<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
President's Letter.....................................................1
BROKERAGE CASH RESERVES:
Investment Review......................................................3
Portfolio of Investments...............................................6
Statement of Assets and Liabilities....................................8
Statement of Operations................................................9
Statements of Changes in Net Assets....................................10
Notes to Financial Statements..........................................11
Financial Highlights...................................................13
</TABLE>
<PAGE>
PRESIDENT'S LETTER
Dear Fellow Shareholder,
Thank you for investing in the Aetna Series Fund, Inc. With nearly 9,000 mutual
funds available in today's market, we appreciate your confidence in us.
A brief review of the economy over the past six months lends some interesting
insights into the performance of financial markets. The U.S. economy grew at an
astonishing annualized rate of 7.3% in the fourth quarter of 1999 and 5.4% in
the first quarter of 2000, as measured by real Gross Domestic Product. The pace
of this wealth-induced growth, combined with other inflation concerns, has led
the Federal Reserve to raise the Federal Funds rate by 0.75% since November to
its current 6.00%, and the end is not yet in sight. Still, consumers remained
confident about the economy, and economic statistics continued to show strength.
Equity markets experienced significant volatility but ended positively despite
rising interest rates. Often extreme, this volatility plagued all facets of the
stock market during the first four months of 2000, but was most noticeable in
the technology sector. Domestic bonds produced positive returns despite interest
rate increases by the Federal Reserve, and short-term interest rates moved
higher than long-term interest rates.
The Fund and its advisor, Aeltus Investment Management, Inc., strive to
continuously improve its products and services. Here are some highlights of our
recent efforts:
o AETNA PRINCIPAL PROTECTION FUND II enjoyed a successful offering, as
investors committed nearly $130 million to the fund; AETNA PRINCIPAL
PROTECTION FUND III is in its offering period until May 30, 2000. These
innovative total-return funds offer investors downside protection - while
providing investors the opportunity for upside market potential.
o
On December 22, 1999, Aeltus announced the acquisition of a minority equity
interest in ELIJAH ASSET MANAGEMENT, LLC (EAM), headquartered in San
Francisco. EAM is known as a skilled manager of specialized growth and
technology funds.
o AETNA TECHNOLOGY FUND was launched on March 1, 2000. Sub-advised by EAM,
this fund seeks long-term capital appreciation by investing primarily in
common stocks of companies in the technology sector.
o Your Board of Directors considered and agreed to submit to you a proposal
(proxy) to LIQUIDATE FOUR FUNDS: Aetna Mid Cap Fund, Aetna Real Estate
Securities Fund, Aetna High Yield Fund and Aetna Index Plus Bond Fund.
Proxy materials will be mailed to those of you in these funds on or about
May 30, 2000, with a proposed liquidation date on or before September 1,
2000.
o On March 31, five of our funds were recognized by Morningstar, Inc. with
four and five star ratings.
This is merely a sample of some of the ways we have set out to fulfill our
commitment to bringing you our best in products and services. Again, we very
much appreciate and value your continued confidence in our funds and in Aeltus.
Sincerely,
/s/ J. Scott Fox
J. Scott Fox
President
Aetna Series Fund, Inc.
A prospectus containing more complete information including charges and expenses
is available from your financial advisor, at www.aetnafunds.com, or by calling
800-238-6263, option 2. Read the prospectus carefully before investing.
1
<PAGE>
Brokerage Cash Reserves
Growth of $10,000
[tabular representation of line chart]
<TABLE>
<CAPTION>
9-7-1999 Oct-99 Apr-00
<S> <C> <C> <C> <C>
Brokerage Cash Reserves 10,000 10,070 10,198 10,330
IBC's Money Fund Average/All Taxable index 10,000 10,077 10,202 10,336
</TABLE>
Average Annual
Total Return
for the
period ended
April 30, 2000*
-----------------
Inception
-----------------
3.30%
-----------------
*Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Investment
return and principal of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
BROKERAGE CASH RESERVES
HOW DID THE FUND PERFORM DURING THE PERIOD?
