AETNA SERIES FUND INC, 497, 1997-03-07

AETNA SERIES FUND INC
497, 1997-03-07

Previous: MONEY STORE INC /NJ, S-3/A, 1997-03-07

Next: AETNA SERIES FUND INC, 497, 1997-03-07

[Front Cover]
------------------
Build for
Retirement. Manage
for Life.(SM)
------------------

Aetna Mutual Funds
Select Class

Prospectus
March 3, 1997

PROS. SERSEL-97 [Aetna Retirement Services logo] Aetna
Retirement Services(SM)

<PAGE>

Select Class

Aetna
Mutual Funds
Prospectus

[Aetna logo] March 3, 1997
-----------------------------------------------------------------------------

Aetna Series Fund, Inc. (Fund) is an open-end management investment company
authorized to issue multiple series of shares, each representing a
diversified portfolio of investments (Series) with different investment
objectives, policies and restrictions. Currently, each Series is authorized
to offer two classes of shares, the Select Class and the Adviser Class.
Select Class shares are no-load, which means you do not pay any sales
charges, distribution or service fees.

This Prospectus sets forth concisely the information about the Fund and its
Series that you should know before investing. Please read this Prospectus
carefully before investing and retain for future reference. Additional
information about the Fund and its Series, including a Statement of
Additional Information (Statement) dated March 3, 1997, has been filed with
the Securities and Exchange Commission (Commission). The Statement is
incorporated by reference into this Prospectus and 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.
Additional information filed with the Commission can be obtained by
contacting the Commission at its Web Site (http://www.sec.gov).

This Prospectus is for investors eligible to purchase Select Class shares. A
separate Prospectus is available for investors eligible to purchase Adviser
Class shares. Sales charges, expenses and performance will vary with respect
to each class.

Investment Objectives
-----------------------------------------------------------------------------
Aetna Money Market Fund
seeks to provide high current return, consistent with preservation of capital
and liquidity, through investment in high-quality money market instruments.
Although the Money Market Fund will strive to maintain a $1.00 net asset
value per share, there is no assurance that it will be able to do so.
Investments in this Series are neither insured nor guaranteed by the U.S.
Government.

Aetna Government Fund seeks to provide income consistent with the
preservation of capital through investment in securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.

Aetna Bond Fund seeks to provide as high a level of total return (i.e.,
income and capital appreciation) as is consistent with reasonable risk,
primarily through investment in a diversified portfolio of investment-grade
corporate bonds and securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.

The Aetna Fund seeks to maximize total return with reasonable safety of
principal by investing in a diversified portfolio of stocks, bonds and money
market instruments. The Aetna Fund may involve less investment risk than a
portfolio consisting entirely of common stocks.

<PAGE>

Aetna Growth and Income Fund seeks long-term growth of capital and income
through investment in a diversified portfolio consisting primarily of common
stocks and securities convertible into common stocks believed to offer
above-average growth potential.

Aetna Growth Fund seeks growth of capital through investment in a diversified
portfolio consisting primarily of common stocks and securities convertible
into common stocks believed to offer growth potential.

Aetna Index Plus Fund seeks to outperform the total return performance of
publicly traded common stocks represented by the S&P 500 Composite Stock
Price Index (S&P 500), a stock market index composed of 500 common stocks
selected by the Standard & Poor's Corporation.

Aetna Small Company Fund seeks growth of capital primarily through investment
in a diversified portfolio of common stocks and securities convertible into
common stocks of companies with smaller market capitalizations.

Aetna International Growth Fund seeks long-term capital growth primarily
through investment in a diversified portfolio of common stocks principally
traded in countries outside of North America.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

2 Aetna Mutual Funds Prospectus
<PAGE>

Table of Contents

Highlights 4
Fee Tables 6
Financial Highlights 10
Description of the Fund 16
Risk Factors and Other Considerations 22
Investment Restrictions 27
Shareholder Services 28
Other Features 34
Cross Investing 35
Management 36
Portfolio Management 38
Distributions 40
Net Asset Value 40
Taxes 40
General Information 42
Performance Data 43
Appendix A--Glossary of Investment Terms 44
Appendix B--Description of Corporate Bond Ratings 47

Aetna Mutual Funds Prospectus 3
<PAGE>

Highlights

What is a Mutual Fund and What are its Advantages? A mutual fund pools the
money of a number of investors and invests in a portfolio of securities on
their behalf. Mutual funds allow you to spread risk through diversification
and to benefit from professional management. You have immediate access to
your money simply by writing a letter or, in the case of the Aetna Money
Market Fund, by writing a check.

What Series are Offered? The following mutual funds are offered by this
Prospectus, each with its own objective and policies and all of which are
diversified portfolios under the Investment Company Act of 1940 (1940 Act).
See "Description of the Fund."

[ ] Aetna Money Market Fund -- (Money Market)

[ ] Aetna Government Fund -- (Government)

[ ] Aetna Bond Fund -- (Bond)

[ ] The Aetna Fund -- (Aetna Fund), a balanced fund

[ ] Aetna Growth and Income Fund -- (Growth and Income)

[ ] Aetna Growth Fund -- (Growth)

[ ] Aetna Index Plus Fund -- (Index Plus)

[ ] Aetna Small Company Fund -- (Small Company)

[ ] Aetna International Growth Fund -- (International Growth)

What are the Risks? The different types of securities purchased and
investment techniques used by the above mutual funds involve varying amounts
of risk. For more information, see "Risk Factors and Other Considerations."

What is the Difference Between Select and Adviser Class Shares? Two classes
of shares are available, the Select Class shares and the Adviser Class
shares. Select Class shares are only offered to (1) certain retirement plans
and wrap fee programs; (2) salaried employees and persons retired from
salaried positions (including members of employees' and retired persons'
immediate families) of Aetna Life Insurance and Annuity Company (Aetna) and
its affiliates; (3) certain insurance companies (including their separate
accounts); (4) registered investment companies; (5) investment advisers and
broker-dealers acting for their own account; (6) persons who were and
remained shareholders from the time Adviser Class shares were first offered
and their immediate family members; (7) the Fund's Board of Directors
(Directors) and (8) members of such other groups as may be approved by the
Directors.

4 Aetna Mutual Funds Prospectus
<PAGE>

Select Class shares are no-load, which means you do not pay any sales
charges, distribution or service fees. Adviser Class shares are subject to a
contingent deferred sales charge at a maximum rate of 1%, declining to 0%
after 4 years from the date of initial purchase (except for direct purchases
into Money Market.) Additionally, Adviser Class shares are subject to a
distribution fee at an annual rate of 0.50% (0.00% for Money Market) and a
service fee at an annual rate of 0.25% (0.10% for Money Market) of the
average daily net assets.

How Can I Purchase Shares? You may purchase shares by completing an
application and sending it as described under "Shareholder Services." Your
initial purchase must be for a minimum of $1,000 for each Series with a
minimum of $500 for Individual Retirement Accounts (IRA). Participants in
employer-sponsored retirement plans should refer to their plan materials. We
also offer a systematic investment program that enables you 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 (NYSE) is open for business. Select Class shares are
redeemable at net asset value. See "Shareholder Services" for further
information.

Who is Managing the Assets? Aetna serves as the investment adviser for each
of the Series and Aeltus Investment Management, Inc. (Aeltus) serves as the
subadviser for each of the Series. Aetna and Aeltus (collectively, the
"Adviser") are both indirect wholly-owned subsidiaries of Aetna Retirement
Services, Inc., which is in turn an indirect wholly-owned subsidiary of Aetna
Inc.

See "Management" for further information.

What if I have Additional Questions? Shareholders enjoy a high level of
customer service. Please call 1-800-367-7732 if you have questions about your
account or would like to initiate a transaction. Please call 1-800-238-6263
if you would like to receive an additional prospectus, application or
information about the Fund.

Aetna Mutual Funds Prospectus 5
<PAGE>

Fee Tables

The following is provided to assist you in understanding the various charges
and expenses that you would bear directly or indirectly as a shareholder. For
a complete description of these charges and expenses, see "Management."
-----------------------------------------------------------------------------
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 Operating Expenses
(as a percentage of average daily net assets)

<TABLE>
<CAPTION>
Total
Operating
Management/ Administrative Other Expenses
Advisory Fee Fee Expenses (after fee
(after fee (after fee (after waiver/expense
waiver) waiver) reimbursement) reimbursement)(1)
- --------------------- ------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Money Market 0.07% 0.25% 0.18% 0.50%
Government 0.00% 0.00% 0.70% 0.70%
Bond 0.09% 0.25% 0.41% 0.75%
Aetna Fund 0.80% 0.25% 0.26% 1.31%
Growth and Income 0.68% 0.25% 0.15% 1.08%
Growth 0.70% 0.25% 0.33% 1.28%
Index Plus(2) 0.30% 0.25% 0.15% 0.70%
Small Company 0.85% 0.25% 0.34% 1.44%
International Growth 0.85% 0.25% 1.07% 2.17%
</TABLE>

(2) Inception date December 10, 1996.
The expenses shown above are based on the year ended October 31, 1996 and
reflect the most current fee waiver/expense reimbursement arrangements as
of the date of this Prospectus. Fee waiver/expense reimbursement
arrangements are currently in effect for Money Market, Government, Bond and
Index Plus. These arrangements limit the Total Operating Expenses to the
amounts shown above. Without these arrangements, Management/Advisory Fees,
Administrative Fees and Total Operating Expenses would have been 0.40%,
0.25%, and 0.83% for Money Market; 0.50%, 0.25%, and 1.57% for Government;
and 0.50%, 0.25%, and 1.16% for Bond. For Index Plus, Management/Advisory
Fees and Total Operating Expenses are estimated to be 0.45% and 0.85%,
respectively. These are based on estimated amounts for the current fiscal
year. With respect to Money Market, Aetna may waive or reimburse an amount
that would lower the Total Operating Expenses shown above.

-----------------------------------------------------------------------------

6 Aetna Mutual Funds Prospectus
<PAGE>

-----------------------------------------------------------------------------
Select Class
Example

Using the above percentages, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each of
the periods shown:

1 Year 3 Years 5 Years 10 Years
- --------------------- ------ ------- ------- --------
Money Market $ 5 $16 $ 28 $ 63
Government 7 22 39 87
Bond 8 24 42 93
Aetna Fund 13 42 72 158
Growth and Income 11 34 60 132
Growth 13 41 70 155
Index Plus 7 22 39 87
Small Company 15 46 79 172
International Growth 22 68 116 250

This example should not be considered an indication of prior or future
expenses. Actual expenses for the current year may be greater or less than
those shown.

-----------------------------------------------------------------------------
Adviser Class
Shareholder Transaction Expenses

<TABLE>
<CAPTION>
Deferred Sales
Charge on
Sales Charge Redemptions
on Purchases (as a percentage Sales Charge
(as a percentage of redemption on Dividend Exchange
of purchase price) proceeds)(1) Reinvestment Fee
------------------------- ------------------ ---------------- ------------- --------
<S> <C> <C> <C> <C>
Money Market None 1.0% None None
Government None 1.0% None None
Bond None 1.0% None None
Aetna Fund None 1.0% None None
Growth and Income None 1.0% None None
Growth None 1.0% None None
Index Plus None 1.0% None None
Small Company None 1.0% None None
International Growth None 1.0% None None
</TABLE>

(1) The contingent deferred sales charge set forth in the above table is the
maximum redemption charge imposed on Adviser Class shares. Direct purchases
into Money Market are not subject to a sales charge on redemption. Investors
may pay charges less than 1.0%, depending on the length of time the shares
are held. Adviser Class shares are also subject to distribution fees at an
annual rate of 0.50% (0.00% for Money Market) and service fees at an annual
rate of 0.25% (0.10% Money Market) of the value of average daily net assets
of the Adviser Class. See "Fees and Charges" in the Adviser Class
prospectus.

Aetna Mutual Funds Prospectus 7
<PAGE>

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

<TABLE>
<CAPTION>
Total
Other Operating
Management/ Administrative Expenses Expenses
Advisory Fee Fee (after (after fee
(after fee (after fee 12b-1 expense waiver/expense
waiver) waiver) Fee reimbursement) reimbursement)(1)
- --------------------- ------------ -------------- ----- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Money Market 0.07% 0.25% 0.00% 0.18% 0.50%
Government 0.00% 0.00% 0.50% 0.95% 1.45%
Bond 0.09% 0.25% 0.50% 0.66% 1.50%
Aetna Fund 0.80% 0.25% 0.50% 0.52% 2.07%
Growth and Income 0.68% 0.25% 0.50% 0.40% 1.83%
Growth 0.70% 0.25% 0.50% 0.58% 2.03%
Index Plus(2) 0.30% 0.25% 0.50% 0.40% 1.45%
Small Company 0.85% 0.25% 0.50% 0.60% 2.20%
International Growth 0.85% 0.25% 0.50% 1.34% 2.94%
</TABLE>

(1) From time to time, Aetna may agree to waive all or a portion of its
Management/Advisory Fee and/or its Administrative Fee for a particular
Series and to reimburse some or all of a particular Series' Other Expenses.
Such fee waiver/ expense reimbursement arrangements will increase the
Series' total return and may be modified or terminated at any time.
(2) Inception date December 10, 1996.
The expenses shown above are based on the year ended October 31, 1996 and
reflect the most current fee waiver/ expense reimbursement arrangements as
of the date of this Prospectus. Fee waiver/expense reimbursement
arrangements are currently in effect for Money Market, Government, Bond and
Index Plus. These arrangements limit the Total Operating Expenses to the
amounts shown above. Without these arrangements, Management/Advisory Fees,
Administrative Fees and Total Operating Expenses would have been 0.40%,
0.25%, and 0.93% for Money Market; 0.50%, 0.25%, and 2.32% for Government
and 0.50%, 0.25%, and 1.91% for Bond. For Index Plus, Management/ Advisory
Fees and Total Operating Expenses are estimated to be 0.45% and 1.60%,
respectively. These are based on estimated amounts for the current fiscal
year. With respect to Money Market, Aetna may waive or reimburse an amount
that would lower the Total Operating Expenses shown above.

-----------------------------------------------------------------------------

8 Aetna Mutual Funds Prospectus
<PAGE>

-----------------------------------------------------------------------------
Adviser Class
Example

Using the above expenses, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and either redemption at the end of
each of the periods shown or no redemption:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
--------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Money Market*
Redemption at end of each time period $ 5 $16 $ 28 $ 63
No Redemption 5 16 28 63
Government
Redemption at end of each time period 25 51 79 174
No Redemption 15 46 79 174
Bond
Redemption at end of each time period 25 52 82 179
No Redemption 15 47 82 179
Aetna Fund
Redemption at end of each time period 31 70 111 240
No Redemption 21 65 111 240
Growth and Income
Redemption at end of each time period 29 63 99 215
No Redemption 19 58 99 215
Growth
Redemption at end of each time period 31 69 109 236
No Redemption 21 64 109 236
Index Plus
Redemption at end of each time period 25 51 79 174
No Redemption 15 46 79 174
Small Company
Redemption at end of each time period 32 74 118 253
No Redemption 22 69 118 253
International Growth
Redemption at end of each time period 40 96 155 326
No Redemption 30 91 155 326
</TABLE>

This example should not be considered an indication of prior or future
expenses. Actual expenses for the current year may be greater or less than
those shown. This example reflects, among other things, the application of
the maximum Deferred Sales Charge imposed on Adviser Class shares.
*These numbers do not reflect a Contingent Deferred Sales Charge since a
Deferred Sales Charge is only applied to proceeds from Money Market share
redemptions when the shares were purchased through an exchange from another
Series and the Deferred Sales Charge has been deferred. (See "Fees and
Charges--Contingent Deferred Sales Charge.")
The Fund offers two classes of shares for each of its Series, Select Class
and Adviser Class. Because the expenses and sales charges vary between the
classes, the performance of each class will vary. Registered representatives
may receive different levels of compensation depending on the class sold.
Additional information regarding the classes may be obtained by calling your
representative or 1-800-238-6263.

-----------------------------------------------------------------------------

Aetna Mutual Funds Prospectus 9
<PAGE>

Financial Highlights

(for one outstanding share throughout each period)

The selected data presented below for, and as of the end of, each of the
periods listed are derived from the financial statements of Aetna Series
Fund, Inc., which financial statements have been audited by KPMG Peat Marwick
LLP, independent auditors. The financial statements as of, and for the year
ended October 31, 1996 and the independent auditors' report thereon, are
included in the annual report which is incorporated by reference into the
Statement.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Select Class Shares
Money Market
-------------------------------------------------------
1996 1995 1994+ 1993 1992
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------
Net Investment Income 0.05 0.06 0.03 0.03 0.04
Net Realized and Change in Unrealized Gain (Loss)
on Investments 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Total from Investment Operations 0.05 0.06 0.03 0.03 0.04
Dividends from Net Investment Income (0.05) (0.06) (0.03) (0.03) (0.04)
Dividends in Excess of Net Investment Income 0.00 0.00 0.00 0.00 0.00
Distributions from Realized Gain on Investments 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------
Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total Return 5.44% 5.95% 3.33% 3.29% 3.98%
Net Assets End of Period (in thousands) $323,281 $275,524 $161,756 $107,844 $36,522
Ratio of Total Investment Expenses to Average Net
Assets* 0.30% 0.27% 0.21% 0.00% 0.00%
Ratio of Net Investment Income to Average Net
Assets* 5.30% 5.78% 4.05% 3.33% 3.93%
Ratio of Net Investment Expense Before
Reimbursement and Waiver to Average Net Assets* 0.83% 0.88% 0.85% 0.95% 1.04%
Ratio of Net Investment Income Before
Reimbursement and Waiver to Average Net Assets* 4.78% 5.17% 3.38% 2.38% 2.87%
Portfolio Turnover N/A N/A N/A N/A N/A
Average Commission Rate Paid Per Share -- -- -- -- --
</TABLE>

* Annualized for periods less than one year.
+ For the ten month period ended October 31, 1994.
Per share data calculated using average number of shares outstanding
throughout the period.
Additional information about the performance of the Fund and its Series is
contained in the Annual Report dated October 31, 1996. The Annual Report is
incorporated herein by reference and is available, without charge, by
writing to the Fund at the address listed on the cover of this Prospectus
or by calling 1-800-238-6263.

10 Aetna Mutual Funds Prospectus
<PAGE>

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Government Bond
- -------------------------------- ---------------------------------------------------
1996 1995 1994+ 1996 1995 1994+ 1993 1992
- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.01 $ 9.41 $ 10.00 $ 10.27 $ 9.58 $ 10.37 $ 9.99 $ 10.00
- ------- ------- ------- ------- ------- ------- ------- -------
0.56 0.64 0.40 0.65 0.65 0.52 0.55 0.53
(0.13) 0.59 (0.63) (0.15) 0.65 (0.86) 0.45 0.16
- ------- ------- ------- ------- ------- ------- ------- -------
0.43 1.23 (0.23) 0.50 1.30 (0.34) 1.00 0.69
(0.64) (0.63) (0.36) (0.68) (0.61) (0.45) (0.55) (0.53)
0.00 0.00 0.00 0.00 0.00 0.00 (0.07) (0.17)
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------- ------- ------- ------- ------- ------- ------- -------
$9.80 $ 10.01 $ 9.41 $ 10.09 $ 10.27 $ 9.58 $ 10.37 $ 9.99
======= ======= ======= ======= ======= ======= ======= =======
4.43% 13.58% (2.37)% 5.09% 14.06% (3.31)% 10.20% 7.23%
$10,662 $19,154 $26,110 $28,864 $32,778 $27,584 $46,788 $37,209
0.70% 0.70% 0.41% 0.75% 0.79% 0.76% 0.47% 0.05%
5.67% 6.79% 5.29% 6.16% 6.56% 6.29% 5.34% 5.44%
1.57% 1.30% 1.16% 1.16% 1.06% 1.06% 1.01% 1.10%
4.80% 6.19% 4.54% 5.75% 6.25% 5.98% 4.80% 4.39%
50.48% 117.31% 43.63% 42.33% 56.99% 51.80% 50.01% 57.05%
-- -- -- -- -- -- -- --
</TABLE>

Aetna Mutual Funds Prospectus 11
<PAGE>

Financial Highlights (continued)

(for one outstanding share throughout each period)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Select Class Shares
Aetna Fund
---------------------------------------------------
1996 1995 1994+ 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 12.36 $ 10.65 $ 10.82 $ 10.18 $ 10.00
------- ------- ------- ------- -------
Net Investment Income 0.31 0.35 0.23 0.34 0.43
Net Realized and Change in Unrealized Gain (Loss)
on Investments 1.77 1.69 (0.28) 0.64 0.24
------- ------- ------- ------- -------
Total from Investment Operations 2.08 2.04 (0.05) 0.98 0.67
Dividends from Net Investment Income (0.35) (0.33) (0.12) (0.30) (0.39)
Dividends in Excess of Net Investment Income 0.00 0.00 0.00 (0.01) (0.10)
Distributions from Realized Gain on Investments (0.57) 0.00 0.00 (0.03) 0.00
------- ------- ------- ------- -------
Net Asset Value End of Period $ 13.52 $ 12.36 $ 10.65 $ 10.82 $ 10.18
======= ======= ======= ======= =======
Total Return 17.63% 19.45% (0.42)% 9.84% 6.64%
Net Assets End of Period (in thousands) $88,625 $83,941 $76,267 $63,982 $37,726
Ratio of Total Investment Expenses to Average Net
Assets* 1.31% 1.27% 1.09% 0.93% 0.07%
Ratio of Net Investment Income to Average Net
Assets* 2.42% 3.14% 2.65% 3.21% 4.31%
Ratio of Net Investment Expense Before
Reimbursement and Waiver to Average Net Assets* 1.31% 1.30% 1.32% 1.34% 1.47%
Ratio of Net Investment Income Before
Reimbursement and Waiver to Average Net Assets* 2.42% 3.11% 2.42% 2.79% 2.91%
Portfolio Turnover 117.88% 129.05% 86.10% 19.95% 13.35%
Average Commission Rate Paid Per Share $0.0557 -- -- -- --
</TABLE>

12 Aetna Mutual Funds Prospectus
<PAGE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Growth and Income Growth
- ------------------------------------------------------- -------------------------------
1996 1995 1994+ 1993 1992 1996 1995 1994+
- -------- -------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13.46 $ 11.11 $ 11.03 $ 10.51 $ 10.00 $ 13.75 $ 10.78 $ 10.00
- -------- -------- -------- ------- ------- ------- ------- -------
0.19 0.21 0.12 0.19 0.26 0.03 0.04 0.09
3.09 2.27 0.04 0.50 0.51 2.39 3.02 0.69
- -------- -------- -------- ------- ------- ------- ------- -------
3.28 2.48 0.16 0.69 0.77 2.42 3.06 0.78
(0.24) (0.13) (0.08) (0.16) (0.26) (0.05) (0.08) 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
(0.76) 0.00 0.00 (0.01) 0.00 (1.76) (0.01) 0.00
- -------- -------- -------- ------- ------- ------- ------- -------
$ 15.74 $ 13.46 $ 11.11 $ 11.03 $ 10.51 $ 14.36 $ 13.75 $ 10.78
======== ======== ======== ======= ======= ======= ======= =======
25.69% 22.58% 1.40% 6.58% 7.81% 19.82% 28.79% 7.70%
$377,784 $356,803 $301,360 $60,127 $31,473 $45,473 $36,936 $27,188
1.08% 1.10% 0.92% 1.13% 0.33% 1.28% 1.20% 0.92%
1.35% 1.73% 1.51% 1.77% 2.83% 0.20% 0.36% 1.10%
1.08% 1.10% 1.03% 1.27% 1.72% 1.28% 1.30% 1.42%
1.35% 1.73% 1.39% 1.55% 1.44% 0.20% 0.26% 0.60%
106.09% 127.43% 54.13% 23.60% 14.44% 144.19% 171.75% 120.32%
$ 0.0505 -- -- -- -- $0.0598 -- --
</TABLE>

Aetna Mutual Funds Prospectus 13
<PAGE>

Financial Highlights (continued)

(for one outstanding share throughout each period)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Select Class Shares
Small Company
-------------------------------
1996 1995 1994+
------- ------- -------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 13.52 $ 10.39 $ 10.00
------- ------- -------
Net Investment Income (0.08) 0.00 0.02
Net Realized and Change in Unrealized Gain (Loss)
on Investments 2.64 3.15 0.37
------- ------- -------
Total from Investment Operations 2.56 3.15 0.39
Dividends from Net Investment Income 0.00 (0.02) 0.00
Dividends in Excess of Net Investment Income 0.00 0.00 0.00
Distributions from Realized Gain on Investments (1.41) 0.00 0.00
------- ------- -------
Net Asset Value End of Period $ 14.67 $ 13.52 $ 10.39
======= ======= =======
Total Return 19.78% 30.39% 3.90%
Net Assets End of Period (in thousands) $32,125 $33,511 $25,879
Ratio of Total Investment Expenses to Average Net
Assets* 1.44% 1.41% 1.15%
Ratio of Net Investment Income to Average Net
Assets* (0.53)% (0.01)% 0.21%
Ratio of Net Investment Expense Before
Reimbursement and Waiver to Average Net Assets* 1.44% 1.49% 1.58%
Ratio of Net Investment Income Before
Reimbursement and Waiver to Average Net Assets* (0.53)% (0.08)% (0.22)%
Portfolio Turnover 163.21% 156.43% 116.28%
Average Commission Rate Paid Per Share $0.0575 -- --
</TABLE>

*Annualized for periods less than one year.
+For the ten month period ended October 31, 1994.
Per share data calculated using average number of shares outstanding
throughout the period.
Additional information about the performance of the Fund and its Series is
contained in the Annual Report dated October 31, 1996. The Annual Report is
incorporated herein by reference and is available, without charge, by writing
to the Fund at the address listed on the cover of this Prospectus or by
calling 1-800-238-6263.

