INVESTMENT SUBADVISORY AGREEMENT
Between
Aetna Life Insurance and Annuity Company
and
X. Xxxx Price Associates, Inc.
INVESTMENT SUBADVISORY AGREEMENT, made as of the ______ day of __________, 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 X. Xxxx Price Associates, Inc. ("Subadviser"), a corporation organized and
existing under the laws of the State of Maryland .
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated as
of the _____ day of ________, 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 X. Xxxx Price Growth Equity 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 X. Xxxx Price Associates,
Inc. place orders and negotiate the commissions (if any) for the
execution of transactions in securities or other assets with or
through such brokers, dealers, underwriters or issuers as the
Subadviser may select.
B. Subadviser Undertakings. In all matters relating to the performance of
this Agreement, the Subadviser shall act in conformity with the Company's
Articles of Incorporation, By-Laws, and current Prospectus and with the
written instructions and directions of the Board and the Adviser. The
Subadviser hereby agrees to:
(i) regularly (but no less frequently than quarterly) report to the
Board and the Adviser with respect to the implementation of the
investment program and, in addition, provide such statistical
information and special reports concerning the Portfolio and/or
important developments materially affecting the investments held, or
contemplated to be purchased, by the Portfolio, as may reasonably be
requested by the Board or the Adviser and agreed to by the
Subadviser,
2
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) 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
(iv) 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.
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 its nominees, the Subadviser shall
use its best efforts to obtain for the Portfolio the 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
3
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 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's initial 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.
F. 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.
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 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. The Adviser or Administrator shall promptly provide the
Subadviser with copies of the Company's current Prospectus, Articles of
Incorporation and By-Laws 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 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.
4
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 in accordance with the terms of the License Agreement entered into
between the parties hereto dated _______________, 1997.
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 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, the Company, or
the Company's shareholders for any loss or expense suffered by the Adviser, the
Company, or the Company's shareholders resulting from its acts or omissions as
Subadviser to the Portfolio, except for losses or expenses to the Adviser, the
Company, or the Company's shareholders 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, the Company, or the Company's
shareholders 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.
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
5
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 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 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 use its best efforts to 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.
6
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 or the Company is served or otherwise receives notice of
any action, suit, proceeding, inquiry, or investigation, at law or in equity,
before or by any court, public board, or body, involving the affairs of the
Company;
C. a controlling stockholder of the Subadviser or the portfolio manager of
the Portfolio changes or there is otherwise an actual change in control or
management of the Subadviser.
11. Provision of Certain Information by the Adviser. The Adviser will promptly
notify the Subadviser in writing of the occurrence of any of the following
events:
A. the Adviser fails to be registered as an investment adviser under the
Advisers Act or under the laws of any jurisdiction in which the Adviser is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement;
B. the Adviser is served or otherwise receives notice of any action, suit,
proceeding, inquiry, or investigation, at law or in equity, before or by any
court, public board, or body, involving the affairs of the Company;
C. a controlling stockholder of the Adviser changes or there is otherwise an
actual change in control or management of the Adviser.
12. Termination of Agreement. Notwithstanding the foregoing, this Agreement may
be terminated at any time, without the payment of any penalty, by vote of the
Board or by a vote of a majority of the outstanding voting securities of the
Portfolio on 60 days' prior written notice to the Subadviser. This Agreement may
also be terminated by the Adviser: (i) on at least 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.
7
13. Amendment of Agreement. No provision of this Agreement may be changed,
waived, discharged, or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge,
or termination is sought, and no material amendment of this Agreement shall be
effective until approved by vote of a majority of the Independent Directors cast
in person at a meeting called for the purpose of such approval.
14. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the
laws of the State of Maryland without giving effect to the conflicts of laws
principles thereof, and the 1940 Act. To the extent that the applicable laws
of the State of Maryland conflict with the applicable provisions of the 1940
Act, the latter shall control.
B. Captions. The Captions contained in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
C. Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior agreements
between the parties concerning management of the Portfolio and all such prior
agreements shall be deemed terminated upon the effectiveness of this
Agreement.
D. Interpretation. Nothing herein contained shall be deemed to require the
Company to take any action contrary to its Articles of Incorporation,
By-Laws, or any applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or deprive the Board of its
responsibility for and control of the conduct of the affairs of the Company.
E. Definitions. Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or, in the absence of any controlling decision of any
such court, by rules, releases or orders of the SEC validly issued pursuant
to the Act. As used in this Agreement, the terms "majority of the outstanding
voting securities," "affiliated person," "interested person," "assignment,"
"broker," "investment adviser," "net assets," "sale," "sell," and "security"
shall have the same meaning as such terms have in the 1940 Act, subject to
such exemptions as may be granted by the SEC by any rule, release or order.
Where the effect of a requirement of the federal securities laws reflected in
any
8
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:_____________________________________
Attest:
___________________________________
X. Xxxx Price Associates, Inc.
By:____________________________________
Attest:
___________________________________
9
APPENDIX A
Fee Schedule
X. Xxxx Price Growth Equity .40% on the first $500 million of
average daily net assets
.375% on assets over $500 million