Brokerage Cash Reserves shares generated a 2.59% total return, net of fund
expenses, for the six month period ended April 30, 2000. The benchmark, IBC's
Money Fund Average/All Taxable Index(a), returned 2.56% for the same period. As
of April 30, 2000, the Fund reported a 7-day yield of 5.31% with an average
weighted maturity of 47 days.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
With the economy growing at a torrid 7.3% pace in the fourth quarter of 1999 and
5.4% in the first quarter of 2000, combined with accelerating inflation
indicators, market consensus expects the Federal Reserve Bank (the Fed) to
continue increasing interest rates, thereby pushing up short-term yields.
Employment costs are increasing at the fastest rate in a decade and consumer
inflation indicators show signs of accelerating. Combining this with strong
economic growth, the increase in inflation has led to talk of a more aggressive
Fed.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
Continued emphasis on asset-backed securities and floating rate notes
contributed to the Fund's performance. A significant shortening of weighted
average maturity enabled the Fund to take advantage of higher rates more
quickly.
See Definition of Terms. 3
<PAGE>
WHAT IS YOUR OUTLOOK GOING FORWARD?
The Fed will meet in the middle of May and it is a virtual certainty that they
will raise rates again. Currently, the markets rate it a toss-up whether the
increase will be 25 or 50 basis points. The higher option may be the final
outcome should the economic data continue to show strong growth and rising
inflation.
Much of the Y2K-related demand for short-term paper that had previously put
pressure on spreads has now moved further out along the yield curve. In
contrast, many issuers have made a conscious effort to keep maturities short due
to the yield curve inversion. (An inverted yield curve occurs when short-term
interest rates are higher than long-term interest rates.) This change in the
supply/demand balance should keep an upward pressure on short rates in the near
term.
We will continue to maintain a short weighted average maturity so that the Fund
can take advantage of the inverted yield curve and additional interest rate
increases by the Fed. We expect to increase our weighted average maturity as
the economy weakens and money market rates decline. Finally, we will
concentrate on purchasing securities in those sectors that provide the greatest
relative value.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
<TABLE>
<CAPTION>
QUALITY RATINGS*
<S> <C>
Tier 1 98.8%
Tier 2 1.2%
</TABLE>
<TABLE>
<CAPTION>
MATURITY DISTRIBUTION
<S> <C>
1 - 30 days 42.0%
31 - 60 days 10.2%
61 - 90 days 5.7%
91 - 120 days 6.0%
121 - 180 days 6.1%
181 - 397 days 30.0%
</TABLE>
*Tier 1 securities are, or are comparable to, securities which are rated in the
highest short-term rating category by at least two nationally recognized
statistical rating organizations (NRSROs) or by the only NRSRO that has rated
the security. Tier 2 securities are securities that have received the requisite
rating in one of the two highest categories, but are not Tier 1.
The opinions expressed reflect those of the portfolio manager only through April
30, 2000. The manager's opinions are subject to change at any time based on
market and other conditions. The composition, industries and holdings of the
Fund are subject to change.
4 See Definition of Terms.
<PAGE>
DEFINITION OF TERMS
(a) The IBC's Money Fund Average/All Taxable Index is an average of the returns
of more than 250 money market mutual funds surveyed each month by
IBC/Donaghue, Inc.
The unmanaged index described above is not available for individual investment.
