[front cover]
[Aetna Mutual Funds runs down left side of cover]
Semi-
Annual
Report
April 30, 1996
Aetna Tax-Free Fund
[Aetna logo]
<PAGE>
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Table of Contents
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President's Letter.................................... 1
Investment Review..................................... 2
Portfolio of Investments.............................. 3
Statement of Assets and Liabilities................... 5
Statement of Operations............................... 6
Statements of Changes in Net Assets................... 7
Notes to Financial Statements......................... 8
Financial Highlights.................................. 12
<PAGE>
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President's Letter
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Dear Aetna Tax-Free Shareholder:
This Semi-Annual Report is required to be sent to all Tax-Free Fund shareholders
of record as of April 30, 1996.
On May 23, 1996, a Special Meeting of shareholders of the Aetna Tax-Free Fund
was held to vote on two proposals. First was the proposal for liquidation of the
assets and dissolution of the Portfolio pursuant to provisions of a Plan of
Liquidation approved by the Board of Directors of the Fund. Next was the
proposal to amend the Articles of Incorporation of Aetna Series Fund, Inc. to
reflect the dissolution of the Tax-Free Portfolio. We received shareholder
approval to implement both proposals.
On the scheduled Liquidation Date, June 24, 1996, all shares of the Fund were
redeemed. Shareholders of the Fund on June 24, should have received their
liquidation check shortly thereafter.
Thank you for your support in this matter.
Sincerely,
/s/Shaun P. Mathews
Shaun P. Mathews
President
Aetna Mutual Funds Semi-Annual Report 1
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Tax-Free Fund
-------------
The Aetna Tax-Free Fund Select Class shares produced a total return of .77%
(.35% for Adviser Class shares) for the six month period ended April 30, 1996 as
compared to a 1.11% return for the Lehman Municipal Bond Index (an unmanaged
index). Of Morningstar's national municipal bond fund universe for the same six
month period, the Select Class shares of the Fund ranked in the top 55% (279 out
of 510), while the Adviser Class shares ranked in the top 81% (412 out of 510).
Municipal bonds outperformed taxable securities during the period, especially in
the longer maturities. Despite major swings in Treasury bond yields, municipal
bonds ended the period about one-quarter of a percentage point higher than the
Treasury bond yield.
In the marketplace, the impact of concerns over the possible implementation of
flat tax proposals were lessened by retail investors' attraction to the
municipal market's higher yields. In addition, property and casualty companies
were good buyers of bonds, especially when municipals cheapened relative to
Treasuries, thereby buoying bond prices.
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Quality Ratings
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AAA 42.0%
AA 25.1%
A 15.7%
BBB 17.2%
2
<PAGE>
Portfolio of Investments
April 30, 1996 (Unaudited)
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Tax-Free Fund
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Principal Market
Amount Value
--------- ------
Long-Term Bonds and Notes (93.4%)
Municipal Bonds (93.4%)
California Educational
Facility Authority,
Revenue Bonds,
University of
Southern California
Project, 5.80%,
10/01/15 $1,000,000 $ 998,750
Cedar Rapids, Iowa,
5.125%, 06/01/11 1,000,000 953,750
City and County of
Arapahoe, Colorado,
Highway Revenue, E-
470 Project, 6.90%,
08/31/15 1,000,000 1,051,250
City and County of
Denver, Colorado,
Airport System
Revenue Bonds,
7.00%, 11/15/99 1,000,000 1,050,000
City and County of
Honolulu, Hawaii,
5.50%, 04/01/06 1,000,000 1,016,250
City of Philadelphia
Water and Waste
Water (AMBAC
Insured), 5.625%,
06/15/09 1,000,000 1,013,750
Dormitory Authority of
the State of New
York, Consolidated
City University
Revenue Bonds,
5.75%, 07/01/09 1,000,000 976,250
DuPage Water
Commission, Illinois,
Water Revenue
Refunding Bonds,
5.25%, 05/01/11 1,000,000 950,000
Florida Municipal
Power Agency,
Power Supply
Revenue Bonds
(AMBAC Insured),
5.10%, 10/01/14 $1,000,000 $ 917,500
Illinois Development
Finance Authority,
Pollution Control
Revenue Refund
Bonds
(Commonwealth
Edison Project),
5.85%, 01/15/14
1,000,000 937,500
Indiana Transportation
Finance Authority,
Airport Facilities
Lease Revenue
Bonds, 6.50%,
11/01/07 1,000,000 1,057,500
Kentucky Turnpike
Authority, Economic
Development Road
Revenue Refunding
Bonds (AMBAC
Insured), 5.50%,
07/01/09 1,000,000 1,012,500
Massachusetts Water
Resources Authority,
General Revenue
Refunding Bonds,
5.25%, 03/01/13 1,000,000 913,750
Michigan State Trunk
Line Fund, 5.75%,
10/01/12 1,000,000 983,750
Portland, Oregon Sewer
System Revenue
Bonds, 6.10%,
06/01/10 1,000,000 1,050,000
See Notes to Portfolio of Investments.
