As filed with the Securities and Exchange File No. 33-41694
Commission on February 25, 1999 File No. 811-6352
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 30
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 40
Aetna Series Fund, Inc.
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10 State House Square SH11, Hartford, Connecticut 06103-3602
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(860) 275-2032
Amy R. Doberman, Counsel
10 State House Square SH11, Hartford, Connecticut 06103-3602
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(Name and Address of Agent for Service)
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It is proposed that this filing will become effective:
X on March 1, 1999 pursuant to paragraph (b)
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<PAGE>
Aetna Series Fund, Inc.
Prospectus
Class A, Class B and Class C Shares
March 1, 1999
Capital Appreciation Funds
Aetna Growth Fund (Growth)
Aetna International Fund (International)
Aetna Mid Cap Fund (Mid Cap)
Aetna Small Company Fund (Small Company)
Aetna Value Opportunity Fund (Value Opportunity)
Growth & Income Funds
Aetna Balanced Fund (Balanced)
Aetna Growth and Income Fund (Growth and Income)
Aetna Real Estate Securities Fund (Real Estate)
Income Funds
Aetna Bond Fund (Bond Fund)
Aetna Government Fund
Aetna High Yield Fund (High Yield)
Aetna Money Market Fund (Money Market)
Index Plus Funds
Aetna Index Plus Bond Fund (Index Plus Bond)
Aetna Index Plus Large Cap Fund (Index Plus Large Cap)
Aetna Index Plus Mid Cap Fund (Index Plus Mid Cap)
Aetna Index Plus Small Cap Fund (Index Plus Small Cap)
Generation Funds
Aetna Ascent Fund (Ascent)
Aetna Crossroads Fund (Crossroads)
Aetna Legacy Fund (Legacy)
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Anyone
who represents to the contrary has committed a criminal offense.
This Prospectus is for investors purchasing or considering purchase of Class A,
Class B or Class C shares of one or more of the Funds.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
The Funds' Investments 3
Investment Objectives, Principal Investment Strategies and Risks,
Investment Performance 3
Fund Expenses 26
Other Considerations 33
Management of the Funds 34
Investing in the Funds 36
Opening an Account and Selecting a Share Class 36
How to Buy Shares 39
How to Sell Shares 42
Timing of Requests 43
Other Information about Shareholder Accounts and Services 43
Dividends and Distributions 45
Tax Information 45
Private Account Performance 46
Financial Highlights 48
Additional Information 59
</TABLE>
2
<PAGE>
The Funds' Investments
Investment Objectives, Principal Investment Strategies and Risks, Investment
Performance
Below is a description of each Fund's investment objective, the principal
investment strategies employed on behalf of each Fund and the principal
risks associated with investing in each Fund.
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A performance bar chart is provided for each Fund that has been in existence for
at least one full calendar year. If a Fund has been in existence for at least
two full calendar years, the bar chart shows changes in the Fund's performance
from year to year. The fluctuation in returns illustrates each Fund's
performance volatility. Sales charges are not reflected in the bar chart
performance. If sales charges were reflected, returns would be lower. The chart
is accompanied by the Fund's best and worst quarterly returns throughout the
years noted in the bar chart.
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A table for each Fund that has been in existence for at least one full calendar
year shows its average annual total return. These returns do reflect all
applicable sales charges. The table also compares the Fund's performance to the
performance of one or more broad-based securities market indices. Each index is
a widely recognized, unmanaged index of securities. A Fund's past performance is
not necessarily an indication of how it will perform in the future.
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Additional information about the Funds' investment strategies and risks is
included on page 33.
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Aeltus Investment Management, Inc. (Aeltus) serves as investment adviser of the
Funds.
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Bradley, Foster & Sargent, Inc. (Bradley) serves as subadviser of Value
Opportunity.
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Shares of the Funds will rise and fall in value and you could lose money by
investing in them. There is no guaranty the Funds will achieve their
investment objectives. Shares of the Funds are not bank deposits and are not
guaranteed, endorsed or insured by any financial institution, the FDIC or any
other government agency.
3
<PAGE>
Capital Appreciation Funds
Aetna Growth Fund (Growth)
Investment Objective 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.
Principal Investment Strategies Under normal market conditions, Growth
invests at least 65% of its total assets in common stocks.
In managing Growth, Aeltus:
* Tends to emphasize stocks of larger companies, although it may invest in
companies of any size.
* Uses internally developed quantitative computer models to evaluate the
financial characteristics (for example, earnings growth consistency, earnings
momentum, and price/earnings ratio) of approximately 1,000 companies. Aeltus
analyzes these characteristics in an attempt to identify companies it
believes have strong growth characteristics or demonstrate a positive trend
in earnings estimates, but whose full value is not reflected in the stock
price.
* Focuses on companies that it believes have strong, sustainable and improving
earnings growth, and established market positions in a particular industry.
Principal Risks The principal risks of investing in Growth are those generally
attributable to stock investing. They include sudden and unpredictable drops in
the value of the market as a whole and periods of lackluster or negative
performance.
Growth-oriented stocks typically sell at relatively high valuations as compared
to other types of stocks. If a growth stock does not exhibit the consistent
level of growth expected, its price may drop sharply. Historically,
growth-oriented stocks have been more volatile than value-oriented stocks.
4
<PAGE>
Aetna Growth Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return (Class A) 1995 1996 1997 1998
<S> <C> <C> <C> <C>
33.38% 21.26% 21.88% 37.51%
</TABLE>
[ARROW UP] Best Quarter:
first quarter 1998, up 17.42%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 10.06%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class A* 29.61% 21.83% 01/04/94
Class C* 35.57% 22.83% 01/04/94
S&P 500 Index** 28.57% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical
risk of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
** The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500
widely held stocks that assumes the reinvestment of all dividends, and is
considered to be representative of the stock market in general.
5
<PAGE>
Aetna International Fund
(International)
Investment Objective Seeks long-term capital growth primarily through investment
in a diversified portfolio of common stocks principally traded in countries
outside of North America. International will not target any given level of
current income.
Principal Investment Strategies Under normal market conditions, International
invests at least 65% of its total assets in securities principally traded in
three or more countries outside of North America. These securities may include
common stocks as well as securities convertible into common stocks.
In managing International, Aeltus:
* Diversifies the Fund's portfolio by investing in a mix of stocks that it
believes have the potential for long-term growth, as well as stocks that
appear to be trading below their real value.
* Allocates assets among several geographic regions and individual countries,
investing primarily in those areas that it believes have the greatest
potential for growth as well as stable exchange rates.
* Invests primarily in established foreign securities markets, although it may
invest in emerging markets as well.
* Typically invests in approximately 90 to 120 different securities at any one
time, and looks to allocate no more than 3% of the Fund's total assets to a
single security.
* Uses internally developed quantitative computer models to evaluate the
financial characteristics of over 2,000 companies. Aeltus analyzes cash
flows, earnings and dividends of each company, in an attempt to select
companies with long-term sustainable growth characteristics.
* Employs currency hedging strategies to protect the portfolio from adverse
effects on the U.S. dollar.
Principal Risks The principal risks of investing in International are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance.
Stocks of foreign companies present additional risks for U.S. investors,
including the following:
* Stocks of foreign companies tend to be less liquid and more volatile than
their U.S. counterparts.
* Accounting standards and market regulations tend to be less standardized in
certain foreign countries, and economic and political climates tend to be
less stable.
* Stocks of foreign companies may be denominated in foreign currency. Exchange
rate fluctuations may reduce or eliminate gains or create losses. A hedging
strategy adds to the Fund's expenses and may not perform as expected.
6
<PAGE>
Aetna International Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return (Class A) 1995 1996 1997 1998
<S> <C> <C> <C> <C>
6.27% 22.27% 14.94% 17.87%
</TABLE>
[ARROW UP] Best Quarter:
first quarter 1998, up 16.79%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 15.74%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class A* 11.09% 10.49% 9.50% 01/03/92
Class C* 16.41% 11.51% 10.14% 01/03/92
MSCI EAFE Index** 20.33% 9.50% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical
risk of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
**The Morgan Stanley Capital International-Europe, Australia and Far East Index
is a market value-weighted average of the performance of more than 900
securities listed on the stock market exchanges of countries in Europe,
Australia and the Far East.
7
<PAGE>
Aetna Mid Cap Fund (Mid Cap)
Investment Objective Seeks growth of capital primarily through investment in a
diversified portfolio of common stocks and securities convertible into common
stocks of companies having medium market capitalizations.
Principal Investment Strategies Under normal market conditions, Mid Cap invests
at least 65% of its total assets in common stocks of mid-capitalization
companies, defined as:
* The 1,000 largest U.S. companies (as measured by market capitalization),
excluding companies in the Standard & Poor's 500 Composite Index.
* All companies not included above that are included in the Standard & Poor's
MidCap 400 Index.
* Currently, companies falling into these categories have market
capitalizations of between $800 million and $20 billion.
In managing Mid Cap, Aeltus invests in stocks that it believes have the
potential for long-term growth, as well as those that appear to be trading below
their real value. Aeltus uses internally developed quantitative computer models
to evaluate the financial characteristics of companies. Aeltus analyzes these
characteristics in an attempt to identify companies whose full value is not
reflected in the stock price. These characteristics include a company's
potential for strong, sustainable earnings and for long-term profitability.
Principal Risks The principal risks of investing in Mid Cap are those generally
attributable to stock investing. These risks include sudden and unpredictable
drops in the value of the market as a whole and periods of lackluster or
negative performance. Stocks of medium-sized companies tend to be more volatile
and less liquid than stocks of larger companies.
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Aetna Small Company Fund
(Small Company)
Investment Objective 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.
Principal Investment Strategies Under normal market conditions, Small Company
invests at least 65% of its total assets in common stocks of
small-capitalization companies, defined as:
* The 2,000 smallest of the 3,000 largest U.S. companies (as measured by market
capitalization).
* All companies not included above that are included in the Standard & Poor's
SmallCap 600 Index.
* Currently the largest company in this group has a market capitalization of
approximately $1.3 billion.
In managing Small Company, Aeltus:
* Invests in stocks that it believes have the potential for long-term growth,
as well as those that appear to be trading below their real value.
* Uses internally developed quantitative computer models to evaluate financial
characteristics (for example, changes in earnings, earnings estimates and
price momentum) of over 2,000 companies. Aeltus analyzes these
characteristics in an attempt to identify companies whose full value is not
reflected in the stock price.
* Considers the potential of each company to create or take advantage of unique
product opportunities, its potential to achieve long-term sustainable growth
and the quality of its management.
Principal Risks The principal risks of investing in Small Company are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance.
Other principal risks include:
* Stocks of smaller companies carry higher risks than stocks of larger
companies. This is because smaller companies may lack the management
experience, financial resources, product diversification, and competitive
strengths of larger companies.
* The frequency and volume of trading in small cap stocks may be substantially
less than stocks of larger companies. As a result, the stocks of smaller
companies may be subject to wider price fluctuations or may be less liquid.
* When selling a large quantity of a particular stock, the Fund may have to
sell at a discount from quoted prices or may have to make a series of small
sales over an extended period of time due to the more limited trading volume
of smaller company stocks.
* Stocks of smaller companies can be particularly sensitive to expected changes
in interest rates, borrowing costs and earnings.
8
<PAGE>
Aetna Small Company Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return (Class A) 1995 1996 1997 1998
<S> <C> <C> <C> <C>
47.11% 12.79% 32.26% 1.12%
</TABLE>
[ARROW UP] Best Quarter:
third quarter 1997, up 18.27%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 18.27%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class A* -4.70% 16.06% 01/04/94
Class C* -0.76% 17.01% 01/04/94
Russell 2000 Index** -2.55% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
** The Russell 2000 Index consists of the smallest 2,000 companies in the
Russell 3000 Index and represents approximately 10% of the Russell 3000 total
market capitalization. The Russell 2000 Index assumes reinvestment of all
dividends and is unmanaged.
9
<PAGE>
Aetna Value Opportunity Fund
(Value Opportunity)
Investment Objective Seeks growth of capital primarily through investment in a
diversified portfolio of common stocks and securities convertible into common
stock.
Principal Investment Strategies Under normal market conditions, Value
Opportunity invests at least 65% of its total assets in common stocks. In
managing Value Opportunity, Bradley tends to invest in larger companies it
believes are trading below their real value, although it may invest in companies
of any size. Bradley believes that Value Opportunity's investment objective can
best be achieved by investing in companies whose stock price has been
excessively discounted due to perceived problems. In searching for investments,
Bradley evaluates financial and other characteristics of companies, attempting
to find those companies that appear to possess a catalyst for positive change,
such as strong management, solid assets, or market position, rather than those
companies whose stocks are simply inexpensive. Bradley looks to sell a security
when company business fundamentals deviate from expectations or when stop-loss
levels are triggered.
Principal Risks The principal risks of investing in Value Opportunity are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance.
Stocks that appear to be undervalued may never appreciate to the extent
expected. Further, because the prices of value-oriented stocks tend to correlate
more closely with economic cycles than growth-oriented stocks, they are more
sensitive to changing economic conditions, such as changes in interest rates,
corporate earnings and industrial production.
- --------------------------------------------------------------------------------
Growth & Income Funds
Aetna Balanced Fund
(Balanced)
Investment Objective Seeks to maximize total return with reasonable safety of
principal by investing in a diversified portfolio of stocks, bonds and money
market instruments.
Principal Investment Strategies Under normal market conditions, Balanced
allocates its assets among the following asset classes:
* Equities, such as common and preferred stocks.
* Debt, such as bonds, mortgage-related and other asset-backed securities, U.S.
Government securities and money market instruments.
Aeltus typically maintains approximately 60% of Balanced's total assets in
equities and approximately 40% of its total assets in debt (including money
market instruments), although those percentages may vary from time to time
depending on Aeltus' view of the relative attractiveness of each asset class. In
making asset allocation decisions, Aeltus uses current market statistics and
economic indicators to attempt to forecast returns for the equity and debt
sectors of the securities market. Within each asset class, Aeltus uses
quantitative computer models to evaluate financial criteria in an attempt to
identify those issuers whose full value is not reflected in their equity or debt
securities.
Aeltus generally does not attempt to respond to short-term swings in the market
by quickly changing the characteristics of the Fund's portfolio.
In managing the equity component of Balanced, Aeltus typically emphasizes
investment in stocks of larger companies, although it may invest in stocks of
smaller companies to a significant extent.
In managing the debt component of Balanced, Aeltus looks to select investments
with the opportunity to enhance the portfolio's yield and total return, focusing
on performance over the long term. The Fund may invest up to 15% of its total
assets in high-yield, high-risk bonds (high-yield bonds). High-yield bonds are
fixed income securities rated below BBB- by Standard & Poor's Corporation (S&P)
or Baa3 by Moody's Investors Services, Inc. (Moody's) or, if unrated, considered
by Aeltus to be of comparable quality.
Principal Risks The principal risks of investing in Balanced are those generally
attributable to stock and bond investing. The success of the Fund's strategy
depends on Aeltus' skill in allocating Fund assets between equities and debt and
in choosing investments within those categories. Because the Fund's assets are
allocated between equities and fixed income securities, Balanced may
underperform stock funds when stocks are in favor and underperform bond funds
when bonds are in favor.
10
<PAGE>
Risks attributable to stock investing include sudden and unpredictable drops in
the value of the market as a whole and periods of lackluster or negative
performance. Stocks of smaller companies tend to be less liquid and more
volatile than stocks of larger companies. Further, stocks of smaller companies
also can be particularly sensitive to expected changes in interest rates,
borrowing costs and earnings.
The Fund's fixed-income investments are subject to the risk that interest rates
will rise, which generally causes bond prices to fall. Also, economic and market
conditions may cause issuers to default or go bankrupt. In either case, the
price of Fund shares may fall. The value of high-yield bonds are even more
sensitive to economic and market conditions than other bonds.
The prices of mortgage-related securities, in addition to being sensitive to
changes in interest rates, also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
Aetna Balanced Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return (Class A) 1995 1996 1997 1998
<S> <C> <C> <C> <C>
25.00% 14.49% 20.89% 16.26%
</TABLE>
[ARROW UP] Best Quarter:
fourth quarter 1998, up 12.73%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 6.71%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class A* 9.57% 12.93% 11.33% 01/03/92
Class C* 14.31% 13.92% 11.95% 01/03/92
S&P 500** 28.57% 24.06% N/A
LBAB*** 8.69% 7.27% N/A
60% S&P 500 Index/
40% LBAB 20.98% 17.32% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
** The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500
widely held stocks that assumes the reinvestment of all dividends, and is
considered to be representative of the stock market in general.
*** The Lehman Brothers Aggregate Bond Index (LBAB) is an unmanaged index of
corporate, government and mortgage bonds.
11
<PAGE>
Aetna Growth and Income Fund
(Growth and Income)
Investment Objective 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.
Principal Investment Strategies Under normal market conditions, Growth and
Income invests at least 65% of its total assets in common stocks that Aeltus
believes have significant potential for capital or income growth.
In managing Growth and Income, Aeltus:
* Tends to emphasize stocks of larger companies.
* Also invests the Fund's assets across other asset classes (including stocks
of small and medium-sized companies, international stocks, real estate
securities and fixed income securities).
* Uses internally developed quantitative computer models to determine the
relative attractiveness of each asset class and to evaluate company financial
characteristics (for example, price to earnings ratios, growth rates and
earnings estimates) to select securities within each class. In analyzing
these characteristics, Aeltus attempts to identify positive earnings momentum
and valuation characteristics in selecting securities whose full value is not
reflected in their price.
Principal Risks The principal risks of investing in Growth and Income are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance. The success of the Fund's strategy depends
significantly on Aeltus' skill in allocating assets and in choosing investments
within each asset class.
Growth-oriented stocks typically sell at relatively high valuations as compared
to other types of stocks. If a growth stock does not exhibit the level of growth
expected, its price may drop sharply. Historically, growth-oriented stocks have
been more volatile than value-oriented stocks.
Although Aeltus emphasizes large cap stocks, the Fund is more diversified across
asset classes than most other funds with a similar investment objective.
Therefore, it may not perform as well as those funds when large cap stocks are
in favor.
Aetna Growth and Income Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return (Class A) 1995 1996 1997 1998
<S> <C> <C> <C> <C>
30.75% 26.79% 30.57% 14.58%
</TABLE>
[ARROW UP] Best Quarter:
fourth quarter 1998, up 19.30%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 14.28%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class A* 7.99% 18.27% 14.77% 01/03/92
Class C* 12.76% 19.21% 15.34% 01/03/92
S&P 500 Index** 28.57% 24.06% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical
risk of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
** The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500
widely held stocks that assumes the reinvestment of all dividends, and is
considered to be representative of the stock market in general.
12
<PAGE>
Aetna Real Estate Securities Fund
(Real Estate)
Investment Objective Seeks maximum total return primarily through investment in
a diversified portfolio of equity securities of real estate companies, the
majority of which are real estate investment trusts (REITs).
Principal Investment Strategies Under normal market conditions, Real Estate
invests at least 65% of its total assets in stocks, convertible securities and
preferred stocks of companies principally engaged in the real estate industry.
These companies may invest in, among other things, shopping malls, healthcare
facilities, office parks and apartment communities, or may provide real estate
management and development services.
In selecting investments from a universe of equity securities of REITs and real
estate operating companies, Aeltus uses internally developed quantitative models
to forecast the returns of each security. Aeltus evaluates real estate companies
based on their earnings history and long-term growth prospects, analyst
estimates of future earnings, safety and growth in dividends, balance sheet
strength and quality of management. Aeltus also considers whether the securities
appear to be trading below their real value. Aeltus allocates assets among
property types and economic and geographic regions. Aeltus attempts to construct
Real Estate's portfolio so that the overall level of risk is not in excess of
its benchmark index, the National Association of Real Estate Investment Trusts
Equity Index.
Principal Risks Concentrating in stocks of real estate-related companies
presents certain risks that are more closely associated with investing in real
estate directly than with investing in the stock market generally. Those risks
include:
* Periodic declines in the value of real estate, generally, or in the rents and
other income generated by real estate.
* Periodic over-building, which creates gluts in the market, as well as changes
in laws (such as zoning laws) that impair the property rights of real estate
owners.
* Adverse developments in the real estate industry, which may have a greater
impact on this Fund than a fund that is more broadly diversified.
The performance of the Fund also may be adversely affected by sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative stock market performance. Although Real Estate is subject
to the risks generally attributable to stock investing, because the Fund has
concentrated its assets in one industry it may be subject to more abrupt swings
in value than would a fund that does not concentrate its assets in one industry.
- --------------------------------------------------------------------------------
Income Funds
Aetna Bond Fund (Bond Fund)
Investment Objective Seeks to provide as high a level of total return as is
consistent with reasonable risk, primarily through investment in a diversified
portfolio of investment-grade corporate bonds, and debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
Principal Investment Strategies Under normal market conditions, Bond Fund
invests at least 65% of its total assets in:
* High-grade corporate bonds.
* Mortgage-related and other asset-backed securities.
* Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
High-grade securities are rated at least A by S&P or Moody's, or if unrated,
considered by Aeltus to be of comparable quality. The Fund may also invest up to
15% of its total assets in high-yield bonds, and up to 25% of its total assets
in foreign debt securities.
In managing Bond Fund, Aeltus:
* Looks to construct an intermediate-term (generally consisting of securities
with an average maturity of between 5-10 years), high quality portfolio by
selecting investments with the opportunity to enhance the portfolio's overall
total return and yield, while managing volatility.
* Uses quantitative computer models to identify issuers whose full value is not
reflected in their security prices.
Principal Risks The principal risks of investing in Bond Fund are those
generally attributable to debt investing, including increases in interest rates
and loss of principal. Generally, when interest rates rise, bond prices fall.
Bonds with longer maturities tend to be more sensitive to changes in interest
rates.
13
<PAGE>
For all bonds there is a risk that the issuer will default. High-yield bonds
generally are more susceptible to the risk of default than higher rated bonds.
The prices of mortgage-related securities, in addition to being sensitive to
changes in interest rates, also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
Foreign securities present additional risks. Some foreign securities tend to be
less liquid and more volatile than their U.S. counterparts. In addition,
accounting standards and market regulations tend to be less standardized. These
risks are usually higher for securities of companies in emerging markets.
Finally, securities of foreign companies may be denominated in foreign currency.
Exchange rate fluctuations may reduce or eliminate gains or create losses.
Aetna Bond Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return (Class A) 1995 1996 1997 1998
<S> <C> <C> <C> <C>
16.26% 2.46% 7.19% 8.09%
</TABLE>
[ARROW UP] Best Quarter:
second quarter 1995, up 5.57%
[ARROW DOWN] Worst Quarter:
first quarter 1996, down 1.76%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class A* 2.95% 4.77% 5.66% 01/03/92
Class C* 6.31% 5.42% 6.05% 01/03/92
LBAB** 8.69% 7.27% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
** The Lehman Brothers Aggregate Bond Index (LBAB) is an unmanaged index of
corporate, government and mortgage bonds.
14
<PAGE>
Aetna Government Fund
Investment Objective 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.
Principal Investment Strategies Under normal market conditions, Aetna Government
Fund invests at least 65% of its total assets in U.S. Government securities.
U.S. Government securities include securities issued by the U.S. Treasury,
individual government agencies and certain organizations created through federal
legislation. Securities issued by the U.S. Treasury are backed by the full faith
and credit of the federal government, the strongest form of credit backing in
the U.S. Securities issued by individual agencies and organizations may be
backed by the full faith and credit of the federal government as to principal or
interest but are not direct obligations of the U.S. Treasury. Government
securities also include certain mortgage-related securities that are sponsored
by a U.S. Government agency or organization and are not direct obligations of
the U.S. Government.
In managing Aetna Government Fund, Aeltus:
* Looks to construct an intermediate-term, high-quality portfolio by selecting
investments with the potential to enhance the portfolio's overall yield and
total return.
* Uses quantitative computer models to identify attractive investments within
the U.S. Government securities markets. As a result, Aetna Government Fund
may, at times, emphasize one type of U.S. Government security rather than
another.
Principal Risks The principal risks of investing in Aetna Government Fund are
those generally attributable to bond investing, including increases in interest
rates. Generally, when interest rates rise, bond prices fall. Bonds with longer
maturities tend to be more sensitive to changes in interest rates.
In addition to being sensitive to changes in interest rates, the prices of
mortgage-related securities also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
Aetna Government Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return (Class A) 1995 1996 1997 1998
<S> <C> <C> <C> <C>
15.12% 1.44% 8.59% 7.47%
</TABLE>
[ARROW UP] Best Quarter:
second quarter 1995, up 4.97%
[ARROW DOWN] Worst Quarter:
first quarter 1996, down 1.99%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class A* 2.36% 4.82% 01/04/94
Class C* 5.69% 5.47% 01/04/94
Lehman Brothers Intermediate
Government Index** 8.49% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
** The Lehman Brothers Intermediate Government Bond Index, an unmanaged index,
includes those bonds found in the Lehman Brothers Government Bond Index that
have a maturity of one to 9.99 years.
15
<PAGE>
Aetna High Yield Fund
(High Yield)
Investment Objective Seeks high current income and growth of capital primarily
through investment in a diversified portfolio of fixed-income securities rated
lower than BBB- by S&P or lower than Baa3 by Moody's.
Principal Investment Strategies Under normal market conditions, High Yield
invests at least 65% of its total assets in high-yield bonds. High-yield bonds
are bonds rated below investment grade in terms of quality, and may include
bonds of companies in default or bankruptcy.
In managing High Yield, Aeltus:
* Looks to meet the Fund's objective and reduce volatility by constructing a
diversified portfolio consisting of securities with varying maturities and
credit ratings. Aeltus, however, attempts to look beyond credit ratings to
select investments that it believes offer opportunities for high income,
growth and credit improvement.
* Uses a quantitative process for evaluating the financial criteria of issuers,
such as cash flow and profitability.
* Evaluates other, less quantitative factors, such as market share, strength of
management and management's equity stake in the company.
Principal Risks When the economy weakens, cash flows weaken, making it more
difficult for issuers to pay principal and interest. For all bonds, there is a
risk that an issuer will default. This risk is even greater with high-yield
bonds. Moreover, high-yield bonds, as a group, often decline in value when the
market anticipates or experiences a large number of issuers defaulting or
declaring bankruptcy.
Additional principal risks include:
* The performance of High Yield may be affected by weak equity markets, when
issuers of high-yield bonds generally find it difficult to reduce debt by
replacing debt with equity.
* Generally, when interest rates rise, bond prices fall, which may cause the
value of the Fund's portfolio securities to fall as well.
- --------------------------------------------------------------------------------
Aetna Money Market Fund
(Money Market)
Investment Objective Seeks to provide high current return, consistent with
preservation of capital and liquidity, through investment in high-quality money
market instruments.
Principal Investment Strategies Money Market invests in a diversified portfolio
of high-quality fixed income securities denominated in U.S. dollars, with short
remaining maturities. These securities include U.S. Government securities (such
as U.S. Treasury bills and securities issued or sponsored by U.S. government
agencies), corporate debt securities, finance company commercial paper,
asset-backed securities and certain obligations of U.S. and foreign banks, each
of which must be highly rated by independent rating agencies. Money Market
maintains a dollar-weighted average portfolio maturity of 90 days or less.
Principal Risks Although Money Market seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
Money Market. An investment in Money Market is not insured or guaranteed by the
FDIC or any other government agency. A weak economy, strong equity markets and
changes by the Federal Reserve in its monetary policies all could affect
short-term interest rates and therefore the yield of Money Market's shares.
16
<PAGE>
Aetna Money Market Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return (Class A) 1995 1996 1997 1998
<S> <C> <C> <C> <C>
5.99% 5.41$ 5.45% 5.32%
</TABLE>
[ARROW UP] Best Quarter:
second quarter 1995, up 1.51%
[ARROW DOWN] Worst Quarter:
first quarter 1997, up 1.28%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class A* 5.32% 5.29% 4.83% 01/03/92
Class C* 5.32% 5.29% 4.83% 01/03/92
IBC Index** 4.92% 4.75% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical
risk of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the internal fees and
expenses of the Adviser Class shares. For periods prior to the Class C
inception date, Class C performance is calculated using the performance of
Class I shares.
** IBC's Money Funds Report Average/All Taxable Index (IBC) is an average of the
returns of over 250 money market mutual funds surveyed each month by IBC.
To obtain current yield information, please contact 1-800-367-7732.
17
<PAGE>
Index Plus Funds
Aetna Index Plus Bond Fund
(Index Plus Bond)
Investment Objective Seeks maximum total return, consistent with preservation of
capital, primarily through investment in a diversified portfolio of fixed-income
securities, which will be chosen to substantially replicate the characteristics
of the Lehman Brothers Aggregate Bond Index (LBAB), an unmanaged index comprised
of approximately 6,900 securities.
Principal Investment Strategies Index Plus Bond invests at least 90% of its
total assets in bonds, including U.S. Treasuries, corporate bonds and
mortgage-related securities.
In managing Index Plus Bond, Aeltus:
* Attempts to achieve a total return which, before deducting Fund expenses,
exceeds the LBAB.
* Allocates assets among various sectors, as well as among individual
securities, that it believes will outperform those in the LBAB, while
underweighting those sectors and securities it believes will underperform.
* In determining which bonds to purchase, evaluates various criteria, such as
the financial strength of the issuer and the issuer's potential for strong,
sustained earnings growth as well as the potential for interest rates to rise
or fall.
Aeltus expects that there will be a close correlation between the performance of
Index Plus Bond and that of the LBAB in both rising and falling markets.
Principal Risks The principal risks of investing in Index Plus Bond are those
generally attributable to bond investing. Generally, when interest rates rise,
bond prices fall. Bonds with longer maturities tend to be more sensitive to
changes in interest rates. For all bonds there is a risk that an issuer will
default.
The prices of mortgage-related securities, in addition to being sensitive to
changes in interest rates, also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
The success of the Fund's strategy depends significantly on Aeltus' skill in
choosing investments, and in determining which sectors or securities to
overweight, underweight or avoid altogether.
- --------------------------------------------------------------------------------
Aetna Index Plus Large Cap Fund
(Index Plus Large Cap)
Investment Objective Seeks to outperform the total return performance of the
Standard & Poor's 500 Composite Index (S&P 500), while maintaining a market
level of risk.
Principal Investment Strategies Index Plus Large Cap invests at least 80% of its
net assets in stocks included in the S&P 500 (other than Aetna Inc. common
stock). The S&P 500 is a stock market index comprised of common stocks of 500 of
the largest companies in the U.S. selected by Standard & Poor's Corporation.
In managing Index Plus Large Cap, Aeltus attempts to achieve the Fund's
objective by overweighting those stocks in the S&P 500 that Aeltus believes will
outperform the index, and underweighting (or avoiding altogether) those stocks
that Aeltus believes will underperform the index.
In determining stock weightings, Aeltus uses internally developed quantitative
computer models to evaluate various criteria, such as the financial strength of
each company and its potential for strong, sustained earnings growth. At any one
time, Aeltus generally includes in Index Plus Large Cap approximately 400 of the
stocks included in the S&P 500. Although the Fund will not hold all the stocks
in the S&P 500, Aeltus expects that there will be a close correlation between
the performance of Index Plus Large Cap and that of the S&P 500 in both rising
and falling markets.
Principal Risks The principal risks of investing in Index Plus Large Cap are
those generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance. The success of the Fund's strategy depends
significantly on Aeltus' skill in determining which securities to overweight,
underweight or avoid altogether.
18
<PAGE>
Aetna Index Plus Large Cap Fund Investment Performance
<TABLE>
<CAPTION>
Year Ended December 31,
Year-by-Year Total Return (Class A) 1998
<S> <C>
32.12%
</TABLE>
[ARROW UP] Best Quarter:
fourth quarter 1998, up 22.40%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 9.05%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class A* 28.16% 28.83% 12/10/96
Class C* 30.69% 30.40% 12/10/96
S&P 500 Index** 28.57% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical
risk of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
** The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500
widely held stocks that assumes the reinvestment of all dividends, and is
considered to be representative of the stock market in general.
19
<PAGE>
Aetna Index Plus Mid Cap Fund
(Index Plus Mid Cap)
Investment Objective Seeks to outperform the total return performance of the
Standard & Poor's MidCap 400 Index (S&P 400), while maintaining a market level
of risk.
Principal Investment Strategies Index Plus Mid Cap invests at least 80% of its
net assets in stocks included in the S&P 400. The S&P 400 is a stock market
index comprised of common stocks of 400 mid-capitalization companies in the U.S.
selected by Standard & Poor's Corporation.
In managing Index Plus Mid Cap, Aeltus attempts to achieve the Fund's objective
by overweighting those stocks in the S&P 400 that Aeltus believes will
outperform the index, and underweighting (or avoiding altogether) those stocks
that Aeltus believes will underperform the index. In determining stock
weightings, Aeltus uses internally developed quantitative computer models to
evaluate various criteria, such as the financial strength of each issuer and its
potential for strong, sustained earnings growth. Although the Fund will not hold
all of the stocks in the S&P 400, Aeltus expects that there will be a close
correlation between the performance of Index Plus Mid Cap and that of the S&P
400 in both rising and falling markets.
Principal Risks The principal risks of investing in Index Plus Mid Cap are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance. In addition, stocks of medium sized
companies tend to be more volatile and less liquid than stocks of larger
companies.
The success of the Fund's strategy depends significantly on Aeltus' skill in
determining which securities to overweight, underweight or avoid altogether.
- --------------------------------------------------------------------------------
Aetna Index Plus Small Cap Fund
(Index Plus Small Cap)
Investment Objective Seeks to outperform the total return performance of the
Standard & Poor's SmallCap 600 (S&P 600), while maintaining a market level of
risk.
Principal Investment Strategies Index Plus Small Cap invests at least 80% of its
net assets in stocks included in the S&P 600. The S&P 600 is a stock market
index comprised of common stocks of 600 small-capitalization companies in the
U.S. selected by Standard & Poor's Corporation.
In managing Index Plus Small Cap, Aeltus attempts to achieve the Fund's
objective by overweighting those stocks in the S&P 600 that Aeltus believes will
outperform the index, and underweighting (or avoiding altogether) those stocks
that Aeltus believes will underperform the index. In determining stock
weightings, Aeltus uses internally developed quantitative computer models to
evaluate various criteria, such as the financial strength of each issuer and its
potential for strong, sustained earnings growth. Although the Fund will not hold
all of the stocks in the S&P 600, Aeltus expects that there will be a close
correlation between the performance of Index Plus Small Cap and that of the S&P
600 in both rising and falling markets.
Principal Risks The principal risks of investing in Index Plus Small Cap are
those generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance.
Other principal risks include:
* Stocks of smaller companies carry higher risks than stocks of larger
companies because smaller companies may lack the management experience,
financial resources, product diversification and competitive strengths of
larger companies.
* The frequency and volume of trading in small cap stocks may be substantially
less than stocks of larger companies. As a result, the stocks of smaller
companies may be subject to wider price fluctuations.
* When selling a large quantity of a particular stock, the Fund may have to
sell at a discount from quoted prices or may have to make a series of small
sales over an extended period of time due to the more limited trading volume
of smaller company stocks.
* Stocks of smaller companies tend to be more volatile than stocks of larger
companies and can be particularly sensitive to expected changes in interest
rates, borrowing costs and earnings.
Finally, the success of the Fund's strategy depends significantly on Aeltus'
skill in determining which securities to overweight, underweight or avoid
altogether.
20
<PAGE>
Generation Funds
Aetna Ascent Fund
(Ascent)
Aetna Crossroads Fund
(Crossroads)
Aetna Legacy Fund
(Legacy)
Investment Objectives Ascent seeks to provide capital appreciation.
Crossroads seeks to provide total return (i.e., income and capital appreciation,
both realized and unrealized).
Legacy seeks to provide total return consistent with preservation of capital.
Principal Investment Strategies Ascent, Crossroads and Legacy are asset
allocation funds that have been designed for investors with different investment
goals:
* Ascent is managed for investors seeking capital appreciation who generally
have an investment horizon exceeding 15 years and who have a high level of
risk tolerance.
* Crossroads is managed for investors seeking a balance between income and
capital appreciation who generally have an investment horizon exceeding 10
years and who have a moderate level of risk tolerance.
* Legacy is managed for investors primarily seeking total return consistent
with capital preservation who generally have an investment horizon exceeding
5 years and who have a low level of risk tolerance.
Under normal market conditions, Aeltus allocates the assets of each Generation
Fund, in varying degrees, among several classes of equities, fixed-income
securities (including up to 15% in high-yield bonds) and money market
instruments. To remain consistent with each Generation Fund's investment
objective and intended level of risk tolerance, Aeltus has instituted both a
benchmark percentage allocation and a Fund level range allocation for each
asset class. The benchmark percentage for each asset class assumes neutral
market and economic conditions. The Fund level range allows Aeltus to vary the
securities in each Fund and take advantage of opportunities as market and
economic conditions change. Aeltus does not attempt to respond to short-term
swings in the market by quickly changing the characteristics of the Generation
Funds' portfolios.
The Generation Funds' benchmarks and ranges are described on the following page.
The asset allocation limits apply at the time of purchase of a particular
security.
Each Generation Fund's asset allocation may vary from the benchmark allocation
(within the permissible range) based on Aeltus' ongoing evaluation of the
expected returns and risks of each asset class relative to other classes. Among
the criteria Aeltus evaluates to determine allocations are economic and market
conditions, including changes in circumstances with respect to particular asset
classes, geographic regions, industries or issuers, and interest rate movements.
In selecting individual portfolio securities, Aeltus considers such factors as:
* Expected dividend yields and total returns.
* Bond yields.
* Price-to-earnings ratios.
21
<PAGE>
<TABLE>
<CAPTION>
Asset Class
Ascent Crossroads(1) Legacy(2) Comparative Index
Equities
<S> <C> <C> <C> <C>
Large Capitalization Stocks
Range 0-60% 0-45% 0-30% S&P 500 Index
Benchmark 20% 15% 10%
Small-/Mid-Capitalization Stocks
Range 0-40% 0-30% 0-20% Russell 2500 Index
Benchmark 20% 15% 10%
International Stocks Morgan Stanley Capital
Range 0-40% 0-30% 0-20% International Europe,
Benchmark 20% 15% 10% Australia and Far East Index
Real Estate Stocks National Association of
Range 0-40% 0-30% 0-20% Real Estate Investment Trusts
Benchmark 20% 15% 10% Equity Index
Fixed Income
U.S. Dollar Bonds
Range 0-30% 0-70% 0-100% Salomon Brothers Broad
Benchmark 10% 25% 40% Investment Grade Index
International Bonds
Range 0-20% 0-20% 0-20% Salomon Brothers Non-U.S.
Benchmark 10% 10% 10% World Government Bond Index
Money Market Instruments
Range 0-30% 0-30% 0-30% 91-Day U.S. Treasury Bill Rate
Benchmark 0% 5% 10%
</TABLE>
- ----------
(1) Crossroads will invest no more than 60% of its assets in any combination of
the following asset classes: small-/mid-capitalization stocks, high-yield
bonds, international stocks and international fixed-income securities.
(2) Legacy will invest no more than 35% of its assets in any combination of the
following asset classes: small-/mid-capitalization stocks, high-yield
bonds, international stocks and international fixed-income securities.
22
<PAGE>
Principal Risks The success of each Generation Fund's strategy depends
significantly on Aeltus' skill in choosing investments and in allocating assets
among the different investment classes.
In addition, each asset type has risks that are somewhat unique, as described
below. The performance of each Generation Fund will be affected by these risks
to a greater or lesser extent depending on the size of the allocation. The
principal risks of investing in each Generation Fund are those generally
attributable to stock and bond investing.
For stock investments, those risks include sudden and unpredictable drops in the
value of the market as a whole and periods of lackluster or negative
performance. Stocks of smaller companies tend to be less liquid and more
volatile than stocks of larger companies, and can be particularly sensitive to
expected changes in interest rates, borrowing costs and earnings.
The risks associated with real estate securities include periodic declines in
the value of real estate, generally, or in the rents and other income generated
by real estate caused by such factors as periodic over-building.
For bonds, generally, when interest rates rise, bond prices fall. Also, economic
and market conditions may cause issuers to default or go bankrupt. The value of
high-yield bonds are even more sensitive to economic and market conditions than
other bonds.
The prices of mortgage-related securities, in addition to being sensitive to
changes in interest rates, also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
Foreign securities present additional risks. Some foreign securities tend to be
less liquid and more volatile than their U.S. counterparts. In addition,
accounting standards and market regulations tend to be less standardized. These
risks are usually higher for securities of companies in emerging markets.
Finally, securities of foreign companies may be denominated in foreign currency.
Exchange rate fluctuations may reduce or eliminate gains or create losses.
23
<PAGE>
Aetna Ascent Fund Investment Performance
<TABLE>
<CAPTION>
Year Ended December 31,
Year-by-Year Total Return (Class A) 1998
<S> <C>
4.28%
</TABLE>
[ARROW UP] Best Quarter:
fourth quarter 1998, up 10.25%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 12.94%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class A* -1.72% 15.07% 01/04/95
Class C* 2.51% 16.30% 01/04/95
Russell 3000 Index** 24.14% N/A
Ascent Composite**** 7.93% N/A
</TABLE>
Aetna Crossroads Fund Investment Performance
<TABLE>
<CAPTION>
Year Ended December 31,
Year-by-Year Total Return (Class A) 1998
<S> <C>
3.87%
</TABLE>
[ARROW UP] Best Quarter:
fourth quarter 1998, up 7.48%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 10.18%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class A* -2.11% 12.65% 01/04/95
Class C* 2.06% 13.87% 01/04/95
Saly BIG Index*** 8.72% N/A
Crossroads Composite**** 8.42% N/A
</TABLE>
24
<PAGE>
Aetna Legacy Fund Investment Performance
<TABLE>
<CAPTION>
Year Ended December 31,
Year-by-Year Total Return (Class A) 1998
<S> <C>
6.12%
</TABLE>
[ARROW UP] Best Quarter:
fourth quarter 1998, up 5.82%
[ARROW DOWN] Worst Quarter:
third quarter 1998, down 5.79%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class A* 0.02% 10.67% 01/04/95
Class C* 4.24% 11.85% 01/04/95
Saly BIG Index*** 8.72% N/A
Legacy Composite**** 8.74% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* On February 2, 1998, the Fund redesignated Adviser Class shares as Class A
Shares. The Fund introduced Class C shares on June 30, 1998. For periods
prior to the Class A inception date, Class A performance is calculated using
the performance of Class I shares, and deducting the Class A front-end sales
charge and the internal fees and expenses of the Adviser Class shares. For
periods prior to the Class C inception date, Class C performance is
calculated using the performance of Class I shares, and deducting the
internal fees and expenses of the Class C shares. Class C share 1-year
returns reflect the deduction of the applicable contingent deferred sales
charge (CDSC) as described under "Opening an Account and Selecting a Share
Class."
** The Russell 3000 Index measures the performance of the 3,000 largest US
companies based on total market capitalization, which represents
approximately 98% of the investable US equity market.
*** The Salomon Brothers Broad Investment-Grade Bond Index (Saly BIG Index) is a
market-weighted index that contains approximately 4,700 individually priced
investment-grade bonds. The index includes US Treasury/agency issues,
mortgage passthrough securities, and corporate issues.
**** The Ascent Composite, Crossroads Composite and Legacy Composite are each
comprised of the seven stock and bond indices listed below in weights that
correspond to the particular benchmark weights for each Fund.
<TABLE>
<CAPTION>
Asset Class Benchmark Index
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Large Cap Stocks The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500 widely held stocks that
assumes the reinvestment of all dividends, and is considered to be representative of the stock
market in general.
Small-/Mid-Cap Stocks The Russell 2500 Index consists of the smallest 500 securities in the Russell 1000 Index and all
2,000 securities in the Russell 2000 Index. Each of these indices assumes reinvestment of all
dividends and is unmanaged.
International Stocks The Morgan Stanley Capital International-Europe, Australia, Far East Index is an unmanaged, market
value-weighted average of the performance of more than 900 securities listed on the stock exchange
of countries in Europe, Australia and the Far East.
Real Estate Stocks The National Association of Real Estate Investment Trusts Equity Index is an unmanaged,
market-weighted average of the performance of tax-qualified real estate investment trusts listed on
the New York Stock Exchange, American Stock Exchange and the NASDAQ National Market System.
U.S. Dollar Bonds Salomon Brothers Broad Investment-Grade Bond Index is an unmanaged, market-weighted index that
contains approximately 4,700 individually priced investment-grade bonds rated BBB or better. The
index includes U.S. Treasury/Agency issues, mortgage pass-through securities and corporate issues.
International Bonds The Salomon Brothers Non-U.S. World Government Bond Index serves as an unmanaged benchmark to
evaluate the performance of government bonds with a maturity of one year or greater in the
following 12 countries: Japan, United Kingdom; Germany; France; Canada; the Netherlands; Australia;
Denmark, Italy, Belgium, Spain and Sweden.
Cash Equivalents Three-month Treasury bills are government-backed short-term investments considered to be risk-free,
and equivalent to cash because their maturity is only three months.
</TABLE>
25
<PAGE>
Fund Expenses
The following tables describe Fund expenses. Shareholder fees are paid directly
by shareholders. Annual Fund Operating Expenses are deducted from Fund assets
every year, and are thus paid indirectly by all shareholders.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
Shareholder Fees(1) Shareholder Fees(1) Shareholder Fees(1)
Maximum Maximum Maximum Maximum Maximum Maximum
Sales Deferred Sales Sales Charge Deferred Sales Sales Charge Deferred Sales
Charge (Load) Charge (Load) (Load) on Charge (Load) (Load) on Charge (Load)
on Purchases (as a percentage Purchases (as (as a percentage Purchases (as (as a percentage
(as a percentage of gross a percentage of gross a percentage of gross
of purchase redemption of purchase redemption of purchase redemption
price) proceeds)(2) price) proceeds)(3) price) proceeds)(4)
<S> <C> <C> <C> <C> <C> <C>
Growth 5.75% None None 5.00% None 1.00%
International 5.75% None None 5.00% None 1.00%
Mid Cap 5.75% None None 5.00% None 1.00%
Small Company 5.75% None None 5.00% None 1.00%
Value Opportunity 5.75% None None 5.00% None 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced 5.75% None None 5.00% None 1.00%
Growth and Income 5.75% None None 5.00% None 1.00%
Real Estate 5.75% None None 5.00% None 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund 4.75% None None 5.00% None 1.00%
Aetna Government Fund 4.75% None None 5.00% None 1.00%
High Yield 4.75% None None 5.00% None 1.00%
Money Market None None None 5.00% None None
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 3.00% None None 5.00% None 0.75%
Index Plus Large Cap 3.00% None None 5.00% None 0.75%
Index Plus Mid Cap 3.00% None None 5.00% None 0.75%
Index Plus Small Cap 3.00% None None 5.00% None 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Ascent 5.75% None None 5.00% None 1.00%
Crossroads 5.75% None None 5.00% None 1.00%
Legacy 5.75% None None 5.00% None 1.00%
</TABLE>
(1) The Funds do not impose any sales charge (load) on reinvested dividends or
exchanges.
(2) A CDSC of up to 1.00% is assessed only on certain redemptions of Class A
shares that were purchased without a front-end sales charge.
(3) The Funds charge a CDSC of 5.00% on shares redeemed in the first year,
declining to 1.00% on shares redeemed in the sixth year. No CDSC is charged
thereafter.
(4) The Funds charge a CDSC of 1.00% (0.75% for the Index Plus Funds) on shares
redeemed in the first 18 months. No CDSC is charged thereafter.
26
<PAGE>
Class A Shares
Annual Fund Operating Expenses
Class A Shares
Annual Fund Operating Expenses(1)
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Distribution Total Fee Waiver/
Management (12b-1) Operating Expense Net
Fee Fees Other Expenses Expenses Reimbursement Expenses
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Growth 0.700% 0.25% 0.300% 1.25% 0.00% 1.25%
International 0.850% 0.25% 0.820% 1.92% 0.32% 1.60%
Mid Cap 0.750% 0.25% 2.840% 3.84% 2.44% 1.40%
Small Company 0.850% 0.25% 0.580% 1.68% 0.18% 1.50%
Value Opportunity 0.700% 0.25% 2.710% 3.66% 2.31% 1.35%
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced 0.800% 0.25% 0.320% 1.37% 0.00% 1.37%
Growth and Income 0.625% 0.25% 0.255% 1.13% 0.00% 1.13%
Real Estate 0.800% 0.25% 2.090% 3.14% 1.59% 1.55%
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund 0.500% 0.25% 0.470% 1.22% 0.22% 1.00%
Aetna Government Fund 0.500% 0.25% 1.010% 1.76% 0.81% 0.95%
High Yield 0.650% 0.25% 1.620% 2.52% 1.32% 1.20%
Money Market 0.400% 0.00% 0.320% 0.72% 0.22% 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 0.350% 0.25% 1.070% 1.67% 0.82% 0.85%
Index Plus Large Cap 0.450% 0.25% 0.720% 1.42% 0.47% 0.95%
Index Plus Mid Cap 0.450% 0.25% 2.060% 2.76% 1.76% 1.00%
Index Plus Small Cap 0.450% 0.25% 2.180% 2.88% 1.88% 1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Ascent 0.800% 0.25% 0.630% 1.68% 0.23% 1.45%
Crossroads 0.800% 0.25% 0.600% 1.65% 0.20% 1.45%
Legacy 0.800% 0.25% 0.870% 1.92% 0.47% 1.45%
</TABLE>
(1) Aeltus is contractually obligated through December 31, 1999 to waive all or
a portion of its investment advisory fee and/or its administrative services
fee for certain Funds and/or to reimburse a portion of those Funds' other
expenses in order to ensure that the Fund's total operating expenses do not
exceed the percentage of the Fund's average daily net assets reflected in
the table under Net Expenses. Fee waiver/expense reimbursement obligations
apply to each Fund except Growth, Balanced, and Growth and Income. An
administrative services fee of 0.10% is included in Other Expenses.
The expenses shown above are based on the year ended October 31, 1998, and have
been restated to reflect changes in certain contractual arrangements.
Previously, Class A shares were assessed an administrative services fee of
0.25%, a distribution (12b-1) fee of 0.50% (0.00% for Money Market) and a
shareholder services fee of 0.25% (0.10% for Money Market). As of January 1,
1998, the shareholder services fee for this class of shares was eliminated.
27
<PAGE>
Class A Shares Example
The following example is designed to help you compare the costs of investing in
the Funds with the costs of investing in other mutual funds. Using the annual
fund operating expenses percentages above, you would pay the following expenses
on a $10,000 investment, assuming a 5% annual return and redemption at the end
of each of the periods shown:
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years*
<S> <C> <C> <C> <C>
Growth $ 695 $ 949 $1,222 $1,999
International 728 1,115 1,529 2,693
Mid Cap 709 1,486 2,321 4,683
Small Company 719 1,058 1,422 2,448
Value Opportunity 705 1,446 2,243 4,503
- ------------------------------------------------------------------------------------------------------------------
Balanced 706 984 1,282 2,127
Growth and Income 684 913 1,161 1,871
Real Estate 724 1,357 2,035 3,946
- ------------------------------------------------------------------------------------------------------------------
Bond Fund 572 824 1,096 1,877
Aetna Government Fund 567 930 1,324 2,455
High Yield 591 1,109 1,666 3,256
Money Market 51 208 380 882
- ------------------------------------------------------------------------------------------------------------------
Index Plus Bond 384 736 1,117 2,218
Index Plus Large Cap 394 692 1,015 1,945
Index Plus Mid Cap 399 978 1,605 3,404
Index Plus Small Cap 399 1,003 1,657 3,535
- ------------------------------------------------------------------------------------------------------------------
Ascent 714 1,054 1,418 2,448
Crossroads 714 1,048 1,405 2,417
Legacy 714 1,102 1,519 2,696
</TABLE>
* Aeltus is contractually obligated to waive fees and/or reimburse expenses
through December 31, 1999. Therefore, all figures reflect a
waiver/reimbursement for the first year of the period.
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.
Long-term shareholders (except for Money Market shareholders) may pay more than
the economic equivalent of the maximum sales charge permitted by the National
Association of Securities Dealers, Inc. (NASD), because of the combination of
front-end sales charges and distribution (12b-1) fees. Registered
representatives may receive different levels of compensation depending on the
class sold. Additional information regarding the classes may be obtained by
calling your investment professional.
