INVESTMENT SUBADVISORY AGREEMENT
Between
Aetna Life Insurance and Annuity Company
and
Xxxxxxx Xxxxxx Investments, Inc.
INVESTMENT SUBADVISORY AGREEMENT, made as of the 7th day of September, 1998,
between Aetna Life Insurance and Annuity Company (the "Adviser"), an insurance
corporation organized and existing under the laws of the State of Connecticut,
and Xxxxxxx Xxxxxx Investments, Inc. ("Subadviser"), a corporation organized and
existing under the laws of Delaware.
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated as
of the 25th day of August, 1997 ("Advisory Agreement") with Portfolio Partners,
Inc. ("Company"), which is engaged in business as an open-end management
investment company registered under the Investment Company Act of 1940 ("1940
Act"); and
WHEREAS, the Company is and will continue to be a series fund having two or more
investment portfolios, each with its own assets, investment objectives, policies
and restrictions; and
WHEREAS, the Company shareholders are and will be separate accounts maintained
by insurance companies for variable life insurance policies and variable annuity
contracts (the "Policies") under which income, gains, and losses, whether or not
realized, from assets allocated to such accounts are, in accordance with the
Policies, credited to or charged against such accounts without regard to other
income, gains, or losses of such insurance companies; and
WHEREAS, the Subadviser is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 ("Advisers Act"); and
WHEREAS, the Board of Directors and the Adviser desire to retain the Subadviser
as subadviser for the Xxxxxxx International Growth Portfolio (the "Portfolio"),
a portfolio of the Company, to furnish certain investment advisory services to
the Adviser and the Company and the Subadviser is willing to furnish such
services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set
forth, the parties hereto agree as follows:
1. Appointment. Adviser hereby appoints the Subadviser as its investment
Subadviser with respect to the Portfolio for the period and on the terms set
forth in this Agreement. The Subadviser accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
2. Duties of the Subadviser
A. Investment Subadvisory Services. Subject to the supervision of the Company's
Board of Directors ("Board") and the Adviser, the Subadviser shall act as the
investment Subadviser and shall supervise and direct the investments of the
Portfolio in accordance with the portfolio's investment objective, policies, and
restrictions as provided in the Company's Prospectus and Statement of Additional
Information, as currently in effect and as amended or supplemented from time to
time (hereinafter referred to as the "Prospectus"), and such other limitations
as the Company may impose by notice in writing to the Subadviser. The Subadviser
shall obtain and evaluate such information relating to the economy, industries,
businesses,
securities markets, and individual securities as it may deem necessary or useful
in the discharge of its obligations hereunder and shall formulate and implement
a continuing program for the management of the assets and resources of the
Portfolio in a manner consistent with the Portfolio's investment objective,
policies, and restrictions, and in compliance with the requirements applicable
to registered investment companies under applicable laws and those requirements
applicable to both regulated investment companies and segregated asset accounts
under Subchapters M and L of the Internal Revenue Code of 1986, as amended
("Code"). To implement its duties, the Subadviser is hereby authorized to:
(i) buy, sell, exchange, convert, lend, and otherwise trade in
any stocks, bonds, and other securities or assets on behalf of the Portfolio;
and
(ii) directly or through the trading desks of the Subadviser
or its affiliate place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or through such
brokers, dealers, underwriters or issuers as the Subadviser may select.
B. Subadviser Undertakings. In all matters relating to the performance
of this Agreement, the Subadviser shall act in conformity with the Company's
Articles of Incorporation, By-Laws, and current Prospectus and with the written
instructions and directions of the Board and the Adviser. The Subadviser hereby
agrees to:
(i) regularly (but no less frequently than quarterly) report
to the Board and the Adviser with respect to the implementation of the
investment program and, in addition, provide such statistical information and
special reports concerning the Portfolio and/or important developments
materially affecting the investments held, or contemplated to be purchased, by
the Portfolio, as may reasonably be requested by the Board or the Adviser and
agreed to by the Subadviser, including attendance at Board meetings, as
reasonably requested, to present such information and reports to the Board;
(ii) consult with the Company's pricing agent regarding the
valuation of securities that are not registered for public sale, not traded on
any securities markets, or otherwise may be deemed illiquid for purposes of the
1940 Act and for which market quotations are not readily available;
(iii) provide any and all information, records and supporting
documentation about accounts the Subadviser manages that have investment
objectives, policies, and strategies substantially similar to those employed by
the Subadviser in managing the Portfolio which may be reasonably necessary,
under applicable laws, to allow the Company or its agent to present historical
performance information concerning the Subadviser's similarly managed accounts,
for inclusion in the Company's Prospectus and any other reports and materials
prepared by the Company or its agent, in accordance with regulatory
requirements;
(iv) establish appropriate personal contacts with the Adviser
and the Company's Administrator in order to provide the Adviser and
Administrator with information as reasonably requested by the Adviser or
Administrator; and
(v) execute account documentation, agreements, contracts and
other documents as the Adviser shall be requested by brokers, dealers,
counterparties and other persons to execute in connection with its management of
the assets of the Portfolio, provided that the Subadviser receives the express
agreement and consent of the Adviser and/or the Board to execute such
documentation, agreements, contracts and other documents. In such respect, and
only for this limited purpose, the Subadviser shall act as the Adviser and/or
the Portfolio's agent and attorney-in-fact.
