Aetna Variable Annuity Funds
BUILD FOR
RETIREMENT. MANAGE
FOR LIFE.(SM)
1998
Annual
Report
[Aetna Logo]
ANN.INDEX-98(3/99) Retirement Services(R)
<PAGE>
PRESIDENT'S LETTER
Dear Valued Shareholder,
Thank you for investing in Aetna Variable Funds. Since you have many other
investment options from which to choose, we truly appreciate the confidence
you've placed in us to help you reach your investment goals. While the enclosed
annual report will give you a detailed review of the funds you have selected,
I'd like to share a few observations about the market in general and some
specific news about the funds and their adviser, Aeltus Investment Management,
Inc.
The past twelve months have been memorable both for the stock market and the
U.S. economy overall. It was a year of ups and downs in the market, with a
record high in July, followed by a severe correction during the third quarter.
Market volatility achieved and sustained levels not seen since the aftershocks
of the Crash of '87. Despite this volatility, there was plenty of good news.
The American economy was generally healthy, with low interest and inflation
rates, a reduced federal budget deficit and unemployment levels that registered
at lows not seen in many years. In addition, wages continued to grow and
consumer confidence held steady. All of these positive factors have allowed the
U.S. stock market to recoup the ground lost during the correction, despite
ongoing economic problems in Asia, Russia and Latin America.
Even with so much happening "on the street," the past year was equally exciting
and productive for Aeltus and the funds. Six new Aetna Variable Funds were
added, opening up new opportunities for investors like you to diversify your
portfolios across a broader range of asset classes and investment styles. The
names of certain funds were changed to more clearly reflect their investment
styles, as presented below,
<TABLE>
<CAPTION>
<S> <C>
Former Name Current Name
----------- ------------
Aetna Income Shares Aetna Bond VP
Aetna Investment Advisers Fund, Inc. Aetna Balanced VP, Inc.
Aetna Variable Encore Fund Aetna Money Market VP
Aetna Variable Fund Aetna Growth and Income VP
</TABLE>
In addition, we have been actively assessing and updating Aeltus' computer
systems with respect to "Year 2000" dating issues so they will be able to
adequately perform their intended functions after 1999. We look forward to
completing remediation and testing of all relevant systems by mid-1999.
Today, with over $49 billion in assets under management, Aeltus is one of the
country's largest investment management firms. That's important for investors,
because it represents the kind of size and strength that will allow us to
continue refining our existing investment management services and products,
adding new ones, and growing our staff to serve valued shareholders like you.
Thank you for your continued confidence in the Aetna Variable Funds and Aeltus
Investment Management, Inc. We look forward to a mutually prosperous new year.
Sincerely,
[Graphic of Signature of J. Scott Fox]
J. Scott Fox
President
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S>
<C>
President's Letter..................................................... i
INDEX PLUS PORTFOLIOS:
Investment Review...................................................... 1
Portfolios of Investments:
Aetna Index Plus Bond VP.............................................. 10
Aetna Index Plus Large Cap VP......................................... 12
Aetna Index Plus Mid Cap VP........................................... 18
Aetna Index Plus Small Cap VP......................................... 22
Statements of Assets and Liabilities................................... 28
Statements of Operations............................................... 30
Statements of Changes in Net Assets.................................... 32
Notes to Financial Statements.......................................... 36
Additional Information................................................. 41
Financial Highlights................................................... 42
Independent Auditors' Report........................................... 46
GENERATION PORTFOLIOS:
Investment Review...................................................... 47
Portfolios of Investments:
Aetna Ascent VP....................................................... 52
Aetna Crossroads VP................................................... 59
Aetna Legacy VP....................................................... 66
Statements of Assets and Liabilities................................... 73
Statements of Operations............................................... 74
Statements of Changes in Net Assets.................................... 75
Notes to Financial Statements.......................................... 78
Additional Information................................................. 87
Financial Highlights................................................... 88
Independent Auditors' Report........................................... 91
</TABLE>
<PAGE>
Aetna Index Plus Bond VP
Growth of $10,000
[Begin Line Chart]
Lehman Brothers
Aetna Index Plus Bond VP Aggregate Bond Index
------------------------ --------------------
12/18/97 10,000 10,000
12/31/97 10,031 10,046
10,182 10,200
10,409 10,439
10,761 10,881
12/31/98 10,851 10,918
[End Line Chart]
- ------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1998*
- ------------------------------------------
<TABLE>
<CAPTION>
Inception Date 1 Year Inception
- ------------------------------------------
<S> <C> <C>
12/18/97 8.17% 8.20%
- ------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not take into account any separate account charges imposed by Aetna.
AETNA INDEX PLUS BOND VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Index Plus Bond VP (Index Plus Bond) generated a 8.17% total return, net
of fund expenses, for the year ended December 31, 1998. The benchmark, Lehman
Brothers Aggregate Bond Index(a), returned 8.69% for the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
The most significant factor influencing the performance of the Portfolio during
1998 was the performance of the corporate bond market. The Portfolio's strategy
incorporates a 25% overweight in corporate bonds. Corporate bonds modestly
underperformed U.S. Treasuries during the first half of 1998, but severely
underperformed in the third quarter. Recession fears and the unwinding of hedge
fund holdings caused corporate bond spreads to widen dramatically. During the
fourth quarter, corporate bonds had a weak start, but ended the quarter modestly
better. Corporate bonds had their worst performance in a decade.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
The Portfolio's overweight position in corporate bonds, in particular finance
company holdings and specific foreign bond holdings, performed poorly in the
context of a weak corporate bond environment.
WHAT IS YOUR OUTLOOK GOING FORWARD?
The U.S. economy is widely expected to slow in 1999 to its long-term average
growth rate of 2.3%. A cooling from 1998's robust growth is premised on a
decline in consumer spending and business investment, but Europe and Asia may
see stronger
See Definition of Terms. 1
<PAGE>
growth in 1999, which would help offset the drag on the U.S. from lower domestic
consumption and investment.
The largest risks continue to be posed by the possibilities of a material
correction in the U.S. stock market, or a financial collapse of a significant
Asian or Latin American economy. Thus, constant monitoring of economic
conditions and careful selection of individual bonds will continue to be
critical in the months ahead.
<TABLE>
<CAPTION>
- -------------------------------------------
QUALITY RATINGS
- -------------------------------------------
<S> <C>
AAA 58.2%
AA 1.7%
A 19.4%
BBB 19.2%
BB 1.5%
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------
MATURITY DISTRIBUTION
- -------------------------------------------
<S> <C>
0 - 1 years 7.7%
1 - 5 years 28.9%
5 - 10 years 12.9%
10 - 20 years 18.8%
20 + years 31.7%
</TABLE>
The opinions expressed reflect those of the portfolio manager only through
December 31, 1998. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
2 See Definition of Terms.
<PAGE>
Aetna Index Plus Large Cap VP
Growth of $10,000
[Begin Line Chart]
Aetna Index Plus Large Cap VP S&P 500 Index
----------------------------- -------------
09/16/96 10,000 10,000
09/30/96 10,069 10,276
12/31/96 10,964 11,053
11,246 10,834
13,272 13,067
14,285 14,045
12/31/97 14,680 14,448
16,759 16,464
17,420 17,007
15,728 15,315
12/31/98 19,319 18,577
[End Line Chart]
Average Annual Total Returns
for the period ended December 31, 1998*
- ------------------------------------------
<TABLE>
<CAPTION>
Inception Date 1 Year Inception
- ------------------------------------------
<S> <C> <C>
09/16/96 31.60% 33.32%
- ------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not take into account any separate account charges imposed by Aetna.
AETNA INDEX PLUS LARGE CAP VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Index Plus Large Cap VP (Index Plus Large Cap) generated a 31.60% total
return, net of fund expenses, for the year ended December 31, 1998. The
benchmark, Standard & Poor's (S&P) 500 Index(b), returned 28.57% for the same
period. Among variable annuity large blend stock funds tracked by Morningstar,
Inc., the Portfolio ranked in the top 9% (out of 662 funds) for the one year
period ended December 31, 1998.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
The size effect persisted throughout the year (large stocks did better than
smaller stocks). The Portfolio once again benefited from this effect because our
model continued to rate larger issues more favorably and consequently
overweighted them in the Portfolio. It should be noted that these issues were
not favored because they were large per se, but because they generally scored
well on attributes such as low price to earnings, relative performance and
earnings momentum, all of which are important determinants in predicting which
stocks are likely to do well.
Another trend that affected the performance of the Portfolio in 1998 was the
enormous disparity between the returns of so-called growth stocks relative to
value stocks. The stocks in the S&P 500 with the lowest price relative to their
book value (the criterion used to create S&P/Barra style indexes) underperformed
the alternative by over 7%. The Portfolio benefited from this large dispersion
because our model rated growth issues more favorably and consequently
overweighted them.
See Definition of Terms. 3
<PAGE>
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
The Portfolio benefited from an underweight position in the energy sector for
most of 1998 as oil prices plummeted to an all-time low (adjusted for inflation)
during the year. Conversely, performance was adversely affected by a relatively
low weight in finance sector, which outperformed during the fourth quarter.
WHAT IS YOUR OUTLOOK GOING FORWARD?
In 1998, as fears of disinflation took root, the market favored long duration
assets such as long-term bonds or other long dated assets in order to lock in
the current economic rent for money (usually in the form of a high coupon). The
longest duration asset class that exists is a true growth company -- a company
that can grow its earnings regardless of the environment is an extremely
valuable asset. The multiple you would pay for such an asset in a deflationary
environment is huge. In 1998, people paid dearly for growth due to a pervasive
fear of deflation and global economic malaise. If, in 1999, the world economy
is stronger and there is a shift in perception about the world economy, this
trend may reverse. However, the evidence of a turn right now is tenuous at
best.
PORTFOLIO SECTOR BREAKDOWN:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
% OF
COMMON % OF S&P OVER/(UNDER)
SECTOR STOCKS 500 WEIGHTING
- ------------------------------------------------------------------
<S> <C> <C> <C>
Basic Materials 2.2% 3.1% (0.9)%
Commercial Services 1.7% 1.8% (0.1)%
Consumer Discretionary 12.7% 12.3% 0.4%
Consumer Non-Discretionary 6.8% 9.4% (2.6)%
Energy 4.7% 6.9% (2.2)%
Finance 13.9% 15.7% (1.8)%
Healthcare 12.7% 12.3% 0.4%
Manufacturing 9.8% 9.7% 0.1%
Technology 20.6% 18.1% 2.5%
Utilities 14.9% 10.7% 4.2%
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- --------------------------------------------------
<S> <C>
Microsoft Corp. 4.5%
General Electric Co. 2.9%
Intel Corp. 2.9%
Wal-Mart Stores, Inc. 2.6%
International Business Machines Corp. 2.5%
Lucent Technologies, Inc. 2.1%
Merck & Co., Inc. 2.0%
Cisco Systems 1.7%
Exxon Corp. 1.5%
Eli Lilly & Co. 1.4%
</TABLE>
The opinions expressed reflect those of the portfolio manager only through
December 31, 1998. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
4 See Definition of Terms.
<PAGE>
Aetna Index Plus Mid Cap VP
Growth of $10,000
[Begin Line Chart]
Aetna Index Plus Mid Cap VP S&P Midcap 400 Index
--------------------------- --------------------
12/16/97 10,000 10,000
12/31/97 10,348 10,390
11,459 11,535
11,339 11,288
9,958 9,655
12/31/98 12,862 12,377
[End Line Chart]
- ------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1998*
<TABLE>
<CAPTION>
- ------------------------------------------
Inception Date 1 Year Inception
- ------------------------------------------
<S> <C> <C>
12/16/97 24.30% 27.35%
- ------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not take into account any separate account charges imposed by Aetna.
AETNA INDEX PLUS MID CAP VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Index Plus Mid Cap VP (Index Plus Mid Cap) generated a 24.30% total
return, net of fund expenses, for the year ended December 31, 1998. The
benchmark, Standard & Poor's (S&P) Midcap 400 Index(c), returned 19.11% for the
same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
One trend that affected the performance of the Portfolio in 1998 was the
enormous disparity between the returns of so-called growth stocks relative to
value stocks. The stocks in the S&P Midcap 400 with the lowest price relative to
their book value (the criterion used to create the S&P/Barra style indexes)
underperformed the alternative by an amazing 30.2%. The Portfolio benefited
from this large dispersion because the model used to evaluate the stocks in the
S&P Midcap 400 rated growth issues more favorably and consequently overweighted
them in the Portfolio. It should be noted that these issues were not favored
because they were growth stocks, but because they generally scored well on
attributes such as low price to earnings, relative performance and earnings
momentum, all of which are important determinants in predicting which stocks are
likely to do well.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
The Portfolio benefited from an underweight position in the energy sector as oil
prices plummeted to an all-time low (adjusted for inflation) during 1998. The
energy sector was the worst performing sector for the quarter as well as for the
year. Over the past year, the S&P Midcap 400 has been dominated by America
Online, Inc. (AOL). This stock had almost twice the weight of the next closest
stock in the index, due to its extraordinary appreciation in 1998. The Portfolio
benefited from an overweight position in this stock for most of 1998. However,
on the final trading day of the 1998, S&P moved AOL out of the S&P
See Definition of Terms. 5
<PAGE>
Midcap 400 and into the S&P 500, forcing its sale since this Portfolio will only
hold stocks in the S&P Midcap 400.
WHAT IS YOUR OUTLOOK GOING FORWARD?
In 1998, as fears of disinflation took root, the market favored long duration
assets such as long-term bonds or other long dated assets in order to lock in
the current economic rent for money (usually in the form of a high coupon). The
longest duration asset class that exists is a true growth company -- a company
that can grow its earnings regardless of the environment is an extremely
valuable asset in a deflationary environment. In 1998, people paid dearly for
growth due to a pervasive fear of deflation and global economic malaise. If, in
1999, the world economy is stronger and there is a shift in perception about the
world economy, this trend may reverse. However, the evidence of a turn right
now is tenuous at best.
PORTFOLIO SECTOR BREAKDOWN:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
% OF
COMMON % OF S&P OVER/(UNDER)
SECTOR STOCKS MIDCAP 400 WEIGHTING
- --------------------------------------------------------------------
<S> <C> <C> <C>
Basic Materials 3.0% 5.6% (2.6)%
Commercial Services 5.1% 6.7% (1.6)%
Consumer Discretionary 12.5% 14.8% (2.3)%
Consumer Non-Discretionary 2.9% 3.4% (0.5)%
Energy 4.3% 5.4% (1.1)%
Finance 14.5% 14.3% 0.2%
Healthcare 11.2% 11.6% (0.4)%
Manufacturing 10.4% 11.2% (0.8)%
Technology 20.6% 15.3% 5.3%
Utilities 15.5% 11.7% 3.8%
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ------------------------------------------------
<S> <C>
America Online, Inc. 6.4%
Compuware Corp. 2.6%
AFLAC, Inc. 2.2%
Solectron Corp. 2.1%
Lexmark International Group, Inc. 1.4%
McKesson Corp. 1.4%
Century Telephone Enterprises, Inc. 1.3%
Best Buy Co., Inc. 1.1%
Biogen, Inc. 1.1%
Allegiance Corp. 0.9%
</TABLE>
The opinions expressed reflect those of the portfolio manager only through
December 31, 1998. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
6 See Definition of Terms.
<PAGE>
Aetna Index Plus Small Cap VP
Growth of $10,000
[Begin Line Chart]
Aetna Index Plus Small Cap VP S&P Smallcap 600 Index
----------------------------- ----------------------
12/19/97 10,000 10,000
12/31/97 10,430 10,403
11,441 11,555
10,901 11,040
8,749 8,731
12/31/98 10,289 10,268
[End Line Chart]
- ------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1998*
<TABLE>
<CAPTION>
- ------------------------------------------
Inception Date 1 Year Inception
- ------------------------------------------
<S> <C> <C>
12/19/97 -1.35% 2.80%
- ------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not take into account any separate account charges imposed by Aetna.
AETNA INDEX PLUS SMALL CAP VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Index Plus Small Cap VP (Index Plus Small Cap) generated a -1.35% total
return, net of fund expenses, for the year ended December 31, 1998. The
benchmark, Standard & Poor's (S&P) Smallcap 600 Index(d), returned -1.30% for
the same period.
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
The quantitative models we use in this Portfolio were conflicting during the
fourth quarter since they look for positive momentum and good value, but the
stocks that did the best had very negative momentum and poor value. This is not
atypical behavior of stocks coming out of a bear market and small cap stocks
certainly qualified for that designation after the third quarter. However, the
rebound happened so fast we did not have enough time to reposition the
Portfolio.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIO'S PERFORMANCE OVER THE PAST TWELVE
MONTHS?
The Portfolio benefited from an underweight position in the energy sector as oil
prices plummeted to an all-time low (adjusted for inflation) during the year.
The energy stocks in the S&P Smallcap 600 lost almost half of their value
during 1998 -- it was by far the worst performing sector for the fourth quarter
as well as for the year. The Portfolio's underweight position in technology hurt
performance in the fourth quarter.
See Definition of Terms. 7
<PAGE>
WHAT IS YOUR OUTLOOK GOING FORWARD?
In 1998, as fears of disinflation took root, the market favored long duration
assets such as long-term bonds or other long dated assets in order to lock in
the current economic rent for money (usually in the form of a high coupon). The
longest duration asset class that exists is a true growth company -- a company
that can grow its earnings regardless of the environment is an extremely
valuable asset in a deflationary environment. In 1998, people paid dearly for
growth due to a pervasive fear of deflation and global economic malaise. If, in
1999, the world economy is stronger and there is a shift in perception about the
world economy, this trend may reverse. However, the evidence of a turn right
now is tenuous at best.
PORTFOLIO SECTOR BREAKDOWN:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
% OF
COMMON % OF S&P OVER/(UNDER)
SECTOR STOCKS SMALLCAP 600 WEIGHTING
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Basic Materials 4.0% 3.7% 0.3%
Commercial Services 10.4% 9.4% 1.0%
Consumer Discretionary 22.2% 20.3% 1.9%
Consumer Non-Discretionary 2.9% 3.0% (0.1)%
Energy 4.7% 4.7% --%
Finance 16.0% 16.1% (0.1)%
Healthcare 10.6% 11.1% (0.5)%
Manufacturing 10.3% 10.9% (0.6)%
Technology 14.7% 17.9% (3.2)%
Utilities 4.2% 2.9% 1.3%
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------
% OF NET
TOP TEN EQUITY HOLDINGS ASSETS
- ----------------------------------------------
<S> <C>
Sanmina Corp. 1.5%
Medimmune, Inc. 1.3%
Mohawk Industries, Inc. 1.2%
Devry, Inc. 1.0%
Valassis Communications, Inc. 1.0%
SEI Investments Co. 0.9%
American Management Systems, Inc. 0.8%
Comair Holdings, Inc. 0.8%
Novellus Systems, Inc. 0.8%
Vitesse Semiconductor Corp. 0.8%
</TABLE>
The opinions expressed reflect those of the portfolio manager only through
December 31, 1998. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolio are subject to change.
8 See Definition of Terms.
<PAGE>
- --------------------------------------------------------------------------------
DEFINITION OF TERMS
- --------------------------------------------------------------------------------
(a) The Lehman Brothers Aggregate Bond Index is an unmanaged index of U.S.
corporate, government and mortgage bonds.
(b) The Standard & Poor's (S&P) 500 Index is a value-weighted, unmanaged index
of 500 widely held stocks that assumes reinvestment of all dividends and is
considered to be representative of the U.S. stock market in general.
(c) The Standard & Poor's (S&P) Midcap 400 Index is a value-weighted, unmanaged
index of 400 common stocks that assumes the reinvestment of all dividends and
is considered to be representative of the U.S. stock market in general.
(d) The Standard & Poor's (S&P) Smallcap 600 Index is a value-weighted,
unmanaged index of 600 common stocks that assumes reinvestment of all dividends
and is considered to be representative of the U.S. stock market in general.
9
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS BOND
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (102.7%)
CORPORATE BONDS (43.0%)
ELECTRIC AND TELEPHONE BONDS
AirTouch Communications, Inc.,
7.13%, 07/15/01 ..................... $ 250,000 $ 259,757
MCI WorldCom, Inc., 6.95%, 08/15/28 .. 150,000 161,046
Puget Sound Energy, Inc., 7.02%,
12/01/27............................. 250,000 265,395
-----------
686,198
-----------
FINANCIAL BONDS
Associates Corp. N.A., 6.88%, 11/15/08 200,000 216,426
Capital One Bank, 6.83%, 05/17/99 .... 385,000 386,351
Chase Manhatten Corp., 7.13%, 06/15/09 200,000 219,056
Citigroup Inc., 7.88%, 05/15/25 ...... 225,000 260,836
First Maryland Bancorp, 8.38%,
05/15/02............................. 300,000 324,594
Ford Motor Credit Corp., 5.75%,
01/25/01............................. 250,000 252,165
Homeside Lending Inc., 6.86%, 07/02/01 250,000 256,300
Ikon Capital Resources, 6.52%,
10/29/99............................. 375,000 377,708
International Lease Finance Corp.,
6.38%, 01/18/00 ..................... 300,000 302,625
Paine Webber Group Inc., 9.18%,
03/12/99............................. 300,000 302,091
Salomon Smith Barney Holdings,
6.63%, 11/15/03 ..................... 250,000 257,185
-----------
3,155,337
-----------
FOREIGN AND SUPRANATIONALS
Panama (Republic of), 7.88%, 02/13/02
++ .................................. 250,000 238,125
-----------
FOREIGN BONDS
Celulosa Arauco Constitution, 7.50%,
09/15/17............................. 50,000 37,220
Cia. Transporte Energia, 8.63%,
04/01/03 ++.......................... 250,000 228,750
Quebec Province, 7.50%, 07/15/02 ..... 300,000 318,702
-----------
584,672
-----------
OTHER PUBLIC CORPORATE BONDS
Conrail, Inc., 9.75%, 06/01/00 ....... 130,000 136,522
Crown Cork & Seal Co., Inc., 6.75%,
04/15/03............................. 300,000 302,352
Dayton Hudson Co., 6.63%, 03/01/03 ... 175,000 181,659
Dayton Hudson Co., 9.75%, 07/01/02 ... 100,000 113,001
Federated Department Stores, Inc.,
8.13%, 10/15/02 ..................... 200,000 215,586
Lockheed Martin Corp., 7.25%, 05/15/06 210,000 227,201
Rite Aid Corp., 5.50%, 12/15/00 ...... 200,000 199,560
Royal Caribbean, 8.25%, 04/01/05 ..... 140,000 149,517
Sears Roebuck Acceptance, 7.05%,
09/17/01............................. 300,000 310,545
-----------
1,835,943
-----------
TOTAL CORPORATE BONDS (COST $6,434,226) 6,500,275
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (33.9%)
Federal Home Loan Mortgage Corp.,
6.00%, 12/01/12 ..................... 120,533 120,948
Federal Home Loan Mortgage Corp.,
6.50%, 12/01/27 ..................... 944,899 951,986
Federal Home Loan Mortgage Corp.,
7.00%, 05/01/28 ..................... 149,131 152,114
Federal Home Loan Mortgage Corp.,
7.50%, 12/01/27 ..................... 590,205 606,620
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
Federal Home Loan Mortgage Corp.,
9.00%, 07/01/16 - 09/01/16........... $ 73,524 $ 77,568
Federal National Mortgage Association,
4.75%, 11/14/03 ..................... 450,000 444,235
Federal National Mortgage Association,
6.00%, 07/01/13 - 10/01/12........... 198,732 197,702
Federal National Mortgage Association,
6.50%, 12/01/12 ..................... 736,591 747,410
Federal National Mortgage Association,
7.00%, 05/01/28 - 07/01/28........... 242,118 246,960
Federal National Mortgage Association,
7.50%, 04/01/28 ..................... 115,144 118,346
Government National Mortgage
Association, 6.50%, 10/15/28 ........ 181,441 183,426
Government National Mortgage
Association, 7.00%, 03/15/27 -
05/15/28............................. 342,704 350,949
Government National Mortgage
Association, 7.50%, 10/15/22 ........ 62,245 64,249
Government National Mortgage
Association, 8.00%, 04/15/17 -
08/15/17............................. 384,244 399,613
Government National Mortgage
Association, 9.50%, 08/15/21 ........ 429,184 463,653
-----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED 5,125,779
SECURITIES (COST $5,092,672)
-----------
U.S. GOVERNMENT OBLIGATIONS (25.8%)
U.S. Treasury Bond, 6.13%, 08/15/07 .. 525,000 573,400
U.S. Treasury Bond, 6.50%, 11/15/26 .. 50,000 58,203
U.S. Treasury Bond, 6.75%, 08/15/26 .. 200,000 239,594
U.S. Treasury Bond, 7.25%, 05/15/16 .. 690,000 835,873
U.S. Treasury Bond, 8.13%, 05/15/21 .. 550,000 741,983
U.S. Treasury Bond, 11.75%, 11/15/14 . 135,000 209,903
U.S. Treasury Note, 5.75%, 08/15/03 .. 175,000 182,739
U.S. Treasury Note, 10.75%, 08/15/05 . 471,000 628,196
U.S. Treasury Note, 11.25%, 02/15/15 . 120,000 198,506
U.S. Treasury Strip, Zero Coupon,
08/15/05............................. 308,000 225,207
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $3,708,126) 3,893,604
-----------
TOTAL LONG-TERM BONDS AND NOTES (COST $15,235,024) 15,519,658
-----------
SHORT-TERM INVESTMENTS (1.0%)
Student Loan Marketing, 4.28%,
01/04/99............................. 145,000 145,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $145,000) 145,000
-----------
TOTAL INVESTMENTS (COST $15,380,024)(A) 15,664,658
OTHER ASSETS LESS LIABILITIES (557,575)
-----------
TOTAL NET ASSETS $15,107,083
===========
</TABLE>
10 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes is identical.
Unrealized gains and losses, based on identified tax cost at December 31,
1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains............................. $ 339,764
Unrealized losses............................ (55,130)
-----------
Net unrealized gain......................... $ 284,634
===========
</TABLE>
++ 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.