14 Aetna Mutual Funds Prospectus
<PAGE>

<TABLE>
<CAPTION>
- -----------------------------------------------------
International Growth
- -----------------------------------------------------
1996 1995 1994+ 1993 1992
- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 10.62 $ 11.56 $ 11.17 $ 8.88 $ 10.00
0.03 0.11 0.06 0.05 0.06
1.59 (0.09) 0.33 2.65 (1.15)
1.62 0.02 0.39 2.70 (1.09)
(0.19) (0.40) 0.00 (0.05) (0.03)
0.00 0.00 0.00 (0.34) 0.00
(0.26) (0.56) 0.00 (0.02) 0.00
$ 11.79 $ 10.62 $ 11.56 $ 11.17 $ 8.88
15.61% (0.04)% 3.49% 30.37% (10.84)%
$45,786 $25,102 $31,479 $39,847 $26,640
2.17% 1.37% 1.66% 1.48% 0.50%
0.40% 1.02% 0.71% 0.50% 1.36%
2.17% 1.50% 1.80% 1.77% 2.98%
0.40% 0.88% 0.57% 0.20% (1.12)%
135.92% 32.91% 81.67% 110.38% 81.74%
$0.0178 -- -- -- --
</TABLE>

Aetna Mutual Funds Prospectus 15
<PAGE>

Description of the Fund

The Fund is a management investment company incorporated in the State of
Maryland made up of multiple portfolios or series, each of which is
diversified under the 1940 Act. Each has an investment objective which is
fundamental. There can be no assurance that a Series will meet its investment
objective. Each Series is subject to investment restrictions described in
this Prospectus and in the Statement, some of which are fundamental policies.
The investment objective and fundamental investment policies of a Series may
be changed only by a vote of a majority of the outstanding shares (both
Adviser and Select Class) of that Series (as defined in the 1940 Act). A
glossary describing various investment terms relating to securities that may
be held is contained in Appendix A.

Description of
Money Market
Fund

Money Market
Investment Objective Money Market seeks to provide high current return,
consistent with preservation of capital and liquidity, through investment in
high-quality money market instruments.

Investment Policy Money Market invests in U.S. Treasury bills, notes and
bonds; obligations of agencies and instrumentalities of the U.S. Government;
obligations of domestic banks and U.S. dollar denominated obligations of
foreign banks (provided that the issuing bank has reported assets in excess
of $5 billion and meets strict capital and profitability criteria), finance
company commercial paper, corporate commercial paper (including variable-rate
instruments), discounted notes of domestic banks, domestic banker's
acceptances eligible for discounting at the Federal Reserve, Yankee
certificates of deposit, Yankee commercial paper, Eurodollar securities,
corporate bonds and notes and other debt instruments. Money Market may
purchase securities on a when-issued or delayed-delivery basis. All
investments will have a maturity at the time of purchase, as defined under
the federal securities laws, of 397 days or less. Any foreign securities or
obligations will be U.S. dollar denominated.

The remainder of Money Market's assets will be invested in securities
rated within the two highest rating categories by any two rating agencies (or
one, if only one rating agency has rated the security) and unrated securities
if the Adviser determines the security to be of com-

16 Aetna Mutual Funds Prospectus
<PAGE>

parable quality. With respect to these securities, Money Market will not
invest more than 1% of the market value of its total assets or $1 million,
whichever is greater, in the securities or obligations of any one issuer.

Money Market will use nationally recognized rating agencies including, but
not limited to, Standard & Poor's Corporation (Standard & Poor's) and Moody's
Investors Service, Inc. (Moody's) when determining security credit ratings.
All investments will be determined to present minimal credit risks.

Money Market's dollar weighted average maturity will not exceed 90 days.
Although the Adviser will use its best efforts to maintain a constant net
asset value of $1.00 per share, there is no assurance that it will be able to
do so. Investments in Money Market are neither insured nor guaranteed by the
U.S. Government.

Description of
Government
Fund

Government
Investment Objective Government seeks to provide income consistent with the
preservation of capital through investment in securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.

Investment Policy Government invests at least 65% of its assets in direct
obligations of the U.S. Government, such as treasury bills, notes and bonds
which are backed by the full faith and credit of the United States, or in
indirect obligations of the U.S. Government, such as notes and bonds which are
guaranteed by agencies and instrumentalities of the U.S. Government. Securities
of such agencies and instrumentalities are backed by either the full faith and
credit of the U.S. Treasury, the right of the issuer to borrow from the U.S.
Treasury, or the credit of the agency or instrumentality. Such agencies and
instrumentalities include, but are not limited to, the Government National
Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA)
and the Federal Home Loan Mortgage Corporation (FHLMC).

Government may also invest in STRIPs, zero coupon bonds and options and
futures contracts and in other Treasury instruments.

Description of
Bond Fund

Bond
Investment Objective Bond seeks to provide as high a level of total return
(i.e., income and capital appreciation) as is consistent with reasonable
risk, primarily through investment in a diversified portfolio of
investment-grade corporate bonds and securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.

Aetna Mutual Funds Prospectus 17
<PAGE>

by the U.S. Government, its agencies or instrumentalities. "High-grade
corporate bonds" are securities rated A or above by Standard & Poor's or by
Moody's, and securities rated comparably by other nationally recognized
statistical rating organizations, or considered to be of comparable quality.

Additionally, Bond may invest in commercial paper and other short-term
investments, including variable-rate instruments, all having a maturity of
less than one year, and in debt securities with equity features,
convertibles, and other debt securities.

Bond may invest up to 15% of its total assets in high-risk, high-yield
securities or "junk bonds" (securities rated BB/Ba or below, or, if unrated,
considered by the Adviser to be of comparable quality). See "Risk Factors and
Other Considerations" for further information.

The Series will not target any given maturity, thus giving it flexibility
to invest in short and long-term securities as market conditions change. Bond
may also invest in equity securities (not to exceed 5% of total assets) and
securities issued by any foreign corporation or instrumentality or political
subdivision of foreign governments (not to exceed 25% of total assets). Bond
may also purchase securities on a when-issued, delayed-delivery or
forward-commitment basis.

As of October 31, 1996, the weighted average distribution of bonds based
on Standard & Poor's and Moody's bond ratings was 48.0% in AAA/Aaa, 19.9% in
AA/Aa, 11.2% in A, 3.2% in BBB/Baa, 3.2% in BB/Ba, and 14.5% in unrated
bonds. See Appendix B for further information on bond ratings.

Description of
Aetna Fund

Aetna Fund
Investment Objective Aetna Fund seeks to maximize total return with
reasonable safety of principal by investing in a diversified portfolio of
stocks, bonds and money market instruments.

Investment Policy An investment in Aetna Fund may involve less investment
risk than an investment in a portfolio consisting entirely of common stocks.
Aetna Fund will allocate its assets among common and preferred stocks, bonds,
including mortgage-related and other asset-backed securities, U.S. Government
securities, U.S. Government derivatives, and money market instruments,
including variable-rate instruments, in proportions that reflect the
anticipated returns and risks of each asset class. Aetna Fund will not invest
more than 15% of the total value of its assets in high-risk, high-yield
securities, or "junk bonds." It may purchase commercial paper and other
short-term instruments and invest up to 25% of its assets in foreign
securities. It may write and buy listed covered call options and buy and sell
put

18 Aetna Mutual Funds Prospectus
<PAGE>

and call options and stock index futures contracts and related options. Aetna
Fund may also purchase securities on a when-issued, delayed-delivery or
forward-commitment basis.

The Adviser employs current market statistics and economic indicators to
forecast returns for each sector of the securities market for Aetna Fund.
These calculations provide a disciplined framework for assessing the relative
attractiveness of stocks, bonds, and cash equivalents. The Adviser uses
proprietary computer programs to help calculate the optimal asset exposure
over specified time periods for Aetna Fund.

Special Considerations Investors should be aware that the investment results
of Aetna Fund partly depend upon the Adviser's ability to anticipate
correctly the relative performance of stocks, bonds and money market
instruments.

While the Adviser has substantial experience in managing all asset classes,
there can be no assurance that the Adviser will always allocate assets to the
best performing sectors. Aetna Fund's performance would suffer if a major
portion of its assets were allocated to stocks in a declining market or,
similarly, if a major portion of its assets were allocated to bonds at a time
of adverse interest rate movement.

Description of
Growth and
Income Fund

Growth and Income
Investment Objective Growth and Income seeks long-term growth of capital and
income through investment in a diversified portfolio consisting primarily of
common stocks and securities convertible into common stocks believed to offer
above-average growth potential.

Investment Policy Growth and Income invests at least 65% of its assets in
common stocks which the Adviser believes have significant potential for
capital or income growth. It may also invest in convertible and
non-convertible preferred stocks, debt securities, rights and warrants.

Additionally, Growth and Income may write and buy listed covered call options
and buy and sell put and call options and stock index futures and options.
Growth and Income may also purchase commercial paper and other short-term
instruments, invest up to 25% of its assets in foreign securities, engage in
currency hedging and purchase securities on a when-issued, delayed-delivery
or forward commitment basis. Growth and Income will not invest more than 15%
of the total value of its assets in high risk, high-yield securities or "junk
bonds."

Description of
Growth Fund

Growth
Investment Objective Growth seeks growth of capital through investment in a
diversified portfolio consisting primarily of common stocks and securities
convertible into common stocks believed to offer growth potential.

Aetna Mutual Funds Prospectus 19
<PAGE>

Investment Policy Growth will normally invest at least 65% of its total
assets in common stocks which have potential for capital growth. It may also
invest in convertible and non-convertible preferred stocks.

Additionally, Growth may write and buy listed covered call options and buy
and sell put and call options, and stock index futures and options. Growth
may also purchase commercial paper and other short-term instruments, invest
up to 25% of its assets in foreign securities, engage in currency hedging and
purchase securities on a when-issued, delayed-delivery or forward commitment
basis. Growth will not invest more than 15% of the total value of its assets
in high risk, high yield securities or "junk bonds."

Index Plus
Investment Objective Index Plus seeks to outperform the total return
performance of publicly traded common stocks represented by the S&P 500.

Investment Policy Index Plus will attempt to be fully invested in common
stocks. Under normal circumstances, Index Plus will invest at least 90% of
its assets in common stocks represented in the S&P 500. Inclusion of a stock
in the S&P 500 in no way implies an opinion by Standard & Poor's Corporation
as to the stock's attractiveness as an investment. Index Plus is neither
sponsored by nor affiliated with Standard & Poor's Corporation. AN INVESTMENT
IN INDEX PLUS INVOLVES RISKS SIMILAR TO THOSE OF INVESTING IN COMMON STOCKS
GENERALLY. As Index Plus invests primarily in common stocks, Index Plus is
subject to market risk--i.e. the possibility that common stock prices will
decline over short or even extended periods. The U.S. stock market tends to
be cyclical, with periods when stock prices generally rise and periods when
prices generally decline.

Under normal circumstances, Index Plus will generally include
approximately 400 stocks included in the S&P 500. Index Plus intends, under
normal circumstances, to exclude common stocks which are not part of the S&P
500 and to exclude Aetna Inc. common stock.

It is a reasonable expectation that there will be a close correlation
between the performance of Index Plus and that of the S&P 500 in both rising
and falling markets. Index Plus expects to achieve a correlation between the
performance of its portfolio and that of the S&P 500 of at least 0.95,
without taking into account expenses. A correlation of 1.00 would indicate
perfect correlation, which would be achieved when the net asset value of
Index Plus, including the value of its dividends and capital gains
distributions, increases or decreases in exact proportion to changes in the
S&P 500.

20 Aetna Mutual Funds Prospectus
<PAGE>

The weightings of stocks in the S&P 500 are based on each stock's relative
total market capitalization, that is, its market price per share multiplied
by the number of common shares outstanding. Aetna will attempt to outperform
the investment results of the S&P 500 by creating a portfolio that has
similar market risk characteristics to the S&P 500, but will use a
disciplined analysis to identify those stocks having the greatest likelihood
of either outperforming or underperforming the market.

Description of
Small Company
Fund

Small Company
Investment Objective Small Company seeks growth of capital primarily through
investment in a diversified portfolio of common stocks and securities
convertible into common stocks of companies with smaller market
capitalizations.

Investment Policy Small Company will normally invest at least 65% of its
total assets in the common stock of companies with equity market
capitalizations at the time of purchase of $1 billion or less. Small Company
may also invest in convertible and non-convertible preferred stocks.

Additionally, Small Company may write and buy listed covered call options and
buy and sell put and call options and stock index futures and options. Small
Company may also purchase commercial paper and other short-term instruments,
invest up to 25% of its assets in foreign securities, engage in currency
hedging and purchase securities on a when-issued, delayed-delivery or forward
commitment basis. Small Company will not invest more than 15% of the total
value of its assets in high risk, high-yield securities or "junk bonds."

Description of
International
Growth Fund

International Growth
Investment Objective International Growth seeks long-term capital growth
primarily through investment in a diversified portfolio of common stocks
principally traded in countries outside of North America. International
Growth will not target any given level of current income.

Investment Policy International Growth will invest at least 65% of its total
assets among securities principally traded in three or more countries
excluding the United States, Canada and Mexico.

International Growth will invest primarily in equity securities including
securities convertible into stocks. Further, from time to time International
Growth may hold up to 10% of its total assets in long-term debt securities
with an equivalent Standard & Poor's or Moody's rating of AA/Aa or above.

Aetna Mutual Funds Prospectus 21
<PAGE>

International Growth may enter into forward foreign exchange contracts or
purchase financial futures or options (including options on futures) as a
means to moderate the impact of foreign currency fluctuations. It may also
purchase money market instruments and securities on a when-issued,
delayed-delivery or forward-commitment basis.

A special note
for Investors in
International
Growth Fund

Special Considerations for International Investors In the last 30 years,
foreign economic growth has frequently outpaced that of the United States and
returns from foreign equity investments have often exceeded those on
comparable U.S. securities. The Adviser believes that investment in foreign
securities offers significant potential for long-term capital appreciation
and affords substantial opportunities for investment diversification.

Investments in securities of foreign companies and in securities
denominated in foreign currencies involve additional risks not present in
U.S. securities. See "Risk Factors and Other Considerations" below for
additional information.

Risk Factors and Other Considerations

General Considerations The different types of securities purchased and
investment techniques used by the Adviser involve varying amounts of risk.
For example, equity securities are subject to a decline in the stock market
or in the value of the issuing company and preferred stocks have price risk
and some interest rate and credit risk. The value of fixed income or debt
securities may be affected by changes in general interest rates and in the
creditworthiness of the issuer. Debt securities with longer maturities (for
example, over ten years) are more affected by changes in interest rates and
provide less price stability than securities with short term maturities (for
example, one to ten years). Also, for each debt security, there is a risk of
principal and interest default which will be greater with higher-yielding,
lower-grade securities. High-risk, high-yield securities ("junk bonds") may
provide a higher return but with added risk. In addition, foreign securities
have currency risk.

Portfolio Turnover Portfolio turnover refers to the frequency of portfolio
transactions and the percentage of portfolio assets being bought and sold in
the aggregate during the year. Although the Adviser (except with respect to
Money Market) does not purchase securities with the intention of profiting
from short-term trading, the Adviser may buy and sell securities when the
Adviser believes such action is appropriate. It is anticipated that the
average annual turnover rate for Index Plus, Growth and Income, Bond and
Government may exceed 125% during fiscal year 1997, and that the turnover
rate for Aetna Fund, Growth and Small Company may exceed 150%. The annual

22 Aetna Mutual Funds Prospectus
<PAGE>

portfolio turnover rate for each of the other Series is not expected to but
may exceed 100%. Higher turnover rates have resulted and are expected to
continue to result in higher transaction costs relating to stock or equity
transactions, which costs are borne directly by the Series. The Adviser
anticipates that these higher costs are offset by the potentially improved
performance that is sought by numerous portfolio transactions. High turnover
rates may also result in a possible increase in short-term capital gains or
losses. See "Distributions," "Taxes" and the Statement for additional
information.

Cash or Cash Equivalents The Adviser reserves the right to temporarily depart
from a Series' investment objective by investing up to 100% of its assets in
cash or cash equivalents to defend against potential market decline. Such
cash equivalents include commercial paper and other short-term instruments as
deemed appropriate by the Adviser. In addition, all Series (except Money
Market) reserve the right to deposit some or all of their uninvested cash
balances into one or more joint accounts as authorized by the Commission.

All the Series may use the following:
Derivatives In order to manage exposure to changing interest rates,
securities prices and currency exchange rates, or to increase investment
return, a Series may engage in hedging and other strategies using
derivatives. A derivative is a financial instrument the value of which
depends on (or "derives" from) the value of an underlying asset, such as a
security, interest rate, currency rate or index. Derivatives that may be used
by a Series include, but are not limited to, forward contracts, swaps,
structured notes, collateralized mortgage obligations (CMOs), futures and
options (see "Futures Contracts" and "Options" below). The risks involved in
using derivatives include the risk that the derivative may experience greater
price swings than other securities and may be less liquid than other
securities. Leveraged derivatives involve borrowing. A Series may use
derivatives as a hedge against foreign currency, equity market or interest
rate risk, or to gain additional exposure to certain markets for investment
purposes, within the limitations set forth below. In addition, derivatives
may be used to enhance a Series' yield. For purposes other than hedging, a
Series will invest no more than 5% of its assets in derivatives which at the
time of purchase are considered by management to involve high risk to the
Series, such as inverse floaters, interest-only and principal-only debt
instruments. Each Series (except Money Market) may invest up to 30% of its
assets in lower risk derivatives for hedging, to gain additional exposure to
certain markets for investment purposes, and to maintain liquidity to meet
shareholder redemptions or to minimize trading costs.

Aetna Mutual Funds Prospectus 23
<PAGE>

Borrowing Each Series may borrow up to 5% of the value of its total assets
from a bank for temporary or emergency purposes. The Series does not intend
to borrow for other purposes, except that it may invest in leveraged
derivatives which have certain risks as outlined above. The Series may borrow
for leveraging purposes only if after the borrowing, the value of the Series'
net assets including proceeds from the borrowings, is equal to at least 300%
of all outstanding borrowings. Leveraging can increase the volatility of a
Series since it exaggerates the effects of changes in the value of the
securities purchased with the borrowed funds.

Repurchase Agreements Each Series may enter into repurchase agreements with
domestic banks and broker-dealers. Under a repurchase agreement, the Series
may acquire a debt instrument for a relatively short period subject to an
obligation by the seller to repurchase and by the Series to resell the
instrument at a fixed price and time. Such agreements, although fully
collateralized, involve the risk that the seller of the securities may fail
to repurchase them. In that event, a Series 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 Series to liquidate the collateral
may be delayed or limited.

The Directors have established credit standards for issuers of repurchase
agreements entered into by the Series.

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

Bank Obligations Each Series 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%.

Illiquid and Restricted Securities Each Series may invest up to 15% of its
total assets in illiquid securities (10% in the case of Index Plus and Money
Market). Illiquid securities are securities that are not readily marketable
or cannot be liquidated within seven days in the ordinary course of business
without taking a materially reduced price. In addition, a Series may invest
in securities that are subject to legal or contractual restrictions as to
resale, including securities purchased

24 Aetna Mutual Funds Prospectus
<PAGE>

under Rule 144A and Section 4(2) of the Securities Act of 1933. The Directors
have established a policy to monitor the liquidity of securities acquired by
its Series.

Foreign Securities The purchase of foreign securities may involve certain
additional risks. Such risks include: currency fluctuations and related
currency conversion costs; less liquidity; price or income volatility; less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies; possible difficulty in obtaining and enforcing judgments
against foreign entities; adverse foreign political and economic
developments; different accounting procedures and auditing standards; the
possible imposition of withholding taxes on interest income payable on
securities; the possible seizure or nationalization of foreign assets; the
possible establishment of exchange controls or other foreign laws or
restrictions which might adversely affect the payment and transferability of
principal, interest and dividends on securities; higher transaction costs;
possible settlement delays; and less publicly available information about
foreign issuers.

All Series except Money Market may also use the following:
Securities Lending Each Series 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 Series' total assets. The Series will not lend portfolio
securities to affiliates. Though fully collateralized, lending portfolio
securities involves certain risks, including the possibility that a Series
may incur costs in liquidating the collateral or a loss if the collateral
declines in value. In the event of a disparity between the value of the
loaned security and the collateral, there is the additional risk that the
borrower may fail to return the securities or provide additional collateral.

Futures Contracts A Series may enter into futures contracts or options on
futures subject to the limits discussed in the Statement. See "Derivatives"
above.

Certain risks are involved in futures contracts including but not limited
to: transactions to close out futures contracts may not be able to be
effected at favorable prices; possible reduction in a Series' total return
and yield; possible reduction in value of the futures instrument; the
inability of a Series to limit losses by closing its position due to lack of
a liquid secondary market or due to daily limits of price fluctuation;
imperfect correlation between the value of the futures contracts and the
related securities; and potential losses in excess of the amount invested in
the futures contracts themselves.

Aetna Mutual Funds Prospectus 25
<PAGE>

The use of futures involves a high degree of leverage because of the low
margin requirements. As a result, small price movements in futures contracts
may result in immediate and potentially unlimited losses or gains to a
Series. The amount of gains or losses on investments in futures contracts
depends on the portfolio manager's ability to predict correctly the direction
of stock prices, interest rates and other economic factors.

Options Options are used to minimize principal fluctuation or to generate
additional premium income but they do involve risks. Writing call options,
for example, involves the risk of not being able to effect closing
transactions at favorable prices or to participate in the appreciation of the
underlying securities. Purchasing put options involves the risk of losing the
entire purchase price of the option.

All Series except Money Market, Government, and International Growth may also
use the following:

High-Risk, High-Yield Securities The Series may invest in high-risk,
high-yield securities, often called "junk bonds". These securities are rated
BB/Ba or below, or, if unrated, are considered 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, they may be purchased if
they are thought to offer good value. This may happen if, for example, the
rating agencies have, in the Adviser's opinion, misclassified the bonds or
overlooked the potential for the issuer's enhanced creditworthiness.

Government, Bond and Aetna Fund may also use the following:

26 Aetna Mutual Funds Prospectus
<PAGE>

adjustable-rate mortgage loans. In addition, a Series may invest in CMOs and
securities issued by real estate mortgage investment conduits (REMICs).
Mortgage-backed securities are subject to the same prepayment risk as
asset-backed securities.

Aetna Fund, Growth and Income, Growth, Index Plus and Small Company may also
use the following:

Small Capitalization Companies The Series may acquire securities of smaller,
less well-known U.S. companies with equity market capitalization generally
less than $1.0 billion. These companies may be in an early developmental
stage or may be older companies entering a new stage of growth due to
management changes, new technology, products or markets. The securities of
small capitalization companies may also be undervalued due to poor economic
conditions, market decline or actual or unanticipated unfavorable
developments affecting the companies.

Securities of small capitalization companies tend to offer greater
potential for growth than securities of larger, more established issuers but
there are additional risks associated with them. These risks include: limited
marketability; more abrupt or erratic market movements than securities of
larger capitalization companies; and less publicly available information
about the company and its securities. In addition, these companies may be
dependent on relatively few products or services, have limited financial
resources and lack of management depth, and may have less of a track record
or historical pattern of performance.

Index Plus may also use the following:

Supranational Agencies. Index Plus 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.

Investment Restrictions

Aetna Mutual Funds Prospectus 27
<PAGE>

purposes of this restriction, finance companies will be classified as separate
industries according to the end users of their services, such as automobile
finance, computer finance and consumer finance. This limitation will not apply
to securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities and, in the case of Money Market to securities invested in, or
repurchase agreements for, U.S. Government securities, and certificates of
deposit, banker's acceptances, or securities of banks and bank holding
companies. Also, a Series 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 Series' total assets. The Series do not invest in the
securities of companies determined by the Adviser to be primarily involved in
the production or distribution of tobacco products. This policy does not apply
to Index Plus. See the Statement for additional restrictions.

Shareholder Services

The Fund offers several services to its shareholders. These may be selected
on the application or you may call 1-800-367-7732 to select these services at
a later date.

Certain features may not be available through employer-sponsored retirement
plans. Please refer to your plan materials for specific information about
services available under your plan.

Shareholder Inquiries If you have questions about your account or would like
to initiate a transaction, please call 1-800-367-7732. If you would like to
receive an additional prospectus, application or information about the Fund,
please call 1-800-238-6263.

How to
Purchase
Shares

How to Purchase Shares Select Class shares may be purchased directly from the
Fund, through a registered representative of a broker-dealer affiliated with
the Fund, through a registered representative of an unaffiliated
broker-dealer, or through an employer-sponsored retirement plan. (If you are
purchasing through an employer-sponsored retirement plan, please refer to
your plan materials.)

28 Aetna Mutual Funds Prospectus
<PAGE>

class of another Series in the Fund. All checks must be drawn on a bank located
within the United States and payable in U.S. dollars. Minimum investments may be
waived if an investment is made through exchange of the entire amount invested
in another Series. 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 Shares for new accounts will be purchased at the net
asset value next determined on any day that the NYSE is open for business
(Business Day) so long as the completed and signed application accompanied by
a check in payment for the shares is received by Firstar Trust Company
(Transfer Agent) at its Milwaukee offices prior to 4:00 p.m. Additional
investments and exchanges will be processed at the net asset value next
determined if the check or wire for the purchase, or the exchange request, is
received by 4:00 p.m. Orders received after 4:00 p.m. will be processed at
the net asset value determined on the following Business Day. For investors
purchasing shares in connection with retirement plans offered by certain
institutions (Institutions) under Sections 401, 403(b) or 457 of the Internal
Revenue Code, shares will be purchased at the net asset value determined on
the Business Day on which the Institution receives the investor's request
before the time specified by such Institution. Investors participating in
such a plan should refer to their plan materials for a discussion of any
specific instructions on the timing or restrictions on the purchase of
shares. Please refer to "Net Asset Value" for information on how net asset
value is determined.

A special note
for Investors in
International
Growth Fund

Purchase by Mail To purchase shares by mail, please complete and sign the
application, make a check payable to the Aetna Series Fund, Inc. and mail to
Firstar Trust Company, the transfer agent, as follows:

Aetna Series Fund, Inc.
c/o Mutual Fund Services, 3rd Floor
P.O. Box 701
Milwaukee, WI 53201-0701

Correspondence mailed by overnight courier should be sent to the transfer
agent as follows:

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

Aetna Mutual Funds Prospectus 29
<PAGE>

name, account number(s), the Series you wish to invest in, and the amount to be
invested in each Series. When opening an account, your check should be made
payable to Aetna Series Fund Inc. 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 Aetna
Series Fund, Inc.

