<PAGE>
ANNUAL REPORT
-------------
OCTOBER 31, 2000
BROKERAGE
CASH
RESERVES
<PAGE>
PRESIDENT'S LETTER
Dear Fellow Shareholder,
October 31, 2000
Thank you for investing in the Aetna Series Fund, Inc. With nearly 8,000 mutual
funds available in today's market, we appreciate your confidence in us.
The twelve months ended October, 2000 witnessed much volatility in the U.S.
stock markets. For the past ten months, the major stock markets have all
declined: S&P 500 Index, off 1.8%; NASDAQ Composite Index, down 17.2%; Dow
Jones Industrial Average, minus 3.4%. Technology stocks in particular were hit
with a sharp decline in the latter part of this 12-month period. Still, each of
the indices remained in positive territory for the 12-month period, due to the
exceptionally strong performance during the last two months of 1999.
Over the course of the year, the Federal Reserve (the "Fed") continued a series
of rate increases that resulted in the Fed funds rate climbing from 5.45% to
6.5% as of October 31, 2000. The impact of rising interest rates and oil prices
was reflected in the U.S. Gross Domestic Product, which slowed from an 8.3%
annual rate in the last quarter of 1999 to an estimated 2.7% in the third
quarter of 2000. International investing was negatively affected by the spike
in oil prices and the strength of the U.S. dollar versus the Euro.
Nevertheless, U.S. economic and corporate earnings outlooks remained robust as
this report period closed, and market breadth, i.e. the number of stocks
advancing versus declining, has improved. Thus it appears that the Fed has been
able to slow the economy to a sustainable growth rate.
The Fund and its advisor, Aeltus Investment Management, Inc., continuously
strive to improve products and services for the benefit of the shareholders.
Here are some highlights of our recent efforts:
. AETNA PRINCIPAL PROTECTION FUNDS II, III AND IV enjoyed successful
offerings, as investors committed more than $450 million to the funds.
AETNA INDEX PLUS PROTECTION FUND (offering a lower minimum investment of
$5,000) is in its offering period until November 30, 2000. These funds are
designed to appeal to a broad range of investors seeking downside
protection with upside market potential.
.
On December 22, 1999, Aeltus acquired a minority equity interest in ELIJAH
ASSET MANAGEMENT, LLC (EAM), a skilled manager of specialized growth and
technology funds.
. AETNA TECHNOLOGY FUND was launched on March 1, 2000. Sub-advised by EAM,
the fund seeks long-term capital appreciation by investing primarily in
technology-sector stocks.
Following approval of shareholders and your Board of Directors, four funds
(Aetna Mid Cap Fund, Aetna Real Estate Securities Fund, Aetna High Yield Fund
and Aetna Index Plus Bond Fund) were liquidated on August 25, 2000, due to low
investor interest and resultant high fund expenses.
As 2000 draws to an end, we want to reaffirm our commitment to bring you the
best of products and services. Again, we greatly appreciate and value your
continued confidence in our funds and in Aeltus.
Sincerely,
<TABLE>
<CAPTION>
<S><C>
LOGO
J. Scott Fox
President
Aetna Series Fund, Inc.
</TABLE>
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.
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
President's Letter.....................................................i
BROKERAGE CASH RESERVES:
Investment Review......................................................1
Portfolio of Investments...............................................4
Statement of Assets and Liabilities....................................6
Statement of Operations................................................7
Statements of Changes in Net Assets....................................8
Notes to Financial Statements..........................................9
Additional Information.................................................12
Financial Highlights...................................................13
Independent Auditors' Report...........................................14
</TABLE>
<PAGE>
LOGO
<TABLE>
<CAPTION>
Page # Sep-99 Oct-99 Oct-00
<S> <C> <C> <C> <C> <C> <C> <C>
Brokerage Cash Reserves 1 10,000 10,070 10,198 10,330 10,476 10,629
IBC's Money Fund Average/All Taxable Index 1 10,000 10,077 10,202 10,336 10,482 10,636
</TABLE>
<TABLE>
<CAPTION>
<C> <S>
Average Annual Total Returns
for the Period ended October 31, 2000*
------------------------------------------
1 Year Inception
------------------------------------------
5.56% 5.44%
------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Investment
return and principal of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
**Effective April 3, 2000, the benchmark of the fund, IBC's Money Fund
Average/All Taxable Index, has changed its name to the iMoneyNet All Taxable
Average Index.