Information concerning restricted securities at December 31, 1998 is shown
below:
<TABLE>
<CAPTION>
Cost
-----------
<S> <C>
Cia. Transporte Energia................................. $ 249,615
Panama (Republic of).................................... 250,526
-----------
$ 500,141
===========
</TABLE>
The market value of the total restricted securities above represent 3.09% of the
total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 11
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS LARGE CAP
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (91.6%)
AIR TRANSPORT (0.3%)
AMR Corp. + ............................ 7,800 $ 463,125
Delta Air Lines, Inc. .................. 6,800 353,600
Southwest Airlines Co. ................. 18,375 412,289
US Airways Group, Inc. + ............... 6,200 322,400
------------
1,551,414
------------
ALUMINUM (0.2%)
Alcan Aluminum Ltd. .................... 9,100 246,269
Aluminum Co. of America ................ 7,600 566,675
Reynolds Metals Co. .................... 4,800 252,900
------------
1,065,844
------------
AUTO PARTS AND HARDWARE (0.2%)
Black & Decker Corp. ................... 5,200 291,525
Briggs & Stratton Corp. ................ 100 4,988
Cooper Tire & Rubber Co. ............... 1,200 24,525
Dana Corp. ............................. 6,793 277,664
Genuine Parts Co. ...................... 7,400 247,437
Goodyear Tire & Rubber Co. (The) ....... 5,500 277,406
Snap-On, Inc. .......................... 1,200 41,775
Stanley Works (The) .................... 2,200 61,050
------------
1,226,370
------------
AUTOMOTIVE (1.8%)
Eaton Corp. ............................ 2,900 204,994
Ford Motor Co. ......................... 80,600 4,730,212
General Motors Corp. ................... 47,400 3,392,063
Johnson Controls, Inc. ................. 4,800 283,200
TRW, Inc. .............................. 4,000 224,750
------------
8,835,219
------------
BANKS AND THRIFTS (4.7%)
Bank of New York Co., Inc. ............. 31,600 1,271,900
Bank One Corp. ......................... 48,744 2,488,990
BankAmerica Corp. ...................... 28,296 1,701,297
BankBoston Corp. ....................... 10,000 389,375
BB&T Corp. ............................. 12,400 499,875
Chase Manhattan Corp. .................. 35,200 2,395,800
Comerica, Inc. ......................... 6,050 412,534
Fifth Third Bancorp .................... 11,125 793,352
First Union Corp. ...................... 42,234 2,568,355
Fleet Financial Group, Inc. ............ 22,900 1,023,344
Golden West Financial Corp. ............ 3,100 284,231
Huntington Bancshares .................. 7,080 212,843
J.P. Morgan & Co. ...................... 2,800 294,175
KeyCorp ................................ 17,700 566,400
Mellon Bank Corp. ...................... 10,200 701,250
Mercantile Bancorporation, Inc. ........ 6,300 290,588
National City Corp. .................... 13,100 949,750
Northern Trust Corp. ................... 5,200 454,025
PNC Bank Corp. ......................... 11,900 644,087
Regions Financial Corp. ................ 9,200 370,875
Republic New York Corp. ................ 3,600 164,025
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
BANKS AND THRIFTS (CONTINUED)
State Street Corp. ..................... 6,700 $ 466,069
Summit Bancorp. ........................ 7,300 318,919
Suntrust Banks, Inc. ................... 10,300 787,950
Synovus Financial Corp. ................ 8,400 204,750
U.S. Bancorp ........................... 28,849 1,024,139
Union Planters Corp. ................... 4,600 208,438
Wachovia Corp. ......................... 8,200 716,987
Washington Mutual, Inc. ................ 22,944 876,174
------------
23,080,497
------------
BIOTECH AND MEDICAL PRODUCTS (1.4%)
Alza Corp. + ........................... 4,900 256,025
Amgen, Inc. + .......................... 18,400 1,923,950
Bard (C.R.) Inc. ....................... 1,900 94,050
Bausch & Lomb, Inc. .................... 2,300 138,000
Becton, Dickinson & Co. ................ 9,900 422,606
Biomet, Inc. ........................... 5,100 205,275
Boston Scientific Corp. + .............. 16,200 434,363
Guidant Corp. .......................... 8,500 937,125
Mallinckrodt, Inc. ..................... 1,900 58,544
Medtronic, Inc. ........................ 20,900 1,551,825
Monsanto Co. ........................... 9,700 460,750
Perkin-Elmer Corp. ..................... 2,100 204,881
Saint Jude Medical, Inc. + ............. 3,300 91,369
------------
6,778,763
------------
CHEMICALS (0.7%)
Dow Chemical Co. ....................... 9,100 827,531
Du Pont (E.I.) de Nemours .............. 45,400 2,409,037
Eastman Chemical Co. ................... 2,800 125,300
Hercules, Inc. ......................... 2,400 65,700
Rohm & Haas Co. ........................ 6,300 189,788
Union Carbide Corp. .................... 1,800 76,500
------------
3,693,856
------------
COMMERCIAL SERVICES (0.4%)
Berkshire Hathaway, Inc. Class B + ..... 1 1,175
Deluxe Corp. ........................... 3,300 120,656
Dun & Bradstreet Corp. ................. 7,000 220,938
Interpublic Group of Co., Inc. ......... 4,950 394,762
Omnicom Group, Inc. .................... 9,200 533,600
Paychex, Inc. .......................... 9,000 462,937
RR Donnelley & Sons Co. ................ 4,700 205,919
------------
1,939,987
------------
COMPUTERS (6.3%)
Apple Computer, Inc. + ................. 7,200 294,750
Ceridian Corp. + ....................... 3,000 209,438
Compaq Computer Corp. .................. 72,500 3,040,469
Computer Sciences Corp. ................ 6,600 425,288
Dell Computer Corp. + .................. 92,200 6,747,887
Electronic Data Systems Corp. .......... 18,800 944,700
Gateway 2000, Inc. + ................... 9,900 506,756
Hewlett Packard Co. .................... 41,800 2,855,462
</TABLE>
12 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
COMPUTERS (CONTINUED)
International Business Machines Corp. .. 66,900 $ 12,359,775
Micron Technology, Inc. + .............. 9,900 500,569
Seagate Technology, Inc. + ............. 8,000 242,000
Sun Microsystems, Inc. + ............... 27,600 2,363,250
Unisys Corp. + ......................... 17,500 602,656
------------
31,093,000
------------
CONGLOMERATE AND AEROSPACE (3.9%)
Crane Co. .............................. 2,475 74,714
General Dynamics Corp. ................. 8,500 498,312
General Electric Co. ................... 139,600 14,247,925
Goodrich (B. F.) Co. ................... 3,100 111,213
Lockheed Martin Corp. .................. 7,746 656,473
Loews Corp. ............................ 4,600 451,950
National Service Industries, Inc. ...... 1,100 41,800
Northrop Grumman Corp. ................. 2,300 168,188
Raytheon Co. ........................... 9,300 495,225
Rockwell International Corp. ........... 7,800 378,787
Tenneco, Inc. .......................... 5,200 177,125
Textron, Inc. .......................... 6,500 493,594
United Technologies Corp. .............. 16,000 1,740,000
------------
19,535,306
------------
CONSUMER FINANCE (2.3%)
Associates First Capital Corp. ......... 27,264 1,155,312
Capital One Financial Corp. ............ 4,400 506,000
Countrywide Credit Industries, Inc. .... 7,400 371,388
Federal Home Loan Mortgage Corp. ....... 49,100 3,163,881
Federal National Mortgage Association .. 58,900 4,358,600
Household International, Inc. .......... 17,500 693,438
MBNA Corp. ............................. 31,275 779,920
SLM Holding Corp. ...................... 6,800 326,400
------------
11,354,939
------------
CONSUMER PRODUCTS (2.8%)
Alberto-Culver Co. ..................... 200 5,338
American Greetings Corp. ............... 2,400 98,550
Avon Products, Inc. .................... 9,300 411,525
Bestfoods .............................. 11,800 628,350
Clorox Co. ............................. 7,500 876,094
Colgate-Palmolive Co. .................. 11,600 1,077,350
Eastman Kodak Co. ...................... 13,400 964,800
Gillette Co. ........................... 18,900 913,106
International Flavors & Fragrances, Inc. 3,500 154,656
Kimberly-Clark Corp. ................... 21,400 1,166,300
Procter & Gamble Co. ................... 56,500 5,159,156
RJR Nabisco Holdings Corp. ............. 5,200 154,375
Unilever NV ............................ 26,200 2,172,962
------------
13,782,562
------------
CONSUMER SERVICES (0.8%)
Darden Restaurants, Inc. ............... 8,000 144,000
H & R Block, Inc. ...................... 3,500 157,500
Harrah's Entertainment, Inc. + ......... 1,500 23,531
Hilton Hotels Corp. .................... 7,900 151,088
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
CONSUMER SERVICES (CONTINUED)
Marriott International, Inc. ........... 11,500 $ 333,500
McDonald's Corp. ....................... 28,100 2,153,162
Service Corp. International ............ 10,600 403,463
Tricon Global Restaurants, Inc. + ...... 11,040 553,380
Wendy's International, Inc. ............ 4,300 93,794
------------
4,013,418
------------
CONSUMER SPECIALTIES (0.2%)
Allergan, Inc. ......................... 4,500 291,375
Brunswick Corp. ........................ 3,700 91,575
Hasbro, Inc. ........................... 4,700 169,788
Mattel, Inc. ........................... 10,400 237,250
------------
789,988
------------
DATA AND IMAGING SERVICES (8.1%)
Adobe Systems, Inc. .................... 2,600 121,550
Autodesk, Inc. ......................... 1,600 68,300
Automatic Data Processing, Inc. ........ 12,000 962,250
BMC Software, Inc. + ................... 14,500 646,156
Cisco Systems, Inc. + .................. 90,800 8,427,375
Computer Associates International, Inc.. 31,000 1,321,375
EMC/MASS Corp. + ....................... 35,500 3,017,500
First Data Corp. ....................... 18,000 570,375
Microsoft Corp. + ...................... 161,500 22,398,031
Novell. + .............................. 19,800 358,875
Oracle Corp. + ......................... 52,800 2,277,000
Parametric Technology Co. + ............ 11,000 180,125
------------
40,348,912
------------
DISCRETIONARY RETAIL (6.3%)
AutoZone, Inc. + ....................... 5,400 177,863
Circuit City Stores, Inc. .............. 2,500 124,844
Costco Companies, Inc. + ............... 9,900 714,656
Dayton Hudson Co. ...................... 18,200 987,350
Dillards, Inc. ......................... 3,200 90,800
Dollar General Corp. ................... 8,650 204,356
Federated Department Stores, Inc. + .... 8,700 378,994
Gap, Inc. .............................. 40,275 2,265,469
Home Depot, Inc. ....................... 113,200 6,926,425
J.C. Penney Co., Inc. .................. 9,900 464,062
Kmart Corp. + .......................... 23,200 355,250
Kohl's Corp. + ......................... 9,000 552,937
Lowe's Co., Inc. ....................... 24,900 1,274,569
May Department Stores Co. .............. 9,800 591,675
Nordstrom, Inc. ........................ 5,000 173,438
Sears, Roebuck & Co. ................... 15,300 650,250
Staples, Inc. + ........................ 22,300 974,231
Tandy Corp. ............................ 6,200 255,362
The Limited, Inc. ...................... 7,600 221,350
TJX Companies, Inc. .................... 21,900 635,100
Toys "R" Us, Inc. + .................... 10,400 175,500
Wal-Mart Stores, Inc. .................. 161,100 13,119,581
------------
31,314,062
------------
</TABLE>
See Notes to Portfolio of Investments. 13
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS LARGE CAP (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
DIVERSIFIED FINANCIAL SERVICES (1.9%)
American Express Co. ................... 19,000 $ 1,942,750
American General Corp. ................. 10,521 820,638
Citigroup Inc. ......................... 96,800 4,791,600
Morgan Stanley, Dean Witter, Discover &
Co..................................... 24,010 1,704,710
Transamerica Corp. ..................... 3,300 381,150
------------
9,640,848
------------
DRUGS (9.7%)
Abbott Laboratories .................... 85,200 4,174,800
American Home Products Corp. ........... 53,800 3,029,613
Baxter International, Inc. ............. 11,300 726,731
Bristol-Myers Squibb Co. ............... 41,300 5,526,456
Eli Lilly & Co. ........................ 79,700 7,083,337
Johnson & Johnson ...................... 57,300 4,806,037
Merck & Co., Inc. ...................... 66,900 9,880,294
Pfizer, Inc. ........................... 22,000 2,759,625
Pharmacia & Upjohn, Inc. ............... 21,700 1,228,763
Schering Plough ........................ 84,500 4,668,625
Warner Lambert Co. ..................... 59,500 4,473,656
------------
48,357,937
------------
ELECTRIC UTILITIES (2.4%)
AES Corp. + ............................ 7,400 350,575
Ameren Corp. ........................... 5,700 243,319
American Electric Power Co. ............ 7,900 371,794
Baltimore Gas & Electric Co. ........... 4,900 151,288
Carolina Power & Light Co. ............. 7,800 367,088
Central & South West Corp. ............. 14,200 389,612
Cinergy Corp. .......................... 6,500 223,438
Consolidated Edison, Inc. .............. 15,700 830,137
Dominion Resources, Inc. ............... 10,600 495,550
DTE Energy Co. ......................... 8,600 368,725
Duke Energy Corp. ...................... 14,971 959,080
Edison International ................... 17,600 490,600
Entergy Corp. .......................... 10,200 317,475
FirstEnergy Corp. ...................... 9,800 319,113
FPL Group, Inc. ........................ 12,100 745,662
GPU, Inc. .............................. 6,700 296,056
Houston Industries Finance Co. ......... 20,148 647,254
Niagara Mohawk Power Corp. + ........... 5,800 93,525
Northern States Power Co. .............. 5,400 149,850
PacifiCorp ............................. 11,300 238,006
Peco Energy Co. ........................ 14,800 616,050
PG&E Corp. ............................. 15,800 497,700
PP & L Resources, Inc. ................. 9,900 275,963
Public Service Enterprise Group, Inc. .. 12,200 488,000
Southern Co. ........................... 28,500 828,281
Texas Utilities Co. .................... 11,667 544,703
Unicom Corp. ........................... 12,500 482,031
------------
11,780,875
------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.6%)
Harris Corp. ........................... 2,200 80,575
Pitney Bowes, Inc. ..................... 13,100 865,419
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
ELECTRICAL MACHINERY AND INSTRUMENTS (CONTINUED)
Xerox Corp. ............................ 18,900 $ 2,230,200
------------
3,176,194
------------
ELECTRONIC MEDIA (1.2%)
Clear Channel Communications, Inc. + ... 4,000 218,000
King World Production, Inc. + .......... 1,700 50,044
Tele-Communications, Inc. + ............ 18,300 1,012,219
Time Warner, Inc. ...................... 47,400 2,941,762
Viacom, Inc. + ......................... 11,800 873,200
Walt Disney Co. (The) .................. 34,100 1,023,000
------------
6,118,225
------------
FOOD AND BEVERAGE (2.5%)
Anheuser-Busch Co., Inc. ............... 26,000 1,706,250
Archer-Daniels-Midland Co. ............. 22,184 381,287
Brown-Forman Corp. + ................... 1,800 136,238
Campbell Soup Co. ...................... 18,400 1,012,000
Coca-Cola Co. .......................... 41,000 2,741,875
Coca-Cola Enterprises, Inc. ............ 16,300 582,725
Conagra, Inc. .......................... 19,000 598,500
Coors (Adolph) Co. ..................... 2,000 112,875
Fortune Brands, Inc. ................... 7,100 224,537
General Mills, Inc. .................... 6,400 497,600
Heinz (H.J.) Co. ....................... 15,400 872,025
Hershey Foods Corp. .................... 4,700 292,281
PepsiCo, Inc. .......................... 23,200 949,750
Pioneer Hi-Bred International, Inc. .... 6,500 175,500
Quaker Oats Co. ........................ 6,400 380,800
Ralston-Ralston Purina Group ........... 13,000 420,875
Sara Lee Corp. ......................... 38,900 1,096,494
Wrigley (Wm.) Jr. Co. .................. 3,100 277,644
------------
12,459,256
------------
FOOD AND DRUG RETAIL (1.7%)
Albertson's, Inc. ...................... 11,200 713,300
American Stores Co. .................... 14,900 550,369
CVS Corp. .............................. 16,200 891,000
Fred Meyer, Inc. + ..................... 8,700 524,175
Great Atlantic & Pacific Tea Co., Inc. . 1,500 44,437
Kroger Co. (The) + ..................... 17,100 1,034,550
Longs Drug Stores, Inc. ................ 1,400 52,500
Rite Aid Corp. ......................... 10,800 535,275
Safeway, Inc. + ........................ 28,000 1,706,250
SUPERVALU, Inc. ........................ 4,000 112,000
Sysco Corp. ............................ 11,200 307,300
Walgreen Co. ........................... 28,700 1,680,744
Winn-Dixie Stores, Inc. ................ 4,900 219,887
------------
8,371,787
------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.5%)
Armstrong World Industries, Inc. ....... 2,200 132,687
Ball Corp. ............................. 1,300 59,475
Bemis Co., Inc. ........................ 1,400 53,113
Boise Cascade Corp. .................... 2,000 62,000
Crown Cork & Seal Co., Inc. ............ 4,900 150,981
</TABLE>
14 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
FOREST PRODUCTS AND BUILDING MATERIALS (CONTINUED)
Fort James Corp. ....................... 7,400 $ 296,000
International Paper Co. ................ 5,100 228,544
Louisiana-Pacific Corp. ................ 5,000 91,563
Masco Corp. ............................ 17,800 511,750
Mead Corp. ............................. 2,300 67,419
Owens Corning .......................... 1,300 46,069
Owens-Illinois, Inc. + ................. 4,500 137,812
Temple-Inland, Inc. .................... 1,100 65,244
Westvaco Corp. ......................... 1,600 42,900
Weyerhaeuser Co. ....................... 6,500 330,281
Willamette Industries, Inc. ............ 3,700 123,950
------------
2,399,788
------------
GAS UTILITIES (0.4%)
Coastal Corp. (The) .................... 10,700 373,831
Columbia Energy Group .................. 2,800 161,700
Consolidated Natural Gas Co. ........... 3,100 167,400
Eastern Enterprises .................... 100 4,375
Enron Corp. ............................ 13,000 741,812
NICOR, Inc. ............................ 700 29,575
ONEOK, Inc. ............................ 100 3,613
People's Energy Corp. .................. 1,500 59,813
Sempra Energy .......................... 9,907 251,390
Sonat Inc. ............................. 4,200 113,662
Williams Co., Inc. (The) ............... 7,300 227,669
------------
2,134,840
------------
HEALTH SERVICES (0.7%)
Cardinal Health, Inc. .................. 11,300 857,387
Columbia/HCA Healthcare Corp. .......... 10,600 262,350
HBO & Co. .............................. 31,300 897,919
HCR Manor Care, Inc. + ................. 3,800 111,625
Humana, Inc. + ......................... 5,800 103,313
IMS Health, Inc. ....................... 6,600 497,887
Tenet Healthcare Corp. + ............... 12,400 325,500
United Healthcare Corp. ................ 6,800 292,825
------------
3,348,806
------------
HEAVY MACHINERY (0.1%)
Caterpillar, Inc. ...................... 6,100 280,600
Cummins Engine Co., Inc. ............... 1,700 60,350
NACCO Industries, Inc. ................. 200 18,400
Navistar International Corp. + ......... 4,700 133,950
PACCAR, Inc. ........................... 2,600 106,925
------------
600,225
------------
HOUSING AND FURNISHINGS (0.2%)
Centex Corp. ........................... 3,700 166,731
Fleetwood Enterprises, Inc. ............ 1,500 52,125
Kaufman & Broad Home Corp. ............. 1,700 48,875
Maytag Corp. ........................... 5,500 342,375
Newell Co. ............................. 5,800 239,250
Pulte Corp. ............................ 2,600 72,313
Rubbermaid, Inc. ....................... 5,000 157,188
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
HOUSING AND FURNISHINGS (CONTINUED)
Whirlpool Corp. ........................ 2,600 $ 143,975
1,222,832
------------
INDUSTRIAL SERVICES (0.3%)
Browning-Ferris Industries, Inc. ....... 6,200 176,313
Fluor Corp. ............................ 3,100 131,944
Laidlaw, Inc. .......................... 7,700 77,481
Milacron, Inc. ......................... 1,300 25,025
USA Waste Management, Inc. ............. 23,700 1,105,012
------------
1,515,775
------------
INSURANCE (2.7%)
Allstate Corp. (The) ................... 35,000 1,351,875
American International Group, Inc. ..... 44,750 4,323,969
Aon Corp. .............................. 6,150 340,556
Chubb Corp. ............................ 2,600 168,675
CIGNA Corp. ............................ 11,900 920,019
Cincinnati Financial Corp. ............. 5,600 205,100
Conseco, Inc. .......................... 12,500 382,031
Hartford Financial Services Group, Inc.. 9,200 504,850
Jefferson-Pilot Corp. .................. 4,750 356,250
Lincoln National Corp. ................. 4,500 368,156
Marsh & Mclennan Co., Inc. ............. 13,150 768,453
MBIA, Inc. ............................. 4,500 295,031
MGIC Investment Corp. .................. 6,500 258,781
Progressive Corp. ...................... 4,700 796,062
Provident Companies, Inc. .............. 5,600 232,400
Safeco Corp. ........................... 4,900 210,394
St. Paul Co., Inc. ..................... 3,902 135,595
SunAmerica, Inc. ....................... 13,800 1,119,525
Torchmark Corp. ........................ 4,600 162,438
UNUM Corp. ............................. 5,700 332,738
------------
13,232,898
------------
INVESTMENT SERVICES (1.2%)
Bear Stearns Co., Inc. (The) ........... 4,700 175,662
Charles Schwab Corp. ................... 15,825 889,167
Franklin Resources, Inc. ............... 10,500 336,000
Lehman Brothers Holdings, Inc. ......... 4,000 176,250
Merrill Lynch & Co., Inc. .............. 14,300 954,525
Providian Financial Corp. .............. 9,900 742,500
Wells Fargo Co. ........................ 68,900 2,751,694
------------
6,025,798
------------
MAJOR TELECOMMUNICATIONS (8.2%)
ALLTEL Corp. ........................... 11,700 699,806
Ameritech Corp. ........................ 47,000 2,978,625
AT&T Corp. ............................. 74,700 5,621,175
Bell Atlantic Corp. .................... 89,294 5,073,015
BellSouth Corp. ........................ 138,200 6,892,725
GTE Corp. .............................. 54,200 3,655,113
MCI Worldcom, Inc. + ................... 78,160 5,607,980
SBC Communications, Inc. ............... 112,564 6,036,245
Sprint Corp. ........................... 25,000 2,103,125
Sprint PCS + ........................... 16,850 389,656
</TABLE>
See Notes to Portfolio of Investments. 15
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS LARGE CAP (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
MAJOR TELECOMMUNICATIONS (CONTINUED)
U.S. WEST, Inc. ........................ 27,710 $ 1,790,759
------------
40,848,224
------------
MISCELLANEOUS METALS (0.2%)
Barrick Gold Corp. ..................... 26,600 518,700
Phelps Dodge Corp. ..................... 1,000 50,875
Placer Dome, Inc. ...................... 17,700 203,550
------------
773,125
------------
OIL (3.9%)
Amerada Hess Corp. ..................... 1,500 74,625
Amoco Corp. ............................ 39,700 2,396,887
Ashland Oil, Inc. ...................... 2,500 120,938
Chevron Corp. .......................... 10,800 895,725
Exxon Corp. ............................ 102,900 7,524,562
Mobil Corp. ............................ 33,200 2,892,550
Royal Dutch Petroleum Co. .............. 94,700 4,533,762
Sunoco Inc. ............................ 2,800 100,975
Texaco, Inc. ........................... 8,900 470,588
USX-Marathon Group ..................... 3,900 117,488
------------
19,128,100
------------
OIL SERVICES (0.0%)
McDermott International, Inc. .......... 2,000 49,375
------------
OTHER TELECOMMUNICATIONS (3.7%)
AirTouch Communications, Inc. + ........ 32,100 2,315,212
Andrew Corp. + ......................... 1,200 19,800
Ascend Communications, Inc. + .......... 15,300 1,005,975
Comcast Corp. .......................... 13,700 804,019
Frontier Corp. ......................... 6,100 207,400
General Instrument Corp. + ............. 11,800 400,463
Lucent Technologies, Inc. .............. 93,036 10,233,960
Mediaone Group, Inc. + ................. 24,100 1,132,700
New Century Energies, Inc. ............. 4,200 204,750
Northern Telecom Ltd. .................. 26,260 1,316,282
Tellabs, Inc. + ........................ 12,300 843,319
------------
18,483,880
------------
PRINT MEDIA (0.5%)
Dow Jones & Co., Inc. .................. 2,000 96,250
Equifax, Inc. .......................... 5,800 198,287
Gannett Co., Inc. ...................... 11,000 728,062
Harcourt General, Inc. ................. 1,400 74,463
Knight-Ridder, Inc. .................... 2,700 138,038
McGraw-Hill Co., Inc. .................. 5,500 560,312
Meredith Corp. ......................... 1,700 64,388
New York Times Co. ..................... 6,400 222,000
Times Mirror Co. ....................... 2,200 123,200
Tribune Co. ............................ 4,800 316,800
------------
2,521,800
------------
PRODUCER GOODS (2.3%)
Aeroquip-Vickers, Inc. ................. 900 26,944
Allegheny Teledyne, Inc. ............... 7,900 161,456
Allied Signal, Inc. .................... 23,100 1,023,619
Avery Dennison Corp. ................... 4,100 184,756
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
PRODUCER GOODS (CONTINUED)
Cooper Industries, Inc. ................ 3,900 $ 185,981
Corning, Inc. .......................... 7,900 355,500
Danaher Corp. .......................... 7,300 396,481
Dover Corp. ............................ 3,800 139,175
Ecolab, Inc. ........................... 3,300 119,419
Emerson Electric Co. ................... 18,200 1,138,637
FMC Corp. + ............................ 1,400 78,400
Grainger (W.W.), Inc. .................. 3,800 158,175
Honeywell, Inc. ........................ 5,800 436,812
Illinois Tool Works, Inc. .............. 10,100 585,800
Ingersoll-Rand Co. ..................... 11,100 521,006
ITT Industries, Inc. ................... 3,500 139,125
Minnesota Mining and Manufacturing Co. . 15,700 1,116,662
Pall Corp. ............................. 4,200 106,313
Parker-Hannifin Corp. .................. 3,600 117,900
PPG Industries, Inc. ................... 7,100 413,575
Raychem Corp. .......................... 2,100 67,856
Sherwin-Williams Co. ................... 6,100 179,188
Thermo Electron Corp. + ................ 6,400 108,400
Thomas & Betts Corp. ................... 1,600 69,300
Timken Co. ............................. 900 16,988
Tyco International Ltd. ................ 44,701 3,372,132
------------
11,219,600
------------
SEMICONDUCTORS AND ELECTRONICS (4.2%)
3Com Corp. + ........................... 26,000 1,165,125
Advanced Micro Devices + ............... 8,100 234,394
AMP, Inc. .............................. 8,200 426,913
Applied Materials, Inc. + .............. 14,300 610,431
Intel Corp. ............................ 120,800 14,322,350
Motorola, Inc. ......................... 24,500 1,496,031
Texas Instruments, Inc. ................ 28,200 2,412,862
------------
20,668,106
------------
SPECIALTY CHEMICALS (0.2%)
Air Products and Chemicals, Inc. ....... 8,200 328,000
Engelhard Corp. ........................ 5,900 115,050
Grace (W.R.) & Co. ..................... 1,600 25,100
Great Lakes Chemical Corp. ............. 1,900 76,000
Morton International, Inc. ............. 4,000 98,000
Nalco Chemical Co. ..................... 2,600 80,600
Praxair, Inc. .......................... 6,500 229,125
Sigma-Aldrich Corp. .................... 4,200 123,375
------------
1,075,250
------------
STEEL (0.1%)
Freeport-McMoRan Copper & Gold, Inc. ... 4,000 41,750
Homestake Mining Co. ................... 9,600 88,200
Nucor Corp. ............................ 3,400 147,050
USX-US Steel Group, Inc. ............... 3,600 82,800
Worthington Industries ................. 1,300 16,250
------------
376,050
------------
SURFACE TRANSPORT (0.5%)
Burlington Northern Santa Fe Corp. ..... 19,200 648,000
</TABLE>
16 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
SURFACE TRANSPORT (CONTINUED)
CSX Corp. .............................. 3,600 $ 149,400
FDX Corp. Holding Co. + ................ 6,000 534,000
Norfolk Southern Corp. ................. 15,700 497,494
Ryder System, Inc. ..................... 1,100 28,600
Union Pacific Corp. .................... 9,900 446,119
------------
2,303,613
------------
TEXTILES AND APPAREL (0.1%)
Fruit of The Loom, Inc. + .............. 1,600 22,100
Liz Claiborne, Inc. .................... 2,400 75,750
Nike, Inc. ............................. 7,200 292,050
VF Corp. ............................... 5,500 257,813
------------
647,713
------------
TOBACCO (1.2%)
Philip Morris Co., Inc. ................ 103,800 5,553,300
UST, Inc. .............................. 5,800 202,275
------------
5,755,575
------------
TOTAL COMMON STOCKS (COST $384,760,371) 454,640,632
------------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.1%)
Student Loan Marketing, 4.28%, 01/04/99 $4,879,000 4,879,000
U.S. Treasury Bill, 3.88%, 02/18/99 @... 400,000 397,824
U.S. Treasury Bill, 3.98%, 02/18/99 @... 100,000 99,456
------------
TOTAL SHORT-TERM INVESTMENTS (COST $5,376,563) 5,376,280
------------
TOTAL INVESTMENTS (COST $390,136,934)(A) 460,016,912
OTHER ASSETS LESS LIABILITIES 36,042,142
------------
TOTAL NET ASSETS $496,059,054
============
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$395,295,654. Unrealized gains and losses, based on identified tax cost at
December 31, 1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains................................ $ 71,537,528
Unrealized losses............................... (6,816,270)
------------
Net unrealized gain............................ $ 64,721,258
============
</TABLE>
Information concerning open futures contracts at December 31, 1998 is shown
below:
<TABLE>
<CAPTION>
NO. OF INITIAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
--------- ------- ---------- -----------
LONG CONTRACTS
- ----------------------
<S> <C> <C> <C> <C>
S&P 500 Index Futures 2 $ 587,417 Mar 99 $ 35,315
========== =========
</TABLE>
+ Non-income producing security.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1998.
Category percentages are based on net assets.
See Notes to Financial Statements. 17
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS MID CAP
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (102.0%)
AIR TRANSPORT (0.8%)
Airborne Freight Corp. ............... 800 $ 28,850
Alaska Air Group, Inc. + ............. 300 13,275
ASA Holdings, Inc. ................... 300 9,150
CNF Transportation, Inc. ............. 800 30,050
-----------
81,325
-----------
AUTO PARTS AND HARDWARE (0.6%)
Carlisle Co., Inc. ................... 300 15,488
Lear Corp. + ......................... 600 23,100
SPX Corp. + .......................... 300 20,100
-----------
58,688
-----------
AUTOMOTIVE (1.7%)
Arvin Industries, Inc. ............... 300 12,506
Borg-Warner Automotive, Inc. ......... 400 22,325
Federal-Mogul Corp. .................. 500 29,750
Harley-Davidson, Inc. ................ 1,400 66,325
Meritor Automotive, Inc. ............. 1,100 23,306
Modine Manufacturing Co. ............. 300 10,875
-----------
165,087
-----------
BANKS AND THRIFTS (8.1%)
Associated Banc-Corp. ................ 500 17,094
CCB Financial Corp. .................. 400 22,800
Charter One Financial, Inc. .......... 1,155 32,051
City National Corp. .................. 800 33,300
Crestar Financial Corp. .............. 1,100 79,200
Dime Bancorp, Inc. ................... 1,000 26,437
First Security Corp. ................. 1,450 33,894
First Tennessee National Corp. ....... 2,400 91,350
First Virginia Banks, Inc. ........... 500 23,500
Greenpoint Financial Corp. ........... 800 28,100
Hibernia Corp. ....................... 1,100 19,113
Keystone Financial, Inc. ............. 500 18,500
Marshall & Ilsley Corp. .............. 900 52,594
Mercantile Bankshares Corp. .......... 600 23,100
North Fork Bancorp, Inc. ............. 1,100 26,331
Old Kent Financial Corp. ............. 1,875 87,187
Pacific Century Financial Corp. ...... 1,400 34,125
Provident Financial Group, Inc. ...... 400 15,100
SouthTrust Corp. ..................... 1,400 51,712
Sovereign Bancorp, Inc. .............. 1,400 19,950
TCF Financial Corp. .................. 700 16,931
Wilmington Trust Corp. ............... 300 18,488
Zion Bancorporation .................. 600 37,425
-----------
808,282
-----------
BIOTECH AND MEDICAL PRODUCTS (5.9%)
Agouron Pharmaceuticals, Inc. + ...... 300 17,625
Beckman Coulter Inc. ................. 500 27,125
Biogen, Inc. + ....................... 1,300 107,900
Centocor, Inc. + ..................... 600 27,075
Chiron Corp. + ....................... 1,400 36,662
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
BIOTECH AND MEDICAL PRODUCTS (CONTINUED)
Covance, Inc. + ...................... 600 $ 17,475
DENTSPLY International, Inc. ......... 400 10,300
Genzyme Corp. + ...................... 701 34,827
Hillenbrand Industries, Inc. ......... 500 28,438
IVAX Corp. + ......................... 2,200 27,363
Mylan Laboratories, Inc. ............. 2,300 72,450
Quintiles Transnational Corp. + ...... 600 32,025
Steris Corp. + ....................... 1,100 31,281
Stryker Corp. ........................ 800 44,050
Sybron International Corp. + ......... 800 21,750
Watson Pharmaceuticals, Inc. + ....... 800 50,300
-----------
586,646
-----------
COMMERCIAL SERVICES (3.5%)
ACNielsen Corp. + .................... 1,100 31,075
Cintas Corp. ......................... 900 63,394
IMC Global, Inc. ..................... 1,100 23,512
Kelly Services, Inc. ................. 600 19,050
Manpower, Inc. ....................... 700 17,631
NOVA Corp. + ......................... 600 20,813
Ogden Corp. .......................... 800 20,050
Robert Half International, Inc. + .... 800 35,750
Standard Register Co. ................ 500 15,469
U.S. Foodservice + ................... 1,000 49,000
Viad Corp. ........................... 900 27,337
Whitman Corp. ........................ 900 22,838
-----------
345,919
-----------
COMPUTERS (1.2%)
Arrow Electronics, Inc. + ............ 900 24,019
NCR Corp. + .......................... 2,200 91,850
-----------
115,869
-----------
CONGLOMERATE AND AEROSPACE (1.8%)
Cordant Technologies, Inc. ........... 600 22,500
Gencorp, Inc. ........................ 600 14,962
Lancaster Colony Corp. ............... 300 9,638
Litton Industries, Inc. + ............ 800 52,200
Newport News Shipbuilding, Inc. ...... 500 16,719
Pittston Brink's Group ............... 400 12,750
Sundstrand Corp. ..................... 1,000 51,875
-----------
180,644
-----------
CONSUMER FINANCE (0.8%)
Comdisco, Inc. ....................... 1,200 20,250
Finova Group, Inc. (The) ............. 500 26,969
GATX Corp. ........................... 900 34,087
-----------
81,306
-----------
CONSUMER PRODUCTS (0.9%)
Dial Corp. ........................... 900 25,988
First Brands Corp. ................... 400 15,775
Tyson Foods, Inc. .................... 2,100 44,625
-----------
86,388
-----------
</TABLE>
18 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
CONSUMER SERVICES (1.5%)
Bob Evans Farms, Inc. ................ 600 $ 15,638
Brinker International, Inc. + ........ 1,200 34,650
Outback Steakhouse, Inc. + ........... 400 15,950
Sotheby's Holdings, Inc. ............. 1,000 32,000
Starbucks Corp. + .................... 700 39,287
Stewart Enterprises, Inc. ............ 600 13,350
-----------
150,875
-----------
DATA AND IMAGING SERVICES (17.7%)
America Online, Inc. ................. 4,000 640,000
Citrix Systems, Inc. + ............... 400 38,825
Compuware Corp. + .................... 3,300 257,812
Electronic Arts, Inc. + .............. 1,100 61,737
Fiserv, Inc. + ....................... 850 43,722
GTECH Holdings Corp. + ............... 700 17,938
Intuit Inc. + ........................ 1,100 79,750
Keane, Inc. + ........................ 1,100 43,931
Lexmark International Group, Inc. + .. 1,400 140,700
Network Associates, Inc. + ........... 1,200 79,500
Platinum Technology, Inc. + .......... 700 13,388
Policy Management Systems Corp. + .... 700 35,350
Quantum Corp. + ...................... 1,500 31,875
Reynolds And Reynolds ................ 800 18,350
Siebel Systems, Inc. + ............... 1,000 33,938
Sterling Software, Inc. + ............ 1,400 37,888
Storage Technology Corp. + ........... 900 32,006
Sungard Data Systems, Inc. + ......... 1,000 39,687
Symantec Corp. + ..................... 800 17,400
Symbol Technologies, Inc. ............ 950 60,741
Synopsys, Inc. + ..................... 500 27,125
-----------
1,751,663
-----------
DISCRETIONARY RETAIL (5.6%)
Barnes & Noble, Inc. + ............... 600 25,500
Bed Bath & Beyond, Inc. + ............ 1,200 40,950
Best Buy Co., Inc. + ................. 1,800 110,475
BJ's Wholesale Club, Inc. + .......... 600 27,787
Borders Group, Inc. + ................ 700 17,456
Claire's Stores, Inc. ................ 900 18,450
Dollar Tree Stores, Inc. + ........... 1,300 56,794
Family Dollar Stores, Inc. ........... 1,500 33,000
Hannaford Bros. Co. .................. 400 21,200
Micro Warehouse, Inc. + .............. 600 20,288
Office Depot, Inc. + ................. 2,200 81,262
Officemax, Inc. + .................... 1,100 13,338
Ross Stores, Inc. .................... 800 31,500
Saks Inc. + .......................... 1,300 41,031
Tiffany & Co. ........................ 300 15,563
-----------
554,594
-----------
DRUGS (0.6%)
Forest Laboratories, Inc. + .......... 700 37,231
Omnicare, Inc. ....................... 700 24,325
-----------
61,556
-----------
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
ELECTRIC UTILITIES (9.6%)
Allegheny Energy, Inc. ............... 2,200 $ 75,900
American Financial Group, Inc. ....... 500 21,938
CalEnergy Co., Inc. + ................ 500 17,344
Cleco Corp. .......................... 500 17,156
CMS Energy Corp. ..................... 1,900 92,031
Conectiv, Inc. ....................... 925 22,663
Energy East Corp. .................... 1,400 79,100
Florida Progress Corp. ............... 1,800 80,662
Hawaiian Electric Industries, Inc. ... 300 12,075
Idacorp Inc. ......................... 300 10,856
Interstate Energy Corp. .............. 700 22,575
IPALCO Enterprises, Inc. ............. 1,000 55,312
Kansas City Power & Light Co. ........ 1,000 29,625
Midamerican Energy Holdings Corp. .... 1,500 40,312
Minnesota Power, Inc. ................ 500 22,000
Montana Power Co. .................... 900 50,906
Nevada Power Co. ..................... 1,100 28,600
New England Electric System .......... 500 24,063
Nipsco Industries, Inc. .............. 2,200 66,962
Northeast Utilities + ................ 1,200 19,200
OGE Energy Corp. ..................... 1,300 37,619
Pinnacle West Capital Corp. .......... 800 33,900
Public Service Co. of New Mexico ..... 400 8,175
Puget Sound Energy, Inc. ............. 1,600 44,600
UtiliCorp United Inc. ................ 1,000 36,688
-----------
950,262
-----------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.5%)
Diebold, Inc. ........................ 600 21,413
SCI Systems, Inc. + .................. 500 28,875
-----------
50,288
-----------
FOOD AND BEVERAGE (2.0%)
Dean Foods Co. ....................... 300 12,244
Flowers Industries, Inc. ............. 1,800 43,087
Hormel Foods Corp. ................... 500 16,375
IBP, Inc. ............................ 1,500 43,687
Interstate Bakeries Corp. ............ 600 15,863
McCormick & Co., Inc. ................ 1,600 54,100
Universal Foods Corp. ................ 400 10,975
-----------
196,331
-----------
FOOD AND DRUG RETAIL (0.2%)
Ruddick Corp. ........................ 800 18,400
-----------
FOREST PRODUCTS AND BUILDING MATERIALS (1.5%)
Georgia-Pacific Corp. ................ 800 19,050
Martin Marietta Materials, Inc. ...... 800 49,750
Sonoco Products Co. .................. 880 26,070
Southdown, Inc. ...................... 300 17,756
Vulcan Materials Co. ................. 300 39,469
-----------
152,095
-----------
GAS UTILITIES (2.2%)
AGL Resources, Inc. .................. 1,100 25,369
El Paso Energy Corp. ................. 1,100 38,294
</TABLE>
See Notes to Portfolio of Investments. 19
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS MID CAP (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
GAS UTILITIES (CONTINUED)
KeySpan Energy Corp. ................. 2,900 $ 89,900
KN Energy, Inc. ...................... 400 14,550
National Fuel Gas Co. ................ 400 18,075
Questar Corp. ........................ 700 13,562
Washington Gas Light Co. ............. 800 21,700
-----------
221,450
-----------
HEALTH SERVICES (4.7%)
Allegiance Corp. ..................... 2,000 93,250
Bergen Brunswig Corp. ................ 1,800 62,775
Beverly Enterprises, Inc. + .......... 1,700 11,475
First Health Group Corp. + ........... 400 6,625
Health Management Associates, Inc. + . 2,250 48,656
Lincare Holdings, Inc. + ............. 900 36,506
McKesson Corp. ....................... 1,700 134,406
PSS World Medical, Inc. + ............ 1,100 25,300
Total Renal Care Holdings, Inc. + .... 700 20,694
Trigon Healthcare, Inc. + ............ 700 26,119
-----------
465,806
-----------
HOUSING AND FURNISHINGS (0.9%)
Clayton Homes, Inc. .................. 1,250 17,265
Herman Miller, Inc. .................. 800 21,500
Hon Industries, Inc. ................. 500 11,969
Leggett & Platt, Inc. ................ 1,800 39,600
-----------
90,334
-----------
INDUSTRIAL SERVICES (1.0%)
Allied Waste Industries, Inc. + ...... 2,300 54,338
Granite Construction, Inc. ........... 500 16,781
Jacobs Engineering Group, Inc. + ..... 600 24,450
-----------
95,569
-----------
INSURANCE (5.1%)
AFLAC, Inc. .......................... 4,900 215,600
AMBAC, Inc. .......................... 1,500 90,281
HSB Group, Inc. ...................... 300 12,319
Old Republic International Corp. ..... 1,200 27,000
PacifiCare Health Systems, Inc. + .... 800 63,600
PMI Group, Inc. (The) ................ 300 14,813
Protective Life Corp. ................ 1,000 39,812
ReliaStar Financial Corp. ............ 900 41,512
-----------
504,937
-----------
INVESTMENT SERVICES (1.2%)
Edwards (A.G.), Inc. ................. 900 33,525
Paine Webber Group Inc. .............. 1,300 50,212
T. Rowe Price & Associates ........... 1,000 34,250
-----------
117,987
-----------
OIL (0.4%)
Pennzoil-Quaker State Co. + .......... 246 3,646
Ultramar Diamond Shamrock Corp. ...... 1,600 38,800
-----------
42,446
-----------
OIL SERVICES (1.7%)
Global Marine, Inc. .................. 1,600 14,700
Noble Drilling Corp. + ............... 2,300 29,756
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
OIL SERVICES (CONTINUED)
Tosco Corp. .......................... 2,700 $ 69,862
Transocean Offshore, Inc. ............ 1,900 50,944
Varco International, Inc. + .......... 900 6,975
-----------
172,237
-----------
OTHER TELECOMMUNICATIONS (6.0%)
Aliant Communications, Inc. .......... 300 12,263
American Water Works Co., Inc. ....... 700 23,625
Century Telephone Enterprises, Inc. .. 1,950 131,625
Cincinnati Bell Inc. ................. 1,200 45,375
COMSAT Corp. ......................... 500 18,000
Comverse Technology, Inc. + .......... 400 28,400
DPL Inc. ............................. 1,500 32,437
LG&E Energy Corp. .................... 2,800 79,275
Potomac Electric Power Co. ........... 1,000 26,312
Qualcomm Incorporated ................ 600 31,087
Scana Corp. .......................... 900 29,025
TCA Cable TV, Inc. ................... 800 28,550
Teco Energy, Inc. .................... 1,100 31,006
Vanguard Cellular Systems, Inc. + .... 600 15,488
Wisconsin Energy Corp. ............... 2,100 66,019
-----------
598,487
-----------
PRINT MEDIA (0.9%)
Media General, Inc. + ................ 200 10,600
Scholastic Corp. + ................... 300 16,087
Washington Post Co. .................. 100 57,794
-----------
84,481
-----------
PRODUCER GOODS (3.6%)
American Power Conversion Corp. + .... 1,700 82,344
American Standard Companies, Inc. + .. 600 21,563
AMETEK, Inc. ......................... 400 8,925
Donaldson Co., Inc. .................. 400 8,300
Ferro Corp. .......................... 400 10,400
Harsco Corp. ......................... 300 9,131
Kaydon Corp. ......................... 500 20,031
Mark IV Industries, Inc. ............. 900 11,700
Pentair, Inc. ........................ 400 15,925
Precision Castparts Corp. ............ 200 8,850
Premark International, Inc. .......... 1,100 38,087
RPM, Inc. ............................ 900 14,400
Tecumseh Products Co. ................ 400 18,650
Teleflex, Inc. ....................... 500 22,813
Trinity Industries, Inc. ............. 800 30,800
U.S. Filter Corp. + .................. 1,500 34,312
-----------
356,231
-----------
SEMICONDUCTORS AND ELECTRONICS (6.1%)
Altera Corp. + ....................... 900 54,788
Avnet, Inc. .......................... 300 18,150
Hubbell, Inc. + ...................... 400 15,200
International Game Technology ........ 900 21,881
Linear Technology Corp. .............. 700 62,694
Maxim Integrated Products, Inc. + .... 1,200 52,425
</TABLE>
20 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
SEMICONDUCTORS AND ELECTRONICS (CONTINUED)
Microchip Technology, Inc. + ......... 500 $ 18,500
Molex, Inc. .......................... 1,500 57,187
Solectron Corp. + .................... 2,200 204,462
Tech Data Corp. + .................... 900 36,225
Xilinx, Inc. + ....................... 700 45,588
York International Corp. ............. 400 16,325
-----------
603,425
-----------
SPECIALTY CHEMICALS (0.9%)
Albemarle Corp. ...................... 500 11,875
Cabot Corp. .......................... 600 16,763
Dexter Corp. ......................... 200 6,288
Olin Corp. ........................... 500 14,156
Solutia, Inc. ........................ 1,900 42,512
-----------
91,594
-----------
STEEL (0.3%)
AK Steel Holding Corp. ............... 1,100 25,850
Cleveland-Cliffs, Inc. ............... 200 8,063
-----------
33,913
-----------
SURFACE TRANSPORT (0.7%)
Kansas City Southern Industries, Inc. 1,000 49,188
Snyder Communications, Inc. + ........ 600 20,250
-----------
69,438
-----------
TEXTILES AND APPAREL (1.7%)
Abercrombie & Fitch Co. + ............ 800 56,600
Shaw Industries, Inc. ................ 2,000 48,500
Warnaco Group, Inc. (The) ............ 1,100 27,775
Westpoint Stevens, Inc. + ............ 1,000 31,562
-----------
164,437
-----------
TOBACCO (0.1%)
Universal Corp. ...................... 300 10,538
-----------
TOTAL COMMON STOCKS (COST $8,418,844) 10,119,528
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
SHORT-TERM INVESTMENTS (2.6%)
Federal Home Loan Mortgage Corp.,
4.40%, 01/04/99 ..................... $255,000 255,000
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $255,000) 255,000
-----------
TOTAL INVESTMENTS (COST $8,673,844)(A) 10,374,528
OTHER ASSETS LESS LIABILITIES (451,634)
-----------
TOTAL NET ASSETS $ 9,922,894
===========
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$8,798,038. Unrealized gains and losses, based on identified tax cost at
December 31, 1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains............................... $ 1,860,450
Unrealized losses.............................. (283,960)
-----------
Net unrealized gain........................... $ 1,576,490
===========
</TABLE>
+ Non-income producing security.