5
<PAGE>
BROKERAGE CASH RESERVES FUND
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
BROKERAGE CASH RESERVES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------- ---------------
<S> <C> <C>
ASSET-BACKED SECURITIES (43.8%)
Americredit Auto Receivables
Trust, 6.04%, 02/05/01............... $ 6,648,016 $ 6,648,016
CarMax Auto Owner Trust, 6.20%,
11/15/00 ............................ 1,699,963 1,699,963
CNH Equipment Trust, 6.18%, 04/09/01 . 9,163,383 9,163,383
Copelco Capital Funding
LLC, 5.94%, 10/18/00 ................ 3,223,016 3,223,016
Copelco Capital Funding
LLC, 6.51%, 05/14/01 ................ 10,000,000 10,000,000
Dealers Capital Acceptance Trust,
Inc., 6.10%, 05/01/00................ 3,500,000 3,500,000
Dealers Capital Acceptance Trust,
Inc., 6.15%, 05/01/00................ 9,537,000 9,537,000
DVI Receivables X LLC, 6.17%, 11/13/00 3,435,056 3,435,056
Eureka Securitization,
Inc., 6.07%, 05/05/00 ++ * .......... 9,000,000 8,993,930
Ford Credit Auto Owner Trust 2000-A,
6.22%, 12/15/00...................... 8,000,000 8,000,000
Huntington Auto Trust, 6.32%, 04/15/01 12,649,571 12,649,571
Ikon Receivables LLC, 6.14%, 10/15/00 3,958,185 3,958,185
Long Lane Master Trust
IV, 6.10%, 06/08/00 ++............... 3,000,000 2,980,683
New Holland Equipment Business
Trust, 6.15%, 11/15/00 ++............ 2,710,421 2,710,421
Onyx Acceptance Owner
Trust, 6.09%, 03/15/01 #............. 4,031,747 4,031,747
Onyx Acceptance Owner
Trust, 6.18%, 11/15/00............... 616,255 616,255
Onyx Acceptance Owner
Trust, 6.41%, 05/15/01............... 8,300,000 8,300,000
Orix Credit Alliance Receivables
Trust, 6.13%, 12/15/00............... 4,909,351 4,909,351
Orix Credit Alliance Receivables
Trust, 6.24%, 03/15/01............... 6,933,502 6,933,502
Ryder Vehicle Lease
Trust, 6.15%, 10/16/00............... 1,644,866 1,644,866
Summit Acceptance Auto Investment
LLC, 6.45%, 05/15/01 ++ # ........... 6,000,000 6,000,000
Syndicated Loan Funding
Trust, 5.66%, 10/16/00 ++ ........... 8,000,000 8,000,000
Syndicated Loan Funding
Trust, 6.28%, 03/15/01 ++ ........... 3,000,000 3,000,000
Unicapital, 6.28%, 04/20/01 ++ ....... 8,921,482 8,921,482
---------------
TOTAL ASSET-BACKED SECURITIES 138,856,427
---------------
COMMERCIAL PAPER - DOMESTIC (29.2%)
Ciesco L.P., 6.08%, 05/01/00 ++ ...... 3,000,000 3,000,000
Cooper Industries,
Inc., 6.27%, 08/09/00 ++ ........... 6,500,000 6,386,794
Detroit Edison Co., 6.22%, 05/09/00 * 9,000,000 8,987,560
Lehman Brothers Holdings
Inc., 6.29%, 10/20/00................ 5,000,000 5,000,000
MCI Worldcom Inc., 6.01%, 06/13/00 ++ 7,000,000 6,949,750
PHH Corp., 6.17%, 05/01/00 ........... 1,360,000 1,360,000
PHH Corp., 6.17%, 05/02/00 ........... 7,500,000 7,498,715
PHH Corp., 6.20%, 05/01/00 ........... 4,000,000 4,000,000
Popular North America
Inc., 6.18%, 05/03/00................ 3,600,000 3,598,764
Popular North America
Inc., 6.20%, 05/03/00................ 2,000,000 1,999,311
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------- ---------------
<S> <C> <C>
COMMERCIAL PAPER - DOMESTIC (CONTINUED)
Wheels Inc., 6.20%, 05/02/00 + ....... $ 13,000,000 $ 12,997,760
Wood Street Funding
Corp., 6.23%, 05/30/00 ++ ........... 13,000,000 12,934,758
Xerox Capital De Mexico, 6.15%,
05/24/00 ++.......................... 3,000,000 2,988,213
Xerox Capital Plc, 6.20%, 05/01/00 ++ 1,140,000 1,140,000
Xerox Corp., 6.20%, 05/01/00 ++ ...... 5,799,000 5,799,000
Zions Bancorporation, 6.15%,
05/16/00 ++ ........................ 8,000,000 7,979,500
---------------
TOTAL COMMERCIAL PAPER - DOMESTIC 92,620,125
---------------
CORPORATE NOTES (15.6%)
Associates Corp. N.A., 6.41%,
06/29/00 ++.......................... 5,000,000 4,999,120
Bank One Corp.,6.32%,01/16/01 ++ ..... 10,000,000 10,006,974
Chrysler Financial
Corp., 6.63%, 08/15/00............... 500,000 500,577
Detroit Edison Co., 6.72%, 07/28/00 .. 4,000,000 4,000,000
Finova Capital Corp., 6.38%, 10/15/00 4,000,000 3,996,178
Fleet Boston Corp., 5.18%, 01/29/01 .. 10,000,000 9,998,212