Aetna Mutual Funds Semi-Annual Report 3
<PAGE>
Portfolio of Investments
April 30, 1996 (Unaudited)
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Tax-Free Fund (continued)
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Principal Market
Amount Value
-------- -------
San Antonio, Texas,
General Obligation
Limited Tax Bonds
(Prerefunded 8/1/97
@ 100), 7.875%,
08/01/10 $1,000,000 $1,048,750
Southern Minnesota
Municipal Power
Agency, Power
Supply System
Revenue Bonds,
5.50%, 01/01/03 640,000 657,600
Southern Minnesota
Municipal Power
Agency, Power
Supply System
Revenue Bonds
(Escrowed to
Maturity),
5.50%, 01/01/03 360,000 374,400
Spokane, Washington
Regional Solid Waste
Management Services
Revenue Bond
(AMBAC Insured),
5.50%, 12/01/09 1,000,000 988,750
State of Illinois, Sales
Tax Revenue Bonds,
5.25%, 06/15/13 1,000,000 926,250
Tarrant County, Texas
Water Control and
Improvement District
No. 1, Water
Revenue Bonds
(Prerefunded 3/1/98
@ 100), 7.70%,
03/01/00 1,000,000 1,063,750
Virginia Housing
Development
Authority, Mortgage
Revenue Bonds,
5.70%, 01/01/11 1,000,000 988,750
Washington Public
Power Supply,
Nuclear Project No.
2, Revenue
Refunding Bonds,
5.375%, 07/01/11 $1,000,000 $ 930,000
Total Long-Term
Bonds and Notes
(cost $21,768,599) $21,860,750
-----------
Short-Term Investments (5.1%)
Koch Industries, Inc.,
Comm. Paper, 5.36%,
05/01/96 600,000 600,000
TRW, Inc., Comm.
Paper, 5.35%,
05/01/96 586,000 586,000
-----------
Total Short-Term
Investments
(cost $1,186,000 $1,186,000)
-----------
Total Investments
(cost $22,954,599) (a) $23,046,750
Other assets less
liabilities 369,198
-----------
Total Net Assets $23,415,948
Notes to Portfolio of Investments
(a) The cost of investments for federal
income tax purposes is $22,940,117.
Unrealized gains and losses, based on
identified tax cost, at April 30, 1996
are as follows:
Unrealized gains .......... $ 458,961
Unrealized losses ......... (352,328)
==========
Net unrealized gain ... $ 106,633
==========
Category percentages are based on net assets.
4 See Notes to Financial Statements.
<PAGE>
Statement of Assets and Liabilities
April 30, 1996 (Unaudited)
- ----------------------------------- -------------
Aetna Series Fund, Inc. Tax-Free Fund
- ----------------------------------- -------------
Assets:
Investments, at market value (Note $23,046,750
1) ...............................
Cash ............................... 418
Receivable for:
Dividends and interest ........... 386,019
Investments sold ................. 900,000
Reimbursement from Investment 1,346
Advisor ........................
Prepaid insurance .................. 1,894
------------
Total assets ................... 24,336,427
------------
Liabilities:
Payable for:
Investments purchased ............ 899,860
Other liabilities ................ 20,619
------------
Total liabilities .............. 920,479
------------
NET ASSETS ......................... $23,415,948
============
Net assets represented by:
Paid-in capital .................... 24,018,359
Unrealized gain on investments ..... 92,151
Undistributed net investment income ... 21,803
Accumulated net realized (loss) on
investments ...................... (716,365)
============
NET ASSETS ......................... $23,415,948
============
Capital Shares, $.001 par value
Select Class: Outstanding .......... 157,172
Net Assets ........... $ 1,517,577
Net Asset Value per $ 9.66
share ..............
