EX (d.2)
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
AETNA LIFE INSURANCE AND ANNUITY COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
INVESTMENT SUBADVISORY AGREEMENT, made as of the 7th day of November, 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 Massachusetts Financial Services Company ("Subadviser"), a business trust
organized and existing under the laws of the State of Delaware.
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated as
of the 7th day of November, 2001 ("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 MFS Capital Opportunities Portfolio (formerly MFS Value Equity
Portfolio), MFS Emerging Equities Portfolio and MFS Research Growth Portfolio,
portfolios of the Company (collectively, the "Portfolios"), 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 Portfolios 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 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 Portfolios and/or
important developments materially affecting the investments held,
or contemplated to be purchased, by the Portfolios, 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
Portfolios 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 Portfolios, 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 Portfolios' 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.
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 Portfolios 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 Portfolios, in the name of the Portfolios or their nominees, the
Subadviser shall use its best efforts to obtain for the Portfolios 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 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 Portfolios 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 Portfolios, 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 Portfolios 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 current Prospectus and any written
policies or procedures adopted by the Board applicable to the Portfolios 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.
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
Portfolios.
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 Portfolios 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 Portfolios, 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 Portfolios 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. The Subadviser shall keep confidential any nonpublic
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 shall become effective with respect to
the Portfolios as of November 7, 2001. This Agreement will remain in effect
through November 30, 2002, 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 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.
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 a
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 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.
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 Portfolios 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
Attest: By: /s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxxxxx
Vice President
-----------------------------------
(Title)
/s/ Xxxx X. Xxxxxxx
----------------------
Massachusetts Financial Services Company
Attest: By: /s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx
Senior Executive Vice President
----------------------------------
(Title)
/s/ Xxxxxx X. Xxxx
----------------------
APPENDIX A
FEE SCHEDULE THROUGH DECEMBER 31, 2001:
.40% on the first $300 million of aggregate
average daily net assets under management
.375% on the next $300 million
.35% on the next $300 million
.325% on the next $600 million
.25% on assets over $1.5 billion
FEE SCHEDULE EFFECTIVE JANUARY 1, 2002:
For purposes of applying this schedule, assets of all ING affiliated portfolios
subject to the Subadviser's management are consolidated when calculating
aggregate average daily net assets under management.
.35% on the first $500 million of aggregate
average daily net assets under management
.30% on the next $1 billion
.25% on all assets thereafter over $1.5 billion