You can
purchase by
wire, electronic
funds transfer
or exchange

Purchase by Wire Once you are a shareholder of a Series, you may purchase
additional shares 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 transfer agent and custodian bank are open for
business.

Purchase by Electronic Funds Transfer Once you are a shareholder in any
Series of the Fund, you may purchase additional 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 Series. You must elect EFT capability in writing, on the
application or subsequently by requesting the appropriate information.

Purchase by Exchange You may open an account or purchase additional shares by
making an exchange from the same class shares of any other Series of the
Fund, provided shares of such Series 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 your name and account number(s), the name of the
Series into which you wish to exchange, the amount to be exchanged, and the
signatures of all shareholders. Send your request to the address listed above
under "Purchase by Mail." Note that this exchange privilege also applies to
three Series of the Fund that are offered through a different
prospectus--Aetna Ascent, Aetna Crossroads and Aetna Legacy, which are known
as the Generation Series.

You may also exchange your shares by calling 1-800-367-7732. Please have
available the Series' names, account number(s), your Social Security number
or taxpayer identification number, 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:

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

[ ] An exchange which represents an initial investment in a Series must meet
the minimum investment requirements described under "Shareholder Services
- How to Open an Account."

30 Aetna Mutual Funds Prospectus
<PAGE>

[ ] 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 Series account that is not registered identically
to the transferring Series account.

[ ] Following an investment in a Series, there is a required eight-day
holding period or maximum allowed by law, if shorter, before those shares
can be exchanged.

There is currently no limit on the number of exchanges. However, each
Series reserves the right to temporarily or permanently terminate the
exchange privilege for any person who makes more than five exchanges out of a
Series per calendar year. In addition, each Series reserves the right to
refuse exchange purchases by any person or group if, in the Adviser's
judgment, it would be unable to invest effectively in accordance with its
investment objective as a result of such exchange. Each Series 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 Fund has
established reasonable procedures to confirm that instructions received are
genuine. If these procedures are not followed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. For your protection,
all telephone exchange transactions may be recorded, and you will be asked
for certain identifying information.

Your distribution
option can be
changed at any
time by calling
1-800-367-7732

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

[ ] Full Reinvestment - Both dividends and capital gains distributions from a
Series will be reinvested in additional Select Class shares of that
Series. This option will be selected automatically unless one of the
other options is specified. (Please refer to "Distributions.")

[ ] Or . . . Capital Gains Reinvestment - Capital gains distributions from a
Series will be reinvested in additional Select Class shares of that
Series and all net income from dividends will be distributed in cash.

[ ] 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 Series
of the Fund. To request information or to initiate a transaction, please call
1-800-367-7732.

If you make no selection, income dividends and capital gains distributions
with respect to a particular Series will be reinvested in additional

Aetna Mutual Funds Prospectus 31
<PAGE>

Select Class shares of that Series. Distributions paid in shares will be
credited to your account at the next determined net asset value per share.

Changes to the above options will be effective for distributions occurring
ten days after the date written notification is received by the transfer
agent.

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 on that
Business Day so long as the redemption request and all required documentation
is received by Firstar Trust Company (the transfer agent) at its Milwaukee
offices prior to 4:00 p.m. Redemption requests received after 4:00 p.m. will
be processed at the net asset value determined on the following Business Day.

A Series 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 Series 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 Series in any 90 day period. To the extent possible, the
Series will distribute readily marketable securities, in conformity with
applicable rules of the Commission. In the event such redemption is requested
by institutional investors, the Series 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 Statement for additional information on redemptions in
kind.

For help with
redemptions, call
1-800-367-7732

Redeem by Mail Shares of any Series may be redeemed by sending written
instructions to the transfer agent. The instructions should identify the
Series, the number of shares or dollar amount to be redeemed, your name and
account number. The instructions must be signed by all person(s) required to
sign for the Series account, exactly as the shares are registered, and
accompanied by a signature guarantee(s). (See "Signature Guarantee" below.)
Certain nonindividual shareholders may also be required to furnish copies of
supporting documents such as corporate resolutions or trust instruments.

Once a redemption request is received in good order, the Series will
normally send the proceeds of such redemption within one or two business
days. However, if making immediate payment could adversely affect a Series,
the Series may defer distribution for up to seven days or the maximum period
allowed by law, if shorter. Also, a Series will hold payment of redemption
proceeds until a purchase check or systematic investment clears, which may
take up to 12 calendar days. The Series may suspend redemptions or postpone pay-

32 Aetna Mutual Funds Prospectus
<PAGE>

ments 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 $12.00 fee will be charged for this service. A minimum redemption of
$1,000 is required for wire transfers.

Signature Guarantee A signature guarantee is verification of the authenticity
of the signature given by certain authorized institutions. The Fund may 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 Fund reserves the right to amend or discontinue this policy at any
time and establish other criteria for verifying the authenticity of any
redemption request.

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 Series 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 Series and mail the proceeds to you at the
address of record. Shares will be redeemed at net asset value on the day the
account is closed. The Fund will give you 60 days notice that such redemption
will occur unless you make an additional investment to increase the account
balance to the $500 minimum.

Information you
will receive

Tax-Deferred Retirement Plans The Fund 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:

[ ] IRAs, available to individuals who work and their spouses

Aetna Mutual Funds Prospectus 33
<PAGE>

[ ] 401(k) programs, available to corporations of all sizes to benefit their
employees

Shareholder Information The transfer agent will maintain your account
information. Account statements will be sent at least quarterly. A Form 1099
will also be sent each year by January 31. Annual and semiannual reports will
also be sent to shareholders. The transfer agent may charge you a fee for
special requests such as an historical transcript of your account and copies
of canceled checks.

Consolidated Statements reflecting current values, share balances 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 other shareholders be shown on one Consolidated Statement. For
example, information on your individual account, your IRA, your spouse's
individual account and your spouse's IRA may be shown on one Consolidated
Statement.

Other Features

A convenient
way to make
regular
investments

Systematic Investment The Systematic Investment feature, using the EFT
capability (see "Shareholder Services--Purchase by Electronic Funds Transfer"),
allows you to make automatic monthly investments in any Series. On the
application, you may select the amount of money to be moved and the Series in
which it will be invested. There is no minimum initial cash investment required
to purchase shares if you elect to use the EFT feature. The minimum monthly
Systematic Investment is currently $50 per Series, and we reserve the right to
increase that amount. EFT transactions will be effective 15 days following the
receipt by the transfer agent of your application. The Systematic Investment
feature and EFT capability will be terminated upon total redemption of your
shares. Payment of redemption proceeds will be held until a Systematic
Investment has cleared, which may take up to 12 calendar days. See "How to
Redeem Shares."

For more
information, call
1-800-367-7732

Automatic Cash Withdrawal Plan The Automatic Cash Withdrawal Plan provides a
convenient way for you to receive a systematic distribution while maintaining an
investment in the Fund. The Automatic Cash Withdrawal Plan permits you to have
payments of $100 or more automatically transferred from a Series to your
designated bank account on a monthly basis. To enroll in this plan, you must
have a minimum balance of $10,000 in a Series utilizing this feature. Your
automatic cash with-

34 Aetna Mutual Funds Prospectus
<PAGE>

drawals will be processed on a regular basis beginning on or about the first day
of the month. There may be tax consequences associated with these transactions.
Please consult your tax adviser.

Be sure to
sign up for
checkwriting
services

Checkwriting Service Checkwriting is available with Money Market. There is
currently no charge for this service, however, the transfer agent may impose
a nominal fee for checks. Checks must be for a minimum of $250 and the
checkwriting service may not be used for a complete redemption of your
shares. If the amount of the check is greater than the value of your shares,
the check will be returned unpaid. In addition, checks written against shares
purchased by check or Systematic Investment during the preceding 12 calendar
days will be returned unpaid due to uncollected funds. You may select the
checkwriting service by indicating your election on the application or by
calling 1-800-367-7732. All notices with respect to checks must be given to
the transfer agent. The checkwriting service is not available for IRAs or
other retirement accounts.

TDD Service Firstar Trust Company, the transfer agent, offers
Telecommunication Device for the Deaf (TDD) services for hearing impaired
shareholders. The dedicated number for this service is 1-800-684-3416 and
appears on shareholder account statements.

Changes to Service The Fund reserves the right to amend the shareholder
services described above or to change the terms or conditions of such
services at any time.

Cross Investing

[ ] Dividend Investing - You may elect to have dividend and/or capital gains
distributions automatically invested in one other Select Class Series,
including those Series offered through the Generation Series Prospectus
(Aetna Ascent, Aetna Crossroads and Aetna Legacy).

[ ] Systematic Exchange - You may establish an automatic exchange of Select
Class shares from one Series to another. The exchange will occur on or
about the 15th day of each month and must be for a minimum of $50 per
month. Since this transaction is treated as an exchange, the policies
related to the exchange privilege apply. Please read the "Shareholder
Services - Purchase by Exchange" section carefully. There may be tax
consequences associated with these exchanges. Please consult your tax
adviser.

Cross Investing may only be made in a Series that has been previously
established with the minimum investment. To request information or to
initiate a transaction under either or both of these features, please call
1-800-367-7732.

Aetna Mutual Funds Prospectus 35
<PAGE>

Management

Directors Each Series is managed under the supervision of the Directors. The
Directors set broad policies for the Fund and each of its Series. Information
about the Directors is found in the Statement.

The Fund's
Investment
Adviser

Investment Adviser Aetna has entered into an investment advisory agreement
with the Fund on behalf of each Series which provides that Aetna is
responsible for managing the investments of each Series and for providing all
necessary facilities and personnel costs to conduct such activities. Aetna is
a Connecticut corporation with its principal offices located at 151
Farmington Avenue, Hartford, Connecticut 06156. Aetna is registered with the
Commission as an investment adviser.

Listed below are the Advisory Fees that Aetna receives from each Series as
well as the fees that Aetna pays to the Subadvisor at an annual rate based on
average daily net assets of each Series:

<TABLE>
<CAPTION>
Subadvisory
Advisory Fee Fee Assets
- --------------------- ------------ ----------- ---------------------
<S> <C> <C> <C>
Money Market 0.400% 0.300% On first $500 million
0.350% 0.265% On next $500 million
0.340% 0.255% On next $1 billion
0.330% 0.250% On next $1 billion
0.300% 0.225% Over $3 billion
- ------------------------------------------------------------------------------
Government 0.500% 0.350% On first $250 million
0.475% 0.335% On next $250 million
0.450% 0.315% On next $250 million
0.425% 0.300% On next $1.25 billion
0.400% 0.280% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Bond 0.500% 0.350% On first $250 million
0.475% 0.335% On next $250 million
0.450% 0.315% On next $250 million
0.425% 0.300% On next $1.25 billion
0.400% 0.280% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Aetna Fund 0.800% 0.500% On first $500 million
0.750% 0.470% On next $500 million
0.700% 0.440% On next $1 billion
0.650% 0.410% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Growth and Income 0.700% 0.450% On first $250 million
0.650% 0.420% On next $250 million
0.625% 0.405% On next $250 million
0.600% 0.390% On next $1.25 billion
0.550% 0.355% Over $2 billion
- --------------------- ------------ ----------- ---------------------
</TABLE>

36 Aetna Mutual Funds Prospectus
<PAGE>

<TABLE>
<CAPTION>
Subadvisory
Advisory Fee Fee Assets
- --------------------- ------------ ----------- ---------------------
<S> <C> <C> <C>
Growth 0.700% 0.450% On first $250 million
0.650% 0.420% On next $250 million
0.625% 0.405% On next $250 million
0.600% 0.390% On next $1.25 billion
0.550% 0.355% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Index Plus 0.450% 0.350 % On first $250 million
0.450% 0.345 % On next $250 million
0.425% 0.3275% On next $250 million
0.400% 0.310 % On next $250 million
0.400% 0.300 % On next $1 billion
0.375% 0.2775% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Small Company 0.850% 0.550% On first $250 million
0.800% 0.520% On next $250 million
0.775% 0.505% On next $250 million
0.750% 0.490% On next $1.25 billion
0.725% 0.470% Over $2 billion
- --------------------- ------------ ----------- ---------------------
International Growth 0.850% 0.550% On first $250 million
0.800% 0.520% On next $250 million
0.775% 0.505% On next $250 million
0.750% 0.490% On next $1.25 billion
0.700% 0.455% Over $2 billion
</TABLE>

The investment advisory and administrative service fees (see
"Administrator" below) applicable to Aetna Fund, Growth and Income, Growth,
Small Company, and International Growth when taken together (before expense
reimbursement) are higher than those charged by some other investment
advisers to other registered investment companies.

Subadviser to
Aetna Series
Fund, Inc.

Subadviser Aetna, the Fund on behalf of each Series and Aeltus have entered
into subadvisory agreements appointing Aeltus as the subadviser for each
Series (Subadvisory Agreements). Aeltus is a Connecticut corporation with its
principal offices located at 242 Trumbull Street, Hartford, Connecticut
06103-1205. Aeltus is registered as an investment adviser with the
Commission. Under the Subadvisory Agreements, Aeltus is responsible for
managing the assets of each Series in accordance with its investment
objective and policies, subject to the supervision of Aetna, the Fund and the
Fund's Directors. Aeltus determines what securities and other instruments are
purchased and sold by each Series and handles certain related accounting and
administrative functions, including determining each Series' net asset value
on a daily basis and preparing and providing such reports, data and
information as Aetna or the Directors request from time to time.

Aetna Mutual Funds Prospectus 37
<PAGE>

Administrator The Fund on behalf of each Series has appointed Aetna as
administrator for each Series. Aetna has responsibility for all
administrative and internal accounting and reporting services, oversight of
relationships with third party service providers such as the transfer agent
and custodian, shareholder communications and reporting for each Series. As
administrator, Aetna will oversee the calculation of net asset values and
other financial reports prepared by the subadviser for the Series.

For these services, each Series pays Aetna a fee determined at an annual
rate of average daily net assets of the Series as follows: 0.25% on the first
$250 million; 0.24% on the next $250 million; 0.23% on the next $250 million;
0.22% on the next $250 million; 0.20% on the next $1 billion; and 0.18% on
assets over $2.0 billion.

Principal Underwriter Aetna is the principal underwriter for the Fund. Aetna
contracts with various broker-dealers, including one or more of its
affiliates, for distribution of shares.

Transfer Agent Firstar Trust Company, located at 615 E. Michigan Street,
Milwaukee, WI 53202, acts as the 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.

Series Expenses Each Series bears the costs of its operations. Expenses
directly attributable to a Series are charged to that Series. Some expenses
are allocated among all Series of the Fund in proportion to the net assets of
each Series and some expenses are allocated equally to each Series. Series
expenses for each class of shares are included in the Fee Tables.

Portfolio Management

The following individuals are primarily responsible for the day-to-day
management of the Series, as indicated below. All of the following
individuals may also decide as a group what strategy may benefit all of the
Series.

Money Market and Bond Jeanne Wong-Boehm, Managing Director, Aeltus, has been
managing Money Market and Bond since January 1992. Ms. Wong-Boehm joined
Aetna in 1983 as a fixed income portfolio analyst and in 1989 she was
assigned primary responsibility for the money market operations.

38 Aetna Mutual Funds Prospectus
<PAGE>

he advanced to Senior Investment Officer. In October 1989, Mr. Kim joined Aetna
as Fixed Income Portfolio Manager. He subsequently served as a Vice President of
Investor Relations for Aetna Inc. and later became Vice President and Senior
Portfolio Manager for Aetna Inc.'s Property/Casualty portfolios. In 1993, Mr.
Kim joined Mitchell Hutchins Institutional Investors as Managing Director and
Head of Institutional Fixed Income. In 1994 he returned to Aetna as its Chief
Investment Officer.

Growth and Income Kevin Means, Managing Director, Aeltus, has managed Growth
and Income since July 1994. Mr. Means is responsible for the management of
over $6 billion in variable annuity and mutual funds assets. Mr. Means joined
Aetna 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. Mr. Means heads a team of portfolio
managers who specialize in various asset classes used in the management of
Growth and Income.

Index Plus Geoffrey A. Brod, Vice President, Aeltus, is primarily responsible
for the day-to-day management of Index Plus. Mr. Brod has over 30 years of
experience in quantitative applications and has over 9 years of experience in
equity investments. Mr. Brod has been with the Aetna organization since 1966.

International Growth Vince Fioramonti, Vice President, Aeltus, has managed
International Growth since December 1995. Mr. Fioramonti manages
international stocks and non-U.S. dollar government bonds for several Aetna
investment funds. Mr. Fioramonti joined Aetna in 1994 after serving as Vice
President for The Travelers Investment Management Company. He began his
investment career with Travelers in 1988.

Growth Peter Canoni, Managing Director, Aeltus, has managed Growth since its
inception in January 1994. Mr. Canoni has worked as a fund manager for Aeltus
since 1980.

Small Company Thomas DiBella, Vice President, Aeltus, has managed Small
Company since its inception in January, 1994. Mr. DiBella joined Aeltus in
1991 and is currently responsible for the management of small capitalization
portfolios. Prior to joining Aeltus, Mr. DiBella was an investment officer
with Bethlehem Steel from 1989 to 1991.

Government Hugh T.M. Whelan, Vice President, Aeltus has managed Government
since January 1997. Mr. Whelan joined Aeltus in 1989 and manages fixed-income
portfolios employing different strategies.

Aetna Mutual Funds Prospectus 39
<PAGE>

Distributions

How to
receive
dividends

[ ] Money Market declares dividends daily and pays monthly.

[ ] Government and Bond declare and pay dividends monthly.

[ ] Aetna Fund and Growth and Income declare and pay dividends semiannually.

[ ] Growth, Index Plus, Small Company and International Growth declare and
pay 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 Series. Capital gains distributions are derived from each
Series' realized long-term capital gains. The per share dividends and
distributions of Select Class shares will be higher than the per share
dividends and distributions of the Adviser Class as a result of the
distribution fees and service fees applicable to the Adviser Class.

Money Market shares begin to accrue dividends the next Business Day after
they are purchased; a redemption will include dividends declared through the
redemption date.

Both income dividends and capital gains distributions are paid by each
Series on a per share basis. As a result, at the time of such payment, the net
asset value per share of a Series (except Money Market) will be reduced by the
amount of such payment.

Pricing
your Fund

Net Asset Value

The net asset value per share (NAV) of each Series is determined as of the
earlier of 15 minutes after the close of the NYSE or 4:15 p.m. eastern time
on each Business Day. Except for Money Market, the NAV is computed by
dividing the total value of a Series' assets (including dividends and
interest accrued but not collected) less all liabilities (including accrued
expenses), by the number of shares outstanding. A Series' securities are
valued primarily on the basis of market quotations. All other assets,
including restricted securities and other securities for which market
quotations are not readily available, are valued at their fair value in such
manner as may be determined, from time to time, under the authority of the
Directors.

Money Market's portfolio securities are valued at their amortized cost.
Money Market's use of amortized cost is part of its effort to maintain a
constant net asset value of $1.00 per share.

Form 1099-DIV
will be mailed
to you in January

Taxes

40 Aetna Mutual Funds Prospectus
<PAGE>

the Statement for a more detailed discussion of federal income tax
considerations. In addition to federal taxes, you may be subject to state and
local taxes and you should discuss your individual tax situation with your tax
adviser.

Shareholder Distributions Each Series intends to qualify for treatment under
Subchapter M of the Internal Revenue Code, as amended. By distributing all of
its income and meeting certain other requirements relating to the source of
its income and diversification of its assets, the Series will not be liable
for federal income or excise taxes. Therefore, each Series will distribute
all of its net income and gains to shareholders. Such distributions will be
taxable income or capital gains to the shareholders and not the Series.
Distributions of net long-term capital gains are taxable to the shareholders
as long-term capital gains regardless of the length of time a shareholder has
owned the shares. Distributions of net investment income and net short-term
capital gains are taxable as ordinary income. Depending on a Series'
investments, part or all of ordinary income dividends could be treated as:
(1) "U.S. Government Interest Dividends" which are exempt from state and
local taxes in some jurisdictions or (2) "Qualifying Dividends" which for
eligible corporate shareholders qualify for the corporate dividends-received
deduction. Dividends paid by Government may be U.S. Government Interest
Dividends. Substantially all dividends paid by Growth and Income, and, to a
lesser degree, Aetna Fund, Growth and Small Company will be Qualifying Dividends
for which eligible corporate shareholders may claim a partial deduction.

Investment income from foreign securities may be subject to foreign taxes
withheld at the source. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Series' assets to be invested in
various countries is not known. International Growth may elect to "pass
through" foreign taxes paid in order to permit shareholders to claim a credit
or deduction, if more than 50% of the value of such Series' assets at the
close of a taxable year consist of stock or securities of foreign
corporations.

A Series' distributions are taxable in the year they are received,
regardless of whether you take them in cash or reinvest them in additional
shares. However, distributions declared in December to shareholders of record
on a date in December and paid in January of the following year are taxable
as if paid on December 31 of the year of declaration. Each Series will send a
statement to shareholders by January 31 indicating the tax status of
distributions made during the previous year, and any foreign taxes
"passed-through" to shareholders.

Buying a Dividend If you buy shares of a Series (other than Money Market)
just before the ex-dividend date, you may be taxed on the entire amount of
the dividend received.

Aetna Mutual Funds Prospectus 41
<PAGE>

Share Redemptions Any gain or loss realized when you redeem (sell) or
exchange shares of a Series will be treated as a taxable long-term or
short-term capital gain or loss. Please see the Statement 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 the Fund to withhold 31% of your taxable dividends, capital gains
distributions and redemption proceeds.

General Information

Articles of Incorporation The Fund 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 Fund currently offers 12 Series, nine of which are
described in this Prospectus.

Share Classes The Fund's shares are 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 Fund. The
Directors continue to consider whether any such conflicts exist and, if so,
will take appropriate action.

The Fund has obtained a ruling from the IRS with respect to the Series
described in this Prospectus to the effect that differing distributions among
the classes of its shares will not result in a Series' dividends or other
distributions being regarded as "preferential dividends" under the Code. For
additional information, see the Statement.

Capital Stock The Articles currently authorize the issuance of 4.8 billion
shares of capital stock of the Fund. All shares are nonassessable,
transferable and redeemable. There are no preemptive rights. As of January
31, 1997, Aetna and its affiliates owned 15.49% of all outstanding shares of
the Fund. Aetna and its affiliates may make additional investments to the
Series.

42 Aetna Mutual Funds Prospectus
<PAGE>

Shareholder Meetings The Fund 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 Series' outstanding shares, the Fund will hold a shareholder
meeting for the purpose of voting on the removal of one or more Directors and
will assist with 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 Fund. Voting rights are not
cumulative. Generally, shares of the Fund will be voted on a Fund-wide basis
on all matters except matters affecting only the interests of one Series or
one class of shares.

Payments to Dealers From time to time, Aetna 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 may or may not be affiliates of
Aetna, 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.
Aetna may also award various types of non-cash compensation such as merchandise,
trips and/or educational seminars to sales personnel.

Performance Data

A Series may compare its 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); Russell 2000 Index, Lehman Brothers
Aggregate Bond Index; Dow Jones Industrial Average (DJIA); Lipper Analytical
Services, Inc., Morningstar, Inc.; IBC/Donoghue's Taxable MFA; the Morgan
Stanley Capital International Europe, Australia, Far East (EAFE) Index; and
the Morgan Stanley Capital International Far East Free ("FEF ex. Japan")
Index.

Aetna Mutual Funds Prospectus 43
<PAGE>

Appendix A--Glossary of Investment Terms

This glossary describes some of the securities used by the Series. Further
information is available in the Statement.

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.

Eurodollar 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 that are 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 Adviser to be of comparable
quality. These bonds are often called "junk bonds" because of the greater
possibility of default.

Pay-in-Kind Bonds Pay-in-kind bonds are bonds that pay all or a portion of
their interest through the issuance of additional bonds.

Repurchase Agreements A repurchase agreement or "repo" is an agreement
between a seller and buyer, usually of U.S. Government securities, to sell
and subsequently repurchase securities at a fixed price on a future date. The
primary attraction of repurchase agreements is the flexibility of maturities.

U.S. Government Derivatives A Series may purchase separately traded principal
and interest components of certain U.S. Government

44 Aetna Mutual Funds Prospectus

<PAGE>

securities (STRIPS). In addition, a Series may acquire custodial receipts
that represent ownership in a U.S. Government security's future interest or
principal payments. These securities are known by such exotic names as TIGRS
and CATS and may be issued at a discount to face value. They are generally
more volatile than normal fixed income securities because interest payments
are accrued rather than paid out in regular installments.

U.S. Government Securities Securities issued by the U.S. Government and its
agencies. Direct Obligations of the U.S. Government are:

Treasury Bills - issued with short maturities (one year or less) and
priced at a discount to face value. The income for investors is the
difference between the purchase price and the face value.

Treasury Notes - intermediate-term securities with maturities of between
one to ten years. Income to investors is paid in semiannual interest
payments.

Treasury Bonds - long-term debt instruments with maturities from ten
years to up to thirty years. Income is paid to investors on a semi-annual
basis.

In addition, U.S. Government Agencies issue debt securities to finance
activities for the U.S. Government. These agencies include among others the
Federal Home Loan Bank, Federal National Mortgage Association ("FNMA" or
"Fannie Mae"), Government National Mortgage Association ("GNMA" or "Ginnie
Mae"), Export-Import Bank and the Tennessee Valley Authority.

Not all agencies are backed by the full faith and credit of the United
States; for example the FNMA may borrow money from the U.S. Treasury only
under certain circumstances. There is no guarantee that the government will
support these types of securities and they therefore involve more risk than
direct government obligations.

Variable Rate Instruments A variable or floating rate instrument is one whose
terms provide for the adjustment of its interest rate on set dates and which
can reasonably be expected to have a market value close to par value.

Yankee Bonds A bond issued in the United States by foreign countries,
corporations and banks. Similarly, Yankee CDs are issued in the U.S. by
branches of foreign banks.