BROKERAGE CASH RESERVES
HOW DID THE FUND PERFORM DURING THE PERIOD?
Brokerage Cash Reserves shares generated a 5.56% total return, net of fund
expenses, for the year ended October 31, 2000. The benchmark, iMoneyNet All
Taxable Average Index(a), returned 5.54% for the same period. As of October 31,
2000, the Fund reported a 7-day yield of 5.80% with an average weighted maturity
of 42 days.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE FUND?
The beginning of the year reflected market expectations of continued Federal
Reserve ("the Fed") tightenings and higher short-term rates. As a result, the
yield curve was inverted for much of this time. Volatility in the capital
markets throughout the year led investors to increase their cash holdings. This
incremental demand at the short end of the yield curve has caused spreads to
narrow.
Recently, Treasury bond yields have declined, factoring in a slowing economy and
the market expectation that no further action by the Fed will be necessary. The
yield curve has become less inverted due to declines in 30-year Treasury yields
and large investor demand in the three-month area of the money market curve.
Expecting no additional tightening in the Fed's monetary policy for the
foreseeable future, money markets have virtually removed this factor from their
pricing.
See Definition of
Terms. 1
<PAGE>
WHAT INVESTMENTS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST TWELVE MONTHS?
The Fund maintained an overweight position in both the floating rate and
asset-backed (ABS) note sectors throughout much of the year. The Fund's
overweight position in floating rate instruments enabled the Fund to quickly
reflect Fed tightenings. The Fund strategically adjusted its weighted average
maturity, shortening its days before anticipated Fed tightenings and lengthening
at the end of June and September, in order to maximize the benefits of higher
yields.
Asset-backed issuance for the second calendar quarter surged, causing spreads to
widen considerably. We added numerous ABS purchases as a result. ABS spreads
tightened later in the reporting period as investor demand increased in the
short end. The Fund continued to add to the sector because yield pickup remained
more attractive than traditional money market instruments.
WHAT IS YOUR OUTLOOK GOING FORWARD?
While Treasury yields have declined on the expectation that the Fed is done
tightening, consumer demand continues to be strong, largely financed by prior
stock market and housing asset inflation as well as consumer debt. Given tight
labor markets, this growth is above sustainable levels under most reasonable
assumptions for productivity growth. The large current account deficit provides
support for our view that the dollar could weaken. Combined with high oil
prices, this could cause inflation to continue to increase at the same time that
growth decelerates. This scenario could cause interest rates to rise or spreads
to widen.
There continues to be strong demand throughout the curve, especially in the two
to six month maturity range where the supply is lighter and the yield pickup is
greater. The strong bid for ABS paper should also continue, as term investors
shorten up and use ABS as a cash surrogate.
Against this framework, we expect to maintain a weighted average maturity that
is modestly shorter than our competitors, until technical or other factors cause
market conditions to reverse and there is greater value in term paper. Despite
narrower spreads, we plan on maintaining our overweight in the ABS sector, both
as a means to acquire incremental yield and to provide credit quality stability.
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 33.8%
31 - 60 days 17.5%
61 - 90 days 7.7%
91 - 120 days 1.6%
121 - 180 days 4.7%
181 - 397 days 34.7%
</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
October 31, 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.
2 See Definition of Terms.
<PAGE>
<TABLE>
<CAPTION>
DEFINITION OF TERMS
<S><C>
(a)The iMoneyNet All Taxable Average Index (formerly the IBC Money Fund
Average/All Taxable Index) is an average of the returns of more than 250
money market mutual funds surveyed each month by iMoneyNet, Inc.
The unmanaged index described above is not available for individual investment.