Adviser Class: Outstanding .......... 2,268,056
Net Assets ........... $21,898,371
Net Asset Value per $ 9.66
share ..............
Cost of Investments ................ $22,954,599
============
See notes to Financial Statements.
Aetna Mutual Funds Semi-Annual Report 5
<PAGE>
Statement of Operations
Six-month period ended April 30, 1996 (Unaudited)
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Aetna Series Fund, Inc. Tax-Free Fund
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Investment income: (Note 1)
Interest ............................ $668,670
---------
Total investment income ........... 668,670
---------
Investment Expenses: (Notes 2 and 3)
Investment advisory fee ............. 59,529
Administrative service fee .......... 29,764
12b-1 and service fees .............. 83,236
Printing and postage expenses ....... 285
Custody fees ........................ 4,334
Transfer agent fees ................. 15,611
Audit fees .......................... 5,160
Directors' fees ..................... 3,473
State and federal fees .............. 21,933
---------
Expenses before reimbursement and
waiver from Adviser ............... 223,325
Expense reimbursement and waiver
from Adviser ...................... (38,890)
---------
Net investment expenses ........... 184,435
---------
---------
Net investment income (loss) ........ 484,235
---------
Realized and unrealized gain (loss):
(Notes 1 and 4)
Realized gain (loss) on:
Sale of investments, (excluding
short-term investments) ......... 38,001
---------
Net realized gain (loss) ........ 38,001
---------
Net change in unrealized gain (loss) on:
Investments ....................... (426,350)
---------
Net change in unrealized gain (426,350)
(loss) ........................
---------
Net realized and change in
unrealized gain (loss) on
investments ....................... (388,349)
---------
Increase in net assets resulting from $ 95,886
operations =========
6 See Notes to Financial Statements.
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- ----------------------------------- --------------------------------
Aetna Series Fund, Inc. Tax-Free Fund
- ----------------------------------- --------------------------------
Six-months
ended
April 30, Year ended
1996 October 31,
(Unaudited) 1995
-------------- ----------------
<S> <C> <C>
From Operations:
Net investment income ........................... $ 484,235 $ 1,010,715
Net realized gain (loss) ........................ 38,001 (246,800)
Net change in unrealized gain (loss) ............ (426,350) 2,386,069
------------ ------------
Increase in net assets resulting from operations 95,886 3,149,984
------------ ------------
Distributions to Shareholders: (Note 1)
Select Class:
From net investment income .................... (41,576) (81,588)
Adviser Class:
From net investment income .................... (490,299) (876,283)
------------ ------------
Decrease in net assets from distributions to
shareholders .................................. (531,875) (957,871)
------------ ------------
Fund Shares Transactions: (Note 5)
Select Class:
Proceeds from shares sold ..................... -- 677,584
Reinvestment of distributions ................. 40,586 80,267
Cost of shares redeemed ....................... (245,854) (632,497)
Adviser Class:
Proceeds from shares sold ..................... -- 909,721
Reinvestment of distributions ................. 489,587 869,986
Cost of shares redeemed ....................... (362,294) (7,212,924)
------------ ------------
Decrease in net assets from fund share (77,975) (5,307,863)
transactions ..................................
------------ ------------
Change in net assets ............................ (513,964) (3,115,750)
Net Assets:
Beginning of period ............................. 23,929,912 27,045,662
============ ============
End of period ................................... $23,415,948 $23,929,912
============ ============
End of period net assets includes undistributed
net investment income ......................... $ 21,803 $ 69,443
============ ============
</TABLE>
Aetna Mutual Funds Semi-Annual Report 7
<PAGE>
AETNA SERIES FUND, INC.
Notes to Financial Statements
April 30, 1996 (Unaudited)
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1. Summary of Significant Accounting Policies
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Aetna Series Fund, Inc. ("Company") is registered under the Investment Company
Act of 1940 as a diversified, 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 each of which has its
own investment objectives, policies and restrictions.