Zero Coupon Bonds Bonds issued at a deep discount to face value. These bonds
pay no interest but are redeemed at full face value. The price of zero coupon
bonds are more volatile than bonds which pay interest but are rated on the
same principles as all fixed-income investments.

Aetna Mutual Funds Prospectus 45
<PAGE>

The Series also use some of the following securities to manage risk and
volatility:

Call Option The right to buy a security, currency or stock index at a stated
price, or strike price, within a fixed period. A call option will be
exercised if the spot price rises above the strike price; if not, the option
expires worthless.

Convertible Stock Corporate securities, which may be either bonds or
preferred shares, that can be exchanged for shares at a fixed price.

Covered Call Options A call option backed by the securities underlying the
option. The owner of a security will normally sell covered call options to
collect premium income or to reduce price fluctuations of the security. A
covered call option limits the capital appreciation of the underlying
security.

Futures Contracts to buy securities, currencies or stock indexes in the
future at a price agreed in advance. A futures contract obliges the buyer to
purchase the security and the seller to sell it, unlike an option where the
buyer can choose whether or not to exercise the option.

Preferred Stock Shares which pay a fixed dividend, in contrast to common
stock whose dividends depend on the profits of the company.

Put Option The right to sell a security, currency or stock index at a stated
price, or strike price, within a fixed period. A put option will be exercised
if the market price falls below the strike price; if not, the option expires
worthless.

Warrants A security, normally offered with bonds or preferred stock, that
entitles investors to buy shares at a prescribed price within a named or
stated period to perpetuity. The time period is usually longer than that of a
call option.

46 Aetna Mutual Funds Prospectus

<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.

Aetna Mutual Funds Prospectus 47
<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.

48 Aetna Mutual Funds Prospectus

<PAGE>

[Aetna logo] Aetna Series Fund, Inc.

151 Farmington Avenue
Hartford, CT 06156-8962
1-800-238-6263

Investment Adviser
Aetna Life Insurance and Annuity Company
151 Farmington Avenue, TN41
Hartford, CT 06156-8962

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.

Aetna Mutual Funds Prospectus 49

<PAGE>

[Back Cover]

Aetna Money Market Fund
Aetna Government Fund
Aetna Bond Fund
The Aetna Fund
Aetna Growth and Income Fund
Aetna Growth Fund
Aetna Index Plus Fund
Aetna Small Company Fund
Aetna International Growth Fund

Securities offered through
Aetna Investment Services, Inc.
or authorized broker/dealers
who have an agreement with the company.

[Recycle symbol] printed on recycled paper
PROS.SERSEL-97

<PAGE>

[Front Cover]
------------------
Build for
Retirement. Manage
for Life.(SM)
------------------

Aetna Mutual Funds
Adviser Class

Prospectus
March 3, 1997

PROS. SERADV-97 [Aetna Retirement Services logo] Aetna
Retirement Services(SM)
<PAGE>
Adviser Class

Aetna
Mutual Funds
Prospectus

[Aetna logo] March 3, 1997

-----------------------------------------------------------------------------
Aetna Series Fund, Inc. (Fund) is an open-end management investment company
authorized to issue multiple series of shares, each representing a
diversified portfolio of investments (Series) with different investment
objectives, policies and restrictions. Currently, each Series is authorized
to offer two classes of shares, the Adviser Class and the Select Class.

This Prospectus sets forth concisely the information about the Fund and its
Series that you should know before investing. Please read this Prospectus
carefully before investing and retain for future reference. Additional
information about the Fund and its Series, including a Statement of
Additional Information (Statement) dated March 3, 1997 has been filed with
the Securities and Exchange Commission (Commission). The Statement is
incorporated by reference into this Prospectus and 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.
Additional information filed with the Commission can be obtained by
contacting the Commission at its Web Site (http://www.sec.gov).

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.

Although the Money Market Fund will strive to maintain a $1.00 net asset
value per share, there is no assurance that it will be able to do so.
Investments in this Series are neither insured nor guaranteed by the U.S.
Government.

Aetna Bond Fund seeks to provide as high a level of total return (i.e.,
income and capital appreciation), as is consistent with reasonable risk,
primarily through investment in a diversified portfolio of investment-grade
corporate bonds and securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.

<PAGE>

Aetna International Growth Fund seeks long-term capital growth primarily
through investment in a diversified portfolio of common stocks principally
traded in countries outside of North America.

2 Aetna Mutual Funds Prospectus
<PAGE>

Table of Contents

Highlights 4
Fee Tables 6
Financial Highlights 10
Description of the Fund 16
Risk Factors and Other Considerations 22
Investment Restrictions 27
Shareholder Services 29
Other Features 35
Cross Investing 36
Fees and Charges 36
Management 38
Portfolio Management 41
Distributions 42
Net Asset Value 42
Taxes 43
General Information 44
Performance Data 46
Appendix A--Glossary of Investment Terms 47
Appendix B--Description of Corporate Bond Ratings 50

Aetna Mutual Funds Prospectus 3
<PAGE>

Highlights

[ ] Aetna Money Market Fund (Money Market)

[ ] Aetna Government Fund (Government)

[ ] Aetna Bond Fund (Bond)

[ ] The Aetna Fund (Aetna Fund), a balanced fund

[ ] Aetna Growth and Income Fund (Growth and Income)

[ ] Aetna Growth Fund (Growth)

[ ] Aetna Index Plus Fund (Index Plus)

[ ] Aetna Small Company Fund (Small Company)

[ ] Aetna International Growth Fund (International Growth)

What is the Difference Between Adviser and Select Class Shares? Two classes
of shares are available, the Adviser Class shares and the Select Class
shares. Adviser Class shares are offered primarily to the general public, and
Select Class shares are offered principally to institutions.

Adviser Class shares (except for certain purchases of Money Market
shares--see "Contingent Deferred Sales Charge" for details) are subject to a
contingent deferred sales charge (CDSC). The maximum CDSC is 1.0% (see
"Contingent Deferred Sales Charge" for details), declining by 0.25% each year
after the date of purchase to zero, so that no charge is imposed on shares
purchased over four years prior to redemption. Adviser Class shares of each
Series are also subject to a service fee at an annual rate of 0.25% (0.10%
for the Money Market Series) and (except for the Money Market Series) a
distribution fee at an annual rate of 0.50% of the average daily net assets.
See "Fees and Charges" for more information.

4 Aetna Mutual Funds Prospectus
<PAGE>

How Can I Purchase Shares? You may purchase shares by completing an
application and sending it as described under "Shareholder Services." Your
initial purchase must be for a minimum of $1,000 for each Series with a
minimum of $500 for Individual Retirement Accounts (IRA). We also offer a
systematic investment program that enables you 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 the New York
Stock Exchange (NYSE) is open for business. Adviser Class shares are
redeemable at net asset value less any applicable CDSC. See "Shareholder
Services" for further information.

See "Management" for further information.

Aetna Mutual Funds Prospectus 5
<PAGE>

Fee Tables

-----------------------------------------------------------------------------
Adviser Class
Shareholder Transaction Expenses

<TABLE>
<CAPTION>
Deferred Sales
Sales Charge Charge on
on Purchases Redemptions Sales Charge
(as a percentage (as a percentage of on Dividend
of purchase price) redemption proceeds)(1) Reinvestment Exchange Fee
- ---------------------- ------------------ ----------------------- ------------ ------------
<S> <C> <C> <C> <C>
Money Market None 1.0% None None
Government None 1.0% None None
Bond None 1.0% None None
Aetna Fund None 1.0% None None
Growth and Income None 1.0% None None
Growth None 1.0% None None
Index Plus(2) None 1.0% None None
Small Company None 1.0% None None
International Growth None 1.0% None None
</TABLE>

(1) The contingent deferred sales charge set forth in the above table is the
maximum redemption charge imposed on Adviser Class shares. Direct purchases
into Money Market are not subject to a sales charge on redemption. Investors
may pay charges less than 1.0%, depending on the length of time the shares
are held. Adviser Class shares of each Series other than Money Market are
also subject to an annual distribution fee of 0.50% and an annual service
fee of 0.25% (0.10% for Money Market) of the value of average daily net
assets of the Adviser Class. See "Fees and Charges."

(2) Inception date December 10, 1996.

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

<TABLE>
<CAPTION>
Total
Management/ Other Operating
Advisory Fee Administrative Expenses Expenses (after
(after fee Fee (after 12b-1 (after expense fee waiver/expense
waiver) fee waiver) Fee reimbursement) reimbursement)(1)
- --------------------- ------------ -------------- ----- -------------- -------------------
<S> <C> <C> <C> <C> <C>
Money Market 0.07% 0.25% 0.00% 0.18% 0.50%
Government 0.00% 0.00% 0.50% 0.95% 1.45%
Bond 0.09% 0.25% 0.50% 0.66% 1.50%
Aetna Fund 0.80% 0.25% 0.50% 0.52% 2.07%
Growth and Income 0.68% 0.25% 0.50% 0.40% 1.83%
Growth 0.70% 0.25% 0.50% 0.58% 2.03%
Index Plus2 0.30% 0.25% 0.50% 0.40% 1.45%
Small Company 0.85% 0.25% 0.50% 0.60% 2.20%
International Growth 0.85% 0.25% 0.50% 1.34% 2.94%
</TABLE>

The expenses shown above are based on the year ended October 31, 1996 and
reflect the most current fee waiver/expense reimbursement arrangements as of the
date of this Prospectus. Fee waiver/expense reimbursement arrangements are
currently in effect for Money Market, Government, Bond and Index Plus. These
arrangements limit the Total Operating Expenses to the amounts shown above.
Without these arrangements, Management/Advisory Fees, Administrative Fees and
Total Operating Expenses would have been 0.40%, 0.25%, and 0.93% for Money
Market; 0.50%, 0.25%, and 2.32% for Government; and 0.50%, 0.25%, and 1.91% for
Bond. For Index Plus, Management/Advisory Fees and Total Operating

6 Aetna Mutual Funds Prospectus
<PAGE>

Expenses are estimated to be 0.45% and 1.60%, respectively. These are based
on estimated amounts for the current fiscal year. With respect to Money
Market, Aetna may waive or reimburse an amount that would lower the Total
Operating Expenses shown above.
(2) Inception Date December 10, 1996.

-----------------------------------------------------------------------------
Adviser Class
Example

Using the above percentages, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and either redemption at the end of
each of the periods shown or no redemption:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
--------------------------------------- ------- -------- -------- ----------
<S> <C> <C> <C> <C>
Money Market*
Redemption at end of each time period $ 5 $16 $ 28 $ 63
No Redemption 5 16 28 63
Government
Redemption at end of each time period 25 51 79 174
No Redemption 15 46 79 174
Bond
Redemption at end of each time period 25 52 82 179
No Redemption 15 47 82 179
Aetna Fund
Redemption at end of each time period 31 70 111 240
No Redemption 21 65 111 240
Growth and Income
Redemption at end of each time period 29 63 99 215
No Redemption 19 58 99 215
Growth
Redemption at end of each time period 31 69 109 236
No Redemption 21 64 109 236
Index Plus
Redemption at end of each time period 25 51 79 174
No Redemption 15 46 79 174
Small Company
Redemption at end of each time period 32 74 118 253
No Redemption 22 69 118 253
International Growth
Redemption at end of each time period 40 96 155 326
No Redemption 30 91 155 326
</TABLE>

Aetna Mutual Funds Prospectus 7
<PAGE>

Series and the Deferred Sales Charge has been deferred. (See "Fees and
Charges--Contingent Deferred Sales Charge.")

The Fund offers two classes of shares for each of its Series, Adviser Class
and Select Class. Because the expenses and sales charges vary between the
classes, the performance of each class will vary. Registered representatives
may receive different levels of compensation depending on the class sold.
Additional information regarding the classes may be obtained by calling your
representative or 1-800-238-6263.

-----------------------------------------------------------------------------
Select Class Shareholder Transaction Expenses

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

<TABLE>
<CAPTION>
Total
Operating
Expenses
Management/ Administrative Other (after fee
Advisory Fee Fee Expenses waiver/
(after fee (after fee (after expense
waiver) waiver) reimbursement) reimbursement)(1)
- -------------------- ------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Money Market 0.07% 0.25% 0.18% 0.50%
Government 0.00% 0.00% 0.70% 0.70%
Bond 0.09% 0.25% 0.41% 0.75%
Aetna Fund 0.80% 0.25% 0.26% 1.31%
Growth and Income 0.68% 0.25% 0.15% 1.08%
Growth 0.70% 0.25% 0.33% 1.28%
Index Plus(2) 0.30% 0.25% 0.15% 0.70%
Small Company 0.85% 0.25% 0.34% 1.44%
International Growth 0.85% 0.25% 1.07% 2.17%
</TABLE>

(2) Inception date December 10, 1996. The expenses shown above are based on
the year ended October 31, 1996 and reflect the most current fee waiver/
expense reimbursement arrangements as of the date of this Prospectus. Fee
waiver/expense reimbursement arrangements are currently in effect for Money
Market, Government, Bond and Index Plus. These arrangements limit the Total
Operating Expenses to the amounts shown above. Without these arrangements,
Management/Advisory Fees, Administrative Fees and Total Operating Expenses
would have been 0.40%, 0.25%, and 0.83% for Money Market; 0.50%, 0.25%, and
1.57% for Government; and 0.50%, 0.25%, and 1.16% for Bond. For Index Plus,
Management/Advisory Fees and Total Operating Expenses are estimated to be
0.45% and 0.85%, respectively. These are based on estimated amounts for the
current fiscal year. With respect to Money Market, Aetna may waive or
reimburse an amount that would lower the Total Operating Expenses shown
above.

-----------------------------------------------------------------------------

8 Aetna Mutual Funds Prospectus
<PAGE>

Select Class
Example

Using the above percentages, you would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each of
the periods shown:

1 Year 3 Years 5 Years 10 Years
- --------------------- ------- -------- -------- ----------
Money Market $ 5 $16 $ 28 $ 63
Government 7 22 39 87
Bond 8 24 42 93
Aetna Fund 13 42 72 158
Growth and Income 11 34 60 132
Growth 13 41 70 155
Index Plus 7 22 39 87
Small Company 15 46 79 172
International Growth 22 68 116 250

This example should not be considered an indication of prior or future
expenses. Actual expenses for the current year may be greater or less than
those shown.
-----------------------------------------------------------------------------
As noted above, each Series has two classes of shares, Adviser Class and
Select Class. Because the expenses and sales charges vary between the
classes, the performance of each class will vary. Registered representatives
may receive different levels of compensation when selling shares of the
Series' classes. Additional information regarding each Series' classes may be
obtained by calling your representative or 1-800-367-7732.

Aetna Mutual Funds Prospectus 9
<PAGE>

Financial Highlights

(for one outstanding share throughout each period)

<TABLE>
<CAPTION>
Adviser Class Shares

Money Market
------------------------------
1996 1995 1994+
-------- ------- -------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 1.00 $ 1.00 $ 1.00
-------- ------- -------
Net Investment Income .05 0.06 0.03
Net Realized and Change in Unrealized Gain (Loss) on
Investments 0.00 0.00 0.00
-------- ------- -------
Total from Investment Operations 0.05 0.06 0.03
Dividends from Net Investment Income (0.05) (0.06) (0.03)
Dividends in Excess of Net Investment Income 0.00 0.00 0.00
Distributions from Realized Gain on Investments 0.00 0.00 0.00
-------- ------- -------
Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00
======== ======= =======
Total Return* 5.44% 5.95% 2.41%
Net Assets End of Period (in thousands) $119,849 $78,726 $47,350
Ratio of Total Investment Expenses to Average Net Assets** 0.30% 0.26% 0.21%
Ratio of Net Investment Income to Average Net Assets** 5.30% 5.79% 4.27%
Ratio of Net Investment Expense Before Reimbursement and
Waiver to Average Net Assets** 0.93% 0.87% 0.92%
Ratio of Net Investment Income Before Reimbursement and
Waiver to Average Net Assets** 4.67% 5.19% 3.67%
Portfolio Turnover N/A N/A N/A
</TABLE>

+ The Fund commenced offering Adviser Class shares on April 15, 1994. Prior
to that date, the Fund offered only Select Class shares.

* The Total Return percentage does not reflect the Contingent Deferred Sales
Charge imposed on Adviser Class shares. Inclusion of this charge would reduce
the total return figures.

** Annualized for periods less than one year.

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

Additional information about the performance of the Fund and its Series is
contained in the Annual Report dated
October 31, 1996. The Annual Report is incorporated herein by reference and
is available, without charge, by writing to the Fund at the address listed on
the cover of this Prospectus or by calling 1-800-238-6263.

10 Aetna Mutual Funds Prospectus
<PAGE>

-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Government Bond
- ----------------------------- ---------------------------
1996 1995 1994+ 1996 1995 1994+
- ------ ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
$10.00 $ 9.41 $ 9.67 $10.27 $ 9.58 $ 9.92
- ------ ------- ------ ------ ------ -------
0.48 0.60 0.24 0.62 0.56 0.28
(0.13) 0.56 (0.24) (0.20) 0.66 (0.35)
- ------ ------- ------ ------ ------ -------
0.35 1.16 0.00 0.42 1.22 (0.07)
(0.56) (0.57) (0.26) (0.60) (0.53) (0.27)
0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
- ------ ------- ------ ------ ------ -------
$ 9.79 $ 10.00 $ 9.41 $10.09 $10.27 $ 9.58
====== ======= ====== ====== ====== =======
3.75% 12.60% (0.06)% 4.27% 13.28% (0.68)%
$ 526 $ 405 $ 151 $ 877 $7,340 $25,405
1.45% 1.51% 1.28% 1.50% 1.50% 1.49%
4.96% 6.02% 4.68% 5.47% 5.91% 5.36%
2.32% 2.11% 2.11% 1.91% 1.82% 1.81%
4.09% 5.42% 3.85% 5.06% 5.60% 5.04%
50.48% 117.31% 43.63% 42.33% 56.99% 51.80%
</TABLE>

Aetna Mutual Funds Prospectus 11
<PAGE>

Financial Highlights (continued)

(for one outstanding share throughout each period)
-----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Adviser Class Shares

Aetna Fund
-----------------------------
1996 1995 1994+
------- ------- -------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 12.34 $ 10.62 $ 10.54
------- ------- -------
Net Investment Income 0.20 0.23 0.19
Net Realized and Change in Unrealized Gain (Loss) on
Investments 1.79 1.91 0.00
------- ------- -------
Total from Investment Operations 1.99 2.14 0.19
Dividends from Net Investment Income (0.27) (0.42) (0.11)
Dividends in Excess of Net Investment Income 0.00 0.00 0.00
Distributions from Realized Gain on Investments (0.57) 0.00 0.00
------- ------- -------
Net Asset Value End of Period $ 13.49 $ 12.34 $ 10.62
======= ======= =======
Total Return* 16.83% 18.32% 1.84%
Net Assets End of Period (in thousands) $ 3,783 $ 1,362 $26,396
Ratio of Total Investment Expenses to Average Net Assets** 2.07% 2.04% 1.87%
Ratio of Net Investment Income to Average Net Assets** 1.60% 2.61% 1.90%
Ratio of Net Investment Expense Before Reimbursement and
Waiver to Average Net Assets** 2.07% 2.07% 2.06%
Ratio of Net Investment Income Before Reimbursement and
Waiver to Average Net Assets** 1.60% 2.58% 1.67%
Portfolio Turnover 117.88% 129.05% 86.10%
Average Commission Rate Paid Per Share $0.0557 -- --
</TABLE>

+ The Fund commenced offering Adviser Class shares on April 15, 1994. Prior
to that date, the Fund offered only Select Class shares.

* The Total Return percentage does not reflect the Contingent Deferred Sales
Charge imposed on Adviser Class shares. Inclusion of this charge would reduce
the total return figures.

** Annualized for periods less than one year.

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

12 Aetna Mutual Funds Prospectus
<PAGE>

Growth and Income Growth
- ----------------------------- -----------------------------
1996 1995 1994+ 1996 1995 1994+
- ------- ------- ------ ------- ------- -------
$ 13.43 $ 11.08 $10.75 $ 13.63 $ 10.74 $ 10.26
- ------- ------- ------ ------- ------- -------
0.08 0.12 0.11 (0.08) (0.06) (0.02)
3.08 2.31 0.30 2.38 3.00 0.50
- ------- ------- ------ ------- ------- -------
3.16 2.43 0.41 2.30 2.94 0.48
(0.14) (0.08) (0.08) 0.00 (0.05) 0.00
0.00 0.00 0.00 0.00 0.00 0.00
(0.76) 0.00 0.00 (1.76) 0.00 0.00
- ------- ------- ------ ------- ------- -------
$ 15.69 $ 13.43 $11.08 $ 14.17 $ 13.63 $ 10.74
======= ======= ====== ======= ======= =======
24.70% 21.90% 3.71% 18.97% 27.92% 4.58%
$ 6,638 $ 2,217 $5,740 $ 4,615 $ 1,727 $ 417
1.83% 1.84% 2.32% 2.03% 2.03% 1.72%
0.55% 1.14% 1.74% (0.59)% (0.47)% (0.25)%
1.83% 1.84% 2.42% 2.03% 2.14% 2.17%
0.55% 1.14% 1.65% (0.59)% (0.58)% (0.71)%
106.09% 127.43% 54.13% 144.19% 171.75% 120.32%
$0.0505 -- -- $0.0598 -- --

Aetna Mutual Funds Prospectus 13
<PAGE>

Financial Highlights (continued)

(for one outstanding share throughout each period)

<TABLE>
<CAPTION>
Adviser Class Shares

Small Company
-----------------------------
1996 1995 1994+
------- ------- -------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 13.39 $ 10.35 $ 10.24
------- ------- -------
Net Investment Income (0.18) (0.11) (0.04)
Net Realized and Change in Unrealized Gain (Loss)
on Investments 2.62 3.15 0.15
------- ------- -------
Total from Investment Operations 2.44 3.04 0.11
Dividends from Net Investment Income 0.00 0.00 0.00
Dividends in Excess of Net Investment Income 0.00 0.00 0.00
Distributions from Realized Gain on Investments (1.41) 0.00 0.00
------- ------- -------
Net Asset Value End of Period $ 14.42 $ 13.39 $ 10.35
======= ======= =======
Total Return* 19.02% 29.44% 0.98%
Net Assets End of Period (in thousands) $ 3,884 $ 1,285 $ 205
Ratio of Total Investment Expenses to Average Net Assets** 2.20% 2.23% 1.78%
Ratio of Net Investment Income to Average Net Assets** (1.26)% (0.89%) (0.72%)
Ratio of Net Investment Expense Before Reimbursement and
Waiver to Average Net Assets** 2.20% 2.30% 2.14%
Ratio of Net Investment Income Before Reimbursement and
Waiver to Average Net Assets** (1.26)% (0.97)% (1.07)%
Portfolio Turnover 163.21% 156.43% 116.28%
Average Commission Rate Paid Per Share $0.0575 -- --
</TABLE>

+ The Fund commenced offering Adviser Class shares on April 15, 1994. Prior
to that date, the Fund offered only Select Class shares.

* The Total Return percentage does not reflect the Contingent Deferred Sales
Charge imposed on Adviser Class shares. Inclusion of this charge would reduce
the total return figures.

** Annualized for periods less than one year.

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

Additional information about the performance of the Fund and its Series is
contained in the Annual Report dated October 31, 1996. The Annual Report is
incorporated herein by reference and is available, without charge, by writing
to the Fund at the address listed on the cover of this Prospectus or by calling
1-800-238-6263.

14 Aetna Mutual Funds Prospectus
<PAGE>

International Growth
- -------------------------------
1996 1995 1994+
- ------- ------- -------
$ 10.59 $ 11.51 $ 11.24
- ------- ------- -------
(0.05) 0.03 0.01
1.57 (0.20) 0.26
- ------- ------- -------
1.52 (0.17) 0.27
(0.08) (0.27) 0.00
0.00 0.00 0.00
(0.26) (0.48) 0.00
- ------- ------- -------
$ 11.77 $ 10.59 $ 11.51
======= ======= =======
14.67% (0.81)% 2.40%
$22,893 $26,464 $26,647
2.94% 2.12% 0.27%
(0.42)% 0.27% 0.17%
2.94% 2.25% 2.41%
(0.42)% 0.14% 0.02%
135.92% 32.91% 81.67%
$0.0178 -- --

Aetna Mutual Funds Prospectus 15
<PAGE>

Description of the Fund

The Fund is a management investment company incorporated in the State of
Maryland made up of multiple portfolios or series, each of which is
diversified under the 1940 Act. Each has an investment objective which is
fundamental. There can be no assurance that the Series will meet their
investment objectives. Each Series is subject to investment restrictions
described in this Prospectus and in the Statement, some of which are
fundamental policies. The investment objective and fundamental investment
policies of a Series may be changed only by a vote of a majority of the
outstanding shares (both Adviser and Select Class) of that Series (as defined
in the 1940 Act). A glossary describing various investment terms relating to
securities that may be held is contained in Appendix A.

Money Market
Investment Objective
Money Market seeks to provide high current return, consistent with
preservation of capital and liquidity, through investment in high-quality
money market instruments.

Description of
Money Market

Money Market will invest at least 95% of its total assets in high-quality
securities. High-quality securities are those receiving the highest credit
rating by any two rating agencies (or one, if only one rating agency has
rated the security). High-quality securities may also include unrated
securities if the Adviser determines the security to be of comparable
quality. The remainder of Money Market's assets will be invested in
securities rated within the two highest rating categories by any two rating
agencies (or one, if only one rating agency has rated the security) and
unrated securities if the Adviser determines the security to be of com-
parable quality. With respect to these securities, Money Market will not
invest more than 1% of the market value of its total assets or $1 million,
whichever is greater, in the securities or obligations of any one issuer.

16 Aetna Mutual Funds Prospectus
<PAGE>

Money Market will use nationally recognized rating agencies including, but
not limited to, Standard & Poor's Corporation ("Standard & Poor's") and
Moody's Investors Service, Inc. (Moody's) when determining security credit
ratings. All investments will be determined to present minimal credit risks.

