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TABLE OF CONTENTS
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President's Letter..................................................... 1
INCOME FUNDS:
Investment Review...................................................... 3
Portfolios of Investments:
Aetna Bond Fund.......................................................13
Aetna Government Fund.................................................16
Aetna High Yield Fund.................................................17
Aetna Money Market Fund...............................................19
Statements of Assets and Liabilities...................................22
Statements of Operations...............................................24
Statements of Changes in Net Assets....................................26
Notes to Financial Statements..........................................34
Additional Information.................................................41
Financial Highlights...................................................42
<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>
AETNA BOND FUND
Growth of $10,000
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Aetna Bond Fund Lehman Brothers
(Class I) Aggregate Bond Index
<S> <C> <C>
Jan-92 10,000 10,000
9,900 9,872
10,290 10,271
10,860 10,712
Dec-92 10,670 10,741
11,160 11,185
11,470 11,481
11,771 11,781
Dec-93 11,820 11,788
11,530 11,450
11,333 11,332
11,428 11,401
Dec-94 11,432 11,444
11,921 12,021
12,610 12,753
12,827 13,003
Dec-95 13,379 13,557
13,171 13,317
13,225 13,393
13,463 13,641
Oct-96 13,696 13,944
13,888 14,094
13,985 14,182
14,612 14,877
Oct-97 14,751 15,183
15,069 15,604
15,261 15,725
15,569 16,043
Oct-98 15,890 16,598
16,319 16,862
16,181 16,712
15,926 16,443
Oct-99 16,138 16,686
15,970 16,551
Apr-00 16,154 16,923
</TABLE>
[END PLOT POINTS]
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns
for the period ended April 30, 2000*
----------------------------------------
1 Year 5 Years Inception
----------------------------------------
<S> <C> <C> <C>
Class I -0.17% 6.01% 5.93%
----------------------------------------
Class A:
POP (1) -5.22% 4.44% 4.67%
NAV (2) -0.51% 5.47% 5.28%
----------------------------------------
Class B:
w/CDSC (3) -5.96% 4.62% 4.88%
NAV -1.24% 4.95% 4.88%
----------------------------------------
Class C:
w/CDSC (4) -2.18% 4.93% 4.87%
NAV -1.23% 4.93% 4.87%
----------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. For periods prior to the inception of Class A, Class B and Class
C, the performance of each class is calculated by using the performance of Class
I since its inception date (01/03/92), adjusted for fees and expenses charged to
the appropriate class. Class I, Class A, Class B and Class C shares participate
in the same portfolio of securities. 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.
AETNA BOND FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Bond Fund Class I shares generated a 0.10% total return, net of fund
expenses, for the six month period ended April 30, 2000. The benchmark, Lehman
Brothers Aggregate Bond Index(a), returned 1.42% for the same period.
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. For
the six-month period, the yield on the two-year Treasury increased 90 basis
points while the yield on the five-year Treasury increased only 61 basis points.
The longer end of the yield curve contin-
See Definition of Terms. 3
<PAGE>
ues to be influenced by forecasts of reduced supply and Treasury buy-backs,
which have driven down the yield on the 30-year bond by 19 basis points over the
period. (One basis point is equal to one hundredth of a percent, or 0.01%.)
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.
Asset-backed securities and mortgage-backed securities were the only investment
grade sectors to outperform Treasuries by a very modest 4 basis points and 2
basis points, respectively. A-rated corporate bonds underperformed Treasuries by
200 basis points, BBB-rated corporate bonds underperformed by 294 basis points,
agency bonds by 92 basis points, and collateral mortgage-backed securities by 47
basis points. Within higher risk sectors, high yield bonds underperformed by 143
basis points while emerging markets were the best performer by a wide margin,
with 1,033 basis points of outperformance.
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
Performance of the Fund was negatively impacted by an exposure to international
bonds. These bonds underperformed as domestic growth continued strong against
foreign economies, and the U.S. dollar appreciated versus the Euro (the single
European currency introduced in January 1999).
Underweighting our holdings in investment grade corporate bonds, agency bonds,
and mortgage-backed securities had mixed results early in the period. However,
overweighting these sectors late in the period detracted from performance as
these sectors all underperformed Treasuries.
The impact of duration was mixed, although our short duration posture over much
of the period paid off as rates increased.
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. In this environment, we expect to be neutral to slightly short
duration.
With spreads still close to historical wides, we are comfortable continuing with
a tactical overweight position across the higher quality sectors, specifically
agencies, A- and above rated corporate bonds and mortgage-backed securities.
While we still don't think we will get back to historical averages any time soon
due to credit concerns and other risk factors in the economy, we do think the
risk/reward tradeoff is favorable for higher quality credits.
With a current account deficit at 4% of GDP and domestic growth expected to
moderate, we believe weaker domestic capital markets could cause the dollar to
weaken against foreign currencies, and hence we believe non-dollar assets are
poised to outperform over the remainder of the year.
Within the higher risk sectors (high yield, emerging markets and BBB- rated
corporates), we expect to stay defensive with only modest exposure.
4 See Definition of Terms.
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------
QUALITY RATINGS
----------------------------------------
<S> <C>
AAA 56.7%
AA 3.7%
A 18.6%
BBB 4.3%
BB 1.6%
B 2.9%
N/R* 12.2%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------
MATURITY DISTRIBUTION
----------------------------------------
<S> <C>
0 - 1 years 14.6%
1 - 5 years 14.8%
5 - 10 years 33.5%
10 - 20 years 1.5%
20 + years 35.6%
</TABLE>
*The Not Rated (N/R) indication is used by securities rating services (such as
Standard & Poor's or Moody's) and mercantile agencies (such as Dun & Bradstreet)
to show that a security or a company has not been rated. It has neither negative
nor positive implications.
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.
See Definition of Terms. 5
<PAGE>
AETNA GOVERNMENT FUND
Growth of $10,000
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Aetna Government Lehman Brothers
Fund Intermediate Government
(Class I) Bond Index
<S> <C> <C>
Jan-94 10,000 10,000
9,790 9,815
9,739 9,760
9,784 9,835
Dec-94 9,811 9,825
10,254 10,234
10,779 10,712
10,932 10,878
Dec-95 11,380 11,241
11,173 11,165
11,196 11,240
11,382 11,433
Oct-96 11,583 11,621
11,677 11,743
11,737 11,827
12,310 12,243
Oct-97 12,554 12,472
12,894 12,766
12,959 12,852
13,205 13,077
Oct-98 13,625 13,658
13,787 13,730
13,721 13,668
13,545 13,606
Oct-99 13,705 13,769
13,605 13,689
Apr-00 13,944 13,955
</TABLE>
[END PLOT POINTS]
<TABLE>
<CAPTION>
Average Annual Total Returns
for the period ended April 30, 2000*
----------------------------------------
1 Year 5 Years Inception
----------------------------------------
<S> <C> <C> <C>
Class I 1.61% 6.10% 5.40%
----------------------------------------
Class A:
POP (1) -3.33% 4.55% 4.01%
NAV (2) 1.45% 5.57% 4.81%
----------------------------------------
Class B:
w/CDSC (3) -4.23% 4.70% 4.34%
NAV 0.59% 5.03% 4.34%
----------------------------------------
Class C:
w/CDSC (4) -0.34% 5.04% 4.35%
NAV 0.63% 5.04% 4.35%
----------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. For periods prior to the inception of Class A, Class B and Class
C, the performance of each class is calculated by using the performance of Class
I since its inception date (01/04/94), adjusted for fees and expenses charged to
the appropriate class. Class I, Class A, Class B and Class C shares participate
in the same portfolio of securities. 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.
AETNA GOVERNMENT FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Government Fund Class I shares generated a 1.74% total return, net of
fund expenses, for the six month period ended April 30, 2000. The benchmark,
Lehman Brothers Intermediate Government Bond Index(b), returned 1.35% for the
same period.
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. For
the six-month period, the yield on the two-year Treasury increased 90
6 See Definition of Terms.
<PAGE>
basis points while the yield on the five-year Treasury increased only 61 basis
points. The longer end of the yield curve continues to be influenced by
forecasts of reduced supply and Treasury buybacks, which have driven down the
yield on the 30-year bond by 19 basis points over the period. (One basis point
is equal to one hundredth of a percent, or 0.01%.)
Employment costs are increasing at the fastest rate in a decade and consumer
inflation indicators show signs of accelerating. Combining these 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?
Most of the Fund's Treasury holdings were concentrated in the back-end of the
yield curve, which outperformed all other parts of the curve, mostly due to the
larger than expected Treasury buy-back program.
The Fund's exposure to Treasury Inflation Index bonds helped performance due to
rising fears of inflation. However, the Fund also had exposure to agency bonds
and mortgage-backed securities, both of which contributed to negative
performance.
Duration was mixed, although our short duration posture over much of the quarter
paid off as rates increased, particularly in the short end.
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. In this environment, we expect to be neutral to slightly short
duration versus our competitive universe.
Treasury buybacks and reduced supply will continue to exert a powerful influence
on the long end of the yield curve, we expect to maintain an overweight to this
part of the curve.
With spreads still close to historical wides, we are comfortable continuing with
an overweight position in agencies and mortgage-backed securities. While we
still don't think we will get back to historical averages any time soon due to
credit concerns and other risk factors in the economy, we do think the
risk/reward tradeoff is favorable.
<TABLE>
<CAPTION>
---------------------------------------
QUALITY RATINGS
---------------------------------------
<S> <C>
AAA 100.0%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------
MATURITY DISTRIBUTION
---------------------------------------
<S> <C>
0 - 1 years 26.2%
1 - 5 years 19.1%
5 - 10 years 15.7%
10 - 20 years 13.6%
20 + years 25.4%
</TABLE>
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.
See Definition of Terms. 7
<PAGE>
AETNA HIGH YIELD FUND
Growth of $10,000
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Aetna High Yield Fund Merrill Lynch
(Class I) High Yield Master Index
<S> <C> <C>
Feb-98 10,000 10,000
10,304 10,176
10,551 10,356
Oct-98 9,350 9,766
10,086 10,315
10,401 10,486
10,087 10,409
Oct-99 10,066 10,204
10,423 10,324
Apr-00 10,302 10,192
</TABLE>
[END PLOT POINTS]
<TABLE>
<CAPTION>
Average Annual Total Returns
for the period ended April 30, 2000*
----------------------------------------
1 Year Inception
----------------------------------------
<S> <C> <C>
Class I -0.97% 1.33%
----------------------------------------
Class A:
POP (1) -5.91% -1.08%
NAV (2) -1.21% 1.09%
----------------------------------------
Class B:
w/CDSC (3) -6.39% -0.93%
NAV -1.91% 0.29%
----------------------------------------
Class C:
w/CDSC (4) -2.86% 0.31%
NAV -1.96% 0.31%
----------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. For the period prior to the inception of Class B and Class C, the
performance is calculated by using the performance of Class I since its
inception date (02/02/98), adjusted for fees and expenses charged to the
appropriate class. Class I, Class A, Class B and Class C shares participate in
the same portfolio of securities. 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.
AETNA HIGH YIELD FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna High Yield Fund Class I shares generated a 2.35% total return, net of
fund expenses, for the six month period ended April 30, 2000. The benchmark,
Merrill Lynch High Yield Master Index(c), returned -0.12% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
Over the past six months, high yield funds have seen steady cash outflows in the
face of accelerating inflation pressures and the corresponding rising interest
rate environment. These outflows have led to decreased demand for high yield
bonds, putting downward pressure on bond prices and causing returns to be
significantly below U.S. Treasury securities in the seven to ten year maturity
range.
8 See Definition of Terms.
<PAGE>
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
Overweighting the telecommunications and technology sectors contributed to the
Fund's performance for the six-month period, as did overweighting European
dollar-denominated securities.
Shorter-duration, step-up coupon securities held in the Fund were less volatile
during the period and contributed to positive performance. Holdings in the paper
and chemical sectors, which benefited from increased global demand, also made
positive contributions.
Detracting from performance was the expected restructuring of Dimac, which
caused this distressed security to fall further.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Yields in the high yield market have risen over the last six months to levels
higher than any observed since the peak of the financial crisis in October 1998.
Default rates appear to have stabilized during the first quarter and appear to
be trending downward after the peak in the second half of last year, but the
number of securities trading at distressed levels continues to be high, weighing
heavily on the market.
Liquidity in the market remains tenuous, as demand for high yield paper remains
weak. A catalyst for significant improvement in the High Yield market is
unlikely to arise until we see stabilization in the interest rate environment
and overall lower volatility in financial markets.
High yielding fixed income securities are subject to greater market fluctuations
and risk of loss of income and principal than investments in lower yielding
fixed income securities.
<TABLE>
<CAPTION>
---------------------------------------
QUALITY RATINGS
---------------------------------------
<S> <C>
BBB 1.4%
BB 6.7%
B 67.7%
CCC 9.8%
N/R* 14.4%
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------
MATURITY DISTRIBUTION
---------------------------------------
<S> <C>
0 - 1 years 11.1%
1 - 5 years 4.9%
5 - 10 years 82.5%
10 - 20 years 1.5%
</TABLE>
*The Not Rated (N/R) indication is used by securities rating services (such as
Standard & Poor's or Moody's) and mercantile agencies (such as Dun & Bradstreet)
to show that a security or a company has not been rated. It has neither negative
nor positive implications.
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.
