88 See Notes to Financial Statements.
Aetna Bond VP Growth of $10,000
[The following was depicted as a line graph in the printed material.]
*Total Return is calculated including reinvestment of income and capital gain distributions. Performance does not
take into account any separate account charges imposed by Aetna. Past performance is no guarantee of future
results. Investment return and principal of an investment will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
AETNA BOND VP
HOW DID THE PORTFOLIO PERFORM DURING THE PERIOD?
Aetna Bond VP (Bond) generated a 3.12% total return, net of fund expenses, for the six month period ended
June 30, 2000. The benchmark, Lehman Brothers Aggregate Bond Index(a), returned 3.99% for the same
WHAT ECONOMIC OR FINANCIAL MARKET CONDITIONS IMPACTED THE PORTFOLIO?
During the first quarter, U.S. Treasuries rallied as a reduced supply more than offset the impact of strong growth
and Federal Reserve Bank (Fed) interest rate tightening. This condition reversed in the second quarter, as
worries around inflation and the eventual magnitude of Fed tightening required to slow the economy and control
inflation took center stage.
On the heels of 7.3% growth in Gross Domestic Product for the fourth quarter, the first quarter remained strong
at 5.5%. Combined with the previously mentioned rise in inflation, this led the Fed to increase interest rates 100
basis points (1.00%) over the first half of 2000. (One basis point equals one hundredth of one percent, or
As we entered May and June, reports of economic data began showing evidence of a slowdown. Inflation
indicators were tame for both April and May, and other economic reports showed decelerating growth and less
pricing pressure. Combined with a soft May employment report, these indicators led the Treasury market to
revert back to the bullish action of the first quarter.
See Definition of Terms. 89