C. Adviser and Company Undertakings. To facilitate the Subadviser's
fulfillment of its obligations under this Agreement, the Adviser and the Company
will undertake the following:
(i) the Adviser agrees promptly to provide the Subadviser with
all amendments or supplements to the Prospectus, the Company's Articles of
Incorporation, and By-Laws;
(ii) the Company and the Adviser each agrees, on an ongoing
basis, to notify the Subadviser expressly in writing of each change in the
fundamental and nonfundamental investment policies of the Portfolio;
(iii) the Adviser agrees to provide or cause to be provided to
the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolio under
this Agreement, including, without limitation, information concerning the
Portfolio, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolio's
affairs;
(iv) the Adviser agrees to provide or cause to be provided to
the Subadviser on an ongoing basis, such information as is reasonably requested
by the Subadviser for performance by the Subadviser of its obligations under
this Agreement, and the Subadviser shall not be in breach of any term of this
Agreement or be deemed to have acted negligently if the Adviser fails to provide
or cause to be provided such requested information and the Subadviser relies on
the information most recently furnished to the Subadviser; and
(v) the Adviser will promptly provide the Subadviser with any
guidelines and procedures applicable to the Subadviser or the Portfolio adopted
from time to time by the Board and agrees to promptly provide the Subadviser
copies of all amendments thereto.
D. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment required for it to
faithfully and fully perform its duties and obligations under this Agreement.
E. The Subadviser will select brokers and dealers to effect all
Portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolio in accordance with such policies or practices as may be established by
the Board and the Adviser and described in the current Prospectus as amended
from time to time. In placing orders for the purchase or sale of investments for
the Portfolio, in the name of the Portfolio or its nominees, the Subadviser
shall use its best efforts to obtain for the Portfolio the most favorable price
and best execution available, considering all of the circumstances, and shall
maintain such records as are required of an investment adviser under applicable
law.
Subject to the appropriate policies and procedures approved by the
Adviser and the Board, the Subadviser may, to the extent authorized by Section
28(e) of the Securities Exchange Act of 1934, cause the Portfolio to pay a
broker or dealer that provides brokerage or research services to the Subadviser,
an amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Subadviser determines, in good faith, that such amount
of commission is reasonable in relationship to the value of such brokerage or
research services provided viewed in terms of that particular transaction or the
Subadviser's overall responsibilities to the Portfolio or its other advisory
clients. To the extent authorized by said Section 28(e) and the Adviser and the
Board, the Subadviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of
such action. In addition, subject to seeking the best execution available, the
Subadviser may also consider sales of shares of the Portfolio as a factor in the
selection of brokers and dealers.
F. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, and subject to the Adviser approval of the Subadviser's procedures,
may, but shall be under no obligation to, aggregate the orders for securities to
be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
G. With respect to the provision of services by the Subadviser
hereunder, the Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the 1940 Act and the Advisers Act and
the rules under both statutes.
H. The Subadviser and the Adviser acknowledge that the Subadviser is
not the compliance agent for the Portfolio, and does not have access to all of
the Company's books and records necessary to perform certain compliance testing.
However, to the extent that the Subadviser has agreed to perform the services
specified in Section 2A, the Subadviser shall perform compliance testing with
respect to the Portfolio based upon information in its possession and upon
information and written instructions received from the Adviser or the
Administrator.
I. Unless the Adviser gives the Subadviser written instructions to the
contrary, the Subadviser shall use its good faith judgment in a manner which it
reasonably believes best serves the interests of the Portfolio's shareholders to
vote or abstain from voting all proxies solicited by or with respect to the
issuers of securities in which assets of the Portfolio may be invested. The
Adviser shall furnish the Subadviser with any further documents, materials or
information that the Subadviser may reasonably request to enable it to perform
its duties pursuant to this Agreement.
J. Subadviser hereby authorizes Adviser to use Subadviser's name and
any applicable trademarks in the Company's Prospectus, as well as in any
advertisement or sales literature used by the Adviser or its agents to promote
the Company and/or to provide information to shareholders of the Portfolio. Upon
termination of this Agreement, the Adviser and the Company shall immediately
cease to use such name and trademarks, except as necessary to comply with
disclosure requirements under the federal securities laws.