Money Market's dollar weighted average maturity will not exceed 90 days.
Although the Adviser will use its best efforts to maintain a constant net
asset value of $1.00 per share, there can be no assurance that it will be
able to do so. Investments in Money Market are neither insured nor guaranteed
by the U.S. Government.

Description of
Government

Government

Investment Objective Government seeks to provide income consistent with the
preservation of capital through investment in securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.

Investment Policy Government invests at least 65% of its assets in direct
obligations of the U.S. Government, such as treasury bills, notes and bonds
which are backed by the full faith and credit of the United States, or in
indirect obligations of the U.S. Government, such as notes and bonds which
are guaranteed by agencies and instrumentalities of the U.S. Government.
Securities of such agencies and instrumentalities are backed by either the
full faith and credit of the U.S. Treasury, the right of the issuer to borrow
from the U.S. Treasury, or the credit of the agency or instrumentality. Such
agencies and instrumentalities include, but are not limited to, the
Government National Mortgage Association (GNMA), the Federal National
Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation
(FHLMC).

Government may also invest in STRIPs, zero coupon bonds and options and
futures contracts and in other Treasury instruments.

Bond

Investment Objective Bond seeks to provide as high a level of total return
(i.e., income and capital appreciation), consistent with reasonable risk,
primarily through investment in a diversified portfolio of investment grade
corporate bonds and securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.

Description
of Bond

Investment Policy Bond will normally invest at least 65% of its total assets
in high-grade corporate bonds, mortgage-related and other asset-backed and
debt securities, and securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. "High grade corporate bonds" are
securities rated A or above by Standard & Poor's or by Moody's, and
securities rated comparably by other

Aetna Mutual Funds Prospectus 17
<PAGE>

nationally recognized statistical rating organizations, or considered to be
of comparable quality.

Bond may invest up to 15% of its total assets in high risk, high-yield
securities or "junk bonds" (securities rated BB/Ba or below, or if unrated,
considered by the Adviser to be of comparable quality). This restriction will
limit Bond's ability to earn a higher return which may be associated with
high risk, non-investment grade securities. See "Risk Factors and Other
Considerations" for further information.

As of October 31, 1996, the weighted average distribution of bonds in Bond
based on Standard & Poor's and Moody's bond ratings was 48.0% in AAA/Aaa,
19.9% in AA/Aa, 11.2% in A, 3.2% in BBB/Baa, 3.2% in BB/Ba, and 14.5% in
unrated bonds. See Appendix B for further information on bond ratings.

Aetna Fund

Description of
Aetna Fund

Investment Objective Aetna Fund seeks to maximize total return with
reasonable safety of principal by investing in a diversified portfolio of
stocks, bonds and money market instruments.

Aetna Fund will not invest more than 15% of the total value of its assets
in high risk, high-yield securities, or "junk bonds." It may purchase
commercial paper and other short-term instruments and invest up to 25% of its
assets in foreign securities. It may write and buy listed covered call
options and buy and sell put and call options and stock index futures
contracts and related options. Aetna Fund may

18 Aetna Mutual Funds Prospectus
<PAGE>

also purchase securities on a when-issued, delayed-delivery or
forward-commitment basis.

While the Adviser has substantial experience in managing all asset
classes, there can be no assurance that the Adviser will always allocate
assets to the best performing sectors. Aetna Fund's performance would suffer
if a major portion of its assets were allocated to stocks in a declining
market or, similarly, if a major portion of its assets were allocated to
bonds at a time of adverse interest rate movement.

Growth and Income

Description of
Growth and
Income

Investment Objectives Growth and Income seeks long-term growth of capital and
income through investment in a diversified portfolio consisting primarily of
common stocks and securities convertible into common stocks believed to offer
above-average growth potential.

Investment Policy Growth and Income invests at least 65% of its assets in
common stocks which the Adviser believes have significant potential for
capital or income growth. It may also invest in convertible and
nonconvertible preferred stocks, debt securities, rights and warrants.

Additionally, Growth and Income may write and buy listed covered call
options and buy and sell put and call options and stock index futures and
options. Growth and Income may also purchase commercial paper and other
short-term instruments, invest up to 25% of its assets in foreign securities,
engage in currency hedging and purchase securities on a when-issued,
delayed-delivery or forward-commitment basis. Growth and Income will not
invest more than 15% of the total value of its assets in high risk,
high-yield securities or "junk bonds."

Growth

Description of Growth Investment Objective Growth seeks growth of capital
through investment in a diversified portfolio consisting primarily of common
stocks and securities convertible into common stocks believed to offer growth
potential.

Aetna Mutual Funds Prospectus 19
<PAGE>

Description of
Growth

Additionally, Growth may write and buy listed covered call options and buy
and sell put and call options, and stock index futures and options. Growth
may also purchase commercial paper and other short-term instruments, invest
up to 25% of its assets in foreign securities, engage in currency hedging and
purchase securities on a when-issued, delayed delivery or forward-commitment
basis. Growth will not invest more than 15% of the total value of its assets
in high risk, high-yield securities or "junk bonds."

Index Plus

Investment Objective. Index Plus seeks to outperform the total return
performance of publicly traded common stocks represented by the S&P 500.

Investment Policy. Index Plus will attempt to be fully invested in common
stocks. Under normal circumstances, Index Plus will invest at least 90% of
its assets in common stocks represented in the S&P 500. Inclusion of a stock
in the S&P 500 in no way implies an opinion by Standard & Poor's Corporation
as to the stock's attractiveness as an investment. Index Plus is neither
sponsored by nor affiliated with Standard & Poor's Corporation. AN INVESTMENT
IN INDEX PLUS INVOLVES RISKS SIMILAR TO THOSE OF INVESTING IN COMMON STOCKS
GENERALLY. As Index Plus invests primarily in common stocks, Index Plus is
subject to market risk--i.e. the possibility that common stock prices will
decline over short or even extended periods. The U.S. stock market tends to
be cyclical, with periods when stock prices generally rise and periods when
prices generally decline.

20 Aetna Mutual Funds Prospectus
<PAGE>

Small Company

Investment Objective Small Company seeks growth of capital primarily through
investment in a diversified portfolio of common stocks and securities
convertible into common stocks of companies with smaller market
capitalizations.

Description of
Small Company

Additionally, Small Company may write and buy listed covered call options
and buy and sell put and call options and stock index futures and options.
Small Company may also purchase commercial paper and other short-term
instruments, invest up to 25% of its assets in foreign securities, engage in
currency hedging and purchase securities on a when-issued, delayed delivery
or forward-commitment basis. Small Company will not invest more than 15% of
the total value of its assets in high risk, high-yield securities or "junk
bonds."

Description of
International
Growth

International Growth

Investment Objective International Growth seeks long-term capital growth
primarily through investment in a diversified portfolio of common stocks
principally traded in countries outside of North America. International
Growth will not target any given level of current income.

Investment Policy International Growth will invest at least 65% of its total
assets among securities principally traded in three or more countries
excluding the United States, Canada and Mexico.

International Growth may enter into forward foreign exchange contracts or
purchase financial futures or options (including options on

Aetna Mutual Funds Prospectus 21
<PAGE>

futures) as a means to moderate the impact of foreign currency fluctuations.
It may also purchase money market instruments and securities on a
when-issued, delayed-delivery or forward-commitment basis.

A special note
for Investors
in International
Growth

Risk Factors and Other Considerations

General Considerations The different types of securities purchased and
investment techniques used by the Adviser involve varying amounts of risk.
For example, equity securities are subject to a decline in the stock market
or in the value of the issuing company and preferred stocks have price risk
and some interest rate and credit risk. The value of fixed income or debt
securities may be affected by changes in general interest rates and in the
creditworthiness of the issuer. Debt securities with longer maturities (for
example, over ten years) are more affected by changes in interest rates and
provide less price stability than securities with short term maturities (for
example, one to ten years). Also, on each debt security, there is a risk of
principal and interest default which will be greater with higher-yielding,
lower-grade securities. High risk, high-yield securities ("junk bonds") may
provide a higher return but with added risk. In addition, foreign securities
have currency risk.

Portfolio Turnover Portfolio turnover refers to the frequency of portfolio
transactions and the percentage of portfolio assets being bought and sold in
the aggregate during the year. Although the Adviser (except with respect to
Money Market) does not purchase securities with the intention of profiting
from short-term trading, the Adviser may buy and sell securities when the
Adviser believes such action is appropriate. It is anticipated that the
average annual turnover rate for Index Plus, Growth and Income, Bond, and
Government may exceed 125% during fiscal year 1997, and that the turnover
rate for Aetna Fund, Growth and Small Company may exceed 150%. The annual
portfolio turnover rate for each of the other Series is not expected to but
may exceed 100%. Higher turnover rates have resulted and are expected to
continue to result in higher transaction costs relating to

22 Aetna Mutual Funds Prospectus
<PAGE>

stock or equity transactions, which costs are borne directly by the Series.
The Adviser anticipates that these higher costs are offset by the potentially
improved performance that is sought by numerous portfolio transactions. High
turnover rates may also result in a possible increase in short-term capital
gains or losses. See "Distributions," "Taxes" and the Statement for
Additional Information.

Cash or Cash Equivalents The Adviser reserves the right to temporarily depart
from a Series' investment objective by investing up to 100% of its assets in
cash or cash equivalents to defend against potential market decline. Such
cash equivalents will be the same type of instruments invested in by Money
Market. In addition, all Series (except Money Market) reserve the right to
deposit some or all of their uninvested cash balances into one or more joint
accounts as authorized by the Commission.

All the Series may use the following:

Derivatives In order to manage its exposure to changing interest rates,
securities prices and currency exchange rates, or to increase investment
return, a Series may engage in hedging and other strategies using
derivatives. A derivative is a financial instrument the value of which
depends on (or "derives" from) the value of an underlying asset, such as a
security, interest rate, currency rate or index. Derivatives that may be used
by the Series include, but are not limited to, forward contracts, swaps,
structured notes, collateralized mortgage obligations ("CMOs"), futures and
options (see "Futures Contracts" and "Options" below). The risks involved in
using derivatives include the risk that the derivative may experience greater
price swings than other securities and may be less liquid than other
securities. Leveraged derivatives involve borrowing. The Series may use
derivatives as a hedge against foreign currency, equity market or interest
rate risk, or to gain additional exposure to certain markets for investment
purposes, within the limitations set forth below. In addition, derivatives
may be used to enhance a Series' yield. For purposes other than hedging, a
Series will invest no more than 5% of its assets in derivatives which at the
time of purchase are considered by management to involve high risk to the
Series, such as inverse floaters, interest-only and principal-only debt
instruments. Each Series (except Money Market) may invest up to 30% of its
assets in lower risk derivatives for hedging, to gain additional exposure to
certain markets for investment purposes, and in order to maintain liquidity
to meet shareholder redemptions or to minimize trading costs.

Aetna Mutual Funds Prospectus 23
<PAGE>

above. The Series may borrow for leveraging purposes only if after the
borrowing, the value of the Series' net assets including proceeds from the
borrowings, is equal to at least 300% of all outstanding borrowings.
Leveraging can increase the volatility of a Series since it exaggerates the
effects of changes in the value of the securities purchased with the borrowed
funds.

The Directors have established credit standards for issuers of repurchase
agreements entered into by the Series.

Bank Obligations Each Series may invest in obligations issued by domestic or
foreign banks (including bankers' acceptances, commercial paper, bank notes,
time deposits and certificates of deposit) provided the issuing bank has a
minimum of $5 billion in assets and a primary capital ratio of at least
4.25%.

24 Aetna Mutual Funds Prospectus
<PAGE>

government supervision and regulation of foreign stock exchanges, brokers and
listed companies; possible difficulty in obtaining and enforcing judgments
against foreign entities; adverse foreign political and economic
developments; different accounting procedures and auditing standards; the
possible imposition of withholding taxes on interest income payable on
securities; the possible seizure or nationalization of foreign assets; the
possible establishment of exchange controls or other foreign laws or
restrictions which might adversely affect the payment and transferability of
principal, interest and dividends on securities; higher transaction costs;
possible settlement delays; and less publicly available information about
foreign issuers.

All Series except Money Market
may also use the following:

Securities Lending Each Series 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 Series' total assets. The Series will not lend portfolio
securities to affiliates. Though fully collateralized, lending portfolio
securities involves certain risks, including the possibility that a Series
may incur costs in liquidating the collateral or a loss if the collateral
declines in value. In the event of a disparity between the value of the
loaned security and the collateral, there is the additional risk that the
borrower may fail to return the securities or provide additional collateral.

Futures Contracts A Series may enter into futures contracts or options on
futures subject to the limits discussed in the Statement. See "Derivatives"
above.

Aetna Mutual Funds Prospectus 25
<PAGE>

All Series except Money Market,
Government and International Growth,
may also use the following:

High-Risk, High-Yield Securities A Series may invest in high-risk, high-yield
securities, often called "junk bonds." These securities are rated BB/Ba or
below, or, if unrated, are considered 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.

Government, Bond and
Aetna Fund may also
use the following:

Mortgage-Backed Securities The Series may invest in mortgage-backed and
other pass-through securities. Payments of interest and principal on these
securities may be guaranteed by an agency or instrumentality of the U.S.
Government such as the GNMA, the FHLMC and FNMA. These securities represent
part ownership of a pool of mortgage loans where principal is scheduled to be
paid back by the borrower over the length of the loan rather than returned in
a lump sum at maturity. The Series may also invest in private mortgage
pass-through securities backed by pools of conventional fixed-rate or
adjustable-rate mortgage loans. In addition, a Series may invest in CMOs and
securities issued by real estate mortgage investment conduits ("REMICs").
Mortgage-backed securities are subject to the same prepayment risk as
asset-backed securities.

26 Aetna Mutual Funds Prospectus
<PAGE>

Aetna Fund, Growth and Income,
Growth, Index Plus and Small Company
may also use the following:

Index Plus may also use the following:

Investment Restrictions

A Series will not concentrate its investments in any one industry except that
a Series 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

Aetna Mutual Funds Prospectus 27
<PAGE>

as automobile finance, computer finance and consumer finance. This limitation
will not apply to securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities and in the case of Money Market, to securities
invested in, or repurchase agreements for, U.S. Government securities, and
certificates of deposit, bankers' acceptances, or securities of banks and bank
holding companies. Also, a Series 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 Series' total assets. The Series do
not invest in the securities of companies determined by the Adviser to be
primarily involved in the production or distribution of tobacco products. This
policy does not apply to Index Plus. See the Statement for additional
restrictions.

28 Aetna Mutual Funds Prospectus
<PAGE>

Shareholder Services

The Fund offers several services to its shareholders. These may be selected
on the application or you may call 1-800-367-7732 to select these services at
a later date.

Certain features may not be available through employer-sponsored retirement
plans. Please refer to your plan materials for specific information about
services available under your plan.

How to
Purchase
Shares

How to Purchase Shares Adviser Class shares may be purchased directly from
the Fund, through a registered representative of a broker-dealer affiliated
with the Fund, through a registered representative of an unaffiliated
broker-dealer, or through an employer-sponsored retirement plan. (If you are
purchasing through an employer-sponsored retirement plan, please refer to
your plan 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 Series, additional investments
may be made by mail ($100 minimum), wire transfer ($500 minimum) or exchange
from the same class of another Series in the Fund. All checks must be drawn
on a bank located within the United States and payable in U.S. dollars.
Minimum investments may be waived if an investment is made through exchange
of the entire amount invested in another Series. 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.")

Aetna Mutual Funds Prospectus 29
<PAGE>

institutions (Institutions) under Section 401, 403(b) or 457 of the Internal
Revenue Code (Code), shares will be purchased at the net asset value
determined on the Business Day on which the Institution receives the
investor's request before the time specified by such Institution. Investors
participating in such a plan should refer to their plan materials for a
discussion of any specific instructions on the timing or restrictions on the
purchase of shares. Please refer to "Net Asset Value" for information on how
net asset value is determined.

No initial sales charge is imposed at the time of purchase. A CDSC is
imposed, however, on certain redemptions of Adviser Class shares. See "Fees
and Charges--Contingent Deferred Sales Charge" which describes the CDSC in
greater detail.

You can make
a purchase by
mail

Aetna Series Fund, Inc.
c/o Mutual Fund Services, 3rd Floor
P.O. Box 701
Milwaukee, WI 53201-0701

Correspondence mailed by overnight courier should be sent to the transfer
agent as follows:

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

You can make additional investments to your accounts by using the investment
stubs from your confirmation statements or by sending payments to the address
listed above. Your letter should indicate your name, account number(s), the
Series you wish to invest in, and the amount to be invested in each Series.
When opening an account, your check should be made payable to Aetna Series
Fund, Inc. 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 Aetna Series Fund, Inc.

You can
purchase by
wire, electronic
funds transfer
or exchange

Purchase by Wire Once you are a shareholder of a Series you may purchase
additional shares 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 transfer agent and custodian bank are open for
business.

Purchase by Electronic Funds Transfer Once you are a shareholder in any
Series of the Fund, you may purchase additional shares by using Electronic
Funds Transfer (EFT) facilities under the System-

30 Aetna Mutual Funds Prospectus
<PAGE>

atic Investment feature. See "Other Features." EFT will allow you to transfer
money between a bank account and a specific Series. You must elect EFT
capability in writing, on the application or subsequently by requesting the
appropriate information.

Purchase by Exchange You may open an account or purchase additional shares by
making an exchange from the same class shares of any other Series of the
Fund, provided shares of such Series 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 your name and account(s), number(s), the name of
the Series into which you wish to exchange, the amount to be exchanged, and
the signatures of all shareholders. Send your request to the address listed
above under "Purchase by Mail." Note that this exchange privilege also
applies to three Series of the Fund that are offered through a different
prospectus--Aetna Ascent, Aetna Crossroads and Aetna Legacy, which are known
as the Generation Series.

You may also exchange your Adviser Class shares by calling
1-800-367-7732. Please have available the Series' names, account number(s),
your Social Security number or taxpayer identification number, 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:

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

[ ] An exchange which represents an initial investment in a Series must meet
the minimum investment requirements described under "Shareholder
Services--How to Open an Account."

[ ] 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 Series account that is not registered identically to the
transferring Series account.

[ ] Following an investment in a Series, there is a required eight-day holding
period or maximum allowed by law, if shorter, before those shares can be
exchanged.

There is currently no limit on the number of exchanges. However, each Series
reserves the right to temporarily or permanently terminate the exchange
privilege for any person who makes more than five exchanges out of a Series
per calendar year. In addition, each Series reserves the right to refuse
exchange purchases by any person or group if, in the Adviser's judgment, it
would be unable to invest effectively in accordance with its investment
objective as a result of

Aetna Mutual Funds Prospectus 31
<PAGE>

such exchange. Each Series also reserves the right to revise the exchange
privilege at any time.

Your distribution
option can be
changed at any
time by calling
1-800-367-7732

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

[ ] Full Reinvestment--Both dividends and capital gains distributions from a
Series will be reinvested in additional Adviser Class shares of that
Series. This option will be selected automatically unless one of the other
options is specified. (Please refer to "Distributions".)

[ ] Or . . . Capital Gains Reinvestment--Capital gains distributions from a
Series will be reinvested in additional Adviser Class shares of that Series
and all net income from dividends will be distributed in cash.

[ ] 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 Series of the Fund.
To request information or to initiate a transaction, please call
1-800-367-7732.

If you make no selection, income dividends and capital gains distributions
with respect to a particular Series will be reinvested in additional Adviser
Class shares of that Series. Distributions paid in shares will be credited to
your account at the next determined net asset value per share.

Changes to the above options will be effective for distributions occurring
ten days after the date written notification is received by the transfer
agent.

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 on that
Business Day so long as the redemption request and all required documentation
is received by Firstar Trust Company (the transfer agent) at its Milwaukee
offices prior to 4:00 p.m. Redemption

32 Aetna Mutual Funds Prospectus
<PAGE>

requests received after 4:00 p.m. will be processed at the net asset value
determined on the following Business Day. Redemptions may be subject to a
contingent deferred sales charge. See "Fees and Charges" for more
information.

A Series 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 Series 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 Series in any 90 day period. To the extent possible, the
Series will distribute readily marketable securities, in conformity with
applicable rules of the Commission. In the event such redemption is requested
by institutional investors, the Series 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 Statement for additional information on redemptions
in kind.

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

Redeem by Mail Shares of any Series may be redeemed by sending written
instructions to the transfer agent. The instructions should identify the
Series, the number of shares or dollar amount to be redeemed, your name and
the Series account number. The instructions must be signed by all person(s)
required to sign for the Series 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 supporting documents such as corporate resolutions or trust
instruments.

Signature Guarantee A signature guarantee is verification of the authenticity
of the signature given by certain authorized institutions.

Aetna Mutual Funds Prospectus 33
<PAGE>

The Fund's
Investment
Adviser

The Fund may waive the signature guarantee requirement for redemption
requests for amounts of $10,000 or less. However, if you wish to have your
redemption proceeds transferred by wire to your designated bank account, paid
to someone other than the shareholder of record, or sent somewhere other than
the shareholder address of record, you must provide a signature guarantee
with your written redemption instructions regardless of the amount of
redemption.

The Funds reserve the right to amend or discontinue this policy at any time
and establish other criteria for verifying the authenticity of any redemption
request.

You can obtain a signature guarantee from any one of the following
institutions: a national or state bank (or savings bank in New York or
Massachusetts only); a trust company; a federal savings and loan association;
or a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges. Please note that signature guarantees are not provided by notary
publics.

Minimum Account Balance To keep your account open, you must maintain a
minimum balance of $500 in each Series account. If this minimum balance is
not maintained due to redemptions, the Series reserves the right to redeem
all of your remaining shares in that Series and mail the proceeds to you at
the address of record. Shares will be redeemed at net asset value on the day
the account is closed. The Fund will give you 60 days notice that such
redemption will occur unless you make an additional investment to increase
the account balance to the $500 minimum.

[ ] IRAs, available to individuals who work and their spouses.

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

Information you
will receive

34 Aetna Mutual Funds Prospectus
<PAGE>

permission of the other shareholders involved, you have the option of
requesting that accounts controlled by other shareholders be shown on one
Consolidated Statement. For example, information on your individual account,
your IRA, your spouse's individual account and your spouse's IRA may be shown
on one Consolidated Statement.

Other Features

A convenient way
to make regular
investments

Systematic Investment The Systematic Investment feature, using the EFT
capability (see "Shareholder Services--Purchase by Electronic Funds
Transfer"), allows you to make automatic monthly investments in any Series.
On the application you may select the amount of money to be moved and the
Series in which it will be invested. There is no minimum initial cash
investment required to purchase shares if you elect to use the EFT feature.
The minimum monthly Systematic Investment is $50 per Series, and we reserve
the right to increase that amount. EFT transactions will be effective 15 days
following the receipt by the transfer agent of your application. The
Systematic Investment feature and EFT capability will be terminated upon
total redemption of your shares. Payment of redemption proceeds will be held
until a Systematic Investment has cleared, which may take up to 12 calendar
days. See "How to Redeem Shares."

For more
information, call
your agent or
representative
or 1-800-367-7732

Automatic Cash Withdrawal Plan The Automatic Cash Withdrawal Plan provides a
convenient way for you to receive a systematic distribution while maintaining
an investment in the Fund. The Automatic Cash Withdrawal Plan permits you to
have payments of $100 or more automatically transferred from a Series to your
designated bank account on a monthly basis. To enroll in this plan, you must
have a minimum balance of $10,000 in any Series utilizing this feature. Your
automatic cash withdrawals will be processed on a regular basis beginning on
or about the first day of the month. There may be tax consequences associated
with these transactions. Please consult your tax adviser.

Be sure to
sign up for
checkwriting
services

Checkwriting Service Checkwriting is available with Money Market and any
applicable CDSC will be charged to your account. There is currently no charge
for this service, however, the transfer agent may impose a nominal fee for
checks. Checks must be for a minimum of $250 and the checkwriting service may
not be used for a complete redemption of your shares. If the amount of the
check including any applicable CDSC is greater than the value of your shares,
the check will be returned unpaid. In addition, checks written against shares
purchased by check or Systematic Investment during the past 12 calendar days
will be returned unpaid due to uncollected funds. You may select the
checkwriting service by indicating your election on the application or by
calling 1-800-367-7732. All notices with respect to checks must be given to
the

Aetna Mutual Funds Prospectus 35
<PAGE>

transfer agent. The checkwriting service is not available for IRAs or other
retirement accounts.

Changes to Service The Fund reserve the right to amend the shareholder
services described above or to change the terms or conditions of such
services at any time.

Cross Investing

[ ] Dividend Investing--You may elect to have dividend and/or capital gains
distributions automatically invested in one other Adviser Class Series,
including those Series offered through the Generation Series Prospectus
(Aetna Ascent, Aetna Crossroads and Aetna Legacy).

[ ] Systematic Exchange--You may establish an automatic exchange of Adviser
Class shares from one Series to another. The exchange will occur on or
about the 15th day of each month and must be for a minimum of $50 per
month. Since this transaction is treated as an exchange, the policies
related to the exchange privilege apply. Please read the "Shareholder
Services--Purchase by Exchange" section carefully. There may be tax
consequences associated with these exchanges. Please consult your tax
adviser.

Fees and Charges

Shareholder Services Fee Under a Shareholder Services Plan approved by the
Board of Directors, Aetna is paid a service fee at an annual rate of 0.25%
(0.10% for Money Market Series) of the daily net assets of the Adviser Class
shares of each Series. This fee is used as compensation for expenses incurred
in servicing shareholder accounts.

12b-1 Distribution Fee The Directors and the Adviser Class shareholders have
approved a Distribution Plan under Rule 12b-1 of the 1940 Act. Under this
plan, Aetna is paid a distribution fee at an annual rate of 0.50% of the
average daily net assets of the Adviser Class shares of each Series except
Money Market.

The distribution fee may be used to cover expenses incurred in promoting
the sale of Adviser Class shares, including (i) costs of

36 Aetna Mutual Funds Prospectus
<PAGE>

printing and distributing each Series' prospectus, Statement 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 Aetna distribution
related expenses; and (iv) accruals for interest on the amount of the
foregoing expenses that exceed distribution fees and the CDSC received by
Aetna.