</TABLE>
3
<PAGE>
BROKERAGE CASH RESERVES
PORTFOLIO OF INVESTMENTS - OCTOBER 31, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PRINCIPAL VALUE
AMOUNT
-------------- ---------------
ASSET-BACKED SECURITIES (46.8%)
Americredit Auto Receivables Trust,
6.89%,06/05/01 ...................... $ 4,022,994 $ 4,022,814
ANRC Auto Owner Trust,6.72%,08/15/01 . 8,417,267 8,417,267
Chevy Chase Auto Receivables Trust,
6.87%,07/12/01 ...................... 2,426,284 2,426,284
CIT Equipment Collateral Owner Trust,
6.64%,06/20/01 ...................... 10,946,279 10,946,279
CNH Equipment Trust,6.18%,04/09/01 ... 386,492 386,492
Conseco Finance Lease LLC,
6.84%,08/20/01 ...................... 5,985,419 5,985,419
Copelco Capital Funding LLC,
6.51%,05/14/01....................... 4,529,895 4,529,895
Dealers Capital Acceptance Trust,
Inc.,
6.57%,12/26/00 ...................... 5,000,000 4,949,813
Dealers Capital Access
Trust,6.70%,11/01/00................. 8,000,000 8,000,000
DVI Receivables,6.72%,05/14/01 ....... 3,113,390 3,113,390
Eureka Securitization
Plc,6.57%,11/13/00 ++................ 1,641,000 1,637,406
First Security Auto Owner Trust,
6.77%,07/15/01 ...................... 4,302,233 4,302,233
Ford Credit Auto Owner Trust,
6.67%,06/15/01....................... 9,000,000 9,000,000
Ford Credit Auto Owner Trust,
6.82%,03/15/01....................... 2,849,133 2,849,133
Honda Auto Receivables Owner Trust,
6.71%,11/15/01 ...................... 7,000,000 7,000,000
Huntington Auto Trust,6.32%,04/15/01 . 2,410,885 2,410,885
MMCA Auto Owner Trust 2000-1,
6.73%,05/15/01 ...................... 10,030,052 10,030,052
Navistar Financial
Owner,6.73%,11/15/01 # .............. 8,000,000 8,000,000
Onyx Acceptance Owner Trust,
6.41%,05/15/01 ...................... 1,633,012 1,633,012
Onyx Acceptance Owner Trust 2000-B
Class A-1,6.79%,08/15/01 ............ 2,508,241 2,508,241
Orix Credit Alliance Owner Trust,
6.24%,03/15/01 ...................... 1,272,543 1,272,543
Orix Credit Alliance Receivables Trust
2000-A,6.76%,09/15/01................ 12,234,975 12,235,466
Racers Series 2000mm,6.64%,05/30/01 ++ 10,000,000 9,998,470
Summit Acceptance Auto,6.45%,05/15/01
++................................... 2,192,822 2,192,822
Syndicated Loan Funding Trust,
6.77%,03/15/01 ++ ................... 3,000,000 3,000,000
Textron Financial Corp.,6.67%,10/15/01
++................................... 3,389,684 3,389,684
Variable Funding
Capital,6.65%,11/01/00 ++ ........... 13,000,000 13,000,000
TOTAL ASSET-BACKED SECURITIES 147,237,600
---------------
COMMERCIAL PAPER - DOMESTIC (18.5%)
Block Financial Corp.,6.62%,11/30/00
++................................... 6,000,000 5,968,003
Countrywide Home Loans,6.73%,11/01/00 3,000,000 3,000,000
PHH Corp.,6.80%,11/01/00 ............. 4,000,000 4,000,000
PHH Corp.,6.70%,12/14/00 ............. 9,000,000 8,927,975
Popular North America
Inc.,6.70%,11/21/00.................. 5,000,000 4,981,389
Torchmark Corp.,6.60%,12/14/00 ....... 1,500,000 1,488,175
Torchmark Corp.,6.55%,12/12/00 ....... 5,000,000 4,962,701
PRINCIPAL VALUE
AMOUNT
-------------- ---------------
COMMERCIAL PAPER - DOMESTIC (CONTINUED)
Washington Mutual Financial Corp.,
6.75%,01/24/01 ++ ................... $ 4,000,000 $ 3,937,000
Wheels Inc.,6.65%,11/07/00 + *........ 13,000,000 12,985,592
Wood Street Funding
Corp.,6.51%,11/03/00 ++ ............. 8,084,000 8,081,072
TOTAL COMMERCIAL PAPER - DOMESTIC 58,331,907
---------------
CORPORATE NOTES (11.1%)
Bank One Corp.,6.93%,01/16/01 ........ 10,000,000 10,002,039
Countrywide Home Loans, Inc.,
6.75%,09/05/01 ...................... 10,000,000 9,996,855
Eaton Corp.,6.58%,11/14/00 ++ ........ 5,000,000 4,988,119
Vodafone AirTouch Plc,6.76%,06/05/01
++................................... 10,000,000 10,000,000
TOTAL CORPORATE NOTES 34,987,013
---------------
AGENCY OBLIGATIONS (4.2%)
Student Loan Marketing Assoc.,