The Aetna Tax-Free Fund ("Fund") offered two classes of shares, the Select Class
and the Adviser Class. The Fund sought to provide income exempt from federal
income tax consistent with the preservation of capital primarily through
investment in municipal securities. The Board of Directors voted in October 1995
to liquidate the Fund, subject to shareholder approval. As a result, the Fund
has not been offered since October 13, 1995. The Plan of Liquidation was
approved by shareholders at a special shareholders meeting called for this
purpose on May 23, 1996. Accordingly, the Fund was liquidated on June 24, 1996.
Aetna Life Insurance and Annuity Company ("ALIAC") served as the Investment
Adviser and principal underwriter to the Fund.
The accompanying financial statements of the Fund have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the Fund.
A. Valuation of Investments
Investments are stated at market values based upon closing sales prices as
reported on national securities exchanges or, for over-the-counter securities,
at the mean of the bid and asked prices. Short-term investments maturing in more
than sixty days for which market quotations are readily available are valued at
current market value. Short-term investments maturing in less than sixty days
are valued at amortized cost which when combined with accrued interest
approximates market. Securities for which market quotations are not considered
to be readily available are valued in good faith using methods approved by the
Board of Directors.
8
<PAGE>
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1. Summary of Significant Accounting Policies (Continued)
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B. 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 Fund to sell them promptly at an
acceptable price. Restricted securities are subject to legal or contractual
restrictions on resale and may not be publicly sold without registration under
the Federal Securities Act of 1933. The 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 Fund will not pay the
costs of disposition of restricted securities other than ordinary brokerage
fees, if any.
C. Federal Income Taxes
As a qualified regulated investment company, the 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.
D. Distributions
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for discount on securities purchased.
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. Realized gains
and losses from investment transactions are determined on an identified cost
basis.
Aetna Mutual Funds Semi-Annual Report 9
<PAGE>
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2. Investment Advisory, Management, Shareholder Service and Distribution Fees
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The Fund paid the Investment Adviser annual fees expressed as a weighted average
percentage of average daily net assets of the Fund. The Fund paid an effective
annual rate of .50% as of April 30, 1996.
The Company 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. The
Fund paid ALIAC a monthly fee at an annual rate based on average daily net
assets of 0.25% on the first $250 million.
The Fund adopted a Shareholder Service Plan for the Adviser Class shares. Under
the Shareholder Service Plan, ALIAC was paid a service fee at an annual rate of
0.25% of the daily net assets of the Adviser Class of the Fund. This fee was
used as compensation for expenses incurred in servicing shareholder accounts.
For the six-month period ended April 30, 1996, the Fund paid ALIAC $27,745 in
service fees.
The Fund adopted a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940. The Distribution Plan provides for payments to ALIAC at an
annual rate 0.50% of the daily net assets of the Adviser Class shares of the
Fund. Amounts paid by the Fund were used to pay expenses incurred by ALIAC in
promoting the sales of the Adviser Class shares. For the six-month period ended
April 30, 1996, the Fund paid ALIAC $55,491 in Rule 12b-1 fees. The Fund class
specific expenses were limited to Shareholder Service and Distribution Plan
expenses incurred by the Adviser Class shares.
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3. Reimbursement from Investment Adviser
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The Investment Adviser may, from time to time, make reimbursements to a Fund for
some or all of its operating expenses. Reimbursement arrangements will increase
a Fund's yield and total return.
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4. Purchase and Sales of Investment Securities
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Sales of investment securities, excluding short-term investments, for the Fund
for the six-month period ended April 30, 1996 were $1,032,070. There were no
purchases of investment securities, excluding short-term investments, for the
period ended April 30, 1996.
10
<PAGE>
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5. Authorized Capital Shares and Capital Share Transactions
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The Company is authorized to issue a total of 4.0 billion shares. Of those
shares, the Fund was allocated 100 million each of Select and Adviser Class
shares. Share transactions for the Fund were as follows:
<TABLE>
<CAPTION>
Select Adviser
------------------------------ -----------------------------
Six-month Six-month
period ended Year ended period ended Year ended
April 30, 1996 October 31, 1995 April 30, 1996 October 31,1995
-------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Shares sold - 71,693 - 96,648
Shares issued upon 4,099 8,514 49,456 92,619
reinvestment
Shares redeemed (24,61) (65,562) (36,631) (785,103)
======= ======== ======== =========
Net increase (decrease) (20,51) 14,645 12,825 (595,836)
======= ======== ======== =========
</TABLE>
As of April 30, 1996, ALIAC owned 79,131 Select Class shares and 2,226,109
Adviser Class shares of the Fund.