During the term of this Agreement, the Adviser shall furnish to the
Subadviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature, or other material prepared for distribution
to shareholders of the Company or the public, which refer to the Subadviser or
its clients in any way, prior to the use thereof, and the Adviser shall not use
any such materials if the Subadviser reasonably objects within five business
days (or such other time as may be mutually agreed) after receipt thereof. The
Adviser shall ensure that materials prepared by employees or agents of the
Adviser or its affiliates that refer to the Subadviser or its clients in any way
are consistent with those materials previously approved by the Subadviser.
Subadviser will provide reasonable marketing support to Adviser in connection
with the promotion of the Portfolio.
3. Compensation of Subadviser. The Adviser will pay the Subadviser, with respect
to the Portfolio, the compensation specified in Appendix A to this Agreement.
Payments shall be made to the Subadviser on the second business day of each
month; however, this advisory fee will be calculated based on the daily average
value of the Portfolio's assets and accrued on a daily basis. Compensation for
any partial period shall be pro-rated based on the length of the period.
4. Liability of Subadviser. Neither the Subadviser nor any of its directors,
officers, employees or agents shall be liable to the Adviser or the Company for
any loss or expense suffered by the Adviser or the Company resulting from its
acts or omissions as Subadviser to the Portfolio, except for losses or expenses
to the Adviser or the Company resulting from willful misconduct, bad faith, or
gross negligence in the performance of, or from reckless disregard of, the
Subadviser's duties under this Agreement. Neither the Subadviser nor any of its
agents shall be liable to the Adviser or the Company for any loss or expense
suffered as a consequence of any action or inaction of other service providers
to the Company in failing to observe the instructions of the Adviser, provided
such action or inaction of such other service providers to the Company is not a
result of the willful misconduct, bad faith or gross negligence in the
performance of, or from reckless disregard of, the duties of the Subadviser
under this Agreement.
5. Non-Exclusivity. The services of the Subadviser to the Portfolio and the
Company are not to be deemed to be exclusive, and the Subadviser shall be free
to render investment advisory or other services to others (including other
investment companies) and to engage in other activities. It is understood and
agreed that the directors, officers, and employees of the Subadviser are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors,
trustees, or employees of any other firm or corporation, including other
investment companies. Furthermore, the Company and the Adviser recognize that
the Subadviser may give advice, and take action, with respect to its other
clients that may differ from the advice given, or the time or nature of action
taken, with respect to the Portfolio.
6. Adviser Oversight and Cooperation with Regulators. The Subadviser shall
cooperate in providing records, reports and other materials relating to the
Company that are in its possession, at the request of the Adviser, and in
response to inquiries by regulatory and administrative bodies having proper
jurisdiction over the Company, in connection with the services provided pursuant
to this Agreement; provided, however, that this agreement to cooperate does not
apply to the provision of information, reports and other materials which the
Subadviser reasonably believes the regulatory or administrative body does not
have the authority to request or which is privileged or confidential information
of the Subadviser.
7. Records. The records relating to the services provided under this Agreement
required to be established and maintained by an investment adviser under
applicable law or those required by the Adviser or the Board of Directors for
the Subadviser to prepare and provide shall be the property of the Company and
shall be under its control; however, the Company shall permit the Subadviser to
retain such records (either in original or in duplicate form) as it shall
reasonably require in order to carry out its duties. In the event of the
termination of this Agreement, such records shall promptly be returned to the
Company by the Subadviser free from any claim or retention of rights therein.
The Subadviser shall keep confidential any information concerning the Adviser or
any Subadviser's duties hereunder and shall disclose such information only if
the Company has authorized such disclosure or if such disclosure is expressly
required or requested by applicable federal or state regulatory authorities.
8. Duration of Agreement. This Agreement is effective with respect to the
Portfolio as of December 31, 1997. This Agreement will remain in effect through
June 30, 1999, unless earlier terminated under the provisions of Section 12.
Following the expiration of its initial term, the Agreement shall continue in
effect from year to year only so long as such continuance is specifically
approved at least annually by the Board, provided that in such event such
continuance shall also be approved by the vote of a majority of the Directors
who are not "interested persons" (as defined in the 0000 Xxx) of any party to
this Agreement ("Independent Directors") cast in person at a meeting called for
the purpose of voting on such approval or by a vote of a majority of the
outstanding voting securities (as determined in accordance with the 1940 Act).
