FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
AETNA LIFE INSURANCE AND ANNUITY COMPANY
AND
XXXX XXXXX MANAGEMENT, INC.
INVESTMENT SUBADVISORY AGREEMENT, made as of the __________ day of
_______________, 2001, between Aetna Life Insurance and Annuity Company (the
"Adviser"), an insurance corporation organized and existing under the laws of
the State of Connecticut, and Xxxx Xxxxx Management, Inc. ("Subadviser"), a
corporation organized and existing under the laws of the State of New York.
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated as
of the 14th day of December, 2000 ("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 (1) 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,
(2) qualified pension and retirement plans outside the separate account context,
and (3) the
investment adviser of certain affiliated open-end management investment
companies registered under the 1940 Act or any of the Adviser's affiliates;
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 ______________________________________ (the "Portfolio"),
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 each Portfolio in accordance with its 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
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in the discharge of its obligations hereunder and shall formulate
and implement a continuing program for the management of the assets and
resources of each Portfolio in a manner consistent with each 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 each
Portfolio; and
(ii) 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 (in such form as the Adviser and Subadviser
mutually agree) 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;
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(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. 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.
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D. 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 their 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
records adequate to demonstrate compliance with this requirement.
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.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of a 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
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the Subadviser 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.
F. With respect to the provision of services by the Subadviser hereunder,
the Subadviser will maintain all accounts, books and records with respect
to each 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.
G. 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 this Agreement, 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 and shall not
be held in breach of this Agreement so long as it performs in accordance
with such information and instructions. The Adviser or Administrator
shall promptly provide the Subadviser with copies of the Company's
Articles of Incorporation, By-Laws, current Prospectus and any written
policies or procedures adopted by the Board applicable to the Portfolio
and any amendments or revisions thereto.
H. 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 a 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.
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I. 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.
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 three 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.
3. COMPENSATION OF SUBADVISER. The Adviser will pay the Subadviser, with respect
to each Portfolio, the compensation specified in Appendix A to this Agreement.
Payments shall be made to the Subadviser on the second day of each month;
however, this advisory fee will be calculated based on the daily average value
of the aggregate assets of all Portfolio subject to the Subadviser's management
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
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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.
6. ADVISER OVERSIGHT AND COOPERATION WITH REGULATORS. The Adviser and Subadviser
shall cooperate with each other in providing records, reports and other
materials to regulatory and administrative bodies having proper jurisdiction
over the Company, the Adviser and the Subadviser, 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 either the Subadviser or Adviser reasonably believes
the regulatory or administrative body does not have the authority to request or
which is privileged or confidential information of the Subadviser or Adviser.
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 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; provided however, that the Subadviser
may retain copies thereof. Each party to this Agreement shall keep confidential
any nonpublic information concerning the other party's (or any Subadviser's)
duties hereunder and shall disclose such information only if the non-disclosing
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party 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 shall become effective with respect to
the Portfolio on the later of the date of its execution or the date of the
commencement of operations of the Portfolio. This Agreement will continue in
effect for a period of more than two years from the date of its execution 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 1940 Act) ("Independent Directors") of any party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval.
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.
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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;
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C. a controlling stockholder of the Subadviser or the portfolio manager of
a Portfolio changes or there is otherwise an actual "change in control" (as
that phrase is interpreted under the 1940 Act and the Advisers Act) 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 with respect to a Portfolio, without the payment
of any penalty, by vote of the Board or by a vote of a majority of the
outstanding voting securities of such Portfolio on 60 days prior written
notice to the Subadviser. This Agreement may also be terminated by the
Adviser: (i) on at least 120 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 90
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.
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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.
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Aetna Life Insurance and Annuity Company
Attest: By: _____________________________
-----------------------------
(Title)
-------------------------------
Xxxx Xxxxx Management, Inc.
Attest: By: ______________________________
Xxxxxxx X. Xxxx
Executive Vice President
-------------------------------
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APPENDIX A
FEE SCHEDULE
For purposes of applying this schedule, assets of all portfolios managed by
Xxxx Xxxxx Management, Inc. will be combined.
.40% on the first $150 million in assets
.35% on the next $350 million in assets
.30% on the next $500 million in assets
.25% on all assets in excess of $1 billion
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