28
<PAGE>
Class B Shares
Annual Fund Operating Expenses
Class B Shares
Annual Fund Operating Expenses(1)
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Distribution and Total Fee Waiver/
Management Service (12b-1) Operating Expense Net
Fee Fees Other Expenses Expenses Reimbursement Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth 0.700% 1.00% 0.300% 2.00% 0.00% 2.00%
International 0.850% 1.00% 0.820% 2.67% 0.32% 2.35%
Mid Cap 0.750% 1.00% 2.840% 4.59% 2.44% 2.15%
Small Company 0.850% 1.00% 0.580% 2.43% 0.18% 2.25%
Value Opportunity 0.700% 1.00% 2.710% 4.41% 2.31% 2.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced 0.800% 1.00% 0.320% 2.12% 0.00% 2.12%
Growth and Income 0.625% 1.00% 0.255% 1.88% 0.00% 1.88%
Real Estate 0.800% 1.00% 2.090% 3.89% 1.59% 2.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund 0.500% 1.00% 0.470% 1.97% 0.22% 1.75%
Aetna Government Fund 0.500% 1.00% 1.010% 2.51% 0.81% 1.70%
High Yield 0.650% 1.00% 1.620% 3.27% 1.32% 1.95%
Money Market 0.400% 1.00% 0.320% 1.72% 0.22% 1.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 0.350% 1.00% 1.070% 2.42% 0.82% 1.60%
Index Plus Large Cap 0.450% 1.00% 0.720% 2.17% 0.47% 1.70%
Index Plus Mid Cap 0.450% 1.00% 2.060% 3.51% 1.76% 1.75%
Index Plus Small Cap 0.450% 1.00% 2.180% 3.63% 1.88% 1.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Ascent 0.800% 1.00% 0.630% 2.43% 0.23% 2.20%
Crossroads 0.800% 1.00% 0.600% 2.40% 0.20% 2.20%
Legacy 0.800% 1.00% 0.870% 2.67% 0.47% 2.20%
</TABLE>
(1) Aeltus is contractually obligated through December 31, 1999 to waive all or
a portion of its investment advisory fee and/or its administrative services
fee for certain Funds and/or to reimburse a portion of those Funds' other
expenses in order to ensure that the Fund's total operating expenses do not
exceed the percentage of the Fund's average daily net assets reflected in
the table under Net Expenses. Fee waiver/expense reimbursement obligations
apply to each Fund except Growth, Balanced, and Growth and Income. An
administrative services fee of 0.10% is included in Other Expenses.
Because Class B shares are new, the expenses shown above are based on expenses
incurred by Class A shareholders for the year ended October 31, 1998, adjusted
for differences in the distribution (Rule 12b-1) fees applicable to Class B
shares. Class B shareholders are charged a higher distribution (12b-1) fee and
are charged a shareholder services fee of 0.25%.
29
<PAGE>
Class B Shares Example
The following example is designed to help compare the costs of investing in the
Funds with the costs of investing in other mutual funds. Using the annual fund
operating expenses percentages above, you would pay the following expenses on a
$10,000 investment, assuming a 5% annual return and redemption at the end of
each of the periods shown:
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years**
<S> <C> <C> <C> <C>
Growth $ 703 $ 927 $1,278 $2,131
International 738 1,101 1,594 2,830
Mid Cap 718 1,489 2,417 4,860
Small Company 728 1,041 1,483 2,582
Value Opportunity 713 1,447 2,336 4,677
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced 715 964 1,339 2,258
Growth and Income 691 891 1,216 2,003
Real Estate 733 1,354 2,119 4,106
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund 678 898 1,246 2,099
Aetna Government Fund 673 1,009 1,480 2,682
High Yield 698 1,193 1,830 3,484
Money Market 653 821 1,116 1,758
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 663 980 1,434 2,588
Index Plus Large Cap 673 936 1,330 2,315
Index Plus Mid Cap 678 1,226 1,924 3,758
Index Plus Small Cap 678 1,252 1,977 3,887
- ------------------------------------------------------------------------------------------------------------------------------------
Ascent 723 1,037 1,480 2,583
Crossroads 723 1,030 1,467 2,552
Legacy 723 1,088 1,584 2,835
</TABLE>
* Aeltus is contractually obligated to waive fees and/or reimburse expenses
through December 31, 1999. Therefore, all figures reflect a
waiver/reimbursement for the first year of the period.
** Reflects the conversion of Class B shares to Class A shares, which pay lower
12b-1 fees. Conversion occurs eight years after purchase.
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.
Long-term shareholders may pay more than the economic equivalent of the maximum
sales charge permitted by the NASD, because of the distribution and shareholder
service (12b-1) fees. Registered representatives may receive different levels of
compensation depending on the class sold. Additional information regarding the
classes may be obtained by calling your investment professional.
30
<PAGE>
Class C Shares
Annual Fund Operating Expenses
Class C Shares
Annual Fund Operating Expenses(1)
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Distribution and Total Fee Waiver/
Management Service (12b-1) Operating Expense Net
Fee Fees Other Expenses Expenses Reimbursement Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth 0.700% 1.00% 0.300% 2.00% 0.00% 2.00%
International 0.850% 1.00% 0.820% 2.67% 0.32% 2.35%
Mid Cap 0.750% 1.00% 2.840% 4.59% 2.44% 2.15%
Small Company 0.850% 1.00% 0.580% 2.43% 0.18% 2.25%
Value Opportunity 0.700% 1.00% 2.710% 4.41% 2.31% 2.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced 0.800% 1.00% 0.320% 2.12% 0.00% 2.12%
Growth and Income 0.625% 1.00% 0.255% 1.88% 0.00% 1.88%
Real Estate 0.800% 1.00% 2.090% 3.89% 1.59% 2.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund 0.500% 1.00% 0.470% 1.97% 0.22% 1.75%
Aetna Government Fund 0.500% 1.00% 1.010% 2.51% 0.81% 1.70%
High Yield 0.650% 1.00% 1.620% 3.27% 1.32% 1.95%
Money Market 0.400% 0.00% 0.320% 0.72% 0.22% 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 0.350% 0.75% 1.070% 2.17% 0.82% 1.35%
Index Plus Large Cap 0.450% 0.75% 0.720% 1.92% 0.47% 1.45%
Index Plus Mid Cap 0.450% 0.75% 2.060% 3.26% 1.76% 1.50%
Index Plus Small Cap 0.450% 0.75% 2.180% 3.38% 1.88% 1.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Ascent 0.800% 1.00% 0.630% 2.43% 0.23% 2.20%
Crossroads 0.800% 1.00% 0.600% 2.40% 0.20% 2.20%
Legacy 0.800% 1.00% 0.870% 2.67% 0.47% 2.20%
</TABLE>
(1) Aeltus is contractually obligated through December 31, 1999 to waive all or
a portion of its investment advisory fee and/or its administrative services
fee for certain Funds and/or to reimburse a portion of those Funds' other
expenses in order to ensure that the Fund's total operating expenses do not
exceed the percentage of the Fund's average daily net assets reflected in
the table under Net Expenses. Fee waiver/expense reimbursement obligations
apply to each Fund except Growth, Balanced, and Growth and Income. An
administrative services fee of 0.10% is included in Other Expenses.
The expenses shown above are based on the period from June 30, 1998 (Class C
inception date) to October 31, 1998, and have been annualized.
31
<PAGE>
Class C Shares Example
The following example is designed to help compare the costs of investing in the
Funds with the costs of investing in other mutual funds. Using the annual fund
operating expenses percentages above, you would pay the following expenses on a
$10,000 investment, assuming a 5% annual return and redemption at the end of
each of the periods shown:
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years*
<S> <C> <C> <C> <C>
Growth $ 303 $ 627 $1,078 $2,327
International 338 801 1,394 3,019
Mid Cap 318 1,189 2,217 5,053
Small Company 328 741 1,283 2,773
Value Opportunity 313 1,147 2,136 4,871
- ------------------------------------------------------------------------------------------------------------------
Balanced 315 664 1,139 2,452
Growth and Income 291 591 1,016 2,201
Real Estate 333 1,054 1,919 4,297
- ------------------------------------------------------------------------------------------------------------------
Bond Fund 278 598 1,046 2,299
Aetna Government Fund 273 709 1,280 2,883
High Yield 298 893 1,630 3,681
Money Market 51 208 380 882
- ------------------------------------------------------------------------------------------------------------------
Index Plus Bond 212 604 1,105 2,527
Index Plus Large Cap 223 559 1,001 2,250
Index Plus Mid Cap 228 851 1,600 3,712
Index Plus Small Cap 228 877 1,653 3,843
- ------------------------------------------------------------------------------------------------------------------
Ascent 323 737 1,280 2,776
Crossroads 323 730 1,267 2,744
Legacy 323 788 1,384 3,028
</TABLE>
* Aeltus is contractually obligated to waive fees and/or reimburse expenses
through December 31, 1999. Therefore, all figures reflect a
waiver/reimbursement for the first year of the period.
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.
Long-term shareholders (except Money Market shareholders) may pay more than the
economic equivalent of the maximum sales charge permitted by the NASD, because
of the distribution and shareholder service (12b-1) fees. Registered
representatives may receive different levels of compensation depending on the
class sold. Additional information regarding the classes may be obtained by
calling your investment professional.
32
<PAGE>
Other Considerations
In addition to the principal investments and strategies described on the
previous pages, the Funds may also invest in other securities, engage in other
practices, and be subject to additional risks, as discussed below and in the
Statement of Additional Information (SAI).
Futures Contracts and Options Each Fund (except Money Market) may enter into
futures contracts and use options. The Funds primarily use futures contracts and
options to hedge against price fluctuations or increase exposure to a particular
asset class. To a limited extent, the Funds also may use these instruments for
speculation (investing for potential income or capital gain).
* Futures contracts are agreements that obligate the buyer to buy and the
seller to sell a specific quantity of securities at a specific price on a
specific date.
* Options are agreements that give the holder the right, but not the
obligation, to purchase or sell a certain amount of securities or futures
contracts during a specified period or on a specified date.
The main risk with futures contracts and options is that they can amplify a gain
or loss, potentially earning or losing substantially more money than the actual
cost of the instrument. In addition, while a hedging strategy can guard against
potential risks for the Fund as a whole, it adds to the Fund's expenses and may
reduce or eliminate potential gains. There is also a risk that a futures
contract or option intended as a hedge may not perform as expected.
Defensive Investing In response to unfavorable market conditions, each Fund
(except Index Plus Bond, Index Plus Large Cap, Index Plus Mid Cap and Index Plus
Small Cap) may make temporary investments that are not consistent with its
principal investment objective and policies.
Year 2000 As a healthcare and financial services enterprise, Aetna Inc.
(referred to collectively with its affiliates and subsidiaries as "Aetna"), is
dependent on computer systems and applications to conduct its business. Aetna
has developed and is currently executing a comprehensive risk-based plan
designed to make its mission-critical information technology ("IT") systems and
embedded systems Year 2000 ready. The plan for IT systems covers five stages
including (i) assessment, (ii) remediation, (iii) testing, (iv) implementation
and (v) Year 2000 approval. At year-end 1997, Aetna, including Aeltus, had
substantially completed the assessment stage. The remediation of
mission-critical IT systems was completed year-end 1998. Testing of all
mission-critical IT systems is underway with Year 2000 approval targeted for
completion by mid-1999. The costs of these efforts will not affect the Funds.
Aeltus and the Funds also have relationships with broker-dealers, transfer
agents, custodians or other securities industry participants or other service
providers that are not affiliated with Aetna. Aetna, including Aeltus, has
initiated communication with its critical external relationships to determine
the extent to which Aetna may be vulnerable to such parties' failure to resolve
their own Year 2000 issues. Aetna and Aeltus have asssessed and are prioritizing
responses in an attempt to mitigate risks with respect to the failure of these
parties to be Year 2000 ready. There can be not assurance that failure of third
parties to complete adequate preparations in a timely manner, and any resulting
systems interruptions or other consequences, would not have an adverse effect,
directly or indirectly, on the Funds, including, without limitation, their
operation or the valuation of their assets.
In addition, the Year 2000 problem may adversely affect issuers in which a Fund
invests. For example, issuers may incur substantial costs to address the
problem. Aeltus and the Funds will continue to monitor developments relating to
this issue.
Risks of Conversion to Euro On January 1, 1999, 11 of the countries in the
European Monetary Union adopted the Euro as their official currency. However,
their original currencies (for example, the franc, the mark and the lire) will
continue in use for cash transactions until January 1, 2002. After that date, it
is expected that only the Euro will be used in those countries. Although a
common currency is expected to confer some benefits in those markets, the
conversion to the new currency may affect issuers in which the Funds invest,
because of changes in the competitive environment from a consolidated currency
market, and greater operational costs from converting to the new currency. This
could depress the value of their stock. Any negative impact of the conversion to
the Euro will be most significant for International.
Portfolio Turnover Portfolio turnover refers to the frequency of portfolio
transactions and the percentage of portfolio assets being bought and sold during
the year. For the fiscal year ended October 31, 1998, Growth, International,
Small Company, Growth and Income, Aetna Government Fund and High Yield each had
a portfolio turnover rate in excess of 150%. A high portfolio turnover rate
increases a Fund's transaction costs and may increase your tax liability.
33
<PAGE>
Management of the Funds
Aeltus Investment Management, Inc., 10 State House Square, Hartford, Connecticut
06103-3602 serves as investment adviser to the Funds. Aeltus is responsible for
managing the assets of each Fund in accordance with its investment objective and
policies, subject to oversight by the Aetna Series Fund, Inc. (Company) Board of
Directors (Board). Aeltus has acted as adviser or subadviser to mutual funds
since 1994 and has managed institutional accounts since 1972.
Advisory Fees
* Listed below for Funds that have operated for at least one full fiscal year
are the aggregate advisory fees paid by each Fund for its most recent fiscal
year. These numbers reflect the advisory fees after fee waiver and expense
reimbursement. See the Fund Operating Expense table for the advisory fee
(Management Fee) Aeltus was entitled to receive.
* Listed below for the Funds that have operated for less than one full fiscal
year are the advisory fees that Aeltus is entitled to receive, expressed as
an annual rate based on the average daily net assets of each Fund.
<TABLE>
<CAPTION>
Aggregate Advisory Fees Paid as a Aggregate Advisory Fees Paid as a
Percentage of Average Net Assets Percentage of Average Net Assets
Fund Name for Year Ended October 31, 1998 Fund Name for Year Ended October 31, 1998
<S> <C> <C> <C> <C>
Growth 0.70 Aetna Government Fund 0.00
International 0.66 Money Market 0.15
Small Company 0.73 Index Plus Large Cap 0.00
Balanced 0.80 Ascent 0.61
Growth and Income 0.66 Crossroads 0.63
Bond Fund 0.28 Legacy 0.37
Fund Name Rate Average Daily Net Assets
Mid Cap 0.750% On first $250 million
0.700% On next $250 million
0.675% On next $250 million
0.650% On next $1.25 billion
0.600% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Value Opportunity 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate 0.800% On first $250 million
0.750% On next $250 million
0.725% On next $250 million
0.700% On next $1.25 billion
0.650% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield 0.650% On first $250 million
0.600% On next $250 million
0.575% On next $250 million
0.550% On next $1.25 billion
0.500% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 0.350% On first $250 million
0.350% On next $250 million
0.325% On next $250 million
0.300% On next $1.25 billion
0.275% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Mid Cap 0.450% On first $250 million
0.450% On next $250 million
0.425% On next $250 million
0.400% On next $1.25 billion
0.375% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Small Cap 0.450% On first $250 million
0.450% On next $250 million
0.425% On next $250 million
0.400% On next $1.25 billion
0.375% Over $2 billion
</TABLE>
34
<PAGE>
On October 1, 1998, Bradley, Foster & Sargent, Inc., CityPlace II, 185 Asylum
Street, Hartford, Connecticut 06103, was appointed as subadviser to Value
Opportunity. While Bradley had not previously served as an investment adviser or
subadviser to a mutual fund, it has managed private client assets as well as
401(k), profit sharing and other retirement plan assets since 1994.
Bradley is responsible for making equity investment decisions. Aeltus, as
adviser, remains responsible for all other aspects of managing Value
Opportunity, including trade execution and cash management. Aeltus pays Bradley
a monthly subadvisory fee at an annual rate of 0.15% of Value Opportunity's
average daily net assets on the first $250 million of assets, and 0.10% on
assets above $250 million.
Portfolio Management The following people are primarily responsible for the
day-to-day management of the Funds.
Capital Appreciation Funds
Growth Kenneth H. Bragdon, Portfolio Manager, Aeltus, has been managing Growth
since May 1998. Previously, Mr. Bragdon co-managed the Fund. Mr. Bragdon has
been with the Aetna organization since 1978 and has 27 years of experience in
the investment business.
International Vince Fioramonti, Portfolio Manager, Aeltus, has been managing
International 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 of The Travelers
Investment Management Company. He began his investment career with Travelers in
1988.
Mid Cap Donald Townswick, Portfolio Manager, Aeltus, has been managing Mid Cap
since its inception in February 1998. He also manages small- and mid-cap stocks
for several other mutual funds managed by Aeltus. Mr. Townswick joined the Aetna
organization in July 1994 after serving for 2 years with Invesco Inc.
Small Company Thomas DiBella, Portfolio Manager, Aeltus, has been managing Small
Company since its inception in January 1994. Mr. DiBella joined Aeltus in 1991
and is currently responsible for the management of several small-capitalization
portfolios.
Value Opportunity Peter Canoni, Principal, Bradley, manages Value Opportunity.
Before joining Bradley, Mr. Canoni was a Managing Director of Aeltus and the
portfolio manager of Value Opportunity from its inception in February 1998
through August 3, 1998. Mr. Canoni had been with the Aetna organization since
1980 and has over 26 years of investment experience.
Growth & Income Funds
Balanced Geoffrey A. Brod, Portfolio Manager, Aeltus, has been managing large
cap stocks for the Fund since August 1, 1998. He has over 30 years of experience
in quantitative applications and has over 11 years of experience in equity
investments. Mr. Brod has been with the Aetna organization since 1966.
Thomas DiBella, Portfolio Manager, Aeltus, has been managing small cap stocks
for the Fund since March 1, 1999. Mr. DiBella joined Aeltus in 1991 and is
currently responsible for the management of several small-capitalization
portfolios.
Carl Baker, Portfolio Manager, Aeltus, has been managing fixed-income securities
for the Fund since August 1, 1998. Mr. Baker has 11 years of experience in fixed
income portfolio management and has been with the Aetna organization since 1982.
Growth and Income Kevin M. Means, Managing Director, Aeltus, has been managing
Growth and Income since July 1994. Mr. Means joined Aetna in July 1994 after
serving as Chief Investment Officer at Invesco Management and Research since
1993. He also served from 1987 to 1993 as the Director of Quantitative Research
and Equity Portfolio Manager at Invesco Capital Management. Mr. Means heads a
team of portfolio managers each of whom specializes in a particular asset class
used in the management of Growth and Income.
Real Estate Yaniv Tepper, Portfolio Manager, Aeltus, has been managing Real
Estate since its inception in February 1998. He has been managing real estate
securities for several investment funds managed by Aeltus since 1994 when he
joined Aeltus. He has over 10 years of experience in direct real estate and real
estate securities investments.
Income Funds
Bond Fund Steven C. Huber, Managing Director, Aeltus, has been managing the Fund
since August 1998. Mr. Huber joined the Aetna organization in 1987 as a
quantitative analyst and has been managing fixed-income portfolios since 1989.
Aetna Government Fund Hugh T.M. Whelan, Portfolio Manager, Aeltus, has been
managing the Aetna Government Fund since January 1997. Mr. Whelan joined the
Aetna organization in 1989 and manages fixed-income portfolios employing
different strategies.
35
<PAGE>
High Yield Gail Bruhn, Portfolio Manager, Aeltus, has been managing High Yield
since its inception in February 1998. Ms. Bruhn joined Aeltus in 1995 after
spending 12 years with CIGNA Investments. She currently manages high-yield
securities for several institutional accounts.
Money Market Jeanne Wong-Boehm, Managing Director, Aeltus, has been managing
Money Market since its inception in January 1992. Ms. Wong-Boehm joined the
Aetna organization in 1983 as a fixed-income portfolio analyst and in 1989 she
was assigned primary responsibility for the money market operations.
Index Plus Funds
Index Plus Bond Christie Bull, Portfolio Manager, Aeltus, has been managing
Index Plus Bond since its inception in February 1998. Ms. Bull is also the
Director of Fixed Income Research for Aeltus. Ms. Bull has been with the Aetna
organization since 1979, and has been managing fixed-income securities for
several private accounts managed by Aeltus since 1993.
Index Plus Large Cap Geoffrey A. Brod, Portfolio Manager, Aeltus, has been
managing Index Plus Large Cap since its inception in December 1996. He has over
30 years of experience in quantitative applications and has over 11 years of
experience in equity investments. Mr. Brod has been with the Aetna organization
since 1966.
Index Plus Mid Cap, Index Plus Small Cap Geoffrey A. Brod, Portfolio Manager,
Aeltus, and Michael F. Farrell, Portfolio Manager, Aeltus, serve as co-managers
of Index Plus Mid Cap and Index Plus Small Cap. Mr. Brod served as the sole
manager of Index Plus Mid Cap and Index Plus Small Cap from each Fund's
inception in February 1998 through February 1999. Mr. Farrell has been with the
Aetna organization since 1991 and has been responsible for quantitative research
and development of equity models.
Generation Funds
Ascent, Crossroads, Legacy Kevin M. Means, Managing Director, Aeltus, is the
lead portfolio manager for each Generation Fund and has been responsible for
determining the allocation of each Fund's investments since its inception in
January 1995. Mr. Means is also responsible for the selection of large
capitalization stocks for the Generation Funds. Mr. Means is supported by a team
of investment professionals, each of whom focuses on a particular asset class.
Donald Townswick, Portfolio Manager, Aeltus, has been managing small and mid-cap
stocks for the Generation Funds since January 1995.
Vince Fioramonti, Portfolio Manager, Aeltus, has been managing international
stocks and non-U.S. dollar government bonds for the Generation Funds since
January 1995.
Yaniv Tepper, Portfolio Manager, Aeltus, has been managing real estate
securities for the Generation Funds since May 1995.
Carl Baker, Portfolio Manager, Aeltus, has been managing U.S. Dollar Bonds for
the Generation Funds since August 1998.
Jeanne Wong-Boehm, Managing Director, Aeltus, has been managing money market
investments for the Generation Funds since their inception in January 1995.
Investing in the Funds
Opening an Account and Selecting a Share Class
How to Open an Account You may open an account either through your investment
professional or through the sponsor of your employer-sponsored retirement plan.
If you are opening an account through your investment professional, he or she
will guide you through the process of investing in a Fund. If you are investing
through a retirement plan, please refer to your plan materials.
Selecting a Class
Class A Shares (except Money Market)
* Front-end sales charge applies (at the time of purchase), which will vary
depending on the Fund and the size of your purchase.
* No CDSC applies, except in certain instances when the front-end sales charge
has been waived because the aggregate investment in the Funds was at least $1
million or the purchase was through certain participant-directed employee
benefit plans.
* Distribution (12b-1) Fee of 0.25% applies.
36
<PAGE>
Sales Charges: Class A Shares The tables below show the front-end sales charges
you will pay if you purchase Class A shares of the Funds in any amount up to $1
million.
<TABLE>
<CAPTION>
Growth Balanced Ascent
International Growth and Income Crossroads
Mid Cap Real Estate Legacy
Small Company
Value Opportunity
When you invest this amount This % is Which equals this
deducted % of your investment
for sales charges
<S> <C> <C> <C>
under $50,000 5.75% 6.10%
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 2.50 2.56
$500,000 but under $1,000,000 2.00 2.04
</TABLE>
<TABLE>
<CAPTION>
Bond Fund
Aetna Government Fund
High Yield
When you invest this amount This % is Which equals this
deducted % of your investment
for sales charges
<S> <C> <C>
under $50,000 4.75% 4.99%
$50,000 but under $100,000 4.50 4.71
$100,000 but under $250,000 3.50 3.63
$250,000 but under $500,000 2.50 2.56
$500,000 but under $1,000,000 2.00 2.04
</TABLE>
<TABLE>
<CAPTION>
Index Plus Bond
Index Plus Large Cap
Index Plus Mid Cap
Index Plus Small Cap
When you invest this amount This % is deducted Which equals this
for sales charges % of your investment
<S> <C> <C>
under $50,000 3.00% 3.09%
$50,000 but under $100,000 2.50 2.56
$100,000 but under $250,000 2.00 2.04
$250,000 but under $500,000 1.50 1.52
$500,000 but under $1,000,000 1.00 1.01
</TABLE>
37
<PAGE>
Class A Shares Sales Charge Waivers Generally, no front-end sales charge applies
if you are buying Class A shares with money you received within the past 60 days
by redeeming class A shares of another Aeltus-advised Fund on which a front-end
sales charge was paid or with money you received within the past 30 days by
redeeming shares of another mutual fund on which you paid a front-end sales
charge. The Funds also waive the Class A front-end sales charge for purchases
made by certain types of investors. (See the Statement of Additional Information
or call 1-800-367-7732 for additional details.)
CDSC on Class A Shares The Funds do not impose a CDSC on Class A shares
purchased with an aggregate investment in the Funds of less than $1 million. All
Funds other than Money Market may impose a CDSC on Class A shares purchased (i)
with an aggregate investment in the Funds in excess of $1 million or (ii) by
certain participant-directed employee benefit plans. The CDSC on Class A shares
will apply only to shares for which a finder's fee is paid to investment
professionals pursuant to a distribution agreement with the Funds. The CDSC
imposed is as follows:
<TABLE>
<S> <C>
this % is deducted from
When you invest this amount your proceeds
$1 million but under $3 million Year 1 - 1.00%
Year 2 - 0.50%
$3 million but under $20 million Year 1 - 0.50%
Year 2 - 0.50%
$20 million or greater Year 1 - 0.25%
Year 2 - 0.25%
</TABLE>
Class B Shares
* No front-end sales charge applies.
* CDSC applies (if you sell your shares within six years of purchase).
* Distribution (12b-1) Fee of 0.75% applies.
* Service Fee of 0.25% applies.
* Automatic conversion to Class A shares after eight years.
You can purchase Class B shares of Money Market only by (i) opening a Dollar
Cost Averaging account by which all of the amount invested will be reinvested in
another Fund within 24 months of the initial purchase or (ii) exchanging Class B
shares of another Fund. Orders for Class B shares for $250,000 or more will be
treated as orders for Class A shares.
Sales Charges: Class B Shares All Funds impose a CDSC on redemptions, but not
exchanges, made within six years of purchase. The table below shows the
applicable CDSC based on the time invested.
<TABLE>
<S> <C>
Redemption During CDSC
1st year since purchase 5%
2nd year since purchase 4%
3rd year since purchase 3%
4th year since purchase 3%
5th year since purchase 2%
6th year since purchase 1%
7th year since purchase None
</TABLE>
Class C Shares (except Money Market)
* No front-end sales charge applies.
* CDSC applies (if you sell your shares within 18 months of purchase).
* Distribution (12b-1) Fee of 0.75% (for all Funds except the Index Plus Funds)
or 0.50% (for the Index Plus Funds) applies.
* Service Fee of 0.25% applies.
Sales Charges: Class C Shares All Funds other than Money Market impose a CDSC on
redemptions made within 18 months of purchase. The CDSC imposed on redemptions
is 1.00%, except for the Index Plus Funds which impose a CDSC of 0.75%.
Other Policies Relating to Charges and Fees
Application of a CDSC To determine whether a CDSC is payable on any redemption,
the Fund will first redeem shares not subject to any charge, and then shares
held longest during the CDSC period. The CDSC is assessed on an amount equal to
the lesser of the current market value or the original cost of the shares being
redeemed.
Unless otherwise specified, when you request to sell a stated dollar amount, the
Fund will redeem additional shares to cover any CDSC. For requests to sell a
stated number of shares, the Fund will deduct the amount of the CDSC, if any,
from the sale proceeds.
38
<PAGE>
When the CDSC Does Not Apply The CDSC does not apply in certain situations,
including certain exchanges, certain retirement distributions, and certain
redemptions made because of disability or death. (See the Statement of
Additional Information or call 1-800-367-7732 for additional details.)
Distribution (12b-1) Fees With respect to its Class A and Class C shares, each
Fund, other than Money Market, has adopted a plan that allows the Fund to pay
fees for the sale and distribution of Fund shares (Rule 12b-1 plan). With
respect to its Class B shares, each Fund, including Money Market, has adopted a
Rule 12b-1 plan. The 12b-1 fees are paid out of Fund assets on an ongoing basis,
and as a result, over time, these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges. Some of the
distribution (12b-1) fees are used to compensate financial professionals who
sell Fund shares.
Service Fee Each Fund, with respect to its Class B and Class C shares other than
Money Market, has adopted a Shareholder Services Plan that allows the payment of
a servicing fee. The servicing fee is used primarily to pay selling dealers and
their agents for servicing and maintaining shareholder accounts.
How to Buy Shares
Minimum Investments
<TABLE>
<CAPTION>
Initial Investment Additional Investments
<S> <C> <C>
Individual Retirement Accounts $500 *$100 except by wire or Systematic
(including Roth IRAs) Investment
*$500 by wire
*$50 by Systematic
Investment
All other investments $1,000 *$100 except by wire or Systematic
Investment
*$500 by wire
*$50 by Systematic Investment
</TABLE>
Instructions for Buying Fund Shares
Please contact your investment professional or consult your plan materials
regarding the purchase of Fund shares. If you are purchasing Fund shares through
your investment professional, he or she will guide you through the process of
opening an account and purchasing additional shares, as follows.
<TABLE>
<CAPTION>
To Open An Account To Purchase Additional Shares
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
By Mail Complete and sign your Fill out the investment stub from your
application, make confirmation statement or send a letter
your check payable to Aetna indicating your name, account
Series Fund, Inc. and mail to: number(s), the Fund(s) in which you
wish to invest and the amount you want
Aetna Series Fund, Inc. to invest in each Fund.
c/o First Data Investor Services
Group, Inc. Make your check payable to Aetna
P.O. Box 9681 Series Fund, Inc. and mail to:
Providence, RI 02940
Aetna Series Fund, Inc.
Your check must be drawn on a c/o First Data Investor Services Group, Inc.
bank located within the United P.O. Box 9663
States and payable in U.S. dollars. Providence, RI 02940
Cash, credit cards and third party
checks cannot be used to open
an account.
39
<PAGE>
To Open An Account To Purchase Additional Shares
Your check must be drawn on a bank
located within the United States and
payable in U.S. dollars. The Funds will
accept checks which are made payable
to you and endorsed to Aetna Series
Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
By Overnight Courier Follow the instructions above Follow the instructions above for
for "By Mail" but send your "By Mail" but send your check and
completed application and check investment stub or letter to:
to:
Aetna Series Fund, Inc.
Aetna Series Fund, Inc. c/o First Data Investor Services
c/o First Data Investor Services Group, Inc.
Group, Inc. 4400 Computer Drive
4400 Computer Drive Westborough, MA 01581
Westborough, MA 01581
- ------------------------------------------------------------------------------------------------------------------------------------
By Wire Not Available. Call 1-800-367-7732 prior to sending
the wire in order to obtain a
confirmation number.
Instruct your bank to wire funds to:
Wire to:
Boston Safe Deposit & Trust Company
ABA # 011001234
Credit to:
Boston Safe Deposit & Trust Company
Account # 176656
Further Credit to:
Name of Fund
Shareholder Account Number
Shareholder Registration
Federal funds wire purchase orders will
be accepted only when the Fund's
transfer agent and custodian bank are
open for business.
Neither the Funds nor their agents are
responsible for the consequences of
delays resulting from the banking or
Federal Reserve wire system or from
incomplete instructions.
40
<PAGE>
To Open An Account To Purchase Additional Shares
By Electronic Not Available. Use the Systematic Investment Option.
Funds Transfer Sign up for this service when opening
your account or by requesting the
appropriate information.
- ------------------------------------------------------------------------------------------------------------------------------------
By Exchange Submit a written request to the Submit a written request to the address
address listed above under listed above under "By Mail." Include:
"By Mail." Include: *Your name and account number.
*Your name and account number. *The name of the Fund into and out of
*The name of the Fund into and which you wish to exchange.
out of which you wish to *The amount to be exchanged and the
exchange. signatures of all shareholders.
*The amount to be exchanged
and the signatures of all You may also exchange your shares by
shareholders. calling 1-800-367-7732. Please be
prepared to provide:
*The Funds' names.
You may also exchange your *Your account number(s).
shares by calling 1-800-367-7732. *Your Social Security number or
Please be prepared to provide: taxpayer identification number.
*The Funds' names. *Your address.
*Your account number(s). *The amount to be exchanged.
*Your Social Security number or
taxpayer identification number.
*Your address.
*The amount to be exchanged.
</TABLE>
41
<PAGE>
How to Sell Shares
To redeem all or a portion of the shares in your account, you should submit a
redemption request through your investment professional, plan sponsor or as
described below. Your investment professional may charge you a fee for selling
your shares.
Redemption requests in amounts up to $25,000 may be made in writing or by
telephone. The Company requires a signature guarantee if the amount of the
redemption request is over $25,000. You may obtain a signature guarantee at most
banks and securities dealers. Please note that notaries public cannot provide
signature guarantees.
Once your redemption request is received in good order as described below, the
Fund normally will send the proceeds of such redemption within one or two
business days. However, if making immediate payment could adversely affect a
Fund, the Fund may defer distribution for up to seven days or a longer period if
permitted. If you redeem shares of a Fund shortly after purchasing them, the
Fund will hold payment of redemption proceeds until a purchase check or
systematic investment clears, which may take up to 12 calendar days. A
redemption request made within 15 calendar days after submission of a change of
address is permitted only if the request is in writing and is accompanied by a
signature guarantee.
<TABLE>
<S> <C>
Redemptions by Mail You may redeem shares you own in any Fund by sending written
instructions to:
Aetna Series Fund, Inc.
c/o First Data Investor Services Group, Inc.
P.O. Box 9681
Providence, RI 02940
Your instructions should identify:
* The Fund.
* The number of shares or dollar amount to be redeemed.
* Your name and account number.
Your instructions must be signed by all person(s)
required to sign for the Fund account, exactly as the
shares are registered, and, if necessary,
accompanied by a signature guarantee(s).
- ------------------------------------------------------------------------------------------------------------------------------------
Redemptions by Wire A minimum redemption of $1,000 is required for wire transfers.
Redemption proceeds will be transferred by wire to your previously
designated bank account or to another destination if the federal funds wire
instructions provided with your redemption request are accompanied by a
signature guarantee. A $12.00 fee will be charged for this service.
]-----------------------------------------------------------------------------------------------------------------------------------
Redemptions by Telephone Call 1-800-367-7732. Please be prepared to provide your account number,
account name and the amount of the redemption, which generally
must be no less than $500 and no more than $25,000.
</TABLE>
42
<PAGE>
Timing of Requests
Orders that are received before the close of regular trading on the New York
Stock Exchange (usually 4:00 p.m. eastern time) will be processed at the Net
Asset Value (NAV) calculated that business day (adjusted for the front-end sales
charge or CDSC, if applicable). Orders received after the close of regular
trading on the New York Stock Exchange will be processed at the NAV calculated
on the following business day (adjusted for the front-end sales charge or CDSC,
if applicable).
The Company may appoint certain financial intermediaries and institutions
(Institutions) as parties that may accept purchase and redemption orders on
behalf of the Company. If you purchase or redeem shares in connection with
programs offered by these Institutions, and the Institution receives your order
before the close of regular trading on the New York Stock Exchange, your shares
will be purchased or redeemed at the NAV determined that business day, subject
to the applicable front-end sales charge or CDSC.
Institutions may be authorized to designate other intermediaries to accept
purchase and redemption orders on the Company's behalf, subject to the Company's
approval. Thus, the Company will be deemed to have received a purchase or
redemption order when the Institution or, if applicable, the Institution's
authorized designee, accepts the order.
Institutions may charge you fees or assess other charges for the services they
provide to their customers. These fees or charges are retained by the
Institution and are not remitted to the Company.
Investors purchasing through an Institution should refer to the Institution's
materials for a discussion of any specific instructions on the timing of or
restrictions relating to the purchase or redemption of shares.
Other Information about Shareholder Accounts and Services
Business Hours Each Fund is open on the same days as the New York Stock Exchange
(generally, Monday through Friday). Fund representatives are available from 8
a.m. to 8 p.m. eastern time on those days.
Net Asset Value The NAV of each Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. eastern time).
In calculating the NAV, the securities held by Money Market are valued using
amortized cost. For all other Funds, securities are valued primarily by
independent pricing services using market quotations. Short-term debt securities
maturing in less than 60 days are valued using amortized cost. Securities for
which market quotations are not readily available are valued at their fair
value, subject to procedures adopted by the Board. With respect to any Fund that
invests in foreign securities, because those securities may be traded on markets
that are open on days when the Fund does not price its shares, the Fund's NAV
may change even though Fund shareholders may not be permitted to sell or redeem
Fund shares.
Exchange Privileges There is no fee to exchange shares from one Fund to another.
However, a sales charge may apply upon an exchange of Class A shares of Money
Market for Class A shares of another Fund. When you exchange shares, your new
Fund shares will be in the equivalent class of your current shares. For Class B
and Class C shares, any CDSC that applies to your current shares will apply to
the new shares. The CDSC will be calculated from the date of your original
purchase.
There are no limits on the number of exchanges you can make. However, the Funds
may suspend or terminate your exchange privilege if you make more than five
exchanges out of a single Fund in any calendar year, and the Funds may refuse to
accept any exchange request, especially if as a result of the exchange, in
Aeltus' judgment, it would be too difficult to invest effectively in accordance
with the Fund's investment objective.
The Funds are not designed for professional market timing organizations or other
entities using programmed or frequent exchanges. The Funds reserve the right to
reject any specific purchase or exchange request, including a request made by a
market timer.
Cross Investing
* Dividend Investing You may elect to have dividend and/or capital gains
distributions automatically invested in the same class of one other Fund.
* Systematic Exchange You may establish an automatic exchange of shares from
one Fund to another.
Telephone Exchange and Redemption Privileges You automatically receive telephone
exchange and redemption privileges when you establish your account. If you do
not want these telephone privileges, you may call 1-800-367-7732 to have them
removed. All telephone transactions may be recorded, and you will be asked for
certain identifying information.
43
<PAGE>
Telephone redemption requests will be accepted if the request is for a minimum
of $500 or a maximum of $25,000. Telephone redemption requests will not be
accepted if you:
* Have submitted a change of address within the preceding 15 calendar days.
* Are selling shares in a retirement plan account held in trust.
The Funds reserve the right to amend telephone exchange and redemption purchases
at any time upon notice to shareholders and may refuse a telephone exchange or
redemption if the Funds believe it is advisable to do so.
Minimum Account Balance You must maintain a minimum balance of $500 in each Fund
account. If you do not, the Fund may give you 60 days' notice to increase the
account balance to the $500 minimum. If you fail to increase your account
balance to the minimum, the Fund may redeem all of your remaining shares and
mail the proceeds to you at the address of record. The Fund will not redeem
shares for failing to maintain an adequate account balance if the account
balance falls below the minimum balance only because the value of Fund shares
has decreased.
Additional Services The Funds offer these additional investor services. Each
Fund reserves the right to terminate or amend these services at any time. For
all of the services, certain terms and conditions apply. See the Statement of
Additional Information or call 1-800-367-7732 for additional details.
* Systematic Investment You can make automatic monthly investments in any Fund.
* Letter of Intent If you agree to purchase a specific amount of Class A shares
of one or more Funds (other than Money Market) over a 13-month period, the
front-end sales charge will be calculated at the rate that would have been
charged had you purchased the entire amount all at once. You may qualify for
a reduced front-end sales charge by notifying us of your intent no later than
90 days after the date of your initial investment and by completing and
returning to us the relevant portion of your application. After the Letter of
Intent is filed, each additional investment will be entitled to the front-end
sales charge applicable to the level of investment indicated on the Letter of
Intent.
* Right of Accumulation/Cumulative Quantity Discounts To determine if you may
pay a reduced front-end sales charge on Class A purchases, you may add the
amount of your current purchase to the cost or current value, whichever is
higher, of other Class A shares of the Funds (other than Money Market) owned
by you, your family and your company (if you are the sole owner).
* 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 a Fund.
* Checkwriting Service Checkwriting is available with Class A and Class C
shares of Money Market. There currently is no transaction charge for this
service, and the initial checkbook you receive is free. However, you will be
charged a $3.00 fee for each checkbook reorder. Checks must be for a minimum
of $250 and the checkwriting service may not be used for a complete
redemption of your shares. This service is not available for IRA or other
retirement accounts. You will be charged a $25 fee for stop payment requests
and for Money Market checks that are returned due to insufficient funds.
* TDD Service Telecommunication Device for the Deaf (TDD) services are offered
for hearing impaired investors. The dedicated number for this service is
1-800-684-4889.
* Tax-Deferred Retirement Plans Each Fund may be used for investment by a
variety of tax-deferred retirement plans, such as individual retirement
accounts (IRAs, including Roth IRAs) and 401(k) and 403(b)(7) programs
sponsored by employers. There is no minimum investment or minimum account
balance applicable to investments in 403(b)(7) accounts except that a
rollover from a 403(b)(7) account must be for at least $500. Purchases made
in connection with IRAs and 403(b)(7) accounts may be subject to an annual
custodial fee of $10.00 for each account registered under the same taxpayer
identification number. This fee will be deducted directly from your
account(s). The custodial fee will be waived for IRAs and 403(b)(7) accounts
registered under the same taxpayer identification number having an aggregate
balance over $30,000 at the time such fee is scheduled to be deducted.
Payments to Securities Dealers and Selection of Executing Brokers From time to
time, ACI or its affiliates may make payments to other dealers and/or their
agents, who may not be affiliates of Aetna, who sell shares or who provide
shareholder services. The value of a shareholder's investment will be unaffected
by these payments.
Aeltus may consider the sale of shares of the Funds and of other investment
companies advised by Aeltus as a factor in the selection of brokerage firms to
execute each Fund's portfolio transactions, subject to Aeltus' duty to obtain
best execution.
44
<PAGE>
Dividends and Distributions
Dividends Dividends are declared and paid as follows:
* declared daily and paid monthly Money Market
* declared and paid monthly Aetna Government Fund
Bond Fund
High Yield
Index Plus Bond
* declared and paid semiannually Balanced
Growth and Income
* declared and paid annually All other Funds
Capital gains distributions, if any, are paid on an annual basis around the end
of the year, December 31. To comply with federal tax regulations, each Fund may
also pay an additional capital gains distribution, usually in June.
Money Market shares begin to accrue dividends the business day after they are
purchased. A redemption of Money Market shares will include dividends declared
through the redemption date.
Both income dividends and capital gains distributions are paid by each Fund on a
per share basis. As a result, at the time of this payment, the share price of a
Fund (except Money Market) will be reduced by the amount of the payment.
Distribution Options When completing your application, you must select one of
the following three options for dividends and capital gains distributions:
* Full Reinvestment Both dividends and capital gains distributions from a Fund
will be reinvested in additional shares of the same class of shares of that
Fund. This option will be selected automatically unless one of the other
options is specified.
* Capital Gains Reinvestment Capital gains distributions from a Fund will be
reinvested in additional shares of the same class of shares of that Fund and
all net income from dividends will be distributed in cash.
* 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 shares of another Fund.
Distributions paid in shares will be credited to your account at the next
determined NAV per share.
Tax Information
* In general, dividends and short-term capital gains distributions you receive
from any Fund are taxable as ordinary income.
* Distributions of other capital gains generally are taxable as capital gains.
* Ordinary income and capital gains are taxed at different rates.
* The rates that you will pay on capital gains distributions will depend on how
long the Fund holds its portfolio securities. This is true no matter how long
you have owned your shares in the Fund or whether you reinvest your
distributions or take them as cash.
* The sale of shares in your account may produce a gain or loss, and typically
is a taxable event. For tax purposes, an exchange is the same as a sale.
Every year, the Funds will send you information detailing the amount of ordinary
income and capital gains distributed to you for the previous year. You should
consult your tax professional for assistance in evaluating the tax implications
of investing in the Funds.
Backup Withholding By law, the Funds must withhold 31% of your distributions and
proceeds if you have not provided complete, correct taxpayer information.
45
<PAGE>
Private Account Performance
Index Plus Large Cap, Index Plus Bond and High Yield are recently organized and
do not yet have long-term performance records. However, these Funds have
investment objectives, policies and strategies substantially similar to those
employed by Aeltus in managing accounts for certain institutional investors
(Private Accounts). Therefore, the performance of these Private Accounts is
provided below. Note that the Private Accounts, unlike the Funds, are not
subject to certain investment limitations, diversification requirements and
other restrictions imposed by the Investment Company Act of 1940 and the
Internal Revenue Code of 1986, as amended, which, if applicable, could have
adversely affected the Private Accounts' performance.
The Private Account Performance data, shown below, was calculated in accordance
with the standards established by the Association for Investment Management and
Research (AIMR). AIMR is a nonprofit membership and educational organization
that, among other things, has formulated a set of performance presentation
standards for investment advisers. AIMR has not been involved with the
preparation or review of the performance shown.
All Private Account Performance data:
* Was calculated on a time-weighted total return basis and includes all
dividends and interest, accrued income and realized and unrealized gains and
losses.
* Reflects the reinvestment of dividends and distributions.
* Reflects the deduction of investment advisory fees and brokerage commissions
paid by the Private Accounts, but does not reflect the deduction of custodial
fees.
* Includes cash and cash equivalents.
The historical fees and expenses paid by the Private Accounts are significantly
lower than those paid by the corresponding Fund. Had Fund level expenses been
charged to the Private Accounts, performance would have been lower.
The following table shows average annual total returns for the periods ended
December 31, 1998 for the Funds, the comparable Private Accounts and their
respective benchmark indices. Investors should not consider the historical
performance of the Private Accounts as an indication of the future performance
of a comparably managed Fund.
46
<PAGE>
Private Account Composite and Fund Performance
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
INDEX PLUS LARGE CAP 1 YEAR 5 YEARS INCEPTION
<S> <C> <C> <C>
Index Plus Large Cap, Class A (assuming payment
of maximum front-end sales charge)(1) 28.16% N/A 28.83% (12/10/96)
Index Plus Large Cap, Class A (without payment of
front-end sales charge)(1) 32.12% N/A 30.76% (12/10/96)
Index Plus Large Cap Private Account Composite 31.58% 25.19% N/A
S&P 500 Stock Index 28.57% 24.06% N/A
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
INDEX PLUS BOND 1 YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C>
Index Plus Bond, Class A (assuming payment
of maximum front-end sales charge) N/A N/A N/A 3.18% (2/4/98)
Index Plus Bond, Class A (without payment of
front-end sales charge) N/A N/A N/A 6.38% (2/4/98)
Index Plus Bond Private Account Composite 8.17% 7.11% 9.07% N/A
Lehman Brothers Aggregate Bond Index 8.69% 7.27% 9.26% N/A
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
HIGH YIELD 1 YEAR 5 YEARS INCEPTION
<S> <C> <C> <C>
High Yield, Class A (assuming payment of
maximum front-end sales charge) N/A N/A -6.51% (2/2/98)
High Yield, Class A (without payment of
front-end sales charge) N/A N/A -1.85% (2/2/98)
High Yield Private Account Composite 4.21% 11.74% N/A
Merrill Lynch High Yield Master Index 3.66% 9.11% N/A
</TABLE>
(1) The Fund redesignated its Adviser Class shares as Class A shares on February
2, 1998. For periods prior to the Class A inception date, Class A
performance is calculated by using the performance of Class I shares and
deducting the maximum Class A front-end sales load and internal fees and
expenses of the Adviser Class.
47
<PAGE>
Financial Highlights
These highlights are intended to help you understand the Funds' performance for
the past 5 years (or since commencement of operations, if shorter). Certain
information reflects financial results for a single Fund share. The total
returns in the tables represent the rate an investor would have earned (or lost)
on an investment in each Fund (assuming reinvestment of all dividends and
distributions). The information in these tables has been audited by KPMG LLP,
independent auditors, whose reports, along with the Funds' Financial Statements,
are included in the Funds' Annual Reports, which are available upon request.
