INVESTMENT SUBADVISORY AGREEMENT
Between
Aetna Life Insurance and Annuity Company
and
Massachusetts Financial Services Company
INVESTMENT SUBADVISORY AGREEMENT, made as of the 29th day of August, 1997,
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 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 MFS Emerging Equities Portfolio, MFS Research Growth Portfolio
and MFS Value Equity 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:
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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
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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
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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.
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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
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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 on the later of the date of its execution or the date of the
commencement of operations of the Portfolios. 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 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
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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.
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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
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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/Xxxxx X. Xxxxxxx
-----------------------------
Xxxxx X. Xxxxxxx
Vice President
/s/ Xxxxx X. Xxxxxx
-----------------------------
Xxxxx X. Xxxxxx
Assistant Secretary
Massachusetts Financial Services Company
Attest: By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Xxxxxx X. Xxxxx
Senior Executive Vice President
/s/ Xxxxx XxxXxxxxx
-----------------------------
Xxxxx XxxXxxxxx
Vice President
Appendix A
Fee Schedule*
MFS Emerging Equities .40% on the first $300 million of aggregate
MFS Research Growth average daily net assets under management
MFS Value Equity .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
*Amended and approved by the Board of Directors of the Company on February 10,
1999, to be effective May 3, 1999.