9. Representations of Subadviser. The Subadviser represents, warrants, and
agrees as follows:
A. The Subadviser: (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will continue to meet for so long as this Agreement remains in effect, any other
applicable federal or
state requirements, or the applicable requirements of any regulatory or industry
self-regulatory organization, necessary to be met in order to perform the
services contemplated by this Agreement; (iv) has the authority to enter into
and perform the services contemplated by this Agreement; and (v) will
immediately notify the Adviser of the occurrence of any event that would
disqualify the Subadviser from serving as an investment adviser of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. The Subadviser has adopted a written code of ethics complying with
the requirements of Rule 17j-1 under the 1940 Act and, if it has not already
done so, will provide the Adviser and the Company with a copy of such code of
ethics, together with evidence of its adoption.
C. The Subadviser has provided the Adviser and the Company with a copy
of its Form ADV as most recently filed with the SEC and hereafter will furnish a
copy of its annual amendment to the Adviser.
10. Provision of Certain Information by Subadviser. The Subadviser will promptly
notify the Adviser in writing of the occurrence of any of the following events:
A. the Subadviser fails to be registered as an investment adviser under
the Advisers Act or under the laws of any jurisdiction in which the Subadviser
is required to be registered as an investment adviser in order to perform its
obligations under this Agreement;
B. the Subadviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry, or investigation, at law or in equity, before or by
any court, public board, or body, involving the affairs of the Company;
C. a controlling stockholder of the Subadviser or the portfolio manager
of the Portfolio changes or there is otherwise an actual change in control or
management of the Subadviser.
11. Provision of Certain Information by the Adviser. The Adviser will promptly
notify the Subadviser in writing of the occurrence of any of the following
events:
A. the Adviser fails to be registered as an investment adviser under
the Advisers Act or under the laws of any jurisdiction in which the Adviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement;
B. the Adviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry, or investigation, at law or in equity, before or by
any court, public board, or body, involving the affairs of the Company;
C. a controlling stockholder of the Adviser changes or there is
otherwise an actual change in control or management of the Adviser.
12. Termination of Agreement. Notwithstanding the foregoing, this Agreement may
be terminated at any time, without the payment of any penalty, by vote of the
Board or by a vote of a majority of the outstanding voting securities of the
Portfolio on 60 days' prior written notice to the Subadviser. This Agreement may
also be terminated by the Adviser: (i) on at least 60 days' prior written notice
to the Subadviser, without the payment of any penalty; (ii) upon material breach
by the Subadviser of any of the representations and warranties, if such breach
shall not have been cured within a 20-day period after notice of such breach; or
(iii) if the Subadviser becomes unable to discharge its duties and obligations
under this Agreement. The Subadviser may terminate this Agreement at any time,
without the payment of any penalty, on at least 60 days' prior notice to the
Adviser. This Agreement shall terminate automatically in the event of its
assignment or upon termination of the Advisory Agreement between the Company and
the Adviser.
13. Amendment of Agreement. No provision of this Agreement may be changed,
waived, discharged, or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge,
or termination is sought, and no material amendment of this Agreement shall be
effective until approved by vote of a majority of the Independent Directors cast
in person at a meeting called for the purpose of such approval.
14. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws
of the State of Maryland without giving effect to the conflicts of laws
principles thereof, and the 1940 Act. To the extent that the applicable laws of
the State of Maryland conflict with the applicable provisions of the 1940 Act,
the latter shall control.
B. Captions. The Captions contained in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
C. Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior agreements
between the parties concerning management of the Portfolio and all such prior
agreements shall be deemed terminated upon the effectiveness of this Agreement.
D. Interpretation. Nothing herein contained shall be deemed to require
the Company to take any action contrary to its Articles of Incorporation,
By-Laws, or any applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Company.
E. Definitions. Any question of Interpretation of any term or provision
of this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, releases or orders of the SEC validly issued pursuant to the Act. As
used in this Agreement, the terms "majority of the outstanding voting
securities," "affiliated person," "interested person," "assignment," "broker,"
"investment adviser," "net assets," "sale," "sell," and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemptions
as may be granted by the SEC by any rule, release or order. Where the effect of
a requirement of the federal securities laws reflected in any provision of this
Agreement is made less restrictive by a rule, release, or order of the SEC,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, release, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized signatories as of the date and year first
above written.
Aetna Life Insurance and Annuity Company
By: /s/ Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
Senior Vice President
Attest:
/s/ Xxxx-Xxxxx XxXxxxxx
Xxxx-Xxxxx XxXxxxxx
Assistant Corporate Secretary
Xxxxxxx Xxxxxx Investments, Inc.
By: /s/ Xxxxxxxx X. Small
Xxxxxxxx X. Small
Managing Director
Attest:
By: /s/ Xxxx Xxxx
Xxxx Xxxx
Vice President
Appendix A
Fee Schedule
Xxxxxxx International Growth .75% on the first $20 million of average daily net assets
.65% on the next $15 million
.50% on the next $65 million
.40% on the next $200 million
.30% on assets over $300 million