<TABLE>
<CAPTION>
Growth
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From
April 15, 1994 June 30, 1998
Year Year Year Year (Date of Initial (Date of Initial
Ended Ended Ended Ended Public Offering) Public Offering)
October 31, October 31, October 31, October 31, to October 31, to October 31,
1998 1997 1996 1995 1994 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 16.76 $ 14.17 $ 13.63 $ 10.74 $ 10.26 $ 17.86
- ----------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income ................... (0.04) (0.11) (0.08) (0.06) (0.02) (0.05)
Net realized and change in unrealized
gain or loss on investments ......... 2.05 3.84 2.38 3.00 0.50 (1.25)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.01 3.73 2.30 2.94 0.48 (1.30)
- ----------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income .............. -- -- -- (0.05) -- --
From net realized gains on investments .. (2.40) (1.14) (1.76) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions ............ (2.40) (1.14) (1.76) (0.05) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 16.37 $ 16.76 $ 14.17 $ 13.63 $ 10.74 $ 16.56
==================================================================================================================================
Total Return ............................ 14.34% 28.05% 18.97% 27.92% 4.58% (7.28)%
Net assets, end of period (000's) ....... $ 12,877 $ 8,647 $ 4,615 $ 1,727 $ 417 $ 356
Ratio of net expenses to
average net assets .................. 1.32% 1.92% 2.03% 2.03% 1.72%(1)(2) 1.99%(1)
Ratio of net investment income to
average net assets .................. (0.25)% (0.67)% (0.59)% (0.47)% (0.25)%(1) (0.92)%(1)
Ratio of expenses before
reimbursement and waiver to
average net assets .................. 1.32% 1.92% 2.03% 2.14% 2.17%(1) 1.99%(1)
Portfolio turnover rate ................. 170.46% 141.07% 144.19% 171.75% 120.32% 170.46%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
48
<PAGE>
<TABLE>
<CAPTION>
International Mid Cap
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From Period From Period From
April 15, 1994 June 30, 1998 February 4, 1998 June 30, 1998
(Date of Initial (Date of Initial (Commencement (Date of Initial
Year Ended Year Ended Year Ended Year Ended Public Offering) Public Offering) of Operations) Public Offering)
October 31, October 31, October 31, October 31, to October 31, to October 31, to October 31, to October 31,
1998 1997 1996 1995 1994 1998 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 13.57 $ 11.77 $ 10.59 $ 11.51 $ 11.24 $ 13.29 $ 10.00 $ 11.12
- ------------------------------------------------------------------------------------------------------------------------------------
(0.02) (0.07) (0.05) 0.03 0.01 (0.03) (0.04) (0.04)
1.05 2.88 1.57 (0.20) 0.26 (1.41) (0.68) (1.82)
- ------------------------------------------------------------------------------------------------------------------------------------
1.03 2.81 1.52 (0.17) 0.27 (1.44) (0.72) (1.86)
- ------------------------------------------------------------------------------------------------------------------------------------
(0.31) (0.12) (0.08) (0.27) -- -- -- --
(2.46) (0.89) (0.26) (0.48) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(2.77) (1.01) (0.34) (0.75) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
$ 11.83 $ 13.57 $ 11.77 $ 10.59 $ 11.51 $ 11.85 $ 9.28 $ 9.26
====================================================================================================================================
9.76% 25.07% 14.67% (0.81)% 2.40% (10.84)% (7.20)% (16.73)%
$ 15,078 $ 19,063 $ 22,893 $ 26,464 $ 26,647 $ 156 $ 115 $ 83
1.82% 2.47% 2.94% 2.12%(2) 2.27%(1)(2) 2.36%(1)(2) 1.40%(1)(2) 2.15%(1)(2)
(0.19)% (0.57)% (0.42)% 0.27% 0.17%(1) (0.73)%(1) (0.46)%(1) (1.21)%(1)
2.01% 2.47% 2.94% 2.25% 2.41%(1) 2.55%(1) 3.84%(1) 4.59%(1)
152.73% 194.41% 135.92% 32.91% 81.67% 152.73% 113.99% 113.99%
</TABLE>
49
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
<TABLE>
<CAPTION>
Small Company
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From
April 15, 1994 June 30, 1998
Year Year Year Year (Date of Initial (Date of Initial
Ended Ended Ended Ended Public Offering) Public Offering)
October 31, October 31, October 31, October 31, to October 31, to October 31,
1998 1997 1996 1995 1994 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 15.20 $ 14.42 $ 13.39 $ 10.35 $ 10.24 $ 12.11
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment
Operations:
Net investment income ................... 0.01 (0.16) (0.18) (0.11) (0.04) (0.02)
Net realized and change in unrealized
gain or loss on investments ......... (0.84) 4.36 2.62 3.15 0.15 (1.70)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.83) 4.20 2.44 3.04 0.11 (1.72)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income .............. -- -- -- -- -- --
From net realized gains on investments .. (4.22) (3.42) (1.41) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ............ (4.22) (3.42) (1.41) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 10.15 $ 15.20 $ 14.42 $ 13.39 $ 10.35 $ 10.39
====================================================================================================================================
Total Return ............................ (7.77)% 36.73% 19.02% 29.44% 0.98% (14.21)%
Net assets, end of period (000's) ....... $ 9,089 $ 7,077 $ 3,884 $ 1,285 $ 205 $ 1,118
Ratio of net expenses to
average net assets .................. 1.63%(2) 2.33% 2.20% 2.23%(2) 1.78%(1)(2) 2.30%(1)(2)
Ratio of net investment income to
average net assets .................. 0.15% (1.17)% (1.26)% (0.89)% (0.72)%(1) (0.52)%(1)
Ratio of expenses before
reimbursement and waiver to
average net assets .................. 1.74% 2.33% 2.20% 2.30% 2.14%(1) 2.41%(1)
Portfolio turnover rate ................. 211.87% 150.43% 163.21% 156.43% 116.28% 211.87%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
50
<PAGE>
<TABLE>
<CAPTION>
Value Opportunity Balanced
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From Period From Period From
February 2, 1998 June 30, 1998 April 15, 1994 June 30, 1998
(Commencement (Date of Initial (Date of Initial (Date of Initial
of Operations) Public Offering) Year Ended Year Ended Year Ended Year Ended Public Offering) Public Offering)
to October 31, to October 31, October 31, October 31, October 31, October 31, to October 31, to October 31,
1998 1998 1998 1997 1996 1995 1994 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 11.04 $ 14.05 $ 13.49 $ 12.34 $ 10.62 $ 10.54 $ 13.27
- ------------------------------------------------------------------------------------------------------------------------------------
0.01 (0.02) 0.29 0.23 0.20 0.23 0.19 0.07
(0.04) (1.07) 1.01 2.03 1.79 1.91 -- (0.54)
- ------------------------------------------------------------------------------------------------------------------------------------
(0.03) (1.09) 1.30 2.26 1.99 2.14 0.19 (0.47)
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- (0.24) (0.20) (0.27) (0.42) (0.11) --
-- -- (2.28) (1.50) (0.57) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- (2.52) (1.70) (0.84) (0.42) (0.11) --
- ------------------------------------------------------------------------------------------------------------------------------------
$ 9.97 $ 9.95 $ 12.83 $ 14.05 $ 13.49 $ 12.34 $ 10.62 $ 12.80
====================================================================================================================================
(0.30)% (9.88)% 10.44% 18.64% 16.83% 18.32% 1.84% (3.54)%
$ 464 $ 95 $ 7,544 $ 6,289 $ 3,783 $ 1,362 $ 26,396 $ 216
1.35%(1)(2) 2.10%(1)(2) 1.44% 1.99% 2.07% 2.04%(2) 1.87%(1)(2) 2.11%(1)
0.12%(1) (0.63)%(1) 2.22% 1.68% 1.60% 2.61% 1.90%(1) 1.55%(1)
3.66%(1) 4.41%(1) 1.44% 1.99% 2.07% 2.07% 2.06%(1) 2.11%(1)
132.45% 132.45% 84.55% 116.69% 117.88% 129.05% 86.10% 84.55%
</TABLE>
51
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
<TABLE>
<CAPTION>
Growth and Income
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From
April 15, 1994 June 30, 1998
Year Year Year Year (Date of Initial (Date of Initial
Ended Ended Ended Ended Public Offering) Public Offering)
October 31, October 31, October 31, October 31, to October 31, to October 31,
1998 1997 1996 1995 1994 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 18.01 $ 15.69 $ 13.43 $ 11.08 $ 10.75 $ 16.92
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment
Operations:
Net investment income ................... 0.06 0.03 0.08 0.12 0.11 (0.01)
Net realized and change in unrealized
gain or loss on investments ......... 0.51 4.99 3.08 2.31 0.30 (1.69)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.57 5.02 3.16 2.43 0.41 (1.70)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income .............. (0.04) (0.10) 0.14) (0.08) (0.08) --
From net realized gains on investments .. (3.32) (2.60) (0.76) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ............ (3.36) (2.70) (0.90) (0.08) (0.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 15.22 $ 18.01 $ 15.69 $ 13.43 $ 11.08 $ 15.22
====================================================================================================================================
Total Return ............................ 3.42% 36.49% 24.70% 21.90% 3.71% (10.05)%
Net assets, end of period (000's) ....... $ 23,603 $ 15,955 $ 6,638 $ 2,217 $ 5,740 $ 569
Ratio of net expenses to average
net assets .......................... 1.20% 1.75% 1.83% 1.84% 2.32%(1)(2) 1.86%(1)
Ratio of net investment income to
average net assets .................. 0.39% 0.18% 0.55% 1.14% 1.74%(1) (0.27)%(1)
Ratio of expenses before
reimbursement and waiver to
average net assets .................. 1.20% 1.75% 1.83% 1.84% 2.42%(1) 1.86%(1)
Portfolio turnover rate ................. 160.48% 157.92% 106.09% 127.43% 54.13% 160.48%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
52
<PAGE>
<TABLE>
<CAPTION>
Real Estate Bond
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From Period From Period From
February 2, 1998 June 30, 1998 April 15, 1994 June 30, 1998
(Commencement (Date of Initial (Date of Initial (Date of Initial
of Operations) Public Offering) Year Ended Year Ended Year Ended Year Ended Public Offering) Public Offering)
to October 31, to October 31, October 31, October 31, October 31, October 31, to October 31, to October 31,
1998 1998 1998 1997 1996 1995 1994 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 9.45 $ 10.22 $ 10.09 $ 10.27 $ 9.58 $ 9.92 $ 10.31
- ------------------------------------------------------------------------------------------------------------------------------------
0.25 0.05 0.57 0.54 0.62 0.56 0.28 0.17
(1.95) (1.21) 0.15 0.13 (0.20) 0.66 (0.35) 0.05
- ------------------------------------------------------------------------------------------------------------------------------------
(1.70) (1.16) 0.72 0.67 0.42 1.22 (0.07) 0.22
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- (0.57) (0.54) (0.60) (0.53) (0.27) (0.16)
-- -- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
-- -- (0.57) (0.54) (0.60) (0.53) (0.27) (0.16)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 8.30 $ 8.29 $ 10.37 $ 10.22 $ 10.09 $ 10.27 $ 9.58 $ 10.37
====================================================================================================================================
(17.00)% (12.28)% 7.27% 6.89% 4.27% 13.28% (0.68)% 2.10%
$ 266 $ 96 $ 1,890 $ 1,006 $ 877 $ 7,340 $ 25,405 $ 108
2.19%(1)(2) 3.00%(1)(2) 1.05%(2) 1.50%(2) 1.50%(2) 1.50%(2) 1.49%(1)(2) 1.75%(1)(2)
2.51%(1) 1.70%(1) 5.49% 5.32% 5.47% 5.91% 5.36%(1) 4.79%(1)
3.08%(1) 3.89%(1) 1.27% 1.89% 1.91% 1.82% 1.81%(1) 1.97%(1)
63.79% 63.79% 77.01% 48.56% 42.33% 56.99% 51.80% 77.01%
</TABLE>
53
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
<TABLE>
<CAPTION>
Aetna Government Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From
April 15, 1994 June 30, 1998
Year Year Year Year (Date of Initial (Date of Initial
Ended Ended Ended Ended Public Offering) Public Offering)
October 31, October 31, October 31, October 31, to October 31, to October 31,
1998 1997 1996 1995 1994 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 9.99 $ 9.79 $ 10.00 $ 9.41 $ 9.67 $ 10.11
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment
Operations:
Net investment income ................... 0.49 0.51 0.48 0.60 0.24 0.15
Net realized and change in unrealized
gain or loss on investments ......... 0.31 0.21 (0.13) 0.56 (0.24) 0.17
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 0.80 0.72 0.35 1.16 -- 0.32
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income .............. (0.50) (0.52) (0.56) (0.57) (0.26) (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ............ (0.50) (0.52) (0.56) (0.57) (0.26) (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 10.29 $ 9.99 $ 9.79 $ 10.00 $ 9.41 $ 10.29
====================================================================================================================================
Total Return ............................ 8.19% 7.67% 3.75% 12.60% (0.06)% 3.18%
Net assets, end of period (000's) ....... $ 875 $ 531 $ 526 $ 405 $ 151 $ 117
Ratio of net expenses to
average net assets .................. 1.03%(2) 1.45%(2) 1.45%(2) 1.51%(2) 1.28%(1)(2) 1.70%(1)(2)
Ratio of net investment income to
average net assets .................. 4.88% 5.16% 4.96% 6.02% 4.68%(1) 4.21%(1)
Ratio of expenses before
reimbursement and waiver to
average net assets .................. 1.84% 2.45% 2.32% 2.11% 2.11%(1) 2.51%(1)
Portfolio turnover rate ................. 181.08% 147.78% 50.48% 117.31% 43.63% 181.08%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
54
<PAGE>
<TABLE>
<CAPTION>
High Yield Money Market
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From Period From Period From
February 2, 1998 June 30, 1998 April 15, 1994 June 30, 1998
(Commencement (Date of Initial (Date of Initial (Date of Initial
of Operations) Public Offering) Year Ended Year Ended Year Ended Year Ended Public Offering) Public Offering)
to October 31, to October 31, October 31, October 31, October 31, October 31, to October 31, to October 31,
1998 1998 1998 1997 1996 1995 1994 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 10.07 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------------------------
0.58 0.24 0.05 0.05 0.05 0.06 0.03 0.02
(1.21) (1.27) -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(0.63) (1.03) 0.05 0.05 0.05 0.06 0.03 0.02
- ------------------------------------------------------------------------------------------------------------------------------------
(0.56) (0.24) (0.05) (0.05) (0.05) (0.06) (0.03) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
(0.56) (0.24) (0.05) (0.05) (0.05) (0.06) (0.03) (0.02)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 8.81 $ 8.80 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
====================================================================================================================================
(6.67)% (10.28)% 5.36% 5.49% 5.44% 5.95% 2.41% 1.75%
$ 225 $ 178 $161,456 $156,530 $119,849 $78,726 $47,350 $ 916
1.20%(1)(2) 1.94%(1)(2) 0.48%(2) 0.37%(2) 0.30%(2) 0.26%(2) 0.21%(1)(2) 0.48%(1)(2)
7.92%(1) 7.18%(1) 5.24% 5.31% 5.30% 5.79% 4.27%(1) 5.24%(1)
2.52%(1) 3.26%(1) 0.72% 0.91% 0.93% 0.87% 0.92%(1) 0.72%(1)
258.33% 258.33% -- -- -- -- -- --
</TABLE>
55
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
<TABLE>
<CAPTION>
Index Plus Bond Index Plus Large Cap
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From Period From Period From
February 4, 1998 June 30, 1998 February 3, 1997 June 30, 1998
(Commencement (Date of Initial (Date of Initial (Date of Initial
of Operations) Public Offering) Year Ended Public Offering) Public Offering)
to October 31, to October 31, October 31, to October 31, to October 31,
1998 1998 1998 1997 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $ 10.00 $ 10.01 $ 12.36 $ 10.57 $ 14.17
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income ....................... 0.38 0.16 0.09 0.02 0.01
Net realized and change in unrealized
gain or loss on investments ............. 0.14 0.11 2.56 1.77 (0.44)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ... 0.52 0.27 2.65 1.79 (0.43)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income .................. (0.38) (0.15) (0.09) -- --
From net realized gains on investments ...... -- -- (1.22) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ................ (0.38) (0.15) (1.31) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period .............. $ 10.14 $ 10.13 $ 13.70 $ 12.36 $ 13.74
====================================================================================================================================
Total Return ................................ 5.29% 2.75% 23.09% 16.93% (3.04)%
Net assets, end of period (000's) ........... $ 280 $ 118 $ 6,422 $ 1,833 $ 910
Ratio of net expenses to average
net assets .............................. 0.85%(1)(2) 1.35%(1)(2) 0.99%(2) 1.45%(1)(2) 1.43%(1)(2)
Ratio of net investment income to
average net assets ...................... 5.14%(1) 4.64%(1) 0.67% 0.16%(1) 0.23%(1)
Ratio of expenses before
reimbursement and waiver to average
net assets .............................. 1.67%(1) 2.17%(1) 1.46% 2.98%(1) 1.90%(1)
Portfolio turnover rate ..................... 20.86% 20.86% 124.16% 82.31% 124.16%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
56
<PAGE>
<TABLE>
<CAPTION>
Index Plus Mid Cap Index Plus Small Cap Ascent
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C Class A Class C
- -----------------------------------------------------------------------------------------------------------------------------------
Period From Period From Period From Period From Period From Period From
February 3, 1998 June 30, 1998 February 3, 1998 June 30, 1998 January 20, 1997 June 30, 1998
(Commencement (Date of Initial Commencement (Date of Initial (Date of Initial (Date of Initial
of Operations) Public Offering) of Operations) Public Offering) Year Ended Public Offering) Public Offering)
to October 31, to October 31, to October 31, to October 31, October 31, to October 31, to October 31,
1998 1998 1998 1998 1998 1997 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 10.92 $ 10.00 $ 10.62 $ 14.42 $ 12.50 $ 12.49
- -----------------------------------------------------------------------------------------------------------------------------------
0.02 (0.01) -- (0.02) 0.20 0.15 0.04
0.32 (0.58) (1.14) (1.76) (0.40) 1.77 (1.42)
- -----------------------------------------------------------------------------------------------------------------------------------
0.34 (0.59) (1.14) (1.78) (0.20) 1.92 (1.38)
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- (0.37) -- --
-- -- -- -- (2.76) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
-- -- -- -- (3.13) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
$ 10.34 $ 10.33 $ 8.86 $ 8.84 $ 11.09 $ 14.42 $ 11.11
===================================================================================================================================
3.40% (5.40)% (11.40)% (16.76)% (2.17)% 15.36% (11.05)%
$ 269 $ 100 $ 349 $ 155 $ 2,266 $ 886 $ 133
1.00%(1)(2) 1.50%(1)(2 ) 1.00%(1)(2) 1.50%(1)(2) 1.53%(2) 2.08%(1)(2) 2.23%(1)(2)
0.32%(1) (0.18)%(1) 0.00%(1) (0.50)%(1) 1.71% 1.11%(1) 1.01%(1)
2.76%(1) 3.26%(1) 2.88%(1) 3.38%(1) 1.72% 2.35%(1) 2.42%(1)
129.87% 129.87% 100.41% 100.41% 105.08% 162.80% 105.08%
</TABLE>
57
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
<TABLE>
<CAPTION>
Crossroads Legacy
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Class C Class A Class C
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From Period From Period From
January 20, 1997 June 30, 1998 January 20, 1997 June 30, 1998
(Date of Initial (Date of Initial (Date of Initial (Date of Initial
Year Ended Public Offering) Public Offering) Year Ended Public Offering) Public Offering)
October 31, to October 31, to October 31, October 31, to October 31, to October 31,
1998 1998 1998 1998 1997 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .... $ 13.22 $ 11.67 $ 12.18 $ 12.09 $ 11.01 $ 10.72
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income ................... 0.27 0.30 0.06 0.31 0.29 0.08
Net realized and change in unrealized
gain or loss on investments ......... (0.37) 1.25 (1.20) (0.06) 0.79 (0.62)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations (0.10) 1.55 (1.14) 0.25 1.08 (0.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income .............. (0.41) -- -- (0.57) -- --
From net realized gains on investments .. (1.70) -- -- (1.62) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ............ (2.11) -- -- (2.19) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period .......... $ 11.01 $ 13.22 $ 11.04 $ 10.15 $ 12.09 $ 10.18
====================================================================================================================================
Total Return ............................ (1.17)% 13.28% (9.36)% 2.29% 9.81% (5.04)%
Net assets, end of period (000's) ....... $ 2,105 $ 547 $ 158 $ 1,812 $ 481 $ 171
Ratio of net expenses to average
net assets .......................... 1.52%(2) 2.11%(1)(2) 2.24%(1)(2) 1.53%(2) 2.21%(1)(2) 2.24%(1)(2)
Ratio of net investment income to
average net assets .................. 2.33% 1.64%(1) 1.61%(1) 2.97% 2.39%(1) 2.26%(1)
Ratio of expenses before
reimbursement and waiver to average
net assets .......................... 1.68% 2.41%(1) 2.40%(1) 1.96% 2.50%(1) 2.67%(1)
Portfolio turnover rate ................. 115.65% 161.75% 115.65% 115.12% 158.71% 115.12%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
58
<PAGE>
Additional Information
The SAI, which is incorporated by reference into this Prospectus, contains
additional information about the Funds. The Funds' most recent annual and
semi-annual reports also contain information about the Funds' investments, as
well as a discussion of the market conditions and investment strategies that
significantly affected their performance during the past fiscal year.
You may request free of charge the current SAI or the most recent annual and
semi-annual reports, or other information about the Funds, by calling
1-800-367-7732 or writing to:
Aetna Series Fund, Inc.
10 State House Square
Hartford, Connecticut 06103-3602
The SEC also makes available to the public reports and information about the
Funds. Certain reports and information, including the SAI, are available on the
SEC's web site (http://www.sec.gov) or at the SEC's public reference room in
Washington, D.C. You may call 1-800-SEC-0330 to get information about the
operations of the public reference room or you may write to public reference
section, Washington, D.C. 20549-6009 to get information from the public
reference section. The public reference section will charge a duplicating fee
for copying and sending any information you request.
Investment Company Act File No. 811-6352.
59
<PAGE>
Aetna Series Fund, Inc.
Prospectus
Class I Shares
March 1, 1999
Capital Appreciation Funds
Aetna Growth Fund (Growth)
Aetna International Fund (International)
Aetna Mid Cap Fund (Mid Cap)
Aetna Small Company Fund (Small Company)
Aetna Value Opportunity Fund (Value Opportunity)
Growth & Income Funds
Aetna Balanced Fund (Balanced)
Aetna Growth and Income Fund (Growth and Income)
Aetna Real Estate Securities Fund (Real Estate)
Income Funds
Aetna Bond Fund (Bond Fund)
Aetna Government Fund
Aetna High Yield Fund (High Yield)
Aetna Money Market Fund (Money Market)
Index Plus Funds
Aetna Index Plus Bond Fund (Index Plus Bond)
Aetna Index Plus Large Cap Fund (Index Plus Large Cap)
Aetna Index Plus Mid Cap Fund (Index Plus Mid Cap)
Aetna Index Plus Small Cap Fund (Index Plus Small Cap)
Generation Funds
Aetna Ascent Fund (Ascent)
Aetna Crossroads Fund (Crossroads)
Aetna Legacy Fund (Legacy)
The Securities and Exchange Commission has not approved or disapproved these
securities or determined whether this prospectus is truthful or complete. Anyone
who represents to the contrary has committed a criminal offense.
This Prospectus is for investors purchasing or considering purchase of Class I
shares of one or more of the Funds. Only certain investors are eligible to
purchase Class I shares. All other investors may purchase Class A, Class B and
Class C shares. Investors who wish to purchase Class A, Class B or Class C
shares of the Funds may request a separate prospectus by calling 1-800-367-7732.
<PAGE>
<TABLE>
<S> <C>
Table of Contents
The Funds' Investments 3
Investment Objectives, Principal Investment Strategies and Risks,
Investment Performance 3
Fund Expenses 28
Other Considerations 30
Management of the Funds 31
Investing in the Funds 34
Opening an Account and Eligibility for Class I Shares 34
How to Buy Shares 34
How to Sell Shares 37
Timing of Requests 38
Other Information about Shareholder Accounts and Services 38
Dividends and Distributions 39
Tax Information 40
Private Account Performance 40
Financial Highlights 42
Additional Information 53
</TABLE>
2
<PAGE>
The Funds' Investments
Investment Objectives, Principal Investment Strategies and Risks, Investment
Performance
Below is a description of each Fund's investment objective, the principal
investment strategies employed on behalf of each Fund, and the principal risks
associated with investing in each Fund.
- --------------------------------------------------------------------------------
A bar chart for each Fund that has been in existence for at least one full
calendar year shows changes in the Fund's performance from year to year. The
fluctuation in returns illustrates each Fund's performance volatility. The chart
is accompanied by the Fund's best and worst quarterly returns throughout the
years noted in the bar chart.
- --------------------------------------------------------------------------------
A table for each Fund that has been in existence for at least one full calendar
year shows its average annual total return. The table also compares the Fund's
performance to the performance of one or more broad-based securities market
indices. Each index is a widely recognized, unmanaged index of securities. A
Fund's past performance is not necessarily an indication of how it will perform
in the future.
- --------------------------------------------------------------------------------
Additional information on the Funds' investment strategies and risks is
included, beginning on page 30.
- --------------------------------------------------------------------------------
Aeltus Investment Management, Inc. (Aeltus) serves as investment adviser of the
Funds.
- --------------------------------------------------------------------------------
Bradley, Foster & Sargent, Inc. (Bradley) serves as subadviser of Value
Opportunity.
- --------------------------------------------------------------------------------
Shares of the Funds will rise and fall in value and you could lose money by
investing in them. There is no guaranty the Funds will achieve their investment
objectives. Shares of the Funds are not bank deposits and are not guaranteed,
endorsed or insured by any financial institution, the FDIC or any other
government agency.
3
<PAGE>
Capital Appreciation Funds
Aetna Growth Fund (Growth)
Investment Objective 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.
Principal Investment Strategies Under normal market conditions, Growth invests
at least 65% of its total assets in common stocks.
In managing Growth, Aeltus:
* Tends to emphasize stocks of larger companies, although it may invest in
companies of any size.
* Uses internally developed quantitative computer models to evaluate the
financial characteristics (for example, earnings growth consistency, earnings
momentum, and price/earnings ratio) of approximately 1,000 companies. Aeltus
analyzes these characteristics in an attempt to identify companies it
believes have strong growth characteristics or demonstrate a positive trend
in earnings estimates, but whose full value is not reflected in the stock
price.
* Focuses on companies that it believes have strong, sustainable and improving
earnings growth, and established market positions in a particular industry.
Principal Risks The principal risks of investing in Growth are those generally
attributable to stock investing. They include sudden and unpredictable drops in
the value of the market as a whole and periods of lackluster or negative
performance.
Growth-oriented stocks typically sell at relatively high valuations as compared
to other types of stocks. If a growth stock does not exhibit the consistent
level of growth expected, its price may drop sharply. Historically,
growth-oriented stocks have been more volatile than value-oriented stocks.
4
<PAGE>
Aetna Growth Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
5.59% 34.30% 22.12% 22.75% 37.90%
</TABLE>
[Arrow Up] Best Quarter:
first quarter 1998, up 17.55%
[Arrow Down] Worst Quarter:
third quarter 1998, down 9.98%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class I 37.90% 24.06% 01/04/94
S&P 500 Index* 28.57% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical
risk of an investment in the Fund.
- ----------
* The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500
widely held stocks that assumes the reinvestment of all dividends, and is
considered to be representative of the stock market in general.
5
<PAGE>
Aetna International Fund
(International)
Investment Objective Seeks long-term capital growth primarily through investment
in a diversified portfolio of common stocks principally traded in countries
outside of North America. International will not target any given level of
current income.
Principal Investment Strategies Under normal market conditions, International
invests at least 65% of its total assets in securities principally traded in
three or more countries outside of North America. These securities may include
common stocks as well as securities convertible into common stocks.
In managing International, Aeltus:
* Diversifies the Fund's portfolio by investing in a mix of stocks that it
believes have the potential for long-term growth, as well as stocks that
appear to be trading below their real value.
* Allocates assets among several geographic regions and individual countries,
investing primarily in those areas that it believes have the greatest
potential for growth as well as stable exchange rates.
* Invests primarily in established foreign securities markets, although it may
invest in emerging markets as well.
* Typically invests in approximately 90 to 120 different securities at any one
time, and looks to allocate no more than 3% of the Fund's total assets to a
single security.
* Uses internally developed quantitative computer models to evaluate the
financial characteristics of over 2,000 companies. Aeltus analyzes cash
flows, earnings and dividends of each company, in an attempt to select
companies with long-term sustainable growth characteristics.
* Employs currency hedging strategies to protect the portfolio from adverse
effects on the U.S. dollar.
Principal Risks The principal risks of investing in International are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance.
Stocks of foreign companies present additional risks for U.S. investors,
including the following:
* Stocks of foreign companies tend to be less liquid and more volatile than
their U.S. counterparts.
* Accounting standards and market regulations tend to be less standardized in
certain foreign countries, and economic and political climates tend to be
less stable.
* Stocks of foreign companies may be denominated in foreign currency. Exchange
rate fluctuations may reduce or eliminate gains or create losses. A hedging
strategy adds to the Funds' expenses and may not perform as expected.
6
<PAGE>
Aetna International Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
-10.84% 30.37% 0.04% 6.98% 23.23% 15.91% 18.34%
</TABLE>
[Arrow Up] Best Quarter:
first quarter 1998, up 16.97%
[Arrow Down] Worst Quarter:
third quarter 1998, down 15.63%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class I 18.34% 12.59% 11.22% 01/03/92
MSCI EAFE Index* 20.33% 9.50% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical
risk of an investment in the Fund.
- ----------
* The Morgan Stanley Capital International-Europe, Australia and Far East Index
is a market value-weighted average of the performance of more than 900
securities listed on the stock market exchanges of countries in Europe,
Australia and the Far East.
7
<PAGE>
Aetna Mid Cap Fund
(Mid Cap)
Investment Objective Seeks growth of capital primarily through investment in a
diversified portfolio of common stocks and securities convertible into common
stocks of companies having medium market capitalizations.
Principal Investment Strategies Under normal market conditions, Mid Cap invests
at least 65% of its total assets in common stocks of medium capitalization
companies, defined as:
* The 1,000 largest U.S. companies (as measured by market capitalization),
excluding companies in the Standard & Poor's 500 Composite Index.
* All companies not included above that are included in the Standard & Poor's
MidCap 400 Index.
* Currently, companies falling into these categories have market
capitalizations of between $800 million and $20 billion.
In managing Mid Cap, Aeltus invests in stocks that it believes have the
potential for long-term growth, as well as those that appear to be trading below
their real value. Aeltus uses internally developed quantitative computer models
to evaluate the financial characteristics of companies. Aeltus analyzes these
characteristics in an attempt to identify companies whose full value is not
reflected in the stock price. These characteristics include a company's
potential for strong, sustainable earnings and for long-term profitability.
Principal Risks The principal risks of investing in Mid Cap are those generally
attributable to stock investing. These risks include sudden and unpredictable
drops in the value of the market as a whole and periods of lackluster or
negative performance. Stocks of medium-sized companies tend to be more volatile
and less liquid than stocks of larger companies.
- --------------------------------------------------------------------------------
Aetna Small Company Fund
(Small Company)
Investment Objective 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.
Principal Investment Strategies Under normal market conditions, Small Company
invests at least 65% of its total assets in common stocks of small-
capitalization companies, defined as:
* The 2,000 smallest of the 3,000 largest U.S. companies (as measured by market
capitalization).
* All companies not included above that are included in the Standard & Poor's
SmallCap 600 Index.
* Currently the largest company in this group has a market capitalization of
approximately $1.3 billion.
In managing Small Company, Aeltus:
* Invests in stocks that it believes have the potential for long-term growth,
as well as those that appear to be trading below their real value.
* Uses internally developed quantitative computer models to evaluate financial
characteristics (for example, changes in earnings, earnings estimates and
price momentum) of over 2,000 companies. Aeltus analyzes these
characteristics in an attempt to identify companies whose full value is not
reflected in the stock price.
* Considers the potential of each company to create or take advantage of unique
product opportunities, its potential to achieve long-term sustainable growth
and the quality of its management.
Principal Risks The principal risks of investing in Small Company are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance.
Other principal risks include:
* Stocks of smaller companies carry higher risks than stocks of larger
companies. This is because smaller companies may lack the management
experience, financial resources, product diversification, and competitive
strengths of larger companies.
* The frequency and volume of trading in small cap stocks may be substantially
less than stocks of larger companies. As a result, the stocks of smaller
companies may be subject to wider price fluctuations or may be less liquid.
* When selling a large quantity of a particular stock, the Fund may have to
sell at a discount from quoted prices or may have to make a series of small
sales over an extended period of time due to the more limited trading volume
of smaller company stocks.
* Stocks of smaller companies can be particularly sensitive to expected changes
in interest rates, borrowing costs and earnings.
8
<PAGE>
Aetna Small Company Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
1.30% 48.17% 13.62% 33.28% 1.27%
</TABLE>
[Arrow Up] Best Quarter:
third quarter 1997, up 18.49%
[Arrow Down] Worst Quarter:
third quarter 1998, down 18.17%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class I 1.27% 18.19% 01/04/94
Russell 2000 Index* -2.55% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* The Russell 2000 Index consists of the smallest 2,000 companies in the
Russell 3000 Index and represents approximately 10% of the Russell 3000 total
market capitalization. The Russell 2000 Index assumes reinvestment of all
dividends and is unmanaged.
9
<PAGE>
Aetna Value Opportunity Fund
(Value Opportunity)
Investment Objective Seeks growth of capital primarily through investment in a
diversified portfolio of common stocks and securities convertible into common
stock.
Principal Investment Strategies Under normal market conditions, Value
Opportunity invests at least 65% of its total assets in common stocks. In
managing Value Opportunity, Bradley tends to invest in larger companies it
believes are trading below their real value, although it may invest in companies
of any size. Bradley believes that Value Opportunity's investment objective can
best be achieved by investing in companies whose stock price has been
excessively discounted due to perceived problems. In searching for investments,
Bradley evaluates financial and other characteristics of companies, attempting
to find those companies that appear to possess a catalyst for positive change,
such as strong management, solid assets, or market position, rather than those
companies whose stocks are simply inexpensive. Bradley looks to sell a security
when company business fundamentals deviate from expectations or when stop-loss
levels are triggered.
Principal Risks The principal risks of investing in Value Opportunity are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance.
Stocks that appear to be undervalued may never appreciate to the extent
expected. Further, because the prices of value-oriented stocks tend to correlate
more closely with economic cycles than growth-oriented stocks, they are more
sensitive to changing economic conditions, such as changes in interest rates,
corporate earnings and industrial production.
Growth & Income Funds
Aetna Balanced Fund
(Balanced)
Investment Objective Seeks to maximize total return with reasonable safety of
principal by investing in a diversified portfolio of stocks, bonds and money
market instruments.
Principal Investment Strategies Under normal market conditions, Balanced
allocates its assets among the following asset classes:
* Equities, such as common and preferred stocks.
* Debt, such as bonds, mortgage-related and other asset-backed securities, U.S.
Government securities and money market instruments.
Aeltus typically maintains approximately 60% of Balanced's total assets in
equities and approximately 40% of its total assets in debt (including money
market instruments), although those percentages may vary from time to time
depending on Aeltus' view of the relative attractiveness of each asset class. In
making asset allocation decisions, Aeltus uses current market statistics and
economic indicators to attempt to forecast returns for the equity and debt
sectors of the securities market. Within each asset class, Aeltus uses
quantitative computer models to evaluate financial criteria in an attempt to
identify those issuers whose full value is not reflected in their equity or debt
securities. Aeltus generally does not attempt to respond to short-term swings
in the market by quickly changing the characteristics of the Fund's portfolio.
In managing the equity component of Balanced, Aeltus typically emphasizes
investment in stocks of larger companies, although it may invest in stocks of
smaller companies to a significant extent.
In managing the debt component of Balanced, Aeltus looks to select investments
with the opportunity to enhance the portfolio's yield and total return, focusing
on performance over the long term. The Fund may invest up to 15% of its total
assets in high-yield, high-risk bonds (high-yield bonds). High-yield bonds are
fixed income securities rated below BBB- by Standard & Poor's Corporation (S&P)
or Baa3 by Moody's Investors Services, Inc. (Moody's) or, if unrated, considered
by Aeltus to be of comparable quality.
Principal Risks The principal risks of investing in Balanced are those generally
attributable to stock and bond investing. The success of the Fund's strategy
depends on Aeltus' skill in allocating Fund assets between equities and debt and
in choosing investments within those categories. Because the Fund's assets are
allocated between equities and fixed income securities, Balanced may
underperform stock funds when stocks are in favor and underperform bond funds
when bonds are in favor.
10
<PAGE>
Risks attributable to stock investing include sudden and unpredictable drops in
the value of the market as a whole and periods of lackluster or negative
performance. Further, stocks of smaller companies tend to be less liquid and
more volatile than stocks of larger companies. Stocks of smaller companies also
can be particularly sensitive to expected changes in interest rates, borrowing
costs and earnings.
The Fund's fixed-income investments are subject to the risk that interest rates
will rise, which generally causes bond prices to fall. Also, economic and market
conditions may cause issuers to default or go bankrupt. In either case, the
price of Fund shares may fall. The value of high-yield bonds are even more
sensitive to economic and market conditions than other bonds.
The prices of mortgage-related securities, in addition to being sensitive to
changes in interest rates, also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
Aetna Balanced Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
6.68% 9.73% -1.73% 26.18% 15.34% 21.09% 16.52%
</TABLE>
[Arrow Up] Best Quarter:
fourth quarter 1998, up 12.85%
[Arrow Down] Worst Quarter:
third quarter 1998, down 6.64%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class I 16.52% 15.08% 13.08% 01/03/92
S&P 500 Index* 28.57% 24.06% N/A
LBAB** 8.69% 7.27% N/A
60% S&P 500 Index/
40% LBAB 20.98% 17.32% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500
widely held stocks that assumes the reinvestment of all dividends and is
considered to be representative of the stock market in general.
** The Lehman Brothers Aggregate Bond Index (LBAB) is an unmanaged index of
corporate, government and mortgage bonds.
11
<PAGE>
Aetna Growth and Income Fund
(Growth and Income)
Investment Objective 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.
Principal Investment Strategies Under normal market conditions, Growth and
Income invests at least 65% of its total assets in common stocks that Aeltus
believes have significant potential for capital or income growth.
In managing Growth and Income, Aeltus:
* Tends to emphasize stocks of larger companies.
* Also invests the Fund's assets across other asset classes (including stocks
of small and medium-sized companies, international stocks, real estate
securities and fixed income securities).
* Uses internally developed quantitative computer models to determine the
relative attractiveness of each asset class and to evaluate company financial
characteristics (for example, price to earnings ratios, growth rates and
earnings estimates) to select securities within each class. In analyzing
these characteristics, Aeltus attempts to identify positive earnings momentum
and valuation characteristics in selecting securities whose full value is not
reflected in their price.
Principal Risks The principal risks of investing in Growth and Income are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance. The success of the Fund's strategy depends
significantly on Aeltus' skill in allocating assets and in choosing investments
within each asset class.
Growth-oriented stocks typically sell at relatively high valuations as compared
to other types of stocks. If a growth stock does not exhibit the level of growth
expected, its price may drop sharply. Historically, growth-oriented stocks have
been more volatile than value-oriented stocks.
Although Aeltus emphasizes large cap stocks, the Fund is more diversified across
asset classes than most other funds with a similar investment objective.
Therefore, it may not perform as well as those funds when large cap stocks are
in favor.
Aetna Growth and Income Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
7.81% 6.58% -0.34% 31.49% 27.83% 31.51% 14.88%
</TABLE>
[Up Arrow] Best Quarter:
fourth quarter 1998, up 19.37%
[Down Arrow] Worst Quarter:
third quarter 1998, down 14.19%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class I 14.88% 20.41% 16.49% 01/03/92
S&P 500 Index* 28.57% 24.06% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500
widely held stocks that assumes the reinvestment of all dividends and is
considered to be representative of the stock market in general.
12
<PAGE>
Aetna Real Estate Securities Fund
(Real Estate)
Investment Objective Seeks maximum total return primarily through investment in
a diversified portfolio of equity securities of real estate companies, the
majority of which are real estate investment trusts (REITs).
Principal Investment Strategies Under normal market conditions, Real Estate
invests at least 65% of its total assets in stocks, convertible securities and
preferred stocks of companies principally engaged in the real estate industry.
These companies may invest in, among other things, shopping malls, healthcare
facilities, office parks and apartment communities, or may provide real estate
management and development services.
In selecting investments from a universe of equity securities of REITs and real
estate operating companies, Aeltus uses internally developed quantitative models
to forecast the returns of each security. Aeltus evaluates real estate companies
based on their earnings history and long-term growth prospects, analyst
estimates of future earnings, safety and growth in dividends, balance sheet
strength and quality of management. Aeltus also considers whether the securities
appear to be trading below their real value. Aeltus allocates assets among
property types and economic and geographic regions. Aeltus attempts to construct
Real Estate's portfolio so that the overall level of risk is not in excess of
its benchmark index, the National Association of Real Estate Investment Trusts
Equity Index.
Principal Risks Concentrating in stocks of real estate-related companies
presents certain risks that are more closely associated with investing in real
estate directly than with investing in the stock market generally. Those risks
include:
* Periodic declines in the value of real estate, generally, or in the rents and
other income generated by real estate.
* Periodic over-building, which creates gluts in the market, as well as changes
in laws (such as zoning laws) that impair the property rights of real estate
owners.
* Adverse developments in the real estate industry, which may have a greater
impact on this Fund than a fund that is more broadly diversified.
The performance of the Fund also may be adversely affected by sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative stock market performance. Although Real Estate is subject
to the risks generally attributable to stock investing, because the Fund has
concentrated its assets in one industry it may be subject to more abrupt swings
in value than would a fund that does not concentrate its assets in one industry.
13
<PAGE>
Income Funds
Aetna Bond Fund (Bond Fund)
Investment Objective Seeks to provide as high a level of total return as is
consistent with reasonable risk, primarily through investment in a diversified
portfolio of investment-grade corporate bonds, and debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
Principal Investment Strategies Under normal market conditions, Bond Fund
invests at least 65% of its total assets in:
* High-grade corporate bonds.
* Mortgage-related and other asset-backed securities.
* Securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
High-grade securities are rated at least A by S&P or Moody's, or if unrated,
considered by Aeltus to be of comparable quality. The Fund may also invest up to
15% of its total assets in high-yield bonds, and up to 25% of its total assets
in foreign debt securities.
In managing Bond Fund, Aeltus:
* Looks to construct an intermediate-term (generally consisting of securities
with an average maturity of between 5-10 years), high-quality portfolio by
selecting investments with the opportunity to enhance the portfolio's overall
total return and yield, while managing volatility.
* Aeltus uses quantitative computer models to identify issuers whose full value
is not reflected in their security prices.
Principal Risks The principal risks of investing in Bond Fund are those
generally attributable to debt investing, including increases in interest rates
and loss of principal. Generally, when interest rates rise, bond prices fall.
Bonds with longer maturities tend to be more sensitive to changes in interest
rates.
For all bonds there is a risk that the issuer will default. High-yield bonds
generally are more susceptible to the risk of default than higher rated bonds.
The prices of mortgage-related securities, in addition to being sensitive to
changes in interest rates, also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
Foreign securities present additional risks. Some foreign securities tend to be
less liquid and more volatile than their U.S. counterparts. In addition,
accounting standards and market regualtions tend to be less standardized. These
risks are usually higher for securities of companies in emerging markets.
Finally, securities of foreign companies may be denominated in foreign currency.
Exchange rate fluctuations may reduce or eliminate gains or create losses.
14
<PAGE>
Aetna Bond Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
7.22% 10.20% -3.26% 17.03% 3.39% 7.91% 8.45%
</TABLE>
[Arrow Up] Best Quarter:
second quarter 1995, up 5.78%
[Arrow Down] Worst Quarter:
first quarter 1994, down 2.39%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class I 8.45% 6.49% 7.13% 01/03/92
LBAB* 8.69% 7.27% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* The Lehman Brothers Aggregate Bond Index (LBAB) is an unmanaged index of
corporate, government and mortgage bonds.
15
<PAGE>
Aetna Government Fund
Investment Objective 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.
Principal Investment Strategies Under normal market conditions, Aetna Government
Fund invests at least 65% of its total assets in U.S. Government securities.
U.S. Government securities include securities issued by the U.S. Treasury,
individual government agencies and certain organizations created through federal
legislation. Securities issued by the U.S. Treasury are backed by the full faith
and credit of the federal government, the strongest form of credit backing in
the U.S. Securities issued by individual agencies and organizations may be
backed by the full faith and credit of the federal government as to principal or
interest but are not direct obligations of the U.S. Treasury. Government
securities also include certain mortgage-related securities that are sponsored
by a U.S. Government agency or organization and are not direct obligations of
the U.S. Government.
In managing Aetna Government Fund, Aeltus:
* Looks to construct an intermediate-term, high-quality portfolio by selecting
investments with the potential to enhance the portfolio's overall yield and
total return.
* Uses quantitative computer models to identify attractive investments within
the U.S. Government securities markets. As a result, Aetna Government Fund
may, at times, emphasize one type of U.S. Government security rather than
another.
Principal Risks The principal risks of investing in Aetna Government Fund are
those generally attributable to bond investing, including increases in interest
rates. Generally, when interest rates rise, bond prices fall. Bonds with longer
maturities tend to be more sensitive to changes in interest rates.
In addition to being sensitive to changes in interest rates, the prices of
mortgage-related securities also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
16
<PAGE>
Aetna Government Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
-1.89% 16.00% 2.29% 9.32% 7.72%
</TABLE>
[Arrow Up] Best Quarter:
second quarter 1995, up 5.12%
[Arrow Down] Worst Quarter:
first quarter 1996, down 1.82%
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
Class I 7.72% 6.53% 01/04/94
Lehman Brothers Intermediate
Government Index* 8.49% N/A
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* The Lehman Brothers Intermediate Government Bond Index, an unmanaged index,
includes those bonds found in the Lehman Brothers Government Bond Index that
have a maturity of one to 9.99 years.
17
<PAGE>
Aetna High Yield Fund
(High Yield)
Investment Objective Seeks high current income and growth of capital primarily
through investment in a diversified portfolio of fixed-income securities rated
lower than BBB- by S&P or lower than Baa3 by Moody's.
Principal Investment Strategies Under normal market conditions, High Yield
invests at least 65% of its total assets in high-yield bonds. High-yield bonds
are bonds rated below investment grade in terms of quality, and may include
bonds of companies in default or bankruptcy.
In managing High Yield, Aeltus:
* Looks to meet the Fund's objective and reduce volatility by constructing a
diversified portfolio consisting of securities with varying maturities and
credit ratings. Aeltus, however, attempts to look beyond credit ratings to
select investments that it believes offer opportunities for high income,
growth and credit improvement.
* Uses a quantitative process for evaluating the financial criteria of issuers,
such as cash flow and profitability.
* Evaluates other, less quantitative factors, such as market share, strength of
management and management's equity stake in the company.
Principal Risks When the economy weakens, cash flows weaken, making it more
difficult for issuers to pay principal and interest. For all bonds, there is a
risk that an issuer will default. This risk is even greater with high-yield
bonds. Moreover, high-yield bonds, as a group, often decline in value when the
market anticipates or experiences a large number of issuers defaulting or
declaring bankruptcy.
Additional principal risks include:
* The performance of High Yield may be affected by weak equity markets, when
issuers of high-yield bonds generally find it difficult to reduce debt by
replacing debt with equity.
* Generally, when interest rates rise, bond prices fall, which may cause the
value of the Fund's portfolio securities to fall as well.
- --------------------------------------------------------------------------------
Aetna Money Market Fund
(Money Market)
Investment Objective Seeks to provide high current return, consistent with
preservation of capital and liquidity, through investment in high-quality money
market instruments.
Principal Investment Strategies Money Market invests in a diversified portfolio
of high-quality fixed income securities denominated in U.S. dollars, with short
remaining maturities. These securities include U.S. Government securities (such
as U.S. Treasury bills and securities issued or sponsored by U.S. government
agencies), corporate debt securities, finance company commercial paper,
asset-backed securities, and certain obligations of U.S. and foreign banks, each
of which must be highly rated by independent rating agencies. Money Market
maintains a dollar-weighted average portfolio maturity of 90 days or less.
Principal Risks Although Money Market seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
Money Market. An investment in Money Market is not insured or guaranteed by the
FDIC or any other government agency. A weak economy, strong equity markets and
changes by the Federal Reserve in its monetary policies all could affect
short-term interest rates and, therefore, the yield of Money Market's shares.
18
<PAGE>
Aetna Money Market Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
4.04% 3.29% 4.29% 5.99% 5.41% 5.45% 5.32%
</TABLE>
[Arrow Up] Best Quarter:
second quarter 1995, up 1.51%
[Arrow Down] Worst Quarter:
second quarter 1993, up 0.80%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year 5 Years Since Inception Inception Date
<S> <C> <C> <C> <C>
Class I 5.32% 5.29% 4.83% 01/03/92
IBC Index* 4.92% 4.75% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* IBC's Money Funds Report Average/All Taxable Index (IBC) is an average of the
returns of over 250 money market mutual funds surveyed each month by IBC.
To obtain current yield information, please contact 1-800-367-7732.
19
<PAGE>
Index Plus Funds
Aetna Index Plus Bond Fund
(Index Plus Bond)
Investment Objective Seeks maximum total return, consistent with preservation of
capital, primarily through investment in a diversified portfolio of fixed-income
securities, which will be chosen to substantially replicate the characteristics
of the Lehman Brothers Aggregate Bond Index (LBAB), an unmanaged index comprised
of approximately 6,900 securities.
Principal Investment Strategies Index Plus Bond invests at least 90% of its
total assets in bonds, including U.S. Treasuries, corporate bonds and
mortgage-related securities.
In managing Index Plus Bond, Aeltus:
* Attempts to achieve a total return which, before deducting Fund expenses,
exceeds the LBAB.
* Allocates assets among various sectors, as well as among individual
securities, that it believes will outperform those in the LBAB, while
underweighting those sectors and securities it believes will underperform.
* In determining which bonds to purchase, evaluates various criteria, such as
the financial strength of the issuer and the issuer's potential for strong,
sustained earnings growth as well as the potential for interest rates to rise
or fall.
Aeltus expects that there will be a close correlation between the performance of
Index Plus Bond and that of the LBAB in both rising and falling markets.
Principal Risks The principal risks of investing in Index Plus Bond are those
generally attributable to bond investing. Generally, when interest rates rise,
bond prices fall. Bonds with longer maturities tend to be more sensitive to
changes in interest rates. For all bonds there is a risk that an issuer will
default.
The prices of mortgage-related securities, in addition to being sensitive to
changes in interest rates, also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
The success of the Fund's strategy depends significantly on Aeltus' skill in
choosing investments, and in determining which sectors or securities to
overweight, underweight or avoid altogether.
- --------------------------------------------------------------------------------
Aetna Index Plus Large Cap Fund
(Index Plus Large Cap)
Investment Objective Seeks to outperform the total return performance of the
Standard & Poor's 500 Composite Index (S&P 500), while maintaining a market
level of risk.
Principal Investment Strategies Index Plus Large Cap invests at least 80% of its
net assets in stocks included in the S&P 500 (other than Aetna Inc. common
stock). The S&P 500 is a stock market index comprised of common stocks of 500 of
the largest companies in the U.S. selected by Standard & Poor's Corporation.
In managing Index Plus Large Cap, Aeltus attempts to achieve the Fund's
objective by overweighting those stocks in the S&P 500 that Aeltus believes will
outperform the index, and underweighting (or avoiding altogether) those stocks
that Aeltus believes will underperform the index. In determining stock
weightings, Aeltus uses internally developed quantitative computer models to
evaluate various criteria, such as the financial strength of each company and
its potential for strong, sustained earnings growth. At any one time, Aeltus
generally includes in Index Plus Large Cap portfolio approximately 400 of the
stocks included in the S&P 500. Although the Fund will not hold all the stocks
in the S&P 500, Aeltus expects that there will be a close correlation between
the performance of Index Plus Large Cap and that of the S&P 500 in both rising
and falling markets.
Principal Risks The principal risks of investing in Index Plus Large Cap are
those generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance. The success of the Fund's strategy depends
significantly on Aeltus' skill in determining which securities to overweight,
underweight or avoid altogether.
20
<PAGE>
Aetna Index plus Large Cap Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1997 1998
<S> <C> <C>
33.93% 32.50%
</TABLE>
[Arrow Up] Best Quarter:
fourth quarter 1998, up 22.49%
[Arrow Down] Worst Quarter:
third quarter 1998, down 9.00%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class I 32.50% 31.41% 12/10/96
S&P 500 Index* 28.57% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500
widely held stocks that assumes the reinvestment of all dividends, and is
considered to be representative of the stock market in general.
21
<PAGE>
Aetna Index Plus Mid Cap Fund
(Index Plus Mid Cap)
Investment Objective Seeks to outperform the total return performance of the
Standard & Poor's MidCap 400 Index (S&P 400), while maintaining a market level
of risk.
Principal Investment Strategies Index Plus Mid Cap invests at least 80% of its
net assets in stocks included in the S&P 400. The S&P 400 is a stock market
index comprised of common stocks of 400 mid-capitalization companies in the U.S.
selected by Standard & Poor's Corporation.
In managing Index Plus Mid Cap, Aeltus attempts to achieve the Fund's objective
by overweighting those stocks in the S&P 400 that Aeltus believes will
outperform the index, and underweighting (or avoiding altogether) those stocks
that Aeltus believes will underperform the index. In determining stock
weightings, Aeltus uses internally developed quantitative computer models to
evaluate various criteria, such as the financial strength of each issuer and its
potential for strong, sustained earnings growth. Although the Fund will not hold
all of the stocks in the S&P 400, Aeltus expects that there will be a close
correlation between the performance of Index Plus Mid Cap and that of the S&P
400 in both rising and falling markets.
Principal Risks The principal risks of investing in Index Plus Mid Cap are those
generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance. In addition, stocks of medium sized
companies tend to be more volatile and less liquid than stocks of larger
companies.
The success of the Fund's strategy depends significantly on Aeltus' skill in
determining which securities to overweight, underweight or avoid altogether.
Aetna Index Plus Small Cap Fund
(Index Plus Small Cap)
Investment Objective Seeks to outperform the total return performance of the
Standard & Poor's SmallCap 600 Index (S&P 600), while maintaining a market level
of risk.
Principal Investment Strategies Index Plus Small Cap invests at least 80% of its
net assets in stocks included in the S&P 600. The S&P 600 is a stock market
index comprised of common stocks of 600 small-capitalization companies in the
U.S. selected by Standard & Poor's Corporation.
In managing Index Plus Small Cap, Aeltus attempts to achieve the Fund's
objective by overweighting those stocks in the S&P 600 that Aeltus believes will
outperform the index, and underweighting (or avoiding altogether) those stocks
that Aeltus believes will underperform the index. In determining stock
weightings, Aeltus uses internally developed quantitative computer models to
evaluate various criteria, such as the financial strength of each issuer and its
potential for strong, sustained earnings growth. Although the Fund will not hold
all of the stocks in the S&P 600, Aeltus expects that there will be a close
correlation between the performance of Index Plus Small Cap and that of the S&P
600 in both rising and falling markets.
Principal Risks The principal risks of investing in Index Plus Small Cap are
those generally attributable to stock investing. These risks include sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster or negative performance.
Other principal risks include:
* Stocks of smaller companies carry higher risks than stocks of larger
companies because smaller companies may lack the management experience,
financial resources, product diversification and competitive strengths of
larger companies.
* The frequency and volume of trading in small cap stocks may be substantially
less than stocks of larger companies. As a result, the stocks of smaller
companies may be subject to wider price fluctuations.
* When selling of a large quantity of a particular stock, the Fund may have to
sell at a discount from quoted prices or may have to make a series of small
sales over an extended period of time due to the more limited trading volume
of smaller company stocks.
* Stocks of smaller companies tend to be more volatile than stocks of larger
companies and can be particularly sensitive to expected changes in interest
rates, borrowing costs and earnings.
Finally, the success of the Fund's strategy depends significantly on Aeltus'
skill in determining which securities to overweight, underweight or avoid
altogether.
22
<PAGE>
Generation Funds
Aetna Ascent Fund
(Ascent)
Aetna Crossroads Fund
(Crossroads)
Aetna Legacy Fund
(Legacy)
Investment Objectives Ascent seeks to provide capital appreciation.
Crossroads seeks to provide total return (i.e., income and capital appreciation,
both realized and unrealized).
Legacy seeks to provide total return consistent with preservation of capital.
Principal Investment Strategies Ascent, Crossroads and Legacy are asset
allocation funds that have been designed for investors with different investment
goals:
* Ascent is managed for investors seeking capital appreciation who generally
have an investment horizon exceeding 15 years and who have a high level of
risk tolerance.
* Crossroads is managed for investors seeking a balance between income and
capital appreciation who generally have an investment horizon exceeding 10
years and who have a moderate level of risk tolerance.
* Legacy is managed for investors primarily seeking total return consistent
with capital preservation who generally have an investment horizon exceeding
5 years and who have a low level of risk tolerance.
Under normal market conditions, Aeltus allocates the assets of each Generation
Fund, in varying degrees, among several classes of equities, fixed-income
securities (including up to 15% in high-yield bonds) and money market
instruments. To remain consistent with each Generation Fund's investment
objective and intended level of risk tolerance, Aeltus has instituted both a
benchmark percentage allocation and a Fund level range allocation for each
asset class. The benchmark percentage for each asset class assumes neutral
market and economic conditions. The Fund level range allows Aeltus to vary the
securities in each Fund and take advantage of opportunities as market and
economic conditions change. Aeltus does not attempt to respond to short-term
swings in the market by quickly changing the characteristics of the Generation
Funds' portfolios.
The Generation Funds' benchmarks and ranges are described on the following page.
The asset allocation limits apply at the time of purchase of a particular
security.
23
<PAGE>
<TABLE>
<CAPTION>
Asset Class
Ascent Crossroads(1) Legacy(2) Comparative Index
Equities
<S> <C> <C> <C> <C>
Large Capitalization Stocks
Range 0-60% 0-45% 0-30% S&P 500 Index
Benchmark 20% 15% 10%
Small-/Mid-Capitalization Stocks
Range 0-40% 0-30% 0-20% Russell 2500 Index
Benchmark 20% 15% 10%
International Stocks Morgan Stanley Capital
Range 0-40% 0-30% 0-20% International Europe,
Benchmark 20% 15% 10% Australia and Far East Index
Real Estate Stocks National Association of
Range 0-40% 0-30% 0-20% Real Estate Investment Trusts
Benchmark 20% 15% 10% Equity Index
Fixed Income
U.S. Dollar Bonds
Range 0-30% 0-70% 0-100% Salomon Brothers Broad
Benchmark 10% 25% 40% Investment Grade Index
International Bonds
Range 0-20% 0-20% 0-20% Salomon Brothers Non-U.S.
Benchmark 10% 10% 10% World Government Bond Index
Money Market Instruments
Range 0-30% 0-30% 0-30% 91-Day U.S. Treasury Bill Rate
Benchmark 0% 5% 10%
</TABLE>
- ----------
(1) Crossroads will invest no more than 60% of its assets in any combination of
the following asset classes: small-/mid-capitalization stocks, high-yield
bonds, international stocks and international fixed-income securities.
