.10% for Aetna Legacy.

The Adviser Class is not being offered at this time.

25
<PAGE>
Portfolio of Investments
October 31, 1995

Ascent Fund

Number of Market
Shares Value
---------- -------------
Common Stocks (92.2%)
Aerospace & Defense (0.0%)
McDonnell Douglas Corp. 200 $ 16,350
-------------
Apparel (0.5%)
Chic By H I S, Inc.+ 3,000 16,500
Coats Viyella Plc 10,800 31,867
Nike, Inc. 600 34,050
Oshkosh B'Gosh, Inc. 300 4,013
Phillips-Van Heusen 800 8,100
VF Corp. 100 4,788
-------------
99,318
-------------
Autos & Auto Equipment (0.9%)
Autoliv AB 300 17,205
Borg Warner Automotive, Inc. 1,000 29,500
Kaydon Corp. 1,400 40,425
Mitsubishi Motors Corp. 4,000 33,332
Smith (A.O.) Corp. 1,100 22,825
Snap-On, Inc. 200 8,475
Varity Corp.+ 300 10,875
Volvo AB Class B 800 18,002
-------------
180,639
-------------
Banks (6.0%)
AMMB Holdings Bhd 2,000 24,774
Bank of Montreal 900 19,907
Bank of New York Co., Inc. 900 37,800
BankAmerica Corp. 500 28,750
Banque Bruxelles Lambert SA 150 24,926
Canadian Imperial Bank of Commerce 1 25
Charter One Financial, Inc. 1,500 42,469
Chemical Banking Corp. 300 17,063
CITICORP 400 25,950
City National Corp. 5,300 70,225
Coast Savings Financial, Inc.+ 800 21,100
Commerce Asset Holding Bhd 3,000 14,864
Cullen/Frost Bankers, Inc. 1,100 55,688
Development Bank of Singapore Ltd. 2,000 22,904
F & M Bancorp 110 2,874
First American Corp. (Tenn.) 800 35,050
First Chicago Corp. 500 33,938
First Citizens Bancshares Class A 100 5,300
First Interstate Bancorp 300 38,700
Firstbank of Illinois Co. 1,000 29,875
HSBC Holdings Plc 2,519 36,886
Kagoshima Bank 3,000 $ 22,299
Keycorp 600 20,250
Mellon Bank Corp. 100 5,013
Michigan National Corp. 300 32,963
National City Bancshares, Inc. 500 22,844
NationsBank, Inc. 500 32,875
Northern Trust Corp. 500 23,750
Provident Bancorp 1,000 42,000
Queens County Bancorp, Inc. 1,400 56,350
Reliance Bancorp 3,300 48,056
River Forest Bancorp, Inc. 2,000 46,750
Royal Bank of Canada 800 17,918
Silicon Valley Bancshares+ 3,000 58,875
Star Banc Corp. 800 44,300
Sumimoto Bank of California 100 2,350
Susquehanna Bancshares, Inc. 1,100 32,038
Union Bank 1,000 50,250
Union Planters Corp. 2,100 64,313
White River Corp.+ 400 14,250
-------------
1,226,512
-------------
Building Materials & Construction (2.5%)
American Buildings Co.+ 1,000 25,125
Champion Enterprises, Inc.+ 2,600 67,275
Continental Homes Holding Corp. 200 4,100
Elcor Corp. 300 6,300
Fujita Corp. 8,000 36,383
Granite Construction, Inc. 1,100 31,350
International Aluminum Corp. 300 9,113
Kon. Volker Stevin N.V. 300 19,271
Lindab AB Class B 800 17,415
Metra Oy Class B 1,000 43,324
Nippon Densetsu Kogyo 4,000 38,144
Pulte Corp. 200 6,325
Redman Industries, Inc.+ 1,300 34,125
Sanki Engineering 3,000 29,048
Security Capital Industrial Trust 1,500 24,563
Texas Industries, Inc. 500 26,313
Toll Brothers, Inc.+ 500 8,938
Tredegar Industries, Inc. 1,400 40,775
Webb (Del E.) Corp. 500 10,375
WHX Corp.+ 1,100 11,413
Wing Tai Holdings 16,000 27,711
-------------
517,386
-------------

See Notes to Portfolio of Investments

F-1
<PAGE>

Chemicals (2.7%)
ARCO Chemical Co. 700 $ 34,300
Dow Chemical Co. 200 13,725
du Pont (E.I.) de Nemours 200 12,475
Dyno Industrier AS 700 14,160
Eastman Chemical Co. 100 5,950
Fuji Photo Film 1,000 24,744
Geon Company (The) 1,900 47,263
Great Lakes Chemical Corp. 200 13,425
Lyondell Petrochemical Co. 1,900 40,613
Norsk Hydro AS 1,800 71,665
Novellus Systems, Inc.+ 400 27,500
PPG Industries, Inc. 300 12,750
Sekisui Chemical Co. 7,000 91,056
Sigma-Aldrich Corp. 300 14,325
Solvay SA Class A 100 50,387
Union Carbide Corp. 400 15,150
Vigoro Corp. 900 39,038
Wellman, Inc. 1,200 28,200
-------------
556,726
-------------
Commercial Services (0.8%)
GATX Corp. 1,200 57,000
Inchcape Plc 3,970 19,607
Manpower, Inc. 1,200 32,550
Robert Half International, Inc.+ 500 18,250
Royal PTT Nederland N.V. 526 18,475
WMX Technologies, Inc. 400 11,250
-------------
157,132
-------------
Computer Software (1.8%)
Acxiom Corp.+ 400 11,900
Applix Inc.+ 2,200 61,325
Borland International, Inc.+ 900 12,206
Cadence Design Systems, Inc.+ 2,850 91,913
Cirrus Logic, Inc.+ 1,300 54,681
Electronic Arts, Inc.+ 600 22,013
Hogan Systems, Inc.+ 4,900 43,794
Hyperion Software+ 200 9,775
Kronos, Inc.+ 100 4,688
Micro Warehouse, Inc.+ 400 17,900
Reynolds & Reynolds Co. Class A 1,100 39,188
Shiva Corp.+ 100 6,013
Softdesk, Inc.+ 100 2,288
-------------
377,684
-------------
Computers & Office Equipment (2.6%)
Acma Ltd 6,000 $ 19,511
CANON, Inc. 2,000 34,232
Ceridian Corp.+ 200 8,700
Comdisco, Inc. 1,500 45,750
Compaq Computer Corp.+ 200 11,150
Dell Computer Corp.+ 1,000 46,563
Fujitsu Ltd. 4,000 47,729
HBO & Co. 100 7,063
In Focus Systems, Inc.+ 2,100 69,038
International Business Machines
Corp. 200 19,450
Komag, Inc.+ 400 22,825
Kurabo Industries 25,000 85,090
Microsoft Corp.+ 100 10,006
Read-Rite Corp.+ 2,400 83,850
Sun Microsystems, Inc.+ 100 7,813
United Stationers, Inc. 100 3,888
-------------
522,658
-------------
Consumer Products (0.1%)
Alberto-Culver Co. Class B 200 6,275
Liz Claiborne, Inc. 300 8,513
Reckitt & Coleman Plc 1,183 12,563
-------------
27,351
-------------
Diversified (1.8%)
Alusuisse-Lonza Holding AG 15 11,456
Brady (WH) Co. 400 29,200
Dover Corp. 500 19,750
Harrisons & Crosfield Plc 14,028 32,095
Harsco Corp. 700 36,925
Illinois Tool Works, Inc. 100 5,813
Johnson Controls, Inc. 200 11,650
Katy Industries 6,500 66,625
Lonrho Plc 5,500 13,582
Opal, Inc.+ 200 3,025
Oriental Holdings Bhd 3,000 13,803
Polaris Industries, Inc. 2,250 63,000
Textron, Inc. 200 13,750
Varlen Corp. 1,680 45,360
-------------
366,034
-------------
Electrical & Electronics (4.3%)
Applied Materials, Inc.+ 200 10,038
Austria Mikro Systeme International 400 74,065
Cohu, Inc. 100 3,088
Cypress Semiconductor Corp.+ 1,400 49,350

See Notes to Portfolio of Investments

F-2
<PAGE>

Dallas Semiconductor Corp. 1,000 $ 21,250
Hewlett Packard Co. 300 27,788
Hitachi Koki 5,000 44,599
Intel Corp. 100 6,994
Kyocera Corp. 1,000 81,960
Lam Research Corp.+ 500 30,438
Logicon, Inc. 1,800 41,175
Matsushita Electric Industrial Co.
Ltd. 3,000 42,545
Micron Technology Inc. 100 7,063
Nintendo Co. Ltd.+ 1,000 73,549
Nokia AB Class A 1,500 85,823
Novo-Nordisk AS 200 25,428
Philips Electronics N.V. 600 23,163
Quickturn Design System, Inc.+ 1,300 13,325
Ramtron International Corp.+ 100 1,006
Rohm Co. 1,000 60,736
Seagate Technology, Inc.+ 1,500 67,125
Siliconix, Inc.+ 400 11,600
Telefonaktiebolaget 550 11,673
Tencor Instruments+ 400 17,100
Varian Associates, Inc. 1,000 51,375
-------------
882,256
-------------
Electrical Equipment (3.3%)
Adflex Solutions, Inc.+ 1,600 41,800
Allgon AB Class B 700 10,589
Arrow Electronics, Inc.+ 900 45,675
Avnet, Inc. 800 40,300
Draka Holding N.V. 500 13,765
FPL Group, Inc. 300 12,563
General Electric Co. 500 31,625
Hitachi Ltd. (Hit. Seisakusho) 6,000 61,617
International Rectifier Corp.+ 1,000 45,125
Kemet Corp.+ 600 20,550
Kent Electronics Corp.+ 1,000 48,750
Marshall Industries+ 1,300 45,825
Mentor Graphics Corp.+ 2,400 50,700
Nichicon 1,000 13,497
Park Electrochemical Corp. 1,400 43,750
Sundstrand Corp. 1,500 91,875
Tektronix, Inc. 100 5,925
Texas Instruments, Inc. 600 40,950
-------------
664,881
-------------
Financial Services (4.6%)
Abbey National Plc 5,000 42,248
ABN Amro Holding N.V. 500 $ 20,980
Alex Brown & Sons, Inc. 1,200 58,650
Algem Maatsch Voor Nijverhei 100 27,298
Banponce Corp. 400 15,450
Barclays Plc 1,700 19,930
BayBanks, Inc. 500 40,438
BHC Financial, Inc. 3,200 58,800
Citizens Bancorp 1,600 52,600
CNA Financial Corp.+ 100 11,400
Creditanstalt-Bankverein 500 24,924
Crestar Financial Corp. 1,000 57,000
Dean Witter Discover and Co. 100 4,975
Den Danske Bank 300 19,866
Fokus Banken AS+ 3,000 15,893
Greenpoint Financial Corp. 700 18,988
Household International, Inc. 100 5,625
Internationale Nederland 300 17,866
Jyske Bank AS 200 13,098
Leader Financial Corp. 800 28,600
Lion Land Bhd 11,000 11,895
Merrill Lynch & Co., Inc. 300 16,650
Morgan Keegan, Inc. 1,700 18,488
Orient Corp. 3,000 13,614
Oversea-Chinese Banking 2,000 23,470
Park National Corp. 100 4,525
RCSB Financial, Inc. 200 4,463
Schweizerische Bankverein 40 16,401
Societe Generale De Belg 200 15,047
Svenska Handelsbanke 1,000 17,536
TR Financial Corp. 700 17,413
Transamerica Corp. 200 13,550
Travelers, Inc. 500 25,250
Unitas Bank Ltd. Class A+ 9,500 23,039
United Carolina Bancshares, Inc. 1,200 42,900
United Overseas Bank Ltd. 2,600 22,791
US Bancorp Inc. 1,400 45,675
Vermont Financial Services 1,300 41,275
Yasuda Trust & Banking 3,000 13,409
-------------
942,020
-------------
Food & Beverages (3.0%)
Bols Wessanen CVA 12 237
Cadbury Schweppes Plc 4,300 35,485
Cerebos Pacific Ltd. 3,000 18,663
Coca-Cola Co. 200 14,375

See Notes to Portfolio of Investments

F-3
<PAGE>

ConAgra, Inc. 700 $ 27,038
CPC International Inc. 400 26,550
Danisco AS 400 18,220
Hillsdown Holdings Plc 16,415 43,514
Hometown Buffet, Inc.+ 100 1,294
Hormel Foods Corp. 1,500 34,500
Hudson Foods, Inc. Class A 1,300 18,363
Huhtamaki Group Class I 400 11,867
IBP, Inc. 1,000 59,875
International Multifoods Corp. 1,700 34,850
Katokichi 1,000 18,289
Kroger Co. (The)+ 100 3,338
McDonald's Corp. 800 32,800
Molson Companies Ltd. 1,400 22,509
Mondavi (Robert) Corp.+ 600 17,025
Morningstar Group, Inc.+ 2,600 20,800
Nestle SA Registered 15 15,706
Oester Brau-Beteiligungs 400 20,544
PepsiCo, Inc. 500 26,375
Safeway, Inc.+ 800 37,800
Sara Lee Corp. 300 8,813
Superfos AS 200 17,744
Supervalu, Inc. 500 15,375
-------------
601,949
-------------
Health Services (1.1%)
Invacare Corp. 1,400 35,000
Lincare Holdings, Inc.+ 1,400 35,088
Mine Safety Appliances Co. 800 40,600
Moore Corp. Ltd. 800 15,300
Nellcor, Inc.+ 700 40,425
Quorum Health Group, Inc.+ 500 10,781
Universal Health Services, Inc.+ 1,200 45,000
-------------
222,194
-------------
Home Furnishings & Appliances (0.2%)
Electrolux AB 400 17,099
Leggett & Platt, Inc. 1,400 33,600
-------------
50,699
-------------
Hotels & Restaurants (0.3%)
Compass Group Plc 2,900 19,676
Hotel Properties Ltd. 10,000 15,128
Marriott International Inc. 300 11,063
Prime Hospitality Corp.+ 1,400 13,825
-------------
59,692
-------------
Household Products (0.2%)
National Presto Industries, Inc. 900 $ 36,450
Premark International, Inc. 300 13,875
-------------
50,325
-------------
Insurance (4.0%)
Aegon N.V. 576 21,836
AFLAC, Inc. 1,500 61,125
Alleghany Corp. 300 53,850
Allstate Corp. 599 22,013
American Bankers Insurance Group 1,700 60,775
Baloise Holding Ltd. 5 10,251
Capital American Financial Corp. 100 1,963
Chubb Corp. 100 8,988
CMAC Investment Corp. 400 19,000
Commerce Group, Inc. 400 8,125
EA-Generali AG 150 41,018
Fremont General Corp. 1,500 43,500
Fund American Enterprises, Inc.+ 390 26,910
Guardian Royal Exchange Plc 7,200 26,016
Home Beneficial Corp. Class B 400 9,850
Kansas City Life Insurance Co. 400 20,800
Loews Corp. 300 43,988
Orion Capital Corp. 400 16,400
Pxre Corp. 1,500 37,688
Reinsurance Group of America 1,700 58,438
Royal Insurance Holdings Plc 2,400 14,807
State Auto Financial Corp. 1,000 22,313
Transatlantic Holdings, Inc. 800 53,900
Transnational Re Corp. Class A+ 1,700 38,144
Transport Holdings, Inc.+ 2 80
UNI Storebrand AS+ 13,600 68,557
Winterthur Schweizerische
Versicherungs-Gesellschaft 15 10,044
Zurich Versicherungs-Gesellschaft 65 18,588
-------------
818,967
-------------
Machinery & Equipment (1.7%)
Acme-Cleveland Corp. 1,700 37,188
Barnes Group, Inc. 900 33,750
Blount, Inc. Class A 1,000 43,375
Central Sprinkler Corp.+ 2,100 67,725
Entergy Corp. 600 17,100
FSI International, Inc.+ 900 21,488
Jenbacher Werke AG 100 16,145
Koyo Seiko Co. Ltd. 3,000 23,913