How we calculate
the deferred
sales charge

Contingent Deferred Sales Charge You may buy Adviser Class shares of any
Series without an initial sales charge. However, Aetna will impose a
contingent deferred sales charge (CDSC) on certain Fund share redemptions.

There is no CDSC on redemptions of Adviser Class shares purchased through
reinvestment of dividends or capital gains distributions or shares purchased
more than four years prior to the redemption. In addition, there is no CDSC
on Money Market Series redemptions unless those shares were purchased through
an exchange from another Series within four years prior to the redemption.
Redemptions of Adviser Class shares within four years of purchase are subject
to a CDSC. The charge is assessed on an amount equal to the lesser of the
current market value or the original cost of the shares being redeemed. The
result is there is no sales charge on increases in the net asset value of
shares above the initial purchase price.

The CDSC is calculated by multiplying the lesser of the current market
value or the original cost of the shares being redeemed, by the percentage
shown below based on the time invested:

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 Fund 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 Series 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 Series 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

Aetna Mutual Funds Prospectus 37
<PAGE>

of $2,000, the first $1,200 would not be subject to a CDSC, but the remaining
$800 would be subject to the CDSC and would be assumed to have come from your
oldest purchase payment. Thus, a 0.50% CDSC would be imposed (for redemptions
of shares in the third year since purchase), for a total charge of $4.00.

Because the CDSC is assessed on a Series-by-Series basis, shareholders who
contemplate a redemption and have invested in multiple Series should consider
redeeming from the Series that would produce the lowest CDSC.

Waivers of CDSC The CDSC may be waived on (a) exchanges under appropriate
circumstances such as between Series; (b) redemptions of shares following the
death or disability of the shareholder; (c) redemptions of shares in
connection with distributions and certain eligible withdrawals from
retirement plans or IRAs; (d) redemptions of shares purchased by active or
retired employees of the Underwriter or affiliated companies; (e) redemptions
by shareholders with a current account balance of $1 million or more in the
account from which they wish to redeem; and (f) involuntary redemptions.

Management

Listed below are the Advisory Fees that Aetna receives from each Series as
well as the fees that Aetna pays to the Subadviser at an annual rate based on
average daily net assets of each Series:

Subadvisory
Advisory Fee Fee Assets
Money Market 0.400% 0.300% On first $500 million
0.350% 0.265% On next $500 million
0.340% 0.255% On next $1 billion
0.330% 0.250% On next $1 billion
0.300% 0.225% Over $3 billion
- --------------------- ------------ ----------- ---------------------
Government 0.500% 0.350% On first $250 million
0.475% 0.335% On next $250 million
0.450% 0.315% On next $250 million
0.425% 0.300% On next $1.25 billion
0.400% 0.280% Over $2 billion
- --------------------- ------------ ----------- ---------------------

38 Aetna Mutual Funds Prospectus
<PAGE>

- --------------------- ------------ ----------- ---------------------
Bond 0.500% 0.350% On first $250 million
0.475% 0.335% On next $250 million
0.450% 0.315% On next $250 million
0.425% 0.300% On next $1.25 billion
0.400% 0.280% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Aetna Fund 0.800% 0.500% On first $500 million
0.750% 0.470% On next $500 million
0.700% 0.440% On next $1 billion
0.650% 0.410% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Growth and Income 0.700% 0.450% On first $250 million
0.650% 0.420% On next $250 million
0.625% 0.405% On next $250 million
0.600% 0.390% On next $1.25 billion
0.550% 0.355% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Growth 0.700% 0.450% On first $250 million
0.650% 0.420% On next $250 million
0.625% 0.405% On next $250 million
0.600% 0.390% On next $1.25 billion
0.550% 0.355% Over $2 billion
- --------------------- ------------ ----------- ---------------------

Index Plus 0.450% 0.350% On first $250 million
0.450% 0.345% On next $250 million
0.425% 0.3275% On next $250 million
0.400% 0.310% On next $250 million
0.400% 0.300% On next $1 billion
0.375% 0.2775% Over $2 billion
- --------------------- ------------ ----------- ---------------------
Small Company 0.850% 0.550% On first $250 million
0.800% 0.520% On next $250 million
0.775% 0.505% On next $250 million
0.750% 0.490% On next $1.25 billion
0.725% 0.470% Over $2 billion

- --------------------- ------------ ----------- ---------------------
International Growth 0.850% 0.550% On first $250 million
0.800% 0.520% On next $250 million
0.775% 0.505% On next $250 million
0.750% 0.490% On next $1.25 billion
0.700% 0.455% Over $2 billion
- --------------------- ------------ ----------- ---------------------

The investment advisory and administrative service fees (see
"Administrator" below) applicable to Aetna Fund, Growth and Income, Growth,
Small Company, and International Growth when taken together

Aetna Mutual Funds Prospectus 39
<PAGE>

(before expense reimbursement) are higher than those charged by some other
investment advisers to other registered investment companies.

Sub-adviser to
Aetna Series
Fund, Inc.

Subadviser Aetna, the Fund on behalf of each Series and Aeltus have entered
into subadvisory agreements appointing Aeltus as the subadviser for each
Series (Subadvisory Agreements). Aeltus is a Connecticut corporation with its
principal offices located at 242 Trumbull Street, Hartford, Connecticut
06103-1205. Aeltus is registered as an investment adviser with the
Commission. Under the Subadvisory Agreements, Aeltus is responsible for
managing the assets of each Series in accordance with its investment
objective and policies, subject to the supervision of Aetna, the Fund and the
Fund's Directors. Aeltus determines what securities and other instruments are
purchased and sold by each Series and handles certain related accounting and
administrative functions, including determining each Series' net asset value
on a daily basis and repairing and providing such reports, data and
information as Aetna or the Directors request from time to time.

Principal Underwriter Aetna is the principal underwriter for the Fund. Aetna
contracts with various broker-dealers, including one or more of its
affiliates, for distribution of shares.

Transfer Agent Firstar Trust Company located at 615 E. Michigan Street,
Milwaukee, WI 53202 acts as the 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.

Series' Expenses Each Series bears the costs of its operations. Expenses
directly attributable to a Series are charged to that Series. Some expenses
are allocated proportionately among all Series of the Fund in proportion to
the net assets of each Series and some expenses are allocated equally to each
Series. Series expenses for each class of shares are included in the Fee
Tables.

40 Aetna Mutual Funds Prospectus
<PAGE>

Portfolio Management

Money Market and Bond Jeanne Wong-Boehm, Managing Director, Aeltus, has been
managing Money Market and Bond since January 1992. Ms. Wong-Boehm joined
Aetna in 1983 as a fixed income portfolio analyst, and in 1989 she was
assigned primary responsibility for the money market operations.

Aetna Fund John Y. Kim, President and Chief Investment Officer, Aeltus. Mr.
Kim has been managing Aetna Fund since May 1994. He joined Aetna Life
Insurance Company in 1983 as a Bond Analyst and in 1989 he advanced to Senior
Investment Officer. In October 1989, Mr. Kim joined Aetna as Fixed Income
Portfolio Manager. He subsequently served as a Vice President of Investor
Relations for Aetna Inc. and later became Vice President and Senior Portfolio
Manager for Aetna Inc.'s Property/Casualty portfolios. In 1993, Mr. Kim
joined Mitchell Hutchins Institutional Investors as Managing Director and
Head of Institutional Fixed Income. In 1994 he returned to Aetna as its Chief
Investment Officer.

Growth and Income Kevin Means, Managing Director, Aeltus, has managed Growth
and Income Series since July 1994. Mr. Means is responsible for the
management of over $6 billion in variable annuity and mutual funds assets.
Mr. Means joined Aetna 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. Mr. Means heads a
team of portfolio managers who specialize in various asset classes used in
the management of Growth and Income.

Index Plus Geoffrey A. Brod, a Vice President of Aeltus, is primarily
responsible for the day-to-day management of Index Plus. Mr. Brod has over 30
years of experience in quantitative applications and has over 9 years of
experience in equity investments. Mr. Brod has been with the Aetna
organization since 1966.

International Growth Vince Fioramonti, Vice-President, Aeltus, has managed
International Growth since December 1995. Mr. Fioramonti manages
international stocks and non-U.S. dollar government bonds for several Aetna
investment funds. Mr. Fioramonti joined Aetna in 1994 after serving as Vice
President for The Travelers Investment Management Company. He began his
investment career with Travelers in 1988.

Aetna Mutual Funds Prospectus 41
<PAGE>

Growth Peter B. Canoni, Managing Director, Aeltus, has managed Growth since
its inception in January 1994. Mr. Canoni has worked as a fund manager for
Aeltus since 1980.

Small Company Thomas DiBella, Vice President, Aeltus, has managed Small
Company since its inception in January 1994. Mr. DiBella joined Aeltus in
1991 and is currently responsible for the management of small capitalization
portfolios. Prior to joining Aeltus, Mr. DiBella was an investment officer
with Bethlehem Steel from 1989 to 1991.

Government Hugh T. M. Whelan, Vice President, Aeltus has managed Government
since January 1997. Mr. Whelan joined Aeltus in 1989 and manages fixed-income
portfolios employing different strategies.

Distributions

How to receive
dividends

[ ] Money Market declares dividends daily and pays monthly.

[ ] Government and Bond declare and pay dividends monthly.

[ ] Aetna Fund and Growth and Income declare and pay dividends semiannually.

[ ] Growth, Index Plus, Small Company, and International Growth declare and pay
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 Series. Capital gains distributions are derived from each
Series realized long-term capital gains. The per share dividends and
distributions on Adviser Class shares will be less than the per share
dividends and distributions of the Select Class as a result of the
distribution fees and service fees applicable to the Adviser Class.

Money Market shares begin to accrue dividends the next Business Day after
they are purchased; a redemption will include dividends declared through the
redemption date.

Both income dividends and capital gains distributions are paid by each
Series on a per-share basis. As a result, at the time of such payment, the
net asset value per share of a Series (except Money Market) will be reduced
by the amount of such payment.

Net Asset Value

Pricing
your Fund

42 Aetna Mutual Funds Prospectus
<PAGE>

market quotations. All other assets, including restricted securities and
other securities for which market quotations are not readily available, are
valued at their fair value in such manner as may be determined, from time to
time, under the authority, of the Directors.

Money Market's portfolio securities are valued by the amortized cost method
of valuation. Money Market's use of amortized cost is part of its effort to
maintain a constant net asset value of $1.00 per share.

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 Statement 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.

Form 1099-DIV
will be mailed
to you in January

Shareholder Distributions Each Series intends to qualify for treatment under
Subchapter M of the Internal Revenue Code, as amended. By distributing all of
its income and meeting certain other requirements relating to the source of
its income and diversification of its assets, the fund will not be liable for
federal income or excise taxes. Therefore, each Series will distribute all of
its net investment income and net long-term capital gains to shareholders.
Such distributions will be taxable income or capital gains to the
shareholders and not the Series. Distributions of net long-term capital gains
are taxable to the shareholders as long-term capital gains regardless of the
length of time a shareholder has owned the shares. Distributions of net
investment income and net short-term capital gains are taxable as ordinary
income. Depending on a Series' investments, part or all of ordinary income
dividends could be treated as: (1) "U.S. Government Interest Dividends" which
are exempt from state and local taxes in some jurisdictions or (2)
"Qualifying Dividends" which for eligible corporate shareholders qualify for
the corporate dividends-received deduction Dividends paid by Government may
be U.S. Government Interest Dividends. Substantially all dividends paid by
Growth and Income, and, to a lesser degree, Aetna Fund, Growth and Small
Company will be Qualifying Dividends for which eligible corporate
shareholders may claim a partial deduction.

Aetna Mutual Funds Prospectus 43
<PAGE>

Series' assets at the close of a taxable year consist of stock or securities
of foreign corporations.

Buying a Dividend If you buy shares of a Series (other than Money Market)
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 the Fund to withhold 31% of your taxable dividends, capital gains
distributions and redemption proceeds.

General Information

Articles of Incorporation The Fund 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 Fund currently offers 12 series, nine of which are
described in this Prospectus.

Share Classes The Fund shares are 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 Fund. The
Directors continue to consider whether any such conflicts exist and, if so,
will take appropriate action.

44 Aetna Mutual Funds Prospectus
<PAGE>

As of January 31, 1997, Aetna and its affiliates owned 15.49% of all
outstanding shares of the Fund. Aetna and its affiliates may make additional
investments to the Series.

Shareholder Meetings The Fund 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 Series' outstanding shares, the Fund will hold a shareholder
meeting for the purpose of voting on the removal of one or more Directors and
will assist with communication concerning that shareholder meeting.

Payments to Dealers For sales of Funds' shares (other than Money Market
Fund), Aetna 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, Aetna may also award various types of non-cash compensation such as
merchandise, trips and/or educational and business seminars 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
Aetna so the price you pay for Adviser Class shares and the value of your
investment will be unaffected.

Aetna Mutual Funds Prospectus 45
<PAGE>

Performance Data

46 Aetna Mutual Funds Prospectus
<PAGE>

Appendix A--Glossary of Investment Terms

This glossary describes some of the securities used by the Series. Further
information is available in the Statement.

Certificates of Deposit For large deposits not withdrawable on demand, banks
issue certificates of deposit ("CDs") as evidence of ownership. CDs are
usually negotiable and traded among investors such as mutual funds and banks.

Commercial Paper Commercial paper is unsecured short-term debt instruments
issued by companies or banks with a maturity ranging from two to 270 days.

Eurodollars Eurodollars are U.S. dollars held in banks outside the United
States, mainly in Europe but also in other countries, and are commonly used
for the settlement of international transactions. There are many types of
Eurodollar securities including Eurodollar CDs and bonds; these securities
are not registered with the Commission. Certain Eurodollar deposits are not
FDIC insured and may be subject to future political and economic developments
and governmental restrictions.

High Risk High-Yield Securities Bonds that are rated BB or below by Standard
& Poor's or Ba or below by Moody's 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 Series may purchase separately traded principal
and interest components of certain U.S. Government securities ("STRIPS"). In
addition, a Series may acquire custodial receipts that represent ownership in
a U.S. Government security's future interest or principal payments. These
securities are known by such exotic names as TIGRS and CATS and may be issued
at a discount to face value. They are generally more volatile than normal

Aetna Mutual Funds Prospectus 47
<PAGE>

fixed income securities because interest payments are accrued rather than
paid out in regular installments.

U.S. Government Securities Securities issued by the U.S. Government and its
agencies.

Direct Obligations of the U.S. Government are:

Treasury Bills--issued with short maturities (one year or less) and priced
at a discount to face value. The income for investors is the difference
between the purchase price and the face value.

Treasury Notes--intermediate-term securities with maturities of between
one to ten years. Income to investors is paid in semiannual interest
payments.

Treasury Bonds--long-term debt instruments with maturities from ten years
to up to thirty years. Income is paid to investors on a semiannual basis.

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.

48 Aetna Mutual Funds Prospectus
<PAGE>

The Series also use some of the following securities to manage risk and
volatility:

Convertible Stock Corporate securities, which may be either bonds or
preferred shares, that can be exchanged for shares 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.

Aetna Mutual Funds Prospectus 49
<PAGE>

Appendix B--Description of Corporate Bond Ratings

Moody's Investors Service, Inc.

50 Aetna Mutual Funds Prospectus
<PAGE>

The modifier 1 indicates that the bond ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks in the lower end of its rating
category.

Standard & Poor's Corporation

"AAA" Rating Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.

"AA" Rating Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small
degree.

The ratings from "AA" to "B" may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within the major rating
categories.

Aetna Mutual Funds Prospectus 51
<PAGE>

[Aetna logo] Aetna Series Fund, Inc.

151 Farmington Avenue
Hartford, CT 06156-8962
1-800-238-6263

Investment Adviser
Aetna Life Insurance and Annuity Company
151 Farmington Avenue
Hartford, CT 06156-8962

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 Series in any jurisdiction in
which such sale, offer to sell, or solicitation may not be lawfully made.

<PAGE>

[Back Cover]

Securities offered through
Aetna Investment Services, Inc.
or authorized broker/dealers
who have an agreement with the company.

[Recycle symbol] printed on recycled paper
PROS.SERADV-97

<PAGE>

AETNA SERIES FUND, INC.
Adviser Class Shares and Select Class Shares
151 Farmington Avenue
Hartford, Connecticut 06156-8962
Statement of Additional Information dated: March 3, 1997

This Statement of Additional Information (Statement) is not a prospectus and
should be read in conjunction with the current prospectuses for Aetna Series
Fund, Inc. and Aetna Generation Series, dated March 3, 1997. 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 2
Investment Techniques 3
Directors and Officers 14
Control Persons and Principal Shareholders 17
The Investment Advisory Agreements 17
The Subadvisory Agreements 18
The Administrative Services Agreements 19
The License Agreement 20
Custodian 20
Independent Auditors 21
Principal Underwriter 21
Distribution Arrangements 21
Brokerage Allocation and Trading Policies 21
Description of Shares 23
Sale and Redemption of Shares 24
Net Asset Value 24
Tax Status 25
Performance Information 29
Financial Statements 32

<PAGE>

GENERAL INFORMATION AND HISTORY

Aetna Series Fund, Inc. (Fund) is an open-end management investment company
which consists of Series, each representing a diversified portfolio of
investments with different investment objectives, policies and restrictions.
Each Series is currently authorized to offer two classes of shares, the
Adviser Class and the Select Class. The following Series are described in
this Statement:

Aetna Money Market Fund (Money Market)
Aetna Government Fund (Government)
Aetna Bond Fund (Bond)
The Aetna Fund (Aetna Fund), a balanced fund
Aetna Growth and Income Fund (Growth and Income)
Aetna Growth Fund (Growth)
Aetna Index Plus Fund (Index Plus)
Aetna Small Company Fund (Small Company), (prior to September 1996, the Aetna
Small Company Growth Fund)
Aetna International Growth Fund (International Growth)
Aetna Ascent (Ascent)
Aetna Crossroads (Crossroads)
Aetna Legacy (Legacy)

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

ADDITIONAL INVESTMENT RESTRICTIONS AND POLICIES

The investment objectives and certain investment policies of each Series, are
matters of fundamental policy for purposes of the Investment Company Act of
1940 (1940 Act) and therefore cannot be changed without the approval of a
majority of the outstanding voting securities of that Series. This means the
lesser of: (i) 67% of the shares of a Series present at a shareholders'
meeting if the holders of more than 50% of the shares of that Series then
outstanding are present in person or by proxy; or (ii) more than 50% of the
outstanding voting securities of the Series.

As a matter of fundamental policy, a Series 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
Series' 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 Series 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, for Legacy, Crossroads and Ascent, 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. Additionally for Money Market,
investments in the following shall not be subject to the 25% limitation:
securities invested in, or repurchase agreements for, U.S. Government
securities, certificates of deposit, bankers' acceptances, or securities
of banks and bank holding companies;

(3) make loans, except that, to the extent appropriate under its investment
program, a Series may (a) purchase bonds, debentures or other debt
instruments, 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 Series' total
assets;

(4) issue any senior security (as defined in the 1940 Act), except that (a) a
Series may enter into commitments to purchase securities in accordance
with that Series' investment program, including reverse repurchase
agreements, delayed delivery and when-issued securities, which may be
considered the issuance of senior securities; (b) a Series 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 Series (other than Money Market)
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 Series 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 Series 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 Series may acquire real estate as a result of ownership of securities
or other interests (this could occur for example if a Series holds a
security that is collateralized by an interest in real estate and the
security defaults);

<PAGE>

(6) invest in commodity contracts, except that a Series may, to the extent
appropriate under its investment program, purchase securities of
companies engaged in such activities; may (other than Money Market) 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 Series (other than Money Market) may
enter into certain futures contracts and options related thereto; (b) a
Series may enter into commitments to purchase securities in accordance
with that Series' investment program, including delayed delivery and
when-issued securities and reverse repurchase agreements; (c) for
temporary emergency purposes, a Series 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 Series (other than Money
Market) may borrow money from banks (including its custodian bank) only
if, immediately after such borrowing, the value of that Series' 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 Series' assets fails to meet the 300% asset
coverage requirement relative only to leveraging, that Series will,
within three days (not including Sundays and holidays), reduce its
borrowings to the extent necessary to meet the 300% test;

(8) act as an underwriter of securities except to the extent that, in
connection with the disposition of portfolio securities by a Series, that
Series may be deemed to be an underwriter under the provisions of the
Securities Act of 1933 (the "1933 Act").

The Fund's Board of Directors (Directors) has adopted certain other
investment restrictions which may be changed by the Directors and without
shareholder vote. Some of these restrictions are described in the prospectus.
In addition, under such restrictions, the Series 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 Series, as
described in this Statement and in the prospectus;

(2) except for International Growth, Aetna Ascent, Aetna Crossroads, and
Aetna Legacy invest more than 25% of its total assets in securities or
obligations of foreign issuers, including marketable securities of, or
guaranteed by, foreign governments (or any instrumentality or subdivision
thereof). A Series will invest in securities or obligations of foreign
banks only if such banks have a minimum of $5 billion in assets and a
primary capital ratio of at least 4.25%. Money Market may only purchase
foreign securities or obligations that are U.S. dollar denominated;

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

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

(5) purchase interests in oil, gas or other mineral exploration programs;
however, this limitation will not prohibit the acquisition of securities
of companies engaged in the production or transmission of oil, gas, or
other minerals;

(6) No Series will invest more than 15% (10% for Index Plus and Money Market)
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;

(7) except for Legacy, Crossroads and Ascent invest more than 25% of the
total value of its assets in high risk, high-yield securities or "junk
bonds" (securities rated BB/Ba or lower by Standard & Poor's Corporation
or Moody's Investors Service, Inc., or, if unrated, considered by the
Adviser to be of comparable quality);

(8) except for Index Plus, invest in securities issued by any entity listed in
the Wall Street Journal's Quarterly "Corporate Performance Report" under the
heading "Consumer, Noncyclical-Tobacco," or are otherwise determined by the
Adviser to be primarily involved in the production or distribution of
tobacco products.

Where a Series' 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.

INVESTMENT TECHNIQUES

Options, Futures and Other Derivative Instruments
Each Series may use derivative instruments as described below and in the
prospectuses under "Description of the Fund," "Investment Techniques" and
"Risk Factors and Other Considerations." The following provides additional
information about these instruments.

<PAGE>

Futures Contracts--Each Series (other than Money Market) may enter into
futures contracts as described in the prospectus but subject to restrictions
described below under "Restrictions." A Series may enter into futures
contracts or options thereon, which are traded on national futures exchanges
and are standardized as to maturity date and underlying financial instrument.
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 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 Series will be able
to enter into an offsetting transaction with respect to a particular contract
at a particular time. If a Series 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 Series 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 Series with a
commodities broker in a custodian account in order to initiate futures
trading and to maintain open positions in a Series' futures contracts. A
margin deposit is intended to assure the Series' 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 Series. These
daily payments to and from a Series 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 Series will mark to market the current value of its
open futures contracts. Each Series expects to earn interest income on its
initial margin deposits. Furthermore, in the case of a futures contract
purchase, each Series 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 Series 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

<PAGE>

excess of the amount initially invested in the futures contract. However, a
Series 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 Series can enter into options on futures contracts. See "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
Series 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 Series' obligation might be more or less than the premium
received when it originally wrote the option. Further, the Series might
occasionally not be able to close the option because of insufficient activity
in the options market.

Call and Put Options--Each Series (except Money Market) 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 subject to the restrictions described
below under "Restrictions." A call option 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 Series (except Money Market) 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 or Subadviser (collectively the "Adviser").

A Series (other than Legacy, Crossroads, Ascent and Money Market) may
purchase and sell futures contracts and related options under the following
conditions: (a) the then-current aggregate futures market prices of financial
instruments required to be delivered and purchased under open futures
contracts shall not exceed 30% of a Series' total assets, at market value (b)
no more than 5% of the assets, at market value at the time of entering into a
contract, shall be committed to margin deposits in relation to futures
contracts. No Series other than Legacy, Crossroads and Ascent may have call
options outstanding at any one time on more than 30% of its total assets nor
will it buy put options if more than 3% of its assets immediately following
such purchase would consist of put options. Each Series except Legacy,
Crossroads, Ascent and Money Market may purchase call and sell put options
only to close out positions it previously opened. Each will only write a call
option on a security it already owns and will not write call options on
when-issued securities. Securities it "already owns" include any stock which
it has the right to acquire without any additional payment, at its discretion
for as long as the put or call remains outstanding. As evidence of this
hedging intent, each Series expects that at least 75% of futures contract
purchases will be "completed"; that is, upon the sale of these long
contracts, equivalent amounts of related securities will have been or are
then being purchased by that Series in the cash market. Money Market may not
enter into futures contracts and related options. Legacy, Crossroads and
Ascent are limited as described in their prospectus.

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 Series (except Money Market) 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.

Index Plus may purchase and write call options on stock indices, including
the S&P 500, as well as on any individual stock, as described below. Index
Plus will use these techniques primarily as a temporary substitute for taking
positions in certain securities or in the securities that comprise the index,
particularly if Aetna considers these instruments to be undervalued relative
to the prices of particular securities or of the securities that comprise the
index.

An option on an index (or a particular security) is a contract that gives the
purchaser of the option, in return for the premium paid, the right to receive
from the writer of the option cash equal to the difference between the
closing price of the index (or security) and the exercise price of the
option, expressed in dollars, times a specified multiple (the "multiplier").
Index Plus may, in particular, purchase call options on an index (or a
particular security) to protect against increases in the price of securities
underlying that index (or individual securities) that Index Plus intends to
purchase pending its ability to invest in such securities in an orderly
manner.

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

<PAGE>

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 Series (except Money Market) may write put options on
debt securities or futures, only if such puts are covered by segregated
liquid assets.

In writing puts, there is the risk that a writer may be required to buy the
underlying security at a disadvantageous price. Writing a put covered by
segregated liquid assets equal to the exercise of the put has the same
economic effect as writing a covered call option. The premium the writer
receives from writing a put option represents a profit, as long as the price
of the underlying instrument remains above the exercise price; however, if
the put is exercised, the writer is obligated during the option period to buy
the underlying instrument from the buyer of the put at the exercise price,
even though the value of the investment may have fallen below the exercise
price. If the put lapses unexercised, the writer realizes a gain in the
amount of the premium. If the put is exercised, the writer may incur a loss,
equal to the difference between the exercise price and the current market
value of the underlying instrument.