(2) Legacy will invest no more than 35% of its assets in any combination of the
following asset classes: small-/mid-capitalization stocks, high-yield
bonds, international stocks and international fixed-income securities.
24
<PAGE>
Each Generation Fund's asset allocation may vary from the benchmark allocation
(within the permissible range) based on Aeltus' ongoing evaluation of the
expected returns and risks of each asset class relative to other classes. Among
the criteria Aeltus evaluates to determine allocations are economic and market
conditions, including changes in circumstances with respect to particular asset
classes, geographic regions, industries or issuers and interest rate movements.
In selecting individual portfolio securities, Aeltus considers such factors as:
* Expected dividend yields and total returns.
* Bond yields.
* Price-to-earnings ratios.
Principal Risks The success of each Generation Fund's strategy depends
significantly on Aeltus' skill in choosing investments and in allocating assets
among the different investment classes.
In addition, each asset type has risks that are somewhat unique, as described
below. The performance of each Generation Fund will be affected by these risks
to a greater or lesser extent depending on the size of the allocation. The
principal risks of investing in each Generation Fund are those generally
attributable to stock and bond investing.
For stock investments, those risks include sudden and unpredictable drops in the
value of the market as a whole and periods of lackluster or negative
performance. Stocks of smaller companies tend to be less liquid and more
volatile than stocks of larger companies, and can be particularly sensitive to
expected changes in interest rates, borrowing costs and earnings.
The risks associated with real estate securities include periodic declines in
the value of real estate, generally, or in the rents and other income generated
by real estate caused by such factors as periodic over-building.
For bonds, generally, when interest rates rise, bond prices fall. Also, economic
and market conditions may cause issuers to default or go bankrupt. The value of
high-yield bonds are even more sensitive to economic and market conditions than
other bonds.
The prices of mortgage-related securities, in addition to being sensitive to
changes in interest rates, also are sensitive to changes in the prepayment
patterns on the underlying instruments. If the principal on the underlying
mortgage notes is repaid faster than anticipated, which typically occurs in
times of low or declining interest rates, the price of the mortgage-related
security may fall.
Foreign securities present additional risks. Some foreign securities tend to be
less liquid and more volatile than their U.S. counterparts. In addition,
accounting standards and market regulations tend to be less standardized. These
risks are usually higher for securities of companies in emerging markets.
Finally, securities of foreign companies may be denominated in foreign currency.
Exchange rate fluctuations may reduce or eliminate gains or create losses.
25
<PAGE>
Aetna Ascent Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1995 1996 1997 1998
<S> <C> <C> <C> <C>
23.62% 23.17% 19.38% 4.54%
</TABLE>
[Arrow Up] Best Quarter:
second quarter 1997, up 10.57%
[Arrow Down] Worst Quarter:
third quarter 1998, down 12.89%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class I 4.54% 17.46% 01/04/95
Russell 3000 Index* 24.14% N/A
Ascent Composite*** 7.93% N/A
</TABLE>
Aetna Crossroads Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1995 1996 1997 1998
<S> <C> <C> <C> <C>
21.05% 18.59% 16.95% 4.11%
</TABLE>
[Arrow Up] Best Quarter:
second quarter 1997, up 8.71%
[Arrow Down] Worst Quarter:
third quarter 1998, down 10.13%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class I 4.11% 15.02% 01/04/95
Saly BIG Index** 8.72% N/A
Crossroads Composite*** 8.42% N/A
</TABLE>
26
<PAGE>
Aetna Legacy Fund Investment Performance
<TABLE>
<CAPTION>
Years Ended December 31,
Year-by-Year Total Return 1995 1996 1997 1998
<S> <C> <C> <C> <C>
18.90% 14.41% 12.52% 6.28%
</TABLE>
[Arrow Up] Best Quarter:
second quarter 1997, up 6.67%
[Arrow Down] Worst Quarter:
third quarter 1998, down 5.67%
<TABLE>
<CAPTION>
As of December 31, 1998
Average Annual Total Return 1 Year Since Inception Inception Date
<S> <C> <C> <C>
Class I 6.28% 12.97% 01/04/95
Saly BIG Index** 8.72% N/A
Legacy Composite*** 8.74% N/A
</TABLE>
The performance table and bar chart provide an indication of the historical risk
of an investment in the Fund.
- ----------
* The Russell 300 Index measures the performance of the 3,000 largest US
companies based on total market capitalization, which represents
approximately 98% of the investable US equity market.
** The Salomon Brothers Broad Investment-Grade Bond Index (Saly BIG Index) is a
market-weighted index that contains approximately 4,700 individually priced
investment-grade bonds. The index includes US Treasury/agency issues,
mortgage passthrough securities, and corporate issues.
*** The Ascent Composite, Crossroads Composite and Legacy Composite are each
comprised of the seven stock and bond indices listed below in weights that
correspond to the particular benchmark weights for each Fund.
<TABLE>
<CAPTION>
Asset Class Benchmark Index
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Large Cap Stocks The Standard & Poor's 500 Index is a value-weighted, unmanaged index of 500 widely held stocks that
assumes the reinvestment of all dividends, and is considered to be representative of the stock
market in general.
Small-/Mid-Cap Stocks The Russell 2500 Index consists of the smallest 500 securities in the Russell 1000 Index and all
2,000 securities in the Russell 2000 Index. Each of these indices assumes reinvestment of all
dividends and is unmanaged.
International Stocks The Morgan Stanley Capital International-Europe, Australia, Far East Index is an unmanaged, market
value-weighted average of the performance of more than 900 securities listed on the stock exchange
of countries in Europe, Australia and the Far East.
Real Estate Stocks The National Association of Real Estate Investment Trusts Equity Index is an unmanaged,
market-weighted average of the performance of tax-qualified real estate investment trusts listed on
the New York Stock Exchange, American Stock Exchange and the NASDAQ National Market System.
U.S. Dollar Bonds Salomon Brothers Broad Investment-Grade Bond Index is an unmanaged, market-weighted index that
contains approximately 4,700 individually priced investment-grade bonds rated BBB or better. The
index includes U.S. Treasury/Agency issues, mortgage pass-through securities and corporate issues.
International Bonds The Salomon Brothers Non-U.S. World Government Bond Index serves as an unmanaged benchmark to
evaluate the performance of government bonds with a maturity of one year or greater in the
following 12 countries: Japan, United Kingdom; Germany; France; Canada; the Netherlands; Australia;
Denmark, Italy, Belgium, Spain and Sweden.
Cash Equivalents Three-month Treasury bills are government-backed short-term investments considered to be risk-free,
and equivalent to cash because their maturity is only three months.
</TABLE>
27
<PAGE>
Fund Expenses
The following tables describe Fund expenses. Annual Fund Operating Expenses are
deducted from Fund assets every year, and are thus paid indirectly by all
shareholders.
Class I Shareholder Fees
There are no sales charges deducted on initial purchases of Class I shares, no
deferred sales charges applied on redemptions, no sales charges applied to
dividend reinvestments, and no exchange fees.
Class I Shares
Annual Fund Operating Expenses(1)
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Distribution Total Fee Waiver/
Management (12b-1) Operating Expense Net
Fee Fees Other Expenses Expenses Reimbursement Expenses
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Growth 0.700% 0.00% 0.300% 1.00% 0.00% 1.00%
International 0.850% 0.00% 0.820% 1.67% 0.32% 1.35%
Mid Cap 0.750% 0.00% 2.840% 3.59% 2.44% 1.15%
Small Company 0.850% 0.00% 0.580% 1.43% 0.18% 1.25%
Value Opportunity 0.700% 0.00% 2.710% 3.41% 2.31% 1.10%
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced 0.800% 0.00% 0.320% 1.12% 0.00% 1.12%
Growth and Income 0.625% 0.00% 0.255% 0.88% 0.00% 0.88%
Real Estate 0.800% 0.00% 2.090% 2.89% 1.59% 1.30%
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund 0.500% 0.00% 0.470% 0.97% 0.22% 0.75%
Aetna Government Fund 0.500% 0.00% 1.010% 1.51% 0.81% 0.70%
High Yield 0.650% 0.00% 1.620% 2.27% 1.32% 0.95%
Money Market 0.400% 0.00% 0.320% 0.72% 0.22% 0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 0.350% 0.00% 1.070% 1.42% 0.82% 0.60%
Index Plus Large Cap 0.450% 0.00% 0.720% 1.17% 0.47% 0.70%
Index Plus Mid Cap 0.450% 0.00% 2.060% 2.51% 1.76% 0.75%
Index Plus Small Cap 0.450% 0.00% 2.180% 2.63% 1.88% 0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Ascent 0.800% 0.00% 0.630% 1.43% 0.23% 1.20%
Crossroads 0.800% 0.00% 0.600% 1.40% 0.20% 1.20%
Legacy 0.800% 0.00% 0.870% 1.67% 0.47% 1.20%
</TABLE>
(1) Aeltus is contractually obligated through December 31, 1999 to waive all or
a portion of its investment advisory fee and/or its administrative services
fee for certain Funds and/or to reimburse a portion of those Funds' other
expenses in order to ensure that the Fund's total operating expenses do not
exceed the percentage of the Fund's average daily net assets reflected in
the table under Net Expenses. Fee waiver/expense reimbursement obligations
apply to each Fund except Growth, Balanced, and Growth and Income. An
administrative services fee of 0.10% is included in Other Expenses.
The expenses shown above are based on the year ended October 31, 1998, and have
been restated to reflect changes in certain contractual arrangements. Prior to
February 1998, Class I shares were assessed an administrative services fee of
0.25%.
28
<PAGE>
Class I Shares Example
The following example is designed to help you compare the costs of investing
in the Funds with the costs of investing in other mutual funds. Using the
annual fund operating expenses percentages above, you would pay the following
expenses on a $10,000 investment, assuming a 5% annual return and redemption
at the end of each of the periods shown:
<TABLE>
<CAPTION>
1 Year* 3 Years* 5 Years* 10 Years*
<S> <C> <C> <C> <C>
Growth $102 $318 $552 $1,225
International 137 496 882 1,976
Mid Cap 117 892 1,727 4,114
Small Company 127 435 767 1,711
Value Opportunity 112 849 1,644 3,919
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced 114 356 617 1,363
Growth and Income 90 281 488 1,084
Real Estate 132 754 1,423 3,323
- ------------------------------------------------------------------------------------------------------------------------------------
Bond Fund 77 288 517 1,181
Aetna Government Fund 72 400 758 1,795
High Yield 97 589 1,121 2,652
Money Market 51 208 380 882
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 61 371 709 1,691
Index Plus Large Cap 72 326 603 1,407
Index Plus Mid Cap 77 622 1,216 2,934
Index Plus Small Cap 77 649 1,270 3,070
- ------------------------------------------------------------------------------------------------------------------------------------
Ascent 122 431 763 1,710
Crossroads 122 424 749 1,677
Legacy 122 482 870 1,976
</TABLE>
* Aeltus is contractually obligated to waive fees and/or reimburse expenses
through December 31, 1999. Therefore, all figures reflect a waiver/
reimbursement for the first year of the period.
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.
29
<PAGE>
Other Considerations
In addition to the principal investments and strategies described above, the
Funds may also invest in other securities, engage in other practices, and be
subject to additional risks, as discussed below and in the Statement of
Additional Information (SAI).
Futures Contracts and Options Each Fund (except Money Market) may enter into
futures contracts and use options. The Funds primarily use future contracts and
use options to hedge against price fluctuations or increase exposure to a
particular asset class. To a limited extent, the Funds also may use these
instruments for speculation (investing for potential income or capital gain).
* Futures contracts are agreements that obligate the buyer to buy and the
seller to sell a specific quantity of securities at a specific price on a
specific date.
* Options are agreements that give the holder the right, but not the
obligation, to purchase or sell a certain amount of securities or futures
contracts during a specified period or on a specified date.
The main risk with futures contracts and options is that they can amplify a gain
or loss, potentially earning or losing substantially more money than the actual
cost of the instrument. In addition, while a hedging strategy can guard against
potential risks for the Fund as a whole, it adds to the Fund's expenses and may
reduce or eliminate potential gains. There is also a risk that a futures
contract or option intended as a hedge may not perform as expected.
Defensive Investing In response to unfavorable market conditions, each Fund
(except Index Plus Bond, Index Plus Large Cap, Index Plus Mid Cap and Index Plus
Small Cap) may make temporary investments that are not consistent with its
principal investment objective and policies.
Year 2000 As a healthcare and financial services enterprise, Aetna Inc.
(referred to collectively with its affiliates and subsidiaries as "Aetna"), is
dependent on computer systems and applications to conduct its business. Aetna
has developed and is currently executing a comprehensive risk-based plan
designed to make its mission-critical information technology ("IT") systems and
embedded systems Year 2000 ready. The plan for IT systems covers five stages
including (i) assessment, (ii) remediation, (iii) testing, (iv) implementation
and (v) Year 2000 approval. At year-end 1997, Aetna, including Aeltus, had
substantially completed the assessment stage. The remediation of
mission-critical IT systems was completed year-end 1998. Testing of all
mission-critical IT systems is underway with Year 2000 approval targeted for
completion by mid-1999. The costs of these efforts will not affect the Funds.
Aeltus and the Funds also have relationships with broker-dealers, transfer
agents, custodians or other securities industry participants or other service
providers that are not affiliated with Aetna. Aetna, including Aeltus, has
initiated communication with its critical external relationships to determine
the extent to which Aetna may be vulnerable to such parties' failure to resolve
their own Year 2000 issues. Aetna and Aeltus have asssessed and are prioritizing
responses in an attempt to mitigate risks with respect to the failure of these
parties to be Year 2000 ready. There can be no assurance that failure of third
parties to complete adequate preparations in a timely manner, and any resulting
systems interruptions or other consequences, would not have an adverse effect,
directly or indirectly, on the Funds, including, without limitation, their
operation or the valuation of their assets.
In addition, the Year 2000 problem may adversely affect issuers in which a Fund
invests. For example, issuers may incur substantial costs to address the
problem. Aeltus and the Funds will continue to monitor developments relating to
this issue.
Risks of Conversion to Euro On January 1, 1999, 11 of the countries in the
European Monetary Union adopted the Euro as their official currency. However,
their original currencies (for example, the franc, the mark, and the lire) will
continue in use for cash transactions until January 1, 2002. After that date, it
is expected that only the Euro will be used in those countries. Although a
common currency is expected to confer some benefits in those markets, the
conversion to the new currency may affect issuers in which the Funds invest,
because of changes in the competitive environment from a consolidated currency
market, and greater operational costs from converting to the new currency. This
could depress the value of their stock. Any negative impact of the conversion to
the Euro will be most significant for International.
Portfolio Turnover Portfolio turnover refers to the frequency of portfolio
transactions and the percentage of portfolio assets being bought and sold during
the year. For the fiscal year ended October 31, 1998, Growth, International,
Small Company, Growth and Income, Aetna Government Fund and High Yield each had
a portfolio turnover rate in excess of 150%. A high portfolio turnover rate
increases a Fund's transaction costs and may increase your tax liability.
30
<PAGE>
Management of the Funds
Aeltus Investment Management, Inc., 10 State House Square, Hartford, Connecticut
06103-3602 serves as investment adviser to the Funds. Aeltus is responsible for
managing the assets of each Fund in accordance with its investment objective and
policies, subject to oversight by the Aetna Series Fund, Inc. (Company) Board of
Directors (Board). Aeltus has acted as adviser or subadviser to mutual funds
since 1994 and has managed institutional accounts since 1972.
Advisory Fees
* Listed below for Funds that have operated for at least one full fiscal year
are the aggregate advisory fees paid by each Fund for its most recent fiscal
year. These numbers reflect the advisory fees after fee waiver and expense
reimbursement. See the Fund Operating Expense table for the advisory fee
(Management Fee) Aeltus was entitled to receive.
* Listed below for the Funds that have operated for less than one full fiscal
year are the advisory fees that Aeltus is entitled to receive, expressed as
an annual rate based on the average daily net assets of each Fund.
<TABLE>
<CAPTION>
Aggregate Advisory Fees Paid as a Aggregate Advisory Fees Paid as a
Percentage of Average Net Assets Percentage of Average Net Assets
Fund Name for Year Ended October 31, 1998 Fund Name for Year Ended October 31, 1998
<S> <C> <C> <C> <C>
Growth 0.70 Aetna Government Fund 0.00
International 0.66 Money Market 0.15
Small Company 0.73 Index Plus Large Cap 0.00
Balanced 0.80 Ascent 0.61
Growth and Income 0.66 Crossroads 0.63
Bond Fund 0.28 Legacy 0.37
Fund Name Rate Average Daily Net Assets
Mid Cap 0.750% On first $250 million
0.700% On next $250 million
0.675% On next $250 million
0.650% On next $1.25 billion
0.600% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Value Opportunity 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate 0.800% On first $250 million
0.750% On next $250 million
0.725% On next $250 million
0.700% On next $1.25 billion
0.650% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield 0.650% On first $250 million
0.600% On next $250 million
0.575% On next $250 million
0.550% On next $1.25 billion
0.500% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Bond 0.350% On first $250 million
0.350% On next $250 million
0.325% On next $250 million
0.300% On next $1.25 billion
0.275% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Mid Cap 0.450% On first $250 million
0.450% On next $250 million
0.425% On next $250 million
0.400% On next $1.25 billion
0.375% Over $2 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Index Plus Small Cap 0.450% On first $250 million
0.450% On next $250 million
0.425% On next $250 million
0.400% On next $1.25 billion
0.375% Over $2 billion
</TABLE>
31
<PAGE>
On October 1, 1998, Bradley, Foster & Sargent, Inc. CityPlace II, 185 Asylum
Street, Hartford, Connecticut 06103, was appointed as subadviser to Value
Opportunity. While Bradley had not previously served as an investment adviser or
subadviser to a mutual fund, it has managed private client assets as well as
401(k), profit sharing and other retirement plan assets since 1994.
Bradley is responsible for making equity investment decisions. Aeltus, as
adviser, remains responsible for all other aspects of managing Value
Opportunity, including trade execution and cash management. Aeltus pays Bradley
a monthly subadvisory fee at an annual rate of 0.15% of Value Opportunity's
average daily net assets on the first $250 million of assets, and 0.10% on
assets above $250 million.
Portfolio Management The following people are primarily responsible for the
day-to-day management of the Funds.
Capital Appreciation Funds
Growth Kenneth H. Bragdon, Portfolio Manager, Aeltus, has been managing Growth
since May 1998. Previously, Mr. Bragdon co-managed the Fund. Mr. Bragdon has
been with the Aetna organization since 1978 and has 27 years of experience in
the investment business.
International Vince Fioramonti, Portfolio Manager, Aeltus, has been managing
International 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 of The Travelers
Investment Management Company. He began his investment career with Travelers in
1988.
Mid Cap Donald Townswick, Portfolio Manager, Aeltus, has been managing Mid Cap
since its inception in February 1998. He also manages small- and mid-cap stocks
for other mutual funds managed by Aeltus. Mr. Townswick joined the Aetna
organization in July 1994 after serving 2 years with Invesco Inc.
Small Company Thomas DiBella, Portfolio Manager, Aeltus, has been managing Small
Company since its inception in January 1994. Mr. DiBella joined Aeltus in 1991
and is currently responsible for the management of several small-capitalization
portfolios.
Value Opportunity Peter Canoni, Principal, Bradley, manages Value Opportunity.
Before joining Bradley, Mr. Canoni was a Managing Director of Aeltus and the
portfolio manager of Value Opportunity from its inception in February 1998
through August 3, 1998. Mr. Canoni had been with the Aetna organization since
1980 and has over 26 years of investment experience.
Growth & Income Funds
Balanced Geoffrey A. Brod, Portfolio Manager, Aeltus, has been managing large
cap stocks for the Fund since August 1, 1998. He has over 30 years of experience
in quantitative applications and has over 11 years of experience in equity
investments. Mr. Brod has been with the Aetna organization since 1966.
Thomas DiBella, Portfolio Manager, Aeltus, has been managing small cap stocks
for the Fund since March 1, 1999. Mr. DiBella joined Aeltus in 1991 and is
currently responsible for the management of several small-capitalization
portfolios.
Carl Baker, Portfolio Manager, Aeltus, has been managing fixed-income securities
for the Fund since August 1, 1998. Mr. Baker has 11 years of experience in fixed
income portfolio management and has been with the Aetna organization since 1982.
Growth and Income Kevin M. Means, Managing Director, Aeltus, has been managing
Growth and Income since July 1994. Mr. Means joined Aetna in July 1994 after
serving as Chief Investment Officer at Invesco Management and Research since
1993. He also served from 1987 to 1993 as the Director of Quantitative Research
and Equity Portfolio Manager at Invesco Capital Management. Mr. Means heads a
team of portfolio managers each of whom specializes in a particular asset class
used in the management of Growth and Income.
Real Estate Yaniv Tepper, Portfolio Manager, Aeltus, has been managing Real
Estate since its inception in February 1998. He has been managing real estate
securities for several investment funds managed by Aeltus since 1994, when he
joined Aeltus. He has over 10 years of experience in direct real estate and real
estate securities investments.
32
<PAGE>
Income Funds
Bond Fund Steven C. Huber, Managing Director, Aeltus, has been managing the Fund
since August 1998. Mr. Huber joined the Aetna organization in 1987 as a
quantitative analyst and has been managing fixed-income portfolios since 1989.
Aetna Government Fund Hugh T.M. Whelan, Portfolio Manager, Aeltus, has been
managing the Aetna Government Fund since January 1997. Mr. Whelan joined the
Aetna organization in 1989 and manages fixed-income portfolios employing
different strategies.
High Yield Gail Bruhn, Portfolio Manager, Aeltus, has been managing High Yield
since its inception in February 1998. Ms. Bruhn joined Aeltus in 1995 after
spending 12 years with CIGNA Investments. She currently manages high-yield
securities for several institutional accounts.
Money Market Jeanne Wong-Boehm, Managing Director, Aeltus, has been managing
Money Market since its inception in January 1992. Ms. Wong-Boehm joined the
Aetna organization in 1983 as a fixed-income portfolio analyst and in 1989 she
was assigned primary responsibility for the money market operations.
Index Plus Funds
Index Plus Bond Christie Bull, Portfolio Manager, Aeltus, has been managing
Index Plus Bond since its inception in February 1998. Ms. Bull is also the
Director of Fixed Income Research for Aeltus. Ms. Bull has been with the Aetna
organization since 1979, and has been managing fixed-income securities for
several private accounts since 1993.
Index Plus Large Cap Geoffrey A. Brod, Portfolio Manager, Aeltus, has been
managing Index Plus Large Cap since its inception in December 1996.
Index Plus Mid Cap, Index Plus Small Cap Geoffrey A. Brod, Portfolio Manager,
Aeltus, and Michael F. Farrell, Portfolio Manager, Aeltus, serve as co-managers
of Index Plus Mid Cap and Index Plus Small Cap. Mr. Brod served as the sole
manager of Index Plus Mid Cap and Index Plus Small Cap from each Fund's
inception in February 1998 through February 1999. Mr. Farrell has been with the
Aetna organization since 1991 and has been responsible for quantitative research
and development of equity models.
Generation Funds
Ascent, Crossroads, Legacy Kevin M. Means, Managing Director, Aeltus, is the
lead portfolio manager for each Generation Fund and has been responsible for
determining the allocation of each Fund's investments since its inception in
January 1995. Mr. Means is also responsible for the selection of large
capitalization stocks for the Generation Funds. Mr. Means is supported by a team
of investment professionals, each of whom focuses on a particular asset class.
Donald Townswick, Portfolio Manager, Aeltus, has been managing small and mid-cap
stocks for the Generation Funds since January 1995.
Vince Fioramonti, Portfolio Manager, Aeltus, has been managing international
stocks and non-U.S. dollar government bonds for the Generation Funds since
January 1995.
Yaniv Tepper, Portfolio Manager, Aeltus, has been managing real estate
securities for the Generation Funds since May 1995.
Carl Baker, Portfolio Manager, Aeltus, has been managing U.S. Dollar Bonds for
the Generation Funds since August 1998.
Jeanne Wong-Boehm, Managing Director, Aeltus, has been managing money market
investments for the Generation Funds since their inception in January 1995.
33
<PAGE>
Investing in the Funds
Opening an Account and Eligibility for Class I Shares
How to Open an Account You may open an account through the sponsor of your
employer-sponsored retirement plan or by yourself. If you are investing through
a retirement plan, please refer to your plan materials. If you wish to open an
account on your own, you must submit a completed application to the Fund. You
may submit a completed and signed application along with your check to:
Aetna Series Fund, Inc.
c/o First Data Investor Services Group
P.O. Box 9681
Providence, RI 02940
Your check must be drawn on a bank located within the United States and payable
in U.S. dollars.
Class I Eligibility
Class I shares are offered to:
* Certain retirement plans.
* Certain registered investment advisers having an agreement with the Funds to
invest a minimum of $1 million within one year of initial purchase.
* Employees and retired employees of Aetna Inc. and its affiliates (including
members of employees' and retired persons' immediate families, board members
and trustees, and their immediate families).
* Insurance companies (including separate accounts).
* Registered investment companies.
* Shareholders holding Select Class shares at the time such shares were
redesignated as Class I shares, and their immediate family members, as long
as they maintain a shareholder account.
* Certain bank and independent trust companies investing on behalf of their
clients for which they charge trust or investment management fees.
* Members of the Board.
* NASD-registered representatives of Aeltus Capital, Inc. (ACI) or any
affiliated broker-dealer (including members of their immediate families).
* Other groups as may be approved by the Board from time to time.
How to Buy Shares
<TABLE>
<CAPTION>
Minimum Investments Initial Investment Additional Investments
<S> <C> <C>
Individual Retirement Accounts $500 *$100 except by wire or Systematic
(including Roth IRAs) Investment
*$500 by wire
*$50 by Systematic
Investment
All other investments $1,000 *$100 except by wire or Systematic
Investment
*$500 by wire
*$50 by Systematic Investment
</TABLE>
34
<PAGE>
Instructions for Buying Fund Shares
<TABLE>
<CAPTION>
To Open An Account To Purchase Additional Shares
Through Your Consult your plan materials. Consult your plan materials.
Retirement Plan
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
By Mail Complete and sign your Fill out the investment stub from your
application, make confirmation statement or send a letter
your check payable to Aetna indicating your name, account
Series Fund, Inc. and mail to: number(s), the Fund(s) in which you
wish to invest and the amount you want
Aetna Series Fund, Inc. to invest in each Fund.
c/o First Data Investor Services
Group, Inc. Make your check payable to Aetna
P.O. Box 9681 Series Fund, Inc. and mail to:
Providence, RI 02940
Aetna Series Fund, Inc.
Cash, credit cards and third party c/o First Data Investor Services Group, Inc.
checks cannot be used to open an P.O. Box 9663
account. Providence, RI 02940
The Funds will accept checks which are
made payable to you and endorsed to
Aetna Series Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
By Overnight Courier Follow the instructions above Follow the instructions above for
for "By Mail" but send your "By Mail" but send your check and
completed application and check investment stub or letter to:
to:
Aetna Series Fund, Inc.
Aetna Series Fund, Inc. c/o First Data Investor Services
c/o First Data Investor Services Group, Inc.
Group, Inc. 4400 Computer Drive
4400 Computer Drive Westborough, MA 01581
Westborough, MA 01581
- ------------------------------------------------------------------------------------------------------------------------------------
By Wire Not Available. Call 1-800-367-7732 prior to sending
the wire in order to obtain a
confirmation number.
Instruct your bank to wire funds to:
Wire to:
Boston Safe Deposit & Trust Company
ABA # 011001234
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
To Open An Account To Purchase Additional Shares
<S> <C> <C>
Credit to:
Boston Safe Deposit & Trust Company
Account # 176656
Further Credit to:
Name of Fund
Shareholder Account Number
Shareholder Registration
Federal funds wire purchase orders will
be accepted only when the Fund's
transfer agent and custodian bank are
open for business.
Neither the Funds nor their agents are
responsible for the consequences of
delays resulting from the banking or
Federal Reserve wire system or from
incomplete instructions.
- ------------------------------------------------------------------------------------------------------------------------------------
By Electronic Not Available. Use the Systematic Investment Option.
Funds Transfer Sign up for this service when opening
your account or by requesting the
appropriate information.
- ------------------------------------------------------------------------------------------------------------------------------------
By Exchange Submit a written request to the Submit a written request to the address
address listed above under listed above under "By Mail." Include:
"By Mail." Include: *Your name and account number
*Your name and account number. *The name of the Fund into and out of
*The name of the Fund into and which you wish to exchange.
out of which you wish to *The amount to be exchanged and the
exchange. signatures of all shareholders.
*The amount to be exchanged
and the signatures of all You may also exchange your shares by
shareholders. calling 1-800-367-7732. Please be
prepared to provide:
You may also exchange your *The Funds' names.
shares by calling 1-800-367-7732. *Your account number(s).
Please be prepared to provide: *Your Social Security number or
*The Funds' names. taxpayer identification number.
*Your account number(s). *Your address.
*Your Social Security number or *The amount to be exchanged.
taxpayer identification number.
*Your address.
*The amount to be exchanged.
</TABLE>
36
<PAGE>
How to Sell Shares
To redeem all or a portion of the shares in your account, you should submit a
redemption request through your plan sponsor or as described below.
Redemption requests in amounts up to $25,000 may be made in writing or by
telephone. The Company requires a signature guarantee if the amount of the
redemption request is over $25,000. You may obtain a signature guarantee at most
banks and securities dealers. Please note that notaries public cannot provide
signature guarantees.
Once your redemption request is received in good order as described below, the
Fund normally will send the proceeds of such redemption within one or two
business days. However, if making immediate payment could adversely affect a
Fund, the Fund may defer distribution for up to seven days or a longer period if
permitted. If you redeem shares of a Fund shortly after purchasing them, the
Fund will hold payment of redemption proceeds until a purchase check or
systematic investment clears, which may take up to 12 calendar days. A
redemption request made within 15 calendar days after submission of a change of
address is permitted only if the request is in writing and is accompanied by a
signature guarantee.
<TABLE>
<S> <C>
Redemptions by Mail You may redeem shares you own in any Fund by sending written
instructions to:
Aetna Series Fund, Inc.
c/o First Data Investor Services Group, Inc.
P.O. Box 9681
Providence, RI 02940
Your instructions should identify:
* The Fund.
* The number of shares or dollar amount to be redeemed.
* Your name and account number.
Your instructions must be signed by all person(s) required to sign for the
Fund account, exactly as the shares are registered, and, if necessary,
accompanied by a signature guarantee(s).
- ------------------------------------------------------------------------------------------------------------------------------------
Redemptions by Wire A minimum redemption of $1,000 is required for wire transfers.
Redemption proceeds will be transferred by wire to your previously
designated bank account or to another destination if the federal funds wire
instructions provided with your redemption request are accompanied by a
signature guarantee. A $12.00 fee will be charged for this service.
- ------------------------------------------------------------------------------------------------------------------------------------
Redemptions by Telephone Call 1-800-367-7732. Please be prepared to provide your account number,
account name and the amount of the redemption, which generally
must be no less than $500 and no more than $25,000.
</TABLE>
37
<PAGE>
Timing of Requests
Orders that are received before the close of regular trading on the New York
Stock Exchange (usually 4:00 p.m. eastern time) will be processed at the Net
Asset Value (NAV) calculated that business day. Orders received after the close
of regular trading on the New York Stock Exchange will be processed at the NAV
calculated on the following business day.
The Company may appoint certain financial intermediaries and institutions
(Institutions) as parties that may accept purchase and redemption orders on
behalf of the Company. If you purchase or redeem shares in connection with
programs offered by these Institutions, and the Institution receives your order
before the close of regular trading on the New York Stock Exchange, your shares
will be purchased or redeemed at the NAV determined that business day.
Institutions may be authorized to designate other intermediaries to accept
purchase and redemption orders on the Company's behalf, subject to the Company's
approval. Thus, the Company will be deemed to have received a purchase or
redemption order when the Institution or, if applicable, the Institution's
authorized designee, accepts the order.
Investors purchasing through an Institution should refer to the Institution's
materials for a discussion of any specific instructions on the timing of or
restrictions relating to the purchase or redemption of shares.
Other Information about Shareholder Accounts and Services
Business Hours Each Fund is open on the same days as the New York Stock Exchange
(generally, Monday through Friday). Fund representatives are available from 8:00
a.m. to 8:00 p.m. eastern time on those days.
Net Asset Value The NAV of each Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. eastern time).
In calculating the NAV, the securities held by Money Market are valued using
amortized cost. For all other Funds, securities are valued primarily by
independent pricing services using market quotations. Short-term debt securities
maturing in less than 60 days are valued using amortized cost. Securities for
which market quotations are not readily available are valued at their fair
value, subject to procedures adopted by the Board. With respect to any Fund that
invests in foreign securities, because those securities may be traded on markets
that are open on days when the Fund does not price its shares, the Fund's NAV
may change even though Fund shareholders may not be permitted to sell or redeem
Fund shares.
Exchange Privileges There is no fee to exchange shares from one Fund to another.
When you exchange shares, your new Fund shares will be in the equivalent class
of your current shares.
There are no limits on the number of exchanges you can make. However, the Funds
may suspend or terminate your exchange privilege if you make more than five
exchanges out of a single Fund in any calendar year, and the Funds may refuse to
accept any exchange request, especially if as a result of the exchange, in
Aeltus' judgment, it would be too difficult to invest effectively in accordance
with the Fund's investment objective.
The Funds are not designed for professional market timing organizations or other
entities using programmed or frequent exchanges. The Funds reserve the right to
reject any specific purchase or exchange request, including a request made by a
market timer.
Cross Investing
* Dividend Investing You may elect to have dividend and/or capital gains
distributions automatically invested in the same class of one other Fund.
* Systematic Exchange You may establish an automatic exchange of share from one
Fund to another.
Telephone Exchange and Redemption Privileges You automatically receive telephone
exchange and redemption privileges when you establish your account. If you do
not want these telephone privileges, you may call 1-800-367-7732 to have them
removed. All telephone transactions may be recorded, and you will be asked for
certain identifying information.
Telephone redemption requests will be accepted if the request is for a minimum
of $500 or a maximum of $25,000. Telephone redemption requests will not be
accepted if you:
* Have submitted a change of address within the preceding 15 calendar days.
* Are selling shares in a retirement plan account held in trust.
The Funds reserve the right to amend telephone exchange and redemption purchases
at any time upon notice to shareholders and may refuse a telephone exchange or
redemption if the Funds believe it is advisable to do so.
38
<PAGE>
Minimum Account Balance You must maintain a minimum balance of $500 in each Fund
account. If you do not, the Fund may give you 60 days' notice to increase the
account balance to the $500 minimum. If you fail to increase your account
balance to the minimum, the Fund may redeem all of your remaining shares and
mail the proceeds to you at the address of record. The Fund will not redeem
shares for failing to maintain an adequate account balance if the account
balance falls below the minimum balance only because the value of Fund shares
has decreased.
Additional Services The Funds offer these additional investor services. Each
Fund reserves the right to terminate or amend these services at any time. For
all of the services, certain terms and conditions apply. See the Statement of
Additional Information or call 1-800-367-7732 for additional details.
* Systematic Investment You can make automatic monthly investments in any Fund.
* 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 a Fund.
* Checkwriting Service Checkwriting is available with Money Market. There
currently is no transaction charge for this service, and the initial
checkbook you receive is free. However, you will be charged a $3.00 fee for
each checkbook reorder. Checks must be for a minimum of $250 and the
checkwriting service may not be used for a complete redemption of your
shares. This service is not available for IRA or other retirement accounts.
You will be charged a $25 fee for stop payment requests and for Money Market
checks that are returned due to insufficient funds.
* TDD Service Telecommunication Device for the Deaf (TDD) services are offered
for hearing impaired investors. The dedicated number for this service is
1-800-684-4889.
* Tax-Deferred Retirement Plans Each Fund may be used for investment by a
variety of tax-deferred retirement plans, such as individual retirement
accounts (IRAs, including Roth IRAs) and 401(k) and 403(b)(7) programs
sponsored by employers. There is no minimum investment or minimum account
balance applicable to investments in 403(b)(7) accounts except that a
rollover from a 403(b)(7) account must be for at least $500. Purchases made
in connection with IRAs and 403(b)(7) accounts may be subject to an annual
custodial fee of $10.00 for each account registered under the same taxpayer
identification number. This fee will be deducted directly from your
account(s). The custodial fee will be waived for individual retirement
accounts and 403(b) accounts registered under the same taxpayer
identification number having an aggregate balance over $30,000 at the time
such fee is scheduled to be deducted.
Payments to Securities Dealers and Selection of Executing Brokers From time to
time, ACI or its affiliates may make payments to other dealers and/or their
agents, who may not be affiliates of Aetna, who sell shares or who provide
shareholder services. The value of a shareholder's investment will be unaffected
by these payments.
Aeltus may consider the sale of shares of the Funds and of other investment
companies advised by Aeltus as a factor in the selection of brokerage firms to
execute each Fund's portfolio transactions, subject to Aeltus' duty to obtain
best execution.
Dividends and Distributions
Dividends Dividends are declared and paid as follows:
<TABLE>
<S> <C>
* declared daily and paid monthly Money Market
* declared and paid monthly Aetna Government Fund
Bond Fund
High Yield
Index Plus Bond
* declared and paid semiannually Balanced
Growth and Income
* declared and paid annually All other Funds
</TABLE>
Capital gains distributions, if any, are paid on an annual basis around the end
of the year, December 31. To comply with federal tax regulations, each Fund may
also pay an additional capital gains distribution, usually in June.
Money Market shares begin to accrue dividends the business day after they are
purchased. A redemption of Money Market shares will include dividends declared
through the redemption date.
Both income dividends and capital gains distributions are paid by each Fund on a
per share basis. As a result, at the time of this payment, the share price of a
Fund (except Money Market) will be reduced by the amount of the payment.
39
<PAGE>
Distribution Options When completing your application, you must select one of
the following three options for dividends and capital gains distributions:
* Full Reinvestment Both dividends and capital gains distributions from a Fund
will be reinvested in additional shares of the same class of shares of that
Fund. This option will be selected automatically unless one of the other
options is specified.
* Capital Gains Reinvestment Capital gains distributions from a Fund will be
reinvested in additional shares of the same class of shares of that Fund and
all net income from dividends will be distributed in cash.
* 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 shares of another Fund.
Distributions paid in shares will be credited to your account at the next
determined NAV per share.
Tax Information
* In general, dividends and short-term capital gains distributions you receive
from any Fund are taxable as ordinary income.
* Distributions of other capital gains generally are taxable as capital gains.
* Ordinary income and capital gains are taxed at different rates.
* The rates that you will pay on capital gains distributions will depend on how
long the Fund holds its portfolio securities. This is true no matter how long
you have owned your shares in the Fund or whether you reinvest your
distributions or take them as cash.
* The sale of shares in your account may produce a gain or loss, and typically
is a taxable event. For tax purposes, an exchange is the same as a sale.
Every year, the Funds will send you information detailing the amount of ordinary
income and capital gains distributed to you for the previous year. You should
consult your tax professional for assistance in evaluating the tax implications
of investing in the Funds.
Backup Withholding By law, the Funds must withhold 31% of your distributions and
proceeds if you have not provided complete, correct taxpayer information.
Private Account Performance
Index Plus Large Cap, Index Plus Bond and High Yield are recently organized and
do not yet have long-term performance records. However, these Funds have
investment objectives, policies and strategies substantially similar to those
employed by Aeltus in managing accounts for certain institutional investors
(Private Accounts). Therefore, the performance of these Private Accounts is
provided below. Note that the Private Accounts, unlike the Fund, are not subject
to certain investment limitations, diversification requirements and other
restrictions imposed by the Investment Company Act of 1940 and the Internal
Revenue Code of 1986, as amended, which, if applicable, could have adversely
affected the Private Accounts' performance.
The Private Account Performance data, shown below, was calculated in accordance
with the standards established by the Association for Investment Management and
Research (AIMR). AIMR is a nonprofit membership and education organization that,
among other things, has formulated a set of performance presentation standards
for investment advisers. AIMR has not been involved with the preparation or
review of the performance shown.
All Private Account Performance data:
* Was calculated on a total return basis and includes all dividends and
interest, accrued income, and realized and unrealized gains and losses.
* Reflects the reinvestment of dividends and distributions.
* Reflects the deduction of investment advisory fees and brokerage commissions
paid by the Private Accounts, but does not reflect the deduction of custodial
fees.
* Includes cash and cash equivalents.
The historical fees and expenses paid by the Private Accounts are significantly
lower than those paid by the corresponding Fund. Had higher expenses been
charged to the Private Accounts performance would have been lower.
The following table shows average annual total returns for the periods ended
December 31, 1998 for the Funds, the comparable Private Accounts and their
respective benchmark indices. Investors should not consider the historical
performance of the Private Accounts as an indication of the future performance
of a comparably managed Fund.
40
<PAGE>
Private Account Composite and Fund Performance
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
INDEX PLUS LARGE CAP 1 YEAR 5 YEARS INCEPTION
<S> <C> <C> <C>
Index Plus Large Cap (Class I) 32.50% N/A 31.41% (12/10/96)
Index Plus Large Cap Private Account
Composite 31.58% 25.19% N/A
S&P 500 Stock Index 28.57% 24.06% N/A
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
INDEX PLUS BOND 1 YEAR 5 YEARS 10 YEARS INCEPTION
<S> <C> <C> <C> <C>
Index Plus Bond (Class I) N/A N/A N/A 6.61% (2/4/98)
Index Plus Bond Private Account
Composite 8.17% 7.11% 9.07% N/A
Lehman Brothers Aggregate Bond Index 8.69% 7.27% 9.26% N/A
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SINCE
HIGH YIELD 1 YEAR 3 YEARS INCEPTION
<S> <C> <C> <C>
High Yield (Class I) N/A N/A -1.75% (2/2/98)
High Yield Private Account Composite 4.21% 11.74% N/A
Merrill Lynch High Yield Master Index 3.66% 9.11% N/A
</TABLE>
41
<PAGE>
Financial Highlights
(for one outstanding share throughout each period)
These highlights are intended to help you understand the Funds' performance for
the past 5 years (or since commencement of operations, if shorter). Certain
information reflects financial results for a single Fund share. The total
returns in the tables represent the rate an investor would have earned (or lost)
on an investment in each Fund (assuming reinvestment of all dividends and
distributions). The information in these tables has been audited by KPMG LLP,
independent auditors, whose reports, along with the Funds' Financial Statements,
are included in the Funds' Annual Reports, which are available upon request.
Class I Shares
<TABLE>
<CAPTION>
Growth
- ------------------------------------------------------------------------------------------------------------------------------------
Period From
January 4, 1994
Year Year Year Year (Commencement
Ended Ended Ended Ended of Operations) to
October 31, October 31, October 31, October 31, October 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 17.02 $ 14.36 $ 13.75 $ 10.78 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income .......................... 0.01 0.01 0.03 0.04 0.09
Net realized and change in unrealized gain or
loss on investments ........................ 2.09 3.88 2.39 3.02 0.69
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...... 2.10 3.89 2.42 3.06 0.78
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income ..................... -- (0.03) (0.05) (0.08) --
From net realized gains on investments ......... (2.50) (1.20) (1.76) (0.01) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ................... (2.50) (1.23) (1.81) (0.09) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................. $ 16.62 $ 17.02 $ 14.36 $ 13.75 $ 10.78
====================================================================================================================================
Total return ................................... 14.78% 28.95% 19.82% 28.79% 7.70%
Net assets, end of period (000's) .............. $ 128,667 $ 82,186 $ 45,473 $ 36,936 $ 27,188
Ratio of net expenses to average net assets .... 1.00% 1.17% 1.28% 1.20%(2) 0.92%(1)(2)
Ratio of net investment income to average
net assets ................................. 0.07% 0.08% 0.20% 0.36% 1.10%(1)
Ratio of expenses before reimbursement and
waiver to average net assets ............... 1.00% 1.17% 1.28% 1.30% 1.42%(1)
Portfolio turnover rate ........................ 170.46% 141.07% 144.19% 171.75% 120.32%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
42
<PAGE>
<TABLE>
<CAPTION>
International Mid Cap
- ------------------------------------------------------------------------------------------------------------------------------------
Period From
Ten Month February 4, 1998
Period (Commencement
Year Ended Year Ended Year Ended Year Ended Ended Year Ended of Operations) to
October 31, October 31, October 31, October 31, October 31, December 31, October 31,
1998 1997 1996 1995 1994 1993 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 13.65 $ 11.79 $ 10.62 $ 11.56 $ 11.17 $ 8.88 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
0.02 0.02 0.03 0.11 0.06 0.05 (0.02)
1.06 2.89 1.59 (0.09) 0.33 2.65 (0.69)
- ------------------------------------------------------------------------------------------------------------------------------------
1.08 2.91 1.62 0.02 0.39 2.70 (0.71)
- ------------------------------------------------------------------------------------------------------------------------------------
(0.40) (0.16) (0.19) (0.40) -- (0.39) --
(2.46) (0.89) (0.26) (0.56) -- (0.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
(2.86) (1.05) (0.45) (0.96) -- (0.41) --
- ------------------------------------------------------------------------------------------------------------------------------------
$ 11.87 $ 13.65 $ 11.79 $ 10.62 $ 11.56 $ 11.17 $ 9.29
====================================================================================================================================
10.22% 26.02% 15.61% (0.04)% 3.49% 30.37% (7.10)%
$ 34,556 $ 56,369 $ 45,786 $ 25,102 $ 31,479 $ 39,847 $ 4,503
1.48%(2) 1.72% 2.17% 1.37%(2) 1.66%(1)(2) 1.48%(2) 1.15%(1)(2)
0.15% 0.18% 0.40% 1.02% 0.71%(1) 0.50% (0.21)%(1)
1.67% 1.72% 2.17% 1.50% 1.80%(1) 1.77% 3.59%(1)
152.73% 194.41% 135.92% 32.91% 81.67% 110.38% 113.99%
</TABLE>
43
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
Class I Shares
<TABLE>
<CAPTION>
Small Company
- ------------------------------------------------------------------------------------------------------------------------------------
Period From
January 4, 1994
Year Year Year Year (Commencement
Ended Ended Ended Ended of Operations) to
October 31, October 31, October 31, October 31, October 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $ 15.55 $ 14.67 $ 13.52 $ 10.39 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income .......................... 0.09 (0.06) (0.08) -- 0.02
Net realized and change in unrealized gain or
loss on investments ........................ (0.90) 4.45 2.64 3.15 0.37
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ...... (0.81) 4.39 2.56 3.15 0.39
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income ..................... -- -- -- (0.02) --
From net realized gains on investments ......... (4.31) (3.51) (1.41) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ................... (4.31) (3.51) (1.41) (0.02) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................. $ 10.43 $ 15.55 $ 14.67 $ 13.52 $ 10.39
====================================================================================================================================
Total return ................................... (7.47)% 37.80% 19.78% 30.39% 3.90%
Net assets, end of period (000's) .............. $ 29,543 $ 22,661 $ 32,125 $ 33,511 $ 25,879
Ratio of net expenses to average net assets .... 1.32%(2) 1.58% 1.44% 1.41%(2) 1.15%(1)(2)
Ratio of net investment income to average
net assets ................................. 0.46% (0.42)% (0.53)% (0.01)% 0.21%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ........... 1.43% 1.58% 1.44% 1.49% 1.58%(1)
Portfolio turnover rate ........................ 211.87% 150.43% 163.21% 156.43% 116.28%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
44
<PAGE>
<TABLE>
<CAPTION>
Value
Opportunity Balanced
- ------------------------------------------------------------------------------------------------------------------------------------
Period From
February 2, 1998 Ten Month
(Commencement Period
of Operations) to Year Ended Year Ended Year Ended Year Ended Ended Year Ended
October 31, October 31, October 31, October 31, October 31, October 31, December 31,
1998 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 14.09 $ 13.52 $ 12.36 $ 10.65 $ 10.82 $ 10.18
- ------------------------------------------------------------------------------------------------------------------------------------
0.03 0.33 0.33 0.31 0.35 0.23 0.34
(0.04) 1.02 2.04 1.77 1.69 (0.28) 0.64
- ------------------------------------------------------------------------------------------------------------------------------------
(0.01) 1.35 2.37 2.08 2.04 (0.05) 0.98
- ------------------------------------------------------------------------------------------------------------------------------------
-- (0.32) (0.30) (0.35) (0.33) (0.12) (0.31)
-- (2.28) (1.50) (0.57) -- -- (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
-- (2.60) (1.80) (0.92) (0.33) (0.12) (0.34)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 9.99 $ 12.84 $ 14.09 $ 13.52 $ 12.36 $ 10.65 $ 10.82
====================================================================================================================================
(0.10)% 10.81% 19.57% 17.63% 19.45% (0.42)% 9.84%
$ 4,625 $ 111,887 $ 105,813 $ 88,625 $ 83,941 $ 76,267 $ 63,982
1.10%(1)(2) 1.12% 1.24% 1.31% 1.27%(2) 1.09%(1)(2) 0.93%(2)
0.37%(1) 2.54% 2.43% 2.42% 3.14% 2.65%(1) 3.21%
3.41%(1) 1.12% 1.24% 1.31% 1.30% 1.32%(1) 1.34%
132.45% 84.55% 116.69% 117.88% 129.05% 86.10% 19.95%
</TABLE>
45
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
Class I Shares
<TABLE>
<CAPTION>
Growth and Income
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Month
Year Year Year Year Period Year
Ended Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31, December 31,
1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ....................... $ 18.08 $ 15.74 $ 13.46 $ 11.11 $ 11.03 $ 10.51
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income ............ 0.12 0.15 0.19 0.21 0.12 0.19
Net realized and change in
unrealized gain or loss on
investments .................. 0.51 5.00 3.09 2.27 0.04 0.50
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations .............. 0.63 5.15 3.28 2.48 0.16 0.69
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income ....... (0.13) (0.21) (0.24) (0.13) (0.08) (0.16)
From net realized gains on
investments .................. (3.32) (2.60) (0.76) -- -- (0.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ..... (3.45) (2.81) (1.00) (0.13) (0.08) (0.17)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ... $ 15.26 $ 18.08 $ 15.74 $ 13.46 $ 11.11 $ 11.03
====================================================================================================================================
Total return ..................... 3.80% 37.44% 25.69% 22.58% 1.40% 6.58%
Net assets, end of period (000's) $ 614,493 $ 595,969 $ 377,784 $ 356,803 $ 301,360 $ 60,127
Ratio of net expenses to average
net assets ................... 0.88% 1.00% 1.08% 1.10% 0.92%(1)(2) 1.13%(2)
Ratio of net investment income to
average net assets ........... 0.71% 0.93% 1.35% 1.73% 1.51%(1) 1.77%
Ratio of expenses before
reimbursement and waiver to
average net assets ........... 0.88% 1.00% 1.08% 1.10% 1.03%(1) 1.27%
Portfolio turnover rate .......... 160.48% 157.92% 106.09% 127.43% 54.13% 23.60%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
46
<PAGE>
<TABLE>
<CAPTION>
Real Estate Bond
- ------------------------------------------------------------------------------------------------------------------------------------
Period From
February 2, 1998 Ten Month
(Commencement Period
of Operations) to Year Ended Year Ended Year Ended Year Ended Ended Year Ended
October 31, October 31, October 31, October 31, October 31, October 31, December 31,
1998 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 10.22 $ 10.09 $ 10.27 $ 9.58 $ 10.37 $ 9.99
- ------------------------------------------------------------------------------------------------------------------------------------
0.25 0.60 0.62 0.65 0.65 0.52 0.55
(1.93) 0.17 0.13 (0.15) 0.65 (0.86) 0.45
- ------------------------------------------------------------------------------------------------------------------------------------
(1.68) 0.77 0.75 0.50 1.30 (0.34) 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
-- (0.61) (0.62) (0.68) (0.61) (0.45) (0.55)
-- -- -- -- -- -- (0.07)
- ------------------------------------------------------------------------------------------------------------------------------------
-- (0.61) (0.62) (0.68) (0.61) (0.45) (0.62)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 8.32 $ 10.38 $ 10.22 $ 10.09 $ 10.27 $ 9.58 $ 10.37
====================================================================================================================================
(16.80)% 7.72% 7.72% 5.09% 14.06% (3.31)% 10.20%
$ 3,970 $ 41,804 $ 34,080 $ 28,864 $ 32,778 $ 27,584 $ 46,788
2.00%(1)(2) 0.75%(2) 0.75%(2) 0.75%(2) 0.79%(2) 0.76%(1)(2) 0.47%(2)
2.70%(1) 5.79% 6.07% 6.16% 6.56% 6.29%(1) 5.34%
2.89%(1) 0.97% 1.14% 1.16% 1.06% 1.06%(1) 1.01%
63.79% 77.01% 48.56% 42.33% 56.99% 51.80% 50.01%
</TABLE>
47
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
Class I Shares
<TABLE>
<CAPTION>
Aetna Government Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Ten Month
Year Year Year Year Period
Ended Ended Ended Ended Ended
October 31, October 31, October 31, October 31, October 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 9.99 $ 9.80 $ 10.01 $ 9.41 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income ............................ 0.53 0.58 0.56 0.64 0.40
Net realized and change in unrealized gain or loss
on investments ............................... 0.30 0.21 (0.13) 0.59 (0.63)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ........ 0.83 0.79 0.43 1.23 (0.23)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income ....................... (0.53) (0.60) (0.64) (0.63) (0.36)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ..................... (0.53) (0.60) (0.64) (0.63) (0.36)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................... $ 10.29 $ 9.99 $ 9.80 $ 10.01 $ 9.41
====================================================================================================================================
Total Return ..................................... 8.54% 8.39% 4.43% 13.58% (2.37)%
Net assets, end of period (000's) ................ $ 13,980 $ 10,217 $ 10,662 $ 19,154 $ 26,110
Ratio of net expenses to average net assets ...... 0.70%(2) 0.70%(2) 0.70%(2) 0.70%(2) 0.41%(1)(2)
Ratio of net investment income to average
net assets ................................... 5.21% 5.91% 5.67% 6.79% 5.29%(1)
Ratio of expenses before reimbursement and
waiver to average net assets ................. 1.51% 1.70% 1.57% 1.30% 1.16%(1)
Portfolio turnover rate .......................... 181.08% 147.78% 50.48% 117.31% 43.63%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
48
<PAGE>
<TABLE>
<CAPTION>
High Yield Money Market
- ------------------------------------------------------------------------------------------------------------------------------------
Period From
February 2, 1998 Ten Month
(Commencement Period
of Operations) to Year Ended Year Ended Year Ended Year Ended Ended Year Ended
October 31, October 31, October 31, October 31, October 31, October 31, December 31,
1998 1998 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------------------------------
0.60 0.05 0.05 0.05 0.06 0.03 0.03
(1.21) -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
(0.61) 0.05 0.05 0.05 0.06 0.03 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
(0.58) (0.05) (0.05) (0.05) (0.06) (0.03) (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
(0.58) (0.05) (0.05) (0.05) (0.06) (0.03) (0.03)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 8.81 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====================================================================================================================================
(6.50)% 5.36% 5.49% 5.44% 5.95% 3.33% 3.29%
$ 8,452 $ 276,024 $ 273,710 $ 323,281 $ 275,524 $ 161,756 $ 107,844
0.95%(1)(2) 0.48%(2) 0.37%(2) 0.30%(2) 0.27%(2) 0.21%(1)(2) 0.00%(2)
8.17%(1) 5.24% 5.31% 5.30% 5.78% 4.05%(1) 3.33%
2.27%(1) 0.72% 0.81% 0.83% 0.88% 0.85%(1) 0.95%
258.33% -- -- -- -- -- --
</TABLE>
49
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
Class I Shares
<TABLE>
<CAPTION>
Index Plus Index Plus Index Plus Index Plus
Bond Large Cap Mid Cap Small Cap
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From Period From Period From
February 4, 1998 December 10, 1996 February 3, 1998 February 3, 1998
(Commencement (Commencement (Commencement (Commencement
of Operations) to Year Ended of Operations) to of Operations) to of Operations) to
October 31, October 31, October 31, October 31, October 31,
1998 1998 1997 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....$ 10.00 $ 12.43 $ 10.00 $ 10.00 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income ................... 0.40 0.13 0.12 0.04 0.02
Net realized and change in unrealized
gain or loss on investments ......... 0.14 2.57 2.33 0.32 (1.15)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations .................. 0.54 2.70 2.45 0.36 (1.13)
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income .............. (0.40) (0.13) (0.02) -- --
From net realized gains on
investments ......................... -- (1.22) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ............ (0.40) (1.35) (0.02) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ..........$ 10.14 $ 13.78 $ 12.43 $ 10.36 $ 8.87
====================================================================================================================================
Total Return ............................ 5.48% 23.46% 24.49% 3.60% (11.30)%
Net assets, end of period (000's) .......$ 14,958 $ 31,671 $ 10,876 $ 6,996 $ 5,862
Ratio of net expenses to average
net assets .......................... 0.60%(1)(2) 0.70%(2) 0.70%(1)(2) 0.75%(1)(2) 0.75%(1)(2)
Ratio of net investment income to
average net assets .................. 5.39%(1) 0.96% 1.15%(1) 0.57%(1) 0.25%(1)
Ratio of expenses before reimbursement
and waiver to average net assets .... 1.42%(1) 1.17% 1.95%(1) 2.51%(1) 2.63%(1)
Portfolio turnover rate ................. 20.86% 124.16% 82.31% 129.87% 100.41%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
50
<PAGE>
<TABLE>
<CAPTION>
Ascent Crossroads
- ------------------------------------------------------------------------------------------------------------------------------------
Period From Period From
January 4, 1995 January 4, 1995
(Commencement (Commencement
Year Ended Year Ended Year Ended of Operations) to Year Ended Year Ended Year Ended of Operations) to
October 31, October 31, October 31, October 31, October 31, October 31, October 31, October 31,
1998 1997 1996 1995 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 14.48 $ 12.57 $ 11.67 $ 10.00 $ 13.29 $ 12.16 $ 11.53 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
0.24 0.21 0.21 0.25 0.31 0.27 0.25 0.29
(0.41) 2.92 2.04 1.42 (0.37) 2.16 1.64 1.24
- ------------------------------------------------------------------------------------------------------------------------------------
(0.17) 3.13 2.25 1.67 (0.06) 2.43 1.89 1.53
- ------------------------------------------------------------------------------------------------------------------------------------
(0.41) (0.25) (0.38) -- (0.45) (0.30) (0.44) --
(2.76) (0.97) (0.97) -- (1.70) (1.00) (0.82) --
- ------------------------------------------------------------------------------------------------------------------------------------
(3.17) (1.22) (1.35) -- (2.15) (1.30) (1.26) --
- ------------------------------------------------------------------------------------------------------------------------------------
$ 11.14 $ 14.48 $ 12.57 $ 11.67 $ 11.08 $ 13.29 $ 12.16 $ 11.53
====================================================================================================================================
(1.90)% 26.59% 20.94% 16.70% (0.87)% 21.65% 17.66% 15.30%
$ 38,012 $ 27,359 $ 25,752 $ 20,433 $ 37,620 $ 26,028 $ 22,947 $ 20,370
1.24%(2) 1.52%(2) 1.73% 1.38%(1) 1.24%(2) 1.57%(2) 1.74% 1.40%(1)
2.00% 1.53% 1.69% 2.80%(1) 2.61% 2.13% 2.18% 3.26%(1)
1.43% 1.61% -- -- 1.40% 1.66% -- --
105.08% 162.80% 104.84% 164.09% 115.65% 161.75% 107.40% 166.93%
</TABLE>
51
<PAGE>
Financial Highlights (continued)
(for one outstanding share throughout each period)
Class I Shares
<TABLE>
<CAPTION>
Legacy
- ------------------------------------------------------------------------------------------------------------------------------------
Period From
January 4, 1995
Year Year Year (Commencement
Ended Ended Ended of Operations) to
October 31, October 31, October 31, October 31,
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............. $ 12.15 $ 11.64 $ 11.41 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net investment income ............................ 0.35 0.32 0.29 0.33
Net realized and change in unrealized gain or loss
on investments ............................... (0.07) 1.41 1.20 1.08
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ........ 0.28 1.73 1.49 1.41
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
From net investment income ....................... (0.60) (0.33) (0.50) --
From net realized gains on investments ........... (1.62) (0.89) (0.76) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions ..................... (2.22) (1.22) (1.26) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ................... $ 10.21 $ 12.15 $ 11.64 $ 11.41
====================================================================================================================================
Total Return ..................................... 2.51% 15.94% 14.11% 14.10%
Net assets, end of period (000's) ................ $ 22,352 $ 18,313 $ 22,326 $ 19,651
Ratio of net expenses to average
net assets ................................... 1.24%(2) 1.63%(2) 1.73% 1.42%(1)
Ratio of net investment income to average
net assets ................................... 3.26% 2.77% 2.62% 3.75%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ............. 1.67% 1.75% -- --
Portfolio turnover rate .......................... 115.12% 158.71% 91.62% 179.88%
</TABLE>
(1) Annualized.