See Notes to Portfolio of Investments

F-4
<PAGE>

L.S. Starrett Co. Class A 800 $ 18,300
Landis & Gyr 10 6,027
Regal Beloit 800 14,400
Tsubakimoto Chain 7,000 32,862
Tsukishima Kikai 1,000 19,561
-------------
351,834
-------------
Media & Entertainment (1.1%)
Belo (A.H.) Corp. Class A 1,000 34,625
Callaway Golf Co. 2,700 44,213
Genting Bhd 1,000 8,612
Granada Group Plc 1,500 16,000
GTECH Holdings Corp.+ 1,200 29,400
King World Productions, Inc.+ 600 20,925
Media General, Inc. 1,200 33,300
Mirage Resorts, Inc.+ 1,000 32,750
-------------
219,825
-------------
Medical Supplies (0.5%)
Baxter International, Inc. 400 15,450
CONMED Corp.+ 1,500 52,875
GC Companies, Inc.+ 900 29,025
North American Biologicals, Inc.+ 1,300 10,481
-------------
107,831
-------------
Metals & Mining (1.9%)
AK Steel Holding Corp. 500 15,500
Alcan Aluminum Ltd. 600 18,975
Aluminum Co. of America 200 10,200
Carpenter Technology Corp. 1,200 45,450
Cleveland-Cliffs, Inc. 700 26,163
Cyprus Amax Minerals Co. 800 20,900
Dofasco, Inc. 1,307 16,523
Georg Fischer AG 10 13,814
J & L Specialty Steel, Inc. 2,000 32,750
Kennametal, Inc. 1,200 37,350
Kon. Ned. Hoogovens En 20 684
Lukens, Inc. 400 12,300
Magma Copper Co. 500 8,375
Mueller Industries, Inc.+ 800 18,800
Phelps Dodge Corp. 200 12,675
Reliance Steel & Aluminum Co. 2,400 39,900
Schnitzer Steel Industries, Inc. 1,700 45,688
Shiloh Industries, Inc.+ 300 3,319
Svenskt Stal AB 1,600 16,015
-------------
395,381
-------------
Oil & Gas (2.5%)
Alberta Energy Co Ltd.+ 700 $ 10,929
Atlantic Richfield Co. 200 21,350
Belden & Blake Corp.+ 1,300 19,338
Burmah Castrol Plc 2,200 34,193
Camco International, Inc. 200 4,575
Chesapeake Energy Corp.+ 300 8,775
Conwest Exploration Co. Ltd. 900 15,809
Diamond Shamrock, Inc. 1,600 41,200
Exxon Corp. 800 61,100
Falconbridge Ltd. 600 13,216
Fina, Inc. Class A 700 31,238
Halliburton Co. 300 12,450
Imperial Oil Ltd. 3 125
Leviathan Gas Pipeline Partners
L.P. 1,600 39,800
Lufkin Industries, Inc. 700 13,125
Mobil Corp. 400 40,300
Occidental Petroleum Corp. 200 4,300
Oneok, Inc. 900 21,938
Petro-Canada 1,600 17,249
Royal Dutch Petroleum Co. 400 49,150
RPC, Inc.+ 900 6,975
Smith International, Inc.+ 1,300 20,800
Sun Company, Inc. 100 2,863
Texaco 200 13,625
-------------
504,423
-------------
Paper & Containers (2.4%)
Abitibi Price, Inc. 500 8,736
Asia Pulp & Paper Co. Ltd.+ 4,000 41,000
Bobst SA 5 7,567
Champion International Corp. 200 10,700
Chesapeake Corp. 2,700 82,688
Consolidated Papers, Inc. 1,400 80,150
Georgia-Pacific Corp. 100 8,250
Greif Brothers Corp. Class A 200 5,025
Leykam-Muerztaler Papier+ 350 13,809
MacMillan Bloedel Ltd. 900 11,877
Mayr-Melnhof Karton AG 100 5,832
Mead Corp. 300 17,288
Rayoner, Inc. 1,200 45,000
Repola Oy 2,100 40,644
Stone-Consolidated Corp.+ 600 8,309
Stora Kopparbergs 1,200 14,540
Temple-Inland, Inc. 300 13,650

See Notes to Portfolio of Investments

F-5
<PAGE>

Willamette Industries, Inc. 1,100 $ 64,075
-------------
479,140
-------------
Pharmaceuticals (1.3%)
Becton, Dickinson & Co. 300 $ 19,500
Bio-Rad Labs, Inc. Class A+ 500 19,000
Bristol-Myers Squibb Co. 400 30,500
Cor Therapeutics+ 600 6,150
Immulogic Pharmaceutical Corp.+ 100 1,163
Immunex Corp.+ 100 1,263
Johnson & Johnson 200 16,300
Merck & Co., Inc. 300 17,250
Pfizer, Inc. 1,000 57,375
Rhone-Poulenc Rorer, Inc. 1,000 47,125
Schering Plough 600 32,175
Watson Pharmaceuticals, Inc.+ 400 18,000
-------------
265,801
-------------
Printing & Publishing (0.9%)
Banta Corp. 1,100 47,850
Central Newspapers, Inc. Class A 1,100 32,450
Gannett Co., Inc. 200 10,875
New York Times Co 300 8,325
Plenum Publishing Corp. 300 10,725
Pulitzer Publishing Co. 1,300 58,825
Tribune Co. 200 12,625
Wiley (John) & Sons, Inc. Class A 200 5,950
-------------
187,625
-------------
Real Estate Investment Trusts (25.0%)
Associated Estates Realty Corp. 14,100 289,050
Beacon Properties Corp. 12,900 280,575
BRE Properties, Inc. Class A 11,100 355,200
Cali Realty Corp. 2,900 56,550
CBL & Associates Properties, Inc. 10,100 214,625
Chelsea GCA Realty, Inc. 9,800 271,950
Colonial Properties Trust 11,500 287,500
Cousins Properties, Inc. 6,500 112,938
Crescent Real Estate Equities, Inc. 9,200 294,400
Developers Diversified Realty Corp. 3,000 85,500
Duke Realty Investments, Inc. 8,500 260,313
Equity Inns, Inc. 4,900 56,963
Equity Residential Properties Trust 4,100 114,800
Essex Property Trust, Inc. 8,600 156,950
Evans Withycombe Residential, Inc. 9,300 175,538
Excel Realty Trust, Inc. 13,700 258,588
HGI Realty, Inc. 900 $ 19,913
Highwood Properties, Inc. 11,000 292,875
JDN Realty Corp. 800 16,300
Kimco Realty Corp. 4,000 147,500
Kranzco Realty Trust 1,200 18,300
Oasis Residential, Inc. 10,200 221,850
Prime Residential, Inc. 4,000 70,750
Regency Realty Corp. 4,000 68,000
Sekisui House 2,000 23,082
Smith (Charles E.) Residential
Realty Co. 3,100 72,075
South West Property Trust 2,750 33,344
Spieker Properties, Inc. 12,200 295,850
Storage Equities, Inc. 16,100 295,838
Walden Residential Properties, Inc. 14,600 268,229
-------------
5,115,346
-------------
Retail (2.7%)
Argyll Group Plc 2,600 13,210
Burton Group Plc 26,600 42,392
Claire's Stores, Inc. 2,000 39,250
Colruyt SA 150 37,997
Familymart 1,000 42,154
Fastenal Co. 700 24,369
General Host Corp.+ 5,600 27,300
Hannaford Brothers, Co. 1,700 44,413
Hudson's Bay Co. 500 9,340
Ito-Yokado Co. Ltd. 1,000 54,673
JUSCO Co. 3,000 70,419
Koninklijke Ahold N.V. 521 19,718
Merkur Holding AG 35 7,791
Neiman Marcus Group, Inc. 1,900 32,538
Robinson & Co. Ltd. 4,000 16,966
Sears Roebuck & Co. 400 13,600
Tesco Plc 271 1,283
Waban, Inc.+ 2,200 34,375
Zale Corp.+ 1,800 26,663
-------------
558,451
-------------
Telecommunications (0.8%)
Ameritech Corp. 800 43,200
Case Corp. 1,000 38,125
Computer Associates International,
Inc. 250 13,750
GN Store Nord AS 200 14,818
Holophane Corp.+ 500 13,531
Lincoln Telecommunications Co. 2,400 41,700

See Notes to Portfolio of Investments

F-6
<PAGE>

Mobile Telecommunications
Technologies Corp.+ 100 $ 2,850
-------------
167,974
-------------
Transportation (2.4%)
Alaska Air Group, Inc.+ 300 4,463
American President Co. Ltd. 1,600 38,800
AMR Corp.+ 200 13,200
Bergesen d.y. AS Class B 1,500 30,824
British Airways Plc 800 5,744
Comair Holdings, Inc. 2,250 63,422
Det Norske Luftfartselskap AS 500 23,118
East Japan Railway Co. 13 61,411
Expeditors International of
Washington, Inc. 500 13,313
Florida East Coast Industries, Inc. 400 26,750
Guidant Corp. 1,600 51,200
Hornbeck Offshore Services, Inc.+ 200 2,900
Kobenhavns Lufthavne AS 200 15,000
Kvaerner AS 600 25,237
Malaysian International Shipping 4,000 10,539
Peninsular & Orient Steam
Navigation Co. 3,900 29,661
PHH Corp. 900 39,375
Singapore Airlines Ltd. 3,000 27,782
-------------
482,739
-------------
Utilities - Electric (5.2%)
Boston Edison Co. 1,300 35,588
California Energy Company, Inc.+ 1,500 27,188
Centerior Energy Corp. 2,500 25,000
Consolidated Edison Co. of New
York, Inc. 500 15,188
DQE, Inc. 700 19,250
Elektrowatt AG 30 9,054
General Public Utilities Corp. 900 28,125
Hokkaido Electric Power Co. 2,000 46,359
Illinova Corp. 1,400 39,725
Interstate Power Co. (Del.) 700 20,300
Korea Electric Power ADR+ 2,000 49,500
LG&E Corp. 1,200 49,800
MDU Resources Group, Inc. 2,550 53,869
National Power Plc ADR 550 6,875
New England Electric System 900 35,100
New York State Electric & Gas Corp. 1,500 37,875
Nipsco Industries, Inc. 1,100 40,150
Northeast Utilities 800 19,800
Oklahoma Gas & Electric 900 $ 36,000
Orange & Rockland Utilities, Inc. 1,300 45,663
Pacific Gas & Electric Co. 800 23,500
Peco Energy Co. 700 20,475
Pinnacle West Capital Corp. 2,500 68,750
Portland General Corp. 1,500 40,688
Powergen Plc ADR 550 9,144
Reunies Electrobel & Tractebel 150 54,873
San Diego Gas & Electric Co. 1,700 39,525
SCEcorp 1,400 23,800
Sierra Pacific Resources 2,400 56,100
Transalta Corp. 1,600 17,249
Unicom Corp. 700 22,925
United Illuminating Co. 200 7,600
Western Resources, Inc. 600 20,175
-------------
1,045,213
-------------
Utilities - Oil & Gas (1.7%)
Atlanta Gas Light Co. 800 30,900
Brooklyn Union Gas Co. (The) 1,800 45,225
Connecticut Energy Corp. 700 13,563
Energen Corp. 2,500 56,563
Mitchell Energy & Development Corp. 3,300 53,625
New Jersey Resources Corp. 1,100 27,500
OEMV AG 300 25,882
Petronas Gas Bhd+ 4,000 13,527
Union Texas Petroleum Holdings,
Inc. 1,500 27,000
Valero Energy Corp. 500 11,813
Washington Gas Light Co. 100 1,913
Wicor, Inc. 1,000 29,625
Williams Co., Inc. 200 7,725
-------------
344,861
-------------
Utilities - Telephone (1.2%)
AT&T Corp. 200 12,800
Bell Atlantic Corp. 200 12,725
BellSouth Corp. 200 15,300
Cable & Wireless Plc 5,700 37,235
Citizens Utilities Co.+ 1,360 14,960
DDI Corp. 3 24,324
Nippon Telephone & Telegraph Corp. 6 49,235
SBC Communications, Inc. 300 16,763
Southern New England Telecom. Corp. 1,100 39,738
Sprint Corp. 800 30,800
-------------
253,880
-------------

See Notes to Portfolio of Investments

F-7
<PAGE>

Utilities - Water (0.2%)
SJW Corp. 500 $ 17,563
Welsh Water Plc 1,833 21,783
-------------
39,346
-------------
Total Common Stocks
(cost $17,390,119) $18,860,443
-------------
Preferred Stocks (0.0%)
Utilities - Water (0.0%)
Welsh Water Plc 1,980 $ 3,249
-------------
Total Preferred Stocks
(cost $3,223) $ 3,249
-------------
Warrants (0.1%)
Morgan Stanley American Express
Hong Kong+ 8,000 $ 36,000
-------------
Total Warrants
(cost $39,390) $ 36,000
-------------
Principal Market
Amount Value
---------- -------------
U.S. Treasury Notes (2.1%)
U.S. Treasury Note, 9.25%, 01/15/96 $325,000 $ 327,373
U.S. Treasury Note, 5.125%, 03/31/
96++++ 100,000 99,875
-------------
Total U.S. Treasury Notes
(cost $426,722) $ 427,248
-------------
Short Term Investments (5.5%)
Banc One Corp., Comm. Paper, 5.85%,
11/01/95 737,000 737,000
General Signal Corp., Comm. Paper,
5.85%, 11/07/95+++ 350,000 349,659

See Notes to Financial Statements

Principal Market
Amount Value
-------- ------------
Mitsubishi Bank, Corp. Note,
3.00%, 11/30/02 $40,000 $ 41,626
------------
Total Short Term Investments
(cost $1,126,659) $ 1,128,285
------------
Total Investments
(cost $18,986,113) (a) $20,455,225
Other assets less liabilities (22,283)
------------
Total Net Assets $20,432,942
------------

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 securities have been
determined to be liquid under guidelines established by the Board of
Directors.