6.82%,11/13/00-02/01/01 ............. 10,500,000 10,501,622
Student Loan Marketing Assoc.,
6.85%,03/23/01 ...................... 2,700,000 2,701,173
TOTAL AGENCY OBLIGATIONS 13,202,795
---------------
MEDIUM-TERM NOTES - DOMESTIC (12.0%)
American Express Centurion Bank,
6.59%,10/16/01 ...................... 5,000,000 5,000,000
Associates Corp. N.A.,6.65%,10/01/01
++ .................................. 4,000,000 4,000,000
Associates Corp. N.A.,6.66%,10/01/01
++................................... 4,000,000 4,000,000
Ciesco LP,6.59%,10/15/01 ............. 7,000,000 7,000,000
Lehman Brothers Holdings Inc,
6.87%,09/04/01 ...................... 4,400,000 4,407,221
Lehman Brothers Holdings Inc.,
7.09%,11/06/00 ...................... 3,000,000 3,000,130
Pacific Gas & Electric
Co.,7.06%,10/31/01 ++ ............... 3,300,000 3,300,000
Popular North America
Inc.,6.75%,08/09/01.................. 2,000,000 1,994,626
Washington Mutual Financial Corp.,
5.88%,02/27/01 ++ ................... 5,000,000 4,983,962
TOTAL MEDIUM-TERM NOTES - DOMESTIC 37,685,939
---------------
MEDIUM-TERM NOTES - FOREIGN (5.6%)
Republic of Argentina,Zero
Coupon,04/15/01...................... 8,000,000 7,760,645
Unilever NV,6.79%,07/15/01 ........... 10,000,000 9,998,512
TOTAL MEDIUM-TERM NOTES - FOREIGN 17,759,157
---------------
TOTAL INVESTMENTS
(COST $309,204,411)(A) 309,204,411
OTHER ASSETS LESS LIABILITIES 5,731,735
---------------
TOTAL NET ASSETS $314,936,146
---------------
</TABLE>
4 See Notes to Portfolio of Investments.
<PAGE>
<TABLE>
<CAPTION>
NOTES TO PORTFOLIO OF INVESTMENTS
<S> <C>
(a) The cost of investments for federal income tax purposes is identical.
There were no unrealized gains or losses as of October 31, 2000.
</TABLE>
# When-issued or delayed delivery 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.
* Segregated securities for purchases of delayed delivery or when-issued
securities held at October 31, 2000.
<TABLE>
<CAPTION>
Acquisition date and cost of illiquid securities at October 31, 2000 is shown
below:
ACQUISITION
DATE COST
-------------------- ----------------------
<S> <C> <C>
Wheels Inc., 6.65%, 11/07/00..... 10/06/00 $12,985,592
================
</TABLE>
The market value of the total illiquid securities above is $12,985,592 which
represents 4.12% of the total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 5
<PAGE>
BROKERAGE CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value ........................................ $309,204,411
Receivable for:
Dividends and interest ...................................... 1,082,874
Investments sold ............................................ 16,200,121
Reimbursement from Investment Adviser ....................... 159,006
Prepaid expenses ............................................. 3,403
------------
Total assets ............................................ 326,649,815
------------
LIABILITIES:
Payable for:
Investments purchased ....................................... 11,300,000
Investment advisory fees ..................................... 50,555
Administration service fees .................................. 25,278
Service fees ................................................. 37,916
Custodian fees ............................................... 805
Other liabilities ............................................ 299,115
------------
Total liabilities ....................................... 11,713,669
------------
NET ASSETS ............................................. $314,936,146
============
NET ASSETS REPRESENTED BY:
Paid-in capital .............................................. $315,293,707
Undistributed net investment income.......................... 35,599
Accumulated net realized loss on investments ................. (393,160)
------------
NET ASSETS ............................................. $314,936,146
============
CAPITAL SHARES, $.001 PAR VALUE:
Outstanding .................................................. 315,293,707
Net Assets ................................................... $314,936,146
Net asset value, offering and redemption price per share (net
assets divided by shares outstanding) ....................... $ 1.00
Cost of investments .......................................... $309,204,411
</TABLE>
6 See Notes to Financial Statements.
<PAGE>
BROKERAGE CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2000
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest ...................................................... $20,277,940
-----------
Total investment income .................................. 20,277,940
-----------
INVESTMENT EXPENSES:
Investment advisory fees ...................................... 633,835
Administrative services fees .................................. 316,918
Distribution Plan and shareholder services fees ............... 2,059,964
Printing and postage fees ..................................... 21,159
Custody fees .................................................. 11,654
Transfer agent fees ........................................... 156,830
Audit fees .................................................... 26,397
Directors' fees ............................................... 6,790
Registration fees ............................................. 1,612
Miscellaneous expenses ........................................ 20,479
-----------
Expenses before reimbursement and waiver from Investment
Adviser....................................................... 3,255,638
Expense reimbursement and waiver from Investment Adviser ...... (242,526)
-----------
Net investment expenses .................................. 3,013,112
-----------
Net investment income ......................................... 17,264,828
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments .................................................. (393,160)
-----------
Net realized loss on investments ......................... (393,160)
-----------
Net increase in net assets resulting from operations .......... $16,871,668
===========
</TABLE>
See Notes to Financial Statements. 7
<PAGE>
BROKERAGE CASH RESERVES
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 7, 1999
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income .................. $17,264,828 $1,859,345
Net realized loss on investments........ (393,160) --
Net increase in net assets resulting 16,871,668 1,859,345
from operations........................
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............. (17,229,229) (1,859,345)
Decrease in net assets from (17,229,229) (1,859,345)
distributions to shareholders..........
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.............. 250,504,678 304,691,306
Net asset value of shares issued upon
reinvestment of distributions......... 17,230,481 1,859,488
Payments for shares redeemed........... (230,052,872) (28,939,374)
Net increase in net assets from fund 37,682,287 277,611,420
share transactions.....................
Net change in net assets................ 37,324,726 277,611,420
NET ASSETS:
Beginning of period..................... 277,611,420 --
End of period........................... $314,936,146 $277,611,420
End of period net assets includes $35,599 $--
undistributed net investment income....
SHARE TRANSACTIONS:
Number of shares sold.................. 250,504,678 304,691,306
Number of shares issued upon
reinvestment of distributions......... 17,230,481 1,859,488
Number of shares redeemed.............. (230,052,872) (28,939,374)
Net increase........................... 37,682,287 277,611,420
</TABLE>
8 See Notes to Financial Statements.
<PAGE>
BROKERAGE CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
1. ORGANIZATION
Aetna Series Fund, Inc. (Company) is registered under the Investment Company Act
of 1940 (the Act) as an open-end management investment company. It was
incorporated under the laws of Maryland on June 17, 1991. The Articles of
Incorporation permit the Company to offer separate funds, each of which has its
own investment objective, policies and restrictions.
This report covers Brokerage Cash Reserves (Fund). Shares in the Fund were first
made available to the public on September 7, 1999. The Fund seeks to provide
high current return, consistent with the preservation of capital and liquidity,
through investment in high-quality money market instruments.
Aeltus Investment Management, Inc. (Aeltus) serves as the investment adviser to
the Fund. Aeltus Capital, Inc. (ACI) is the Fund's principal underwriter. Aeltus
and ACI are indirect wholly owned subsidiaries of Aetna Inc. (Aetna).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Fund have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of financial statements requires management to make
estimates and assumptions that affect amounts reported therein. Actual results
could differ from these estimates.
A. VALUATION OF INVESTMENTS
The Fund, as permitted by Rule 2a-7 under the Act, carries all investments at
amortized cost, which approximates market value.
B. ILLIQUID AND RESTRICTED SECURITIES
Illiquid securities are not readily marketable. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price. Restricted securities are those sold under Rule 144A of the
Securities Act of 1933 (1933 Act) or are securities offered pursuant to section
4(2) of the 1933 Act, and are subject to legal or contractual restrictions on
resale and may not be publicly sold without registration under the 1933 Act.