See Definition of Terms. 9
<PAGE>
AETNA MONEY MARKET FUND
Growth of $10,000
[LINE CHART PLOT POINTS]
<TABLE>
<CAPTION>
Aetna Money IBC's Money Fund
Market Fund Average/All
(Class I) Taxable Index
<S> <C> <C>
Jan-92 10,000 10,000
10,104 10,096
10,210 10,184
10,308 10,263
Dec-92 10,404 10,334
10,488 10,404
10,572 10,472
10,656 10,541
Dec-93 10,744 10,611
10,834 10,684
10,934 10,773
11,057 10,878
Dec-94 11,205 11,003
11,365 11,148
11,536 11,299
11,706 11,446
Dec-95 11,875 11,592
12,031 11,731
12,187 11,869
12,347 12,009
Oct-96 12,402 12,056
12,574 12,200
12,731 12,346
12,905 12,498
Oct-97 13,083 12,653
13,259 12,811
13,426 12,969
13,608 13,128
Oct-98 13,783 13,287
13,951 13,434
14,113 13,578
14,277 13,725
Oct-99 14,450 13,881
14,652 14,053
Apr-00 14,855 14,237
</TABLE>
[END PLOT POINTS]
<TABLE>
<CAPTION>
Average Annual Total Returns
for the period ended April 30, 2000*
----------------------------------------
1 Year 5 Years Inception
----------------------------------------
<S> <C> <C> <C>
Class I 5.29% 5.40% 4.87%
----------------------------------------
Class A 5.29% 5.40% 4.87%
----------------------------------------
Class B:
w/CDSC (3) -0.75% 4.02% 3.84%
NAV 4.25% 4.36% 3.84%
----------------------------------------
Class C 5.29% 5.40% 4.87%
----------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. For periods prior to the inception of Class A, Class B and Class
C, the performance of each class is calculated by using the performance of Class
I since its inception date (01/03/92), adjusted for fees and expenses charged to
the appropriate class. Class I, Class A, Class B and Class C shares participate
in the same portfolio of securities. 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.
AETNA MONEY MARKET FUND
HOW DID THE FUND PERFORM DURING THE PERIOD?
The Aetna Money Market Fund Class I shares generated a 2.80% 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(d), returned 2.56% for the same
period. As of April 30, 2000, the Fund reported a 7-day yield of 5.62% with an
average weighted maturity of 43 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.
10 See Definition of Terms.
<PAGE>
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.
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 1 100.0%
Tier 2 --
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------
MATURITY DISTRIBUTION
----------------------------------------
<S> <C>
1 - 30 days 50.0%
31 - 60 days 5.1%
61 - 90 days 7.6%
91 - 120 days 8.8%
121 - 180 days 4.7%
181 - 397 days 23.8%
</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.
See Definition of Terms. 11
<PAGE>
--------------------------------------------------------------------------------
DEFINITION OF TERMS
--------------------------------------------------------------------------------
(1) On February 2, 1998, the Funds redesignated Adviser Class shares as Class A
shares. For periods prior to that date, Class A performance is calculated by
using the performance of Class I shares and deducting the Class A front-end
load and internal fees and expenses applicable to the Class A shares. The
maximum load for the Funds is 4.75%, excluding the Money Market Fund. The
POP (public offering price) returns reflect this maximum load.
(2) NAV (net asset value) returns are net of Fund expenses only and do not
reflect the deduction of a front-end load or contingent deferred sales
charges. This charge, if reflected, would reduce the performance results
shown.
(3) The Funds began offering Class B shares on March 1, 1999. For periods prior
to that date, Class B performance is calculated using the performance of
Class I shares and deducting the internal fees and expenses applicable to
the Class B shares. Class B share returns with CDSC (contingent deferred
sales charge) reflect the deduction of a maximum CDSC, assuming full
redemption at the end of the period. The CDSC applies for all shares
redeemed prior to the end of the first six years of ownership. The CDSC
charges are as follows: Year 1 - 5%, Year 2 - 4%, Year 3 - 3%, Year 4 - 3%,
Year 5 - 2%, Year 6 - 1%.
(4) The Funds began offering Class C shares on June 30, 1998. For periods prior
to that date, Class C performance is calculated using the performance of
Class I shares and deducting the internal fees and expenses applicable to
the Class C shares. Class C share returns for periods less than 18 months
reflect the deduction of the contingent deferred sales charge of 1%.
(a) The Lehman Brothers Aggregate Bond Index is an unmanaged index and is
composed of securities from Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index and the Asset-Backed Securities Index.
(b) The Lehman Brothers Intermediate Government Bond Index is composed of all
publicly issued, nonconvertible, domestic debt of the U.S. government or
agency, quasi-federal corporations, or corporate debt guaranteed by the U.S.
government with maturities between one and 9.99 years. Total return
comprises price appreciation/depreciation and income as a percentage of the
original investment.
(c) The Merrill Lynch High Yield Master Index is an unmanaged index of secured
and subordinated debt securities rated by Standard & Poor's or by Moody's
Investors Service as less than investment grade (i.e. BBB or Baa) but not in
default.
(d) 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.
(e) The Lehman Brothers Government Bond Index is a market value weighted index
of U.S. Government and government agency securities (other than mortgage
securities) with maturities of one year or more.
The unmanaged indices described above are not available for individual
investment.
12
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
BOND
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ----------
<S> <C> <C>
PREFERRED STOCKS (0.2%)
Global Crossing Holdings
Ltd., 10.5%, 12/01/08 ............ 750 $ 74,062
----------
TOTAL PREFERRED STOCKS (COST $74,625) 74,062
----------
PRINCIPAL
AMOUNT
---------
LONG-TERM BONDS AND NOTES (94.2%)
CORPORATE BONDS (28.2%)
ELECTRIC AND TELEPHONE BONDS (5.9%)
AT&T Corp., 6.50%, 03/15/29 ....... $255,000 215,108
Coastal Corp., 6.50%, 05/15/06 .... 225,000 207,128
Duke Energy Corp., 7.38%, 03/01/10 160,000 157,800
El Paso Energy
Corp., 6.63%, 07/15/01 ........... 200,000 197,586
Global Crossing Holdings
Ltd., 9.13%, 11/15/06 ............ 90,000 87,075
Global Crossing Holdings
Ltd., 9.50%, 11/15/09 ............ 75,000 72,750
GTE California
Inc., 5.50%, 01/15/09 ............ 200,000 171,280
GTE California
Inc., 7.65%, 03/15/07 ............ 195,000 194,033
GTE North, Inc., 5.65%, 11/15/08 .. 115,000 99,815
ICG Communications Holdings,
Inc., Zero Coupon, 05/01/06 ...... 130,000 104,000
ICG Holdings Inc., Zero
Coupon, 03/15/07 ................. 30,000 19,500
MCI WorldCom,
Inc., 6.95%, 08/15/28 ............ 361,000 318,348
Metromedia International Group,
Inc., 10.00%, 11/15/08 ........... 20,000 19,150
MGC Communications
Inc., 13.00%, 04/01/10 ++ ........ 50,000 47,875
Nextlink Communications, Zero
Coupon, 06/01/09 ................. 50,000 29,500
Qwest Communications
International
Inc., 7.50%, 11/01/08 ............ 145,000 139,406
Sempra Energy, 7.95%, 03/01/10 .... 180,000 181,487
Texas Utilities
Co., 8.25%, 04/01/04 ............. 300,000 302,472
Viatel, Inc., 11.25%, 04/15/08 .... 50,000 43,000
Voicestream Wire, 10.38%, 11/15/09 30,000 30,525
Winstar Communications,
Inc., 12.50%, 04/15/08 ........... 30,000 28,950
----------
2,666,788
----------
FINANCIAL BONDS (7.6%)
Associates Corp.
N.A., 5.80%, 04/20/04 ............ 70,000 65,403
Associates Corp.
N.A., 6.25%, 11/01/08 * .......... 560,000 502,975
Bank of America
Corp., 5.75%, 03/01/04 ........... 90,000 84,392
Bank of America
Corp., 5.88%, 02/15/09 ........... 225,000 198,304
Bank of America
Corp., 7.80%, 02/15/10 ........... 235,000 233,360
Bombardier Capital
Inc., 7.30%, 12/15/02 ............ 180,000 177,300
Chase Manhattan
Corp., 7.00%, 11/15/09 ........... 500,000 469,585
CIT Holdings LLC, 6.88%, 02/16/05 . 240,000 230,846
Citigroup Inc., 6.20%, 03/15/09 ... 55,000 50,088
Diageo Capital
Plc, 7.25%, 11/01/09 ............. 220,000 217,347
First Union National
Bank, 7.88%, 02/15/10 ............ 215,000 213,231
General Motors Acceptance
Corp., 7.75%, 01/19/10 ........... 460,000 454,282
Household Finance
Corp., 7.88%, 03/01/07 ........... 120,000 118,759
Morgan JP & Co.
Inc., 6.00%, 01/15/09 ............ 230,000 201,358
Textron Financial
Corp., 7.13%, 12/09/04 ........... 270,000 262,988
----------
3,480,218
----------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
FOREIGN AND SUPRANATIONALS (0.2%)
Inter-American Development
Bank, 7.38%, 01/15/10 ............ $ 55,000 $ 55,515
International Bank
Reconstruction &
Development, 7.00%, 01/27/05 ..... 40,000 39,662
----------
95,177
----------
FOREIGN BONDS (3.7%)
Capitol Records
Inc., 8.38%, 08/15/09 ............ 62,000 62,403
Charter Communications Holding
LLC, 10.25%, 01/15/10 ............ 100,000 96,250
Edison International
Inc., 6.88%, 09/15/04 ............ 180,000 175,952
Flag Telecom Holding
Ltd., 11.63%, 03/30/10 ............. 75,000 69,938
Impsat Fiber
Networks, 13.75%, 02/15/05 ....... 300,000 282,000
NTL Inc., Zero Coupon, 02/01/06 ... 50,000 46,250
Petroleum
Geo-Services, 7.50%, 03/31/07 .... 150,000 142,033
RSL Communications
Plc, 10.50%, 11/15/08 ............ 105,000 87,150
Telewest Communications Plc, Zero
Coupon, 02/01/10 ................. 90,000 50,400
Telewest Plc, 11.00%, 10/01/07 .... 60,000 56,400
Tembec Industries
Inc., 8.63%, 06/30/09 ............ 60,000 58,200
Tyco International Group
SA, 6.38%, 06/15/05 .............. 230,000 213,948
Vodafone Airtouch
Plc, 7.63%, 02/15/05 ............. 195,000 194,269
Vodafone Airtouch
Plc, 7.75%, 02/15/10 ............. 145,000 145,217
----------
1,680,410
----------
OIL (0.2%)
Baker Hughes Inc., 6.25%, 01/15/09 30,000 26,956
Baker Hughes Inc., 6.88%, 01/15/29 60,000 50,348
----------
77,304
----------
OTHER PUBLIC CORPORATE BONDS (10.3%)
Allied Waste North
America, 10.00%, 08/01/09 ........ 105,000 72,188
Comcast Cable
Communications, 6.20%, 11/15/08 .. 75,000 65,812
Conoco Inc., 6.95%, 04/15/29 ...... 70,000 62,761
Cox Communications
Inc., 6.50%, 11/15/02 ............ 185,000 179,213
Cox Communications
Inc., 7.75%, 08/15/06 ............ 165,000 161,000
CSC Holdings Inc., 7.88%, 02/15/18 165,000 147,675
CSC Holdings Inc., 8.13%, 07/15/09 175,000 172,812
DaimlerChrysler NA Holdings
Inc., 7.20%, 09/01/09 ............ 469,000 451,089
Eastman Kodak Co., 6.50%, 08/15/01 230,000 227,323
Ford Motor Credit
Corp., 7.38%, 10/28/09 ........... 440,000 425,313
Ford Motor Credit
Corp., 7.50%, 03/15/05 ........... 365,000 361,021
Honeywell
International, 7.50%, 03/01/10 ... 330,000 328,762
Huntsman ICI
Chemicals, 10.13%, 07/01/09 ...... 75,000 74,250
Lockheed Martin
Corp., 8.50%, 12/01/29 ........... 250,000 244,535
Pepsi Bottling Holdings
Inc., 5.63%, 02/17/09 ............ 265,000 233,086
Raytheon Co., 8.30%, 03/01/10 ..... 120,000 118,320
Rohm & Haas Co., 7.85%, 07/15/29 .. 110,000 109,207
Texaco Capital,
Inc., 5.50%, 01/15/09. ........... 480,000 411,658
Time Warner Inc., 6.63%, 05/15/29 . 150,000 124,583
Time Warner Inc., 8.11%, 08/15/06 . 45,000 45,207
</TABLE>
See Notes to Portfolio of Investments. 13
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
BOND (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
OTHER PUBLIC CORPORATE BONDS (CONTINUED)
U.S. West Communications
Group, 7.20%, 11/01/04 ...........$ 200,000 $ 195,918
United Technologies
Corp., 7.50%, 09/15/29 ++ ........ 115,000 111,543
Wal-Mart Stores, 6.88%, 08/10/09 .. 150,000 143,976
Wal-Mart Stores, 7.55%, 02/15/30 .. 230,000 230,996
-----------
4,698,248
-----------
UTILITIES - NATURAL GAS (0.3%)
Keyspan Gas East, 7.88%, 02/01/10* 160,000 156,202
-----------
TOTAL CORPORATE BONDS (COST $13,054,805) 12,854,347
-----------
FOREIGN OBLIGATIONS (10.2%)
FOREIGN CURRENCY SECURITIES (10.2%)
Bundesobligation, 4.25%, 11/26/04 . 1,500,000 1,326,898
Bundesrepub.