(2) Aeltus has waived, and is contractually obligated through December 31, 1999
to waive all or a portion of its fees and/or to reimburse a portion of the
Funds' other expenses (see note 4 of Notes to Financial Statements).
Per share data calculated using weighted average number of shares outstanding
throughout the period.
52
<PAGE>
Additional Information
The SAI, which is incorporated by reference into this Prospectus, contains
additional information about the Funds. The Funds' most recent annual and
semi-annual reports also contain information about the Funds' investments, as
well as a discussion of the market conditions and investment strategies that
significantly affected their performance during the past fiscal year.
You may request free of charge the current SAI or the most recent annual and
semi-annual reports, or other information about the Funds, by calling
1-800-367-7732 or writing to:
Aetna Series Fund, Inc.
10 State House Square
Hartford, Connecticut 06103-3602
The SEC also makes available to the public reports and information about the
Funds. Certain reports and information, including the SAI, are available on the
SEC's web site (http://www.sec.gov) or at the SEC's public reference room in
Washington, D.C. You may call 1-800-SEC-0330 to get information about the
operations of the public reference room or you may write to public reference
section, Washington, D.C. 20549-6009 to get information from the public
reference section. The public reference section will charge a duplicating fee
for copying and sending any information you request.
Investment Company Act File No. 811-6352.
53
<PAGE>
Statement of Additional Information Dated: March 1, 1999
AETNA SERIES FUND, INC.
CLASS A, CLASS B, CLASS C
AND CLASS I SHARES
This Statement of Additional Information (Statement) is not a Prospectus and
should be read in conjunction with the current Prospectus for Class A, Class B
and Class C shares of Aetna Series Fund, Inc. (Company) and the current
Prospectus for Class I shares of the Company, each dated March 1, 1999, for the
following funds (Funds). Capitalized terms not defined herein are used as
defined in the Prospectuses.
<TABLE>
<S> <C>
Capital Appreciation Funds Index Plus Funds
Aetna Growth Fund (Growth) Aetna Index Plus Bond Fund (Index Plus Bond)
Aetna International Fund (International) Aetna Index Plus Large Cap Fund (Index Plus
Aetna Mid Cap Fund (Mid Cap) Large Cap)
Aetna Small Company Fund (Small Company) Aetna Index Plus Mid Cap Fund (Index Plus
Plus Aetna Value Opportunity Fund (Value Mid Cap)
Opportunity) Aetna Index Plus Small Cap Fund (Index
Plus Small Cap)
Growth & Income Funds
Aetna Balanced Fund (Balanced) Generation Funds
Aetna Growth and Income Fund (Growth and Aetna Ascent Fund (Ascent)
Income) Aetna Crossroads Fund (Crossroads)
Aetna Real Estate Securities Fund (Real Aetna Legacy Fund (Legacy)
Estate)
Income Funds
Aetna Bond Fund (Bond Fund)
Aetna Government Fund
Aetna High Yield Fund (High Yield)
Aetna Money Market Fund (Money Market)
</TABLE>
The Funds' Financial Statements and the independent auditors' reports thereon,
included in the Company's Annual Report, are incorporated herein by reference in
this Statement. A free copy of the Company's Annual Report and each Prospectus
is available upon request by writing to: Aetna Series Fund, Inc., 10 State House
Square, Hartford, Connecticut 06103-3602, or by calling: (800) 367-7732.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information ......................................... 3
Additional Investment Restrictions and Policies ............. 4
Investment Techniques and Risk Factors ...................... 6
Directors and Officers ...................................... 18
Control Persons and Principal Shareholders .................. 21
The Investment Advisory Agreements .......................... 22
The Subadvisory Agreement ................................... 26
The Administrative Services Agreement ....................... 26
Custodian ................................................... 28
Transfer Agent .............................................. 28
Independent Auditors ........................................ 28
Principal Underwriter ....................................... 28
Distribution and Shareholder Servicing Arrangements ......... 29
Purchase and Redemption of Shares ........................... 32
Brokerage Allocation and Trading Policies ................... 35
Shareholder Accounts and Services ........................... 37
Net Asset Value ............................................. 38
Tax Status .................................................. 39
Performance Information ..................................... 39
Financial Statements ........................................ 45
</TABLE>
2 Aetna Series Fund, Inc.
<PAGE>
GENERAL INFORMATION
Incorporation--The Company was incorporated under the laws of Maryland on June
17, 1991.
Series and Classes--The Company currently offers 19 separate series, all of
which are listed on the first page of the Statement. The Board of Directors
(Board) has the authority 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.
Shares of each Fund currently are classified into four classes: Class A, Class
B, Class C and Class I. Class I shares are shares that are offered to certain
retirement plans; certain registered investment advisers having an agreement
with the Funds to invest a minimum of $1 million within one year of initial
purchase; employees and retired employees of Aetna Inc. and its affiliates
(including members of employees' and retired persons' immediate families, board
members and trustees, and their immediate families); insurance companies
(including separate accounts); registered investment companies; shareholders
holding Select Class shares at the time such shares were redesignated as Class I
shares, and their immediate family members, as long as they maintain a
shareholder account; certain bank and independent trust companies investing on
behalf of their clients for which they charge trust and investment management
fees; members of the Board; NASD-registered representatives of Aeltus Capital or
any affiliated broker-dealer (including members of their immediate families);
and of such other groups as may be approved by the Company's Board from time to
time. Class A, Class B and Class C shares are shares that are offered to
accounts not eligible to buy Class I shares. Each class of shares has the same
rights, privileges and preferences, except with respect to: (a) the effect of
sales charges, if any, for each class; (b) the distribution 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.
Capital Stock--Fund shares are fully paid and nonassessable when issued. Fund
shares have no preemptive or conversion rights, except that Class B shares
automatically convert to Class A shares after 8 years. Each share of a Fund has
the same rights to share in dividends declared by a Fund. Upon liquidation of
any Fund, shareholders in that Fund are entitled to share pro rata in the net
assets of the Fund available for distribution to shareholders.
Voting Rights--Shareholders of each class are entitled to one vote for each full
share held (and fractional votes for fractional shares of each class held) and
will vote on the election of Directors and on other matters submitted to the
vote of shareholders. Generally, all shareholders have voting rights on all
matters except matters affecting only the interests of one Fund or one class of
shares. Voting rights are not cumulative, so that the holders of more than 50%
of the shares voting in the election of Directors can, if they choose to do so,
elect all the Directors, in which event the holders of the remaining shares will
be unable to elect any person as a Director.
The Articles may be amended by an affirmative vote of a majority of the shares
at any meeting of shareholders or by written instrument signed by a majority of
the Directors and consented to by a majority of the shareholders.
Shareholder Meetings--The Company is not required, and does not intend, to hold
annual shareholder meetings. The Articles provide for meetings of shareholders
to elect Directors at such times as may be determined by the Directors or as
required by the Investment Company Act of 1940, as amended (1940 Act). If
requested by the holders of at least 10% of the Company's outstanding shares,
the Company will hold a shareholder meeting for the purpose of voting on the
removal of one or more Directors and will assist with communication concerning
that shareholder meeting.
1940 Act Classification--The Company is an open-end management investment
company, as that term is defined under the 1940 Act. Each Fund is a diversified
company, as that term is defined under the 1940 Act. The 1940 Act generally
requires that with respect to 75% of its total assets, a diversified company may
not invest more than 5% of its total assets in the securities of any one issuer.
Money Market is subject to this restriction with respect to 100% of its total
assets.
Aetna Series Fund, Inc. 3
<PAGE>
ADDITIONAL INVESTMENT RESTRICTIONS AND POLICIES
The investment objectives and certain investment policies of each Fund are
matters of fundamental policy for purposes of the 1940 Act and therefore cannot
be changed without the approval of a majority of the outstanding voting
securities of that Fund. This means the lesser of (a) 67% of the shares of a
Fund present at a shareholders' meeting if the holders of more than 50% of the
shares of that Fund then outstanding are present in person or by proxy; or (b)
more than 50% of the outstanding voting securities of the Fund.
As a matter of fundamental policy, a Fund 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% (100% in the case of
Money Market) of the value of a Fund's total assets. Securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities are
excluded from this restriction;
(2) except for Real Estate, concentrate its investments in any one industry,
although a Fund may invest up to 25% of its total assets in securities
issued by companies principally engaged in any one industry. For purposes
of this restriction, finance companies will be classified as separate
industries according to the end user of their services, such as automobile
finance, computer finance and consumer finance. In addition, for purposes
of this restriction, for Ascent, Crossroads and Legacy (collectively
referred to as the "Generation Funds"), real estate stocks will be
classified as separate industries according to property type, such as
apartment, retail, office and industrial. This limitation will not apply
to any Fund's investment in securities issued or guaranteed by the U.S.
Government, its agencies or 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, and securities of banks;
(3) make loans, except that, to the extent appropriate under its investment
program, a Fund may (i) purchase bonds, debentures or other debt
instruments, including short-term obligations; (ii) enter into repurchase
transactions; and (iii) lend portfolio securities provided that the value
of such loaned securities does not exceed one-third of the Fund's total
assets;
(4) issue any senior security (as defined in the 1940 Act), except that (i) a
Fund may enter into commitments to purchase securities in accordance with
that Fund's investment program, including reverse repurchase agreements,
delayed delivery and when-issued securities, which may be considered the
issuance of senior securities; (ii) a Fund may engage in transactions that
may result in the issuance of a senior security to the extent permitted
under applicable regulations, interpretations of the 1940 Act or an
exemptive order; (iii) a Fund (other than Money Market) may engage in
short sales of securities to the extent permitted in its investment
program and other restrictions; (iv) the purchase or sale of futures
contracts and related options shall not be considered to involve the
issuance of senior securities; and (v) subject to certain fundamental
restrictions set forth below, a Fund may borrow money as authorized by the
1940 Act;
(5) except for Real Estate, purchase real estate, interests in real estate or
real estate limited partnership interests except that: (i) to the extent
appropriate under its investment program, a Fund may invest in securities
secured by real estate or interests therein or issued by companies,
including real estate investment trusts, which deal in real estate or
interests therein; or (ii) a Fund may acquire real estate as a result of
ownership of securities or other interests (this could occur for example
if a Fund holds a security that is collateralized by an interest in real
estate and the security defaults);
(6) invest in commodity contracts, except that a Fund may, to the extent
appropriate under its investment program, purchase securities of companies
engaged in such activities; may (other than Money Mar-
4 Aetna Series Fund, Inc.
<PAGE>
ket) enter into transactions in financial and index futures contracts and
related options; and may enter into forward currency contracts;
(7) borrow money, except that (i) a Fund (other than Money Market) may enter
into certain futures contracts and options related thereto; (ii) a Fund
may enter into commitments to purchase securities in accordance with that
Fund's investment program, including delayed delivery and when-issued
securities and reverse repurchase agreements; (iii) for temporary
emergency purposes, a Fund may borrow money in amounts not exceeding 5% of
the value of its total assets at the time the loan is made; and (iv) for
purposes of leveraging, a Fund (other than Money Market) may borrow money
from banks (including its custodian bank) only if, immediately after such
borrowing, the value of that Fund's assets, including the amount borrowed,
less its liabilities, is equal to at least 300% of the amount borrowed,
plus all outstanding borrowings. If, at any time, the value of that Fund's
assets fails to meet the 300% asset coverage requirement relative only to
leveraging, that Fund will, within three days (not including Sundays and
holidays), reduce its borrowings to the extent necessary to meet the 300%
test;
(8) act as an underwriter of securities except to the extent that, in
connection with the disposition of portfolio securities by a Fund, that
Fund may be deemed to be an underwriter under the provisions of the
Securities Act of 1933 (1933 Act).
The Board has adopted the following other investment restrictions which may be
changed by the Board and without shareholder vote. A Fund will not:
(1) make short sales of securities, other than short sales "against the box,"
or purchase securities on margin except for short-term credits necessary
for clearance of portfolio transactions, provided that this restriction
will not be applied to limit the use of options, futures contracts and
related options, in the manner otherwise permitted by the investment
restrictions, policies and investment programs of each Fund, as described
in this Statement and in the Prospectuses;
(2) except for International and Generation Funds, invest more than 25% of its
total assets in securities or obligations of foreign issuers, including
marketable securities of, or guaranteed by, foreign governments (or any
instrumentality or subdivision thereof). A Fund will invest in securities
or obligations of foreign banks only if such banks have a minimum of $5
billion in assets and a primary capital ratio of at least 4.25%. 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 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;
(5) invest more than 15% (10% for Money Market, Index Plus Bond, Index Plus
Large Cap, Index Plus Mid Cap and Index Plus Small Cap) of its net 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 under, or securities offered pursuant
to Section 4(2) of the 1933 Act, shall not be deemed illiquid solely by
reason of being unregistered. Aeltus Investment Management, Inc. (Aeltus),
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;
(6) except for High Yield, invest more than 15% (10% for Index Plus Large Cap,
Index Plus Mid Cap and Index Plus Small Cap) of the total value of its
assets in high-yield bonds (securities rated below BBB- by Standard &
Poor's Corporation (S&P) or Baa3 by Moody's Investors Service, Inc.
(Moody's), or, if unrated, considered by Aeltus to be of comparable
quality);
Aetna Series Fund, Inc. 5
<PAGE>
(7) except for Index Plus Bond, Index Plus Large Cap, Index Plus Mid Cap and
Index Plus Small Cap, 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
Aeltus to be primarily involved in the production or distribution of tobacco
products.
Where a Fund's investment objective or policy restricts it to holding or
investing a specified percentage of its 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 AND RISK FACTORS
Options, Futures and Other Derivative Instruments
Each Fund may use certain derivative instruments as a means of achieving its
investment objective. For purposes other than hedging, a Fund will invest no
more than 5% of its assets in derivatives, which at the time of purchase are
considered by management to involve high risk to the Fund, such as inverse
floaters and interest-only and principal-only debt instruments.
Each Fund (except Money Market) may use the derivative instruments described
below and in the Prospectuses. Derivatives that may be used by a Fund (other
than Money Market) include forward contracts, swaps, structured notes, futures
and options. Each Fund may invest up to 30% of its assets in lower risk
derivatives for hedging or to gain additional exposure to certain markets for
investment purposes while maintaining liquidity to meet shareholder redemptions
and minimizing trading costs. Forward exchange contracts are not subject to this
30% limitation.
The following provides additional information about those derivative instruments
each Fund (except Money Market) may use.
Futures Contracts--Each Fund may enter into futures contracts and options
thereon subject to the restrictions described below under "Additional
Restrictions on the Use of Futures and Option Contracts." A Fund may enter into
futures contracts or options thereon that are traded on national futures
exchanges and are standardized as to maturity date and underlying financial
instrument. The futures exchanges and trading in the U.S. are regulated under
the Commodity Exchange Act by the Commodities Futures Trading Commission (CFTC).
A futures contract provides for the future sale by one party and purchase by
another party of a specified amount of a financial instrument or a specific
stock market index for a specified price at a designated date, time, and place.
Brokerage fees are incurred when a futures contract is bought or sold and at
expiration, and margin deposits must be maintained.
Although interest rate futures contracts typically require actual future
delivery of and payment for the underlying instruments, those contracts are
usually closed out before the delivery date. Stock index futures contracts do
not contemplate actual future delivery and will be settled in cash at expiration
or closed out prior to expiration. Closing out an open futures contract sale or
purchase is effected by entering into an offsetting futures contract purchase or
sale, respectively, for the same aggregate amount of the identical type of
underlying instrument and the same delivery date. There can be no assurance,
however, that a Fund will be able to enter into an offsetting transaction with
respect to a particular contract at a particular time. If a Fund is not able to
enter into an offsetting transaction, it will continue to be required to
maintain the margin deposits on the contract.
The prices of futures contracts are volatile and are influenced, among other
things, by actual and anticipated changes in interest rates and equity prices,
which in turn are affected by fiscal and monetary policies and national and
international political and economic events. Small price movements in futures
contracts
6 Aetna Series Fund, Inc.
<PAGE>
may result in immediate and potentially unlimited loss or gain to a Fund
relative to the size of the margin commitment. A purchase or sale of a futures
contract may result in losses in excess of the amount initially invested in the
futures contract.
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 U.S. futures exchanges limit the amount of fluctuation permitted in
interest rate futures contract prices during a single trading day, and, as
noted, temporary regulations limiting price fluctuations for stock index futures
contracts are also now in effect. The daily limit establishes the maximum amount
that the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that limit. The daily limit governs only price
movement during a particular trading day and therefore does not limit potential
losses, because the limit may prevent the liquidation of unfavorable positions.
Futures contract prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some persons engaging in futures
transactions to substantial losses.
Sales of futures contracts which are intended to hedge against a change in the
value of securities held by a Fund may affect the holding period of such
securities and, consequently, the nature of the gain or loss on such securities
upon disposition.
"Margin" is the amount of funds that must be deposited by a Fund with a
commodities broker in a custodian account in order to initiate futures trading
and to maintain open positions in a Fund's futures contracts. A margin deposit
is intended to assure the Fund's performance of the futures contract. The margin
required for a particular futures contract is set by the exchange on which the
contract is traded and may be significantly modified from time to time by the
exchange during the term of the contract.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy the
margin requirement, the broker will require an increase in the margin. However,
if the value of a position increases because of favorable price changes in the
futures contract so that the margin deposit exceeds the required margin, the
broker will promptly pay the excess to a Fund. These daily payments to and from
a Fund are called variation margin. At times of extreme price volatility,
intra-day variation margin payments may be required. In computing daily net
asset values, each Fund will mark-to-market the current value of its open
futures contracts. Each Fund expects to earn interest income on its initial
margin deposits.
When a Fund buys or sells a futures contract, unless it already owns an
offsetting position, it will designate cash and/or liquid securities having an
aggregate value at least equal to the full "notional" value of the futures
contract, thereby insuring that the leveraging effect of such futures contract
is minimized, in accordance with regulatory requirements.
A Fund can buy and write (sell) options on futures contracts. A Fund may
purchase and sell futures contracts and related options under the following
conditions: (a) the then-current aggregate futures market prices of financial
instruments required to be delivered and purchased under open futures contracts
shall not exceed 30% of a Fund's total assets (100% in the case of Ascent and
60% in the case of Crossroads) at market value at the time of entering into a
contract and (b) no more than 5% of the assets, at market value at the time of
entering into a contract, shall be committed to margin deposits in relation to
futures contracts. See "Call and Put Options" below for additional restrictions.
Aetna Series Fund, Inc. 7
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Call and Put Options--Each Fund may purchase and write (sell) call options and
put options on securities, indices and futures as discussed in the Prospectuses,
subject to the restrictions described in this section and under "Additional
Restrictions on the Use of Futures and Option Contracts." 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 Fund may write or purchase put or call options
listed on national securities exchanges in standard contracts or may write or
purchase put or call options with or directly from investment dealers meeting
the creditworthiness criteria of Aeltus.
Each Fund, except the Generation Funds, is prohibited from having written call
options outstanding at any one time on more than 30% of its total assets. A Fund
will not write a put if it will require more than 50% of the Fund's net assets
to be designated to cover all put obligations. No Fund may buy put options if
more than 3% of its assets immediately following such purchase would consist of
put options. The Funds may purchase call and sell put options on equity
securities only to close out positions previously opened; the Generation Funds
are not subject to this restriction. No Fund will write a call option on a
security unless the call is "covered" (i.e., it already owns the underlying
security). 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
call remains outstanding. This restriction does not apply to the writing of
calls on securities indices or futures contracts. The Funds will not write call
options on when-issued securities. The Funds purchase call options primarily as
a temporary substitute for taking positions in certain securities or in the
securities that comprise a relevant index, particularly if Aeltus (or Bradley,
in the case of Value Opportunity) considers these instruments to be undervalued
relative to the prices of particular securities or of the securities underlying
that index. A Fund may also purchase call options on an index to protect against
increases in the price of securities underlying that index that the Fund intends
to purchase pending its ability to invest in such securities in an orderly
manner.
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.
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.
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).
A Fund may write calls on securities indices and futures contracts provided that
it enters into an appropriate offsetting position or that it designates liquid
assets in an amount sufficient to cover the underlying obligation in accordance
with regulatory requirements. The risk involved in writing call options on
futures contracts or market indices is that a Fund would not benefit from any
increase in value above the exercise price. Usually, this risk can be eliminated
by entering into an offsetting transaction. However, the cost to do an
offsetting transaction and terminate the Fund's obligation might be more or less
than the premium received when it originally wrote the option. Further, a Fund
might occasionally not be able to close the option because of insufficient
activity in the options market.
8 Aetna Series Fund, Inc.
<PAGE>
In the case of a put option, as long as the obligation of the put writer
continues, it may be assigned an exercise notice by the broker-dealer through
which such option was sold, requiring the writer to take delivery of the
underlying security against payment of the exercise price. A writer has no
control over when it may be required to purchase the underlying security, since
it may be assigned an exercise notice at any time prior to the expiration date.
This obligation terminates earlier if the writer effects a closing purchase
transaction by purchasing a put of the same series as that previously sold.
If a put option is sold by a Fund, the Fund will designate liquid securities
with a value equal to the exercise price, or else will hold an offsetting
position in accordance with regulatory requirements. In writing puts, there is
the risk that a writer may be required to buy the underlying security at a
disadvantageous price. 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. If the put is exercised, however, the writer is
obligated during the option period to buy the underlying instrument from the
buyer of the put at the exercise price, even though the value of the investment
may have fallen below the exercise price. If the put lapses unexercised, the
writer realizes a gain in the amount of the premium. If the put is exercised,
the writer may incur a loss, equal to the difference between the exercise price
and the current market value of the underlying instrument.
A Fund may purchase put options when Aeltus (or Bradley, in the case of Value
Opportunity) 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 Fund's holdings in an
underlying security against a substantial decline in market value. Such
protection is, of course, only provided during the life of the put option when a
Fund, as the holder of the put option, is able to sell the underlying security
at the put exercise price regardless of any decline in the underlying security's
market price. By using put options in this manner, a Fund will reduce any profit
it might otherwise have realized in its underlying security by the premium paid
for the put option and by transaction costs.
The premium received from writing a call or put option, or paid for purchasing a
call or put option will reflect, among other things, the current market price of
the underlying security, the relationship of the exercise price to such market
price, the historical price volatility of the underlying security, the length of
the option period, and the general interest rate environment. The premium
received by a Fund for writing call options will be recorded as a liability in
the statement of assets and liabilities of that Fund. This liability will be
adjusted daily to the option's current market value. The liability will be
extinguished upon expiration of the option, by the exercise of the option, or by
entering into an offsetting transaction. Similarly, the premium paid by a Fund
when purchasing a put option will be recorded as an asset in the statement of
assets and liabilities of that Fund. This asset will be adjusted daily to the
option's current market value. The asset will be extinguished upon expiration of
the option, by selling an identical option in a closing transaction, or by
exercising the option.
Closing transactions will be effected in order to realize a profit on an
outstanding call or put option, to prevent an underlying security from being
called or put, or to permit the exchange or tender of the underlying security.
Furthermore, effecting a closing transaction will permit a Fund to write another
call option, or purchase another put option, on the underlying security with
either a different exercise price or expiration date or both. If a Fund desires
to sell a particular security from its portfolio on which it has written a call
option, or purchased a put option, it will seek to effect a closing transaction
prior to, or concurrently with, the sale of the security. There is, of course,
no assurance that a Fund will be able to effect a closing transaction at a
favorable price. If a Fund cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold, in which case it
would continue to be at market risk on the security. A Fund will pay brokerage
commissions in connection with the sale or purchase of options to close out
previously established option positions. These brokerage commissions are
normally higher as a percentage of underlying asset values than those applicable
to purchases and sales of portfolio securities.
Foreign Futures Contracts and Foreign Options--The Funds may engage in
transactions in foreign futures contracts and foreign options. Participation in
foreign futures contracts and foreign options transactions involves the
execution and clearing of trades on or subject to the rules of a foreign board
of trade.
Aetna Series Fund, Inc. 9
<PAGE>
Neither the CFTC, the National Futures Association (NFA) nor any domestic
exchange regulates activities of any foreign boards of trade including the
execution, delivery and clearing of transactions, or has the power to compel
enforcement of the rules of a foreign board of trade or any applicable foreign
laws. Generally, the foreign transaction will be governed by applicable foreign
law. This is true even if the exchange is formally linked to a domestic market
so that a position taken on the market may be liquidated by a transaction on
another market. Moreover, such laws or regulations will vary depending on the
foreign country in which the foreign futures contracts or foreign options
transaction occurs. Investors that 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 U.S. futures exchange. The price of any foreign
futures contracts or foreign options contract and, therefore, the potential
profit and loss thereon, may be affected by any variance in the foreign exchange
rate between the time an order is placed and the time it is liquidated, offset
or exercised.
Options on Foreign Currencies--Each Fund may write and purchase calls on foreign
currencies. A Fund may purchase and write puts and calls on foreign currencies
that are traded on a securities or commodities exchange or quoted by major
recognized dealers in such options for the purpose of protecting against
declines in the dollar value of foreign securities and against increases in the
dollar cost of foreign securities to be acquired. If a rise is anticipated in
the dollar value of a foreign currency in which securities to be acquired are
denominated, the increased cost of such securities may be partially offset by
purchasing calls or writing puts on that foreign currency. If a decline in the
dollar value of a foreign currency is anticipated, the decline in value of
portfolio securities denominated in that currency may be partially offset by
writing calls or purchasing puts on that foreign currency. In such
circumstances, the Fund collateralizes the position by designating cash and/or
liquid securities in an amount not less than the value of the underlying foreign
currency in U.S. dollars marked-to-market daily. In the event of rate
fluctuations adverse to a Fund's position, it would lose the premium it paid and
transactions costs. A call written on a foreign currency by a Fund is covered if
the Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration specially designated)
upon conversion or exchange of other foreign currency held in its portfolio.
Additional Restrictions on the Use of Futures and Option Contracts--CFTC
regulations require that to prevent a Fund from being a commodity pool the Funds
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. As evidence of its
hedging intent, each Fund expects that at least 75% of futures contract
purchases will be "completed"; that is, upon the sale of these long contracts,
equivalent amounts of related securities will have been or are then being
purchased by that Fund in the cash market. With respect to futures contracts or
related options that are entered into for purposes that may be considered
speculative, the aggregate initial margin for future contracts and premiums for
options will not exceed 5% of a Fund's net assets, after taking into account
realized profits and unrealized losses on such futures contracts.
Forward Exchange Contracts--Each Fund may enter into forward contracts for
foreign currency (forward exchange contracts), which obligate the seller to
deliver and the purchaser to take a specific amount of a specified foreign
currency at a future date at a price set at the time of the contract. These
contracts are generally traded in the interbank market conducted directly
between currency traders and their customers. A Fund may enter into a forward
exchange contract in order to "lock in" the U.S. dollar price of a security
denominated in a foreign currency which it has purchased or sold but which has
not yet settled (a transaction hedge); or to lock in the value of an existing
portfolio security (a position hedge); or to protect against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
10 Aetna Series Fund, Inc.
<PAGE>
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 Fund may also enter into
a forward exchange contract to sell a foreign currency that 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
Aeltus to correctly identify and monitor the correlation between foreign
currencies and the U.S. dollar. To the extent that the correlation is not
identical, a Fund may experience losses or gains on both the underlying security
and the cross currency hedge.
Each Fund may use forward exchange contracts to protect against uncertainty in
the level of future exchange rates. The use of forward exchange contracts does
not eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance. In
addition, although forward exchange contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit any
potential gain that might result should the value of the currencies increase.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of these securities between the date the forward contract
is entered into and the date it is sold. Accordingly, it may be necessary for a
Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase), if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its market
value exceeds the amount of foreign currency the Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing the Fund to sustain losses
on these contracts and transactions costs.
At or before the maturity of a forward exchange contract requiring a Fund to
sell a currency, the Fund may either sell a portfolio security and use the sale
proceeds to make delivery of the currency or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, a Fund may
close out a forward contract requiring it to purchase a specified currency by
entering into a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would realize a
gain or loss as a result of entering into such an offsetting forward contract
under either circumstance to the extent the exchange rate(s) between the
currencies involved moved between the execution dates of the first contract and
the offsetting contract.
The cost to a Fund of engaging in forward exchange contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. Because such
contracts are not traded on an exchange, Aeltus must evaluate the credit and
performance risk of each particular counterparty under a forward contract.
Although the Funds value their assets daily in terms of U.S. dollars, they do
not intend to convert their holdings of foreign currencies into U.S. dollars on
a daily basis. The Funds may convert foreign currency from time to time. Foreign
exchange dealers do not charge a fee for conversion, but they do seek to realize
a profit based on the difference between the prices at which they buy and sell
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Funds at one rate, while offering a lesser rate of exchange should the Funds
desire to resell that currency to the dealer.
Aetna Series Fund, Inc. 11
<PAGE>
Interest Rate Swap Transactions--Swap agreements entail both interest rate risk
and credit risk. There is a risk that, based on movements of interest rates in
the future, the payments made by a Fund under a swap agreement will have been
greater than those received by it. Credit risk arises from the possibility that
the counterparty will default. If the counterparty to an interest rate swap
defaults, a Fund's loss will consist of the net amount of contractual interest
payments that a Fund has not yet received. Aeltus will monitor the
creditworthiness of counterparties to a Fund's interest rate swap transactions
on an ongoing basis. A Fund will enter into swap transactions with appropriate
counterparties pursuant to master netting agreements. A master netting agreement
provides that all swaps done between a Fund and that counterparty under that
master agreement shall be regarded as parts of an integral agreement. If on any
date amounts are payable in the same currency in respect of one or more swap
transactions, the net amount payable on that date in that currency shall be
paid. In addition, the master netting agreement may provide that if one party
defaults generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a loss to
one party, the measure of that party's damages is calculated by reference to the
average cost of a replacement swap with respect to each swap (i.e., the
mark-to-market value at the time of the termination of each swap). The gains and
losses on all swaps are then netted, and the result is the counterparty's gain
or loss on termination. The termination of all swaps and the netting of gains
and losses on termination is generally referred to as "aggregation."
Mortgage-Related Debt Securities
Money Market, Aetna Government Fund, Bond Fund, Growth and Income, High Yield,
Balanced, Real Estate, Index Plus Bond and the Generation Funds may invest in
mortgage-related debt securities, collateralized mortgage obligations (CMOs) and
real estate mortgage investment conduits (REMICs). 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 U.S., the securities and guarantees of which
are backed by the full faith and credit of the U.S. FNMA, a federally chartered
and privately owned corporation, and FHLMC, a federal corporation, are
instrumentalities of the U.S. 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 that is part of the regular monthly
payment. A borrower is more likely to repay a mortgage bearing a relatively high
rate of interest. This means that in times of declining interest rates, some
higher yielding securities held by a Fund might be converted to cash, and the
Fund could be expected to reinvest such cash at the then prevailing lower rates.
The increased likelihood of prepayment when interest rates decline also limits
market price appreciation of mortgage-related securities. If a Fund buys
mortgage-related securities at a premium, mortgage foreclosures or mortgage
prepayments may result in losses of up to the amount of the premium paid since
only timely payment of principal and interest is guaranteed.
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.
12 Aetna Series Fund, Inc.
<PAGE>
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 or may not be guaranteed as to payment of principal
and interest by an agency or instrumentality of the U.S. Government such as GNMA
or otherwise backed by FNMA or FHLMC. Alternatively, such securities may be
backed by mortgage insurance, letters of credit or other credit enhancing
features. Both CMOs and REMICs are issued by private entities. They are not
directly guaranteed by any government agency and are secured by the collateral
held by the issuer. CMOs and REMICs are subject to the type of prepayment risk
described above due to the possibility that prepayments on the underlying assets
will alter the cash flow.
Asset-Backed Securities
Each Fund may invest in 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.
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.
The collateral behind certain asset-backed securities (such as CARs and CARDs)
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. Other asset-backed securities, such as home equity asset-
backed securities, have prepayment rates that are sensitive to interest rates.
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.
Zero Coupon and Pay-in-Kind Securities
Each Fund may invest in zero coupon securities and all Funds (except Money
Market) may invest in pay-in-kind securities. In addition, each Fund 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
Aetna Series Fund, Inc. 13
<PAGE>
securities generally are more volatile than the market prices of securities with
similar maturities that pay interest periodically and are likely to respond to
changes in interest rates to a greater degree than do non-zero coupon securities
having similar maturities and credit quality.
The risks associated with lower-rated debt securities apply to these securities.
Zero coupon and pay-in-kind securities are also subject to the risk that in the
event of a default, a Fund may realize no return on its investment, because
these securities do not pay cash interest.
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 Fund's transactions in derivatives.
Risk of Imperfect Correlation--A Fund's ability to hedge effectively all or a
portion of its portfolio through transactions in futures, options on futures or
options on securities and indexes depends on the degree to which movements in
the value of the securities or index underlying such hedging instrument
correlate with movements in the value of the assets being hedged. If the values
of the assets being hedged do not move in the same amount or direction as the
underlying security or index, the hedging strategy for a Fund might not be
successful and the Fund could sustain losses on its hedging transactions which
would not be offset by gains on its portfolio. It is also possible that there
may be a negative correlation between the security or index underlying a futures
or option contract and the portfolio securities being hedged, which could result
in losses both on the hedging transaction and the portfolio securities. In such
instances, the Fund's overall return could be less than if the hedging
transactions had not been undertaken.
Potential Lack of a Liquid Secondary Market--Prior to exercise or expiration, a
futures or option position may be terminated only by entering into a closing
purchase or sale transaction, which requires a secondary market on the exchange
on which the position was originally established. While a Fund will establish a
futures or option position only if there appears to be a liquid secondary market
therefor, there can be no assurance that such a market will exist for any
particular futures or option contract at any specific time. In such event, it
may not be possible to close out a position held by the Fund, which could
require the Fund to purchase or sell the instrument underlying the position,
make or receive a cash settlement, or meet ongoing variation margin
requirements. The inability to close out futures or option positions also could
have an adverse impact on the Fund's ability effectively to hedge its portfolio,
or the relevant portion thereof.
The 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 Aeltus'
judgment concerning the general direction of interest rates is incorrect, a
Fund's overall performance may be poorer than if it had not entered into any
such contract. For example, if a Fund has been hedged against the possibility of
an increase in interest rates which would adversely affect the price of bonds
held in its portfolio and interest rates decrease instead, the Fund will lose
part or all of the benefit of the increased value of its bonds which have been
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have to
sell bonds from its portfolio to meet daily variation margin requirements,
possibly at a time when it may be disadvantageous to do so. Such sale of bonds
may be, but will not necessarily be, at increased prices which reflect the
rising market.
Trading and Position Limits--Each contract market on which futures and option
contracts are traded has established a number of limitations governing the
maximum number of positions which may be held by a trader, whether acting alone
or in concert with others. The Company does not believe that these trading and
position limits will have an adverse impact on the hedging strategies regarding
the Funds.
14 Aetna Series Fund, Inc.
<PAGE>
Counterparty Risk--With some derivatives, whether used for hedging or
speculation, there is also the risk that the counterparty may fail to honor its
contract terms, causing a loss for the Fund.
Funds' Investment in Equity and Debt Securities
Each Fund may invest in equity and debt securities (except that Aetna Government
Fund and Money Market may not invest in equity securities). 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. International may hold
up to 10% of its total assets in long-term debt securities with an S&P or
Moody's rating of AA/Aa or above, or, if unrated, are considered by Aeltus to be
of comparable quality. Balanced generally maintains at least 25% of its total
assets in debt securities.
Repurchase Agreements
Each Fund may enter into repurchase agreements with domestic banks and
broker-dealers meeting certain size and creditworthiness standards approved by
the Board. Under a repurchase agreement, a Fund may acquire a debt instrument
for a relatively short period (usually not more than one week) subject to an
obligation of the seller to repurchase and the Fund to resell the instrument at
a fixed price and time, thereby determining the yield during the Fund's holding
period. This results in a fixed rate of return insulated from market
fluctuations during such period. Such underlying debt instruments serving as
collateral will meet the quality standards of a Fund. The market value of the
underlying debt instruments will, at all times, be equal to the dollar amount
invested. Repurchase agreements, although fully collateralized, involve the risk
that the seller of the securities may fail to repurchase them from a Fund. In
that event, the Fund may incur (a) disposition costs in connection with
liquidating the collateral, or (b) a loss if the collateral declines in value.
Also, if the default on the part of the seller is due to insolvency and the
seller initiates bankruptcy proceedings, a Fund's ability to liquidate the
collateral may be delayed or limited. Repurchase agreements maturing in more
than seven days will not exceed 10% of the total assets of a Fund.
Variable Rate Demand Instruments
Each Fund, except International, may invest in variable rate demand instruments.
Variable rate demand instruments (including floating rate instruments) held by a
Fund may have maturities of more than one year, provided: (i) the Fund is
entitled to the payment of principal at any time, or during specified intervals
not exceeding one year, upon giving the prescribed notice (which may not exceed
30 days), and (ii) the rate of interest on such instruments is adjusted at
periodic intervals not to exceed one year. In determining whether a variable
rate demand instrument has a remaining maturity of one year or less, each
instrument will be deemed to have a maturity equal to the longer of the period
remaining until its next interest rate adjustment or the period remaining until
the principal amount can be recovered through demand. A Fund will be able (at
any time or during specified periods not exceeding one year, depending upon the
note involved) to demand payment of the principal of a note. If an issuer of a
variable rate demand note defaulted on its payment obligation, a Fund might be
unable to dispose of the note and a loss would be incurred to the extent of the
default. A Fund may invest in variable rate demand notes only when the
investment is deemed to involve minimal credit risk. The continuing
creditworthiness of issuers of variable rate demand notes held by a Fund will
also be monitored to determine whether such notes should continue to be held.
Variable and floating rate instruments with demand periods in excess of seven
days and which cannot be disposed of promptly within seven business days and in
the usual course of business without taking a reduced price will be treated as
illiquid securities.
Foreign Securities
All Funds may invest in foreign securities. 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
impo-
Aetna Series Fund, Inc. 15
<PAGE>
sition of exchange controls or other foreign governmental laws or restrictions.
Because the Funds (other than Money Market) may invest in securities denominated
or quoted in currencies other than the U.S. dollar, changes in foreign currency
exchange rates will affect the value of securities in the portfolio and the
unrealized appreciation or depreciation of investments so far as U.S. investors
are concerned. In addition, with respect to certain countries, there is the
possibility of expropriation of assets, confiscatory taxation, political or
social instability, or diplomatic developments that could adversely affect
investments in those countries.
There may be less publicly available information about a foreign issuer than
about a U.S. company, and foreign issuers may not be subject to accounting,
auditing, and financial reporting standards and requirements comparable to or as
uniform as those of U.S. issuers. Foreign securities markets, while growing in
volume, have, for the most part, substantially less volume than U.S. markets.
Securities of many foreign issuers are less liquid and their prices more
volatile than securities of comparable U.S. issuers. Transactional costs in
non-U.S. securities markets are generally higher than in U.S. securities
markets. There is generally less government supervision and regulation of
exchanges, brokers, and issuers than there is in the U.S. The Company might have
greater difficulty taking appropriate legal action with respect to foreign
investments in non-U.S. courts than with respect to domestic issuers in U.S.
courts. In addition, transactions in foreign securities may involve greater time
from the trade date until settlement than domestic securities transactions and
involve the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries.
All these risks usually are higher in emerging markets, such as most countries
in Africa, Asia, Latin America and the Middle East, than in more established
markets, such as Western Europe.
Depositary receipts are typically dollar denominated, although their market
price is subject to fluctuations of the foreign currency in which the underlying
securities are denominated. Depositary receipts include: (a) American Depositary
Receipts (ADRs), which are typically designed for U.S. investors and held either
in physical form or in book entry form; (b) European Depositary Receipts (EDRs),
which are similar to ADRs but may be listed and traded on a European exchange as
well as in the U.S. (typically, these securities are traded on the 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.
High-Yield Bonds
All Funds, except International, Aetna Government Fund and Money Market, may
invest in high-yield bonds, subject to the limits described above and in the
Prospectuses. High-yield bonds 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 and S&P or other rating agencies, or, if unrated,
are considered to be of comparable quality by Aeltus. These securities include:
(a) fixed rate corporate debt obligations (including bonds, debentures and
notes) rated below Baa3 by Moody's or BBB- by S&P;
(b) preferred stocks that have yields comparable to those of high-yielding debt
securities; and
(c) any securities convertible into any of the foregoing.
Debt obligations rated below Baa3/BBB- generally involve more risk of loss of
principal and income than higher-rated securities. Their yields and market
values tend to fluctuate more. Fluctuations in value do not affect the cash
income from the securities but are reflected in a Fund's net asset value. The
greater risks and fluctuations in yield and value occur, in part, because
investors generally perceive issuers of lower-rated and unrated securities to be
less creditworthy. Lower ratings, however, may not necessarily indicate higher
risks. In pursuing a Fund's objectives, Aeltus seeks to identify situations in
which Aeltus believes that future developments will enhance the creditworthiness
and the ratings of the issuer.
16 Aetna Series Fund, Inc.
<PAGE>
Some of the risks associated with high-yield bonds include:
Sensitivity to Interest Rate and Economic Changes--High-yield 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.
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. In addition, periods of economic uncertainty and changes
can be expected to result in increased volatility of market prices of these
securities and a Fund's net asset value. Furthermore, in the case of high-yield
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.
Payment Expectations--High-yield 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 Funds 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.
Liquidity and Valuation Risks--Some issuers of high-yield 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.
Limitations of Credit Ratings--The credit ratings assigned to high-yield 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, Aeltus primarily relies on its
own credit analysis which includes a study of existing debt, capital structure,
ability to service debts and to pay dividends, the issuer's sensitivity to
economic conditions, its operating history and the current trend of earnings.
Thus the achievement of a Fund's investment objective may be more dependent on
Aeltus' own credit analysis than might be the case for a fund which does not
invest in these securities.
Convertibles
All Funds except Aetna Government Fund may invest in convertible securities. 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.
Real Estate Securities
All Funds except Bond Fund, Aetna Government Fund, High Yield and Money Market
may invest in real estate securities, including interests in real estate
investment trusts (REITs), real estate development, real estate operating
companies, and companies engaged in other real estate related businesses. REITs
are trusts that sell securities to investors and use the proceeds to invest in
real estate or interests in real estate. A REIT may focus on a particular
project, such as apartment complexes, or geographic region, such as the
Northeastern U.S., or both.
Aetna Series Fund, Inc. 17
<PAGE>
Equity Securities of Smaller Companies
All Funds other than Bond Fund, Aetna Government Fund, Money Market, High Yield
and Index Plus Bond may invest in equity securities issued by U.S. companies
with smaller market capitalizations. 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.
Supranational Agencies
Each Fund, except Mid Cap, Real Estate, International, Small Company and Growth,
may invest up to 10% of its net assets in securities of supranational agencies.
These securities are not considered government securities and are not supported
directly or indirectly by the U.S. Government. Examples of supranational
agencies include, but are not limited to, 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.
Borrowing
Each Fund may borrow up to 5% of the value of its total assets from a bank for
temporary or emergency purposes. The Funds do not intend to borrow, except that
they may invest in leveraged derivatives which have certain risks as outlined
above. The Funds may borrow for leveraging purposes only if after the borrowing,
the value of the Funds' net assets including proceeds from the borrowings, is
equal to at least 300% of all outstanding borrowings. Leveraging can increase
the volatility of a Fund since it exaggerates the effects of changes in the
value of the securities purchased with the borrowed funds.
Bank Obligations
Each Fund may invest in obligations issued by domestic or foreign banks
(including banker's acceptances, commercial paper, bank notes, time deposits and
certificates of deposit) provided the issuing bank has a minimum of $5 billion
in assets and a primary capital ratio of at least 4.25%.
Portfolio Turnover
The portfolio turnover rate for Small Company was significantly higher in 1998
than in 1997 because of increased volatility in the market for
small-capitalization stocks. The portfolio turnover rate for Bond Fund was
significantly higher in 1998 than in 1997 because of a change in portfolio
managers which led to a reallocation of Fund assets. The portfolio turnover rate
for Index Plus Large Cap was significantly higher in 1998 than in 1997 because
of increased volatility in the quantitative rankings used in managing the Fund.
DIRECTORS AND OFFICERS
The investments and administration of the Company are under the supervision of
the Board. The Directors and executive officers of the Company and their
principal occupations for the past five years are listed below. Those Directors
who are "interested persons," as defined in the 1940 Act, are indicated by an
asterisk (*). Directors and officers hold the same positions with other
investment companies in the same Fund Complex: Aetna Variable Fund, Aetna Income
Shares, Aetna Variable Encore Fund, Aetna Balanced VP, Inc., Aetna GET Fund,
Aetna Generation Portfolios, Inc. and Aetna Variable Portfolios, Inc.
18 Aetna Series Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal Occupation During Past Five
Years (and Positions held with
Position(s) Held Affiliated Persons or Principal
Name, Address and Age with the Company Underwriters of the Company)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Scott Fox* Director and President Director, Managing Director, Chief Operating
10 State House Square Officer, Chief Financial Officer, Aeltus
Hartford, Connecticut Investment Management, Inc., October 1997
Age 44 to present; Director and Senior Vice
President, Aetna Life Insurance and Annuity
Company, March 1997 to February 1998;
Director, Managing Director, Chief Operating
Officer, Chief Financial Officer and Treasurer,
Aeltus, April 1994 to March 1997.
- -------------------------------------------------------------------------------------------------------------------
Wayne F. Baltzer Vice President Vice President, Aeltus Capital, Inc., May 1998
10 State House Square to present.
Hartford, Connecticut
Age 55
- -------------------------------------------------------------------------------------------------------------------
Albert E. DePrince, Jr. Director Professor, Middle Tennessee State
3029 St. Johns Drive University, 1991 to present.
Murfreesboro, Tennessee
Age 57
- -------------------------------------------------------------------------------------------------------------------
Stephanie A. DeSisto Vice President, Vice President, Mutual Fund Accounting,
10 State House Square Treasurer and Chief Aeltus Investment Management, Inc.,
Hartford, Connecticut Financial Officer November 1995 to present; Director, Mutual
Age 45 Fund Accounting, Aetna Life Insurance and
Annuity Company, August 1994 to November
1995; Assistant Vice President, Investors
Bank & Trust, January 1993 to August 1994.