A Series (except Money Market) may purchase put options when the 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 may be used to protect a Series' 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 Series, 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 Series 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 Series' 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 Series for writing call options will
be recorded as a liability in the statement of assets and liabilities of that
Series. 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 Series when purchasing a put option will be
recorded as an asset in the statement of assets and liabilities of that
Series. 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 Series
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 Series desires to sell a particular security from its portfolio
on which it has written a call option, or purchased a put option, it will
seek to effect a closing transaction prior to, or concurrently with, the sale
of the security. There is, of course, no assurance that a Series will be able
to effect a closing transaction at a favorable price. If a Series 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 Series 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 Series (except Money Market) 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 Series 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 Series. Any
profits from writing covered call options are considered short-term gain for
federal income tax purposes and, when distributed by a Series, are taxable as
ordinary income.

Foreign Futures Contracts and Foreign Options--The Series (except Money
Market) 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")

<PAGE>

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 Series (except Money Market) may write
and purchase calls on foreign currencies. A Series (except Money Market) 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 Series' position, it would lose the premium it
paid and transactions costs. A call written on a foreign currency by a Series
is covered if the Series 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
Series (except Money Market) 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 Series 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 Series collateralizes
the position by maintaining in a segregated account with the Series'
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 Series (except Money Market) 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 Series
(except Money Market) 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 contracts include standardized foreign currency futures contracts
which are traded on exchanges and are subject to procedures and regulations
applicable to futures. Each Series (except Money Market) 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 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 Series may experience losses or gains on both the underlying
security and the cross currency hedge.

Each Series (except Money Market) 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 Series 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 Series' assets that may be
committed to forward exchange contracts. The Series will not enter into a
"cross hedge," unless it is denominated in a currency or currencies that the
Adviser believes will have price movements that tend to correlate closely
with the currency in which the investment being hedged is denominated.

The Fund's custodian will segregate securities of a Series or other liquid
high-quality debt securities in a separate account of each Series having a
value equal to the aggregate amount of that Series' commitments under forward
contracts entered into with respect to position hedges and cross hedges. If
the value of the securities segregated 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 Series' commitments with respect
to such

<PAGE>

contracts. As an alternative to maintaining all or part of the separate
account, a Series (except Money Market) may purchase a call option permitting
the Series to purchase the amount of foreign currency being hedged by a
forward sale contract at a price no higher than the forward contract price,
or a Series (except Money Market) may purchase a put option permitting the
Series 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 Series 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 Series 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 Series
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 Series 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 Series to sustain losses on these contracts
and transactions costs.

At or before the maturity of a forward exchange contract requiring a Series
to sell a currency, the Series 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 Series will obtain, on the same
maturity date, the same amount of the currency that it is obligated to
deliver. Similarly, a Series 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 Series 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 Series 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 Series must
evaluate the credit and performance risk of each particular counterparty
under a forward contract.

Although the Series 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 Series 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 Series at one rate, while offering a lesser
rate of exchange should the Series desire to resell that currency to the
dealer.

Restrictions on the Use of Futures and Option Contracts--CFTC regulations
require that to prevent it from being a commodity pool the Series enter into
all short futures for the purpose of hedging the value of securities held,
and that all long futures positions either constitute bona fide hedging
transactions, as defined in such regulations, or have a total value not in
excess of an amount determined by reference to certain cash and securities
positions maintained, 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 Series' net
assets, after taking into account realized profits and unrealized losses on
such futures contracts.

A Series' ability to engage in the hedging transactions described herein may
be limited by the current federal income tax requirement that a Series 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 Series 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 Series' loss will consist of the net amount of
contractual interest payments that a Series has not yet received. The Adviser
will monitor the creditworthiness of counterparties to a Series' interest
rate swap transactions on an ongoing basis. A Series will enter into swap
transactions with appropriate counterparties pursuant to master netting
agreements. A master netting agreement provides that all swaps done between a
Series 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."

<PAGE>

Additional Risk Factors in Using Derivatives--In addition to any risk factors
which may be described elsewhere in this section, or in the prospectuses, the
following sets forth certain information regarding the potential risks
associated with a Series' transactions in derivatives.

Risk of Imperfect Correlation--A Series' 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
Series might not be successful and the Series 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 Series'
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 Series 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 Series will not be able to establish
hedging positions, or that any hedging strategy adopted will be insufficient
to completely protect the Series.

The Series will purchase or sell futures contracts or options for hedging
purposes only if, in the 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 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 Series 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 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 Series 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 Series, which could require the Series 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 Series' 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
Adviser's judgment concerning the general direction of interest rates is
incorrect, a Series' overall performance may be poorer than if it had not
entered into any such contract. For example, if a Series 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 Series 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 Series 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 Fund does not believe that these trading
and position limits will have an adverse impact on the hedging strategies
regarding the Series.

<PAGE>

Repurchase Agreements
Each Series may enter into repurchase agreements with domestic banks and
broker-dealers meeting certain size and creditworthiness standards
established by the Fund's Board of Directors. Under a repurchase agreement, a
Series 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 Series to resell the instrument at a fixed price and time, thereby
determining the yield during the Series' 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 Series. 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 Series. In that event, a
Series 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 Series' ability to liquidate the
collateral may be delayed or limited. Under the 1940 Act, repurchase
agreements are considered loans by a Series. Repurchase agreements maturing
in more than seven days will not exceed 10 percent of the total assets of a
Series.

Variable Rate Demand Instruments
Variable rate demand instruments (including floating rate instruments) held
by a Series may have maturities of more than one year, provided: (i) the
Series 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 Series 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 Series might be unable to
dispose of the note and a loss would be incurred to the extent of the
default. A Series 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 Series
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 Statement.

Securities Lending
The Series 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 (NYSE); (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 Series 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 Series 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 Adviser's opinion, lending portfolio securities to qualified
broker-dealers affords a Series a means of increasing the yield on its
portfolio. A Series 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 Series 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
Adviser or subadviser will regain or direct the vote with respect to loaned
securities.

The primary risk a Series 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 Series 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 Series 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.

<PAGE>

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 Fund 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 Series, but also indirectly bear similar expenses of the
underlying closed-end fund. Also, as a result of a Series' policy of
investing in closed-end mutual funds, investors in the Series 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 Series 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 United States.
Typically, these securities are traded on the 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. Depositary receipts denominated in U.S. dollars will
not be considered foreign securities for purposes of the 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 Series
might be converted to cash, and the Series 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 Series 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 Series 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

<PAGE>

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, home equity loans, or credit card receivables. The payments
from the collateral are generally 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 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 Series, except Money Market, Government and International Growth may
invest in high-risk, high-yield securities (junk bonds), subject to the
limits described above, 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 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 Series' 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 Series' objectives, the Adviser seeks to identify
situations in which the Adviser believes that future developments will
enhance the creditworthiness and the ratings of the issuer.

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 Series 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 generally 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 Series defaults, the Series may incur additional expenses to
seek recovery.

<PAGE>

In addition, periods of economic uncertainty and changes can be expected
to result in increased volatility of market prices of these securities
and a Series' 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
Series may have to replace the securities with a lower yielding security,
resulting in a decreased return for investors. 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. Some issuers of high risk, high-yield
securities (junk bonds) may be traded among a limited number of
broker-dealers rather than in a broad 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 and S&P are considered, the 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
Series' investment objective may be more dependent on the Adviser's own
credit analysis than might be the case for a fund which does not invest
in these securities.

(5) Legislation. Legislation may have a negative impact on the market for
high risk, high-yield securities (junk bonds), such as legislation
requiring federally-insured savings and loan associations to divest
themselves of their investments in these securities.

Zero Coupon and Pay-in-Kind Securities
All of the Series may invest in zero coupon securities and all Series except
Money Market may invest in pay-in-kind securities. In addition, the Series
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 Series 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.

When-Issued or Delayed-Delivery Securities
During any period that a Series has outstanding a commitment to purchase
securities on a when-issued or delayed-delivery basis, that Series will
segregate securities 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 Series will be

<PAGE>

required to pay on settlement, additional assets may be required to be
segregated. Such segregated assets could affect the Series' liquidity and
ability to manage its portfolio. When a Series 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 Series' incurring a loss or missing an opportunity to invest segregated
assets more advantageously. A Series 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 Series at the time the
commitment is made. Because the market value of securities purchased on a
when-issued or delayed-delivery basis may increase or decrease prior to
settlement as a result of changes in interest rates or other factors, such
securities will be subject to changes in market value prior to settlement and a
loss may be incurred if the value of the security to be purchased declines prior
to settlement.

Portfolio Turnover
For the periods ended October 31, 1995 and October 31, 1996 the portfolio
turnover rates were as follows:

1995 1996
Government 117.31% 50.48%
Bond 56.99% 42.33%
Aetna Fund 129.05% 117.88%
Growth and Income 127.43% 106.09%
Growth 171.75% 144.19%
Small Company 156.43% 163.21%
International Growth 32.91% 135.92%
Ascent 164.09% 104.84%
Crossroads 166.93% 107.40%
Legacy 179.88% 91.62%

In 1995 the portfolio turnover rate for Government was higher than expected
due to very large withdrawals by the Series' largest investor.

In 1995 the portfolio turnover rates were higher than expected for Ascent,
Crossroads and Legacy due to very large withdrawals by the Series' largest
investor. This was a one-time event. Had these activities not occurred, the
portfolio turnover rates would have been 102.69% for Ascent, 115.99% for
Crossroads, and 136.31% for Legacy.

In 1996 the portfolio turnover rate for International Growth was higher than
expected because of the merger of Aetna Asian Growth into International Growth
in September 1996.

DIRECTORS AND OFFICERS

The investments and administration of the Fund are under the supervision of
the Directors. The Directors and executive officers of the Fund and their
principal occupations for the past five years are listed below. Those
Directors who are "interested persons," as defined in the 1940 Act, are
indicated by an asterisk (*) and hold similar positions with other investment
companies in the same fund complex managed by the Adviser.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal Occupation During Past Five Years
Position(s) Held (and Positions held with Affiliated Persons or
Name, Address and Age with Registrant Principal Underwriters of the Registrant)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shaun P. Mathews* Director and Vice President/Senior Vice President, ALIAC, March 1991 to
151 Farmington Avenue President present and Vice President, Aetna Life Insurance Company, 1991
Hartford, Connecticut to present. Director and President, Aetna Investment Services,
Age 41 Inc.; and Director and Senior Vice President, Aetna Insurance
Company of America, March 1991 to present.
- -------------------------------------------------------------------------------------------------------------------
Wayne F. Baltzer Vice President Assistant Vice President, ALIAC, May 1991 to present; Vice
151 Farmington Avenue President, Aetna Investment Services, Inc. July 1993 to
Hartford, Connecticut present.
Age 53
- -------------------------------------------------------------------------------------------------------------------
Martin T. Conroy Vice President Assistant Treasurer, ALIAC, October 1991 to present.
151 Farmington Avenue
Hartford, Connecticut
Age 57
- -------------------------------------------------------------------------------------------------------------------

<PAGE>

- -------------------------------------------------------------------------------------------------------------------
J. Scott Fox Vice President Director, Managing Director, Chief Operating Officer, Chief
242 Trumbull Street and Treasurer Financial Officer and Treasurer, Aeltus Investment Management,
Hartford, Connecticut Inc. (Aeltus), April 1994 to present; Managing Director and
Age 42 Treasurer, Equitable Capital Management Corp., March 1987 to
September 1993. Director and Chief Financial Officer, Aeltus
Capital, Inc. and Aeltus Trust Company, Inc.; Director,
President and Chief Executive Officer, Aetna Investment
Management, (Bermuda) Holding, Ltd.
- -------------------------------------------------------------------------------------------------------------------
Susan E. Bryant Secretary Counsel, Aetna Inc. (formerly Aetna Life and Casualty Company)
151 Farmington Avenue March 1993 to present; General Counsel and Corporate
Hartford, Connecticut Secretary, First Investors Corporation, April 1991 to March
Age 49 1993. Secretary, Aetna Investment Services, Inc. and Vice
President and Senior Counsel, Aetna Financial Services, Inc.
- -------------------------------------------------------------------------------------------------------------------
Morton Ehrlich Director Chairman and Chief Executive Officer, Integrated Management
1000 Venetian Way Corp. (an entrepreneurial company) and Universal Research
Miami, Florida Technologies, 1992 to present; Director and Chairman, Audit
Age 62 Committee, National Bureau of Economic Research, 1985 to 1992.
- -------------------------------------------------------------------------------------------------------------------
Maria T. Fighetti Director Manager/Attorney, Health Services, New York City Department of
325 Piermont Road Mental Health, Mental Retardation and Alcohol Services, 1973
Closter, New Jersey to present.
Age 53
- -------------------------------------------------------------------------------------------------------------------
David L. Grove Director Private Investor; Economic/Financial Consultant, December 1985
5 The Knoll to present.
Armonk, New York
Age 78
- -------------------------------------------------------------------------------------------------------------------
Timothy A. Holt* Director Director, Senior Vice President and Chief Financial Officer,
151 Farmington Avenue ALIAC, February 1996 to present; Vice President, Portfolio
Hartford, Connecticut Management/Investment Group, Aetna Inc. (formerly Aetna Life
Age 43 and Casualty Company), June 1991 to February 1996. Director
and Vice President, Aetna Retirement Holdings Services, Inc.
- -------------------------------------------------------------------------------------------------------------------
Daniel P. Kearney* Director Director, President, and Chief Executive Officer, ALIAC,
151 Farmington Avenue December 1993 to present; Executive Vice President, Aetna Inc.
Hartford, Connecticut (formerly Aetna Life and Casualty Company), December 1993 to
Age 57 present; Group Executive, Aetna Inc. (formerly Aetna Life and
Casualty Company), 1991 to 1993; Director, Aetna Investment
Services, Inc., November 1994 to present; Director, Aetna
Insurance Company of America, May 1994 to present.
- -------------------------------------------------------------------------------------------------------------------
Sidney Koch Director Financial Adviser, self-employed, January 1993 to present;
455 East 86th Street Senior Adviser, Daiwa Securities America, Inc., January 1992
New York, New York to January 1993; Executive Vice President, Member of Executive
Age 61 Committee, Daiwa Securities America, Inc., January 1986 to
January 1992.
- -------------------------------------------------------------------------------------------------------------------

<PAGE>

- -------------------------------------------------------------------------------------------------------------------
Corine T. Norgaard Director, Chair Dean of the Barney School of Business, University of Hartford,
556 Wormwood Hill Audit Committee and (West Hartford, CT), August 1996 to present; Professor,
Mansfield Center, Contract Committee Accounting and Dean of the School of Management, Binghamton
Connecticut University, (Binghamton, NY), August 1993 to August 1996;
Age 59 Professor, Accounting, University of Connecticut, (Storrs,
Connecticut), September 1969 to June 1993; Director, The
Advest Group (holding company for brokerage firm) through
September 1996.
- -------------------------------------------------------------------------------------------------------------------
Richard G. Scheide Director Trust and Private Banking Consultant, David Ross Palmer
11 Lily Street Consultants, July 1991 to present.
Nantucket, Massachusetts
Age 67
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

* Interested persons as defined in the Investment Company Act of 1940 (1940
Act).

During the period ended October 31, 1996, members of the Board of Directors
who are also directors, officers or employees of Aetna Inc. and its
affiliates were not entitled to any compensation from the Fund. Members of
the Board of Directors who are not affiliated as employees of Aetna Inc. or
its subsidiaries received an annual retainer of $30,000 for service on the
Board, and a fee of $5,000 for each meeting of such Board (equal to an
aggregate annual fee of $25,000). They also received a fee of $3,000 per
Audit Committee meeting, and $5,000 per Contract Committee meeting.

As of October 31, 1996, 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.

<TABLE>
<CAPTION>
Aggregate
Name of Person, Compensation Total Compensation from Registrant
Position from Registrant and Series Complex* Paid to Directors
- ------------------------------- --------------------- ---------------------------------------
<S> <C> <C>
Corine Norgaard
Director and Chairman,
Audit and Contract Committees $7,125 $71,250
- ------------------------------- --------------------- ---------------------------------------
Sidney Koch $68,250
Director and Member,
Audit and Contract Committees $6,825
- ------------------------------- --------------------- ---------------------------------------
Maria T. Fighetti
Director and Member,
Audit and Contract Committees $5,925 $59,250
- ------------------------------- --------------------- ---------------------------------------
Morton Ehrlich
Director and Member,
Audit and Contract Committees $5,925 $59,250
- ------------------------------- --------------------- ---------------------------------------
Richard G. Scheide
Director and Member,
Audit and Contract Committees $6,425 $64,250
- ------------------------------- --------------------- ---------------------------------------
David L. Grove
Director and Member,
Audit and Contract Committees $6,425** $64,250**
- ------------------------------- --------------------- ---------------------------------------
</TABLE>

*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), Aetna GET Fund
(Series C), Aetna Generation Portfolios, Inc. and Aetna Variable
Portfolios, Inc.
**Mr. Grove elected to defer all such compensation under an existing
deferred compensation plan.
The Fund has applied for an order by the Securities and Exchange
Commission to allow the Members of the Board of Directors who are not
affiliated with Aetna Inc. or any of its subsidiaries to defer all or a
portion of their compensation in accordance with the terms of a new
Deferred Compensation Plan (the "Plan"). Under the Plan, compensation
deferred by an unaffiliated Director is periodically adjusted as though an
equivalent amount had been invested and reinvested in shares of one or
more series of Aetna Series Fund, Inc. designated by the Director. The
amount paid to the unaffiliated Director under the Plan will be based upon
the performance of such investments. Deferral of compensation in
accordance with the Plan will have a negligible effect on the assets,
liabilities and net income per share of any Series and will not obligate
the Fund to retain the services of any Director or to pay any particular
level of compensation to any Director.

<PAGE>

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS

As of January 31, 1997, for the Select Class shares, Aetna owned 48,043
(0.67%) shares of Aetna Fund; 772,714 (25.68%) shares of Bond; 854,276
(81.84%) shares of Government; 122,811 (3.14%) shares of Growth; 253,533
(0.86%) shares of Growth & Income; 1,010,000 (99.85%) shares of Index Plus;
2,058,730 (52.76%) shares of International Growth; 82,355,969 (24.89%) shares
of Money Market; 1,276,043 (78.18%) shares of Small Company; 1,642,952
(94.41%) shares of Ascent; 1,498,467 (95.30%) shares of Crossroads; 1,509,975
(97.12%) shares of Legacy.

As of January 31, 1997, for the Adviser Class shares, Aetna owned 1,756,256
(89.23%) shares of International Growth; 2,000 (100.00%) shares of Ascent;
2,271 (100.00%) shares of Legacy.

As of January 31, 1997, officers and Directors owned less than 1% of the
outstanding shares of any of the Series.

THE INVESTMENT ADVISORY AGREEMENTS

The Fund, on behalf of each Series, has entered into investment advisory
agreements (advisory agreements) appointing Aetna as the Investment Adviser
of each Series. These Advisory Agreements were adopted by the Directors on
December 12, 1995 and February 28, 1996. Each Advisory Agreement is effective
through December 31, 1997. The Advisory Agreements will remain in effect
thereafter if approved at least annually by a majority of the Directors,
including a majority of the Directors who are not "interested persons" of the
Fund, as defined by the 1940 Act (Independent Directors), at a meeting called
for that purpose, and held in person. Each Advisory Agreement may be
terminated without penalty at any time by the Directors or by a majority vote
of the outstanding voting securities of that Series. They may be terminated
upon sixty (60) days' written notice by Aetna. The Advisory Agreements
terminate automatically in the event of assignment. The Advisory Agreements
replace investment advisory agreements with Aetna that were approved by
shareholders on July 26, 1996. Under the Advisory Agreements and subject to
the supervision of the Directors of the Fund, Aetna has responsibility for
supervising all aspects of the operations of each Series including the
selection, purchase and sale of securities on behalf of each Series, the
calculation of net asset values and the preparation of financial and other
reports as requested by the Directors. Under the Advisory Agreements, Aetna
is given the right to delegate any or all of its obligations to a subadviser.

The Advisory Agreements provide that Aetna is responsible for payment of all
costs of its personnel, its overhead and of its employees who also serve as
officers or Directors of the Fund and each Series is responsible for payment
of all other of its costs.

For its services Aetna receives the following annual investment advisory fees
expressed as a percentage of the average daily net assets of each Series:

Money Market Government; Bond

Fee Assets Fee Assets
0.40% On first $500 million 0.50% On first $250 million
0.35% On next $500 million 0.475% On next $250 million
0.34% On next $1 billion 0.450% On next $250 million
0.33% On next $1 billion 0.425% On next $1.25 billion
0.30% Over $3 billion 0.40% Over $2 billion

Aetna Fund Growth and Income; Growth

Fee Assets Fee Assets
0.80% On first $500 million 0.70% On first $250 million
0.75% On next $500 million 0.65% On next $250 million
0.70% On next $1 billion 0.625% On next $250 million
0.65% Over $2 billion 0.60% On next $1.25 billion
0.55% Over $2 billion
Small Company International Growth
Fee Assets Fee Assets
0.85% On first $250 million 0.85% On first $250 million
0.80% On next $250 million 0.80% On next $250 million
0.775% On next $250 million 0.775% On next $250 million
0.75% On next $1.25 billion 0.75% On next $1.25 billion
0.725% Over $2 billion 0.70% Over $2 billion

Ascent; Crossroads; Legacy Index Plus
Fee Assets Fee Assets
0.80% On first $500 million 0.45% On first $250 million
0.775% On next $500 million 0.45% On next $250 million
0.75% On next $500 million 0.425% On next $250 million
0.725% On next $500 million 0.40% On next $250 million
0.70% Over $2 billion 0.40% On next $1 billion
0.375% Over $2 billion

<PAGE>

Aetna has agreed to reimburse the Series 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 are
registered for sale having the most stringent expense reimbursement
provisions. As of the date of this Statement, the most stringent limitation
rate applicable to a Series is 2-1/2% of the first $30 million of a Series'
average net assets, 2% of the next $70 million of such Series' average net
assets, and 1-1/2% of the remaining average net assets of such Series for any
fiscal year.

Aetna received investment advisory fees as follows:

<TABLE>
<CAPTION>
Total
Investment Aetna Net Investment
Advisory Fees Reimbursement Advisory Fees Paid
<S> <C> <C> <C>
For Period Ended October 31, 1994*
Money Market $ 544,857 $ 544,857 $ 0
Government 91,999 91,999 0
Bond 210,162 128,686 81,476
Aetna Fund 569,014 156,406 412,608
Growth and Income 625,998 101,043 524,955
Growth 121,917 87,583 34,334
Small Company 144,601 73,512 71,089
International Growth 357,374 55,230 302,144
For Year Ended October 31, 1995
Money Market $1,083,771 $1,083,771 $ 0
Government 109,261 109,261 0
Bond 227,665 143,622 84,043
Aetna Fund 706,625 26,507 680,118
Growth and Income 2,288,249 0 2,288,249
Growth 231,452 34,500 196,952
Small Company 257,552 22,162 235,390
International Growth 472,412 74,627 397,785
Ascent** 157,225 0 157,225
Crossroads** 156,356 0 156,356
Legacy** 155,255 0 155,255
For Year Ended October 31, 1996
Money Market $1,560,183 $1,560,183 $ 0
Government 67,466 67,466 0
Bond 174,209 141,557 32,652
Aetna Fund 687,346 0 687,346
Growth and Income 2,616,904 0 2,616,904
Growth 296,559 0 296,559
Index Plus*** 0 0 0
Small Company 330,302 0 330,302
International Growth 389,220 0 389,220
Ascent 185,916 0 185,916
Crossroads 177,185 0 177,185
Legacy 169,807 0 169,807
</TABLE>

*In 1994, the Fund changed its fiscal year to end on October 31.
**Ascent, Crossroads and Legacy commenced operations on January 4, 1995.
Investment Advisory Fees shown are for the period from January 4, 1995 to
October 31, 1995.

***Index Plus commenced operations on December 10, 1996.

THE SUBADVISORY AGREEMENTS

Aetna and the Fund, on behalf of each Series, have entered into agreements
(Subadvisory Agreements) with Aeltus Investment Management, Inc. (Aeltus)
effective August 1, 1996 appointing Aeltus subadviser of each Series. These
Subadvisory Agreements were adopted by the Directors in February 1996 and
approved by the shareholders in July 1996. Each Subadvisory Agreement will be
effective through December 31, 1997. The Subadvisory Agreements will remain
in effect thereafter if approved at least annually by a majority of the
Directors, including a majority of the Independent Directors of the Fund, at
a meeting, called for that purpose, and held in person. The Subadvisory
Agreements may be terminated without penalty at any time by the Directors or
by a majority of the outstanding voting securities of the Series of the Fund
or they may be terminated on sixty (60) days' written notice by Aetna, the
Fund or the Subadviser. The Subadvisory Agreements terminate automatically in
the event of their assignment.

<PAGE>

For Growth and Small Company, the Subadvisory Agreements replace subadvisory
agreements with Aeltus that had been approved by shareholders in 1994. Those
agreements were substantially the same as the new agreements. Under both the
old and the new Subadvisory Agreements, Aeltus is responsible for managing
the assets of each Series in accordance with its investment objective and
policies, subject to the supervision of Aetna, the Fund and the Directors,
and for preparing and providing accounting and financial information as
requested by Aetna and the Directors. The Subadviser pays the salaries,
employment benefits and other related costs of its personnel.

For its services, Aetna has agreed to pay the Subadviser a monthly fee at an
annual rate based on the average daily net assets of each Series as follows.
This fee is not charged to a Series but is paid by Aetna out of its
investment advisory fees.