++++ Security pledged to cover initial margin deposits on open futures
contracts at October 31, 1995.

(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 $1,891,427
Unrealized losses (422,315)
-----------
Net unrealized gain $1,469,112
===========

Category percentages are based on net assets.

Information concerning open futures contracts is shown below:

F-8
<PAGE>

Crossroads Fund
Number
of Market
Shares Value
-------- -----------

Common Stocks (76.2%)
Crossroads Fund
Aerospace & Defense (0.1%)
McDonnell Douglas Corp. 300 $ 24,525
-----------
Apparel (0.3%)
Chic By H I S, Inc.+ 2,800 15,400
Coats Viyella Plc 8,100 23,900
Nike, Inc. 200 11,350
Oshkosh B'Gosh, Inc. 300 4,013
Phillips-Van Heusen 700 7,088
VF Corp. 100 4,788
-----------
66,539
-----------

Autoliv AB 200 11,470
Borg Warner Automotive, Inc. 900 26,550
Kaydon Corp. 700 20,213
Mitsubishi Motors Corp. 3,000 24,999
Smith (A.O.) Corp. 1,000 20,750
Snap-On, Inc. 200 8,475
Varity Corp.+ 300 10,875
Volvo AB Class B 600 13,502
-----------
136,834
-----------
Banks (4.6%)
AMMB Holdings Bhd 1,000 12,387
Bank of Montreal 1,200 26,543
Bank of New York Co., Inc. 700 29,400
BankAmerica Corp. 400 23,000
Banque Bruxelles Lambert SA 200 33,234
Canadian Imperial Bank of Commerce 1 25
Chemical Banking Corp. 300 17,063
CITICORP 400 25,950
City National Corp. 4,700 62,275
Coast Savings Financial, Inc.+ 700 18,463
Commerce Asset Holding Bhd 4,000 19,819
Cullen/Frost Bankers, Inc. 1,000 50,625
Development Bank of Singapore Ltd. 1,000 11,452
F & M Bancorp 110 2,874
First American Corp. (Tenn.) 700 30,669
First Chicago Corp. 300 20,363
First Citizens Bancshares Class A 100 5,300
First Interstate Bancorp 100 12,900
Firstbank of Illinois Co. 500 14,938
HSBC Holdings Plc 1,888 27,646
JSB Financial, Inc. 1,000 30,813
Kagoshima Bank 2,000 14,866
Keycorp 600 $ 20,250
Mellon Bank Corp. 100 5,013
Michigan National Corp. 100 10,988
National City Bancshares, Inc. 300 13,706
NationsBank, Inc. 500 32,875
Northern Trust Corp. 400 19,000
Provident Bancorp 900 37,800
Queens County Bancorp, Inc. 300 12,075
Reliance Bancorp 500 7,281
River Forest Bancorp, Inc. 1,600 37,400
Royal Bank of Canada 400 8,959
Silicon Valley Bancshares+ 2,000 39,250
Star Banc Corp. 600 33,225
Suffolk Bancorp 300 10,650
Sumitomo Bank of California 100 2,350
Susquehanna Bancshares, Inc. 1,300 37,863
Union Bank 1,000 50,250
Union Planters Corp. 1,700 52,063
White River Corp.+ 300 10,688
-----------
932,291
-----------
Building Materials & Construction (2.4%)
American Buildings Co.+ 900 22,613
Champion Enterprises, Inc.+ 2,400 62,100
Continental Homes Holding Corp. 200 4,100
Elcor Corp. 200 4,200
Fujita Corp. 6,000 27,287
Granite Construction, Inc. 1,900 54,150
International Aluminum Corp. 300 9,113
Kon. Volker Stevin N.V. 250 16,059
Lindab AB Class B 800 17,415
Metra Oy Class B 800 34,659
Nippon Densetsu Kogyo 3,000 28,608
Puerto Rican Cement Co., Inc. 700 23,013
Pulte Corp. 200 6,325
Redman Industries, Inc.+ 1,200 31,500
Sanki Engineering 2,000 19,365
Security Capital Industrial Trust 1,400 22,925
Texas Industries, Inc. 500 26,313
Toll Brothers, Inc.+ 400 7,150
Tredegar Industries, Inc. 1,000 29,125
Webb (Del E.) Corp. 400 8,300
WHX Corp.+ 1,000 10,375
Wing Tai Holdings 12,000 20,783
-----------
485,478
-----------

See Notes to Portfolio of Investments

F-9
<PAGE>

Chemicals (2.2%)
ARCO Chemical Co. 700 $ 34,300
Dow Chemical Co. 200 13,725
du Pont (E.I.) de Nemours 200 12,475
Dyno Industrier AS 500 10,114
Eastman Chemical Co. 100 5,950
Fuji Photo Film 1,000 24,744
Geon Co. (The) 1,800 44,775
Great Lakes Chemical Corp. 200 13,425
Lyondell Petrochemical Co. 1,800 38,475
Norsk Hydro AS 1,300 51,758
Novellus Systems, Inc.+ 400 27,500
PPG Industries, Inc. 300 12,750
Sekisui Chemical Co. 3,000 39,024
Sigma-Aldrich Corp. 100 4,775
Solvay SA Class A 50 25,193
Union Carbide Corp. 500 18,938
Vigoro Corp. 800 34,700
Wellman, Inc. 1,100 25,850
-----------
438,471
-----------
Commercial Services (0.7%)
CPI Corp. 1,500 27,375
GATX Corp. 400 19,000
Inchcape Plc 4,697 23,198
Manpower, Inc. 1,100 29,838
Robert Half International, Inc.+ 400 14,600
Royal PTT Nederland N.V. 526 18,475
WMX Technologies, Inc. 400 11,250
-----------
143,736
-----------
Computer Software (1.4%)
Acxiom Corp.+ 400 11,900
Boole & Babbage, Inc.+ 100 3,638
Borland International, Inc.+ 700 9,494
Cadence Design Systems, Inc.+ 2,700 87,075
Cirrus Logic, Inc.+ 1,000 42,063
Electronic Arts, Inc.+ 600 22,013
Hogan Systems, Inc.+ 4,600 41,113
Hyperion Software+ 100 4,888
Kronos, Inc.+ 100 4,688
Micro Warehouse, Inc.+ 300 13,425
Reynolds & Reynolds Co. Class A 1,000 35,625
Softdesk, Inc.+ 100 2,288
-----------
278,210
-----------
Computers & Office Equipment (1.8%)
Acma Ltd. 4,000 $ 13,007
CANON, Inc. 1,000 17,116
Ceridian Corp.+ 700 30,450
Comdisco, Inc. 1,200 36,600
Compaq Computer Corp.+ 200 11,150
Dell Computer Corp.+ 1,000 46,563
Fujitsu Ltd. 3,000 35,796
HBO & Co. 100 7,063
In Focus Systems, Inc.+ 1,500 49,313
International Business Machines
Corp. 200 19,450
Komag, Inc.+ 200 11,413
Microsoft Corp.+ 100 10,006
Read-Rite Corp.+ 2,100 73,369
Sun Microsystems, Inc.+ 100 7,813
-----------
369,109
-----------
Consumer Products (0.3%)
Alberto-Culver Co. Class B 200 6,275
Block Drug Co., Inc. 1,000 38,625
Liz Claiborne, Inc. 300 8,513
Reckitt & Coleman Plc 1,261 13,391
-----------
66,804
-----------
Diversified (1.8%)
Alusuisse-Lonza Holding AG 10 7,637
Brady (WH) Co. 300 21,900
Dover Corp. 500 19,750
Harrisons & Crosfield Plc 10,231 23,408
Harsco Corp. 700 36,925
Illinois Tool Works, Inc. 100 5,813
Johnson Controls, Inc. 100 5,825
Katy Industries 5,600 57,400
Lonrho Plc 4,400 10,865
Opal, Inc.+ 200 3,025
Oriental Holdings Bhd 3,000 13,803
Polaris Industries, Inc. 1,950 54,600
SPS Technologies, Inc.+ 1,000 39,000
Textron, Inc. 300 20,625
Varlen Corp. 1,610 43,470
-----------
364,046
-----------
Electrical & Electronics (3.7%)
Applied Materials, Inc.+ 200 10,038
Austria Mikro Systeme International 250 46,291
Cohu, Inc. 100 3,088

See Notes to Portfolio of Investments

F-10
<PAGE>

Cypress Semiconductor Corp.+ 1,200 $ 42,300
Dallas Semiconductor Corp. 500 10,625
Hewlett Packard Co. 300 27,788
Hitachi Koki 4,000 35,679
Intel Corp. 100 6,994
Kyocera Corp. 1,000 81,960
Lam Research Corp.+ 500 30,438
Logicon, Inc. 1,800 41,175
Matsushita Electric Industrial Co.
Ltd. 2,000 28,363
Micron Technology, Inc. 100 7,063
Nintendo Co. Ltd. 1,000 73,549
Nokia AB Class A 1,100 62,937
Novo-Nordisk AS 100 12,714
Phillips Electronics N.V. 600 23,163
Quickturn Design System, Inc.+ 800 8,200
Ramtron International Corp.+ 100 1,006
Rohm Co. 1,000 60,736
Seagate Technology, Inc.+ 1,200 53,700
Siliconix, Inc.+ 300 8,700
Telefonaktiebolaget 550 11,673
Tencor Instruments+ 300 12,825
Unitrode Corp.+ 600 16,125
Varian Associates, Inc. 800 41,100
-----------
758,230
-----------
Electrical Equipment (2.8%)
Adflex Solutions, Inc.+ 1,500 39,188
Allgon AB Class B 500 7,564
Arrow Electronics, Inc.+ 900 45,675
Avnet, Inc. 700 35,263
Draka Holding N.V. 500 13,765
FPL Group, Inc. 300 12,563
General Electric Co. 400 25,300
Hitachi Ltd. (Hit. Seisakusho) 4,000 41,078
International Rectifier Corp.+ 900 40,613
Kemet Corp.+ 600 20,550
Kent Electronics Corp.+ 1,000 48,750
Marshall Industries+ 1,200 42,300
Mentor Graphics Corp.+ 2,000 42,250
Park Electrochemical Corp. 1,200 37,500
Sundstrand Corp. 1,300 79,625
Texas Instruments, Inc. 600 40,950
-----------
572,934
-----------
Financial Services (3.3%)
Abbey National Plc 1,600 13,519
ABN Amro Holding N.V. 400 $ 16,784
Alex Brown & Sons, Inc. 1,100 53,763
Banponce Corp. 200 7,725
Barclays Plc 1,300 15,241
BayBanks, Inc. 500 40,438
Bear Stearns Co., Inc. 1,800 35,775
BHC Financial, Inc. 3,000 55,125
Citizens Bancorp 1,500 49,313
CNA Financial Corp.+ 100 11,400
Creditanstalt-Bankverein 350 17,447
Crestar Financial Corp. 300 17,100
Dean Witter Discover and Co. 100 4,975
Den Danske Bank 300 19,866
Greenpoint Financial Corp. 300 8,138
Household International, Inc. 100 5,625
Internationale Nederland 200 11,911
Jyske Bank AS 200 13,098
Leader Financial Corp. 800 28,600
Lion Land Bhd 9,000 9,733
Merrill Lynch & Co., Inc. 300 16,650
Morgan Keegan, Inc. 1,200 13,050
Orient Corp. 3,000 13,614
Oversea-Chinese Banking 1,000 11,735
Park National Corp. 100 4,525
Promise Co. Ltd. 200 7,883
RCSB Financial, Inc. 200 4,463
Schweizerische Bankverein 30 12,301
Societe Generale De Belg 300 22,570
Svenska Handelsbanke 800 14,029
TR Financial Corp. 600 14,925
Travelers, Inc. 500 25,250
United Carolina Bancshares, Inc. 1,000 35,750
United Overseas Bank Ltd. 2,400 21,038
Yasuda Trust & Banking 2,000 8,939
-----------
662,298
-----------
Food & Beverages (2.6%)
Cadbury Schweppes Plc 3,200 26,408
Cerebos Pacific Ltd. 2,000 12,442
Coca-Cola Co. 200 14,375
ConAgra, Inc. 700 27,038
CPC International Inc. 400 26,550
Danisco AS 300 13,665
Hillsdown Holdings Plc 6,976 18,492
Hometown Buffet, Inc.+ 100 1,294