Illiquid and restricted securities are valued using market quotations when
readily available. In the absence of market quotations, the securities are
valued based upon their fair value determined under procedures approved by the
Board of Directors. The Fund will not pay the costs of disposition of restricted
securities other than ordinary brokerage fees, if any.
C. DELAYED DELIVERY TRANSACTIONS
The Fund may purchase or sell securities on a when-issued or forward commitment
basis. The price of the underlying securities and date when the securities will
be delivered and paid for are fixed at the time the transaction is negotiated.
The market value of the securities purchased or sold are identified in the
Fund's Portfolio of Investments. Losses may arise due to changes in the market
value of the securities or from the inability of counterparties to meet the
terms of the contract. In connection with such purchases, the Fund is required
to hold liquid assets as collateral with the Funds' custodian sufficient to
cover the purchase price.
9
<PAGE>
BROKERAGE CASH RESERVES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2000
D. FEDERAL INCOME TAXES
The Fund intends to meet the requirements to be taxed as a regulated investment
company for the current year. As such, the Fund is relieved of federal income
taxes by distributing all of its net taxable investment income and capital
gains, if any, in compliance with the applicable provisions of the Internal
Revenue Code (Code). Furthermore, by declaring such distributions during the
calendar year, the Fund will avoid federal excise taxes in accordance with the
applicable provisions of the Code. Thus, the financial statements contain no
provision for federal income taxes.
E. DISTRIBUTIONS
Distributions are recorded on the ex-dividend date. Distributions of realized
gains from sales of securities held one year or less are taxable to shareholders
at ordinary income tax rates rather than preferred capital gain tax rates in
accordance with the applicable provisions of the Code.
F. OTHER
Investment transactions are accounted for on trade date. Interest income is
recorded on an accrual basis. Discounts and premiums on securities purchased are
accreted or amortized, respectively, using an effective yield method over the
life of the security.
3. INVESTMENT ADVISORY, SHAREHOLDER SERVICES AND DISTRIBUTION FEES
The Fund pays Aeltus an investment advisory fee at an annual rate of 0.20% of
the average daily net assets.
The Company and Aeltus have entered into an Administrative Services Agreement
under which Aeltus acts as administrator and provides certain administrative and
shareholder services and is responsible for the supervision of other service
providers for each Fund. The Fund pays Aeltus an administrative services fee at
an annual rate of 0.10% of its average daily net assets.
The Company has adopted a Shareholder Services Plan for the Fund. Under the
Shareholder Services Plan, ACI is paid a service fee at an annual rate of 0.15%
of the average daily net assets of the Fund. This fee is used as compensation
for expenses incurred in servicing shareholders' accounts.
The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Act. The Distribution Plan provides for payments to ACI at an annual rate of
0.50% of the average daily net assets.
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated through December 31, 2000 to reimburse the
Fund for some or all of its operating expenses or to waive fees in order to
maintain a certain expense ratio. Reimbursement and waiver arrangements will
increase the Fund's yield and total return. Actual expenses for the year ended
October 31, 2000 were at contractual limits. Actual expense ratios are included
in the Financial Highlights.
5. AUTHORIZED CAPITAL SHARES
The Company is authorized to issue a total of 15 billion shares. Of those 15
billion shares, 1 billion shares have been designated to the Fund.
10
<PAGE>
6. CAPITAL LOSS CARRYFORWARDS
As of October 31, 2000, the Fund had a capital loss carryforward of $393,160.
This capital loss carryforward may be used to offset future capital gains until
October 31, 2008, at which time the carryforward will expire. It is the policy
of the Fund to reduce future distributions of realized gains to shareholders to
the extent of the unexpired capital loss carryforward.
11
<PAGE>
BROKERAGE CASH RESERVES
ADDITIONAL INFORMATION
OCTOBER 31, 2000
1. SHAREHOLDER MEETING (UNAUDITED)
The shareholders of Aetna Inc. (Aetna), of which Aeltus was an indirect
wholly-owned subsidiary, voted in favor of a proposal to sell certain of Aetna's
businesses, including Aeltus, to ING Groep N.V. (ING), an integrated financial
services provider. Consummation of the transaction has resulted in Aeltus
becoming an indirect wholly-owned subsidiary of ING in December 2000.