Deutschland, 6.00%, 07/04/07 ..... 1,800,000 1,711,531
French Treasury Note, Zero
Coupon, 07/12/05 ................. 900,000 817,382
Republic of Deutschland, Zero
Coupon, 07/04/09 ................. 900,000 773,994
-----------
TOTAL FOREIGN OBLIGATIONS (COST $5,053,071) 4,629,805
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES (50.3%)
AGENCY MORTGAGE-BACKED
SECURITIES (50.3%)
Federal Home Loan Mortgage
Corp., Zero Coupon, 09/15/29 ..... 644,575 400,043
Federal Home Loan Mortgage
Corp., 6.88%, 01/15/05 ........... 1,230,000 1,212,313
Federal Home Loan Mortgage
Corp., 7.00%, 03/15/10 ........... 1,825,000 1,786,511
Federal Home Loan Mortgage
Corp., 7.00%, 05/01/30 # ......... 1,400,000 1,340,276
Federal Home Loan Mortgage
Corp., 8.00%, 07/15/29 # ......... 450,000 449,928
Federal National Mortgage
Association, 6.00%, 07/01/29 ..... 26,575 24,058
Federal National Mortgage
Association, 6.50%, 05/15/29 # ... 2,600,000 2,426,138
Federal National Mortgage
Association, 6.50%, 08/01/29 ..... 2,940,665 2,743,993
Federal National Mortgage
Association, 6.63%, 09/15/09 ..... 1,250,000 1,191,600
Federal National Mortgage
Association, 6.63%, 09/15/09 * ... 1,405,000 1,340,244
Federal National Mortgage
Association, 7.00%, 01/01/30 ..... 997,251 953,930
Federal National Mortgage
Association, 7.13%, 01/15/30 ..... 630,000 623,599
Federal National Mortgage
Association, 7.25%, 01/15/10 ..... 1,000,000 997,030
Federal National Mortgage
Association, 7.50%, 11/01/28 ..... 220,422 216,150
Federal National Mortgage
Association, 8.00%, 05/01/30 # ... 450,000 449,298
Federal National Mortgage
Association, 8.50%,
11/01/23-12/01/29 ................ 1,328,098 1,349,053
Government National Mortgage
Association, 6.00%,
11/20/29-01/20/30 ................ 697,245 685,131
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES (CONTINUED)
Government National Mortgage
Association, 6.38%, 04/20/28 .... $ 226,745 $ 227,915
Government National Mortgage
Association, 6.50%, 01/20/30 .... 486,716 483,752
Government National Mortgage
Association, 7.00%, 04/15/26 .... 603,351 581,100
Government National Mortgage
Association, 7.00%, 07/15/28 * .. 1,954,291 1,879,774
Government National Mortgage
Association, 7.50%,
12/15/22-10/15/26 ............... 1,523,616 1,503,184
Government National Mortgage
Association, 9.50%, 07/15/18 .... 29,472 31,115
-----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED
SECURITIES (COST $23,223,923) 22,896,135
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (5.4%)
AGENCY MORTGAGE-BACKED
SECURITIES (1.3%)
Small Business Administration
92-20K, 7.55%, 11/01/12.......... 593,600 590,944
-----------
U.S. GOVERNMENT AGENCY
OBLIGATIONS (4.1%)
Marine Midland
1992-1, 8.00%, 04/25/23 ......... 359,384 359,384
Private Export Funding
Corp., 5.48%, 09/15/03 .......... 700,000 681,331
Prudential Home Mortgage
Corp., 7.00%, 12/25/07 .......... 514,275 495,331
Prudential Home Mortgage
Corp., 7.50%, 06/25/07 .......... 332,996 327,858
-----------
1,863,904
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $2,522,765) ............... 2,454,848
-----------
U.S. GOVERNMENT OBLIGATIONS (0.1%)
U.S. TREASURIES (0.1%)
U.S. Treasury
Note, 6.13%, 08/15/29 ........... 38,000 38,089
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $38,801) 38,089
-----------
TOTAL LONG-TERM BONDS AND NOTES
(COST $43,893,365) 42,873,224
-----------
SHORT-TERM INVESTMENTS (15.7%)
Federal Farm Credit
Bank, 5.88%, 05/01/00 ........... 2,349,000 2,349,000
Houston Industries
Finance, 6.35%, 05/15/00 * ...... 2,000,000 1,995,061
Occidental Petroleum
Corp., 6.35%, 05/04/00 .......... 1,000,000 999,471
U.S. Treasury
Bill, 5.57%, 05/18/00 @ ......... 200,000 199,473
U.S. Treasury
Bill, 5.59%, 05/18/00 @ ......... 100,000 99,736
Viacom International
Inc., 6.35%, 05/17/00 ........... 1,500,000 1,495,768
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $7,138,509) .......................... 7,138,509
-----------
TOTAL INVESTMENTS
(COST $51,106,499)(a) ...................... 50,085,795
OTHER ASSETS LESS LIABILITIES ............... (4,574,383)
-----------
TOTAL NET ASSETS ............................ $45,511,412
===========
</TABLE>
14 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$52,481,839. Unrealized gains and losses, based on identified tax cost at
April 30, 2000, are as follows:
<TABLE>
<S> <C>
Unrealized gains............................ $ --
Unrealized losses........................... (2,396,044)
-----------
Net unrealized loss........................ $(2,396,044)
===========
</TABLE>
Information concerning open futures contracts at April 30, 2000 is shown below:
<TABLE>
<CAPTION>
NO. OF NOTIONAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
------------- ------------ -------------- -----------------
LONG CONTRACTS
----------------------
<S> <C> <C> <C> <C>
U.S. Agency 10 Yr..... 10 $910,625 Jun 00 $(7,690)
======== =======
</TABLE>
<TABLE>
<CAPTION>
SHORT CONTRACTS
--------------------
<S> <C> <C> <C> <C>
U.S. Treasury 2 Yr... 5 $ (986,172) Jun 00 $ 2,881
U.S. Treasury 5 Yr... 18 (1,756,406) Jun 00 11,191
U.S. Treasury 10 Yr.. 36 (3,490,312) Jun 00 38,336
U.S. Treasury 30 Yr.. 23 (2,220,938) Jun 00 (32,928)
----------- ---------
$(8,453,828) $ 19,480
=========== =========
</TABLE>
Information concerning the following swap contract at April 30, 2000 is shown
below:
<TABLE>
<S> <C>
Swap Counter Party: Morgan Stanley Capital Services, Inc.
Notional Principal: $2,200,000
Fund will pay: LIBOR less 0.15%
Fund will receive: Lehman Corporate Bond Total Return
Effective LIBOR rate: 5.98%
Change in total return of
Lehman Corporate Bond Index: (11.86)%
Net unrealized gain/(loss): $(30,607)
Termination date: October 1, 2000
</TABLE>
* Segregated securities for purchases of delayed delivery or when-issued
securities held at April 30, 2000.
++ Securities that may be resold to "qualified institutional buyers" under Rule
144A or securities offered pursuant to section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Directors.
@ Security pledged to cover initial margin requirements on open futures
contracts at April 30, 2000.
# When-issued or delayed delivery security.
Category percentages are based on net assets.
See Notes to Financial Statements. 15
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
AETNA GOVERNMENT FUND
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- -----------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (93.5%)
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (65.3%)
Federal Home Loan Mortgage
Association, 9.50%, 07/01/20........... $ 85,076 $ 88,692
Federal Home Loan Mortgage
Association, 10.50%, 07/01/20.......... 276,985 294,900
Federal Home Loan Mortgage
Association, 11.50%, 02/01/16.......... 143,931 157,802
Federal Home Loan Mortgage
Corp., 6.88%, 01/15/05................. 500,000 492,810
Federal Home Loan Mortgage
Corp., 7.00%, 02/15/03-03/15/10........ 2,015,000 1,985,099
Federal Home Loan Mortgage Corp. -
Gold, 9.50%, 12/01/22.................. 148,499 156,062
Federal National Mortgage
Association, 6.00%, 05/17/04........... 2,600,000 2,485,834
Federal National Mortgage
Association, 6.50%, 08/15/04........... 3,050,000 2,965,637
Federal National Mortgage
Association, 6.50%, 05/15/29 # ........ 1,900,000 1,772,947
Federal National Mortgage
Association, 7.00%, 05/01/30 # ........ 720,000 688,838
Federal National Mortgage
Association, 9.50%, 02/01/17........... 300,421 314,345
Federal National Mortgage
Association, 10.00%, 06/01/20-10/01/20. 502,341 533,266
Federal National Mortgage
Corp., 10.50%, 04/01/19................ 64,666 68,901
Government National Mortgage
Association, 7.00%, 12/15/23-04/15/26.. 1,093,025 1,053,778
Government National Mortgage
Association, 9.00%, 05/15/16-07/15/16.. 567,708 590,592
Government National Mortgage
Association, 9.50%, 11/15/21........... 108,733 114,767
Government National Mortgage Association
- II, 9.50%, 09/20/19 ................. 106,721 111,423
-----------
13,875,693
-----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (6.9%)
Private Export Funding
Corp., 5.48%, 09/15/03................. 350,000 340,666
Small Business Administration
91-20K, 8.25%, 11/01/11................ 518,416 526,480
Small Business Administration
92-20K, 7.55%, 11/01/12................ 593,600 590,944
-----------
1,458,090
-----------
U.S. TREASURY OBLIGATIONS (21.3%)
Treasury Inflation Index, 3.63%,
04/15/28 *............................. 1,000,000 1,006,001
U.S. Treasury Bond, 6.63%, 02/15/27 * .. 250,000 263,165
U.S. Treasury Bond, 10.38%, 11/15/12 * . 1,750,000 2,130,625
U.S. Treasury Note, 9.88%, 11/15/15 * .. 250,000 336,290
U.S. Treasury Note, 8.13%, 08/15/19 * .. 425,000 510,663
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -----------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS (CONTINUED)
U.S. Treasury Strip, Zero Coupon, 08/15/05 $ 400,000 $ 282,460
-----------
4,529,204
-----------
TOTAL LONG-TERM BONDS AND NOTES
(COST $20,215,021) 19,862,987
-----------
SHORT-TERM INVESTMENTS (17.3%)
Federal Farm Credit Bank, 5.88%, 05/01/00 3,669,000 3,669,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $3,669,000) 3,669,000
-----------
TOTAL INVESTMENTS (COST $23,884,021)(a) 23,531,987
OTHER ASSETS LESS LIABILITIES (2,291,913)
-----------
TOTAL NET ASSETS $21,240,074
===========
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$23,885,110. Unrealized gains and losses, based on identified tax cost at
April 30, 2000, are as follows:
<TABLE>
<S> <C>
Unrealized gains............................. $ 51,683
Unrealized losses............................ (404,806)
-----------
Net unrealized loss......................... $ (353,123)
===========
</TABLE>
* Segregated securities for purchases of delayed delivery or when-issued
securities held at April 30, 2000.
# When-issued or delayed delivery security.
Category percentages are based on net assets.