Category percentages are based on net assets.
See Notes to Financial Statements. 21
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS SMALL CAP
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (94.9%)
AIR TRANSPORT (1.8%)
Air Express International Corp. ..... 600 $ 13,050
Comair Holdings, Inc. ............... 1,900 64,125
Expeditors International of
Washington, Inc. ................... 500 21,000
Fritz Companies, Inc. + ............. 900 9,731
SkyWest, Inc. ....................... 1,000 32,688
----------
140,594
----------
AUTO PARTS AND HARDWARE (1.1%)
Barnes Group, Inc. .................. 700 20,562
CLARCOR, Inc. ....................... 900 18,000
Myers Industries, Inc. .............. 300 8,588
Standard Motor Products, Inc. ....... 500 12,125
TBC Corp. + ......................... 900 6,412
WD-40 Co. ........................... 300 8,588
Wynn's International, Inc. .......... 450 9,956
----------
84,231
----------
AUTOMOTIVE (0.8%)
Gentex Corp. + ...................... 1,400 28,000
Simpson Industries, Inc. ............ 900 8,719
Standard Products Co. ............... 400 8,150
Winnebago Industries, Inc. .......... 900 13,612
----------
58,481
----------
BANKS AND THRIFTS (6.9%)
Anchor Bancorp Wisconsin, Inc. ...... 700 16,800
Astoria Financial Corp. ............. 1,100 50,325
Banknorth Group, Inc. ............... 600 22,575
Carolina First Corp. ................ 700 17,719
Centura Banks, Inc. ................. 400 29,750
Commerce Bancorp, Inc. .............. 400 21,000
Commercial Federal Corp. ............ 900 20,869
Cullen/Frost Bankers, Inc. .......... 400 21,950
Downey Financial Corp. .............. 530 13,482
First Bancorp ....................... 500 15,094
First Midwest Bancorp, Inc. ......... 600 22,837
FirstMerit Corp. .................... 1,600 43,000
HUBCO, Inc. ......................... 815 24,552
JSB Financial, Inc. ................. 300 16,312
MAF Bancorp, Inc. ................... 900 23,850
National Data Corp. ................. 700 34,081
Premier Bancshare ................... 600 15,712
Riggs National Corp. ................ 600 12,225
Silicon Valley Bancshares + ......... 400 6,813
State Paul Bancorp, Inc. ............ 900 24,497
TrustCo Bank Corp. NY ............... 690 20,700
U.S. Trust Corp. .................... 300 22,800
UST Corp. ........................... 600 14,138
Whitney Holdings Corp. .............. 400 15,000
----------
526,081
----------
BIOTECH AND MEDICAL PRODUCTS (5.3%)
ADAC Laboratories + ................. 800 15,975
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
BIOTECH AND MEDICAL PRODUCTS (CONTINUED)
Alpharma, Inc. ++ ................... 1,000 $ 35,313
Ballard Medical Products ............ 500 12,156
Barr Laboratories, Inc. + ........... 400 19,200
Bindley Western Industries, Inc. .... 900 44,325
Biomatrix, Inc. + ................... 400 23,300
Cooper Companies, Inc. + ............ 600 12,413
Datascope Corp. + ................... 700 16,100
IDEXX Laboratories, Inc. + .......... 700 18,834
Invacare Corp. ...................... 600 14,400
MedImmune, Inc. + ................... 1,000 99,437
Micros Systems, Inc. + .............. 400 13,150
Safeskin Corp. + .................... 1,000 24,125
VISX, Inc. + ........................ 600 52,463
----------
401,191
----------
CHEMICALS (0.2%)
Geon Co. (The) ...................... 500 11,500
----------
COMMERCIAL SERVICES (7.1%)
ABM Industries, Inc. ................ 400 13,850
ADVO, Inc. + ........................ 1,000 26,375
Catalina Marketing Corp. + .......... 400 27,350
Central Parking Corp. ............... 500 16,219
Consolidated Graphics, Inc. + ....... 300 20,269
Corn Products International, Inc. ... 700 21,262
Devry, Inc. + ....................... 2,600 79,625
Dycom Industries, Inc. + ............ 300 17,138
Franklin Covey Co. + ................ 500 8,375
HA-LO Industries, Inc. + ............ 1,100 41,387
Insight Enterprises, Inc. + ......... 600 30,525
Interim Services, Inc. + ............ 900 21,038
Lason, Inc. + ....................... 500 29,094
Merrill Corp. ....................... 300 5,794
PAREXEL International Corp. + ....... 500 12,500
Pre-Paid Legal Services, Inc. + ..... 500 16,500
Thor Industries, Inc. ............... 500 12,750
True North Communications, Inc. ..... 900 24,187
Valassis Communications, Inc. + ..... 1,400 72,275
World Color Press, Inc. + ........... 1,500 45,656
----------
542,169
----------
COMPUTERS (1.1%)
Computer Task Group, Inc. ........... 400 10,850
Henry (Jack) & Associates, Inc. ..... 700 34,825
Micrel, Inc. + ...................... 700 38,500
----------
84,175
----------
CONGLOMERATE AND AEROSPACE (1.8%)
AAR Corp. ........................... 550 13,131
Alliant Techsystems, Inc. + ......... 500 41,219
Anixter International, Inc. + ....... 1,300 26,406
BE Aerospace, Inc. + ................ 600 12,600
Kaman Corp. ......................... 500 8,031
Orbital Sciences Corp. + ............ 800 35,400
----------
136,787
----------
</TABLE>
22 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
CONSUMER FINANCE (0.2%)
Americredit Corp. + ................. 1,300 $ 17,956
----------
CONSUMER SERVICES (3.0%)
CEC Entertainment, Inc. + ........... 800 22,200
Cheesecake Factory, Inc. (The) + .... 800 23,725
CKE Restaurants, Inc. ............... 858 25,257
Consumers Water Co. ................. 400 12,575
Foodmaker, Inc. + ................... 1,600 35,300
Grand Casinos, Inc. + ............... 800 6,450
IHOP Corp. + ........................ 300 11,981
Luby's Cafeterias, Inc. ............. 600 9,263
Ruby Tuesday, Inc. .................. 1,400 29,750
Ryan's Family Steak Houses, Inc. + .. 900 11,138
Service Experts, Inc. + ............. 600 17,550
Sonic Corp. + ....................... 750 18,656
TCBY Enterprises, Inc. .............. 500 3,500
----------
227,345
----------
CONSUMER SPECIALTIES (1.1%)
Coca-Cola Bottling Co. .............. 100 5,750
Huffy Corp. ......................... 300 4,950
Polaris Industries, Inc. ............ 1,100 43,107
Russ Berrie & Co., Inc. ............. 500 11,750
Sola International, Inc. + .......... 500 8,625
Sturm, Ruger & Co., Inc. ........... 700 8,356
----------
82,538
----------
DATA AND IMAGING SERVICES (6.9%)
Acxiom Corp. + ...................... 1,300 40,300
American Management Systems, Inc. + . 1,600 64,000
Analysts International Corp. ........ 500 9,625
BISYS Group, Inc. (The) + ........... 500 25,812
Boole & Babbage, Inc. + ............. 1,050 30,909
Ciber, Inc. + ....................... 1,000 27,937
Gerber Scientific, Inc. ............. 400 9,525
HNC Software Inc. + ................. 500 20,219
Hyperion Solutions Corp. + .......... 500 9,000
InterVoice, Inc. + .................. 500 17,250
Kronos, Inc. + ...................... 300 13,294
Macromedia, Inc. + .................. 1,600 53,900
Mercury Interactive Corp. + ......... 700 44,275
National Computer Systems, Inc. ..... 1,100 40,700
National Instruments Corp. + ........ 700 23,888
Platinum Software Corp. + ........... 1,100 14,094
Progress Software Corp. + ........... 750 25,312
Whittman-Hart, Inc. + ............... 900 24,863
Xircom, Inc. + ...................... 900 30,600
----------
525,503
----------
DISCRETIONARY RETAIL (5.1%)
Cato Corp. (The) .................... 1,100 10,828
Discount Auto Parts, Inc. + ......... 700 15,356
Dress Barn, Inc. + .................. 900 13,669
Footstar, Inc. + .................... 400 10,000
Hancock Fabrics, Inc. ............... 1,000 8,375
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
DISCRETIONARY RETAIL (CONTINUED)
Just For Feet, Inc. + ............... 500 $ 8,688
Linens 'n Things, Inc. + ............ 1,100 43,587
Men's Wearhouse, Inc. + ............. 900 28,575
Michaels Stores, Inc. + ............. 600 10,856
New England Business Service, Inc. .. 400 15,650
O'Reilly Automotive, Inc. + ......... 800 37,800
Pacific Sunwear of California + ..... 800 13,100
Pier 1 Imports, Inc. ................ 1,800 17,438
Regis Corp. ......................... 600 24,000
Shopko Stores, Inc. + ............... 1,000 33,250
Williams-Sonoma, Inc. + ............. 1,100 44,344
Zale Corp. + ........................ 1,500 48,375
----------
383,891
----------
DRUGS (0.7%)
Jones Medical Industries, Inc. ...... 600 21,900
Roberts Pharmaceutical Corp. + ...... 1,300 28,275
----------
50,175
----------
ELECTRIC UTILITIES (3.4%)
Aquarion Co. ........................ 300 12,300
Central Hudson Gas & Electric Co. ... 300 13,425
Cilcorp, Inc. ....................... 600 36,712
Commonwealth Energy System Co. ...... 800 32,400
Eastern Utilities Association ....... 900 25,425
Orange & Rockland Utilities, Inc. ... 200 11,400
Philadelphia Suburban Corp. ......... 1,033 30,538
Sierra Pacific Resources ............ 1,200 45,600
United Illuminating Co. ............. 500 25,750
United Water Resources, Inc. ........ 1,000 23,938
----------
257,488
----------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.5%)
Analogic Corp. ...................... 300 11,288
Dionex Corp. + ...................... 500 18,312
Harmon Industries, Inc. ............. 400 9,225
----------
38,825
----------
ELECTRONIC MEDIA (0.7%)
Hollywood Park, Inc. + .............. 1,100 9,144
Metro Networks, Inc. + .............. 300 12,787
Primark Corp. + ..................... 400 10,850
Westwood One, Inc. + ................ 700 21,350
----------
54,131
----------
FOOD AND BEVERAGE (2.1%)
Applebee's International, Inc. ...... 600 12,375
Canandiagua Brands, Inc. + .......... 700 40,469
Earthgrains Co. (The) ............... 1,600 49,500
Natures Sunshine Products, Inc. ..... 400 6,100
Smithfields Foods, Inc. + ........... 1,400 47,425
----------
155,869
----------
FOOD AND DRUG RETAIL (1.5%)
Casey's General Stores, Inc. ........ 1,100 14,334
Express Scripts, Inc. + ............. 600 40,275
Fleming Companies, Inc. ............. 800 8,300
</TABLE>
See Notes to Financial Statements. 23
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS SMALL CAP (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
FOOD AND DRUG RETAIL (CONTINUED)
Nash-Finch Co. ...................... 600 $ 8,550
Richfood Holdings, Inc. ............. 800 16,600
Whole Foods Market, Inc. + .......... 500 24,188
----------
112,247
----------
FOREST PRODUCTS AND BUILDING MATERIALS (2.3%)
AptarGroup, Inc. .................... 1,000 28,063
Caraustar Industries, Inc. .......... 500 14,281
Delta & Pine Land Co. ............... 800 29,600
Eagle Hardware & Garden, Inc. + ..... 400 13,000
Florida Rock Industries, Inc. ....... 400 12,400
Lone Star Industries, Inc. .......... 800 29,450
Republic Group, Inc. ................ 500 10,031
Shorewood Packaging Corp. + ......... 750 15,375
TJ International, Inc. .............. 400 10,275
Universal Forest .................... 700 14,044
----------
176,519
----------
GAS UTILITIES (2.7%)
Atmos Energy Corp. .................. 1,200 38,700
Connecticut Energy Corp. ............ 300 9,150
New Jersey Resources Corp. .......... 500 19,750
Northwest Natural Gas Co. ........... 600 15,525
Piedmont Natural Gas, Inc. .......... 1,100 39,737
Public Service Co. of North Carolina 800 20,800
Southwest Gas Corp. ................. 1,400 37,625
Wicor, Inc. ......................... 1,000 21,813
----------
203,100
----------
HEALTH SERVICES (4.1%)
Cerner Corp. + ...................... 1,300 34,775
Curative Health Services, Inc. + .... 500 16,750
MedQuist, Inc. + .................... 900 35,550
Orthodontic Centers of America, Inc.
+................................... 900 17,494
Patterson Dental Co. + .............. 1,200 52,200
Pediatrix Medical Group, Inc. + ..... 600 35,962
Pharmaceutical Product Development + 1,100 33,069
Renal Care Group, Inc. + ............ 1,450 41,778
Sierra Health Services, Inc. + ...... 750 15,797
Universal Health Services, Inc. + ... 600 31,125
----------
314,500
----------
HEAVY MACHINERY (1.2%)
Astec Industries, Inc. + ............ 400 22,250
Blount, Inc. + ...................... 700 17,456
JLG Industries, Inc. ................ 1,900 29,687
Manitowoc Co., Inc. (The) ........... 300 13,313
Wabash National Corp. ............... 400 8,125
----------
90,831
----------
HOUSING AND FURNISHINGS (4.2%)
Champion Enterprises, Inc. + ........ 700 19,163
D.R. Horton, Inc. ................... 2,075 47,725
Ethan Allen Interiors, Inc. ......... 500 20,500
Interface, Inc. ..................... 1,000 9,281
La-Z-Boy, Inc. ...................... 1,500 26,719
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
HOUSING AND FURNISHINGS (CONTINUED)
MDC Holdings, Inc. .................. 900 $ 19,237
Mohawk Industries, Inc. + ........... 2,100 88,331
Pillowtex Corp. ..................... 400 10,700
Ryland Group, Inc. .................. 400 11,550
Skyline Corp. ....................... 400 13,000
Standard Pacific Corp. .............. 1,600 22,600
Toll Brothers, Inc. + ............... 500 11,281
U.S. Home Corp. + ................... 600 19,950
----------
320,037
----------
INDUSTRIAL SERVICES (1.0%)
Butler Manufacturing Co. ............ 400 8,950
Insituform Technologies, Inc. + ..... 1,100 15,950
Morrison Knudsen Corp. + ............ 1,100 10,725
Smith (A.O.) Corp. .................. 450 11,053
Stone & Webster, Inc. ............... 300 9,975
Superior Services, Inc. + ........... 600 12,038
Watsco, Inc. ........................ 600 10,050
----------
78,741
----------
INSURANCE (5.5%)
American Bankers Insurance Group .... 800 38,700
Capital Re Corp. .................... 1,200 24,075
CMAC Investment Corp. ............... 400 18,375
Delphi Financial Group, Inc. + ...... 612 32,092
Enhance Financial Services Group,
Inc................................ 700 21,000
Executive Risk, Inc. ................ 300 16,481
Fidelity National Financial, Inc. ... 1,034 31,537
First American Financial Corp. ...... 1,650 53,006
Fremont General Corp. ............... 1,200 29,700
Gallagher (Arthur J.) & Co. ......... 700 30,888
Mutual Risk Management Ltd. ......... 1,500 58,687
NAC Re Corp. ........................ 400 18,775
Orion Capital Corp. ................. 600 23,888
Selective Insurance Group, Inc. ..... 800 16,100
Trenwick Group, Inc. ................ 200 6,525
----------
419,829
----------
INVESTMENT SERVICES (3.7%)
Dain Rauscher Corp. ................. 200 5,900
Eaton Vance Corp. ................... 1,400 29,225
Envoy Corp. + ....................... 400 23,300
Jefferies Group, Inc. ............... 400 19,850
Legg Mason, Inc. .................... 1,000 31,562
Queens County Bancorp, Inc. ......... 900 26,775
Raymond James Financial, Inc. ....... 950 20,069
SEI Investments Co. ................. 700 69,562
Susquehanna Bancshares, Inc. ........ 650 13,305
United Bankshares, Inc. ............. 1,600 42,400
----------
281,948
----------
MISCELLANEOUS METALS (0.7%)
Amcol International Corp. ........... 700 6,913
IMCO Recycling, Inc. ................ 600 9,262
</TABLE>
24 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
MISCELLANEOUS METALS (CONTINUED)
Stillwater Mining Co. + ............. 900 $ 36,900
----------
53,075
----------
OIL (1.4%)
Barrett Resources Corp. + ........... 1,200 28,800
Devon Energy Corp. .................. 1,200 36,825
Newfield Exploration Co. + .......... 1,500 31,312
Plains Resources Inc. + ............. 400 5,750
----------
102,687
----------
OIL SERVICES (0.5%)
Oceaneering International, Inc. + ... 1,000 15,000
Offshore Logistics, Inc. + .......... 800 9,500
Seitel, Inc. + ...................... 900 11,194
----------
35,694
----------
OTHER TELECOMMUNICATIONS (0.6%)
Commscope, Inc. + ................... 1,000 16,813
Dialogic Corp. + .................... 300 5,897
Inter-Tel, Inc. ..................... 1,100 25,712
----------
48,422
----------
PRODUCER GOODS (4.6%)
Amcast Industrial Corp. ............. 400 7,650
Applied Power, Inc. ................. 700 26,425
Baldor Electric Co. ................. 500 10,125
Brady (W.H.) Co. .................... 500 13,469
Buckeye Technologies, Inc. + ........ 700 10,456
Cable Design Technologies, Inc. + ... 550 10,175
Commercial Metals Co. ............... 600 16,650
Graco, Inc. ......................... 300 8,850
Griffon Corp. + ..................... 1,200 12,750
Hughes Supply, Inc. ................. 400 11,700
Intermet Corp. ...................... 1,000 13,062
Juno Lighting, Inc. ................. 500 11,688
Kuhlman Corp. ....................... 700 26,512
Lilly Industries, Inc. .............. 600 11,963
MacDermid, Inc. ..................... 1,000 39,125
Mueller Industries, Inc. + .......... 600 12,187
Oak Industries, Inc. + .............. 300 10,500
Regal-Beloit Corp. .................. 400 9,200
SPS Technologies, Inc. + ............ 500 28,312
Standex International Corp. ......... 300 7,875
Steel Technologies, Inc. ............ 500 3,375
Thomas Industries, Inc. ............. 600 11,775
Tredegar Industries, Inc. ........... 700 15,750
Valmont Industries .................. 700 9,713
Zebra Technologies, Inc. + .......... 400 11,500
----------
350,787
----------
SEMICONDUCTORS AND ELECTRONICS (5.9%)
Avid Technology, Inc. + ............. 500 11,688
Benchmark Electronics, Inc. + ....... 500 18,313
Brightpoint, Inc. + ................. 1,000 13,750
Burr-Brown Corp. + .................. 700 16,406
C-Cube Microsystems, Inc. + ......... 1,400 37,975
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
--------- ----------
<S> <C> <C>
SEMICONDUCTORS AND ELECTRONICS (CONTINUED)
CTS Corp. ........................... 600 $ 26,100
Dallas Semiconductor Corp. .......... 600 24,450
Harman International Industries ..... 400 15,250
Lawson Products, Inc. ............... 300 6,900
Methode Electronics, Inc. ........... 600 9,375
Novellus Systems, Inc. + ............ 1,200 59,400
Plexus Corp. + ...................... 600 20,325
Sanmina Corp. + ..................... 1,800 112,500
Technitrol, Inc. .................... 600 19,125
Vitesse Semiconductor Corp. + ....... 1,300 59,312
----------
450,869
----------
SPECIALTY CHEMICALS (0.5%)
Cambrex Corp. ....................... 600 14,400
Chemed Corp. ........................ 200 6,700
OM Group, Inc. ...................... 400 14,600
----------
35,700
----------
STEEL (0.8%)
Getchell Gold Corp. + ............... 600 16,350
Quanex Corp. ........................ 400 9,025
Reliance Steel & Aluminum Co. ....... 400 11,050
Texas Industries, Inc. .............. 800 21,550
----------
57,975
----------
SURFACE TRANSPORT (2.0%)
American Freightways Corp. + ........ 800 9,225
Fair Isaac & Co., Inc. .............. 200 9,238
Heartland Express, Inc. + ........... 600 10,500
Kirby Corp. + ....................... 500 9,969
Landstar Systems, Inc. + ............ 300 12,225
M.S. Carriers, Inc. + ............... 500 16,469
Rollins Truck Leasing Corp. ......... 2,350 34,662
U.S. Freightways Corp. .............. 800 23,300
Werner Enterprises, Inc. ............ 950 16,803
Yellow Corp. + ...................... 500 9,562
----------
151,953
----------
TEXTILES AND APPAREL (1.8%)
Ann Taylor Stores Corp. + ........... 1,000 39,437
G & K Services, Inc. ................ 400 21,300
Justin Industries ................... 700 9,188
Kellwood Co. ........................ 400 10,000
Nautica Enterprises, Inc. + ......... 800 12,000
Oshkosh B'Gosh, Inc. ................ 800 16,150
Oxford Industries, Inc. ............. 500 14,125
Timberland Co. (The) + .............. 400 18,225
----------
140,425
----------
TOBACCO (0.1%)
Schweitzer-Mauduit International,
Inc................................. 400 6,175
----------
TOTAL COMMON STOCKS (COST $6,768,230) 7,210,444
----------
</TABLE>
See Notes to Financial Statements. 25
<PAGE>
INDEX PLUS PORTFOLIOS
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
INDEX PLUS SMALL CAP (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (4.5%)
Federal Home Loan Mortgage Corp.,
4.40%, 01/04/99 ......................... $ 341,000 $ 341,000
----------
TOTAL SHORT-TERM INVESTMENTS (COST $341,000) 341,000
----------
TOTAL INVESTMENTS (COST
$7,109,230)(A) 7,551,444
OTHER ASSETS LESS LIABILITIES 47,989
----------
TOTAL NET ASSETS $7,599,433
==========
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$7,186,158. Unrealized gains and losses, based on identified tax cost at
December 31, 1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains............................... $ 887,259
Unrealized losses.............................. (521,973)
---------
Net unrealized gain........................... $ 365,286
=========
</TABLE>
+ Non-income producing security.
++ 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.
Category percentages are based on net assets.
26 See Notes to Financial Statements.
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
27
<PAGE>
INDEX PLUS PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
================================================================================
<TABLE>
<S> <C>
ASSETS:
Investments, at market value ..........................................
Cash ..................................................................
Receivable for:
Dividends and interest ...............................................
Investments sold .....................................................
Fund shares sold .....................................................
Variation margin......................................................
Reimbursment from Investment Adviser .................................
Prepaid expenses ......................................................
Total assets .....................................................
LIABILITIES:
Payable for:
Dividends to shareholders ............................................
Investments purchased ................................................
Fund shares redeemed .................................................
Accrued investment advisory fees ......................................
Accrued administrative service fees ...................................
Accrued custody fees ..................................................
Other liabilities .....................................................
Total liabilities ................................................
NET ASSETS .........................................................
NET ASSETS REPRESENTED BY:
Paid-in capital .......................................................
Net unrealized gain on investments and open futures contracts .........
Undistributed (distributions in excess of) net investment income ......
Accumulated net realized gain (loss) on investments ...................
NET ASSETS .........................................................
CAPITAL SHARES:
Authorized ............................................................
Par value .............................................................
Outstanding ...........................................................
Net asset value, offering and redemption price per share (net assets
divided by shares outstanding) .......................................
Cost of investments ...................................................
</TABLE>
28 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
INDEX PLUS BOND INDEX PLUS LARGE CAP INDEX PLUS MID CAP INDEX PLUS SMALL CAP
--------------- -------------------- ------------------ --------------------
<S> <C> <C> <C> <C>
$15,664,658 $460,016,912 $10,374,528 $7,551,444
270 23,884 2,469 1,074
205,660 411,707 6,786 5,256
-- 5,625,774 54,067 209,254
9,827 37,737,566 34,777 17,569
-- 1,700 -- --
2,944 -- 3,526 9,169
91 634 43 43
----------- ------------ ----------- ----------
15,883,450 503,818,177 10,476,196 7,793,809
----------- ------------ ----------- ----------
763,425 -- 238,954 33,553
-- 7,530,239 255,266 111,277
-- 14,101 42,000 32,000
4,570 144,707 3,560 2,712
1,142 31,009 667 509
2,447 13,316 7,330 8,724
4,783 25,751 5,525 5,601
----------- ------------ ----------- ----------
776,367 7,759,123 553,302 194,376
----------- ------------ ----------- ----------
$15,107,083 $496,059,054 $ 9,922,894 $7,599,433
=========== ============ =========== ==========
$14,808,997 $425,309,838 $ 8,239,393 $7,896,470
284,634 69,915,293 1,700,684 442,214
6,929 8,658 -- (602)
6,523 825,265 (17,183) (738,649)
----------- ------------ ----------- ----------
$15,107,083 $496,059,054 $ 9,922,894 $7,599,433
=========== ============ =========== ==========
Two Billion Two Billion Two Billion Two Billion
$ 0.001 $ 0.001 $ 0.001 $ 0.001
1,482,779 28,207,887 813,112 770,713
$ 10.19 $ 17.59 $ 12.20 $ 9.86
$15,380,024 $390,136,934 $ 8,673,844 $7,109,230
</TABLE>
See Notes to Financial Statements. 29
<PAGE>
INDEX PLUS PORTFOLIOS
STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends .............................................................
Interest ..............................................................
Foreign taxes withheld on dividends ...................................
Total investment income ..........................................
INVESTMENT EXPENSES:
Investment advisory fees ..............................................
Administrative services fees ..........................................
Printing and postage ..................................................
Custody fees ..........................................................
Transfer agent fees ...................................................
Audit fees ............................................................
Directors' fees .......................................................
Registration fees .....................................................
Miscellaneous .........................................................
Expenses before reimbursement and waiver from Investment Adviser ......
Expense reimbursement and waiver from Investment Adviser ..............
Net expenses .....................................................
Net investment income .................................................
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ..........................................................
Written options.......................................................
Futures contracts.....................................................
Net realized gain (loss) on investments ..........................
Net change in unrealized gain or loss on:
Investments ..........................................................
Futures contracts.....................................................
Net change in unrealized gain on investments .....................
Net realized and change in unrealized gain or loss on investments
Net increase (decrease) in net assets resulting from operations .......
</TABLE>
30 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
INDEX PLUS BOND INDEX PLUS LARGE CAP INDEX PLUS MID CAP INDEX PLUS SMALL CAP
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1998 1998
--------------------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
$ -- $ 3,681,210 $ 96,852 $ 64,161
958,876 578,410 13,992 13,244
---------- ----------- ---------- ---------
958,876 4,259,620 110,844 77,405
-- (15,743) -- (27)
---------- ----------- ---------- ---------
958,876 4,243,877 110,844 77,378
---------- ----------- ---------- ---------
46,975 971,046 34,602 31,659
15,466 253,167 9,814 9,263
3,281 8,539 3,102 3,102
3,130 19,234 10,199 11,886
1,756 1,815 1,756 1,755
11,448 11,075 10,774 10,774
274 4,806 152 142
-- 12,782 151 234
166 1,743 89 89
---------- ----------- ---------- ---------
82,496 1,284,207 70,639 68,904
(11,856) -- (18,635) (21,262)
---------- ----------- ---------- ---------
70,640 1,284,207 52,004 47,642
---------- ----------- ---------- ---------
888,236 2,959,670 58,840 29,736
---------- ----------- ---------- ---------
62,856 16,063,589 409,644 (470,947)
-- -- -- 6,254
-- 957,090 12,264 450
---------- ----------- ---------- ---------
62,856 17,020,679 421,908 (464,243)
---------- ----------- ---------- ---------
276,559 59,856,007 1,443,442 122,989
-- 35,315 -- --
---------- ----------- ---------- ---------
276,559 59,891,322 1,443,442 122,989
---------- ----------- ---------- ---------
339,415 76,912,001 1,865,350 (341,254)
---------- ----------- ---------- ---------
$1,227,651 $79,871,671 $1,924,190 $(311,518)
========== =========== ========== =========
</TABLE>
See Notes to Financial Statements. 31
<PAGE>
INDEX PLUS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
INDEX PLUS BOND
---------------------------------------
PERIOD FROM
DECEMBER 18, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS)
DECEMBER 31, 1998 TO DECEMBER 31, 1997
----------------- --------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................ $ 888,236 $ 32,299
Net realized gain on investments..... 62,856 --
Net change in unrealized gain or
loss on investments................. 276,559 8,075
----------- -----------
Net increase in net assets
resulting from operations.......... 1,227,651 40,374
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income......... (882,106) (31,500)
From net realized gains............ (56,333) --
----------- -----------
Decrease in net assets from
distributions to shareholders...... (938,439) (31,500)
----------- -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.......... 1,961,822 15,000,000
Net asset value of shares issued
upon reinvestment of distributions 75,564 --
Payments for shares redeemed....... (2,228,389) --
----------- -----------
Net increase (decrease) in net
assets from fund share transactions (191,003) 15,000,000
----------- -----------
Net change in net assets............. 98,209 15,008,874
NET ASSETS:
Beginning of period.................. 15,008,874 --
----------- -----------
End of period........................ $15,107,083 $15,008,874
=========== ===========
End of period net assets includes
undistributed net investment income $ 6,929 $ 799
=========== ===========
SHARE TRANSACTIONS:
Number of shares sold.............. 185,078 1,500,000
Number of shares issued upon
reinvestment of distributions..... 7,415 --
Number of shares redeemed.......... (209,714) --
----------- -----------
Net increase (decrease)............. (17,221) 1,500,000
=========== ===========
</TABLE>
32 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
INDEX PLUS LARGE CAP
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................... $ 2,959,670 $ 921,019
Net realized gain on investments........ 17,020,679 5,527,485
Net change in unrealized gain or loss
on investments........................ 59,891,322 8,934,413
------------ ------------
Net increase in net assets resulting
from operations....................... 79,871,671 15,382,917
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (3,004,103) (867,859)
From net realized gains............... (17,271,067) (4,427,074)
------------ ------------
Decrease in net assets from
distributions to shareholders......... (20,275,170) (5,294,933)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold............. 305,756,393 108,547,655
Net asset value of shares issued upon
reinvestment of distributions........ 20,275,170 5,294,933
Payments for shares redeemed.......... (22,085,528) (10,824,511)
------------ ------------
Net increase in net assets from fund
share transactions.................... 303,946,035 103,018,077
------------ ------------
Net change in net assets................ 363,542,536 113,106,061
NET ASSETS:
Beginning of period..................... 132,516,518 19,410,457
------------ ------------
End of period........................... $496,059,054 $132,516,518
============ ============
End of period net assets includes
undistributed net investment income.... $ 8,658 $ 53,091
============ ============
SHARE TRANSACTIONS:
Number of shares sold................. 19,017,627 8,195,022
Number of shares issued upon
reinvestment of distributions........ 1,157,764 377,773
Number of shares redeemed............. (1,421,398) (898,689)
------------ ------------
Net increase........................... 18,753,993 7,674,106
============ ============
</TABLE>
See Notes to Financial Statements. 33
<PAGE>
INDEX PLUS PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
INDEX PLUS MID CAP
---------------------------------------
PERIOD FROM
DECEMBER 16, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS)
DECEMBER 31, 1998 TO DECEMBER 31, 1997
----------------- --------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................ $ 58,840 $ 4,777
Net realized gain on investments..... 421,908 --
Net change in unrealized gain or
loss on investments................. 1,443,442 257,242
----------- ----------
Net increase in net assets
resulting from operations.......... 1,924,190 262,019
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income......... (58,489) (5,625)
From net realized gains............ (438,594) --
----------- ----------
Decrease in net assets from
distributions to shareholders...... (497,083) (5,625)
----------- ----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.......... 5,622,966 7,500,000
Net asset value of shares issued
upon reinvestment of distributions 258,130 --
Payments for shares redeemed....... (5,141,703) --
----------- ----------
Net increase in net assets from
fund share transactions............ 739,393 7,500,000
----------- ----------
Net change in net assets............. 2,166,500 7,756,394
NET ASSETS:
Beginning of period.................. 7,756,394 --
----------- ----------
End of period........................ $ 9,922,894 $7,756,394
=========== ==========
End of period net assets includes
distributions in excess of
net investment income............... $ -- $ (848)
=========== ==========
SHARE TRANSACTIONS:
Number of shares sold.............. 509,475 750,000
Number of shares issued upon
reinvestment of distributions..... 21,894 --
Number of shares redeemed.......... (468,257) --
----------- ----------
Net increase........................ 63,112 750,000
=========== ==========
</TABLE>
34 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
INDEX PLUS SMALL CAP
---------------------------------------
PERIOD FROM
DECEMBER 19, 1997
(COMMENCEMENT OF
YEAR ENDED OPERATIONS)
DECEMBER 31, 1998 TO DECEMBER 31, 1997
----------------- --------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income................ $ 29,736 $ 5,536
Net realized loss on investments..... (464,243) --
Net change in unrealized gain or
loss on investments................. 122,989 319,225
----------- ----------
Net increase (decrease) in net
assets resulting from operations... (311,518) 324,761
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income......... (28,374) (7,500)
From net realized gains............ (274,406) --
----------- ----------
Decrease in net assets from
distributions to shareholders...... (302,780) (7,500)
----------- ----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold.......... 8,260,731 7,500,000
Net asset value of shares issued
upon reinvestment of distributions 269,228 --
Payments for shares redeemed....... (8,133,489) --
----------- ----------
Net increase in net assets from
fund share transactions............ 396,470 7,500,000
----------- ----------
Net change in net assets............. (217,828) 7,817,261
NET ASSETS:
Beginning of period.................. 7,817,261 --
----------- ----------
End of period........................ $ 7,599,433 $7,817,261
=========== ==========
End of period net assets includes
distributions in excess
of net investment income............ $ (602) $ (1,964)
=========== ==========
SHARE TRANSACTIONS:
Number of shares sold.............. 858,897 750,000
Number of shares issued upon
reinvestment of distributions..... 27,986 --
Number of shares redeemed.......... (866,170) --
----------- ----------
Net increase........................ 20,713 750,000
=========== ==========
</TABLE>
See Notes to Financial Statements. 35
<PAGE>
INDEX PLUS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
1. ORGANIZATION
Aetna Variable Portfolios, Inc. (Fund) 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 4, 1996. The Articles of
Incorporation permit the Company to offer separate portfolios, each of which has
its own investment objective, policies and restrictions.