- -------------------------------------------------------------------------------------------------------------------
Amy R. Doberman Secretary General Counsel, Aeltus Investment
10 State House Square Management, Inc., February 1999 to present;
Hartford, Connecticut Counsel, Aetna Life Insurance and Annuity
Age 36 Company, December 1996 to present;
Attorney, Securities and Exchange
Commission, March 1990 to November 1996.
- -------------------------------------------------------------------------------------------------------------------
Maria T. Fighetti Director Manager/Attorney, Health Services, New
325 Piermont Road York City Department of Mental Health,
Closter, New Jersey Mental Retardation and Alcohol Services,
Age 55 1973 to present.
- -------------------------------------------------------------------------------------------------------------------
David L. Grove Director Private Investor; Economic/Financial
5 The Knoll Consultant, December 1985 to present.
Armonk, New York
Age 80
- -------------------------------------------------------------------------------------------------------------------
John Y. Kim* Director Director, President, Chief Executive Officer,
10 State House Square Chief Investment Officer, Aeltus Investment
Hartford, Connecticut Management, Inc., December 1995 to
Age 38 present; Director, Aetna Life Insurance and
Annuity Company, February 1995 to March 1998;
Senior Vice President, Aetna Life Insurance
and Annuity Company, September 1994 to
present.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Aetna Series Fund, Inc. 19
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Principal Occupation During Past Five
Years (and Positions held with
Position(s) Held Affiliated Persons or Principal
Name, Address and Age with the Company Underwriters of the Company)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sidney Koch Director Financial Adviser, self-employed, January
455 East 86th Street 1993 to present.
New York, New York
Age 63
- -------------------------------------------------------------------------------------------------------------------
Frank Litwin Vice President Managing Director, Aeltus Investment
10 State House Square Management, Inc., August 1997 to present;
Hartford, Connecticut Managing Director, Aeltus Capital, Inc., May
Age 49 1998 to present; Vice President, Fidelity
Investments Institutional Services Company,
April 1992 to August 1997.
- -------------------------------------------------------------------------------------------------------------------
Shaun P. Mathews* Director Vice President/Senior Vice President, Aetna
151 Farmington Avenue Life Insurance and Annuity Company, March
Hartford, Connecticut 1991 to present; Director, Aetna Investment
Age 43 Services, Inc., July 1993 to present; Senior
Vice President, Aetna Investment Services,
Inc., July 1993 to February 1999.
- -------------------------------------------------------------------------------------------------------------------
Corine T. Norgaard Director Dean of the Barney School of Business,
556 Wormwood Hill University of Hartford (West Hartford, CT),
Mansfield Center, August 1996 to present; Professor,
Connecticut Accounting and Dean of the School of
Age 61 Management, SUNY Binghamton
(Binghamton, NY), August 1993 to August
1996
- -------------------------------------------------------------------------------------------------------------------
Richard G. Scheide Director Trust and Private Banking Consultant, David
11 Lily Street Ross Palmer Consultants, July 1991 to
Nantucket, present.
Massachusetts
Age 69
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
During the fiscal year ended October 31, 1998, members of the Board who are also
directors, officers or employees of Aetna Inc. and its affiliates were not
entitled to any compensation from the Company. As of October 31, 1998, the
unaffiliated members of the Board received compensation in the amounts included
in the following table. None of these Directors was entitled to receive pension
or retirement benefits.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Aggregate Total Compensation from
Name of Person Compensation from the Company and Fund
Position the Company Complex Paid to Directors
- --------------------------------------------------------------------
<S> <C> <C>
Corine Norgaard $6,600 $66,000
Director
- --------------------------------------------------------------------
Sidney Koch 6,650 66,500
Director
- --------------------------------------------------------------------
Maria T. Fighetti* 6,550 65,500
Director
- --------------------------------------------------------------------
</TABLE>
20 Aetna Series Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Aggregate Total Compensation from
Name of Person Compensation from the Company and Fund
Position the Company Complex Paid to Directors
- -------------------------------------------------------------------------
<S> <C> <C>
Richard G. Scheide 7,075 70,750
Director, Chairperson
Audit Committee
- -------------------------------------------------------------------------
David L. Grove* 6,925 69,250
Director, Chairperson
Contract Committee
- -------------------------------------------------------------------------
Albert E. DePrince, Jr. 3,077 30,778
Director
- -------------------------------------------------------------------------
</TABLE>
* During the fiscal year ended October 31, 1998, Ms. Fighetti and Dr. Grove
elected to defer $15,000 and $69,250, respectively, of their compensation.
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
As of January 31, 1999, Aetna Life Insurance and Annuity Company (Aetna), a
Connecticut corporation, and its affiliates, had the following interest in the
Funds, through direct ownership or through one of Aetna's separate accounts:
<TABLE>
<CAPTION>
% Aetna and its affiliates
---------------------------------------
Class I Class A Class C
----------- ----------- -----------
<S> <C> <C> <C>
Aetna Bond Fund 54.57%
Aetna Government Fund 86.52% 60.25%
Aetna High Yield Fund 99.31% 31.86% 31.26%
Aetna Index Plus Bond Fund 99.57% 25.57% 43.62%
Aetna Index Plus Large Cap Fund 43.67% 2.31%
Aetna Index Plus Mid Cap Fund 98.99% 29.72% 41.04%
Aetna Index Plus Small Cap Fund 98.05% 21.24% 11.30%
Aetna International Fund 22.30% 31.68%
Aetna Mid Cap Fund 98.33% 71.47% 95.16%
Aetna Money Market Fund 48.93%
Aetna Real Estate Securities Fund 98.37% 28.78% 75.31%
Aetna Small Company Fund 57.43% 5.37%
Aetna Value Opportunity Fund 97.14% 70.15% 18.89%
Aetna Ascent Fund 87.86% 53.04%
Aetna Crossroads Fund 92.35% 44.45%
Aetna Legacy Fund 86.08% 33.20%
</TABLE>
Shares of the Funds held beneficially by Aetna and its affiliates are voted in
the same proportion as shares held by non-Aetna shareholders of that Fund.
As of January 31, 1999, officers and Directors owned less than 1% of the
outstanding shares of any of the Funds.
Aetna (like Aeltus) is an indirect wholly-owned subsidiary of Aetna Retirement
Services, Inc., which is in turn an indirect wholly-owned subsidiary of Aetna
Inc. Aetna's principal office is located at 151 Farmington Avenue, Hartford,
Connecticut 06156. Aetna is registered with the Commission as an investment
adviser.
Aetna Series Fund, Inc. 21
<PAGE>
THE INVESTMENT ADVISORY AGREEMENTS
The Company, on behalf of each Fund, has entered into investment advisory
agreements (Advisory Agreements) appointing Aeltus as the Investment Adviser of
each Fund. Under the Advisory Agreements and subject to the supervision of the
Board, Aeltus has responsibility for supervising all aspects of the operations
of each Fund including the selection, purchase and sale of securities. Under the
Advisory Agreements, Aeltus is given the right to delegate any or all of its
obligations to a subadviser. Aeltus is an indirect wholly-owned subsidiary of
Aetna Inc., a publicly-owned holding company whose principal operating
subsidiaries engage in the health benefits, insurance and financial services
businesses in the U.S. and internationally.
The Advisory Agreements provide that Aeltus 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 Company and that each Fund is responsible for
payment of all other of its costs.
Advisory Fees for each Fund are allocated to a particular class on the basis of
the net assets of that class in relation to the net assets of the Fund. Listed
below are the Advisory Fees that Aeltus is entitled to receive from each Fund at
an annual rate based on average daily net assets of each Fund:
<TABLE>
<CAPTION>
Advisory Fee Assets
CAPITAL APPRECIATION FUNDS -------------- ----------------------
<S> <C> <C>
Growth 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
International 0.850% On first $250 million
0.800% On next $250 million
0.775% On next $250 million
0.750% On next $1.25 billion
0.700% Over $2 billion
Mid Cap 0.750% On first $250 million
0.700% On next $250 million
0.675% On next $250 million
0.650% On next $1.25 billion
0.600% Over $2 billion
Small Company 0.850% On first $250 million
0.800% On next $250 million
0.775% On next $250 million
0.750% On next $1.25 billion
0.725% Over $2 billion
Value Opportunity 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
</TABLE>
22 Aetna Series Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Advisory Fee Assets
GROWTH & INCOME FUNDS -------------- ----------------------
<S> <C> <C>
Balanced 0.800% On first $500 million
0.750% On next $500 million
0.700% On next $1 billion
0.650% Over $2 billion
Growth and Income 0.700% On first $250 million
0.650% On next $250 million
0.625% On next $250 million
0.600% On next $1.25 billion
0.550% Over $2 billion
Real Estate 0.800% On first $250 million
0.750% On next $250 million
0.725% On next $250 million
0.700% On next $1.25 billion
0.650% Over $2 billion
INCOME FUNDS
Bond Fund 0.500% On first $250 million
0.475% On next $250 million
0.450% On next $250 million
0.425% On next $1.25 billion
0.400% Over $2 billion
Aetna Government Fund 0.500% On first $250 million
0.475% On next $250 million
0.450% On next $250 million
0.425% On next $1.25 billion
0.400% Over $2 billion
High Yield 0.650% On first $250 million
0.600% On next $250 million
0.575% On next $250 million
0.550% On next $1.25 billion
0.500% Over $2 billion
Money Market 0.400% On first $500 million
0.350% On next $500 million
0.340% On next $1 billion
0.330% On next $1 billion
0.300% Over $3 billion
INDEX PLUS FUNDS
Index Plus Bond 0.350% On first $250 million
0.350% On next $250 million
0.325% On next $250 million
0.300% On next $1.25 billion
0.275% Over $2 billion
</TABLE>
Aetna Series Fund, Inc. 23
<PAGE>
<TABLE>
<CAPTION>
Advisory Fee Assets
INDEX PLUS FUNDS -------------- ----------------------
<S> <C> <C>
Index Plus Large Cap 0.450% On first $250 million
0.450% On next $250 million
0.425% On next $250 million
0.400% On next $250 million
0.400% On next $1 billion
0.375% Over $2 billion
Index Plus Mid Cap 0.450% On first $250 million
0.450% On next $250 million
0.425% On next $250 million
0.400% On next $1.25 billion
0.375% Over $2 billion
Index Plus Small Cap 0.450% On first $250 million
0.450% On next $250 million
0.425% On next $250 million
0.400% On next $1.25 billion
0.375% Over $2 billion
GENERATION FUNDS
Ascent Fund 0.800% On first $500 million
0.775% On next $500 million
0.750% On next $500 million
0.725% On next $500 million
0.700% Over $2 billion
Crossroads Fund 0.800% On first $500 million
0.775% On next $500 million
0.750% On next $500 million
0.725% On next $500 million
0.700% Over $2 billion
Legacy Fund 0.800% On first $500 million
0.775% On next $500 million
0.750% On next $500 million
0.725% On next $500 million
0.700% Over $2 billion
</TABLE>
For the fiscal years ended October 31, 1998, October 31, 1997 and October 31,
1996, investment advisory fees were paid to Aetna (investment adviser to the
Funds prior to February 2, 1998) and Aeltus (for the period February 2, 1998
through October 31, 1998) as follows:
24 Aetna Series Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Total Investment Net Advisory
Advisory Fees Waiver Fees Paid
----------------- ------------ --------------
<S> <C> <C> <C>
Year Ended October 31, 1998
- -----------------------------
Growth 809,670 0 809,670
International 493,627 110,044 383,583
Mid Cap* 29,053 29,053 0
Small Company 298,442 40,629 257,813
Value Opportunity** 28,337 28,337 0
Balanced 955,035 0 955,035
Growth and Income 4,429,415 0 4,429,415
Real Estate** 28,481 28,481 0
Bond Fund 196,033 87,410 108,623
Aetna Government Fund 62,424 62,424 0
High Yield** 47,995 47,995 0
Money Market 1,701,171 1,041,156 660,015
Index Plus Bond* 39,396 39,396 0
Index Plus Large Cap 102,550 102,550 0
Index Plus Mid Cap*** 25,868 25,868 0
Index Plus Small Cap*** 24,996 24,996 0
Ascent 295,978 69,924 226,054
Crossroads 295,895 61,513 234,382
Legacy 174,700 94,604 80,096
Year Ended October 31, 1997
- -----------------------------
Growth 500,660 0 500,660
International 639,565 0 639,565
Small Company 238,340 0 238,340
Balanced 812,391 0 812,391
Growth and Income 3,385,694 0 3,385,694
Bond Fund 163,110 128,800 34,310
Aetna Government Fund 53,048 53,048 0
Money Market 1,782,769 1,782,769 0
Index Plus Large Cap**** 49,212 49,212 0
Ascent 202,834 21,845 180,989
Crossroads 186,369 19,968 166,401
Legacy 151,110 22,749 128,361
</TABLE>
Aetna Series Fund, Inc. 25
<PAGE>
<TABLE>
<CAPTION>
Total Investment Net Advisory
Advisory Fees Waiver Fees Paid
----------------- ------------ --------------
<S> <C> <C> <C>
Year Ended October 31, 1996
- -----------------------------
Growth 296,559 0 296,559
International 389,220 0 389,220
Small Company 330,302 0 330,302
Balanced 687,346 0 687,346
Growth and Income 2,616,904 0 2,616,904
Bond Fund 174,209 141,557 32,652
Aetna Government Fund 67,466 67,466 0
Money Market 1,560,183 1,560,183 0
Ascent 185,916 0 185,916
Crossroads 177,185 0 177,185
Legacy 169,807 0 169,807
</TABLE>
* Mid Cap and Index Plus Bond commenced operations on February 4, 1998.
Investment Advisory Fees shown are for the period from February 4, 1998 to
October 31, 1998.
** Value Opportunity, Real Estate and High Yield commenced operations on
February 2, 1998. Investment Advisory Fees shown are for the period from
February 2, 1998 to October 31, 1998.
*** Index Plus Mid Cap and Index Plus Small Cap commenced operations on
February 3, 1998. Investment Advisory Fees shown are for the period from
February 3, 1998 to October 31, 1998.
**** Index Plus Large Cap commenced operations on December 10, 1996. Investment
Advisory Fees shown are for the period from December 10, 1996 to October
31, 1997.
THE SUBADVISORY AGREEMENT
Aeltus and the Company, on behalf of Value Opportunity, have entered into an
agreement (Subadvisory Agreement) with Bradley, Foster & Sargent, Inc. (Bradley)
effective October 1, 1998 appointing Bradley as subadviser of Value Opportunity.
Bradley is managed by its six principals, Robert H. Bradley, Peter B. Canoni,
Timothy H. Foster, Jeffrey G. Marsted, J. Edward Roney, Jr., and Joseph D.
Sargent.
The Subadvisory Agreement gives Bradley broad latitude to select equity
securities for Value Opportunity consistent with the investment objective and
policies of the Fund, subject to Aeltus' oversight. The Agreement contemplates
that Bradley will be responsible only for making equity investment decisions.
Aeltus remains responsible for all other aspects of managing and administering
Value Opportunity, including trade execution and cash management.
For the services under the Subadvisory Agreement, Bradley will receive an annual
fee payable monthly as described in the Prospectuses. Subadvisory Fees are
allocated to a particular class on the basis of the net assets of that class in
relation to the net assets of Value Opportunity.
For the month ended October 31, 1998, Aeltus paid Bradley subadvisory fees of
$629.
Aeltus has also retained Bradley to provide certain shareholder communication
services and marketing assistance with respect to Value Opportunity, through
December 31, 1999. The fee for these services is $13,000 per month and is paid
out of Aeltus' revenues, not the assets of the Fund.
THE ADMINISTRATIVE SERVICES AGREEMENT
Pursuant to the Administrative Services Agreement, Aeltus 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 Aeltus include: (a) internal accounting services; (b)
monitoring regulatory compliance, such as reports and filings with the
Commission and state securities regulatory authorities; (c) preparing financial
information for proxy statements; (d) preparing semiannual
26 Aetna Series Fund, Inc.
<PAGE>
and annual reports to shareholders; (e) calculating net asset values; (f)
preparation of certain shareholder communications; (g) supervision of the
custodians and transfer agent; and (h) reporting to the Board.
For its services, Aeltus is entitled to receive from each Fund a fee at an
annual rate of 0.10% of its average daily net assets.
For the years ended October 31, 1998, October 31, 1997 and October 31, 1996,
administrative services fees were paid to Aetna (administrator to the Funds
prior to February 2, 1998) and Aeltus (for the period February 2, 1998 through
October 31, 1998) as follows:
<TABLE>
<CAPTION>
Total Net
Administrative Administrator Administrative
Services Fees Waiver Services Paid
---------------- --------------- ---------------
<S> <C> <C> <C>
Year Ended October 31, 1998
- -----------------------------
Growth 149,789 0 149,789
International 82,614 0 82,614
Mid Cap* 3,874 3,874 0
Small Company 45,674 0 45,674
Value Opportunity** 4,048 4,048 0
Balanced 162,126 0 162,126
Growth and Income 903,105 0 903,105
Real Estate** 3,560 3,560 0
Bond Fund 52,793 0 52,793
Aetna Government Fund 16,722 16,722 0
High Yield** 7,384 7,384 0
Money Market 586,393 0 586,393
Index Plus Bond* 11,256 11,256 0
Index Plus Large Cap**** 27,653 4,832 22,821
Index Plus Mid Cap*** 5,748 5,748 0
Index Plus Small Cap*** 5,555 5,555 0
Ascent 47,924 0 47,924
Crossroads 47,989 0 47,989
Legacy 28,950 0 28,950
Year Ended October 31, 1997
- -----------------------------
Growth 178,807 0 178,807
International 188,108 0 188,108
Small Company 70,100 0 70,100
Balanced 253,872 0 253,872
Growth and Income 1,228,819 0 1,228,819
Bond Fund 81,555 0 81,555
Aetna Government Fund 26,524 26,524 0
Money Market 1,094,798 175,308 919,490
Index Plus Large Cap**** 27,340 27,340 0
Ascent 63,386 0 63,386
Crossroads 58,240 0 58,240
Legacy 47,222 0 47,222
</TABLE>
Aetna Series Fund, Inc. 27
<PAGE>
<TABLE>
<CAPTION>
Total Net
Administrative Administrator Administrative
Services Fees Waiver Services Paid
---------------- --------------- ---------------
<S> <C> <C> <C>
Year Ended October 31, 1996
- -----------------------------
Growth 105,914 0 105,914
International 114,478 0 114,478
Small Company 97,148 0 97,148
Balanced 214,796 0 214,796
Growth and Income 945,088 0 945,088
Bond Fund 87,105 0 87,105
Aetna Government Fund 33,733 33,733 0
Money Market 961,110 498,621 462,489
Ascent 58,099 0 58,099
Crossroads 55,370 0 55,370
Legacy 53,065 0 53,065
</TABLE>
* Mid Cap and Index Plus Bond commenced operations on February 4, 1998.
Administrative Services Fees shown are for the period from February 4, 1998
to October 31, 1998.
** Value Opportunity, Real Estate and High Yield commenced operations on
February 2, 1998. Administrative Services Fees shown are for the period
from February 2, 1998 to October 31, 1998.
*** Index Plus Mid Cap and Index Plus Small Cap commenced operations on
February 3, 1998. Administrative Services Fees shown are for the period
from February 3, 1998 to October 31, 1998.
**** Index Plus Large Cap commenced operations on December 10, 1996.
Administrative Services Fees shown are for the period from December 10,
1996 to October 31, 1997.
CUSTODIAN
Mellon Bank, N.A., One Mellon Bank Center, Pittsburgh, Pennsylvania, 15258,
serves as custodian for the assets of all Funds except International. Brown
Brothers Harriman & Company, 40 Water Street, Boston, Massachusetts, 02109,
serves as custodian for the assets of International. Neither custodian
participates in determining the investment policies of a Fund nor in deciding
which securities are purchased or sold by a Fund. A Fund may, however, invest in
obligations of the custodian and may purchase or sell securities from or to the
custodian.
For portfolio securities which are purchased and held outside the U.S., Mellon
Bank, N.A. and Brown Brothers Harriman & Company have entered into sub-custodian
agreements (which are designed to comply with Rule 17f-5 under the 1940 Act)
with certain foreign banks or clearing agencies.
TRANSFER AGENT
First Data Investor Services Group, Inc. 4400 Computer Drive, Westborough,
Massachusetts 01581, serves as the transfer agent and dividend-paying agent to
the Funds.
INDEPENDENT AUDITORS
KPMG LLP, CityPlace II, Hartford, Connecticut 06103 serves as independent
auditors to the Company. KPMG LLP provides audit services, assistance and
consultation in connection with the Commission filings.
PRINCIPAL UNDERWRITER
Shares of each Fund are offered on a continuous basis. Effective May 1, 1998,
the Company's Board approved a change in the Company's principal underwriter
from Aetna Investment Services, Inc. (AISI), 151 Farmington Avenue, Hartford,
Connecticut 06156, to Aeltus Capital, Inc. (ACI), 10 State House Square,
Hartford, Connecticut 06103-3602. ACI is a Connecticut corporation, and is a
wholly-owned subsidiary of Aeltus and an indirect wholly-owned subsidiary of
Aetna Inc. ACI has agreed to use its best efforts to distribute the shares as
the principal underwriter of the Funds pursuant to an Underwriting Agreement
between it and the Company.
28 Aetna Series Fund, Inc.
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICING ARRANGEMENTS
Fund shares are distributed by ACI. With respect to Class A shares of the Funds
(other than Money Market), ACI is paid an annual distribution fee at the rate of
0.25% of the value of average daily net assets attributable to those shares
under a Distribution Plan adopted by the Company pursuant to Rule 12b-1 under
the 1940 Act ("Distribution Plan"). With respect to Class B shares of the Funds,
ACI is paid an annual distribution fee at the rate of 0.75% of the value of
average daily net assets attributable to those shares under a Distribution Plan.
With respect to Class C shares of the Funds (other than Money Market), ACI is
paid an annual distribution fee at the rate of 0.75% (0.50% for the Index Plus
Funds) of the value of average daily net assets attributable to those shares
under a Distribution Plan. The distribution fee for a specific class may be used
to cover expenses incurred in promoting the sale of that class of shares,
including (a) the costs of printing and distributing to prospective investors
Prospectuses, statements of additional information and sales literature; (b)
payments to investment professionals and other persons who provide support
services in connection with the distribution of shares; (c) overhead and other
distribution related expenses; and (d) accruals for interest on the amount of
the foregoing expenses that exceed distribution fees and contingent deferred
sales charges. ACI may reallow all or a portion of these fees to broker-dealers
entering into selling agreements with it, including its affiliates.
Class B and Class C shares each are also subject to a Shareholder Services Plan
adopted pursuant to Rule 12b-1. Under the Class B Shareholder Services Plan, ACI
is paid a servicing fee at an annual rate of 0.25% of the average daily net
assets of the Class B shares of each Fund. Under the Class C Shareholder
Services Plan, ACI is paid a servicing fee at an annual rate of 0.25% of the
average daily net assets of the Class C shares of each Fund except Money Market.
The Service Fee may be used by ACI primarily to pay selling dealers and their
agents for servicing and maintaining shareholder accounts.
ACI is required to report in writing to the Board at least quarterly on the
amounts and purpose of any payment made under each Distribution or Shareholder
Services Plan and any related agreements, as well as to furnish the Board with
such other information as may reasonably be requested in order to enable the
Board to make an informed determination whether each Plan should be continued.
The terms and provisions of the Plans relating to required reports, term, and
approval are consistent with the requirements of Rule 12b-1.
Prior to February 2, 1998, with respect to Adviser Class (redesignated Class A)
shares, AISI received a distribution fee at the rate of 0.50% and a Shareholder
Service fee at the rate of 0.25% (0.10% for Money Market) of the value of
average daily net assets.
The years ended October 31, 1998, 1997 and 1996, Shareholder Services and
distribution fees were paid to Aetna (principal underwriter of the Company prior
to August 1, 1997), AISI (for the period August 1, 1997 through April 30, 1998)
and ACI (for the period May 1, 1998 through October 31, 1998) as follows:
<TABLE>
<CAPTION>
Year Ended October 31, 1998 Total Underwriting Fees
- -------------------------------- ------------------------
<S> <C>
Growth $34,543
International 60,303
Mid Cap* 507
Small Company 29,313
Value Opportunity** 861
Balanced 24,151
Growth and Income 65,703
Real Estate** 656
Bond Fund 4,918
Aetna Government Fund 2,207
High Yield** 630
Money Market 26,009
</TABLE>
Aetna Series Fund, Inc. 29
<PAGE>
<TABLE>
<S> <C>
Index Plus Bond* 616
Index Plus Large Cap 12,230
Index Plus Mid Cap*** 608
Index Plus Small Cap*** 682
Ascent 5,795
Crossroads 5,009
Legacy 4,820
Year Ended October 31, 1997 Total Underwriting Fees
- -------------------------------------- ------------------------
Growth $49,657
International 166,514
Small Company 37,758
Balanced 37,922
Growth and Income 82,810
Bond Fund 5,949
Aetna Government Fund 3,948
Money Market 141,236
Index Plus Large Cap**** 4,683
Ascent***** 1,691
Crossroads***** 764
Legacy***** 823
Year Ended October 31, 1996
- --------------------------------------
Growth $23,653
International 167,007
Small Company 20,104
Balanced 19,775
Growth and Income 32,657
Bond Fund 15,911
Aetna Government Fund 4,074
Money Market 101,840
</TABLE>
* Mid Cap and Index Plus Bond commenced operations on February 4, 1998.
** Value Opportunity, Real Estate and High Yield commenced operations on
February 2, 1998.
*** Index Plus Mid Cap and Index Plus Small Cap commenced operations on
February 3, 1998.
**** Index Plus Large Cap commenced operations on December 10, 1996.
***** Ascent, Crossroads and Legacy Class A Shares commenced operations on
January 20, 1997.
Fees in the amount of $26,009, $141,236 and $101,840, for the years ended
December 31, 1998, 1997, and 1996, respectively, were waived for Money Market.
The Distribution Plans and Shareholder Services Plans continue from year to
year, provided such continuance is approved annually by vote of the Board,
including a majority of Independent Directors. The Distribution Plans may not be
amended to increase the amount to be spent for the services provided by ACI
without shareholder approval. All amendments to the Distribution Plans must be
approved by the Board in the manner described above. The Distribution Plans may
be terminated at any time, without penalty, by vote of a majority of the
Independent Directors upon not more than thirty (30) days' written notice to any
other party to the Distribution Plans. All persons who are under common control
with the Funds could be deemed to have a financial interest in the Plans. No
other interested person of the Funds has a financial interest in the Plans.
For the fiscal year ended October 31, 1998, approximately $134,458, $25,319,
$517, $107,380, $113,451 and $165,681 of total distribution expenses were
expended in connection with advertising, printing and mailing of prospectuses to
other than current shareholders, compensation to underwriters, compensation to
broker-dealers and compensation to sales personnel, respectively.
30 Aetna Series Fund, Inc.
<PAGE>
Other Payments to Securities Dealers
Typically, a portion of the front-end sales charge on Class A shares is paid to
your investment professional as shown in the following tables. Your investment
professional may, however, receive up to the entire amount of the front-end
sales charge.
The following table applies to Growth, International, Mid Cap, Small Company,
Value Opportunity, Balanced, Growth and Income, Real Estate and the Generation
Funds:
<TABLE>
<CAPTION>
Amount of sales charge typically reallowed to
When you invest this amount dealers as a percentage of offering price
- --------------------------------- ----------------------------------------------
<S> <C>
under $50,000 5.00%
$50,000 but under $100,000 3.75
$100,000 but under $250,000 2.75
$250,000 but under $500,000 2.00
$500,000 but under $1,000,000 1.75
</TABLE>
The following table applies to Bond Fund, Aetna Government Fund and High Yield:
<TABLE>
<CAPTION>
Amount of sales charge typically reallowed to
When you invest this amount dealers as a percentage of offering price
- --------------------------------- ----------------------------------------------
<S> <C>
under $50,000 4.00%
$50,000 but under $100,000 3.75
$100,000 but under $250,000 2.75
$250,000 but under $500,000 1.75
$500,000 but under $1,000,000 1.25
</TABLE>
The following table applies to Index Plus Bond, Index Plus Large Cap, Index Plus
Mid Cap and Index Plus Small Cap:
<TABLE>
<CAPTION>
Amount of sales charge typically reallowed to
When you invest this amount dealers as a percentage of offering price
- --------------------------------- ----------------------------------------------
<S> <C>
under $50,000 2.50%
$50,000 but under $100,000 2.00
$100,000 but under $250,000 1.50
$250,000 but under $500,000 1.00
$500,000 but under $1,000,000 0.50
</TABLE>
Securities dealers who initiate and are responsible for purchases of Class A
shares of $1 million or more or are responsible for purchases of Class A shares
by certain retirement plans pursuant to a sales charge waiver will be entitled
to receive the following commissions:
<TABLE>
<CAPTION>
Commission
-----------
<S> <C>
o on sales of $1 million to $3 million; 1.00%
o on sales over $3 million to $20 million; and 0.50%
o on sales over $20 million. 0.25%
</TABLE>
These breakpoints are reset every 12 months for purposes of additional
purchases. ACI may make these payments in the form of contingent advance
payments, which may be recovered from the securities dealer or set off against
other payments due to the dealer if shares are sold within 12 months of the
calendar month of purchase. Other conditions may apply.
Aetna Series Fund, Inc. 31
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
Class I shares of the Company are purchased and redeemed at the net asset value
of each Fund next determined after a purchase or redemption order is received,
as described in the Prospectus. Class B and Class C shares of the Company are
purchased at the net asset value of each Fund next determined after a purchase
order is received. Class B and Class C shares are redeemed at the net asset
value of each Fund next determined less any applicable contingent deferred sales
charge (CDSC) after a redemption request is received, as described in the
Prospectus. Class A shares of the Company are purchased at the net asset value
of each Fund next determined after a purchase order is received less any
applicable front-end sales charge and redeemed at the net asset value of each
Fund next determined adjusted for any applicable CDSC after a redemption request
is received, as described in the Prospectus.
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. The right to redeem shares may be suspended
or payment therefore 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 Fund of securities owned by
it is not reasonably practicable, or (ii) it is not reasonably practicable for a
Fund to determine fairly the value of its net assets; or (c) the Commission by
order so permits for the protection of shareholders of a Fund.
Any written request to redeem shares in amounts in excess of $25,000 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. 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.
A Fund has the right to satisfy redemption requests by delivering securities
from its investment portfolio rather than cash when it decides that distributing
cash would not be in the best interests of shareholders. However, a Fund is
obligated to redeem its shares solely in cash up to an amount equal to the
lesser of $250,000 or 1% of its net assets for any one shareholder of a Fund in
any 90-day period. To the extent possible, the Fund will distribute readily
marketable securities, in conformity with applicable rules of the Commission. In
the event such redemption is requested by institutional investors, the Fund will
weigh the effects on nonredeeming shareholders in applying this policy.
Securities distributed to shareholders may be difficult to sell and may result
in additional costs to the shareholders.
Purchases and exchanges should be made for investment purposes only. The Funds
reserve the right to reject any specific purchase or exchange request. In the
event a Fund rejects an exchange request, neither the redemption nor the
purchase side of the exchange will be processed until the Fund receives further
redemption instructions.
The Funds are not designed for professional market timing organizations or other
entities using programmed or frequent exchanges. The Funds define a "market
timer" as an individual, or entity acting on behalf of one or more individuals,
if (i) the individual or entity makes three or more exchange requests out of any
Fund per calendar year and (ii) any one of such exchange requests represents
shares equal in value to 1/2 of 1% or more of the Fund's net assets at the time
of the request. Accounts under common ownership or control, including accounts
administered by market timers, will be aggregated for purposes of this
definition.
Front-end Sales Charge Waivers
Front-end sales charges will not apply if you are buying Class A shares with
proceeds from the following sources:
1. Redemptions from any Aeltus-advised Fund if you:
o Originally paid a front-end sales charge on the shares;
o Reinvest the money within 60 days of the redemption date; and
o Reinvest the money in the same class of shares.
32 Aetna Series Fund, Inc.
<PAGE>
2. Redemptions from other mutual funds if you:
o Originally paid a front-end sales charge on the shares;
o Reinvest the money within 30 days of the redemption date; and
o Reinvest the money in the same class of shares.
The Fund's front-end sales charges will also not apply to Class A purchases by:
3. Investors who purchase Fund shares with redemption proceeds received in
connection with a distribution from a retirement plan investing either
directly in any Fund or indirectly through an unregistered separate account
sponsored by Aetna Life Insurance and Annuity Company (Aetna) or any
affiliate thereof.
4. Certain trust companies and bank trust departments agreeing to invest in the
Fund over a 13-month period at least $1 million of assets over which the
trust companies and bank trust departments have full or shared investment
discretion.
5. Certain retirement plans that are sponsored by an employer with at least 25
employees and either (a) have plan assets of $1 million or more or (b)
agree to invest at least $500,000 in the Fund over a 13-month period.
6. Broker-dealers, registered investment advisers and financial planners that
have entered into a selling agreement with ACI (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to
sales of fund shares) on behalf of clients participating in advisory fee
programs.
7. Current employees of broker-dealers and financial institutions that have
entered into a selling agreement with ACI (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to
sales of fund shares) and their immediate family members, as allowed by the
internal policies of their employer.
8. Investment companies exchanging shares or selling assets pursuant to a
merger, acquisition or exchange offer.
9. Shareholders of the Adviser Class at the time such shares were redesignated
as Class A shares.
Contingent Deferred Sales Charge
Certain Class A shares, all Class B shares and all Class C shares (except for
Money Market) are subject to a CDSC, as described in the Prospectus. There is no
CDSC imposed on:
o redemptions of shares purchased through reinvestment of dividends or capital
gains distributions;
o shares purchased more than two years (in the case of Class A shares), six
years (in the case of Class B shares) or eighteen months (in the case of
Class C shares) prior to the redemption; and
o redemptions of Money Market Class A and Class C shares unless:
o those shares were purchased through an exchange from another Fund within
two years (in the case of Class A shares) or eighteen months (in the case
of Class C shares) prior to the redemption; and
o the original purchase of the shares exchanged was subject to a CDSC.
CDSC Waivers
The CDSC will be waived for:
o Exchanges to other Funds of the same class;
o Redemptions following the death or disability of the shareholder or beneficial
owner;
o Redemptions related to distributions from retirement plans or accounts under
Internal Revenue Code Section 403(b) after you attain age 70-1/2.
o Tax-free returns of excess contributions from employee benefit plans;
o Distributions from employee benefit plans, including those due to plan
termination or plan transfer; and
o Redemptions made in connection with the Automatic Cash Withdrawal Plan (see
Shareholder Services and Other Features), provided that such redemptions:
Aetna Series Fund, Inc. 33
<PAGE>
o are limited annually to no more than 12% of the original account value;
o are made in equal monthly amounts, not to exceed 1% per month; and
o the minimum account value at the time the Automatic Cash Withdrawal Plan
was initiated was no less than $10,000.
Letter of Intent
You may qualify for a reduced sales charge when you buy Class A shares (other
than Money Market), as described in the Prospectus. At any time within 90 days
after the first investment that you want to qualify for a reduced sales charge,
you may file with the Company a signed shareholder application with the Letter
of Intent section completed. After the Letter of Intent is filed, each
additional investment will be entitled to the sales charge applicable to the
level of investment indicated on the Letter of Intent. Sales charge reductions
based on purchases in more than one Fund will be effective only after
notification to ACI that the investment qualifies for a discount. Your holdings
in the Company (other than Money Market shares) acquired more than 90 days
before the Letter of Intent is filed will be counted towards completion of the
Letter of Intent but will not be entitled to a retroactive downward adjustment
in the sales charge. Any redemptions you make during the 13-month period, except
in the case of certain retirement plans, will be subtracted from the amount of
the purchases for purposes of determining whether the terms of the Letter of
Intent have been completed. If the Letter of Intent is not completed within the
13-month period, there will be an upward adjustment of the sales charge,
depending on the amount actually purchased (less redemptions) during the period.
If you execute a Letter of Intent before a change in the sales charge structure
of the Company, you may complete the Letter of Intent at the lower of the new
sales charge structure or the sales charge structure in effect at the time the
Letter of Intent was filed.
Five percent (5%) of the amount of the total intended purchase will be reserved
in Class A shares of the Company registered in your name until you fulfill the
Letter of Intent. This policy of reserving shares does not apply to certain
retirement plans. If total purchases, less redemptions, equal the amount
specified under the Letter of Intent, the reserved shares will be deposited to
an account in your name or delivered to you or as you direct. If total
purchases, less redemptions, exceed the amount specified under the Letter of
Intent and are in an amount that would qualify for a further quantity discount,
a retroactive price adjustment will be made by ACI and the securities dealer
through whom purchases were made pursuant to the Letter of Intent (to reflect
such further quantity discount) on purchases made within 90 days before and on
those made after filing the Letter. The resulting difference will be applied to
the purchase of additional shares in an amount equivalent to a single purchase
or the dollar amount of the total purchases. If the total purchases, less
redemptions, are less than the amount specified under the Letter of Intent, you
will remit to ACI an amount equal to the difference in the dollar amount of
sales charge actually paid and the amount of sales charge that would have
applied to the aggregate purchases if the total of the purchases had been made
at a single time. Upon remittance, the reserved shares held for your account
will be deposited to an account in your name or delivered to you or as you
direct. If within 20 days after written request the difference in sales charge
is not paid, the redemption of an appropriate number of reserved shares to
realize the difference will be made. In the event of a total redemption of the
account before fulfillment of the Letter of Intent, the additional sales charge
due will be deducted from the proceeds of the redemption, and the balance will
be forwarded to you.
If a Letter of Intent is executed on behalf of certain retirement plans, the
level and any reduction in sales charge for these plans will be based on actual
plan participation and the projected investments in the Company (other than
Money Market) under the Letter of Intent. These plans are not subject to the
requirement to reserve 5% of the total intended purchase, or to any penalty as a
result of the early termination of a plan, nor are these plans entitled to
receive retroactive adjustments in price for investments made before executing
the Letter of Intent.
Right of Accumulation/Cumulative Quantity Discount
A purchaser of Class A shares may qualify for a cumulative quantity discount by
combining a current purchase (or combined purchases as described above) with
certain other Class A shares (excluding Money Market) of the Funds already
owned. To determine if you may pay a reduced front-end sales charge, the
34 Aetna Series Fund, Inc.
<PAGE>
amount of your current purchase is added to the cost or current value, whichever
is higher, of your other Class A shares (excluding Money Market), as well as
those Class A shares (excluding Money Market) of your spouse and children under
the age of 21. If you are the sole owner of a company, you may also add any
company accounts, including retirement plan accounts invested in Class A shares
(excluding Money Market) of the Funds. Companies with one or more retirement
plans may add together the total plan assets invested in Class A shares
(excluding Money Market) of the Funds to determine the front-end sales charge
that applies.
To qualify for the cumulative quantity discount on a purchase through an
investment dealer, when each purchase is made the investor or dealer must
provide the Company with sufficient information to verify that the purchase
qualifies for the privilege or discount. The shareholder must furnish this
information to the Company when making direct cash investments.
BROKERAGE ALLOCATION AND TRADING POLICIES
Subject to the supervision of the Board, Aeltus has responsibility for making
investment decisions, for effecting the execution of trades and for negotiating
any brokerage commissions thereon. It is Aeltus' policy to obtain the best
quality of execution available, giving attention to net price (including
commissions where applicable), execution capability (including the adequacy of a
firm's capital position), research and other services related to execution. The
relative priority given to these factors will depend on all of the circumstances
regarding a specific trade. Aeltus may also consider the sale of shares of the
Funds and of other investment companies advised by Aeltus as a factor in the
selection of brokerage firms to execute the Funds' portfolio transactions,
subject to Aeltus' duty to obtain best execution.
Aeltus receives 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 Funds and other investment companies,
services related to the execution of trades on behalf of a Fund and advice as to
the valuation of securities, the providing of equipment used to communicate
research information and specialized consultations with Company personnel with
respect to computerized systems and data furnished to the Funds as a component
of other research services. Aeltus 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 Fund's securities and may pay higher commission rates than the
lowest available when it is reasonable to do so in light of the value of the
brokerage and research services received generally or in connection with a
particular transaction. Aeltus' policy in selecting a broker to effect a
particular transaction is to seek to obtain "best execution," which means prompt
and efficient execution of the transaction at the best obtainable price with
payment of commissions which are reasonable in relation to the value of the
services provided by the broker, taking into consideration research and
brokerage services provided. When the trader believes that more than one broker
can provide best execution, preference may be given to brokers that provide
additional services to Aeltus.
Research services furnished by brokers through whom the Funds effect securities
transactions may be used by Aeltus in servicing all of its accounts; not all
such services will be used by Aeltus to benefit the Funds.
Consistent with federal law, Aeltus may obtain such brokerage and research
services regardless of whether they are paid for (1) by means of commissions, or
(2) by means of separate, non-commission payments. Aeltus' 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 Aeltus' opinion as to which services and which means of
payment are in the long-term best interests of the Funds.
The Funds have not effected, and have no present intention of effecting, any
brokerage transactions in portfolio securities with Aeltus or any other
affiliated person of the Company.
Aetna Series Fund, Inc. 35
<PAGE>
A Fund and another advisory client of Aeltus or Aeltus 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 aggregated, and then 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 Fund and the other
accounts, the relative size of portfolio holdings of the same or comparable
securities, availability of cash for investment, and the size of their
respective investment commitments. Prices are averaged for aggregated trades.
Brokerage commissions were paid as follows:
<TABLE>
<CAPTION>
For Year Ended For Year Ended For Year Ended
Fund Name Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1996
- -------------------------- ---------------- -------------------- ----------------
<S> <C> <C> <C>
Growth $ 347,005 $ 170,182 $ 135,750
International 428,858 907,087 479,630
Mid Cap* 16,093 N/A N/A
Small Company 189,609 167,794 223,630
Value Opportunity** 15,334 N/A N/A
Balanced 74,562 131,989 207,536
Growth and Income 2,363,653 1,908,594 1,120,636
Real Estate** 21,212 N/A N/A
Bond Fund 0 0 0
Aetna Government Fund 0 0 0
High Yield** 0 0 0
Money Market 0 0 0
Index Plus Bond* 0 0 0
Index Plus Large Cap*** 44,831 15,942 N/A
Index Plus Mid Cap**** 19,919 N/A N/A
Index Plus Small Cap**** 27,474 N/A N/A
Ascent 125,071 113,789 81,898
Crossroads 100,787 79,184 61,817
Legacy 44,163 47,247 38,705
</TABLE>
* Mid Cap and Index Plus Bond commenced operations on February 4, 1998.
** Value Opportunity, Real Estate and High Yield commenced operations on
February 2, 1998.
*** Index Plus Large Cap commenced operations December 10, 1996.
**** Index Plus Mid Cap and Index Plus Small Cap commenced operations on
February 3, 1998.
For the fiscal year ended October 31, 1998, commissions in the amounts listed
below were paid with respect to portfolio transactions directed to certain
brokers because of research services:
<TABLE>
<CAPTION>
Company Name Commissions Paid on Total Transactions
- ----------------------- ---------------------------------------
<S> <C>
Growth $ 36,804
International 5,919
Mid Cap* 2,580
Small Company 3,573
Value Opportunity** 1,200
Balanced 13,840
Growth and Income 473,468
Real Estate** 1,602
Index Plus Large Cap 14,799
Index Plus Mid Cap*** 0
</TABLE>
36 Aetna Series Fund, Inc.
<PAGE>
<TABLE>
<CAPTION>
Company Name Commissions Paid on Total Transactions
- ------------------------- ---------------------------------------
<S> <C>
Index Plus Small Cap*** 0
Ascent 13,954
Crossroads 10,049
Legacy 4,040
</TABLE>
* Mid Cap and Index Plus Bond commenced operations on February 4, 1998.
** Value Opportunity, Real Estate and High Yield commenced operations on
February 2, 1998.
*** Index Plus Mid Cap and Index Plus Small Cap commenced operations on
February 3, 1998.
The Board has adopted a policy allowing trades to be made between affiliated
registered investment companies or series thereof provided they meet the terms
of Rule 17a-7 under the 1940 Act.
The Board has also adopted a Code of Ethics governing personal trading by
persons who manage, or who have access to trading activity by, a Fund. The Code
of Ethics allows trades to be made in securities that may be held by a Fund.
However, it prohibits a person from taking advantage of Fund trades or from
acting on inside information. Aeltus also has adopted a Code of Ethics, which
the Board reviews annually.
SHAREHOLDER ACCOUNTS AND SERVICES
Systematic Investment
The Systematic Investment feature, using the EFT capability, allows you to make
automatic monthly investments in any Fund. On the application, you may select
the amount of money to be moved and the Fund in which it will be invested. In
order to elect EFT, you must first have established an account, subject to the
minimum amount specified in the Prospectuses. Thereafter, the minimum monthly
Systematic Investment is currently $50 per Fund, 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.
Shareholder Information
The Fund's transfer agent will maintain your account information. Account
statements will be sent at least quarterly. A Form 1099 generally 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 historical transcripts of your account and copies of canceled checks.
Consolidated statements reflecting current values, share balances and
year-to-date transactions generally 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.
Automatic Cash Withdrawal Plan
A CDSC may be applied to withdrawals made under this plan. The Automatic Cash
Withdrawal Plan permits you to have payments of $100 or more automatically
transferred from a Fund 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 Fund. 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.
Aetna Series Fund, Inc. 37
<PAGE>
Checkwriting Service
Checkwriting is available with Class A, Class C and Class I shares of Money
Market. 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 (800) 367-7732. All notices with respect to checks must be given to the
transfer agent.
Cross Investing
Dividend Investing--You may elect to have dividend and/or capital gains
distributions automatically invested in the same class of one other Fund.
Systematic Exchange--You may establish an automatic exchange of shares from one
Fund 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. Because this transaction is treated
as an exchange, the policies related to the exchange privilege apply. There may
be tax consequences associated with these exchanges. Please consult your tax
adviser.
Cross investing may only be made in a Fund 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 (800) 367-7732.
Signature Guarantee
A signature guarantee is verification of the authenticity of the signature given
by certain authorized institutions. The Company requires a signature guarantee
for redemption requests in amounts in excess of $25,000. In addition, 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 Company reserves 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 notaries
public.
NET ASSET VALUE
Securities of the Funds are generally valued by independent pricing services
which have been approved by the Board. 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 that 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 that 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 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. 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, in good faith, by or under the authority of, the
Board.
38 Aetna Series Fund, Inc.
<PAGE>
TAX STATUS
The following is only a limited discussion of certain additional tax
considerations generally affecting each Fund. No attempt is made to present a
detailed explanation of the tax treatment of each Fund and no explanation is
provided with respect to the tax treatment of any Fund shareholder. The
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Code. If for any taxable year a Fund does not qualify as a
regulated investment company, all of its taxable income (including its net
capital gain) will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions will be
taxable to the shareholders as ordinary dividends to the extent of the Fund's
current and accumulated earnings and profits. Such distributions generally will
be eligible for the dividends-received deduction in the case of corporate
shareholders.
Foreign Investments
Investment income from foreign securities may be subject to foreign taxes
withheld at the source. It is impossible to determine the effective rate of
foreign tax in advance since the amount of a Fund's assets to be invested in
various countries is not known.
If more than 50% of International's total assets at the close of its fiscal year
consist of securities of foreign corporations, that Fund will be eligible to,
and may, file an election with the Internal Revenue Service (IRS) pursuant to
which shareholders will be required to include their pro rata portions of
foreign taxes paid by the Fund as income received by them. Shareholders may then
either deduct such pro rata portion in computing their taxable income or use
them as foreign tax credits against their U.S. income taxes. If International
makes such an election, it will report annually to each shareholder the amount
of foreign taxes to be included in income and then either deducted or credited.
Alternatively, if the amount of foreign taxes paid by International is not large
enough to warrant its making such an election, the Fund may claim the amount of
foreign taxes paid as a deduction against its own gross income. In that case
shareholders would not be required to include any amount of foreign taxes paid
by the International in their income and would not be permitted either to deduct
any portion of foreign taxes from their own income or to claim any amount tax
credit for taxes paid by the Fund.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on the undistributed income of 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.
Each Fund intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that a Fund may in certain circumstances be required to liquidate portfolio
investments to make sufficient distributions to avoid excise tax liability.
PERFORMANCE INFORMATION
Performance information for each class of shares including the yield and
effective yield of Money Market, the yield of Bond Fund, Aetna Government Fund,
High Yield and Index Plus Bond and the total return of all Funds, may appear in
reports or promotional literature to current or prospective shareholders.
Aetna Series Fund, Inc. 39
<PAGE>
Money Market Yields
Current yield for Money Market will be based on a recently ended seven-day
period, computed by determining the net change, exclusive of capital changes and
income other than investment income, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from that shareholder
account, and dividing the difference by the value of the account 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, 1998 were 4.96% and 5.09%, respectively.
30-Day Yield for Certain Non-Money Market Funds
Quotations of yield for Bond Fund, Aetna Government Fund, High Yield and Index
Plus Bond will be based on all investment income per share earned during a
particular 30-day period, less expenses accrued during the period (net
investment income), and will be computed by dividing net investment income by
the value of a share on the last day of the period, according to the following
formula:
YIELD = 2[(a-b + 1)(6)-1]
---
cd
Where:
a = dividends and interest earned during the period
b = the expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
d = the maximum offering price per share on the last day of the period
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), interest earned on debt obligations held by the
Fund is calculated by computing the yield to maturity of each obligation held by
the Fund based on the market value of the obligation (including actual accrued
interest) at the close of business on the last business day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest) and dividing the result by 360 and multiplying the
quotient by the market value of the obligation (including actual and accrued
interest). For purposes of this calculation, it is assumed that each month
contains 30 days.
The maturity of an obligation with a call provision is the next call date on
which the obligation reasonably may be expected to be called or, if none, the
maturity date. With respect to debt obligations purchased at a discount or
premium, the formula generally calls for amortization of the discount or
premium. The amortization schedule will be adjusted from time to time to reflect
changes in the market value of such debt obligations.
Undeclared earned income will be subtracted from the net asset value per share
(variable "d" in the formula). Undeclared earned income is the net investment
income which, at the end of the base period, has not been declared as a
dividend, but is reasonably expected to be and is declared as a dividend shortly
thereafter.
40 Aetna Series Fund, Inc.
<PAGE>
For the 30-day period ended October 31, 1998:
<TABLE>
<CAPTION>
Yield
----------------------------------
Name of Fund Class A Class I Class C
- ------------------------- --------- --------- ----------
<S> <C> <C> <C>
Bond Fund 4.93% 5.43% 4.42%
Aetna Government Fund 4.31% 4.79% 3.79%
High Yield 9.97% 10.74% 9.73%
Index Plus Bond 4.98% 5.39% 4.63%
</TABLE>
Dividend Yield
Bond Fund, Aetna Government Fund, High Yield, Money Market, and Index Plus Bond
may quote a "dividend yield" for each class of its shares. Dividend yield is
based on the dividends paid on shares of a class during the actual dividend
period from net investment income during a stated period.
To calculate dividend yield, the dividends of a class declared during a stated
30-day period are added together and the sum is multiplied by 12 (to annualize
the yield) and divided by the net asset value on the last day of the dividend
period. The formula is shown below:
Dividend Yield = (Dividends paid x 12) / Net Asset Value
The Class A dividend yield may also be quoted with the public offering price
(POP) for Class A shares. The POP includes the maximum front-end sales charge.
The dividend yield for Class B shares and Class C shares is calculated without
considering the effect of contingent deferred sales charges.
The dividend yields for the 30-day dividend period ended December 31, 1998 were
as follows (Class B shares were not offered during the period listed):
<TABLE>
<CAPTION>
Fund Class A (NAV) Class A (POP) Class C
- ----------------------- --------------- --------------- ----------
<S> <C> <C> <C>
Money Market 5.46% 5.46% 5.46%
Aetna Government Fund 4.53% 4.32% 4.01%
Bond Fund 6.21% 5.91% 5.59%
High Yield 9.02% 8.59% 8.42%
Index Plus Bond 5.46% 5.30% 4.94%
</TABLE>
Average Annual Total Return
Quotations of average annual total return for any Fund will be expressed in
terms of the average annual compounded rate of return of a hypothetical
investment in a Fund over a period of one, five and ten years (or, if less, up
to the life of the Fund), calculated pursuant to the formula:
P(1 + T)(n) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = an average annual total return
n = the number of years
ERV = the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5, or 10 year period at the end of the 1, 5, or 10
year period (or fractional portion thereof).
The Company may also from time to time include in such advertising a total
return figure for Class A, Class B and/or Class C that is not calculated
according to the formula set forth above. Specifically, the Company may include
performance for Class A that does not take into account payment of the
applicable front-end sales load, or the Company may include performance for
Class B or Class C that does not take into account the imposition of the
applicable CDSC.
All the following figures are based on actual investment performance.