16 See Notes to Financial Statements.
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
HIGH YIELD
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ----------
<S> <C> <C>
STOCK WARRANTS (1.4%)
KMC Telcom Holdings, Inc. Warrants ........ 300 $ 6,000
Ono Finance Plc Warrants .................. 1,000 15,000
R&B Falcon Corp. Warrants ................. 375 112,500
----------
TOTAL STOCK WARRANTS (COST $118,244) 133,500
----------
PREFERRED STOCKS (5.3%)
Adelphia Business Solutions + ............. 53 50,075
Benedek Communications Corp. .............. 150 105,000
Cluett American Corp. + > ................. 103 1,751
Cumulus Media, Inc. + ..................... 51 43,860
Global Crossing Holdings Ltd. ............. 1,200 118,500
Rural Cellular Corp. ...................... 183 170,705
----------
TOTAL PREFERRED STOCKS (COST $556,913) 489,891
----------
PRINCIPAL
AMOUNT
------------
LONG-TERM BONDS AND NOTES (85.0%)
CORPORATE BONDS (84.0%)
360Networks Inc., 12.00%, 08/01/09 ........ $ 100,000 92,750
Adelphia Communications, 8.13%, 07/15/03 .. 100,000 95,000
Allegiance Telecom, Inc., Zero
Coupon, 02/15/08.......................... 250,000 178,750
Ameristar Casino, 10.50%, 08/01/04 ........ 100,000 97,500
Anteon Corp., 12.00%, 05/15/09 ............ 125,000 112,500
App China Group Ltd., 14.00%, 03/15/10 .... 150,000 120,000
ASAT Finance Llc, 12.50%, 11/01/06 ........ 100,000 105,000
Clearnet Communications, Zero
Coupon, 12/15/05.......................... 150,000 150,750
Condor Systems Inc., 11.88%, 05/01/09 + ... 100,000 48,500
Crown Castle International Corp., Zero
Coupon, 11/15/07.......................... 500,000 362,500
Dimac Corp., 12.50%, 10/01/08 > ........... 150,000 1,500
Dunlop Stand Aero Holdings
Corp., 11.88%, 05/15/09................... 125,000 127,187
ESAT Telecom Group Plc, 11.88%, 12/01/08 .. 200,000 229,880
Esprit Telecom Group Plc, 10.88%, 06/15/08 200,000 170,000
Exodus Communications, Inc., 10.75%,
12/15/09 ................................. 200,000 199,500
Fairchild Semiconductor
Inc., 10.38%, 10/01/07.................... 100,000 99,750
Flag Telecom Holding Ltd., 11.63%, 03/30/10 75,000 69,938
Focal Commerce Corp., 11.88%, 01/15/10 .... 100,000 100,000
Garden State Newspapers
Corp., 8.63%, 07/01/11.................... 150,000 130,875
Great Lakes Dredge & Dock
Corp., 11.25%, 08/15/08................... 50,000 51,000
Hollywood Park, Inc., 9.25%, 02/15/07 ..... 100,000 100,000
Hyperion Telecom Corp., 12.25%, 09/01/04 .. 100,000 104,250
ICG Communications Holdings, Inc., Zero
Coupon, 05/01/06.......................... 150,000 120,000
Integrated Circuit Systems,
Inc., 11.50%, 05/15/09.................... 125,000 133,750
ITC Deltacom, Inc., 9.75%, 11/15/08 ....... 150,000 144,000
Jupiters Ltd., 8.50%, 03/01/06 ............ 125,000 117,500
KMC Telcom Holdings, Inc., Zero
Coupon, 02/15/08.......................... 300,000 159,000
Labranche & Company, 12.00%, 03/01/07 ++ .. 100,000 98,000
Maxcom Telecommunications, 13.75%, 04/01/07 300,000 292,500
McLeodUSA, Inc., 9.50%, 11/01/08 .......... 100,000 97,000
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
<S> <C> <C>
CORPORATE BONDS (CONTINUED)
Metromedia International Group,
Inc., 10.00%, 11/15/08 ................... $ 200,000 $ 191,500
Metronet Communications Corp., Zero
Coupon, 11/01/07.......................... 150,000 122,273
MGC Communications Inc., 13.00%, 04/01/10 ++ 100,000 95,750
Microcell Telecommunications, Zero
Coupon, 06/01/06.......................... 150,000 135,000
Netia Holdings II B.V., 13.13%, 06/15/09 .. 75,000 73,125
Nextlink Communications,
Inc., 10.75%, 11/15/08.................... 150,000 147,000
NTL Communications Corp., 11.50%, 10/01/08 200,000 202,500
NTL Communications Corp., 12.38%, 10/01/08 125,000 81,875
Ono Finance PLC, 13.00%, 05/01/09 ......... 100,000 100,500
Penhall Acquisition Corp., 12.00%, 08/01/06 75,000 73,875
Price Communications Wireless
Inc., 11.75%, 07/15/07.................... 200,000 217,000
PSINET, Inc., 11.50%, 11/01/08 ............ 175,000 160,125
Radio Unica Corp., Zero Coupon, 08/01/06 .. 75,000 46,125
Repap New Brunswick, 11.50%, 06/01/04 ..... 150,000 153,000
Rhythms NetConnections Inc., Zero
Coupon, 05/15/08.......................... 100,000 50,000
Rhythms NetConnections Inc., 12.75%,
04/15/09 ................................. 50,000 42,500
RSL Communications Plc, 9.13%, 03/01/08 ... 75,000 59,250
RSL Communications Plc, 10.50%, 11/15/08 .. 100,000 83,000
SBA Communications Corp., Zero
Coupon, 03/01/08.......................... 500,000 340,000
Telecommunication Techniques
Co., 9.75%, 05/15/08...................... 100,000 91,250
Telewest Plc, 11.00%, 10/01/07 ............ 100,000 94,000
Teligent, Inc., Zero Coupon, 03/01/08 ..... 175,000 91,000
Tenneco Automotive Inc., 11.63%, 10/15/09 . 150,000 150,000
United Artists Theatre Corp.,
9.75%, 04/15/08 + ........................ 100,000 4,000
United Pan-Europe Communications, Zero
Coupon, 08/01/09.......................... 150,000 73,500
Venetian Casino/LV Sands
Corp., 10.00%, 11/15/05................... 125,000 113,750
Verio Inc., 10.63%, 11/15/09 .............. 150,000 142,500
Verio Inc., 11.25%, 12/01/08 .............. 150,000 147,750
Versatel Telecom BV, 11.88%, 07/15/09 ..... 100,000 98,000
Voicestream Wire Co., Zero Coupon, 11/15/09 200,000 124,000
Waterford Gaming Llc, 9.50%, 03/15/10 ++ .. 143,000 137,280
Williams Communications
Inc., 10.70%, 10/01/07.................... 100,000 101,750
Williams Communications
Inc., 10.88%, 10/01/09.................... 150,000 151,125
Winstar Communications,
Inc., 12.75%, 04/15/10.................... 75,000 71,250
----------
7,874,433
----------
FOREIGN OBLIGATIONS (1.0%)
Jazztel Plc, Zero Coupon, 12/15/09 ........ 50,000 46,248
NTL Inc., Zero Coupon, 04/15/09 ........... 50,000 43,619
----------
89,867
----------
TOTAL LONG-TERM BONDS AND NOTES
(COST $8,513,589) 7,964,300
----------
</TABLE>
See Notes to Portfolio of Investments. 17
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
HIGH YIELD (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (5.4%)
Federal Farm Credit Bank,5.88%,05/01/00 $ 508,000 $ 508,000
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $508,000) 508,000
----------
TOTAL INVESTMENTS (COST $9,696,746)(a) 9,095,691
OTHER ASSETS LESS LIABILITIES 273,433
----------
TOTAL NET ASSETS $9,369,124
----------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$9,700,795. Unrealized gains and losses, based on identified tax cost at
April 30, 2000, are as follows:
<TABLE>
<S> <C>
Unrealized gains............................. $ 127,756
Unrealized losses............................ (732,860)
----------
Net unrealized loss......................... $(605,104)
==========
</TABLE>
> Non-income producing security.
+ 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.
Acquisition date and cost concerning illiquid securities at April 30, 2000 is
shown below:
<TABLE>
<CAPTION>
ACQUISITION
DATE COST
----------- ----------
<S> <C> <C>
Cluett American Corp.......... 5/18/98 $ 9,375
Condor Systems Inc............ 4/15/99 98,585
Dimac Corp.................... 10/22/98 146,136
United Artists Theatre Corp... 4/21/98 71,173
----------
$ 325,269
==========
</TABLE>
The market value of the total illiquid securities above is $55,751 which
represents 0.60% of the total net assets.
Category percentages are based on net assets.
18 See Notes to Financial Statements.
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
MONEY MARKET
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
ASSET-BACKED SECURITIES (37.8%)
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
Charter Equipment Lease 1999-1
LLC, 5.78%, 08/25/00.................. 846,010 846,010
CNH Equipment Trust, 6.18%, 04/09/01 .. 9,163,383 9,163,383
Copelco Capital Funding, 6.51%, 05/14/01 13,426,071 13,426,071
Dealers Capital Acceptance Trust,
Inc., 6.10%, 05/01/00................. 6,000,000 6,000,000
Dealers Capital Acceptance Trust,
Inc., 6.15%, 05/01/00................. 12,903,000 12,903,000
DVI Receivables VII LLC, 5.38%, 07/13/00 442,912 442,912
DVI Receivables X LLC, 6.17%, 11/13/00 2,226,947 2,226,947
Eureka Securitization,
Inc., 6.07%, 05/05/00 ++ ............. 11,000,000 10,992,581
Ford Credit Auto Owner Trust 2000-A,
6.22%, 12/15/00....................... 5,000,000 5,000,000
Huntington Auto Trust, 6.32%, 04/15/01 16,022,791 16,022,792
Ikon Receivables Llc, 5.11%, 06/15/00 . 589,472 589,472
Ikon Receivables Llc, 6.14%, 10/15/00 . 5,757,360 5,757,360
New Holland Equipment Business
Trust, 6.15%, 11/15/00 ++ ............ 2,981,463 2,981,463
Newcourt Equipment Trust
Securities, 5.97%, 08/20/00........... 762,258 762,258
Onyx Acceptance Owner
Trust, 6.09%, 03/15/01................ 4,031,747 4,031,747
Onyx Acceptance Owner
Trust, 6.18%, 11/15/00................ 493,004 493,004
Onyx Acceptance Owner
Trust, 6.41%, 05/15/01 # ............. 15,000,000 15,000,000
Orix Credit Alliance Receivables
Trust, 6.13%, 12/15/00................ 5,370,001 5,370,001
Orix Credit Alliance Receivables
Trust, 6.24%, 03/15/01................ 10,448,814 10,448,814
Racers Series 1999, 5.55%, 07/17/00 ++ 14,000,000 14,000,000
Syndicated Loan Funding
Trust, 6.28%, 03/15/01 ++ ............ 11,000,000 11,000,000
Unicapital, 6.28%, 04/20/01 ++ ........ 8,029,333 8,029,333
------------
TOTAL ASSET-BACKED SECURITIES 163,835,127
------------
COMMERCIAL PAPER - DOMESTIC (27.3%)
Cooper Industries, Inc.,
6.27%, 08/09/00 ++.................... 9,000,000 8,843,250
Detroit Edison Co., 6.22%, 05/09/00 ... 5,800,000 5,791,983
Lehman Brothers Holdings
Inc., 6.29%, 10/20/00................. 8,000,000 8,000,000
MCI Worldcom Inc., 6.01%, 06/13/00 ++ . 11,000,000 10,921,035
PHH Corp., 6.17%, 05/01/00-05/03/00 ... 6,840,000 6,838,286
PHH Corp., 6.20%, 05/01/00 ............ 13,800,000 13,800,000
Popular North America
Inc., 6.18%, 05/03/00................. 5,000,000 4,998,283
Popular North America
Inc., 6.20%, 05/03/00-05/04/00........ 11,300,000 11,294,937
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
COMMERCIAL PAPER - DOMESTIC (CONTINUED)
Republic Industries Funding
Corp., 6.07%, 05/15/00................ $10,000,000 $ 9,976,394
Wheels Inc., 6.20%, 05/02/00 > ........ 21,000,000 20,996,384
Xerox Corp., 6.20%, 05/01/00 ++ ....... 7,845,000 7,845,000
Xerox Credit Corp., 6.20%, 05/01/00 ++ 2,122,000 2,122,000
Zions Bancorporation, 6.15%, 05/16/00 ++ 7,000,000 6,982,063
------------
TOTAL COMMERCIAL PAPER - DOMESTIC 118,409,615
------------
CORPORATE NOTES (18.1%)
Associates Corp. N.A., 6.41%,
06/29/00 ++ .......................... 6,000,000 5,998,944
Associates Corp. N.A., 6.45%,
09/15/00 ++ .......................... 3,000,000 3,002,986
Bank One Corp., 6.32%, 01/16/01 ++ .... 5,000,000 5,003,487
Detroit Edison Co., 6.72%, 07/28/00 * . 15,500,000 15,500,000
MCI Worldcom, Inc., 6.27%, 08/17/00 ++ 11,000,000 11,004,668
Textron Financial Corp.,
5.56%, 05/15/00 ++ ................... 18,000,000 17,999,999
Washington Mutual, Inc.,
6.38%, 07/01/00 ++ ................... 6,000,000 5,997,991
Zions Bancorporation, 6.44%, 10/27/00 ++ 14,000,000 14,000,000
------------
TOTAL CORPORATE NOTES 78,508,075
------------
MEDIUM-TERM NOTES - DOMESTIC (17.7%)
Countrywide Home Loans,
Inc., 6.33%, 07/27/00................. 6,500,000 6,500,000
General Motors Acceptance
Corp., 5.33%, 10/20/00................ 8,500,000 8,469,234
Heller Financial, Inc., 5.65%, 08/07/00 13,000,000 13,000,000
Heller Financial, Inc., 6.58%, 09/25/00 5,000,000 5,005,626
Lehman Brothers Holdings
Inc., 6.47%, 11/06/00................. 6,350,000 6,360,418
Popular Inc., 6.81%, 05/17/00 ......... 2,500,000 2,500,198
Prudential Funding Corp.,
6.25%, 07/28/00 ++ ................... 13,000,000 12,999,645
Student Loan Marketing
Assoc., 6.23%, 11/13/00-02/01/01...... 13,500,000 13,509,757
Student Loan Marketing
Assoc., 6.26%, 03/23/01............... 3,450,000 3,453,441
Washington Mutual, Inc., 5.88%,
02/27/01 ++........................... 5,000,000 4,958,953
------------
TOTAL MEDIUM-TERM NOTES - DOMESTIC 76,757,272
------------
MEDIUM-TERM NOTES - FOREIGN (0.8%)
Republic of Argentina, Zero
Coupon, 10/16/00...................... 3,500,000 3,405,446
------------
TOTAL MEDIUM-TERM NOTES - FOREIGN 3,405,446
------------
TOTAL INVESTMENTS
(COST $440,915,535)(a) 440,915,535
OTHER ASSETS LESS LIABILITIES (7,497,150)
------------
TOTAL NET ASSETS $433,418,385
============
</TABLE>
See Notes to Portfolio of Investments. 19
<PAGE>
INCOME FUNDS
PORTFOLIO OF INVESTMENTS - APRIL 30, 2000 (UNAUDITED)
MONEY MARKET (CONTINUED)
================================================================================
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.
++ 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.
> Restricted security. This security has been determined to be illiquid 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 $20,996,384
===========
</TABLE>
The market value of the total illiquid securities above is $20,996,384 which
represents 4.84% of the total net assets.
Category percentages are based on net assets.
20 See Notes to Financial Statements.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
INCOME FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at market value ..........................................
Cash ..................................................................
Foreign currency ......................................................
Receivable for:
Dividends and interest ...............................................
Investments sold .....................................................
Fund shares sold .....................................................
Reimbursement from Investment Adviser ................................
Prepaid expenses ......................................................
Gross unrealized gain on forward foreign currency exchange contracts ..
Total assets .....................................................
LIABILITIES:
Payable for:
Dividends to shareholders ............................................
Investments purchased ................................................
Fund shares redeemed .................................................
Variation margin .....................................................
Other liabilities .....................................................
Net unrealized depreciation on swap contract ..........................
Total liabilities ................................................
NET ASSETS ..........................................................
NET ASSETS REPRESENTED BY:
Paid-in capital .......................................................
Net unrealized loss on investments, open futures contracts and foreign
currency related transactions ........................................
Undistributed net investment income ...................................
Accumulated net realized loss on investments ..........................
NET ASSETS ..........................................................
Cost of investments ...................................................
Cost of foreign currency ..............................................
CAPITAL SHARES, $.001 PAR VALUE:
Class I:
Outstanding ..........................................................
Net Assets ...........................................................
Net Asset Value, offering and redemption price per share (net assets
divided by shares outstanding) ......................................
Class A:
Outstanding ..........................................................
Net Assets ...........................................................
Net Asset Value and redemption price per share (net assets divided by
shares outstanding) .................................................
Offering Price (net asset value divided by 1 minus maximum sales load)
Class B:
Outstanding ..........................................................
Net Assets ...........................................................
Net Asset Value, offering and redemption price per share (net assets
divided by shares outstanding) ......................................
Class C:
Outstanding ..........................................................
Net Assets ...........................................................
Net Asset Value, offering and redemption price per share (net assets
divided by shares outstanding) ......................................