The Fund currently offers eleven portfolios. This report covers four
diversified portfolios: Aetna Index Plus Bond VP, Aetna Index Plus Large Cap VP,
Aetna Index Plus Mid Cap VP and Aetna Index Plus Small Cap VP (Portfolios).
The following is each Portfolio's investment objective:
AETNA INDEX PLUS BOND VP (Index Plus Bond) seeks to maximize total return
consistent with preservation of capital primarily through investment in a
diversified portfolio of fixed income securities, which will be chosen to
substantially replicate the characteristics of the Lehman Brothers Aggregate
Bond Index, an unmanaged index comprised of approximately 6,000 domestic
securities.
AETNA INDEX PLUS LARGE CAP VP (Index Plus Large Cap) seeks to outperform the
total return performance of publicly traded common stocks represented in the
Standard and Poor's 500 Composite Stock Price Index.
AETNA INDEX PLUS MID CAP VP (Index Plus Mid Cap) seeks to outperform the
total return performance of publicly traded common stocks represented in the
Standard and Poor's Midcap 400 Index.
AETNA INDEX PLUS SMALL CAP VP (Index Plus Small Cap) seeks to outperform the
total return performance of publicly traded common stocks represented in the
Standard and Poor's Smallcap 600 Index.
Shares of each Portfolio are currently owned by insurance companies as
depositors of separate accounts which are used to fund variable annuity
contracts and variable life insurance policies. All shares are currently held by
separate accounts of Aetna Life Insurance and Annuity Company (ALIAC) and its
subsidiary, Aetna Insurance Company of America.
Effective May 1, 1998, Aeltus Investment Management, Inc. (Aeltus) became the
investment adviser to each Portfolio. Prior to May 1, 1998, ALIAC acted as
investment adviser and Aeltus served as sub-adviser to the Portfolios. ALIAC
serves as the principal underwriter to each Portfolio. Aeltus and ALIAC are
both indirect wholly-owned subsidiaries of Aetna Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Portfolios 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. Although actual results could differ from
these estimates, any such differences are expected to be immaterial to the net
assets of the Portfolios.
A. VALUATION OF INVESTMENTS
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. Short-term
investments maturing in more than sixty days for which market quotations are
readily available are valued at current market value. Short-term investments
maturing in less than sixty days 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.
36
<PAGE>
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
B. OPTIONS CONTRACTS
The Portfolios may purchase and write (sell) call options and put options and
write (sell) covered call options 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 Portfolios 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 Portfolios 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 Portfolios 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 Portfolios 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.
C. FUTURES 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 Portfolios invest in
financial futures contracts as a hedge against 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 Portfolios 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 Portfolios equal to the daily fluctuations
in the market value of the contract. These amounts are recorded by the
Portfolios as unrealized gains or losses. When a contract is closed, the
Portfolios 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 Portfolios are closed prior to
expiration.
The risks associated with financial futures may arise from an imperfect
correlation between the change in market value of the securities held by the
Portfolios 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 are reflected in
the accompanying financial statements. The amounts at risk under such futures
may exceed the amounts reflected in the financial statements. For federal income
tax purposes, any futures contracts which remain open at year end are
marked-to-market and the resultant net gain or loss is reported to shareholders
as federal taxable income.
D. 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 Portfolios to sell them promptly
at an acceptable price. Restricted securities are those which can only be 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. Each Portfolio may invest up to 10% of its
total assets in illiquid securities. 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 Portfolios will not pay the costs of
disposition of restricted securities other than ordinary brokerage fees, if any.
Illiquid and restricted securities are valued using market quotations when
readily available.
37
<PAGE>
INDEX PLUS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. DELAYED DELIVERY TRANSACTIONS
The Portfolios 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 such securities are identified in the
Portfolios 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.
F. FEDERAL INCOME TAXES
Each Portfolio intends to meet the requirements to be taxed as a regulated
investment company for the current year. As such, each Portfolio 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. Furthermore, by distributing substantially all of its net
taxable investment income and capital gains during the calendar year, each
Portfolio will avoid federal excise taxes in accordance with the applicable
provisions of the Internal Revenue Code. Thus, the financial statements contain
no provision for federal taxes.
G. 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 futures contracts and certain losses
deferred due to transactions characterized as "wash sales" by federal tax
regulations. 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 Internal Revenue Code.
H. 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 AND ADMINISTRATIVE SERVICE FEES
Each Portfolio pays Aeltus a monthly fee expressed as a percentage of its
average daily net assets. Below are the Portfolios' annual Investment Advisory
fees as of December 31, 1998:
<TABLE>
<CAPTION>
ADVISORY FEE
------------
<S> <C>
Index Plus Bond 0.30%
Index Plus Large Cap 0.35%
Index Plus Mid Cap 0.40%
Index Plus Small Cap 0.40%
</TABLE>
Aeltus has served as the investment adviser for the Portfolios since May 1,
1998. Prior to May 1, 1998, ALIAC served as investment adviser and Aeltus served
as sub-adviser. As the sub-adviser, Aeltus supervised the investment and
reinvestment of cash and securities and provided certain related administrative
services for the Fund. For the period January 1, 1998 through April 30, 1998,
ALIAC collected $248,161 from the Portfolios, of which it paid $176,369 to
Aeltus.
38
<PAGE>
================================================================================
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICE FEES (CONTINUED)
Effective May 1, 1998, each Portfolio pays expenses incurred in exchange for
services provided by auditors, legal firms, transfer agents, custodian banks,
and financial printers. Each Portfolio pays its proportionate share of
compensation to the Fund's Board of Directors and its proportionate share of
insurance premiums. Each Portfolio pays its direct costs incurred to mail
shareholder reports, register its shares with the Securities and Exchange
Commission and any other costs incurred by the Portfolio. In addition, each
Portfolio pays Aeltus an administrative services fee in exchange for receiving
certain administrative and shareholder services and to compensate Aeltus for
supervising the Portfolios' other service providers. Each Portfolio pays
Aeltus an administrative services fee at an annual rate based on its average
daily net assets. The rate is 0.075% on the first $5 billion in Portfolio
assets and 0.050% on all Portfolio assets over $5 billion.
Prior to May 1, 1998, ALIAC acted as Administrator to the Portfolios. As
Administrator, ALIAC paid all the expenses of the Portfolios on their behalf,
supervised the Portfolios' other service providers and provided the Portfolios
with certain administrative and shareholder services. In exchange for these
services, ALIAC received an administrative services fee at an annual rate of up
to 0.20% of each Portfolio's average daily net assets. For the period January
1, 1998 through April 30, 1998, ALIAC collected $108,960 in administrative
services fees from the Portfolios.
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Portfolio, in
exchange for fees payable by Aeltus, of up to 0.20% of the Portfolios' average
daily net assets. For the period May 1, 1998 through December 31, 1998, Aeltus
paid ALIAC $411,178.
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated through December 31, 1999 to reimburse a
Portfolio 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 Portfolio's yield and total return.
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the year ended December 31, 1998 were:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
Index Plus Bond $5,274,335 $2,860,893
Index Plus Large Cap 509,254,688 260,970,672
Index Plus Mid Cap 14,644,120 13,843,070
Index Plus Small Cap 10,769,825 10,890,888
</TABLE>
39
<PAGE>
INDEX PLUS PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
================================================================================
6. OPTIONS
All Portfolios may use options. For the year ended December 31, 1998, the
following reflects the written put and covered call activity:
<TABLE>
<CAPTION>
CALL OPTIONS WRITTEN
------------------------------------------------------
NUMBER OF PREMIUM REALIZED
INDEX PLUS SMALL CAP CONTRACTS RECEIVED GAIN (LOSS)
------------------------------------------------------
<S> <C> <C> <C>
Outstanding December -- $ -- $ --
31, 1997
Written 20 20,189 --
Closed (20) (20,189) (2,811)
Exercised -- -- --
Expired -- -- --
------------------------------------------------------
Outstanding December 31, 1998 -- $ -- $ (2,811)
======================================================
<CAPTION>
PUT OPTIONS WRITTEN
------------------------------------------------------
NUMBER OF PREMIUM REALIZED
INDEX PLUS SMALL CAP CONTRACTS RECEIVED GAIN (LOSS)
------------------------------------------------------
<S> <C> <C> <C>
Outstanding December -- $ -- $ --
31, 1997
Written 47 22,146 --
Closed (47) (22,146) 9,065
Exercised -- -- --
Expired -- -- --
------------------------------------------------------
Outstanding December 31, 1998 -- $ -- $ 9,065
======================================================
</TABLE>
40
<PAGE>
INDEX PLUS PORTFOLIOS
ADDITIONAL INFORMATION
DECEMBER 31, 1998
================================================================================
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR (UNAUDITED)
In accordance with federal tax authorities, certain portions of the dividends
taxable as ordinary income qualify for the corporate dividends received
deduction. The following percentages reflect the portions of such dividends
paid:
<TABLE>
<S> <C>
Index Plus Large Cap 18.36%
Index Plus Mid Cap 15.85%
Index Plus Small Cap 20.67%
</TABLE>
In accordance with federal tax authorities, the following amount of dividends
which qualify to be taxed at long-term capital gain rates were paid during the
year ended December 31, 1998:
<TABLE>
AGGREGATE PER SHARE
--------- ---------
<S> <C> <C>
Index Plus Large Cap $3,658,819 $ 0.15
Index Plus Mid Cap 7,331 0.01
</TABLE>
YEAR 2000 (UNAUDITED)
The Portfolios receive services from a number of providers which rely on the
effective functioning of their respective systems and the systems of others to
perform those services. It is generally recognized that certain systems in use
today may not be able to perform their intended functions adequately after 1999
because of the inability of computer systems and software to distinguish the
year 2000 from the year 1900. Aeltus is taking steps that it believes are
reasonably designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Portfolios' other major service providers. There can be no assurance, however,
that these steps will be sufficient to avoid any adverse impact on the
Portfolios from this problem.
41
<PAGE>
INDEX PLUS PORTFOLIOS
FINANCIAL HIGHLIGHTS
INDEX PLUS BOND
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 18, 1997
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS)
1998 TO DECEMBER 31, 1997
------------ --------------------
<S> <C> <C>
Net asset value, beginning of period .... $ 10.01 $ 10.00
------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.60 0.02+
Net realized and change in unrealized
gain or loss on investments ........... 0.21 0.01
------- -------
Total from investment operations .... 0.81 0.03
------- -------
LESS DISTRIBUTIONS:
From net investment income ............. (0.59) (0.02)
From net realized gains on investments . (0.04) --
------- -------
Total distributions ................. (0.63) (0.02)
------- -------
Net asset value, end of period .......... $ 10.19 $ 10.01
======= =======
Total return*............................ 8.17% 0.27%
Net assets, end of period (000's) ....... $15,107 $15,009
Ratio of net expenses to average net
assets.................................. 0.45% 0.45%(1)
Ratio of net investment income to average
net assets ............................. 5.67% 5.23%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ....... 0.53% --
Portfolio turnover rate ................. 19.52% --
</TABLE>
(1) Annualized.
*The total return percentage does not reflect any separate account charges under
variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
42 See Notes to Financial Statements.
<PAGE>
INDEX PLUS LARGE CAP
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 16, 1996
YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, OPERATIONS)
1998 1997 TO DECEMBER 31, 1996
------------ ------------ --------------------
<S> <C> <C> <C>
Net asset value, beginning
of period ................ $ 14.02 $ 10.91 $ 10.00
-------- -------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income .... 0.12 0.10+ 0.05+
Net realized and change in
unrealized gain
or loss on investments .. 4.30 3.60 0.92
-------- -------- -------
Total from investment
operations............ 4.42 3.70 0.97
-------- -------- -------
LESS DISTRIBUTIONS:
From net investment income (0.12) (0.10) (0.05)
From net realized gains on
investments............... (0.73) (0.49) (0.01)
-------- -------- -------
Total distributions ... (0.85) (0.59) (0.06)
-------- -------- -------
Net asset value, end of
period.................... $ 17.59 $ 14.02 $ 10.91
======== ======== =======
Total return* ............. 31.60% 33.89% 9.64%
Net assets, end of period
(000's)................... $496,059 $132,517 $19,410
Ratio of net expenses to
average net assets ....... 0.46% 0.50% 0.50%(1)
Ratio of net investment
income to average net
assets.................... 1.07% 1.38% 1.89%(1)
Portfolio turnover rate ... 98.61% 76.83% 5.18%
</TABLE>
(1) Annualized.
*The total return percentage does not reflect any separate account charges under
variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 43
<PAGE>
INDEX PLUS PORTFOLIOS
FINANCIAL HIGHLIGHTS (CONTINUED)
INDEX PLUS MID CAP
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 16, 1997
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS)
1998 TO DECEMBER 31, 1997
------------ --------------------
<S> <C> <C>
Net asset value, beginning of period .... $ 10.34 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.07 0.01+
Net realized and change in unrealized
gain or loss on investments ........... 2.42 0.34
------- ------
Total from investment operations .... 2.49 0.35
------- ------
LESS DISTRIBUTIONS:
From net investment income ............. (0.07) (0.01)
From net realized gains on investments . (0.56) --
------- ------
Total distributions ................. (0.63) (0.01)
------- ------
Net asset value, end of period .......... $ 12.20 $10.34
======= ======
Total return*............................ 24.30% 3.50%
Net assets, end of period (000's) ....... $ 9,923 $7,756
Ratio of net expenses to average net
assets.................................. 0.60% 0.60%(1)
Ratio of net investment income to average
net assets ............................. 0.68% 1.37%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ....... 0.82% --
Portfolio turnover rate ................. 165.70% --
</TABLE>
(1) Annualized.
*The total return percentage does not reflect any separate account charges under
variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
44 See Notes to Financial Statements.
<PAGE>
INDEX PLUS SMALL CAP
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 19, 1997
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS)
1998 TO DECEMBER 31, 1997
------------ --------------------
<S> <C> <C>
Net asset value, beginning of period .... $ 10.42 $10.00
------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .................. 0.04 0.01+
Net realized and change in unrealized
gain or loss on investments ........... (0.19) 0.42
------- ------
Total from investment operations .... (0.15) 0.43
------- ------
LESS DISTRIBUTIONS:
From net investment income ............. (0.04) (0.01)
From net realized gains on investments . (0.37) --
------- ------
Total distributions ................. (0.41) (0.01)
------- ------
Net asset value, end of period .......... $ 9.86 $10.42
======= ======
Total return* ........................... (1.35)% 4.33%
Net assets, end of period (000's) ....... $ 7,599 $7,817
Ratio of net expenses to average net
assets.................................. 0.60% 0.60%(1)
Ratio of net investment income to average
net assets ............................. 0.38% 1.90%(1)
Ratio of expenses before reimbursement
and waiver to average net assets ....... 0.87% --
Portfolio turnover rate ................. 141.99% --
</TABLE>
(1) Annualized.
*The total return percentage does not reflect any separate account charges under
variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 45
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Aetna Variable Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Index Plus Bond VP, Aetna Index Plus Large Cap VP, Aetna Index Plus Mid Cap VP
and Aetna Index Plus Small Cap VP (collectively the Index Plus Portfolios), four
portfolios of Aetna Variable Portfolios, Inc., including the portfolios of
investments as of December 31, 1998 and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
years or periods in the two-year period then ended and financial highlights for
the year ended December 31, 1998 and the period from December 18, 1997
(commencement of operations) to December 31, 1997 for Aetna Index Plus Bond VP,
for each of the years in the two-year period ended December 31, 1998 and the
period from September 16, 1996 (commencement of operations) to December 31, 1996
for Aetna Index Plus Large Cap VP, for the year ended December 31, 1998 and the
period from December 16, 1997 (commencement of operations) to December 31, 1997
for Aetna Index Plus Mid Cap VP and for the year ended December 31, 1998 and the
period from December 19, 1997 (commencement of operations) to December 31, 1997
for the Aetna Index Plus Small Cap VP. These financial statements and financial
highlights are the responsibility of the Index Plus Portfolios' 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 generally accepted auditing
standards. 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the custodian
and brokers. 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
Index Plus Bond VP, Aetna Index Plus Large Cap VP, Aetna Index Plus Mid Cap VP
and Aetna Index Plus Small Cap VP as of December 31, 1998, results of their
operations for the year then ended, changes in their net assets for each of the
years or periods in the two-year period then ended and financial highlights for
the years and periods specified in the first paragraph above, in conformity with
generally accepted accounting principles.
KPMG LLP
Hartford, Connecticut
January 29, 1999
46
<PAGE>
Aetna Ascent VP
Growth of $10,000
[Begin Line Chart]
Aetna Ascent VP Ascent Composite
--------------- ----------------
07/95 10,000 10,000
10,601 10,531
12/95 11,045 10,949
11,453 11,256
12,049 11,621
12,654 11,921
12/96 13,650 12,793
13,617 12,652
15,103 14,036
16,524 15,026
12/97 16,366 14,854
17,917 16,012
17,939 15,920
15,508 14,394
12/98 17,069 16,034
[End Line Chart]
Aetna Crossroads VP
Growth of $10,000
[Begin Line Chart]
Aetna Crossroads VP Crossroads Composite
------------------- --------------------
07/95 10,000 10,000
10,532 10,433
12/95 10,930 10,836
11,233 11,301
11,739 11,318
12,207 11,593
12/96 12,985 12,302
12,995 12,184
14,151 13,274
15,323 14,064
12/97 15,268 14,022
16,408 14,889
16,528 14,901
14,984 13,978
12/98 16,170 15,201
[End Line Chart]
Aetna Legacy VP
Growth of $10,000
[Begin Line Chart]
Aetna Legacy VP Legacy Composite
--------------- ----------------
07/95 10,000 10,000
10,451 10,334
12/95 10,827 10,723
11,036 10,810
11,403 11,021
11,773 11,270
12/96 12,363 11,827
12,347 11,729
13,236 12,546
14,088 13,154
12/97 14,156 13,223
14,932 13,826
15,085 13,929
14,290 13,543
12/98 15,139 14,374
[End Line Chart]
See Definition of Terms. 47
<PAGE>
- -------------------------------------------------------------------------
Average Annual Total Returns
for the period ended December 31, 1998*
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ascent Crossroads Legacy
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Inception Date 1 Year Inception 1 Year Inception 1 Year Inception
- -----------------------------------------------------------------------------
07/05/95 4.30% 16.55% 5.91% 14.76% 6.94% 12.62%
- -----------------------------------------------------------------------------
</TABLE>
*Total Return is calculated including reinvestment of income and capital gain
distributions. Past performance is no guarantee of future results. Performance
does not take into account any separate account charges imposed by Aetna.
AETNA GENERATION PORTFOLIOS, INC.
HOW DID THE PORTFOLIOS PERFORM DURING THE PERIOD?
For the twelve month period ended December 31, 1998, the Aetna Generation
Portfolios, Inc. (Generation Portfolios) have all underperformed their
respective benchmarks. These benchmark indices are comprised of the seven stock
and bond indices listed below in weights that correspond to the particular
benchmark weights for each Portfolio.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PORTFOLIO BENCHMARK INDEX FUND -
GENERATION PORTFOLIO RETURN RETURN BENCHMARK
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Ascent 4.30% 7.93% -3.63%
Crossroads 5.91% 8.42% -2.51%
Legacy 6.94% 8.74% -1.80%
</TABLE>
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIOS?
Serving as a backdrop for each of the Generation Portfolios' performance are the
returns for the various indices for each of the asset classes among which the
Generation Portfolios allocate investments (shown below). The combination of
these seven indices in different weights comprise the overall benchmarks against
which we measure each Portfolio's performance (shown above).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INDEX
ASSET CLASS BENCHMARK INDEX RETURN
- --------------------------------------------------------------------------------
<S> <C> <C>
Large Company Stocks S&P 500 (a) 28.57%
Small Company Stocks Russell 2000 (b) -2.55%
International Stocks MSCI EAFE (c) 20.33%
Real Estate Stocks NAREIT (d) -17.51%
Domestic Bonds Salomon Broad (e) 8.72%
International Bonds S.B. Non-U.S. WGBI (f) 17.80%
Cash Equivalents U.S. 90 Day T-Bill (g) 5.15%
</TABLE>
The past year was an extremely difficult one for the Generation Portfolios, due
primarily to our asset allocation decisions. The following exhibits show the
progression of asset allocations for the three Generation Portfolios. We were
hurt by being underweight in large cap stocks and foreign bonds and by being
overweight in small cap stocks and equity real estate investments trusts
(REITs), positions that were driven by our analysis of the relative valuation of
these asset classes. In general, allocations to U.S. bonds and cash were
reduced over the course of the year, primarily to fund increases in large cap
stocks and equity REITs in response to improved valuation in these two asset
classes.
48 See Definition of Terms.
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
ASSET ALLOCATION: % OF NOTIONAL VALUE* ECONOMIC EXPOSURE*
ASSET CLASS INVESTMENT OF FUTURES 12/31/98 12/31/97 BENCHMARK RANGE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASCENT
------
Large Cap Stocks 17.4% -- 17.4% 14.9% 20% 0-60%
Small Cap Stocks 28.8% -- 28.8% 24.3% 20% 0-40%
International Stocks 13.1% -- 13.1% 17.3% 20% 0-40%
International Bonds -- 0.6% 0.6% 2.0% 10% 0-20%
Real Estate Stocks 30.5% -- 30.5% 15.2% 20% 0-40%
Fixed Income 4.5% -- 4.5% 14.6% 10% 0-30%
Cash Equivalents 5.7% (0.6)% 5.1% 11.7% -- 0-30%
------------------------------------------------------------------
100.0% -- 100.0% 100.0% 100%
==================================================================
CROSSROADS
----------
Large Cap Stocks 13.2% -- 13.2% 11.0% 15% 0-45%
Small Cap Stocks 21.4% -- 21.4% 19.4% 15% 0-30%
International Stocks 10.9% 0.1% 11.0% 14.3% 15% 0-30%
International Bonds 1.5% 1.0% 2.5% 2.3% 10% 0-20%
Real Estate Stocks 22.8% -- 22.8% 11.2% 15% 0-30%
Fixed Income 14.8% -- 14.8% 29.1% 25% 0-70%
Cash Equivalents 15.4% (1.1)% 14.3% 12.7% 5% 0-30%
------------------------------------------------------------------
100.0% -- 100.0% 100.0% 100%
==================================================================
LEGACY
------
Large Cap Stocks 8.8% -- 8.8% 7.0% 10% 0-30%
Small Cap Stocks 14.5% -- 14.5% 12.8% 10% 0-20%
International Stocks 8.3% -- 8.3% 10.3% 10% 0-20%
International Bonds 3.2% 1.5% 4.7% 2.4% 10% 0-20%
Real Estate Stocks 16.2% -- 16.2% 7.0% 10% 0-20%
Fixed Income 24.2% -- 24.2% 43.1% 40% 0-100%
Cash Equivalents 24.8% (1.5)% 23.3% 17.4% 10% 0-30%
------------------------------------------------------------------
100.0% -- 100.0% 100.0% 100%
==================================================================
</TABLE>
* Notional value refers to the economic value at risk or the exposure to the
financial instruments underlying the options and futures positions. Economic
exposure reflects the Portfolio's exposure to both changes in the value of the
portfolio of investments as well as the financial instruments underlying the
options and futures positions.
WHAT INVESTMENTS INFLUENCED THE PORTFOLIOS' PERFORMANCE OVER THE PAST TWELVE
MONTHS?
Relative value is the primary criteria in our asset allocation decisions. Early
in the year, our valuation disciplines indicated that large cap stocks were
overvalued relative to other equity asset classes and, consequently, we
maintained an underweight position in large cap stocks and an overweight
position in small cap stocks and equity REITs. Over the course of the year,
these two equity asset classes became even more undervalued relative to large
cap stocks, so we increased our overweight positions as a result.
In addition, our analysis indicated that U.S. bond investors were being offered
an unusually small increment of yield compared to cash equivalents in
compensation for the greatly increased interest rate risk of bonds compared to
cash, so we trimmed back on our already underweight U.S. bond holdings.
International bonds, likewise, offered little incremental yield over U.S. bonds
and cash (and often had lower yields) and seemed likely to suffer if the U.S.
dollar strengthened, so we kept our holdings of foreign bonds fairly low.
See Definition of Terms. 49
<PAGE>
Small Cap Earnings/Price - S&P 500 Earnings/Price
This graph shows the comparison between Small Cap Earnings/Price
to the S&P 500 Earnings/Price.
REIT Earnings/Price - S&P 500 Earnings/Price
This graph shows the comparison between REIT Earnings/Price
to the S&P 500 Earnings/Price.
WHAT IS YOUR OUTLOOK GOING FORWARD?
Diversification works well over the long run. In the short run, however, a
strategy of selling asset classes that have performed well recently and are
overvalued, and buying asset classes that have performed poorly recently and are
undervalued can appear foolish at times. Value disciplines rely upon a return
to historical valuation relationships and will tend to underperform when
valuation relationships are moving away from the historical norm, as they have
over the past year. This gap should reverse at some point and we believe the
Portfolios are positioned to benefit from the reversion to more normal
relationships.
The opinions expressed reflect those of the portfolio manager only through
December 31, 1998. The manager's opinions are subject to change at any time
based on market and other conditions. The composition, industries and holdings
of the Portfolios are subject to change.
50 See Definition of Terms.
<PAGE>
- --------------------------------------------------------------------------------
DEFINITION OF TERMS
- --------------------------------------------------------------------------------
(a) The Standard & Poor's (S&P) 500 Index is a value-weighted, unmanaged index
of 500 widely held stocks that assumes reinvestment of all dividends and is
considered to be representative of the U.S. stock market in general.
(b) The Russell 2000 Index consists of the smallest 2,000 companies in the
Russell 3000 Index and represents approximately 11% of the Russell 3000 total
market capitalization. The 3,000 largest U.S. companies by market
capitalization, representing nearly 98% of the U.S. equity market, comprise the
Russell 3000 Index. Both indices assume reinvestment of all dividends and are
unmanaged.
(c) The Morgan Stanley Capital International-Europe, Australia and Far East
(MSCI EAFE) Index is a market value-weighted average of the performance of more
than 900 securities listed on the stock exchanges of countries in Europe,
Australia and the Far East.
(d) The National Association of Real Estate Investment Trusts (NAREIT) Equity
REIT Index is an unmanaged, market-weighted average of the performance for
tax-qualified real estate investment trusts listed on the New York Stock
Exchange, American Stock Exchange and the NASDAQ National Market System.
(e) Salomon Brothers Broad Investment-Grade Bond Index is an unmanaged,
market-weighted index that contains approximately 4,700 individually priced
investment-grade bonds rated BBB or better. The index includes U.S. Treasury/
Agency issues, mortgage pass-through securites and corporate issues.
(f) The Salomon Brothers Non-U.S. World Government Bond Index (S.B. Non-U.S.
WGBI) serves as an unmanaged benchmark to evaluate the performance of government
bonds with a maturity of one year or greater in the following 12 countries:
Japan, United Kingdom, Germany, France, Canada, the Netherlands, Australia,
Denmark, Italy, Belgium, Spain and Sweden.
(g)Three-month Treasury bills are backed by full faith and credit of the U.S.
Government, short-term investments are equivalent to cash because their maturity
is only three months.