Aetna Series Fund, Inc. 41
<PAGE>
In February 1998, the Funds redesignated Adviser Class shares as Class A
shares. For periods prior to the Class A inception date, Class A performance is
calculated by using the performance of Class I (formerly Select Class) shares
and deducting the Class A front-end sales load and internal fees and expenses
of the Adviser Class. In June 1998, the Funds introduced Class C shares. For
periods prior to the Class C inception date, Class C performance is calculated
using the performance of Class I (formerly Select Class) shares, and deducting
the internal fees and expenses applicable to the Class C shares. CDSC applies
for all shares redeemed prior to the end of the first eighteen months of
ownership. The 1-year returns without CDSC are net of fund expenses only, and
do not deduct a CDSC. Neither a front-end sales load nor a CDSC applies to
Money Market.
Total Return Quotations as of October 31, 1998:
Class I
<TABLE>
<CAPTION>
Fund Name 1 Year 5 Years Since Inception Inception Date*
- ----------------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Money Market 5.36% 5.23% 4.82% 1/3/92
Aetna Government Fund 8.54% N/A 6.63% 1/4/94
Bond Fund 7.72% 6.07% 7.02% 1/3/92
Balanced 10.81% 13.42% 12.03% 1/3/92
Growth and Income 3.80% 17.67% 14.78% 1/3/92
Growth 14.78% N/A 20.53% 1/4/94
Index Plus Large Cap 23.46% N/A 25.53% 12/10/96
Small Company -7.47% N/A 16.28% 1/4/94
International 10.22% 11.65% 10.15% 1/3/92
Ascent -1.90% N/A 15.84% 1/4/95
Crossroads -0.87% N/A 13.76% 1/4/95
Legacy 2.51% N/A 12.11% 1/4/95
High Yield N/A N/A -6.50% 2/2/98
Index Plus Bond N/A N/A 5.48% 2/4/98
Index Plus Mid Cap N/A N/A 3.60% 2/3/98
Index Plus Small Cap N/A N/A -11.30% 2/3/98
Mid Cap N/A N/A -7.10% 2/4/98
Real Estate N/A N/A -16.80% 2/2/98
Value Opportunity N/A N/A -0.10% 2/2/98
</TABLE>
Class A (assuming payment of the front-end sales load)
<TABLE>
<CAPTION>
Fund Name 1 Year 5 Years Since Inception Inception Date*
- ----------------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Aetna Government Fund 3.05% N/A 4.87% 1/4/94
Bond Fund 2.18% 4.33% 5.52% 1/3/92
Balanced 4.09% 11.30% 10.27% 1/3/92
Growth and Income -2.52% 15.57% 13.06% 1/3/92
Growth 7.76% N/A 18.29% 1/4/94
Index Plus Large Cap 19.39% N/A 22.88% 12/10/96
Small Company -13.07% N/A 14.12% 1/4/94
International 3.45% 9.55% 8.43% 1/3/92
Ascent -7.79% N/A 13.39% 1/4/95
Crossroads -6.85% N/A 11.32% 1/4/95
Legacy -3.59% N/A 9.74% 1/4/95
High Yield N/A N/A -11.10% 2/2/98
Index Plus Bond N/A N/A 2.13% 2/4/98
Index Plus Mid Cap N/A N/A 0.30% 2/3/98
</TABLE>
42 Aetna Series Fund, Inc.
<PAGE>
Class A (assuming payment of the front-end sales load)
<TABLE>
<CAPTION>
Fund Name 1 Year 5 Years Since Inception Inception Date*
- ---------------------- -------- --------- ----------------- ----------------
<S> <C> <C> <C> <C>
Index Plus Small Cap N/A N/A -14.06% 2/3/98
Mid Cap N/A N/A -12.54% 2/4/98
Real Estate N/A N/A -21.77% 2/2/98
Value Opportunity N/A N/A -6.03% 2/2/98
</TABLE>
Class A (without payment of the front-end sales load)
<TABLE>
<CAPTION>
Fund Name 1 Year 5 Years Since Inception Inception Date*
- ----------------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Money Market 5.36% 5.23% 4.82% 1/3/92
Aetna Government Fund 8.19% N/A 5.93% 1/4/94
Bond Fund 7.27% 5.35% 6.28% 1/3/92
Balanced 10.44% 12.63% 11.23% 1/3/92
Growth and Income 3.42% 16.95% 14.04% 1/3/92
Growth 14.34% N/A 19.75% 1/4/94
Index Plus Large Cap 23.09% N/A 24.87% 12/10/96
Small Company -7.77% N/A 15.53% 1/4/94
International 9.76% 10.86% 9.37% 1/3/92
Ascent -2.17% N/A 15.16% 1/4/95
Crossroads -1.17% N/A 13.06% 1/4/95
Legacy 2.29% N/A 11.45% 1/4/95
High Yield N/A N/A -6.67% 2/2/98
Index Plus Bond N/A N/A 5.29% 2/4/98
Index Plus Mid Cap N/A N/A 3.40% 2/3/98
Index Plus Small Cap N/A N/A -11.40% 2/3/98
Mid Cap N/A N/A -7.20% 2/4/98
Real Estate N/A N/A -17.00% 2/2/98
Value Opportunity N/A N/A -0.30% 2/2/98
</TABLE>
Class C (assuming payment of the CDSC)
<TABLE>
<CAPTION>
Fund Name 1 Year 5 Years Since Inception Inception Date*
- ----------------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Aetna Government Fund 6.46% N/A 5.57% 1/4/94
Bond Fund 5.54% 4.99% 5.94% 1/3/92
Balanced 8.74% 12.30% 10.92% 1/3/92
Growth and Income 1.85% 16.51% 13.65% 1/3/92
Growth 12.61% N/A 19.32% 1/4/94
Index Plus Large Cap 21.74% N/A 24.56% 12/10/96
Small Company -9.35% N/A 15.11% 1/4/94
International 8.31% 10.57% 9.08% 1/3/92
Ascent -3.78% N/A 14.70% 1/4/95
Crossroads -2.87% N/A 12.62% 1/4/95
Legacy 0.53% N/A 11.01% 1/4/95
High Yield N/A N/A -8.19% 2/2/98
Index Plus Bond N/A N/A 4.04% 2/4/98
Index Plus Mid Cap N/A N/A 2.24% 2/3/98
Index Plus Small Cap N/A N/A -12.53% 2/3/98
Mid Cap N/A N/A -8.69% 2/4/98
Real Estate N/A N/A -18.26% 2/2/98
Value Opportunity N/A N/A -1.89% 2/2/98
</TABLE>
Aetna Series Fund, Inc. 43
<PAGE>
Class C (without payment of the CDSC)
<TABLE>
<CAPTION>
Fund Name 1 Year 5 Years Since Inception Inception Date*
- ----------------------- ------------ ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Money Market 5.36% 5.23% 4.82% 1/3/92
Aetna Government Fund 7.46% N/A 5.57% 1/4/94
Bond Fund 6.54% 4.99% 5.94% 1/3/92
Balanced 9.74% 12.30% 10.92% 1/3/92
Growth and Income 2.85% 16.51% 13.65% 1/3/92
Growth 13.61% N/A 19.32% 1/4/94
Index Plus Large Cap 22.49% N/A 24.56% 12/10/96
Small Company -8.43% N/A 15.11% 1/4/94
International 9.31% 10.57% 9.08% 1/3/92
Ascent -2.81% N/A 14.70% 1/4/95
Crossroads -1.89% N/A 12.62% 1/4/95
Legacy 1.53% N/A 11.01% 1/4/95
High Yield N/A N/A -7.26% 2/2/98
Index Plus Bond N/A N/A 4.79% 2/4/98
Index Plus Mid Cap N/A N/A 2.99% 2/3/98
Index Plus Small Cap N/A N/A -11.87% 2/3/98
Mid Cap N/A N/A -7.77% 2/4/98
Real Estate N/A N/A -17.44% 2/2/98
Value Opportunity N/A N/A -0.90% 2/2/98
</TABLE>
* The inception dates above represent the commencement of investment
operations, which may not coincide with the effective date of the
post-effective amendment to the registration statement through which the
Funds was added.
Performance information for a Fund may be compared, in reports and promotional
literature, to: (a) the Standard & Poor's 500 Stock Index, the Russell 2000
Index, the Russell 3000 Index, Lehman Brothers Aggregate Bond Index, Lehman
Brothers Intermediate Government Bond Index, Merrill Lynch High Yield Index,
Salomon Brothers Broad Investment Grade Bond Index, Dow Jones Industrial
Average, or other indices (including, where appropriate, a blending of indices)
that measure performance of a pertinent group of securities widely regarded by
investors as representative of the securities markets in general; (b) other
groups of investment companies tracked by Morningstar or Lipper Analytical
Services, widely used independent research firms that rank 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 or other criteria; and (c)
the Consumer Price Index (measure for inflation) to assess the real rate of
return from an investment in a Fund.
From time to time sales materials and advertisements may include comparisons of
the cost of borrowing a specific amount of money at a given loan rate over a set
period of time to the cost of a monthly investment program, over the same time
period, which earns the same rate of return. The comparison may involve
historical rates of return on a given index, or may involve performance of any
of the Funds.
44 Aetna Series Fund, Inc.
<PAGE>
FINANCIAL STATEMENTS
The Financial Statements and the independent auditors' reports thereon are
incorporated by reference in this Statement. The Companies' Annual Reports are
available upon request and without charge by calling (800) 367-7732.
ASF(S)-Aetna Series Fund, Inc. Statement of Additional Information
SAI.SERIES-98
Aetna Series Fund, Inc. 45
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<S> <C>
(a.1) Articles of Amendment and Restatement (September 2, 1997)(1)
(a.2) Articles of Amendment (October 29, 1997)(2)
(a.3) Articles Supplementary (October 29, 1997)(2)
(a.4) Articles of Amendment (January 26, 1998)(3)
(a.5) Articles Supplementary (June 25, 1998)(4)
(a.6) Articles Supplementary (December 22, 1998)
(b) By-laws (as amended September 13, 1994)(5)
(c) Instruments Defining Rights of Holders (set forth in the Articles of Amendment and
Restatement)(1)
(d.1) Investment Advisory Agreement between Aeltus Investment Management, Inc. and Aetna Series Fund,
Inc., on behalf of Aetna Balanced Fund, Aetna Bond Fund, Aetna Growth Fund, Aetna Growth and
Income Fund, Aetna Government Fund, Aetna Index Plus Large Cap Fund, Aetna International Fund,
Aetna Money Market Fund, Aetna Small Company Fund, Aetna Ascent Fund, Aetna Crossroads Fund, Aetna
Legacy Fund, Aetna High Yield Fund, Aetna Index Plus Bond Fund, Aetna Index Plus Mid Cap Fund,
Aetna Index Plus Small Cap Fund, Aetna Mid Cap Fund, Aetna Real Estate Securities Fund, and Aetna
Value Opportunity Fund
(d.2) Subadvisory Agreement between Aeltus Investment Management, Inc., Aetna Series Fund, Inc.,
on behalf of Aetna Value Opportunity Fund, and Bradley, Foster & Sargent, Inc.(6)
(e.1) Underwriting Agreement between Aeltus Capital, Inc. and Aetna Series Fund, Inc.(3)
(e.2) Master Selling Dealer Agreement(3)
(f) Directors' Deferred Compensation Plan(1)
(g.1) Custodian Agreement - Mellon Bank, N.A. (September 1, 1992)(5)
(g.2) Amendment to Custodian Agreement - Mellon Bank, N.A. (May 11, 1994)(2)
(g.3) Amendment to Custodian Agreement - Mellon Bank, N.A. (September 14, 1994)(5)
(g.4) Amendment to Custodian Agreement - Mellon Bank, N.A. (October 11, 1996)(7)
(g.5) Amendment to Custodian Agreement - Mellon Bank, N.A. (January 29, 1998)(3)
(g.6) Custodian Agreement - Brown Brothers Harriman & Company (Aetna International Fund) (December
12, 1991)(8)
(h.1) Administrative Services Agreement between Aeltus Investment Management, Inc. and Aetna Series
Fund, Inc. on behalf of Aetna Balanced Fund, Aetna Bond Fund, Aetna Growth Fund, Aetna Growth and
Income Fund, Aetna Government Fund, Aetna Index Plus Large Cap Fund, Aetna International Fund,
Aetna Money Market Fund, Aetna Small Company Fund, Aetna Ascent Fund, Aetna Crossroads Fund,
<PAGE>
Aetna Legacy Fund, Aetna High Yield Fund, Aetna Index Plus Bond Fund, Aetna Index Plus Mid Cap Fund,
Aetna Index Plus Small Cap Fund, Aetna Mid Cap Fund, Aetna Real Estate Securities Fund, and Aetna
Value Opportunity Fund
(h.2) License Agreement(5)
(h.3) Transfer Agent Agreement(4)
(h.4) Amendment No. 1 to the Transfer Agency and Services Agreement(9)
(h.5) Amendment No. 2 to the Transfer Agency and Services Agreement(9)
(h.6) Amendment No. 3 to the Transfer Agency and Services Agreement
(i) Opinion and Consent of Counsel
(j) Consent of Independent Auditors
(k) Not applicable
(l) Initial Capital Agreement(9)
(m.1) Distribution Plan (Class A)
(m.2) Distribution Plan (Class C)
(m.3) Distribution Plan (Class B)
(m.4) Shareholder Service Plan (Class C)
(m.5) Shareholder Service Plan (Class B)
(n) Financial Data Schedules
(o) Multiple Class Plan(9)
(p.1) Power of Attorney (November 6, 1998)(9)
(p.2) Authorization for Signatures(10)
</TABLE>
1. Incorporated herein by reference to Post-Effective Amendment No. 24 to
Registration Statement on Form N-1A (File No. 33-41694), as filed with the
Securities and Exchange Commission on January 16, 1998.
2. Incorporated herein by reference to Post-Effective Amendment No. 23 to
Registration Statement on Form N-1A, (File No. 33-41694), as filed with the
Securities and Exchange Commission on November 3, 1997.
3. Incorporated herein by reference to Post-Effective Amendment No. 25 to
Registration Statement on Form N-1A, (File No. 33-41694), as filed with the
Securities and Exchange Commission on April 24, 1998.
4. Incorporated herein by reference to Post-Effective Amendment No. 26 to
Registration Statement on Form N-1A (File No. 33-41694), as filed with the
Securities and Exchange Commission on June 29, 1998.
5. Incorporated herein by reference to Post-Effective Amendment No. 1 to
Registration Statement on Form N-1A, (File No. 33-85620), as filed with the
Securities and Exchange Commission on June 28, 1995.
6. Incorporated herein by reference to Post-Effective Amendment No. 28 to
Registration Statement on Form N-1A (File No. 33-41694), as filed with the
Securities and Exchange Commission on September 30, 1998.
7. Incorporated herein by reference to Post-Effective Amendment No. 16 to
Registration Statement on Form N-1A (File No. 33-41694), as filed with the
Securities and Exchange Commission on December 10, 1996.
<PAGE>
8. Incorporated herein by reference to Post-Effective Amendment No. 14 to
Registration Statement on Form N-1A (File No. 33-41694), as filed with the
Securities and Exchange Commission on September 20, 1996.
9. Incorporated herein by reference to Post-Effective Amendment No. 29 to
Registration Statement on Form N-1A (File No. 33-41694), as filed with the
Securities and Exchange Commission on December 17, 1998.
10. Incorporated herein by reference to Post-Effective Amendment No. 2 to
Registration Statement on Form N-1A (File No. 333-05173), as filed with the
Securities and Exchange Commission on September 26, 1997.
<PAGE>
Item 24. Persons Controlled by or Under Common Control
Registrant is a Maryland corporation for which separate financial
statements are filed. As of January 31, 1999, Aetna Life Insurance and
Annuity Company (Aetna), and its affiliates, had the following interest
in the series of the Registrant, through direct ownership or through one
of Aetna's separate accounts:
<TABLE>
<CAPTION>
% Aetna
------------------------------------------------------------
Class I Class A Class C
------- ------- -------
<S> <C> <C> <C>
Aetna Bond Fund 54.57%
Aetna Government Fund 86.52% 60.25%
Aetna High Yield Fund 99.31% 31.86% 31.26%
Aetna Index Plus Bond Fund 99.57% 25.57% 43.62%
Aetna Index Plus Large Cap Fund 43.67% 2.31%
Aetna Index Plus Mid Cap Fund 98.99% 29.72% 41.04%
Aetna Index Plus Small Cap Fund 98.05% 21.24% 11.30%
Aetna International Fund 22.30% 31.68%
Aetna Mid Cap Fund 98.33% 71.47% 95.16%
Aetna Money Market Fund 48.93%
Aetna Real Estate Securities Fund 98.37% 28.78% 75.31%
Aetna Small Company Fund 57.43% 5.37%
Aetna Value Opportunity Fund 97.14% 70.15% 18.89%
Aetna Ascent Fund 87.86% 53.04%
Aetna Crossroads Fund 92.35% 44.45%
Aetna Legacy Fund 86.08% 33.20%
</TABLE>
Aetna is an indirect wholly owned subsidiary of Aetna Inc.
A list of all persons directly or indirectly under common control with
the Registrant is incorporated herein by reference to Item 26 of
Post-Effective Amendment No. 2 to the Registration Statement on Form N-4
(File No. 333-56297), as filed electronically with the Securities and
Exchange Commission on December 14, 1998.
Item 25. Indemnification
Article 12, Section (d) of the Registrant's Articles of Amendment and
Restatement, incorporated herein by reference to Exhibit (a.1) to
Registrant's Registration Statement on Form N-1A (File No. 33-41694), as
filed electronically on November 3, 1997, provides for indemnification of
directors and officers. In addition, the Registrant's officers and
directors are covered under a directors and officers/errors and omissions
liability insurance policy issued by Gulf Insurance Company which expires
October 1, 1999.
<PAGE>
Section XI.B of the Administrative Services Agreement, filed herein as
Exhibit (h.1), provides for indemnification of the Administrator.
Section 8 of the Underwriting Agreement, incorporated herein by reference
to Exhibit (e.1) to Registrant's Registration Statement on Form N-1A
(File No. 33-41694), as filed electronically on April 24, 1998, provides
for indemnification of the Underwriter, its several officers and
directors, and any person who controls the Underwriter within the meaning
of Section 15 of the Securities Act of 1933.
Reference is also made to Section 2-418 of the Corporations and
Associations Article of the Annotated Code of Maryland which provides
generally that (1) a corporation may (but is not required to) indemnify
its directors for judgments, fines and expenses in proceedings in which
the director is named a party solely by reason of being a director,
provided the director has not acted in bad faith, dishonestly or
unlawfully, and provided further that the director has not received any
"improper personal benefit"; and (2) that a corporation must (unless
otherwise provided in the corporation's charter or articles of
incorporation) indemnify a director who is successful on the merits in
defending a suit against him by reason of being a director for
"reasonable expenses." The statutory provisions are not exclusive; i.e.,
a corporation may provide greater indemnification rights than those
provided by statute.
Item 26. Business and Other Connections of Investment Adviser
The investment adviser, Aeltus Investment Management, Inc. (Aeltus), is
registered as an investment adviser with the Securities and Exchange
Commission. In addition to serving as investment adviser and
administrator for Aetna Series Fund, Inc., Aeltus acts as investment
adviser and administrator for Aetna Variable Fund, Aetna Income Shares,
Aetna Variable Encore Fund, Aetna Balanced VP, Inc., Aetna GET Fund,
Aetna Generation Portfolios, Inc., and Aetna Variable Portfolios, Inc.
(all management investment companies registered under the Investment
Company Act of 1940 (1940 Act)). It also acts as investment adviser to
certain private accounts.
The following table summarizes the business connections of the directors
and principal officers of the Investment Adviser.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1996/Addresses*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John Y. Kim Director, President, Chief Director (February 1995 - March 1998) -- Aetna Life
Executive Officer, Chief Insurance and Annuity Company; Senior Vice President
Investment Officer (since September 1994) -- Aetna Life Insurance and
Annuity Company.
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1996/Addresses*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Scott Fox Director, Managing Director, Vice President (since April 1997) -- Aetna
Chief Operating Officer, Chief Retirement Services, Inc.; Director and Senior Vice
Financial Officer President (March 1997 - February 1998) -- Aetna Life
Insurance and Annuity Company; Managing Director, Chief
Operating Officer, Chief Financial Officer, Treasurer
(April 1994 - March 1997) -- Aeltus Investment
Management, Inc.
Thomas J. McInerney Director President (since August 1997) -- Aetna Retirement
Services, Inc.; Director and President (since
September 1997) -- Aetna Life Insurance and Annuity
Company; Executive Vice President (since August
1997) -- Aetna Inc.; Vice President, Strategy (March
1997 - August 1997) -- Aetna Inc.; Vice President,
Marketing and Sales (December 1996 - March 1997) --
Aetna U.S. Healthcare; Vice President, National
Accounts (April 1996 - December 1996) -- Aetna U.S.
Healthcare.
Catherine H. Smith Director Chief Financial Officer (since February 1998) --
Aetna Retirement Services, Inc.; Director, Senior
Vice President and Chief Financial Officer (since
February 1998) -- Aetna Life Insurance and Annuity
Company; Vice President, Strategy, Finance and
Administration, Financial Relations (September 1996
- February 1998) -- Aetna Inc.
Lennart A. Carlson Managing Director, Fixed Income Managing Director (since January 1996) -- Aeltus
Investments Trust Company.
Stephanie A. DeSisto Vice President
Amy R. Doberman Vice President, Counsel (since December 1996) -- Aetna Life Insurance
General Counsel and Annuity Company; Attorney (March 1990 - November
and Secretary 1996) -- Securities and Exchange Commission.
Steven C. Huber Managing Director, Fixed Income Managing Director (since August 1996) -- Aeltus
Investments Trust Company.
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Name Positions and Offices Other Principal Position(s) Held
with Investment Adviser Since Oct. 31, 1996/Addresses*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Brian K. Kawakami Vice President, Chief Compliance Chief Compliance Officer & Director (since January
Officer 1996) -- Aeltus Trust Company; Chief Compliance
Officer (since August 1993) -- Aeltus Capital, Inc.
Neil Kochen Managing Director, Product Managing Director (since April 1996) -- Aeltus Trust
Development Company; Managing Director (since August 1996) --
Aeltus Capital, Inc.
Frank Litwin Managing Director, Retail Vice President, Strategic Marketing (April, 1992 -
Marketing and Sales August, 1997) -- Fidelity Investments Institutional
Services Company.
Kevin M. Means Managing Director, Equity Managing Director (since August 1996) -- Aeltus
Investments Trust Company.
L. Charles Meythaler Managing Director, Institutional Director (since July 1997) -- Aeltus Trust Company;
Marketing Managing Director (since June 1997) -- Aeltus Trust
and Sales Company; President (June 1993 - April 1997) -- New
England Investment Association.
Jeanne Wong-Boehm Managing Director, Fixed Income Managing Director (since August 1996) -- Aeltus
Investments Trust Company.
</TABLE>
* Except with respect to Mr. McInerney and Ms. Smith, the principal
business address of each person named is 10 State House Square,
Hartford, Connecticut 06103-3602. The address of Mr. McInerney and Ms.
Smith is 151 Farmington Avenue, Hartford, Connecticut 06156.
For information regarding Bradley, Foster & Sargent, Inc. (Bradley), the
subadviser for Aetna Value Opportunity Fund, reference is made to the section
entitled "Subadviser" in the Class A, B and C Prospectus, the Class I Prospectus
and the Statement of Additional Information each dated March 1, 1999. For
information as to the business, profession, vocation or employment of a
substantial nature of each of the officers of Bradley, reference is made to
Bradley's current Form ADV (File No. 801-46616) filed under the Investment
Advisers Act of 1940, incorporated herein by reference.
Item 27. Principal Underwriters
(a) None
<PAGE>
(b) The following are the directors and principal officers of Aeltus
Capital, Inc., the principal underwriter of the Registrant:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------
<S> <C> <C>
John Y. Kim Director and President Director
J. Scott Fox Director, Managing Director, Chief Operating Director and President
Officer, Chief Financial Officer
Brian K. Kawakami Director, Vice President, Chief Compliance None
Officer
Frank Litwin Director, Managing Director Vice President
Daniel F. Wilcox Vice President - Finance, and Treasurer None
</TABLE>
*The principal business address of all directors and officers listed is 10
State House Square, Hartford, Connecticut 06103-3602.
(c) Not applicable.
Item 28. Location of Accounts and Records
As required by Section 31(a) of the 1940 Act and the rules thereunder,
the Registrant and its investment adviser, Aeltus, maintain physical
possession of each account, book or other document, at 10 State House
Square, Hartford, Connecticut 06103-3602.
Shareholder records are maintained by the transfer agent, First Data
Investor Services Group, Inc., 4400 Computer Drive, Westboro,
Massachusetts 01581.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, Aetna Series Fund, Inc. certifies that it meets all of the requirements for
effectiveness of this registration statement under rule 485(b) under the
Securities Act and has duly caused this registration statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Hartford and
State of Connecticut on the 25th day of February, 1999.
AETNA SERIES FUND, INC.
-------------------------------
Registrant
By J. Scott Fox*
---------------------------
J. Scott Fox
President
Pursuant to the requirements of the Securities Act , this registration statement
has been signed below by the following persons in the capacities and on the
date(s) indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C> <C>
J. Scott Fox* President and Director )
- ------------------------------------------- (Principal Executive Officer) )
J. Scott Fox )
)
Albert E. DePrince, Jr.* Director )
- ------------------------------------------- )
Albert E. DePrince, Jr. )
)
Maria T. Fighetti* Director ) February
- ------------------------------------------- )
Maria T. Fighetti ) 25, 1999
)
David L. Grove* Director )
- ------------------------------------------- )
David L. Grove )
)
John Y. Kim* Director )
- ------------------------------------------- )
John Y. Kim )
)
Sidney Koch* Director )
- ------------------------------------------- )
Sidney Koch )
)
Shaun P. Mathews* Director )
- ------------------------------------------- )
Shaun P. Mathews )
<PAGE>
Corine T. Norgaard* Director )
- ------------------------------------------- )
Corine T. Norgaard )
)
Richard G. Scheide* Director )
- ------------------------------------------- )
Richard G. Scheide )
)
Stephanie A. DeSisto* Treasurer and Chief Financial Officer )
- ------------------------------------------- (Principal Financial and Accounting )
Stephanie A. DeSisto Officer) )
</TABLE>
By: /s/ Amy R. Doberman
---------------------------------------------------
*Amy R. Doberman
Attorney-in-Fact
*Executed pursuant to Power of Attorney dated November 6, 1998 and filed
with the Securities and Exchange Commission on December 17, 1998.
<PAGE>
Aetna Series Fund, Inc.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
----------- ------- ----
<S> <C> <C>
99-(a.6) Articles Supplementary (December 22, 1998)
-----------------
99-(d.1) Investment Advisory Agreement between Aeltus Investment Management, Inc.
and Aetna Series Fund, Inc., on behalf of Aetna Balanced Fund, Aetna
Bond Fund, Aetna Growth Fund, Aetna Growth and Income Fund, Aetna
Government Fund, Aetna Index Plus Large Cap Fund, Aetna International
Fund, Aetna Money Market Fund, Aetna Small Company Fund, Aetna Ascent
Fund, Aetna Crossroads Fund, Aetna Legacy Fund, Aetna High Yield Fund,
Aetna Index Plus Bond Fund, Aetna Index Plus Mid Cap Fund, Aetna Index
Plus Small Cap Fund, Aetna Mid Cap Fund, Aetna Real Estate Securities
Fund, and Aetna Value Opportunity Fund
-----------------
99-(h.1) Administrative Services Agreement between Aeltus Investment Management,
Inc. and Aetna Series Fund, Inc. on behalf of Aetna Balanced Fund, Aetna
Bond Fund, Aetna Growth Fund, Aetna Growth and Income Fund, Aetna
Government Fund, Aetna Index Plus Large Cap Fund, Aetna International
Fund, Aetna Money Market Fund, Aetna Small Company Fund, Aetna Ascent
Fund, Aetna Crossroads Fund, Aetna Legacy Fund, Aetna High Yield Fund,
Aetna Index Plus Bond Fund, Aetna Index Plus Mid Cap Fund, Aetna Index
Plus Small Cap Fund, Aetna Mid Cap Fund, Aetna Real Estate Securities
Fund, and Aetna Value Opportunity Fund
-----------------
99-(h.6) Amendment No. 3 to the Transfer Agency and Services Agreement
-----------------
99-(i) Opinion and Consent of Counsel
-----------------
99-(j) Consent of Independent Auditors
-----------------
99-(m.1) Distribution Plan (Class A)
-----------------
99-(m.2) Distribution Plan (Class C)
-----------------
99-(m.3) Distribution Plan (Class B)
-----------------
<PAGE>
<CAPTION>
Exhibit No. Exhibit Page
----------- ------- ----
<S> <C> <C>
99-(m.4) Shareholder Service Plan (Class C)
-----------------
99-(m.5) Shareholder Service Plan (Class B)
-----------------
99-(n) Financial Data Schedules (filed here as Ex-27)
-----------------
</TABLE>
AETNA SERIES FUND, INC.
ARTICLES SUPPLEMENTARY
AETNA SERIES FUND, INC., a Maryland corporation registered as an open-end
investment company under the Investment Company Act of 1940 and having its
principal office in the State of Maryland in Baltimore City, Maryland
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at its December 9, 1998
meeting, adopted a resolution increasing the total number of shares of stock
which the Corporation shall have authority to issue to twelve billion, six
hundred million (12,600,000,000) shares of capital stock with a par value of
$0.001 per share and with an aggregate par value of twelve million, six hundred
thousand dollars ($12,600,000.00);
SECOND: The Board of Directors, at its meeting held on December 9, 1998,
by resolutions, did designate and classify two billion, nine hundred million
(2,900,000,000) shares of capital stock as a new "Class B" of each series
("Series") as follows:
<TABLE>
<CAPTION>
Name of Number of
Name of Series Class of Series Shares Allocated
<S> <C> <C>
AETNA MONEY MARKET FUND Class B 1,000,000,000
AETNA BOND FUND Class B 100,000,000
AETNA BALANCED FUND Class B 100,000,000
AETNA GROWTH AND Class B 100,000,000
INCOME FUND
AETNA INTERNATIONAL FUND Class B 200,000,000
AETNA GOVERNMENT FUND Class B 100,000,000
AETNA SMALL COMPANY FUND Class B 100,000,000
AETNA GROWTH FUND Class B 100,000,000
AETNA ASCENT FUND Class B 100,000,000
AETNA CROSSROADS FUND Class B 100,000,000
AETNA LEGACY FUND Class B 100,000,000
AETNA INDEX PLUS Class B 100,000,000
LARGE CAP FUND
AETNA INDEX PLUS BOND FUND Class B 100,000,000
AETNA INDEX PLUS Class B 100,000,000
MID CAP FUND
AETNA MID CAP FUND Class B 100,000,000
AETNA INDEX PLUS Class B 100,000,000
SMALL CAP FUND
AETNA HIGH YIELD FUND Class B 100,000,000
AETNA REAL ESTATE SECURITIES FUND Class B 100,000,000
AETNA VALUE Class B 100,000,000
OPPORTUNITY FUND
</TABLE>
<PAGE>
THIRD: The shares of each Series, and of each Class of such Series,
including, but not limited to the shares of Class B of each Series designated
and classified in paragraph Second of these Articles Supplementary, shall have
the preferences, rights, voting powers, restrictions, limitations as to
dividends, qualifications, conversion rights, and terms and conditions of
redemption as set forth in paragraphs SEVENTH and EIGHTH of, and elsewhere in,
the Articles of Amendment and Restatement of the Corporation. In addition, the
proceeds of the redemption of Class B shares of each Series (including
fractional shares) may be reduced by the amount of any contingent deferred sales
charge payable on such redemption pursuant to the terms of the issuance of such
shares.
FOURTH: The shares of each Series and of each Class of each Series shall
be subject to all provisions of the Articles of Amendment and Restatement of the
Corporation.
FIFTH: The shares of the Corporation authorized and classified pursuant
to paragraphs FIRST and SECOND of these Articles Supplementary have been so
authorized and classified by the Board of Directors under the authority
contained in the charter of the Corporation. The total number of shares of
capital stock that the Corporation has authority to issue has been increased by
the Board of Directors in accordance with Section 2-105(c) of the Maryland
General Corporation Law.
SIXTH: Immediately prior to the effectiveness of these Articles
Supplementary, the Corporation had the authority to issue nine billion, seven
hundred million (9,700,000,000) shares of capital stock with a par value of
$0.001 per share and with an aggregate par value of nine million, seven hundred
thousand dollars ($9,700,000.00), of which the Board of Directors had designated
and classified eight billion, seven hundred million (8,700,000,000) shares as
follows:
<TABLE>
<CAPTION>
Name of Series Name of Number of
Class of Series Shares Allocated
<S> <C> <C>
AETNA MONEY MARKET FUND Class I 1,000,000,000
Class A 1,000,000,000
Class C 1,000,000,000
2
<PAGE>
AETNA BOND FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA BALANCED FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA GROWTH AND Class I 100,000,000
INCOME FUND Class A 100,000,000
Class C 100,000,000
AETNA INTERNATIONAL FUND Class I 200,000,000
Class A 200,000,000
Class C 200,000,000
AETNA GOVERNMENT FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA SMALL COMPANY FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA GROWTH FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA ASCENT FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA CROSSROADS FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA LEGACY FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA INDEX PLUS Class I 100,000,000
LARGE CAP FUND Class A 100,000,000
Class C 100,000,000
AETNA INDEX PLUS BOND FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
3
<PAGE>
AETNA INDEX PLUS Class I 100,000,000
MID CAP FUND Class A 100,000,000
Class C 100,000,000
AETNA MID CAP FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA INDEX PLUS Class I 100,000,000
SMALL CAP FUND Class A 100,000,000
Class C 100,000,000
AETNA HIGH YIELD FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA REAL ESTATE SECURITIES FUND Class I 100,000,000
Class A 100,000,000
Class C 100,000,000
AETNA VALUE Class I 100,000,000
OPPORTUNITY FUND Class A 100,000,000
Class C 100,000,000
</TABLE>
SEVENTH: Immediately following the effectiveness of these Articles
Supplementary, the Corporation will have authority to issue twelve billion, six
hundred million (12,600,000,000) shares of capital stock with a par value of
$0.001 per share and with an aggregate par value of twelve million, six hundred
thousand dollars ($12,600,000.00) of which the Board of Directors has designated
and classified eleven billion, seven hundred million (11,600,000,000) shares as
set forth in paragraphs SECOND and SIXTH of these Articles Supplementary and of
which one billion (1,000,000,000) shares remain unclassified.
IN WITNESS WHEREOF, Aetna Series Fund, Inc. has caused these Articles
Supplementary to be signed in its name on its behalf by its authorized officers
who acknowledge that these Articles Supplementary are the act of the
Corporation, that to the best of their knowledge, information and belief, all
matters and facts set forth herein relating to the authorization and approval of
these Articles Supplementary are true in all material respects and that this
statement is made under the penalties of perjury.
ATTEST: AETNA SERIES FUND, INC.
/s/ Amy R. Doberman /s/ J. Scott Fox
- ---------------------------- -------------------------
Amy R. Doberman J. Scott Fox
Secretary President
Date: 12/22/98
-----------------------
CORPORATE SEAL
4
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between AELTUS INVESTMENT MANAGEMENT, INC. a
Connecticut corporation (the "Adviser") and AETNA SERIES FUND, INC., a Maryland
corporation (the "Fund"), on behalf of its series, Aetna Bond Fund (the
"Series"), as of the date set forth above the parties' signatures.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission (the
"Commission") as an open-end, diversified, management investment company under
the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Fund has established the Series; and
WHEREAS, the Adviser is registered with the Commission as an investment adviser
under the Investment Advisers Act of 1940 (the "Advisers Act"), and is in the
business of acting as an investment adviser; and
WHEREAS, the Fund, on behalf of the Series, and the Adviser desire to enter into
an agreement to provide for investment advisory and management services for the
Series on the terms and conditions hereinafter set forth;
NOW THEREFORE, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADVISER
Subject to the terms and conditions of this Agreement and the policies and
control of the Fund's Board of Directors (the "Board"), the Fund, on behalf of
the Series, hereby appoints the Adviser to serve as the investment adviser to
the Series, to provide the investment advisory services set forth below in
Section II. The Adviser agrees that, except as required to carry out its duties
under this Agreement or otherwise expressly authorized, it is acting as an
independent contractor and not as an agent of the Series and has no authority to
act for or represent the Series in any way.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall do the following:
1. supervise all aspects of the operations of the Series;
<PAGE>
2. select the securities to be purchased, sold or exchanged by
the Series or otherwise represented in the Series' investment
portfolio, place trades for all such securities and regularly
report thereon to the Board;
3. formulate and implement continuing programs for the purchase
and sale of securities and regularly report thereon to the
Board;
4. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy
generally, the Series, securities held by or under
consideration for the Series, or the issuers of those
securities;
5. provide economic research and securities analyses as the
Adviser considers necessary or advisable in connection with
the Adviser's performance of its duties hereunder;
6. obtain the services of, contract with, and provide
instructions to custodians and/or subcustodians of the Series'
securities, transfer agents, dividend paying agents, pricing
services and other service providers as are necessary to carry
out the terms of this Agreement; and
7. take any other actions which appear to the Adviser and the
Board necessary to carry into effect the purposes of this
Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of the Adviser
Adviser hereby represents and warrants to the Fund as follows:
1. Due Incorporation and Organization. The Adviser is
duly organized and is in good standing under the laws
of the State of Connecticut and is fully authorized
to enter into this Agreement and carry out its duties
and obligations hereunder.
2. Registration. The Adviser is registered as an
investment adviser with the Commission under the
Advisers Act. The Adviser shall maintain such
registration in effect at all times during the term
of this Agreement.
3. Best Efforts. The Adviser at all times shall provide
its best judgment and effort to the Series in
carrying out its obligations hereunder.
B. Representations and Warranties of the Series and the Fund
The Fund, on behalf of the Series, hereby represents and warrants to
the Adviser as follows:
-2-
<PAGE>
1. Due Incorporation and Organization. The Fund has been
duly incorporated under the laws of the State of
Maryland and it is authorized to enter into this
Agreement and carry out its obligations hereunder.
2. Registration. The Fund is registered as an investment
company with the Commission under the 1940 Act and
shares of the Series are registered or qualified for
offer and sale to the public under the Securities Act
of 1933 and all applicable state securities laws.
Such registrations or qualifications will be kept in
effect during the term of this Agreement.
IV. DELEGATION OF RESPONSIBILITIES
Subject to the approval of the Board and the shareholders of the
Series, the Adviser may enter into a Subadvisory Agreement to engage a
subadviser to the Adviser with respect to the Series.
V. BROKER-DEALER RELATIONSHIPS
A. Series Trades
The Adviser shall place all orders for the purchase and sale of
portfolio securities for the Series with brokers or dealers selected by
the Adviser, which may include brokers or dealers affiliated with the
Adviser. The Adviser shall use its best efforts to seek to execute
portfolio transactions at prices that are advantageous to the Series
and at commission rates that are reasonable in relation to the benefits
received.
B. Selection of Broker-Dealers
In selecting broker-dealers qualified to execute a particular
transaction, brokers or dealers may be selected who also provide
brokerage or research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Adviser and/or the
other accounts over which the Adviser or its affiliates exercise
investment discretion. The Adviser may also select brokers or dealers
to effect transactions for the Series that provide payment for expenses
of the Series. The Adviser is authorized to pay a broker or dealer who
provides such brokerage or research services or expenses, and that has
provided assistance in the distribution of shares of the Series to the
extent permitted by law, a commission for executing a portfolio
transaction for the Series that is in excess of the amount of
commission another broker or dealer would have charged for effecting
that transaction if the Adviser determines in good faith that such
amount of commission is reasonable in relation to the value of the
brokerage or research services provided by such broker or dealer and is
paid in compliance with Section 28(e). This determination may be viewed
in terms of either that particular transaction or the overall
responsibilities that the Adviser and its affiliates have with respect
to accounts over which they exercise investment discretion. The Board
shall periodically review the commissions paid by the Series to
determine if the
-3-
<PAGE>
commissions paid over representative periods of time were reasonable
in relation to the benefits received.
VI. CONTROL BY THE BOARD
Any investment program undertaken by the Adviser pursuant to this Agreement, as
well as any other activities undertaken by the Adviser on behalf of the Series
pursuant thereto, shall at all times be subject to any directives of the Board.
VII. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Adviser shall at all
times conform to:
1. all applicable provisions of the 1940 Act;
2. the provisions of the current Registration Statement of the
Fund;
3. the provisions of the Fund's Articles of Incorporation, as
amended;
4. the provisions of the Bylaws of the Fund, as amended; and
5. any other applicable provisions of state and federal law.
VIII. COMPENSATION
For the services to be rendered, the facilities furnished and the expenses
assumed by the Adviser, the Fund, on behalf of the Series, shall pay to the
Adviser an annual fee, payable monthly, based upon the following average daily
net assets of the Series:
<TABLE>
<CAPTION>
Rate Assets
---- ------
<S> <C>
.50% first $250 million
.475% next $250 million
.45% next $250 million
.425% next $1.25 million
.40% over $2 billion
</TABLE>
Except as hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily at the rate of 1/365 of the annual advisory fee
applied to the daily net assets of the Series. If this Agreement becomes
effective subsequent to the first day of a month or terminates before the last
day of a month, compensation for that part of the month this Agreement is in
effect shall be prorated in a manner
-4-
<PAGE>
consistent with the calculation of the fees set forth above. Subject to the
provisions of Section X hereof, payment of the Adviser's compensation for the
preceding month shall be made as promptly as possible.
IX. EXPENSES
The expenses in connection with the management of the Series shall be allocated
between the Series and the Adviser as follows:
A. Expenses of the Adviser
The Adviser shall pay:
1. the salaries, employment benefits and other related
costs and expenses of those of its personnel engaged
in providing investment advice to the Series,
including without limitation, office space, office
equipment, telephone and postage costs; and
2. all fees and expenses of all directors, officers and
employees, if any, of the Fund who are employees of
the Adviser, including any salaries and employment
benefits payable to those persons.
B. Expenses of the Series
The Series shall pay:
1. investment advisory fees pursuant to this Agreement;
2. brokers' commissions, issue and transfer taxes or
other transaction fees payable in connection with any
transactions in the securities in the Series'
investment portfolio or other investment transactions
incurred in managing the Series' assets, including
portions of commissions that may be paid to reflect
brokerage research services provided to the Adviser;
3. fees and expenses of the Series' independent
accountants and legal counsel and the independent
Directors' legal counsel;
4. fees and expenses of any administrator, transfer
agent, custodian, dividend, accounting, pricing or
disbursing agent of the Series;
5. interest and taxes;
6. fees and expenses of any membership in the Investment
Company Institute or any similar organization in
which the Board deems it advisable for the Fund to
maintain membership;
-5-
<PAGE>
7. insurance premiums on property or personnel
(including officers and directors) of the Fund;
8. all fees and expenses of the Company's directors, who
are not "interested persons" (as defined in the 1940
Act) of the Fund or the Adviser;
9. expenses of preparing, printing and distributing
proxies, proxy statements, prospectuses and reports
to shareholders of the Series, except for those
expenses paid by third parties in connection with the
distribution of Series shares and all costs and
expenses of shareholders' meetings;
10. all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in
shares of the Series or in cash;
11. costs and expenses (other than those detailed in
paragraph 9 above) of promoting the sale of shares in
the Series, including preparing prospectuses and
reports to shareholders of the Series, provided,
nothing in this Agreement shall prevent the charging
of such costs to third parties involved in the
distribution and sale of Series shares;
12. fees payable by the Series to the Commission or to
any state securities regulator or other regulatory
authority for the registration of shares of the
Series in any state or territory of the United States
or of the District of Columbia;
13. all costs attributable to investor services,
administering shareholder accounts and handling
shareholder relations, (including, without
limitation, telephone and personnel expenses), which
costs may also be charged to third parties by the
Adviser; and
14. any other ordinary, routine expenses incurred in the
management of the Series' assets, and any
nonrecurring or extraordinary expenses, including
organizational expenses, litigation affecting the
Series and any indemnification by the Fund of its
officers, directors or agents.
Notwithstanding the above, the Adviser may waive a portion or all of the fees it
is entitled to receive.
In addition, the Adviser may reimburse the Fund, on behalf of a Series, for
expenses allocated to a Series.
For fiscal year 1999, the Adviser has agreed to waive fees and reimburse
expenses so that the total annual operating expenses (excluding distribution
fees) do not exceed 0.75% of the average daily net assets.
-6-
<PAGE>
X. ADDITIONAL SERVICES
Upon the request of the Board, the Adviser may perform certain accounting,
shareholder servicing or other administrative services on behalf of the Series
that are not required by this Agreement. Such services will be performed on
behalf of the Series and the Adviser may receive from the Series such
reimbursement for costs or reasonable compensation for such services as may be
agreed upon between the Adviser and the Board on a finding by the Board that the
provision of such services by the Adviser is in the best interests of the Series
and its shareholders. Payment or assumption by the Adviser of any Series expense
that the Adviser is not otherwise required to pay or assume under this Agreement
shall not relieve the Adviser of any of its obligations to the Series nor
obligate the Adviser to pay or assume any similar Series expense on any
subsequent occasions. Such services may include, but are not limited to, (a) the
services of a principal financial officer of the Fund (including applicable
office space, facilities and equipment) whose normal duties consist of
maintaining the financial accounts and books and records of the Fund and the
Series and the services (including applicable office space, facilities and
equipment) of any of the personnel operating under the direction of such
principal financial officer; (b) the services of staff to respond to shareholder
inquiries concerning the status of their accounts, providing assistance to
shareholders in exchanges among the investment companies managed or advised by
the Adviser, changing account designations or changing addresses, assisting in
the purchase or redemption of shares; or otherwise providing services to
shareholders of the Series; and (c) such other administrative services as may be
furnished from time to time by the Adviser to the Fund or the Series at the
request of the Board.
XII. NONEXCLUSIVITY
The services of the Adviser to the Series are not to be deemed to be exclusive,
and the Adviser shall be free to render investment advisory or other services to
others (including other investment companies) and to engage in other activities,
so long as its services under this Agreement are not impaired thereby. It is
understood and agreed that officers and directors of the Adviser may serve as
officers or directors of the Fund, and that officers or directors of the Fund
may serve as officers or directors of the Adviser to the extent permitted by
law; and that the officers and directors of the Adviser are not prohibited from
engaging in any other business activity or from rendering services to any other
person, or from serving as partners, officers, directors or trustees of any
other firm or trust, including other investment companies.
XIII. TERM
This Agreement shall become effective on January 1, 1999, and shall remain in
force and effect through December 31, 1999, unless earlier terminated under the
provisions of Article XV.
-7-
<PAGE>
XIV. RENEWAL
Following the expiration of its initial term, the Agreement shall continue in
force and effect from year to year, provided that such continuance is
specifically approved at least annually:
1. a. by the Board, or
b. by the vote of a majority of the Series' outstanding
voting securities (as defined in Section 2(a)(42) of
the 1940 Act), and
2. by the affirmative vote of a majority of the directors who are
not parties to this Agreement or interested persons of a party
to this Agreement (other than as a director of the Fund), by
votes cast in person at a meeting specifically called for such
purpose.
XV. TERMINATION
This Agreement may be terminated at any time, without the payment of any
penalty, by vote of the Board or by vote of a majority of the Series'
outstanding voting securities (as defined in Section 2(a)(42) of the 1940 Act),
or by the Adviser, on sixty (60) days' written notice to the other party. The
notice provided for herein may be waived by the party required to be notified.
This Agreement shall automatically terminate in the event of its "assignment."
XVI. LIABILITY
The Adviser shall be liable to the Fund and shall indemnify the Fund for any
losses incurred by the Fund, whether in the purchase, holding or sale of any
security or otherwise, to the extent that such losses resulted from an act or
omission on the part of the Adviser or its officers, directors or employees,
that is found to involve willful misfeasance, bad faith or negligence, or
reckless disregard by the Adviser of its duties under this Agreement, in
connection with the services rendered by the Adviser hereunder.
XVII. NOTICES
Any notices under this Agreement shall be in writing, addressed and delivered,
mailed postage paid, or sent by other delivery service, or by facsimile
transmission to each party at such address as each party may designate for the
receipt of notice. Until further notice, such addresses shall be:
if to the Fund, on behalf of the Series:
10 State House Square
Hartford, Connecticut 06103
Fax number 860/275-2158
-8-
<PAGE>
if to the Adviser:
10 State House Square
Hartford, Connecticut 06103
Fax number 860/275-4440
XVIII. QUESTIONS OF INTERPRETATION
This Agreement shall be governed by the laws of the State of Connecticut. Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the 1940 Act
shall be resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof, if any, by the United States courts or, in the absence
of any controlling decision of any such court, by rules or orders of the
Commission issued pursuant to the 1940 Act, or contained in no-action and
interpretive positions taken by the Commission staff. In addition, where the
effect of a requirement of the 1940 Act reflected in the provisions of this
Agreement is revised by rule or order of the Commission, such provisions shall
be deemed to incorporate the effect of such rule or order.
XIX. SERVICE MARK
The service mark of the Fund and the Series and the name "Aetna" have been
adopted by the Fund with the permission of Aetna Services, Inc. (formerly known
as Aetna Life and Casualty Company) and their continued use is subject to the
right of Aetna Services, Inc. to withdraw this permission in the event the
Adviser or another affiliated corporation of Aetna Services, Inc. should not be
the investment adviser of the Series.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in duplicate by their respective officers on the 18th day of December, 1998.
Aeltus Investment Management, Inc.
By: /s/John Y. Kim
------------------------------
Attest: /s/Katherine Cheng Name: John Y. Kim
------------------------ ----------------------------
Name: Katherine Cheng Title: President
------------------------ ----------------------------
Title: Assistant Secretary
------------------------
Aetna Series Fund, Inc.
on behalf of its series,
Aetna Bond Fund
By: /s/J. Scott Fox
------------------------------
Attest: /s/Daniel E. Burton Name: J. Scott Fox
----------------------- ----------------------------
Name: Daniel E. Burton Title: President
------------------------ ----------------------------
Title: Assistant Secretary
------------------------
-9-
<PAGE>
Investment Advisory Agreement
Schedule Pursuant to Rule 483(d)(2) under the Securities Act of 1933
Investment Advisory Agreements have been entered into by Aetna Series Fund, Inc.
on behalf of the following series in substantially the same form and type as
exhibit (d.1) - Investment Advisory Agreement, included herewith.
<TABLE>
<CAPTION>
Difference in Difference in
Date Portfolio Compensation Expenses
---- --------- ------------ --------
<S> <C> <C> <C>
1/30/98 Aetna Balanced Fund .80% on first $500 million No Fee Waiver/Fee Cap
.75% on next $500 million
.70% on next $1 billion
.65% over $2 billion
1/30/98 Aetna Growth Fund .70% on first $250 million No Fee Waiver/Fee Cap
.65% on next $250 million
.625% on next $250 million
.60% on next $1.25 billion
.55% over $2 billion
1/30/98 Aetna Growth and Income Fund .70% on first $250 million No Fee Waiver/Fee Cap
.65% on next $250 million
.625% on next $250 million
.60% on next $1.25 billion
.55% over $2 billion
12/18/98 Aetna Government Fund .50% on first $250 million total annual operating
.475% on next $250 million fees do not exceed
.45% on next $250 million 0.70% of average daily
.425% on next $1.25 billion net assets
.40% over $2 billion
12/18/98 Aetna Index Plus .45% on first $250 million total annual operating
Large Cap Fund .45% on next $250 million fees do not exceed
.425% on next $250 million 0.70% of average daily
.40% on next $250 million net assets
.40% on next $1 billion
.375% over $2 billion
12/18/98 Aetna International Fund .85% on first $250 million total annual operating
.80% on next $250 million fees do not exceed
.775% on next $250 million 1.35% of average daily
.75% on next $1.25 billion net assets
.70% over $2 billion
-10-
<PAGE>
<CAPTION>
Difference in Difference in
Date Portfolio Compensation Expenses
---- --------- ------------ --------
<S> <C> <C> <C>
12/18/98 Aetna Money Market Fund .40% on first $500 million total annual
.35% on next $500 million operating fees do
.34% on next $1 billion not exceed 0.50% of
.33% on next $1 billion average daily net
.30% over $3 billion assets
12/18/98 Aetna Small Company Fund .85% on first $250 million total annual
.80% on next $250 million operating fees do
.775% on next $250 million not exceed 1.25% of
.75% on next $1.25 billion average daily net
.725% over $2 billion assets
12/18/98 Aetna Ascent Fund .80% on first $500 million total annual
.775% on next $500 million operating fees do
.75% on next $500 million not exceed 1.20% of
.725% on next $500 million average daily net
.70% over $2 billion assets
12/18/98 Aetna Crossroads Fund .80% on first $500 million total annual
.775% on next $500 million operating fees do
.75% on next $500 million not exceed 1.20% of
.725% on next $500 million average daily net
.70% over $2 billion assets
1/30/98 Aetna Legacy Fund .80% on first $500 million total annual
.775% on next $500 million operating fees do
.75% on next $500 million not exceed 1.20% of
.725% on next $500 million average daily net
.70% over $2 billion assets
12/18/98 Aetna High Yield Fund .65% on first $250 million total annual
.60% on next $250 million operating fees do
.575% on next $250 million not exceed 0.95% of
.55% on next $250 million average daily net
.55% on next $1 billion assets
.50% over $2 billion
12/18/98 Aetna Index Plus .35% on first $250 million total annual
Bond Fund .35% on next $250 million operating fees do
.325% on next $250 million not exceed 0.60% of
.30% on next $250 million average daily net
.30% on next $1 billion assets
.275% over $2 billion
-11-
<PAGE>
<CAPTION>
Difference in Difference in
Date Portfolio Compensation Expenses
---- --------- ------------ --------
<S> <C> <C> <C>
12/18/98 Aetna Index Plus .45% on first $250 million total annual
Mid Cap Fund .45% on next $250 million operating fees do not
.425% on next $250 million exceed 0.75% of
.40% on next $250 million average daily net
.40% on next $1 billion assets
.375% over $2 billion
12/18/98 Aetna Index Plus .45% on first $250 million total annual
Small Cap Fund .45% on next $250 million operating fees do not
.425% on next $250 million exceed 0.75% of
.40% on next $250 million average daily net
.40% on next $1 billion assets
.375% over $2 billion
12/18/98 Aetna Mid Cap Fund .75% on first $250 million total annual
.70% on next $250 million operating fees do not
.675% on next $250 million exceed 1.15% of
.65% on next $250 million average daily net
.65% on next $1 billion assets
.60% over $2 billion
12/18/98 Aetna Real Estate .80% on first $250 million total annual
Securities Fund .75% on next $250 million operating fees do not
.725% on next $250 million exceed 1.30% of
.70% on next $250 million average daily net
.70% on next $1 billion assets
.65% over $2 billion
12/18/98 Aetna Value Opportunity Fund .70% on first $250 million total annual
.65% on next $250 million operating fees do not
.625% on next $250 million exceed 1.10% of
.60% on next $250 million average daily net
.60% on next $1 billion assets
.55% over $2 billion;
</TABLE>
-12-
ADMINISTRATIVE SERVICES AGREEMENT
FOR AETNA SERIES FUND, INC.