Money Market Government; Bond

Fee Assets Fee Assets
0.30% On first $500 million 0.35% On first $250 million
0.265% On next $500 million 0.335% On next $250 million
0.255% On next $1 billion 0.315% On next $250 million
0.25% On next $1 billion 0.30% On next $1.25 billion
0.225% Over $3 billion 0.28% Over $2 billion

Aetna Fund Growth and Income; Growth

Fee Assets Fee Assets
0.50% On first $500 million 0.45% On first $250 million
0.47% On next $500 million 0.42% On next $250 million
0.44% On next $1 billion 0.405% On next $250 million
0.41% Over $2 billion 0.39% On next $1.25 billion
0.355% Over $2 billion
Small Company International Growth
Fee Assets Fee Assets
0.55% On first $250 million 0.55% On first $250 million
0.52% On next $250 million 0.52% On next $250 million
0.505% On next $250 million 0.505% On next $250 million
0.49% On next $1.25 billion 0.49% On next $1.25 billion
0.47% Over $2 billion 0.455% Over $2 billion

Ascent; Crossroads; Legacy Index Plus
Fee Assets Fee Assets
0.50% On first $500 million 0.350% On first $250 million
0.47% On next $500 million 0.345% On next $250 million
0.44% On next $1 billion 0.3275% On next $250 million
0.41% Over $2 billion 0.310% On next $250 million
0.300% On next $1 billion
0.2775% Over $2 billion

Aetna, as the Investment Adviser, retains overall responsibility for
monitoring the investment program maintained by Aeltus for compliance with
applicable laws and regulations and each Series' investment objective and
policies.

THE ADMINISTRATIVE SERVICES AGREEMENTS

Pursuant to the Administrative Services Agreements described below, Aetna
acts as administrator and provides certain administrative and shareholder
services necessary for Fund operations and is responsible for the supervision
of other service providers. The services provided by Aetna include: (1)
internal accounting services; (2) regulatory compliance, such as reports and
filings with the Commission and state securities commissions; (3) preparing
financial information for proxy statements; (4) preparing semiannual and
annual reports to shareholders; (5) preparing federal, state and local income
tax returns; (6) overseeing the determination and publication of net asset
values; (7) certain shareholder communications; (8) supervision of the
custodians and transfer agent; and (9) reporting to the Directors.

For its services, each Series pays Aetna a fee at an annual rate based on
average daily net assets of each Series 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. Aetna received administrative service fees as
follows:

<PAGE>

<TABLE>
<CAPTION>
Total
Administrative Aetna Net Administrative
Service Fees Reimbursement Service Fees Paid
<S> <C> <C> <C>
For Period Ended October 31, 1994*
Money Market $340,536 $340,536 $ 0
Government 46,000 46,000 0
Bond 105,128 0 105,128
Aetna Fund 177,792 0 177,792
Growth and Income 223,571 0 223,571
Growth 43,542 0 43,542
Small Company 42,530 0 42,530
International Growth 105,110 0 105,110
For Year Ended October 31, 1995
Money Market $677,357 $514,954 $162,403
Government 54,630 21,312 33,318
Bond 113,832 0 113,832
Aetna Fund 220,820 0 220,820
Growth and Income 830,718 0 830,718
Growth 82,661 0 82,661
Small Company 75,751 0 75,751
International Growth 138,945 0 138,945
Ascent** 49,133 0 49,133
Crossroads** 48,861 0 48,861
Legacy** 48,517 0 48,517
For Year Ended October 31, 1996
Money Market $961,110 $498,621 $462,489
Government 33,733 33,733 0
Bond 87,105 0 87,105
Aetna Fund 214,796 0 214,796
Growth and Income 945,088 0 945,088
Growth 105,914 0 105,914
Index Plus*** 0 0 0
Small Company 97,148 0 97,148
International Growth 114,478 0 114,478
Ascent 58,099 0 58,099
Crossroads 55,370 0 55,370
Legacy 53,065 0 53,065
</TABLE>

*In 1994, the Fund changed its fiscal year to end on October 31.
**Ascent, Crossroads and Legacy commenced operations on January 4, 1995.
Administrative Service Fees shown are for the period from January 4, 1995
to October 31, 1995.

***Index Plus commenced operations on December 10, 1996.

Unless terminated earlier, the Administrative Services Agreements remain in
effect from year to year if approved annually by a majority of the Directors,
including a majority of the Independent Directors. The Agreements may be
terminated by either party upon sixty (60) days' written notice.

THE LICENSE AGREEMENT

The Fund uses the service mark of the Fund and each Series, and the name
"Aetna" with the permission of Aetna Inc. granted under a License Agreement.
The continued use is subject to the right of Aetna Inc. to withdraw this
permission in the event Aetna or another subsidiary or affiliated corporation
of Aetna Inc. should not be the investment adviser of the Series.

CUSTODIAN

Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, Pennsylvania, 15258
serves as custodian for the assets of all Series except the International
Growth. Brown Brothers Harriman & Company, 40 Water Street, Boston,
Massachusetts 02109 serves as custodian for the assets of International
Growth. Neither custodian participates in determining the investment policies
of a Series or in deciding which securities are purchased or sold by a
Series. A Series may, however, invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.

<PAGE>

Regarding portfolio securities which are purchased outside the United States,
Brown Brothers Harriman & Company has entered into sub-custodian agreements
with several foreign banks or clearing agencies which are designed to comply
with Rule 17f-5 under the 1940 Act with respect to portfolio securities held
in custody by foreign banks.

INDEPENDENT AUDITORS

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

PRINCIPAL UNDERWRITER

Shares of the Series are offered on a continuous basis. Aetna has agreed to
use its best efforts to distribute the shares as the principal underwriter of
the Series pursuant to an Underwriting Agreement between it and the Fund. The
agreement was reapproved on December 11, 1996 to continue through December 31,
1997. ALIAC is registered as a broker-dealer with the Commission 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
Series' 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 (Independent
Directors), of Aetna, and who are not interested persons of the Fund,
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 Aetna or by a vote of the holders of a majority of
a Series' shares without the payment of any penalty.

DISTRIBUTION ARRANGEMENTS

Fund shares are distributed on a best efforts basis by Aetna as Underwriter
which contracts with various broker-dealers, including one or more
affiliates. To compensate Aetna for the services it provides Select and
Adviser Class shareholders, Aetna is paid an annual service fee at the rate
of 0.25% (0.10% for Money Market) of the average daily net assets pursuant to
a Shareholder Services Plan. Aetna is also paid an annual distribution fee
with respect to Adviser Class shares of the Series (other than Money Market)
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 Fund pursuant to Rule
12b-1 of the 1940 Act to cover expenses primarily intended to result in the
sale of Adviser Class shares. It may reallow all or a portion of these fees
to broker-dealers entering into selling agreements with it including its
affiliates.

For the 10 month period ended October 31, 1994 and the years ended October
31, 1995 and October 31, 1996, Shareholder Services and Distribution fees
were paid to Aetna as follows (fees in the amount of $17,959, $64,022 and
$101,840, respectively, were waived for Money Market):

1994* 1995 1996
Government $ 229 $ 2,110 $ 4,074
Bond 102,308 118,895 15,911
Aetna Fund 103,950 57,241 19,775
Growth and Income 102,402 19,108 32,657
Growth 545 7,194 23,653
Index Plus** N/A N/A N/A
Small Company 321 5,012 20,104
International Growth 104,655 202,548 167,007

*In 1994, the Fund changed its fiscal year to end on October 31.
**Index Plus commenced operations December 10, 1996.

The Shareholder Services Plan and the Distribution Plan (Plans) continue from
year to year, provided such continuance is approved annually by vote of the
Directors, including a majority of Independent Directors. The Distribution
Plan may not be amended to increase the amount to be spent for the services
provided by Aetna 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 upon not more than 30 days' written notice to any other
party to the Plan. Pursuant to the Plans, Aetna will provide the Directors
periodic reports of amounts expended under the Plans and the purpose for
which such expenditures were made. For the fiscal year ended October 31,
1996, approximately $57,773, $140,634, and $87,896 of total distribution
expenses were expended in connection with printing and mailing of
prospectuses, total commissions paid to sales personnel and advertising,
respectively.

BROKERAGE ALLOCATION AND TRADING POLICIES

Subject to the supervision of the Directors, the Adviser has responsibility
for making investment decisions, for effecting the execution of trades and
for negotiating any brokerage commissions thereon. It is the Adviser's 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

<PAGE>

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 Fund. These brokerage and research services include, but are
not limited to, quantitative and qualitative research information and
purchase and sale recommendations regarding securities and industries,
analyses and reports covering a broad range of economic factors and trends,
statistical data relating to the strategy and performance of the Series and
other investment companies, services related to the execution of trades in a
Series' securities and advice as to the valuation of securities, the
providing of equipment used to communicate research information and
specialized consultations with Series' personnel with respect to computerized
systems and data furnished to the Series as a component of other research
services. The Adviser considers 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 Series' 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. Aetna'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 Aetna.

Research services furnished by brokers through whom the Fund effects
securities transactions may be used by the Investment Adviser in servicing
all of its accounts; not all such services will be used by the Investment
Adviser to benefit the Fund.

Consistent with Federal law, the Adviser 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 Series. The Series will not effect any
brokerage transactions in portfolio securities with Aetna or any affiliate of
the Fund or the 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 Adviser also have supervisory
responsibility with respect to the securities portfolio of the Adviser's own
general account. Further, the Adviser also acts as investment adviser to
other investment companies registered under the 1940 Act. The Directors and
the Adviser have adopted policies designed to prevent disadvantaging the
Series in placing orders for the purchase and sale of securities.

A Series and another advisory client of the Adviser, or the Adviser itself,
may desire to buy or sell the same security at or about the same time. In
such a case, the purchases or sales will normally be allocated as nearly as
practicable on a pro rata basis in proportion to the amounts to be purchased
or sold by each. In some cases the smaller orders will be filled first. In
determining the amounts to be purchased and sold, the main factors to be
considered are the respective investment objectives of a Series and the other
portfolios, 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 as follows:

For 10 Month
Period Ended
Oct. 31, For Year Ended For Year Ended
1994* Oct. 31, 1995 Oct. 31, 1996

Bond $ 5,112 $ 2,400 $ 0
Aetna Fund 129,278 321,699 207,536
Growth and Income 278,919 1,765,123 1,120,636
Growth 96,666 142,354 135,750
Index Plus** N/A N/A N/A
Small Company 122,178 172,008 223,630
International Growth 142,000 117,138 479,630
Ascent*** N/A 289,353 81,898
Crossroads*** N/A 225,220 61,817
Legacy*** N/A 156,342 38,705

*In 1994, the Fund changed its fiscal year to end on October 31.
**Index Plus commenced operations on December 10, 1996.
***Ascent, Crossroads and Legacy commenced operations on January 4, 1995.

<PAGE>

Commissions paid by Aetna Fund and Growth and Income were higher in 1995 as a
result of a high rate of portfolio turnover attributable to a new management
team and to a transition in equity portfolio holdings from 100% large
capitalization equities to a mix of large, mid and small capitalization
equities. The increase in International Growth Commissions from 1995 to 1996
is a result of the merger of the Asian Growth Fund into International Growth
in September 1996.

For the fiscal year ended October 31, 1996, 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
Fund Name Total Transactions Total Transactions

Aetna Fund $ 32,888,417 $ 35,043
Growth & Income 290,889,262 368,053
Growth Fund 15,482,530 19,650
Index Plus* N/A N/A
Small Company 6,930,419 15,900
Ascent 14,829,987 21,474
Crossroads 10,040,854 11,756
Legacy 7,187,290 7,608

*Index Plus commenced operations December 10, 1996.

No Portfolio transactions placed on behalf of Bond, Government and
International Growth were directed to brokers in exchange for research
services.

No brokerage business was placed with any brokers affiliated with Aetna
during the last three fiscal years.

The Directors have 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 Series may buy a security from
or sell another security to another registered investment company advised by
the Adviser.

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

DESCRIPTION OF SHARES

The Fund's Articles of Incorporation as amended (Articles) permit the
Directors to direct the issuance of full and fractional shares of one or more
Series, each of which represents a proportionate interest in that Series
equal to each other share in that Series. 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 the Series. 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 the Series equal
to each other share in that Series. The Fund is currently authorized to issue
shares in twelve 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 Series has the same rights to share in dividends
declared by a Series.

The Fund has obtained a ruling from the Internal Revenue Service (IRS) with
respect to the Series of the Fund (not including Index Plus) to the effect
that differing distributions among the classes of its shares will not result
in dividends or other distributions being regarded as "preferential
dividends" under the Internal Revenue Code of 1986, as amended (Code).
Generally, a preferential dividend is a dividend which a Series cannot treat
as having been distributed for purposes of determining (i) whether the Series
qualifies as a regulated investment company for federal income tax purposes
and (ii) the Series' tax calculations. In order to qualify as a regulated
investment company, each Series must satisfy certain requirements, including
an income distribution requirement. If a Series so qualifies, it generally
will not be subject to federal tax on income timely distributed to
shareholders. Index Plus will rely on a recent revenue ruling issued by the
IRS to the same effect.

Upon liquidation of any Series, shareholders of shares representing an
interest in that Series are entitled to share pro rata in the net assets of
the Series available for distribution to shareholders. Series 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 Series or one class of
shares. Voting rights are not

<PAGE>

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 Code, 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 Fund are sold and redeemed at the net
asset value of each Series next determined after a purchase or redemption
order is received in acceptable form by Firstar Trust Company, the transfer
agent for the Fund as described under "Shareholder Services" in the
Prospectus. Occasionally orders may be submitted through a broker. It is the
broker's responsibility to promptly remit orders to the transfer agent and
shares will be purchased as described in the Prospectus. No sales charge or
redemption charge is imposed on Select Class shares. No initial sales charge
is imposed at the time of purchase on Adviser Class shares; however, a
contingent deferred sales charge is imposed on certain redemptions of Adviser
Class shares. The value of shares redeemed may be more or less than the
shareholder's cost, depending upon the market value of the portfolio
securities at the time of redemption. Payment for shares redeemed will be
made within seven days (or the maximum period allowed by law, if shorter)
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 shares may be suspended or payment therefor postponed for
any period during which (a) trading on the NYSE is restricted as determined
by the Commission or the NYSE is closed for other than weekends and holidays;
(b) an emergency exists, as determined by the Commission, as a result of
which (i) disposal by a Series of securities owned by it is not reasonably
practicable, or (ii) it is not reasonably practicable for a Series to
determine fairly the value of its net assets; or (c) the Commission by order
so permits for the protection of shareholders of a Series.

An open account is automatically set up and maintained for each shareholder
to facilitate the voluntary accumulation of 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 Series 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 Inc. 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 and credited to the shareholder's
account at the then current net asset value. Further, subsequent dividends
and distributions will be automatically reinvested and credited to the
shareholder's account.

A Series reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase of shares by
making payment, in whole or in part, in securities chosen by that Series and
valued in the same way as they would be valued for purposes of computing that
Series' net asset value. If payment is made in securities, a shareholder may
incur transactions costs in converting these securities into cash. The Series
have elected, however, to be governed by Rule 18f-1 under the 1940 Act so
that a Series 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 Series.

NET ASSET VALUE

Securities of the Series 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 and 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. Short-term debt
securities maturing in sixty days or less at the date of purchase, and all
securities in Money Market, will be

<PAGE>

valued using the "amortized cost" method of valuation. This involves valuing
an instrument at its cost and thereafter assuming a constant amortization of
premium or increase of discount.

Options are valued at the mean of the last bid and asked price on the
exchange where the option is primarily traded. 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 Series 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 Series 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 Series has elected to be taxed as a regulated investment company under
Subchapter M of the Code. As a regulated investment company, a Series
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 (Distribution Requirement), and satisfies certain other requirements of
the Code that are described below. Distributions made during the taxable year
or, under specified circumstances, within twelve months after the close of
the taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement.

In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies (Income Requirement);
and (2) derive less than 30% of its gross income (exclusive of certain gains
on designated hedging transactions that are offset by realized or unrealized
losses on offsetting positions) from the sale or other disposition of stock,
securities or foreign currencies (or options, futures or forward contracts
thereon) held for less than three months (Short-Short Gain Test). For
purposes of these calculations, gross income includes tax-exempt income.
However, foreign currency gains, including those derived from options,
futures and forwards, will not in any event be characterized as Short-Short
Gain if they are directly related to the regulated investment company's
investments in stock or securities (or options or futures thereon). Because
of the Short-Short Gain Test, a Series 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 Series 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 Series 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 Series 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
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 Series 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 elected otherwise), will generally be treated as
ordinary income or loss.

In general, for purposes of determining whether capital gain or loss
recognized by a Series 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 as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Series 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
Series 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 Series 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 Series on the lapse of, or any gain or loss
recognized by a Series from a closing transaction with respect to, an option
written by the Series will be treated as a short-term capital gain or loss.
For purposes of the Short-Short Gain Test, the

<PAGE>

holding period of an option written by a Series 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 Series 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 Series (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 Series, 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 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 Series may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies (PFICs) for
federal income tax purposes. If a Series invests in a PFIC, it may elect to
treat the PFIC as a qualifying electing fund (QEF) in which event the Series
will each year have ordinary income equal to its pro rata share of the PFIC's
ordinary earnings for the year and long-term capital gain equal to its pro
rata share of the PFIC's net capital gain for the year, regardless of whether
the Series receives distributions of any such ordinary earnings or capital
gain from the PFIC. If a Series 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 upon sale or other disposition of its interest in the
PFIC or any excess distribution received from the PFIC will be allocated
ratably over the Series' 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 Series' gross income for such year as ordinary income (and
the distribution of such portion to shareholders will be taxable as an
ordinary income dividend, but such portion will not be subject to tax at the
Series level), (3) the Series 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 to shareholders of the portions of such gain or excess
distribution so allocated to prior years (net of the tax payable by the
Series thereon) will again be taxable to the shareholders as an ordinary
income dividend.

Under proposed Treasury Regulations a Series may be eligible to 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 Series' adjusted tax
basis in that share ("mark to market gain"). Such mark to market gain will be
included by the Series as ordinary income, such gain will not be subject to
the Short-Short Gain Test, and the Series' holding period with respect to
such PFIC stock commences on the first day of the next taxable year. If a
Series makes such election in the first taxable year it holds PFIC stock, the
Series 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 Series 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
Series' taxable year, at least 50% of the value of the Series' 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 Series has not invested more than 5% of the value of the Series'
total assets in securities of such issuer and as to which the Series 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 Series 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, certain 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

<PAGE>

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 Series 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 Series' current and
accumulated earnings and profits. Such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.

Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year
ending November 30 or December 31, for its taxable year (taxable year
election)). Tax-exempt interest on municipal obligations is not subject to
the excise tax. The balance of such income must be distributed during the
next calendar year. For the foregoing purposes, a regulated investment
company is treated as having distributed any amount on which it is subject to
income tax for any taxable year ending in such calendar year.

For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses from Section 988 transactions incurred
after October 31 of any year (or after the end of its taxable year if it has
made a taxable year election) in determining the amount of ordinary taxable
income for the current calendar year (and, instead, include such gains and
losses in determining ordinary taxable income for the succeeding calendar
year).

Each Series 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 Series may in certain circumstances be required
to liquidate portfolio investments to make sufficient distributions to avoid
excise tax liability.

Fund Distributions
Each Series anticipates distributing substantially all of its investment
company taxable income for each taxable year. Depending on a Series'
investments, distributions may be treated as a net capital gain dividend, an
ordinary income dividend, a U.S. Government interest dividend, a qualifying
dividend, or an exempt interest dividend. Dividends paid on Select Class and
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 Series may either retain or distribute to shareholders its net capital
gain for each taxable year. Each Series 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 Series 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 Series'
disposition of domestic "small business" stock will be subject to tax.

Conversely, if a Series elects to retain its net capital gain, the Series
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Series elects to retain its
net capital gain, it is expected that the Series 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 Series 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 Series 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 Series from domestic corporations for the taxable
year and if the shareholder meets eligibility requirements in the Code.
Generally, substantially all of the dividends paid by Growth and Income, and
to a lesser degree, by Aetna Fund, Growth, and Small Company, will qualify
for the dividends-received deduction. A dividend received by a Series will
not be treated as a qualifying dividend (1) if it has been received with
respect to any share of stock that the Series 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
Series has an option to sell, is under a contractual obligation to sell, 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 such
(or substantially identical) stock; (2) to the extent that the Series 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

<PAGE>

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
Series 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 Series 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 Series 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 Series 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 Series' assets to be invested in various
countries is not known. International Growth anticipates investing
substantially in foreign securities. If more than 50% of the value of a
Series' total assets at the close of its taxable year consist of the stock or
securities of foreign corporations, the Series may elect to "pass through" to
Series shareholders the amount of foreign taxes paid by the Series. If the
Series 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 Series, but would be treated as having paid his pro rata
share of such foreign taxes and would therefore be allowed to either deduct
such amount in computing taxable income or use such amount (subject to
various Code limitations) as a foreign tax credit against federal income tax
(but not both). For purposes of the foreign tax credit limitation rules of
the Code, each shareholder would treat as foreign source income his pro rata
share of such foreign taxes plus the portion of dividends received
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 Series 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 Series will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Series (or of another Series). 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 reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Series,
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 Series 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 Series) 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 Series 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 that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."

Sale or Redemption of Shares
Money Market seeks to maintain a stable net asset value of $1.00 per share;
however, there can be no assurance that Money Market will do this. A
shareholder will recognize gain or loss on the sale or redemption of shares
of a Series 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
Series 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 will be considered capital gain or loss and will be long-term
capital gain or loss if the shares were held for longer than one year.
However, any capital loss arising from the sale or redemption of shares held,
or deemed under Code rules to be held, for six months or less will be
disallowed to the extent of the amount of exempt-

<PAGE>

interest dividends received on such shares and (to the extent not disallowed)
will be treated as a long-term capital loss to the extent of the amount of
capital gain dividends received on such shares.

Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership (foreign shareholder), depends on whether the income from a
Series is "effectively connected" with a U.S. trade or business carried on by
such shareholder.

If the income from a Series 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 Series' 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 Series,
capital gain dividends and exempt-interest dividends and amounts retained by
the Series that are designated as undistributed capital gains.

If the income from a Series 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
Series will be subject to U.S. federal income tax at the rates applicable to
U.S. citizens or domestic corporations.

In the case of foreign noncorporate shareholders, a Series 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 Series 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 Series,
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. 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 their investment.

PERFORMANCE INFORMATION

Performance information for each class of shares including the yield and
effective yield of Money Market, the yield of Bond and Government, and the
total return of all Series, may appear in reports or promotional literature
to current or prospective shareholders.

Money Market Fund Yields
Current yield for Money Market will be computed by determining the net
change, exclusive of capital changes, at the beginning of a seven-day period
in the value of a hypothetical investment of one share, subtracting any
deductions from shareholder accounts, and dividing the difference by the
value of the hypothetical investment at the beginning of the base period to
obtain the base period return. This base period return is then multiplied by
(365/7) with the resulting yield figure carried to at least the nearest
hundredth of one percent. Calculation of "effective yield" begins with the
same "base period return" used in the calculation of yield, which is then
annualized to reflect weekly compounding pursuant to the following formula:

Effective Yield = [(Base Period Return + 1)(365/7)] - 1

The yield and effective yield for Money Market for the seven days ended
October 31, 1996 were 5.18% and 5.32%, respectively.

30-Day Yield for Non-Money Market Funds
Quotations of yield for Bond and Government will be based on all investment
income per share earned during a particular 30-day period, less expenses
accrued during the period (net investment income), and will be computed by
dividing net investment income by the value of a share on the last day of the
period, according to the following formula:

YIELD = 2[(a - b + 1)(6) - 1]
-----
cd

<PAGE>

Where:
a = dividends and interest earned during the period
b = the expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
d = the maximum offering price per share on the last day of the period

The yield for Bond for the 30-day period ended October 31, 1996 was 6.12%
for the Select Class, and 5.37% for the Adviser Class. The yield for
Government for the 30-day period ended October 31, 1996 was 5.65% for the
Select Class, and 4.90% for the Adviser Class.

Average Annual Total Return For Non-Money Market Funds
Quotations of average annual total return for any Series will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in a Series over a period of one, five and ten years (or, if less,
up to the life of the Series), 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 Series 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 Series;
(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 Fund 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 Series with other
measures of investment return. For example: Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.

Total Return Quotations as of October 31, 1996:

Select Class
Since
1 Year Inception Inception Date

Money Market 5.44% 4.56% 12/27/91
Government 4.43% 5.34% 12/22/93
Bond 5.09% 6.72% 12/27/91
Aetna Fund 17.63% 10.78% 12/27/91
Growth and Income 25.69% 12.87% 12/27/91
Growth 19.82% 19.71% 12/23/93
Index Plus 12/10/96
Small Company 19.78% 18.69% 12/23/93
International Growth 15.61% 7.10% 12/27/91
Ascent 20.94% 20.64% 1/4/95
Crossroads 17.66% 18.07% 1/4/95
Legacy 14.11% 15.46% 1/4/95

Adviser Class

Since
1 Year Inception Inception Date

Money Market 5.44% 4.55% 4/15/94
Government 2.75% 4.44% 4/15/94
Bond 3.27% 6.31% 4/15/94
Aetna Fund 15.83% 10.31% 4/15/94
Growth and Income 23.70% 12.50% 4/15/94
Growth 17.97% 18.81% 4/15/94
Index Plus 12/10/96
Small Company 18.02% 17.80% 4/15/94
International Growth 13.67% 6.66% 4/15/94

<PAGE>

All figures are based on actual investment performance. Performance figures
for the Adviser Class shares reflect the deduction of the maximum contingent
deferred sales charge of 1%, assuming shares were redeemed at the end of the
period.
From time to time sales materials and advertisements may include
discussions which compare the cost of borrowing a specific amount of money at
a given loan rate over a set period of time to the cost of a monthly
investment program, over the same time period, which earns the same rate of
return. The comparison may involve historical rates of return on a given
index, or may involve performance of any of the Series. 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.

31
<PAGE>

FINANCIAL STATEMENTS

Financial Statements for Aetna Series Fund, Inc., are incorporated herein by
reference to the Annual Reports dated October 31, 1996. The Annual Reports
are 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.

<PAGE>

Aetna Series Fund, Inc.

Statement of Additional Information

ASF(S)-1 March 1997