</TABLE>
22 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
BOND AETNA GOVERNMENT FUND HIGH YIELD MONEY MARKET
----------- --------------------- ----------- ------------
<S> <C> <C> <C>
$50,085,795 $23,531,987 $ 9,095,691 $440,915,535
16,670 493 950 1,986,606
11,750 -- -- --
660,362 332,829 203,415 1,929,434
-- -- 142,188 --
89,211 36,585 72 5,091,731
776 4,771 4,068 --
286 85 60 2,921
449 -- -- --
----------- ----------- ----------- ------------
50,865,299 23,906,750 9,446,444 449,926,227
----------- ----------- ----------- ------------
18,883 1,395 60,539 68,749
5,238,581 2,504,369 -- 15,013,359
12,180 135,114 -- 1,147,025
8,075 -- -- --
45,561 25,798 16,781 278,709
30,607 -- -- --
----------- ----------- ----------- ------------
5,353,887 2,666,676 77,320 16,507,842
----------- ----------- ----------- ------------
$45,511,412 $21,240,074 $ 9,369,124 $433,418,385
=========== =========== =========== ============
$47,839,916 $21,897,705 $11,009,882 $433,418,385
(1,053,389) (352,034) (601,215) --
95,519 54,879 31,755 --
(1,370,634) (360,476) (1,071,298) --
----------- ----------- ----------- ------------
$45,511,412 $21,240,074 $ 9,369,124 $433,418,385
=========== =========== =========== ============
$51,106,499 $23,884,021 $ 9,696,746 $440,915,535
$ 12,391 $ -- $ -- $ --
3,181,188 1,110,953 959,753 247,279,651
$30,881,787 $10,829,938 $ 8,092,750 $247,279,651
$ 9.71 $ 9.75 $ 8.43 $ 1.00
1,440,644 1,038,860 88,886 178,267,117
$13,980,580 $10,124,378 $ 749,484 $178,267,117
$ 9.70 $ 9.75 $ 8.43 $ 1.00
$ 10.18 $ 10.24 $ 8.85 $ 1.00
19,944 17,110 36,527 174,194
$ 193,475 $ 166,886 $ 307,660 $ 174,194
$ 9.70 $ 9.75 $ 8.42 $ 1.00
47,006 12,204 26,032 7,697,423
$ 455,570 $ 118,872 $ 219,230 $ 7,697,423
$ 9.69 $ 9.74 $ 8.42 $ 1.00
</TABLE>
See Notes to Financial Statements. 23
<PAGE>
INCOME FUNDS
STATEMENTS OF OPERATIONS
SIX MONTH PERIOD ENDED APRIL 30, 2000 (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends .............................................................
Interest ..............................................................
Total investment income ..........................................
INVESTMENT EXPENSES:
Investment advisory fees ..............................................
Administrative services fees ..........................................
Distribution plan fees - Class A ......................................
Distribution plan fees - Class B ......................................
Distribution plan fees - Class C ......................................
Shareholder services fees - Class B ...................................
Shareholder services fees - Class C ...................................
Printing and postage fees .............................................
Custody fees ..........................................................
Transfer agent fees ...................................................
Audit fees ............................................................
Directors' fees .......................................................
Registration fees .....................................................
Miscellaneous expenses ................................................
Expenses before reimbursement and waiver from Investment Adviser ......
Expense reimbursement and waiver from Investment Adviser ..............
Net investment expenses ..........................................
Net investment income .................................................
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ..........................................................
Written options ......................................................
Futures contracts ....................................................
Foreign currency related transactions ................................
Net realized loss on investments .................................
Net change in unrealized gain or loss on:
Investments ..........................................................
Swap contract ........................................................
Futures contracts ....................................................
Foreign currency related transactions ................................
Net change in unrealized gain or loss on investments .............
Net realized and change in unrealized gain or loss on investments .....
Net increase (decrease) in net assets resulting from operations .......
</TABLE>
24 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
BOND AETNA GOVERNMENT FUND HIGH YIELD MONEY MARKET
----------- --------------------- --------- ------------
<S> <C> <C> <C>
$ 1,711 $ -- $ 8,048 $ --
1,555,918 642,771 487,940 14,068,985
----------- --------- --------- -----------
1,557,629 642,771 495,988 14,068,985
----------- --------- --------- -----------
116,298 47,098 31,281 921,432
23,260 9,420 4,812 230,358
16,167 10,319 813 --
629 575 1,153 588
2,830 398 876 --
209 192 384 196
943 133 292 --
3,626 1,777 1,565 25,333
13,995 5,910 3,409 8,152
23,394 13,634 13,048 262,753
10,868 10,260 11,733 11,494
564 226 144 6,983
8,632 7,271 3,868 32,778
1,586 174 115 5,340
----------- --------- --------- -----------
223,001 107,387 73,493 1,505,407
(27,428) (30,014) (24,166) (236,100)
----------- --------- --------- -----------
195,573 77,373 49,327 1,269,307
----------- --------- --------- -----------
1,362,056 565,398 446,661 12,799,678
----------- --------- --------- -----------
(332,855) (145,132) (83,382) --
3,411 -- -- --
(38,722) 731 (925) --
(75,386) -- 711 --
----------- --------- --------- -----------
(443,552) (144,401) (83,596) --
----------- --------- --------- -----------
(892,366) (96,131) (142,119) --
(30,607) -- -- --
(6,768) 572 -- --
(15,441) -- (160) --
----------- --------- --------- -----------
(945,182) (95,559) (142,279) --
----------- --------- --------- -----------
(1,388,734) (239,960) (225,875) --
----------- --------- --------- -----------
$ (26,678) $ 325,438 $ 220,786 $12,799,678
=========== ========= ========= ===========
</TABLE>
See Notes to Financial Statements. 25
<PAGE>
INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
BOND
--------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ..................... $ 1,362,056 $ 2,474,333
Net realized loss on investments........... (443,552) (743,025)
Net change in unrealized gain or loss on
investments............................... (945,182) (1,075,698)
----------- ------------
Net increase (decrease) in net assets
resulting from operations................ (26,678) 655,610
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income................ (927,115) (2,104,287)
Class A:
From net investment income................ (355,158) (333,647)
Class B:
From net investment income................ (3,797) (4,549)
Class C:
From net investment income................ (16,014) (30,718)
----------- ------------
Decrease in net assets from distributions
to shareholders.......................... (1,302,084) (2,473,201)
----------- ------------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold................. 2,175,305 9,189,628
Net asset value of shares issued upon
reinvestment of distributions............ 839,833 1,907,667
Payments for shares redeemed.............. (5,475,372) (17,127,490)
Class A:
Proceeds from shares sold................. 5,647,724 12,315,085
Net asset value of shares issued upon
reinvestment of distributions............ 342,523 323,857
Payments for shares redeemed.............. (3,600,234) (2,284,603)
Class B:
Proceeds from shares sold................. 99,640 198,698
Net asset value of shares issued upon
reinvestment of distributions............ 1,420 863
Payments for shares redeemed.............. (96,986) --
Class C:
Proceeds from shares sold................. 1,173,586 1,079,999
Net asset value of shares issued upon
reinvestment of distributions............ 9,043 13,200
Payments for shares redeemed.............. (1,753,816) (122,954)
----------- ------------
Net increase (decrease) in net assets from
fund share transactions.................. (637,334) 5,493,950
----------- ------------
Net change in net assets................... (1,966,096) 3,676,359
NET ASSETS:
Beginning of period........................ 47,477,508 43,801,149
----------- ------------
End of period.............................. $45,511,412 $ 47,477,508
=========== ============
End of period net assets includes
undistributed net investment income....... $ 95,519 $ 35,547
=========== ============
</TABLE>
26 See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
BOND
---------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
SHARE TRANSACTIONS:
Class I:
Number of shares sold..................... 219,996 898,536
Number of shares issued upon reinvestment
of distributions......................... 85,445 186,800
Number of shares redeemed................. (557,557) (1,680,650)
----------- ------------
Net decrease.............................. (252,116) (595,314)
=========== ============
Class A:
Number of shares sold..................... 571,701 1,210,580
Number of shares issued upon reinvestment
of distributions......................... 34,867 31,994
Number of shares redeemed................. (364,856) (225,829)
----------- ------------
Net increase.............................. 241,712 1,016,745
=========== ============
Class B:
Number of shares sold..................... 10,153 19,478
Number of shares issued upon reinvestment
of distributions......................... 145 86
Number of shares redeemed................. (9,918) --
----------- ------------
Net increase.............................. 380 19,564
=========== ============
Class C:
Number of shares sold..................... 119,517 105,601
Number of shares issued upon reinvestment
of distributions......................... 921 1,303
Number of shares redeemed................. (178,924) (11,792)
----------- ------------
Net increase (decrease)................... (58,486) 95,112
=========== ============
</TABLE>
See Notes to Financial Statements. 27
<PAGE>
INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
AETNA GOVERNMENT FUND
--------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ..................... $ 565,398 $ 690,021
Net realized loss on investments........... (144,401) (116,795)
Net change in unrealized gain or loss on
investments............................... (95,559) (486,031)
----------- -----------
Net increase in net assets resulting from
operations............................... 325,438 87,195
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income................ (293,035) (542,676)
Class A:
From net investment income................ (233,111) (121,821)
Class B:
From net investment income................ (3,641) (3,253)
Class C:
From net investment income................ (2,455) (6,134)
----------- -----------
Decrease in net assets from distributions
to shareholders.......................... (532,242) (673,884)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold................. 3,466,730 4,279,736
Net asset value of shares issued upon
reinvestment of distributions............ 253,219 476,891
Payments for shares redeemed.............. (2,610,610) (8,443,194)
Class A:
Proceeds from shares sold................. 8,021,835 5,805,058
Net asset value of shares issued upon
reinvestment of distributions............ 230,584 119,308
Payments for shares redeemed.............. (4,019,886) (699,786)
Class B:
Proceeds from shares sold................. 15,030 154,439
Net asset value of shares issued upon
reinvestment of distributions............ 1,387 689
Class C:
Proceeds from shares sold................. 30,270 126,145
Net asset value of shares issued upon
reinvestment of distributions............ 1,285 1,491
Payments for shares redeemed.............. (35,150) (113,612)
----------- -----------
Net increase in net assets from fund share
transactions............................. 5,354,694 1,707,165
----------- -----------
Net change in net assets................... 5,147,890 1,120,476
NET ASSETS:
Beginning of period........................ 16,092,184 14,971,708
----------- -----------
End of period.............................. $21,240,074 $16,092,184
=========== ===========
End of period net assets includes
undistributed net investment income....... $ 54,879 $ 21,723
=========== ===========
</TABLE>
28 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
AETNA GOVERNMENT FUND
---------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
SHARE TRANSACTIONS:
Class I:
Number of shares sold..................... 357,672 424,983
Number of shares issued upon reinvestment
of distributions......................... 25,948 47,455
Number of shares redeemed................. (267,712) (836,164)
----------- -----------
Net increase (decrease)................... 115,908 (363,726)
=========== ===========
Class A:
Number of shares sold..................... 817,019 582,416
Number of shares issued upon reinvestment
of distributions......................... 23,629 11,963
Number of shares redeemed................. (411,433) (69,747)
----------- -----------
Net increase.............................. 429,215 524,632
=========== ===========
Class B:
Number of shares sold..................... 1,531 15,367
Number of shares issued upon reinvestment
of distributions......................... 142 70
----------- -----------
Net increase.............................. 1,673 15,437
=========== ===========
Class C:
Number of shares sold..................... 3,101 12,499
Number of shares issued upon reinvestment
of distributions......................... 132 155
Number of shares redeemed................. (3,577) (11,456)
----------- -----------
Net increase (decrease)................... (344) 1,198
=========== ===========
</TABLE>
See Notes to Financial Statements. 29
<PAGE>
INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
HIGH YIELD
---------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income ..................... $ 446,661 $ 898,804
Net realized loss on investments........... (83,596) (688,072)
Net change in unrealized gain or loss on
investments............................... (142,279) 467,806
---------- ----------
Net increase in net assets resulting from
operations............................... 220,786 678,538
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income................ (453,802) (763,495)
Class A:
From net investment income................ (33,963) (32,615)
Class B:
From net investment income................ (14,823) (8,518)
Class C:
From net investment income................ (11,225) (17,824)
---------- ----------
Decrease in net assets from distributions
to shareholders.......................... (513,813) (822,452)
---------- ----------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold................. 60,907 224,123
Net asset value of shares issued upon
reinvestment of distributions............ 4,013 8,487
Payments for shares redeemed.............. (167,577) (124,468)
Class A:
Proceeds from shares sold................. 284,545 376,967
Net asset value of shares issued upon
reinvestment of distributions............ 24,922 18,357
Payments for shares redeemed.............. (106,299) (33,381)
Class B:
Proceeds from shares sold................. 30,000 390,137
Net asset value of shares issued upon
reinvestment of distributions............ 1,377 773
Payments for shares redeemed.............. -- (94,606)
Class C:
Proceeds from shares sold................. 33,708 245,958
Net asset value of shares issued upon
reinvestment of distributions............ 7,532 11,246
Payments for shares redeemed.............. (30,162) (215,729)
---------- ----------
Net increase in net assets from fund share
transactions............................. 142,966 807,864
---------- ----------
Net change in net assets................... (150,061) 663,950
NET ASSETS:
Beginning of period........................ 9,519,185 8,855,235
---------- ----------
End of period.............................. $9,369,124 $9,519,185
========== ==========
End of period net assets includes
undistributed net investment income....... $ 31,755 $ 98,907
========== ==========
</TABLE>
30 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
HIGH YIELD
---------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
SHARE TRANSACTIONS:
Class I:
Number of shares sold..................... 6,956 24,838
Number of shares issued upon reinvestment
of distributions......................... 462 937
Number of shares redeemed................. (19,632) (13,648)
---------- ----------
Net increase (decrease)................... (12,214) 12,127
========== ==========
Class A:
Number of shares sold..................... 32,814 41,653
Number of shares issued upon reinvestment
of distributions......................... 2,882 2,054
Number of shares redeemed................. (12,387) (3,716)
---------- ----------
Net increase.............................. 23,309 39,991
========== ==========
Class B:
Number of shares sold..................... 3,421 43,647
Number of shares issued upon reinvestment
of distributions......................... 158 88
Number of shares redeemed................. -- (10,787)
---------- ----------
Net increase.............................. 3,579 32,948
========== ==========
Class C:
Number of shares sold..................... 3,854 26,573
Number of shares issued upon reinvestment
of distributions......................... 870 1,244
Number of shares redeemed................. (3,545) (23,233)
---------- ----------
Net increase.............................. 1,179 4,584
========== ==========
</TABLE>
See Notes to Financial Statements. 31
<PAGE>
INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
MONEY MARKET
---------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income .................... $ 12,799,678 $ 22,062,472
------------- -------------
Net increase in net assets resulting from
operations.............................. 12,799,678 22,062,472
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Class I:
From net investment income............... (7,483,805) (13,482,333)
Class A:
From net investment income............... (5,102,072) (8,371,429)
Class B:
From net investment income............... (3,578) (4,484)
Class C:
From net investment income............... (210,223) (204,226)
------------- -------------
Decrease in net assets from distributions
to shareholders......................... (12,799,678) (22,062,472)
------------- -------------
FROM FUND SHARE TRANSACTIONS:
Class I:
Proceeds from shares sold................ 86,750,821 230,408,465
Net asset value of shares issued upon
reinvestment of distributions........... 7,158,256 12,949,579
Payments for shares redeemed............. (131,223,687) (234,788,242)
Class A:
Proceeds from shares sold................ 306,133,599 642,480,787
Net asset value of shares issued upon
reinvestment of distributions........... 4,947,498 8,131,090
Payments for shares redeemed............. (314,436,585) (630,445,060)
Class B:
Proceeds from shares sold................ 146,565 388,741
Net asset value of shares issued upon
reinvestment of distributions........... 3,251 2,948
Payments for shares redeemed............. (123,407) (243,904)
Class C:
Proceeds from shares sold................ 5,147,566 9,145,791
Net asset value of shares issued upon
reinvestment of distributions........... 190,727 183,320
Payments for shares redeemed............. (4,405,819) (3,479,776)
------------- -------------
Net increase (decrease) in net assets
from fund share transactions............ (39,711,215) 34,733,739
------------- -------------
Net change in net assets.................. (39,711,215) 34,733,739
NET ASSETS:
Beginning of period....................... 473,129,600 438,395,861
------------- -------------
End of period............................. $ 433,418,385 $ 473,129,600
============= =============
End of period net assets includes
undistributed net investment income ..... $ -- $ --
============= =============
</TABLE>
32 See Notes to Financial Statements.
<PAGE>
=============================================================================
<TABLE>
<CAPTION>
MONEY MARKET
---------------------------------
SIX MONTH
PERIOD ENDED
APRIL 30, 2000 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1999
-------------- ----------------
<S> <C> <C>
SHARE TRANSACTIONS:
Class I:
Number of shares sold.................... 86,750,821 230,408,465
Number of shares issued upon reinvestment
of distributions........................ 7,158,256 12,949,579
Number of shares redeemed................ (131,223,687) (234,788,242)
------------- -------------
Net increase (decrease).................. (37,314,610) 8,569,802
============= =============
Class A:
Number of shares sold.................... 306,133,599 642,480,787
Number of shares issued upon reinvestment
of distributions........................ 4,947,498 8,131,090
Number of shares redeemed................ (314,436,585) (630,445,060)
------------- -------------
Net increase (decrease).................. (3,355,488) 20,166,817
============= =============
Class B:
Number of shares sold.................... 146,565 388,741
Number of shares issued upon reinvestment
of distributions........................ 3,251 2,948
Number of shares redeemed................ (123,407) (243,904)
------------- -------------
Net increase............................. 26,409 147,785
============= =============
Class C:
Number of shares sold.................... 5,147,566 9,145,791
Number of shares issued upon reinvestment
of distributions........................ 190,727 183,320
Number of shares redeemed................ (4,405,819) (3,479,776)
------------- -------------
Net increase............................. 932,474 5,849,335
============= =============
</TABLE>
See Notes to Financial Statements. 33
<PAGE>
INCOME FUNDS
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 four funds, (each a Fund; collectively, the Funds), Aetna
Bond Fund (Bond), Aetna Government Fund, Aetna High Yield Fund (High Yield) and
Aetna Money Market Fund (Money Market).
The Funds are authorized to offer four classes of shares, Class I, Class A,
Class B and Class C. Class I is offered principally to institutions. Information
regarding sales charges and fees pursuant to Rule 12b-1 of the Act are as
follows:
CLASS I: No sales charges or distribution fees.
CLASS A: Generally, subject to a front-end sales charge; distribution fees of
0.25% (of average net assets of the class per year), except for Money
Market.
CLASS B: No front-end sales charge; contingent deferred sales charge (CDSC)
applies if you sell your shares within six years of purchase;
distribution fees of 0.75%; service fees of 0.25%; automatic
conversion to Class A shares after eight years.
CLASS C: No front-end sales charge; CDSC on redemptions made within 18 months
of purchase; distribution fees of 0.75% (except for Money Market);
service fees of 0.25% (except for Money Market).
Shares in each Class were first made available to the public on the following
dates:
<TABLE>
<CAPTION>
CLASS I CLASS A CLASS B CLASS C
------- ------- ------- -------
<S> <C> <C> <C> <C>
BOND December 27, 1991 April 15, 1994 March 1, 1999 June 30, 1998
AETNA GOVERNMENT FUND December 22, 1993 April 15, 1994 March 1, 1999 June 30, 1998
HIGH YIELD February 2, 1998 February 2, 1998 March 1, 1999 June 30, 1998
MONEY MARKET December 27, 1991 April 15, 1994 March 1, 1999 June 30, 1998
</TABLE>
The following is each Fund's investment objective:
BOND 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.
AETNA GOVERNMENT FUND seeks to provide income consistent with the preservation
of capital through investment in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
HIGH YIELD seeks high current income and growth of capital primarily through
investment in a diversified portfolio of fixed-income securities rated lower
than BBB- by Standard and Poor's Corporation or lower than Baa3 by Moody's
Investors Services, Inc.
MONEY MARKET seeks to provide high current return, consistent with the
preservation of capital and liquidity, through investment in high-quality
money market instruments.
34
<PAGE>
================================================================================
Aeltus Investment Management, Inc. (Aeltus) serves as the investment adviser to
each Fund. Aeltus Capital, Inc. (ACI) is each 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 Funds 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
Except for Money Market, exchange traded equity investments are stated at market
values based upon prices furnished by external pricing sources as reported on
national securities exchanges or, for over-the-counter securities, at the mean
of the bid and asked prices. Fixed income securities, with the exception of high
yield securities, maturing in more than sixty days for which market quotations
are readily available are valued at the mean of the last bid and asked price.
High yield securities are priced at bid by external pricing sources or brokers
making a market in the security. Short-term investments maturing sixty days or
less are valued at amortized cost, which when combined with accrued interest,
approximates market value. Securities and fixed income investments for which
market quotations are not considered to be readily available are valued using
methods approved by the Board of Directors (Board). Money Market, as permitted
by Rule 2a-7 under the Act, carries all investments at amortized cost, which
approximates market value.
The accounting records of the Funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the prevailing rates of exchange at the end
of each day. Purchases and sales of securities, income receipts, and expense
payments are translated into U.S. dollars at the prevailing exchange rate on the
respective dates of the transactions. The Funds do not isolate the portion of
the results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in their market prices.
Such fluctuations are included in net realized and unrealized gain or loss on
investments.
B. FUTURES AND FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
specific amount of a commodity, security or financial instrument including an
index of stocks at a set price on a future date. The Funds (except for Money
Market) invest in financial futures contracts as a hedge against their existing
portfolio securities, to manage the risk of changes in interest rates, equity
prices, currency exchange rates or in anticipation of future purchases and sales
of portfolio securities.
Upon entering into a futures contract, the Funds are required to deposit with a
broker an amount (initial margin) equal to a percentage of the purchase price
indicated by the futures contract. Subsequent deposits (variation margin) are
received or paid each day by the Funds equal to the daily fluctuations in the
market value of the contract. These amounts are recorded by the Funds as
unrealized gains or losses. When a contract is closed, the Funds record a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed. Generally,
futures contracts held by the Funds are closed prior to expiration.
A forward foreign currency exchange contract is an agreement to pay or receive
specific amounts of a currency at a future date in exchange for another currency
at an agreed upon exchange rate. The Funds, where authorized, may use forward
foreign currency exchange contracts to hedge against foreign currency exchange
rate risks on its non-U.S. dollar denominated portfolio securities. Contracts
are recorded at market value and marked-to-market daily. Money Market may not
invest in forward foreign currency exchange contracts.
35
<PAGE>
INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2000 (UNAUDITED)
================================================================================
The risks associated with financial futures and forward foreign currency
exchange contracts may arise from an imperfect correlation between the change in
market value of the securities held by the Funds and the price of the contracts.
Risks may also arise from an illiquid secondary market or from the inability of
counterparties to meet the terms of the contracts.
Realized and unrealized gains or losses on financial futures and forward foreign
currency exchange contracts are reflected in the accompanying financial
statements. The amounts at risk under such futures and forward foreign currency
exchange contracts may exceed the amounts reflected in the financial statements.
The notional amounts (economic exposure) of these contracts are disclosed in the
Portfolios of Investments and elsewhere in the Notes to Financial Statements.
For federal income tax purposes, any futures and forward foreign currency
exchange contracts which remain open at the end of the fiscal year are
marked-to-market and the resultant net gain or loss is reported to shareholders
as federal taxable income.
C. OPTIONS CONTRACTS
The Funds (except for Money Market) may purchase put and call options and may
write (sell) put options and covered call options. The Funds engage in option
transactions as a hedge against adverse movements in the value of portfolio
holdings or to increase market exposure.
Option contracts are valued daily and unrealized gains or losses are recorded
based upon the last sales price on the principal exchange on which the options
are traded. The Funds will realize a gain or loss upon the expiration or closing
of the option contract. When an option is exercised, the proceeds on sales of
the underlying security for a written call option, the purchase cost of the
security for a written put option, or the cost of the security for a purchased
put or call option is adjusted by the amount of premium received or paid.
Realized and unrealized gains or losses on option contracts are reflected in the
accompanying financial statements.
The risk in writing a call option is that the Funds give up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Funds may incur a loss
if the market price of the security decreases and the option is exercised. The
risk in buying an option is that the Funds pay a premium whether or not the
option is exercised. Risks may also arise from an illiquid secondary market or
from the inability of counterparties to meet the terms of the contract.
D. SWAP CONTRACTS
Bond may enter into interest rate swaps, currency swaps and other types of swap
agreements, including swaps on securities and indices. A swap is an agreement
between two parties pursuant to which each party agrees to make one or more
payments to the other on regularly scheduled dates over a stated term, based on
different interest rates, currency exchange rates, security prices, the prices
or rates of other types of financial instruments or assets or the levels of
specified indices. During the term of the swap, changes in the value of the swap
are recognized as unrealized gains or losses by marking-to-market to reflect the
market value of the swap. When the swap is terminated, the Fund will record a
realized gain or loss. As of April 30, 2000, Bond had entered into the following
total return swap agreement. In the agreement, Bond has exchanged U.S. Dollar 1
month LIBOR (London Interbank Offered Rate) less 0.15% for Lehman Corporate Bond
Index. The terms of the contract provide for the index differential to be
settled on a monthly basis. For the period ended April 30, 2000 net cash payment
of $(30,607) by Bond were accrued in connection with the total return swap
agreement.
E. ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are securities that are not readily marketable. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Funds to sell them promptly at an
acceptable price. Restricted securities are those sold under Rule 144A of the
Securities Act of 1933 (1933 Act) or are securities offered pursuant
36
<PAGE>
================================================================================
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. The Funds will not pay the costs of disposition of
restricted securities other than ordinary brokerage fees, if any.
F. DELAYED DELIVERY TRANSACTIONS
The Funds 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
Funds' 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 Funds are required
to hold liquid assets as collateral with the Funds' custodian sufficient to
cover the purchase price.
G. DOLLAR ROLL TRANSACTIONS
Each of the Funds may engage in dollar roll transactions with respect to
mortgage-backed securities issued by Government National Mortgage Association,
Federal National Mortgage Association and Federal Home Loan Mortgage Corp. In a
dollar roll transaction, a Fund sells a mortgage-backed security to a financial
institution, such as a bank or broker/dealer, and simultaneously agrees to
repurchase a substantially similar (i.e., same type, coupon, and maturity)
security from the institution on a delayed delivery basis at an agreed upon
price. The mortgage-backed securities that are repurchased will bear the same
interest rate as those sold, but generally will be collateralized by different
pools of mortgages with different prepayment histories.
H. FEDERAL INCOME TAXES
Each 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, each 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, each 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.
I. DISTRIBUTIONS
Distributions are recorded on the ex-dividend date. Income and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for foreign currency transactions, certain
futures contracts and repurchases of certain securities sold at a loss. In
addition, 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.
J. LINE OF CREDIT
Certain series of the Company (including Bond), certain portfolios of Aetna
Variable Portfolios, Inc., Aetna Generation Portfolios, Inc., Aetna Balanced VP,
Inc., Aetna Variable Fund, Aetna Income Shares and certain series of Aetna GET
Fund, collectively Aetna Mutual Funds, have entered into a revolving credit
facility, of up to $300,000,000, with a syndicate of banks led by Citibank, N.A.
For its services as Agent, Citibank, N.A. received an agent fee of $200,000. In
addition, the revolving
37
<PAGE>
INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2000 (UNAUDITED)
================================================================================
credit facility requires the payment of an annual commitment fee of 0.09% based
on the average daily unutilized amount of the credit facility. Each of the
participating series will pay its pro rata share of both the agent fee and
commitment fee. Generally, borrowings under the facility accrue interest at the
Federal Funds Rate plus a specified margin. Repayments generally must be made
within 30 days after the date of a revolving credit advance. The revolving
credit facility became effective on November 30, 1999. No borrowings from the
line of credit have been made as of April 30, 2000.
K. OTHER
Investment transactions are accounted for on the day following trade date,
except same day settlements which are accounted for on the trade date. Interest
income is recorded on an accrual basis. Discounts and premiums on securities
purchased are accreted or amortized, respectively, using an effective yield
method over the life of the security. Dividend income and stock splits are
recorded on the ex-dividend date. Realized gains and losses from investment
transactions are determined on an identified cost basis.