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6. Capital Loss Carryforwards
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At April 30, 1996, for federal income tax purposes the Fund had the following
capital loss carryforwards:
Capital Loss Carryforward Year of Expiration
------------------------- ------------------
$508,000 2002
247,000 2003
Aetna Mutual Funds Semi-Annual Report 11
<PAGE>
Financial Highlights
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
-----------------------
Tax-Free Fund
-----------------------
Select Class
-----------------------
Six-month
period Ten-month
ended Year period
April ended ended
30, October October
1996 31, 31,
(Unaudited) 1995 1994
------------------ --------
<S> <C> <C> <C>
Net asset value, beginning of period ................ $ 9.84 $8.98 $10.00
Income from investment operations:
Net investment income ............................. 0.24 0.51 0.38
Net realized and change in unrealized gain (loss) . (0.16) 0.80 (1.07)
------- ------ ------
Total ........................................... 0.08 1.31 (0.69)
Less distributions:
From net investment income ........................ (0.26) (0.45) (0.33)
======= ====== ======
Net asset value, end of period ...................... $ 9.66 $9.84 $8.98
======= ====== ======
Total return ........................................ 0.77% 14.89% (6.95)%
Net assets, end of period (000's) ................... $1,518 $1,748 $1,465
Ratio of total investment expenses to average net 0.85% 0.67% 0.30%
assets* ...........................................
Ratio of net investment income to average net 4.77% 5.43% 4.85%
assets* ...........................................
Ratio of net investment expense before reimbursement
and waiver to average net assets* ................. 1.18% 0.97% 1.20%
Ratio of net investment income before reimbursement
and waiver to average net assets* ................. 4.44% 5.13% 3.94%
Portfolio turnover rate* ............................ 0.00% 25.24% 29.14%
</TABLE>
*Annualized for periods of less than one year.
Per share data calculated using average number of shares outstanding throughout
the period.
12
<PAGE>
Financial Highlights
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
-----------------------
Tax-Free Fund
-----------------------
Adviser Class
-----------------------
Six-month
period Ten-month
ended Year period
April ended ended
30, October October
1996 31, 31,
(Unaudited) 1995 1994
------------------ --------
<S> <C> <C> <C>
Net asset value, beginning of period ................ $ 9.84 $8.98 $10.00
Income from investment operations:
Net investment income ............................. 0.24 0.51 0.38
Net realized and change in unrealized gain (loss) . (0.16) 0.80 (1.07)
------- ------ ------
Total ........................................... 0.08 1.31 (0.69)
Less distributions:
From net investment income ........................ (0.26) (0.45) (0.33)
======= ====== ======
Net asset value, end of period ...................... $ 9.66 $9.84 $8.98
======= ====== ======
Total return ........................................ 0.77% 14.89% (6.95)%
Net assets, end of period (000's) ................... $1,518 $1,748 $1,465
Ratio of total investment expenses to average net 0.85% 0.67% 0.30%
assets* ...........................................
Ratio of net investment income to average net 4.77% 5.43% 4.85%
assets* ...........................................
Ratio of net investment expense before reimbursement
and waiver to average net assets* ................. 1.18% 0.97% 1.20%
Ratio of net investment income before reimbursement
and waiver to average net assets* ................. 4.44% 5.13% 3.94%
Portfolio turnover rate* ............................ 0.00% 25.24% 29.14%
</TABLE>
*Annualized for periods of less than one year.
Per share data calculated using average number of shares outstanding throughout
the period.
Aetna Mutual Funds Semi-Annual Report 13
<PAGE>
[back cover]
Aetna Series Fund, Inc.
151 Farmington Avenue
Hartford, CT 06156-8962
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the corporation. The report is not
authorized for distribution to prospective investors in the corporation unless
preceded or accompanied by an effective prospectus.
SA.AETTF.1-1 [recycle logo] Printed on recycled paper using soybean ink