51
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
ASCENT
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (89.3%)
UNITED STATES (76.8%)
AIR TRANSPORT (0.5%)
Alaska Air Group, Inc. + .............. 1,700 $ 75,225
AMR Corp. + ........................... 9,600 570,000
Delta Air Lines, Inc. ................. 6,000 312,000
------------
957,225
------------
AUTO PARTS AND HARDWARE (0.4%)
Black & Decker Corp. .................. 12,200 683,962
Tower Automotive, Inc. + .............. 6,100 152,119
------------
836,081
------------
AUTOMOTIVE (0.5%)
Ford Motor Co. ........................ 16,400 962,475
-------------
BANKS AND THRIFTS (1.0%)
Chase Manhattan Corp. ................. 700 47,644
Dime Bancorp, Inc. .................... 2,800 74,025
FirstFed Financial Corp. + ............ 3,200 57,200
Golden State Bancorp, Inc. ............ 56,800 944,300
Golden West Financial Corp. ........... 5,000 458,437
Greenpoint Financial Corp. ............ 2,000 70,250
Pacific Century Financial Corp. ....... 2,900 70,687
Suntrust Banks, Inc. .................. 2,300 175,950
UnionBanCal Corp. ..................... 1,800 61,313
WSFS Financial Corp. .................. 4,400 74,250
------------
2,034,056
------------
BIOTECH AND MEDICAL PRODUCTS (4.2%)
ADAC Laboratories + ................... 7,700 153,759
Agouron Pharmaceuticals, Inc. + ....... 1,000 58,750
Alpharma, Inc. ++ ..................... 42,800 1,511,375
Amgen, Inc. + ......................... 3,400 355,512
Barr Laboratories, Inc. + ............. 13,100 628,800
Bio-Rad Labs, Inc. + .................. 24,000 504,000
Guidant Corp. ......................... 2,000 220,500
Hanger Orthopedic Group, Inc. + ....... 10,100 227,250
Maxxim Medical, Inc. + ................ 43,800 1,303,050
MedImmune, Inc. + ..................... 2,200 218,763
OEC Medical Systems, Inc. + ........... 33,400 1,050,012
Osteotech, Inc. + ..................... 8,900 413,850
Safeskin Corp. + ...................... 7,100 171,288
VISX, Inc. + .......................... 19,500 1,705,031
West Co., Inc. ....................... 5,300 189,144
------------
8,711,084
------------
COMMERCIAL SERVICES (1.7%)
Data Processing Resources Corp. + ..... 2,900 84,825
Day Runner, Inc. + .................... 3,000 43,500
Deluxe Corp. .......................... 9,400 343,687
Franklin Covey Co. + .................. 18,700 313,225
Galileo International, Inc. ........... 24,800 1,078,800
Modtech, Inc. + ....................... 2,600 39,650
Romac International, Inc. + ........... 51,600 1,148,100
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
COMMERCIAL SERVICES (CONTINUED)
Valassis Communications, Inc. + ....... 3,000 $ 154,875
World Color Press, Inc. + ............. 12,200 371,337
------------
3,577,999
------------
COMPUTERS (1.4%)
Apple Computer, Inc. + ................ 17,100 700,031
International Business Machines Corp. . 4,200 775,950
NeoMagic Corp. + ...................... 23,400 517,725
SPR, Inc. + ........................... 9,150 157,838
Sun Microsystems, Inc. + .............. 9,900 847,687
------------
2,999,231
------------
CONGLOMERATE AND AEROSPACE (1.2%)
Ducommun, Inc. + ...................... 13,100 180,944
General Electric Co. .................. 965 98,490
Goodrich (B. F.) Co. .................. 15,500 556,063
Kellstrom Industries, Inc. + .......... 12,400 356,500
Loews Corp. ........................... 5,800 569,850
United Technologies Corp. ............. 6,600 717,750
------------
2,479,597
------------
CONSUMER FINANCE (0.1%)
Countrywide Credit Industries, Inc. ... 5,400 271,013
Federal National Mortgage Association . 200 14,800
------------
285,813
------------
CONSUMER PRODUCTS (1.0%)
American Greetings Corp. .............. 3,250 133,453
Blyth Industries, Inc. + .............. 1,500 46,875
M & F Worldwide Corp. + ............... 29,600 297,850
National R.V. Holdings, Inc. + ........ 35,700 919,275
Procter & Gamble Co. .................. 6,800 620,925
------------
2,018,378
------------
CONSUMER SERVICES (2.0%)
Avis Rent A Car, Inc. + ............... 1,600 38,700
Bob Evans Farms, Inc. ................. 2,400 62,550
Darden Restaurants, Inc. .............. 17,800 320,400
Extended Stay America, Inc. + ......... 142,900 1,500,450
Foodmaker, Inc. + ..................... 22,500 496,406
Grand Casinos, Inc. + ................. 52,500 423,281
Harvey's Casino Resorts ............... 5,100 141,206
Promus Hotel Corp. + .................. 1,072 34,706
Sonic Corp. + ......................... 40,450 1,006,194
Tricon Global Restaurants, Inc. + ..... 1,900 95,238
------------
4,119,131
------------
CONSUMER SPECIALTIES (1.4%)
Premier Parks Inc. + .................. 44,800 1,355,200
Russ Berrie & Co., Inc. ............... 13,800 324,300
Speedway Motorsports, Inc. + .......... 43,800 1,248,300
------------
2,927,800
------------
DATA AND IMAGING SERVICES (3.9%)
Adobe Systems, Inc. ................... 5,100 238,425
Avant! Corp. + ........................ 26,000 416,000
BMC Software, Inc. + .................. 10,000 445,625
</TABLE>
52 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
DATA AND IMAGING SERVICES (CONTINUED)
Computer Associates International, Inc. 14,500 $ 618,062
Compuware Corp. + ..................... 1,500 117,188
Great Plains Software, Inc. + ......... 1,700 82,025
Keane, Inc. + ......................... 1,600 63,900
Microsoft Corp. + ..................... 7,600 1,054,025
Network Appliance, Inc. + ............. 3,200 144,000
Oracle Corp. + ........................ 19,300 832,312
Parametric Technology Co. + ........... 20,100 329,138
Pixar, Inc. + ......................... 900 31,500
Progress Software Corp. + ............. 26,300 887,625
QLogic Corp. + ........................ 16,200 2,120,175
Siebel Systems, Inc. + ................ 12,600 427,612
THQ, Inc. + ........................... 11,400 319,200
------------
8,126,812
------------
DISCRETIONARY RETAIL (4.1%)
American Eagle Outfitters, Inc. + ..... 30,525 2,033,728
Ames Department Stores, Inc. + ........ 17,100 461,700
Best Buy Co., Inc. + .................. 1,100 67,513
Cato Corp. (The) ...................... 7,600 74,813
Federated Department Stores, Inc. + ... 11,000 479,187
Gap, Inc. ............................. 8,550 480,937
Global DirectMail Corp. + ............. 20,800 486,200
Lowe's Co., Inc. ...................... 15,000 767,812
Micro Warehouse, Inc. + ............... 2,700 91,294
Musicland Stores Corp. + .............. 41,700 622,894
Tandy Corp. ........................... 3,200 131,800
TJX Companies, Inc. ................... 16,600 481,400
Transport World Entertainment Corp. + . 63,300 1,206,656
Zale Corp. + .......................... 37,300 1,202,925
------------
8,588,859
------------
DIVERSIFIED FINANCIAL SERVICES (0.2%)
Trammell Crow Co. + ................... 9,000 252,000
Transamerica Corp. .................... 1,000 115,500
------------
367,500
------------
DRUGS (2.1%)
Abbott Laboratories ................... 13,400 656,600
Dura Pharmaceuticals, Inc. + .......... 10,400 157,950
Eli Lilly & Co. ....................... 6,200 551,025
IDEC Pharmaceuticals Corp. + .......... 21,500 1,010,500
Johnson & Johnson ..................... 1,700 142,587
Medicis Pharmaceutical Corp. + ........ 7,200 429,300
Merck & Co., Inc. ..................... 5,300 782,744
Roberts Pharmaceutical Corp. + ........ 26,300 572,025
------------
4,302,731
------------
ELECTRIC UTILITIES (0.9%)
Allegheny Energy, Inc. ................ 1,700 58,650
Citizens Utilities Co. + .............. 1,624 13,196
Conectiv, Inc. ........................ 2,700 66,150
Energy East Corp. ..................... 1,200 67,800
Florida Progress Corp. ................ 1,600 71,700
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
Niagara Mohawk Power Corp. + .......... 20,700 $ 333,787
OGE Energy Corp. ...................... 2,100 60,769
TNP Enterprises, Inc. ................ 33,800 1,282,287
------------
1,954,339
------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.6%)
Power Integrations, Inc. + ............ 22,100 553,881
Xerox Corp. ........................... 5,900 696,200
------------
1,250,081
------------
ELECTRONIC MEDIA (0.2%)
USA Networks, Inc. + .................. 700 23,188
Viacom, Inc. + ........................ 6,300 466,200
------------
489,388
------------
FOOD AND BEVERAGE (1.7%)
American Italian Pasta Co. + .......... 13,200 348,150
Canandiagua Brands, Inc. + ............ 14,000 809,375
Earthgrains Co. (The) ................. 15,900 491,906
IBP, Inc. ............................. 3,500 101,938
J & J Snack Foods Corp. + ............. 10,100 225,987
Keebler Foods Co. + ................... 1,600 60,200
Robert Mondavi Corp. + ................ 5,600 228,900
Suiza Foods Corp. + ................... 25,700 1,309,094
------------
3,575,550
------------
FOOD AND DRUG RETAIL (1.2%)
Casey's General Stores, Inc. .......... 61,400 800,119
CVS Corp. ............................. 12,600 693,000
Kroger Co. (The) + .................... 6,500 393,250
Safeway, Inc. + ....................... 800 48,750
SUPERVALU, Inc. ....................... 21,900 613,200
------------
2,548,319
------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.7%)
Ball Corp. ............................ 600 27,450
Boise Cascade Corp. ................... 1,900 58,900
Centex Construction Products, Inc. .... 14,300 580,938
Georgia-Pacific Corp. ................. 2,400 57,150
Lafarge Corp. ......................... 1,300 52,650
Lone Star Industries, Inc. ............ 14,400 530,100
USG Corp. ............................. 1,200 61,125
------------
1,368,313
------------
GAS UTILITIES (1.1%)
Columbia Energy Group ................. 3,750 216,563
Eastern Enterprises ................... 10,300 450,625
Energen Corp. ......................... 32,600 635,700
NUI Corp. ............................. 10,000 268,125
ONEOK, Inc. ........................... 9,500 343,187
Sempra Energy ......................... 10,526 267,097
------------
2,181,297
------------
HEALTH SERVICES (0.5%)
Bergen Brunswig Corp. ................. 2,100 73,238
Lincare Holdings, Inc. + .............. 15,700 636,831
</TABLE>
See Notes to Portfolio of Investments. 53
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
ASCENT (continued)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
HEALTH SERVICES (CONTINUED)
Pediatrix Medical Group, Inc. + ....... 4,900 $ 293,694
------------
1,003,763
------------
HOUSING AND FURNISHINGS (2.5%)
Centex Corp. .......................... 8,400 378,525
Department 56, Inc. + ................. 15,700 589,731
Fleetwood Enterprises, Inc. ........... 15,800 549,050
Herman Miller, Inc. ................... 3,000 80,625
Kaufman & Broad Home Corp. ............ 13,100 376,625
Lennar Corp. .......................... 19,500 492,375
MDC Holdings, Inc. .................... 53,400 1,141,425
Pulte Corp. ........................... 11,000 305,938
Ryland Group, Inc. .................... 36,100 1,042,388
Winsloew Furniture, Inc. + ............ 5,100 135,150
------------
5,091,832
------------
INDUSTRIAL SERVICES (0.5%)
Fluor Corp. ........................... 2,300 97,894
Foster Wheeler Corp. .................. 17,900 236,056
Milacron, Inc. ........................ 17,500 336,875
RTI International Metals + ............ 20,500 287,000
Walter Industries, Inc. + ............. 11,200 171,500
------------
1,129,325
------------
INSURANCE (1.2%)
Allstate Corp. (The) .................. 21,600 834,300
American Bankers Insurance Group ...... 3,100 149,962
CIGNA Corp. ........................... 6,400 494,800
Conseco, Inc. ......................... 6,700 204,769
First American Financial Corp. ........ 17,400 558,975
MGIC Investment Corp. ................. 5,500 218,969
Old Republic International Corp. ...... 2,550 57,375
PacifiCare Health Systems, Inc. + ..... 800 63,600
------------
2,582,750
------------
INVESTMENT SERVICES (0.2%)
BancWest Corp. ........................ 1,300 62,400
Dames & Moore Group ................... 5,100 65,663
Providian Financial Corp. ............. 1,050 78,750
Roslyn Bancorp, Inc. .................. 6,700 144,050
------------
350,863
------------
MAJOR TELECOMMUNICATIONS (1.5%)
ALLTEL Corp. .......................... 5,500 328,969
AT&T Corp. ............................ 15,500 1,166,375
Bell Atlantic Corp. ................... 6,500 369,281
BellSouth Corp. ....................... 8,600 428,925
Sprint Corp. .......................... 9,500 799,188
Sprint PCS + .......................... 4,450 102,906
------------
3,195,644
------------
MISCELLANEOUS METALS (0.1%)
Stillwater Mining Co. + ............... 1,000 41,000
Titanium Metals Corp. ................. 28,200 239,700
------------
280,700
------------
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
OIL (1.3%)
Ashland Oil, Inc. ..................... 10,900 $ 527,288
Belco Oil & Gas Corp. ................. 2,400 13,350
Penn Virginia Corp. ................... 7,400 135,975
Pennzoil-Quaker State Co. + ........... 4,430 65,622
Sunoco Inc. ........................... 23,300 840,256
Swift Energy Co. + .................... 13,600 100,300
Tesoro Petroleum Corp. + .............. 90,700 1,099,737
------------
2,782,528
------------
OIL SERVICES (0.4%)
McDermott International, Inc. ......... 13,500 333,281
Seitel, Inc. + ........................ 4,600 57,213
Tidewater, Inc. ....................... 2,800 64,925
Tosco Corp. ........................... 2,600 67,275
Trico Marine Services, Inc. + ......... 24,300 118,462
Veritas DGC, Inc. + ................... 6,500 84,500
------------
725,656
------------
OTHER TELECOMMUNICATIONS (0.7%)
Adelphia Communications + ............. 13,600 622,200
Century Telephone Enterprises, Inc. ... 1,350 91,125
Cincinnati Bell Inc. .................. 1,700 64,281
Comverse Technology, Inc. + .......... 800 56,800
Lucent Technologies, Inc. ............. 2,000 220,000
Melita International Corp. + .......... 9,400 197,400
Tekelec + ............................. 6,200 102,688
Tellabs, Inc. + ....................... 1,100 75,419
------------
1,429,913
------------
PRINT MEDIA (1.0%)
Knight-Ridder, Inc. ................... 10,100 516,362
McGraw-Hill Co., Inc. ................. 100 10,188
Media General, Inc. + ................. 1,300 68,900
Meredith Corp. ........................ 8,700 329,513
New York Times Co. .................... 13,600 471,750
Thomas Nelson, Inc. .................. 23,900 322,650
Wiley (John) & Sons, Inc. ............. 7,700 372,006
------------
2,091,369
------------
PRODUCER GOODS (0.9%)
C & D Technologies, Inc. .............. 27,400 753,500
Honeywell, Inc. ....................... 3,000 225,937
Ingersoll-Rand Co. .................... 8,700 408,356
Kaydon Corp. .......................... 1,200 48,075
Tecumseh Products Co. ................. 400 18,650
Trinity Industries, Inc. .............. 500 19,250
Tyco International Ltd. ............... 5,300 399,819
------------
1,873,587
------------
REAL ESTATE INVESTMENT TRUSTS (30.3%)
AMB Property Corp. .................... 2,400 52,800
American Health Properties, Inc. ...... 12,200 251,625
Apartment Investment & Management Co. . 54,000 2,008,125
Archstone Communities Trust ........... 30,200 611,550
Arden Realty Group, Inc. .............. 17,600 408,100
</TABLE>
54 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Avalon Bay Communities, Inc. .......... 32,770 $ 1,122,372
Beacon Capital + + .................... 38,400 614,400
Bedford Property Investors, Inc. ...... 6,000 101,250
Boykin Lodging Co. .................... 8,600 106,425
Bradley Real Estate, Inc. ............. 15,900 325,950
Brandywine Realty Trust ............... 52,700 942,013
Cabot Industrial Trust ................ 9,800 200,288
Camden Property Trust ................. 30,500 793,000
Captec Net Lease Realty, Inc. ......... 16,000 200,000
Carramerica Realty Corp. .............. 11,800 283,200
CBL & Associates Properties, Inc. ..... 42,000 1,084,125
CCA Prison Realty Trust ............... 25,900 530,950
Chateau Communities, Inc. ............. 17,700 518,831
Colonial Properties Trust ............. 57,900 1,541,587
Cornerstone Properties, Inc. .......... 30,100 470,313
Cousins Properties, Inc. .............. 19,900 641,775
Crescent Real Estate Equities, Inc. .. 69,500 1,598,500
Criimi Mae, Inc. ...................... 30,600 107,100
Developers Diversified Realty Corp. ... 6,800 120,700
Duke Realty Investments, Inc. ......... 16,400 381,300
Eastgroup Properties, Inc. ............ 5,700 105,094
Equity Office Properties Trust ........ 149,600 3,590,400
Equity One, Inc. ...................... 8,900 80,656
Equity Residential Properties Trust ... 90,953 3,677,912
Essex Property Trust, Inc. ............ 12,800 380,800
FelCor Lodging Trust Inc. ............. 21,200 488,925
First Industrial Realty Trust, Inc. ... 37,800 1,013,512
Franchise Finance Corp. of America .... 22,800 547,200
Gables Residential Trust .............. 18,200 422,013
General Growth Properties, Inc. ....... 36,800 1,393,800
Glenborough Realty Trust, Inc. ........ 49,100 1,000,412
Glimcher Realty Trust ................. 10,700 167,856
Golf Trust of America, Inc. ........... 7,900 219,225
Health Care REIT, Inc. ................ 25,600 662,400
Healthcare Realty Trust, Inc. ......... 24,757 552,391
Highwood Properties, Inc. ............. 24,600 633,450
Home Properties of New York, Inc. ..... 6,700 172,525
Hospitality Properties Trust .......... 24,900 600,713
HRPT Properties Trust ................. 153,800 2,162,812
Imperial Credit Commercial Mortgage
Investment Corp. ..................... 7,500 70,313
Innkeepers USA Trust .................. 29,400 347,288
Kilroy Realty Corp. ................... 21,000 483,000
Kimco Realty Corp. .................... 88,100 3,496,469
Koger Equity, Inc. .................... 26,400 453,750
Lexington Corporate Properties Trust .. 8,400 105,525
Liberty Property Trust ................ 127,500 3,139,687
LTC Properties, Inc. .................. 10,800 179,550
Manufactured Home Communities, Inc. ... 18,500 463,656
Meditrust Companies Corp. ............. 67,500 1,020,937
MeriStar Hospitality Corp. ............ 12,543 232,829
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Merry Land Properties, Inc. + ......... 1,005 $ 3,643
Mid-America Apartment Communities, Inc. 9,800 222,338
National Golf Properties, Inc. ........ 9,800 283,588
OMEGA Healthcare Investors, Inc. ...... 60,700 1,832,381
Parkway Properties, Inc. .............. 12,100 378,125
Post Properties, Inc. ................. 85,300 3,278,719
Prentiss Properties Trust ............. 34,800 776,475
Prime Retail, Inc. .................... 26,000 255,125
PS Business Parks, Inc. ............... 26,000 620,750
Public Storage, Inc. .................. 37,300 1,009,431
Ramco-Gerhenson Properties Trust ...... 8,400 121,800
Reckson Associates Realty Corp. ....... 36,800 816,500
Reckson Service Industries + .......... 5,832 24,057
Regency Realty Corp. .................. 16,800 373,800
RFS Hotel Investors, Inc. ............. 16,100 197,225
Shurgard Storage Centers, Inc. ........ 10,500 271,031
Simon Property Group, Inc. ............ 70,600 2,012,100
Sovran Self Storage, Inc. ............. 13,900 349,238
Spieker Properties, Inc. .............. 35,900 1,243,037
Starwood Financial Trust .............. 216 12,960
Starwood Lodging Trust ................ 84,850 1,925,034
Storage Trust Realty .................. 8,500 198,688
Sun Communities, Inc. ................. 12,150 422,972
Tanger Factory Outlet Centers, Inc. ... 9,600 203,400
Tower Realty Trust, Inc. .............. 10,000 201,250
United Dominion Realty Trust, Inc. .... 34,300 353,719
Urban Shopping Centers, Inc. .......... 23,600 772,900
Vornado Operating Co. + ............... 1,995 16,085
Vornado Realty Trust .................. 39,900 1,346,625
Walden Residential Properties, Inc. ... 10,300 210,506
Weeks Corp. ........................... 12,300 346,706
------------
62,961,587
------------
SEMICONDUCTORS AND ELECTRONICS (2.0%)
AMP, Inc. ............................. 11,800 614,337
C-Cube Microsystems, Inc. + ........... 2,800 75,950
CHS Electronics, Inc. + ............... 30,600 518,288
Intel Corp. ........................... 12,000 1,422,750
Lattice Semiconductor Corp. + ......... 10,900 500,378
National Semiconductor Corp. + ........ 9,200 124,200
Park Electrochemical Corp. ............ 3,900 111,638
Vitesse Semiconductor Corp. + ......... 15,400 702,625
------------
4,070,166
------------
SPECIALTY CHEMICALS (0.1%)
Albemarle Corp. ....................... 3,000 71,250
Engelhard Corp. ....................... 1,100 21,450
International Specialty Products, Inc.
+..................................... 3,100 42,044
------------
134,744
------------
STEEL (0.4%)
Cleveland-Cliffs, Inc. ................ 400 16,125
Quanex Corp. .......................... 29,100 656,569
</TABLE>
See Notes to Portfolio of Investments. 55
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
ASCENT (continued)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
STEEL (CONTINUED)
Texas Industries, Inc. ................ 3,000 $ 80,812
------------
753,506
------------
SURFACE TRANSPORT (0.1%)
Burlington Northern Santa Fe Corp. .... 3,600 121,500
------------
TEXTILES AND APPAREL (1.0%)
Abercrombie & Fitch Co. + ............. 24,100 1,705,075
Intimate Brands, Inc. ................ 15,400 460,075
------------
2,165,150
------------
TOTAL UNITED STATES (COST $153,676,959) 159,406,642
------------
FOREIGN COMMON STOCKS (12.5%)
AUSTRALIA (0.3%)
Telstra Corp. Ltd.
(Other Telecommunications) + ......... 72,900 341,189
Westpac Banking Corp. Ltd.
(Banks and Thrifts) .................. 56,297 377,096
------------
TOTAL AUSTRALIA 718,285
------------
BELGIUM (0.3%)
Delhaize-le Lion SA (Food and Beverage) 6,100 539,795
------------
CANADA (0.1%)
Canadian National Railway Co.
(Surface Transport) ................... 3,500 181,563
Trizec Hahn Corp.
(Real Estate Investment Trusts) ....... 4,700 96,350
------------
TOTAL CANADA 277,913
------------
DENMARK (0.2%)
Den Danske Bank (Investment Services) . 1,300 174,641
Tele Danmark A/S
(Major Telecommunications) ............ 2,300 310,425
------------
TOTAL DENMARK 485,066
------------
FINLAND (0.4%)
Nokia Corp., ADR
(Other Telecommunications) ............ 4,800 578,100
Sampo Insurance Co. (Insurance) ....... 7,900 301,902
------------
TOTAL FINLAND 880,002
------------
FRANCE (1.8%)
Credit Commercial de France
(Banks and Thrifts) + ................. 3,500 325,176
Elf Aquitaine SA (Oil) ................ 3,050 352,708
Etablissements Economiques du Casino
Guichard-Perrachon SA
(Commercial Services) + .............. 2,800 291,719
Gemini Sogeti SA (Insurance) .......... 3,200 513,838
Groupe Danone (Food and Beverage) ..... 1,300 372,346
Lafarge SA
(Forest Products and Building
Materials)............................ 3,800 361,212
Renault SA (Automotive) ............... 3,300 148,276
Sanofi SA (Drugs) ..................... 2,100 345,852
Scor (Insurance) ...................... 4,700 310,882
Societe Generale (Banks and Thrifts) .. 1,500 243,010
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
FRANCE (CONTINUED)
Vivendi (Utilities - Water) ........... 1,600 $ 415,309
------------
TOTAL FRANCE 3,680,328
------------
GERMANY (1.0%)
Bayericshe Hypo-und Vereinsb
(Chemicals) +......................... 5,400 423,091
BHF-Bank AG (Banks and Thrifts) ....... 5,000 201,129
DaimlerChrysler AG (Automotive) ....... 2,100 207,403
Deutsche Pfandbrief & Hypothekenbank AG
(Banks and Thrifts) .................. 3,300 289,265
Douglas Holding AG (Discretionary
Retail)............................... 3,500 206,982
Gehe AG (Health Services) ............. 5,400 372,839
Mannesmann AG (Producer Goods) ........ 3,700 424,291
------------
TOTAL GERMANY 2,125,000
------------
HONG KONG (0.2%)
HSBC Holdings Plc (Investment Services) 4,000 99,647
VTech Holdings Ltd.
(Semiconductors and Electronics) ..... 64,000 279,220
------------
TOTAL HONG KONG 378,867
------------
IRELAND (0.5%)
Allied Irish Banks (Banks and Thrifts) 22,165 397,568
CRH Plc
(Forest Products and Building
Materials)............................ 22,102 382,267
Waterford Wedgewood
(Housing and Furnishings) ............ 279,199 237,283
------------
TOTAL IRELAND 1,017,118
------------
ITALY (0.6%)
Arnoldo Mondadori Editor (Print Media) 22,900 303,446
Banca Commerciale Italiana (Banks and
Thrifts).............................. 37,000 255,800
Banca del Nazionale Lavoro
(Banks and Thrifts) + ................ 89,200 267,501
Istituto Nazionale delle Assicurazioni
(Insurance) +......................... 115,000 304,422
Telecom Italia SpA (Commercial
Services)............................. 18,700 159,903
Unione Immobiliare SpA
(Real Estate Investment Trusts) + ..... 64,000 33,457
------------
TOTAL ITALY 1,324,529
------------
JAPAN (1.7%)
Bank of Tokyo-Mitsubishi, Ltd. (The)
(Investment Services) ................ 19,200 199,149
Fuji Photo Film (Chemicals) ........... 11,000 409,575
Hitachi Ltd. (Semiconductors and
Electronics).......................... 48,000 297,872
Kao Corp. (Consumer Products) ......... 25,000 565,160
Mizuno Corp. (Consumer Products) ...... 41,000 124,672
Nintendo Co. Ltd.
(Semiconductors and Electronics) ..... 3,000 291,223
NTT Mobile Communication Network, Inc.
(Other Telecommunications) + ......... 50 206,117
Orix Corp. (Investment Services) ...... 3,100 231,950
Santen Pharmaceutical Co. Ltd. (Drugs) 12,000 230,851
Seino Transportation Co. Ltd.
(Surface Transport) .................. 54,000 309,255
SoftBank Corp. (Banks and Thrifts) .... 9,200 554,610
------------
TOTAL JAPAN 3,420,434
------------
</TABLE>
56 See Notes to Portfolio of Investments.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
MEXICO (0.1%)
Grupo Financiero Banamex Accival, SA de
CV (Banacci) (Banks and Thrifts) + ... 102,001 $ 133,872
-------------
NETHERLANDS (0.8%)
Akzo Nobel (Chemicals) ................ 6,400 291,576
Hunter Douglas NV (Consumer Services) . 8,525 282,546
ING Groep NV (Banks and Thrifts) ...... 5,860 357,527
Koninklijke Ahold NV (Commercial
Services)............................. 6,969 257,712
TNT Post Group NV (Surface Transport) . 6,500 209,543
VNU-Verenigde Nederlandes
Uitgeversbedrijven Verenigd Bezit
(Print Media) ........................ 8,800 331,987
-------------
TOTAL NETHERLANDS 1,730,891
-------------
NEW ZEALAND (0.1%)
Fernz Corp. Ltd. (Chemicals) .......... 62,200 192,233
-------------
NORWAY (0.4%)
Det Sondenfjelds-Norske
Dampskibsselskab
(Oil) + .............................. 12,000 94,501
Fokus Banken ASA (Investment Services) 22,600 225,436
Merkantildata ASA (Data and Imaging
Services)............................. 26,300 258,892
Ocean Rig ASA (Oil) + ................. 362,500 98,963
Tandberg Television ASA (Electronic
Media) +.............................. 26,000 214,989
-------------
TOTAL NORWAY 892,781
-------------
SPAIN (0.4%)
Iberdrola SA (Electric Utilities) + ... 23,800 445,949
Telefonica de Espana
(Major Telecommunications) ........... 6,000 267,193
Telefonica SA Rights
(Major Telecommunications) + ......... 6,000 5,335
-------------
TOTAL SPAIN 718,477
-------------
SWEDEN (0.5%)
Industrial & Financial Systems
(Data and Imaging Services) + ++ ..... 31,500 363,351
NetCom AB (Major Telecommunications) + 4,900 199,487
Securitas AB (Consumer Services) ...... 25,000 388,610
-------------
TOTAL SWEDEN 951,448
-------------
SWITZERLAND (0.6%)
Adecco SA (Commercial Services) ....... 300 136,949
Fischer (Georg) AG (Auto Parts and
Hardware)............................. 850 287,459
Novartis AG Registered Shares
(Health Services) + .................. 150 294,867
Swiss Re (Insurance) .................. 90 234,649
UBS AG (Banks and Thrifts) ............ 1,200 368,693
-------------
TOTAL SWITZERLAND 1,322,617
-------------
UNITED KINGDOM (2.5%)
Bank of Scotland (Banks and Thrifts) .. 25,134 299,835
Berisford Plc (Industrial Services) ... 52,700 157,828
British Aerospace Plc
(Conglomerate and Aerospace) ......... 47,317 401,896
British Telecom Plc
(Major Telecommunications) ........... 17,800 267,133
Cable & Wireless Plc
(Other Telecommunications) + ......... 13,900 171,023
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Glaxo Wellcome Plc (Drugs) ............ 8,565 $ 294,699
Granada Group Plc (Consumer Services) + 23,451 414,564
Kingfisher Plc (Discretionary Retail) . 25,553 276,561
Kwik-Fit Holding Plc (Auto Parts and
Hardware)............................. 29,000 232,807
National Westminster Bank Plc
(Banks and Thrifts) .................. 16,200 312,392
Pearson Plc (Print Media) ............. 20,200 400,952
Peninsular & Oriental Steam Navigation
Co.
(Surface Transport) + ................ 22,983 271,498
Railtrack Group (Surface Transport) ... 9,303 240,998
SmithKline Beecham Plc (Drugs) ........ 18,900 265,245
Unilever Plc (Consumer Products) ...... 25,500 285,957
Vodafone Group Plc (Consumer Products) 36,192 587,711
WPP Group Plc (Commercial Services) ... 33,200 202,006
-------------
TOTAL UNITED KINGDOM 5,083,105
-------------
TOTAL FOREIGN COMMON STOCKS (COST $22,000,577) 25,872,761
-------------
TOTAL COMMON STOCKS (COST $175,677,536) 185,279,403
-------------
PREFERRED STOCKS (0.4%)
GERMANY (0.4%)
Henkel KGAA (Chemicals) ............... 5,000 447,286
Hugo Boss AG (Textiles and Apparel) + . 100 192,123
SAP AG (Data and Imaging Services) + .. 500 239,614
-------------
TOTAL PREFERRED STOCKS (COST $623,162) 879,023
-------------
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (4.5%)
CORPORATE AND CONVERTIBLE BONDS (0.6%)
GTE Corp., 9.38%, 12/01/00 ............ $ 300,000 $ 321,771
HSBC Americas, Inc., 7.00%, 11/01/06 .. 900,000 942,462
-------------
TOTAL CORPORATE AND CONVERTIBLE BONDS 1,264,233
(COST $1,216,456) -------------
CORPORATE BONDS (2.4%)
BankAmerica Corp., 7.88%, 12/01/02 .... 300,000 323,898
Fifth Third Banc, 6.75%, 07/15/05 ..... 450,000 472,275
Ford Motor Credit Corp., 6.63%,
10/01/28.............................. 390,000 400,503
Heller Financial, Inc., 6.35%, 08/15/99
++ ................................... 800,000 803,320
Household Finance Corp., 5.88%,
09/25/04.............................. 200,000 200,214
International Lease Finance Corp.,
5.56%, 09/18/01 ...................... 200,000 199,528
MBIA, Inc., 6.63%, 10/01/28 ........... 380,000 381,569
Norwest Financial, Inc., 5.38%,
09/30/03.............................. 200,000 198,844
Rite Aid Corp., 6.00%, 10/01/03 ....... 200,000 199,810
Simon De Bartolo Group, Inc., 6.63%,
06/15/03.............................. 200,000 197,294
Tenet Healthcare Corp., 7.88%, 01/15/03 800,000 809,592
Time Warner, Inc., 9.13%, 01/15/13 .... 475,000 601,331
USA Waste Management, Inc., 6.13%,
07/15/01.............................. 200,000 201,240
-------------
TOTAL CORPORATE BONDS (COST $4,849,456) 4,989,418
-------------
</TABLE>
See Notes to Portfolio of Investments. 57
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
ASCENT (continued)
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
------------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (1.4%)
Federal National Mortgage
Association-Convertible Loan, 6.50%,
11/01/27.............................. 919,504 $ 925,826
Government National Mortgage
Association, 7.00%, 04/15/26 -
01/15/28.............................. 1,856,539 1,901,207
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED 2,827,033
SECURITIES (COST $2,797,235) -------------
U.S. GOVERNMENT OBLIGATIONS (0.1%)
U.S. Treasury Bond, 7.25%, 08/15/04 ... 50,000 56,211
U.S. Treasury Note, 7.50%, 11/15/01 ... 120,000 129,037
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $178,959) 185,248
-------------
TOTAL LONG-TERM BONDS AND NOTES (COST $9,042,106) 9,265,932
-------------
SHORT-TERM INVESTMENTS (5.1%)
Federal Home Loan Mortgage Corp.,
4.70%, 01/04/99 ...................... 5,462,000 5,462,000
Federal National Mortgage Association,
4.75%, 01/05/99 ...................... 5,000,000 4,999,340
U.S. Treasury Bill, 4.98%, 02/18/99 @ . 100,000 99,456
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $10,560,719) 10,560,796
--------------
TOTAL INVESTMENTS (COST $195,903,523)(a) 205,985,154
OTHER ASSETS LESS LIABILITIES 1,610,662
--------------
TOTAL NET ASSETS $207,595,816
==============
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$196,254,380. Unrealized gains and losses, based on identified tax cost at
<TABLE>
<S> <C>
December 31, 1998, are as follows:
Unrealized gains....................................... $ 26,414,432
Unrealized losses...................................... (16,683,658)
--------------
Net unrealized gain................................... $ 9,730,774
==============
</TABLE>
Information concerning open futures contracts at December 31, 1998 is shown
below:
<TABLE>
<CAPTION>
NO. OF INITIAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
---------- ----------- ----------- --------------
LONG CONTRACTS
- -------------------------
<S> <C> <C> <C> <C>
Long-Term German
Government Bond
Futures.................. 2 $ 344,667 Mar 99 $ 660
Swiss Government
Bond Futures............. 9 853,477 Mar 99 (15,398)
Topix Index Futures...... 4 381,559 Mar 99 (16,844)
---------- ----------
$1,579,703 $ (31,582)
========== ==========
<CAPTION>
SHORT CONTRACTS
- -------------------------
<S> <C> <C> <C> <C>
United Kingdom FTSE 100
Index Futures...........
4 $ (375,905) Mar 99 $ (17,470)
========== ==========
</TABLE>
+ Non-income producing security.
++ 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.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1998.
Information concerning restricted securities at December 31, 1998 is shown
below:
<TABLE>
<CAPTION>
COST
----------
<S> <C>
Beacon Capital........................................ $ 768,000
Heller Financial, Inc................................. 800,201
Industrial & Financial Systems........................ 154,500
----------
$1,722,701
==========
</TABLE>
The market value of the total restricted securities above represent 0.86% of the
total net assets.
Category percentages are based on net assets.
58 See Notes to Financial Statements.
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
CROSSROADS
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (67.7%)
UNITED STATES (57.3%)
AIR TRANSPORT (0.3%)
AMR Corp. + ........................ 6,900 $ 409,688
Delta Air Lines, Inc. .............. 4,000 208,000
-------------
617,688
-------------
AUTO PARTS AND HARDWARE (0.3%)
Black & Decker Corp. ............... 8,400 470,925
Briggs & Stratton Corp. ............ 1,800 89,775
-------------
560,700
-------------
AUTOMOTIVE (0.4%)
Ford Motor Co. ..................... 11,900 698,381
-------------
BANKS AND THRIFTS (0.5%)
Dime Bancorp, Inc. ................. 1,400 37,012
Golden State Bancorp, Inc. ......... 32,400 538,650
Golden West Financial Corp. ........ 3,300 302,569
Greenpoint Financial Corp. ......... 1,100 38,637
Washington Federal, Inc. ........... 1,000 26,688
WSFS Financial Corp. ............... 3,200 54,000
-------------
997,556
-------------
BIOTECH AND MEDICAL PRODUCTS (3.4%)
Agouron Pharmaceuticals, Inc. + .... 700 41,125
Alpharma, Inc. ++ .................. 30,700 1,084,094
Amgen, Inc. + ...................... 3,600 376,425
Barr Laboratories, Inc. + .......... 12,400 595,200
Bio-Rad Labs, Inc. + ............... 8,100 170,100
Empi Inc. + ........................ 1,500 37,500
Guidant Corp. ...................... 1,300 143,325
Hanger Orthopedic Group, Inc. + .... 24,200 544,500
Maxxim Medical, Inc. + ............. 29,500 877,625
Mylan Laboratories, Inc. ........... 1,200 37,800
OEC Medical Systems, Inc. + ........ 20,000 628,750
Osteotech, Inc. + .................. 6,000 279,000
Safeskin Corp. + ................... 3,100 74,788
Sunrise Medical + .................. 12,700 157,956
VISX, Inc. + ....................... 13,600 1,189,150
West Co., Inc. .................... 8,200 292,637
-------------
6,529,975
-------------
COMMERCIAL SERVICES (1.0%)
Day Runner, Inc. + ................. 7,800 113,100
Deluxe Corp. ....................... 4,800 175,500
Franklin Covey Co. + ............... 14,600 244,550
Galileo International, Inc. ........ 17,400 756,900
Modtech, Inc. + .................... 1,600 24,400
Romac International, Inc. + ........ 25,500 567,375
-------------
1,881,825
-------------
COMPUTERS (1.3%)
Apple Computer, Inc. + ............. 12,000 491,250
Dell Computer Corp. + .............. 3,400 248,837
International Business Machines
Corp............................... 2,600 480,350
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
COMPUTERS (CONTINUED)
NeoMagic Corp. + ................... 21,200 $ 469,050
SPR, Inc. + ........................ 7,350 126,788
Sun Microsystems, Inc. + ........... 7,400 633,625
-------------
2,449,900
-------------
CONGLOMERATE AND AEROSPACE (1.2%)
Cordant Technologies, Inc. ......... 700 26,250
Ducommun, Inc. + ................... 9,900 136,744
General Electric Co. ............... 6,959 710,253
Goodrich (B. F.) Co. ............... 7,500 269,062
Kellstrom Industries, Inc. + ....... 10,300 296,125
Loews Corp. ........................ 4,300 422,475
Northrop Grumman Corp. ............. 200 14,625
United Technologies Corp. .......... 4,800 522,000
-------------
2,397,534
-------------
CONSUMER FINANCE (0.1%)
Countrywide Credit Industries, Inc. 4,200 210,788
Crescent Operating, Inc. + ......... 520 2,470
Federal National Mortgage
Association........................ 600 44,400
-------------
257,658
-------------
CONSUMER PRODUCTS (0.5%)
American Greetings Corp. ........... 2,150 88,284
Blyth Industries, Inc. + ........... 1,001 31,264
M & F Worldwide Corp. + ............ 13,800 138,863
National R.V. Holdings, Inc. + ..... 23,550 606,412
Procter & Gamble Co. ............... 1,600 146,100
-------------
1,010,923
-------------
CONSUMER SERVICES (1.3%)
Anchor Gaming + .................... 200 11,275
Avis Rent A Car, Inc. + ............ 1,100 26,606
Bob Evans Farms, Inc. .............. 1,500 39,094
Darden Restaurants, Inc. ........... 12,500 225,000
Extended Stay America, Inc. + ...... 101,100 1,061,550
Foodmaker, Inc. + .................. 14,700 324,319
Grand Casinos, Inc. + .............. 34,200 275,737
Harvey's Casino Resorts ............ 2,900 80,294
Promus Hotel Corp. + ............... 777 25,155
Sonic Corp. + ...................... 18,600 462,675
-------------
2,531,705
-------------
CONSUMER SPECIALTIES (1.0%)
Premier Parks Inc. + ............... 31,800 961,950
Russ Berrie & Co., Inc. ............ 4,700 110,450
Speedway Motorsports, Inc. + ....... 31,300 892,050
-------------
1,964,450
-------------
DATA AND IMAGING SERVICES (2.9%)
Avant! Corp. + ..................... 21,200 339,200
BMC Software, Inc. + ............... 7,200 320,850
Computer Associates International,
Inc................................ 10,300 439,037
Compuware Corp. + .................. 700 54,688
Great Plains Software, Inc. + ...... 1,700 82,025
</TABLE>
See Notes to Financial Statements. 59
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
CROSSROADS (continued)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
DATA AND IMAGING SERVICES (CONTINUED)
Keane, Inc. + ...................... 800 $ 31,950
Microsoft Corp. + .................. 6,700 929,206
Network Appliance, Inc. + .......... 800 36,000
Oracle Corp. + ..................... 14,100 608,062
Parametric Technology Co. + ........ 9,200 150,650
Pixar, Inc. + ...................... 400 14,000
Progress Software Corp. + .......... 15,500 523,125
QLogic Corp. + ..................... 11,000 1,439,625
Siebel Systems, Inc. + ............. 8,600 291,863
THQ, Inc. + ........................ 12,400 347,200
VERITAS Software Corp. + ........... 500 29,969
-------------
5,637,450
-------------
DISCRETIONARY RETAIL (3.4%)
American Eagle Outfitters, Inc. + .. 34,800 2,318,550
Ames Department Stores, Inc. + ..... 11,500 310,500
Federated Department Stores, Inc. + 8,100 352,856
Gap, Inc. .......................... 6,000 337,500
Global DirectMail Corp. + .......... 9,000 210,375
Lowe's Co., Inc. ................... 10,900 557,944
Micro Warehouse, Inc. + ............ 1,500 50,719
Musicland Stores Corp. + ........... 20,100 300,244
Renters Choice, Inc. + ............. 2,100 66,675
Tandy Corp. ........................ 2,300 94,731
TJX Companies, Inc. ................ 11,200 324,800
Transport World Entertainment Corp.