See Notes to Portfolio of Investments

F-11
<PAGE>

Hormel Foods Corp. 800 $ 18,400
Huhtamaki Group Class I 300 8,900
IBP, Inc. 900 53,888
International Multifoods Corp. 1,500 30,750
Katokichi 2,000 36,579
Kikkoman 3,000 21,419
Kroger Co. (The)+ 300 10,013
McDonald's Corp. 700 28,700
Molson Companies Ltd. 800 12,862
Mondavi (Robert) Corp.+ 600 17,025
Morningstar Group, Inc.+ 100 800
Nestle SA Registered 10 10,471
Oester Brau-Beteiligungs 350 17,976
PepsiCo, Inc. 800 42,200
Safeway, Inc.+ 700 33,075
Sara Lee Corp. 300 8,813
Superfos AS 200 17,744
Supervalu, Inc. 600 18,450
-----------
528,329
-----------
Health Services (1.0%)
Columbia/HCA Healthcare Corp. 100 4,913
Invacare Corp. 1,400 35,000
Lincare Holdings, Inc.+ 1,200 30,075
Mine Safety Appliances Co. 500 25,375
Moore Corp. Ltd. 900 17,213
Nellcor, Inc.+ 600 34,650
Quorum Health Group, Inc.+ 500 10,781
Universal Health Services, Inc.+ 1,100 41,250
-----------
199,257
-----------
Home Furnishings (0.2%)
Electrolux AB 300 12,824
Leggett & Platt, Inc. 1,200 28,800
-----------
41,624
-----------
Hotels & Restaurants (0.3%)
Compass Group Plc 2,900 19,676
Hotel Properties Ltd. 7,000 10,590
Marriott International Inc. 300 11,063
Prime Hospitality Corp.+ 1,200 11,850
-----------
53,179
-----------
Household Products (0.2%)
National Presto Industries, Inc. 300 12,150
Oneida Ltd. 300 4,950
Premark International, Inc. 300 13,875
-----------
30,975
-----------
Insurance (3.5%)
Aegon N.V. 576 $ 21,836
AFLAC, Inc. 1,200 48,900
Alleghany Corp. 300 53,850
Allstate Corp. 400 14,700
American Bankers Insurance Group 1,600 57,200
Baloise Holding Ltd. 5 10,251
Capital American Financial Corp. 100 1,963
Chubb Corp. 100 8,988
CMAC Investment Corp. 400 19,000
Commerce Group, Inc. 300 6,094
EA-Generali AG 50 13,673
Fremont General Corp. 600 17,400
Fund American Enterprises, Inc.+ 390 26,910
General Re Corp. 100 14,488
Guardian Royal Exchange Plc 5,200 18,790
Home Beneficial Corp. Class B 400 9,850
Kansas City Life Insurance Co. 500 26,000
Loews Corp. 300 43,988
Maxicare Health Plans, Inc.+ 3,300 57,750
Orion Capital Corp. 400 16,400
Reinsurance Group of America 1,600 55,000
Royal Insurance Holdings Plc 1,600 9,871
State Auto Financial Corp. 900 20,081
Transatlantic Holdings, Inc. 800 53,900
Transnational Re Corp. Class A+ 800 17,950
Transport Holdings, Inc.+ 2 80
UNI Storebrand AS+ 10,100 50,913
Winterthur Schweizerische
Versicherungs-Gesellschaft 10 6,696
Zurich Versicherungs-Gesellschaft 50 14,298
-----------
716,820
-----------

Machinery & Equipment (1.6%)
Acme-Cleveland Corp. 1,600 35,000
Barnes Group, Inc. 800 30,000
Blount, Inc. Class A 900 39,038
Central Sprinkler Corp.+ 1,700 54,825
Christiana Co.+ 700 18,463
Entergy Corp. 900 25,650
Fluor Corp. 100 5,650
FSI International, Inc.+ 800 19,100
Jenbacher Werke AG 50 8,072
Koyo Seiko Co. Ltd. 2,000 15,942
L.S. Starrett Co. Class A 700 16,013
Landis & Gyr 10 6,027

See Notes to Portfolio of Investments

F-12
<PAGE>

Regal Beloit 700 $ 12,600
Tsubakimoto Chain 4,000 18,778
Tsukishima Kikai 1,200 23,473
-----------
328,631
-----------
Media & Entertainment (1.0%)
Belo Corp. Class A 900 31,163
Callaway Golf Co. 2,200 36,025
Genting Bhd 3,000 25,836
Granada Group Plc 800 8,533
GTECH Holdings Corp.+ 1,000 24,500
King World Productions, Inc.+ 600 20,925
Media General, Inc. 1,100 30,525
Mirage Resorts, Inc.+ 900 29,475
-----------
206,982
-----------
Medical Supplies (0.5%)
Baxter International, Inc. 400 15,450
CONMED Corp.+ 1,400 49,350
GC Companies, Inc.+ 800 25,800
North American Biologicals, Inc.+ 900 7,256
-----------
97,856
-----------
Metals & Mining (2.0%)
AK Steel Holding Corp. 400 12,400
Alcan Aluminum Ltd. 1,200 37,990
Allegheny Ludlum Corp. 700 11,813
Aluminum Co. of America 200 10,200
Carpenter Technology Corp. 600 22,725
Cleveland-Cliffs, Inc. 700 26,163
Cyprus Amax Minerals Co. 400 10,450
Dofasco, Inc. 500 6,320
Georg Fischer AG 5 6,907
J & L Specialty Steel, Inc. 1,900 31,113
Kennametal, Inc. 1,100 34,238
Lukens, Inc. 300 9,225
Magma Copper Co. 500 8,375
Mueller Industries, Inc.+ 600 14,100
Phelps Dodge Corp. 700 44,363
Rautaruukki Oy 4,800 26,333
Reliance Steel & Aluminum Co. 2,200 36,575
Santa Fe Pacific Gold Corp. 300 2,963
Schnitzer Steel Industries, Inc. 1,600 43,000
Shiloh Industries, Inc.+ 300 3,319
Svenskt Stal AB 1,400 14,013
-----------
412,585
-----------
Oil & Gas (2.2%)
Alberta Energy Co Ltd.+ 700 $ 10,929
Atlantic Richfield Co. 100 10,675
Burmah Castrol Plc 1,600 24,868
Camco International, Inc. 200 4,575
Chesapeake Energy Corp.+ 300 8,775
Diamond Shamrock, Inc. 500 12,875
Edisto Resources Corp.+ 900 5,625
Exxon Corp. 700 53,463
Fina, Inc. Class A 600 26,775
Halliburton Co. 500 20,750
Imperial Oil Ltd. 3 94
Leviathan Gas Pipeline Partners
L.P. 1,500 37,313
Lufkin Industries, Inc. 600 11,250
Mobil Corp. 400 40,300
Occidental Petroleum Corp. 400 8,600
Oneok, Inc. 800 19,500
Panhandle Eastern Corp. 200 5,050
Petro-Canada 1,400 15,093
Petrofina SA 150 46,487
Royal Dutch Petroleum Co. 400 49,150
RPC, Inc.+ 800 6,200
Smith International, Inc.+ 1,200 19,200
Sun Company, Inc. 100 2,863
Texaco 200 13,625
-----------
454,035
-----------
Paper & Containers (2.1%)
Abitibi Price, Inc. 500 8,736
Asia Pulp & Paper Co. Ltd.+ 3,000 30,750
Bobst SA 5 7,567
Champion International Corp. 200 10,700
Chesapeake Corp. 2,400 73,500
Consolidated Papers, Inc. 1,000 57,250
Georgia-Pacific Corp. 100 8,250
Greif Brothers Corp. Class A 200 5,025
Leykam-Muerztaler Papier+ 500 19,727
MacMillan Bloedel Ltd. 800 10,558
Mayr-Melnhof Karton AG 200 11,665
Mead Corp. 300 17,288
Rayoner, Inc. 1,100 41,250
Repola Oy 1,300 25,161
Stone-Consolidated Corp.+ 600 8,309
Stora Kopparbergs 1,000 12,117
Temple-Inland, Inc. 400 18,200
Willamette Industries, Inc. 1,000 58,250
-----------

See Notes to Portfolio of Investments

F-13
<PAGE>

424,303
-----------
Pharmaceuticals (1.2%)
Becton, Dickinson & Co. 300 $ 19,500
Bio-Rad Labs, Inc. Class A+ 500 19,000
Bristol-Myers Squibb Co. 300 22,875
Cor Therapeutics+ 600 6,150
Immulogic Pharmaceutical Corp.+ 100 1,163
Immunex Corp.+ 100 1,263
Johnson & Johnson 200 16,300
Merck & Co., Inc. 300 17,250
Pfizer, Inc. 600 34,425
Rhone-Poulenc Rorer, Inc. 900 42,413
Schering Plough 500 26,813
Watson Pharmaceuticals, Inc.+ 300 13,500
Yamanouchi Pharmaceuticals 1,000 22,299
-----------
242,951
-----------
Printing & Publishing (0.8%)
Banta Corp. 900 39,150
Central Newspapers, Inc. Class A 1,000 29,500
Gannett Co., Inc. 200 10,875
Plenum Publishing Corp. 300 10,725
Pulitzer Publishing Co. 1,150 52,038
Tribune Co. 200 12,625
Wiley (John) & Sons, Inc. Class A 200 5,950
-----------
160,863
-----------
Real Estate Investment Trusts (20.2%)
Associated Estates Realty Corp. 13,200 270,600
Beacon Properties Corp. 10,100 219,675
BRE Properties, Inc. Class A 1,500 48,000
Cali Realty Corp. 2,700 52,650
CBL & Associates Properties, Inc. 9,400 199,750
Chelsea GCA Realty, Inc. 7,800 216,450
Colonial Properties Trust 9,400 235,000
Cousins Properties, Inc. 6,000 104,250
Crescent Real Estate Equities, Inc. 6,600 211,200
Developers Diversified Realty Corp. 2,800 79,800
Duke Realty Investments, Inc. 7,800 238,875
Equity Inns, Inc. 5,800 67,425
Equity Residential Properties Trust 3,000 84,000
Essex Property Trust, Inc. 11,400 208,050
Evans Withycombe Residential, Inc. 9,500 179,313
Excel Realty Trust, Inc. 10,900 205,738
HGI Realty, Inc. 800 17,700
Highwood Properties, Inc. 8,700 231,638
JDN Realty Corp. 2,100 $ 42,788
Kimco Realty Corp. 3,400 125,375
Kranzco Realty Trust 1,200 18,300
Prime Residential, Inc. 2,000 35,375
Oasis Residential, Inc. 9,500 206,625
Regency Realty Corp. 2,100 35,700
Sekisui House 2,000 23,082
Smith (Charles E.) Residential
Realty Co. 1,700 39,525
South West Property Trust 2,250 27,281
Spieker Properties, Inc. 9,700 235,225
Storage Equities, Inc. 12,900 237,038
Walden Residential Properties, Inc. 11,700 214,941
-----------
4,111,369
-----------
Retail (1.8%)
Argyll Group Plc 2,100 10,670
Blair Corp. 100 2,950
Burton Group Plc 19,400 30,917
Circuit City Stores, Inc. 100 3,338
Claire's Stores, Inc. 1,600 31,400
Fastenal Co. 600 20,888
General Host Corp.+ 5,200 25,350
Hannaford Brothers Co. 1,600 41,800
Hudson's Bay Co. 500 9,340
JUSCO Co. 2,000 46,946
Koninklijke Ahold N.V. 622 23,540
Longs Drug Stores, Inc. 200 8,000
Merkur Holding AG 30 6,678
Neiman Marcus Group, Inc. 1,800 30,825
Robinson & Co. Ltd. 3,000 12,724
Sears Roebuck & Co. 300 10,200
Tesco Plc 198 937
Waban, Inc.+ 1,800 28,125
Zale Corp.+ 1,700 25,181
-----------
369,809
-----------
Telecommunications (0.7%)
Ameritech Corp. 800 43,200
Case Corp. 800 30,500
Computer Associates International,
Inc. 250 13,750
GN Store Nord AS 200 14,818
Holophane Corp.+ 400 10,825
Lincoln Telecommunications Co. 1,800 31,275
Mobile Telecommunications
Technologies Corp.+ 100 2,850
-----------
147,218
-----------

See Notes to Portfolio of Investments

F-14
<PAGE>

Transportation (1.3%)
Alaska Air Group, Inc.+ 100 $ 1,488
American President Co. Ltd. 1,400 33,950
AMR Corp.+ 100 6,600
Bergesen d.y. AS Class B 1,300 26,714
British Airways Plc 400 2,872
Det Norske Luftfartselskap AS 400 18,494
East Japan Railway Co. 7 33,068
Expeditors International of
Washington, Inc. 400 10,650
Florida East Coast Industries, Inc. 400 26,750
Flughafen Wien AG 300 19,253
Guidant Corp. 500 16,000
Hornbeck Offshore Services, Inc.+ 200 2,900
Kobenhavns Lufthavne AS 200 15,000
Peninsular & Orient Steam
Navigation Co. 2,800 21,295
PHH Corp. 300 13,125
Singapore Airlines Ltd. 2,000 18,521
-----------
266,680
-----------
Utilities - Electric (3.9%)
Boston Edison Co. 1,000 27,375
California Energy Company, Inc.+ 1,400 25,375
Consolidated Edison Co. of New
York, Inc. 600 18,225
DQE, Inc. 650 17,875
Elektrowatt AG 30 9,054
General Public Utilities Corp. 900 28,125
Hawaiian Electric Industries, Inc. 1,000 39,000
Hokkaido Electric Power Co. 1,000 23,180
Illinova Corp. 1,100 31,213
Interstate Power Co. (Del.) 1,600 46,400
Korea Electric Power ADR+ 1,000 24,750
LG&E Corp. 900 37,350
National Power Plc ADR 900 11,250
New England Electric System 600 23,400
New York State Electric & Gas Corp. 1,200 30,300
Nipsco Industries, Inc. 900 32,850
Northeast Utilities 700 17,325
Oklahoma Gas & Electric 800 32,000
Orange & Rockland Utilities, Inc. 1,200 42,150
Pacific Gas & Electric Co. 700 20,563
Peco Energy Co. 400 11,700
Pinnacle West Capital Corp. 2,300 63,250
Portland General Corp. 800 21,700
Powergen Plc ADR 900 14,963
Reunies Electrobel & Tractebel 50 18,291
San Diego Gas & Electric Co. 500 11,625
SCEcorp 1,300 $ 22,100
Sierra Pacific Resources 2,300 53,763
Transalta Corp. 800 8,625
Unicom Corp. 700 22,925
United Illuminating Co. 200 7,600
Western Resources, Inc. 400 13,450
-----------
807,752
-----------
Utilities - Oil & Gas (1.6%)
Atlanta Gas Light Co. 1,000 38,625
Brooklyn Union Gas Co. (The) 500 12,563
Connecticut Energy Corp. 500 9,688
Energen Corp. 2,300 52,038
Getty Petroleum Corp. 300 3,975
Indiana Energy, Inc. 1,100 23,238
Mitchell Energy & Development Corp. 3,100 50,375
New Jersey Resources Corp. 1,000 25,000
OEMV AG 250 21,569
Petronas Gas Bhd+ 3,000 10,146
Union Texas Petroleum Holdings,
Inc. 1,200 21,600
Valero Energy Corp. 1,500 35,438
Washington Gas Light Co. 100 1,913
Wicor, Inc. 800 23,700
Williams Co., Inc. 200 7,725
-----------
337,593
-----------
Utilities - Telephone (1.3%)
AT&T Corp. 400 25,600
Bell Atlantic Corp. 200 12,725
BellSouth Corp. 400 30,600
Cable & Wireless Plc 4,100 26,783
Citizens Utilities Co.+ 1,249 13,739
DDI Corp. 3 24,324
Nippon Telephone & Telegraph Corp. 3 24,617
SBC Communications, Inc. 600 33,525
Southern New England
Telecommunications Corp. 1,000 36,125
Sprint Corp. 700 26,950
-----------
254,988
-----------
Utilities - Water (0.1%)
SJW Corp. 400 14,050
Welsh Water Plc 1,333 15,842
-----------
29,892
-----------
Total Common Stocks
(cost $14,233,299) $15,523,196
-----------