THIS AGREEMENT is made by and between AETNA SERIES FUND, INC., a
Maryland Corporation (the "Fund"), on behalf of each of its series, Aetna Money
Market Fund, Aetna Bond Fund, Aetna Balanced Fund, Aetna Growth and Income Fund,
Aetna International Fund, Aetna Government Fund, Aetna Growth Fund, Aetna Small
Company Fund, Aetna Index Plus Large Cap Fund, Aetna Ascent Fund, Aetna
Crossroads Fund, Aetna Legacy Fund, Aetna High Yield Fund, Aetna Index Plus Bond
Fund, Aetna Index Plus Mid Cap Fund, Aetna Index Plus Small Cap Fund, Aetna Mid
Cap Fund, Aetna Real Estate Securities Fund, and Aetna Value Opportunity Fund
(the "Series"), and AELTUS INVESTMENT MANAGEMENT, INC., a Connecticut
corporation (the "Administrator"), with respect to the following recital of
facts:
R E C I T A L
WHEREAS, the Fund is registered as an open-end diversified management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and
WHEREAS, the Administrator is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act"), and engages in the
business of acting as an investment adviser and an administrator of investment
companies; and
WHEREAS, the Fund has established the Series; and
WHEREAS, the Fund, on behalf of each of its Series, and the
Administrator desire to enter into an agreement to provide for administrative
services for the Series on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable considerations, the receipt of which is
hereby acknowledged, the parties agree as follows:
I. APPOINTMENT AND OBLIGATIONS OF THE ADMINISTRATOR
The Administrator is hereby appointed to serve as the Administrator to
the Series, to provide the administrative services described herein and assume
the obligations set forth in Section II, subject to the terms of this Agreement
and the control of the Fund's Board of Directors (the "Board"). The
Administrator shall, for all purposes herein, be deemed an independent
contractor and shall have, unless otherwise expressly provided or authorized, no
authority to act for or represent the Series in any way or otherwise be deemed
an agent of the Series.
<PAGE>
II. DUTIES OF THE ADMINISTRATOR
In carrying out the terms of this Agreement, the Administrator shall:
A. provide office space, equipment and facilities (which may be the
Administrator's or its affiliates') for maintaining the Fund's organization, for
meetings of the Fund's Board and shareholders, and for performing administrative
services hereunder;
B. supervise and manage all aspects of the Series' operations (other
than investment advisory activities), supervise relations with, and monitor the
performance of, custodians, depositories, transfer and pricing agents,
accountants, attorneys, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary and desirable by the Board;
C. provide internal clerical and legal services, and stationery and
office supplies;
D. provide accounting services, including:
1. determining and arranging for the publication of the net asset
value of each Series;
2. preparing financial information for presentation to the Fund's
Board and management;
3. preparing and monitoring the Fund's annual expense budget, and
establishing daily accruals;
4. coordinating payment of fund expenses;
5. calculating periodic dividend rates to be declared in accordance
with management guidelines;
6. calculating total return information as defined in the current
prospectus and statement of additional information;
7. coordinating audit packages for use by independent public
accountants;
8. responding to regulatory audits;
E. provide non-investment related statistical and research data and
such other reports, evaluations and information as the Series may request from
time to time;
F. monitor each Series' compliance with the current prospectus and
statement of additional information, the 1940 Act, the Internal Revenue Code and
other applicable laws and regulations;
G. prepare, to the extent requested by the Fund, registration
statements, proxy statements and annual and semi-annual reports to shareholders;
- 2 -
<PAGE>
H. arrange for the printing and mailing (at the Series' expense) of
proxy statements and other reports or other materials provided to the Series'
shareholders;
I. support outside auditors in preparing and filing all the Series'
federal and state tax returns and required tax filings other than those required
to be made by the Series' custodian and transfer agent;
J. prepare periodic reports to and filings with the Securities and
Exchange Commission (the "SEC") and
state Blue Sky authorities with the advice of the Series' counsel;
K. maintain the Fund's existence, and during such times as the shares
of the Series are publicly offered, maintain the registration and qualification
of the Series' shares under federal and state law;
L. keep and maintain the financial accounts and records of the Series;
M. develop and implement, if appropriate, management and shareholder
services designed to enhance the value or convenience of the Series as an
investment vehicle;
N. provide the Board on a regular basis with reports and analyses of
the Series' operations and the operations of comparable investment companies;
and
O. take any other actions which appear to the Administrator and the
Board necessary to carry into effect the purposes of this Agreement.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADMINISTRATOR
The Administrator hereby represents and warrants to the Fund as
follows:
1. Due Incorporation and Organization. The Administrator is
duly organized and is in good standing under the laws of the State of
Connecticut and is fully authorized to enter into this Agreement and carry out
its duties and obligations hereunder.
2. Best Efforts. The Administrator at all times shall provide
its best judgment and effort to the Series in carrying out its obligations
hereunder.
B. REPRESENTATIONS AND WARRANTIES OF THE SERIES AND THE FUND
The Fund, on behalf of each of its Series, hereby represents and
warrants to the Administrator as follows:
1. Due Incorporation and Organization. The Fund has been duly
incorporated under the laws of the State of Maryland and it is authorized to
enter into this Agreement and carry out its terms.
- 3 -
<PAGE>
2. Registration. The Fund is registered as an investment
company with the SEC under the 1940 Act and shares of the Series are registered
or qualified for offer and sale to the public under the Securities Act of 1933
(the "1933 Act"), and all applicable state securities laws. Such registrations
or qualifications will be kept in effect during the term of this Agreement.
IV. CONTROL BY THE BOARD OF DIRECTORS
Any activities undertaken by the Administrator pursuant to this
Agreement on behalf of the Series shall at all times be subject to any
directives of the Board.
V. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Administrator
shall at all times conform to:
A. all applicable provisions of the 1940 Act;
B. the provisions of the registration statement of the Fund under the
1933 Act and the 1940 Act;
C. the provisions of the Fund's Articles of Incorporation, as amended;
D. the provisions of the By-Laws of the Fund, as amended; and
E. any other applicable provisions of state and federal law.
VI. DELEGATION OF RESPONSIBILITIES
All services to be provided by the Administrator under this Agreement
may be furnished by any directors, officers or employees of the Administrator or
by any affiliates of the Administrator under the Administrator's supervision.
VII. COMPENSATION
For the services to be rendered, the facilities furnished and the
expenses assumed by the Administrator, the Fund, on behalf of each of its
Series, shall pay to the Administrator an annual fee at a rate of 0.10% of the
average daily net assets of each of its Series payable monthly (in arrears).
Except as hereinafter set forth, compensation under this Agreement shall be
calculated and accrued daily at the rate of 1/365 of 0.10% of the daily net
assets of the Series. If this Agreement becomes effective subsequent to the
first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
above.
- 4 -
<PAGE>
Notwithstanding the above, the Administrator may waive a portion or all of the
fees it is entitled to receive. For fiscal year 1999, the Administrator has
agreed to waive fees so that the total annual operating expenses (excluding
distribution fees) do not exceed the percentage of the average daily net assets
outlined below for the following Series:
<TABLE>
<S> <C>
Aetna International Fund 1.35%
Aetna Mid Cap Fund 1.15%
Aetna Small Company Fund 1.25%
Aetna Value Opportunity Fund 1.10%
Aetna Real Estate Securities Fund 1.30%
Aetna Bond Fund 0.75%
Aetna Government Fund 0.70%
Aetna High Yield Fund 0.95%
Aetna Money Market Fund 0.50%
Aetna Index Plus Bond Fund 0.60%
Aetna Index Plus Large Cap Fund 0.70%
Aetna Index Plus Mid Cap Fund 0.75%
Aetna Index Plus Small Cap Fund 0.75%
Aetna Ascent Fund 1.20%
Aetna Crossroads Fund 1.20%
Aetna Legacy Fund 1.20%
</TABLE>
VIII. NON-EXCLUSIVITY
The services of the Administrator to the Series are not to be deemed to
be exclusive, and the Administrator shall be free to render administrative or
other services to others (including other investment companies) and to engage in
other activities, so long as its services under this Agreement are not impaired
thereby. It is understood and agreed that officers and directors of the
Administrator may serve as officers or directors of the Fund, and that officers
or directors of the Fund may serve as officers or directors of the Administrator
to the extent permitted by law; and that the officers and directors of the
Administrator are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers, directors or trustees of any other firm or trust, including other
investment companies.
IX. TERM
This Agreement shall become effective on January 1, 1999, and shall
continue through December 31, 1999. Thereafter it shall continue for successive
annual periods, provided such continuance is specifically approved at least
annually:
1. a. by the Board, or
b. by the vote of a majority of the Series' outstanding voting
securities (as defined in Section 2(a)(42) of the 1940 Act), and
- 5 -
<PAGE>
2. by the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as a director of the Fund), by votes cast in person at a meeting
specifically called for such purpose.
X. TERMINATION
This Agreement may be terminated at any time, without the payment of
any penalty, by vote of the Fund's directors or by vote of a majority of the
Series' outstanding voting securities, as defined in Section 2(a)(42) of the
1940 Act, or by the Administrator, on sixty (60) days' written notice to the
other party.
XI. LIABILITY OF ADMINISTRATOR AND INDEMNIFICATION
A. LIABILITY
The Administrator shall be liable to the Fund and shall indemnify the
Fund for any losses incurred by the Fund, whether in the purchase, holding or
sale of any security or otherwise, to the extent that such losses resulted from
an act or omission on the part of the Administrator or its officers, directors
or employees, that is found to involve willful misfeasance, bad faith or
negligence, or reckless disregard by the Administrator of its duties under this
Agreement, in connection with the services rendered by the Administrator
hereunder.
B. INDEMNIFICATION
In the absence of willful misfeasance, bad faith, negligence or
reckless disregard of obligations or duties hereunder on the part of the
Administrator or any officer, director or employee of the Administrator, to the
extent permitted by applicable law, the Fund hereby agrees to indemnify and hold
the Administrator harmless from and against all claims, actions, suits and
proceedings at law or in equity, whether brought or asserted by a private party
or a governmental agency, instrumentality or entity of any kind, relating to the
sale, purchase, pledge of, advertisement of, or solicitation of sales or
purchases of any security (whether of the Series or otherwise) by the Fund, its
officers, directors, employees or agents in alleged violation of applicable
federal, state or foreign laws, rules or regulations.
XII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Administrator for this
purpose shall be 10 State House Square, Hartford, Connecticut 06103, and the
address of the Fund for this purpose shall be 10 State House Square, Hartford,
Connecticut 06103.
- 6 -
<PAGE>
XIII. QUESTIONS OF INTERPRETATIONS
This Agreement shall be governed by the laws of the State of
Connecticut. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the 1940 Act shall be resolved by reference to such term or provision of the
1940 Act and to interpretations thereof, if any, by the United States courts or,
in the absence of any controlling decision of any such court, by rules or orders
of the SEC issued pursuant to the 1940 Act, or contained in no-action and
interpretive positions taken by the SEC staff. In addition, where the effect of
a requirement of the 1940 Act reflected in the provisions of this Agreement is
revised by rule or order of the SEC, such provisions shall be deemed to
incorporate the effect of such rule or order.
XIV. SERVICE MARK
The service mark of the Fund and the Series and the name "Aetna" have
been adopted by the Fund with the permission of Aetna Services, Inc. (formerly
known as Aetna Life and Casualty Company) and their continued use is subject to
the right of Aetna Services, Inc. to withdraw this permission in the event the
Administrator or another subsidiary or affiliated corporation of Aetna Services,
Inc. should not be the Administrator of the Series.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers as of the 18th day of
December, 1998.
AETNA SERIES FUND, INC.
on behalf of each of its Series,
Aetna Money Market Fund
Aetna Bond Fund
Aetna Balanced Fund
Aetna Growth and Income Fund
Aetna International Fund
Aetna Government Fund
Aetna Growth Fund
Aetna Small Company Fund
Aetna Index Plus Large Cap Fund
Aetna Ascent Fund
Aetna Crossroads Fund
Aetna Legacy Fund
Aetna High Yield Fund
Aetna Index Plus Bond Fund
Aetna Index Plus Mid Cap Fund
Aetna Index Plus Small Cap Fund
Aetna Mid Cap Fund
AELTUS INVESTMENT Aetna Real Estate Securities Fund
MANAGEMENT, INC. Aetna Value Opportunity Fund
By: /s/ John Y. Kim By: /s/ J. Scott Fox
-------------------- -------------------
Name: John Y. Kim Name: J. Scott Fox
-------------------- -------------------
Title: President Title: President
-------------------- -------------------
Attest: Attest:
/s/ Katherine Cheng /s/ Daniel E. Burton
-------------------- -------------------
Name: Katherine Cheng Name: Daniel E. Burton
-------------------- -------------------
Title: Assistant Secretary Title: Assistant Secretary
-------------------- -------------------
- 8 -
AMENDMENT No. 3
TO THE TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AMENDMENT, dated as of 1/1/99 is made to the Transfer Agency and
Services Agreement dated July 3, 1998 (the "Transfer Agent Agreement") between
AETNA SERIES FUND, INC. (the "Fund") and FIRST DATA INVESTOR SERVICES GROUP,
INC. ("Investor Services Group").
WITNESSETH
WHEREAS, Investor Services Group and the Fund desire to amend the
Agreement to identify certain services provided by Investor Services Group in
connection with various retirement plan products offered by the Fund.
NOW THEREFORE, the Fund and Investor Services Group agree that as of
the date first referenced above, the Transfer Agent Agreement shall be amended
as follows:
1. Amendment No. 1 is deleted in its entirety.
2. Schedule A - Duties of Investor Services Group is hereby amended by adding
the following new section:
"Retirement Plans. In connection with individual retirement accounts,
simplified employee pension plans, rollover individual retirement plans,
educational IRA and ROTH individual retirement accounts (each hereinafter
referred to as an "IRA" and, collectively, the "IRAs") within the meaning of
Section 408 of the Internal Revenue Code of 1986, as amended (the "Code") and
retirement plans within the meaning of Sections 403(b)(7) of the Code offered by
the Fund (such IRAs and 403(b)(7) plans as amended from time to time being
hereinafter sometimes referred to individually as a "Plan" and collectively as
the "Plans") for which contributions of the Fund's shareholders (the
"Participants") in the Plans are invested in shares of Portfolios of the Fund,
Investor Services Group shall provide the following administrative services on
behalf of the Fund and Aeltus Trust Company, the custodian for the Plans, in
addition to those services described herein:
(a) Establish a record of types and reasons for distributions (i.e.,
attainment of age 59-1/2, disability, death, return of excess contributions,
etc.);
(b) Record method of distribution requested and/or made;
(c) Receive and process designation of the beneficiary forms;
(d) Examine and process requests for direct transfers between
custodians/trustees, transfer and pay over to the successor assets in the
account and records pertaining thereto as requested and execute any such
transfer of asset forms required by the prior custodian;
(e) Prepare any annual reports or returns required to be prepared
and/or filed by a custodian of a Plan, including, but not limited to, an annual
fair market value report, Forms 1099R and 5498 and file with the IRS and provide
to Participant/Beneficiary; and
(f) Perform applicable federal withholding and send
Participants/Beneficiaries an annual TEFRA notice regarding required federal tax
withholding.
Notwithstanding anything in the Agreement to the contrary, Investor
Services Group hereby acknowledges that in addition to the Fund, the provisions
of Articles 10, 11 and 12 of the Agreement shall apply to Aeltus Trust Company
with respect to the services provided by Investor Services Group under this
"Retirement Plans" section of this Schedule A - Duties of Investor Services
Group.
This Amendment contains the entire understanding between the parties
with respect to the transactions contemplated hereby. To the extent that any
provision of this Amendment modifies or is otherwise inconsistent with any
provision of the Transfer Agent Agreement and related agreements, this Amendment
shall control, but the Transfer Agent Agreement and all related documents shall
otherwise remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, as of the day and year first above
written.
AETNA SERIES FUND, INC.
By: /s/ Wayne F. Baltzer
-----------------------------------------
Title: Vice President
-----------------------------------------
FIRST DATA INVESTOR SERVICES
GROUP, INC.
By: /s/ Jylanne Dunne
-----------------------------------------
Title: Senior Vice President
-----------------------------------------
[Aetna letterhead] Aetna Inc.
[Aetna logo] 10 State House Square
Hartford, CT 06103-3602
February 25, 1999 Amy R. Doberman
Counsel
Law Division, SH11
Investments & Financial Services
(860) 275-2032
Fax: (860) 275-2158
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Aetna Series Fund, Inc.
Post-Effective Amendment No. 30 to
Registration Statement on Form N-1A
(File No. 33-41694 and 811-6352)
Dear Sir or Madam:
The undersigned serves as counsel to Aeltus Investment Management, Inc., the
investment adviser to Aetna Series Fund, Inc., a Maryland corporation (the
"Company"). It is my understanding that the Company has registered an indefinite
number of shares of beneficial interest under the Securities Act of 1933 (the
"1933 Act") pursuant to Rule 24f-2 under the Investment Company Act of 1940 (the
"1940 Act").
Insofar as it relates or pertains to the Company, I have reviewed the prospectus
and the Company's Registration Statement on Form N-1A, as amended to the date
hereof, filed with the Securities and Exchange Commission under the 1933 Act and
the 1940 Act, pursuant to which the Shares will be sold (the "Registration
Statement"). I have also examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents and other instruments I have
deemed necessary or appropriate for the purpose of this opinion. For purposes of
such examination, I have assumed the genuineness of all signatures on original
documents and the conformity to the original of all copies.
I am admitted to practice law in Connecticut, Maryland and the District of
Columbia. My opinion herein as to Maryland law is based upon a limited inquiry
thereof that I have deemed appropriate under the circumstances.
<PAGE>
Page 2
February 25, 199
Based upon the foregoing, and assuming the securities are issued and sold in
accordance with the provisions of the Company's Articles of Incorporation and
the Registration Statement, I am of the opinion that the securities will when
sold be legally issued, fully paid and nonassessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Sincerely,
/s/ Amy R. Doberman
Amy R. Doberman
Counsel
Consent of Independent Auditors
The Board of Directors and Shareholders
Aetna Series Fund, Inc.
We consent to the use of our reports dated December 11, 1998 incorporated herein
by reference to the references to our firm under the captions Financial
Highlights in the prospectuses and Independent Auditors in the statement of
additional information.
/s/ KPMG LLP
------------
KPMG LLP
Hartford, Connecticut
February 25, 1999
DISTRIBUTION PLAN
Aetna Series Fund, Inc.
Class A
This Distribution Plan (the "Plan") is adopted in accordance with Rule 12b-1
(the "Rule") under the Investment Company Act of 1940 (the "1940 Act"), by Aetna
Series Fund, Inc. (the "Fund"), a Maryland corporation, on behalf of the Class A
shares of each of its Series (except Aetna Money Market Fund) as set forth in
Appendix A, as amended from time to time, subject to the following terms and
conditions:
Section 1. Annual Fees
Distribution Fee. Each Series will pay to the underwriter of its shares, Aeltus
Capital, Inc. (the "Underwriter"), a Connecticut corporation, a distribution fee
under the Plan at the annual rate of 0.25% of the average daily net assets of
each Series attributable to its Class A shares (the "Distribution Fee").
Adjustment to Fees. The Distribution Fee may be reduced with respect to the
Class A shares of any Series if agreed upon by the Board of Directors of the
Fund (the "Board") and the Underwriter and if approved in the manner specified
in Section 3 of this Plan.
Payment of Fees. The Distribution Fee will be calculated daily and paid monthly
by each Series with respect to its Class A shares at the annual rate indicated
above.
Section 2. Expenses covered by the Plan.
The Fund, with respect to its Class A shares, will pay the Underwriter a
Distribution Fee under the Plan to compensate the Underwriter, and firms with
which the Underwriter enters into related agreements, for engaging in sales and
promotional activities, as well as for providing shareholder services not
otherwise provided by the Fund's transfer agent. Such activities and related
services will relate only to Class A shares of the Fund. Such expenditures may
consist of sales commissions to firms and their representatives for selling
Class A shares of the Fund, compensation for servicing Class A shareholders as
described above, payments to sales and marketing personnel, and the payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Fund and the costs of preparing and distributing
promotional materials. Payment of the Distribution Fee described in this Section
shall be subject to any limitation set forth in any applicable regulation of the
National Association of Securities Dealers, Inc.
The amount of the Distribution Fees payable under Section 1 hereof is not
related directly to expenses incurred by the Underwriter and this Section 2 does
not obligate a Series to reimburse the Underwriter for such expenses. The
Distribution Fees will be paid by each Series to the Underwriter unless and
until (a) the Plan is terminated pursuant to Section 5 hereof, or (b) the Plan
is not renewed with respect to a Series or Class A thereof pursuant
<PAGE>
to Section 4 hereof. Any distribution expenses incurred by the Underwriter on
behalf of a Series in excess of the Distribution Fees specified in Section 1
hereof which the Underwriter has accrued through the termination date are the
sole responsibility and liability of the Underwriter and are not an obligation
of a Series.
Section 3. Approval of Directors.
Neither the Plan nor any related agreements will take effect until approved by a
majority of both (a) the Board of Directors of the Fund and (b) those Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
it (the "Qualified Directors"), cast in person at a meeting called for the
purpose of voting on the Plan and the related agreements.
Section 4. Continuance of the Plan.
The Plan shall become effective on May 1, 1998 and shall remain in force and
effect through December 31, 1998, unless earlier terminated. Following the
expiration of its initial term, the Plan shall continue in force and effect for
a one year period, provided such continuance is specifically approved at least
annually:
1. (a) by a majority of the members of the Board, or (b) by vote of a
majority of each Series' Class A shares, and
2. by the vote of a majority of the Qualified Directors cast in person at
a meeting specifically called for such purpose.
Section 5. Termination.
The Plan may be terminated at any time with respect to Class A shares of any
Series (a) by the vote of a majority of that Series' outstanding voting Class A
securities, or (b) by a vote of a majority of the Qualified Directors. The Plan
may remain in effect with respect to a Series even if the Plan has been
terminated in accordance with this Section 5 with respect to any other Series.
Section 6. Amendments.
The Plan may not be amended with respect to any Series so as to increase
materially the amounts of the Distribution Fees described in Section 1 above
unless the amendment is approved by a vote of the holders of at least a majority
of the outstanding voting Class A securities of that Series. No material
amendment to the Plan may be made unless approved in the manner described in
Section 3 above.
- 2 -
<PAGE>
Section 7. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the Fund's
Directors who are not interested persons of the Fund will be committed to the
discretion of the Directors then in office who are not interested persons of the
Fund.
Section 8. Written Reports.
In each year during which the Plan remains in effect, any person authorized to
direct the disposition of monies paid or payable by a Series pursuant to the
Plan or any related agreement will prepare and furnish to the Board, and the
Board will review, at least quarterly, written reports setting out the amounts
expended under the Plan, the purposes for which those expenditures were made,
and otherwise complying with the requirements of the Rule.
Section 9. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to the Plan
and any report made pursuant to Section 8 above, for a period of not less than
six years (the first two years in an easily accessible place) from the date of
the Plan, agreement or report.
Section 10. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning ascribed
to those terms under the 1940 Act.
IN WITNESS WHEREOF, the Fund, on behalf of the Class A Shares of each of its
Series, has executed this Plan as of this 2nd day of April, 1998.
AETNA SERIES FUND, INC.
on behalf of its CLASS A shares
By: /s/ J. Scott Fox
------------------------------
J. Scott Fox, President
- 3 -
<PAGE>
Appendix A
Aetna Bond Fund
Aetna Balanced Fund
Aetna Growth and Income Fund
Aetna International Fund
Aetna Government Fund
Aetna High Yield Fund
Aetna Growth Fund
Aetna Small Company Fund
Aetna Ascent Fund
Aetna Crossroads Fund
Aetna Legacy Fund
Aetna Mid Cap Fund
Aetna Value Opportunity Fund
Aetna Real Estate Securities Fund
Aetna Index Plus Bond Fund
Aetna Index Plus Large Cap Fund
Aetna Index Plus Small Cap Fund
Aetna Index Plus Mid Cap Fund
DISTRIBUTION PLAN
Aetna Series Fund, Inc.
Class C
This Distribution Plan (the "Plan") is adopted in accordance with Rule 12b-1
(the "Rule") under the Investment Company Act of 1940 (the "1940 Act"), by Aetna
Series Fund, Inc. (the "Fund"), a Maryland corporation, on behalf of the Class C
shares of each of its Series (except Aetna Money Market Fund) as set forth in
Appendix A, as amended from time to time, subject to the following terms and
conditions:
Section 1. Annual Fees
Distribution Fee. Each Series other than Index Plus Large Cap, Index Plus Mid
Cap, Index Plus Small Cap, and Index Plus Bond (collectively, the "Index Plus
Funds") will pay to the underwriter of its shares, Aeltus Capital, Inc. (the
"Underwriter"), a Connecticut corporation, a distribution fee under the Plan at
the annual rate of 0.75% of the average daily net assets of each Series
attributable to its Class C shares (the "Distribution Fee"). The Index Plus
Funds will pay to the Underwriter a Distribution Fee under the Plan at the
annual rate of 0.50% of the average daily net assets of each Series attributable
to its Class C shares.
Adjustment to Fees. The Distribution Fee may be reduced with respect to the
Class C shares of any Series if agreed upon by the Board of Directors of the
Fund (the "Board") and the Underwriter and if approved in the manner specified
in Section 3 of this Plan.
Payment of Fees. The Distribution Fee will be calculated daily and paid monthly
by each Series set forth in Appendix A with respect to its Class C shares at the
annual rate indicated above.
Section 2. Expenses covered by the Plan.
The Fund, with respect to its Class C shares, will pay the Underwriter a
Distribution Fee under the Plan to compensate the Underwriter, and firms with
which the Underwriter enters into related agreements, for engaging in sales and
promotional activities. Such activities and related services will relate only to
the sale, promotion and marketing of the Class C shares of the Fund. Such
expenditures may consist of sales commissions to firms and their representatives
for selling Class C shares of the Fund, compensation, sales incentives and
payments to sales and marketing personnel, and the payment of expenses incurred
in sales and promotional activities, including advertising expenditures related
to the Fund and the costs of preparing and distributing promotional materials.
Payment of the Distribution Fee described in this Section shall be subject to
any limitation set forth in any applicable regulation of the National
Association of Securities Dealers, Inc.
<PAGE>
The amount of the Distribution Fees payable under Section 1 hereof is not
related directly to expenses incurred by the Underwriter and this Section 2 does
not obligate a Series to reimburse the Underwriter for such expenses. The
Distribution Fees will be paid by each Series to the Underwriter unless and
until (a) the Plan is terminated pursuant to Section 5 hereof, or (b) the Plan
is not renewed with respect to a Series or Class C thereof pursuant to Section 4
hereof. Any distribution expenses incurred by the Underwriter on behalf of a
Series in excess of the Distribution Fees specified in Section 1 hereof which
the Underwriter has accrued through the termination date are the sole
responsibility and liability of the Underwriter and are not an obligation of a
Series.
Section 3. Approval of Directors.
Neither the Plan nor any related agreements will take effect until approved by a
majority of both (a) the Board of Directors of the Fund and (b) those Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
it (the "Qualified Directors"), cast in person at a meeting called for the
purpose of voting on the Plan and the related agreements.
Section 4. Continuance of the Plan.
The Plan shall become effective on July 1, 1998 and shall remain in force and
effect through December 31, 1998, unless earlier terminated. Following the
expiration of its initial term, the Plan shall continue in force and effect for
a one year period, provided such continuance is specifically approved at least
annually:
1. (a) by a majority of the members of the Board, or
(b) by vote of a majority of each Series' Class C shares, and
2. by the vote of a majority of the Qualified Directors cast in person
at a meeting specifically called for such purpose.
Section 5. Termination.
The Plan may be terminated at any time with respect to Class C shares of any
Series (a) by the vote of a majority of that Series' outstanding voting Class C
securities, or (b) by a vote of a majority of the Qualified Directors. The Plan
may remain in effect with respect to a Series even if the Plan has been
terminated in accordance with this Section 5 with respect to any other Series.
Section 6. Amendments.
The Plan may not be amended with respect to any Series so as to increase
materially the amounts of the Distribution Fees described in Section 1 above
unless the amendment is approved by a vote of the holders of at least a majority
of the outstanding voting Class C
- 2 -
<PAGE>
securities of that Series. No material amendment to the Plan may be made unless
approved in the manner described in Section 3 above.
Section 7. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the Fund's
Directors who are not interested persons of the Fund will be committed to the
discretion of the Directors then in office who are not interested persons of the
Fund.
Section 8. Written Reports.
In each year during which the Plan remains in effect, any person authorized to
direct the disposition of monies paid or payable by a Series pursuant to the
Plan or any related agreement will prepare and furnish to the Board, and the
Board will review, at least quarterly, written reports setting out the amounts
expended under the Plan, the purposes for which those expenditures were made,
and otherwise complying with the requirements of the Rule.
Section 9. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to the Plan
and any report made pursuant to Section 8 above, for a period of not less than
six years (the first two years in an easily accessible place) from the date of
the Plan, agreement or report.
Section 10. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning ascribed
to those terms under the 1940 Act.
IN WITNESS WHEREOF, the Fund, on behalf of the Class C Shares of each of its
Series, has executed this Plan as of this 2nd day of April, 1998.
AETNA SERIES FUND, INC.
on behalf of its CLASS C shares
By: /s/ J. Scott Fox
--------------------------
J. Scott Fox, President
- 3 -
<PAGE>
Appendix A
Aetna Bond Fund
Aetna Balanced Fund
Aetna Growth and Income Fund
Aetna International Fund
Aetna Government Fund
Aetna High Yield Fund
Aetna Growth Fund
Aetna Small Company Fund
Aetna Ascent Fund
Aetna Crossroads Fund
Aetna Legacy Fund
Aetna Mid Cap Fund
Aetna Value Opportunity Fund
Aetna Real Estate Securities Fund
Aetna Index Plus Bond Fund
Aetna Index Plus Large Cap Fund
Aetna Index Plus Small Cap Fund
Aetna Index Plus Mid Cap Fund
DISTRIBUTION PLAN
Aetna Series Fund, Inc.
Class B
This Distribution Plan (the "Plan") is adopted in accordance with Rule 12b-1
(the "Rule") under the Investment Company Act of 1940, as amended (the "1940
Act"), by Aetna Series Fund, Inc. (the "Fund"), a Maryland corporation, on
behalf of the Class B shares of each of its Series as set forth in Appendix A,
as amended from time to time, subject to the following terms and conditions:
Section 1. Annual Fees.
Distribution Fee. Each Series will pay to the underwriter of its shares, Aeltus
Capital, Inc. (the "Underwriter"), a Connecticut corporation, a distribution fee
under the Plan at the annual rate of 0.75% of the average daily net assets of
each Series attributable to its Class B shares (the "Distribution Fee").
Adjustment to Fees. The Distribution Fee may be reduced with respect to the
Class B shares of any Series if agreed upon by the Board of Directors of the
Fund (the "Board") and the Underwriter and if approved in the manner specified
in Section 3.
Payment of Fees. The Distribution Fee will be calculated daily and paid monthly
by each Series set forth in Appendix A with respect to its Class B shares at the
annual rate indicated above.
Section 2. Expenses Covered by the Plan.
The Fund, with respect to its Class B shares, will pay the Underwriter a
Distribution Fee under the Plan to compensate the Underwriter, and firms with
which the Underwriter enters into related agreements, for engaging in sales and
promotional activities. Such activities and related services will relate only to
the sale, promotion and marketing of the Class B shares of the Fund. Such
expenditures may consist of sales commissions to firms and their representatives
for selling Class B shares of the Fund, compensation, sales incentives and
payments to sales and marketing personnel, and the payment of expenses incurred
in sales and promotional activities, including advertising expenditures related
to the Fund and the costs of preparing and distributing promotional materials.
The Distribution Fee may also be used to pay the financing costs of accruing the
unreimbursed expenditures described in this Section. Payment of the Distribution
Fee described in this Section shall be subject to any limitation set forth in
any applicable regulation of the National Association of Securities Dealers,
Inc.
The amount of the Distribution Fee payable under Section 1 is not related
directly to expenses incurred by the Underwriter and this Section 2 does not
obligate a Series to reimburse the Underwriter for such expenses. The
Distribution Fees will be paid by each
<PAGE>
Series to the Underwriter unless and until (a) the Plan is terminated pursuant
to Section 5, or (b) the Plan is not renewed with respect to a Series or Class B
thereof pursuant to Section 4. Any distribution expenses incurred by the
Underwriter on behalf of a Series in excess of the Distribution Fees specified
in Section 1 which the Underwriter has accrued through the termination date are
the sole responsibility and liability of the Underwriter and are not an
obligation of a Series.
Section 3. Approval of Directors.
Neither the Plan nor any related agreements will take effect until approved by a
majority of both (a) the Board of Directors of the Fund and (b) those Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
it (the "Qualified Directors"), cast in person at a meeting called for the
purpose of voting on the Plan and the related agreements.
Section 4. Continuance of the Plan.
The Plan shall become effective on March 1, 1999 and shall remain in force and
effect through December 31, 1999, unless earlier terminated. Following the
expiration of its initial term, the Plan shall continue in force and effect for
a one-year period, provided such continuance is specifically approved at least
annually:
1. by a majority of the members of the Board, or by vote of a majority of each
Series' Class B shares, and
2. by the vote of a majority of the Qualified Directors cast in person at a
meeting specifically called for such purpose.
Section 5. Termination.
The Plan may be terminated at any time with respect to Class B shares of any
Series (a) by the vote of a majority of that Series' outstanding voting Class B
securities, or (b) by a vote of a majority of the Qualified Directors. The Plan
may remain in effect with respect to a Series even if the Plan has been
terminated in accordance with this Section 5 with respect to any other Series.
Section 6. Amendments.
The Plan may not be amended with respect to any Series so as to increase
materially the amounts of the Distribution Fees described in Section 1 unless
the amendment is approved by a vote of the holders of at least a majority of the
outstanding voting Class B securities of that Series. No material amendment to
the Plan may be made unless approved in the manner described in Section 3.
- 2 -
<PAGE>
Section 7. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the Fund's
Directors who are not interested persons of the Fund will be committed to the
discretion of the Directors then in office who are not interested persons of the
Fund.
Section 8. Written Reports.
In each year during which the Plan remains in effect, any person authorized to
direct the disposition of monies paid or payable by a Series pursuant to the
Plan or any related agreement will prepare and furnish to the Board, and the
Board will review, at least quarterly, written reports setting out the amounts
expended under the Plan, the purposes for which those expenditures were made,
and otherwise complying with the requirements of the Rule.
Section 9. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to the Plan
and any report made pursuant to Section 8, for a period of not less than six (6)
years (the first two (2) years in an easily accessible place) from the date of
the Plan, agreement or report.
Section 10. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning ascribed
to those terms under the 1940 Act.
IN WITNESS WHEREOF, the Fund, on behalf of the Class B Shares of each of its
Series, has executed this Plan as of this 8th day of January, 1999.
AETNA SERIES FUND, INC.
on behalf of its CLASS B shares
By: /s/ J. Scott Fox
---------------------------
J. Scott Fox, President
- 3 -
<PAGE>
Appendix A
Aetna Money Market Fund
Aetna Bond Fund
Aetna Balanced Fund
Aetna Growth and Income Fund
Aetna International Fund
Aetna Government Fund
Aetna High Yield Fund
Aetna Growth Fund
Aetna Small Company Fund
Aetna Ascent Fund
Aetna Crossroads Fund
Aetna Legacy Fund
Aetna Mid Cap Fund
Aetna Value Opportunity Fund
Aetna Real Estate Securities Fund
Aetna Index Plus Bond Fund
Aetna Index Plus Large Cap Fund
Aetna Index Plus Small Cap Fund
Aetna Index Plus Mid Cap Fund
SHAREHOLDER SERVICES PLAN
Aetna Series Fund, Inc.
Class C
This Shareholder Services Plan (the "Plan") is adopted by in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act),
Aetna Series Fund, Inc. (the "Fund"), a Maryland corporation, on behalf of the
Class C shares of each of its Series (except Aetna Money Market Fund) as set
forth in Appendix A ("Series"), as amended from time to time, subject to the
following terms and conditions:
Section 1. Annual Fees.
Service Fee. The Series will pay to the underwriter of its shares, Aeltus
Capital, Inc. (the "Underwriter"), a Connecticut corporation, a service fee
under the Plan at the annual rate of 0.25% of the average daily net assets of
the Series attributable to Class C shares (the "Service Fee").
Adjustment to Fees. The Service Fee may be reduced if approved by the
Underwriter and the Board of Directors of the Fund (the "Board") in the manner
specified in Section 3 of this Plan.
Payment of Fees. The Service Fee will be calculated daily and paid monthly by
the Series.
Section 2. Expenses Covered by the Plan.
The Service Fee may be used by the Underwriter primarily to pay firms and their
agents for servicing shareholder accounts, including a continuing fee which
shall begin to accrue immediately after the sale of such shares.
The amount of the Service Fee is not related directly to expenses incurred by
the Underwriter, and this Section 2 does not obligate the Series to reimburse
the Underwriter for such expenses. The Service Fee will be paid by the Series to
the Underwriter unless and until (a) the Plan is terminated in accordance with
Section 5 hereof; or (b) the Plan is not renewed with respect to the Series or
Class C pursuant to Section 4 hereof. Any service expenses in excess of the
Service Fee which the Underwriter has incurred on behalf of a Series and accrued
through the termination date are the sole responsibility and liability of the
Underwriter and are not an obligation of the Series.
Section 3. Approval of Directors.
Neither the Plan nor any related agreements will take effect until approved by a
majority of both (a) the Board of Directors of the Fund and (b) those Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the
<PAGE>
operation of the Plan or in any agreements related to it (the "Qualified
Directors"), cast in person at a meeting called for the purpose of voting on the
Plan and the related agreements.
Section 4. Continuance of the Plan.
The Plan shall become effective on July 1, 1998 and shall remain in force and
effect through December 31, 1998, unless earlier terminated. Following the
expiration of its initial term, the Plan shall continue in force and effect for
a one-year period, provided such continuance is specifically approved at least
annually:
1. (a) by the a majority of the members of the Board, or
(b) by vote of a majority of each Series' Class C shares; and
2. by vote of a majority of the Qualified Directors cast in person at a
meeting specifically called for such purpose.
Section 5. Termination.
The Plan may be terminated at any time with respect to Class C of any Series,
without the payment of any penalty, (a) by the vote of a majority of that
Series' outstanding voting Class C securities, or (b) by a vote of a majority of
the Qualified Directors.
Section 6. Amendments.
The Plan may not be amended with respect to any Series so as to increase
materially the amounts of the Service Fee described in Section 1 above unless
the amendment is approved by a vote of the holders of at least a majority of the
outstanding voting Class C securities of that Series. No material amendment to
the Plan may be made unless approved in the manner described in Section 3 above.
Section 7. Written Reports.
In each year during which the Plan remains in effect, any person authorized to
direct the disposition of monies paid or payable by the Series pursuant to the
Plan, or any related agreement, will prepare and furnish to the Board, and the
Board shall review, at least quarterly, written reports setting out the amounts
expended under the Plan and the purposes for which those expenditures were made.
Section 8. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to the Plan
and any report made pursuant to Section 8 above, for a period of not less than
six years (the first two years in an easily accessible place) from the date of
the Plan, agreement or report.
2
<PAGE>
Section 9. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning ascribed
to those terms under the 1940 Act.
IN WITNESS WHEREOF, the Fund, on behalf of the Class C Shares of each of its
Series, has executed this Plan as of this 2nd day of April, 1998.
AETNA SERIES FUND, INC.
on behalf of the Class C Shares
of each of its Series
By: /s/ J. Scott Fox
---------------------------
J. Scott Fox, President
3
<PAGE>
APPENDIX A
Aetna Government Fund
Aetna Bond Fund
Aetna High Yield Fund
Aetna Balanced Fund
Aetna Growth and Income Fund
Aetna Real Estate Securities Fund
Aetna Value Opportunity Fund
Aetna Growth Fund
Aetna Mid Cap Fund
Aetna Small Company Fund
Aetna International Fund
Aetna Index Plus Large Cap Fund
Aetna Index Plus Small Cap Fund
Aetna Index Plus Mid Cap Fund
Aetna Index Plus Bond Fund
Aetna Ascent Fund
Aetna Crossroads Fund
Aetna Legacy Fund
4
SHAREHOLDER SERVICES PLAN
Aetna Series Fund, Inc.
Class B
This Shareholder Services Plan (the "Plan") is adopted in accordance with Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"), by
Aetna Series Fund, Inc. (the "Fund"), a Maryland corporation, on behalf of the
Class B shares of each of its Series as set forth in Appendix A ("Series"), as
amended from time to time, subject to the following terms and conditions:
Section 1. Annual Fees.
Service Fee. The Series will pay to the underwriter of its shares, Aeltus
Capital, Inc. (the "Underwriter"), a Connecticut corporation, a service fee
under the Plan at the annual rate of 0.25% of the average daily net assets of
the Series attributable to Class B shares (the "Service Fee").
Adjustment to Fees. The Service Fee may be reduced if approved by the
Underwriter and the Board of Directors of the Fund (the "Board") in the manner
specified in Section 3.
Payment of Fees. The Service Fee will be calculated daily and paid monthly by
the Series.
Section 2. Expenses Covered by the Plan.
The Service Fee may be used by the Underwriter primarily to pay firms and their
agents for servicing shareholder accounts, including a continuing fee which
shall begin to accrue immediately after the sale of such shares.
The amount of the Service Fee is not related directly to expenses incurred by
the Underwriter, and this Section 2 does not obligate the Series to reimburse
the Underwriter for such expenses. The Service Fee will be paid by the Series to
the Underwriter unless and until (a) the Plan is terminated in accordance with
Section 5; or (b) the Plan is not renewed with respect to the Series or Class B
pursuant to Section 4. Any service expenses in excess of the Service Fee which
the Underwriter has incurred on behalf of a Series and accrued through the
termination date are the sole responsibility and liability of the Underwriter
and are not an obligation of the Series.
Section 3. Approval of Directors.
Neither the Plan nor any related agreements will take effect until approved by a
majority of both (a) the Board of Directors of the Fund and (b) those Directors
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related to
it (the "Qualified Directors"), cast in
<PAGE>
person at a meeting called for the purpose of voting on the Plan and the related
agreements.
Section 4. Continuance of the Plan.
The Plan shall become effective on March 1, 1999 and shall remain in force and
effect through December 31, 1999, unless earlier terminated. Following the
expiration of its initial term, the Plan shall continue in force and effect for
a one-year period, provided such continuance is specifically approved at least
annually:
1. by a majority of the members of the Board, or by vote of a majority of
each Series' Class B shares; and
2. by the vote of a majority of the Qualified Directors cast in person at
a meeting specifically called for such purpose.
Section 5. Termination.
The Plan may be terminated at any time with respect to Class B of any Series,
without the payment of any penalty, by (a) the vote of a majority of that
Series' outstanding voting Class B securities, or (b) a vote of a majority of
the Qualified Directors. The Plan may remain in effect with respect to a Series
even if the Plan has been terminated in accordance with this Section 5 with
respect to any other Series.
Section 6. Amendments.
The Plan may not be amended with respect to any Series so as to increase
materially the amounts of the Service Fee described in Section 1 unless the
amendment is approved by a vote of the holders of at least a majority of the
outstanding voting Class B securities of that Series. No material amendment to
the Plan may be made unless approved in the manner described in Section 3.
Section 7. Written Reports.
In each year during which the Plan remains in effect, any person authorized to
direct the disposition of monies paid or payable by the Series pursuant to the
Plan, or any related agreement, will prepare and furnish to the Board, and the
Board shall review, at least quarterly, written reports setting out the amounts
expended under the Plan and the purposes for which those expenditures were made.
Section 8. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to the Plan
and any report made pursuant to Section 7, for a period of not less than six (6)
years (the first two (2) years in an easily accessible place) from the date of
the Plan, agreement or report.
2
<PAGE>
Section 9. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning ascribed
to those terms under the 1940 Act.
IN WITNESS WHEREOF, the Fund, on behalf of the Class B Shares of each of its
Series, has executed this Plan as of this 17th day of December, 1998.
AETNA SERIES FUND, INC.
on behalf of the Class B Shares
of each of its Series
By: /s/ J. Scott Fox
----------------------------
J. Scott Fox, President
3
<PAGE>
APPENDIX A
Aetna Money Market Fund
Aetna Government Fund
Aetna Bond Fund
Aetna High Yield Fund
Aetna Balanced Fund
Aetna Growth and Income Fund
Aetna Real Estate Securities Fund
Aetna Value Opportunity Fund
Aetna Growth Fund
Aetna Mid Cap Fund
Aetna Small Company Fund
Aetna International Fund
Aetna Index Plus Large Cap Fund
Aetna Index Plus Small Cap Fund
Aetna Index Plus Mid Cap Fund
Aetna Index Plus Bond Fund
Aetna Ascent Fund
Aetna Crossroads Fund
Aetna Legacy Fund
4
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 01
<NAME> Money Market-Class I
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 474,845,743
<INVESTMENTS-AT-VALUE> 474,845,743
<RECEIVABLES> 4,753,767
<ASSETS-OTHER> 136,773
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 479,736,283
<PAYABLE-FOR-SECURITIES> 39,500,008
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,840,414
<TOTAL-LIABILITIES> 41,340,422
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<PAID-IN-CAPITAL-COMMON> 438,395,861
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-INVESTMENT-INCOME> 22,276,969
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<SHARES-REINVESTED> 13,180,175
<NET-CHANGE-IN-ASSETS> 8,155,787
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,028,262
<AVERAGE-NET-ASSETS> 266,373,203
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
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<PER-SHARE-DIVIDEND> (0.05)
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 01
<NAME> Money Market-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 474,845,743
<INVESTMENTS-AT-VALUE> 474,845,743
<RECEIVABLES> 4,753,767
<ASSETS-OTHER> 136,773
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 479,736,283
<PAYABLE-FOR-SECURITIES> 39,500,008
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,840,414
<TOTAL-LIABILITIES> 41,340,422
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 438,395,861
<SHARES-COMMON-STOCK> 161,455,788
<SHARES-COMMON-PRIOR> 156,530,243
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 161,455,788
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24,305,231
<OTHER-INCOME> 0
<EXPENSES-NET> (2,028,262)
<NET-INVESTMENT-INCOME> 22,276,969
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 22,276,969
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (8,355,762)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 528,354,421
<NUMBER-OF-SHARES-REDEEMED> (531,518,375)
<SHARES-REINVESTED> 8,089,499
<NET-CHANGE-IN-ASSETS> 8,155,787
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,701,171
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,028,262
<AVERAGE-NET-ASSETS> 159,977,579
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<SERIES>
<NUMBER> 01
<NAME> Money Market-Class C
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> JUN-30-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 474,845,743
<INVESTMENTS-AT-VALUE> 474,845,743
<RECEIVABLES> 4,753,767
<ASSETS-OTHER> 136,773
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 06
<NAME> Government Fund-Class I
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 06
<NAME> Government Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 06
<NAME> Government Fund-Class C
<S> <C>
<PERIOD-TYPE> 4-MOS
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<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 02
<NAME> Bond Fund-Class I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 02
<NAME> Bond Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 02
<NAME> Bond Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 03
<NAME> Balanced Fund-Class I
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1998
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 03
<NAME> Balanced Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
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<PERIOD-END> OCT-31-1998
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<NUMBER-OF-SHARES-REDEEMED> 140,421
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<NET-CHANGE-IN-ASSETS> 7,545,750
<ACCUMULATED-NII-PRIOR> 1,090,686
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 03
<NAME> Balanced Fund-Class C
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> JUN-30-1998
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<SHARES-REINVESTED> 0
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<ACCUMULATED-NII-PRIOR> 1,090,686
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<INTEREST-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 13.27
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<PER-SHARE-NAV-END> 12.80
<EXPENSE-RATIO> 2.11
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 04
<NAME> Growth and Income-Class I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 591,095,290
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<NUMBER-OF-SHARES-REDEEMED> (5,721,922)
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<PER-SHARE-NII> 0.12
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<PER-SHARE-NAV-END> 15.26
<EXPENSE-RATIO> 0.88
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 04
<NAME> Growth and Income-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 591,095,290
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<RECEIVABLES> 22,669,814
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<ACCUMULATED-NII-PRIOR> 2,909,165
<ACCUMULATED-GAINS-PRIOR> 114,225,571
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<PER-SHARE-DIVIDEND> (0.04)
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<PER-SHARE-NAV-END> 15.22
<EXPENSE-RATIO> 1.20
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 04
<NAME> Growth and Income-Class C
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> JUN-30-1998
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<GROSS-EXPENSE> 5,949,104
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<PER-SHARE-NAV-BEGIN> 16.92
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<EXPENSE-RATIO> 1.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 08
<NAME> Growth Fund-Class I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
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<GROSS-EXPENSE> 1,186,692
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<PER-SHARE-NAV-END> 16.62
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 08
<NAME> Growth Fund-Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 08
<NAME> Growth Fund-Class C
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> JUN-30-1998
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<PER-SHARE-NAV-END> 16.56
<EXPENSE-RATIO> 1.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 14
<NAME> Index Plus Large Cap Fund-Class I
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
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<PERIOD-END> OCT-31-1998
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<NET-ASSETS> 31,670,686
<DIVIDEND-INCOME> 311,330
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 14
<NAME> Index Plus Large Cap Fund-Class A
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 14
<NAME> Index Plus Large Cap Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 09
<NAME> Small Company Fund-Class I
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 09
<NAME> Small Company Fund-Class A
<S> <C>
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<TABLE> <S> <C>
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<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 09
<NAME> Small Company Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 05
<NAME> International Fund-Class I
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 05
<NAME> International Fund-Class A
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 05
<NAME> International Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 11
<NAME> Ascent Fund-Class I
<S> <C>
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<TABLE> <S> <C>
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<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 11
<NAME> Ascent Fund-Class A
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 11
<NAME> Ascent Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 12
<NAME> Crossroads Fund-Class I
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 12
<NAME> Crossroads Fund-Class A
<S> <C>
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<TABLE> <S> <C>
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<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 12
<NAME> Crossroads Fund-Class C
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 13
<NAME> Legacy Fund-Class I
<S> <C>
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<TABLE> <S> <C>
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<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 13
<NAME> Legacy Fund-Class A
<S> <C>
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<TABLE> <S> <C>
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<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
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<NAME> Legacy Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 15
<NAME> Value Opportunity Fund-Class I
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 15
<NAME> Value Opportunity Fund-Class A
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 15
<NAME> Value Opportunity Fund-Class C
<S> <C>
<PERIOD-TYPE> 4-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 16
<NAME> Mid Cap Fund-Class I
<S> <C>
<PERIOD-TYPE> 9-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 16
<NAME> Mid Cap Fund-Class A
<S> <C>
<PERIOD-TYPE> 9-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 16
<NAME> Mid Cap Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 17
<NAME> Real Estate Securities Fund-Class I
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 17
<NAME> Real Estate Securities Fund-Class A
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 17
<NAME> Real Estate Securities Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 18
<NAME> Index Plus Small Cap Fund-Class I
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 18
<NAME> Index Plus Small Cap Fund-Class A
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 18
<NAME> Index Plus Small Cap Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 19
<NAME> Index Plus Mid Cap Fund-Class I
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 19
<NAME> Index Plus Mid Cap Fund-Class A
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 19
<NAME> Index Plus Mid Cap Fund-Class C
<S> <C>
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 20
<NAME> Index Plus Bond Fund-Class I
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<CIK> 0000877233
<NAME> Aetna Series Fund, Inc.
<SERIES>
<NUMBER> 20
<NAME> Index Plus Bond Fund-Class A
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<NAME> Aetna Series Fund, Inc.
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