INVESTMENT SUBADVISORY AGREEMENT
Between
Aetna Life Insurance and Annuity Company
and
Xxxxxxx Xxxxxx Investments, Inc.
INVESTMENT SUBADVISORY AGREEMENT, made as of the 2nd day of February, 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
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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;
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(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
4
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
5
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
6
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
7
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.
8
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.
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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
Attest: Senior Vice President
/s/Xxxx-Xxxxx XxXxxxxx
-------------------------------
Xxxx-Xxxxx XxXxxxxx
Assistant Corporate Secretary
Xxxxxxx Xxxxxx Investments, Inc.
By: /s/Xxxxxxxx X. Small
-----------------------------------
Xxxxxxxx X. Small
Attest: Managing Director
/s/Xxxx Xxxx
--------------------------------
Xxxx Xxxx
Vice President
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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
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