See Notes to Portfolio of Investments

F-15
<PAGE>

Preferred Stocks (0.0%)
Utilities - Water (0.0%)
Welsh Water Plc 1,440 $ 2,363
-----------
Total Preferred Stocks
(cost $2,344) $ 2,363
-----------
Warrants (0.1%)
Morgan Stanley American Express
Hong Kong Warrants+ 6,000 $ 27,000
-----------
Total Warrants
(cost $29,543) $ 27,000
-----------
Principal Market
Amount Value
-------- -----------
Long Term Bonds & Notes (8.3%)
U.S. Treasury Securities (8.1%)
U.S. Treasury Note, 5.125%,
03/31/96++++ 100,000 $ 99,875
U.S. Treasury Note, 9.25%, 11/15/96 675,000 679,928
U.S. Treasury Note, 7.25%, 05/15/04 800,000 865,750
-----------
1,645,553
-----------
Corporate Obligations (0.2%)
Mitsubishi Bank, Corp. Note, 3.00%,
11/30/02 30,000 31,220
-----------
Total Long Term Bonds & Notes
(cost $1,646,378) $ 1,676,773
-----------
Short Term Investments (15.1%)
Banc One Corp., Comm. Paper, 5.85%,
11/01/95 211,000 $ 211,000
Dover Corp., Comm. Paper, 5.75%,
11/01/95+++ 750,000 750,000
Fleetwood Credit Corp., Comm.
Paper, 5.80%, 11/03/95+++ 750,000 749,758

See Notes to Financial Statements

Principal Market
Amount Value
-------- -----------
Public Service Co. of Colorado,
Comm. Paper, 5.85%, 11/06/95 750,000 $ 749,391
Quaker Oats Co., Comm. Paper,
5.80%, 11/09/95 625,000 624,194
-----------
Total Short Term Investments
(cost $3,084,343) $ 3,084,343
-----------
Total Investments
(cost $18,995,907)(a) $20,313,675
Other assets less liabilities 56,253
-----------
Total Net Assets

-----------
$20,369,928

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 securities have been
determined to be liquid under guidelines established by the Board of
Directors.

++++ Security pledged to cover initial margin deposits on open futures
contracts at October 31, 1995.

(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 $1,656,706
Unrealized losses (338,938)
-----------
Net unrealized gain $1,317,768
===========

Category percentages are based on net assets.

Information concerning open futures contracts is shown below:

No. of Initial Expiration Unrealized
Contracts Value Date Gain/(Loss)
-------- -------- --------- ------------
All Ordinaries Share
Price Index 4 $162,208 12/29/95 $ (6,998)
Canada Government Bonds
Future 3 232,575 12/19/95 6,848
TSE 35 Index Future 1 90,848 12/14/95 (2,937)
German DAX Index Future 2 310,644 12/14/95 (16,261)
Long-Term German Bonds
Future 2 323,208 12/06/95 7,243
CAC 40 Stock Index
Future 2 150,565 12/29/95 (7,807)
French Noton 1 114,414 12/18/95 347
Long Gilt Bonds Future 1 82,088 12/27/95 839
FTSE 100 Index Future 1 139,161 12/15/95 (1,854)
Italian Government Bonds
Future 2 250,969 12/04/95 351
10 Year Swiss Bonds
Future 2 180,922 12/18/95 5,403
Hang Seng Index Future 2 126,681 11/29/95 65
------------
$(14,761)
============

F-16
<PAGE>

Portfolio of Investments
October 31, 1995

Legacy Fund
Number
of Market
Shares Value
-------- ------------
Common Stocks (61.3%)
Aerospace & Defense (0.1%)
McDonnell Douglas Corp. 300 $ 24,525
------------
Apparel (0.2%)
Chic By H I S, Inc.+ 2,300 12,650
Coats Viyella Plc 5,400 15,934
Nike, Inc. 200 11,350
Oshkosh B'Gosh, Inc. 200 2,675
Phillips-Van Heusen 400 4,050
VF Corp. 100 4,788
------------
51,447
------------
Autos & Auto Equipment (0.4%)
Borg Warner Automotive, Inc. 700 20,650
Kaydon Corp. 500 14,438
Mitsubishi Motors Corp. 2,000 16,666
Smith (A.O.) Corp. 800 16,600
Varity Corp.+ 100 3,625
Volvo AB Class B 500 11,251
------------
83,230
------------
Banks (4.2%)
AMMB Holdings Bhd 1,000 12,387
Bank of Montreal 800 17,695
Bank of New York Co., Inc. 500 21,000
BankAmerica Corp. 400 23,000
Banque Bruxelles Lambert SA 300 49,852
Canadian Imperial Bank of Commerce 1 25
Chemical Banking Corp. 300 17,063
CITICORP 300 19,463
City National Corp. 3,100 41,075
Coast Savings Financial, Inc.+ 500 13,188
Commerce Asset Holding Bhd 3,000 14,864
Cullen/Frost Bankers, Inc. 800 40,500
Development Bank of Singapore Ltd. 2,000 22,904
F & M Bancorp 105 2,743
First American Corp. (Tenn.) 500 21,906
First Chicago Corp. 400 27,150
First Citizens Bancshares Class A 100 5,300
First Interstate Bancorp 200 25,800
First Tennessee National Corp. 600 32,250
Firstbank of Illinois Co. 400 11,950
HSBC Holdings Plc 1,364 19,973
JSB Financial, Inc. 800 24,650
Keycorp 500 16,875
Mellon Bank Corp. 100 5,013
Michigan National Corp. 100 $ 10,988
National City Bancshares, Inc. 200 9,138
NationsBank, Inc. 1,000 65,750
Northern Trust Corp. 300 14,250
Provident Bancorp 700 29,400
Queens County Bancorp, Inc. 300 12,075
River Forest Bancorp, Inc. 800 18,700
Royal Bank of Canada 500 11,199
Silicon Valley Bancshares+ 900 17,663
Star Banc Corp. 400 22,150
Suffolk Bancorp 300 10,650
Sumimoto Bank of California 100 2,350
UAL Corp.+ 150 26,381
Union Bank 800 40,200
Union Planters Corp. 1,300 39,813
White River Corp.+ 300 10,688
------------
828,021
------------
Building Materials & Construction (1.9%)
American Buildings Co.+ 800 20,100
Champion Enterprises, Inc.+ 2,000 51,750
Continental Homes Holding Corp. 200 4,100
Elcor Corp. 200 4,200
Fujita Corp. 4,000 18,192
Granite Construction, Inc. 1,500 42,750
International Aluminum Corp. 200 6,075
Kon. Volker Stevin N.V. 150 9,635
Lindab AB Class B+ 500 10,884
Metra Oy Class B 400 17,329
Nippon Densetsu Kogyo 2,000 19,072
Puerto Rican Cement Co., Inc. 600 19,725
Pulte Corp. 400 12,650
Redman Industries, Inc.+ 1,000 26,250
Sanki Engineering 2,000 19,365
Security Capital Industrial Trust 1,000 16,375
Texas Industries, Inc. 400 21,050
Toll Brothers, Inc.+ 300 5,363
Tredegar Industries, Inc. 800 23,300
Webb (Del E.) Corp. 300 6,225
WHX Corp.+ 800 8,300
Wing Tai Holdings 8,000 13,856
------------
376,546
------------
Chemicals (1.5%)
ARCO Chemical Co. 600 29,400
Dow Chemical Co. 200 13,725

See Notes to Portfolio of Investments

F-17
<PAGE>

du Pont (E.I.) de Nemours 200 $ 12,475
Eastman Chemical Co. 100 5,950
Geon Company (The) 1,400 34,825
Great Lakes Chemical Corp. 200 13,425
Lyondell Petrochemical Co. 1,400 29,925
Norsk Hydro AS 700 27,870
Novellus Systems, Inc.+ 300 20,625
PPG Industries, Inc. 200 8,500
Sekisui Chemical Co. 2,000 26,016
Sigma-Aldrich Corp. 100 4,775
Union Carbide Corp. 600 22,725
Vigoro Corp. 700 30,363
Wellman, Inc. 900 21,150
------------
301,749
------------
Commercial Services (0.5%)
CPI Corp. 1,200 21,900
GATX Corp. 700 33,250
Inchcape Plc 1,444 7,132
Manpower, Inc. 800 21,700
Robert Half International, Inc.+ 200 7,300
WMX Technologies, Inc. 300 8,438
------------
99,720
------------
Computer Software (1.2%)
Acxiom Corp.+ 300 8,925
Borland International, Inc.+ 600 8,138
Cadence Design Systems, Inc.+ 2,100 67,725
Cirrus Logic, Inc.+ 800 33,650
Electronic Arts, Inc.+ 500 18,344
Hogan Systems, Inc.+ 3,800 33,963
Hyperion Software+ 100 4,888
Kronos, Inc.+ 100 4,688
Micro Warehouse, Inc.+ 300 13,425
Reynolds & Reynolds Co. Class A 700 24,938
Softdesk, Inc.+ 100 2,288
------------
220,972
------------
Computers & Office Equipment (1.7%)
Acma Ltd. 3,000 9,755
CANON, Inc. 1,000 17,116
Ceridian Corp.+ 900 39,150
Comdisco, Inc. 1,000 30,500
Compaq Computer Corp.+ 300 16,725
Dell Computer Corp.+ 800 37,250
Fujitsu Ltd. 2,000 23,864
In Focus Systems, Inc.+ 1,400 $ 46,025
International Business Machines Corp. 200 19,450
Komag, Inc.+ 200 11,413
Microsoft Corp.+ 100 10,006
Read-Rite Corp.+ 1,700 59,394
Sun Microsystems, Inc.+ 100 7,813
------------
328,461
------------
Consumer Products (0.1%)
Alberto-Culver Co. Class B 200 6,275
Liz Claiborne, Inc. 300 8,513
Reckitt & Coleman Plc 644 6,839
------------
21,627
------------
Diversified (1.6%)
Alusuisse-Lonza Holding AG 10 7,637
Brady (WH) Co. 300 21,900
Dover Corp. 500 19,750
Harrisons & Crosfield Plc 7,493 17,144
Harsco Corp. 600 31,650
Illinois Tool Works, Inc. 100 5,813
Johnson Controls, Inc. 200 11,650
Katy Industries 4,400 45,100
Lonrho Plc 2,600 6,420
Opal, Inc.+ 100 1,513
Oriental Holdings Bhd 2,000 9,202
Polaris Industries, Inc. 1,650 46,200
SPS Technologies, Inc.+ 800 31,200
Textron, Inc. 300 20,625
Varlen Corp. 1,320 35,640
------------
311,444
------------
Electrical & Electronics (2.7%)
Applied Materials, Inc.+ 200 10,038
Austria Mikro Systeme International 50 9,258
Cypress Semiconductor Corp.+ 1,000 35,250
Dallas Semiconductor Corp. 500 10,625
Hewlett Packard Co. 300 27,788
Hitachi Koki 3,000 26,759
Intel Corp. 100 6,994
Lam Research Corp.+ 400 24,350
Logicon, Inc. 1,400 32,025
Matsushita Electric Industrial Co.
Ltd. 1,000 14,182
Micron Technology, Inc. 100 7,063
Nintendo Co. Ltd. 1,000 73,549
Nokia AB Class A 800 46,714

See Notes to Portfolio of Investments

F-18
<PAGE>

Novo-Nordisk AS 100 $ 12,714
Phillips Electronics N.V. 500 19,303
Quickturn Design System, Inc.+ 700 7,175
Rohm Co. 1,000 60,736
Seagate Technology, Inc.+ 1,000 44,750
Siliconix, Inc.+ 300 8,700
Telefonaktiebolaget 550 11,673
Tencor Instruments+ 200 8,550
Unitrode Corp.+ 500 13,438
Varian Associates, Inc. 200 10,275
------------
521,909
------------
Electrical Equipment (2.1%)
Adflex Solutions, Inc.+ 1,200 31,350
Arrow Electronics, Inc.+ 700 35,525
Avnet, Inc. 600 30,225
FPL Group, Inc. 300 12,563
General Electric Co. 500 31,625
Hitachi Ltd. (Hit. Seisakusho) 3,000 30,808
International Rectifier Corp.+ 700 31,588
Kemet Corp.+ 400 13,700
Kent Electronics Corp.+ 800 39,000
Marshall Industries+ 1,000 35,250
Park Electrochemical Corp. 1,000 31,250
Sundstrand Corp. 1,000 61,250
Tektronix, Inc. 100 5,925
Texas Instruments, Inc. 400 27,300
------------
417,359
------------
Financial Services (2.8%)
Abbey National Plc 900 7,605
ABN Amro Holding N.V. 300 12,588
Alex Brown & Sons, Inc. 900 43,988
Algem Maatsch Voor Nijverhei 150 40,948
Banponce Corp. 100 3,863
Barclays Plc 700 8,207
BayBanks, Inc. 400 32,350
Bear Stearns Co., Inc. 1,600 31,800
BHC Financial, Inc. 2,400 44,100
Citizens Bancorp 1,200 39,450
CNA Financial Corp.+ 100 11,400
Creditanstalt-Bankverein 300 14,954
Crestar Financial Corp. 200 11,400
Dean Witter Discover and Co. 100 4,975
Den Danske Bank 300 19,866
Greenpoint Financial Corp. 200 5,425
Household International, Inc. 100 $ 5,625
Internationale Nederland 200 11,911
Leader Financial Corp. 600 21,450
Lion Land Bhd 14,000 15,140
Merrill Lynch & Co., Inc. 500 27,750
Park National Corp. 100 4,525
Promise Co. Ltd. 200 7,883
RCSB Financial, Inc. 200 4,463
Schweizerische Bankverein 25 10,251
Svenska Handelsbanke 600 10,521
TR Financial Corp. 400 9,950
Travelers, Inc. 500 25,250
Unitas Bank Ltd. Class A+ 5,600 13,581
United Carolina Bancshares, Inc. 800 28,600
Yasuda Trust & Banking 3,000 13,409
------------
543,228
------------
Food & Beverages (2.3%)
Cadbury Schweppes Plc 2,300 18,981
Cerebos Pacific Ltd. 2,000 12,442
Coca-Cola Co. 200 14,375
ConAgra, Inc. 500 19,313
CPC International, Inc. 800 53,100
Danisco AS 300 13,665
Hillsdown Holdings Plc 5,076 13,456
Hometown Buffet, Inc.+ 100 1,294
Hormel Foods Corp. 700 16,100
IBP, Inc. 800 47,900
International Multifoods Corp. 1,100 22,550
Katokichi 1,000 18,289
Kikkoman 4,000 28,559
Kroger Co. (The)+ 100 3,338
McDonald's Corp. 1,400 57,400
Mondavi (Robert) Corp.+ 500 14,188
Nestle SA Registered 10 10,471
PepsiCo, Inc. 700 36,925
Safeway, Inc.+ 600 28,350
Sara Lee Corp. 200 5,875
Supervalu, Inc. 700 21,525
------------
458,096
------------
Health Services (0.9%)
Columbia/HCA Healthcare Corp. 100 4,913
Invacare Corp. 1,000 25,000
Lincare Holdings, Inc.+ 800 20,050
Mine Safety Appliances Co. 400 20,300