+.................................. 63,154 1,203,873
Zale Corp. + ....................... 15,400 496,650
-------------
6,625,417
-------------
DIVERSIFIED FINANCIAL SERVICES (0.3%)
Morgan Stanley, Dean Witter,
Discover & Co. .................... 3,675 260,925
Trammell Crow Co. + ................ 5,200 145,600
Transamerica Corp. ................. 700 80,850
-------------
487,375
-------------
DRUGS (1.6%)
Abbott Laboratories ................ 9,200 450,800
Dura Pharmaceuticals, Inc. + ....... 12,100 183,769
Eli Lilly & Co. .................... 4,000 355,500
IDEC Pharmaceuticals Corp. + ....... 9,100 427,700
Johnson & Johnson .................. 1,200 100,650
Medicis Pharmaceutical Corp. + ..... 13,000 775,125
Merck & Co., Inc. .................. 3,900 575,981
Roberts Pharmaceutical Corp. + ..... 14,000 304,500
-------------
3,174,025
-------------
ELECTRIC UTILITIES (0.5%)
Allegheny Energy, Inc. ............. 1,200 41,400
Citizens Utilities Co. + ........... 1,116 9,070
Conectiv, Inc. ..................... 1,300 31,850
Energy East Corp. .................. 700 39,550
Florida Progress Corp. ............. 1,000 44,813
Kansas City Power & Light Co. ...... 200 5,925
Niagara Mohawk Power Corp. + ....... 16,700 269,287
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
ELECTRIC UTILITIES (CONTINUED)
OGE Energy Corp. ................... 1,500 $ 43,406
TNP Enterprises, Inc. ............. 12,100 459,044
-------------
944,345
-------------
ELECTRICAL MACHINERY AND INSTRUMENTS (0.2%)
Xerox Corp. ........................ 3,400 401,200
-------------
ELECTRONIC MEDIA (0.1%)
USA Networks, Inc. + ............... 500 16,563
Viacom, Inc. + ..................... 1,700 125,800
-------------
142,363
-------------
FOOD AND BEVERAGE (1.2%)
American Italian Pasta Co. + ....... 8,600 226,825
Aurora Foods, Inc. + ............... 1,800 35,663
Canandiagua Brands, Inc. + ......... 9,400 543,437
Earthgrains Co. (The) .............. 20,700 640,406
IBP, Inc. .......................... 2,500 72,813
J & J Snack Foods Corp. + .......... 6,200 138,725
Robert Mondavi Corp. + ............. 9,500 388,312
Suiza Foods Corp. + ................ 6,300 320,906
-------------
2,367,087
-------------
FOOD AND DRUG RETAIL (1.1%)
Casey's General Stores, Inc. ....... 47,500 618,984
CVS Corp. .......................... 6,100 335,500
Kroger Co. (The) + ................. 5,300 320,650
Longs Drug Stores, Inc. ............ 300 11,250
Rite Aid Corp. ..................... 7,700 381,631
Safeway, Inc. + .................... 600 36,563
SUPERVALU, Inc. .................... 15,400 431,200
-------------
2,135,778
-------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.4%)
Ball Corp. ......................... 400 18,300
Boise Cascade Corp. ................ 1,400 43,400
Centex Construction Products, Inc. . 4,100 166,563
Georgia-Pacific Corp. .............. 1,600 38,100
Lafarge Corp. ...................... 800 32,400
Lone Star Industries, Inc. ......... 11,200 412,300
Owens Corning ...................... 700 24,806
USG Corp. .......................... 700 35,656
-------------
771,525
-------------
GAS UTILITIES (0.6%)
Columbia Energy Group .............. 2,400 138,600
Eastern Enterprises ................ 6,400 280,000
Energen Corp. ...................... 16,200 315,900
NUI Corp. .......................... 6,400 171,600
Sempra Energy ...................... 7,067 179,325
-------------
1,085,425
-------------
HEALTH SERVICES (0.2%)
Bergen Brunswig Corp. .............. 1,100 38,363
Lincare Holdings, Inc. + ........... 6,100 247,431
-------------
285,794
-------------
</TABLE>
60 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
HOUSING AND FURNISHINGS (1.7%)
Centex Corp. ....................... 5,600 $ 252,350
Department 56, Inc. + .............. 15,000 563,438
Fleetwood Enterprises, Inc. ........ 11,100 385,725
Kaufman & Broad Home Corp. ......... 4,800 138,000
Lennar Corp. ....................... 11,100 280,275
MDC Holdings, Inc. ................. 37,200 795,150
Pulte Corp. ........................ 7,400 205,813
Ryland Group, Inc. ................. 20,500 591,937
Winsloew Furniture, Inc. + ......... 5,000 132,500
-------------
3,345,188
-------------
INDUSTRIAL SERVICES (0.2%)
Fluor Corp. ........................ 1,600 68,100
Foster Wheeler Corp. ............... 10,800 142,425
Milacron, Inc. ..................... 3,400 65,450
RTI International Metals + ......... 9,800 137,200
-------------
413,175
-------------
INSURANCE (1.2%)
Allstate Corp. (The) ............... 14,700 567,787
CIGNA Corp. ........................ 4,600 355,637
Conseco, Inc. ...................... 8,100 247,556
First American Financial Corp. ..... 28,950 930,019
MGIC Investment Corp. .............. 3,800 151,288
PacifiCare Health Systems, Inc. + .. 500 39,750
-------------
2,292,037
-------------
INVESTMENT SERVICES (0.3%)
BancWest Corp. ..................... 800 38,400
Dames & Moore Group ................ 9,400 121,025
Providian Financial Corp. .......... 4,950 371,250
-------------
530,675
-------------
MAJOR TELECOMMUNICATIONS (1.0%)
ALLTEL Corp. ....................... 1,000 59,813
AT&T Corp. ......................... 11,400 857,850
Bell Atlantic Corp. ................ 8,800 499,950
Sprint Corp. ....................... 6,700 563,637
-------------
1,981,250
-------------
MISCELLANEOUS METALS (0.1%)
Titanium Metals Corp. .............. 11,500 97,750
-------------
OIL (1.1%)
Ashland Oil, Inc. .................. 6,800 328,950
Penn Virginia Corp. ................ 6,900 126,788
Sunoco Inc. ........................ 15,800 569,788
Swift Energy Co. + ................. 55,000 405,625
Tesoro Petroleum Corp. + ........... 64,900 786,912
-------------
2,218,063
-------------
OIL SERVICES (0.3%)
Ensco International, Inc. ......... 3,300 35,269
McDermott International, Inc. ...... 5,900 145,656
Seitel, Inc. + ..................... 30,000 373,125
Tidewater, Inc. .................... 900 20,869
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
OIL SERVICES (CONTINUED)
Tosco Corp. ........................ 1,300 $ 33,637
-------------
608,556
-------------
OTHER TELECOMMUNICATIONS (0.5%)
Adelphia Communications + .......... 6,500 297,375
Century Telephone Enterprises, Inc. 1,000 67,500
Cincinnati Bell Inc. ............... 1,100 41,594
Melita International Corp. + ....... 9,400 197,400
Tekelec + .......................... 11,500 190,469
Tellabs, Inc. + .................... 2,500 171,406
-------------
965,744
-------------
PRINT MEDIA (0.7%)
Knight-Ridder, Inc. ................ 6,500 332,312
McGraw-Hill Co., Inc. .............. 800 81,500
Media General, Inc. + .............. 500 26,500
Meredith Corp. ..................... 6,300 238,613
New York Times Co. ................. 5,000 173,438
Thomas Nelson, Inc. ............... 8,900 120,150
Wiley (John) & Sons, Inc. .......... 7,400 357,512
-------------
1,330,025
-------------
PRODUCER GOODS (0.9%)
C & D Technologies, Inc. ........... 18,400 506,000
Gleason Corp. ...................... 16,300 295,437
Ingersoll-Rand Co. ................. 8,200 384,887
Tecumseh Products Co. .............. 200 9,325
Trinity Industries, Inc. ........... 1,000 38,500
Tyco International Ltd. ............ 3,800 286,663
Varlen Corp. ....................... 12,875 296,930
-------------
1,817,742
-------------
REAL ESTATE INVESTMENT TRUSTS (22.7%)
AMB Property Corp. ................. 1,400 30,800
American Health Properties, Inc. ... 8,400 173,250
Apartment Investment & Management
Co................................. 37,100 1,379,656
Archstone Communities Trust ........ 19,800 400,950
Arden Realty Group, Inc. ........... 12,100 280,569
Avalon Bay Communities, Inc. ....... 22,113 757,370
Beacon Capital + + ................. 25,900 414,400
Bedford Property Investors, Inc. ... 4,100 69,188
Boykin Lodging Co. ................. 5,800 71,775
Bradley Real Estate, Inc. .......... 11,100 227,550
Brandywine Realty Trust ............ 27,600 493,350
Cabot Industrial Trust ............. 6,300 128,756
Camden Property Trust .............. 53,193 1,383,018
Captec Net Lease Realty, Inc. ...... 9,700 121,250
Carramerica Realty Corp. ........... 7,900 189,600
CBL & Associates Properties, Inc. .. 25,200 650,475
CCA Prison Realty Trust ............ 16,800 344,400
Chateau Communities, Inc. .......... 12,000 351,750
Colonial Properties Trust .......... 30,800 820,050
Cousins Properties, Inc. ........... 14,300 461,175
Crescent Real Estate Equities, Inc. 46,200 1,062,600
</TABLE>
See Notes to Financial Statements. 61
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
CROSSROADS (continued)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED STATES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Criimi Mae, Inc. ................... 20,300 $ 71,050
Developers Diversified Realty Corp. 5,200 92,300
Duke Realty Investments, Inc. ...... 29,100 676,575
Eastgroup Properties, Inc. ......... 3,900 71,906
Equity Office Properties Trust ..... 100,000 2,400,000
Equity One, Inc. ................... 6,300 57,094
Equity Residential Properties Trust 62,896 2,543,357
Essex Property Trust, Inc. ......... 24,900 740,775
FelCor Lodging Trust Inc. .......... 10,200 235,238
First Industrial Realty Trust, Inc. 26,000 697,125
Franchise Finance Corp. of America . 15,600 374,400
Gables Residential Trust ........... 12,400 287,525
General Growth Properties, Inc. .... 20,200 765,075
Glenborough Realty Trust, Inc. ..... 34,300 698,862
Glimcher Realty Trust .............. 7,300 114,519
Golf Trust of America, Inc. ........ 8,400 233,100
Health Care REIT, Inc. ............. 17,400 450,225
Healthcare Realty Trust, Inc. ...... 23,291 519,680
Highwood Properties, Inc. .......... 18,400 473,800
Home Properties of New York, Inc. .. 4,600 118,450
Hospitality Properties Trust ....... 17,700 427,013
HRPT Properties Trust .............. 105,900 1,489,219
Imperial Credit Commercial Mortgage
Investment Corp. .................. 5,100 47,813
Innkeepers USA Trust ............... 17,600 207,900
Kilroy Realty Corp. ................ 30,600 703,800
Kimco Realty Corp. ................. 61,600 2,444,750
Koger Equity, Inc. ................. 16,500 283,594
Lexington Corporate Properties Trust 4,900 61,556
Liberty Property Trust ............. 92,900 2,287,662
LTC Properties, Inc. ............... 18,700 310,888
Manufactured Home Communities, Inc. 10,000 250,625
Meditrust Companies Corp. .......... 44,700 676,087
MeriStar Hospitality Corp. ......... 8,729 162,032
Merry Land Properties, Inc. + ...... 660 2,393
Mid-America Apartment Communities,
Inc................................ 7,300 165,619
National Golf Properties, Inc. ..... 5,700 164,944
OMEGA Healthcare Investors, Inc. ... 41,900 1,264,856
Parkway Properties, Inc. ........... 17,600 550,000
Post Properties, Inc. .............. 56,400 2,167,875
Prentiss Properties Trust .......... 23,000 513,187
Prime Retail, Inc. ................. 17,200 168,775
PS Business Parks, Inc. ............ 23,900 570,612
Public Storage, Inc. ............... 4,200 113,663
Ramco-Gerhenson Properties Trust ... 4,900 71,050
Reckson Associates Realty Corp. .... 23,900 530,281
Reckson Service Industries + ....... 1,792 7,392
Regency Realty Corp. ............... 10,100 224,725
RFS Hotel Investors, Inc. .......... 8,600 105,350
Shurgard Storage Centers, Inc. ..... 6,900 178,106
Simon Property Group, Inc. ......... 47,700 1,359,450
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED STATES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Sovran Self Storage, Inc. .......... 9,600 $ 241,200
Spieker Properties, Inc. ........... 23,600 817,150
Starwood Financial Trust ........... 216 12,960
Starwood Lodging Trust ............. 58,900 1,336,294
Storage Trust Realty ............... 5,600 130,900
Sun Communities, Inc. .............. 8,250 287,203
Tanger Factory Outlet Centers, Inc. 6,300 133,481
Tower Realty Trust, Inc. ........... 6,800 136,850
United Dominion Realty Trust, Inc. . 22,600 233,063
Urban Shopping Centers, Inc. ....... 8,000 262,000
Vornado Operating Co. + ............ 1,365 11,005
Vornado Realty Trust ............... 27,300 921,375
Walden Residential Properties, Inc. 11,600 237,075
Weeks Corp. ........................ 4,800 135,300
-------------
43,840,061
-------------
SEMICONDUCTORS AND ELECTRONICS (1.4%)
AMP, Inc. .......................... 8,300 432,119
Intel Corp. ........................ 8,500 1,007,781
Lattice Semiconductor Corp. + ...... 7,600 348,887
National Semiconductor Corp. + ..... 12,400 167,400
Park Electrochemical Corp. ......... 6,000 171,750
Vitesse Semiconductor Corp. + ...... 13,600 620,500
-------------
2,748,437
-------------
SPECIALTY CHEMICALS (0.0%)
Albemarle Corp. .................... 2,000 47,500
Engelhard Corp. .................... 700 13,650
International Specialty Products,
Inc. + ............................ 2,200 29,838
-------------
90,988
-------------
STEEL (0.2%)
Cleveland-Cliffs, Inc. ............. 700 28,219
Quanex Corp. ....................... 13,800 311,362
-------------
339,581
-------------
SURFACE TRANSPORT (0.1%)
Burlington Northern Santa Fe Corp. . 3,000 101,250
-------------
TEXTILES AND APPAREL (1.1%)
Abercrombie & Fitch Co. + .......... 17,700 1,252,275
Intimate Brands, Inc. ............. 30,800 920,150
-------------
2,172,425
-------------
TOTAL UNITED STATES (COST $104,814,189) 110,849,026
-------------
FOREIGN COMMON STOCKS (10.4%)
AUSTRALIA (0.4%)
Telstra Corp. Ltd.
(Other Telecommunications) + ...... 101,100 473,172
Westpac Banking Corp. Ltd.
(Banks and Thrifts) ............... 41,277 276,487
-------------
TOTAL AUSTRALIA 749,659
-------------
BELGIUM (0.2%)
Delhaize-le Lion SA (Food and
Beverage).......................... 4,000 353,964
-------------
</TABLE>
62 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
CANADA (0.1%)
Canadian National Railway Co.
(Surface Transport) ............... 3,000 $ 155,625
Trizec Hahn Corp.
(Real Estate Investment Trusts) ... 3,200 65,600
-------------
TOTAL CANADA 221,225
-------------
DENMARK (0.2%)
Den Danske Bank (Investment
Services).......................... 1,100 147,773
Tele Danmark A/S
(Major Telecommunications) ........ 1,800 242,941
-------------
TOTAL DENMARK 390,714
-------------
FINLAND (0.3%)
Nokia Corp., ADR
(Other Telecommunications) ........ 3,300 397,444
Sampo Insurance Co. (Insurance) .... 6,100 233,114
-------------
TOTAL FINLAND 630,558
-------------
FRANCE (1.6%)
Credit Commercial de France
(Banks and Thrifts) + ............. 3,600 334,467
Elf Aquitaine SA (Oil) ............. 2,250 260,195
Etablissements Economiques du Casino
Guichard-Perrachon SA
(Commercial Services) + ........... 2,400 250,045
Gemini Sogeti SA (Insurance) ....... 2,500 401,436
Groupe Danone (Food and Beverage) .. 1,200 343,704
Lafarge SA
(Forest Products and Building
Materials)......................... 3,400 323,189
Renault SA (Automotive) ............ 2,700 121,317
Sanofi SA (Drugs) .................. 1,700 279,975
Scor (Insurance) ................... 3,800 251,351
Societe Generale (Banks and Thrifts) 1,200 194,408
Vivendi (Utilities - Water) ........ 1,200 311,482
-------------
TOTAL FRANCE 3,071,569
-------------
GERMANY (0.7%)
Bayericshe Hypo-und Vereinsb
(Chemicals) +...................... 1,650 129,278
BHF-Bank AG (Banks and Thrifts) .... 4,000 160,903
DaimlerChrysler AG (Automotive) .... 1,658 163,749
Deutsche Pfandbrief & Hypothekenbank
AG (Banks and Thrifts) ............ 3,500 306,796
Douglas Holding AG (Discretionary
Retail)............................ 2,800 165,586
Gehe AG (Health Services) .......... 3,600 248,559
Mannesmann AG (Producer Goods) ..... 2,000 229,347
-------------
TOTAL GERMANY 1,404,218
-------------
HONG KONG (0.2%)
HSBC Holdings Plc (Investment
Services).......................... 3,000 74,736
VTech Holdings Ltd.
(Semiconductors and Electronics) .. 50,000 218,140
-------------
TOTAL HONG KONG 292,876
-------------
IRELAND (0.4%)
Allied Irish Banks (Banks and
Thrifts)........................... 18,118 324,978
CRH Plc
(Forest Products and Building
Materials)......................... 18,083 312,756
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
IRELAND (CONTINUED)
Waterford Wedgewood
(Housing and Furnishings) ......... 230,482 $ 195,880
-------------
TOTAL IRELAND 833,614
-------------
ITALY (0.5%)
Arnoldo Mondadori Editor (Print
Media)............................. 18,900 250,442
Banca Commerciale Italiana
(Banks and Thrifts) ............... 25,000 172,838
Banca del Nazionale Lavoro
(Banks and Thrifts) + ............. 70,400 211,122
Istituto Nazionale delle
Assicurazioni
(Insurance) + ..................... 93,000 246,185
Telecom Italia SpA (Commercial
Services).......................... 13,800 118,003
Unione Immobiliare SpA
(Real Estate Investment Trusts) + . 47,000 24,570
-------------
TOTAL ITALY 1,023,160
-------------
JAPAN (1.4%)
Bank of Tokyo-Mitsubishi, Ltd. (The)
(Investment Services) ............. 14,600 151,436
Fuji Photo Film (Chemicals) ........ 9,000 335,106
Hitachi Ltd.
(Semiconductors and Electronics) .. 39,000 242,021
Kao Corp. (Consumer Products) ...... 20,000 452,128
Mizuno Corp. (Consumer Products) ... 28,000 85,142
Nintendo Co. Ltd.
(Semiconductors and Electronics) .. 3,000 291,223
NTT Mobile Communication Network,
Inc.
(Other Telecommunications) + ...... 30 123,670
Orix Corp. (Investment Services) ... 1,400 104,752
Santen Pharmaceutical Co. Ltd.
(Drugs)............................ 18,000 346,277
Seino Transportation Co. Ltd.
(Surface Transport) ............... 52,000 297,801
SoftBank Corp. (Banks and Thrifts) . 3,100 186,880
-------------
TOTAL JAPAN 2,616,436
-------------
MEXICO (0.1%)
Grupo Financiero Banamex Accival, SA
de CV (Banacci) (Banks and
Thrifts)+ ......................... 83,000 108,932
-------------
NETHERLANDS (0.7%)
Akzo Nobel (Chemicals) ............. 4,800 218,682
Hunter Douglas NV (Consumer
Services).......................... 6,394 211,918
ING Groep NV (Banks and Thrifts) ... 3,958 241,483
Koninklijke Ahold NV
(Commercial Services) ............. 5,656 209,158
TNT Post Group NV (Surface
Transport)......................... 5,200 167,635
VNU-Verenigde Nederlandes
Uitgeversbedrijven
Verenigd Bezit (Print Media) ...... 7,100 267,853
-------------
TOTAL NETHERLANDS 1,316,729
-------------
NEW ZEALAND (0.1%)
Fernz Corp. Ltd. (Chemicals) ....... 43,100 133,203
-------------
NORWAY (0.4%)
Det Sondenfjelds-Norske
Dampskibsselskab (Oil) + .......... 16,800 132,301
</TABLE>
See Notes to Financial Statements. 63
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
CROSSROADS (continued)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
NORWAY (CONTINUED)
Merkantildata ASA
(Data and Imaging Services) ....... 21,700 $ 213,611
Ocean Rig ASA (Oil) + .............. 272,650 74,434
Tandberg Television ASA
(Electronic Media) + .............. 21,300 176,125
Tomra Systems ASA
(Forest Products and Building
Materials)......................... 4,900 160,782
-------------
TOTAL NORWAY 757,253
-------------
SPAIN (0.2%)
Iberdrola SA (Electric Utilities) + 15,700 294,177
Telefonica de Espana
(Major Telecommunications) ........ 4,000 178,128
Telefonica SA Rights
(Major Telecommunications) + ...... 4,000 3,557
-------------
TOTAL SPAIN 475,862
-------------
SWEDEN (0.4%)
Industrial & Financial Systems
(Data and Imaging Services) + ++ .. 25,000 288,374
NetCom AB (Major Telecommunications)
+ ................................. 3,900 158,775
Securitas AB (Consumer Services) ... 18,800 292,235
-------------
TOTAL SWEDEN 739,384
-------------
SWITZERLAND (0.6%)
Adecco SA (Commercial Services) .... 300 136,949
Fischer (Georg) AG
(Auto Parts and Hardware) ......... 800 270,550
Novartis AG Registered Shares
(Health Services) + ............... 150 294,867
Swiss Re (Insurance) ............... 70 182,505
UBS AG (Banks and Thrifts) ......... 1,200 368,693
-------------
TOTAL SWITZERLAND 1,253,564
-------------
UNITED KINGDOM (1.9%)
Bank of Scotland (Banks and Thrifts) 23,253 277,395
Berisford Plc (Industrial Services) 42,900 128,479
British Telecom Plc
(Major Telecommunications) ........ 14,700 220,610
Cable & Wireless Plc
(Other Telecommunications) + ...... 11,800 145,185
Glaxo Wellcome Plc (Drugs) ......... 11,229 386,360
Granada Group Plc (Consumer
Services) +........................ 15,165 268,085
Kingfisher Plc (Discretionary
Retail)............................ 16,763 181,426
Kwik-Fit Holding Plc
(Auto Parts and Hardware) ......... 22,600 181,429
National Westminster Bank Plc
(Banks and Thrifts) ............... 11,000 212,118
Pearson Plc (Print Media) .......... 16,100 319,571
Peninsular & Oriental Steam
Navigation Co. (Surface Transport)
+ ................................. 18,101 213,827
Railtrack Group (Surface Transport) 7,584 196,466
SmithKline Beecham Plc (Drugs) ..... 15,100 211,916
Unilever Plc (Consumer Products) ... 20,600 231,009
Vodafone Group Plc (Consumer
Products).......................... 26,285 426,834
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- ------------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
WPP Group Plc (Commercial Services) 26,600 $ 161,848
-------------
TOTAL UNITED KINGDOM 3,762,558
-------------
TOTAL FOREIGN COMMON STOCKS (COST $17,403,521) 20,135,478
-------------
TOTAL COMMON STOCKS (COST $122,217,710) 130,984,504
-------------
PREFERRED STOCKS (0.3%)
GERMANY (0.3%)
Henkel KGAA (Chemicals) ............ 3,300 295,209
Hugo Boss AG (Textiles and Apparel)
+ ................................. 100 192,123
SAP AG (Data and Imaging Services) + 400 191,691
-------------
TOTAL PREFERRED STOCKS (COST 679,023
$486,909) -------------
<CAPTION>
PRINCIPAL
AMOUNT
------------
<S> <C> <C>
LONG-TERM BONDS AND NOTES (16.3%)
CORPORATE AND CONVERTIBLE BONDS (3.1%)
American Re Corp., 7.45%, 12/15/26 . 600,000 $ 653,088
BCH Cayman Islands Ltd., 6.50%,
02/15/06........................... 1,300,000 1,308,931
GTE Corp., 9.38%, 12/01/00 ......... 900,000 965,313
HSBC Americas, Inc., 7.00%, 11/01/06 1,400,000 1,466,052
Korean Development Bank, 7.13%,
09/17/01........................... 700,000 663,376
National Australia Bank, 6.40%,
12/10/07........................... 1,000,000 1,014,350
-------------
TOTAL CORPORATE AND CONVERTIBLE BONDS
(COST $5,981,795) 6,071,110
-------------
CORPORATE BONDS (6.9%)
BankAmerica Corp., 7.88%, 12/01/02 . 1,000,000 1,079,660
Enron Oil & Gas Corp., 6.50%,
12/01/07........................... 800,000 804,248
Fifth Third Banc, 6.75%, 07/15/05 .. 250,000 262,375
Heller Financial, Inc., 6.35%,
08/15/99 ++........................ 200,000 200,830
Household Finance Corp., 5.88%,
09/25/04........................... 625,000 625,669
IMC Global, Inc., 7.63%, 11/01/05 .. 850,000 864,211
International Lease Finance Corp.,
5.56%, 09/18/01 ................... 970,000 967,711
Norwest Financial, Inc., 5.38%,
09/30/03........................... 625,000 621,388
Raytheon Co., 6.15%, 11/01/08 ...... 825,000 840,155
Ford Motor Credit Corp., 6.63%,
10/01/28........................... 1,070,000 1,098,815
Rite Aid Corp., 6.00%, 10/01/03 .... 625,000 624,406
Simon De Bartolo Group, Inc.,
6.63%, 06/15/03 ................... 1,000,000 986,470
TCI Communications, Inc., 6.38%,
09/15/99........................... 1,500,000 1,511,985
Tenet Healthcare Corp., 7.88%,
01/15/03........................... 750,000 758,992
Time Warner, Inc., 9.13%, 01/15/13 . 625,000 791,225
USA Waste Management, Inc.,
6.13%, 07/15/01 ................... 625,000 628,875
Zurich Capital Trust, 8.38%,
06/01/37 ++........................ 625,000 698,619
-------------
TOTAL CORPORATE BONDS (COST $13,097,404) 13,365,634
-------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (5.6%)
Federal National Mortgage
Association, 6.00%, 01/14/29 # .... 300,000 296,343
Federal National Mortgage
Association - Convertible Loan,
6.50%, 02/01/28 ................... 2,019,592 2,033,477
</TABLE>
64 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
Federal National Mortgage Corp.,
5.75%, 04/15/03 ................... 2,000,000 $ 2,056,244
Government National Mortgage
Association, 7.00%, 12/15/27 -
02/15/28........................... 4,356,291 4,748,294
Government National Mortgage
Association, 7.50%, 12/15/23 ...... 1,618,778 1,670,887
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED 10,805,245
SECURITIES (COST $10,674,015) -------------
U.S. GOVERNMENT OBLIGATIONS (0.7%)
U.S. Treasury Bond, 7.25%, 08/15/04 250,000 281,055
U.S. Treasury Note, 6.50%, 05/31/02
* ................................. 235,000 248,108
U.S. Treasury Note, 6.50%, 10/15/06 640,000 709,901
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $1,154,153) 1,239,064
-------------
TOTAL LONG-TERM BONDS AND NOTES (COST $30,907,367) 31,481,053
-------------
SHORT-TERM INVESTMENTS (15.2%)
Federal Home Loan Mortgage Corp.,
4.70%, 01/04/99 - 01/07/99......... 17,264,000 17,260,083
Federal National Mortgage
Association, 4.75%, 01/05/99 ...... 12,000,000 11,998,417
U.S. Treasury Bill, 4.98%, 02/18/99
@.................................. 100,000 99,456
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $29,357,878) 29,357,956
-------------
TOTAL INVESTMENTS (COST $182,969,864)(A) 192,502,536
OTHER ASSETS LESS LIABILITIES 1,059,509
-------------
TOTAL NET ASSETS $ 193,562,045
=============
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$183,018,109. Unrealized gains and losses, based on identified tax cost at
December 31, 1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains.................................... $ 20,485,917
Unrealized losses................................... (11,001,490)
-------------
Net unrealized gain................................ $ 9,484,427
=============
</TABLE>
Information concerning open futures contracts at December 31, 1998 is shown
below:
<TABLE>
<CAPTION>
NO. OF INITIAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
----------- ------------ ------------ ---------------
LONG CONTRACTS
- ---------------------
<S> <C> <C> <C> <C>
Long-Term German
Government Bond
Futures............. 7 $1,206,335 Mar 99 $ 2,311
Swiss Government
Bond Futures......... 8 758,646 Mar 99 (13,687)
Topix Index Futures.. 2 190,779 Mar 99 (8,422)
----------- ---------
$2,155,760 $ (19,798)
=========== =========
</TABLE>
+ Non-income producing security.
++ 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.
# When-issued or delayed delivery security.
* Segregated securities for purchases of delayed delivery or when-issued
securities held at December 31, 1998.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1998.
Information concerning restricted securities at December 31, 1998 is shown
below:
<TABLE>
<CAPTION>
COST
----------
<S> <C>
Beacon Capital........................................ $ 518,000
Heller Financial, Inc................................. 200,050
Industrial & Financial Systems........................ 122,580
Raytheon Co........................................... 822,848
Zurich Capital Trust.................................. 641,269
----------
$2,304,747
==========
</TABLE>
The market value of the total restricted securities above represent 1.26% of the
total net assets.
Category percentages are based on net assets.