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES
Each Fund pays Aeltus an investment advisory fee expressed as a percentage of
each Fund's average daily net assets. As each Fund's net assets exceed
predetermined thresholds, lower advisory fees apply. Below are the Funds'
investment advisory fee ranges and the effective rates before waivers as of
April 30, 2000:
<TABLE>
<CAPTION>
FEE EFFECTIVE
RANGE RATE
----- ---------
<S> <C> <C>
Bond 0.50%-0.40% 0.50%
Aetna Government Fund 0.50%-0.40% 0.50%
High Yield 0.65%-0.50% 0.65%
Money Market 0.40%-0.30% 0.40%
</TABLE>
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. Each Fund pays Aeltus an administrative services fee at
an annual rate of 0.10% of its average daily net assets.
Aeltus has entered into a Service Agreement with Aetna Life Insurance and
Annuity Company (ALIAC) under which ALIAC will provide various administrative
and shareholder services to certain Class I shareholders of the Funds that
purchased their shares through ALIAC. In exchange for these services, Aeltus
pays ALIAC a fee of up to 0.325% of the average daily net assets associated with
those shares. For the period November 1, 1999 through April 30, 2000, Aeltus
paid ALIAC $67,532.
The Company has adopted a Shareholder Services Plan for the Class B and Class C
shares, except Money Market Class C shares. Under the Shareholder Services Plan,
ACI is paid a service fee at an annual rate of 0.25% of the average daily net
assets of Class B and Class C shares. 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
for the Class A, Class B and Class C shares. The Distribution Plan provides for
payments to ACI at an annual rate of 0.25% of the average daily net assets of
Class A shares of each Fund (except Money Market) and 0.75% of the average daily
net assets of Class B and Class C shares of each Fund (except Class C shares of
Money Market). Amounts paid by the Funds are used to pay expenses incurred by
ACI in promoting the sale of Class A, Class B and Class C shares.
Presently, the Funds' class-specific expenses are limited to distribution fees
incurred in connection with Class A, Class B and Class C shares and service fees
in connection with Class B and Class C shares.
38
<PAGE>
================================================================================
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated through December 31, 2000 to reimburse each
Fund (except Money Market) 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 a 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. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the period ended April 30, 2000 were:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
Bond $82,758,740 $84,930,079
Aetna Government Fund 17,618,099 9,602,445
High Yield 2,799,496 3,411,151
</TABLE>
6. CAPITAL LOSS CARRYFORWARDS
It is the policy of each of the Funds to reduce future distributions of realized
gains to shareholders to the extent of capital loss carryforwards. Such capital
loss carryforwards may be used to offset future capital gains until their
respective expiration dates. As of April 30, 2000, the following capital loss
carryforwards had been incurred:
<TABLE>
<CAPTION>
TOTAL CAPITAL LOSS YEAR OF EXPIRATION
------------------
CARRYFORWARD 2002 2004 2006 2007
------------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Bond $778,764 $ -- $ -- $184,267 $594,497
Aetna Government Fund 215,558 53,515 47,228 -- 114,815
High Yield 987,436 -- -- 299,738 687,698
</TABLE>
7. OPTIONS
For the period ended April 30, 2000, the following reflects the written option
activity:
<TABLE>
<CAPTION>
CALL OPTIONS WRITTEN
-------------------------------------------------------
BOND NUMBER OF PREMIUM REALIZED
CONTRACTS RECEIVED GAIN (LOSS)
-------------------------------------------------------
<S> <C> <C> <C>
Outstanding October 31, 1999 -- $ -- $ --
Written 7,653 11,270 --
Closed (7,653) (11,270) 3,411
-------------------------------------------------------
Outstanding April 30, 2000 -- $ -- $3,411
-------------------------------------------------------
</TABLE>
39
<PAGE>
INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 2000 (UNAUDITED)
================================================================================
8. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As of April 30, 2000, Bond had the following open forward foreign currency
exchange contracts that obligate the Fund to deliver currencies at specified
future dates. Bond had a net unrealized gain of $449 on these contracts, which
are included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
EXCHANGE CONTRACTS IN EXCHANGE CONTRACTS UNREALIZED
DATE TYPE CURRENCY TO RECEIVE/DELIVER FOR AT VALUE GAIN (LOSS)
---- ---- -------- ------------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
5/3/00 Buy EURO 546,668 $497,561 $498,010 $449
</TABLE>
9. AUTHORIZED CAPITAL SHARES
The Company is authorized to issue a total of 14.8 billion shares. Of those 14.8
billion shares, each of the Funds, except Money Market, have been allocated 100
million shares each of Class I, Class A, Class B and Class C; Money Market has
been allocated one billion shares each of Class I, Class A, Class B and Class C.
As of April 30, 2000, the following shares of the Funds were owned by ALIAC and
its affiliates:
<TABLE>
<CAPTION>
CLASS I CLASS A CLASS B CLASS C
------- ------- ------- -------
<S> <C> <C> <C> <C>
Bond 1,666,813 -- -- --
Aetna Government Fund 719,233 -- 9,881 --
High Yield 948,875 10,000 -- --
Money Market 115,106,697 -- -- --
</TABLE>
40
<PAGE>
INCOME FUNDS
ADDITIONAL INFORMATION
APRIL 30, 2000 (UNAUDITED)
================================================================================
FUND CLOSURE
On March 1, 2000, the Board of Directors considered and agreed to submit to
shareholders a proposal by Aeltus to liquidate Aetna High Yield Fund. The Fund
was closed to new direct investors on March 6, 2000 and to new retirement plan
investors on May 15, 2000. If approved by shareholders at the July 28, 2000
meeting, the liquidation will occur on or about September 1, 2000.
41
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS
BOND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I (UNAUDITED) 1999 1998 1997 1996 1995
---------------------------------------------- -------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 9.98 $ 10.38 $ 10.22 $ 10.09 $ 10.27 $ 9.58
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.29 0.57+ 0.60+ 0.62+ 0.65+ 0.65+
Net realized and change in unrealized gain or
loss on investments ........................ (0.28) (0.41) 0.17 0.13 (0.15) 0.65
------- ------- ------- ------- ------- -------
Total income from investment operations ... 0.01 0.16 0.77 0.75 0.50 1.30
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income .................. (0.28) (0.56) (0.61) (0.62) (0.68) (0.61)
------- ------- ------- ------- ------- -------
Total distributions ....................... (0.28) (0.56) (0.61) (0.62) (0.68) (0.61)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $ 9.71 $ 9.98 $ 10.38 $ 10.22 $ 10.09 $ 10.27
======= ======= ======= ======= ======= =======
Total return ................................. 0.10% 1.56% 7.72% 7.72% 5.09% 14.06%
Net assets, end of period (000's) ............ $30,882 $34,268 $41,804 $34,080 $28,864 $32,778
Ratio of net investment expenses to average
net assets .................................. 0.75%(1) 0.75% 0.75% 0.75% 0.75% 0.79%
Ratio of net investment income to average net
assets....................................... 5.93%(1) 5.52% 5.79% 6.07% 6.16% 6.56%
Ratio of expenses before reimbursement and
waiver to average net assets ................ 0.87%(1) 0.93% 0.97% 1.14% 1.16% 1.06%
Portfolio turnover rate ...................... 185.96% 174.14% 77.01% 48.56% 42.33% 56.99%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
42 See Notes to Financial Statements.
<PAGE>
BOND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A (UNAUDITED) 1999 1998 1997 1996 1995
-------------------------------------------- -------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 9.98 $ 10.37 $10.22 $10.09 $10.27 $ 9.58
------- ------- ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.28 0.54+ 0.57+ 0.54+ 0.62+ 0.56+
Net realized and change in unrealized gain
or loss on investments ................... (0.29) (0.39) 0.15 0.13 (0.20) 0.66
------- ------- ------ ------ ------ ------
Total income from investment operations . (0.01) 0.15 0.72 0.67 0.42 1.22
------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS:
From net investment income ................ (0.27) (0.54) (0.57) (0.54) (0.60) (0.53)
------- ------- ------ ------ ------ ------
Total distributions ..................... (0.27) (0.54) (0.57) (0.54) (0.60) (0.53)
------- ------- ------ ------ ------ ------
Net asset value, end of period ............. $ 9.70 $ 9.98 $10.37 $10.22 $10.09 $10.27
======= ======= ====== ====== ====== ======
Total return ............................... (0.12)% 1.43% 7.27% 6.89% 4.27% 13.28%
Net assets, end of period (000's) .......... $13,981 $11,963 $1,890 $1,006 $ 877 $7,340
Ratio of net investment expenses to average
net assets ................................ 1.00%(1) 1.00% 1.05% 1.50% 1.50% 1.50%
Ratio of net investment income to average
net assets ................................ 5.68%(1) 5.27% 5.49% 5.32% 5.47% 5.91%
Ratio of expenses before reimbursement and
waiver to average net assets .............. 1.12%(1) 1.18% 1.27% 1.89% 1.91% 1.82%
Portfolio turnover rate .................... 185.96% 174.14% 77.01% 48.56% 42.33% 56.99%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 43
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
BOND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH MARCH 1, 1999
PERIOD ENDED (DATE OF INITIAL
APRIL 30, 2000 PUBLIC OFFERING)
CLASS B (UNAUDITED) TO OCTOBER 31, 1999
---------------------------------------- -------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ... $ 9.98 $ 10.29
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. 0.24 0.31+
Net realized and change in unrealized
gain or loss on investments .......... (0.29) (0.32)
------- -------
Total income from investment
operations.......................... (0.05) (0.01)
------- -------
LESS DISTRIBUTIONS:
From net investment income ............ (0.23) (0.30)
------- -------
Total distributions ................. (0.23) (0.30)
------- -------
Net asset value, end of period ......... $ 9.70 $ 9.98
======= =======
Total return ........................... (0.49)% (0.11)%
Net assets, end of period (000's) ...... $ 193 $ 195
Ratio of net investment expenses to
average net assets .................... 1.75%(1) 1.75%(1)
Ratio of net investment income to
average net assets .................... 4.93%(1) 4.52%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 1.87%(1) 1.93%(1)
Portfolio turnover rate ................ 185.96% 174.14%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
44 See Notes to Financial Statements.
<PAGE>
BOND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH JUNE 30, 1998
PERIOD ENDED YEAR ENDED (DATE OF INITIAL
APRIL 30, 2000 OCTOBER 31, PUBLIC OFFERING)
CLASS C (UNAUDITED) 1999 TO OCTOBER 31, 1998
--------------------------- -------------- ----------- -------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ................ $ 9.97 $ 10.37 $10.31
------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .... 0.25 0.46+ 0.17+
Net realized and change in
unrealized gain or loss on
investments.............. (0.30) (0.39) 0.05
------- ------- ------
Total income from
investment operations . (0.05) 0.07 0.22
------- ------- ------
LESS DISTRIBUTIONS:
From net investment income (0.23) (0.47) (0.16)
------- ------- ------
Total distributions .... (0.23) (0.47) (0.16)
------- ------- ------
Net asset value, end of
period.................... $ 9.69 $ 9.97 $10.37
======= ======= ======
Total return .............. (0.49)% 0.66% 2.10%
Net assets, end of period
(000's)................... $ 456 $ 1,052 $ 108
Ratio of net investment
expenses to average net
assets.................... 1.75%(1) 1.75% 1.75%(1)
Ratio of net investment
income to average net
assets.................... 4.93%(1) 4.52% 4.79%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets .... 1.87%(1) 1.93% 1.97%(1)
Portfolio turnover rate ... 185.96% 174.14% 77.01%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 45
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
AETNA GOVERNMENT FUND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I (UNAUDITED) 1999 1998 1997 1996 1995
-------------------------------------------- -------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 9.86 $10.29 $ 9.99 $ 9.80 $ 10.01 $ 9.41
------- ------ ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.29 0.51+ 0.53+ 0.58+ 0.56+ 0.64+
Net realized and change in unrealized gain
or loss on investments ................... (0.12) (0.45) 0.30 0.21 (0.13) 0.59
------- ------ ------- ------- ------- -------
Total income from investment operations . 0.17 0.06 0.83 0.79 0.43 1.23
------- ------ ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income ................ (0.28) (0.49) (0.53) (0.60) (0.64) (0.63)
------- ------ ------- ------- ------- -------
Total distributions ..................... (0.28) (0.49) (0.53) (0.60) (0.64) (0.63)
------- ------ ------- ------- ------- -------
Net asset value, end of period ............. $ 9.75 $ 9.86 $ 10.29 $ 9.99 $ 9.80 $ 10.01
======= ====== ======= ======= ======= =======
Total return ............................... 1.74% 0.58% 8.54% 8.39% 4.43% 13.58%
Net assets, end of period (000's) .......... $10,830 $9,808 $13,980 $10,217 $10,662 $19,154
Ratio of net investment expenses to average
net assets ................................ 0.70%(1) 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income to average
net assets ................................ 6.11%(1) 5.00% 5.21% 5.91% 5.67% 6.79%
Ratio of expenses before reimbursement and
waiver to average net assets .............. 1.01%(1) 1.47% 1.51% 1.70% 1.57% 1.30%
Portfolio turnover rate .................... 54.41% 30.72% 181.08% 147.78% 50.48% 117.31%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