See Notes to Portfolio of Investments

F-19
<PAGE>

Moore Corp. Ltd. 1,700 $ 32,513
Nellcor, Inc.+ 500 28,875
Quorum Health Group, Inc.+ 400 8,625
Universal Health Services, Inc.+ 800 30,000
------------
170,276
------------

Home Furnishings & Appliances (0.2%)
Electrolux AB 300 12,824
Leggett & Platt, Inc. 1,000 24,000
------------
36,824
------------
Hotels & Restaurants (0.2%)
Compass Group Plc 1,800 12,213
Hotel Properties Ltd. 5,000 7,564
Marriott International Inc. 300 11,063
Prime Hospitality Corp.+ 900 8,888
------------
39,728
------------
Household Products (0.2%)
National Presto Industries, Inc. 200 8,100
Oneida Ltd. 200 3,300
Premark International, Inc. 300 13,875
Springs Industries, Inc. Class A 100 4,288
------------
29,563
------------
Insurance (2.9%)
Aegon N.V. 576 21,836
AFLAC, Inc. 1,000 40,750
Alleghany Corp. 300 53,850
Allstate Corp. 278 10,217
American Bankers Insurance Group 1,300 46,475
Baloise Holding Ltd. 5 10,251
Capital American Financial Corp. 100 1,963
Chubb Corp. 100 8,988
CMAC Investment Corp. 300 14,250
Commerce Group, Inc. 300 6,094
EA-Generali AG 50 13,673
Fremont General Corp. 400 11,600
Fund American Enterprises, Inc.+ 320 22,080
Guardian Royal Exchange Plc 3,800 13,731
Home Beneficial Corp. Class B 300 7,388
Kansas City Life Insurance Co. 300 15,600
Loews Corp. 200 29,325
Maxicare Health Plans, Inc.+ 2,400 42,000
Orion Capital Corp. 300 12,300
Reinsurance Group of America 1,300 44,688
Royal Insurance Holdings Plc 900 5,553
State Auto Financial Corp. 800 $ 17,850
Transatlantic Holdings, Inc. 600 40,425
Transnational Re Corp. Class A+ 1,200 26,925
Transport Holdings, Inc.+ 2 80
UNI Storebrand AS+ 6,700 33,774
Winterthur Schweizerische
Versicherungs-Gesellschaft 10 6,696
Zurich Versicherungs-Gesellschaft 40 11,439
------------
569,801
------------
Machinery & Equipment (1.4%)
Acme-Cleveland Corp. 1,300 28,438
Barnes Group, Inc. 700 26,250
Blount, Inc. Class A 800 34,700
Central Sprinkler Corp.+ 1,300 41,925
Christiana Co.+ 200 5,275
Entergy Corp. 900 25,650
Fluor Corp. 100 5,650
FSI International, Inc.+ 700 16,713
Koyo Seiko Co. Ltd. 2,000 15,942
L.S. Starrett Co. Class A 500 11,438
Regal Beloit 600 10,800
Tsubakimoto Chain 4,000 18,778
Tsukishima Kikai 1,200 23,473
------------
265,032
------------
Media & Entertainment (0.7%)
Belo Corp. Class A 800 27,700
Callaway Golf Co. 1,600 26,200
Chris-Craft Industries, Inc. 100 3,988
Granada Group Plc 600 6,400
GTECH Holdings Corp.+ 800 19,600
King World Productions, Inc.+ 700 24,413
Media General, Inc. 600 16,650
Mirage Resorts, Inc.+ 600 19,650
------------
144,601
------------
Medical Supplies (0.4%)
Baxter International, Inc. 400 15,450
CONMED Corp.+ 1,100 38,775
GC Companies, Inc.+ 700 22,575
North American Biologicals, Inc.+ 900 7,256
------------
84,056
------------
Metals & Mining (1.6%)
AK Steel Holding Corp. 300 9,300
Alcan Aluminum Ltd. 900 28,490

See Notes to Portfolio of Investments

F-20
<PAGE>

Aluminum Co. of America 200 $ 10,200
Carpenter Technology Corp. 400 15,150
Cleveland-Cliffs, Inc. 500 18,688
Cyprus Amax Minerals Co. 300 7,838
Dofasco, Inc. 906 11,455
Georg Fischer AG 5 6,907
J & L Specialty Steel, Inc. 1,500 24,563
Kennametal, Inc. 900 28,013
Lukens, Inc. 300 9,225
Magma Copper Co. 500 8,375
Mueller Industries, Inc.+ 400 9,400
Phelps Dodge Corp. 700 44,363
Rautaruukki Oy 2,000 10,972
Reliance Steel & Aluminum Co. 1,800 29,925
Schnitzer Steel Industries, Inc. 1,200 32,250
Shiloh Industries, Inc.+ 300 3,319
Svenskt Stal AB 1,000 10,010
------------
318,443
------------
Oil & Gas (1.8%)
Atlantic Richfield Co. 200 21,350
Burmah Castrol Plc 1,200 18,651
Camco International, Inc. 200 4,575
Chesapeake Energy Corp.+ 200 5,850
Conwest Exploration Co. Ltd. 800 14,052
Diamond Shamrock, Inc. 400 10,300
Exxon Corp. 800 61,100
Falconbridge Ltd. 800 17,621
Fina, Inc. Class A 200 8,925
Halliburton Co. 300 12,450
Leviathan Gas Pipeline Partners L.P. 1,200 29,850
Lufkin Industries, Inc. 400 7,500
Mobil Corp. 300 30,225
Occidental Petroleum Corp. 200 4,300
Oneok, Inc. 700 17,063
Petro-Canada 800 8,625
Royal Dutch Petroleum Co. 300 36,863
RPC, Inc.+ 700 5,425
Smith International, Inc.+ 1,000 16,000
Sun Company, Inc. 100 2,863
Texaco 200 13,625
------------
347,213
------------
Paper & Containers (1.6%)
Abitibi Price, Inc. 600 10,483
Asia Pulp & Paper Co. Ltd.+ 2,000 20,500
Bobst SA 5 $ 7,567
Champion International Corp. 200 10,700
Chesapeake Corp. 2,000 61,250
Consolidated Papers, Inc. 600 34,350
Georgia-Pacific Corp. 100 8,250
Greif Brothers Corp. Class A 200 5,025
Leykam-Muerztaler Papier+ 350 13,809
Mayr-Melnhof Karton AG 200 11,665
Mead Corp. 300 17,288
Rayoner, Inc. 900 33,750
Repola Oy 800 15,484
Stora Kopparbergs 800 9,694
Temple-Inland, Inc. 200 9,100
Willamette Industries, Inc. 900 52,425
------------
321,340
------------
Pharmaceuticals (1.1%)
Becton, Dickinson & Co. 300 19,500
Bio-Rad Labs, Inc. Class A+ 400 15,200
Bristol-Myers Squibb Co. 300 22,875
Cardinal Health, Inc. 100 5,138
Cor Therapeutics+ 400 4,100
Immulogic Pharmaceutical Corp.+ 100 1,163
Immunex Corp.+ 100 1,263
Johnson & Johnson 200 16,300
Merck & Co., Inc. 300 17,250
Pfizer, Inc. 400 22,950
Rhone-Poulenc Rorer, Inc. 700 32,988
Schering Plough 400 21,450
Watson Pharmaceuticals, Inc.+ 300 13,500
Yamanouchi Pharmaceuticals 1,000 22,299
------------
215,976
------------
Printing & Publishing (0.6%)
Central Newspapers, Inc. Class A 800 23,600
Gannett Co., Inc. 200 10,875
Plenum Publishing Corp. 200 7,150
Pulitzer Publishing Co. 1,000 45,250
Scholastic Corp.+ 100 6,188
Tribune Co. 200 12,625
Wiley (John) & Sons, Inc. Class A 200 5,950
------------
111,638
------------
Real Estate Investment Trusts (15.5%)
Associated Estates Realty Corp. 10,800 221,400
Beacon Properties Corp. 6,400 139,200

See Notes to Portfolio of Investments

F-21
<PAGE>

BRE Properties, Inc. Class A 800 $ 25,600
Cali Realty Corp. 2,200 42,900
CBL & Associates Properties, Inc. 7,700 163,625
Chelsea GCA Realty, Inc. 5,900 163,725
Colonial Properties Trust 7,700 192,500
Cousins Properties, Inc. 4,900 85,138
Crescent Real Estate Equities, Inc. 5,200 166,400
Developers Diversified Realty Corp. 2,300 65,550
Duke Realty Investments, Inc. 6,300 192,938
Equity Inns, Inc. 5,900 68,588
Equity Residential Properties Trust 2,400 67,200
Essex Property Trust, Inc. 6,800 124,100
Evans Withycombe Residential, Inc. 7,700 145,338
Excel Realty Trust, Inc. 500 9,438
HGI Realty, Inc. 600 13,275
Highwood Properties, Inc. 7,100 189,038
JDN Realty Corp. 2,800 57,050
Kimco Realty Corp. 2,000 73,750
Kranzco Realty Trust 900 13,725
Oasis Residential, Inc. 7,800 169,650
Prime Residential, Inc. 1,400 24,763
Regency Realty Corp. 1,400 23,800
Sekisui House 2,000 23,082
Smith (Charles E.) Residential Realty
Co. 1,200 27,900
South West Property Trust 1,125 13,641
Spieker Properties, Inc. 7,900 191,575
Storage Equities, Inc. 9,700 178,238
Walden Residential Properties, Inc. 8,800 161,646
------------
3,034,773
------------
Retail (1.3%)
Argyll Group Plc 1,600 8,129
Blair Corp. 100 2,950
Burton Group Plc 14,100 22,471
Circuit City Stores, Inc. 100 3,338
Claire's Stores, Inc. 700 13,738
Fastenal Co. 500 17,406
General Host Corp.+ 4,200 20,475
Hannaford Brothers Co. 1,300 33,963
Hudson's Bay Co. 400 7,472
JUSCO Co. 1,000 23,473
Koninklijke Ahold N.V. 400 15,138
Merkur Holding AG 25 5,565
Neiman Marcus Group, Inc. 1,500 25,688
Robinson & Co. Ltd. 2,000 $ 8,483
Sears Roebuck & Co. 300 10,200
Tesco Plc 146 691
Waban, Inc.+ 1,400 21,875
Zale Corp.+ 1,400 20,738
------------
261,793
------------
Telecommunications (0.5%)
Ameritech Corp. 600 32,400
Case Corp. 700 26,688
Computer Associates International,
Inc. 250 13,750
Holophane Corp.+ 200 5,413
Lincoln Telecommunications Co. 1,400 24,325
Mobile Telecommunications Technologies
Corp.+ 100 2,850
------------
105,426
------------
Transportation (1.3%)
Alaska Air Group, Inc.+ 100 1,488
American President Co. Ltd. 1,200 29,100
AMR Corp.+ 100 6,600
Bergesen d.y. AS Class B 1,000 20,549
Det Norske Luftfartselskap AS 600 35,141
East Japan Railway Co. 6 28,344
Expeditors International of
Washington, Inc. 300 7,988
Florida East Coast Industries, Inc. 300 20,063
Guidant Corp. 400 12,800
Hornbeck Offshore Services, Inc.+ 200 2,900
Kobenhavns Lufthavne AS 200 15,000
Kvaerner AS 400 16,825
Peninsular & Orient Steam Navigation
Co. 2,100 15,972
PHH Corp. 200 8,750
Singapore Airlines Ltd. 2,000 18,521
------------
240,041
------------
Utilities - Electric (3.1%)
Boston Edison Co. 800 21,900
California Energy Company, Inc.+ 1,100 19,938
Consolidated Edison Co. of New York,
Inc. 1,100 33,413
DQE, Inc. 500 13,750
General Public Utilities Corp. 700 21,875
Hokkaido Electric Power Co. 1,000 23,180
Illinova Corp. 1,000 28,375
Interstate Power Co. (Del.) 1,300 37,700

See Notes to Portfolio of Investments

F-22
<PAGE>

LG&E Corp. 600 $ 24,900
National Power Plc ADR 1,150 14,375
New England Electric System 500 19,500
New York State Electric & Gas Corp. 400 10,100
Nipsco Industries, Inc. 700 25,550
Northeast Utilities 500 12,375
Oklahoma Gas & Electric 700 28,000
Orange & Rockland Utilities, Inc. 1,000 35,125
Pacific Gas & Electric Co. 400 11,750
Peco Energy Co. 300 8,775
Pinnacle West Capital Corp. 1,800 49,500
Portland General Corp. 1,200 32,550
Powergen Plc ADR 1,150 19,119
Reunies Electrobel & Tractebel 50 18,291
San Diego Gas & Electric Co. 400 9,300
SCEcorp 1,000 17,000
Sierra Pacific Resources 1,900 44,413
Unicom Corp. 800 26,200
Western Resources, Inc. 400 13,450
------------
620,404
------------
Utilities - Oil & Gas (1.4%)
Atlanta Gas Light Co. 800 30,900
Brooklyn Union Gas Co. (The) 1,200 30,150
Connecticut Energy Corp. 300 5,813
Energen Corp. 1,800 40,725
Getty Petroleum Corp. 200 2,650
Indiana Energy, Inc. 1,200 25,350
Mitchell Energy & Development Corp. 3,300 53,625
New Jersey Resources Corp. 800 20,000
OEMV AG 100 8,627
Petronas Gas Bhd+ 2,000 6,764
Union Texas Petroleum Holdings, Inc. 900 16,200
Washington Gas Light Co. 100 1,913
Wicor, Inc. 600 17,775
Williams Co. Inc. 200 7,725
------------
268,217
------------
Utilities - Telephone (1.2%)
AT&T Corp. 200 $ 12,800
Bell Atlantic Corp. 200 12,725
BellSouth Corp. 300 22,950
Cable & Wireless Plc 3,000 19,598
Citizens Utilities Co.+ 832 9,152
DDI Corp. 3 24,324
Nippon Telephone & Telegraph Corp. 5 41,029
SBC Communications, Inc. 900 50,288
Southern New England
Telecommunications Corp. 800 28,900
Sprint Corp. 600 23,100
------------
244,866
------------
Utilities - Water (0.1%)
SJW Corp. 300 10,538
Welsh Water Plc 1,000 11,882
------------
22,420
------------
Total Common Stocks
(cost $10,997,530) $12,040,765
------------
Preferred Stocks (0.0%)
Utilities - Water (0.0%)
Welsh Water Plc 1,080 $ 1,772
------------
Total Preferred Stocks
(cost $1,758) $ 1,772
------------
Warrants (0.1%)
Morgan Stanley American Express Hong
Kong Warrants+ 4,000 $ 18,000
------------
Total Warrants
(cost $19,695) $ 18,000
------------