See Notes to Financial Statements. 65
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
LEGACY
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
COMMON STOCKS (47.3%)
UNITED STATES (39.3%)
AIR TRANSPORT (0.1%)
AMR Corp. + ........................ 3,600 $ 213,750
-------------
AUTO PARTS AND HARDWARE (0.1%)
Black & Decker Corp. ............... 2,400 134,550
Briggs & Stratton Corp. ............ 300 14,963
-------------
149,513
-------------
AUTOMOTIVE (0.4%)
Ford Motor Co. ..................... 6,300 369,731
General Motors Corp. ............... 2,300 164,594
-------------
534,325
-------------
BANKS AND THRIFTS (0.6%)
Dime Bancorp, Inc. ................. 500 13,219
DSP Group, Inc. + .................. 12,500 260,937
Golden State Bancorp, Inc. ......... 15,200 252,700
Golden West Financial Corp. ........ 1,700 155,869
Greenpoint Financial Corp. ......... 400 14,050
Suntrust Banks, Inc. ............... 2,100 160,650
Washington Federal, Inc. ........... 200 5,337
WSFS Financial Corp. ............... 1,600 27,000
-------------
889,762
---------------
BIOTECH AND MEDICAL PRODUCTS (2.2%)
Alpharma, Inc. ++ .................. 15,900 561,469
Amgen, Inc. + ...................... 1,700 177,756
Barr Laboratories, Inc. + .......... 5,100 244,800
Bio-Rad Labs, Inc. + ............... 8,400 176,400
Empi Inc. + ........................ 1,000 25,000
Guidant Corp. ...................... 600 66,150
Hanger Orthopedic Group, Inc. + .... 16,500 371,250
Maxxim Medical, Inc. + ............. 14,600 434,350
MedImmune, Inc. + .................. 900 89,494
OEC Medical Systems, Inc. + ........ 8,500 267,219
Osteotech, Inc. + .................. 2,600 120,900
Safeskin Corp. + ................... 1,700 41,012
Serologicals Corp. + ............... 5,100 153,000
VISX, Inc. + ....................... 5,700 498,394
West Co., Inc. .................... 3,200 114,200
-------------
3,341,394
-------------
COMMERCIAL SERVICES (0.8%)
Deluxe Corp. ....................... 5,700 208,406
Franklin Covey Co. + ............... 7,500 125,625
Galileo International, Inc. ........ 7,400 321,900
Modtech, Inc. + .................... 700 10,675
Romac International, Inc. + ........ 3,000 66,750
Valassis Communications, Inc. + .... 5,300 273,612
Wallace Computer Services, Inc. ... 500 13,188
World Color Press, Inc. + .......... 6,900 210,019
-------------
1,230,175
-------------
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED STATES (CONTINUED)
COMPUTERS (0.8%)
Apple Computer, Inc. + ............. 6,100 249,719
International Business Machines
Corp............................... 2,400 443,400
NeoMagic Corp. + ................... 11,300 250,012
Sun Microsystems, Inc. + ........... 2,900 248,313
-------------
1,191,444
-------------
CONGLOMERATE AND AEROSPACE (0.7%)
Cordant Technologies, Inc. ......... 200 7,500
Ducommun, Inc. + ................... 6,200 85,638
General Electric Co. ............... 2,692 274,752
Goodrich (B. F.) Co. ............... 2,900 104,037
Kellstrom Industries, Inc. + ....... 4,400 126,500
Loews Corp. ........................ 2,200 216,150
United Technologies Corp. .......... 2,200 239,250
-------------
1,053,827
-------------
CONSUMER FINANCE (0.2%)
Countrywide Credit Industries, Inc. 4,200 210,787
Federal National Mortgage
Association........................ 2,100 155,400
-------------
366,187
-------------
CONSUMER PRODUCTS (0.6%)
American Greetings Corp. ........... 1,000 41,063
Blyth Industries, Inc. + ........... 300 9,375
M & F Worldwide Corp. + ............ 19,800 199,238
National R.V. Holdings, Inc. + ..... 11,250 289,687
Procter & Gamble Co. ............... 3,700 337,856
-------------
877,219
-------------
CONSUMER SERVICES (0.9%)
Bob Evans Farms, Inc. .............. 600 15,637
Darden Restaurants, Inc. ........... 5,800 104,400
Extended Stay America, Inc. + ...... 51,000 535,500
Foodmaker, Inc. + .................. 6,700 147,819
Grand Casinos, Inc. + .............. 15,600 125,775
Harvey's Casino Resorts ............ 6,000 166,125
Promus Hotel Corp. + ............... 170 5,504
Sonic Corp. + ...................... 10,850 269,894
Tricon Global Restaurants, Inc. + .. 200 10,025
-------------
1,380,679
-------------
CONSUMER SPECIALTIES (0.7%)
International Speedway Corp. ....... 3,600 145,800
Premier Parks Inc. + ............... 14,500 438,625
Russ Berrie & Co., Inc. ............ 2,400 56,400
Speedway Motorsports, Inc. + ....... 13,500 384,750
-------------
1,025,575
-------------
DATA AND IMAGING SERVICES (1.9%)
Adobe Systems, Inc. ................ 2,600 121,550
Avant! Corp. + ..................... 8,100 129,600
BMC Software, Inc. + ............... 1,200 53,475
Computer Associates International,
Inc................................ 5,500 234,438
Keane, Inc. + ...................... 300 11,981
Microsoft Corp. + .................. 3,300 457,669
Oracle Corp. + ..................... 6,900 297,562
</TABLE>
66 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED STATES (CONTINUED)
DATA AND IMAGING SERVICES (CONTINUED)
Parametric Technology Co. + ........ 4,200 $ 68,775
Pixar, Inc. + ...................... 100 3,500
Progress Software Corp. + .......... 8,300 280,125
Project Software & Development,
Inc. + ........................... 1,700 56,950
QLogic Corp. + ..................... 6,300 824,512
Siebel Systems, Inc. + ............. 2,400 81,450
THQ, Inc. + ........................ 9,450 264,600
VERITAS Software Corp. + ........... 100 5,994
-------------
2,892,181
-------------
DISCRETIONARY RETAIL (2.4%)
American Eagle Outfitters, Inc. + .. 12,450 829,481
Ames Department Stores, Inc. + ..... 5,500 148,500
Best Buy Co., Inc. + ............... 200 12,275
Cato Corp. (The) ................... 14,300 140,766
Federated Department Stores, Inc. + 4,300 187,319
Gap, Inc. .......................... 3,150 177,187
Global DirectMail Corp. + .......... 8,100 189,337
Lowe's Co., Inc. ................... 5,500 281,531
Micro Warehouse, Inc. + ............ 600 20,288
Musicland Stores Corp. + ........... 14,400 215,100
Tandy Corp. ........................ 1,000 41,188
TJX Companies, Inc. ................ 8,400 243,600
Transport World Entertainment Corp.
+.................................. 33,004 629,139
Zale Corp. + ....................... 11,700 377,325
-------------
3,493,036
-------------
DIVERSIFIED FINANCIAL SERVICES (0.1%)
Trammell Crow Co. + ................ 2,100 58,800
Transamerica Corp. ................. 400 46,200
-------------
105,000
-------------
DRUGS (1.1%)
Abbott Laboratories ................ 4,400 215,600
Eli Lilly & Co. .................... 3,100 275,512
IDEC Pharmaceuticals Corp. + ....... 4,300 202,100
Johnson & Johnson .................. 600 50,325
Medicis Pharmaceutical Corp. + ..... 7,100 423,337
Merck & Co., Inc. .................. 1,400 206,763
Roberts Pharmaceutical Corp. + ..... 10,300 224,025
-------------
1,597,662
-------------
ELECTRIC UTILITIES (0.3%)
Allegheny Energy, Inc. ............. 400 13,800
Citizens Utilities Co. + ........... 609 4,944
Conectiv, Inc. ..................... 300 7,350
Energy East Corp. .................. 300 16,950
Florida Progress Corp. ............. 400 17,925
Kansas City Power & Light Co. ...... 300 8,888
Niagara Mohawk Power Corp. + ....... 9,000 145,125
OGE Energy Corp. ................... 800 23,150
Thermo Ecotek Corp. + .............. 3,200 33,800
TNP Enterprises, Inc. ............. 3,900 147,956
-------------
419,888
-------------
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED STATES (CONTINUED)
ELECTRICAL MACHINERY AND INSTRUMENTS (0.1%)
Xerox Corp. ........................ 700 $ 82,600
-------------
ELECTRONIC MEDIA (0.0%)
Viacom, Inc. + ..................... 300 22,200
-------------
FOOD AND BEVERAGE (0.7%)
American Italian Pasta Co. + ....... 1,400 36,925
Aurora Foods, Inc. + ............... 700 13,869
Canandiagua Brands, Inc. + ......... 1,900 109,844
Earthgrains Co. (The) .............. 6,700 207,281
IBP, Inc. .......................... 1,300 37,863
J & J Snack Foods Corp. + .......... 10,100 225,987
Robert Mondavi Corp. + ............. 4,400 179,850
Suiza Foods Corp. + ................ 3,900 198,656
-------------
1,010,275
-------------
FOOD AND DRUG RETAIL (0.7%)
Casey's General Stores, Inc. ....... 25,300 329,691
CVS Corp. .......................... 3,000 165,000
Kroger Co. (The) + ................. 3,400 205,700
Rite Aid Corp. ..................... 2,300 113,994
Safeway, Inc. + .................... 200 12,187
SUPERVALU, Inc. .................... 7,900 221,200
-------------
1,047,772
-------------
FOREST PRODUCTS AND BUILDING MATERIALS (0.3%)
Ball Corp. ......................... 600 27,450
Boise Cascade Corp. ................ 3,000 93,000
Centex Construction Products, Inc. . 1,400 56,875
Georgia-Pacific Corp. .............. 500 11,906
Lafarge Corp. ...................... 200 8,100
Lone Star Industries, Inc. ......... 6,000 220,875
USG Corp. .......................... 200 10,188
-------------
428,394
-------------
GAS UTILITIES (0.5%)
Columbia Energy Group .............. 1,200 69,300
Eastern Enterprises ................ 2,600 113,750
Energen Corp. ...................... 7,400 144,300
Kaneb Services, Inc. + ............. 15,300 62,156
NUI Corp. .......................... 7,000 187,687
Sempra Energy ...................... 3,308 83,941
Southwestern Energy Co. ............ 2,500 18,750
-------------
679,884
-------------
HEALTH SERVICES (0.2%)
Lincare Holdings, Inc. + ........... 5,700 231,206
Pediatrix Medical Group, Inc. + .... 1,600 95,900
Trigon Healthcare, Inc. + .......... 800 29,850
-------------
356,956
-------------
HOUSING AND FURNISHINGS (1.1%)
Centex Corp. ....................... 2,400 108,150
Department 56, Inc. + .............. 2,700 101,419
Fleetwood Enterprises, Inc. ........ 5,600 194,600
Herman Miller, Inc. ................ 600 16,125
Lennar Corp. ....................... 10,000 252,500
</TABLE>
See Notes to Financial Statements. 67
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
LEGACY (continued)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED STATES (CONTINUED)
HOUSING AND FURNISHINGS (CONTINUED)
MDC Holdings, Inc. ................. 16,100 $ 344,137
Pulte Corp. ........................ 3,200 89,000
Ryland Group, Inc. ................. 10,100 291,638
Winsloew Furniture, Inc. + ......... 3,900 103,350
-------------
1,500,919
-------------
INDUSTRIAL SERVICES (0.3%)
Fluor Corp. ........................ 2,200 93,638
Foster Wheeler Corp. ............... 7,100 93,631
Milacron, Inc. ..................... 5,300 102,025
RTI International Metals + ......... 7,100 99,400
Walter Industries, Inc. + .......... 2,000 30,625
-------------
419,319
-------------
INSURANCE (0.6%)
Allstate Corp. (The) ............... 6,100 235,612
CIGNA Corp. ........................ 1,900 146,894
Conseco, Inc. ...................... 1,200 36,675
First American Financial Corp. ..... 10,050 322,856
MGIC Investment Corp. .............. 1,800 71,663
Old Republic International Corp. ... 600 13,500
PacifiCare Health Systems, Inc. + .. 200 15,900
-------------
843,100
-------------
INVESTMENT SERVICES (0.2%)
BancWest Corp. ..................... 300 14,400
Dames & Moore Group ................ 8,201 105,579
Providian Financial Corp. .......... 2,250 168,750
-------------
288,729
-------------
MAJOR TELECOMMUNICATIONS (0.6%)
AT&T Corp. ......................... 5,800 436,450
Bell Atlantic Corp. ................ 2,000 113,625
Sprint Corp. ....................... 3,400 286,025
-------------
836,100
-------------
MISCELLANEOUS METALS (0.0%)
Titanium Metals Corp. .............. 6,600 56,100
-------------
OIL (0.7%)
Ashland Oil, Inc. .................. 3,000 145,125
Belco Oil & Gas Corp. .............. 28,700 159,644
Octel Corp. + ...................... 1,800 24,975
Penn Virginia Corp. ................ 6,500 119,437
Sunoco Inc. ........................ 7,100 256,044
Tesoro Petroleum Corp. + ........... 33,200 402,550
-------------
1,107,775
-------------
OIL SERVICES (0.1%)
McDermott International, Inc. ...... 600 14,812
Seitel, Inc. + ..................... 11,300 140,544
Tidewater, Inc. .................... 200 4,638
Tosco Corp. ........................ 500 12,938
Trico Marine Services, Inc. + ...... 5,100 24,862
-------------
197,794
-------------
OTHER TELECOMMUNICATIONS (0.3%)
Century Telephone Enterprises, Inc. 350 23,625
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED STATES (CONTINUED)
OTHER TELECOMMUNICATIONS (CONTINUED)
Cincinnati Bell Inc. ............... 400 $ 15,125
Lucent Technologies, Inc. .......... 900 99,000
Melita International Corp. + ....... 6,200 130,200
Tellabs, Inc. + .................... 2,100 143,981
-------------
411,931
-------------
PRINT MEDIA (0.4%)
Knight-Ridder, Inc. ................ 3,800 194,275
McGraw-Hill Co., Inc. .............. 700 71,313
Media General, Inc. + .............. 300 15,900
Meredith Corp. ..................... 3,600 136,350
Thomas Nelson, Inc. ............... 2,500 33,750
Wiley (John) & Sons, Inc. .......... 3,700 178,756
-------------
630,344
-------------
PRODUCER GOODS (0.5%)
C & D Technologies, Inc. ........... 9,000 247,500
Gleason Corp. ...................... 1,600 29,000
Ingersoll-Rand Co. ................. 3,900 183,056
Kaydon Corp. ....................... 200 8,013
Tecumseh Products Co. .............. 100 4,663
Thomas & Betts Corp. ............... 100 4,331
Trinity Industries, Inc. ........... 100 3,850
Tyco International Ltd. ............ 2,000 150,875
Varlen Corp. ....................... 5,750 132,609
-------------
763,897
-------------
REAL ESTATE INVESTMENT TRUSTS (16.0%)
AMB Property Corp. ................. 600 13,200
American Health Properties, Inc. ... 4,300 88,688
Apartment Investment & Management
Co................................. 23,400 870,187
Archstone Communities Trust ........ 11,000 222,750
Arden Realty Group, Inc. ........... 5,800 134,488
Avalon Bay Communities, Inc. ....... 12,701 435,009
Beacon Capital + + ................. 11,300 180,800
Bedford Property Investors, Inc. ... 1,600 27,000
Bradley Real Estate, Inc. .......... 5,400 110,700
Brandywine Realty Trust ............ 19,300 344,987
Cabot Industrial Trust ............. 2,600 53,138
Camden Property Trust .............. 28,310 736,060
Captec Net Lease Realty, Inc. ...... 4,400 55,000
CBL & Associates Properties, Inc. .. 48,400 1,249,325
Chateau Communities, Inc. .......... 6,300 184,669
Colonial Properties Trust .......... 6,700 178,387
Cousins Properties, Inc. ........... 7,100 228,975
Crescent Real Estate Equities, Inc. 25,100 577,300
Criimi Mae, Inc. ................... 41,300 144,550
Developers Diversified Realty Corp. 1,800 31,950
Duke Realty Investments, Inc. ...... 6,600 153,450
Eastgroup Properties, Inc. ......... 1,500 27,656
Equity Inns, Inc. .................. 16,300 156,888
Equity Office Properties Trust ..... 55,300 1,327,200
Equity One, Inc. ................... 3,200 29,000
</TABLE>
68 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED STATES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Equity Residential Properties Trust 30,919 $ 1,250,287
Essex Property Trust, Inc. ......... 7,700 229,075
First Industrial Realty Trust, Inc. 14,300 383,419
Franchise Finance Corp. of America . 10,400 249,600
Gables Residential Trust ........... 6,400 148,400
General Growth Properties, Inc. .... 7,200 272,700
Glenborough Realty Trust, Inc. ..... 15,100 307,662
Glimcher Realty Trust .............. 3,900 61,181
Golf Trust of America, Inc. ........ 2,900 80,475
Health Care REIT, Inc. ............. 34,100 882,337
Healthcare Realty Trust, Inc. ...... 6,592 147,084
Highwood Properties, Inc. .......... 37,300 960,475
Home Properties of New York, Inc. .. 1,500 38,625
Hospitality Properties Trust ....... 7,100 171,288
HRPT Properties Trust .............. 56,200 790,312
Imperial Credit Commercial Mortgage
Investment Corp. .................. 1,600 15,000
Innkeepers USA Trust ............... 8,400 99,225
Kilroy Realty Corp. ................ 13,400 308,200
Kimco Realty Corp. ................. 33,700 1,337,469
Koger Equity, Inc. ................. 7,500 128,906
Lexington Corporate Properties Trust 2,000 25,125
Liberty Property Trust ............. 48,800 1,201,700
LTC Properties, Inc. ............... 8,100 134,663
Manufactured Home Communities, Inc. 5,400 135,338
Meditrust Companies Corp. .......... 5,000 75,625
MeriStar Hospitality Corp. ......... 4,068 75,512
Merry Land Properties, Inc. + ...... 365 1,323
OMEGA Healthcare Investors, Inc. ... 10,200 307,912
Parkway Properties, Inc. ........... 7,500 234,375
Post Properties, Inc. .............. 30,200 1,160,812
Prentiss Properties Trust .......... 12,400 276,675
Prime Retail, Inc. ................. 4,700 46,119
PS Business Parks, Inc. ............ 21,400 510,925
Public Storage, Inc. ............... 12,500 338,281
Ramco-Gerhenson Properties Trust ... 1,300 18,850
Reckson Associates Realty Corp. .... 13,000 288,437
Reckson Service Industries + ....... 1,312 5,412
Regency Realty Corp. ............... 11,500 255,875
RFS Hotel Investors, Inc. .......... 4,500 55,125
Shurgard Storage Centers, Inc. ..... 4,900 126,481
Simon Property Group, Inc. ......... 26,600 758,100
Sovran Self Storage, Inc. .......... 6,200 155,775
Starwood Financial Trust ........... 116 6,960
Starwood Lodging Trust ............. 31,200 707,850
Storage Trust Realty ............... 3,100 72,463
Sun Communities, Inc. .............. 3,600 125,325
Tanger Factory Outlet Centers, Inc. 3,300 69,919
Tower Realty Trust, Inc. ........... 3,700 74,463
Urban Shopping Centers, Inc. ....... 3,800 124,450
Vornado Operating Co. + ............ 715 5,765
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
UNITED STATES (CONTINUED)
REAL ESTATE INVESTMENT TRUSTS (CONTINUED)
Vornado Realty Trust ............... 14,300 $ 482,625
Walden Residential Properties, Inc. 4,200 85,838
Weeks Corp. ........................ 16,200 456,637
-------------
23,823,812
-------------
SEMICONDUCTORS AND ELECTRONICS (1.0%)
AMP, Inc. .......................... 4,100 213,456
Intel Corp. ........................ 4,400 521,675
Lattice Semiconductor Corp. + ...... 4,900 224,941
National Semiconductor Corp. + ..... 6,200 83,700
Park Electrochemical Corp. ......... 1,500 42,938
Vitesse Semiconductor Corp. + ...... 7,900 360,437
-------------
1,447,147
-------------
SPECIALTY CHEMICALS (0.0%)
Albemarle Corp. .................... 400 9,500
Engelhard Corp. .................... 400 7,800
International Specialty Products,
Inc. + ............................ 900 12,206
-------------
29,506
-------------
STEEL (0.3%)
Cleveland-Cliffs, Inc. ............. 100 4,031
Quanex Corp. ....................... 20,200 455,763
-------------
459,794
-------------
SURFACE TRANSPORT (0.0%)
Burlington Northern Santa Fe Corp. . 1,200 40,500
-------------
TEXTILES AND APPAREL (0.8%)
Abercrombie & Fitch Co. + .......... 9,300 657,975
Intimate Brands, Inc. ............. 15,900 475,012
-------------
1,132,987
-------------
TOTAL UNITED STATES (COST $55,348,085) 58,379,452
-------------
FOREIGN COMMON STOCKS (8.0%)
AUSTRALIA (0.3%)
Telstra Corp. Ltd.
(Other Telecommunications) + ...... 71,500 334,637
Westpac Banking Corp. Ltd.
(Banks and Thrifts) ............... 21,150 141,670
-------------
TOTAL AUSTRALIA 476,307
-------------
BELGIUM (0.1%)
Delhaize-le Lion SA (Food and
Beverage).......................... 1,900 168,133
-------------
CANADA (0.1%)
Canadian National Railway Co.
(Surface Transport) ............... 1,400 72,625
Trizec Hahn Corp.
(Real Estate Investment Trusts) ... 1,800 36,900
-------------
TOTAL CANADA 109,525
-------------
DENMARK (0.2%)
Den Danske Bank (Investment
Services).......................... 700 94,037
Tele Danmark A/S
(Major Telecommunications) ........ 1,000 134,967
-------------
TOTAL DENMARK 229,004
-------------
</TABLE>
See Notes to Financial Statements. 69
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
LEGACY (continued)
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
FINLAND (0.3%)
Nokia Corp., ADR
(Other Telecommunications) ........ 2,500 $ 301,094
Sampo Insurance Co. (Insurance) .... 3,700 141,397
-------------
TOTAL FINLAND 442,491
-------------
FRANCE (1.1%)
Credit Commercial de France
(Banks and Thrifts) + ............. 2,100 195,106
Elf Aquitaine SA (Oil) ............. 1,100 127,206
Etablissements Economiques du Casino
Guichard-Perrachon SA
(Commercial Services) + ........... 1,400 145,859
Gemini Sogeti SA (Insurance) ....... 1,200 192,689
Groupe Danone (Food and Beverage) .. 600 171,852
Lafarge SA
(Forest Products and Building
Materials)......................... 1,500 142,584
Renault SA (Automotive) ............ 1,500 67,398
Sanofi SA (Drugs) .................. 1,000 164,692
Scor (Insurance) ................... 2,200 145,519
Societe Generale (Banks and Thrifts) 700 113,404
Vivendi (Utilities - Water) ........ 700 181,698
-------------
TOTAL FRANCE 1,648,007
-------------
GERMANY (0.6%)
Bayericshe Hypo-und Vereinsb
(Chemicals) +...................... 2,100 164,535
BHF-Bank AG (Banks and Thrifts) .... 2,200 88,497
DaimlerChrysler AG (Automotive) .... 884 87,307
Deutsche Pfandbrief & Hypothekenbank
AG (Banks and Thrifts) ............ 2,000 175,312
Douglas Holding AG (Discretionary
Retail)............................ 1,700 100,534
Gehe AG (Health Services) .......... 2,900 200,228
Mannesmann AG (Producer Goods) ..... 1,000 114,674
-------------
TOTAL GERMANY 931,087
-------------
HONG KONG (0.1%)
HSBC Holdings Plc (Investment
Services).......................... 2,000 49,824
VTech Holdings Ltd.
(Semiconductors and Electronics) .. 30,000 130,884
-------------
TOTAL HONG KONG 180,708
-------------
IRELAND (0.4%)
Allied Irish Banks (Banks and
Thrifts)........................... 12,047 216,084
CRH Plc
(Forest Products and Building
Materials)......................... 12,056 208,515
Waterford Wedgewood
(Housing and Furnishings) ......... 145,895 123,992
-------------
TOTAL IRELAND 548,591
-------------
ITALY (0.4%)
Arnoldo Mondadori Editor (Print
Media)............................. 7,500 99,382
Banca Commerciale Italiana
(Banks and Thrifts) ............... 12,000 82,962
Banca del Nazionale Lavoro
(Banks and Thrifts) + ............. 42,800 128,353
Istituto Nazionale delle
Assicurazioni
(Insurance) + ..................... 55,400 146,652
Telecom Italia SpA (Commercial
Services).......................... 7,500 64,132
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
ITALY (CONTINUED)
Unione Immobiliare SpA
(Real Estate Investment Trusts) + . 26,000 $ 13,592
-------------
TOTAL ITALY 535,073
-------------
JAPAN (1.2%)
Bank of Tokyo-Mitsubishi, Ltd. (The)
(Investment Services) ............. 10,200 105,798
Fuji Photo Film (Chemicals) ........ 5,000 186,170
Hitachi Ltd. (Semiconductors and
Electronics)....................... 23,000 142,731
Kao Corp. (Consumer Products) ...... 11,000 248,670
Mizuno Corp. (Consumer Products) ... 13,000 39,530
Nintendo Co. Ltd.
(Semiconductors and Electronics) .. 2,000 194,149
NTT Mobile Communication Network,
Inc.
(Other Telecommunications) + ...... 30 123,670
Orix Corp. (Investment Services) ... 1,400 104,752
Santen Pharmaceutical Co. Ltd.
(Drugs)............................ 16,000 307,801
Seino Transportation Co. Ltd.
(Surface Transport) ............... 27,000 154,628
SoftBank Corp. (Banks and Thrifts) . 2,700 162,766
-------------
TOTAL JAPAN 1,770,665
-------------
MEXICO (0.0%)
Grupo Financiero Banamex Accival, SA
de CV (Banacci) (Banks and Thrifts)+ 59,000 77,434
-------------
NETHERLANDS (0.5%)
Akzo Nobel (Chemicals) ............. 2,800 127,564
Hunter Douglas NV (Consumer
Services).......................... 3,349 110,997
ING Groep NV (Banks and Thrifts) ... 2,134 130,180
Koninklijke Ahold NV
(Commercial Services) ............. 3,333 123,254
TNT Post Group NV (Surface
Transport)......................... 3,000 96,712
VNU-Verenigde Nederlandes
Uitgeversbedrijven Verenigd Bezit
(Print Media) ..................... 3,200 120,723
-------------
TOTAL NETHERLANDS 709,430
-------------
NEW ZEALAND (0.0%)
Fernz Corp. Ltd. (Chemicals) ....... 19,300 59,648
-------------
NORWAY (0.3%)
Det Sondenfjelds-Norske
Dampskibsselskab
(Oil) + ........................... 8,000 63,001
Merkantildata ASA
(Data and Imaging Services) ....... 11,500 113,204
Ocean Rig ASA (Oil) + .............. 110,550 30,180
Tandberg Television ASA
(Electronic Media) + .............. 12,200 100,879
Tomra Systems ASA
(Forest Products and Building
Materials)......................... 2,900 95,157
-------------
TOTAL NORWAY 402,421
-------------
SPAIN (0.1%)
Iberdrola SA (Electric Utilities) + 7,100 133,035
Telefonica de Espana
(Major Telecommunications) ........ 2,000 89,064
</TABLE>
70 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
SPAIN (CONTINUED)
Telefonica SA Rights
(Major Telecommunications) + ...... 2,000 $ 1,779
-------------
TOTAL SPAIN 223,878
-------------
SWEDEN (0.3%)
Industrial & Financial Systems
(Data and Imaging Services) + ++ .. 12,625 145,629
NetCom AB (Major Telecommunications)
+ ................................. 2,300 93,637
Securitas AB (Consumer Services) ... 11,200 174,097
-------------
TOTAL SWEDEN 413,363
-------------
SWITZERLAND (0.5%)
Adecco SA (Commercial Services) .... 100 45,650
Fischer (Georg) AG
(Auto Parts and Hardware) ......... 450 152,184
Novartis AG Registered Shares
(Health Services) + ............... 100 196,578
Swiss Re (Insurance) ............... 50 130,360
UBS AG (Banks and Thrifts) ......... 600 184,347
-------------
TOTAL SWITZERLAND 709,119
-------------
UNITED KINGDOM (1.5%)
Bank of Scotland (Banks and Thrifts) 12,712 151,647
Berisford Plc (Industrial Services) 24,900 74,571
British Aerospace Plc
(Conglomerate and Aerospace) ...... 24,564 208,639
British Telecom Plc
(Major Telecommunications) ........ 9,400 141,070
Cable & Wireless Plc
(Other Telecommunications) + ...... 7,000 86,127
Glaxo Wellcome Plc (Drugs) ......... 6,445 221,756
Granada Group Plc (Consumer
Services) +........................ 6,272 110,876
Kingfisher Plc (Discretionary
Retail)............................ 7,973 86,292
Kwik-Fit Holding Plc
(Auto Parts and Hardware) ......... 13,600 109,179
National Westminster Bank Plc
(Banks and Thrifts) ............... 5,300 102,202
Pearson Plc (Print Media) .......... 8,900 176,657
Peninsular & Oriental Steam
Navigation Co.
(Surface Transport) + ............. 11,863 140,137
Railtrack Group (Surface Transport) 4,348 112,637
SmithKline Beecham Plc (Drugs) ..... 8,800 123,501
Unilever Plc (Consumer Products) ... 12,300 137,932
Vodafone Group Plc (Consumer
Products).......................... 12,738 206,848
WPP Group Plc (Commercial Services) 15,500 94,310
-------------
TOTAL UNITED KINGDOM 2,284,381
-------------
TOTAL FOREIGN COMMON STOCKS (COST $10,427,847) 11,919,265
-------------
TOTAL COMMON STOCKS (COST $65,775,932) 70,298,717
-------------
PREFERRED STOCKS (0.2%)
GERMANY (0.2%)
Henkel KGAA (Chemicals) ............ 1,500 134,186
Hugo Boss AG (Textiles and Apparel)
+ ................................. 50 96,061
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
---------- -------------
<S> <C> <C>
PREFERRED STOCKS (CONTINUED)
SAP AG (Data and Imaging Services) + 250 $ 119,807
-------------
TOTAL PREFERRED STOCKS (COST
$251,505) 350,054
-------------
PRINCIPAL
AMOUNT
------------
LONG-TERM BONDS AND NOTES (27.1%)
CORPORATE AND CONVERTIBLE BONDS (5.6%)
American Re Corp., 7.45%, 12/15/26 . $ 700,000 761,936
BCH Cayman Islands Ltd., 6.50%,
02/15/06........................... 2,000,000 2,013,740
Capital One Bank, 6.66%, 06/19/00 .. 700,000 703,598
GTE Corp., 9.38%, 12/01/00 ......... 1,000,000 1,072,570
HSBC Americas, Inc., 7.00%, 11/01/06 1,000,000 1,047,180
Korean Development Bank, 7.13%,
09/17/01........................... 700,000 663,376
National Australia Bank, 6.40%,
12/10/07........................... 2,000,000 2,028,700
-------------
TOTAL CORPORATE AND CONVERTIBLE BONDS 8,291,100
(COST $8,201,214) -------------
CORPORATE BONDS (11.6%)
BankAmerica Corp., 7.88%, 12/01/02 . 1,500,000 1,619,490
Chrysler Financial Corp., 5.25%,
10/19/00........................... 450,000 450,081
Enron Oil & Gas Corp., 6.50%,
12/01/07........................... 700,000 703,717
Fifth Third Banc, 6.75%, 07/15/05 .. 300,000 314,850
Ford Motor Credit Corp., 6.63%,
10/01/28........................... 1,500,000 1,540,395
Heller Financial, Inc., 6.35%,
08/15/99 ++........................ 500,000 502,075
Household Finance Corp., 5.88%,
09/25/04........................... 835,000 835,893
IMC Global, Inc., 7.63%, 11/01/05 .. 800,000 813,375
International Lease Finance Corp.,
5.56%, 09/18/01 ................... 1,305,000 1,301,920
MBIA, Inc., 6.63%, 10/01/28 ........ 1,500,000 1,506,195
Norwest Financial, Inc., 5.38%,
09/30/03........................... 835,000 830,174
Raytheon Co., 6.15%, 11/01/08 ++ ... 850,000 865,615
Rite Aid Corp., 6.00%, 10/01/03 .... 835,000 834,207
Simon De Bartolo Group, Inc., 6.63%,
06/15/03........................... 1,200,000 1,183,764
TCI Communications, Inc., 6.38%,
09/15/99........................... 1,500,000 1,511,985
Tenet Healthcare Corp., 7.88%,
01/15/03........................... 425,000 430,096
Time Warner, Inc., 9.13%, 01/15/13 . 625,000 791,225
USA Waste Management, Inc., 6.13%,
07/15/01........................... 835,000 840,177
Zurich Capital Trust, 8.38%,
06/01/37 ++........................ 375,000 419,171
-------------
TOTAL CORPORATE BONDS (COST $17,036,160) 17,294,405
-------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (8.9%)
Federal National Mortgage
Association, 6.50%, 08/01/28 ...... 398,556 401,296
Federal National Mortgage
Association - Conventional Loan,
6.50%, 02/01/28 ................... 2,001,929 2,015,692
Federal National Mortgage Corp.,
5.75%, 04/15/03 ................... 1,000,000 1,028,122
Government National Mortgage
Association, 7.00%, 04/15/27 -
07/15/28........................... 5,763,819 5,902,497
</TABLE>
See Notes to Financial Statements. 71
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
PORTFOLIO OF INVESTMENTS - DECEMBER 31, 1998
LEGACY (continued)
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- -------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
Government National Mortgage
Association, 7.50%, 12/15/23 ...... $3,687,218 $ 3,805,909
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED 13,153,516
SECURITIES (COST $13,041,411) -------------
U.S. GOVERNMENT OBLIGATIONS (1.0%)
U.S. Treasury Note, 6.50%,
05/31/02 - 10/15/06 ............... 1,450,000 1,570,961
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $1,459,676) 1,570,961
-------------
TOTAL LONG-TERM BONDS AND NOTES (COST $39,738,461) 40,309,982
-------------
SHORT-TERM INVESTMENTS (24.1%)
Federal Home Loan Mortgage Corp.,
4.70%, 01/04/99 - 01/07/99......... 25,644,000 25,640,083
Federal National Mortgage
Association, 4.75%, 01/05/99 ...... 10,000,000 9,998,681
U.S. Treasury Bill, 4.76%, 02/18/99 100,000 99,456
U.S. Treasury Bill, 4.98%, 02/18/99
@ ................................. 100,000 99,456
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $35,837,547) 35,837,676
-------------
TOTAL INVESTMENTS (COST $141,603,445)(A) 146,796,429
OTHER ASSETS LESS LIABILITIES 1,729,919
-------------
TOTAL NET ASSETS $ 148,526,348
=============
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
(a) The cost of investments for federal income tax purposes amounts to
$141,662,268. Unrealized gains and losses, based on identified tax cost at
December 31, 1998, are as follows:
<TABLE>
<S> <C>
Unrealized gains.................................... $ 10,877,614
Unrealized losses................................... (5,743,453)
-------------
Net unrealized gain................................ $ 5,134,161
=============
</TABLE>
Information concerning open futures contracts at December 31, 1998 is shown
below:
<TABLE>
<CAPTION>
NO. OF INITIAL EXPIRATION UNREALIZED
CONTRACTS VALUE DATE GAIN/(LOSS)
------------ ------------- ------------- ----------------
LONG CONTRACTS
- -------------------
<S> <C> <C> <C> <C>
Long-Term German
Government Bond
Futures........... 10 $1,723,336 Mar 99 $ 3,302
Swiss Government
Bond Futures....... 5 474,154 Mar 99 (8,555)
---------- --------
$2,197,490 $ (5,253)
=========== ========
</TABLE>
+ Non-income producing security.
++ 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.
@ Security pledged to cover initial margin requirements on open futures
contracts at December 31, 1998.
Information concerning restricted securities at December 31, 1998 is shown
below:
<TABLE>
<CAPTION>
COST
----------
<S> <C>
Beacon Capital........................................ $ 226,000
Heller Financial, Inc................................. 500,125
Industrial & Financial Systems........................ 123,821
Raytheon Co........................................... 847,783
Zurich Capital Trust.................................. 384,761
----------
$2,082,490
==========
</TABLE>
The market value of the total restricted securities above represent 1.42% of the
total net assets.
Category percentages are based on net assets.