46 See Notes to Financial Statements.
<PAGE>
AETNA GOVERNMENT FUND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A (UNAUDITED) 1999 1998 1997 1996 1995
-------------------------------------------- -------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 9.86 $10.29 $ 9.99 $ 9.79 $10.00 $ 9.41
------- ------ ------- ------- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.28 0.48+ 0.49+ 0.51+ 0.48+ 0.60+
Net realized and change in unrealized gain
or loss on investments ................... (0.12) (0.45) 0.31 0.21 (0.13) 0.56
------- ------ ------- ------- ------ -------
Total income from investment operations . 0.16 0.03 0.80 0.72 0.35 1.16
------- ------ ------- ------- ------ -------
LESS DISTRIBUTIONS:
From net investment income ................ (0.27) (0.46) (0.50) (0.52) (0.56) (0.57)
------- ------ ------- ------- ------ -------
Total distributions ..................... (0.27) (0.46) (0.50) (0.52) (0.56) (0.57)
------- ------ ------- ------- ------ -------
Net asset value, end of period ............. $ 9.75 $ 9.86 $ 10.29 $ 9.99 $ 9.79 $ 10.00
======= ====== ======= ======= ====== =======
Total return ............................... 1.60% 0.34% 8.19% 7.67% 3.75% 12.60%
Net assets, end of period (000's) .......... $10,124 $6,009 $ 875 $ 531 $ 526 $ 405
Ratio of net investment expenses to average
net assets ................................ 0.95%(1) 0.95% 1.03% 1.45% 1.45% 1.51%
Ratio of net investment income to average
net assets ................................ 5.86%(1) 4.75% 4.88% 5.16% 4.96% 6.02%
Ratio of expenses before reimbursement and
waiver to average net assets .............. 1.26%(1) 1.72% 1.84% 2.45% 2.32% 2.11%
Portfolio turnover rate .................... 54.41% 30.72% 181.08% 147.78% 50.48% 117.31%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 47
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
AETNA GOVERNMENT FUND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH MARCH 1, 1999
PERIOD ENDED (DATE OF INITIAL
APRIL 30, 2000 PUBLIC OFFERING)
CLASS B (UNAUDITED) TO OCTOBER 31, 1999
---------------------------------------- -------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ... $ 9.86 $10.12
------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. 0.25 0.27+
Net realized and change in unrealized
gain or loss on investments .......... (0.13) (0.27)
------ ------
Total income from investment
operations.......................... 0.12 0.00
------ ------
LESS DISTRIBUTIONS:
From net investment income ............ (0.23) (0.26)
------ ------
Total distributions ................. (0.23) (0.26)
------ ------
Net asset value, end of period ......... $ 9.75 $ 9.86
====== ======
Total return ........................... 1.22% 0.00%
Net assets, end of period (000's) ...... $ 167 $ 152
Ratio of net investment expenses to
average net assets .................... 1.70%(1) 1.70%(1)
Ratio of net investment income to
average net assets .................... 5.11%(1) 4.00%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 2.01%(1) 2.47%(1)
Portfolio turnover rate ................ 54.41% 30.72%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
48 See Notes to Financial Statements.
<PAGE>
AETNA GOVERNMENT FUND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH JUNE 30, 1998
PERIOD ENDED YEAR ENDED (DATE OF INITIAL
APRIL 30, 2000 OCTOBER 31, PUBLIC OFFERING)
CLASS C (UNAUDITED) 1999 TO OCTOBER 31, 1998
--------------------------- -------------- ----------- -------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ................ $ 9.85 $10.29 $ 10.11
------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .... 0.24 0.40+ 0.15+
Net realized and change in
unrealized gain or loss on
investments.............. (0.12) (0.45) 0.17
------ ------ -------
Total income from
investment operations . 0.12 (0.05) 0.32
------ ------ -------
LESS DISTRIBUTIONS:
From net investment income (0.23) (0.39) (0.14)
------ ------ -------
Total distributions .... (0.23) (0.39) (0.14)
------ ------ -------
Net asset value, end of
period.................... $ 9.74 $ 9.85 $ 10.29
====== ====== =======
Total return .............. 1.24% (0.46)% 3.18%
Net assets, end of period
(000's)................... $ 119 $ 124 $ 117
Ratio of net investment
expenses to average net
assets.................... 1.70%(1) 1.70% 1.70%(1)
Ratio of net investment
income to average net
assets.................... 5.11%(1) 4.00% 4.21%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets .... 2.01%(1) 2.47% 2.51%(1)
Portfolio turnover rate ... 54.41% 30.72% 181.08%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 49
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
HIGH YIELD
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH FEBRUARY 2, 1998
PERIOD ENDED YEAR ENDED (COMMENCEMENT
APRIL 30, 2000 OCTOBER 31, OF OPERATIONS)
CLASS I (UNAUDITED) 1999 TO OCTOBER 31, 1998
--------------------------- -------------- ----------- -------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ................ $ 8.69 $ 8.81 $ 10.00
------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .... 0.40 0.87+ 0.60+
Net realized and change in
unrealized gain or loss on
investments.............. (0.19) (0.20) (1.21)
------ ------- -------
Total income from
investment operations . 0.21 0.67 (0.61)
------ ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.47) (0.79) (0.58)
------ ------- -------
Total distributions .... (0.47) (0.79) (0.58)
------ ------- -------
Net asset value, end of
period.................... $ 8.43 $ 8.69 $ 8.81
====== ======= =======
Total return .............. 2.35% 7.64% (6.50)%
Net assets, end of period
(000's)................... $8,093 $ 8,447 $ 8,452
Ratio of net investment
expenses to average net
assets.................... 0.95%(1) 0.95% 0.95%(1)
Ratio of net investment
income to average net
assets.................... 9.33%(1) 9.58% 8.17%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets .... 1.45%(1) 1.98% 2.27%(1)
Portfolio turnover rate ... 31.63% 138.79% 258.33%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
50 See Notes to Financial Statements.
<PAGE>
HIGH YIELD
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH FEBRUARY 2, 1998
PERIOD ENDED YEAR ENDED (COMMENCEMENT
APRIL 30, 2000 OCTOBER 31, OF OPERATIONS)
CLASS A (UNAUDITED) 1999 TO OCTOBER 31, 1998
--------------------------- -------------- ----------- -------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ................ $ 8.69 $ 8.81 $ 10.00
------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .... 0.43 0.85+ 0.58+
Net realized and change in
unrealized gain or loss on
investments............. (0.23) (0.20) (1.21)
------ ------- -------
Total income from
investment operations . 0.20 0.65 (0.63)
------ ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.46) (0.77) (0.56)
------ ------- -------
Total distributions .... (0.46) (0.77) (0.56)
------ ------- -------
Net asset value, end of
period.................... $ 8.43 $ 8.69 $ 8.81
====== ======= =======
Total return .............. 2.22% 7.39% (6.67)%
Net assets, end of period
(000's)................... $ 749 $ 570 $ 225
Ratio of net investment
expenses to average net
assets.................... 1.20%(1) 1.20% 1.20%(1)
Ratio of net investment
income to average net
assets.................... 9.08%(1) 9.33% 7.92%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets .... 1.70%(1) 2.23% 2.52%(1)
Portfolio turnover rate ... 31.63% 138.79% 258.33%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 51
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
HIGH YIELD
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH MARCH 1, 1999
PERIOD ENDED (DATE OF INITIAL
APRIL 30, 2000 PUBLIC OFFERING)
CLASS B (UNAUDITED) TO OCTOBER 31, 1999
---------------------------------------- -------------- -------------------
<S> <C> <C>
Net asset value, beginning of period ... $ 8.68 $ 9.27
------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................. 0.43 0.54+
Net realized and change in unrealized
gain or loss on investments .......... (0.26) (0.65)
------ -------
Total income from investment
operations.......................... 0.17 (0.11)
------ -------
LESS DISTRIBUTIONS:
From net investment income ............ (0.43) (0.48)
------ -------
Total distributions ................. (0.43) (0.48)
------ -------
Net asset value, end of period ......... $ 8.42 $ 8.68
====== =======
Total return ........................... 1.86% (1.28)%
Net assets, end of period (000's) ...... $ 308 $ 286
Ratio of net investment expenses to
average net assets .................... 1.95%(1) 1.95%(1)
Ratio of net investment income to
average net assets .................... 8.33%(1) 8.58%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 2.45%(1) 2.98%(1)
Portfolio turnover rate ................ 31.63% 138.79%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
52 See Notes to Financial Statements.
<PAGE>
HIGH YIELD
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH JUNE 30, 1998
PERIOD ENDED YEAR ENDED (DATE OF INITIAL
APRIL 30, 2000 OCTOBER 31, PUBLIC OFFERING)
CLASS C (UNAUDITED) 1999 TO OCTOBER 31, 1998
--------------------------- -------------- ----------- -------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ................ $ 8.68 $ 8.80 $ 10.07
------ ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .... 0.35 0.78+ 0.24+
Net realized and change in
unrealized gain or loss on
investments.............. (0.19) (0.19) (1.27)
------ ------- -------
Total income from
investment operations . 0.16 0.59 (1.03)
------ ------- -------
LESS DISTRIBUTIONS:
From net investment income (0.42) (0.71) (0.24)
------ ------- -------
Total distributions .... (0.42) (0.71) (0.24)
------ ------- -------
Net asset value, end of
period.................... $ 8.42 $ 8.68 $ 8.80
====== ======= =======
Total return .............. 1.82% 6.65% (10.28)%
Net assets, end of period
(000's)................... $ 219 $ 216 $ 178
Ratio of net investment
expenses to average net
assets.................... 1.95%(1) 1.95% 1.94%(1)
Ratio of net investment
income to average net
assets.................... 8.33%(1) 8.58% 7.18%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets .... 2.45%(1) 2.98% 3.26%(1)
Portfolio turnover rate ... 31.63% 138.79% 258.33%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 53
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS I (UNAUDITED) 1999 1998 1997 1996 1995
-------------------------------------------- -------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.03 0.05+ 0.05+ 0.05+ 0.05+ 0.06+
-------- -------- -------- -------- -------- --------
Total income from investment operations . 0.03 0.05 0.05 0.05 0.05 0.06
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income ................ (0.03) (0.05) (0.05) (0.05) (0.05) (0.06)
-------- -------- -------- -------- -------- --------
Total distributions ..................... (0.03) (0.05) (0.05) (0.05) (0.05) (0.06)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ========
Total return ............................... 2.80% 4.88% 5.36% 5.49% 5.44% 5.95%
Net assets, end of period (000's) .......... $247,280 $284,594 $276,024 $273,710 $323,281 $275,524
Ratio of net investment expenses to average
net assets ................................ 0.55%(1) 0.50% 0.48% 0.37% 0.30% 0.27%
Ratio of net investment income to average
net assets ................................ 5.54%(1) 4.79% 5.24% 5.31% 5.30% 5.78%
Ratio of expenses before reimbursement and
waiver to average net assets .............. 0.65%(1) 0.64% 0.72% 0.81% 0.83% 0.88%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
54 See Notes to Financial Statements.
<PAGE>
MONEY MARKET
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
CLASS A (UNAUDITED) 1999 1998 1997 1996 1995
---------------------------------------------- -------------- ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.03 0.05+ 0.05+ 0.05+ 0.05+ 0.06+
-------- -------- -------- -------- -------- -------
Total income from investment
operations ............................... 0.03 0.05 0.05 0.05 0.05 0.06
-------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS:
From net investment income .................. (0.03) (0.05) (0.05) (0.05) (0.05) (0.06)
-------- -------- -------- -------- -------- -------
Total distributions ....................... (0.03) (0.05) (0.05) (0.05) (0.05) (0.06)
-------- -------- -------- -------- -------- -------
Net asset value, end of period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== =======
Total return ................................. 2.80% 4.88% 5.36% 5.49% 5.44% 5.95%
Net assets, end of period (000's) ............ $178,267 $181,623 $161,456 $156,530 $119,849 $78,726
Ratio of net investment expenses to
average net assets .......................... 0.55%(1) 0.50% 0.48% 0.37% 0.30% 0.26%
Ratio of net investment income to average net
assets....................................... 5.54%(1) 4.79% 5.24% 5.31% 5.30% 5.79%
Ratio of expenses before reimbursement and
waiver to average net assets ................ 0.65%(1) 0.64% 0.72% 0.91% 0.93% 0.87%
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 55
<PAGE>
INCOME FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
MONEY MARKET
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH MARCH 1, 1999
PERIOD ENDED (DATE OF INITIAL
APRIL 30, 2000 PUBLIC OFFERING)
CLASS B (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 ................. 0.02 0.03+
------ ------
Total income from investment
operations.......................... 0.02 0.03
------ ------
LESS DISTRIBUTIONS:
From net investment income ............ (0.02) (0.03)
------ ------
Total distributions ................. (0.02) (0.03)
------ ------
Net asset value, end of period ......... $ 1.00 $ 1.00
====== ======
Total return ........................... 2.29% 2.56%
Net assets, end of period (000's) ...... $ 174 $ 148
Ratio of net investment expenses to
average net assets .................... 1.55%(1) 1.50%(1)
Ratio of net investment income to
average net assets .................... 4.54%(1) 3.78%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ...... 1.65%(1) 1.64%(1)
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
56 See Notes to Financial Statements.
<PAGE>
MONEY MARKET
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTH JUNE 30, 1998
PERIOD ENDED YEAR ENDED (DATE OF INITIAL
APRIL 30, 2000 OCTOBER 31, PUBLIC OFFERING)
CLASS C (UNAUDITED) 1999 TO OCTOBER 31, 1998
--------------------------- -------------- ----------- -------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ................ $ 1.00 $ 1.00 $ 1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .... 0.03 0.05+ 0.02+
------ ------ ------
Total income from
investment operations . 0.03 0.05 0.02
------ ------ ------
LESS DISTRIBUTIONS:
From net investment income (0.03) (0.05) (0.02)
------ ------ ------
Total distributions .... (0.03) (0.05) (0.02)
------ ------ ------
Net asset value, end of
period.................... $ 1.00 $ 1.00 $ 1.00
====== ====== ======
Total return .............. 2.80% 4.88% 1.75%
Net assets, end of period
(000's)................... $7,697 $6,765 $ 916
Ratio of net investment
expenses to average net
assets.................... 0.55%(1) 0.50% 0.48%(1)
Ratio of net investment
income to average net
assets.................... 5.54%(1) 4.79% 5.24%(1)
Ratio of expenses before
reimbursement and waiver
to average net assets .... 0.65%(1) 0.64% 0.72%(1)
</TABLE>
(1) Annualized.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 57