Principal Market
Amount Value
-------- ------------
Long Term Bonds and Notes (11.2%)
U.S. Government Obligations (11.1%)
U.S. Treasury Note, 9.25%, 01/15/96 $675,000 $ 679,928

See Notes to Portfolio of Investments

F-23
<PAGE>

Legacy Fund

Principal Market
Amount Value
--------- ------------
U.S. Treasury Note, 5.125%,
03/31/ 96++++ $ 100,000 $ 99,875
U.S. Treasury Note, 7.25%, 05/15/04 1,300,000 1,406,843
------------
2,186,646
------------
Corporate Obligations (0.1%)
Mitsubishi Bank, Corp. Note, 3%,
11/30/02 20,000 20,813
------------
Total Long Term Bonds and Notes
(cost $2,159,638) $ 2,207,459
------------
Short Term Investments (27.2%)
Banc One Corp., Comm. Paper, 5.85%,
11/1/95 697,000 697,000
Bridgestone Firestone, Comm. Paper,
5.8%, 11/3/95+++ 750,000 750,000
Burlington Northern Rail Road, Comm.
Paper, 5.85%, 11/6/95 500,000 499,594
See Notes to Financial Statements
Cargill Inc., Comm. Paper, 5.75%,
11/9/95 $ 750,000 $ 749,042
Cooper Industries, Inc., Comm.
Paper, 5.77%, 11/8/95 750,000 749,159
Public Service Co. of Colorado,
Comm. Paper, 5.87%, 11/1/95 365,000 365,000
Quaker Oats Co., Comm. Paper, 5.8%,
11/7/95 750,000 749,275
Xerox Corp., Comm. Paper, 5.72%,
11/2/95 787,000 786,875
------------
Total Short Term Investments
(cost $5,345,945) $ 5,345,945
------------
Total Investments
(cost $18,524,566) (a) $19,613,941
Other assets less liabilities 36,595
------------
Total Net Assets $19,650,536
------------

See Notes to Financial Statements

Notes to Portfolio of Investments

+ Non-income producing security

++++ Security pledged to cover initial margin deposits on open futures
contracts at October 31, 1995.

(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 $1,337,736
Unrealized losses (248,361)
-----------
Net unrealized gain $1,089,375
===========

Category percentages are based on net assets.

F-24
<PAGE>

Information concerning open futures contracts is shown below:

No. of Initial Expiration Unrealized
Contracts Value Date Gain/(Loss)
--------- -------- --------- ------------
All Ordinaries Share
Price Index 3 $121,656 12/29/95 $(5,249)
Canada Government Bonds
Future 3 232,575 12/19/95 6,848
Long-Term German Bonds
Future 2 323,208 12/06/95 7,243
DTB German DAX Index
Future 1 155,322 12/14/95 (8,130)
Long-Term German Bonds
Future 1 167,375 12/06/95 2,414
CAC 40 Stock Index
Future 1 75,283 12/29/95 (3,904)
French Noton 1 114,414 12/18/95 348
Long Gilt Bonds Future 2 164,177 12/27/95 1,677
FTSE 100 Index Future 1 139,161 12/15/95 (1,854)
Italian Government Bonds
Future 2 250,961 12/04/95 351
10 Year Swiss Bonds
Future 1 90,461 12/18/95 2,702
Hang Seng Index Future 1 63,339 11/29/95 32
------------
$ 2,478
============

F-25
<PAGE>

Statements of Assets and Liabilities
October 31, 1995

------------------------ ----------- ----------- ------------
Aetna Generation Funds Ascent Crossroads Legacy
Assets:
Investments, at market
value (Note 1) $20,455,225 $20,313,675 $19,613,941
Cash 2,323 1,856 1,724
Cash denominated in
foreign currencies 26,362 65,835 61,078
Receivable for:
Dividends and interest 50,056 77,709 88,351
Investments sold 271,341 223,750 137,383
Fund shares sold 4,042 2,564 2,638
Recoverable taxes 2,563 1,940 1,389
Variation margin 6,197 11,951 9,910
Unrealized gain on
forward foreign
currency exchange
contracts
(Note 4) 22,944 20,014 15,319
----------- ----------- ------------
Total assets 20,841,053 20,719,294 19,931,733
Liabilities:
Payable for:
Investments purchased 300,406 257,850 206,425
Fund shares redeemed 1,508 40 0
Unrealized loss on
forward foreign
currency exchange
contracts
(Note 4) 62,509 49,109 32,595
Other liabilities 43,688 42,367 42,177
----------- ----------- ------------
Total liabilities 408,111 349,366 281,197
----------- ----------- ------------
NET ASSETS $20,432,942 $20,369,928 $19,650,536
=========== =========== ============
Net assets represented
by:
Paid-in capital $16,691,145 $16,955,025 $16,505,926
Unrealized gain 1,413,636 1,274,369 1,075,920
Undistributed net
investment income 551,450 638,286 729,717
Accumulated net realized
gain (loss) 1,776,711 1,502,248 1,338,973
----------- ----------- ------------
NET ASSETS $20,432,942 $20,369,928 $19,650,536
=========== =========== ============
Capital Shares, $.001
par value:
Outstanding 1,750,728 1,766,608 1,722,857
Net Assets $20,432,942 $20,369,928 $19,650,536
Net Asset Value per
share $ 11.67 $ 11.53 $ 11.41

Cost of Investments $18,986,113 $18,995,907 $18,524,566
=========== =========== ============

See Notes to Financial Statements

F-26
<PAGE>

Statements of Operations
For the period from January 4, 1995 to October 31, 1995

- ------------------------------ ---------- ---------- ----------
Aetna Generation Funds Ascent Crossroads Legacy

Investment income: (Note 1)
Dividends $ 562,967 $ 459,610 $ 335,416
Interest 274,640 464,379 678,337
---------- ---------- ----------
837,607 923,989 1,013,753
Foreign taxes withheld (13,419) (11,056) (8,010)
---------- ---------- ----------
Total investment income 824,188 912,933 1,005,743
---------- ---------- ----------

Investment Expenses: (Note 2)
Investment advisory fee 157,225 156,356 155,255
Administrative service fee 49,133 48,861 48,517
Printing and Postage 212 212 212
Custody fees 27,173 30,023 33,699
Transfer agent fees 3,000 3,000 3,000
Audit fees 8,325 8,325 8,325
Directors' fees 9,800 9,800 9,800
State and federal fees 15,616 15,816 14,964
Miscellaneous 2,254 2,254 2,254
---------- ---------- ----------
Total investment expenses 272,738 274,647 276,026
---------- ---------- ----------
Net investment income 551,450 638,286 729,717
---------- ---------- ----------

Realized and unrealized gain:
(Notes 1, 3 and 4)
Realized gain (loss) on:
Sales of investments 1,930,573 1,563,458 1,315,015
Futures and forward currency
contracts (126,066) (43,753) 26,544
Foreign currencies (27,796) (17,457) (2,586)
---------- ---------- ----------
Net realized gain 1,776,711 1,502,248 1,338,973
---------- ---------- ----------
Net change in unrealized gain
(loss) on:
Investments 1,469,112 1,317,768 1,089,375
Futures and forward currency
contracts (57,470) (43,857) (14,798)
Foreign currency related
transactions 1,994 458 1,343
---------- ---------- ----------
Net change in unrealized gain 1,413,636 1,274,369 1,075,920
---------- ---------- ----------
Net realized and change in
unrealized gain 3,190,347 2,776,617 2,414,893
---------- ---------- ----------
Increase in net assets
resulting from operations $3,741,797 $3,414,903 $3,144,610
========== ========== ==========

See Notes to Financial Statements

F-27
<PAGE>

Statements of Changes in Net Assets
For the period from January 4, 1995 to October 31, 1995

- ------------------------------ ----------- ----------- ------------
Aetna Generation Funds Ascent Crossroads Legacy
Operations:
Net investment income $ 551,450 $ 638,286 $ 729,717
Net realized gain on
investments 1,776,711 1,502,248 1,338,973
Net change in unrealized gain
on investments 1,413,636 1,274,369 1,075,920
----------- ----------- ------------
Increase in net assets
resulting from operations 3,741,797 3,414,903 3,144,610
----------- ----------- ------------
From Fund Share Transactions:
(Note 5)
Proceeds from shares sold 25,819,671 26,042,671 26,237,824
Cost of shares redeemed (9,128,526) (9,087,646) (9,731,898)
----------- ----------- ------------
Increase in net assets from
fund share transactions 16,691,145 16,955,025 16,505,926
----------- ----------- ------------
Change in net assets 20,432,942 20,369,928 19,650,536
Net Assets:
Beginning of period 0 0 0
----------- ----------- ------------
End of period $20,432,942 $20,369,928 $19,650,536
=========== =========== ============
End of period net assets
includes undistributed net
investment income $ 551,450 $ 638,286 $ 729,717
=========== =========== ============

See Notes to Financial Statements

F-28
<PAGE>

Aetna Generation Funds
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.

On January 4, 1995, Ascent, Crossroads, and Legacy were each seeded by ALIAC
in the amount of $25,200,000 and became available for sale. At October 31,
1995, ALIAC and their related companies owned 1,705,378 shares, 1,694,881
shares, and 1,690,097 shares of Ascent, Crossroads, and Legacy, respectively.
Shares of each Fund are available to all investors including employers and
employees who utilize the Funds as investment options under retirement plans.
The Funds are diversified and are authorized to offer two classes of shares,
the Select Class and the Adviser Class. At this time, the Funds only offer
the Select Class. The Select Class is offered principally to institutions and
is not subject to sales charges or service fees.

Aetna Life Insurance and Annuity Company ("ALIAC") serves as the Investment
Adviser and principal underwriter to each Fund.

The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting
principles.

A. Valuation of Investments

Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter
securities, at the mean of the bid and asked prices. Short-term investments
maturing in more than sixty days for which market quotations are readily
available are valued at current market value. Short-term investments maturing
in less than sixty days are valued at amortized cost which when combined with
accrued interest approximates market value. 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 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. 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 year end are marked-to-market and the
resultant net gain or loss is included in federal taxable income.

C. 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

F-29
<PAGE>

Securities Act of 1933. Each Fund may invest up to 15% 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.

D. 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.

E. 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.

2. Investment Advisory, Management, Shareholder Service and Distribution Fees

Each Fund pays the Investment Adviser a monthly fee at an annual rate of
0.80% based on its average daily net assets. As each Fund's net assets exceed
predetermined thresholds, lower advisory fees are applied.

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. Each Fund pays ALIAC a monthly fee at an annual rate of 0.25%
based on average daily net assets. As each Fund's net assets exceed
predetermined thresholds, lower advisory fees apply.

3. Purchases and Sales of Investment Securities

Purchases and sales of investment securities, excluding short-term
investments, for the period from January 4, 1995 (commencement of operations)
to October 31, 1995 were:

Cost of Proceeds
Purchases from Sales
----------- ------------
Aetna Ascent $49,665,537 $34,025,968
Aetna Crossroads 44,672,771 31,004,848
Aetna Legacy 39,563,510 28,380,332

4. Forward Foreign Currency Exchange Contracts

At October 31, 1995, Ascent, Crossroads, and Legacy had the following open
forward foreign currency exchange contracts that obligate the Funds to
deliver currencies at specified future dates. The unrealized losses of
$39,565, $29,095, and $17,276, respectively, on these contracts is included
in the accompanying financial statements. The terms of the open contracts are
as follows:
Ascent:
<TABLE>
<CAPTION>
U.S. $ Value U.S. $ Value
as of as of Unrealized
Exchange Currency to be October 31, Currency to be October 31, Gain
Date Delivered 1995 Received 1995 (Loss)
---------- -------------------- -------------- -------------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
12/13/95 2,430,000 $245,613 235,419 $235,419 (10,194)
Austrian Schilling U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/13/95 22,222 22,222 220,000 22,237 15
U.S. Dollar Austrian Schilling
---------- -------------------- -------------- -------------------- -------------- ----------
11/22/95 5,839,000 201,872 198,477 198,477 (3,395)
Belgian Franc U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------

F-30
<PAGE>

4. Forward Foreign Currency Exchange Contracts (Continued)

Ascent (continued):