MCI Worldcom, Inc., 6.27%, 08/17/00 ++ 6,000,000 6,002,546
Sears Roebuck Acceptance
Corp., 6.50%, 06/15/00............... 1,000,000 999,967
Washington Mutual, Inc., 6.38%,
07/01/00 ++.......................... 4,000,000 3,998,660
Zions Bancorporation, 6.44%,
10/27/00 ++ ........................ 5,000,000 5,000,000
---------------
TOTAL CORPORATE NOTES 49,502,234
---------------
MEDIUM-TERM NOTES - DOMESTIC (14.0%)
Countrywide Funding
Corp., 6.31%, 08/08/00............... 5,000,000 5,000,674
General Motors Acceptance
Corp., 5.33%, 10/20/00............... 2,325,000 2,316,795
Heller Financial, Inc., 6.58%,
09/25/00 ........................... 5,000,000 5,005,631
Lehman Brothers Holdings
Inc., 6.33%, 08/01/00................ 1,385,000 1,384,738
Lehman Brothers Holdings
Inc., 6.47%, 11/06/00................ 3,000,000 3,004,922
Popular Inc., 6.81%, 05/17/00 ........ 2,000,000 2,000,158
Prudential Funding
Corp., 6.25%, 07/28/00 ++ ........... 7,500,000 7,499,795
Student Loan Marketing
Assoc., 6.23%, 11/13/00.............. 4,500,000 4,503,392
Student Loan Marketing
Assoc., 6.23%, 02/01/01.............. 6,000,000 6,004,243
Student Loan Marketing
Assoc., 6.26%, 03/23/01.............. 2,700,000 2,702,693
Washington Mutual, Inc., 5.88%,
02/27/01 ++.......................... 5,000,000 4,958,953
---------------
TOTAL MEDIUM-TERM NOTES - DOMESTIC 44,381,994
---------------
MEDIUM-TERM NOTES - FOREIGN (1.5%)
Republic of Argentina, Zero
Coupon, 10/16/00..................... 5,000,000 4,864,922
---------------
TOTAL MEDIUM-TERM NOTES - FOREIGN 4,864,922
---------------
TOTAL INVESTMENTS
(COST $330,225,702)(A) 330,225,702
OTHER ASSETS LESS LIABILITIES (12,980,335)
---------------
TOTAL NET ASSETS $317,245,367
===============
</TABLE>
6 See Notes to Portfolio of Investments.
<PAGE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
There were no unrealized gains or losses as of April 30, 2000.
+ Restricted security. This security has been determined to be illiquid under
guidelines established by the Board of Directors.
++ Securities that may be resold to "qualified institutional buyers" under
Rule 144A or securities offered pursuant to section 4(2) of the Securities
Act of 1933, as amended. These securities have been determined to be liquid
under guidelines established by the Board of Directors.
* Segregated securities for purchases of delayed delivery or when-issued
securities held at April 30, 2000.
# When-issued or delayed delivery security.
Acquisition date and cost concerning illiquid securities at April 30, 2000 is
shown below:
<TABLE>
<CAPTION>
ACQUISITION
DATE COST
----------------------- -------------------------
<S> <C> <C>
Wheels Inc................. 4/25/00 $12,997,760
===========
</TABLE>
The market value of the total illiquid securities above is $12,997,760 which
represents 4.10% of the total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 7
<PAGE>
BROKERAGE CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value ............................... $330,225,702
Cash ....................................................... 425,007
Receivable for:
Dividends and interest .................................... 1,157,891
Reimbursement from Investment Adviser ..................... 9,222
Prepaid expenses ........................................... 799
------------
Total assets .......................................... 331,818,621
------------
LIABILITIES:
Payable for:
Investments purchased ..................................... 14,307,392
Other liabilities .......................................... 265,862
------------
Total liabilities ..................................... 14,573,254
------------
NET ASSETS ........................................... $317,245,367
============
NET ASSETS REPRESENTED BY:
Paid-in capital ............................................ $317,245,367
------------
NET ASSETS ........................................... $317,245,367
============
Cost of investments ........................................ $330,225,702
CAPITAL SHARES, $.001 PAR VALUE:
Outstanding ................................................ 317,245,367
Net Assets ................................................. $317,245,367
Net asset value, offering and redemption price per share
(net assets divided by shares outstanding) ................ $ 1.00
</TABLE>
8 See Notes to Financial Statements.
<PAGE>
BROKERAGE CASH RESERVES
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDED APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest ....................................................... $9,717,629
----------
Total investment income ................................... 9,717,629
----------
INVESTMENT EXPENSES:
Investment advisory fees ....................................... 317,807
Administrative services fees ................................... 397,259
Distribution Plan and shareholder services fees ................ 794,517
Printing and postage fees ...................................... 3,734
Custody fees ................................................... 7,360
Transfer agent fees ............................................ 489
Audit fees ..................................................... 16,605
Directors' fees ................................................ 3,345
Registration fees .............................................. 9,075
Miscellaneous expenses ......................................... 11,983
----------
Expenses before reimbursement and waiver from Investment Adviser 1,562,174
Expense reimbursement and waiver from Investment Adviser ....... (51,673)
----------
Net investment expenses ................................... 1,510,501
----------
Net investment income .......................................... 8,207,128
----------
Net increase in net assets resulting from operations ........... $8,207,128
==========
</TABLE>
See Notes to Financial Statements. 9
<PAGE>
BROKERAGE CASH RESERVES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BROKERAGE CASH RESERVES
------------------------------------
PERIOD FROM
SIX MONTH SEPTEMBER 7, 1999
PERIOD ENDED (COMMENCEMENT OF
APRIL 30, 2000 OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1999
-------------- -------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ................. $ 8,207,128 $ 1,859,345
------------- ------------
Net increase in net assets resulting
from operations....................... 8,207,128 1,859,345
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (8,207,128) (1,859,345)
------------- ------------
Decrease in net assets from
distributions to shareholders......... (8,207,128) (1,859,345)
------------- ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold............. 152,221,851 304,691,306
Net asset value of shares issued upon
reinvestment of distributions........ 8,207,728 1,859,488
Payments for shares redeemed.......... (120,795,632) (28,939,374)
------------- ------------
Net increase in net assets from fund
share transactions.................... 39,633,947 277,611,420
------------- ------------
Net change in net assets............... 39,633,947 277,611,420
NET ASSETS:
Beginning of period.................... 277,611,420 --
------------- ------------
End of period.......................... $ 317,245,367 $277,611,420
============= ============
End of period net assets includes
undistributed net investment income .. $ -- $ --
============= ============
SHARE TRANSACTIONS:
Number of shares sold................. 152,221,851 304,691,306
Number of shares issued upon
reinvestment of distributions........ 8,207,728 1,859,488
Number of shares redeemed............. (120,795,632) (28,939,374)
------------- ------------
Net increase.......................... 39,633,947 277,611,420
============= ============
</TABLE>
10 See Notes to Financial Statements.
<PAGE>
BROKERAGE CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000 (UNAUDITED)
1. ORGANIZATION
Aetna Series Fund, Inc. (Company) is registered under the Investment Company Act
of 1940 (the Act) as an open-end management investment company. It was
incorporated under the laws of Maryland on June 17, 1991. The Articles of
Incorporation permit the Company to offer separate funds, each of which has its
own investment objective, policies and restrictions.
This report covers Brokerage Cash Reserves (Fund). Shares in the Fund were first
made available to the public on September 7, 1999. The Fund seeks to provide
high current return, consistent with the preservation of capital and liquidity,
through investment in high-quality money market instruments.
Aeltus Investment Management, Inc. (Aeltus) serves as the investment adviser to
the Fund. Aeltus Capital, Inc. (ACI) is the Fund's principal underwriter. Aeltus
and ACI are indirect wholly owned subsidiaries of Aetna Inc. (Aetna).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Fund have been prepared in
accordance with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect amounts
reported therein. Actual results could differ from these estimates.
A. VALUATION OF INVESTMENTS
The Fund, as permitted by Rule 2a-7 under the Act, carries all investments at
amortized cost, which approximates market value.
B. ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Fund to sell them promptly at an
acceptable price. Restricted securities are those sold under Rule 144A of the
Securities Act of 1933 (1933 Act) or are securities offered pursuant to section
4(2) of the 1933 Act, and are subject to legal or contractual restrictions on
resale and may not be publicly sold without registration under the 1933 Act.