72 See Notes to Financial Statements.
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
ASCENT CROSSROADS LEGACY
------------- --------------- -----------------
<S> <C> <C> <C>
ASSETS:
Investments, at market
value................. $205,985,154 $192,502,536 $146,796,429
Cash .................. 113,295 77,743 41,387
Cash denominated in
foreign currencies ... 1,220,354 1,135,009 720,983
Receivable for:
Dividends and interest 682,766 771,842 677,629
Investments sold ..... 1,856,277 954,588 521,191
Fund shares sold ..... 204,497 392,680 1,124,424
Variation margin ..... -- -- 33
Recoverable foreign
taxes................. 32,413 26,735 13,847
Prepaid expenses ...... 587 482 288
Gross unrealized gain
on forward foreign
currency exchange
contracts............. 67,772 36,112 45,887
------------ ------------ ------------
Total assets ..... 210,163,115 195,897,727 149,942,098
------------ ------------ ------------
LIABILITIES:
Payable for:
Investments purchased 2,190,581 2,020,194 1,163,659
Fund shares redeemed . 8,612 84 90
Variation margin ..... 169 100 --
Accrued investment
advisory fees ........ 115,328 108,011 83,147
Accrued administrative
service fees ......... 14,416 13,502 10,394
Accrued custody fees .. 33,472 34,607 32,453
Other liabilities ..... 18,686 16,421 14,689
Gross unrealized loss
on forward foreign
currency exchange
contracts............. 186,035 142,763 111,318
------------ ------------ ------------
Total liabilities 2,567,299 2,335,682 1,415,750
------------ ------------ ------------
NET ASSETS ........... $207,595,816 $193,562,045 $148,526,348
============ ============ ============
NET ASSETS REPRESENTED
BY:
Paid-in capital ....... $197,721,498 $183,860,553 $143,333,731
Net unrealized gain on
investments and
open futures contracts 9,914,140 9,407,217 5,123,664
Undistributed net
investment income .... 578,631 289,728 194,717
Accumulated net
realized gain (loss)
on investments ....... (618,453) 4,547 (125,764)
------------ ------------ ------------
NET ASSETS ........... $207,595,816 $193,562,045 $148,526,348
============ ============ ============
CAPITAL SHARES:
Authorized ............ Two Billion Two Billion Two Billion
Par value ............. $ 0.001 $ 0.001 $ 0.001
Outstanding ........... 14,806,523 14,533,358 12,005,126
Net asset value,
offering and
redemption price per
share (net assets
divided by shares
outstanding).......... $ 14.02 $ 13.32 $ 12.37
Cost of investments ... $195,903,523 $182,969,864 $141,603,445
Cost of cash
denominated in foreign
currencies............ $ 1,224,819 $ 1,138,108 $ 721,960
</TABLE>
See Notes to Financial Statements. 73
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
STATEMENTS OF OPERATIONS
================================================================================
<TABLE>
<CAPTION>
ASCENT CROSSROADS LEGACY
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1998
------------ ------------ --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends ......................... $ 4,703,666 $3,207,366 $1,683,459
Interest .......................... 1,522,128 3,460,696 4,021,629
----------- ---------- ----------
6,225,794 6,668,062 5,705,088
Foreign taxes withheld on dividends (59,895) (46,181) (24,250)
----------- ---------- ----------
Total investment income ...... 6,165,899 6,621,881 5,680,838
----------- ---------- ----------
INVESTMENT EXPENSES:
Investment advisory fees .......... 1,107,075 1,013,082 745,715
Administrative services fees ...... 179,401 162,576 117,097
Printing and postage .............. 9,100 8,295 6,525
Custody fees ...................... 60,022 58,329 52,238
Transfer agent fees ............... 1,811 1,784 1,788
Audit fees ........................ 12,177 12,150 12,087
Directors' fees ................... 3,326 3,043 2,253
Registration fees ................. 4,799 4,025 4,890
Miscellaneous expenses ............ 2,263 1,963 1,310
----------- ---------- ----------
Total expenses ............... 1,379,974 1,265,247 943,903
----------- ---------- ----------
Net investment income ............. 4,785,925 5,356,634 4,736,935
----------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments ...................... 3,695,301 1,876,391 1,620,103
Futures and forward foreign
currency exchange contracts ...... 200,504 92,330 (53,643)
Foreign currency related
transactions...................... (56,186) 13,226 (88,735)
----------- ---------- ----------
Net realized gain on
investments................... 3,839,619 1,981,947 1,477,725
----------- ---------- ----------
Net change in unrealized gain or
loss on:
Investments ...................... (1,555,726) 1,361,508 906,224
Futures and forward foreign
currency exchange contracts ...... (378,878) (253,136) (145,562)
Foreign currency related
transactions...................... 8,700 4,992 4,809
----------- ---------- ----------
Net change in unrealized gain
or loss on investments ....... (1,925,904) 1,113,364 765,471
----------- ---------- ----------
Net realized and change in
unrealized gain or loss on
investments....................... 1,913,715 3,095,311 2,243,196
----------- ---------- ----------
Net increase in net assets
resulting from operations ........ $ 6,699,640 $8,451,945 $6,980,131
=========== ========== ==========
</TABLE>
74 See Notes to Financial Statements.
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
ASCENT
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.................. $ 4,785,925 $ 2,436,420
Net realized gain on investments....... 3,839,619 7,553,548
Net change in unrealized gain or loss
on investments........................ (1,925,904) 7,203,813
------------ ------------
Net increase in net assets resulting
from operations....................... 6,699,640 17,193,781
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (4,979,306) (2,979,730)
From net realized gains............... (4,834,598) (6,365,007)
------------ ------------
Decrease in net assets from
distributions to shareholders......... (9,813,904) (9,344,737)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold............. 61,786,543 91,118,652
Net asset value of shares issued upon
reinvestment of distributions........ 9,813,904 9,344,736
Payments for shares redeemed.......... (9,700,764) (4,657,488)
------------ ------------
Net increase in net assets from fund
share transactions.................... 61,899,683 95,805,900
------------ ------------
Net change in net assets............... 58,785,419 103,654,944
NET ASSETS:
Beginning of period.................... 148,810,397 45,155,453
------------ ------------
End of period.......................... $207,595,816 $148,810,397
============ ============
End of period net assets includes
undistributed net investment income... $ 578,631 $ 402,167
============ ============
SHARE TRANSACTIONS:
Number of shares sold................. 4,231,255 6,640,539
Number of shares issued upon
reinvestment of distributions........ 698,611 665,526
Number of shares redeemed............. (663,321) (344,396)
------------ ------------
Net increase.......................... 4,266,545 6,961,669
============ ============
</TABLE>
See Notes to Financial Statements. 75
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
CROSSROADS
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.................. $ 5,356,634 $ 2,629,353
Net realized gain on investments....... 1,981,947 5,606,557
Net change in unrealized gain or loss
on investments........................ 1,113,364 5,042,978
------------ ------------
Net increase in net assets resulting
from operations....................... 8,451,945 13,278,888
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (5,665,597) (3,038,631)
From net realized gains............... (1,755,177) (5,215,788)
------------ ------------
Decrease in net assets from
distributions to shareholders......... (7,420,774) (8,254,419)
------------ ------------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold............. 69,477,764 77,759,711
Net asset value of shares issued upon
reinvestment of distributions........ 7,420,774 8,254,419
Payments for shares redeemed.......... (7,357,412) (5,739,228)
------------ ------------
Net increase in net assets from fund
share transactions.................... 69,541,126 80,274,902
------------ ------------
Net change in net assets............... 70,572,297 85,299,371
NET ASSETS:
Beginning of period.................... 122,989,748 37,690,377
------------ ------------
End of period.......................... $193,562,045 $122,989,748
============ ============
End of period net assets includes
undistributed net investment income... $ 289,728 $ 263,241
============ ============
SHARE TRANSACTIONS:
Number of shares sold................. 5,136,875 6,075,990
Number of shares issued upon
reinvestment of distributions........ 558,939 634,014
Number of shares redeemed............. (561,586) (457,343)
------------ ------------
Net increase.......................... 5,134,228 6,252,661
============ ============
</TABLE>
76 See Notes to Financial Statements.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
LEGACY
------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income.................. $ 4,736,935 $ 1,966,118
Net realized gain on investments....... 1,477,725 2,559,961
Net change in unrealized gain or loss
on investments........................ 765,471 2,635,248
------------ -----------
Net increase in net assets resulting
from operations....................... 6,980,131 7,161,327
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (4,684,974) (2,194,825)
From net realized gains............... (1,728,893) (2,305,682)
------------ -----------
Decrease in net assets from
distributions to shareholders......... (6,413,867) (4,500,507)
------------ -----------
FROM FUND SHARE TRANSACTIONS:
Proceeds from shares sold............. 76,155,195 50,159,922
Net asset value of shares issued upon
reinvestment of distributions........ 6,413,867 4,500,507
Payments for shares redeemed.......... (16,258,488) (3,425,545)
------------ -----------
Net increase in net assets from fund
share transactions.................... 66,310,574 51,234,884
------------ -----------
Net change in net assets............... 66,876,838 53,895,704
NET ASSETS:
Beginning of period.................... 81,649,510 27,753,806
------------ -----------
End of period.......................... $148,526,348 $81,649,510
============ ===========
End of period net assets includes
undistributed net investment income... $ 194,717 $ 97,476
============ ===========
SHARE TRANSACTIONS:
Number of shares sold................. 6,061,578 4,187,047
Number of shares issued upon
reinvestment of distributions........ 520,120 373,934
Number of shares redeemed............. (1,324,436) (279,146)
------------ -----------
Net increase.......................... 5,257,262 4,281,835
============ ===========
</TABLE>
See Notes to Financial Statements. 77
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
1. ORGANIZATION
Aetna Generation Portfolios, 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 October 14, 1994 and is
authorized to issue multiple series of shares, each representing a diversified
portfolio of investments (individually, a Portfolio and collectively, the
Portfolios) with its own investment objective, policies and restrictions.
Currently, the Company offers shares of the Aetna Ascent VP, Aetna Crossroads VP
and Aetna Legacy VP. Each of these diversified Portfolios commenced investment
operations on July 5, 1995. The Portfolios are asset allocation funds that seek
to maximize long-term investment returns at varying levels of risk.
The following is each Portfolio's investment objective:
AETNA ASCENT VP (Ascent) seeks to provide capital appreciation.
AETNA CROSSROADS VP (Crossroads) seeks to provide total return (i.e., income
and capital appreciation, both realized and unrealized).
AETNA LEGACY VP (Legacy) seeks to provide total return consistent with
preservation of capital.
Shares of each Portfolio are currently owned by insurance companies as
depositors of separate accounts which are used to fund variable annuity
contracts and variable life insurance policies. All shares are currently held by
separate accounts of Aetna Life Insurance and Annuity Company (ALIAC) and its
subsidiary, Aetna Insurance Company of America.
Effective May 1, 1998, Aeltus Investment Management, Inc. (Aeltus) became the
investment adviser to the Portfolios. Prior to May 1, 1998, ALIAC acted as
investment adviser and Aeltus served as sub-adviser to the Portfolios. ALIAC
serves as the principal underwriter to each Portfolio. Aeltus and ALIAC are
both indirect wholly-owned subsidiaries of Aetna Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the Portfolios 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. Although actual results could differ from these estimates, any
such differences are expected to be immaterial to the net assets of the
Portfolios.
A. VALUATION OF INVESTMENTS
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. Short-term
investments maturing in more than sixty days for which market quotations are
readily available are valued at current market value. Short-term investments
maturing in less than sixty days 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.
The accounting records of the Portfolios 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 exchanges
at the end of each day of each applicable foreign market. 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 Portfolios 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.
78
<PAGE>
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Portfolios invest in
financial futures contracts as a hedge against its 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 Portfolios 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 Portfolios equal to the daily fluctuations
in the market value of the contract. These amounts are recorded by the
Portfolios as unrealized gains or losses. When a contract is closed, the
Portfolios 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 Portfolios 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 Portfolios, 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.
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 Portfolios 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. 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 Portfolios to sell them promptly
at an acceptable price. Restricted securities are those which can only be 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. Each Portfolio may invest up to 15% of its
total assets in illiquid securities. 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 Portfolios will not pay
the costs of disposition of restricted securities other than ordinary brokerage
fees, if any. Below is a summary of securities held which are both illiquid and
restricted as of December 31, 1998:
<TABLE>
<CAPTION>
COST MARKET VALUE % OF NET ASSETS
---- ------------ ---------------
<S> <C> <C> <C>
Ascent $768,000 $614,400 0.30%
Crossroads 518,000 414,400 0.21%
Legacy 226,000 180,800 0.12%
</TABLE>
79
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
================================================================================
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. FEDERAL INCOME TAXES
Each Portfolio intends to meet the requirements to be taxed as a regulated
investment company for the current year. As such, each Portfolio 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. Furthermore, by distributing substantially all of its net
taxable investment income and capital gains during the calendar year, each
Portfolio will avoid federal excise taxes in accordance with the applicable
provisions of the Internal Revenue Code. Thus, the financial statements contain
no provision for federal taxes.
E. 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, certain investments in foreign equity securities and certain
losses deferred due to transactions characterized as "wash sales" by federal tax
regulations. 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 Internal Revenue Code.
F. 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 AND ADMINISTRATIVE SERVICE FEES
Each Portfolio pays Aeltus a monthly advisory fee at an annual rate of 0.60% of
its average daily net assets.
Aeltus has served as the investment adviser for the Portfolios since May 1,
1998. Prior to May 1, 1998, ALIAC served as the Portfolios' investment adviser
and Aeltus served as sub-adviser. As sub-adviser, Aeltus supervised the
investment and reinvestment of cash and securities and provided certain related
administrative services. For the period January 1, 1998 through April 30, 1998,
ALIAC collected $812,549 from the Portfolios, of which it paid $468,975 to
Aeltus.
Effective May 1, 1998, each Portfolio pays expenses incurred in exchange for
services provided by auditors, legal firms, transfer agents, custodian banks and
financial printers. Each Portfolio pays its proportionate share of compensation
to the Portfolio's Board of Directors and its proportionate share of insurance
premiums. Each Portfolio pays its direct costs incurred to mail shareholder
reports, register its shares with the Securities and Exchange Commission and any
other costs incurred by the Portfolio. In addition, each Portfolio pays Aeltus
an administrative services fee in exchange for receiving certain administrative
and shareholder services and to compensate Aeltus for supervising the
Portfolio's other service providers. Each Portfolio pays Aeltus an
administrative services fee at an annual rate based on its average daily net
assets. The rate is 0.075% on the first $5 billion of Portfolio assets and
0.050% on all Portfolio assets over $5 billion.
Prior to May 1, 1998, ALIAC acted as Administrator to the Portfolios. As
Administrator, ALIAC paid all the expenses of the Portfolios on their behalf,
supervised each of the Portfolios' other service providers and provided the
Portfolios with certain administrative and shareholder services. In exchange
for these services, ALIAC received an administrative services fee at an annual
rate of up to 0.15% of each Portfolio's average daily net assets. For the
period January 1, 1998 through April 30, 1998, ALIAC collected $203,137 in
administrative services fees from the Portfolios.
80
<PAGE>
================================================================================
3. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICE FEES (CONTINUED)
Aeltus has entered into a Service Agreement with ALIAC under which ALIAC will
provide various administrative and shareholder services for each Portfolio, in
exchange for fees payable by Aeltus, of up to 0.30% of the average daily net
assets. For the period May 1, 1998 through December 31, 1998, Aeltus paid ALIAC
$1,016,253.
4. REIMBURSEMENT AND WAIVER FROM INVESTMENT ADVISER
Aeltus is contractually obligated through December 31, 1999 to reimburse a
Portfolio 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 Portfolio's yield and total return.
5. PURCHASES AND SALES OF INVESTMENT SECURITIES
Purchases and sales of investment securities, excluding short-term investments,
for the year ended December 31, 1998 were:
<TABLE>
<CAPTION>
COST OF PURCHASES PROCEEDS FROM SALES
----------------- -------------------
<S> <C> <C>
Ascent $241,061,417 $174,751,400
Crossroads 202,395,730 145,008,908
Legacy 142,728,105 97,774,928
</TABLE>
6. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As of December 31, 1998, Ascent, Crossroads and Legacy had the following open
forward foreign currency exchange contracts that obligate the Portfolios to
deliver currencies at specified future dates. The Portfolios' net unrealized
losses of $118,263, $106,651and $65,431, respectively, on these contracts, are
included in the accompanying financial statements. The terms of the open
contracts are as follows:
<TABLE>
<CAPTION>
ASCENT
- ------
U.S. $ VALUE U.S. $ VALUE
EXCHANGE CURRENCY TO BE DECEMBER 31, CURRENCY TO DECEMBER 31, UNREALIZED
DATE DELIVERED 1998 BE RECEIVED 1998 GAIN (LOSS)
----- ----------- ----- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO BUY
- ----------------
1/4/99 227,786 $227,786 136,000 $227,071 $(715)
U.S. Dollar British Pound
- -----------------------------------------------------------------------------------------------
1/19/99 54,011 54,011 300,000 53,691 (320)
U.S. Dollar French Franc
- -----------------------------------------------------------------------------------------------
1/19/99 337,343 337,343 1,890,000 338,257 914
U.S. Dollar French Franc
- -----------------------------------------------------------------------------------------------
2/22/99 186,048 186,048 1,042,000 187,019 971
U.S. Dollar French Franc
- -----------------------------------------------------------------------------------------------
2/3/99 1,311,986 1,311,986 2,201,000 1,323,777 11,791
U.S. Dollar German Deutschemark
- -----------------------------------------------------------------------------------------------
2/3/99 29,947 29,947 50,000 30,072 125
U.S. Dollar German Deutschemark
- -----------------------------------------------------------------------------------------------
1/4/99 101,843 101,843 789,000 101,835 (8)
U.S. Dollar Hong Kong Dollar
- -----------------------------------------------------------------------------------------------
</TABLE>
81
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
ASCENT (CONTINUED)
- ------------------
U.S. $ VALUE U.S. $ VALUE
EXCHANGE CURRENCY TO BE DECEMBER 31, CURRENCY TO DECEMBER 31, UNREALIZED
DATE DELIVERED 1998 BE RECEIVED 1998 GAIN (LOSS)
----- ----------- ----- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO BUY (CONTINUED)
- ----------------------------
2/19/99 180,939 180,939 1,440,000 $185,795 $4,856
U.S. Dollar Hong Kong Dollar
- -----------------------------------------------------------------------------------------------
2/19/99 89,652 89,652 710,000 91,607 1,955
U.S. Dollar Hong Kong Dollar
- -----------------------------------------------------------------------------------------------
2/19/99 49,894 49,894 40,000 51,610 1,716
U.S. Dollar Hong Kong Dollar
- -----------------------------------------------------------------------------------------------
1/27/99 274,544 274,544 33,250,000 295,364 20,820
U.S. Dollar Japanese Yen
- -----------------------------------------------------------------------------------------------
3/17/99 355,247 355,247 40,880,000 366,114 10,867
U.S. Dollar Japanese Yen
- -----------------------------------------------------------------------------------------------
CONTRACTS TO SELL
- -----------------
1/25/99 995,000 527,334 527,334 (3,182)
Dutch Guilder U.S. Dollar
- -----------------------------------------------------------------------------------------------
1/7/99 1,736,000 530,516 309,227 309,227 (871)
French Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------
1/19/99 8,206,000 310,098 1,454,114 1,454,114 (14,531)
French Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------
1/19/99 1,289,000 1,468,645 225,879 225,879 (4,816)
French Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------
1/19/99 847,000 230,695 153,098 153,098 1,509
French Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------
2/22/99 2,948,000 151,589 529,739 529,739 629
French Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------
2/3/99 2,201,000 529,110 1,335,396 1,335,396 11,619
German Deutschemark U.S. Dollar
- -----------------------------------------------------------------------------------------------
2/3/99 2,037,000 1,323,777 1,218,287 1,218,287 (6,853)
German Deutschemark U.S. Dollar
- -----------------------------------------------------------------------------------------------
2/19/99 2,550,000 1,225,140 319,669 319,669 (9,342)
Hong Kong Dollar U.S. Dollar
- -----------------------------------------------------------------------------------------------
1/27/99 150,430,000 329,011 1,290,137 1,290,137 (46,151)
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------
2/26/99 110,280,000 1,336,288 924,702 924,702 (60,359)
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------
3/17/99 111,525,000 985,061 968,099 968,099 (30,698)
Japanese Yen U.S. Dollar
- -----------------------------------------------------------------------------------------------
2/2/99 955,000 998,797 689,645 689,645 (8,189)
Swiss Franc U.S. Dollar
- -----------------------------------------------------------------------------------------------
697,834 $(118,263)
================
</TABLE>
82
<PAGE>
================================================================================
<TABLE>
<CAPTION>
CROSSROADS
- ----------
U.S. $ VALUE U.S. $ VALUE
EXCHANGE CURRENCY TO BE DECEMBER 31, CURRENCY TO DECEMBER 31, UNREALIZED
DATE DELIVERED 1998 BE RECEIVED 1998 GAIN (LOSS)
----- ----------- ----- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO BUY
- ----------------
1/4/99 13,399 $13,399 8,000 $13,357 $(42)
U.S. Dollar British Pound
- ---------------------------------------------------------------------------------------------------
1/7/99 167,035 167,035 100,000 166,877 (158)
U.S. Dollar British Pound
- ---------------------------------------------------------------------------------------------------
1/19/99 82,817 82,817 460,000 82,327 (490)
U.S. Dollar French Franc
- ---------------------------------------------------------------------------------------------------
1/19/99 273,087 273,087 1,530,000 273,827 740
U.S. Dollar French Franc
- ---------------------------------------------------------------------------------------------------
2/22/99 237,649 237,649 1,331,000 238,889 1,240
U.S. Dollar French Franc
- ---------------------------------------------------------------------------------------------------
2/3/99 59,895 59,895 100,000 60,144 249
U.S. Dollar German Deutschemark
- ---------------------------------------------------------------------------------------------------
1/4/99 76,415 76,415 592,000 76,409 (6)
U.S. Dollar Hong Kong Dollar
- ---------------------------------------------------------------------------------------------------
2/19/99 16,335 16,335 130,000 16,773 438
U.S. Dollar Hong Kong Dollar
- ---------------------------------------------------------------------------------------------------
2/19/99 165,414 165,414 1,310,000 169,021 3,607
U.S. Dollar Hong Kong Dollar
- ---------------------------------------------------------------------------------------------------
2/19/99 41,163 41,163 330,000 42,578 1,415
U.S. Dollar Hong Kong Dollar
- ---------------------------------------------------------------------------------------------------
1/27/99 191,066 191,066 23,140,000 205,556 14,490
U.S. Dollar Japanese Yen
- ---------------------------------------------------------------------------------------------------
3/17/99 144,254 144,254 16,600,000 148,666 4,412
U.S. Dollar Japanese Yen
- ---------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
- -----------------
1/25/99 766,000 408,417 405,968 405,968 (2,449)
Dutch Guilder U.S. Dollar
- ---------------------------------------------------------------------------------------------------
1/7/99 2,219,000 396,376 395,262 395,262 (1,114)
French Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------
1/19/99 7,129,000 1,275,892 1,263,268 1,263,268 (12,624)
French Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------
1/19/99 956,000 171,097 167,525 167,525 (3,572)
French Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------
1/19/99 677,000 121,164 122,370 122,370 1,206
French Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------
83
<PAGE>
CONTRACTS TO SELL (CONTINUED)
- -----------------------------
2/22/99 2,737,000 $491,240 491,824 $491,825 $585
French Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------
2/3/99 1,464,000 880,513 888,242 888,243 7,730
German Deutschemark U.S. Dollar
- ---------------------------------------------------------------------------------------------------
2/3/99 9,000 5,413 5,383 5,383 (30)
German Deutschemark U.S. Dollar
- ---------------------------------------------------------------------------------------------------
2/19/99 1,770,000 228,372 221,888 221,888 (6,484)
Hong Kong Dollar U.S. Dollar
- ---------------------------------------------------------------------------------------------------
1/27/99 98,110,000 871,523 841,424 841,424 (30,099)
Japanese Yen U.S. Dollar
- ---------------------------------------------------------------------------------------------------
2/26/99 102,710,000 917,443 861,228 861,228 (56,215)
Japanese Yen U.S. Dollar
- ---------------------------------------------------------------------------------------------------
3/17/99 82,170,000 735,899 713,281 713,280 (22,619)
Japanese Yen U.S. Dollar
- ---------------------------------------------------------------------------------------------------
2/2/99 800,000 584,573 577,713 577,712 (6,861)
Swiss Franc U.S. Dollar
- ---------------------------------------------------------------------------------------------------
$(106,651)
==================
</TABLE>
<TABLE>
<CAPTION>
LEGACY
- ------
U.S. $ VALUE U.S. $ VALUE
EXCHANGE CURRENCY TO BE DECEMBER 31, CURRENCY TO DECEMBER 31, UNREALIZED
DATE DELIVERED 1998 BE RECEIVED 1998 GAIN (LOSS)
----- ----------- ----- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO BUY
- ----------------
1/4/99 3,350 3,350 2,000 3,339 (11)
U.S. Dollar British Pound
- -------------------------------------------------------------------------------------------------
1/7/99 96,880 96,880 58,000 96,788 (92)
U.S. Dollar British Pound
- -------------------------------------------------------------------------------------------------
1/19/99 59,412 59,412 330,000 59,060 (352)
U.S. Dollar French Franc
- -------------------------------------------------------------------------------------------------
1/19/99 146,361 146,361 820,000 146,757 396
U.S. Dollar French Franc
- -------------------------------------------------------------------------------------------------
2/22/99 164,444 164,444 921,000 165,302 858
U.S. Dollar French Franc
- -------------------------------------------------------------------------------------------------
2/3/99 235,379 235,379 390,000 234,563 (816)
U.S. Dollar German Deutschemark
- -------------------------------------------------------------------------------------------------
2/3/99 235,878 235,878 390,000 234,563 (1,315)
U.S. Dollar German Deutschemark
- -------------------------------------------------------------------------------------------------
</TABLE>
84
<PAGE>
================================================================================
<TABLE>
<CAPTION>
LEGACY (CONTINUED)
- ------------------
U.S. $ VALUE U.S. $ VALUE
EXCHANGE CURRENCY TO BE DECEMBER 31, CURRENCY TO DECEMBER 31, UNREALIZED
DATE DELIVERED 1998 BE RECEIVED 1998 GAIN (LOSS)
----- ----------- ----- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO BUY (CONTINUED)
- ----------------------------
2/3/99 242,607 $242,607 407,000 $244,787 $2,180
U.S. Dollar German Deutschemark
- -------------------------------------------------------------------------------------------------
2/3/99 41,926 41,926 70,000 42,101 175
U.S. Dollar German Deutschemark
- -------------------------------------------------------------------------------------------------
1/4/99 49,437 49,437 383,000 49,433 (4)
U.S. Dollar Hong Kong Dollar
- -------------------------------------------------------------------------------------------------
2/19/99 8,796 8,796 70,000 9,032 236
U.S. Dollar Hong Kong Dollar
- -------------------------------------------------------------------------------------------------
2/19/99 54,296 54,296 430,000 55,480 1,184
U.S. Dollar Hong Kong Dollar
- -------------------------------------------------------------------------------------------------
2/19/99 49,894 49,894 400,000 51,610 1,716
U.S. Dollar Hong Kong Dollar
- -------------------------------------------------------------------------------------------------
1/27/99 252,663 252,663 30,600,000 271,824 19,161
U.S. Dollar Japanese Yen
- -------------------------------------------------------------------------------------------------
3/17/99 97,502 97,502 11,220,000 100,485 2,983
U.S. Dollar Japanese Yen
- -------------------------------------------------------------------------------------------------
CONTRACTS TO SELL
- -----------------
1/25/99 420,000 223,936 222,593 222,593 (1,343)
Dutch Guilder U.S. Dollar
- -------------------------------------------------------------------------------------------------
1/7/99 1,535,000 274,194 273,424 273,424 (770)
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------
1/19/99 4,400,600 787,585 779,792 779,792 (7,793)
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------
1/19/99 564,000 100,940 98,833 98,833 (2,107)
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------
1/19/99 395,000 70,694 71,398 71,398 704
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------
2/22/99 1,115,000 200,121 200,359 200,359 238
French Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------
1/21/99 635,000 381,220 391,010 391,010 9,790
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------
2/3/99 1,187,000 713,914 720,180 720,180 6,266
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------
2/3/99 287,000 172,614 171,649 171,649 (965)
German Deutschemark U.S. Dollar
- -------------------------------------------------------------------------------------------------
2/19/99 900,000 116,122 112,824 112,824 (3,298)
Hong Kong Dollar U.S. Dollar
- -------------------------------------------------------------------------------------------------
1/27/99 20,540,000 182,459 176,158 176,158 (6,301)
Japanese Yen U.S. Dollar
- -------------------------------------------------------------------------------------------------
</TABLE>
85
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
LEGACY (CONTINUED)
- ------------------
U.S. $ VALUE U.S. $ VALUE
EXCHANGE CURRENCY TO BE DECEMBER 31, CURRENCY TO DECEMBER 31, UNREALIZED
DATE DELIVERED 1998 BE RECEIVED 1998 GAIN (LOSS)
----- ----------- ----- ----------- ---- -----------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO SELL (CONTINUED)
- -----------------------------
2/26/99 116,890,000 $1,044,104 980,127 $980,127 $(63,977)
Japanese Yen U.S. Dollar
- -------------------------------------------------------------------------------------------------
3/17/99 66,945,000 599,547 581,120 581,120 (18,427)
Japanese Yen U.S. Dollar
- -------------------------------------------------------------------------------------------------
2/2/99 437,000 319,323 315,576 315,576 (3,747)
Swiss Franc U.S. Dollar
- -------------------------------------------------------------------------------------------------
$(65,431)
================
</TABLE>
86
<PAGE>
AETNA GENERATION POIRTFOLIOS, INC.
ADDITIONAL INFORMATION
DECEMBER 31, 1998
================================================================================
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR (UNAUDITED)
In accordance with federal tax authorities, certain portions of the dividends
taxable as ordinary income qualify for the corporate dividends received
deduction. The following percentages reflect the portions of such dividends
paid:
<TABLE>
<S> <C>
Ascent 13.48%
Crossroads 9.47%
Legacy 4.96%
</TABLE>
In accordance with federal tax authorities, the Portfolios paid the following
amounts of dividends which qualify to be taxed at long-term capital gain rates:
<TABLE>
<CAPTION>
AGGREGATE PER SHARE
--------- ---------
<S> <C> <C>
Ascent $4,325,009 $0.31
Crossroads 1,755,177 0.13
Legacy 1,626,611 0.14
</TABLE>
YEAR 2000 (UNAUDITED)
The Portfolios receive services from a number of providers which rely on the
effective functioning of their respective systems and the systems of others to
perform those services. It is generally recognized that certain systems in use
today may not be able to perform their intended functions adequately after 1999
because of the inability of computer systems and software to distinguish the
year 2000 from the year 1900. Aeltus is taking steps that it believes are
reasonably designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Portfolios' other major service providers. There can be no assurance, however,
that these steps will be sufficient to avoid any adverse impact on the
Portfolios from this problem.
87
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS
ASCENT
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 5, 1995
YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, DECEMBER 31, OPERATIONS)
1998 1997 1996 TO DECEMBER 31, 1995+
------------ ------------ ------------ ---------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period . $ 14.12 $ 12.62 $ 10.80 $ 10.00
-------- -------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.33 0.25+ 0.22+ 0.12
Net realized and
change in unrealized
gain or loss
on investments ...... 0.27 2.25 2.29 0.93
-------- -------- ------- -------
Total from
investment
operations........ 0.60 2.50 2.51 1.05
-------- -------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income............... (0.35) (0.34) (0.23) (0.25)
From net realized
gains on investments (0.35) (0.66) (0.46) --
-------- -------- ------- -------
Total distributions (0.70) (1.00) (0.69) (0.25)
-------- -------- ------- -------
Net asset value, end
of period ........... $ 14.02 $ 14.12 $ 12.62 $ 10.80
======== ======== ======= =======
Total return *........ 4.30% 19.90% 23.58% 10.45%
Net assets, end of
period (000's) ...... $207,596 $148,810 $45,155 $18,850
Ratio of total
expenses to average
net assets .......... 0.75% 0.75% 0.84% 1.59%(1)
Ratio of net
investment income to
average net assets .. 2.59% 2.51% 2.53% 2.26%(1)
Portfolio turnover
rate................. 104.33% 124.82% 109.77% 39.77%
</TABLE>
(1) Annualized.
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
88 See Notes to Financial Statements.
<PAGE>
CROSSROADS
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 5, 1995
YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, DECEMBER 31, OPERATIONS)
1998 1997 1996 TO DECEMBER 31, 1995+
------------ ------------ ------------ ---------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period . $ 13.09 $ 11.98 $ 10.74 $ 10.00
-------- -------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.38 0.30+ 0.27+ 0.13
Net realized and
change in unrealized
gain or loss
on investments ...... 0.39 1.79 1.72 0.80
-------- -------- ------- -------
Total from
investment
operations........ 0.77 2.09 1.99 0.93
-------- -------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income............... (0.41) (0.38) (0.30) (0.19)
From net realized
gains on investments (0.13) (0.60) (0.45) --
-------- -------- ------- -------
Total distributions (0.54) (0.98) (0.75) (0.19)
-------- -------- ------- -------
Net asset value, end
of period ........... $ 13.32 $ 13.09 $ 11.98 $ 10.74
======== ======== ======= =======
Total return* ........ 5.91% 17.57% 18.81% 9.30%
Net assets, end of
period (000's) ...... $193,562 $122,990 $37,690 $18,813
Ratio of total
expenses to average
net assets .......... 0.75% 0.75% 0.80% 1.60%(1)
Ratio of net
investment income to
average net assets .. 3.17% 3.20% 3.01% 2.56%(1)
Portfolio turnover
rate................. 102.94% 103.08% 105.66% 49.38%
</TABLE>
(1) Annualized.
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
See Notes to Financial Statements. 89
<PAGE>
AETNA GENERATION PORTFOLIOS, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
LEGACY
================================================================================
Selected data for a fund share outstanding throughout each period:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 5, 1995
YEAR ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, DECEMBER 31, DECEMBER 31, OPERATIONS)
1998 1997 1996 TO DECEMBER 31, 1995+
------------ ------------ ------------ ---------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period . $ 12.10 $ 11.25 $ 10.64 $ 10.00
-------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.41 0.36+ 0.33+ 0.15
Net realized and
change in unrealized
gain or loss
on investments ...... 0.43 1.26 1.15 0.68
-------- ------- ------- -------
Total from
investment
operations........ 0.84 1.62 1.48 0.83
-------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment
income............... (0.41) (0.39) (0.36) (0.19)
From net realized
gains on investments (0.16) (0.38) (0.51) --
-------- ------- ------- -------
Total distributions (0.57) (0.77) (0.87) (0.19)
-------- ------- ------- -------
Net asset value, end
of period ........... $ 12.37 $ 12.10 $ 11.25 $ 10.64
======== ======= ======= =======
Total return* ........ 6.94% 14.50% 14.19% 8.27%
Net assets, end of
period (000's) ...... $148,526 $81,650 $27,754 $18,253
Ratio of total
expenses to average
net assets .......... 0.76% 0.75% 0.80% 1.62%(1)
Ratio of net
investment income to
average net assets .. 3.81% 3.75% 3.45% 2.91%(1)
Portfolio turnover
rate................. 103.71% 85.01% 111.11% 62.43%
</TABLE>
(1) Annualized.
* The total return percentage does not reflect any separate account charges
under variable annuity contracts and life policies.
+ Per share data calculated using weighted average number of shares outstanding
throughout the period.
90 See Notes to Financial Statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Aetna Generation Portfolios, Inc.:
We have audited the accompanying statements of assets and liabilities of Aetna
Ascent VP, Aetna Crossroads VP and Aetna Legacy VP, series of Aetna Generation
Portfolios, Inc. (collectively the Generation Portfolios), including the
portfolios of investments as of December 31, 1998 and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the years in the two-year period then ended and financial highlights for
each of the years in the three-year period ended December 31, 1998 and the
period from July 5, 1995 (commencement of operations) to December 31, 1995.
These financial statements and financial highlights are the responsibility of
the Generation Portfolios' 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 generally accepted auditing
standards. 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the custodian
and brokers. 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
Ascent VP, Aetna Crossroads VP and Aetna Legacy VP as of December 31, 1998,
results of their operations for the year then ended, changes in their net assets
for each of the years in the two-year period then ended and financial highlights
for each of the years in the three-year period ended December 31, 1998 and the
period from July 5, 1995 (commencement of operations) to December 31, 1995, in
conformity with generally accepted accounting principles.
KPMG LLP
Hartford, Connecticut
January 29, 1999
<PAGE>
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<PAGE>
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Retirement Services(R)
Insurance products issued by Aetna Life Insurance and Annuity
Company, Aetna Insurance Company of America and Aetna Life
Insurance Company. Mutual funds and variable products are avail-
able through local representatives of Aetna Investment Services,
Inc., 151 Farmington Avenue, Hartford, Connecticut 06156 and other
broker-dealers that have an agreement with Aetna Life Insurance
and Annuity Company.
These reports are authorized for distribution to other persons only
when preceded or accompanied by a current, effective prospectus
or disclosure booklet for that product which gives sales expense and
other pertinent information.
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