U.S. $ Value U.S. $ Value
as of as of Unrealized
Exchange Currency to be October 31, Currency to be October 31, Gain
Date Delivered 1995 Received 1995 (Loss)
---------- -------------------- -------------- -------------------- -------------- ----------
11/01/95 1,471 $ 1,471 2,000 $ 1,471 0
U.S. Dollar Canadian Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/09/95 135,000 119,008 116,772 116,772 (2,236)
Swiss Franc U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/09/95 8,847 8,847 10,000 8,815 (32)
U.S. Dollar Swiss Franc
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 780,000 142,751 135,417 135,417 (7,334)
Danish Krone U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 16,470 16,470 90,000 16,471 1
U.S. Dollar Danish Krone
---------- -------------------- -------------- -------------------- -------------- ----------
12/21/95 960,000 226,199 216,851 216,851 (9,348)
Finnish Markka U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/21/95 42,392 42,392 180,000 42,412 20
U.S. Dollar Finnish Markka
---------- -------------------- -------------- -------------------- -------------- ----------
11/02/95 13,000 20,502 20,618 20,618 116
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/03/95 13,000 20,502 20,493 20,493 (9)
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 340,000 535,983 523,124 523,124 (12,859)
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 41,072 41,072 26,000 40,987 (85)
U.S. Dollar British Pound
---------- -------------------- -------------- -------------------- -------------- ----------
12/13/95 69,354,000 683,082 704,414 704,414 21,332
Japanese Yen U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/19/95 45,280,000 446,424 447,884 447,884 1,460
Japanese Yen U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 250,000 158,642 150,439 150,439 (8,203)
Dutch Guilder U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 24,480 24,480 38,000 24,114 (366)
U.S. Dollar Dutch Guilder
---------- -------------------- -------------- -------------------- -------------- ----------
12/07/95 1,360,000 218,476 213,103 213,103 (5,373)
Norwegian Krone U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 250,000 177,315 174,240 174,240 (3,075)
Singapore Dollar U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
$(39,565)
==========
Crossroads:
U.S. $ Value U.S. $ Value
as of as of Unrealized
Exchange Currency to be October 31, Currency to be October 31, Gain
Date Delivered 1995 Received 1995 (Loss)
---------- -------------------- -------------- -------------------- -------------- ----------
12/13/95 1,790,000 $180,925 173,416 $173,416 (7,509)
Austrian Schilling U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/13/95 12,121 12,121 120,000 12,129 8
U.S. Dollar Austrian Schilling
---------- -------------------- -------------- -------------------- -------------- ----------
11/22/95 3,936,000 136,079 133,791 133,791 (2,288)
Belgian Franc U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------

F-31
<PAGE>

Crossroads (continued):

U.S. $ Value U.S. $ Value
as of as of Unrealized
Exchange Currency to be October 31, Currency to be October 31, Gain
Date Delivered 1995 Received 1995 (Loss)
---------- -------------------- -------------- -------------------- -------------- ----------
11/01/95 64,000 $ 47,079 47,087 $ 47,087 8
Canadian Dollar U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/09/95 107,100 94,413 92,639 92,639 (1,774)
Swiss Franc U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/09/95 8,847 8,847 10,000 8,815 (32)
U.S. Dollar Swiss Franc
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 650,000 118,959 112,847 112,847 (6,112)
Danish Krone U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 7,320 7,320 40,000 7,321 1
U.S. Dollar Danish Krone
---------- -------------------- -------------- -------------------- -------------- ----------
12/21/95 740,000 174,361 167,156 167,156 (7,205)
Finnish Markka U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/21/95 32,971 32,971 140,000 32,987 16
U.S. Dollar Finnish Markka
---------- -------------------- -------------- -------------------- -------------- ----------
11/02/95 4,000 6,308 6,344 6,344 36
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/03/95 18,000 28,387 28,374 28,374 (13)
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 240,000 378,341 369,264 369,264 (9,077)
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 34,688 34,688 22,000 34,681 (7)
U.S. Dollar British Pound
---------- -------------------- -------------- -------------------- -------------- ----------
12/13/95 62,302,000 613,625 633,137 633,137 19,512
Japanese Yen U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/19/95 18,600,000 183,381 183,813 183,813 432
Japanese Yen U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 250,000 158,642 150,439 150,439 (8,203)
Dutch Guilder U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 35,431 35,431 55,000 34,901 (530)
U.S. Dollar Dutch Guilder
---------- -------------------- -------------- -------------------- -------------- ----------
12/07/95 1,080,000 173,495 169,229 169,229 (4,266)
Norwegian Krone U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/07/95 32,127 32,127 200,000 32,128 1
U.S. Dollar Norwegian Krone
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 170,000 120,576 118,483 118,483 (2,093)
Singapore Dollar U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
$(29,095)
==========
Legacy:
U.S. $ Value U.S. $ Value
as of as of Unrealized
Exchange Currency to be October 31, Currency to be October 31, Gain
Date Delivered 1995 Received 1995 (Loss)
---------- -------------------- -------------- -------------------- -------------- ----------
12/13/95 870,000 $ 87,936 84,286 $ 84,286 (3,650)
Austrian Schilling U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/13/95 7,070 7,070 70,000 7,075 5
U.S. Dollar Austrian Schilling
---------- -------------------- -------------- -------------------- -------------- ----------

F-32
<PAGE>

Legacy (continued):

U.S. $ Value U.S. $ Value
as of as of Unrealized
Exchange Currency to be October 31, Currency to be October 31, Gain
Date Delivered 1995 Received 1995 (Loss)
---------- -------------------- -------------- -------------------- -------------- ----------
11/22/95 2,878,000 $ 99,501 97,828 $ 97,828 (1,673)
Belgian Franc U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/09/95 85,500 75,372 73,956 73,956 (1,416)
Swiss Franc U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/09/95 9,732 9,732 11,000 9,697 (35)
U.S. Dollar Swiss Franc
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 460,000 84,186 79,861 79,861 (4,325)
Danish Krone U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 5,490 5,490 30,000 5,490 0
U.S. Dollar Danish Krone
---------- -------------------- -------------- -------------------- -------------- ----------
12/21/95 490,000 115,455 110,684 110,684 (4,771)
Finnish Markka U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/21/95 23,551 23,551 100,000 23,562 11
U.S. Dollar Finnish Markka
---------- -------------------- -------------- -------------------- -------------- ----------
11/02/95 2,000 3,154 3,172 3,172 18
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
11/03/95 8,000 12,616 12,611 12,611 (5)
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 160,000 252,227 246,176 246,176 (6,051)
British Pound U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 15,769 15,769 10,000 15,764 (5)
U.S. Dollar British Pound
---------- -------------------- -------------- -------------------- -------------- ----------
12/13/95 47,321,000 466,074 481,018 481,018 14,944
Japanese Yen U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/19/95 12,490,000 123,141 123,431 123,431 290
Japanese Yen U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 170,000 107,877 102,299 102,299 (5,578)
Dutch Guilder U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/18/95 28,345 28,345 44,000 27,921 (424)
U.S. Dollar Dutch Guilder
---------- -------------------- -------------- -------------------- -------------- ----------
12/07/95 780,000 125,302 122,220 122,220 (3,082)
Norwegian Krone U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
12/07/95 20,833 20,883 130,000 20,884 1
U.S. Dollar Norwegian Krone
---------- -------------------- -------------- -------------------- -------------- ----------
12/14/95 124,000 87,950 86,420 86,420 (1,530)
Singapore Dollar U.S. Dollar
---------- -------------------- -------------- -------------------- -------------- ----------
$(17,276)
==========
</TABLE>

F-33
<PAGE>

5. Authorized Capital Shares and Capital Share Transactions

Each Fund is authorized to issue 100 million shares. For the period January
4, 1995 to October 31, 1995, the Funds sold and redeemed the following
shares:

-----------------------------------------
Ascent Crossroads Legacy

Shares sold 2,573,924 2,593,512 2,612,101
Shares redeemed (823,196) (826,904) (889,244)
----------- ------------ ------------
Net increase 1,750,728 1,766,608 1,722,857
=========== ============ ============

F-34
<PAGE>

Independent Auditors' Report

The Board of Directors and Shareholders of
Aetna Series Fund, Inc.:

We have audited the accompanying statements of assets and liabilities of
Legacy Fund, Crossroads Fund and Ascent Fund, portfolios of Aetna Series
Fund, Inc., (collectively the Generation Funds or Funds) including the
portfolios of investments, as of October 31, 1995, the related statements of
operations, statements of changes in net assets and financial highlights for
the period from January 4, 1995 (commencement of operations) to October 31,
1995. 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 Generation Funds as of October 31, 1995, the results of their operations,
the changes in their net assets and the financial highlights for the period
from January 4, 1995 to October 31, 1995 in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Hartford, Connecticut
December 15, 1995

F-35

<PAGE>

PART C

OTHER INFORMATION

<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits

<S> <C>
(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 period from January
4, 1995 to October 31, 1995
Statements of Changes in Net Assets for the period
from January 4, 1995 to October 31, 1995
Notes to Financial Statements
Portfolios of Investments
Independent Auditors' Report

(b) Exhibits:
(1) Articles of Incorporation, including Articles Supplementary(1)
(2) By-laws (as amended September 13, 1994)(1)
(3) Not applicable
(4) Not applicable
(5) Form of Investment Advisory Agreement between each Fund and Aetna Life
Insurance and Annuity Company ("ALIAC")(1)
(6)(a) Underwriting Agreement between the Registrant and ALIAC(1)
(6)(b) Dealer Agreement between ALIAC and Aetna Investment Services, Inc. (February 8,
1994) for Aetna Series Fund, Inc.(1)
(7) Not applicable
(8) Custodian Agreement - Mellon Bank, N.A., including amendment(1)
(9)(a) Form of Administrative Services Agreement(1)
(9)(b) License Agreement(1)
(10)(a) Consent of Counsel
(10)(b) Opinion of Counsel(2)
(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 Schedule (See Exhibit 24(b)(7))
(18) Not Applicable
(19) Powers of Attorney(3)
</TABLE>

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 Rule 24f-2 notice filed with the
Securities and Exchange Commission on December 29, 1995.
3. 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 .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.

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

<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 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), 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, Aetna Generation Portfolios,
Inc., Variable Annuity Accounts B, C, and G, and Variable Life
Account B (separate accounts of ALIAC registered as unit
investment trusts), and Variable Annuity Account I (a separate
account of Aetna Insurance Company of America registered as a
unit investment trust). 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 executive officers
of the Underwriter:

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------
<S> <C> <C>
Daniel P. Kearney Director and President Director

Christopher J. Burns Director and Senior Vice President

Laura R. Estes Director and Senior Vice President

Timothy A. Holt Director, Senior Vice President and
Chief Financial Officer

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.

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. (Registrant) has duly caused this Post-Effective
Amendment No. 2 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)
Vice President and Treasurer

James C. Hamilton* (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. -
GENERATION FUNDS

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) Form of Investment Advisory Agreement between *
Registrant and Aetna Life Insurance and Annuity
Company ("ALIAC")

99-b(6)(a) Underwriting Agreement between the Registrant and *
ALIAC

99-b(6)(b) Dealer Agreement between ALIAC and Aetna Investment *
Services, Inc. (February 8, 1994) for Aetna Series
Fund, Inc.

99-b(8) Custodian Agreement - Mellon Bank, N.A., including *
amendment

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.

[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. 2 on Form N-1A to Registration Statement (File Nos. 33-85620 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 GENERATION FUNDS, 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 Since Inception figure assumes the redemption on October 31, 1995 of
values attributable to a $1,000 payment made on January 4, 1994 (commencement of
operations).

Aetna Ascent Fund
Since Inception $1,000(1 + 16.70%) = $1,167

Aetna Crossroads Fund
Since Inception $1,000(1 + 15.30%) = $1,153

Aetna Legacy Fund
Since Inception $1,000(1 + 14.10%) = $1,141

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
<NUMBER> 111
<NAME> ASCENT FUND
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> JAN-04-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 18,986,113
<INVESTMENTS-AT-VALUE> 20,455,225
<RECEIVABLES> 357,143
<ASSETS-OTHER> 28,685
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,841,053
<PAYABLE-FOR-SECURITIES> 300,406
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107,705
<TOTAL-LIABILITIES> 408,111
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,691,145
<SHARES-COMMON-STOCK> 1,750,728
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 551,450
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,776,711
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,413,636
<NET-ASSETS> 20,432,942
<DIVIDEND-INCOME> 549,548
<INTEREST-INCOME> 274,640
<OTHER-INCOME> 0
<EXPENSES-NET> 272,738
<NET-INVESTMENT-INCOME> 551,450
<REALIZED-GAINS-CURRENT> 1,776,711
<APPREC-INCREASE-CURRENT> 1,413,636
<NET-CHANGE-FROM-OPS> 3,741,797
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,573,924
<NUMBER-OF-SHARES-REDEEMED> 823,196
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 20,432,942
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 157,225
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 272,738
<AVERAGE-NET-ASSETS> 19,763,623
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .25
<PER-SHARE-GAIN-APPREC> 1.42
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.67
<EXPENSE-RATIO> 1.38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
<NUMBER> 121
<NAME> CROSSROADS
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> JAN-04-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 18,995,907
<INVESTMENTS-AT-VALUE> 20,313,675
<RECEIVABLES> 337,928
<ASSETS-OTHER> 67,691
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,719,294
<PAYABLE-FOR-SECURITIES> 257,850
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 91,516
<TOTAL-LIABILITIES> 349,366
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,955,025
<SHARES-COMMON-STOCK> 1,766,608
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 638,286
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,502,248
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,274,369
<NET-ASSETS> 20,369,928
<DIVIDEND-INCOME> 448,554
<INTEREST-INCOME> 464,379
<OTHER-INCOME> 0
<EXPENSES-NET> 274,647
<NET-INVESTMENT-INCOME> 638,286
<REALIZED-GAINS-CURRENT> 1,502,248
<APPREC-INCREASE-CURRENT> 1,274,369
<NET-CHANGE-FROM-OPS> 3,414,903
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,593,512
<NUMBER-OF-SHARES-REDEEMED> 826,904
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 20,369,928
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 156,356
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 274,647
<AVERAGE-NET-ASSETS> 19,617,643
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> 1.24
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.53
<EXPENSE-RATIO> 1.40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000877233
<NAME> AETNA SERIES FUND, INC.
<SERIES>
<NUMBER> 131
<NAME> LEGACY FUND
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> JAN-04-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 18,524,566
<INVESTMENTS-AT-VALUE> 19,613,941
<RECEIVABLES> 254,990
<ASSETS-OTHER> 62,802
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,931,733
<PAYABLE-FOR-SECURITIES> 206,425
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 74,772
<TOTAL-LIABILITIES> 281,197
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,505,926
<SHARES-COMMON-STOCK> 1,722,857
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 729,717
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,338,973
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,075,920
<NET-ASSETS> 19,650,536
<DIVIDEND-INCOME> 327,406
<INTEREST-INCOME> 678,337
<OTHER-INCOME> 0
<EXPENSES-NET> 276,026
<NET-INVESTMENT-INCOME> 729,717
<REALIZED-GAINS-CURRENT> 1,338,973
<APPREC-INCREASE-CURRENT> 1,075,920
<NET-CHANGE-FROM-OPS> 3,144,610
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,612,101
<NUMBER-OF-SHARES-REDEEMED> 889,244
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 19,650,536
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 155,255
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 276,026
<AVERAGE-NET-ASSETS> 19,438,451
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> 1.08
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>