Under the Act, the transaction resulted in a change in control of Aeltus and
therefore, constituted an assignment of the Company's investment advisory
agreements. Consequently, Aeltus received approval of new investment advisory
agreements from the Board and the shareholders of each Fund. The results of the
shareholder meeting held on November 22, 2000, are as follows:
A. ELECTION OF DIRECTORS
The following individuals were elected to serve as Directors of the Company.
Every individual named served as a Director prior to this election and there are
no other individuals currently serving as Directors of the Company.
<TABLE>
<CAPTION>
NUMBER OF % OF VOTES
-------------------------
SHARES VOTING CAST FOR WITHHELD
----------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Albert E. DePrince Jr.
695,450,143.647 95.737% 4.263%
Maria T. Fighetti
695,450,143.647 95.658% 4.342%
J. Scott Fox
695,450,143.647 95.644% 4.356%
David L. Grove
695,450,143.647 95.539% 4.461%
John Y. Kim
695,450,143.647 95.641% 4.359%
Sidney Koch
695,450,143.647 95.652% 4.348%
Corine T. Norgaard
695,450,143.647 95.628% 4.372%
Richard G. Scheide
695,450,143.647 95.610% 4.390%
</TABLE>
B. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
Shareholders in each Fund voted to approve a new Investment Advisory Agreement
(Agreement) between each Fund and Aeltus. The Agreement reflects the acquisition
of the financial services and international businesses of Aetna, of which Aeltus
is an indirect wholly-owned subsidiary, by ING, with no change in advisory fees
payable to Aeltus.
<TABLE>
<CAPTION>
NUMBER OF % OF VOTES
--------------------------------------------
SHARES VOTING CAST FOR CAST AGAINST ABSTAIN
----------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Brokerage Cash
Reserves 304,753,572.800 98.784% 0.691% 0.525%
</TABLE>
C. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Shareholders of all the Funds of the Company approved the selection of KPMG LLP
as independent auditors for all of the Funds for the fiscal year ending October
31, 2001.
<TABLE>
<CAPTION>
NUMBER OF % OF VOTES
--------------------------------------------
SHARES VOTING CAST FOR CAST AGAINST ABSTAIN
----------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
KPMG LLP
695,450,143.647 94.875% 1.199% 3.926%
</TABLE>
12
<PAGE>
FINANCIAL HIGHLIGHTS
BROKERAGE CASH RESERVES
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 7, 1999
(COMMENCEMENT
YEAR ENDED OF OPERATIONS)
OCTOBER 31, 2000 TO OCTOBER 31, 1999
---------------- -------------------
<S> <C> <C>
Net asset value, beginning of period . $ 1.00 $ 1.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............... 0.05++ 0.01+
-------- --------
Total income from investment
operations........................ 0.05 0.01
-------- --------
LESS DISTRIBUTIONS:
From net investment income .......... (0.05) (0.01)
-------- --------
Total distributions ............... (0.05) (0.01)
-------- --------
Net asset value, end of period ....... $ 1.00 $ 1.00
======== ========
Total return ......................... 5.56% 0.70%
Net assets, end of period (000's) .... $314,936 $277,611
Ratio of net investment expenses to
average net assets .................. 0.95% 0.95%(1)
Ratio of net investment income to
average net assets .................. 5.45% 4.62%(1)
Ratio of expenses before reimbursement
and waiver to average net assets .... 5.37% 1.22%(1)
</TABLE>
(1) Annualized.
++ Per share data calculated using the SEC method.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 13
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Aetna Series Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Aetna
Brokerage Cash Reserves, a series of Aetna Series Fund, Inc. (the Fund),
including the portfolio of investments as of October 31, 2000, and the related
statement of operations for the year then ended and statements of changes in net
assets and financial highlights for the year then ended and the period from
September 7, 1999 (commencement of operations) to October 31, 1999. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of October 31, 2000 by correspondence with the custodian.
As to securities purchased or sold but not yet received or delivered, we
performed other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Aetna
Brokerage Cash Reserves as of October 31, 2000, the results of its operations,
changes in its net assets and financial highlights for the periods specified in
the first paragraph above, in conformity with accounting principles generally
accepted in the United States of America.
Hartford, Connecticut
December 8, 2000
14
<PAGE>
P171ANN (10/00)