Illiquid and restricted securities are valued using market quotations when
readily available. In the absence of market quotations, the securities are
valued based upon their fair value determined under procedures approved by the
Board of Directors. The Fund will not pay the costs of disposition of restricted
securities other than ordinary brokerage fees, if any.
C. DELAYED DELIVERY TRANSACTIONS
The Fund may purchase or sell securities on a when-issued or forward commitment
basis. The price of the underlying securities and date when the securities will
be delivered and paid for are fixed at the time the transaction is negotiated.
The market value of the securities purchased or sold are identified in the
Fund's Portfolio of Investments. Losses may arise due to changes in the market
value of the securities or from the inability of counterparties to meet the
terms of the contract. In connection with such purchases, the Fund is required
to hold liquid assets as collateral with the Funds' custodian sufficient to
cover the purchase price.
11
<PAGE>
BROKERAGE CASH RESERVES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2000 (UNAUDITED)
D. FEDERAL INCOME TAXES
The Fund has met the requirements to be taxed as a regulated investment company
for the fiscal year ended October 31, 1999, and intends to meet the requirements
for the current year. As such, the Fund is relieved of federal income taxes by
distributing all of its net taxable investment income and capital gains, if any,
in compliance with the applicable provisions of the Internal Revenue Code
(Code). Furthermore, by distributing substantially all of its net taxable
investment income and capital gains during the calendar year, the Fund will
avoid federal excise taxes in accordance with the applicable provisions of the
Code. Thus, the financial statements contain no provision for federal income
taxes.
E. DISTRIBUTIONS
Distributions are recorded on the ex-dividend date. Distributions of realized
gains from sales of securities held one year or less are taxable to shareholders
at ordinary income tax rates rather than preferred capital gain tax rates in
accordance with the applicable provisions of the Code.
F. OTHER
Investment transactions are accounted for on trade date. Interest income is
recorded on an accrual basis. Discounts and premiums on securities purchased are
accreted or amortized, respectively, using an effective yield method over the
life of the security.
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES
The Fund pays Aeltus an investment advisory fee at an annual rate of 0.20% of
the average daily net assets.
The Company and Aeltus have entered into an Administrative Services Agreement
under which Aeltus acts as administrator and provides certain administrative and
shareholder services and is responsible for the supervision of other service
providers for each Fund. The Fund pays Aeltus an administrative services fee at
an annual rate of 0.10% of its average daily net assets.
The Company has adopted a Shareholder Services Plan for the Fund. Under the
Shareholder Services Plan, ACI is paid a service fee at an annual rate of 0.15%
of the average daily net assets of the Fund. This fee is used as compensation
for expenses incurred in servicing shareholders' accounts.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Act. The Distribution Plan provides for payments to ACI at an annual rate of
0.50% of the average daily net assets.
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated through December 31, 1999 to reimburse the
Fund for some or all of its operating expenses or to waive fees in order to
maintain a certain expense ratio. Reimbursement and waiver arrangements will
increase the Fund's yield and total return. Actual expenses for the period ended
April 30, 2000 were at contractual limits. Actual expense ratios are included in
the Financial Highlights.
5. AUTHORIZED CAPITAL SHARES
The Company is authorized to issue a total of 14.8 billion shares. Of those 14.8
billion shares, 1 billion shares have been designated to the Fund.
12
<PAGE>
FINANCIAL HIGHLIGHTS
BROKERAGE CASH RESERVES
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH SEPTEMBER 7, 1999
PERIOD ENDED (COMMENCEMENT
APRIL 30, 2000 OF OPERATIONS)
(UNAUDITED) TO OCTOBER 31, 1999
-------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ... $ 1.00 $ 1.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. 0.03 0.01+
-------- --------
Total income from investment
operations.......................... 0.03 0.01
-------- --------
LESS DISTRIBUTIONS:
From net investment income ............ (0.03) (0.01)
-------- --------
Total distributions ................. (0.03) (0.01)
-------- --------
Net asset value, end of period ......... $ 1.00 $ 1.00
======== ========
Total return ........................... 2.59% 0.70%
Net assets, end of period (000's) ...... $317,245 $277,611
Ratio of net investment expenses to
average net assets .................... 0.95%(1) 0.95%(1)
Ratio of net investment income to
average net assets .................... 5.15%(1) 4.62%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 0.98%(1) 1.22%(1)
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 13
